Overview of Block Energy's Offshore Gabon Deal

Block Energy, a London-listed junior company, has entered a conditional agreement to acquire interests in two offshore exploration blocks in Gabon, marking its first expansion beyond its traditional onshore assets in Georgia. The deal involves the Ndjila and Mpari Production Sharing Contracts (PSCs), where Pilgrim Exploration (registered in the British Virgin Islands) holds 90% operating stakes, with the Gabonese government retaining 10%.

Asset Details and Potential

The PSCs are located in the mature North Gabon basin, covering approximately 5,330 square kilometers. They host four legacy oil discoveries drilled by former operators such as Texaco, Shell, and Tullow. Notably, the Iguega discovery, which tested 3,300 barrels per day, could serve as an anchor field, with Shell having completed development studies. The blocks are covered by 3D seismic data and offer exploration upside, with multiple leads and prospects identified in pre- and post-salt plays. Block Energy believes that completing a technical work programme will generate strong interest for asset-level development financing.

Deal Structure and Financing

Under a convertible loan agreement, Pilgrim will remain the operator, with Block providing technical support. Block is raising $6 million to finance its entry into the PSCs, which it will lend to Pilgrim to meet PSC obligations and fund the initial work programme. Block can choose to convert this loan into an 85% interest in Pilgrim, effectively giving it 76.5% stakes in the PSCs (with Pilgrim holding 13.5% and the government 10%). Additionally, Block will provide up to $4 million in non-cash support by making its staff and resources available.

Work Programme and Strategy

The initial work programme will focus on subsurface interpretation, data integration, and refining the Iguega development concept. Evaluation studies will also be conducted on three other oil discoveries: Ekouata, Topaz, and Pilote. The programme includes mapping the subsurface and ranking prospects to secure finance for development and exploration work. Block's chief executive, Paul Haywood, described the transaction as an excellent value-accretive acquisition, emphasizing that it provides jurisdictional and geological diversification, as well as near-term growth potential.

Market Response

Shareholders have responded mutedly, with Block's share price dropping 7% to £0.011 ($0.015) at the time of publication.