Block Energy Provides Q4 Operational Update

Source: 1/11/2022, 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 31 December 2021.

• Over 110,000 operational man-hours worked in Q4 2021, with no LTIs
• Drilling of well JKT-01Z reached target depth ("TD") of 2,565m measured depth ("MD")
• Significant mud losses observed relative to the WR-B1 well, indicating initial geological objectives have been achieved
• Q4 production of 34.6 Mboe (Q3: 34.6 Mboe) or an average of 376 boepd
• Q4 revenue of $2,550,000 (Q3: $901,000)
o oil revenue of $2,441,000 (Q3: $742,000)
o gas revenue of $109,000 (Q3: $159,000)

Health and Safety
Over 110,000 operational man-hours have been worked by staff and contractors in Q4, and over 399,000 in the twelve months ended 31 December 2021, with no lost-time incidents.

Drilling Operations
Following the end of Q4, in early January 2022, well JKT-01Z reached TD at 2,565m MD. Considerable mud losses were encountered during drilling, suggesting the well has intersected multiple open fractures. Completion operations are now underway and will be followed by clean-up operations to unload the mud losses, ahead of the well being put on test.

JKT-01Z is the second well in the current two-well drilling programme. To support effective management of costs and minimise drilling time, whilst maintaining the same exposure to an oil-in-place of approximately 8 MMbbls, the well has been drilled via a sidetrack from a vertical well drilled in 2011 by a previous operator.

Located in Block XIB, JKT-01Z is close to and targets the same area of the Middle Eocene reservoir as KRT-39, which has been a sustained producer of oil and gas for over 20 years. Unlike KRT-39, JKT-01Z has been drilled as a horizontal well, to maximise the chance of intersecting fractures.

The trajectory and horizontal nature of JKT-01Z benefitted from data gathered from the drilling of previous wells, which enabled a recalibration of the high-quality 3D-seismic data acquired in 2019. The well has also benefitted from refinement of our geomechanics model and horizontal drilling practices.

Additionally, JKT-01Z has been tied into the recently installed gas infrastructure at KRT-39, which will enable the rapid monetization of the gas production from JKT-01Z.

Oil and Gas Production
During Q4, gross production (including the state of Georgia's share) was 34.6 Mboe (Q3: 34.6 Mboe), comprising 24.9 Mbbls of oil (Q3: 21.0 Mbbls) and 9.7 Mboe of gas (Q3: 13.6 Mboe). The average gross production rate for Q4 remained the same as the previous quarter at 376 boepd. Production in Q4 included the first production from WR-B01, which was brought online in late October. It also benefitted from the addition of gas production from well KRT-39 in late November. Production was further supported by the production enhancement programme, which entailed wellbore cleaning using nitrogen and foam, tubing repairs and the replacement of rod pumps.

During 2021, gross production (including the state of Georgia's share) was 156 Mboe (2020: 25 Mboe), comprising 101 Mbbls of oil (2020: 25 Mbbls) and 55 Mboe of gas (2020: nil Mboe).

Oil Sales
In Q4 2021, the Company sold 33.6 Mbbls of oil (Q3: 11.2 Mbbls) for $2,441,000 (Q3: $742,000), resulting in a weighted average price of approximately $73 per barrel (Q3: $66 per barrel), which represents a 10% increase in the realised price in Q4 compared with Q3.

During 2021, the Company sold 86.7 Mbbls of oil (2020: 34.4 Mbbls) for $5,519,000 (2020: $1,255,000), resulting in a weighted average price of approximately $64 per barrel (2020: $36 per barrel), which represents a 75% increase in the realised price in 2021 compared with 2020.

Gas Sales
In Q4 2021, the Company sold 36.1 MMcf of gas (Q3: 52.4 MMcf) for $109,000 (Q3: $159,000), resulting in a weighted average price of approximately $3.03/Mcf (Q3: $3.03/Mcf).

During 2021, the Company sold 191 MMcf of gas (2020: nil MMcf) for $596,000 (2020: $nil), resulting in a weighted average price of approximately $3.11/Mcf (2020: n/a).

Cash Position
As at 31 December 2021, the Company had $1.2 million cash at bank (30 September 2021: $2.7 million).

As at 6 January 2022, Block had an estimated oil inventory of over 19,000 bbls, which at the current Brent price is worth over $1.4 million to the Company. The Company's next oil sales are expected to occur in January and February.

Block Energy plc's Chief Executive Officer, Paul Haywood, said:
"We are pleased with the progress being made at JKT-01Z. Having encountered hydrocarbons and experienced significant mud losses whilst drilling, the early signs are encouraging. If JKT-01Z proves to be successful, side-track operations funded by production revenue will be initiated back at WR-B01, adopting the same geological approach employed at JKT-01Z.

Strong sales, stable production and the ability to take advantage of enhanced sales pricing during the quarter, combined with encouraging initial signs from JKT-01Z, all add to the Board's confidence in the Company's ability to improve performance as we look to the year ahead".

Jonathan Bedford (Block's Technical Manager) has reviewed the reserve, resource and production information contained in this announcement. Mr Bedford has an MSc in Petroleum Geoscience from the University of Aberdeen and is a petrophysicist.

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