TIDMBLOE
RNS Number : 0703B
Block Energy PLC
27 January 2020
27 January 2020
Block Energy Plc
("Block" or the "Company")
Operations Update
This announcement replaces RNS No 9317A which was released at
700 a.m. on Monday 27 January 2020. The heading in the seventh
column of the table of test results has been amended to read
"Average Total (Oil+Gas) Rate (boepd)" instead of "Average Gas Rate
(boepd)". All other details remain unchanged. The full amended text
is shown below:
Block Energy Plc, the exploration and production company focused
on the Republic of Georgia, is pleased to provide an update on
operations at its West Rustavi field ("West Rustavi" or "the
Field"):
Highlights
-- Multi-rate production testing is underway at well WR-38Z
("WR-38Z") following a clean-up period to stabilise the well and
recover fluids lost during drilling. Peak production rates have
exceeded 300 bopd and 1.5 MMCF/d of gas (equivalent to a total of
more than 550 boepd).
-- With the WR-38Z test confirming West Rustavi's rich gas
potential, Block is accelerating the monetisation of its gas
reserves by installing a central gas processing facility for the
Field and by applying for permits required to get the gas onstream
during Q2 2020.
-- Drilling operations have begun at well WR-51Z ("WR-51Z"), the
third of West Rustavi's wells to be horizontally sidetracked.
-- Operations at the West Rustavi appraisal well WR-16aZ
("WR-16aZ"), which was shut-in during December for the installation
of improved surface test facilities, are scheduled to re-start in
early February with a well intervention programme designed to add a
further 100-200 boepd to the Field's production.
-- The Company is encouraged by the quality of data indicated by
a preliminary review of the recently acquired 3D seismic survey of
West Rustavi.
Initial results of the multi-rate production test at WR-38Z
The well has been flowing naturally since 30 November 2019,
aside from a brief shut-in period between 27 December 2019 and 1
January 2020, when pressure recorders were installed in the well
for the production test. The formal multi-rate test began on 3
January 2020, recording high well productivity and higher gas
production rates than expected.
The production test has produced the following range of results
as of 26 January 2020:
Flow Time Choke Average Peak Oil Average Average Average Average
(hours) Size (inches) Oil Rate Rate (bopd) Water-cut Gas Rate Total Tubing
(bopd) (%) (MCF/d) (Oil+Gas) Pressure
Rate (boepd) (psi)
334 9/32" 115 202 77% 949 279 1142
--------------- ---------- ------------- ----------- ---------- -------------- ----------
118 10/32" 152 296 76% 1036 331 1135
--------------- ---------- ------------- ----------- ---------- -------------- ----------
48 11/32" 174 225 75% 1324 402 1155
--------------- ---------- ------------- ----------- ---------- -------------- ----------
31 12/32" 231 300 70% 1606 508 1120
--------------- ---------- ------------- ----------- ---------- -------------- ----------
Wellhead flowing pressures have remained high, indicating the
well's long-term flow potential. Although significant, the water
cut has been stable since testing began. Analogous wells close to
West Rustavi have produced for long periods: For example a vertical
well located two kilometres to the north has produced for 20 years
with a similar water cut. The Company expects WR-38Z, a horizontal
well which has already produced more than 5500 barrels of oil, to
be significantly more productive than a vertical well.
To reduce the amount of gas flared, the choke size has been
reduced to a diameter of 9/32" for the remainder of the test, which
is expected to continue until 31 January 2020. The well will then
be shut-in to measure the pressure build-up and determine technical
reservoir qualities, then put back on production at a choked-back
rate of 200 boepd to conserve gas and reduce flaring while gas
facilities are being installed. Once the facilities have been
installed, the Company intends to flow the well at an oil
production rate of approximately 150 bopd and a gas production rate
of more than 1 MMCF/d (giving a combined total oil and gas rate of
322 boepd). Such rates will pay back the well cost in less than a
year and so meet one of the Company's primary investment critieria
for capital expenditure.
Produced water is being trucked at low cost with the oil to a
nearby storage facility owned by the Georgian Oil and Gas
Corporation ("GOGC") . The storage leasing agreement with GOGC
provides for the disposal of the water into a state-approved
injection well. No treatment is necessary prior to disposal. The
Company continues to make regular oil sales to a local
refinery.
Sidetracking due to begin at WR-51Z
Following the completion of workover operations, and a
preliminary assessment of the the recently acquired 3D seismic
survey, the contracted ZJ-40 rig has been mobilised to the WR-51
wellsite to begin sidetracking operations at a third West Rustavi
well. Drilling is expected to start shortly with the milling of a
window in the existing wellbore. The forecast production rate for
the sidetracked well, which will be referred to as WR-51Z, is 300
boepd which, if achieved, would generate a further US$3m of revenue
during the first year of production (at US$60 Brent).
Expected resumption of production at WR-16aZ
Well WR-16aZ, which was shut-in for a facilities upgrade and a
workover to determine fluid entry points in the wellbore, is
expected to be back on production in early February. Previously,
WR-16aZ produced oil and gas at rates of 30 bopd and 150 MCF/d
(equivalent to a combined oil and gas rate of 55 boepd). The
Company expects to improve the well's oil production by eliminating
at least some of the water production.
Acceleration of gas exploitation
The Company has engaged the services of North American oil and
gas engineering consultants for the construction of an early
production facility ("EPF"), which will include gas processing
capability for West Rustavi. The EPF will initially collect gas
from wells WR-38Z, WR-16aZ and WR-51Z, and will serve future wells
drilled across the Field.
