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Summary
- Block Energy Plc has reported its first commercial sale from West Rustavi oil & gas field.
- The Company has made sale proceeds in US$ 568,000 during September and October 2020.
- The Company will complete the acquisition of the Schlumberger Rustaveli Company Limited on 23 November 2020.
- The Company has reported a revenue of US$ 313,000 during H1 FY20.
Block Energy Plc (LON:BLOE) is the FTSE AIM All-share listed energy stock. The Company is a well-established oil & gas player having its operations in Georgia. Shares of BLOE were up by close to 1.08% from the last closing price (as on 23 November 2020, before the market close at 08:22 AM GMT).
What progress has Block Energy Plc made on its EPF from West Rustavi oil & gas field?
Block Energy Plc is the FTSE AIM All-Share listed exploration and production company, which is based out in Georgia. The operational projects are Norio onshore oil field, East Kavtiskhevi (block VIII), Akoko asheba gold project and Mauritania copper.
Oil & Gas Industry update
The oil industry can be bifurcated into three broad categories: upstream, midstream, and downstream. The top three nations producing oil are the United States, Russia, and Saudi Arabia. These three countries have produced approximately 33 million barrels of oil per day in 2019, which contributes around 54% of total world production.
Oil & gas industry has made a substantial contribution to the global GDP. The operations of the entire oil & gas industry were hampered to a significant extent due to Covid-19 pandemic. The industry was devastated by the weak global demand. The industry has demonstrated a slump in the Brent oil price from US$ 67 per barrel at the beginning of the year to a low of US$ 9 in April 2020 due to weak demand for oil following Covid-19 pandemic and the price war between Russia and Saudi Arabia. However, the price has now recovered to around US$ 45.53 as on 23 November 2020.
Recent Developments
20 November 2020: Update on the Acquisition of the Schlumberger Rustaveli Company Limited.
On 20 November 2020, the Company provided an update regarding the acquisition of Schlumberger Rustaveli Company Limited ("SRCL"). The completion of the deal is expected soon. Upon completion, the Company will take possession of around 29,000 barrels of crude oil inventory, and the cash proceeds from any sales of oil inventory were payable to Schlumberger. The oil inventory will strengthen the Company's balance sheet and will support the Company in the increased level of productions and its integration of the assets.
16 November 2020: Operational update
- The Company has provided the details of its progress made on its Early Production Facility ("EPF") on the West Rustavi oil & gas field.
- The construction of the gathering line between the EPF and the WR-38Z is now well completed and under the budget. The testing was also successfully completed at 6,600 kPa without any failure.
- The Company will achieve its first sale of associated gas through oil production from West Rustavi to The Georgian independent gas company, Bago LLC, which has received all the required permits. Still, the deal is stuck due to delay in construction of its gas sales line.
03 November 2020: Issue of Equity
The Company has updated that it has issued nil-cost options over a total of 1.053 million ordinary shares of 0.25p each ("Options") to directors/PDMRs and employees issued for payment of cash for 40% of salaries and directors' fees for October 2020, following the cash conservation measures announced on 7 April 2020.
H1 FY20 results (ended 30 June 2020) as reported on 30 September 2020.
(Source: Company result)
- The revenue from oil sales during H1 FY20 was US$ 313,000, whereas the Company did not make a single penny of sales in H1 FY19. The Company has managed to produce and generate a sale of oil from its Norio and Satskhenisi licences even during the Covid-19 pandemic period.
- The Company has reported a net loss of US$ 2.668 million during H1 FY20 while it has reported a net loss of US$ 2.725 million during H1 FY19 ended on 30 June 2019. The Company has included an impairment of the capitalized costs in respect of the Satskhenisi licence amounting to US$ 208,000.
- Regarding the financial position, the Company has a closing cash balance of US$ 2.258 million as of 30 June 2020 in comparison to closing cash balance of US$ 6.494 million as of 31 December 2019. The Company has incurred a net operating cash outflow of US$ 2.498 during the six months ended on 30 June 2020.
- The Company has further improved its cash position by the net proceeds of approximately US$ 568,000 from the sales of crude oil inventory at West Rustavi, Norio and Satskhenisi licences during September and October 2020.
24 September 2020: Change in the directorate.
The Company updated that Mr Roger McMechan will stand down from the Board on 30 September 2020 following the successful commissioning of the EPF.
Share Price Performance Analysis of Block Energy Plc
(Source: Refinitiv, chart created by Kalkine group)
Shares of Block Energy Plc were trading at GBX 4.70 and were up by close to 1.08% against the previous closing price as on 23 November 2020, (before the market close at 08:22 AM GMT). BLOE's 52-week High and Low were GBX 5.60 and GBX 0.9025, respectively. Block Energy Plc had a market capitalization of around £17.27 million.
Business Outlook
The Company is largely optimistic regarding its sales during the year despite several headwinds faced such as low crude oil prices and the ongoing market uncertainties due to Covid-19 pandemic. The Company has accomplished its first sale from West Rustavi facility, and the deal is expected to be completed by Q4 FY20 as the gas purchaser, Bago, is completing the construction of its sales gas pipeline. The focus of the Company is to support the Bagoto enable the safe and efficient installation of the sales pipeline, which will allow the business to grow in future.
The acquisition of the Schlumberger's Georgian upstream business is also progressing well for the Company opening up ample business opportunities. The financial position of the Company is looking strong based on its net cash position and near-term realization of its gas reserves.
