Well and Operations Update

RNS Number : 3512Z

Block Energy PLC

24 January 2022

 

24 January 2022

Block Energy plc

("Block" or the "Company")

JKT-01Z Well and Operations Update

Highlights

· Good progress has been made with testing at JKT-01Z, with initial production rates of 344 boepd (comprising 241 bopd and 17,500 m³ of gas per day)

· Rapid monetisation of gas and oil production is expected to make Block's monthly cashflow positive

· Nearly $500,000 additional cash revenue per month, based on current production rates and sales prices

· No LTIs, with time and cost to drill beating forecast by 20% and 10% respectively

· Over 30 per cent higher gas price achieved in Georgia, effective from 1 January 2022

· Success at JKT-01Z significantly de-risks and enhances optimisation of future drilling

· Twelve further sidetracks, analogous to the JKT-01Z, being assessed, including re-completion of the WR-B1 well

JKT-01Z Well Testing

Block Energy plc, the exploration and production company focused on Georgia, is pleased to announce testing on well JKT-01Z has commenced, with current average production rates of 344 boepd, comprising 241 bopd and 17,500 m³ (103 boe) of gas per day . Build-up analysis showed no pressure depletion after the clean-up and well testing flows. This indicates the well is likely to be in good communication with the wider reservoir and will provide sustained production like KRT-39.

R apid monetisation of the gas production from JKT-01Z will be achieved, with the well due to be tied into the recently installed gas infrastructure at KRT-39 within one week. At the current production rate, crude oil price and gas sales price, JKT-01Z is forecast to deliver nearly $500,000 additional monthly cashflow to the Company. Excluding capital expenditure, this additional revenue will make the Company cashflow positive, marking a significant milestone for the Company.

Well JKT-01Z reached total depth at 2,565 metres MD as planned in early January 2022, with no LTIs experienced. Since then, the well has been completed and the well test programme is underway. Except for deliberate shut-in periods to monitor pressure build-up, the well has flowed naturally since 16 January 2022.  At larger choke sizes, the well has flowed at higher gas rates than that stated above. Currently, production rates are being constrained to stay within the safe operating limits of the existing gas infrastructure.

To maximise operational efficiency and minimise costs, JKT-01Z was drilled as a sidetrack from a vertical well drilled in 2011 by a previous operator. The well was drilled and completed 20 per cent ahead of forecast time and 10 per cent under budgeted cost, owing to efficiencies achieved across drilling operations and procurement.

JKT-01Z is producing from an in-place volume estimated to be approximately 8 MMbbls. The well was drilled with its trajectory orientated along a productive open fracture network identified from analysis of the Company's 3D seismic survey acquired in 2019. The oil and gas shows observed during drilling correlate with the seismic fracture attribute indicators and lithology changes. Block's reservoir (material balance) modelling of the nearby KRT-39 well, which has been a sustained producer of oil and gas for over 20 years, also indicates the presence of a large, connected pore system and strong aquifer support in the Krtsanisi area of the West Rustavi Middle Eocene Reservoir.

JKT-01Z was drilled along 597 metres of horizontal reservoir section. The top of the reservoir was encountered shallower than prognosed, resulting in a significant increase in estimated reservoir volume, which is expected to enhance resource and reserves volumes.

Gas Sales Agreements

We are pleased to announce the gas sales agreements for the sale of gas from each of West Rustavi and Block XI^B have been renegotiated with effect from 1 January 2022, and have provided benefit to the Company from rising gas prices generally.

During 2021, gas was sold at a fixed discount to the price of the last tender completed by the Georgian Oil and Gas Corporation for the sale of its gas. Now, gas is sold at a fixed discount to the price achieved by the largest supplier to the domestic gas market, and this discount is subject to potential reductions in the future based on the Company achieving operational milestones. As a result of the improved agreement terms and the improved market, Block will achieve a price for its gas in Q1 2022 that is over 30 per cent higher than the price achieved by the Company in the second half of 2021.

Future Plans

The success at JKT-01Z enhances the Company's confidence in its ability to further optimise drilling within the field through a combination of high-resolution reservoir imaging, reservoir production modelling and horizontal directional drilling technologies. Besides positively impacting the West Rustavi/Krtsanisi field development, this approach should also improve the Company's ability to convert contingent resources to reserves, and reserves to production, across its portfolio.

Using the upgraded sub-surface model, the team are ranking the twelve immediate sidetrack opportunities, analogous to the JKT-01Z well, including a recompletion of the WR-B1 well.

JKT-01Z Video

For more information, please watch the latest video from the JKT-01Z wellsite, available at the following link:

https://www.voxmarkets.co.uk/articles/block-energy-jkt-01z-well-update-2874737

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

"Well JKT-01Z sets a new standard on time and cost for such a sidetrack in our Georgian operation. It has also been delivered with an exceptional safety record. The success of this well represents a milestone for the Company, with Block becoming cashflow positive, opening the opportunity to create and deliver additional value to shareholders. Our strategy remains to drive value through organic growth, converting contingent resources to proven reserves and production, which, given our asset base and today's commodity prices, makes a compelling business case. On the back of the success of JKT-01Z, the team are evaluating twelve further sidetrack candidates . The Board would like to thank all shareholders for their continued support and look forward to providing further updates in due course".

Paul Jeffs (Block's Reservoir Engineer) has reviewed the reserve, resource and production information contained in this announcement. Dr Jeffs has PhD and MSc degrees in Engineering from Imperial College, London and is a Chartered Engineer with 40 years' experience in the Oil and Gas Industry.

**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)	Celicourt 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 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.  LTI: lost-time incident.

7.  Mbbls: thousand barrels.

8.  Mboe: thousand barrels of oil equivalent.

9.  MD: measured depth along the well path.

10.  MMbbls: million barrels.

11.  MMboe: million barrels of oil equivalent.

 

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