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Shares of independent oil and gas producer, Frontera Resources Corporation (LSE:FRR), plunged to an all-time low earlier today after the company said gas production from its Mtstare Khevi gas field in the former Soviet republic of Georgia will be delayed until 2013.
Over 60 million shares were swapped since trading started earlier today, resulting in a loss of as much as 26.5% of Frontera’s market value to 0.36 pence, following the announcement. Share price has since recovered and were now at 0.465 pence, still 5.1% down from yesterday’s close of 0.49 pence.
Investors in forums, including ADVFN’s, expressed disappointment over repeated delays of the gas sale, which was first scheduled to commence last July but was rescheduled for September due to “unanticipated delays associated with final issuance of certain requisite permits relating to transportation of the gas from Georgian government authorities”, as was previously explained by the company.
The installation of gas sales infrastructure in the Mtstare Khevi field was originally scheduled to be completed in April but did not materialise due to extreme winter during the first quarter of 2012.
Frontera’s share price has suffered as a result of the delays, dropping to just less than a third of its value back during the end of January, after a lack of update on the construction of the gas sales infrastructure served as a warning signal for investors to dump their shares.
Still Pending
In a statement, Frontera said the company is still waiting for the final issuance of remaining requisite permits from the Georgian government to allow the installation of the eight-kilometre pipeline and related facilities. The said pipeline and related facilities are the needed before any installation of the gas sales infrastructure in the Mtstare Khevi can be initiated.
“The equipment required for the pipeline has been procured, mobilized, and stacked in the field and in key staging areas awaiting issuance of the remaining requisite permits,” Frontera stated.
Frontera, however, had already advised the same back in September, which means the delays in the project lie in the issuance of the permit from the government.
The company neither provided a tentative timeframe for the construction of the infrastructure nor the commencement of gas sales, but instead stated it will focus on continuing the “integrated geologic study” of the greater gas complex that hosts the Mtstare Khevi gas field, the result of which will be a revised competent person’s report on the greater gas complex surrounding Mtstare Khevi.
Earlier estimates stated the field was expected to produce about two million cubic feet of gas per day, a much needed production to relieve the company of debt, which stood at US$23.3 million (£14.5 million) as at 30th June 2012.
The Mtstare Khevi gas field lies in the western portion of Frontera’s 100% controlled 5,000-square kilometre acreage, a known hydrocarbon-bearing area largely underdeveloped during the Soviet era.
