SOURCE: Frontera Resources

Frontera Resources

September 04, 2009 02:00 ET

Frontera Resources Announces Private Placement to Fund Ongoing Developments at Shallow Fields Production Unit in Georgia

The information set forth below describes the terms of the sale of securities by Frontera Resources Corporation in reliance upon the exemption from registration under the United States Securities Act of 1933, as amended (the "Securities Act") afforded by Regulation S under the Securities Act. Such securities will be offered and sold only outside the United States and only to persons who are not "U.S. persons" as that term is used in Regulation S.

HOUSTON, TX--(Marketwire - September 4, 2009) - Frontera Resources Corporation (London Stock Exchange, AIM Market - Symbol: FRR; OTCQX Market, U.S.A. - Symbol: FRTE), an independent oil and gas exploration and production company, today announced that it has entered into placing and subscription agreements to raise approximately US$6.0 million through a private placement of shares of common stock and warrants. The resulting net proceeds will be used to fund the company's ongoing oil and gas development programs within its Shallow Fields Production Unit, Block 12, located in the country of Georgia.

All of the net proceeds of the placing will go towards the next phase of continued investment in work programs that are aimed at increasing oil and gas production and associated reserve bookings from the Mirzaani and Mtsare Khevi fields, two of four undeveloped fields within the Shallow Fields Production Unit. New drilling operations are scheduled to begin in the third quarter of 2009 and are planned to be completed by year end. Frontera believes that successful completion of these work programs will increase daily production to as much as approximately 1,000 barrels of oil equivalent per day.

At the Mtsare Khevi Field, a portion of the proceeds will go towards drilling three new development wells in continuation of an initial drilling campaign that commenced during the third quarter of 2008. This program resulted in the drilling of 14 new wells in the field that initiated oil production and established the basis for new gas production from reservoirs situated between approximately 200 meters and 350 meters in depth. Accordingly, the Company now plans to invest in the construction of new infrastructure to produce and sell gas from the field into the local Georgian market.

Proceeds will also fund the continuation of new drilling operations at the Mirzaani Field. Two new wells are planned in follow up to the recent drilling of the Mirzaani #2 well that resulted in the discovery of a new, undeveloped extension of the Mirzaani Field known as Mirzaani Field Northwest and also established the basis for developing horizons that remain undeveloped below the Mirzaani Field proper. The new wells will continue to target reservoirs situated between 800 meters and 1,500 meters in depth. In addition, new investment is planned to add production from a workover program of existing wells within the Mirzaani Field.

Based on analysis of programs to date at both fields, Frontera estimates the two fields contain approximately 50 million barrels of prospective resources. New reserve reports are expected to be completed following the planned work program.

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

"We are very pleased with this addition of new capital in support of our company's ongoing efforts. The planned use of these proceeds will permit us to continue to advance work at the Shallow Fields Production Unit where anticipated results are expected to provide us with increased cash flow generation going into 2010. Underpinned by cost cutting initiatives that have been implemented since the beginning of this year and remain ongoing, I am encouraged by the overall prospects for meaningful value realization and growth in the year ahead.

In addition, while we have chosen to prioritize our near term efforts in favor of increasing cost effective production from our Shallow Fields Production Unit in order to establish a strong foundation for our company, we will simultaneously continue to pursue strategies designed to allow us to bring the Taribani Field Unit into commercial production and to fully evaluate the significant exploration potential that we have identified at the Basin Edge 'B' and 'C' Prospects."

Terms of the Private Placement

Frontera has agreed to issue 35,793,300 units (the "Units") at an issue price of 10.3 pence per Unit (the "Issue Price"), representing premiums of approximately 31% and 41% over the 10- and 30-day trailing average share prices, respectively, for gross proceeds of approximately US$6.0 million (£3.7 million) (the "Placement").

Each Unit is comprised of one share of common stock, par value US$0.00004 per share (a "Common Share"), and one Common Share purchase warrant (a "Warrant") of the Company. Each Warrant will entitle the holder thereof to purchase from the Company one Common Share for a period of two years following the transaction closing date at an exercise price of 15 pence per Common Share, subject to customary terms and conditions, including certain anti-dilution provisions.

Companies or other entities controlled by certain members of the Board of Directors of Frontera (the "Subscribers") have agreed to subscribe in the aggregate for all of the Units to be issued in the placement. The number of Units that the Subscribers actually purchase may be subject to reduction under the circumstances described below.

Canaccord Adams Limited ("Canaccord") is acting as financial adviser and placing agent for the Placement and has agreed, subject to the terms and conditions of a placing agreement with the Company, to use all reasonable endeavors to procure placees to purchase some of the Units. The number of Units to be taken by the Subscribers may, to the extent that Units are taken up by placees, be reduced below 35,793,300, or the number of Units issued pursuant to the Placement may, with the agreement of Canaccord and the Company, be increased beyond 35,793,300 Units, subject to a maximum value of US$8.0 million.

Placing Agreement with Canaccord

The Company and Canaccord have entered into a placing agreement under which, subject to certain terms and conditions, Canaccord has agreed with the Company to use all reasonable endeavors to procure placees to take up some of the Units.

Canaccord's obligations under the agreement are conditional upon, among other things, admission to the AIM Market of the London Stock Exchange ("Admission") of the Common Shares comprised in the Units occurring not later than 8.00 a.m., London time, on September 14, 2009, or such other date as may be agreed among the Company and Canaccord not being later than September 21, 2009, and the Company complying in all material respects with its obligations under the placing agreement to the extent that the same are required to be performed prior to Admission.

