14 Aug 2008 07:00
FRONTERA RESOURCES CORPORATION
Houston, Texas U.S.A. - August 14, 2008
OPERATIONS UPDATE, BASIN EDGE PLAY UNIT
Frontera Resources Corporation (London Stock Exchange, AIM Market - Symbol: FRR; OTCQX Market, U.S.A. - Symbol: FRTE), an independent oil and gas exploration and production company, today announced an update of operations at its Basin Edge Play Unit, Block 12, Georgia.
In the most recent Operations Update in April for drilling operations at the "C" Prospect, it was reported that based on the difficult drilling conditions associated with the Eocene formation, a formation that was not originally expected to be encountered within the "C" Prospect, a new approach to drilling this section of the well was designed. This was done with a focus on efficiently and successfully reaching our primary Cretaceous objective within the "C" Prospect.
As a result, it was also concluded that it would be necessary to obtain a new rig with capabilities and specifications that are better suited for the drilling challenges that we have encountered. Based on this, since April, efforts have been underway to secure a new rig to return to drilling operations as quickly as possible. However, due to a congested market for the higher specification drilling equipment required to meet the new technical objectives, it has not been possible to schedule a continuation of drilling operations as originally planned. Efforts are ongoing to secure the appropriate equipment with an objective of continuing operations at the "C" Prospect during the fourth quarter of this year.
While efforts to obtain a new rig have resulted in a delay in the planned continuation of drilling operations, this delay also provided an opportunity to take advantage of the current schedule for reprocessing and additional analysis of the 3D seismic survey related to the "C" Prospect. As a result, the extensive data obtained from the multiple well-bores associated with drilling operations at the Lloyd #1 location is being incorporated into the existing 3D volume in order to enhance the interpretation of the giant "C" Prospect. The result of this work will lead to the generation of a depth conversion, which will allow more accurate mapping of the prospect and provide the basis for future drilling operations.
While the reprocessing effort is still underway and not expected to be completed until the end of the third quarter, early results have revealed that previous structural interpretation remains intact, confirming that the height of the structure is large and that additional up-dip potential can be defined south of the current drilling location. It is also the goal of our reprocessing effort to better define the Miocene and Eocene reservoirs, where we have encountered oil and gas shows, for future drilling.
Steve C. Nicandros, Chairman and Chief Executive Officer, commented:
"Since April, Frontera has been working to return to drilling operations as soon as possible at the 'C' Prospect, but has encountered delays associated with obtaining the required drilling equipment in the current oil price environment. During the delay, however, we have taken the opportunity to enhance our ongoing work by reprocessing our 3D seismic survey over the prospect. This work will incorporate the actual results encountered from the well-bores that have been drilled to date and provide the basis for continuation of drilling operations at the Lloyd #1 location. In addition, reprocessing will yield a more accurate view of the subsurface for future drilling operations that will be designed to appraise the results obtained from our work at the 'C' Prospect thus far. We remain extremely encouraged by our ongoing work at this important prospect."
Basin Edge Play Unit, "C" Prospect - Lloyd #1 Well Background
In December 2007, the Lloyd #1 well was drilled to a measured depth of approximately 3,000 meters. While drilling, the Lloyd #1 well encountered multiple potential reservoirs as well as multiple hydrocarbon shows throughout the Tertiary age section of the well. In particular, 60 feet of conventional geologic core was cut from a 200-foot thick Middle Miocene sandstone interval. The core, which consisted of almost 100 percent sandstone, documented extensive vertical and sub-vertical fractures that contained live oil. In addition, subsequent well log analysis of this same stratigraphic interval indicated that oil was present in zones believed to be primary matrix reservoir.
Within the Tertiary age section, drilling also revealed the unexpected presence of important additional lower-Tertiary age geologic formations within the "C" Prospect. These formations, which consist of Oligocene and Eocene age rocks, are known to contain prolific reservoirs in fields that are situated on-trend to the west and south of the "C" Prospect within the upper Kura Basin. The deepest and oldest interval encountered was of Eocene age, which is expected to be situated stratigraphically directly above the Cretaceous age formations that are the primary target objectives within the "C" Prospect.
Based on analysis of drilling and logging results, it was determined that the well was drilling through highly dipping lower-Tertiary age rocks and, when calibrated to 3D seismic data, it was noted that the Lloyd #1 well bore was on a trajectory further down-dip, or lower on the flank of the "C" Prospect structure, than originally desired. As a result, a new up-dip drilling trajectory (Sidetrack #1-2) from 1,600 meters within the original Lloyd #1 well bore was drilled. This was done in order to try to more optimally encounter the well's Cretaceous age geologic formation targets and also appraise the Tertiary age geologic formations in an up-dip position to where oil and gas shows were encountered low on the structure.
In early February of this year, Sidetrack #1-2 reached the top of the middle Eocene formation at a measured depth of approximately 2,600 meters, and similar hydrocarbon shows were encountered in a position approximately 440 meters up-dip to those encountered in the top of the Eocene formation within the Lloyd #1 original well bore. Hydrocarbon shows and potential reservoir were observed based on analysis of cuttings and mud logs. Drilling in Sidetrack #1-2 also confirmed the up-dip presence of the same lower-Tertiary age geologic formations (Oligocene and Eocene) that were encountered down dip in the original well bore.
