2014 Annual Results

FRONTERA RESOURCES CORPORATION

Houston, Texas, U.S.A. - 30 June 2015

FRONTERA RESOURCES RELEASES 2014 ANNUAL RESULTS

Frontera Resources Corporation (London Stock Exchange, AIM Market - Symbol: FRR), an independent oil and gas exploration and production company ("Frontera" or the "Company"), today releases its audited final results for the year ended 31 December 2014.

2014 Annual Results: Highlights

- Revenues from crude oil and gas sales for 2014 totaled $6.4 million.

- Net loss of $12.5 million, or $0.005 per share on a fully diluted basis. Of this total, approximately $1 million is reflected in one-time charges associated with corporate financing and inventory related accounting.

- Mtsare Khevi Gas Complex: In 2014, gas production operations related to ongoing exploration commenced in April and equaled a total of approximately 188 million cubic feet (5,325 thousand cubic meters) by year-end. Operations continue in accordance with Frontera's April 20, 2015 and May 5, 2015 announcements.

- Taribani Field Complex: Operations have commenced at the Niko#1 location under Phase I of the Varang Exploration farmout agreement at the Taribani Field that was concluded in 2014. In addition, operations at this asset continue in accordance with Frontera's April 20, 2015 announcement.

- Crude oil production during 2014 equaled approximately sixty one thousand barrels of oil from the Taribani Field Complex and Shallow Fields Production Unit.

- Gas Resources: During 2014, extensive work was completed related to the independent confirmation of significant new gas resources that Frontera announced on April 20, 2015. This announcement highlighted a report by the independent consulting firm of Netherland, Sewell & Associates that confirmed combined prospective natural gas resources of as much as 12.9 trillion cubic feet (365 billion cubic meters) of gas-in-place, with as much as 9.4 trillion cubic feet (266 billion cubic meters) of recoverable prospective natural gas resources at the Mtsare Khevi Gas Complex and Taribani Field Complex.

Steve C. Nicandros, Chairman and Chief Executive Officer commented:

"During 2014, Frontera continued to invest in a focused manner, primarily related to our ongoing work at the Mtsare Khevi Gas Complex and the Taribani Field Complex. Accordingly, our commitment to investment during 2014 resulted in reaching important milestones related to the significant value associated with these assets and across the balance of our portfolio. This work has positioned us well for continued value creation for our company throughout the current year. In addition, because of our progress in 2014, our ongoing work will also continue to provide the basis for enhanced domestic economic development and energy independence in Georgia and regional Eastern European energy markets during the year ahead and beyond."

Enquiries:

Frontera Resources Corporation

Liz Williamson

Vice President, Investor Relations and Corporate Communications

(713) 585-3216

[email protected]

Nominated Adviser:

Cairn Financial Advisers LLP

61 Cheapside, London EC2V 6AX

Avi Robinson / Jo Turner

+44 (0) 20 7148 7900

Broker

Cornhill Capital Limited

Nick Bealer / Stefan Olivier

+44 (0) 207 710 9610

Financial PR:

Buchanan

Helen Chan

+44 (0) 20 7466 5000

[email protected]

Notes to Editors:

1. Frontera Resources Corporation is an independent Houston, Texas, U.S.A.-based international oil and gas exploration and production company whose strategy is to identify opportunities and operate in emerging markets in Eastern Europe around the Black Sea. Frontera Resources Corporation shares are traded on the London Stock Exchange, AIM Market - Symbol: FRR. For more information, please visit www.fronteraresources.com.

2. The Mtsare Khevi Gas Complex is an area of approximately 140 square kilometers and encompasses gas reservoir targets found between 300 meters and 5,000 meters in depth. Based on Frontera's internal estimates, analysis has revealed significant gas potential throughout this area of up to approximately 11 TCF of gas-in-place and up to approximately 9 TCF of recoverable gas resources. An April 2015 report by the independent consulting firm of Netherland, Sewell & Associates confirms prospective resources of as much as 8.29 TCF of gas-in-place for the Mtsare Khevi Gas Complex, with as much as 6.15 TCF of recoverable prospective resources. 

