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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.
Geowiz, I I can see how a CPR would work for Jan 2022 and on that basis it is definitely worth doing.
1) If JKT1 flows commercially then the CPR could be useful to show what else might be achieveable with a multi-well drilling campaign.
2) If JKT-1 is unsuccessful then a CPR could be useful to raise some money for a new management team to have another go. - though if JKT1 fails then I am personally intending to sell out for a loss and move on to pastures new as I believe that this will mean basically starting again from scratch with new management.
However, we need to remember that a CPR is not going to make the blindest bit of difference just now as everything is about the next drill and whether Block can show that they have finally understood and cracked the code for the reservoir geology or not. This is the only thing that is going to move the share price in 2021 IMO.
No, the thing that is saving this from sub penny territory is the fact that Block is fully funded to drill JKT1 and they claim to have cracked the reservoir geology. If they can make JKT1 flow commercially then everything changes and they can fund a new well program on debt. If they can't it all goes down the toilet and we are left with a total failure and the job of a new BoD to rebuild.
A CPR won't help now, only oil from JKT1. If this comes in then the company will be a success and if it doesn't it will be a total disaster. There is no middle ground.
So everything seems to rest on JKT-1 now. We know that the well is fully funded from Haywood’s comments in Friday’s video and according to Steven James, the Geoscience Manager, in the video the other day they seem fairly confident that using the lessons learned from WR-B1A they will be able to deliver a successful well that avoids all of the issues they have had so far.
From what I have taken from the video and Sea7’s comments on this board last week it appears that Block have so far drilled two unsuccessful wells, but that were each unsuccessful in completely different ways.
They have had one drill (WR-16AZ) that flowed over 1,000 bopd but consequently had a 78% water cut that reduced the oil flow down to 300bopd.
Then they had a second well (WR-B1a) where they appear to have attempted to solve the water-problems by drilling into an area had a low density of natural fractures but by doing this have massively reduced the flow rate down to 50 bopd even with a pump.
As far as I can tell from watching the video (and I have had time over the weekend to transcribe it and make it easier to read) Steven James now appears to think that they have now fully understand the reservoir as he says: “Following extensive evaluation we now believe that WR-B01a encountered a relatively low density natural fracture network that has resulted in a lower than predicted production rate. In planning to drill Block Energy’s next well, a side-track from the JKT-1 well that was drilled in 2011, Block Energy has brought these learnings together to optimally position the well specifically by calibrating the 3d seismic with the data that has been gathered by drilling and production.”
In other words, they think that they have finally found the goldilocks zone where everything in just right…
Whether they have finally understood the reservoir or not is only going to be proved by the successful drilling of JKT-1 but the logic of how the company and Sea7 have explained these drills does seem to make sense. They raised the money for a two well program and if they can still deliver success I would be delighted and it would make all the failures up until now worthwhile.
But make no mistake, everything rests on this last well. They have now claimed to have understood the geology and if they can prove that they really do then we have a proper production asset on our hands that can be gradually spun out into something enormous via debt.
However, the company is also drinking in the last chance saloon and if the BoD fail again then they should all immediately quit or be forced out. They have said that they finally understand the reservoir and now they have to prove it by delivering a MINIMUM of 300bopd from JKT-1.
Geowiz is not wrong. Debt needs to be serviced by cash and if a company is not generating any cash then it does not really matter what the value of the assets are. So at this second it would be fairly impossible to get debt financing. This is why it is so lucky that we are still fully funded for JKT-1 as everything now rides on this and it would be almost impossible to fund it (except at massive dilution) if we did not already have the finances in place.
However, on a positive note, if they could get JKT-1 to flow at even 300 bopd then this would generate around $5 million per year in revenue and this would be easily enough to get a debt facility to drill another well. Success in one well, money raised by debt and serviced by cashflow allows you to drill a second. Repeat the process and you gradually build up a very significant cash generator which services the debt and after it is paid off, goes straight to shareholders.
As of today, Geowiz is absolutely right, there is no way Block could get any debt funding. However this all changes if we suddenly have a successful well that is producing cash. This is why everything rests on JKT-1.
I need a bit of time to absorb this morning's RNS but everything is on JKT-01 now. If they cannot make that flow tin a significantly commercial way then Heywood et al need to fall on their swords and hand Georgia over to somebody with more experience in the region.
Whatever way we look at it , this morning's news is incredibly disappointing. I jus hope that the share price holds up considering we have another drill starting before the end of the month.
When I asked about timescales last month the general consensus was that we would likely not hear anything about the test until the end of this month. I even think that we may hear about the spud of JKT-01 before we get the flow rates for WR-B1a. This is not the way round that I would like it but I do want JKT-01 drilled asap so if this is the order then so be it.
We do need to hear something from the board though as the silence from the company is deafening.
I think that we will spud in the next couple of weeks as that would then give them 6 weeks to finish the drill before the end of the year which is always what they said that they intended to do. I can't see them wanting to wait until the New Year for the results. so I think that you are right cperkin. It is going to be soon.
Given that a lot of people were predicting that we would not get the results for WR-B1a until the end of this month this means that there is every possibility that we will get the spud RNS for JKT-01 before we get the flow rates for WR-B1a. I would prefer it the other way round but I do want JTK drilled as soon as possible so we can assess whether or not the two-well campaign has been a success or a failure before Christmas.
Cperkin, this is oil and gas - anyone who demands that all stated target aims are always hit 100% should not be investing in this space as it is risky business. Previously I said 700 bopd would be ok by me but since you put words in my mouth 50% delivery on the aim of 1,100 barrels (550bopd) would also still be just about ok for me. This would deliver a revenue of between $10-12 million per annum to Block which would provide plenty of funds to keep the company running and to deliver an additional well program.
Don't get me wrong, I would fare rather see 1,100 bopd and $20+ million a year come out of the two wells than I would half that, but I am also realistic enough to accept that not everything works 100% of the time especially in oil and gas exploration.
I stick to the opinion I voiced here the other day:, as long as the company is still fully funded to drill the second well then they should be allowed to complete the campaign that they raised the money for. and be judged on the combined production from both. However, If they have wasted this money and are no longer fully funded then management have failed shareholders and should be forced out immediately.
Assuming that the second well is drilled and the two well program is completed then this is how I would define success.
1) If they deliver 1,100bopc then I will be praising management to the skies.
2) If they deliver 550+bopd then they have earned the chance to continue running the company as this will provide enough income to enable them to continue a drilling campaign without raising further funds via equity.
3) If they deliver less than 550bopd then they should fall on their swords as new money will need to be raised via placement for further drilling campaigns and I would want somebody else to be in charge for this
So at the moment I am in wait-and-see mode but I am fully ready to call to replace the current management with a different team that have a track record of successfully drilling in Georgia if this campaign does not deliver.
Cperkin, they raised £5 million for the two wells last year and both wells are definitely all funded through to production. In the 3rd Dec 2020 RNS they explicitly state: “The two wells proposed to be drilled in the First Phase are intended to further increase production and cashflow from West Rustavi and Block XIB”