Member Info for Moleinahole

Well a difficult phase in the lifecycle of FRR has been closed by yesterdays news. Finally, we have in an RNS confirmation of what has been talked about at shareholder meetings and speculated on the BB for 2 years. The drop down has brought out some of the worst posting I have witnessed on any share. Yesterdays news has then attracted the herd of momentum traders many of whom hunt in packs and depart likewise to find their next host for the day followed by the return of negativeers some jealous of the rise and others repeating the mantra taught them from the book of doom.

So as of today FRR are still trading and still following the plan. Just over one year ago I was in Georgia with our team on the ground and Zaza and he said give me a year. Lets assess how we've done.

Shareprice: We are at 0.41 and have ranged for the year from .10 to .88 to .22 to .41. Traders and shorters and long term holders have all had opportunity in that range to make money or accumulate. At the moment the traders have probably done best. We have had director buys - twice plus the management team have bought.
higher than 1 year ago and at no point lower than start of year. In that time remember there have been 2 large fund raises plus an institutional investor and 1.3bn shares of YA preference shares shifted.

Operations: Brought in a young and hungry expert on well completion to work at taribani and assembled a team that have drilled 3 oil wells under budget and without incident. The initial flows have been good. We have drilled zone 14, 15 in eldari a and zone 19 in the eldari b. Zone 9 didn't need testing as we have flowed it extensively for 8 years already. We have found gas condensate in zone 19 that needs to be monetised. The quality of the reservoir and size is bigger than the original CPR suggested. The wells still have no reports of sediment influx confirming the drilling and completion technique is proven. On the gas whilst the soviet era UD2 well proved in the end to have the same sediment problems you get with all poorly drilled soviet wells - we flowed good quality gas from a 50m section of a formation that is 3000m deep at under $1m. Pretty low cost exploration by any measure!

Niko funded!

Work continues securing concession in Ukraine and geology mapping in Moldova.

Corporate: Debt continued to be paid down. YA preference shares managed successfully. Company robustly defended its interests. Won and retrieved outstanding arbitration debt of $2.5m from turkey. Engaged legal teams to defend interests of Block 12 as arbitration mooted by SAOG. Preserved block 12 license integrity through use of the study program. And finally advanced the jv/transaction talks to the point in Georgia where we have 2 majors interested in what we are doing.

Communications: Greatly improved even allowing for the past 3 months where communications as we now know have been constrained by the confidentiality agreements now in place.

So in the round he h

Think guys why do you think the share went down to 0.22 in the first place..........

There have been two changes of plan over the past year which fit into this commercial discussions.

First, the decision to exlore and try and produce ud2 for the gas.

Second, the decision to go deep at T39.

Both were indicative of someone requesting more information. On ud2 while we may have let the battle with the old well bore - the war is about the multiple TCF of gas. In that regard ud2 will have yielded invaluable information.

Finally, we knew SAOG were aware of the discussions per their comments in June 2017.
So to posters like Dave who think this is out of the blue and an excuse for non delivery you are wrong. This has been being worked towards for over 2 years since the 2016 campaign.

Well an interesting RNS that I will pick apart later. <br /><br />I'm not surprised it's 2 majors (US based I would think). But it's early days for them. First, they are not interested in the share price they are interested in the asset and title. This is the first RNS update on this since May 2017. <br /><br />It is frustrating not getting the flow test results. Those wth a short view will continue to claim they are poor and hence the company is in trouble. The alternate view is that the flows are commercial and that the company is at least on an even keel financially while the politics and commercial discussions play out.<br /><br />Concluding discussions largely to their timeframes will also resolve funding and arbitration.<br /><br />It will be interesting if Niko drills deeper still below zone 19 now and hopefully those discussions are resolved quickly.

Sonny I think both UD2 and the arbitration has been quite a distraction. The value of the gas is indeed significant and hence it has been thought that the JV was most interested in the gas. Zaza said that was not the case at the AGM and that there were a number of ways the Block could be monetised from one or more transactions. The original WHI notes and the campaign for 2018 was originally an oil campaign. So the way it is linked in some way to a jv or farm in would indicate that oil was more likely. We also know the GOGC and SAOG historically would prefer us to stay away from the gas. I reread the WHI note again today on the Eldari b and I suggest people read that again and avoid looking at the share price which is now disconnected from the oil news flow!

Beyond that I have an open mind on who might end up working the gas in the long term. I do however think the work Schlumberger are doing is important. Maybe we might not need to prove up the gas too much more if they do it for us in the adjacent block (as we have the kitchen they are exploring in block 12).

Dan that investor would not be selling at a loss. If they were selling they would have hedged in some way else they will be holding. The fact they locked in for 6 months in feb pre drilling would mean its odd to suddenly be selling now particularly as they clearly bought in for the oil not gas and there is so far nothing in the public domain that indicates a reason to sell. On the contrary the oil news has been all positive.

Free/Devex I think that is true to a point. That also is different to not caring about the share price.

As of today the share price is important as a means to an end namely should you need to use equity for funding. So II did some quick calculations yesterday when looking at the current headroom to try and understand what might be going on with the share price being forced down.

