Member Info for Moleinahole

Well they got their funding this week for the underground gas storage project so I would think the two are linked.

Prod I keep returning to the June 2017 meeting which occurred and was reported by SAOG. We all thought at the time Steve standing aside was part of the process of mending relations.

"On June 26, the Agency and GOGC met in Tbilisi with Frontera Resources (Frontera) concerning its plans for Block XII and also to address Frontera’s unfounded negative statements to US officials and others about Georgia's business climate. The meeting comes after Frontera’s April 11th announcement that it had determined the feasibility of commercial production in Block XII and estimated that the geologic targets identified contain more than 1 billion barrels of original oil in place. The technical and economic feasibility of these targets has yet to be determined and requires further work which will necessitate significant investment. According to its 2016 financial statements, Frontera had oil and gas sales of USD 3.1 million and net losses of USD 23.6 million (which include interest expense from debt of USD 9.2 million). To support its work program and achieve profitability, Frontera announced in May that it needs to focus on securing a strategic partner. Any assignment is subject to the satisfaction of all the requirements of the production sharing contract."

Clearly they talked about funding and assignment of block 12 of parts of it to a third party at that meeting. The words "satisfaction of all" stand out in the statement as a caveat to approving a jv assignment. The pre-section questions FRR financial ability to fund block 12 development. Of course after that Zaza successfully funded the 2018 campaign (results of which we await). Note also that SAOG are questioning specifically the economic and technical feasibility (which would have been part of the declaration of commercial feasibility. Note also it only talks about oil.

Also note since june meeting in terms of Block 12 license FRR went down the study device in the PSA to extend exploration activities for another 5 years but I think SAOG knew April. Also I have noticed that Zaza does describe the current campaign slightly differently than as a pure commercial drill. The real commercial decision is pending the current results. If the dispute ultimately is just about the technical and economics and the ability of FRR to get the full field development funding then the current campaign does just that.

It would be nice if the flow results resolve the geological, economic and political aspects at the same time. That might be what then required to unlick the jv or wider funding package. Hence sledgehammer to crack a nut.

The current drill campaign is clearly designed to prove the technical and economic feasibility (and GOGC and SAOG have done nothing to block permits). What I did take away from the lobby documents last night was that the dispute leading to the arbitration started at least at early as Nov 3rd 2017, most likely June 2017 and probably has its roots in the April 2017 declaration.

I have pulled back the document. It was lodged in Nov 3rd 2017 (the day of our AGM! and when we were busy at Udabano in the first stage). But can represent anything up to 6 months previous. Initial registration is as below - I'm currently on the DOJ site reading Hogan published correspondence including the Saudi Govt who they also represent (love the US government sites for information! to find what they have said about frontera).

Georgian Oil and Gas Corporation is a state-owned limited liability company with operations, in the areas of oil and gas transportation, engineering and construction. Georgian Oil and Gas Corporation LLC (G0GC) was established in March 2006 by the order of the Minister of Economic Deyelopmeht of Georgia. the government-owned shares of JSC "Georgian International Oil Corporation", JSC "Georgian .International Gas corporation, and JSC tarawto (Georgian Oil) were, accumulated in GOGC's authorized capital. In September 2011, the corporation changed its legal form into a joint stock company.

Section 7
The registrant has agreed to provide the foreign principal with counsel and assistance regarding: (1) agreements to exploit and/or develop oil, gas and mineral reserves, and (2) a contract dispute between the foreign principal and a private entity.

The registrant may engage with United States government officials on the foreign principal behalf. While a formal engagement has hot yet been finalized, standard hourly rates range from approximately $600 to $1000 per hour.

Section 8
As requested by the foreign principal, registrant will advocate on behalf of the foreign principal with United States government officials and/or agencies regarding:
(1) agreements to exploit and/or develop oil, gas arid mineral reserves, and
(2) a contract dispute between the foreign principal and a private entity.

Section 9
Registrant's activities will include meetings and communications with current United States government officials, including Members Of Congress and their staff, on behalf of the foreign principal regarding: (1) agreements to exploit and/or develop oil, gas and mineral reserves, arid (2) a contract dispute between the foreign principal and a private entity.

