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Is Block Energy a buy yet?


Georgia-based oil firm Block Energy (AIM: BLOE) has reported that it is close to the completion of clean up operations focused on its West Rustavi oil well. The well is now reported to be flowing naturally.

The company is now carrying out a multi-rate production test and is expected to inform the market of these results over the next few weeks.

Paul Haywood, CEO of Block Energy, told the market that the firm has completed its 3D acquisition of a separate well called WR-51, which is ready for side tracking operations.

‘Sidetracking’ operations involve drilling a new wellbore away from the original oil well. This might be because the oil company wants to explore an adjacent geological feature. Some firms are forced to do this because of difficulties with the original wellbore – e.g. the presence of junk in the borehole.

Market awaits new production data for core Block Energy well

Many investors are looking at Block Energy again because there is anticipation that we could get further news on production from the company this month or next month. This will help us to evaluate what its long term prospects look like.

New production equipment has also been put in place on the site, imported from North America.

Block Energy shares have given up a lot of value in the last six months and are currently trading at around the 4.30 mark, which is less than a quarter of its 52 week high. Such is the speculative interest in the oil firm, it could well get back to 10-12 if there is enough of a rush into the stock.

We can also see that there is a lot of interest from smaller, more seasoned oil stock traders in the company, but that many investors are sitting on their hands awaiting further results. The focus seems to be on the production tests that the firm is carrying out at the moment.

Block Energy is building a mature production business in Georgia

Block Energy has been working to develop its storage and transportation capacity in Georgia as it seeks to mature its overall delivery network.  It is working in what looks like a very small market in terms of overall oil reserves, which by some estimates is smaller than those possessed by Austria or Serbia. While many investors get excited by its proximity for Azerbaijan, Georgia is not playing in the same league.

That said, there are some listed oil companies which allow investors to get access to the energy story in Georgia, not least of which is Frontera Resources.

Block Energy looks like a very cheap options play at the moment: there is verifiable retail interest in this stock awaiting further news. If that news is positive enough, we could see this stock return to its 52 week high. It is unlikely to be sold off much below 4.25, hence the downside risk is far less than its upside potential.

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This article does not constitute investment advice. Do your own research or consult a professional advisor.

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