REG - Block Energy PLC - Q4 Operational Update

Block EnergyAnnouncement

16/01/2023 07:00

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RNS Number : 7482M  Block Energy PLC  16 January 2023

16 January 2023

 

Block Energy plc

("Block" or the "Company")

Q4 Operational Update

Block Energy Plc, the exploration and production company focused on Georgia,
is pleased to announce its operations update for the three months ended 31
December 2022.

Highlights

·    Over 135,290 operational man-hours worked in Q4 2022, with one minor
Lost Time Incident

 

·    Commenced Project II (Patardzeuli full-field redevelopment), drilling
and testing the JSR-01 DEEP well on time and budget. Encouraging results,
confirming unswept oil in the Field, support the continuation of the project.

 

·    The Company has upgraded its service rig to undertake low-cost
drilling and workover operations in the shallow reservoirs of all its fields
and in particular will support the advancement of Project II.

 

·     Drilling operations on well WR-B01Za commenced in December, with
operations progressing as planned

 

·  Binding agreement signed for the farmout of non-core areas of licence
XIᴮ in exchange for work programme valued at c. $3m gross.

 

·    Q4 production of 34.4 Mboe (Q3: 37.1 Mboe) or an average of 374 boepd

 

·    Q4 revenue of $1,840,400 (Q3: $1,833,000)

 

 

Health, Safety & Emissions

 

Over 135,290 operational man-hours have been worked by staff and contractors
in Q4, and over 382,542 in the twelve months ended 31 December 2022, with one
minor LTI.

 

The Company again sought to minimise emissions, in-line with its commitments,
but was required to flare 300,000cum of gas due to the temporary shutdown of
the Bago gas pipeline and electricity outages prior to the installation of the
generator at the early production facility.

 

The Company has implemented a procedure for the recording of Project I
emissions and is working to reduce other emissions further. In 2023, the
Company plans to record Scope II emissions and fulfil its intention to reduce
those emissions also.

 

Operations

 

Drilling operations on well WR-B01Za are progressing as planned, with
operations having commenced in mid-December. Well WR-B01Za is targeting a
fracture system identified by a high density of seismic attribute lineations
on the west side of the Krtsanisi anticline on the West Rustavi oil field. The
well is located 500m to the west and up-dip from the successful JKT-01Z well,
which has been on continuous production, providing significant returns on the
original investment.

 

Well JSR-01 DEEP successfully confirmed the concept of unswept oil in the
Patardzeuli Field. This encouraging result supports the Company's continued
advancement of Project II and the development of the Patardzeuli oil Field.

 

Well JSR-01 DEEP was safely drilled to a depth 470m deeper than the original
donor well and was successfully completed below budget. The well was drilled
at an inclined angle, allowing the testing of different zones to help evaluate
the remaining oil potential and inform future drilling and development plans.
The well has been handed over to the production operations team.

 

Corporate

 

The Company entered a binding agreement for a 50% farmout of non-core areas of
Licence XIᴮ to Georgia Oil & Gas Limited, in exchange for a work
programme with an estimated value of $3m gross, comprising $2.5m for 2D
seismic acquisition and $0.5m for seismic reprocessing ("Project IV").

 

The farmout advances the Company's exploration opportunities through a sizable
work programme at no cost to the Company. None of the existing fields, current
production nor future development plans associated with Projects I, II and
III, within Licence XIᴮ, are subject to the farm-out.

 

Furthermore, in late November 2022, SLB (previously Schlumberger) notified the
Company of its decision not to exercise its right to acquire 108 million
ordinary shares in Block Energy plc. This decision creates a significant gain
in value for Block and a reduction in dilution for our shareholders.

 

The options had been granted in 2020, as consideration for the acquisition of
the Schlumberger Rustavelli Company Limited, which provided Block with
additional production, material additional oil reserves, significant gas
resources, oil inventory, materials and a US$ 133 million cost recovery offset
for the profit sharing allocation with the State.

 

Oil and Gas Production

 

During Q4, gross production (including the state of Georgia's share) was 34.4
Mboe (Q3: 37.1 Mboe), comprising 27.4 Mbbls of oil (Q3: 28.1 Mbbls) and
7.0 Mboe of gas (Q3: 9.0 Mboe). The average gross production rate for Q4
was 374 boepd (Q3: 404 boepd),

 

Production during the quarter was adversely affected by increased pump
maintenance, requiring production wells to be temporary shut-in.

 

During 2022, gross production (including the State of Georgia's share) was 183
Mboe (2021: 156 Mboe), comprising 120 Mbbls of oil (2021: 101 Mbbls) and
63 Mboe of gas (2021: 55 Mboe).

 

Oil Sales

 

In Q4 2022, the Company sold 21.3 Mbbls of oil (Q3: 17.9 Mbbls) for US$
1,691,400 (Q3: US$ 1,614,000), at a weighted average price of US$ 79 per
barrel (Q3: US$ 92 per barrel), which represents a c.5% increase in revenue
and a 14% decrease in the realised oil price quarter on quarter.

 

During 2022, the Company sold 84.9 Mbbls of oil (2021: 86.7 Mbbls) for US$
7,492,600 (2021: US$ 5,519,000), resulting in a weighted average price of
approximately US$ 89 per barrel (2021: US$ 64 per barrel), which represents a
39% increase in the realised price in 2022 compared with 2021.

 

Gas Sales

 

In Q4 2022, the Company sold 27.3 MMcf of gas (Q3: 36.1 MMcf) for US$ 149,000
(Q3: US$ 192,000), resulting in a weighted average price of approximately US$
5.45/Mcf (Q3: US$ 5.31/Mcf).

 

During 2022, the Company sold 170 MMcf of gas (2021: 191 MMcf) for US$ 769,620
(2021: US$ 596,000), at a weighted average price of US$ 4.52/Mcf (2021: US$
3.11).

 

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

"Block made significant progress in the fourth quarter, which further
strengthens our position and ability to deliver on the potential of our
extensive assets in Georgia. In addition to another quarter of solid revenue
generation, the Company was able to drive Projects I and II forward, while
also creating exposure to material exploration upside at no cost, through the
farmout.  Meanwhile drilling of well WR-B01 Za  is ongoing and progressing
to plan. We look forward to providing further updates on our progress."

 

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 / Ali AlQahtani   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 1.07 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, ERCE 2022).

In 2022, a Competent Person's Report provided by ERCE, ascribed 3P reserves of
3.01 million barrels, with an NPV project value of USD 57 million, to just a
portion of the West Rustavi/Krtsanisi Middle Eocene reservoir.

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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