REG - Deltic Energy PLC - Pensacola Withdrawal and Portfolio Update

Deltic EnergyAnnouncement

11/06/2024 07:00

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RNS Number : 8730R  Deltic Energy PLC  11 June 2024

Prior to publication, the information contained within this announcement was
deemed by the Company to constitute inside information as stipulated under the
UK Market Abuse Regulation. With the publication of this announcement, this
information is now considered to be in the public domain.

 

Deltic Energy Plc / Index: AIM / Epic: DELT / Sector: Natural Resources

 

11 June 2024

 

Deltic Energy Plc ("Deltic" or "the Company")

Pensacola Withdrawal and Portfolio Update

 

Deltic Energy Plc, the AIM-quoted natural resources investing company with a
portfolio of operated and non-operated exploration assets in the UK North Sea,
provides the following update in relation to Pensacola and the wider
portfolio.

 

Licence P2252 - Withdrawal from the Pensacola Discovery

 

Further to the Company's announcement of 3 June 2024, and despite an
exhaustive process, deteriorating sentiment towards the oil and gas industry
as a result of ongoing fiscal volatility and negative political rhetoric in
the run-up to the July election have resulted in Deltic being unable to secure
a farm-out or an alternative funding solution which would allow the Company to
commit to its future commitments with respect to the Pensacola appraisal well.
Therefore, the only appropriate course of action available to Deltic is to
withdraw from the licence prior to further liabilities being crystallised
following the Operator's issuance of the Authorisation for Expenditure ('AFE')
for the well cost, expected tomorrow.

 

In the course of this process, Deltic rigorously examined a wide variety of
funding solutions which included potential industry partners, including our
existing Joint Venture ('JV') partners, via traditional farm-out or asset
sale, the equity capital markets (both traditional and non-traditional sources
of capital), strategic investors, debt providers and commodity trading houses
which can pre-pay for future gas deliveries.

 

Accordingly, Deltic has formally notified the JV partners of Licence P2252 of
the Company's intention to withdraw from the licence and begin the process of
transferring its equity in the licence to the remaining partners in line with
the Joint Operating Agreement.

 

Regardless of Deltic's intention to withdraw from the licence, it is expected
that Deltic may be required to honour certain expenditure in relation to the
appraisal well which was approved by the JV prior to the withdrawal notice
being issued. The value of the committed expenditure, which may potentially be
material to the Company, will be established with the Operator following the
formal withdrawal process, and it is expected that these costs may not become
fully payable until H1 2025.

 

Licence P2437 - Selene Drilling Update

 

Very good progress continues to be made on the Selene exploration well which
remains on track to commence drilling operations in the first half of July
2024, with operations expected to last approximately 90 days. Following a
farm-out to Dana Petroleum earlier this year, Deltic retains a 25% working
interest in the licence and has no cost exposure to the imminent well up to a
gross success case well cost of USD$49M.  The successful farm-out of the
Selene project demonstrates that significant appetite remains for certain
types of exploration assets within the SNS.

 

In contrast to Pensacola, the 318 BCF (Gross P50 Prospective Resources) Selene
prospect is a simple Leman Sandstone structure in an established, well
understood play and located close to existing production infrastructure.  In
a successful outcome, it is considered unlikely that Selene will require
further appraisal prior to field development planning commencing and could
therefore be brought into production relatively quickly following discovery
given the proximity of existing infrastructure.

 

Licence P2542 - Syros Update

 

Deltic is in the process of bringing the farm-out in relation to its 100%
working interest in the Syros prospect to a close. While discussions are
ongoing, there is no guarantee that these will be concluded successfully or
result in a transaction. The Company will provide a further update once these
discussions have been concluded.

 

The Syros prospect is a modestly sized, low risk exploration target located in
the Central North Sea which is in close proximity to established production
infrastructure on the Montrose-Arbroath high.

