Frontera Resources announces results for the period ended December 31, 2005 and provides an operations update

Houston, Texas U.S.A. (April 13, 2006): Frontera Resources Corporation (London Stock Exchange, AIM Market – Symbol: FRR), an independent oil & gas exploration and production company operating in the country of Georgia, today announces its annual results for the period ended December 31,  2005 and provides an update on its operations to date. 

HIGHLIGHTS

Corporate

  • Raised approximately $88.7 million through an initial placing and admission to trading on AIM in March 2005.
  • Reported a net loss of $4.4 million for the year ending December 31, 2005, in line with expectations.
  • Work program through 2007 expected to be completed within the company’s budgeted cash needs.
  • In April 2005 the company announced the appointment of Luis E. Giusti to the board as an independent non-executive director.

Georgia Operations

Taribani Field Unit:

  • Drilling program commenced to evaluate multiple horizons in the Taribani Field.
  • At the Dino#2 well, a vertical pilot hole was drilled to a planned depth of 2,700 metres and, following completion of coring and logging operations, horizontal drilling commenced in zone 15.
  • Acquired 60 kilometers of 2D seismic data in 2005 to further delineate the updip southwest portion of the Taribani Field.  Interpretation of this new seismic data is currently underway.
  • Netherland, Sewell and Associates identified 36 million barrels of additional resource potential reserves in the Taribani Field.

Basin Edge Play Unit:

  • Interpretation of 165 kilometers of 2D seismic data acquired in 2005 confirms the "C" prospect to be an independent four-way structural closure of approximately 55 square kilometers in size.
  • Commenced an 80 square kilometer 3D seismic survey over the "C" prospect in anticipation of drilling in 2007.
  • Interpretation underway of 170 kilometers of 2D seismic data acquired in 2005 over Prospect "B".

Mirzaani Field Area Exploration Unit:

  • Interpretation underway of 105 kilometers of 2D seismic data acquired in 2005 to delineate mapped prospects beneath the Mirzaani Field.

Mirzaani Field Area Production Unit

  • Continued profitable production from the Mirzaani Field Area Production Unit.
  • Netherland, Sewell and Associates complete first reserve booking associated with the Mirzaani Field, one of three fields contained within the Unit.

Block 12 Area-wide Field/Prospect Inventory Development Unit

  • Continued evaluation/prioritization of inventory of existing fields and prospects within Block 12.

Steve C. Nicandros, Chairman and Chief Executive Officer, commented:

"This is an exciting time for Frontera. With the proceeds from our offering on AIM last year, we have been able to continue to pursue our well-established, multiple paths for value creation from within our broad portfolio of exploration and development opportunities.   

To this end, we were able to successfully complete a series of major seismic acquisition programs totalling 500 kilometers of new 2D data over the Taribani Field Unit, the Basin Edge Play Unit and the Mirzaani Field Area Exploration Unit.  Our ongoing interpretation of this new data is revealing an enhanced understanding of the large prospectivity we have identified within each of these operational units.  Of significance is our recently announced commencement of an 80 square kilometer 3D seismic survey over the sizable Basin Edge Play Unit’s "C" prospect.

In 2006, we began drilling operations at the Taribani Field Unit and we continue to be encouraged by the progress of these operations.  We are currently in the process of completing the Dino #2 well that was commenced in February.  As part of a larger drilling program, this well is providing us with critical information in determining the commerciality of the Taribani Field.    

We at Frontera remain committed to work hard to realize the value we believe that our assets hold. I look forward to reporting on our continued progress in the weeks and months ahead."

Enquiries

Citigate Dewe Rogerson (+44 20 7638 9571) – Martin Jackson

Chairman and Chief Executive Officer’s statement

During 2005, Frontera continued to advance its specific work programs throughout five primary areas of focus in Block 12: The Taribani Field Unit; The Basin Edge Play Unit; The Mirzaani Field Area Exploration Unit; The Mirzaani Field Area Production Unit and The Block 12 Area-wide Inventory Development Unit.  Our work in these areas continues according to plan and is aimed at accessing commercial production from the 118 million barrels of P3 reserves and 1.4 billion barrels of unrisked resource potential that has been identified from within a subset of these areas. 

We are pursuing these work programs with a strong balance sheet as a result of our offering and listing on the AIM market in 2005. As a result of this offering, we were able to significantly reduce our outstanding debt and position the company for undertaking our planned work programs from a strong financial foundation.

An update of progress in each of our focus areas within Block 12 follows below, together with a more detailed overview of our 2005 annual results:

Taribani Field Unit:

Drilling Operations:  Horizontal drilling operations are currently underway at the Dino #2 well. The well was designed to evaluate multiple horizons within the field, with a primary objective of a final horizontal completion into horizon 15 at a total depth of approximately 2,700 meters.   

