Block Energy (BLOE ) said it has commenced testing on its JKT-01Z well with current average production rates of 344 boepd, comprising 241 bopd and 17,500 m3 (103 boe) of gas per day.
The Georgian-focused production firm said build-up analysis showed no pressure depletion after the clean-up and well testing flows and that this indicates the well is ‘likely to be in good communication with the wider reservoir and will provide sustained production like KRT-39.’
Block said rapid monetisation of the gas production from JKT-01Z will be achieved, with the well due to be tied into the recently installed gas infrastructure at KRT-39 within one week.
At the current production rate, crude oil price and gas sales price, JKT-01Z is forecast to deliver nearly $500,000 additional monthly cash flow to the Company, Block reported.
Excluding capital expenditure, this additional revenue will make the Company cash flow positive, which the Company said will mark a significant milestone for the business.
JKT-01Z reached total depth at 2,565m MD earlier this month, with no LTIs experienced. Since then, the well has been completed and the well test programme is underway.
Except for deliberate shut-in periods to monitor pressure build-up, well JKT-01Z, the second well in the current two-well drilling programme, has flowed naturally since 16 January 2022.
Currently, production rates at well JKT-01Z, which is located in Block XIB, are being constrained to stay within the safe operating limits of the existing gas infrastructure.
To maximise operational efficiency and minimise costs, well JKT-01Z was drilled as a sidetrack from a vertical well drilled in 2011 by a previous operator, Block explained.
It said the well was drilled and completed 20% ahead of forecast time and 10% under budgeted cost, owing to efficiencies achieved across drilling operations and procurement.
JKT-01Z, which is producing from an in-place volume estimated to be approximately 8 MMbbls, was drilled with its trajectory orientated along a productive open fracture network identified from analysis of the Company’s 3D seismic survey acquired back in 2019.
JKT-01Z was drilled along 597 metres of horizontal reservoir section. The top of the reservoir was encountered shallower than prognosed, resulting in a significant increase in estimated reservoir volume, which is expected to enhance resource and reserves volumes.
Block said the reservoir modelling of the nearby KRT-39 well, which has been a sustained oil and gas producer for over 20 years, indicates the presence of a large, connected pore system and strong aquifer support in the Krtsanisi area of the West Rustavi Middle Eocene Reservoir.
Today, the company also informed investors that the gas sales agreements for the sale of gas from each of West Rustavi and Block XIB have been renegotiated with effect from 1 January 2022, and have, as a result, provided benefit to the Company from rising gas prices generally.
In 2021, gas was sold at a fixed discount to the price of the last tender completed by the Georgian Oil and Gas Corporation. Now, gas is sold at a fixed discount to the price achieved by the largest supplier to the domestic gas market, and this discount is ‘subject to potential reductions in the future based on the Company achieving operational milestones,’ it noted.
As a result of the improved agreement terms and the improved market, Block expects to achieve a price for its gas in 1Q22 that is over 30% higher than it had achieved in 2H21.
Block added that the success at JKT-01Z enhances the Company’s confidence in its ability to further optimise drilling within the field ‘through a combination of high-resolution reservoir imaging, reservoir production modelling and horizontal directional drilling technologies.’
In addition to positively impacting the West Rustavi/Krtsanisi field development, the company stated that this approach should also improve the company’s ability to convert contingent resources to reserves, as well as reserves to production, across its wider portfolio.
Using the upgraded sub-surface model, Block is ranking the twelve immediate sidetrack opportunities, analogous to the JKT-01Z well, including a recompletion of the WR-B1 well.
Commenting on this morning’s news, Block Energy’s Chief Executive Officer, Paul Haywood, said: “Well JKT-01Z sets a new standard on time and cost for such a sidetrack in our Georgian operation. It has also been delivered with an exceptional safety record. The success of this well represents a milestone for the Company, with
Block becoming cash flow positive, opening the opportunity to create and deliver additional value to shareholders.”
Haywood outlined to investors that the company’s strategy remains “to drive value through organic growth, converting contingent resources to proven reserves and production, which, given our asset base and today’s commodity prices, makes a compelling business case.”
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