REG - Block Energy PLC - Well and Operations Update

Block EnergyAnnouncement

24/01/2022 07:05

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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 m(3) 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 m(3)
(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.

Rapid 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
(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/
(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
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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