(Sharecast News) - Georgia-focussed explorer and developer Block Energy said in an update on Wednesday that the JSR-01 DEEP well had been safely drilled and completed below budget.
The AIM-traded firm said it was the first of a series of 'Project II' wells targeting a "wide range of opportunities", designed to exploit large, undrained areas of the deeper zones of the Middle Eocene reservoirs in Block XIB, and test contingent resources, defined by its technical team, of more than 200 million barrels.
It said it drilled the naturally-fractured 600 metre vertical section of the Middle Eocene in the Patardzeuli Oil Field, with total losses of drilling fluid - a drilling technique not previously employed in Georgia.
The technique was used deliberately to avoid wellbore damage from lost circulation material.
During drilling, high losses of 45,000 barrels of fluid were recorded, which the directors said was a "positive indicator" of "highly transmissible natural fractures".
It added that during the staged testing programme, both oil and gas were produced to surface.
"The ongoing JSR-01 DEEP testing programme has been designed to systematically evaluate three independent intervals of the reservoir, with different fracture characteristics and, as such, differs from the programmes used in the company's West Rustavi and Krtsanisi oil field," the firm said.
"The primary objective of the testing programme is the accurate definition of the oil-productive zones, to support the optimal design of future horizontal wells in the project II full-field redevelopment.
At West Rustavi and Krtsanisi, or 'Project I', meanwhile, Block said that in the Krtsanisi anticline of the oil field, the development of the Middle Eocene reservoir would continue this month with the side-track of well WR-B01, which would be an analogue to the successful well JKT-01Z.
WR-B01 ST would be drilled some 500 metres to the west and up-dip of JKT-01Z.
As with JKT-01Z, it said WR-B01 ST would target a fracture system identified by a high density of seismic attribute lineations, but on the west side of the anticline.
The company said JKT-01Z had already produced a cumulative volume of 64,000 barrels of oil equivalent over 11 months of continuous production, providing an approximate 2.5x return on capital expenditure, and therefore supporting its final investment decision on Project I.
"WR-B01 ST is the first new development well associated with the ERCE 2022 competent person's report, which ascribed 3.01 million barrels of 3P reserves, and a 10%-discounted net present project value of $57m, to just a portion of the West Rustavi and Krtsanisi Middle Eocene reservoir.
"The company's contingent resource report ascribes a total of 19.5 million barrels of 2C contingent resources to the whole West Rustavi and Krtsanisi Middle Eocene reservoir."
Block said it was "well-placed" to fund WR-B01 ST from cash reserves and ongoing cash flows, enabling Project I to begin.
"Discussions relating to non-dilutive financing for Project I remain ongoing.
"Given Georgia's strategic location and close links to European energy markets, there remains strong interest in the petroleum potential of the region."
Finally, at the 'Project III' gas development, Block said that while its immediate focus was on developing cash flow from Project I and defining potential company-making reserves in Project II, it was also laying the foundations for the third project.
It said the project was seeking to appraise and monetise the 860 billion cubic feet of contingent resources, identified by its technical team, across licences XIF and XIB.
Natural gas produced from a successful Project III development would support Georgia's growing domestic energy market, and be suitable for export to Europe via Turkey.
The work programme for the project would include 3D seismic interpretation, and the correlation of seismic attribute lineations with legacy production test data.
It said it had upgraded its service rig to support the advancement of Project III with low-cost drilling and workover activities.
Project III workover and retest candidates were being selected, with the directors saying that an update would be made when operations commenced.
"The JSR-01 DEEP testing programme continues and it's pleasing to announce the commencement of Project I with the spudding of well WR-B01 ST later this month," said chief executive officer Paul Haywood.
"I am encouraged by the positive support received from government agencies in Georgia whilst our company remains active on many fronts.
"All of which underpin the strategy we communicated earlier this year of offering our valued stakeholders direct exposure to multiple high-impact events."
At 1430 GMT, shares in Block Energy were flat at 1.7p.
Reporting by Josh White for Sharecast.com.
Block Energy P. (BLOE)