3. The Taribani Field Complex is an area that encompasses approximately 1,400 square kilometers and includes the discovered yet undeveloped Taribani, Kila Kupra, Bayda and Iori fields within Block 12. Internal preliminary analysis suggests that there could be as much as 18 billion barrels of oil in place throughout this complex. Ongoing work continues to study and assess the viability of this analysis and larger scale development potential. Situated within the Taribani Field Complex, the Taribani Field's oil potential consists of 788 million barrels of original oil in place ("OOIP") at depths between 2,000 meters and 3,300 meters, independently assessed by Netherland, Sewell & Associates ("NSA") in 2005. In addition, Frontera estimates gas-in-place resources associated with deeper horizons at the Taribani Field to be as much as approximately 9 tcf from reservoir targets found between 3,400 meters and 5,000 meters in depth. An April 2015 report by NSA confirms prospective resources of as much as 4.62 TCF of gas-in-place associated with deeper gas bearing sands at the Taribani Field, with as much as 3.23 TCF of recoverable prospective resources from horizons situated between 3,400 meters and 5,400 meters in depth. 

4. Information on Resource Estimates: The contingent and prospective resources estimates contained in this announcement were determined by the independent consulting firm of Netherland, Sewell & Associates (NSA) in accordance with the definitions and guidelines set forth in the 2007 Petroleum Resources Management System (PRMS) adopted by the Society of Petroleum Engineers (SPE). Gerard Bono, Frontera's Vice President and Chief Reservoir Engineer, who is a member of the SPE, is the qualified person who reviewed and approved the statements in this announcement.

5. This release may contain certain forward-looking statements, including, without limitation, expectations, beliefs, plans and objectives regarding the transactions, work programs and other matters discussed in this release. Exploration for oil is a speculative business that involves a high degree of risk. Among the important factors that could cause actual results to differ materially from those indicated by such forward-looking statements are: risks inherent in oil and gas production operations; availability and performance of needed equipment and personnel; the Company's ability to raise capital to fund its exploration and development programs; seismic data; evaluation of logs, cores and other data from wells drilled; inherent uncertainty in estimation of oil and gas resources; fluctuations in oil and gas prices; weather conditions; general economic conditions; the political situation in Georgia and relations with neighboring countries; and other factors listed in Frontera's financial reports, which are available at www.fronteraresources.com. There is no assurance that Frontera's expectations will be realized, and actual results may differ materially from those expressed in the forward-looking statements.

6. Glossary of Terms: BCF - means Billion Cubic Feet of gas. TCF - means Trillion Cubic Feet of gas. Mcf - means Thousand Cubic Feet of gas. OOIP - means Original Oil in Place. Bopd - means Barrels of Oil Per Day.

Consolidated Balance Sheets

December 31, 2014 and 2013

Consolidated Statements of Comprehensive Loss

Years Ended December 31, 2014 and 2013

Consolidated Statements of Stockholders' Deficit

Years Ended December 31, 2014 and 2013

Consolidated Statements of Cash Flows

Years Ended December 31, 2014 and 2013

Notes to Consolidated Financial Statements

The financial information set out above and in these notes does not constitute the Company's statutory accounts for the years ended 31 December 2014 or 2013 but is derived from those accounts.

The Annual Report for the years to 31 December 2013 and 2014, which should be read in full, is available on the Company's website, www.fronteraresources.com

1. Summary of Significant Accounting Policies

Principles of Consolidation

The consolidated financial statements include the accounts of Frontera Resources Corporation and its wholly owned subsidiaries. All intercompany transactions and accounts have been eliminated in consolidation.

Use of Estimates

The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent asset and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Estimates of oil and natural gas reserves and their values, future production rates and future costs and expenses are inherently uncertain for numerous reasons, including many factors beyond the Company's control. Reservoir engineering is a subjective process of estimating underground accumulations of oil and natural gas that cannot be measured in an exact manner. The accuracy of any reserve estimate is a function of the quality of data available and of engineering and geological interpretation and judgment. In addition, estimates of reserves may be revised based on actual production, results of subsequent exploitation and development activities, prevailing commodity prices, operating costs and other factors. These revisions may be material and could materially affect the Company's future depletion, depreciation and amortization expenses.

