Block Energy Plc has recovered 200 bbl of oil during flowback at West Rustavi license, Georgia

12/14/2018

LONDON -- Block Energy Plc, the exploration and production company focused on the Republic of Georgia, is pleased to announce that more than 200 bbl of oil were recovered from the legacy vertical well 16a at its West Rustavi permit during a 10-hr flow period. An additional 300 bbl of light oil flowed to a temporary wellsite production facility over the following days.  The results of the test confirm the well lies in an active hydrocarbon system and that the previously producing Middle Eocene reservoir still contains reserves and remains pressurized.  The Company will now move forward with its program to restart production at the field via the drilling of two initial horizontal sidetracks in West Rustavi wells 16a and 38, targeting a combined gross production of 650 bopd by first-quarter 2019.
 
Block holds a 25% interest in West Rustavi as part of an agreed earn-in to 75%. In addition to holding 38 MMbbls of gross contingent resources (‘2C’) of oil, West Rustavi holds estimated gross 2C contingent gas resources of 606 Bcf which it plans to test in 2019 by re-entering up to two wells that previously flowed gas.  West Rustavi is one of three licenses block holds in Georgia, the others being a 100% interest in the producing Norio field, which has gross proven (‘2P’) oil reserves of 1.631 MMbbl, and where a workover and sidetrack program is underway targeting 250 bopd by first-quarter 2019; and a 90% interest in the Satskhenisi field, which has estimated 28 MMbbls of gross 2C contingent resources.
 
Block Energy CEO Paul Haywood said: “The recovery of more than 500 bbl of oil from the legacy vertical wellbore at West Rustavi 16a is highly encouraging and bodes well for our horizontal sidetrack program at the field which is due to begin early next year.  Having raised $6.28 million (£5 million) by the time of our IPO we are fully funded to undertake our work programs at West Rustavi and Norio, which together target a combined 900 bopd net to block by first-quarter 2019. With our existing production at Norio selling for Brent minus $10, a production rate of 900 bopd has the potential to generate circa $13 million in annual revenues at current oil prices, a level that far outstrips our existing $8.8 million (£7 million) market valuation. And we do not intend to stop at 900 bopd. With four more existing wells identified as suitable sidetrack opportunities at West Rustavi, an inventory of historic wells at Norio, and a potential 28 MMbblof contingent resources at Satskhenisi, the opportunity to significantly scale our cash flow further is clear.
 
“Block is not just focused on oil production.  West Rustavi also holds an estimated 606 Bcf of gross 2C contingent gas resources which we plan to test in 2019. With operating netbacks of around $2.6 Mcf at current Georgian gas prices of $5.5 Mcf, and assuming a first phase of gas development producing gross 30 MMcfd, gas production at West Rustavi has the potential to deliver net annual cash flows of more than $20 million."

Further information
Following confirmation of the presence of oil and pressure at West Rustavi 16a, the ZJ40 drilling rig has been mobilized and rigged up at the drill site. The rig, which has undergone a comprehensive inspection and upgrade, is expected to spud the company’s first horizontal sidetrack in early first-quarter 2019. Wellsite production equipment is currently being prepared to ensure rapid oil production once drilling and completion operations at 16a have been carried out. With all relevant permissions already in place, 16a is forecast to commence production as early as first-quarter 2019, subject to positive results from the sidetrack.
 
Civil works are already underway at West Rustavi 38, the second of the field’s wells to be sidetracked. Four other wells have been identified as suitable for re-entry and sidetracking, each of which has the potential to produce at a rate of more than circa 325 bopd. The company also plans to acquire 3D seismic data for the license area to identify additional drilling targets in both the oil-bearing Middle Eocene and the gas bearing Lower Eocene and Upper Cretaceous. Preliminary 3D seismic acquisition design has been completed and will go to tender next year.
 
In tandem with the sidetrack program at West Rustavi, the Company is planning to workover two of the field's other wells in order to test the potential of the Lower Eocene gas zones. Previous well tests achieved rates of up to 0.9 MMcfd from the Lower Eocene and 1.6 MMcfd from the Upper Cretaceous. Subject to the results of the tests, the Company will aim to swiftly finalize a field development plan and gas sales contracts and install a gas production infrastructure.
 
Board and other management changes
The company also announces that Serina Bierer will be stepping down as finance director and from the board of the company as of June 2019.  The board has appointed Orana Corporate (‘Orana’), a London based outsourced finance company to strengthen the finance function and to report to the board. Orana will cover Block’s London headquarters and also the finances of its operations in Georgia. Serina will be assisting Orana during the handover process.  The board would like to thank Serina for her work during the IPO process and wish her well for the future.
 
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.

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