Frontera Resources Regulatory News (FRR)

9 May 2007 07:02

Frontera Resources Corporation09 May 2007 FRONTERA RESOURCES Houston, Texas USA, 9 May 2007 PRIVATE PLACEMENT OF CONVERTIBLE NOTES AND OPERATIONAL UPDATE Frontera Resources Corporation (London Stock Exchange, AIM Market - Symbol:FRR), an independent oil and gas exploration and production company, todayannounces a private placement of Convertible Notes and gives an operationalupdate. HIGHLIGHTS Private Placement • $46.5 million raised through a private placement of convertible unsecured notes due May 2012. • Frontera may issue up to a further $20 million of Notes within 30 days of closing. • Net proceeds essential to support Frontera's development and exploration projects in Block 12, Georgia. Operational Update - Taribani Field Unit • Zone 9 development program to begin with re-entry and re-completion of Dino #2 well in Q2, followed by two new development wells in 2007. • Reservoir objectives situated at approximately 2,300 meters. • Key service contracts awarded and signed for dedicated drilling rig and other associated services. • Eight further wells planned for 2008. • Specialized Frac-Pack completions designed to enhance recovery and manage sediment control during production operations. Operational Update - Basin Edge Play Unit • Drilling at Basin Edge "C" Prospect, Lloyd #1 well, to commence in early Q3, 2007 to evaluate multiple objectives, with a primary Cretaceous target situated at approximately 2,700 meters. • Based on further interpretation of seismic data, Frontera continues to believe the "C" Prospect to be approximately 20% larger than originally mapped. • Site preparation and road construction are currently progressing ahead of rig mobilization. Operational Update - Mirzaani Field Area Production Unit • Q1 2007 oil sales totaled U.S. $1.1 million. • Study completed and program designed to enhance existing production and book additional reserves through re-entries of existing wells and new drilling within the field from undeveloped locations within the shallow Shiraki age reservoir objectives at depths from 400 meters - 1,500 meters. • Two new wells and up to five re-entries scheduled during Q3/Q4; drilling rig contracted. Operational Update - Mirzaani Field Area Exploration Unit (Mirzaani DeepProspect) • To accelerate testing of this important prospect in parallel with ongoing operations in other business units, an effort is underway to seek a farmout partner to undertake new drilling within the next twelve months. Steve C. Nicandros, President and Chief Executive Officer, commented: "Today's announcement signals the continuation of an aggressive drillingcampaign for Frontera. The sustained strong oil price environment provides acompelling economic rationale for us to remain very focused on progressing thecontinuation of work programs across our primary business units within Block 12.Implementing aggressive and thorough technical work programs to realize thesignificant value that our historical investment has identified requiressustained financial resources - particularly when services and materials are inhigh demand. I am very pleased that we are now able to commit to the substantialprograms that are essential to ensure that we have the ability to maintainuninterrupted operations within desired timelines. Through this, we are wellpositioned to achieve our growth objectives and realize shareholder value fromour outstanding portfolio." The Company intends to announce its financial results in respect of the yearended 31 December 2006 within the next two weeks. Enquiries: Frontera Resources CorporationLiz WilliamsonVice President Investor Relationsand Corporate Communications London Office: +44 207 2628235, Mobile: +44 (0) 786-407-5834 (Weeks of 7.5.07and 14.5.07)Houston Office: (713) 585-3216 (Thereafter) Brunswick Group LLPPatrick Handley / Mark Antelme +44 207 4045959 SUMMARY OF CONVERTIBLE NOTE FINANCING • The Notes have been issued at par by Frontera and will bear interest at 10%, payable quarterly in arrears either in cash or in kind at the sole discretion of the Company. • The Notes have been privately placed with a number of institutional and private investors, including certain funds and accounts managed or advised by DDJ Capital Management LLC ("DDJ"). Raymond James and Associates assisted the Company as an introducing agent for a portion of the placement. • The Notes are not admitted to the AIM market of the London Stock Exchange ("AIM") or listed or dealt in on any stock exchange. • The Notes are convertible into fully paid $0.00004 cents common shares of Frontera ("Common Shares") at the option of the holder at a conversion price of U.S. $1.67 per share, which represents a premium of 7.5% over the closing price on May 4, 2007 of £0.78 per Common Share (May 4, 2007, exchange rate: £1 = $1.994). However, if the Sale Price (as defined in the section headed "Further Information on the Notes" below) of Common Shares is at or below $1.30 for 10 out of any 20 consecutive Trading Days (as defined in the section headed "Further Information on the Notes" below) at any time in the 12 months following closing of the issue of the Notes, the conversion price will be reset to $1.30 per share. • $10 million of the proceeds from the Notes will be placed into a separate escrow account from which 50% of the funds will be released to Frontera when the Sale Price of Common Shares exceeds the conversion price for at least 20 consecutive Trading Days and the remaining 50% being released when the Sale Price of Common Shares exceeds two times the conversion price for at least 20 consecutive Trading Days. • In addition, the escrow funds may be released to Frontera at any time upon joint written instructions of Frontera and the representative of the Purchasers. DDJ has been appointed as the representative. • The Notes will be automatically converted into Common Shares if the Sale Price of Common Shares exceeds two times the conversion price for at least 20 consecutive Trading Days. • Any investor who converts its notes into Common Shares before May 8, 2008 will receive an additional payment equal to one year of interest on the amount of Notes converted. At the Company's option, this payment can be made in cash or Common Shares. • Frontera has the right to sell an additional $20 million worth of the Notes through private placement within 30 days of the closing, which took place on 8 May, 2007. USE OF PROCEEDS The proceeds of the issue of the Notes, together with Frontera's 2006 year-endnet cash position of $21.4 million, will be deployed to advance current workplans within existing Business Units, and to continue work throughout Frontera'sextensive inventory of existing undeveloped fields and undrilled prospectsthroughout Block 12. Proceeds will be used specifically to: Taribani Field Unit - Advance a contemplated twenty well development program ofZone 9. Three wells scheduled in 2007 with an additional eight wellscontemplated in 2008. Basin Edge Play Unit - Drill and test the Basin Edge "C" prospect and conductfurther geophysical work further defining Basin Edge "B" and "C" prospects. Mirzaani Field Area Production Unit - Undertake re-entry of existing wells andconduct new drilling operations within undeveloped portions of the field toincrease existing production and book additional reserves. Mirzaani Field Area Exploration Unit - Support of ongoing farmout effort andsubsequent joint operations to drill and test the Mirzaani Deep Prospect. Block 12 Area-Wide Field/Prospect Inventory Development Unit - Continueddevelopment and prioritization of extensive inventory of prospects within Block12, consisting of 19 identified prospects and leads and five undeveloped fields. (Further information on the Notes follows the Operational Update section ofthis press release.) OPERATIONAL UPDATE Taribani Field Unit The Taribani Field is a large, undeveloped oil field covering an area ofapproximately 80 square kilometers with productive horizons situated in Mioceneand Pliocene age reservoirs. These reservoirs are situated at depths between2,200 meters and 3,500 meters. The independent consulting firm of Netherland,Sewell & Associates has assigned 118 million barrels of P3 reserves from Zones9, 14, 15 and 19 within the field. Additionally, Netherland, Sewell &Associates has assigned as much as 36 million barrels of unrisked resourcepotential associated with five deeper horizons in the field. Frontera committed to developing Zone 9 as a consequence of drilling operationsat the Dino #2 well in 2006, when it began work to determine whether sustainablecommercial production could be established from four undeveloped oil bearinghorizons in the Taribani Field. As expected, during the drilling of the Dino #2well, the Pliocene age oil-bearing reservoir interval, Zone 9, was encounteredfrom 2,300 meters to 2,311 meters. In addition, a previously unmapped oilbearing reservoir interval was encountered above Zone 9 from 2,275 meters to2,285 meters. Historically, twelve wells had evidence of oil when perforated inZone 9, with the best well, #23, exceeding 700 BOPD during initial production. Frontera is shortly to commence the execution of a thirty-six month, 20-wellprogram within Zone 9 which represents approximately 17 percent of theidentified reserves within these four zones at Taribani. The first well of theprogram will begin with re-entry and re-completion of the Dino #2 well late inQ2, 2007, followed by two new development wells this year, the first of which,T-#45, will commence in July. Eight new wells are contemplated for 2008. Adedicated drilling rig has been contracted for this program and is currentlybeing mobilized to the field. Of the two new wells that are scheduled for development in 2007, one will bedrilled at a location approximately 900 feet up-dip on the Taribani Fieldstructure from wells that encountered the lowest known oil in the field at thishorizon. This location has been identified as a result of processing,interpreting and integrating approximately 40 kilometers of new 2D seismic data,acquired in late 2005, into the existing 3D mapping of the field. The new datarevealed the Taribani Field to be a larger structure than previously thought andconfirmed important new drilling locations high on the structure. Frontera has designed solutions to address possible formation sediment flowissues associated with oil production from Zone 9, including