Gas sales are expected to begin in Q2 2020 in accordance with a
gas sales agreement with Bago LLC ("Bago"), as announced on 30
October 2019. Under the terms of the agreement, which runs until 31
December 2022, Bago will purchase West Rustavi gas at a fixed price
of US$5.24 per MCF ($185/1,000m3). Bago has also started on the
installation of the pipeline infrastructure, which it is funding,
necessary to connect the EPF to Georgia's gas distribution
network.
The particular conditions of the Georgian energy market
underline the value of gas production. The domestic gas price in
Georgia is well supported due to gas being the primary source for
Georgia's energy, accounting for 40% of the country's total energy
use. Georgia has achieved strong economic growth over the past
decade, growing at an average annual rate of 5%, and is highly
dependent on gas imports from neighbouring countries. Local gas
production currently accounts for less than 0.5% of annual
consumption.
Interpretation of 3D seismic survey data
The Company is encouraged by the quality of the field data
received from the 3D seismic survey of West Rustavi completed in
December 2019. It is already informing the design of WR-51Z. The
field data is currently being processed and interpreted to
illuminate West Rustavi's subsurface and identify optimal locations
for future drilling.
Oil and gas Black Sea exploration tender
Block welcomes the open international tender announced on 15
January 2020 by the Georgian State Agency of Oil and Gas for a
license to conduct a search for oil and gas on the country's Black
Sea shelf [https://bit.ly/30KcsZF]. The tender opens further
opportunities for the international oil and gas sector to exploit
Georgia's hydrocarbon potential and the country's stable political
and economic environment. ExxonMobil and Schlumberger have already
shown significant interest in the country [https://bit.ly/2TLgfVc].
Block continues to maintain excellent relationships with its
Georgian partners, including Bago, GOGC and Georgia Oil and Gas Ltd
("GOG"), whose activities complement Block's. GOG is focused on
advancing its deep frontier exploration plays while Block pursues
shallower oil and gas development and production opportunities.
GOG's principal target formations lie below Block's producing
Miocene reservoir in the Norio field: the Company continues to
benefit from GOG's seismic work and planning of exploration
wells.
Block Energy Chief Executive Officer Paul Haywood said:
"We are glad to announce that our development programme is
moving full-speed ahead on multiple fronts.
"Our extended production test of WR-38Z has allowed us to
thoroughly evaluate the well's performance, and define what we
consider to be stable production parameters. WR-38Z promises to be
a pivotal well for Block. It has proven our capacity to produce oil
and gas at a stable rate from the targeted Middle Eocene formation,
and demonstrated the presence of commercial gas at West Rustavi,
which our current CPR estimates has some 608 BCF of gross unrisked
2C contingent resources in a number of reservoirs including the
Middle Eocene (Gustavson Associates: 1 January 2018). We are
working with our Georgian partners to expedite the offtake and sale
of gas from the Field. Our gas sales will help meet Georgia's
strong demand for energy, to which we are already contributing
through regular oil sales.
"We are also excited to announce commencement of operations on
well WR-51Z, our third horizontal sidetrack within the past 12
months. We look forward to refining our strategy and programme in
light of production at these three wells and the data gathered
through our 3D seismic survey.
"Block is hitting the ground running as we enter 2020,
implementing an ambitious programme made possible by the team's
hard work and the excellent relationships we have developed with
our Georgian partners at the local and national levels.
Furthermore, we welcome the opportunity the Black Sea exploration
tender offers for the further development of Georgia's oil and gas
industry. We keenly anticipate updating our shareholders on our
progress."
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.
For further information please visit
http://www.blockenergy.co.uk/ or contact:
Paul Haywood Block Energy Plc Tel: +44 (0)20 3980 6250
(Chief Executive Officer)
Neil Baldwin Spark Advisory Partners Limited Tel: +44 (0)20 3368 3554
(Nominated Adviser)
Peter Krens Mirabaud Securities Limited Tel: +44 (0)20 3167 7221
(Corporate Broker)
Billy Clegg / Owen Roberts / Violet Wilson Camarco Tel: +44 (0)20 3757 4980
(Financial PR)
Notes to editors
Block Energy is an AIM-quoted independent oil and gas company
focused on production and development in the Republic of Georgia,
applying innovative technology to realise the full potential of
previously discovered fields. The Company is pursuing a
fully-funded multi-well programme designed to convert contingent
resources to reserves, and reserves to revenue.
Block has a 100% working interest in the highly prospective West
Rustavi onshore oil and gas field with multiple wells that have
tested oil and gas from a range of geological horizons. The Field
has so far produced 50 Mbbls of light sweet crude, and has 0.9
MMbbls of gross 2P oil reserves in the Middle Eocene. It also has
38 MMbbls of gross 2C contingent resources of oil and 608 BCF of
gross unrisked 2C contingent resources of gas in the Middle, Upper
and Lower Eocene formations (Source: CPR Gustavson Associates: 1
January 2018).
Block also holds 100% and 90% working interests in the onshore
oil producing Norio and Satskhenisi fields.
The Company offers a clear entry point for investors to gain
exposure to Georgia's growing economy and the strong regional
demand for oil and gas.
Glossary
1. Block is using the suffix 'Z' in a well number to indicate a
horizontal sidetrack. For example when sidetracked WR-51 becomes
WR-51Z.
2. bbls and bbl/d: barrels and barrels per day. A barrel is 35 imperial gallons.
3. bopd: barrels of oil per day.
4. boepd: barrels of oil equivalent per day.
5. Mbbls: thousand barrels.
6. MMbbls: million barrels.
7. MCF and MCF/d: thousand cubic feet, thousand cubic feet per day.
8. MMCF: million cubic feet.
9. BCF: billion cubic feet.
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.
END
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