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Block Energy PLC (BLOE)

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Monday 15 October, 2018

Block Energy PLC

Begins workover operations in Georgia - Amendment

RNS Number : 1030E
Block Energy PLC
15 October 2018
 

This announcement replaces 9659D issued at 7.00am on 15 October 2018. The change relates to the number of barrels the Company intends to produce at its Norio field. As the original announcement stated, Block is aiming to scale production at Norio to 150 bopd by the end of Q1 2019 through two workover campaigns on eight wells. This amended announcement includes a reference to the Company's intention to undertake an additional sidetrack at the field after these workovers, which is forecast to bring Norio's production to 250 bopd.

Block Energy Plc, the exploration and production company focused on the Republic of Georgia, is pleased to announce the start of the workover programme at its Norio oil field intended to scale up production rapidly by the end of 2018. The Company plans to carry out two fully-funded workover campaigns on eight wells through Q4 2018 and Q1 2019 at the field, using an A50 rig and a specialist perforation tool imported from North America.

The programme begins with preparation work on four of the eight wells. The workovers will proceed in sequence with each expected to take five to seven days to complete. A perforation technology selected to bypass any damage caused by historic heavy mud drilling will then be applied to each well. The technique replaces conventional shaped charge perforation with a micro drilling tool able to cut horizontal drain holes at multiple levels. New or refurbished pumps will then be installed to bring the wells to production, before the process is repeated early next year on the remaining four wells.

The Company expects to complete workovers of all eight wells by the end of Q1 2019, with the aim of rapidly scaling Norio's production from 10 to 150 bopd. An additional sidetrack planned at one of the field's wells after these workovers is forecast to bring production to 250 bopd [http://www.blockenergy.co.uk/wp-content/uploads/2018/05/Block-Energy-CPR.Gustavson-Final.051418.pdf]. The field's infrastructure is already operational, allowing oil sales to commence immediately. Norio oil is currently sold at a value of Brent minus US$10. Block holds a 100% working interest in the field, which holds gross proven oil reserves of 1.631 million barrels.

The Company is also preparing to drill horizontal sidetracks and test a legacy gas discovery in the Lower Eocene at its West Rustavi field. The discovery lies on the same play being targeted by Schlumberger on neighbouring fields. When final inspections are complete a ZJ40 rig will be used to drill two high impact horizontal side-tracks, which will increase Block's working interest in the field from 25% to 75%.

Block Energy Chief Executive Officer Paul Haywood said: "The commencement of our operations today is the culmination of a great deal of hard work by the team and the gateway to an exciting future for the Company and our stakeholders. Our Norio work programme aims to scale production up to 150 bopd by the end of Q1 2019, with a planned additional sidetrack forecast to increase production to 250 bopd. Our Georgian operations are already cashflow positive, producing 15 bopd. Increasing our production ten-fold would, at current oil prices, create a highly cash generative platform for Block.

"We have put the infrastructure, technology and team in place to unlock the potential of our Norio licence, which offers multiple low cost, low risk workover opportunities. And with 608 bcf of gross unrisked contingent resources at West Rustavi, we are well placed to realise our objective to establish Block as Georgia's leading independent oil and gas company. We look forward to maintaining a high impact news flow as our work programme progresses over the coming weeks and months."

Roger McMechan, Technical Director, has reviewed the reserve, resource and production information contained in this announcement. Mr McMechan has a BSc in Engineering from the University of Waterloo, Canada and is a Professional Engineer registered in Alberta.

This announcement contains inside information which is disclosed in accordance with the Market Abuse Regulation which came into effect on 3 July 2016.

**ENDS**

Further information

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

Paul Haywood

(Chief Executive Officer)

Block Energy Plc

Please contact St Brides Partners Ltd (see below)

Neil Baldwin

(Nominated Adviser)

Spark Advisory Partners Limited

Tel: +44 (0) 203 368 3554

Craig Fraser

(Joint Corporate Broker)

Baden Hill LLP

Tel: +44 (0) 207 933 8731

Colin Rowbury

(Joint Corporate Broker)

Novum Securities Ltd

Tel: +44 (0)207 399 9427

Frank Buhagiar/Juliet Earl

(Financial PR)

St Brides Partners Ltd

Tel: +44 (0) 207 236 1177

Notes

Block Energy (BLOE.L) is an AIM quoted oil and gas company with a growing portfolio of production, development and exploration assets in the Republic of Georgia. Block holds a 100% working interest ('WI') in the producing Norio field, a 90% WI in the producing Satskhenisi licence and a 25% WI in the West Rustavi field with the right to farm-in to up to a 75% WI. Block's three fields are contiguous with Schlumberger's 100% held position in the Kura basin, which at its peak produced c.70,000 barrels of oil per day ('bopd') in Georgia and is estimated to hold over seven billion barrels of proven reserves in Azerbaijan and the North Caucasus (Russia).

Block's fields hold estimated net proven oil reserves of 1.5 million barrels and 61 million barrels unrisked contingent oil resources ('2C'). The West Rustavi permit has estimated gross unrisked contingent gas resources (2C) of 608 bcf. Multiple gas discoveries have already been made in the Lower Eocene and Upper Cretaceous within the field and are on trend with the same play currently being targeted by Schlumberger in the neighbouring Block XIb field. The estimated cost of gas development and production at West Rustavi is c.US$2.00/Mcf which equates to operating netbacks of c.US$2.6/Mcf (assuming a 75% working interest). Georgia currently purchases its gas for c.US$5.5/Mcf (c.US$600m project value to the Company).

As well as appraising the West Rustavi field Block is rehabilitating the producing Norio (100% WI) and Satskhenisi fields (90% WI), which will provide immediate production uplift when field operations commence in Q3. The near-term target is to increase production from 15 to 900 bopd within 18 months through a low cost, low risk workover and sidetrack programme, and then to use the cashflow to drill horizontal wells and sidetracks to augment production to c.2,000 bopd. Oil production on these fields offers excellent netbacks, with the current cost of production of c.US$25 per barrel providing netbacks of c. US$30-35 per barrel.


This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact [email protected] or visit www.rns.com.
 
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