Member Info for Moleinahole

Sometimes what's best for the business does not align to short timeframe share price objectives.Investing in resource stocks in higher risk foreign territories requires patience.

They remain within the guidance they have given and the wells are under test. 60 90 and 120 day flow tests are not unusual but we are in the timeframe where a result will be treated with a bit more interest than a short term flow would. These results are very important so they need to be clear and definitive when they land to bury commentators like Zak Philips for good. We are long past the point where incomplete results will have any effect on the share price.

King I seriously can't see any risk to producing assets in block 12. Frontera have spent heading on for half a billion dollars and even in a very pessimistic view of the PSA it can run on the producing fields for many years. The debating point is whether the areas we have not placed production wells means they should be relinquished.

Frontera studies of the block show the eldari covers pretty much the whole block including basin edge and the garedji is under the eldari. So the study and the declaration of commerciality subject to further study (the c option in the PSA) looks correct to me.

There a few dimensions on the politics. First, anyone running for election would no doubt like a success in the bag to point out. That could include either the current president who though Georgia Dream is more an independent.it might suit the Georgia Dream government. Ivanashvlli is the one who interests me. As the top businessman and with his Gazprom connections I find it had to explain why he holds no stock in Frontera either personally or through one of his investment vehicles. If there is money to be made he will be at the front of the queue even if he arrives late.

Then you have the other regional players. Azerbaijan, Armenia and Russia. There is already alot of gas heading up from Shah Deniz and Georgia is now taking more gas from Azerbaijan. So in the past Azerbaijan would not have liked the gas developed. But now they have a market via the pipeline to Europe I think they will be less concerned about both Georgian domestic sales and a neighbour linking into the pipeline. I think that is the most important relationship. Russia will not like Georgia developing not so much because of gas sales more because a growing economy and freedoms will contrast with what is going on in the breakaway regions. Long term economic stagnation and repression cause unrest so I would expect Russia will continue to act to destabilise countries like Ukraine, Moldova and Georgia through their hybrid campaigns and that includes Russian sympathetic oligarchs and politicians that they sponsor!

So I do think there is a timing thing here but I think Azerbaijan are the main economic regional while Georgia gaining more support from EU and NATO including embedding the energy community is equally important.

Zaza view on the results was discussed during the proceedings of a properly constituted general meeting of shareholders which is absolutely the right place for that kind of thing.

I would not speculate that results could be late - focus on the fact that they could equally be soon - could be tomorrow. The reality is that they could be any day now.

Don't think you will get early release of results - I would be pretty sure we will get an interim operational update before they are released.

I think Georgia is indeed trying to position itself. The Russian response to nato summt announcements was short and a bit menacing!

Foremost Georgia want the two separatst regions back. Alot of people are internally displaced in Georgia. Equally it's a proud nation and does not want to be held to ransom by the likes of gazprom again. But Russia are making that difficult by their actions inside those regions which will prevent Georgia joining NATO possibly indefinitely. They also have people displaced from Chechnya. If those two regions were resolved the context would be different. At the level of the people they clearly don't want gangsterism and factionalism and corruption. Georgia Dream won alot of support to remove the UNM. They can lose that support quickly if they don't get the economy moving or are seen to be too Russian leaning or corrupt. So whilst they currently have the reins of power and the driver is Ivanashvlli even he has checks on what he can do. Hence his concern about what happened in Armenia.

Into all the current complexity you have Trump. I suspect the Russians will end up as confused about him as his allies. But I think by the time he is gone he will leave the world in a much more dangerous state than when he arrived.

Georgia is strategically important for energy and its location sitting between Europe and Middle East. I think you are correct on the investment front but I think they would like a mix. Azerbaijan is probably like how Ivanashvlli would like things but the danger with him is that he cedes too much to Russia to get back the 2 regions or tries to act more like the old Ukraine adminstration prior to the current trouble.

The elections ths year will measure Georgia Dream support but at the moment the opposition is fragmented across too many groups and hence ineffective. The old pm was from a grouping of conservatives with links to business not controlled by Ivanashvlli. His group if they split away from Georgia dream could weaken their hold a bit and at the moment that seems to be one of the hot topics in politics what he will do next and whether his mp's follow him or stay with Georgia dream.

So it's a period of instability in the government and all this in the run up to presidential election which is the last time voters will vote directly to the the next 6 year term.

So Frontera find themselves having to work with state agencies where there is clear maneouvering going on as part of wider local and regional politics. I think Frontera are careful not to align with any grouping and are clearly going to invest in lobby of the key US the government agencies to protect their interests.

