REG - Block Energy PLC - Farmout Agreement

Block EnergyAnnouncement

12/12/2022 07:00

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RNS Number : 2965J  Block Energy PLC  12 December 2022

12 December 2022

 

Block Energy plc

("Block" or the "Company")

Farmout Agreement

 

Block Energy plc, the exploration and production company focused on Georgia,
is pleased to announce that binding documentation has been entered into with
Georgia Oil and Gas Limited ("GOGL") with respect to a farm-out of part of the
Company's XI(B) licence.

Highlights:

·     Binding documentation entered for a 50% farmout of non-core areas
of licence XI(B) to Georgia Oil and Gas Limited ("GOGL")

 

·     Farmout terms amount to a work programme with an estimated value of
USD 3.0 million comprising USD 2.5 million for a 2D seismic acquisition and
USD 0.5 million for seismic reprocessing

 

·     Portions being farmed out are exploration areas that would have
been subject to relinquishment in 2024,  and now form part of Block's new
Project IV

 

·     None of the existing fields, current production and future
development plans associated with Projects I, II and III within the XI(B)
licence are subject to the farm-out and the transaction will have no impact on
Block's operator status across its existing production areas

 

·    Farmout will advance Block's exploration opportunities through a
sizable work programme commitment from GOGL at no cost to Block

 

·     Future associated cash liability is capped at USD 50,000 per annum
net to Block until further major capital works (3D seismic/drilling) are
committed to by either GOGL or third-party farminee

 

·     GOGL is the largest exploration company in Georgia and holds
acreage of over 13,200 km2 within various PSCs

 

Farm-Out

Block's XI(B) licence covers a total area of 614 km(2) and includes the
Patardzeuli, Samgori, Teleti and Rustavi fields which have produced more than
180 MMbbl of oil.

The portions of XI(B  )that are subject to the farm-out are
exploration-focused, form part of Block's newly established Project IV, and do
not include any of the areas currently in production. They include a 103km(2)
section in the north of the licence (bordering licences XIM & XIQ) and a
148km(2) area in the southeast of XI(B) (bordering licences XIH and XIL). The
northern section will now be known as the "Didi Lilo" area and the southeast
section will now be known as the "South Samgori" area as shown in the map
below:

None of the existing fields associated with Project I, II and III within the
XI(B) licence, are subject to the farm-out and the transaction will have no
impact on Block's existing production base or operator status across all
existing fields.

Transaction Summary

Under the terms negotiated, Block and GOGL will each have a participating
Interest of 50% in the respective areas. As consideration for the farm-out,
GOGL is to complete a work programme, across Didi Lilo and South Samgori,
which comprises:

-      The acquisition and processing of 210 km of 2D seismic data

-      The reprocessing of 1,000 km existing seismic data, within and
around Didi Lilo, South Samgori and the remainder of XI(B)

The cost of the work programme is estimated at USD 3.0 million, comprising USD
2.5 million for seismic acquisition and USD 0.5 million for seismic
reprocessing.

Under the industry-standard Joint Operating Agreements ("JOAs") that have been
negotiated, the annual gross budgets will not exceed USD 100,000 (USD 50,000
net to Block) per annum, until either GOGL or a third-party farminee elects to
acquire a 3D seismic survey over the area and /or drill a well.

Block will retain the optionality to either benefit from a carry, fund its
share of any future 3D survey/drilling or further farm-down its interest in
the licence areas. Industry-standard sole-risk provisions are present in the
JOA.

Rationale

The farm-out advance's exploration opportunities through a sizable work
commitment from GOGL at no cost to Block. Future cash liability associated
with Didi Lilo and South Samgori is capped at USD 50,000 per annum net to
Block until further major capital works (3D seismic/drilling) are committed to
by either GOGL or a third-party farminee.

GOGL is the largest exploration company in Georgia and holds acreage of over
13,200 km(2) within various PSCs.

