REG - Block Energy PLC - West Rustavi/Krtsanisi Field CPR - Replacement

Block EnergyAnnouncement

01/08/2022 13:30

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RNS Number : 4823U  Block Energy PLC  01 August 2022

This RNS replaces RNS No. 4623U due to technical formatting issues involving
the tables included in the announcement.

 

1 August 2022

 

Block Energy plc

("Block" or the "Company")

Project I Update

Krtsanisi Anticline, West Rustavi/Krtsanisi Field

Competent Person's Report

 

Block Energy plc, the exploration and production company focused on Georgia,
is pleased to announce the results of a Competent Person's Report ("CPR")
covering the Krtsanisi Anticline part of the West Rustavi and Krtsanisi oil
field, which straddles the Company's licence blocks XI(F) and XI(B).

The CPR supports Block's sub-surface studies, through a comprehensive and
independent evaluation with the reported Reserves in line with the Company's
internal estimates. It provides the basis to seek development financing for
the next five wells of Project I, the development of the Middle Eocene oil
reservoir in the West Rustavi/Krtsanisi field. The effective date of the CPR
is 31 March 2022.

The scope of this CPR was deliberately focused on the Krtsanisi Anticline, and
on Reserves only, rather than Contingent Resources or Prospective Resources,
to support discussions and negotiations with development finance providers.
The Reserves reported are only part of the Reserves reported in the previous
CPRs; for West Rustavi by Gustavson Associates dated 1 January 2018 (relating
to block XI(F)), and for Krtsanisi by Bayphase Limited dated 1 July 2015
(relating to block XI(B)). Therefore, as a CPR focused on a Krtsanisi
Anticline five-well drilling programme, it is not directly comparable to
previous CPRs with different approaches.

These Reserves are associated with just the first phase of development of the
West Rustavi/Krtsanisi field (Project I) to begin to exploit the 19.5 MMbbls
of Contingent Resources identified by the Company. Data acquisition from this
phase will enhance our sub-surface understanding and guide further phases of
development drilling to access the remaining Contingent Resources.

 

 

Competent Person

 

The CPR was undertaken by ERC Equipoise Limited ("ERCE"), a company well
recognised across the industry, including by the potential provider with which
the Company is in advanced discussions relating to the provision of
non-dilutive finance. ERCE consents to the inclusion of the information in the
form and context in which it appears.

 

The CPR is available on the following page of the Company's website:
 www.blockenergy.co.uk/investors/circulars-presentations-and-reports/.

Highlights:

·    Field Gross 2P Reserves: 1.07 MMbbls

·    NPV10 2P Reserves: $17.95 MM

 

 Commodity           Units   Field Gross Reserves       Net Entitlement Reserves
                             1P       2P       3P       1P         2P         3P
 Total
 Oil and Condensate  MMbbls  0.19     1.07     3.01     0.14       0.79       2.23
 Sales Gas           Bcf     0.34     1.07     2.14     0.25       0.79       1.58

The Reserves were evaluated based on ERCE's Brent crude oil price forecasts as
of 1 April 2022.

 

 Case   CoP Date                                         Net Present Value ($ MM)
        0%                                                      5%     10%    15%    20%
 Total
 1P     Sep-2024                                         3.51   3.34   3.18   3.04   2.90
 2P     Feb-2034                                         23.75  20.53  17.95  15.87  14.15
 3P     Sep-2048 (Block XIF) & May-2039 (Block XIB)      96.82  72.48  56.98  46.47  38.97

 

In estimating net present values of the Reserves, ERCE used their own forecast
of future production, the fiscal terms provided in each of the production
sharing contracts and, having validated them, Block's estimates of capital and
operating costs. Production forecasts were cut off at the earlier of the date
of licence expiry and the date the operations cease to be economic, as defined
under PRMS. It should be noted that net present values of the Reserves do not
necessarily represent the fair market value.

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

"This CPR independently verifies the work and plans for the initial phase of
Project I, which covers five production wells in the West Rustavi/Krtsanisi
field. These wells are expected to deliver material returns for shareholders,
particularly at current oil and gas prices. The report also provides the
audited information necessary to support discussions on non-dilutive
financing, to deliver the initial phase of Project I.

 

Project I will be implemented concurrently with Project II, which will be
funded separately using net cash generated from the Company's existing
operations. Block considers this approach to managing Projects I and II to be
the most efficient use of Company resources to deliver production and returns
to shareholders, in a way that is timely and balanced".

 

Information in the CPR has been reviewed by Paul Wilson BSc, MSc, PhD (Block
Energy's Head Geophysicist) who was the technical lead responsible for
obtaining the CPR focused on the Krtsanisi Anticline presented in this
announcement. Dr Wilson is a geoscientist with over 18 years' experience in
oil and gas exploration, appraisal and field development. Dr Wilson consents
to the inclusion of the information in the form and context in which it
appears.

 

**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 licence block XI(F), which contains
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).

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).

 

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

·    bopd: barrels of oil per day

·    Contingent Resources: "Those quantities of petroleum estimated, as of
a given date, to be potentially recoverable from known accumulations, by the
application of development project(s) not currently considered to be
commercial owing to one or more contingencies. Contingent Resources have an
associated chance of development. Contingent Resources may include, for
example, projects for which there are currently no viable markets, or where
commercial recovery is dependent on technology under development, or where
evaluation of the accumulation is insufficient to clearly assess
commerciality. Contingent Resources are further categorized in accordance with
the range of uncertainty associated with the estimate and should be
subclassified based on project maturity and/or economic status." (source:
PRMS)

·    CoP: (economic) cut-off point

·    Mbbls: thousand barrels

·    Mcf: thousand cubic feet

·    MMbbls: million barrels

·    MMboe: million barrels of oil equivalent

·    NPV10: net present value using a discount rate of 10 per cent

·    PRMS: Petroleum Resources Management System - 2018 Update, Society of
Petroleum Engineers,
https://www.spe.org/en/industry/petroleum-resources-management-system-2018
(https://www.spe.org/en/industry/petroleum-resources-management-system-2018)

·    Prospective Resources: "Those quantities of petroleum estimated, as
of a given date, to be potentially recoverable from undiscovered accumulations
by application of future development projects." (source: PRMS)

·    Reserves: "Those quantities of petroleum anticipated to be
commercially recoverable by application of development projects to known
accumulations from a given date forward under defined conditions. Reserves
must satisfy four criteria: they must be discovered, recoverable, commercial,
and remaining (as of a given date) based on the development project(s)
applied." (source: PRMS)

·    1P: low estimate

·    2P: best estimate

·    3P: high estimate

 

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