Member Info for holyroller

rxdav - what do you perceive as being the elephant in the room?

Hepseal - There are two reasons for the current position of the share price. The first is that after the good news about the success of JKT-01Z somebody (or a group of somebodies) were selling into the news in a very significant way. This went on for ages and had the effect of repressing the share price just at a point when it normally would have been flying up on the good news. Although they seem to have stopped selling now these sales have had to be absorbed and we need another good news event to drive sentiment and prices up (without the seller this time).

The second reason is that there is an element of doubt in the wider market that Block have really cracked the geology of the reservoir. At the moment they have had one successful drill and a number of unsuccessful ones and while they say that they have now unlocked the geology the market wants to see proof that this is the case and that JKT-01Z was not just a fluke.. This proof will be delivered with the next successful sidetrack. If it comes in and flows like JKT-01Z then the company will have proved their point and the market will believe that they have cracked it.

Of course all the other points that you make are also true. The fact that the company is cash flow positive is massive and Block are now producing decent production figures at a time when the oil price is at record highs.

What I think will ultimately happen is that we will get a combination of positive events that will combine together to send the share price soaring:

(1) The company will successfully drill a second sidetrack proving that they have cracked the geology.
(2) The seller will be gone and so on this good news the wider market will see how undervalued Block and will pile in.
(3) The company will explain how they are able to get a debt deal in place to conduct a multi-well drilling programme serviced by existing production.
(4) The company will publish the next quarterly report proving that with production rates as they now are combined with oil prices remaining high that they are making a very significant amount of money.

I sincerely believe that all of these things will happen and it is just a matter of time before they do. Once these events combine we will see a share price that finally represents the true value of where Block are now – but still leaves a lot of room left for expanding in the future by exploiting the rest of the license that we acquired from Sclhlumberger.

A farmout is not a good idea unless we get desperate as it gives away a massive amount of the long-term income stream to another party and since much of the difficult work has been done now, why would we want to do that?

The best way to proceed, as I have said for a while now, is to drill the second sidetrack and prove that they have unlocked the geology. Then we need to go out and get some debt finance for a multi-well drilling programme which could be paid for out of the two sidetracks (JKT1 and the one still to be drilled). This would mean that we had the capability to drill 5-6 wells without needing each and every one of them to be a success and as long as those ones that were successful flowed at approx 300 bopd then the company would very quickly start to generate very significant income which could be used to service even more debt etc.

My second option, if debt financing were unavailable, would be to drill new wells funded out of the budget of existing wells. THe drawback of this is that it would take much longer and the company would be vulnerable to two dusters in a row but it would still have a massive advantage over a farm-out in that we would not be giving up a huge proportion of future income.

Only if we drilled 2-3 dusters in a row and were going to struggle to pay for new wells out of existing cash-flow would I advocate going for a farm out. Quite simply, it is short-sighted. Why do all of the hard work and suffer all of the hard times only to give a huge amount of it away just when the finish line is in sight?

@Chesh, yes your point absolutely makes sense. The only thing that I would say against that is that if they have a finite amount of financial capital then they may consider that it is better deployed in another opportunity now rather than later and that the losses on Block are more than made up for by the profits on another project. It could also be that radx is right and that 3XF are not finished with Block yet. All we can do is speculate based on the evidence at hand. As rxdav says, if and when TR1s start to appear then we might get more clarity at this point.

@rxdav, in relation to Somerset Hippy’s question I completely concur with your reasoning of WHO is behind the selling and it is definitely the Scottish contingent (or the 3XF crew as you refer to them) for all of the reasons that you have mentioned – nobody else has enough equity to have kept selling for this long and, given that we have not had any TR1s released for any individual entity, it is probable that the group as a whole is downscaling their holdings rather than any one individual.

For the WHY, I have a slightly different rationale in that I think that they were hoping that JKT01 would also be a failure. The Block share price would then have collapsed but also more importantly so would any desire amongst investors to back Haywood and his existing board to stay in place (I certainly would have wanted them gone) and in this circumstance there would have been little resistance from retail investors if 3XF had tried again to seize control.

With the successful drill though a takeover attempt becomes much more difficult. Since they failed in their putsch back in summer their position has bee weakened significantly as they no longer have their own man on the BoD who could be appointed to an executive role the instant that they vote the Chairman/CEO out and without that it is very difficult for them to easily exercise any real control. The fact that the current BoD have the budget to drill another sidetrack without having to raise money is also very important IMO. Assuming that the next drill is successful, not only will the share price rise significantly but the BoD will have proved that they have absolutely acquired the necessary knowledge to successfully develop the field and there would be no support for a hostile takeover by a murky group who many of us believe would not want to develop the field but would instead simply wish to sell it off.