In 2022, as part of Georgia's drive to achieve energy independence, GOGL
received a cash equity investment from Georgia Oil and Gas Corporation
("GOGC"), the state-owned national oil company, to progress high-impact and
strategic exploration activities within its portfolio, including the
acquisition of 2D seismic, ahead of facilitating farm-in discussions with NOCs
and IOCs across the region.

The focus of GOGL is on maturing large, strategically significant gas and oil
exploration and appraisal targets within its portfolio, north and south of
Block's Samgori oil field.

The contractor for the acquisition of the 210 km 2D seismic data over Didi
Lilo and South Samgori is Geofizyka Torun S.A., a subsidiary of the Polish Oil
& Gas Company PGNiG SA ("PGNiG"), which has recently merged with Orlen
Group, a fully integrated oil company with a market capitalisation of c. USD
16.5 bn.

GOGL & Geofizika Torun S.A interpret the Norio Deep prospect/play to
extend to within the Dido Lilo Area. This is a Middle/Upper Eocene
prospect/play. GOGL also interpret the Nakarala prospect/play to extend into
the South Samgori Area.

The Dido Lilo and South Samgori Areas have been assigned a risked (P50)
Resource of over 400MMboe by GOGL and its technical partners.

GOGL is involved in advanced detailed farm-out discussions with national and
major oil companies around a farm-in to the Dido Lilo and South Samgori Areas.

Commenting, Paul Haywood, Block Energy CEO said:

"This farm-out enables Block to combine and progress advanced exploration
opportunities (800 MMBOE) with a capable and well-qualified operator, at de
minimis cost, whilst allowing it to continue to focus on its core production
and appraisal-led three Project strategy. This high-impact exploration
opportunity also compliments the existing portfolio with very substantial
upside which continues to attract the attention of major oil companies across
the region.

GOGL have committed to a significant work programme that supports this
exploration opportunity. The commitment to acquire and reprocess existing
seismic on XI(B) will also complement our work within Projects I, II and
Project III. The Company looks forward to working with GOGL, in the Didi Lilo
and South Samgori Areas, as well as on a larger farm-out strategy led by
GOGL."

 

Stephen James BSc, MBA, PhD (Block's Subsurface Manager) has reviewed the
reserve, resource and production information contained in this
announcement. Dr James is a geoscientist with over 40 years' of 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/
(http://www.blockenergy.co.uk/)  or contact:

 Paul Haywood                   Block Energy plc                 Tel: +44 (0)20 3468 9891

 (Chief Executive Officer)
 Neil Baldwin                   Spark Advisory Partners Limited  Tel: +44 (0)20 3368 3554

 (Nominated Adviser)
 Peter Krens                    Tennyson Securities              Tel: +44 (0)20 7186 9030

 (Corporate Broker)
 Philip Dennis / Mark Antelme   Celicourt Communications         Tel: +44 (0)20 8434 2643

 (Financial PR)

 

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. During the
mid-1980s, production peaked at 67,000 bopd and cumulative production reached
100 MMbbls and 80 MMbbls of oil from the Patardzeuli and Samgori fields,
respectively. The remaining 2P reserves across block XI(B) are 64 MMboe,
comprising 2P oil reserves of 36 MMbbls and 2P gas reserves of 28 MMboe.
(Source: CPR Bayphase Limited: 1 July 2015). Additionally, following an
internal technical study designed to evaluate and quantify the undrained oil
potential of the Middle Eocene within the Patardzeuli field, the Company has
estimated gross unrisked 2C contingent resources of 200 MMbbls of oil.

The Company has a 100% working interest in licence block XI(F) containing the
West Rustavi onshore oil and gas field. Multiple wells have tested oil and gas
from a range of geological horizons. The field has so far produced over
75 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

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

·    Bcf: billion cubic feet.

·    boe: barrels of oil equivalent.

·    boepd: barrels of oil equivalent per day.

·    bopd: barrels of oil per day.

·    Mbbls: thousand barrels.

·    Mboe: thousand barrels of oil equivalent.

·    Mcf: thousand cubic feet.

·    MMbbls: million barrels.

·    MMboe: million barrels of oil equivalent.

·    MMcf: million cubic feet.

 

 

 

 

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