Block Energy (LSE:BLOE) bounced 6.6pc to 3.6p on Tuesday after revealing that drilling has begun at one of its prospective fields in Georgia. The firm has lowered a sidetrack drilling device into an existing well called 16a at its West Rustavi site in the country.
16a is part of an initial two-well horizontal sidetrack drilling programme at the site targeting combined gross production of 650bopd by the end of H1 2019. The next step will be to orient the tool in the right direction and cut a hole in the side of 16a’s well casing.
Block then plans to drill a 1,600ft horizontal section into the target reservoir. This is located at a depth of c.2,100m and is expected to have had an original oil column up to 600ft thick. Production testing is forecast to start immediately after drilling operations are complete.
The sidetrack drilling follows a successful oil test at West Rustavi in December last year. This confirmed that the well lies in an active hydrocarbon system and that a previously-producing reservoir called Middle Eocene still contains reserves and remains pressurised.
Block holds a 25pc interest in West Rustavi, which contains an estimated 38MMbbls of 2C oil resources. As part of an agreed earn-in, this stake will increase to 75pc once the two-well sidetrack campaign has completed. In today’s update, Block said it has also identified four other wells at West Rustavi offering similar opportunities for re-entry and sidetracking.
Chief executive Paul Haywood added: ‘The first of an initial two-well sidetrack programme targeting an overall 650 bopd (325 bopd per well) at West Rustavi, 16a is a high impact well for Block and we are therefore delighted that drilling operations have commenced at the site on schedule. This is testament to the excellent work and meticulous planning carried out by the operations team on the ground in Georgia, including the successful flowback test at the Well in December which confirmed the targeted Middle Eocene reservoir still contains reserves and remains pressurised.
‘With gross contingent resources of 38 MMbbls of oil, a total of six historic wells identified as suitable candidates for sidetracking, and a legacy gas discovery, the potential for West Rustavi to generate significant cash flow and value for Block is clear.’
Alongside West Rustavi, Block owns a 100pc interest in the producing Norio field, which has gross proven oil reserves of 1.631 million barrels. It also holds a 90pc stake in the Satskhenisi field, which has estimated 28 MMbbls of gross 2C contingent resources.
Last week saw the business announce strong initial production results at its Norio oilfield in Georgia. The news was particularly significant because it demonstrated the initial success of a specialist perforation technique.
This involves sending a micro drill down an existing well to cut small boreholes in its casing at various depths. These are then drilled several feet horizontally. The aim is to increase the amount of communication between the target reservoir and the wellbore, considerably boosting recovery rates.
The technique has been used by many operators to enhance production since its introduction in North America. However, this is the first time it has been used outside the US.
Block is using the technology to penetrate Norio’s oil-bearing formations to improve upon the results obtained by conventional perforation technologies. The company puts this down to historical damage caused by poor (by today’s standard) drilling techniques back in the 1960s/70s.
Block announced that its first use of the technique at a well called Norio 44 had seen initial success, leading to the recovery of 45bbls of sweet crude oil over five hours. Internal production forecasts for the well, which is being put on pump, were 13bopd. Block said the strong result highlights the potential of the micro-drilling technique.
The company is now testing Norio 44’s stable production rate to get a better idea of the technique’s effectiveness. If its value can be demonstrated, the firm will use it to drill more holes at Norio 44 and multiple additional wells at the field. It is already preparing three wells for drilling next month as part of a fully-funded workover programme consisting of eight workovers and one sidetrack. This is intended to prompt a 25-fold increase in its Norio production to 250bopd by the end of H1 2019.
Speaking to ValueTheMarkets, Haywood said the initial results bode well for Block’s programme: ‘A lot of Norio wells have skin damage around the wellbore because of poor historical drilling. This can seriously damage productivity. Our new technique gets us past this skin damage so we can produce these wells in a much better way. The initial results at Norio-44 are very positive, and we now need to pump the well and see what rates we get over a longer period to provide more consistency. The results will frame our programme and help decide what well we target next with the micro-drill.’