Block Energy PLC MOU Agreed for Hire of Drilling and Workover Rigs (1990A)
September 10 2018 - 2:00AM
UK Regulatory
TIDMBLOE
RNS Number : 1990A
Block Energy PLC
10 September 2018
Block Energy Plc / Index: AIM / Epic: BLOE.L / Sector: Oil and
Gas
10 September 2018
Block Energy Plc ('the Company' "Block" or 'the Group')
MOU Agreed for Hire of Drilling and Workover Rigs
Block Energy Plc, the exploration and production company focused
on the Republic of Georgia, is pleased to announce execution of a
non-binding Memorandum of Understanding ('MOU') with Georgia-based
drilling contractor, JSC Norio Oil Company ('NOC'), for the
provision of a drilling and a workover rig. Subject to a final
agreement, these will be utilised on the 2018/2019 work programmes
across Block's three licence areas: Norio (100% working interest),
Satskhenisi (90% working interest) and West Rustavi (75% working
interest after earn-ins described below) which collectively have
net proven oil reserves of 1.5 million barrels plus 61 million
barrels of oil and c.473 billion cubic feet ('bcf') of gas
classified as net unrisked 2C contingent resources.
Workover Rig
Subject to a final binding agreement, NOC will provide an A50
workover rig that will be used to undertake a short three well
workover programme at Satskhenisi before being moved to the nearby
Norio licence where eight candidate wells have been selected for
workover. Block is aiming for the eight Norio wells to be completed
and on production by Q1 2019. It is anticipated that the rig will
also be used at West Rustavi, where two wells will be prepared for
side tracks and the re-testing of a legacy gas discovery in the
Lower Eocene, a play being targeted on neighbouring licences by
Schlumberger, the leading oil and gas services provider and
operator. Under an existing agreement, the preparation of the two
wells at West Rustavi will trigger an increase in the Company's
working interest in the West Rustavi licence to 50% from 25%.
Drilling Rig
In addition, it is planned that NOC's ZJ40 drilling rig will
drill two high impact horizontal side tracks in the West Rustavi
permit during Q4 2018 / Q1 2019. Targeting initial oil production
of c. 600 barrels per day. The two side tracks will increase the
Company's working interest in the West Rustavi licence to 75% from
50%.
Related Party Transaction
NOC is connected to Georgia Oil and Gas Limited ("GOG"), which
currently owns 32,762,415 shares in the Company representing 12.64%
of Block's current issued share capital. As such, GOG and NOC are
regarded as related parties under the AIM Rules for Companies.
Completion of the final agreement relating to matters envisaged by
the MOU will be a related party transaction, and subject to the
usual Rule 13 requirements of the AIM Rules. It is expected that a
final agreement will be announced shortly.
Paul Haywood, Director of Block Energy, said: "The MOU signals
the start of exciting times for Block during which shareholders can
expect high-impact news flow on work programmes commencing across
our three licence areas in Georgia. Following a comprehensive
tendering process, the principles for favourable terms for rig
contracts have been negotiated which we expect, once finalised,
will secure considerable cost savings.
"The Company is fully funded to complete the first of a three
phase work programme focused on scaling up production to a gross
900 barrels of oil per day within 24 months and on testing legacy
gas discoveries at West Rustavi, which have been assigned 600 bcf
of gross, unrisked contingent resources. The MOU secures two
suitable rigs for the Company for a period of 12 months, giving us
the flexibility and security to execute and complete our first
phase of work before immediately moving into phase two with the
same rig and crew. Furthermore, the terms of the agreement reduce
the risks related to rig availability and cost overruns associated
with hiring on a daily rate basis. We look forward to providing
further details of the final contracts along with updates as
operations get underway."
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.
**ENDS**
For further information visit www.blockenergy.co.uk or
contact:
Paul Haywood Block Energy Plc Tel: +44 (0) 20
Executive Director 3053 3631
Neil Baldwin Spark Advisory Partners Tel: +44 (0) 203
(Nominated Adviser) Limited 368 3554
Craig Fraser Baden Hill LLP Tel: +44 (0) 20
(Joint Corporate Broker) 7933 8731
Colin Rowbury Novum Securities Ltd Tel: +44 (0)207
(Joint Corporate Broker) 399 9427
Frank Buhagiar / Juliet St Brides Partners Tel: +44 (0) 20
Earl Ltd 7236 1177
(Financial PR)
Notes:
Block Energy (BLOE.L) is an AIM quoted oil and gas company with
a growing portfolio of production, development and exploration
assets in the Republic of Georgia. Block holds a 100% Working
Interest ('WI') in the producing Norio licence, a 90% WI in the
producing Satskhenisi licence and a 25% WI in the West Rustavi
licence with the right to farm-in to up to a 75% WI. Block's three
licences lie in the heart of the Schlumberger's 100% held position
in the Kura basin, which at its peak produced 70,000 barrels of oil
per day ('bopd') in Georgia and is estimated to hold over 7 billion
barrels of proven reserves in Azerbaijan and North Caucasus
(Russia).
The licences currently hold estimated net proven oil reserves of
1.5 million barrels plus 60 million barrels unrisked contingent oil
resources ('2C'). Furthermore, the West Rustavi permit has
estimated gross unrisked contingent gas resources (2C) of 608 bcf.
Multiple gas discoveries have already been made in the Lower
Eocence and Upper Cretaceous within the Licence and lie on trend
with 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 (c.US$600m project value to the Company).
Appraisal of West Rustavi is being conducted contemporaneously
with the rehabilitation of the producing Norio (100% WI) and
Satskhenisi fields (90% WI) which provide immediate production
uplift on commencement of field operations in Q3. The near-term
target is to raise production to 900 bopd from 15 bopd within 18
months via a low cost, low risk workover and sidetrack programme,
and then to utilise the cash flow to drill horizontal wells and
sidetracks to raise production to c.2,000 bopd. Oil production on
the fields offers excellent netbacks, with the current cost of
production of c.US$25 per barrel providing netbacks of c. US$30-35
per barrel.
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END
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