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Monday 19 November, 2018

Block Energy PLC

ExxonMobil Enters Georgia

RNS Number : 6835H
Block Energy PLC
19 November 2018
 

 

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

19 November 2018

Block Energy Plc ("the Company", "Block" or "the Group")

ExxonMobil Enters Georgia

 

Block Energy Plc, the exploration and production company focused on the Republic of Georgia, is pleased to note that ExxonMobil (or 'Exxon') is set to carry out a comprehensive review of western Georgia's hydrocarbon resource base and potential, following the signing of an agreement ('the Agreement') with the LEPL State Agency for Oil and Gas of the Ministry of Economy and Sustainable Development of Georgia (or 'the Agency'). 

 

Block's directors believe the Agreement, which follows the entry into Georgia of leading oil and gas services company Schlumberger, further highlights the growing interest among major oil and gas operators in Georgia's hydrocarbon resources.

 

As announced on the Ministry's website (https://goo.gl/58fq7f) Exxon has agreed to build an integrated database of west Georgia's hydrocarbon potential based on the examination of historic geological and geophysical data provided by the Agency. 

 

In May 2017 Schlumberger gained a 100% owned position in Georgia comprising Production Sharing Contracts ("PSC") for three permits including Block XIb from which 210 MMBbls of oil at rates of up to ~70,000 bopd have historically been recovered. Schlumberger's position is contiguous to the north and south of Block's three licences in Georgia: the Norio field (100% net to Block), the Satskhenisi field (90%) and the West Rustavi permit (currently 25% and building to 75% under an earn-in agreement). All of Block's licences are producing or have historically produced and all have significant development potential: 2P gross oil reserves of 2.5 MMbbl; gross contingent oil resources (2C) of 72.9 MMbbls of oil and 626 BCF of gas.  As announced on 15 October 2018, Block commenced a multi-well workover and sidetrack programme at Norio targeting a 15-fold increase in production to 150 bopd by Q1 2019.  At the same time, Block is preparing to drill horizontal sidetracks and test the gas resource base on its West Rustavi licence with net contingent resources of 456 BCF. Previous gas discoveries at West Rustavi lie on trend to the same play being targeted by Schlumberger on neighbouring fields.

 

Block Energy Chief Executive Officer Paul Haywood said: "The Georgian Government's Agreement with Exxon further validates the country's credentials as a secure and stable place to do business, and an emerging hydrocarbon jurisdiction in terms of naturally occurring oil and gas.  Thanks to our positioning and excellent relationships in Georgia, we have already secured a high-quality asset base, which includes multiple low risk development opportunities as well as a huge gas discovery that we estimate is potentially worth US$600 million to Block.  Having raised £5 million at the time of our IPO in June this year, we are well placed to play our part in realising the potential of Georgia's energy industry.  Work is already underway at Norio to increase production to 150 bopd by Q1 2019, and we will drill sidetracks and test the gas discovery at West Rustavi shortly.  With so much activity on the near horizon we look forward to a high-impact newsflow over the coming months."

 

Roger McMechan, Technical Director, has reviewed the reserve, resource and production information 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**

 

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 7 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.


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