Block Energy (BLOE ) has confirmed that gas sales at the West Rustavi field in Georgia have now commenced as current production rates come in ‘substantially higher’ than in 2020.
The commencement has been able to occur following Georgian Oil & Gas Corporation ("GOGC")’s completed tie-in of Bago LLC's gas pipeline into GOGC's main gas pipeline.
West Rustavi WR-38Z and WR-16aZ wells have been on continuous production since 28 January 2021 and 3 February 2021, respectively, and production rates are currently 790 boepd, comprising 423 bopd and 1.9 MMcf/d of gas, representing ‘a substantial increase’ when compared to the rates achieved before the wells were shut-in during April 2020.
The Company stated that well production at West Rustavi is currently constrained as it continues its production testing programme, monitoring reservoir production and facility parameters, to determine the maximum flow potential and optimum production rates.
The testing programme is expected to continue into Q2 this year and, on completion, stable production rates will be communicated to the market. As well as being a major milestone for its growth, the commencement of gas sales also represents ‘a significant step change’ for Block’s progression towards becoming a sustainable energy provider to Georgia, it said.
In total, production across Block's portfolio is currently around 940 boepd, resulting in estimated future revenue of around US$0.92m per month at current oil and gas prices.
The Georgia-focused development and exploration firm’s onshore, low-cost gas production is distributed to independent gas stations, where it is compressed for fuel in motor vehicles.
Block said its gas production represents ‘an important contribution to Georgia's harnessing of an otherwise unutilised energy source, which has the potential to replace the more carbon-intensive forms of hydrocarbons being imported and used in the country.’
Block Energy’s Chief Executive Officer, Paul Haywood, commented, "The commencement of gas sales is a great achievement, as Block has managed to deliver its gas project in a safe manner, with zero LTIs, in the face of a very challenging global environment.”
The expected revenue from our assets now puts us in a strong position as it is expected to more than cover our operating and administrative expenditure and, therefore, we can look to deploy the surplus cash into further increasing our production rate throughout 2021.”
He added, “Our decision to shut in our production at the West Rustavi field in April 2020 has proven to be an astute one, as we can now sell our oil based on a Brent price above US$60/bbl. By commencing gas sales, we have started to deliver on our ESG strategy of limiting flaring and consequently reducing our carbon footprint.”
The Company has timed its return to production at the West Rustavi O&G field extremely well as energy commodity prices recover to pre-pandemic levels. Shares in Block Energy have ticked up by over 3% over the past two weeks with the stock trading 16.62% higher this morning at 3.8p after it revealed that production had commenced.
Reasons to BLOE
Block Energy is an oil and gas company focused on production and development in Georgia. The Company believes that it offers ‘a clear entry point’ for investors to gain exposure to Georgia's growing economy and the strong regional demand for oil and gas.
The Company believes that its activity offers ‘a clear entry point’ for investors to gain exposure to Georgia's growing economy and the strong regional demand for oil and gas.
Block holds 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 unrisked 2C contingent oil resources and 608 BCF of gross unrisked 2C contingent gas resources in the Middle, Upper and Lower Eocene formations (Source: CPR by Gustavson Associates: 1 January 2018).
In addition, Block also holds 100% and 90% working interests in the onshore oil producing Norio and Satskhenisi fields. In March 2020, it entered into a conditional sale and purchase agreement to acquire a company that owns Georgian onshore licence Block IX and XIB.
In a half-year report to 30 June 2020, the company said it expects gas sales to commence in Q4 from West Rustavi despite the coronavirus pandemic proving “very hard to predict”.
The group’s shut-in of the West Rustavi field's production at wells WR-16aZ and WR-38Z was done to conserve valuable gas resources until the gas sales pipeline is soon completed.
Proceeds from sales of crude oil from its West Rustavi, Norio and Satskhenisi licences were $0.313m during 1H2020 and $0.568m following the period end in August and September.
Paul Haywood, Chief Executive of Block Energy, said, “Block Energy remains strong and agile, with cash on the balance sheet and near-term realisation of its gas reserves.”
He added, “Through these gas sales, we will generate more cash from our production base. We look forward to the remaining months of 2020, to continue our mission of value creation for our shareholders, through growing the business and unlocking Georgia's potential."