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Block Energy PLC (BLOE)

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Monday 11 June, 2018

Block Energy PLC

Admission to AIM and First Day of Dealings

RNS Number : 8578Q
Block Energy PLC
11 June 2018
 

Block Energy Plc / Index: AIM / Epic: BLOE.L / Sector: Oil and Gas

11th June 2018

Block Energy Plc ('the Company' or 'the Group')

Admission to AIM and First Day of Dealings

 

Block Energy Plc, the exploration and production company focused on the Republic of Georgia, is pleased to announce that at 08:00 today its ordinary shares commenced trading on AIM under the ticker BLOE.L ('Admission').  As part of the Admission process, the Company has raised £5 million before expenses, through a placing and subscription of 125 million new ordinary shares at an issue price of 4p each, implying a market capitalisation of circa £10.3 million on Admission. 

 

Spark Advisory Partners is acting as Nominated Adviser. Baden Hill LLP, a trading name of Northland Capital Partners Limited, and Novum Securities are Joint Brokers to the Company.  Gneiss Energy Limited acted as corporate adviser to the Company.

 

Highlights

·     Oil and gas portfolio in Georgia with existing rapidly scalable production

100% Working Interest ('WI') in the producing Norio licence

90% WI in the producing Satskhenisi licence

5% interest and the right to earn a 75% WI in the West Rustavi permit

·     All three licences hold reserves and have rapid development potential

·     Competent Persons Report estimates gross unrisked Contingent Resources ('2C') of 72.9 million barrels of oil and gross unrisked 2C gas resources of 626 billion cubic feet ('BCF') gas across the three licences

·     US$39.3 million NPV10 assigned to 2P net oil reserves with significant upside

·     Defined three phase strategy focussed on rapidly scaling up production and de-risking 2C contingent resources via the application of new technologies and techniques:

Phase 1: targeting 900 barrels of oil per day ('bopd') within 18 -24 months via a fully funded, low-cost / low-risk workover and sidetrack programme of existing wells - at a crude oil price of US$70/bbl, the Company breaks even at a  production level of 110 bopd; and testing gas discoveries estimated to contain gross, unrisked contingent resources of 608 BCF (2C)/1 TCF (3C) that form part of the same play being targeted by Schlumberger on the neighbouring licence 

Phase 2: targeting over 2,000 bopd via the drilling of new horizontal wells and sidetracks from existing wells

Phase 3: bring the West Rustavi gas discovery into production with an estimated capex of US$1.10/MCF and operating netback of ~US$3/MCF, as well as acquire additional licences in the wider region

·     Excellent local relationships to execute strategy - major shareholder is an established operator, party to multiple Production Sharing Agreement ('PSAs') and a drilling service provider in Georgia

·     Management and Board with significant oil and gas, regional and Georgian specific experience, supported by UK institutions, including Miton and Amati Global

 

Paul Haywood, Director of Block Energy, said: "Block Energy is an asset backed, revenue generative oil and gas company with scalability and a development schedule providing regular news flow and re-rating potential.  The response from the market to the opportunity was fantastic and we are delighted to have raised £5 million in an oversubscribed placing, which enables the Company to rapidly develop and monetise our portfolio in Georgia.  The US$39.3 million NPV10 assigned to 2P net oil reserves of 1.5 million barrels provides asset backing for the Company which compares favourably to the listing valuation of £10.3 million.  Furthermore, there is substantial potential from 608 BCF 2C gross unrisked contingent gas resources at West Rustavi, where the prospectivity is further underlined by an analogous play being tested by US oil services major Schlumberger in 2018 and 2019 on its adjacent 100% owned and operated licence.  

 

"We are now fully funded to recomplete/reactivate up to ~10 wells and side track wells, with the objective of increasing existing oil production from 15 bopd to over 900 bopd within 18-24 months.  Additionally, we will be seeking to de-risk 72.9 million barrels of oil and 626 BCF of gas that have been classified as 2C gross contingent resources in a CPR.  Our ability to execute in-country is backed by both our team as well as our major shareholder, Georgia Oil and Gas Limited (GOG) who is both an established operator, party to multiple PSCs and a drilling service provider in Georgia.