the drilling ofconventional vertical wells with the addition of Frac-Pack completions. This isanticipated to achieve similar production/recovery results obtained fromdrilling short-reach horizontal wells. Additional sediment control will comefrom the application of packing technology, where screens are installed andgravel is pumped into the well as a slurry to trap the reservoir formationsediment before it can enter the well and cause obstruction. Plans are also underway to continue operations in the deeper horizons of Zones14, 15 and 19 objectives of the Taribani Field in sequence with Frontera's plansto focus first on Zone 9. Analysis has shown that horizontal well completionsare likely best suited for these different reservoir types with the applicationof completion techniques that will likely utilize expandable liners and screens,together with other fit-for-purpose applications, in order to control sedimentflow. Timing of future operations within these deeper horizons is currentlybeing finalized. Basin Edge Play Unit Frontera's Basin Edge Play Unit is located along the northern border of Block 12and represents one of the newest and potentially most prolific exploration playsin the oil rich geological province of the Upper Kura Basin. Frontera's objectives within the Basin Edge Play Unit remain focused oncommercially accessing the unrisked resource potential estimated by theindependent consulting firm of Netherland, Sewell and Associates to be in excessof one billion barrels of oil within two major prospects ("B" and "C"). "C" Prospect - In June 2006, Frontera successfully completed acquisition of anew 80 square kilometer 3-D seismic survey over the Basin Edge Play Unit's "C"prospect. Processing and interpretation results of this data confirmed that theprospect is approximately 20% larger than initially estimated and provided newdetailed imaging of its lateral and vertical limits, as well as the extensionsof fault blocks and possible fracture systems within the prospect. The data alsoconfirms that the prospect had a structural height of approximately 1,000 metersand, most significantly, the primary target Cretaceous reservoirs have beenidentified on the basis of seismic attributes at depths that could occur from2,000 meters to 3,700 meters. The use of amplitude with offset technology (AVO)in the processing of the new data also suggest the possible presence ofhydrocarbons within structural closure in what is interpreted as being a clasticsection. Utilizing this new information, drilling of the first well at the "C" prospect -the Lloyd #1 well - is expected to commence in early July. Designed to evaluatemultiple horizons, the Lloyd #1 will target final completion in the Cretaceousreservoir targets at a total depth of approximately 2,700 meters. Procurement ofservices and equipment necessary for the drilling campaign is nearing completionwhile site preparation and road construction is underway ahead of mobilizing adrilling rig during Q2. "B" Prospect - During the first half of 2006, Frontera also completedacquisition of approximately 170 kilometers of 2D seismic data over a secondlarge prospect within the Basin Edge Play Unit, known as the "B" prospect.Since this time, interpretation of this data is underway with an objective ofundertaking further geophysical work and drilling operations over the nexttwelve to twenty-four months. Mirzaani Field Area Production Unit The Mirzaani Field Area Production Unit is comprised of three underdeveloped andundeveloped, shallow Pliocene-age fields with targeted normal pressurereservoirs situated between 400 meters and 1,500 meters deep. One of thesefields, the Mirzaani Field, currently produces at nominal production levelssufficient to yield annual revenues of approximately $2 million per year.Frontera is currently pursuing work programs designed to develop untappedportions of this field to increase production and book additional reserves. Tothis end, two new wells are scheduled to be drilled during the second half of2007, with up to five additional re-entries of existing wells. Mirzaani Field Area Exploration Unit The Mirzaani Field Area Exploration Unit is an area of new prospectivitysituated beneath the existing shallow, Pliocene-age fields. The companycompleted interpretation of 105 kilometers of 2-D seismic data acquired in 2005to further delineate previously mapped prospects beneath the Mirzaani Field,including a primary focus on the Mirzaani Deep Prospect. This prospect isbelieved to contain Miocene-age, Sarmatian reservoirs similar to those found inthe nearby Taribani Field, situated at depths of approximately 2,500 meters. In order to accelerate testing of this important prospect in parallel withongoing operations in other business units, an effort is underway to seek afarmout partner with which to undertake new drilling operations within the nexttwelve months. In addition, analysis of new seismic data acquired to the south of the MirzaaniField has continued to confirm a previously identified feature called theMirzaani South Prospect. This structure is in the "foot wall" of the same faultthat sets up the Mirzaani Deep Prospect and the shallower Mirzaani Field, andwill remain in Frontera's inventory