The Company's revenue, profitability, and future growth are substantially dependent upon the prevailing and future prices for oil and natural gas, which are dependent upon numerous factors beyond its control such as economic, regulatory developments and competition from other energy sources. The energy markets have historically been volatile and there can be no assurance that oil and natural gas prices will not be subject to wide fluctuations in the future. A substantial or extended decline in oil and natural gas prices could have a material adverse effect on the Company's financial position, results of operations, cash flows and quantities of oil and natural gas reserves that may be economically produced.

Oil and Gas Properties

The Company follows the full cost method of accounting for oil and gas properties. Accordingly, all costs associated with acquisition, exploration and development of oil and gas reserves, including directly related overhead costs, are capitalized.

All capitalized costs of oil and gas properties, including the estimated future costs to develop proved reserves, are depleted on the unit-of-production method using estimates of proved reserves. Investments in unproved properties and major development projects are not depleted until proved reserves associated with the projects can be determined or until impairment occurs. In addition, the capitalized costs are subject to a "ceiling test," which limits such costs to the aggregate of the future net revenues from proved reserves, based on current economic and operating conditions, discounted at a 10% interest rate, plus the lower of cost or fair market value of unproved properties. A ceiling test calculation is performed at each year-end. For the year ended December 31, 2014 and 2013, the ceiling test calculation used a first day of month trailing 12-month natural gas and oil average, as adjusted for basis or location differentials using a 12-month average, and held constant over the life of the reserves. The future cash outflows associated with future development or abandonment of wells are included in the computation of the discounted present value of future net revenues for purposes of the ceiling test calculation. For either year ended December 31, 2014 or 2013, the Company recorded no impairment related to its fields in Georgia.

Sales or other dispositions of oil and gas properties are accounted for as adjustments of capitalized costs with no gain or loss recognized, unless such adjustments would significantly alter the relationship between capitalized costs and proved reserves of oil and gas, in which case the gain or loss is recognized in earnings.

Costs Excluded

The costs associated with unproved properties, initially excluded from the amortization base, relate to unproved leasehold acreage, wells and production facilities in progress and wells pending determination of the existence of proved reserves, together with capitalized interest costs for these projects. Unproved leasehold costs are transferred to the amortization base with the costs of drilling the related well once a determination of the existence of proved reserves has been made or upon impairment of a lease. Costs of seismic data are allocated to various unproved leaseholds and transferred to the amortization base with the associated leasehold costs on a specific project basis. Costs associated with wells in progress and completed wells that have yet to be evaluated are transferred to the amortization base once a determination is made whether or not proved reserves can be assigned to the property. Costs of dry wells are transferred to the amortization base immediately upon determination that the well is unsuccessful.

There were no costs associated with unproved properties related to continuing exploration at December 31, 2014 and 2013 due to changes in the Company's development strategy and management's plans to reduce capital spending in certain oil and gas properties.

Income Taxes

The Company recognizes deferred tax liabilities and assets for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax liabilities and assets are determined based on the difference between the financial statements and the tax bases of assets and liabilities using enacted rates in effect for the years in which the differences are expected to reverse. Valuation allowances are established, when appropriate, to reduce deferred tax assets to the amount expected to be realized.

The Company accounts for uncertain tax positions by reporting a liability for tax benefits resulting from uncertain tax positions taken or expected to be taken in a tax return. The Company recognizes interest and penalties, if any, related to tax benefits in income tax expense.

2. Loss Per Share

Basic and diluted loss per share amounts is calculated based on the weighted average number of common stock outstanding during the year. Diluted loss per share is calculated using the weighted average number of shares of common stock outstanding during the year, including the dilutive effect of stock options, warrants and convertible notes. Basic and diluted loss per share for the years ended December 31, 2014 and 2013 are the same since the effect of all common stock equivalents would be antidilutive to the Company's net loss per share.