 

"We are in the right address in the right country at the right time.  The right address, because our existing licences, including West Rustavi where we have a 5% interest and the right to earn up to a 75% WI, lie in the heart of the prolific Kura basin and contiguous to the largest historical producing field (~70,000 bopd) in Georgia. The right country, because Georgia is a low-cost, business-friendly nation with underdeveloped oil and gas reserves.  The right time, because Schlumberger's entry is game-changing for Block Energy in terms of targeting the same play types and providing third party validation of Georgia's oil and gas potential.  I look forward to providing further updates as we focus on realising this potential and at the same time monetising the multiple company-making opportunities we have identified across our asset base."

 

FURTHER INFORMATION

Defined terms used in this announcement shall have the same meaning as those terms defined and used in the Company's Admission Document dated 4 June 2018, which is available on the Company's website: www.blockenergy.co.uk. Key sections are outlined below.

 

Admission and Placing Statistics

Number of Placing and Subscription Shares

125,000,000

Issue Price

Gross Proceeds Receivable by the Company

4 pence

£5.0 million

Issued share capital upon Admission

Market Cap on Admission

258,547,601

£10.3 million


 

 

 

 

Introduction:

Block Energy is a party to three oil and gas assets in the Republic of Georgia, two of which have existing oil production. These are the Norio PSA, in which the Company has a 100% working interest, and the Satskhenisi PSA, in which it has a 90% working interest. In addition, the Company's subsidiary GNV has a 5% interest in the West Rustavi PSA, with the option to increase its working interest to 75%. The owner of the balance of the working interests in the Satskhenisi PSA and the West Rustavi PSA, GOG, is an established operator and drilling service provider in Georgia.

 

All three licence blocks are located east of the Black Sea in the Kartli Basin (also referred to as the Kura Basin), an oil and gas province located in the eastern part of Georgia. Map 1 and Map 2 show the location of the licence blocks within Georgia. Within the Kartli Basin, approximately 15 oil and gas fields have been discovered over the years, of which the 236 MMBbl Samgori- Patardzeuli and the 58 MMBbl Ninotsminda fields are the best known. The Kartli Basin is coincident with the Kura River valley and is a tectonically complex area situated to the south of the Greater Caucasus.

 

Key Strengths:

The Directors believe that the key strengths of the Company include:

 

·     Operating in a proven yet relatively under-developed hydrocarbon region, specifically the Kura basin which at its peak produced ~70,000 bopd from one single field in Georgia;

·     Ownership of interests in three Production Sharing Agreements (''PSAs''): a 100% working interest in the Norio PSA, a 90% working interest in the Satskhenisi PSA, and a 5% interest in the West Rustavi PSA, with an option to increase to 75% (subject to satisfaction of conditions as set out in paragraph 13 ix of Part V of the Admission document);

·     Existing production - the Company already operates and is producing oil, albeit small quantities currently, in Norio and Satskhenisi at a commercial level;

·     Proven reserves - the areas covered by Norio and Satskhenisi PSAs hold gross (2P) oil reserves of 1.6 MMBbl, which have been assigned an NPV10 of $29.73m, and 35MMBbls of gross unrisked (2C) contingent oil resources;

·     The area covered by the West Rustavi PSA holds gross (2P) oil reserves of 0.92MMBbls, which have been assigned an NPV10 of $9.6m, and 37.9MMBbl of gross unrisked (2C) contingent oil resources, together with 608Bcf of gross unrisked (2C) contingent gas resources. West Rustavi area is contiguous with the licence owned by Schlumberger;

·     A three phase development strategy is in place to exploit the Group's current and prospective Georgian interests;

·     Phase I over the next 12 months - and funded by Placing and Subscription proceeds and revenues - involves scaling up existing oil production via a programme of low cost, low risk workovers re-completions and side-tracks of existing wells at Norio, Satskhenisi and West Rustavi;

·     A management team with significant collective experience of operating in the oil and gas industry, and specifically within the Republic of Georgia;

·     Close working relationship with GOG, a well-established Georgian operator which produces from and explores in licences adjoining those of the Company. GOG is a joint venture partner in two of the Company's licences, is a shareholder in Block Energy and acts as its operator under the Satskhenisi PSA and Norio PSA; and

·     Company's current PSAs located in areas close to significant oil and gas infrastructure and transportation links.

