Block Energy (LSE:BLOE) had fallen by more than a fifth to 8.6p on Friday morning after announcing that production had resumed at its flagship West Rustavi field in Georgia. The business said production from well 16aZ continued on 11 July and has sat at an average rate of c.360boepd on varying choke sizes.
The well has also presented an average water cut of 25pc, which Block considers to be mainly made up of returned drilling fluid. It added that a minimum of 1,200bbls of drilling fluid was lost to the well during drilling and completion operations, calling this ‘a considerable amount indicative of the high productivity of the fractures system’.
Shares in Block exploded in April when 16aZ’s initial production rates came in at an average of 1,100bopd, far exceeding its 325bopd target. According to the business, this test rate indicates a better initial well performance than any well drilled in Georgia over the last 50 years.
Block was forced to scale back production in later the month while it addressed production capacity and offtake requirements. This issue was solved at the beginning of July when the firm announced that it had entered into an oil storage leasing agreement with the state-backed Georgian Oil and Gas Corporation. The deal secures Block for immediate access to up to 90,000bbls of storage at a facility-based some 30km from West Rustavi.
Although 16aZ’s production currently sits well below its initial rate of 1,100bopd, Block said it is now adopting a ‘prudent approach’ at the well. Indeed, it plans to gradually increase production to establish a sustainable flow rate as the well continues to clean up firm lost drilling fluid.
It added that bringing the well onto production marked a significant step in its £12m programme to realise fully the potential of West Rustavi, where it recently became 100pc owner. This work, which is fully funded following a placing at 11p a share in May, will see Block perform the horizontal sidetracking of a well called 38Z this Summer. This well is analogous, adjacent, and updip to 16aZ and is targeting the same Middle Eocene formation. Following this, the organisation plans to sidetrack three additional well across the field.
In parallel with its operations at West Rustavi, Block said on Friday that it is continuing to produce oil at its Norio and Satskhenisi licences at a cumulative average production rate of 26 bopd.
‘We are pleased to resume production at well 16aZ and look forward to establishing with due caution a stable production rate for our best performing well to date. The Well produced exceptional test rates earlier this year and offers excellent netbacks of $35/bbl at $65/bbl Brent,’ said chief executive Paul Haywood. ‘With the resumption of production at well 16aZ our fully-funded back-to-back multi-well drilling programme continues to gather momentum. We now keenly anticipate ramping up production with the sidetracking this summer of well 16aZ’s neighbouring well, 38Z. Three of West Rustavi’s other wells will also be sidetracked in the Middle Eocene structure, and two of them tested for their historic gas discoveries in the Lower Eocene.’
Haywood added that the company is also anticipated the acquisition of a 3D seismic survey that will identify optimal locations for new horizontal oil and gas wells across West Rustavi. The business hopes that this will support an upgrade of its CPR, prepared back in January 2018.