Paul Haywood talks about the recently announced RNS, declaring the acquisition of an additional 20% interest in the West Rustavi licence. He also provides an update on the other licences, Satskhenisi and the Norio Onshore Oil Field.
Raises Interest in Highly Prospective Gas Licence
Block Energy Plc, the exploration and production company focused on the Republic of Georgia, is pleased to announce the acquisition of an additional 20% interest in the highly prospective 36.5 sq km West Rustavi licence (‘West Rustavi’ or ‘the Licence’) in Georgia, increasing its working interest (‘WI’) to 25%.
· West Rustavi has proven reserves and gross, unrisked contingent resources (‘2C’) of 608 BCF gas and 37.9MMBbls of oil and is located in the proven and prolific Kura Basin in Georgia
· Multiple gas discoveries have already been made in the Lower Eocence and Upper Cretaceous within the Licence, which lie on trend to 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
· With a netback of c.US$2.6/Mcf and conservative 50% recovery the Board believes this translates into a c.US$600m project value to the Company
· Inspection of existing well heads at West Rustavi to commence this week, preparing for the gas re-test and side track programme
· Drilling/re-entry of initial targets are anticipated for Q4 2018 which, if successful, will transfer a substantial amount of the Company’s contingent oil and gas resources to reserves and significantly advance the gas development strategy on the Licence
· Acquisition of the additional 20% WI has been satisfied for a cash consideration of US$500,000, and subsequent to US$1million in new ordinary shares in Block priced at 4p per share, issued at the Company’s Admission to trading on AIM on the 11th June 2018. This forms part of agreement with Georgian Oil & Gas to farm-in to up to a 75% WI in the Licence
· West Rustavi’s development is being conducted contemporaneously with the development of the producing Norio (100% WI) and Satskhenisi licences (90% WI) which provide immediate production uplift on commencement of field operations in Q3
· Existing oil production costs approximately US$25 per barrel and is sold at Brent minus US$10 per barrel – target of 900 barrels within 24 months
· Civil and field work at Norio/Satskhenisi including rehabilitation of facilities and reactivation of wells at Satskhenisi to commence in mid-July following routine rig inspections starting next week
Paul Haywood, Director of Block Energy, said: “The value potential for West Rustavi is outstanding. With multiple discoveries and a 608 BCF 2C gross unrisked contingent gas resource and 37.9MMBbls of oil, the Licence is of huge importance to the Company going forward, in terms of development potential and value uplift. Increasing our interest in the Licence is a key strategic objective for Block ahead of embarking on a development programme in Q3 2018, which will unlock both value and production potential, as well as upgrade West Rustavi’s resources to proven reserves. Importantly, with estimated operational and development costs of US$2.00/Mcf per barrel, these huge contingent gas resources (contingent on an approved field development programme) are highly profitable and valuable considering the current gas purchase price in Georgia of c.US$5.5 /Mcf.
“In tandem with this, our fully funded work programme, following our recent £5million raise, which is targeting a ramp-up in oil production to 900bopd, is also commencing in July. As with the gas at West Rustavi, oil production on our fields offers excellent netbacks, with the current cost of production of c.US$25 per barrel providing net backs of c. US$30-35 per barrel. Even if we operate at half our 900 bopd initial production target, our annual revenue potential would be approximately US$6 million, a level equivalent to a significant proportion of our existing enterprise value. With this in mind, we are looking forward to a highly active period across all three licences commencing immediately. I believe we have the foundation, work programme and news flow to support a significant rerating of our share price.”
All information is provided on an as-is basis. Where we allow Bloggers to publish articles on our platform please note these are not our opinions or views and we have no affiliation with the companies mentioned