 

Directors:

Brief biographies of the Directors are set out below.

 

Philip (Phil) Dimmock, Non-Executive Chairman (aged 71)

Philip spent a significant part of his career at BP in a wide variety of senior positions including manager of the Forties oil field, and UK Director of Ranger Oil Limited where he also held the post     of vice president of the international division and served as chairman. Philip was a non-executive director of Nautical Petroleum plc until its acquisition by Cairn Energy in 2012 and presently serves   as a senior independent non-executive director of Gulf Keystone Petroleum plc. Philip graduated from Oxford with an MA in Physics.

 

Paul Haywood, Chief Executive Officer (aged 36)

Paul has over 15 years' experience in operational and investment management for a range of private, corporate & institutional companies throughout Europe, Asia and the Middle East and has been instrumental in creating what is Block Energy today. Having spent more than 8 years in the Georgian oil and gas industry, Paul has a significant understanding of the entire commercial E&P process including project identification, acquisition, asset management and divestment, both as a contractor on behalf of private and public companies and as an advisor, where Paul worked as a consultant to PWC.  Paul is also a non-executive director of AIM quoted Oilex Petroleum Plc and a director of resource- focused advisory firm, Plutus Strategies Limited.

 

Niall Tomlinson, Executive Director (aged 36)

Niall Tomlinson is an experienced geologist with over ten years' experience across a number of commodities. Previously he was a director of Taoudeni Resources Ltd, which was acquired by the Company in 2016, Technical Manager for Alecto Minerals plc and a senior geologist with consultants SRK Exploration and geologist with mining major Rio Tinto.  More recently, he has spent over 3 years assessing natural resource projects in Georgia. Niall holds an MSc in Metals & Energy Finance from Imperial College London, an MSc in Mining Geology from Camborne School of Mines and is a Chartered Geologist of the Geological Society of London. He is also a director of Plutus Strategies Limited.

 

Serina Bierer, Financial Director (aged 37)

Serina gained her MSci in Geological Sciences from the Royal School of Mines, Imperial College London in 2003. She qualified as a Chartered Accountant with BDO LLP, subsequently working in   the Natural Resources team. Her client portfolio covered both oil and gas, and mining companies, with the latter years concentrated on Middle Eastern due diligence projects.  Serina has specialised in the AIM and ASX upstream oil and gas industry for over 10 years, with a proven track record of successfully delivering board strategy through financial management, planning, financial modelling, system integration, treasury management, joint interest partner ventures and structured finance activities. In addition, Serina has worked closely with overseas government and financial regulatory bodies, negotiating a range of applicable tax and financial reporting policies. 

 

Roger McMechan, Technical Director (aged 59)

Roger has over 30 years' experience managing domestic and international operations with senior managerial/executive roles at companies including Petro Canada, Burlington Resources, Winstar Resources (Algeria, Hungary, Romania and Tunisia) and Iskander Energy Corp. (Georgia, Ukraine, Bulgaria and Poland). He has extensive experience in new field development, mature field optimization, oil and gas well completions and stimulation as well as oil/gas opportunity evaluations. He has five years' experience of working in Georgia, including operations, crude marketing, new well drilling, old well workovers & recompletions. Roger has a BSc, Engineering.  from the University of Waterloo, Canada and is a Professional Engineer registered in Alberta, Canada. 

 

Timothy (Tim) Parson, Non-Executive Director (aged 60)

Tim Parson is a Petroleum Engineer with almost 40 years global experience on and offshore from deep water operations in the Far East to onshore multi-rig operations in the Middle East, Amazon and Europe. Roles include Superintendent at Schlumberger and Executive at Occidental Petroleum. Tim has degrees in Petroleum Engineering from the University of New South Wales and Business Management from Curtin University.

 

 

**ENDS**

 

For further information visit www.blockenergy.co.uk or contact:

 

Paul Haywood

Executive Director

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 LLP

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

 


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