Q2 Operations Update

RNS Number : 9298R

Block Energy PLC

11 July 2022

 

11 July 2022

Block Energy plc

("Block" or the "Company")

Q2 Operations Update

Block Energy plc, the exploration and production company focused on Georgia, is pleased to announce the following operations update for the three months ended 30 June 2022.

Highlights

· Strong and consistent performance, with Q2:

o  production of 47.2 Mboe (Q1: 46.1 Mboe)

o  average production of 519 boepd (Q1: 512 boepd)

o  revenue of $2,228,000 (Q1: $2,361,000)

· Cash at 30 June 2022: $1.4m (31 March 2022: $1.2m)

· Preparations for a five-well development plan, including WR-B01 sidetrack, complete and ready for execution

· Advanced discussions on non-dilutive funding for the five-well development plan to accelerate a wider drilling programme are ongoing with industry specialists

· Over 92,000 operational man-hours worked in Q2 (Q1: 92,000 hours), with no lost-time incidents

Health and Safety

92,000 operational man-hours have been worked by staff and contractors in Q2 (Q1: 92,000 hours) with no lost-time incidents.

Operational Strategy

As recently explained in the Company's Annual Report, the Company's assets represent a material growth opportunity in terms of production, revenue and cash flow, particularly at current commodity prices. As with any development programme, single-well development risk remains, and the Company is seeking to mitigate it with a multi-well programme.

The Company's three-project strategy looks at the opportunity in totality. Projects I and II are aimed at generating additional cash in the short to medium term, while Project III seeks to add significant value from the deeper, extensive natural gas resources that lie beneath the portfolio of licences. The investment case for this strategy is supported by the improved understanding of the complexities of the Eocene reservoirs, which was a key objective in 2021.

Project I is the development of the Middle Eocene oil reservoir in the West Rustavi/Krtsanisi field, which straddles Blocks XI^F and XI^B, initially comprising of three sidetracks and two new wells. Preparations for the first sidetrack, of WR-B01, are now complete. These included the procurement of long-lead items and site preparation. Furthermore, construction of the gathering line from WR-B01 to the WR-38 wellsite has been completed on time and on budget, enabling offtake and rapid monetisation of the gas produced from the WR-B01 sidetrack. Project I is primed for non-dilutive debt funding and discussions with potential lenders are at an advanced stage.

Project II, the infill development of the Middle Eocene oil reservoir in the prolific Patardzeuli oil field (100 MMbbls produced) in Block XI^B will be self-funded from the cash generated from operations and will commence shortly. More than 50 sidetrack holes could be drilled from the legacy well stock, six of which have already been defined for sidetracking.

Project III, the evaluation and development of the natural gas resources throughout the Eocene in blocks XIF and XIB, will commence later this year with the workover of legacy wells which discovered gas. This includes the potential sidetrack of the PAT-E1 discovery well, engineered for a 1000m horizontal section through the Lower Eocene and designed to evaluate over 300 Bcf of contingent gas resources.

Oil and Gas Production

During Q2, gross production was 47.2 Mboe (Q1: 46.1 Mboe), comprising 32.8 Mbbls of oil (Q1: 32.1 Mbbls) and 14.4 Mboe of gas (Q1: 14.0 Mboe). The average gross production rate for Q2 increased slightly to 519 boepd (Q1: 512 boepd).

Production in Q2 was supported by a consistent performance from well JKT-01Z and well WR-38Z being brought back into production towards the end of the previous quarter.

Oil Sales

In Q2, Block sold 21.2 Mbbls of oil (Q1: 24.4 Mbbls) for $1,992,000 (Q1: $2,168,000), resulting in a weighted average price of approximately $94 per barrel (Q1: $89 per barrel), representing a 6% increase in the realised price in Q2 compared with Q1. As at 30 June 2022, Block had over 11,000 bbls of unsold oil in inventory.

Gas Sales

In Q2, the Company sold 58.4 MMcf of gas (Q1: 48.4 MMcf) for $236,000 (Q1: $193,000), resulting in a weighted average price of approximately $4.04/Mcf (Q1: $4.00/Mcf).

