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.

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