Block Energy PLC (LON:BLOE) shares jumped higher on Wednesday after the firm told investors that ongoing production from the 16aZ well at the West Rustavi field in Georgia validates its expectation-beating initial results.
Production rates from the well are presently constrained due to capacity restraints at surface, but, the company said the rate remains consistent with the initial 1,100 barrels of oil per day (bopd) result reported earlier this month.
It is currently flowing at around 700 bopd, on the smallest possible choke, which is still more than double the pre-drill target of 325 bopd.
Block Energy said it has negotiated terms on additional storage facilities, and is also negotiating new oil sales contracts with local and international buyers.
The group’s chief executive officer, Paul Haywood commented: “We are very happy to confirm the exceptional test results announced at the beginning of the month. 16aZ continues to flow strongly, going from strength to strength with a steady increase in pressure as the well cleans up.
“With an average production rate of 700 bbl/d, the well is expected to deliver gross monthly free cash to the company of US$1m at the current price of US$70/bbl for Brent Crude Oil (with an approximate two month well cost payout).”
Associated gas production from the well will be sold to Bago Ltd, one of the largest private gas suppliers and purchasers in Georgia. Haywood said that the gas arrangement with Bago, agreed last year, will allow for up to US$1mln of additional annual cash flow.
Further information to come
The Block Energy boss also noted that it will shortly reveal further information about the company’s plans for West Rustavi, in light of the strong sidetrack results.
He added: “The company's management is currently working on a detailed operational market update that will cover its planned oil and gas development. The update will include the scheduled spud date for the sidetracking of West Rustavi's well 38, a neighbour and analogue to well 16aZ, plans for the appraisal of the field's existing gas discoveries, the acquisition of a 3D seismic survey and, a revision of the CPR consequent to the performance of 16aZ.”
In early afternoon trading, shares in Block Energy were 31% higher at 10.88p.
In a note to clients, analysts at SPAngel said: “We believe that whatever results come next for the Company with regards to its asset base, it is has demonstrated that not only can you do business in Georgia, but that Block has gathered the necessary team to assess, and subject to successful appraisal, unlock that value.”
They added: “We believe that shareholders should be pleased with today's results, especially for the signpost that today's well result suggests for West Rustavi.”
-- Adds share price, analyst comment --