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Frontera – well ahead of itself, sell

By Nigel Somerville, the Deputy Sheriff of AIM | Thursday 23 March 2017

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.

One has to marvel at how oily serial disappointment AIM-listed Frontera (FRR) has doubled its share price since yesterday. Has it has a takeover? Nope. Has it announced a gusher? Nope. So what has sparked the rise? It seems  that it is in talks over a possible transaction involving a farm-out or joint operation arrangement within the area of its Block 12 holding in Georgia. But is this just a monster spoof?

Now it could be that it gets a good deal. Or it could be that it does not. But right now there is no certainty, and a doubling of the share price looks to be somewhat over-egging the pudding.

In any case, why was this information slipped into an update over an investor conference-call? Interested parties had previously been told that no market-sensitive information would be released during the call, but at 5pm on Tuesday we were told that:

No new price-sensitive information will be released during the call, except as stated below. 

The Company is currently progressing discussions with potential industry partners regarding a possible transaction involving a farm out or joint operation arrangement within the area of its Block 12 holding in Georgia.  Because of this, some planned operations have been postponed pending the outcome of these discussions, including the execution of the planned six well stimulation program at its South Kakheti Complex.  The Company will keep the market updated as these discussions unfold.

Er….so the long-promised six well stimulation programme has been postponed. This follows a rather tardily announced delay in getting the kit despatched in the first place – see HERE – which some might have considered to be a breach of AIM rules.

To remind you of Tom Winnifrith’s comments:

The RNS issued on 24th October 2016, stated in relation to oil and gas assets in South Kakheti Gas Complex:

“As previously announced on September 30, work is underway to begin the stimulation campaign for six further wells within the Company's ongoing Oil Window and Gas Window operations at its South Kakheti Gas Complex. Specifically, following extensive workover operations throughout October and the procurement of necessary materials, six new wells have now been prepared and will shortly receive stimulation completions in November….”

RNS 5837U dated 19th January 2017

The RNS issued on today’s date, stated in relation to the above assets and work programme:

“During November and December of 2016, operations to complete a new six well stimulation program were delayed pending delivery of additional pumping equipment deemed necessary for execution of the planned program, in order to reduce risk and enhance desired outcome. The pending campaign, previously announced on October 24, 2016, is focused on continuation of the Company's ongoing Oil Window and Gas Window operations at its South Kakheti Complex.

While awaiting mobilization of remaining equipment from the United States, now expected to be delivered during the month of March,….”

Between October 26 and January 19 shares have been heavily traded and on 29 December the company renegotiated the terms of its outstanding bonds yet there was no update on this material (lack of) event. 

How on earth is this not a rule breach? What will the clueless oxymorons round at AIM Regulation do to punish Frontera and to send a message to other companies that this sort of non-disclosure is just not acceptable? Er....what do you think?

So the company is now in discussions over a possible farm-out or joint operation deal, and that is why it has postponed the work programme (again)? Really?

If I had a prize asset and was in discussions over getting a deal I’d want to prove it up ASAP so as to strengthen my negotiating hand as much as possible! Why has Frontera instead postponed the programme?

So here is a question for Frontera: has all the equipment arrived on site? Is it available for deployment? Has it even been despatched yet?

All this from a company listed on AIM, based in the USA, incorporated in the Cayman Islands and with operations in Georgia!

This looks to me like a massive spoof from a company which has form in that department (as referenced above), tried (and failed) to offload a stack of creditors by making a subsidiary insolvent, has sent incredible amounts of cash to the great central bank in the sky – a $467 million accumulated deficit at the last count,  as at H1 last year, and had about $57 million if NEGATIVE net current assets and negative net assets of about $65 million.

Surely it could not be that there is a placing on the way, could it?

Sorry, but I just can’t take any of this seriously. It all looks like great big spoof to me.

With the shares up at 0.44p last seen, if I were a holder I’d get on to my broker post haste and SELL.

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