Company Announcements

13 October 2022

Block Energy plc

("Block" or the "Company")

Q3 Operational Update

Block Energy Plc, the exploration and production company focused on Georgia, is pleased to announce its operations update for the three months ended 30 September 2022.

Highlights

·    Over 102,300 operational man-hours worked in Q3 2022, with no Lost-Time Incidents

·    Minimum Work Programme Commitments completed across the entire portfolio

·    Deepening of well JSR-01 drilled successfully and below budget, testing programme has now commenced

·    Competent Persons Report reaffirms opportunity and investment case for Project I, NPV10 US$57MM (3P Reserves case)

·    Q3 production of 37.1 Mboe (Q2: 47.2 Mboe)

·    Q3 revenue of $1,833,000 (Q2: $2,228,000)

·    As at 30 September 2022 cash balance of$1.1m (30 June 2022: $1.4m) and over 13,000 bbls of oil inventory

Health and Safety

Over 102,300 operational man-hours have been worked by staff and contractors in Q3, and over 286,600 in the nine months ended 30 September 2022, with no lost-time incidents. In-line with the Company's commitment to reduce emissions, there has again been no flaring of gas during the period and a specialist contractor is actively exploring the geothermal potential across the Company's licence areas. As part of Block's commitment to Georgia, in addition to supporting energy security and providing a cost-effective means of domestic energy, there are active community engagement and training projects in place to support the local communities in and around the licence areas.  

Introduction

During the third quarter of the year the Company continued to deliver on the value opportunity across its asset base. Block again reports robust production, cashflow and cash position. It also continued to demonstrate its technical and operational capability through the successful deepening of well JSR-01 and the independent verification of Project I provided by the Competent Persons Report.  

Operations

The Competent Persons Report issued in July independently verified the plan for the initial phase of Project I, with gross field 3P reserves of 3.01 MMbbls with a NPV10 project value of US$57MM, in-line with the Company's internal estimates. The initial phase of Project I comprises five production wells in the West Rustavi / Krtsanisi field. 

The scope of the report was deliberately focused on the Krtsanisi Anticline only, with the specific aim of supporting discussions around non-dilutive financing and is not comparable to previous reserve reports. Discussions with a number of parties are ongoing, with strong interest in the region being shown, albeit the Company is well placed to self-fund operations as desired.

Preparations for the deepening of well JSR-01 in the Patardzeuli oilfield were successfully concluded during the period; drilling commenced in late July. Drilling operations were subsequently complete by late September, safely, on plan and below budget.

Testing operations are currently underway, and the Company looks forward to providing a further update to the market once complete. The deepening of the JSR-01 well is designed to evaluate an undrained area of the Middle Eocene reservoir.

The deepening JSR-01 represented the start of Project II and reflected the Company's prudent use of cashflow generated from production to self-fund new wells and rapidly progress the three-project strategy outlined earlier in the year, to accelerate revenues and to evaluate the significant oil & gas opportunities that exists across Blocks XI^F and XI^B.

As announced in July, during the quarter the State Agency of Oil and Gas ("SAOG") certified that the minimum work programme for Block XI^F had been completed, providing the Company security of title, over the licence to 2043. Block has now completed the minimum work programmes across its entire licence portfolio, yet another significant milestone.

Oil and Gas Production

During Q3, gross production (including the state of Georgia's share) was 37.1 Mboe (Q2: 47.2 Mboe), comprising 28.1 Mbbls of oil (Q2: 32.8 Mbbls) and 9.0 Mboe of gas (Q2: 14.4 Mboe). The average gross production rate for Q3 was 404 boepd (Q2: 519 boepd).

Production during the quarter reflected consistent performance from well JKT-01Z and the Company's other producing wells. This followed an extensive intervention programme during the first half of the year, which comprised over 23 workovers. Average Q3 production performance was affected by production volatility from well WR-38Z and greater than average pump maintenance and power supply outages. The production volatility at well WR-38Z is now under control following the implementation of a new production scheme.

Oil Sales

During Q3 2022, the Company sold 17.9 Mbbls of oil (Q2: 21.2 Mbbls) for $1,614,000 (Q2: $1,992,000), with a weighted average price of approximately $92 per barrel (Q2: $94 per barrel), a 2.1% decrease in the realised price in Q3 compared with Q2.