Pyro - just back from my afternoon meetings.

If you look at the excerpts in things like the back of the AIM listing documents and CPR's then you definitely get a partial view. This is well demonstrated when the company published the actual bit of the PSA a few months ago explaining around the Study. I suspect there are quite a few areas where it is not as well drafted as it could be and equally I am 100% certain there are more provisions than we know about. Remember at the time it was drafted they knew about associated gas but have always been sceptical of the deeper gas. But don't forget gas was not as important then as oil - it was probably as much a nuisance to be handled rather than sold in an oil field.

On the gas there are various definitions of hydro carbons used and yes there is some ambiguity in the 2nd hand bits we have seen. But personally I can't see how you could not classify the gas/condensates with the oil if you make a discovery which I think the deeper gas should be classified as - as opposed the 6 existing known oil fields. A lot of the published part of the PSA we have is around cost recovery pool - hence the declaration of commerciality alters the recovery % at that time for the field subject to the declaration and as Devex says that might be where they want to talk.

The prophets of gloom implied the dispute was over relinquishment (presumably of unexplored or parts of the block not being actively explored) at the end of the exploration phase. The short answer to that is that GOGC have never published that and FRR have not commented on the detail since April 2018.

Devex the registration of GOGC as a lobby interestingly seems to go back to early 2017. Whilst it could link into the spat with FRR - equally remember at that time the Georgians were in debate over the gas contract with Russia and Azer. I will do some more research tonight when I get home on the US government websites as I want to see any actual original lobby documents submitted not a second hand report as the activity only needs to be reported on 6 month returns for the foreign lobby via DOJ not quarterly.

Having said that if they are lobbying about our PSA (as opposed to something else) maybe it shows that FRR do indeed have friends in high places, possibly do have a string case or the Georgians are worried that they could get themselves sanctioned if they miscalculate.

I'll finish by saying that if an arbitration request had actually been received in detail then I would expect that to have been more visible firstly from the SAOG and GOGC and secondly from Frontera in an RNS.

As I say when I get home tonight I'll do some research on US govt sites. But I did notice their lobby seem to do alot of work for Ecuador - so might be an interesting search! I am also interested in why GOGC did not fall under the commercial exemption for their reporting via DOJ - that itself may mean its aimed more at Congress threats to sanction rather than arbitrati

So its a FARA registration then. This is what Manafort and Gates are falling foul of amongst other things.

https://efile.fara.gov/pls/apex/f?p=181:200:3666341892535::NO:RP,200:P200_REG_NUMBER,P200_DOC_TYPE,P200_COUNTRY:2244,Exhibit%20AB,GEORGIA

Last document on the site is stamped 03/11/2017. Not got time this afternoon to search more.

Has anyone else attempted to independently verify this claim about GOGC lobbying? I can't find the entry in the http://disclosures.house.gov/ld/ldsearch.aspx or https://www.opensecrets.org/lobby/lookup.php

I am very suspicious about the return of vulture posters and the sudden re-emergence of this. Please can someone else independently verify as I can't see it registered and I have searched under Country as well as name to eliminate an issue with names in the search.

I'm busy today so would appreciate some additional eyes on it please.

Emblaze I think posted that I thought there would be news this week. I doubt it was me but I do think it is now imminent.

When I read the tweet I see 3 things.

1. Its a general commentary on doing business in Georgia and possibly part of the Mending the fences process with the govt after the war of words in 2016 and 2017.

2. Its not about Cartu bank the one linked to Ivanashvlli.

3. In passing the article also talks about pipelines.

So I would not read anything into it beyond that. FRR have borrowed from Georgian banks for local infrastructure. I remain of the view EBRD will be high up the list for a large funding package if we go that way as that was who funded us 20 years ago.

I actually think the visit of the trade and security delegation from Congress get the past week or so will prove important.

Filtered fact.

Probably a reasonable balance of risk to reward.

Reasonable interest rate on the £15m at 9% non convertible so still needs to be repaid but they get warrants (20m at 32p) so at a reasonable premium to at least underpin the current price if they sell in the future by which time one would hope the share price should be north of here.

