LONDON (Alliance News) - Frontera Resources Corp on Monday said it has issued a large chunk of equity to pay for services being provided to the company on the South Kakheti gas complex in Georgia, adding it will try to secure financing to pay back its outstanding debt which matures later this year.
Frontera said it has issued 180.0 million shares to two strategic service providers to pay for USD780,000 worth of oil field services. Ithaca said the providers "will not have a disclosable interest" in the company following the transaction, which is covering costs for work being provided until the end of June.
That implies an issue price of 0.43 pence per share - a 26% premium to the closing price on Friday last week - and the shares will cause the company's equity to swell to 4.07 billion shares, meaning the shares issued to the service providers represent around a 4.4% stake in the enlarged issued share capital of Frontera.
"The company believes that procurement of services in this manner serves to align and incentivise providers to ensure superior performance quality," said Frontera.
"In addition to current efforts to secure financing for planned development programs at the South Kakheti gas complex, the company is in the process of addressing financing associated with outstanding debt that will this year mature related to convertible note holders and executive management loans to the company," the company added.
Frontera said it is chasing USD8.5 million in pending account receivables, the majority of which relates to tax refunds from the government in Georgia. The company is "confident" it can secure those funds before the end of 2016.
On the operational front, Frontera said it has managed to increase production from one well at South Kakheti by a factor of around five times since launching its work programme on the area back in early April. The company said it has also confirmed the last three wells that were fracked on the area have successfully stimulated the reservoirs which were previously not able to produce.
"Over the past month, these results continue to confirm the potential for commercial large-scale exploitation of the significant associated oil-in-place volumes related to this area of the complex. Production testing is currently ongoing related to the recent three well programme," said Frontera.
The company is now preparing to frack more wells within the next 60 days in the central part of the complex. Notably, Frontera's partner, Varang, solely funded the most recent frack campaign and will also solely fund the next lot of work - freeing Frontera of any near-term financial commitments.
Frontera said its exploration works have produced peak production of 750 barrels of oil equivalent per day under various testing operations since the start of 2016.
However, Frontera admitted it has not met its target to be producing 7.0 million cubic feet per day of gas from the western area of the complex in the first quarter of 2016 as previously guided.
"[The planned gas production has] been consistently delayed due to the Ministry of Energy's discouragement of investment in the ongoing exploration of natural gas resources. Discussions are ongoing to alleviate the Ministry's opposition to this work," said Frontera.
Frontera shares were trading down 3.2% to 0.329 pence per share on Monday morning.
By Joshua Warner; joshuawarner@alliancenews.com; @JoshAlliance
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