As at 30 September 2022, Block had over 13,000 bbls of unsold oil in inventory.

Gas Sales

During Q3 2022, the Company sold 36.1 MMcf of gas (Q2: 58.4 MMcf) for $192,000 (Q2: $236,000), with a weighted average price of $5.31/Mcf (Q2: $4.04/Mcf). The gas price increase occurred as a result of negotiations with the buyer and an improvement in the reference price on which the  contract is based.

Cash Position

As at 30 September 2022, the Company had $1.1million cash at bank (30 June 2021: $1.4 million). The decrease in the cash position reflects the cost of drilling well JSR-01, ordering of LLIs associated with 2 further side tracks, and the workover operations undertaken in the period, offset by continued solid revenue and cashflow generation.

Block Energy plc's Chief Executive Officer, Paul Haywood, said:

"Q3 saw the Company deliver robust production, good cashflows and end the period with cash and oil inventory that will support the ongoing and self-funding development of its three-project strategy.  The successful deepening of well JSR-01 saw the progression of this strategy and reflected the Company's technical and operational excellence. Block is better placed than ever to progress and realise the value opportunity that exists across its portfolio, whilst testing JSR-01 DEEP and preparing for drilling the next well in our multi well drilling programme".

Stephen James BSc, MBA, PhD (Block's Subsurface Manager) has reviewed the reserve, resource and production information contained in this announcement. Dr James is a geoscientist with over 40 years' experience in field development and reservoir management.

**ENDS**

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION AS STIPULATED UNDER THE UK VERSION OF THE MARKET ABUSE REGULATION NO 596/2014 WHICH IS PART OF ENGLISH LAW BY VIRTUE OF THE EUROPEAN (WITHDRAWAL) ACT 2018, AS AMENDED.  ON PUBLICATION OF THIS ANNOUNCEMENT VIA A REGULATORY INFORMATION SERVICE, THIS INFORMATION IS CONSIDERED TO BE IN THE PUBLIC DOMAIN.

For further information please visit http://www.blockenergy.co.uk/ or contact:

Notes to editors

Block Energy plc is an AIM-listed independent oil and gas company focused on production and development in Georgia, applying innovative technology to realise the full potential of previously discovered fields.

Block has a 100% working interest in Georgian onshore licence blocks IX and XI^B. Licence block XI^B is Georgia's most productive block. During the mid-1980s, production peaked at 67,000 bopd and cumulative production reached 100 MMbbls and 80 MMbbls of oil from the Patardzeuli and Samgori fields, respectively. The remaining 2P reserves across block XI^B are 64 MMboe, comprising 2P oil reserves of 36 MMbbls and 2P gas reserves of 28 MMboe. (Source: CPR Bayphase Limited: 1 July 2015). Additionally, following an internal technical study designed to evaluate and quantify the undrained oil potential of the Middle Eocene within the Patardzeuli field, the Company has estimated gross unrisked 2C contingent resources of 200 MMbbls of oil.

The Company has a 100% working interest in licence block XI^F containing the West Rustavi onshore oil and gas field. Multiple wells have tested oil and gas from a range of geological horizons. The field has so far produced over 75 Mbbls of light sweet crude and has 0.9 MMbbls of gross 2P oil reserves in the Middle Eocene. It also has 38 MMbbls of gross unrisked 2C contingent resources of oil and 608 Bcf of gross unrisked 2C contingent resources of gas in the Middle, Upper and Lower Eocene formations (Source: CPR Gustavson Associates: 1 January 2018).

Block also holds 100% and 90% working interests respectively in the onshore oil producing Norio and Satskhenisi fields.

The Company offers a clear entry point for investors to gain exposure to Georgia's growing economy and the strong regional demand for oil and gas.

Glossary

·    bbls: barrels. A barrel is 35 imperial gallons.

·    Bcf: billion cubic feet.

·    boe: barrels of oil equivalent.

·    boepd: barrels of oil equivalent per day.

·    bopd: barrels of oil per day.

·    Mbbls: thousand barrels.

·    Mboe: thousand barrels of oil equivalent.

·    Mcf: thousand cubic feet.

·    MMbbls: million barrels.

·    MMboe: million barrels of oil equivalent.

·    MMcf: million cubic feet.