The company already owns 25% of West Rustavi and the new agreement with Georgian Oil and Gas Limited (GOG) will increase the stake up to 100%. It replaces an ‘earn-in’ agreement entered into back in 2017. The previous arrangement would’ve seen Block increase its stake to 75% with the completion of ongoing West Rustavi workover and sidetracking programme.
The new staged agreement will see Block’s stake rise to 71.5% with a US$250,000 cash payment, and, a further US$500,000 will be paid to GOG, which in turn will subscribe for Block shares at a minimum price of 4p.
In stage-2, Block can increase its working interest to 90% with a US$250,000 in cash payment, upon the start of additional new operations at West Rustavi or 31 August 2019 – whichever comes sooner.
Stage-3 would allow Block to increase its stake to 100% with a subsequent US$500,000 cash payment.
The new arrangement does not include the previously in place work obligations.
Specifically, Block highlighted that it is longer obliged to carry out work that would’ve demanded at least US$4mln of spending, and, would’ve needed US$1mln worth of additional production facilities.
“A 100% WI in West Rustavi will give the company complete discretion over the realisation of the field's potential,” said Paul Haywood, Block chief executive.
"The economic impact of this transaction is also significant, whereby in our single well base case production scenario (325 bopd) well netbacks increase by over 40% on completion of the transaction, to around US$41 per bbl at US$60 Brent.
“Moreover, we welcome further strengthening of the relationship between Block and our major shareholder GOG.
“The deal structure, which is heavily weighted towards equity in the company, is a strong testament of GOG's confidence in the company's current value and potential upside.”