After completing logging runs, intermediate 9-5/8" casing was set to a depth of approximately 2,533 meters within the middle Eocene formation. Upon resumption of drilling from this depth, unexpectedly difficult drilling conditions were encountered that resulted in extremely slow rates of penetration and unacceptable well bore instability.
Analysis determined that these conditions were most likely attributable to the highly tectonized nature of the middle Eocene formation and the angle at which the well was being drilled. As a result, a new sidetrack (Sidetrack #1-3) with a lower well bore angle commenced drilling from a measured depth of approximately 2,200 meters. While encouraging hydrocarbon shows were seen within the #3 sidetrack, after reaching approximately 2,600 meters, difficult drilling conditions were once again encountered.
With the Cretaceous interval expected to be within 300 meters, a sidetrack (Sidetrack #1-4) commenced from a depth of about 2,500 meters and progressed to a depth of approximately 2,700 meters, the well was once again overcome by well-bore instability in the Eocene formation. Hydrocarbon shows were also seen in the #4 sidetrack.
Based on the difficult drilling conditions associated with the Eocene formation, a formation that was not originally expected to be encountered within the "C" Prospect, a new approach to drilling this section of the well has been designed. As a result, appropriate changes have been made to well plan design for continued drilling and efforts are underway to replace the existing drilling rig and associated equipment in favor of a new rig with capabilities and specifications that are better suited for the drilling challenges that we have encountered. This is being done with a focus on efficiently and successfully reaching our primary Cretaceous objective within the "C" Prospect.
As previously stated, analysis of the 3D seismic data related to the "C" Prospect prior to commencement of drilling indicated that the primary target reservoir objectives, identified on the basis of seismic attributes, could occur at depths from 2,000 meters to 3,700 meters. Data thus far gathered from the Lloyd #1 well continues to support this model. The recently discovered up-dip presence of the Oligocene and Eocene sections within the Lloyd #1-Sidetrack #1-2 provides further confirmation that the geology is relatively intact and continuous within the "C" Prospect and that the primary objective Cretaceous section still lies ahead within the originally predicted depth intervals.
Frontera's Basin Edge Play Unit is located along the northern border of Block 12 and represents what the company believes is one of the newest and potentially most prolific exploration plays in the Upper Kura Basin. Netherland, Sewell and Associates estimate total unrisked resource potential to be in excess of one billion barrels of recoverable oil within the unit's two major prospects ("B" and "C"). Of this total, prior to the acquisition of new seismic data suggesting an even larger structure, the "C" Prospect was estimated to contain as much as 300 million barrels of recoverable oil from primary reservoir targets and as much as 250 million barrels from secondary reservoir objectives. Frontera's primary reservoir targets are located in the Cretaceous age carbonate rocks, with secondary reservoir targets in the Tertiary age clastic rocks as well as Jurassic carbonates.
Enquiries:
Frontera Resources Corporation Liz Williamson Vice President, Investor Relations and Corporate Communications (713) 585-3216
lwilliamson@fronteraresources.com
Brunswick Group LLP Patrick Handley / Camilla Gore London: +44 207 4045959
Nominated Advisor:
Morgan StanleyJon Bathard-Smith
+44 20 7425 8000
Notes to Editors:
1. Frontera Resources Corporation is an independent Houston, Texas, U.S.A.- based international oil and gas exploration and production company whose strategy is to identify opportunities and operate in emerging markets around the world. Frontera has operated in Georgia since 1997 where it holds a 100 percent working interest in a production sharing agreement with the government of Georgia. This gives Frontera the exclusive right to explore for, develop and produce oil and gas from a 5,060 square kilometer area in eastern Georgia known as Block 12. For more information, please see www.fronteraresources.com. For more information regarding Frontera's Basin Edge Play Unit, please see: http://www.fronteraresources.com/operations/basinedge.php.
2. The reserve information herein was determined by the independent consulting firm of Netherland, Sewell & Associates in accordance with the petroleum resource definitions adopted by the Society of Petroleum Engineers (SPE), World Petroleum Council (WPC) and the American Association of Petroleum Geologists (AAPG) in 2000.
3. This release contains certain forward-looking statements, including, without limitation, expectations, beliefs, plans, goals and objectives regarding the potential transactions, potential drilling schedule, well results and ventures discussed in this release, as well as reserves, future drilling, development and production rates. Among the important factors that could cause actual results to differ materially from those indicated by such forward-looking statements are: future exploration and development activities; availability and performance of needed equipment and personnel; seismic data; evaluation of logs and cores from wells drilled; fluctuations in oil and gas prices; weather conditions; general economic conditions; and the political situation in Georgia and neighboring countries. There is no assurance that Frontera's expectations will be realized, and actual results may differ materially from those expressed in the forward-looking statements.