We obviously still need funding sorted on the rest of the field development activities so that to come probably different debt\offtake based?

So looking interesting with them going drilling again on top of the other potential newsflow. Certainly helps to have the board with significant skin in the game to work out a deal that attempts to avoid dillution.

Blue the MM appear to have positioned us here with a relatively wide spread. If you buy they are encouraging you to hold but will only take more shares on with the discount in the spread. They don't want to make much of a market at the moment but will take shares off you.

In low volume the MM will often do this so I wouldn't read much into it. They don't know any more than us on news but I do think they have had a relatively modest order could be either a buy or sell (I would say they have been doing both on different days) at prices around this level.

What the drop to here will have done is cleaned out and traders for the moment meaning if news lands you would think if its positive there could be the usual shortage of shares we often see here. We are now outside a T20 range since the last news now. Don't know what the spreads look like but would be a brave short from here with news due so would think overall this is just the level we are at.

Pyro plenty of skulduggery around and yes if they sold up then it would be interesting to see how you shift 20% of 16bn shares when 1m can knock the price!

There does seem to be a persistent transaction of 2.5m multiples at .275. Kicks the price in the morning and in the afternoon - sort of thing you do to keep the price down - maybe something VWAP related going on here at the moment.

I'm comfortable with how they are approaching Taribani and the debt but obviously the next announcement weighs heavy given the change in communications pattern since April and it has clearly pushed a few over the edge.....

Pyro - the board should now be in a closed period now pre half year results let alone pre flow test results......

Flakey I don't know how long you have been invested here but the company are not jumping about as you put it. They have done in the past after setbacks in different plays but that is not how I would characterise what is currently happening. The company have also not as you put it withheld information. Ud2 has just not worked this time you need to get over it. They tried 3 times but it's not going to be production well without a sidetrack like most of the wells in tarbani for the same reason.

Udabno had been in the planning since 2015. The taribani campaign goes back 18 years when the ekdari a and b was originally drilled. The current campaign has been built up to since 2015 and we have waited since then to see them get enough cash together to execute the work that was thwarted by the drop in oil price and Varang exit.

Goodness knows what you would have been posting in 2016 when we faced liquidation!

Today has seen a good broker note giving some useful information to discuss. Focus on that.

Free in the past the wells have started failing straight away with sediment influx. The cementing has actually been resolved for longer than you might think they succeeded in the work In Mirzani with Baker Hughes and Schlumberger years ago and with the work at Dino.

The new innovation in 2018 has been the drilling particularly once the pressure rises as they went down to get the good clean guage in zone 14 and 15 and the use of the ceramic proppant and higher power in the stimulations to open up the formation. That wold likely also be a reason why they perforated and stimulated only very small sections of each zone in the Eldari A. As they found at UD2 if you don't drill cleanly and the cementing is poor you can't stimulate with the force needed to open up the formation. UD2 may well have flowed better much deeper (like T39 is doing) but I expect the well bore below 3000m to 5000m must have been pretty poor as they did not venture much below 2500m at UD2.

Eldari B (Zone 19) is obviously totally different and relies on the clean drilling and clean cementing and then letting the higher pressures get the oil into the well bore. So once the cementing is set it should be ok I think.

Star - Apart from the prophets of gloom leak and the company RNS response there is absolutely nothing on the subject anywhere not on official or unofficial media. It is entirely possible we never hear of it ever again particularly if it was just a tactic by SAOG to speed FRR up on the field development rather than a determined threat to try and take part of the block back. As Zaza said a sledgehammer to crack a nut. Equally I don't doubt the extensive lobbying and engagement of out legal team means they are indeed robustly defending our interests.

Max - The arbitration if it involves the PSA should be at Stockholm Chamber of Commerce not Geneva as stated in the prophets of Gloom where you can read all about the procedure.

If FRR can get some momentum up then that is the best defence. I do think both the venture into the gas at Udabano and the deeper drilling at taribani into different formations are part of determined demonstration that they are active in the Block doing "study" work while they progress the full field development plans for taribani.

