Block Energy Announces Operational Update

Source: www.gulfoilandgas.com 11/2/2022, Location: Asia

Block Energy, the exploration and production company focused on Georgia, has provided the following operational update on its three-project strategy.

JSR-01 DEEP (Project II)

As previously announced, well JSR-01 DEEP has been safely drilled and completed below budget. It is the first of a series of Project II wells targeting a wide range of opportunities designed to exploit large, undrained areas of the deeper zones of the Middle Eocene reservoirs in Block XIB and test contingent resources defined by Block's technical team of over 200 MMbbls.

The Company drilled the naturally fractured 600m vertical section of the Middle Eocene in the Patardzeuli Oil Field with total losses of drilling fluid, a drilling technique not previously employed in Georgia. This technique was used deliberately to avoid wellbore damage from Lost Circulation Material. During drilling, high losses (cumulative of 45,000 bbls of fluid) were recorded, which is a positive indicator of highly transmissible natural fractures. During the staged testing programme, both oil and gas have been produced to the surface.

The ongoing JSR-01 DEEP testing programme has been designed to systematically evaluate three independent intervals of the reservoir, with different fracture characteristics and, as such, differs from the programmes used in the Company's West Rustavi/Krtsanisi oil field. The primary objective of the testing programme is the accurate definition of the oil-productive zones, to support the optimal design of future horizontal wells in the Project II full-field redevelopment.

West Rustavi/Krtsanisi (Project I)

In the Krtsanisi anticline of the West Rustavi/Krtsanisi oil field, the development of the Middle Eocene reservoir will continue this month with the side-track of well WR-B01, which will be an analogue to the successful well JKT-01Z.

WR-B01 ST will be drilled some 500m to the west and up-dip of JKT-01Z. As with JKT-01Z, WR-B01 ST will target a fracture system identified by a high density of seismic attribute lineations but on the west side of the anticline. JKT-01Z has already produced a cumulative volume of 64,000 boe over 11 months of continuous production, providing an approximate 2.5x return on capex and therefore supporting the Company's final investment decision, on Project I.

WR-B01 ST is the first new development well associated with the ERCE 2022 Competent Person's Report, which ascribed 3.01 MMbbl 3P reserves, and an NPV10 project value of US57MM, to just a portion of the West Rustavi/Krtsanisi Middle Eocene reservoir. The Company's contingent resource report ascribes a total of 19.5 MMbbl 2C contingent resources to the whole West Rustavi/Krtsanisi Middle Eocene reservoir.

The Company is well placed to fund WR-B01 ST from cash reserves and ongoing cashflows, enabling Project I to commence. Discussions relating to non-dilutive financing for Project I remain ongoing. Given Georgia's strategic location and close links to European energy markets, there remains strong interest in the petroleum potential of the region.

Gas development (Project III)

Whilst Block's immediate focus is on developing cash flow from Project I and defining potential company-making reserves in Project II, the Company is also laying the foundations for Project III.

Project III seeks to appraise and monetise the 860 BCF of contingent resources, identified by Block's technical team, across licences XIF & XIB. Natural gas produced from a successful Project III development will support Georgia's growing domestic energy market and be suitable for export to Europe via Turkey.

The work programme for Project III includes 3D seismic interpretation and correlation of seismic attribute lineations with legacy production test data. The Company has upgraded its service rig to support the advancement of Project III with low-cost drilling and workover activities. Project III workover and retest candidates are being selected. An update will follow when operations commence.

Commenting, Paul Haywood, Chief Executive Officer of Block Energy, said:

'The JSR-01 DEEP testing programme continues and it's pleasing to announce the commencement of Project I with the spudding of well WR-B01 ST later this month. I am encouraged by the positive support received from government agencies in Georgia whilst our Company remains active on many fronts. All of which underpin the strategy we communicated earlier this year of offering our valued stakeholders direct exposure to multiple high-impact events. We look forward to providing further updates as additional progress is made.'


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