REG - Block Energy PLC - Q2 Operations Update

Block EnergyAnnouncement

11/07/2022 07:00

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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/
(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, 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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