Drilling / Workover Equipment for Work Programme
Block Energy Plc | Index: AIM and workover equipment has been secured for the Company's 2019/2020 back-to-back drilling programme. This includes multiple high-impact horizontal sidetracks at the West Rustavi licence where exceptional production test rates of at least 1,100 bbl/d have been achieved from the 16aZ well, more than three times pre-drill expectations. Earlier this week, the Company announced it had entered into an oil storage agreement allowing oil production at well 16aZ to restart (RNS: https://bit.ly/323XWfy) supporting a significant increase in production.
Highlights
· The Agreements ('the Agreements') have been reached with JSC Norio Oil Company ('JSC NOC'), a Georgian drilling contractor, and Georgia Oil and Gas Ltd ('GOG'), a British Virgin Islands company and owner of drilling equipment in the Republic of Georgia.
· Block will pay JSC NOC and GOG a total of US$750,000 (equivalent to US$2,055 per day) for 12 months' exclusive use of a ZJ40 drilling rig, an A50 workover rig and an extensive inventory of drilling and workover-related equipment. This is the same equipment used to successfully drill well 16aZ.
· Additonally, Block will hire a high resolution flow meter from GOG to aid in the identification of natural fractures during drilling operations for a cost of up to US$100,000.
· The Agreements supersede the previous contracts Block entered with JSC NOC and GOG last September (RNS: https://bit.ly/2XqFazy), which expired during April 2019.
· The rigs and equipment will be used to implement the ambitious work programme announced following the Company's £12 million fundraise (RNS: https://bit.ly/2WYyx8e) designed to unlock the potential of the West Rustavi licence in which the Company intends to exercise its right to increase its Working Interest ('WI') from its current 71.5% to 100%.
· In addition to well 16aZ, the programme includes the horizontal sidetracking of four other West Rustavi wells targeting historic oil and gas discoveries.
Paul Haywood, Block Energy Chief Executive Officer said: 'We are delighted to enter into new contracts for rigs and drilling equipment with the same Georgian companies from which we hired the equipment last year, again on highly favourable terms. The Agreements give us access to all of the rigs and associated equipment we need to pursue our programme without having to negotiate with individual suppliers or mobilise from abroad, saving the Company significant time and cost.
'Last week, we announced an oil storage leasing agreement with Georgian Oil and Gas Corporation, Georgia's state-owned national oil company, allowing us to resume constant production at well 16aZ. We will move the ZJ40 drilling rig onto the sidetracking of West Rustavi well 38, adjacent to and analogous with 16aZ, and go on to sidetrack three of the field's other wells, two of which will also be tested for their historic gas discoveries. We will also acquire a 3D seismic survey to allow us to identify optimal locations for new gas wells and horizontal oil wells across the field, and will expand West Rustavi's surface production facilities to a capacity of 4,000-5,000 bbl/d.
'We are working hard to put in place the building blocks of our post-fundraise programme. The renewal of our drilling contracts on favourable terms is a key cornerstone. We look forward to updating our shareholders as we enter another exciting time for Block, working through each element of our programme over the coming weeks and months.'
Agreement Details and Terms
· The Agreements are with JSC NOC and GOG.
· Block will pay JSC NOC and GOG a total of US$750,000 for 12 months' exclusive access to a ZJ40 drilling rig, an A50 workover rig, and an extensive inventory of drilling and workover-related equipment.
· The 12 month term of the Agreements will be triggered on 30 September 2019 or when the Company mobilises the ZJ40 rig to West Rustavi's well 38 - whichever is earlier. The A50 rig is available for Block's immediate use without triggering the start of the 12 month term.
· In addition, Block has committed to pay GOG up to US$100,000 (at bought-in cost) to hire a high resolution flow meter to aid in the identification of natural fractures during drilling operations. The commitment is conditional on identifying a supplier offering a suitable device at a reasonable price before 1 January 2020.
· GOG has an option to call back the ZJ40 rig from six months after the Commencement Date, by giving at least three months' notice to the Company, in order to drill one well in one of its own licence areas. The drilling of this well is currently scheduled for September 2020 and estimated to take approximately 60 days.
· The Agreements supersede the previous contracts Block entered with JSC NOC and GOG last September (RNS: https://bit.ly/2XqFazy), which expired during April 2019.
· Block is responsible for funding all operating costs.
Related Party Transaction
JSC NOC is affiliated to GOG, which currently owns 26,958,802 shares in the Company, representing 6.93% of Block's current issued share capital. However, GOG has been a substantial shareholder within the last 12 months, and therefore both GOG and JSC NOC are regarded as related parties under the AIM Rules for Companies. The directors, having consulted with SPARK Advisory Partners Limited, the Company's nominated adviser, consider that the terms of the Agreements are fair and reasonable insofar as Block's shareholders are concerned.
Roger McMechan, Technical Director, has reviewed the reserve, resource and production information contained in this announcement. Mr McMechan has a BSc in Engineering from the University of Waterloo, Canada and is a Professional Engineer registered in Alberta.
This announcement contains inside information which is disclosed in accordance with the Market Abuse Regulation which came into effect on 3 July 2016.
**ENDS**
Further information
For further information please visit http://www.blockenergy.co.uk/ or contact:
|
Paul Haywood (Chief Executive Officer) |
Block Energy Plc |
Tel: +44 (0) 20 7997 6136 |
|
Neil Baldwin (Nominated Adviser) |
Spark Advisory Partners Limited |
Tel: +44 (0) 20 3368 3554 |
|
Peter Krens (Corporate Broker) |
Mirabaud Securities Limited |
Tel: +44 (0) 20 3167 7221 |
|
Frank Buhagiar/Juliet Earl (Financial PR) |
St Brides Partners Ltd |
Tel: +44 (0) 20 7236 1177 |
Glossary
1. Block currently has a 71.5% WI in West Rustavi, having secured an agreement in February 2019 to acquire a 100% WI that will give the Company full strategic control over the field's development (RNS: 26 February 2019: https://bit.ly/2H1Eqt5).
2. The licence contains an estimated 0.9 MMbbls 2P oil reserves, 38 MMbbls of gross unrisked 2C contingent resources of oil in the Middle, Upper and Lower Eocene and 608 BCF of legacy gross unrisked 2C contingent resources of gas in the Eocence and Cretaceous (Source: CPR Gustavson Associates : 1 January 2018).
3. bbl/d. Barrels per day. A barrel is 35 imperial gallons.
4. Well 16aZ has been referred to as well 16a in previous updates. The Company is now referring to the well as 16aZ to reflect the addition of the horizontal sidetrack to the vertical well.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
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