WHI /Vox7 Jun 2018 10:46
Frontera Resources (FRR) - WHIreland note 07.06.18
Market Cap �65m
Price 0.42p
Frontera announced that to effectively eliminate the legacy of an equity drawdown facility it has agreed to redeem the entirety of the shares (or securities that can be converted to shares) held by the equity drawdown facility provider for cash over a twelve month period at a rate of $0.265m per month. The company has the right to issue shares in consideration for the elimination of the relevant liability, which has a nominal or redemption value of $2.8m.
In our opinion, the company has matured from the period where it was reliant on equity drawdown facility structures to provide it with funding, which is a very positive evolution in our opinion given what we perceive to be damaging impacts of such facilities. We have assumed that the maximum possible amount of shares that could be issued as a result of the legacy facility will be issued so the drip feed of equity has no dilutive impact on our valuation.
Frontera has made very considerable progress operationally and corporately over the last 12 months, which have essentially transformed the company�s direction of travel. We believe that successful long-term production testing at the company�s Taribani oilfield would further propel it into a different category. With success at Taribani, we believe the company would have access to, what we consider to be, higher-quality sources of capital (equity/debt/industry/hybrid structures) that would better facilitate the the obtainment of corporate goals and the creation of shareholder value. We are glad to see Frontera closing the final chapter on its legacy equity drawdown facility.
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