Block Energy Announces Q3 Operational Update

Source: www.gulfoilandgas.com 10/7/2021, Location: Asia

Block Energy Plc, the exploration and production company focused on Georgia, is pleased to announce its operations update for the three months ended 30 September 2021.

Highlights

- Over 130,000 operational man-hours worked in Q3 2021, with no LTIs

- Well WR-B1a is undergoing clean-up operations and testing

- Preparatory work on the second well in the 2021 drilling programme, JKT-01, is progressing well

- Q3 production of 34.6 Mboe (Q2: 42.6 Mboe)

- Q3 revenue of $901,000 (Q2: $1,165,000)
- oil revenue of $742,000 (Q2: $960,000)
- gas revenue of $159,000 (Q2: $205,000)

Health and Safety

Over 130,000 operational man-hours have been worked by staff and contractors in Q3, and over 300,000 in the nine months ended 30 September 2021, with no lost-time incidents.

Drilling Operations

During the quarter, well WR-B1a was successfully drilled to a total depth of 2,483m, penetrating 478m in the target Middle Eocene reservoir in the West Rustavi field.

The drilling of WR-B1a benefitted from the partnership with Baker Hughes, signed in June this year, as well as the high-quality 3D-seismic data obtained in 2019. Detailed engineering analysis supported placement of the well to optimise recovery, while reducing execution costs and risk.

The well is currently undergoing clean-up operations to recover drilling mud components from the fractures. Oil and gas have been produced to surface. However, it is believed that well productivity is being restricted owing to the natural fractures being clogged with loss circulation material used to prevent the large drilling fluid losses experienced in our previous West Rustavi wells. A thorough clean-up programme has been designed to dissolve the loss circulation material, requiring chemicals with a 14-day lead time to be sourced from a supplier outside Georgia. The results will be published once the clean-up programme and production testing have been completed.

Preparatory work continues on JKT-01, which is in licence block XIB and is planned to be next in the two-well programme. Concurrently, the ZJ-40 drilling rig will be undergoing routine maintenance.

JKT-01, located 1.5km north-east of WR-B1a, in the Krtsanisi part of the West Rustavi field, was originally drilled in 2012 as a vertical well by a previous operator, based on 3D-seismic data acquired in 2010. The well encountered oil, but the vertical borehole did not intersect productive fractures. Block acquired new 3D-seismic data in 2019, greatly superior to the 2010 data that guided the 2012 drilling, and conducted a state-of-the-art attribute analysis, which supports the identification of possible permeable oil-filled fracture networks.

Block therefore plans to drill a horizontal sidetrack from JKT-01, which will target a polygon that potentially contains 2.4 MMboe of recoverable oil and gas reserves. The cost of the drilling of JKT-01 is fully funded by the Company's cash resources.

Following completion of current drilling activities, Block is planning a production logging campaign for West Rustavi. Information gained from logging will provide valuable additional insight into reservoir behaviour, which will assist in optimising future well placement, completion design and reservoir management.

Oil and Gas Production

During Q3, gross production (including the state of Georgia's share) was 34.6 Mboe (Q2: 42.6 Mboe), comprising 21.0 Mbbls of oil (Q2: 25.7 Mbbls) and 13.6 Mboe of gas (Q2: 16.9 Mboe). The average gross production rate for Q3 was 376 boepd (Q2: 468 boepd), representing a decrease of approximately 19.7%, which is mainly owing to the decline from well WR-38Z.

Production during Q3 includes the resumption of production from well WR-16aZ, following successful installation of a sucker rod pump, but this was more than offset by the decline from well WR-38Z.

The Company plans to improve near-term production performance from the mature fields with a production enhancement programme, comprising technical well interventions, such as wellbore cleaning (using nitrogen and foam), and replacement of sucker rod pumps. This programme aims to arrest the production decline realised in Q3 and enjoy the benefit of the currently high Brent price.

Work is ongoing to monetise gas associated with oil production, which involves the upgrading of well KRT-39's surface facilities in Block XIB. This not only brings additional revenue for Block, but also has the environmental benefit of ceasing gas flaring.

Oil Sales

During Q3 2021, the Company sold 11.2 Mbbls of oil (Q2: 15.6 Mbbls) for $742,000 (Q2: $960,000), resulting in a weighted average price of approximately $66 per barrel (Q2: $62 per barrel), which represents a 7% increase in the realised price in Q3 compared with Q2.

At the beginning of October 2021, the Company agreed to sell approximately 9.6 Mbbls of oil from Block XIB and the revenue of $677,000 will be included in the Q4 sales. Also, the Company is currently preparing to sell approximately 12 Mbbls of oil from the West Rustavi field later this month.

Gas Sales

During Q3 2021, the Company sold 52.4 MMcf of gas (Q2: 64.6 MMcf) for $159,000 (Q2: $205,000), resulting in a weighted average price of approximately $3.03/Mcf (Q2: $3.17/Mcf).

Cash Position

As at 30 September 2021, the Company had $2.7 million cash at bank (30 June 2021: $5.5 million).

Block Energy plc's Chief Executive Officer, Paul Haywood, said:

"The company continues to benefit from production from its core wells, which, with improved oil pricing, led to revenue of $901,000 during the quarter. Well WR-B1a is undergoing clean-up operations and testing. We look forward to providing an update once the planned clean-up programme and production testing have been completed. Preparatory work for JKT-01, the planned next well in the two-well programme, is underway."


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