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Block Energy Plc: Total drilled depth of 2659 m reached at well 16a following successful horizontal sidetracking operations

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Oilfield Technology,

Block Energy Plc, the exploration and production company focused on the Republic of Georgia, has reported that Total Drilled Depth ('TDD') has been reached at well 16a ('16a' or 'the well') at its West Rustavi field ('West Rustavi') after the successful completion of horizontal sidetracking operations.

A TDD of 2659 m was reached after the well was re-entered and cleaned, a whipstock positioned at 1932 m below the ground, a build section drilled 205 m into the top of the targeted Middle Eocene, and a further 522 m (some 100 m more than the original plan) drilled horizontally into the formation's reservoir.

Hydrocarbon readings derived from field interpretation of drill cuttings (taken in five metre intervals) and live oil shows on the shale shaker unit and frequent spikes in gas readings provide strong indications that the expected naturally fractured hydrocarbon reservoir Middle Eocene formation was entered, and that the entire horizontal section was drilled within it.

The Company is aiming for a gross initial flow rate of 325 bpd at the well, which would generate a free cash flow of approximately USD 3.6m and payback well costs in less than six months (assuming a price of USD 60/bbl Brent). Well 16a produced some 35 000 bbls when first on production during the Soviet era. According to Gustavson Associates (Source: CPR dated 1 January 2018) West Rustavi's Middle Eocene reservoir holds 21 million bbls of ('2C') contingent resources.

Significant oil and gas shows were also seen during the drilling of the Upper Eocene build section. The Company has logged this section of the well, and initial interpretation indicates oil saturated sands, based on Spectrum Gamma Ray logs and mud logs. Gustavson Associates (Source: CPR) estimate this formation holds 12 million bbls of gross contingent ('2C') resources, and a report by Georgia Oil and Gas ('GOG') notes that the Upper Eocene formation in the neighbouring Ninotsminda and Samgori fields, operated by the Kura Basin Operating Company ('KBOC') and Schlumberger respectively, has produced approximately 1.5 million bbls.

Block will start testing the Middle Eocene section of the well later this week by nitrogen-assisted gaslift which will draw down the bottom hole pressure to clean up the natural fractures in the horizontal open hole section. Testing will take around two weeks. The pressure in a second West Rustavi well, number 38, has been bled off and is now ready for re-entering and sidetracking subject to results at well 16a. Last month Block secured an agreement to increase its working interest ('WI') in West Rustavi from 25% to 100%, giving the Company full strategic control over the development of the field (RNS: 26 February 2019: In addition to an estimated 38 million bbls of gross contingent resources ('2C') of oil, the field holds legacy gas discoveries which support a gross ('2C') gross contingent resource of 608 billion ft3 (Source: CPR).

Block is carrying out its West Rustavi operations in parallel with an ongoing multi-well workover programme at its Norio field, where the Company has a 100% WI, and where earlier this month (RNS: 7 March 2019: a significant increase in production rate to 60 bpd, a four-fold increase, moved the Company towards its breakeven point of 100 bpd.

Chief Executive Officer Paul Haywood said: 'We are delighted to have completed our horizontal sidetracking operations at well 16a, reaching a TDD of nearly 2700 m. This is a critical milestone as we seek to unlock West Rustavi's company-making potential and demonstrate our operational competence to our stakeholders and the broader market.

'Achieving our forecast of a 325 bpd production rate at 16a would move the Company well above its corporate production breakeven rate, generating total free cash flow (including both Norio and West Rustavi) of US$4.5 million per annum at US$60/bbl Brent. In addition to our operations at 16a we have bled off the pressure at a neighbouring well, number 38, which we will swiftly prepare for sidetracking if 16a is successful.

'We also look forward to appraising West Rustavi's legacy gas discovery. According to the documentation the Company received on acquiring its ('WI') in the licence, the first well the Company plans to appraise flowed at rates up to 29 000 m3 or 1.0 million sft3 per day when originally tested in 1988. We are further encouraged by Schlumberger's ongoing gas drilling and testing operations in the neighbouring XIb permit.

'Our move to a 100% WI in West Rustavi gives us complete freedom to manage the permit's tremendous natural gas potential, which if successfully developed would offer netbacks of approximately US$2.5/thousand ft3. We have already signed an offtake agreement with an established Georgian gas trader able to support our ambitions for the field.

'We look forward to updating the market on our test results at 16a and our broader development programme.'

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