Cash Position

As at 30 June 2022, Block had $1.4 million cash at bank (31 March 2022: $1.2 million).

Block Energy plc's Chief Executive Officer, Paul Haywood, said:

"Block had a solid quarter, with stable production and positive operational cash flow. We have developed a balanced portfolio-wide strategy to unlock the inherent value across our assets, which we believe makes for a compelling investment case, particularly at current commodity prices. To accelerate that programme and mitigate the direct risks associated with a single well programme, we are in advanced discussions on a package of non-dilutive financing. Furthermore, the intention is to bring forward plans to initiate infill drilling within the prolific Patardzeuli field and develop the PAT-E1 gas discovery, of over 300 Bcf of contingent gas resources. With or without external financing, we will deliver the multi-well programme, as rapidly as diligent planning and capital discipline will allow."

Stephen James BSc, MBA, PhD (Block Energy's Subsurface Manager) has reviewed the reserve, resource and production information contained in this announcement. Dr James is a geoscientist with more than 40 years' experience in field development and reservoir management.

**ENDS**

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION AS STIPULATED UNDER THE UK VERSION OF THE MARKET ABUSE REGULATION NO 596/2014 WHICH IS PART OF ENGLISH LAW BY VIRTUE OF THE EUROPEAN (WITHDRAWAL) ACT 2018, AS AMENDED.  ON PUBLICATION OF THIS ANNOUNCEMENT VIA A REGULATORY INFORMATION SERVICE, THIS INFORMATION IS CONSIDERED TO BE IN THE PUBLIC DOMAIN.

For further information please visit  http://www.blockenergy.co.uk/  or contact:

Paul Haywood (Chief Executive Officer)	Block Energy plc	Tel: [phone]
Neil Baldwin (Nominated Adviser)	Spark Advisory Partners Limited	Tel: [phone]
Peter Krens (Corporate Broker)	Tennyson Securities	Tel: [phone]
P hilip Dennis / M ark Antelme (Financial PR)	C elicourt Communications	Tel: [phone]

Notes to editors

Block Energy plc is an AIM-listed independent oil and gas company focused on production and development in Georgia, applying innovative technology to realise the full potential of previously discovered fields.

Block has a 100% working interest in Georgian onshore licence blocks IX and XI^B. Licence block XI^B is Georgia's most productive block, with 2P oil and gas reserves of 64 MMboe, comprising 2P oil reserves of 36 MMbbls and 2P gas reserves of 28 MMboe (Source: CPR Bayphase Limited: 1 July 2015) and historical production of over 180 MMbbls of oil from the Middle Eocene, peaking in the mid-1980s at 67,000 bopd.

The Company has a 100% working interest in the West Rustavi onshore oil and gas field with multiple wells that have tested oil and gas from a range of geological horizons. The field has so far produced 50 Mbbls of light sweet crude and has 0.9 MMbbls of gross 2P oil reserves in the Middle Eocene. It also has 38 MMbbls of gross unrisked 2C contingent resources of oil and 608 Bcf of gross unrisked 2C contingent resources of gas in the Middle, Upper and Lower Eocene formations (Source: CPR Gustavson Associates: 1 January 2018).

Block also holds 100% and 90% working interests respectively in the onshore oil producing Norio and Satskhenisi fields.

The Company offers a clear entry point for investors to gain exposure to Georgia's growing economy and the strong regional demand for oil and gas.

Glossary

1.  bbls: barrels. A barrel is 35 imperial gallons.

2.  Bcf: billion cubic feet.

3.  boe: barrels of oil equivalent.

4.  boepd: barrels of oil equivalent per day.

5.  bopd: barrels of oil per day.

6.  gross production: including the state of Georgia's share of production

7.  LTI: lost-time incident.

8.  Mbbls: thousand barrels.

9.  Mboe: thousand barrels of oil equivalent.

10.  MMbbls: million barrels.

11.  MMboe: million barrels of oil equivalent.

 

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