In a statement ahead of its annual general meeting (AGM) in December, chief executive of the Georgia-focused oil and gas explorer Paul Haywood said the company’s assets comprise a set of producing or previously producing licences in the business-friendly country, while it has a “first-class team both here in London and on-site”.
“With a location in the heart of Georgia's hydrocarbon region, and Schlumberger active in a neighbouring acreage, we are confident we have the right assets to reach break-even production rates in the near term and to go on to build a highly profitable oil and gas company,” he said.
Encouraging results from legacy well
The upbeat assessment followed encouraging test results from the group’s West Rustavi 16a legacy well, which flowed 200 barrels of oil over a ten-hour test while a further 300 barrels of oil were recovered in further tests over subsequent days.
It confirms the well lies in an active hydrocarbon system, the reservoir still contains reserves, and it remains pressurised.
Operations at West Rustavi form part of the group’s efforts to establish production of 650 barrels of oil per day (bopd) in the first quarter of 2019. It also includes a two-well sidetrack drilling programme, which kicks off with a sidetrack from Rustavi 16a.
Elsewhere, at the group’s Norio licence, it aims to hit a 250 bopd target through well workovers and sidetracks.
“The recovery of more than 500 barrels of oil from the legacy vertical wellbore at West Rustavi 16a is highly encouraging and bodes well for our horizontal sidetrack programme at the field which is due to begin early next year,” said Haywood.
“Having raised £5mln by the time of our IPO we are fully funded to undertake our work programmes at West Rustavi and Norio, which together target a combined 900 bopd net to Block by Q1 2019.
“With our existing production at Norio selling for Brent minus US$10, a production rate of 900 bopd has the potential to generate circa US$13mln in annual revenues at current oil prices, a level that far outstrips our existing £7mln market valuation.”
Haywood also highlighted that Block intends to continue the growth effort beyond 900 bopd.
“With four more existing wells identified as suitable sidetrack opportunities at West Rustavi, an inventory of historic wells at Norio, and a potential 28 MMbblof contingent resources at Satskhenisi, the opportunity to significantly scale our cash flow further is clear.”
Pioneering new technology
Block is also pioneering the use of downhole perforation technology in Georgia after signing a service agreement in mid-December.
Block said conventional perforation technologies have had mixed success in Georgia so it has opted for this advanced technology, which has a proven record of significantly enhancing recovery rates.
The agreement gives Block exclusive access to the specialist drilling tool throughout eastern Europe, the Caucasus and central Asia. The company will use the technology, which arrived on site at Block's operations in Georgia on December 7, to re-complete up to eight wells at its Norio licence, part of an initial work programme targeting an increase in production at the field to 250 bopd (barrels of oil per day) by the end of June 2019.
"The agreement supplements our production programme by opening a significant new source of revenue for the company. Block will take the lead in demonstrating the technology's effectiveness and reliability in the field, and so qualify for a 10% net royalty stream flowing from the use of the tool within the region by other operators,” Haywood revealed.
“The proposed joint venture agreement, making us the exclusive provider of the technology throughout the region, will put us in a stronger negotiating position when farming into new opportunities.”
With shares trading around 3.3p as of 11 January, Block Energy carries a market cap of £7.64mln.