The 3XF crew put a lot of effort into trying to acquire control of Block but the failure of their attempt to appoint their own man as chairman in summer and the success of the recent sidetrack have put them many months behind where they were this time last year. Consequently, I am hoping that they have simply decided that they no longer think that they can easily get control of Block and are slowly unwinding their positions to go elsewhere and try again with a different company. But maybe I am being too optimistic, time will tell.

Boobyrash – I think that you are right and wrong at the same time with regard to just being able to wait 3 months. Technically, yes of course we could do this but I think that in reality it would be much more difficult to do. If the next drill (from now) was a duster then sentiment would be low and I think that it would be 6-8 months before we drilled again.

If the next drill was a success then it would matter less if the one after that was a failure and obviously the more successful drills we had in a row then the more quickly we could afford to raise the cash for another drill in the event of a failure. But I do think that an early failure would cause long delays.

This is why I would be so keen to get a debt financing dela in place as then we could plan to drill 5 wells and as long as three of them were a success then we would be golden. The important point to remember IMO is that even if the company truly have unlocked the geology of the reservoir then not EVERY drill is going to be a complete success. Knowing that we were funded for 5 wells would enable us to look at the success of the entire well programme rather than feeling like we were on a knife -edge every time we drill.

But you are absolutely right – if the next 3 wells were successful then we would not need any debt funding and Block would generate enough money overall to drill a new sidetrack every month. It is getting to the stage that we have those 3 successes in a row that I would like to have the security of the debt though.

I loved today’s podcast. For me the key messages were that: we are now cash flow positive and this means that:

1. There is no chance of any raising in the near future and
2. That the company kicking off enough cash that this can be recycled into operations.
3. Because of this we are going to drill another sidetrack in the near future and he is just waiting on the technical team to propose the safest next option before we go ahead and drill it.

The next sidetrack is the most important drill in the company’s history imo. If it is successful then we know that they have cracked the geology and JKT1 was not just a fluke. This will mean that we as investors and, more importantly, outside agencies that are willing to provide debt finance can trust that the company is going to be successful with the majority of its drills from now on. But we have to prove that JKT1 was not a fluke and the geology really has been unlocked. Drilling two successful wells on the bounce will prove this beyond doubt.

The other reason that the next sidetrack is so important is because a successful drill (and I define successful as delivering more than 300 bopde) means that the next well will generate another $500k per month in net revenue. This will give the company the money to go out and drill the next well (a third sidetrack) without having to return to the markets. In essence, each successful well helps fund the next well and this means that the company can develop an entire multi-well drilling programme that is simply funded by the success of the wells before.

However, the key issue here is that this needs constant success – hence me saying that the next drill will be the most important in the company’s history. An early failure if the company go this route could once again lead to a halt in the drilling programme due to cash-flow.

What I would really like to see is the company deliver the next drill successfully and prove beyond doubt that they have indeed decoded the reservoir geology. The I believe that they would be in a position to finance a multi-well drilling programme funded via debt. This would be advantageous to as it would mean that there would be economies of scale in knowing that they had the budget to drill multiple wells from the off.

If we can do this and get financing for the next 5 wells then we would only need three of them to be successful to not only pay off the debt but also deliver is an additional revenue of $1.5 million per month. But this all comes off the next sidetrack. If it is successful then Block will have so many options open to them then the share price will fly.

I always said that drilling well JKT1 was the last chance for Haywood and the rest of his crew. They needed to deliver in excess of 300 bopd to deliver on their claims that they had cracked the reservoir geology and if they did not deliver this then their time at the company should be over.

They delivered on this and for that all shareholders should genuinely congratulate them as this means that the company is actually in quite a good position going forwards. However, the success of JKT1 was the minimum that they required to stay in their jobs and now they really need to start delivering thereally big value to shareholders.

The company are now profitable which is amazing news, but what we need to do next is to as quickly as possible start putting together a drilling programme which can be carried out without diluting shareholders further. The company have already said in their 11th Jan RNS that they are planning to go back and drill a sidetrack at WRB01 and that this will be funded by production revenue. If they deliver on this in the near future and can prove beyond all doubt that they completely understand the geology of the area then the share price should rocket, especially with the oil price doing the same. We would then be able to drill a next well and a next well etc.

So, well done Block for the successful drill of JKT1 and now let’s go on and successfully drill a new sidetrack at WRB01 to deliver us another 300+ boe per day. Then we put together a full field development plan and start drilling constantly!

I reckon it will be another 4 weeks until we get the flow test results.

Well I was not expecting us to reach TD this early but that is great news. I still fully expect, as I have said all along, that it will be mid February (another 4 weeks or so) before we get any confirmed flow rates but the mud losses are a very very good sign.

