Block Energy (BLOE ) reported an almost 5-fold increase in revenue in its audited results for the 12-months to 31 December 2021 (FY21).
Block Energy is an AIM-listed oil and gas production and development company, operating in Georgia. Its development programme focuses on three licenses near Tbilisi, including a 100% working interest in the highly prospective West Rustavi field. In November 2020, Block Energy acquired two neighboring blocks from Schlumberger: Block XIB and Block IX. And in February 2021, the company commenced gas sales, which have been profitable so far.
In FY21, its revenues climbed 388% to £6.1m, up from £1.2m in FY20. £5.5m of that revenue came from sales of crude oil, in total 86,700 barrels (up from 34,421 barrels in 2020), representing average revenue of $63.65 per barrel. It commenced gas sales on 15 February 2021, with 91.5 Mcf of gas sold over the rest of the year for net revenue of $596K, representing an average price of $3.11 per Mcf.
In terms of production, Block produced 108,000 barrels in FY21, more than 4 times 2020's 25,000 barrels, the increase coming mostly from the new Block XIB. The Group had over 20,000 barrels of inventory at the year end. Post-period, the group sold another 24,413 barrels for net revenue of £2.16m.
Sales profit (before administrative expenses) was £231K, up from a loss of £1.7m in FY20, while the operating loss was reduced to £4.7m, from £5.5m in 2020.
Following the acquisition and integration of Blocks IX and XIB referenced above, Block successfully delivered on two key initiatives in 2021: a two-well drilling programme to increase production levels, and a workover programme designed to maximise production from existing well stock. These initiatives supported the company's solid production growth in 2021.
Additionally, using 3D-seismic survey analysis, the company's geoscience team "made significant improvements in understanding the nature of our complex Eocene oil and gas reservoirs." This then enabled Block to define three appraisal and development projects: Project I, the development of the Middle Eocene oil reservoir in West Rustavi/Krtsanisi; Project II, infill development of of the Middle Eocene oil reservoir in the Patardzeuli oil field; and Project III, appraisal and development of the natural gas resources throughout the Eocene.
"Projects I and II will provide additional cash flow in the short to medium term from the sale of crude oil and natural gas while Project III promises to add significant value by better defining and ultimately monetising the extensive natural gas resources that lie under our portfolio of leases," chair Philip Dimmock said.
This 3-Project strategy is designed to provide additional short and medium-term cashflows and unlock significant gas potential.
Work on Project I is expected to begin later this year and will entail the drilling of five oil wells in the Krtsanisi anticline, newly recognised in the West Rustavi/Krtsanisi field.
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The post-pandemic increase in oil and gas demand and associated higher prices have resulted in greater revenues for Block Energy in FY21 and so far this year. The company has also seen the benefit of its aforementioned initiatives undertaken in FY21/22 to support production growth, oil development, and continuing of its gas appraisal programme. "Now, a year later, we are seeing the benefits of those decisions, with the Company's revenue more than covering cash costs and enabling us to reinvest more revenue in future development," CEO Paul Haywood said.
As Block Energy is still in an expansion phase, it has not yet achieved sufficient scale of revenue to cover operating costs. However, the 388% rise in revenue and sales profit increase indicate that return on its investments should continue to grow. With unrestricted access to Europe and its increased demand for gas, the company's prospects look solid.
CEO Paul Haywood summarised: "The Company has built an excellent portfolio of assets and the exercise of strict capital discipline, combined with the benefits from higher oil and gas prices, places us in a great position to develop them further in the year ahead. Supported by our cash flow positive business and non-dilutive development financing options being explored, we plan to step up the rate of drilling in 2022 and 2023 to increase oil production and appraise the deeper gas play within our licences, which we believe contains substantial gas resources."
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