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Block Energy: Let the Sh*t Show Begin!

By Nigel Somerville, the Deputy Sheriff of AIM | Thursday 29 July 2021

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.

A group calling itself the Block Energy Support Group has emerged, representing around 20% of the currently issued shares in AIM-listed Block Energy (BLOE). Unlike some shareholder support groups, such as the Quindell one, this support group is not for the support of current management and already two EGMs – one to remove the chairman and the other to commission a forensic report into the affairs of the company – have been called. One would imagine that such aggressive action might suggest that somebody knows something and via the support group’s website the bombs have started to drop.

Block’s Board issued a statement regarding the request for a forensic report and the shareholder group has responded as follows:

 In the Notice of General Meeting posted to shareholders on 23 July 2021 (available in the Investors section of the Company’s website at:, the Board outlined why it believed that shareholders should vote against the resolutions, and maintain the current Board composition.

The following observations are made in respect of claims made by the Company:

Claim: A track record of delivering value, with net asset value having increased by over 200% from US$9.2 million as of 30 June 2018 to US$29.7 million as of 31 December 2020, and 2P reserves increasing by more than 40-fold over the same period, despite the impact of Covid-19.

Response: While net asset value (NAV) has increased, it has been done so without adding value for shareholders who have been significantly diluted. Using the Company’s NAV numbers the effect of dilution has been a NAV / share of  c.2.5p per share at IPO to only c.2.7p per share fully diluted.  This is before the Schlumberger deal (which accounts for the claim on the reserve increase) which on a fully diluted basis sees a reduction in NAV / share to 2.3p per share.

Claim: Continuity with the operations team at a critical time in the current, potentially Company-transforming, drilling campaign. 

Response: The Chairman is not part of the operations team, and his removal would have no effect on the day-to-day operations of the drilling campaign. To suggest that the Chairman is critical to the success of the drilling is worrying in itself as it suggests a lack of robustness in the team and operational processes.

Claim: The Company has increased production from 15 to 486 boepd between 2018 and Q2 2021, representing a 3,000% increase and established itself as Georgia’s leading independent producer through:

1. the transformational acquisition of Schlumberger’s Georgian assets in 2020;

2. the drilling campaign in the West Rustavi field; and

3. the strategic partnership with Baker Hughes, which provides key technologies (such as engineering and subsurface support) to execute a portfolio-wide development plan.

Response: Production rates have been inconsistent, and the Company is incorrectly presenting itself as having a stable production base. The Schlumberger acquisition was highly dilutive to existing shareholders, as shown above, and the results of the drilling campaign in the West Rustavi field have been poor.  One well has struggled to produce, and another was a complete failure. Rather than a strategic partnership, the relationship with Baker Hughes is a service contract (standard in the industry) and it is unclear as to what, if any, commercial benefits the Company achieves from the arrangement.

Claim: Following the fundraising in late 2020, supported by over 99% of voting Shareholders, the Company is currently drilling a potentially transformative well designed to target 2.1 million boe of recoverable oil and gas and increase production to over 1,000 boepd, resulting in a material uplift in value and cashflows.

Response: The fundraising was conducted to execute a three-well campaign. The Company has not referenced this in its response, which the group of shareholders believes is due to poor financial management of the project, and the Company

Ouch and double ouch!

But it gets worse – read this:

Corporate Governance Failures of Block Energy

There are fundamental questions about the Company’s approach to corporate governance; regulatory compliance; and the quality and accuracy of its disclosures to the market. We refer to the following as examples where shareholders will have particular concern:

AIM Rule 21 and the Market Abuse Regulation compliance

In an email dated 24 February 2021, the Chairman stated as follows on behalf of the Board in response to queries from shareholders: “Currently, we have nothing more to report and are now hampered by insider knowledge of activities that have occurred since the last RNS announcement.” The Chairman also confirmed on telephone calls with shareholders that the Board was in possession of “insider knowledge”.

After this admission, a series of directors’ dealings took place:

  • 25 February 2021, the Company announced that William McAvock, and an employee have exercised nil-cost options to acquire 653,517 and 295,231 ordinary shares of 0.25 pence each respectively.

  • 2 March 2021, the Company announced it had issued options over a total of 20,500,000 ordinary shares of 0.25p each (“LTIP Options”) to directors/PDMRs, employees and consultants. The LTIP options included awards of 10,500,000 to the CEO and CFO.

  • 15 March 2021, the Company announced that the CEO and the Chairman, as well as an employee and contractor, had exercised options to acquire shares.

If the Board was in possession of price sensitive information, it is not clear how these directors’ dealings could take place in accordance with AIM Rule 21 and the Market Abuse Regulation given that no price sensitive information was announced to the market during this period. We have asked for an explanation of these trades to allow the Company to clear up any misunderstandings. No adequate explanation has been offered.

Gas Price Disclosures

It should be noted that, on 7 April 2021, the Company issued an RNS containing price sensitive information, including in relation to the Company’s oil and gas sales in Q1 2021 and its proposed operational programme for 2021.

In an RNS on 30th October 2019, the Company indicated that Bago LLC would purchase gas at a price of US$5.24/MCF under a gas sales agreement. Since that date no announcements have been made to the market updating the gas sales arrangements.

However, in the RNS on 7th April 2021, the Company stated that “the gas sold is at a fixed discount to the price of the last tender completed by the Georgian Oil and Gas Corporation for the sale of its gas, as provided in a revised Gas Sales Agreement signed with the buyer of the gas, Bago LLC, in May 2020.”

At no point has a change in circumstances surrounding the gas sales agreement (including pricing) been communicated to the market.  It would therefore appear that absent any reasonable explanation, the Company may have withheld commercial and materially sensitive information from the market for 11 months during which the Company raised additional funds from shareholders.

The Company had ample opportunity to disclose such information to the market and it is noted that at the AGM meeting in June 2020, Paul Haywood specifically referenced the “profitable gas prices” without updating the market that the Company’s position on the gas price had materially changed.

Concerns around oil sales

Shareholders understand from sources in Georgia that there is a concern that oil from Block Energy operations was sold in Q1 2021 and that the buyer is not one of the two operating refineries in country.  In the event that such a sale did take place, the terms of this transaction, and who the oil was sold to, has never been disclosed to the market. It is therefore reasonable for the Company to now provide details of all oil sales in country to alleviate any concerns and set the record straight.

Hmm – insider dealing and a failure to inform shareholders of material changes to the company’s trading? If the above is proved then I would have thought even the Oxymorons at AIM Regulation would have to act. Let’s see what happens there….

In the meantime, I would suggest any existing shareholders get in touch with the rebels at or visit the rebels’ website HERE, and ensure they get their EGM votes in on time.

Non-shareholders should order in plenty of beer and popcorn for a cracking shi*t show – with bargepole firmly in hand!

This is shaping up to be a cracker!

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