AIM darling Block Energy (LSE:BLOE) was trading down 3.5pc at 12.6p on Wednesday after raising £12m to accelerate its Georgian drilling activities hot on the heels of its success at West Rustavi.
Block said an accelerated bookbuild unveiled after markets closed on Wednesday has now closed, with the business placing c.109m shares at 11p each. This represents a discount of around 15.7pc to the company’s closing market price of 13.05p on Wednesday. However, it still represents a significant premium to the 4p at which the organisation was trading at the end of March. Block, which had a market cap of £36m before the accelerated bookbuild, said the placing shares will represent around 28.32pc of its enlarged share price.
The firm has soared since the beginning of April, when initial production rates at well 16a on its West Rustavi field came in at an average of 1,100bopd, far exceeding its 325bopd targeted production rate. According to the business, this test rate indicates a better initial well performance than any well drilled in Georgia over the last 50 years. Following this initial success, Block’s rise continued unabetted for several weeks after it revealed that these impressive flow rates had continued.
Block plans to use the proceeds of its accelerated bookbuild to fund the accelerated of its defined development strategy at West Rustavi. Over the next 12 months, the company plans to drill up to four horizontal sidetracks to scale up production and fund future capital programme and expand production facilities to increase capacity to 4,000-5,000bopd. It will also acquire 3D seismic to give it a better understanding of the area’s subsurface, appraise to existing gas discoveries. Finally, it plans to drill one new well targeting a 608bcf gross contingent 2C gas resource.
Over the longer-term, Block added that it aims to bring West Rustavi gas reserves into production, continue oil development, and secure additional licences in Georgia and the wider region over the next 24 months.
Chief executive Paul Hawood added that Block plans to use the £12 raised to unlock West Rustavi’s ‘company-making potential’ The area holds proven reserves of 0.9MMbbls, contingent resources of 38 MMbbls and 608 BCF and netbacks of $36/bbl at $65/bbl Brent and US$3.40/MCF for gas.
‘We have designed a rigorous programme promising rapid paybacks. The upgrade of production facilities will provide capacity for production from three new sidetracked wells. In Q4 this year we will sidetrack West Rustavi well 38, a neighbour and analogue to 16aZ,’ he said.
Two further wells, West Rustavi 30 and 3 will be sidetracked through H1 next year, and their associated gas discoveries tested. We will acquire a 3D seismic survey this year which will allow us to identify optimal locations for new gas wells and horizontal oil wells to be explored next year. We will also continue our ongoing workover programme at Norio, and have scheduled the field’s well 60 for sidetracking later this year,’.
‘The funds raised also give us the freedom to explore fresh opportunities: we are a young, ambitious company keen to apply the low cost, innovative drilling technologies we have deployed in Georgia to new ventures in the region and beyond. Today marks a major step forward for Block as we move towards our objective of becoming one of AIM’s newest mid-tier oil and gas producers.’
