Update on Workover Operations in Georgia
Block Energy Plc / Index: AIM / Epic: BLOE.L / Sector: Oil and Gas
5 December 2018
Block Energy Plc ("the Company", "Block" or "the Group")
Update on workover operations in Georgia
Highlights
· Successful re-entry of three wells at the Company's Norio field and rigging up at a fourth ahead of the application of a specialised perforation tool selected to significantly enhance recovery rates, which is now in Georgia and shortly to arrive onsite
· The re-entries are the initial element of a multi-well work programme consisting of eight workovers and one sidetrack targeting 250 bopd at Norio by H1 2019
· PNN logging indicates encouraging intervals for perforation
· Potentially excellent payback with total development costs forecast to be recovered within 12 months
· Work to upgrade existing Norio infrastructure on schedule to be completed by year end
Block Energy Plc, the exploration and production company focused on the Republic of Georgia, is pleased to provide an update on its initial work programme focused on achieving a 25-fold increase in production at its Norio oil field to 250 bopd by H1 2019. Block holds a 100% working interest in Norio, which has gross oil reserves of 1.631 million barrels (Source: Competent Person's Report (CPR) completed by Gustavson Associates, 1 January 2018).
The Company is currently preparing four of eight wells for the application of a specialist micro drilling perforation tool which, after being shipped from North America, has landed in Georgia and is due to arrive onsite shortly. The work involves levelling and preparing the ground at the well sites for rig up and access. The programme will enable all four wells are ready for the perforating system by the end of the year.
With the exception of the sidetrack, the Norio workover programme is being carried out using an A50 workover rig. As all of the wells to be worked over have previously produced oil, it is necessary to clean and bleed off each of them to allow a scraper tool to be run down to total depth, ensuring a clear pathway for the wireline, caliper and Pulsed Neutron-Neutron (PNN) logs. The process has been carried out on three wells and is underway on the fourth. So far, the caliper logs have confirmed suitable casing dimensions for the micro drilling system, and the PNN logs indicate encouraging perforation intervals.
The perforation tool has been selected to bypass suspected damage caused by historic heavy mud drilling. It replaces conventional shaped charge perforation with a micro drilling technique able to cut horizontal drain holes at multiple levels. Following the application of the system, new or refurbished pumps will be installed to bring the wells to production.
The current workover programme aims to rapidly scale up production at Norio then sidetrack one of the field's wells with the aim of bringing total net production at Norio to 250 bopd by H1 2019, approximately three times break-even production rate. Crude oil from Norio currently sells at Brent minus US$10/bbl.
Norio's existing facilities are being upgraded to industry standards to accommodate a significant increase in production. Two of the four tanks have so far been painted, and firefighting and other safety systems are being installed. Work on the current phase of the upgrade is on track to be completed by the end of the year.
In addition to the Norio programme the Company is preparing to drill horizontal sidetracks and test a legacy gas discovery in the Lower Eocene at the West Rustavi field, where Block holds a 25% participating interest as part of an agreed earn-in to 75%. The discovery, which lies on the same play being targeted by Schlumberger in neighbouring fields, has estimated gross 2C contingent resources of 608 BCF of natural gas. The field also holds 37.9 MMbbls of 2C gross oil resources (Source: CPR).
Block Energy Chief Executive Officer Paul Haywood said: "After months of planning and preparation we are glad to report that we have undertaken the successful re-entry of three wells at Norio, are rigging up at a fourth, and have compiled encouraging PNN logs. In addition, the specialist perforation tool has arrived in Georgia and will soon be onsite. Shareholders can expect significant newsflow in the coming weeks and months as we pursue our objective of increasing our production rate at Norio from 10 bopd to 250 bopd and commence work at West Rustavi where we plan on drilling two sidetracks. We also look forward to working over two of West Rustavi's other wells to test the extent of the field's gas discovery."
"With ExxonMobil recently entering the country and ongoing operations across Schlumberger's 100% owned position next to our own licences, Georgia's potential as a hydrocarbon region is being recognised by the industry. We are taking advantage of our first mover advantage to play our part in realising this potential, and in the process generating significant value for our shareholders."
Roger McMechan, Technical Director, has reviewed the reserve, resource and production information contained in this announcement. Mr McMechan is a BSc, 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**
For further information visit www.blockenergy.co.uk or contact:
|
Paul Haywood Chief Executive Officer |
Block Energy Plc |
Tel: +44 (0) 20 3053 3631 |
|
Neil Baldwin (Nominated Adviser) |
Spark Advisory Partners Limited |
Tel: +44 (0) 203 368 3554 |
|
Craig Fraser (Joint Corporate Broker) |
Baden Hill, a trading name of Northland Capital Partners ltd. |
Tel: +44 (0) 20 7933 8731 |
|
Colin Rowbury (Joint Corporate Broker) |
Novum Securities Ltd |
Tel: +44 (0)207 399 9427 |
|
Frank Buhagiar / Juliet Earl (Financial PR) |
St Brides Partners Ltd |
Tel: +44 (0) 20 7236 1177 |
Notes:
Block Energy (BLOE.L) is an AIM quoted oil and gas company with a growing portfolio of production, development and exploration assets in the Republic of Georgia. Block holds a 100% Working Interest ('WI') in the producing Norio licence, a 90% WI in the producing Satskhenisi licence and a 25% WI in the West Rustavi licence with the right to farm-in to up to a 75% WI. Block's three licences lie in the heart of the Schlumberger's 100% held position in the Kura basin, which at its peak produced ~70,000 barrels of oil per day ('bopd') in Georgia and is estimated to hold over seven billion barrels of proven reserves in Azerbaijan and North Caucasus (Russia).
The licences currently hold estimated net proven oil reserves of 1.5 million barrels plus 61 million barrels unrisked contingent oil resources ('2C'). Furthermore, the West Rustavi permit has estimated gross unrisked contingent gas resources (2C) of 608 BCF. Multiple gas discoveries have already been made in the Lower Eocence and Upper Cretaceous within the Licence and lie on trend with the same play currently being targeted by Schlumberger on neighbouring licence, Block XIb. The estimated cost of gas development and production at West Rustavi is c.US$2.00/Mcf which equates to operating netbacks of c.US$2.6/Mcf (assuming a 75% working interest) - Georgia currently purchases its gas for c.US$5.5 /Mcf (c.US$600m project value to the Company).
Appraisal of West Rustavi is being conducted contemporaneously with the rehabilitation of the producing Norio (100% WI) and Satskhenisi fields (90% WI) which provide immediate production uplift on commencement of field operations in Q4. The near-term target is to raise production to 900 bopd from 15 bopd within 18 months via a low cost, low risk workover and sidetrack programme, and then to utilise the cash flow to drill horizontal wells and sidetracks to raise production to c.2,000 bopd. Oil production on the fields offers excellent netbacks, with the current cost of production of c.US$25 per barrel providing netbacks of c. US$30-35 per barrel.
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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