Pursuant to the placing agreement the Company has given Canaccord certain warranties with respect to the Company and its subsidiaries and certain matters connected with the Placement. In addition, the Company has given an indemnity to Canaccord and its affiliates in respect of, amongst other things, the performance by Canaccord of its services in connection with the Placement and the application for Admission.

The agreement may be terminated by Canaccord before Admission in certain circumstances.

Directors' Dealings and Related Party Transaction

Companies or other entities controlled by certain members of the Board of Directors of Frontera, have agreed to subscribe in the aggregate for all of the Units issued in the Placement. The maximum number of shares to be subscribed for by companies or other entities controlled by each director is as follows: Steve Nicandros, 5,262,936; Lan Bentsen, 2,291,540; Spyros Karnessis, 28,238,824.

For this reason, the transaction is classified as a related party transaction for the purposes of the AIM rules for companies. Accordingly, as required by the AIM rules for companies, the directors of Frontera (with the exception of Messrs. Nicandros, Bentsen and Karnessis, who abstained), having consulted Frontera's nominated adviser, Canaccord, consider that the terms of the transaction are fair and reasonable insofar as its shareholders are concerned.

Admission and Dealings

Application will be made to the AIM Market of the London Stock Exchange for the Common Shares comprised in the Units to be admitted to trading. It is expected that Admission of the Common Shares will become effective and that dealings will commence at 8.00 a.m. London time on September 14, 2009. The Common Shares will be issued in certificated form. No application will be made for admission of the warrants to the AIM market.

Adjustment to Existing Warrants

At the date of this announcement the Company has outstanding warrants exercisable for approximately 3.15 million Common Shares in the aggregate. Each warrant entitles the holder to purchase one Common Share at a price of $3.50 per share on or before July 3, 2013. The terms of the warrants include a cashless exercise provision. In accordance with the terms of those warrants, the holders' rights will be adjusted following the placement such that the warrants will become exercisable for approximately 5.84 million Common Shares in the aggregate at a price of US$1.89 per share.

Further Information on the Placement

The 35,793,300 Units the Subscribers have agreed to purchase have been sold to them pursuant to the exemption from registration under the United States Securities Act of 1933, as amended (the "Securities Act") by virtue of Section 4(2) of the Securities Act and Regulation D thereunder. Each of the Subscribers has represented and warranted that it is an accredited investor as defined in Regulation D.

All of the Units that may be sold by Canaccord under the placing agreement will be offered and sold pursuant to the exemption from registration under the Securities Act by virtue of Regulation S thereunder. Accordingly, the Units placed by Canaccord will be offered or sold only outside of the United States and only to persons who are not "U.S. persons" as that term is defined in Regulation S.

The information contained herein does not constitute or form part of an offer or solicitation of an offer to purchase or subscribe for securities for sale in the United States, Canada, Australia or Japan or any other jurisdiction. The securities referred to herein have not been and will not be registered under the Securities Act and may not be offered or sold in the United States or to or for the benefit of U.S. persons unless they are registered or exempt from registration under applicable law or in transactions that are exempt from registration. No public offering of securities is being made in the United States.

In the UK Units will only be made available to persons who are both (a) "qualified investors" within the meaning of section 86(7) of the Financial Services Act 2000 or in circumstances that fall within section 86 of that Act and (b) sufficiently expert or sufficiently substantial to understand the risks involved in entering into the proposed transaction (each being: (i) persons who have professional experience in matters relating to investments falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the "Order"); or (ii) persons falling within Article 49(2)(a) to (d) of the Order or (iii) to those persons to whom it can otherwise lawfully be distributed.)

This announcement does not constitute or form part of an offer, or any solicitation of an offer, for securities. The price and value of, and income from, shares may go down as well as up. Persons needing advice should consult a professional adviser.

Canaccord is acting for Frontera and no one else in connection with the Placement and will not be responsible to any other person for providing the protections afforded to its clients or for providing advice in relation to the Placement.

Notes:

1. The Company: 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 opportunities and operate in emerging markets around the world. Frontera's shares are traded on the London Stock Exchange, AIM Market - Symbol: FRR and via the Over-the-Counter Market, U.S.A. - OTCQX Symbol: FRTE. For more information, please visit www.fronteraresources.com.

2. Information on Reserve Estimates: The prospective resources estimates contained in this announcement were determined in accordance with the petroleum resource definitions adopted by the Society of Petroleum Engineers (SPE), World Petroleum Council (WPC) and the American Association of Petroleum Geologists (AAPG) in 2000. Prospective resources are those quantities of petroleum which are estimated, on a given date, to be potentially recoverable from undiscovered accumulations. Gerard Bono, Frontera's Vice President and Chief Reservoir Engineer, who is a member of the SPE, is the qualified person who reviewed and approved the prospective resources estimates associated with the Mirzaani Field and Mtsare Khevi Field. These estimates will be reviewed by Netherland, Sewell & Associates and will be released as soon as practicable.

3. Forward-Looking Statements: This release may contain certain forward-looking statements, including, without limitation, expectations, beliefs, plans and objectives regarding the offering, potential drilling schedule and well results discussed in this release, as well as reserves, future drilling, development and 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 activities; availability and performance of needed equipment and personnel; the company's ability to raise capital to fund the planned exploration and development programs; evaluation of seismic data; evaluation of logs, cores and other data from wells drilled; fluctuations in oil and gas prices; adverse weather conditions; general economic conditions; the political situation in Georgia and neighboring countries; and other factors listed in Frontera's financial reports and admission document, which are available on Frontera's website at http://www.fronteraresources.com/Investors.php?link_id=29. 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.