If they needed to fund NIKO from equity assuming a discount it would use all the current available 1.489bn headroom. We still have outstanding vendor debt being carried that could require conversion and settlement via equity that wold need over 2bn shares. So I can see why firstly they reduced YA monthly amounts and are paying in cash. Not to do so would have depleted the remaining headroom further. Niko from hedge fund would do same. That leaves the possible balance of vendor debt from 2017.

I have also revisited the 2017 restructure RNS.

"As a result of this important progression, the Company is focused on undertaking a work program that will seek to establish commercial exploitation of the Eldari Formation and other related geologic targets associated with its Block 12 licence area.

In order to achieve this in an efficient and expedient manner due to the large-scale oil and gas resources that we have successfully identified, the Company is seeking a strategic partner to assist in accelerating its planned work programs. Accordingly, we are currently progressing discussions with potential industry partners regarding a possible transaction involving a farmout or joint operation arrangement within the area of its Block 12 holding in Georgia. In conjunction with this effort, the Company has designed a work program for the next twelve months that includes the planned drilling and advanced stacked-stimulation completion of 2 new Eldari Formation wells as well as continued geological, geophysical, petrophysical and engineering study work.

The combination of introducing a strategic industry partner to our work and accelerating focused exploitation of the Eldari formation is expected to provide the Company with the basis for achieving profitability and value creation for all of our shareholders from this significant portfolio in Georgia."

Its a while since I revisited that RNS but reading it again a few things stick out.

First, is the symmetry with the SAOG statement from June. Reading the above with the SAOG statement I believe is the basis of the current debate with SAOG and the arbitration.

Second, previously many had assumed the JV was for the gas and oil for FRR. I'm not so sure now.

Third, the current CONCURRENT work program went beyond the original plan and has drilled a third well into the Eldari B and UD2. Was the sudden accelerated work at UD2 just the easiest way to get at the Gareji formation?

They have followed the plan and done more than they originally scoped.

Shafqut - the big decision at the moment is with the Hedge fund on altering the pre-agreed plan and payment schedule for Niko. Just on T39 Zone 19 if you were investing $3m and having to choose between that and the flows from T45 and Dino I think you would like to see the flow sustained.

So while I'm as frustrated as anyone I can see reasons why we might be waiting on T39.

First, the permit issued in may was for Niko was for Eldari A. So that will have needed to be altered and re-approved by GOGC/SAOG.

Second, the original deal on Niko was for $3m. The deeper drill will cost a bit more - $3.5m.

Third, the flow profile on zone 19 includes condensate as well as oil to process and monetise.

Consider the Hedge fund wants both results (Eldari a and b) on longer tests to decide? Given the funds are due on 1st Sept - I believe they will have to RNS the outcome of the discussion with hedge fund should funds not be received. there are many permutations here both positive an negative that can be postulated.

But 1st Sept is the only RNS deadline (other than H1 2018 Results by 30th Sept) that I am aware of that would require reporting in the event it did not occur. As Monday is a holiday in USA and tomorrow is a Saturday business will have to be concluded by today to hit the deadline even if its reported early next week.

I went back and looked at the last time we went a month with no RNS. It was August 2015 (the month after we signed the strategic MOU for Ukraine).

Half year 2018 due by Sept 30th 2018.
Full year 2018 due by June 30th 2019.
Operational update overdue.

Zeps volume is still low so movements are getting exaggerated now we have dropped back down to this quite ridiculous level. We are now lower than where we were a year ago and that is having drilled 3 successful wells and just waiting for the final flows and next well is funded. Having at the same time repaid $4m of YA debt. Udabano campaign was also not a total waste of time - its proved there is gas in the Gareji.

I'm a buyer because I can't see any fundamental reason for the decline to this level.

Hence why the reduction in debt is also so important. The reason I think we have a hedge fund for Niko is that we are not quite ready for a commercial package as while the balance sheet is much improved we still don't have bookable reserves. In their place and pending the reworked CPR the flow rates are all you have to underpin the business case. The updated CPR was going to cost $300k - its a shame we have had to waste that amount instead in the battle with GOGC. Settlement of that dispute is the second reason I suspect we have a hedge fund for Niko rather than EBRD!

The share price has ticked up a wee bit now. I'm a buyer at this level today.

Dulwich no I don't think they have ever planned to "self fund" in that sense. They would "go it alone" and find their own finance if they have too and don't get a JV partner on terms they are comfortable with. BUt the full field devlopment on the scale envisaged can only be funded by injecting significant capital $20 to $30m. A jv partner with deep pockets could do that - even then getting commercial loans would not be out of the question even in a jv.

If they tried to grow now off internal generated revenue it would be too slow to repay debt in 2020 and GOGC would have a sense of humour failure!

It reminds me of when they were busy with the Court case in 2016/17 - we were only able to follow that from public records of the court case. I'm inclined to think they are up to something and having published the initial flow rates (which if you really want to stretch your UD2 comparison they did not publish) the next logical flow is the longer term stabilised flow. Any other flow would serve little or no purpose. I've posted before the 2016 campaign published initial result in April and next results was sept, This is not without precedent especially as they are not just flowing these wells for revenue but to model and finalise the field development plan.

