In its final results for the year ended 31 December 2020, Block Energy (BLOE ) said it continues to perform well after seeing ‘significant’ operational and corporate progress.
The Georgian-focused development and production firm hailed a strong start to the year as production tests at the WR-38Z well confirmed the associated gas potential at West Rustavi. Block said it ‘responded swiftly’ to this by commencing the installation of an EPF to the field.
Thereafter, the production of oil and gas from the two horizontal wells in its West Rustavi licence area was suspended in April 2020 to avoid selling oil at low oil prices and conserve gas resources until the Early Production Facility and gas sales pipeline were completed.
The construction of this EPF, which held capacity for up to six wells, to exploit Block Energy's associated gas and contingent gas resources, was completed on budget in November 2020.
Meanwhile, Block also secured a gas sales agreement with Bago LLC, a private gas supplier and purchaser in Georgia, for the offtake of gas produced at the West Rustavi field, in 2020.
In mid-February 2021, Block confirmed that gas sales at the West Rustavi field had officially commenced with production rates coming in ‘substantially higher’ than in 2020.
The company highlighted to investors that these production rates had generated sufficient revenue, at current oil and gas prices, to cover over 95% of operating and administration costs and therefore preserve almost all of Block’s existing cash for new wells and facilities.
In a statement released back in April 2021 outlining its 2021 objectives, the company highlighted its plans to commence its 2021 drilling programme with a new horizontal well in West Rustavi, at WR-BA location, with the first well expected to spud in May/June 2021.
If successful, Block has identified a number of options for the second well in its work programme but will await results from the well at WR-BA before making a final decision.
Should the group progress with the drilling of a second well at WR-BB location, this would access a further volume of oil and gas in the West Rustavi Middle Eocene core area.
In addition, and in line with its objective to become a leading independent oil and gas producer in Georgia, Block completed its transaction to acquire two blocks, Block IX and Block XIB, from Schlumberger in March 2020, significantly increasing its access to production, reserves and resources and opening opportunities for future development.
In response to the Covid-19 pandemic and to low oil prices, Block postponed capital expenditure and reduced its cash expenditure by 40%. To help to implement its 2021 development strategy, Block raised £5.28m in December 2020, the proceeds of which are intended to support the group through its recently announced operational objectives.
In 2020, Block’s revenue rose to $1.25m (2019: $0.314m). Current year revenue from sales of crude oil was $1.25m (2019: $0.314m) which comprised the sale of 34,421 barrels (2019: 5,210 barrels) of oil, equating to average revenue of $36.45 (2019: $60.29) per barrel.
Following the year end, the Company commenced gas sales on 15 February 2021 and, during the period from 15 February 2021 to 31 March 2021, it sold 38.4 Mcf of gas for net revenue of $123,000, which equates to an average gas price of $3.20 per Mcf.
During 1Q21, Block produced a combined total of 44,394 boe of oil and gas and sold 26,300 barrels for $1.37mln, or $52 a barrel. Gas sales started on 15 February with Block selling 38,400 metric cubic feet (Mcf) of gas during 1Q21 for US$0.125m or US$3.26 per Mcf.
In 2020, the Company continued to produce and sell oil from its Norio, and Satskhenisi licences and revenue from the oil sales in 2020 was $1,255,000, bolstering its cash position.
In total, Block’s loss for the year was $5,512,000 as compared with a $6,130,000 loss in the prior period. Block said the main reason for the decrease in the loss is the income statement covers a shorter period of 12 months compared with 18 months in the prior period.
Block was still loss-making in 2020 because, for most of the year, the wells in West Rustavi were shut in and not producing oil and gas to help to cover the cost base, Block explained. Meanwhile, cash as at 31 December 2020 was $6.3m (31 December 2019: $6.49m).
As at 31 March 2021, Block Energy said it holds a’ strong liquidity position’ with $6.8 million cash. Commenting on its recently outlined plan for 2021, Block Energy’s CEO, Paul Haywood, said: “We enter the drilling campaign with a healthy balance sheet, as our cash and ongoing oil and gas sales means we can plan a sustainable growth strategy for the Company.”
“With a new strategic structure in place, I am optimistic 2021 will be a progressive year for Block and for all, supported by easing restrictions associated with Covid-19,” said Haywood.
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Looking ahead, Block said it has entered this year’s drilling campaign with a healthy balance sheet and that it is “better positioned than ever to meet shareholders’ high expectations.” Shares in the stock were trading 4.63% higher this morning at 2.82p following the news.
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."
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