3. Debt

Debt consists of the following:

Related Party Notes Payable

On January 11, 2011 a revolving credit facility ("Credit Facility") was put in place by and between the Company, Steve C. Nicandros, a Director of the Company, and Zaza Mamulaishvili, a member of Company's senior management team (together, the "Lenders") in the amount of $2,000,000. The $2,000,000 borrowing limit pursuant to the Credit Facility was removed on October 30, 2012. Accordingly, during 2014 and 2013, the Company entered into a series of further notes payable governed by this Credit Facility with the Lenders in the aggregate amounts of $2.1 million and $5.4 million, respectively. These notes have one-term, bear interest of 15%, may be converted, at the discretion of the Lenders, into common stock of the Company at a market-based price, and are classified within Related Party Notes Payable on the Consolidated Balance Sheet. The notes that remained outstanding at the expiry of their original term, have been extended for another year. As of December 31, 2014, the fair value of the of the related party notes was approximately $8.8 million.

The further drawdowns under the Credit Facility as noted above, constitute related party transactions pursuant to the AIM Rules for Companies as the Lenders are directors or applicable employees of the Company, as the case may be. The independent directors of the Company, being all the directors excluding Steve Nicandros, consider, having consulted with finnCap, the Company's nominated adviser at that time, that the further drawdowns pursuant to the Credit Facility as detailed above, are fair and reasonable insofar as the Company's shareholders are concerned.

Convertible Notes Payable

During May 2007, the Company raised approximately $67.0 million through a private placement of convertible unsecured notes due May 2012. The notes were issued at par and bear interest at 10% per annum, payable quarterly in arrears in cash or in kind at the Company's discretion. The notes are convertible into shares of common stock at a conversion price of $1.67 per share. The notes will be automatically converted into common stock at the conversion price if the stock price exceeds two times the conversion price for at least 20 consecutive trading days. On August 2, 2011, 85.1% of the 2012 Notes were converted into the common stock and another 14.6% were exchanged for the 2016 Notes.

On July 3, 2008, the Company raised $23.5 million through a private placement of convertible unsecured notes due July 2013. The notes were issued at par and bear interest at 10% per annum, payable quarterly in arrears in cash or in kind at the Company's discretion. The notes are convertible into common stock at a conversion price of $1.71 per share. On August 2, 2011, 84.0% of the 2013 Notes were converted into the common stock and another 16.0% were exchanged for the 2016 Notes.

On August 2, 2011, note holders exchanged $18,220,312 of 2012 and 2013 Notes into new notes issued under the 2016 Note Purchase Agreement due August 2016 (the "2016 Notes"). The 2016 Notes accrue interest at the rate of 10% per annum, mature five years from the date of issuance and are convertible into Frontera Cayman Shares, at the option of the holder, at a conversion rate of $0.25 per share. As of December 31, 2014, the carrying value of the 2016 Notes approximates fair value.

During 2014 and 2013, the Company elected to pay the quarterly interest payments in kind on the convertible notes and issued approximately $2.4 million and $2.2 million, respectively, in additional convertible notes in accordance with terms of the note purchase agreement.

Other Notes Payable

On June 28, 2011 the Company entered into a standby equity distribution agreement (the "SEDA") with YA Global Master SPV LTd, an investment fund managed by Yorkville Advisors LLC providing for up to approximately £21.6 million (US$35 million) of additional equity investment, through the issue of the new shares in the Company. As of December 31, 2014 approximately £18.8 million (USD $29.3 million) of commitment amount was still available for drawdown. This agreement was extended in April 2015 through December 31, 2018.

The Company drew down from their SEDA-backed loan agreements with YA Global Master SPV Ltd. Under these drawdowns, $4.0 million and $2.5 million were remaining outstanding as of December 31, 2014 and 2013, respectively. As of December 31, 2014, the carrying value of the other notes payable approximates fair value.

Future principal maturities as of December 31, 2014 for long-term debt obligations are as follows:

Derivative Stock Warrant Liabilities

The exchange rate as of December 31, 2013 was $1.66 USD equivalent to UK £ 1.00.

