Deltic Energy, the AIM-quoted natural resources investing company with a high impact exploration and appraisal portfolio focused on the Southern North Sea, presents the results of a Competent Person's Report (or "CPR") in relation to the Pensacola Discovery on Licence P2252 in the Southern North Sea in which Deltic holds a 30% interest.

Following completion of post-well analysis of data collected by the 41/05a-2 discovery well, Deltic commissioned RPS Energy Ltd (or "RPS") to undertake a technical review of the volumes and a commercial review of the Pensacola discovery.  This independent assessment of Contingent Resources builds on the Company's previous estimates of technically recoverable volumes and for the first time illustrates the commercial potential of the Pensacola discovery based on two potential development scenarios - a gas and oil (or "combined") development and a gas only development. A copy of the Summary CPR Report can be found here.

Highlights

• Maiden Contingent Resource estimate completed for the Pensacola Zechstein Reef discovery by RPS, a leading provider of CPR services in the UK
• RPS estimates the Pensacola structure to contain gross P50 Hydrocarbons Initially in Place of 326 MMboe, in-line with Deltic's previous estimate of 342 MMboe
• RPS estimates 2C Contingent Resources, net to Deltic, of 21.8 MMboe in the combined case and 15 MMboe in the gas only case
• Based on the two development scenarios assessed, RPS estimates a 2C Post Tax NPV10 of USD$205M net to Deltic (combined case) and USD$199M net to Deltic (gas only case)
• These project NPV10 valuations equate to approximately 169p - 174p per Deltic share
• Subsequent to the CPR work, appraisal well data from the analogous Crosgan Zechstein discovery has been released that supports the potential for thicker, higher quality reservoir across the crest of Pensacola
• Progress continues to be made on both the Pensacola and Selene farm-out processes with a significant level of interest from industry

Hydrocarbons Initially in Place

Prior to the drilling of an appraisal well, which is currently planned for late 2024, RPS estimates of the Hydrocarbons Initially in Place, as discovered by the 41/05a-2 well, are summarised in the table below.

Possible Developments

Prior to the drilling of the planned appraisal well, a number of uncertainties in relation to the potential development of the oil volumes discovered at Pensacola remain and therefore Deltic provided RPS with two possible development scenarios as summarised below:

• A combined oil and gas development requiring two separate production platforms and six horizontal wells (three gas and three oil producers) with hydrocarbons exported to Teesside via a new pipeline. 
• A lower capex gas only development scenario comprising three horizontal development wells producing via a normally unmanned installation exporting gas through a new pipeline to Teesside.
• Capital and operational costs for both scenarios were estimated for Deltic by S&P Global and reviewed by RPS as part of the CPR process.  The gas only scenario assumes significantly lower capital expenditure than that required to support the combined oil and gas development.

Contingent Resources and Valuation of the Combined Gas and Oil Development

The Contingent Resources (development pending) associated with the oil and gas development scenario for Pensacola as estimated by RPS are summarised in the table below:

Net Present Value ("NPV") estimates as of 1 January 2024 for the combined oil and gas development as calculated by RPS, based on RPS (Q4 2023) long term forecasts for Brent Crude (for oil and condensate sales) and UK National Balancing Point (NBP) for sales gas, are summarised below:

1 Deltic holds a 30% working interest in P2252

Contingent Resources and Valuation of the Gas Only Development

The Contingent Resources (development pending) associated with the gas only development scenario for Pensacola as estimated by RPS are summarised in the table below:

Net Present Value ("NPV") estimates as of 1 January 2024 for the gas only development as calculated by RPS, based on RPS (Q4 2023) long term forecasts for Brent Crude (for oil and condensate sales) and UK National Balancing Point (NBP) for sales gas, are summarised below:

1 Deltic holds a 30% working interest in P2252

The gas only scenario recovers less hydrocarbons than the combined case development but has a significantly lower capital and operational cost base, resulting in similar 2C NPV10 valuations to the combined development scenario.

Post CPR Regional Update

The 41/05a-2 well targeted the flank of the Pensacola structure proving the presence of thinner flank dolomites sourced from the erosion of dolomites deposited up-dip over the crest of the structure.  While thicker, better quality reservoir is predicted to be present updip, the properties of the dolomite reservoir over the crestal part of the field are one of the main uncertainties in the estimate of both hydrocarbons in place and contingent resources for Pensacola.

Following completion of the CPR, the North Sea Transition Authority released summary well information for the Crosgan Zechstein appraisal well drilled in early 2023 by ONE-Dyas, with its JV partner Shell.  Crosgan, located approximately 60km to the east of Pensacola, is highly analogous to the Pensacola discovery and the appraisal well (42/15a-4) drilled on the crest of the Crosgan reef structure is reported to have encountered a Hauptdolomit reservoir that was 140m thick and which flowed at a maximum rate of 26.5 MMscf/day on test. 

These positive well results further support Deltic's view that a thicker, higher quality reservoir is likely to be present across the crest of the Pensacola structure.  The information from the Crosgan offset well will be considered in future volumetric reviews along with additional information collected during the drilling of the Pensacola appraisal well later this year.

Farm-out Process Update

As previously communicated, Deltic continues to work on a number of potential options to both realise value and mitigate exposure to future drilling expenditure on both Pensacola and Selene and has received a significant level of interest. Deltic is continuing to engage with a number of different counterparties in relation to a range of potential transactions on both of these assets and looks forward to updating the market in due course. 

Graham Swindells, Chief Executive of Deltic Energy, commented:    
"RPS's validation of our technical assessment of the Pensacola discovery is another step forward for Deltic as we progress towards drilling the appraisal well in late 2024. In particular, we are pleased with the potential valuation that RPS ascribe to the discovery net to Deltic, particularly within the context of our current share price. It's clear that Pensacola is a regionally significant hydrocarbon accumulation and we will continue to work with our partners at Shell and ONE-Dyas to mature the opportunity and optimise the potential development scenarios as we go forward."

KeyFacts Energy: Deltic Energy UK country profile