The boards of Viaro Bidco and Deltic have reached agreement on the terms of a recommended cash offer for the entire issued and to be issued ordinary share capital of Deltic.
Under the terms of the Acquisition, each Deltic Shareholder will be entitled to receive:
- For each Deltic Share: 7.46 pence in cash (the "Cash Consideration")
The Cash Consideration represents a premium of approximately:
- 36 per cent. to the Closing Price of 5.50 pence per Deltic Share on 27 June 2025 (being the last trading day before the commencement of the Offer Period);
- 34 per cent. to the volume weighted average price of 5.55 pence per Deltic Share for the one-month period to 27 June 2025 (being the last trading day before the commencement of the Offer Period);
- 38 per cent. to the volume weighted average price of 5.41 pence per Deltic Share for the three-month period to 27 June 2025 (being the last trading day before the commencement of the Offer Period); and
- 56 per cent. to the volume weighted average price of 4.79 pence per Deltic Share for the six-month period to 27 June 2025 (being the last trading day before the commencement of the Offer Period).
The Acquisition values the entire issued and to be issued share capital of Deltic at approximately £6.9 million on a fully diluted basis.
In connection with the Acquisition, Viaro Bidco has agreed to provide a bridging loan of up to £2.7 million with a view to providing Deltic with sufficient working capital prior to the Acquisition becoming Effective.
Background to and reasons for the Acquisition
The Viaro Group entered the upstream oil and gas business in 2020 through the acquisition of Viaro Bidco, and has continued to invest and expand through further acquisitions in the UK and Netherlands. Viaro has ambitious growth plans for its upstream business and believes that the Acquisition would support its strategic aim of building a portfolio to deliver group production of 100,000 barrels of oil equivalent per day ("boe/d").
Viaro Bidco has evaluated opportunities to expand its upstream operations in the UK North Sea and views the licence interests held by Deltic to offer significant synergies to its existing portfolio. In particular the development of the Selene discovery is a key opportunity where Viaro Bidco can leverage its expertise to add to Viaro Bidco's near-term production growth in the UK. Additionally, the Blackadder exploration opportunity is close to existing Viaro Bidco infrastructure and, if successful, could add to near term production and extend the life of the potential host facilities.
Deltic's strategy today
Deltic's strategy as an investing company has been focussed on the identification and maturation of new or overlooked exploration activities in the UK North Sea with a particular focus on the Southern North Sea Gas basin. Deltic typically identified opportunities and applied for licences at 100% working interest, with the intention of reducing capital exposure to the projects by bringing partners to fund key aspects of the work programme including seismic acquisition and exploration drilling activities with the option to crystallise value from the assets prior to incurring the costs associated with offshore developments. This approach saw Deltic successfully farm-out a number of licences to established partners, two 3D seismic surveys acquired and two exploration wells drilled, both of which resulted in major discoveries at Pensacola and Selene.
Given the uncertain fiscal and policy environment which has persisted in recent years in the UK, it has become extremely challenging to both continue funding the Deltic business model via the equity markets or to realise significant value from exploration success.
Considerations for the Recommendation
Since 2014, Deltic has been focussed on its UK gas exploration strategy which has delivered material success, including farm-outs to Shell, Capricorn and Dana and two significant gas discoveries in the Southern North Sea at Pensacola and Selene. However, this success has come against a backdrop of volatile oil and gas prices, significant inflationary pressures, an unpredictable UK fiscal regime since the introduction of the Energy Profits Levy in 2022 and the recent election of a UK government which has further undermined the UK's domestic oil and gas industry by pledging to end exploration licencing and ban drilling for new oil and gas fields in UK waters.
The Deltic Directors consider that continuing uncertainty around the UK government's support for domestic exploration and production has undermined investor confidence in the sector as a whole and the industry awaits new fiscal and policy direction later this year in response to a number of ongoing public consultations which the Board believes are likely to have significant implications for the industry. This ongoing uncertainty has been difficult for companies across the sector, but especially for smaller exploration or development focussed oil and gas companies which are pre-revenue, many of which have suffered a material erosion in valuation and share liquidity since early 2024.
The 25 per cent. non-operated interest in the Selene discovery is a material asset for Deltic with material long term cash-flow potential, although it will require substantial additional investment for studies and development capital expenditure prior to delivery of first gas which is currently estimated in early 2029. While debt facilities or gas sales pre-payment options may potentially be available to satisfy the majority of the Company's capital requirements following a final investment decision ('FID'), expected in early 2027, the Deltic Directors consider that the Company would be wholly reliant on equity funding until that point.
Deltic was also recently informed by Shell UK Ltd of an overspend on the Selene well which will result in unexpected costs being allocated to Deltic. The exact quantum of these costs is currently still being assessed and reviewed by the joint venture partners, but it is expected that it will be approximately £1.3 million net to Deltic. While discussions around a deferred payment agreement, similar to that put in place in 2024 for Pensacola, are ongoing, this would represent a significant deferred liability for Deltic that would likely be due prior to first revenues from a potential Selene development.
