FOSI Closes Friday Up 25%

FOSI Closes Friday Up 25%

Frontier Oilfield Services, Inc. (OTCQB: FOSI)

Company Overview

Frontier Oilfield Services, Inc (OTCQB: FOSI) represents a ground-floor opportunity for those who may be seeking to capitalize on the “shale” boom that is sweeping across several oil and gas producing regions in the United States like the Haynesville shale in East Texas. The Haynesville Shale is one of the largest gas shale plays in the US, and is currently the primary location of Frontier’s operations.
As a result of breakthroughs in oilfield technology, the process by which shale oil and gas is extracted has resulted in a massive burden upon the E & P companies –the disposal of drilling and fracing fluids and salt water. As exploration and production (“E&P”) companies have drilled more wells and deployed more hydro-fracturing to increase production, it became imperative that something be done with the flow-back of the drilling and fracing fluids and produced water. Consequently a sizable increase in demand for saltwater disposal has left a considerable gap in the disposal market that needs to be filled.
Frontier’s business focus on wastewater recovery and disposal was selected due to the relatively high margins and a strong barrier to entry by potential competitors due to the limited supply of state permitted disposal wells. This highly fragmented industry consists mostly of “mom and pop” operations with limited to no infrastructure conducive to fostering the growth required to satisfy the needs of the major oil companies within their respective producing regions. Frontier has come to the following conclusions:

  • Advanced technology of hydro-fracturing has increased the demand for saltwater recovery and disposal.
  • Compliance, safety, and environmental practices of “mom and pop” operations are not sufficient for major E&P companies, who shoulder the liability for disposal of saltwater and therefore must seek reliable companies with proven sophistication and logistics.
  • A roll-up strategy through aggressive acquisitions of “mom and pop” disposal operations and organic growth of existing operations could substantially increase the revenue and assets of Frontier and therefore provide the potential for Frontier shareholders for increased value.
  • Drilling and production activity, for example in the Haynesville shale, is expected to continue for decades to come and 37,600 wells are projected to be in production by 2023. The total Haynesville shale saltwater disposal market is projected to reach 6.2 billion barrels.
  • Frontier plans to position itself as one of the premier companies to meet the saltwater disposal needs of oil and gas producers and operators in the Haynesville Shale and then branch out to other shale plays to increase its market share and geographic diversity.
  • Frontier has put into place experienced management with a successful track record of achieving market success in both E&P operations and oilfield services.

The services offered by the Company are necessary and essential to the large exploration and production companies already operating in Frontier’s planned service areas. Currently, Frontier manages the operations of Trinity Disposal and Trucking, LLC. (TDT) a 12 year old saltwater and drilling fluids transportation and disposal company with eight disposal wells and access to approximately 4,000 oil/gas wells operating within the Company’s target area of operations.

  • Frontier intends to complete the acquisition of Trinity Disposal and Trucking LLC through the purchase of 51% of the equity of its parent, Frontier Income and Growth, LLC, which is being made by a $5.5 million dollar preferred stock purchase by Lonestar Income and Growth, LLC (see below).
  • Once acquired Frontier will seek to expand Trinity’s operations, as 100% of their current capacity is being absorbed by major customers like Devon Energy, GMX Resources, Wagner & Brown, Ltd., Matador Oil, NFR, Vernon Faulkner, and XTO Energy.
  • Trinity Disposal and Trucking currently targets customers which are within 15 miles of one of its disposal wells due to the favorable transportation economics of such proximity. Currently, there are approximately 4,000 producing wells that are within a 15 mile radius of Trinity’s disposal wells, and as stated above, Frontier believes that number will grow.

Frontier recently announced an investment agreement with Lonestar Income and Growth, LLC. Lonestar, an unrelated third party, will receive 2,750,000 shares of Frontier’s 2011 Series A 8% preferred stock for the sum of $5,500,000.00 contingent upon Frontier using the proceeds of the stock purchase to acquire a majority (51%) interest in Frontier Income and Growth, LLC., (FIG), the parent of Trinity Disposal and Trucking, LLC.

Frontier also anticipates being able to expand its “roustabout” services which are an additional profit center and a complement to the wastewater recovery and disposal business.

The following is a more detailed explanation of the oilfield salt water disposal business.

View the full profile of Frontier Oilfield Services, Inc. (OTCQB: FOSI) at http://www.stockorange.com/client-profiles/fosi/

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