In July 2008, the Company solicited consents from holders of its 10% convertible notes due May 2012 to amend the note purchase agreements governing such notes to permit the issuance of the new notes and to release the remaining escrowed proceeds of $5.0 million from the May 2007 private placement. In connection with the solicitation, each consenting holder received a warrant exercisable into shares of common stock in an amount equal to 7.5% of the number of shares of common stock into which such consenting holder's existing notes were convertible. The warrants were exercisable for approximately 3,151,000 shares of common stock in the aggregate. Each warrant entitled the holder to purchase one share of common stock at a price of $3.50 per share. During 2009, due to anti-dilution provisions contained in the warrant agreements, the warrants became exercisable into 6,593,037 shares in the aggregate at an exercise price of $1.69 per share. Also, during 2011 due to the same anti-dilution provisions contained in the warrant agreements, the warrants became exercisable into 65,743,893 shares in the aggregate at an exercise price of £0.105 per share. Again, during 2012 due to the same anti-dilution provisions contained in the warrant agreements, the warrants became exercisable into 74,501,366 shares in the aggregate at an exercise price of £0.093 per share. The warrants have a five-year term and include a cashless exercise provision along with other customary terms and provisions. The issuance date fair value of these warrants was estimated to be $0.9 million and has been recorded as a derivative stock warrant liability. The warrants were valued on the issuance date using the following assumptions: risk-free interest rate of 3.42%, expected volatility of 146.3%, no expected dividend yield and a term of 5 years. All of these warrants expired on July 3, 2013.

On February 8, 2011, the Company issued a warrant instrument entitling Arbuthnot, broker of Company, to purchase 500,000 Shares of Common Stock at an exercise price of £0.06 ($.0966) per share. These warrants expired on February 8, 2013.

On August 2, 2011, as part of the fees and commissions payable to Arbuthnot, OPL and Strand Hanson for their respective roles in the Placing, Company has issued 12,558,307 warrants with an exercise price of £0.04 ($0.065) per share with terms ranging from 2 to 3 years. Of these warrants, 11,870,807 expired on August 2, 2013 and 687,500 expired on August 2, 2014.

Under the terms of SEDA-backed Loan Agreement in respect of Initial Advance in January 2012 Yorkville has been granted 15,000,000 warrants exercisable within 2 years with an exercise price of £0.018 ($0.028) per share. These warrants expired on January 31, 2014.

The change in the fair value of the warrants results in derivative income of $0.0 million for 2014 and 2013. The Company determined the fair value of these warrants as of December 31, 2013 using the following assumptions: risk-free interest rates ranging from 0.09% to 0.12%, expected volatilities ranging from 48.41% to 85.69%, no expected dividend yield and terms ranging from 0.08 years to 0.59 years.

4. Directors' Remuneration and Related Party Transactions

No remuneration was received by each director in his capacity of director of the Company during the 2014 financial year.

In conjunction with an ongoing consulting agreement, a director of the Company received consulting fees for the years ended December 31, 2014 and 2013 of $275,000 and $275,000, respectively.

Additionally the Company entered into a series of Notes Payable with two of the Company's officers. During 2013, $5.2 million in principal was borrowed. During 2014, the Company borrowed an additional $2.1 million in principal.

5. Subsequent Events

In April 2015, the Company raised $1.3 million through a draw down on the Standby Equity Distribution Agreement ("SEDA") with YA Global Master SPV Ltd. and issued 88,497,626 new ordinary shares of $0.00004 each in the Company. The proceeds have been used to repay the Company's outstanding corporate debt under the terms of the SEDA-Backed Loan Agreement entered into with YA Global Master SPV Ltd.

In May 2015, the Company successfully completed an equity fund raising initiative of GBP 2.8 million (approximately $4.3 million) by way of subscription for 350,000,000 new ordinary shares of $0.00004 each with certain institutional investors. Simultaneously the Company's authorized share capital has been increased to 4,350,000,000.

Events occurring after December 31, 2014 were evaluated through June 29, 2015, the date this report was available to be issued, to ensure that any subsequent events meeting the criteria for recognition or disclosure were included. 

6. Posting of the Annual Report and Accounts

The Company's Annual Report and Accounts will be distributed to all shareholders via the Company's website, www.fronteraresources.com.