It is against this backdrop of continued and increasing cost exposure associated with the development of Selene and a lack of confidence in the equity market's willingness to continue funding UK projects before further clarity is provided by the UK government, that the Deltic Directors have been considering the financial terms of the Acquisition and whether to recommend it to Shareholders. The Deltic Directors took into account a number of factors, including that:
- Despite the quality of the Selene discovery and the current partnership group, there remain a number of significant stage gates in the process of achieving an FID on Selene. Any one of these could lead to the project being cancelled or delayed in response to external events, including further changes to UK government policy, the regulatory regime, the gas price environment and/or capital availability within the joint venture group.
- The cash value per Deltic Share to be received pursuant to the Acquisition represents a premium of 36 per cent. to the Closing Price of 5.50 pence per Deltic Share on 27 June 2025 (being the last Business Day before this Announcement). In addition, the Acquisition represents premia of 34 per cent., 38 per cent. and 56 per cent. to the volume weighted average price in the one-month, three-month and six-month periods ended 27 June 2025 respectively.
- The Acquisition provides Deltic Shareholders with the opportunity to realise an immediate and certain cash value. The Deltic Directors recognise the market in Deltic Shares over the last year has been relatively illiquid, making it difficult for Shareholders to realise their investment should they wish to do so.
- As at 31 December 2024, Deltic had cash resources totalling £1.4 million. Subsequent to that period end, the cash position of the Company has reduced as a result of normal operational expenditure such that, as at 31 May 2025, Deltic's unaudited cash balance was £0.49 million. Cash levels continue to be carefully managed, however in the absence of the Acquisition proceeding, the Deltic Directors anticipate that Deltic would be required to raise additional capital during July 2025 to: (i) continue to fund the Company's share of the Selene work program until value can be realised from the Selene asset; (ii) cover the Company's general corporate costs; and (iii) allow Deltic to cover its existing and potential additional deferred liabilities to Shell.
- In light of the Company's requirement to access additional capital during July 2025, the Board of Deltic has explored the potential options to fund the business until first revenues on Selene could potentially be achieved, including assessing the possibility of an equity fundraise. However, given the difficult market conditions referred to above and having discussed with the Company's largest shareholder and previously with other potential existing and new investors their appetite to provide further funding, the Deltic Directors do not have confidence in the Company's ability to raise sufficient funds through an issue of equity. The Deltic Directors also believe that, given the stage of Deltic's investments, providers of debt finance would be unwilling to provide the required debt facilities to Deltic.
- Against this backdrop, the Deltic Directors believe that the Acquisition represents certainty for Deltic Shareholders in relation to the future of the Company. The Deltic Directors also believe that, in the absence of alternative funding to the Bridge Financing and the Acquisition progressing, the Company would be in an extremely challenging financial position and the Deltic Directors may have no option but to place the Company into administration. Should administrators be appointed, it is not known how much, if any, value would be returned to Shareholders.
- The Deltic Directors have also considered the Offeror's stated intentions for Deltic's business, assets, management and staff and other stakeholders of Deltic.
Following careful consideration of the financial terms of the Acquisition, the combination of value and certainty that the terms of the Acquisition provide to Deltic Shareholders and the factors noted above, the Deltic Directors intend to unanimously recommend the terms of the Acquisition.
Commenting on the Acquisition, Francesco Mazzagatti, CEO of Viaro Energy, said:
"Deltic's portfolio represents a natural fit with Viaro's existing assets and strategic focus in the North Sea. The Selene discovery is a key driver for this acquisition, which forms an important component of Viaro's recently announced transaction with Shell and ExxonMobil, as well as within the broader basin context. The transaction reflects our commitment to advancing key developments responsibly and with the continuity they require. By working with joint venture partners to overcome the economic challenges imposed by the current fiscal uncertainty, we aim to ensure that important developments like Selene can be successfully progressed towards production in a timely manner, and with the right level of technical and financial support."
Commenting on the Acquisition, Andrew Nunn, CEO of Deltic, said:
"Despite the difficult political and fiscal backdrop impacting the UK E&P industry over a number of years, the achievements of the Deltic team and the quality of our assets have been recognised by Viaro. This transaction provides certainty for Shareholders as well as our staff, regulators and joint venture partners who are progressing the Selene opportunity towards development for the benefit of the UK's future energy needs. We are looking forward to working with the wider Viaro team as we continue to move the Selene and Blackadder opportunities towards production and applying our proven exploration expertise to Viaro's existing and expanding portfolio of Southern North Sea licences."
Commenting on the Acquisition, Mark Lappin, Chairman of Deltic said:
"I couldn't be prouder of the journey and work of the small team within Deltic. They have progressed two major gas discoveries from two wells drilled. Given the capital required to progress our exploration successes to the next stage, it is the right time to change direction. The Acquisition by Viaro gives the Deltic business access to a different funding model, which is better suited to the current business environment and aiming to ensure discoveries are progressed and gas will be delivered to where it is needed."
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