Block Energy PLC (LON:BLOE) told investors that the company is prepared for an extended period of low prices, and its fundamentals remain strong, as it reported results for the 18 months to December 31, 2019, after the market close on Thursday.
“We are accelerating the exploitation of gas resources in West Rustavi and are planning the increase of oil production and exploitation of gas resources in the blocks being acquired from Schlumberger,” Block Energy chairman Philip Dimmock said in the results statement. “We are confident the market will recognise our inherent value and re-rating potential.”
Block Energy ended December with US$6.49mln of cash, and it reported a US$6.03mln loss for the year.
Among operational highlights, Block Energy noted the successful drilling and completion of two horizontal wells at the West Rustavi field, with encouraging production rates seen in testing.
The company had been producing at around 325 barrels of oil equivalent per day (boepd) from the West Rustavi before a temporary shutdown was brought in to conserve oil that would otherwise be sold at a low price and gas that would otherwise be flared.
In March this year, Block Energy agreed the acquisition of two areas held by Schlumberger for no upfront cash consideration. Schlumberger will be given options over Block Energy stock - 120mln shares, or 23.3% of the company, ascribing a base deal value of around US$6mln to the deal.
The firm is acquiring Block XI which is described as “Georgia's most productive block” - over 180mln barrels of oil have been produced historically, with a peak of 67,000 barrels of oil per day (bopd) in the mid-1980s – and it adds 64mln boe of 2P oil reserves to the group.
The other adjacent new asset is Block IX which comprises exploration acreage. Recent appraisal drilling by Schlumberger has unearthed additional potential, identifying 600bn cubic feet of in-place gas.