I think the preferred funder they have in mind is for own development is EDRD convertible loan notes - but as I posted yesterday EBRD do a lot of different funding patterns which does indeed leave room for matched funding and other arrangements. That is different from a potential farm in partner which can never be ruled out here.

The gas and doing Eldari b certainly complicates the arrangement for NIKO with the Hedge Fund. Share of cost/revenue from Eldari A was relatively easy to price but Eldari b adds a bit more risk and complexity at marginal cost increase to the Hedge Fund they could get significantly more money.

Indeed Coggy makes you wonder what Zone 25 will be like when you get down much nearer the Gareji. That will be higher pressured still to drive the recovery. Two different plays in the same well at $2.7m for Eldari A or $3.7m for Eldari B. I think the economics of the field were proved in the 2016 campaign in the Eldari A but the Eldari B is a different proposition altogether.

The leap of faith people need to make is that the field is economic even at low production volumes and to look at the long term projected recovery here not the flows from any single well.

Fair point - WHI have not attempted to address the associated gas question in their note other than noting it helps the lift. But then they never acknowledged Eldari B or the fact that both A and B go out across the block not just in Taribani in their initial note and still have pretty much no value in the wider gas let alone the associated gas.

So their estimate of 0.82p should be reviewed and raised a fair bit in my opinion.

I've said this many times here that people need to read and digest the information that is available. Taribani zone 9, 14 and 15 is expected to flow well but after a couple of years they drop off and then flow steady for the next 10 years.

If you look at Dino on which the WHI eldari a is modelled they recovered 106k barrels over 8.5 years from zone 9. That is an average of just 34 bopd across the period. But the important part is that each well in Eldari A would just on zone 9 deliver @$750,000 a year as an average with the higher flows in the early years covering the capex in under 1 year (on a 3 zone model).

When you then do the same with zone 13, 14 and 15 you get the 3 times or 4 times model numbers.

We now have zone 19 and above to throw in the pot. That will totally change the economic profile of these wells. If you do the lower zones first balancing the slightly deeper drill cost with no need to frack in early years but a flatter production profile then you probably need to drill more wells quicker to start with to then enjoy a more stable middle production period as opposed to higher short term returns from Eldari A.

The well economics clearly make sense just on the Eldari A particularly in the drilling and cementing technique is now proven.

That is the context of the current production tests to determine the optimal field development plan for taribani as depending on which way they go will produce different economic models, capex requirements and indeed the composition of the drilling teams.

5p that's exactly what some of us have been trying to communicate. Whi have rightly picked up on the difference between eldari a and b and covered observation we have discussed here like the significant difference in the size of zone. 19 and its characteristics compared to the 2005 CPR.

They have also answered the question I have asked several times about how you produce across the pressure divide.

Its a good note and gives a totally different explanation and context to those who say the only reason they went deeper was because the higher zones don't flow. If zone 19 and below as a higher early years production profile then it is very important to exploit that first if a well cost is only marginal higher and then when it equalised you for the higher zones by bringing in the tracking equipment.

Dulwich I was reading about the Caspian agreement the other day debating whether it was a sea of a lake as that change the international law that applies. In part it shows how dangerous a game trump is playing by creating new alliances in a volatile region. Iran and turkey both moving closer to Russia as the US creates tension. That is unhelpful for Frontera generally as there is a risk Georgia ends up out of step with its neighbours leaving is very much a frontier state between east and west But that is a position they have navigated through history. If you go back to the original purpose of FRR it was to provide market driven economic growth by exploiting the under developed resources in the black sea region. Been alot longer than anyone imagined but the mission remains as relevant today as it was 20 years ago.

The reserves in the Caspian will be more expensive to extract than onshore and while it may result in new infrastructure there is already plenty in Georgia for us to hook into and we are that little bit closer to Europe and cheaper being onshore and shallower to extract.

But yes the US needs to be careful with the politics. But tend to agree business here will transcend borders and ultimately if the US are not careful the European LNG will not come from US but increasingly from Caspian.

Day closer to news than yesterday and can't be long now for results. Still no nonexec appointed as well so saving costs and half year 2018 results will be falling due fairly soon.