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Frontera – good news? Or just a pre-placing ramp?

By Nigel Somerville, the Deputy Sheriff of AIM | Friday 9 October 2015

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.

AIM-listed Frontera Resources Corporation (FRR) issued a long and detailed RNS regarding its operations in Georgia this morning. It seems to offer a rose-tinted view of the world: could it be that this is a good moment to be buying the shares, then? There is much to like, as the company trumpets a significant upgrade to gas resources associated with its ongoing exploration and production efforts in the country of Georgia. Or is it just a pre-placing ramp?

I find myself suspicious of any US company which lists on AIM when its own domestic market would appear to be a rather more appropriate home for the shares. Frontera is based in Houston, Texas but is registered in the Caymen Islands. Its main operations appear to be in Georgia and the company is listed on AIM. A truly international company, then!

Why might it be a pre-placing ramp? Well, according to its interims to June 2015, current assets of $8.6 million were somewhat overwhelmed by current liabilities of $25.5 million – the company had a shortfall of almost $17 million. Call that about £11 million. Since then there has been a placing which raised £2.8 million before expenses. That’s not going to plug a £11 million hole, is it?

Perhaps that explains why, in the face of the headline writers at Alliance News calling it a ten-fold increase in gas resource estimate, the shares have only moved by 3.5% last seen.

Now I could go into lots of detail about what the RNS actually said, and how an awful lot of it seems to be the same statement as appeared in the interims. But there is one small point which might be easily overlooked.

Today’s statement was an RNS ‘Reach’ – a promotional RNS in other words, and not signed off by the Nomad. If any of the information in today’s RNS had been significant, it would have been a normal RNS, not an RNS reach.

It is therefore a pre-placing ramp.

I would suggest that anyone buying into this promotion is just asking for a spanking. If you like the company, at least wait until after the placing is done.

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  1. I hold Frontera even though it is one of the most opaque companies listed on AIM .

    Without wishing to sound paranoid , this company and one other which has been active in European shale seem to be at least in part connected to U.S. foreign policy .

    In this RNS and the recent interims they mention a huge resource upgrade and also shale gas .

    It’s not clear how much of this gas exists , is in good quality reservoirs , is in tight reservoirs , is in shales .

    Without more info it is just a meaningless headline grabbing figure so you may be right about it being a pre-placing pump .

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