for future drilling. Block 12 Area-Wide Field/Prospect Inventory Development Unit Throughout 2006, Frontera continued Block 12 Area-Wide Field/Prospect Inventorydevelopment and prioritization of an extensive inventory of prospects withinBlock 12, including 19 identified prospects and leads and five undevelopedfields. This constantly evolving inventory provides the basis for a significantcore area of potential reserve replacement and reserve additions for many yearsto come. Related party transaction Certain funds and accounts managed by DDJ Capital Management LLC ("DDJ")purchased an aggregate of $21 million of the Notes. These funds and accounts inaggregate own 10,763,552 Common Shares representing approximately 15.3% ofFrontera's issued shares. Prior to this Placement, funds and accounts managed byDDJ also owned warrants to purchase a further 1,950,000 Common Shares. Afterthis Placement, DDJ now owns 22.8% of Frontera fully-diluted share capital(assuming all outstanding options are exercised and prior to any sales of Notesassociated with the over-allotment). Stephen E. McGregor, a director of theCompany, through SEM Consulting, LLC (SEM), will be paid a commission pursuantto SEM's 2001 consulting and advisory agreement with Frontera. While the actualamount will not be finally determined until the over-allotment is subscribed,the amount paid to SEM will not exceed 2% of the face amount of the Notes. Mr.McGregor also purchased an aggregate of $0.5 million of the Notes. SpyrosKarnessis, a director of Frontera, also purchased an aggregate of $5 million ofthe Notes. For these reasons, the transaction is classified as a related partytransaction for the purposes of the AIM rules for companies. Accordingly, as required by the AIM rules for companies, the directors ofFrontera (with the exception of Messrs. McGregor and Karnessis who abstained)consider, having consulted Frontera's nominated adviser, Morgan Stanley & Co.International plc., that the terms of the transaction are fair and reasonableinsofar as its shareholders are concerned. Morgan Stanley & Co. Internationalplc has placed reliance in this matter on the commercial assessments by Fronteraand its directors of the private placement of the Notes on the terms agreed. FURTHER INFORMATION ON THE NOTES By a note purchase agreement, dated May 8, 2007, Frontera agreed to issue andsell up to $67 million aggregate principal amount of 10% Convertible Notes dueMay 2012 (the "Notes"). $46.5 million of Notes have been issued to thepurchasers named in the agreement and up to a further $20 million of Notes maybe issued and sold within 30 days after the initial issue of Notes to purchaserswho execute a joinder agreement (all of such purchasers being the "Purchasers").Members of the public are not entitled to purchase additional Notes and thisannouncement is communicated to them for the purposes of information only. This announcement does not constitute an offer to sell or a solicitation of anoffer to purchase Notes. In the United Kingdom any sale or issue of theadditional $20 million of Notes will be exclusively to investment professionals(within the meaning of Article 19(5) of the Financial Service and Markets Act2000 (Financial Promotion) Order 2005 (as amended) ("FPO") and high net worthcompanies, unincorporated associations etc (within the meaning of Article 49 ofthe FPO) who are also qualified investors for the purposes of section 86 of theFinancial Services and Markets Act 2000. Such persons are together referred toas "Relevant Persons." No person other than Relevant Persons contacted byFrontera may participate in any sale or purchase of additional Notes or rely onany communication relating to them. Interest is payable on the principal amount of the Notes at a rate of 10% perannum from the date each Note is issued until maturity (unless earlierconverted, redeemed or repurchased). Interest is payable quarterly in arrearson each March 1, June 30, September 30 and December 31 or the next succeedingbusiness day with the first interest payment date being June 30, 2007. Interestis payable in cash or, at Frontera's option in its sole discretion, by issuingadditional Notes on the relevant interest payment date in the aggregateprincipal amount of the interest to be paid. If an event of default (as defined in the note purchase agreement) occurs and iscontinuing Frontera is obliged to pay interest (in cash or in further Notes) onany overdue principal or interest on a quarterly basis at the higher rate of 13%per annum. The sale and purchase of $46.5 million of Notes was closed on May 8, 2007 (afurther $20 million may be issued within 30 days of the May 8th closing.) Onthe closing Frontera deposited $10 million of the proceeds in a segregatedaccount with J P Morgan Chase Manhattan Bank N.A. on the terms of an escrowagreement. The deposit, together with all earnings, interest, income and gainsof any kind ("escrow funds") are to be retained in the segregated accountsubject to the terms of the escrow agreement. Provided no event of default iscontinuing the escrow funds are to be released to Frontera as follows: (i) $5 million will be released to Frontera after the Sale Price of Common Shares exceeds the conversion price for