Block Energy Announces Q2 Operational Update

Source: www.gulfoilandgas.com 7/13/2021, Location: Asia

Highlights

-:Spud of WR-B1 well in Georgia at the end of Q2

- Planning of second well continuing with location and timing to be finalised

- Over 170,000 operational man-hours worked in the year to date, with no lost-time incidents

- The Company produced a combined total of 42.6 Mboe of oil and gas during Q2 2021

- Sold 15.6 Mbbls of oil during Q2 2021 for $960,000, resulting in a weighted average price of approximately $62/bbl

- Sold 64.6 MMcf of gas during Q2 2021 for $209,000, resulting in a weighted average price of approximately $3.24/Mcf

- The Company ended the quarter with a strong liquidity position with $5.4 million cash at bank

- Block was accepted into the UN Global Compact Network

- Agreement announced between Block Energy and Baker Hughes to deploy energy-efficient technologies for oil and gas production and to evaluate geothermal projects in Georgia

Drilling Programme

Block spudded the WR-B1 well at the WR-BA location on the West Rustavi field on 23 June 2021. The 13" casing was installed and cemented after the end Q2, and the well is drilling ahead in the 12" hole towards the kick-off point. The well is targetting the Middle Eocene reservoir with a horizontal section approximately 800 metres long. The team has conducted a geomechanical study to de-risk potential operational challenges and to ensure safe wellbore construction. Due to potential faults and fractures, particular attention has been paid to drilling fluids and cementing operations. Detailed engineering has been carried out to optimise the well placement and maximise production recovery with technologies, such as rotary steerable systems and logging-while-drilling, being deployed in the reservoir section, a first in the Georgian oil and gas sector.

WR-B1 is targetting 2.1 MMboe of recoverable oil and gas and is the first well to be drilled using the data from the Company's 3D-seismic survey acquired over the West Rustavi licence area in 2019. On success, WR-B1 will be tied into Block's Early Production Facility for processing both oil and gas produced from the well. Furthermore, technical well planning and engineering screening of several well candidates are in advanced stages to enable the Company to press forward with its second well after the completion of WR-B1.

Health and Safety

Over 170,000 operational man-hours have been worked by staff and contractors in the six months ended 30 June 2021, with no lost-time incidents.

Oil & Gas Production

During Q2 2021, the Company produced 25.7 Mbbls of oil (Q1: 29.8 Mbbls) and 16.9 Mboe of gas (Q1: 14.6 Mboe), resulting in a combined total of 42.6 Mboe of oil and gas (Q1: 44.4 Mboe). The average production rate for Q2 was 468 boepd (Q1: 493 boepd), which represents a decrease of approximately 5%. Although WR-38Z was on production for the whole of Q2 compared to only two months in Q1, this was outweighed by the natural decline of the wells.

The production team continues to execute Block's well maintenance, intervention and production enhancement program for 2021, following well by well opportunity reviews held earlier in the year. Additional interventions planned for Q3 include WR-38Z, where a production logging tool and artificial lift solution are planned to improve oil and gas production from the well and KRT-39, where surface facility upgrades are due to be installed, in order to monetise associated gas production that was previously flared.

A subsequent event in Q3 is the installation of artificial lift in WR-16aZ, which has been shut-in for most of Q1 and Q2. Initial results of this intervention will be provided in Q3.

As part of Block's wider strategy to enhance production, a production logging program in West Rustavi is planned to provide valuable information in optimising oil and gas production and future water shut-off strategies.

The Company's portfolio comprises 159 wells across five production sharing contracts covering 2,622km2. Production management of old and new wells, including, but not limited to, intervention operations, will continue throughout the year, to arrest natural production decline across all of Block's portfolio of wells.

Oil Sales

During Q2 2021, the Company sold 15.6 Mbbls of oil (Q1: 26.3 Mbbls) for $960,000 (Q1: $1,370,000), resulting in a weighted average price of approximately $62 per barrel (Q1: approximately $52 per barrel), which represents an 18% increase in the realised price in Q2 compared with Q1.

At the end of June 2021, the Company agreed to sell approximately 13.5 Mbbls of oil, of which 2.3 Mbbls was delivered on 30 June 2021 and the revenue of $149,000 is included in the Q2 sales revenue of $960,000. The remaining 11.2 Mbbls was delivered during the period from 1 to 8 July 2021 and the revenue of $742,000 will be included in the Q3 sales.

Gas Sales

As previously reported, during Q1 2021, the Company achieved its first gas sales. In Q2 2021, which was Block's first full quarter of gas sales, it sold 64.6 MMcf of gas (Q1: 38.4 MMcf) for $209,000 (Q1: $123,000), resulting in a weighted average price of approximately $3.24/Mcf (Q1: $3.20/Mcf).

Cash Position

As at 30 June 2021, the Company had $5.4 million cash at bank (31 March 2021: $6.8 million).

ESG

During the period, Block Energy was honoured to have been accepted into the UN Global Compact Network, a global platform for business and non-business entities to proactively network and engage in human rights, labour, environment, and anti-corruption. Participation in the UN Global Compact is a widely visible commitment to the implementation, disclosure, and promotion of its ten universal principles. Details on what these principles cover can be found on the UN website: https://www.unglobalcompact.org/what-is-gc/mission/principles

Block has continued its focus on its environmental impact and in particular, the green energy opportunities in its portfolio. As part of its agreement with Baker Hughes, the partnership is exploring the geothermal energy potential within Block's acreage in Georgia. Georgia has promising geothermal applications, such as farming and local power demand, and has a considerable resource of middle and high-temperature thermal water (33 - 108°C). Block is currently assessing the potential to convert legacy oil wells within Block's fields into geothermal wells. These wells have a proven water production to surface at approximately 80°C. The wells are in the heartland of Georgia's vegetable farming industry. Management believes the benign hot water produced from legacy wells throughout its fields could provide an efficient solution to both local vegetable farmers and an energy source to power current and future operations.

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

'I am pleased to report another positive quarter for Block Energy both financially and operationally. Towards the end of the quarter, we delivered on our key objective as we spudded the WR-B1 well, which, after significant planning and dedication from the team, seeks to provide a material boost to our production in Georgia. The WR-B1 well will also play a vital role in the second well in the campaign as we will look to use critical WR-B1 drilling information to mitigate risk and optimise the programme of the next well. Beyond the drill bit, execution of the baseline production enhancement plan has made solid progress throughout Q2 and we look forward to seeing the results of the team's hard work as the Company moves through an active drilling and workover period in Q3.'


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