Block Energy, the exploration and production company focused on Georgia, today announced the following operations update for the three months ended 30 June 2022.

Highlights

•    Strong and consistent performance, with Q2:
-  production of 47.2 Mboe (Q1: 46.1 Mboe)
-  average production of 519 boepd (Q1: 512 boepd)
-  revenue of $2,228,000 (Q1: $2,361,000)

•    Cash at 30 June 2022: $1.4m (31 March 2022: $1.2m)
•    Preparations for a five-well development plan, including WR-B01 sidetrack, complete and ready for execution
•    Advanced discussions on non-dilutive funding for the five-well development plan to accelerate a wider drilling programme are ongoing with industry specialists
•    Over 92,000 operational man-hours worked in Q2 (Q1: 92,000 hours), with no lost-time incidents

Operational Strategy

As recently explained in the Company's Annual Report, the Company's assets represent a material growth opportunity in terms of production, revenue and cash flow, particularly at current commodity prices. As with any development programme, single-well development risk remains, and the Company is seeking to mitigate it with a multi-well programme.

The Company's three-project strategy looks at the opportunity in totality. Projects I and II are aimed at generating additional cash in the short to medium term, while Project III seeks to add significant value from the deeper, extensive natural gas resources that lie beneath the portfolio of licences. The investment case for this strategy is supported by the improved understanding of the complexities of the Eocene reservoirs, which was a key objective in 2021.

Project I is the development of the Middle Eocene oil reservoir in the West Rustavi/Krtsanisi field, which straddles Blocks XIF and XIB, initially comprising of three sidetracks and two new wells. Preparations for the first sidetrack, of WR-B01, are now complete. These included the procurement of long-lead items and site preparation. Furthermore, construction of the gathering line from WR-B01 to the WR-38 wellsite has been completed on time and on budget, enabling offtake and rapid monetisation of the gas produced from the WR-B01 sidetrack. Project I is primed for non-dilutive debt funding and discussions with potential lenders are at an advanced stage.

Project II, the infill development of the Middle Eocene oil reservoir in the prolific Patardzeuli oil field (100 MMbbls produced) in Block XIB will be self-funded from the cash generated from operations and will commence shortly. More than 50 sidetrack holes could be drilled from the legacy well stock, six of which have already been defined for sidetracking.

Project III, the evaluation and development of the natural gas resources throughout the Eocene in blocks XIF and XIB, will commence later this year with the workover of legacy wells which discovered gas. This includes the potential sidetrack of the PAT-E1 discovery well, engineered for a 1000m horizontal section through the Lower Eocene and designed to evaluate over 300 Bcf of contingent gas resources.

Oil and Gas Production

During Q2, gross production was 47.2 Mboe (Q1: 46.1 Mboe), comprising 32.8 Mbbls of oil (Q1: 32.1 Mbbls) and 14.4 Mboe of gas (Q1: 14.0 Mboe). The average gross production rate for Q2 increased slightly to 519 boepd (Q1: 512 boepd).

Production in Q2 was supported by a consistent performance from well JKT-01Z and well WR-38Z being brought back into production towards the end of the previous quarter.

Oil Sales

In Q2, Block sold 21.2 Mbbls of oil (Q1: 24.4 Mbbls) for $1,992,000 (Q1: $2,168,000), resulting in a weighted average price of approximately $94 per barrel (Q1: $89 per barrel), representing a 6% increase in the realised price in Q2 compared with Q1. As at 30 June 2022, Block had over 11,000 bbls of unsold oil in inventory.

Gas Sales

In Q2, the Company sold 58.4 MMcf of gas (Q1: 48.4 MMcf) for $236,000 (Q1: $193,000), resulting in a weighted average price of approximately $4.04/Mcf (Q1: $4.00/Mcf).

Cash Position

As at 30 June 2022, Block had $1.4 million cash at bank (31 March 2022: $1.2 million).

Block Energy plc's Chief Executive Officer, Paul Haywood, said:
"Block had a solid quarter, with stable production and positive operational cash flow. We have developed a balanced portfolio-wide strategy to unlock the inherent value across our assets, which we believe makes for a compelling investment case, particularly at current commodity prices. To accelerate that programme and mitigate the direct risks associated with a single well programme, we are in advanced discussions on a package of non-dilutive financing. Furthermore, the intention is to bring forward plans to initiate infill drilling within the prolific Patardzeuli field and develop the PAT-E1 gas discovery, of over 300 Bcf of contingent gas resources. With or without external financing, we will deliver the multi-well programme, as rapidly as diligent planning and capital discipline will allow."