I suspect our interpretation of the PSA is correct but it would have suited the SAOG if we had handed part of the block back. Its interesting the war of words restarted after we made the declaration commerciality in April 2017. I think they hoped we would fold. But we did not!

Don't forget Schlumberger are recently in the adjacent block.

Its not new news this - the novelty is the commentators own interpretation and linking of events. I've not seen such an explicit calling out of Ivanshvilli like that before! However, whilst the commentator has good credentials the content is just linking together items that are in the public domain and draws on themes that have been well debated at the Atlantic council for several years including Ariel Cohen's Black Sea Energy strategy. Given this weeks events and the recent activity on the pipelines that is probably worth dusting off for a re-read.

Ivanshvilli like most oligarks has varied business interests so he is a bit more complex than painted in the article. Equally whilst some elements in Georgia clearly have Russian leanings there remains significant western leaning support in the broader electorate.

I've said many times here that people need to leave the board to navigate through this carefully. Personally I trust Zaza and Levan to do that and people under estimate the connections Steve N has and how important they are.

Oil and Gas in Georgia with the ramping up of transit gas from Shah Deniz makes Georgia a strategically important state. It will always have to find the balance between Russia and Europe. If Block 12 and the other adjacent blocks have significant reserves then if the US are serious about energy security then I find it inconceivable that Frontera would find themselves without friends in high places here.

What would be good to see here is the arrival of some tangible US financial or big energy support - as it been a bit like the Alamo here.

I've also long been of the view that the prophets of gloom and doom who seek to undermine this company would do well to stop and ponder whether they are unwittingly supporting Putin's agenda.

Oopsi this is what myself and Dulwichman regularly debate and why we have a large lobbying operation in Washington currently and why we are aligned with the Atlantic council.

The politics are a major risk here and always have been. Ivanashvlli is not to be trusted but equally not so easy to deal with while the Georgians keep voting for his party! I find following Georgian politics an essential part of the background research here.

TSBS - the current share price is a massive improvement on where it was in 2016!

Bladey its comments like (and I know its making lite of a situation with frustration) that if I was me and I read that would make me inclined to wait! That's what I'd do if I'm honest but then I'm quite stubborn.

Burning millions of investors cash? You can look at the accounts - the company employ over 200 people and maintain offices in 2 countries and 3 field centres and a gas processing facility. Then do some basic arithmetic on the current program - the money will all be accounted for and it is being spent on operations not burnt. How much do you think working with a large team on 4 wells over 6 months costs? Compared to other companies the spend here on exploration is very modest - SAOG would say its too modest but they have taken obvious steps to optimise operations and sequencing to contain costs on this particular program.

Historically it is disappointing that the spend on the operations did not yield better results which has meant the cost of 200 people, offices in 2 countries, 3 field centres and a gas processing facility plus accumulated debt leaves a monthly deficit. As a result the current campaign has taken years to get to the point where it has been funded and executed. investors who have been here for a while know the history hence I get the cynicism. But in life you can keep looking back or you can go again. Most businesses go through phases like this.

The challenge I will keep throwing out to armchair CEO is what exactly is it that you believe they should be doing differently given the constraints they operate under? As of today they have retained 100% of block 12 through very difficult circumstances and funded the current campaign while reducing debt. If the answer is simply to issue an incomplete RNS - 2018 has categorically proved they don't work - we are beyond that point now.

Zeps I know the share price is important but if you are taking a longer term view it will take care of itself if the asset is there and it is large. Current headroom limit will restrict further dilution short term and I'm sure the board don't want to dilute at this level unless it is absolutely necessary as we are now aligned with them. With good flows different funding mixes become available as we transition to commercial production.

Sometimes its hard to see beyond the short term share price as its a lonely and bumpy road for long investors on AIM!

Jabond if you have contacts of people who know get them to look at the presentations, the geology and RNS and post then great. Round them up!

There is a wealth of information in the presentations but from what we know UD2 are just vertical soviet era high pressured wells where we are testing very small intervals and as of today no one will be bale to tell you what they did on the last stage they worked. I'm not even sure they redid stage 2 as the depth does not align with previous RNS and would place the last work in April above stage 2! Ud2 and UD1 are very close together and soviets worked on them for a long time. Ud1 the soviets abandoned and drilled UD2 right next to it. So it had a lot of drilling fluid pumped into it when they worked on both wells.

The Jan presentation is actually very detailed on UD2 you can see all the weights and shows of gas right down to the depths. What would be interesting is locating where Schlumberger are drilling in the adjacent block for gas. As there has to be a suspicion they targeting some of the same formation as we know the V# wells to the North of UD# wells have the same composition when logged and they are closer to Schlumberger block. One for Bugsy I have looked but it seems quite well hidden there is some from Block and Georgia Oil and Gas sites but not Schlumberger who are up to something on the quiet.

