Frontera Resources shares dip in the face of Georgian legal challenges

Independent oil and gas exploration and production firm Frontera Resources has become embroiled in a legal dispute concerning a production sharing contract (PSC) at its block 12 licence in Georgia, the company said on Monday.

Shares fell almost 10% after disclosing it has received a request for arbitration from the Georgian Oil and Gas Corporation and the Georgian State Agency of Oil and Gas - although the company denied any wrongdoing.

The legal proceedings, for which a full statement and hearing date are as yet unkown, could potentially see Frontera forced to relinquish its block 12 licence.

A statement from Frontera Resources said: "The company considers the request to be without merit and has engaged legal counsel to protect its rights. The company intends, if the administrative formalities are followed through and the statement is submitted by the authors of the request, to respond to each point and ensure that the company's rights are protected. The company is confident of its standing and complete compliance with the PSC."

In November, Frontera announced that it was studying the sustainability of commercial production at block 12, where the company states that no relinquishment is due for the duration of the study.

The company cited a segment of the PSC that stated that in the event of such a programme the firm "shall not be obligated to relinquish the relevant Study Area pending the completion of the further work."

As of 1017 BST, Frontera Resources’ shares were down 9.65% at 0.52p.