Deltic Energy, the AIM-quoted natural resources investing company with a high impact exploration and appraisal portfolio focused on the Southern and Central North Sea, today announced its interim results for the six months ended 30 June 2024.

Highlights

• Farmed down a 25% interest in Licence P2437 including the Selene prospect to Dana Petroleum (E&P) Limited ("Dana"), resulting in Deltic now being fully carried for the estimated success case cost of the well.
• The Shell operated Selene exploration well, targeting Gross P50 Prospective Resources of 318 BCF in the UK Southern North Sea, was spudded on 28 July.  Operations are expected to take approximately 90 days from spud and the Company will update the market as appropriate.
• Deltic accepted two out of the four licences provisionally awarded by the North Sea Transition Authority ("NSTA") in the UK's 33rd Offshore Licensing Round.  Both licences contain attractive low risk, low cost, infrastructure led exploration opportunities with nominal capital commitments in Phase A of the licences.
• On 10 June Deltic notified its Joint Venture ("JV") partners on Licence P2252, containing the Pensacola discovery, of the Company's intention to withdraw from the licence.
• Deltic has now reached agreement with the JV partners on Licence P2252, limiting the Company's liabilities associated with withdrawal from licence P2252 to £1.9 million with payment of circa 50% of this amount deferred for a period of 24 months.
• Cash position of £3.7 million at 30 June 2024 (31 December 2023: £5.6 million)

Graham Swindells, CEO, commented:
"There is no doubt that the first half of the year has been one of the most challenging periods for the Company since its inception, with highly publicised fiscal and political pressures impacting companies operating across the UK's domestic oil and gas sector. Despite these unprecedented headwinds, the Company continues to make significant commercial and operational progress, which has resulted in a farm-down to Dana which limits our potential cost exposure to the high impact Selene exploration well which is currently being drilled, as well as the award of two new UK licences located close to key production hubs in the Central and Southern North Sea.    

Despite our necessary withdrawal from Pensacola, Deltic remains in a strong position to extract significant value for shareholders from our existing UK asset portfolio over the coming months and years. While limiting our cost exposure to UK exploration, the Company remains committed to continuing its exploration-led growth strategy and is actively evaluating investment opportunities in other jurisdictions where we can leverage our team's core strengths and where a more supportive approach to the future oil and gas exploration and development prevails."

Operating Review

Pensacola - Licence P2252 and P2558

As previously announced, Deltic has withdrawn from licence P2252, which contains the Pensacola discovery, due to an inability to secure a further farm-out or alternative funding structures given the perceived political threats to the industry and ongoing fiscal uncertainty in the run-up to the UK general election on 4 July. The process of transferring Deltic's equity share in Licence P2252 to the remaining partners Shell U.K. Ltd and ONE-Dyas is ongoing.

The Shell-Deltic JV has completed the technical review of potential follow-on opportunities in the Zechstein on adjacent licence P2558. While exploration potential remains within the licence area, no immediately viable drilling opportunity has been identified by the JV and the NSTA has been notified of the JV's intention not to proceed beyond Phase A of the licence. The licence will be allowed to expire on 30 November 2024.

Selene - Licence P2437

The Selene prospect is a 4-way dip closed structure in the Leman Sandstone in the heart of the play fairway and close to offtake infrastructure which is located some 20km to the south of the well location. Deltic has a 25% non-operated interest in the P2437 licence and estimates the Selene structure to contain gross P50 Prospective Resources of 318 BCF (P90 to P10 range of 132 to 580 BCF) and a geological chance of success (GCoS) of 69%.

As previously announced, the Valaris 123 rig was mobilised to the Selene site from the Central North Sea on the 21st July. Drilling operations commenced on the 28th July with well operations expected to take approximately 90 days to complete. The well is being operated by Shell U.K. Ltd.

The Selene opportunity with its material recoverable volumes, low development CAPEX and proximity to existing offshore production infrastructure has what we consider to be an almost unique combination of characteristics in the Southern North Sea which, in the case of exploration success, we believe makes it remain relevant and commercially viable under almost any future fiscal regime.

Blackadder - Licence P2672

The Blackadder prospect was provisionally awarded to Deltic on a 100% basis in Tranche 3 of the 33rd Offshore Licensing Round and formal licence documentation was received and executed in early July.

The licence is located immediately to the west of the West Sole gas field and covers blocks 47/5e, 47/10c and 48/6c and contains the Pharos and Teviot discoveries. Deltic's preliminary evaluation, completed as part of the application process, has resulted in an updated understanding of the structural setting, which suggests that the Pharos discovery and the Blackadder prospect are in fact a single Leman Sandstone structure. 

Deltic's preliminary evaluation of the combined structure estimates P50 Prospective Resources of 165 BCF (P90 to P10 range of 66 to 293 BCF) with a GCoS of 65%. These estimates will be reviewed and updated as part of the Phase A work programme associated with the licence.

Blackadder is highly analogous to the Selene opportunity both in terms of its geological setting but also in relation to access to offtake infrastructure which should speed up commercialisation timelines in the event of a discovery.

The Phase A work programme commitments are focussed on the reprocessing of legacy 3D seismic data to improve reservoir imaging and refine the structural model in order to further de-risk the Blackadder structure.  Total expenditure associated with the Phase A work programme is estimated at less than £200,000.

Syros - Licence P2542

The Syros licence is held 100% by Deltic and contains the Syros prospect, which is hosted in the Jurassic aged Fulmar Sandstone, a prolific producing reservoir on the western flank of the Montrose-Arbroath High in the Central North Sea.

The prospect is mapped as simple rotated fault block on modern high quality 3D and is estimated to contain a light gassy oil with P50 Prospective Resources of 24.5mmboe (P90 to P10 range of 13.7 to 39.7mmboe) with a GCoS of 58%. While a number of potential development options exist, the most likely would be a short subsea tieback to the existing production infrastructure located on the Montrose-Arbroath High.

Following a number of management team changes and corporate ownership changes in licences around the Syros prospect, the Company saw an uptick in interest in the ongoing Syros farm-out process prior to the announcement of the general election in May 2024. The ongoing political and fiscal uncertainty is proving extremely unhelpful in drawing these discussions to a conclusion and Deltic has requested a 12 month extension to Phase A of the licence from the NSTA. 

Licence P2542 will expire on the 30 November 2024 unless either a farm-down can be secured or an extension to Phase A is granted by the NSTA.

Dewar - Licence P2646

Licence P2646 containing the Dewar prospect was awarded to Deltic on a 100% basis in Tranche 2 of the 33rd Offshore Licensing Round. Dewar is a low-risk prospect in the Forties Sandstone, located close to existing and proposed new infrastructure associated with the redevelopment of the Murlach Field (formerly known as Skua) in the CNS.

Deltic currently estimates the Dewar prospect to contain P50 Prospective Resources of 20.8 mmboe (P90 to P10 range of 10 to 38.2 mmboe) with a GCoS of 36%.

The Phase A work programme associated with the licence is restricted to upgrading the key seismic data sets held by the Company at relatively low cost and is focussed on providing greater confidence around prospect volumetrics and risk. The early stage work will also look in detail at the alternative development and export options that were not available last time the company had an interest in this particular opportunity.

KeyFacts Energy: Deltic Energy UK country profile