Zeps - no I draw a distinction between news, the current share price and the underlying business. Short term the share price is a thermometer but long term here it will be a weighing machine for the asset.

I suggest you read the Jan and May presentations. They have the rig counts and financial models for the own development plans for taribani (and a model for the gas wells) over next few years. All this is of course predicated on the flow rates.

As of now the business on a go it alone basis needs to fund the daily costs, service the debt and be able to raise finance for the future work programs. Without looking at the accounts again It runs on a $400k a month deficit.

We know that if the new wells produce say 200 - 300 bopd each then during H2 2018 we will have at least 4 of them adding cash with a 9 month payback (and all are of course now paid for including Niko). That will mean the business is generating cash to cover the deficit and then they can look at what to use the cash on starting with the YA remnant.

On a fundamental basis we would then have something to value the company and in addition with a new CPR reserves and cost recovery can be booked. The presentation show you that the company can then roll out say 5 more wells a year (or more if they engaged a second rig as they did in Azerbaijan). That would result in compound growth year on year as the field development scales out with the wells running for at least 10 years to deplete. Those projections would enable the debt up to 2020 to be serviced and either repaid in shares at a higher share price, replaced by some resource based lending or bought back in cash.

The share price would over time find a value comparable to peers based on the production profile and reserves hence the billion dollar company.

That does not preclude the SP starting to rerate as the assets get priced in or a news driven rerate on sentiment or on a corporate event like a takeover or jv (per the US analogy that Steve liked to compare us too as the explorer sells proved up assets to a major). My personal view has always been that whilst I would never rule out a corporate event at any time the best value is clearly once we have proven more of the assets. So once UD2 and taribani results are known as a minimum.

Hope that makes sense. At some point if the assets are here and valued at more than we currently have on the balance sheet that gap will close as the share price rises. As of today the assets have been attributed zero value in the balance sheet and the prophets of gloom like to focus on the profit and loss account as we are of course a lifestyle company working on a block where all the assets are depleted or uneconomic..

Jabond which bit of the intricacies of UD2 (apart from the current flow) are you looking for information and why Baker Hughes - to my knowledge they are not working at UD2 as they are only doing cementing services - Weatherford were responsible for the testing and we seem to have the EDI service company (who do have some ex Baker Hughes and Weatherford staff involved in the directional drilling and logging but have not owned up to working at UD2 on the gas to my knowledge on their web page!).

Its a vertical gas well and we do have the cross section and information on the full depth in the Powerpoint for UD1 and UD2.

Apart from the flow results the question people seem to want to know is how long will it be tested which might be a difficult question for anyone to answer if the answer is a mix of technical, commercial and political components and factors!

That's ok I think it's important at the moment that people realise that it is entirely possible that the frac fleet with the 2 workover rigs the company have can be active on the other wells independent of t39.

There is no reason interim results on T39 and the results from ud2 and T45 can not come at any time.

That makes no sense in the context of t39 to me. The workover rig would already be on the other wells if they were being worked on independent of t39. I would read the move as transport off site of the deep drill rig.

Gary they only need the workover rig and frac fleet for the follow up work at Dino, T45 and T39.

The drilling rig will be back for Niko in November.

Stop propagating ideas that results will be months away. Where is this idea coming from?

You have a Twitter picture of the rig being loaded on lorries that is all. As I've said I'm of the view they should say and post nothing on twitter in the current climate of cynicism and having campaigned to improve communications with the company I never thought I'd come to that view.

Not really - for a few reasons. First, whilst I may have a large stake and be happier if the price was higher I don't need any capital today and its not my only investments/source of income.

Second, the share price has drifted down on low volume, general sentiment/frustration and what I would see as mainly trading activity. It has not fallen due to any specific killer operational failure that anyone here can point too. Had that happened the price would have moved more sharply. The nearest we have to a problem is the arbitration. I would worry about that more if I saw more information coming out about it - but I have searched carefully and found absolutely nothing and on balance believe at worst it would involve relinquishment of an area in block 12 we probably are not developing.

Third, whilst the communications have dried up there is enough in the RNS combined with what we know in the accounts/presentations for me to be comfortable that the plans are progressing and they just need to be left to get on with it. When your busy at work sometimes the last thing you need is noise from people seeking updates. Yellow Jersey could help a bit here but there will be good reasons for the change in tempo and content of communications since April and I'll wait to see why and will ask directly if need be. We are close to that point but have not passed it yet.