at least 20 consecutive trading days; and, (ii) the balance will be released to Frontera after the Sale Price of Common Shares exceeds two times the conversion price for at least 20 consecutive trading days. In addition the escrow funds may be released to Frontera at any time upon thejoint written instructions of Frontera and the representative of the Purchasers.DDJ has been appointed as the representative. If an event of default occursand is continuing the escrow funds are to be distributed to the Purchasers prorata according to the principal amount of Notes held by each Purchaser. Earnings, interest, income or gain of any kind accrued or earned on the escrowfunds are to be distributed to Frontera quarterly. Pursuant to the note purchase agreement Frontera has given representations andwarranties and covenants to each of the Purchasers about various mattersincluding the Notes, Frontera, its subsidiaries and its and their business andassets. The notes will be convertible into fully paid Common Shares at the option of theholder at a conversion price of $1.67 per share. However, if the Sale Price ofCommon Shares on AIM is at or below $1.30 for any 10 days in 20 consecutiveTrading Days at any time in the twelve months following closing of the initialissue of the Notes, the conversion price will be reset to $1.30 per share. Thenotes will automatically convert into Common Shares if prior to maturity (unlessearlier redeemed or repurchased), the Sale Price exceeds two times theconversion price for 20 consecutive Trading Days. If, at the time of Conversion, Common Shares are admitted to dealings on the AIMmarket of the London Stock Exchange PLC ("AIM"), Frontera has agreed to applyfor the Common Shares issued on conversion to be admitted to dealings on AIM.Frontera has agreed to comply with all requirements of London Stock Exchange PLCin connection with such application. Any investor who converts its notes into Common Shares before May 8, 2009 willreceive an additional payment equal to one year of interest on the amount ofNotes converted. At the Company's option, this payment can be made in cash orCommon Shares. Frontera has agreed not to purchase, redeem, prepay or otherwise acquire,directly or indirectly, any of the outstanding Notes except in accordance withthe terms of the note purchase agreement and the Notes and to cancel all Notesacquired by it pursuant to any payment, prepayment or purchase of Notes pursuantto any provision of the agreement, and not to issue Notes in substitution orexchange for any such cancelled Notes. The note purchase agreement provides for events of default. On the occurrence ofan event of default the holders of a 50% or more of the outstanding notes(excluding any notes held or owned by Frontera) may during the continuance ofthe event of default serve notice declaring all or any part of Frontera'sobligations immediately due and payable. Events of default include in summary:failure of Frontera to pay any principal, when due, and the failure to pay anyinterest, fees or expenses or its other obligations with respect to the Noteswhen due, and such failure continues for 10 days thereafter; any representationor warranty made by Frontera proves to have been false or incorrect in anymaterial respect on any date on or as of which it was made, and Frontera failsto cure the effect of such false or incorrect representation or warranty withinthirty days after receipt of written notice from the Purchasers (other thanFrontera) holding 50% or more of the Notes; and certain events with respect toFrontera any of its subsidiaries or Frontera Eastern Georgia Ltd including, insummary, bankruptcy, insolvency reorganisation or relief of debtors; failure tocomply with certain covenants which continues for 30 days after receipt ofwritten notice; certain categories of default in respect of indebtedness. Upon a change of control (as defined in the note purchase agreement) eachPurchaser has the right to require Frontera to purchase such Purchasers' Notesat a purchase price in cash equal to 150% of the principal amount thereof plusaccrued and unpaid interest if any to the date of purchase. "Change of control" means the occurrence of any one of the following: (1) any "person" or "group" of related persons (as such terms are used in Sections 13(d)and 14(d) of the Securities Exchange Act of 1934 and the rules and regulations("Exchange Act") ) is or becomes the beneficial owner (as defined in Rules 13d-3and 13d-5 under the Exchange Act, except that such person or group shall bedeemed to have "beneficial ownership" of all shares that any such person orgroup has the right to acquire, whether such right is exercisable immediately oronly after the passage of time), directly or indirectly, of more than 50% of thetotal voting power of the voting stock of Frontera (or its successor by merger,consolidation or purchase of all or substantially all of its properties andassets) (for the purposes of this clause, such person or group shall be deemedto beneficially own any voting stock of Frontera held by a parent entity, ifsuch person or group "beneficially owns" (as defined above), directly orindirectly, more than 50% of the voting power of the voting stock of