Block Energy to complete SRCL acquisition on Monday
(AIM:BLOE ) has given investors an update regarding its previously disclosed acquisition of oilfield services provider Schlumberger Rustaveli Company Limited ("SRCL").
The Georgian-focused exploration and production firm entered into a sale and purchase agreement ("SPA") with Schlumberger B.V. ("Schlumberger") in March 2020 to acquire SRCL.
Block said the acquisition will significantly increase access to production, reserves and resources. Of the three production sharing contracts held by SRCL in Georgia, it will acquire producing Block XIB and exploration Block IX while Schlumberger aims to relinquish Block X.
Once completed, the acquisition will immediately boost production and grant Block a total licence area of 2,622km2 and giving it a material position in Georgia's oil and gas fairway.
Production will be boosted by 245 bopd, 2P reserves of oil and gas by 64m boe, 2C contingent resources by 29m boe and add significant upside potential of 245m boe of prospective resources.
Block told investors that it expects the SPA will be finalised 23 November 2020, after which, the group will possess around 29,000 bbls of crude oil inventory while Schlumberger will enter into a transition services agreement with Block in order to assist with the handover.
Under the SPA, the cash proceeds from any sales of Oil Inventory were payable to Schlumberger, but the Deed transferred the Oil Inventory to Block, the group explained.
Block said oil Inventory is ‘a welcome boost’ to its balance sheet and will support the group in its integration of the assets and incremental production into the Block portfolio.
"I am delighted to be able to inform shareholders about the amendments to the SPA and that the acquisition of Blocks XIB and IX is in near sight,” said CEO of Block, Paul Haywood.
“A critical component of this transaction is that it will be completed with no cash consideration, using options on our own share capital,” said Block at the time of the first announcement.
Shares in Block Energy have increased by over 12% in the past month to open at 17.11% higher this morning at 4.45 following the announcement.
Reasons to Follow Block Energy
Block Energy is an oil and gas company focused on production and development in Georgia. The Company believes that it offers ‘a clear entry point’ for investors to gain exposure to Georgia's growing economy and the strong regional demand for oil and gas.
Block holds a 100% working interest in the highly prospective West Rustavi onshore oil and gas field with multiple wells that have tested oil and gas from a range of geological horizons.
The field has so far produced 50 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 oil resources and 608 BCF of gross unrisked 2C contingent gas resources in the Middle, Upper and Lower Eocene formations (Source: CPR by Gustavson Associates: 1 January 2018).
In addition, Block also holds 100% and 90% working interests in the onshore oil producing Norio and Satskhenisi fields. In March 2020, it entered into a conditional sale and purchase agreement to acquire a company that owns Georgian onshore licence Block IX and XIB.
In a half-year report to 30 June 2020, the company said it expects gas sales to commence in Q4 from West Rustavi despite the coronavirus pandemic proving “very hard to predict”.
The group’s shut-in of the West Rustavi field's production at wells WR-16aZ and WR-38Z was done to conserve valuable gas resources until the gas sales pipeline is soon completed.
Proceeds from sales of crude oil from its West Rustavi, Norio and Satskhenisi licences were $0.313m during 1H2020 and $0.568m following the period end in August and September.
Paul Haywood, Chief Executive of Block Energy, said, “Block Energy remains strong and agile, with cash on the balance sheet and near-term realisation of its gas reserves.”
He added, “Through these gas sales, we will generate more cash from our production base. We look forward to the remaining months of 2020, to continue our mission of value creation for our shareholders, through growing the business and unlocking Georgia's potential."
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