Block Energy PLC (LON:BLOE) rose on Monday following news the firm has negotiated a substantial oil storage leasing agreement that will enable it to re-start production from its West Rustavi field in Georgia.
Paul Haywood, Block’s chief executive officer, said the agreement gives it access to 90,000 barrels of storage capacity just 30km away at state oil group GOGC's main facility near Sartichala.
“We can now allow well 16aZ to flow to its full potential, opening the prospect of excellent netbacks of US$36/bbl at US$65/bbl Brent and US$3.40/MCF for gas.”
Well 16aZ flowed at more than 1,100 barrels per day during testing but has been reined back subsequently.
Block added that it expects oil production to restart at West Rustavi in approximately 7 days. The 16aZ well was part of a programme designed steadily to ramp up Block’s production in Georgia.
"Removing oil storage limitations is a critical element in Block's fully-funded back to back drilling programme,"
The next step includes sidetracking of the adjacent and analogous well 38, and three of the field's other wells, two of which will also be tested for their historic gas discoveries.
"In parallel to the immediate drilling programme, a 3D seismic survey will be acquired to identify optimal locations for new horizontal oil and gas wells across the field."
Haywood said details of the programme for the next 12 to 18 months would be released shortly.
Mirabaud starts with 'buy'
Mirabaud Research today initiated coverage on Block Energy shares with a ‘buy’ recommendation.
In a note to clients, the Mirabaud analysts commented: “With additional near term catalysts, including first sales from West Rustavi, development and appraisal drilling, new 3D seismic and an updated Competent Person’s Report (CPR), Block is set for a busy few months.
“Furthermore, with shares trading at c.70% discount to our 35p/shr Target Price, we see considerable scope for rerating in the near term.”
In afternoon trading, shares in Block Energy were 1% higher at 10.10p.
-- Adds analyst comment, share price --