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Frontera Resources shares retreat after project update

Published: 09:33 06 Jun 2013 BST

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Frontera Resources (LON:FRR) shares plummeted over 25% in early deals, even though the company said it was on track to produce first gas from the Mtsare Khevi field in Georgia in the next three months.

The AIM quoted oil and gas firm, which has several projects on the go, had been bought up notably this week rising from just under 1p to approach a 52 week high and was traded at 1.39p on Tuesday.

But, in the wake of Thursday’s operations update, the shares retreated back to previous levels.

At 9:00am on AIM Frontera shares were changing hands at 0.96p, down 23.9%.

In the statement Frontera said that that gas production from Mtsare Khevi would begin almost immediately after a pipeline is complete. This is currently expected by mid-July.

A number of wells at Mtsare Khevi are shut in and it is expected that gas production will reach 2mcf per day shortly after the pipeline comes online.

Work began after the pipeline was approved by the government in March. This key milestone also triggered initial rally on AIM (before that the shares were priced around 0.4p each).

City broker finnCap said in a note that Mtsare Khevi is a key project which will materially increase production and improve cash flows. The broker also highlighted other pending catalysts for the shares.

“Discussions to secure partners to progress a number of other projects continue and we see a successful conclusion to these negotiations as important catalysts for the share price and drivers of future drilling activity,” said analyst Will Arnstein.

Frontera also said on Thursday that oil production for the period January 1 through June 1, 2013 totalled approximately 29,947 barrels.

Production volumes will increase over the remainder of the financial year such that production will be in line with current market forecasts, it added.

Elsewhere, Frontera is still in financing talks related to the Taribani field. This would help pay for a four well programme which would increase production. It also said today that reservoir performance modelling predicts the project would ‘most likely’ contribute 1,000 barrels of oil per day.

The company also has plans to sidetrack existing wells at Taribani.

In all, Taribani has an estimated 788mln barrels of oil in place and a third party assessment has previously suggested 15% of the oil can be recovered.

At the Mirzaani field, meanwhile, Frontera is also in talks for funding proposed work. Here, it is in discussions with a potential partner. The company believes it will finalise the negotiations and start work later this year.

Frontera is also progressing a number of exploration assets, including a shale play.

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