Since commencement of operations on February 17th, drilling of the vertical pilot hole successfully encountered the Pliocene age zones 9, 14 and 15 as expected, with hydrocarbon shows from each while drilling.  Extensive coring and logging operations were completed throughout key portions of the vertical pilot hole.  Zone 9 was encountered from 2,300 meters to 2,311 meters. In addition, a previously unmapped oil bearing reservoir interval was encountered above zone 9 from 2,275 meters to 2,285 meters.  Zones 14 and 15 were encountered between 2,560 meters and 2,700 meters.  All of the data collected from the coring and logging runs are currently undergoing detailed analysis in order to enhance our understanding of reservoir properties and associated fracture systems in anticipation of additional drilling operations from other locations within the field.

After coring and logging operations were completed in the vertical pilot hole, the decision was made to drill the well horizontally into zone 15 where the horizontal portion of the well is currently being drilled into a 15 meter interval of zone 15.  While drilling the horizontal section, high pressure oil and gas bearing intervals have been encountered with oil and gas flowing to the surface.  This has resulted in slower than expected drilling progress. As a result, it is anticipated that drilling will be completed and an extended testing program undertaken within the next two to three weeks.    

Seismic Operations:  Acquisition of 60 kilometers of 2D seismic over the southwestern portion of the Taribani Field was successfully completed.  The southwest area of the field is situated approximately 900 feet updip from the area of the field where our current drilling operations are currently underway.  This new seismic data has been processed and is currently being interpreted and integrated into our existing mapping of the field in anticipation of future drilling operations.    

Reserves Booking:  Netherland, Sewell and Associates (NS) completed analysis on three additional horizons in the field in 2005.  After originally identifying 118 million barrels of P3 reserves from horizons 9, 14, 15 and 19, continued analysis resulted in the identification of as much as 36 million barrels of additional resource potential associated with horizons 20, 21, 23, 24 and 25.  As the field continues to grow in potential size, results from our seismic program over the southwest portion of the field will provide an understanding of how much additional potential exists in the field.      

Basin Edge Play Unit

Frontera has commenced operations to acquire a new 80 square kilometer 3D seismic survey over its Basin Edge Play Unit’s "C" prospect.  Processing and interpretation of approximately 165 kilometers of 2D seismic data that was recently acquired over the "C" prospect has revealed an independent four-way structural closure of approximately 55 square kilometres in size.  As a result, we have chosen to prioritize and focus on this large prospect within the broader Basin Edge Play Unit that is located in the northeastern portion of Block 12.  Acquisition of the new 3D survey is expected to be complete in June and will be followed by a processing and interpretation effort that will be integrated into existing mapping prior to the end of this year.  Drilling operations are planned for 2007.

The objective of the new 3D seismic program is to determine the exact lateral and vertical limits of this large structure, evaluate the extensions of fault blocks and fracture systems contained within it, and identify reservoirs on the basis of seismic attributes. Global Geophysical Services, Inc. of Houston, Texas will acquire the survey over this prospect for Frontera. 

Frontera also recently completed the acquisition of approximately 170 kilometers of 2D seismic data acquired over a second prospect within the Basin Edge Play Unit, known as the "B" prospect.  Interpretation of this data is currently underway.

Frontera’s objectives within the Basin Edge Play Unit remain focused on commercially accessing the unrisked resource potential of 1.4 billion barrels that have been attributed to the "B" and "C" prospects by the independent consulting firm of Netherland, Sewell and Associates.

Mirzaani Field Area Exploration Unit

In 2005, approximately 105 kilometers of 2D seismic were acquired over mapped prospects within the Mirzaani Field Area Exploration Unit.  With processing of this data now complete, interpretation is currently underway to remap and enhance our existing prospect mapping in order to select specific drilling locations. 

Mirzaani Field Area Production Unit

Operations within the Mirzaani Field Area Production Unit profitably yielded an average daily production rate of approximately 90 barrels per day of oil during 2005.   While this volume is not significant in terms of our long term strategy, the day to day operations also provide us a platform to develop the production expertise which will be required as we unlock the larger reserves in Block 12. 

Netherland, Sewell and Associates completed an initial reserve booking on the Mirzaani Field, one of three fields within this operating unit.  Proved producing, probable and possible reserves total approximately 442,000 barrels and yield an NPV of approximately $5 million – $7 million at discount rates of 8% and 12%, respectively.   

Block 12 Area-Wide Field/Prospect  Inventory Development Unit

During 2005, our team advanced work on our extensive inventory of prospects and leads throughout Block 12 with regional geologic and geophysical studies, including new extensive field work. 

New maps were completed that integrate surface geology, fractures, oil seeps, dip information, rivers and major streams together with our existing data base.  This work will highlight future areas of focus within Block 12 for new drilling operations outside of our four main areas of focus detailed above.  Today, our inventory consists of more than 20 identified prospects, including several undeveloped fields.

