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    Block Energy Expands in Georgia


The London-listed junior will pay for the blocks with options on its shares rather than a cash consideration.

by: Joseph Murphy

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Block Energy Expands in Georgia

London-listed Block Energy is set to expand its footprint in Georgia, announcing a deal on March 26 to acquire rights to two oil and gas permits from US services giant Schlumberger for no upfront payment.

The junior explorer signed a sales and purchase agreement to buy Schlumberger Rustaveli, the holder of three production-sharing agreements (PSAs). It will take over the PSAs for blocks XIB and IX, while Schlumberger will relinquish the contract for block X.

Block Energy CEO Paul Haywood described the acquisition as "transformational," giving the company the "scale, increased production, reserves and resources."

"A critical component of this transaction is that it will be completed with no cash consideration, using options on our own share capital," he explained in a statement. "The acquisition demonstrates management's ability to identify, compete for and secure the right deals for its shareholders in an environment posing unprecedented challenges for the industry."

Block Energy is developing the Norio, Satskhenisi and West Rustavi oil and gas fields near Tbilisi. The largest of the fields is West Rustavi, where Block is beginning to exploit a 508bn-ft3 gas resource.

The company will net 64mn barrels of oil equivalent in proven and probable reserves and 245 barrels/day of initial oil production from the transaction.

Block XIB spans 615 km2 is the most productive site in Georgia, having yielded over 180mn barrels of oil over the decades. Its output peaked at 67,000 b/d of oil in the mid-1980s. Block IX is 1,925 km2 in size and is at the exploration phase.

The blocks also offer 600bn ft3 of initial in-place gas in Lower Eocene and Upper Cretaeous rock, identified during recent appraisal drilling by Schlumberger.