LONDON (ShareCast) - (Sharecast News) - Block Energy confirmed that drilling and workover equipment had been secured for its 2019-2020 back-to-back drilling programme on Monday.
The AIM-traded firm said it included multiple high-impact horizontal sidetracks at the West Rustavi licence, where exceptional production test rates of at least 1,100 barrels per day had been achieved from the 16aZ well - more than three times pre-drill expectations.

It had recently announced that it had entered into an oil storage agreement, allowing oil production at well 16aZ to restart, supporting a "significant" increase in production.

Block Energy said the agreements had been reached with JSC Norio Oil Company - a Georgian drilling contractor - and Georgia Oil and Gas - a British Virgin Islands company and owner of drilling equipment in the Republic of Georgia.

It said it would pay Norio Oil Company and Georgia Oil and Gas a total of $0.75m, equivalent to $2,055 per day, for 12 months' exclusive use of a ZJ40 drilling rig, an A50 workover rig and an extensive inventory of drilling and workover-related equipment.

That was the same equipment used to successfully drill well 16aZ.

Additionally, Block said it would hire a high resolution flow meter from Georgia Oil and Gas to aid in the identification of natural fractures during drilling operations for a cost of up to $0.1m.

The agreements superseded the previous contracts Block entered with Norio Oil Company and Georgia Oil and Gas last September, the board said, which expired during April.

Block said the rigs and equipment would be used to implement the "ambitious" work programme announced following its £12m fundraise, which was designed to "unlock the potential" of the West Rustavi licence in which the firm said it intended to exercise its right to increase its working interest to 100% from its current 71.5%.

In addition to well 16aZ, the programme included the horizontal sidetracking of four other West Rustavi wells targeting historic oil and gas discoveries.

"We are delighted to enter into new contracts for rigs and drilling equipment with the same Georgian companies from which we hired the equipment last year, again on highly favourable terms," said chief executive officer Paul Haywood.

"The agreements give us access to all of the rigs and associated equipment we need to pursue our programme without having to negotiate with individual suppliers or mobilise from abroad, saving the company significant time and cost.

"Last week, we announced an oil storage leasing agreement with Georgian Oil and Gas Corporation, Georgia's state-owned national oil company, allowing us to resume constant production at well 16aZ."

Haywood said the company would move the ZJ40 drilling rig onto the sidetracking of West Rustavi well 38, adjacent to and analogous with 16aZ, and go on to sidetrack three of the field's other wells - two of which would also be tested for their historic gas discoveries.

"We will also acquire a 3D seismic survey to allow us to identify optimal locations for new gas wells and horizontal oil wells across the field, and will expand West Rustavi's surface production facilities to a capacity of 4,000-5,000 barrels per day.

"We are working hard to put in place the building blocks of our post-fundraise programme.

"The renewal of our drilling contracts on favourable terms is a key cornerstone. We look forward to updating our shareholders as we enter another exciting time for Block, working through each element of our programme over the coming weeks and months."

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