Corporate News

Financial Review:  We significantly improved our balance sheet by raising $88.7 million as part of our IPO in March, 2005. After retiring $17.1 million of debt from a portion of the offering proceeds, we had $53 million in cash and marketable securities with $3.5 million in long-term debt at December 31, 2005.

We experienced a net loss of $4.4 million for 2005, or $0.10 per share on a fully-diluted basis. Revenues from oil sales were $1.8 million. Operating expenses were $10.4 million, which included $3.1 million of non-recurring general and administrative expenses related to the offering and the SOCAR arbitration. These costs were anticipated in our plan for use of proceeds from the IPO. We also reported other income of $4.2 million, including a $3.0 million gain on income from retiring a portion of the long-term debt at a discount.

Looking forward, we are experiencing higher capital costs for services and materials in Georgia, but we are taking steps to ensure we have sufficient capital to complete the objectives of our work program through 2007.   That work program includes the current drilling program in the Taribani Field Unit this year, and a 3D seismic acquisition and drilling program at the Basin Edge Play Unit.

SOCAR Arbitration:  In January 2006, we announced that our wholly owned subsidiary, Frontera Resources Azerbaijan Corporation, was awarded $1.2 million plus interest from 2000 until payment is made in connection with its binding arbitration case with SOCAR, the State Oil Company of the Azerbaijan Republic. The arbitration was held in Sweden and is binding on the parties under the rules of UNCITRAL, the United Nations Commission on International Trade Law.

As you will recall, Frontera initiated the arbitration against SOCAR in October 2003 related to claims resulting from SOCAR’s halting of exports from the onshore Kursangi & Karabagli oilfields in the Azerbaijan Republic during the fourth quarter of 2000.

The arbitral panel found that the halting of exports of crude oil from the Kursangi & Karabagli oil fields in the Azerbaijan Republic was in violation of the Agreement on Rehabilitation, Exploration, Development and Production Sharing between SOCAR, Frontera, Delta/Hess and SOCAR Oil Affiliate (the "PSA").  The arbitration panel rejected all other claims and counterclaims between the parties and the arbitration therefore resolves all claims between Frontera and SOCAR with respect to the PSA.

In February 2006, Frontera Azerbaijan filed an action in the United States District Court, Southern District of New York seeking to enforce the tribunal’s award in the United States.  Contemporaneously, SOCAR filed a challenge to the award with the Swedish Court of Appeals.  Frontera Azerbaijan does not believe there is any basis for a challenge by SOCAR and will continue to pursue enforcement of the Swedish tribunal’s award.

As we pursue an active work program in Georgia in 2006, all of us at Frontera remain very committed to continue to work very hard on behalf of all of our shareholders to realize the value we believe that our assets hold.  I look forward to reporting our continued progress in the months ahead. 

Steve C. Nicandros
Chairman and Chief Executive Officer
Frontera Resources Corporation

About Frontera

Frontera Resources Corporation is an independent Houston, Texas, U.S.A.- based international oil and gas exploration and production company whose strategy is to identify and operate opportunities in emerging markets around the world. 

Frontera was admitted to the Alternative Investment Market, operated by the London Stock Exchange, on March 14, 2005. 

Frontera has operated in Georgia since 1997 where it holds a 100 per cent working interest in a production sharing agreement with the government of Georgia.  This gives Frontera the exclusive right to explore for, develop and produce oil and gas from a 5,060 square kilometer area in eastern Georgia known as Block 12. For more information, please see www.fronteraresources.com

This release contains certain forward-looking statements, including, without limitation, expectations, beliefs, plans and objectives regarding the potential transactions, potential drilling schedule and ventures discussed in this release, as well as reserves and future production. Among the important factors that could cause actual results to differ materially from those indicated by such forward-looking statements are future exploration and development results, availability and performance of needed equipment and personnel, the final results of the processing of seismic data, fluctuations in oil and gas prices, weather conditions, general economic conditions and the political situation in Georgia and neighboring countries. There is no assurance that Frontera’s expectations will be realized, and actual results may differ materially from those expressed in the forward-looking statements.

The common shares of Frontera have not been registered under the U.S. Securities Act of 1933.  Transfer of these securities is prohibited, except in accordance with the provisions of Regulation S, pursuant to registration under the U.S. Securities Act, or pursuant to an available exemption from registration.  Hedging transactions involving these securities may not be conducted unless in compliance with the U.S. Securities Act.

This document does not constitute an offer to sell or the solicitation of an offer to buy the Company’s securities in any jurisdiction in which such offer is unlawful.

Enquiries

Citigate Dewe Rogerson (+44 20 7638 9571)
Martin Jackson

Click here to view the Results for the period ended December 31,  2005 for Frontera Resources Corporation