One bit of the update I was very interested in was Haywood’s comment that if JKT-1 was successful then we would go straight back to WR1 and carry out a sidetrack there funded by production revenue. If we could go back and get another 300-500 bopd out of there without having to raise any more money to pay for it then that would be incredible news.

They said that they had unlocked the geology of the reservoir and, at last, it is looking like they might have done so, which will obviously be brilliant for all future drills not just JKT-1. Finally, the Q4 revenue being up 150% up compared to last year is just the icing on the cake.

1.5p next stop and further rises contingent on the flow test results IMHO.

I'm looking forward to the production numbers from the quarterly update but I think that it will be mid-February before we get any flow rates from JKT1 so I wouldn't get too excited about seeing them this week. I do agree with mcadder though, the language they used in the tweet last week is very positive so I get the impression that all is proceeding well with the drill.

The next step forward for Block in 2022 should be the Q4 quarterly report which normally comes out on the 7th of each month but might move into next week because of the Christmas break. I will be interested to see what the production numbers are from this as it will give us a good idea of how we are coping at paying the day to day running expenses while completing JKT1.

I would also expect that the quarterly report will give us an update on how we are progressing with the drill of JKT 1. Hopefully they give a good detailed update that indicates that we will finally have a successful drill, but since I don’t expect to actually get any flow results until mid-February it may just be a bland comment about drilling continuing.

I know that there are some on here who think that we are going to get flow results over the next few weeks but that is absolute pie in the sky in my opinion, it will be mid February at the earliest. Like I have said before, Haywood knows that this drill is his team’s last chance at getting things right in Georgia and if he messes it up again then he is almost certain to get kicked out of the company alongside the rest of his board. Consequently they are going to do everything possible to give this drill the best chance of being successful and this will also mean going slow and steady during the drill to make sure that nothing goes wrong. They are also going to be very careful on not going too early on the flow rates given what has happened in the past.

The company claim that they have unlocked the geology of the region now and this well will be their chance to prove that this is the case but there is no way of us moaning to speed the results up and, personally, I will take a slightly longer drilling time-period that delivers good results every time over a quicker drill that gives poor production.

I have just watched the video and am now feeling very optimistic about JKT1. Of course, most of the video was just repeating information that the company has already told us in their previous videos but it was good to get some footage of the rig actually drilling too. It made the whole thing seem more real.

The most interesting bit to me though was to actually see how physically short a distance 300m actually was from the KRT39 well to the JKT1 well. I obviously knew that they were only 300m apart but seeing how close they actually are in the video really brought home that we are just going into exactly the same reservoir as they are producing from. If the company really have unlocked the geology of the reservoir and they can get our well producing even better than KRT39 then we are looking good for a successful drill and apparently there are 8 million barrels still left down there.

All good news this morning and at the moment I feel confident that Block are finally going to deliver us a successful drill.

Excellent news this morning. The BoD have promised that they have finally unlocked the geology here and this drill will prove if they are right.

If they are correct then we will have decent flow rates and a very good chance that every other well we drill will also flow commercially. If they are wrong then we will have a new BoD.

The clock is ticking for all of us now and we can expect flow results in mid-Feb.

If we spud this week there is no way that we are going to get flow rates in two to three weeks. I can’t see us getting flow rates until two months from spud so it will be mid-February at the earliest in opinion.

I know that with the drill about to start then we finally (maybe) have some reason to be cheerful about the future for Block but we also have to be realistic about what our expectations are. The company claim that they have cracked the geology and that this drill will be a success but they must also know that this is their last chance and if they mess if up then all of the BoD will be for the chop.

They are not going to rush this, they are going to do everything that they can to make sure that they get things right this time and that will include going at a slow and steady speed during the drill. They are also going to be very careful on not going too early on the flow rates given what has happened in the past.

The only news that we can expect in the short term is news that the well has spudded and then we just have a long wait for results IMO. Personally, I don’t mind that as long as the results are good!

In the latest video, they do seem very confident that they now understand the geology and will be successful with the JKT-1 sidetrack. Obviously, talk is cheap and they will have to prove this with a successful drill but it is good to see the man in charge of the geology sounding so bullish.

This is my quick write up of what Stephen James said in the video.

Block have now drilled three horizontal wells and acquired 3d seismic which has greatly improved their understanding of the reservoir. This data, together with borehole imaging is the key to exploiting the reservoirs in all of Block’s Georgian assets.

The first two wells WR-16aZ (Jan 19) and WR-38Z (Sept 19) were horizontal sidetracks from Soviet era wells and were drilled before the company acquired the 3d seismic.

The 3d seismic has shown that WR-16aZ was drilled in a structurally complex area of the field. Drilling mud losses and the following production test showed that the well had successfully proved the presence of an extensive and productive natural fracture network. But production from this well has been variable due to the complexity of the reservoir.

