22 December 2023

Block Energy plc

("Block" or the "Company")

Corporate Update and Project III Farm Out Process

Block Energy plc, the development and production company focused on Georgia, is pleased to provide the following corporate update.

Background

The Company's four-part project strategy is evolving to accelerate the significant commercial opportunity offered by Project III, focused on the multi-TCF undeveloped gas resource within the Lower Eocene and Upper Cretaceous reservoirs of Blocks XIB and XIF to which internal estimates attribute 984 BCF 2C Contingent Resources.

Following continued development during 2023, Project III was declared a gas resource of strategic importance by the State of Georgia, and Block has concluded it is now ready to support a farm-out at the asset level. Until now the Project has been funded organically through cashflows from Project I. The accelerated development of Project III has a good chance of success and promises to have a material impact on its Net Asset Value.

The disciplined implementation of Project I during 2023, and Block's focus on improving its overall margin through reducing its operational cost structure ensures the Company will be well funded to execute this high-impact strategy through 2024, based on current production, oil prices and expected natural decline rates. Block will, however, consider drilling additional Project I wells next year as the Company progresses its farm-out strategy.

Project III update

During 2023, the Company completed an integrated full field development study of the Lower Eocene and Upper Cretaceous reservoirs, identifying gas-bearing natural fracture systems of one and a half kilometres thick, spanning the Company's XIB and XIF blocks across three fields, which included reinterpreting two 3D seismic surveys, well design and planning, third-party conceptual development engineering and cost estimation of a pilot scheme and full field processing facilities. Block also signed an MoU with the State of Georgia to support commercialisation of the Company's Project III gas resources. The Company is also currently completing a study on what promises to be a world-class Carbon Capture and Storage (CCS) project throughout XIB, integrated into Project III development plans, thus supporting the Company's longer-term sustainability goals.  

Project III Farmout process

Work undertaken in 2023 has informed the design of a staged appraisal and development plan which is being used to facilitate discussions with possible partners regarding the broader development of our assets in Georgia, including a farm-out of Project III. These discussions, supported by the Government of Georgia, are taking place within the context of Georgia's continued integration with the global economic community this year, including the country's acceptance as an EU candidate nation and its entry into a strategic partnership with China.

Growing industry interest in Georgia is also spurring an increase in exploration activity. OMV is planning to acquire 3D seismic in the Black Sea, and China's commitment to the country has been underlined by the presence of a private Chinese firm using services supplied by CNPC, the Chinese state-owned integrated energy group, in an onshore location between the Black Sea and Block's Project III.

CNPC has been contracted to deliver a firm work programme comprising two deep wells, using a modern rig and a full suite of integrated services. Positive results from this work programme would have an instant read-through to the value of Project III, which stands to benefit from access to a drilling rig and integrated services capable of drilling deep directional wells promising to reduce mobilisation and demobilisation time and costs.

Reporting process:

Given Block's strategy has evolved in-line with the development of its assets, the Company is revising its reporting process. Rather than providing updates each quarter Block will publish shareholder updates in-line with specific news on strategic and operating activity, and to observe financial reporting requirements. The Company believes news of its initiatives and operating developments no longer conform to a quarterly news cycle and therefore risk compromising strategic and commercial discussions with potential farm-in candidates.

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

"I would like to thank the entire Block team for their continued effort and focus, which has supported the safe delivery of this year's plan and ensured we remained cashflow positive while allocating capital to advance our high-impact Projects III and IV.

"Our strategy is now evolving to accelerate the delivery of value from the Company's high-impact projects which, in addition to Projects III and IV, include Project II, where the team continues to advance plans for secondary recovery that promise to trigger yet another high-impact and near-term CF farm-out process, supported by a CCS pilot programme. This shift in focus also allows us to restructure our cost base and set our Project I programme within the context of our wider strategy.

"The Company remains focussed on delivering a quantum leap for our shareholders and has an extremely busy first quarter planned in 2024, when we will continue to implement our strategy, which is being funded by current cashflows. In the meantime, I wish you all a Merry Christmas and look forward to reporting on our progress early in the New Year". 

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 of experience in field development and reservoir management.

 **ENDS**

THIS ANNOUNCEMENT CONTAINS INFORMATION PREVIOUSLY DEEMED BY THE COMPANY TO BE 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.  WITH THE PUBLICATION OF THIS ANNOUNCEMENT VIA A REGULATORY INFORMATION SERVICE, SUCH 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 XIB. Licence block XIB 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 XIB 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 XIF 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.

Project I is focused on developing oil production from the Middle Eocene reservoir of the West Rustavi/Krtsanisi field.

Project II aims to redevelop the Middle Eocene reservoir of the Patardzeuli and Samgori fields.

Project III is focused on the undeveloped gas-bearing natural fracture system within the Lower Eocene and Upper Cretaceous reservoirs - each more than a kilometre thick - spanning the XIB and XIF blocks.

Project IV is focused on exploring the full potential of our licences, including licence IX and Didi Lilo where we have identified significant prospectivity.

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.

·    MD: measured depth.

·    MMbbls: million barrels.

·    MMboe: million barrels of oil equivalent.

·    MMcf: million cubic feet.

·    TVD: True Vertical Depth.