Fourth, I do believe we are aligned with the board's share investment and that we will see off YA and the real enterprise growth is from 2019 to 2025 as per the economic models. That does not mean there will not be progress on the JV front but I tend to view that as a bonus if/when it happens and model how I see the company progressing on a realistic go it alone basis as worse case.

Probably not well phrased as I'm typing in between working on something! The oil from T45 and Dino will come from zone 14 and 15. Zone 9 won't do that much - on Dino in particular it has been well drained. T39 zone 19 and possibly 14, 15 at same time will be more interesting. Zone 13 has not been flowed so we don't know what it would add.

In a pumped model the average is 400 bopd from each well unpumped 250 bopd to 300 bopd. So for T45 and Dino you can expect 4 truckloads a day. T39 will do better lets say it settles at 500 bopd. That's maybe 3 more truckloads a day. So at the moment it is somewhat academic as the wells we are producing will result in most likely 6 - 10 round trip truck trips a day. Each journey is 2 hour round trip with time to load and unload. So say 3.5 hours.

So in a day you will get at best 3 trips for each truck per day. So we need 3 trucks - last time I looked we had 2 on site. So until they bring more wells into production they can carry on trucking as it would only need at best 1 more truck adding to the fleet.

But it won't take long for trucking the oil out to require spend on the 20km road hence I would expect the pipeline to be relaid once they bring more wells on stream in 2019. But it is not an issue for the current work program which serves the dual purpose of working out the commercialised flows of each zone for each well and to produce revenue.

Pompey - the "road" (track in parts) from Taribani to the railhead is dreadful. If you drove a fleet of tankers over that for any length of time it would fall apart. So whilst you can truck oil it is a slow process and will hammer the trucks doing it. So for me it is a short term solution scaleable by increasing the number of trucks.

At the moment 1 barrel is 42 gallons and a larger tanker is 9000 gallons. The ones we use are probably half that. So a single well doing 250 bopd is going to need 2 truck loads a day. Scale up from there.

The original soviet working at taribani had a pipeline off site. That was recycled by the locals in the post soviet confusion period in Georgia but the pipeline line is still there and it would take time to relay but would not be massively expensive. So short term they have no choice but to truck (and probably spend a small amount of money on the track/road!) but relaying the old pipeline would be important if volume went up even a relatively small amount.

So short term there is not a lot of point in producing and stimulating zones you can't transport. Now I don't think funding a pipeline will be any issue at all - as a capital project it is bankable same as the gas pipeline will be.

With traders and shorters targeting the stock I don't mind them leaving these timelines with a bit if ambiguity and keeping people on their toes with the possibility of a surprise. You could argue the 60 day guidance itself has contributed to a large extent to the current share price as a fair bit of the selling pressure has probably come from people trading as much as anything else.

Long term holders will be rewarded with a solid RNS confirming at minimum anything in the 300 to 500 bopd on T45 and dino as that will underpin the business. Even that might not propel the share price up but it would remove alot of noise from the prophets of gloom.

If there was something wrong or they were going to raise the PR would have cranked up. It has done the opposite which i take as a positive indicator. I think once they have sorted out the basic foundations of the business by increasing revenue the larger rolling campaign can be planned for 2019. At the moment they have clearly taken steps to both conserve cash and minimise dillution while the base is establushed and I hope resolve the differences with SAOG and the funding path for the next round of operations.

There remains the wildcards now of UD2 flows and T39 zone 19. While T45 and Dino flows were reasonably predictable those two could surprise.

Its not out of the realms of possibility that we get a combined RNS on initial T39, medium term T45 and Dino and UD2 all together.

If that landed with either some news on arbitration or even better an update on possible corporate transaction then will be interesting to see the reaction.

But in the meantime we wait with the small matter of some football to take mind off things.

Bladey you are right the two companies are different. Different culture, different history, different geology, different geopolitics, different license terms, different working interests, different capital and debt structure. Different investor dynamics - Is echo being actively stalked by shorters and traders? Are Echo testing a new drilled well or an old 30 year soviet well bore? Are they testing a high pressure well or a low pressure well?

Out of balance what is the size of the respective resources being tested and the geology and what would that translate too in terms of testing approach? Echo CSo-2001(d) modern drilled well is 19 bcf at 1500m - UD2 up to 5000m deep and 1.2tcf.

It is frustrating but the results will be released when they are ready. The oil you have some broad guidance on but the RNS leaves room for operational sequence and timing alterations and still not require an RNS! Gas they have been consistent in saying they would prefer to release a final and not an interim result. Echo have chosen to issue an interim result on their gas.

NDA I agree on and I think I have been consistent in emphasising that the company is operating a 2 path strategy involving own work programs and seeking jv to develop assets.

Different company, different dynamics.