WR38Z drilled a less complex area as indicated by the 3d seismic and production from this well has been relatively stable. Drilling mud losses and production from this well again prove the presence of a productive natural fracture network.

The third well WR-B01a was drilled after the seismic and they believe that the lack of continuous drilling mud loss and sparse but regularly space gas shows in WRB1 and B1a indicate that the well encountered a relatively low density natural fracture network that has resulted in a lower than predicted production rate.

Interrogation of the 3d seismic using different algorithms allows us to identify and map vertical features or faults and fractures in the reservoir.

Now they are able to compare the 3d seismic data to their drilling data, most notably the mud loss events and gas shows.
Block now intend to drill the JKT-1 sidetrack by:

1) Calibrating the 3d seismic with the data that has been gathered during the drilling and production.
2) Applying horizontal well technology and geomechanics to maximise access to the natural fracture network.
3) Optimising the well trajectory position in real-time using the data that will be acquired while drilling.

They think that their analysis of the production history of KRT39 which was drilled 300m from JKT1 suggests that thee was 8,5 million barrels of oil in their reservoir and only 470k has been recovered leaving 8 million barrels left to recover. JKT-1 will be targeting production of this remaining oil.

Geowiz, I am afraid that you are ill-informed in this insstance. The company have already said that they are fully funded for JKT1 so they will definitely not need to raise money to drill it.

If iJKT1 ails then yes a raise will 100% be needed (along with a completely new board) but if it is commercially successful then it may not be necessary.

Like I keep saying , everything depends on JKT1 and if the company can make good on its claims that it has finally unlocked the key to the reservoir geology. It's a gamble, but from today's share price the potential upside outweighs the down IMO.

wsr, can I just say that this forum will miss your detailed and extensive posts on Block's projects and prospects.. This board will be a poorer place without you but I am sure you will find another company to contribute your deep well of knowledge to. Good luck with your future investments.

rxdav – I understand what you are saying and I do not disagree with you one iota. However, I also think that given where we are then the only thing that we can do is hope that they are telling the truth and that we will get a good result with the next well. This is simply because the other alternatives are worse.

If for any stupid reason we did not go ahead and drill this well then the money that was raised for it will not just be sitting ringfenced in a bank account to be used for another drill by another CEO. It will simply become administrative expense money and over time will simply disappear. So the money has to be spent on drilling a well or it will disappear anyway. Exactly this happened at Scirocco with the money from the Horse Hill sale that the directors there ”ringfenced” to buy another asset. The problem was that money was only “ringfenced” until it was spent on directors fees, Gneiss energy fees and administrative expenses – and then it just wasn’t there any more. So we simply have to drill the well now or it will never get drilled.

Regarding Haywood et al, I think that the big difference between this drill and any of the others that they have done is partly that they do genuinely have more information about the geology than they did before the WR-B1a drill. However, I think that the key issue is also that they must know that they too are drinking in the last chance saloon. If they screw this well up then they will have to resign or be kicked out. We know that the Scottish contingent still want to get hold of the company, and so there will be no way that Haywood etc would be able to hang on unless they deliver a successful drill. As I have mentioned loudly in the past, I think that Fitzpatrick et al would be truly dreadful custodians of Block Energy but I certainly wouldn’t back Haywood against them next time round unless JKT-1 was a success. If It was a failure then I think I would just sell out, bank my losses and leave the carcass of the company to be picked over by whoever was still interested in its rotting corpse. There would definitely be money to be made through farm-ins or selling of some of the licenses but it would be nothing compared to what would be made if they were able to prove up the whole field.

SO I am here until the results of the next drill and these results will determine whether I stay and make good money or just bank my losses and go out to recover them elsewhere.

Block is not going to go bust but there is no doubt the immediate future of the company share price rests on the performance of the JKT-1 well. As Thordon mentioned we are fully funded to drill this and the company are saying that they now understand the reservoir geology, therefore implying that it will be a success.

Any successful commercial flows (ideally 500 bopd but minimum 300bopd) would allow the company to generate approx. $6 million per annum + and this would give plenty of cash to fund a multi-well drilling program that can be delivered on debt. This will be reflected in the share price.

However, if they have not understood the geology and the JKT-1 is a failure then it is back to step one for Block. The company BoD will have proved that they are not the right people to deliver in Georgia and it will need to find new management who can. This new management would, as Geowiz has suggested, need to produce a CPR and then look at raising more money through an equity placing or a farm-in to refill the company coffers and let them have another go. The company would not go bust as the assets it owns are valuable but it would definitely be a long, hard, and slow journey back to getting to be at a stage where it was funded to do another drill.

As I keep saying, everything rests of JKT-1 at the moment and that Block’s management can deliver on their claims that they have cracked the code to the reservoir.