PG it is self evident that whatever the outcome of the current campaign the company need further resources to develop even taribani in block 12 let alone the other fields and prospects. I suspect that remains at the heart of the disagreement with GOGC and SAOG. They think the block is too big for FRR capacity to fund the work needed.

In terms of dilution I don't think they intend to raise money via equity for the full field development. Its simply too big and too slow to grow organically. The main threat to dilution is from YA but there is a larger threat if the balance of vendor debt from the 2017 restructure converts. As of today we do not know what the plan is for that current liability of $5m+ (double the size of YA balance of preference shares). The plan was to repay using equity at .45p level but today the share price is half that level. So that for me is an open question as to how that short term debt is either being serviced or paid off. That may explain the reduced YA conversions if that debt was being paid by cash resources.

It does feel as though the share price has found itself here through a gradual mark down by the market makers accompanied by some very small scale selling/trading. It has certainly sucked the life out of the share but it will come to an end soon. But if the company intends to secure a non-dilutive funding package not least to keep GOGC quiet then in the absence of a CPR with bookable reserves the next best evidence of commercial viability is longer term flows from the field you want them to invest in. And that I think is what is going on at the moment.

With a bit of luck the results will unlock the funding for 2019 (which could yet involve another party farming in) and go along way to resolve differences of opinion with GOGC I hope.

Cheese no just can't be bothered to read the drivel on here most days.

There is not alot that can be said. I've noticed previously that when Ukog has a good day we get falls here. In low volume like today that is all you need to take 10% here!

Its a waiting game. Once you've decided to reduce communications for whatever reason you might as well finish what you started. Apart from ud2 not being a viable well to flow the gareji there has been no bad news in the past 9 months operationally but there is clearly alot going on around the arbitration given the amount of cash we are having to waste on lobbying.

Pompey there are a few key differences.

First I think you will find Block are benefitting from Frontera work in block 12 in terms of drilling techniques and geological interpretation. That's life. Often those who invest first are not always the ones to benefit most in business.

Second Block have had to give up alot to GOGC for the license. FRR are attempting to retain a high % in a block that is both bigger and more prospective.

Third Block are effectively starting out on a license with a long production history with a fuller CPR allowing Contingent reserves. For all the time FRR have been in block 12 the reserves are still only Prospective. Block are starting with a clean balance sheet Frontera are laiden with debt run up in part learning through mistakes which Block can benefit. That has made funding and progressing the block 12 license since 2011 extremely difficult.

Everyone is frustrated at the moment. The progressive tightening of communications since April is certainly testing not just the wells but pushing people clean over the edge.

USA has labor Day holiday next week. So I think there will be a board meeting this week which I think will be one of the precursor of next news. Non executive board appointment or signing off the 2018 campaign results, alterations to Niko or the 2019 plans. Beyond that the 2018 H1 results have to be issued in the next month. Previously take 2016 campaign the operations updates were done in advance of the H1 results after a similar wait.

With the first Niko payment due 1st sept and service provider needing their upfront payments and pumping team needing to know whether it's needed or not i think that RNS within the next week very likely.

Phil - I suggest you continue do research but above all do not assume anything.

On the YA funds for instance whilst they could be paying it from revenue equally it is entirely possible they are using some or all of the $1.5m excess raised in Feb (shares now no longer locked in) or some or all of the $2m+ from the arbitration settlement in Q1 2018.

Niko is not a soviet well it is well understood and has been drilled or worked a few times - the higher parts of the well are fine it is flowing zone 9 at the moment. There are very good reasons why we are probably limited in our options around funding not least the absence of a bankable CPR (we have possible not proven reserves) and continue to have a large amount of debt even after repaying and converting a huge amount over the past year. The SAOG arbitration request also adds to those difficulties.

Dulwich - you are correct the pope never forgets whose round it is! And he also knows a bit about gas.....

Zib the concession they wanted was the other side of the border from the Modova license (Dobruga basin) which they think is analogous to the Kura basin.

At the AGM Zaza was pretty clear that Georgia is the top priority. Moldova only has a skeleton geology team on the ground at the moment and Ukraine was at an early stage.

The problem with Ukraine is that while it is without doubt prospective it comes with politics and corruption and risk on a different scale to Georgia. So hopefully if we do go there it is with a partner and only after we have secured the company future in Georgia. Remember we have been discussing deals with Ukraine since 2014/15 and had signed memorandums with them in the past around the gas so this has been a long time in coming.

Timster alot of the background context is very important to long term holders.

While the short term results are contingent on operational performance by the team in the field and geology the wider context impacts the company at a corporate level.

I think the longer term holders are quite capable of discerning the difference. Over the last year the company have delivered more than they did in the previous 5 years. I do not think you can compare the ud2 work to taribani. Ud2 was very much exploration but taribani is exploitation we are flow testing horizons that have been flowed before but in an uncontrolled way and for very specific purposes to finalise the full field development plan and in the process get SAOG and GOGC back in their box. The flow rates will be what they are but I think you are wrong to compare to ud2.