suchentity); (2) during any period of two consecutive years, individuals who at thebeginning of such period constituted the Board of Directors of Frontera(together with any new directors whose election by such Board of Directors orwhose nomination for election by the stockholders of Frontera was approved by avote of 66 2/3% of the directors of Frontera then still in office who wereeither directors at the beginning of such period or whose election or nominationfor election was previously so approved) cease for any reason to constitute amajority of the Board of Directors then in office; (3) the sale, conveyance,lease, assignment, transfer or other disposition (other than by way of merger orconsolidation), in one or a series of related transactions, of all orsubstantially all of the properties and assets of Frontera and its Subsidiariestaken as a whole to any "person" (as such term is used in Sections 13(d) and 14(d) of the Exchange Act); or Schedule II - 5 (4) the adoption by thestockholders of Frontera of a plan or proposal for the liquidation ordissolution of Frontera. "Sale Price" means, on any date, the closing sale price per share, or if noclosing sale price is reported, the average bid and asked prices or, if morethan one in either case, the average of the average bid and average askedprices, on such date as reported in transactions for the principal securitiesexchange on which the Common Shares are traded without reference to after-hoursor extended market trading. If the Common Shares are not listed for trading on asecurities exchange and not reported by the London Stock Exchange on therelevant date, the "sale price" shall be the last quoted bid price for CommonShares in the over-the-counter market on the relevant date as reported by theNational Quotation Bureau or similar organization. If the Common Shares are notso quoted, the "sale price" will be the average of the mid-point of the last bidand asked prices for the Common Shares on the relevant date from each of atleast three nationally recognized independent investment banking firms selectedby Frontera for this purpose. If the Sale Price of the shares of Frontera'sCommon Shares is quoted in a currency other the United States dollars, then theSale Price shall be converted to United States dollars as of the date ofdetermination using an exchange rate for such currency to United States dollarsquoted by Bloomberg or any successor entity at the close of trading on such dateof determination. "Trading Day" means a day during which trading in securities generally occurs onthe London Stock Exchange or, if the applicable security is not listed on theLondon Stock Exchange, on the principal other securities exchange on which theapplicable security is then listed or, if the applicable security is not listedon a securities exchange, on the principal other market on which the applicablesecurity is then traded. Morgan Stanley & Co. International -plc, is acting exclusively for Frontera andis not acting for any other person and will not be responsible to any personother than Frontera for providing the protections afforded to its clients or forproviding advice on the transactions or arrangements referred to in thisannouncement. The Notes are being offered only to accredited investors inreliance on an exemption from the registration requirements under the SecuritiesAct of 1933. Notes to editors: 1. Frontera Resources Corporation is an independent Houston, Texas, U.S.A.-based international oil and gas exploration and production company whosestrategy is to identify opportunities and operate in emerging markets around theworld. Frontera has operated in Georgia since 1997 where it holds a 100 per centworking interest in a production sharing agreement with the government ofGeorgia. This gives Frontera the exclusive right to explore for, develop andproduce oil and gas from a 5,060 square kilometer area in eastern Georgia knownas Block 12. 2. The reserve information herein was determined by the independent consultingfirm of Netherland, Sewell & Associates in accordance with the petroleumresource definitions adopted by the Society of Petroleum Engineers (SPE), WorldPetroleum Council (WPC) and the American Association of Petroleum Geologists(AAPG) in 2000. 3. This release contains certain forward-looking statements, including, withoutlimitation, expectations, beliefs, plans and objectives regarding the potentialtransactions, potential drilling schedule and ventures discussed in thisrelease, as well as reserves, future drilling, development and production. Amongthe important factors that could cause actual results to differ materially fromthose indicated by such forward-looking statements are future exploration anddevelopment results, availability and performance of needed equipment andpersonnel, seismic data, fluctuations in oil and gas prices, weather conditions,general economic conditions and the political situation in Georgia andneighboring countries. There is no assurance that Frontera's expectations willbe realized, and actual results may differ materially from those expressed inthe forward-looking statements. For more information, please see www.fronteraresources.com. 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