 

33(rd) Licensing Round Update

 

As previously announced, Deltic was provisionally offered two licences in
Tranche 3 of the 33(rd) Licensing Round. In light of interest in and success
of the Selene farm-out process, the Company has decided to focus its efforts
on the licence award which contains the Pharos-Blackadder discovery. The
Pharos-Blackadder discovery, located adjacent to production infrastructure
associated with the West Sole field, is highly analogous to Selene and is
considered by Deltic to be a better option with respect to attracting a
partner and supporting future drilling activity in the current fiscal and
political environment.

 

Our approach to acceptance of 33(rd) Licensing Round awards is part of a
conscious transition by the Company away from large scale, greenfield
exploration projects like Pensacola and towards those infrastructure-led
opportunities which are lower risk and have an accelerated cycle time from
identification to first gas.

 

Further information with respect to the Pharos-Blackadder opportunity will be
provided once the formal award of the licence is made.

 

Graham Swindells, Chief Executive of Deltic Energy, commented:

 

"Recent history in relation to large scale discoveries such as Cambo and
Rosebank has demonstrated the difficulties associated with progressing major
offshore developments on the UKCS as damaging political rhetoric and fiscal
instability continue to undermine the sector. Although we have been unable to
secure Deltic's future involvement in the Pensacola project, it does not
detract from the achievements of the team in identifying the opportunity,
attracting a partner like Shell and raising the necessary capital to drill the
initial discovery well.

 

Despite our disappointment at not remaining involved in Pensacola, the
technical and  commercial skills and experience demonstrated on the asset
will be critical as we now focus on the Selene opportunity and similar
infrastructure-led projects such as Syros and Blackadder.  We believe these
can be brought onstream more quickly, help maintain the viability of existing
infrastructure and defer decommissioning of key production hubs which continue
to generate interest despite the general malaise affecting the UK E&P
industry.

 

While the current situation is clearly disappointing, this is where the
diversity and quality of the Deltic asset base demonstrates its value and we
will be working tirelessly on behalf of our shareholders to ensure that we
capitalise on those foundations starting with the imminent drilling operations
on the Selene gas prospect. This, on its own, we estimate to be worth
multiples of the Company's current market value and can play an important role
in the maintenance of the UK's security of domestic energy supply when it has
never been more important."

 

**ENDS**

 

For further information please contact the following:

                                                                                  Tel: +44 (0) 20 7887 2630

 Deltic Energy Plc

 Graham Swindells / Andrew Nunn / Sarah McLeod

 Allenby Capital Limited (Nominated                                               Tel: +44 (0) 20 3328 5656
 Adviser)
 David Hart / Alex Brearley (Corporate Finance)

 Stifel Nicolaus Europe Limited (Joint                                            Tel: +44 (0) 20 7710 7600
 Broker)
 Callum Stewart / Simon Mensley / Ashton Clanfield

 Canaccord Genuity Limited (Joint Broker)                                         Tel: +44 (0) 20 7523 8000

 Adam James / Ana Ercegovic

 Vigo Consulting (IR Adviser)                                                     Tel: +44 (0) 20 7390 0230

 Patrick d'Ancona / Finlay Thomson / Kendall Hill

 

Reporting Standard

Estimates of resources have been prepared in accordance with the PRMS as the
standard for classification and reporting.

 

 

Qualified Person's Review

Andrew Nunn, a Chartered Geologist and Chief Operating Officer of Deltic, is a
"Qualified Person" in accordance with the Guidance Note for Mining, Oil and
Gas Companies, June 2009 as updated 21 July 2019, of the London Stock
Exchange. Andrew has reviewed and approved the information contained within
this announcement.

 

Glossary of Technical Terms

 

 BCF:                    Billion Cubic Feet

 P50 resource:           reflects a volume estimate that, assuming the accumulation is developed, there
                         is a 50% probability that the quantities actually recovered will equal or
                         exceed the estimate.  This is therefore a median or best case estimate of
                         resource

 PRMS:                   the June 2018 Society of Petroleum Engineers ("SPE") Petroleum Resources
                         Management System

 Prospective Resources:  Are estimated volumes associated with undiscovered accumulations. These
                         represent quantities of petroleum which are estimated, as of a given date, to
                         be potentially recoverable from oil and gas deposits identified on the basis
                         of indirect evidence but which have not yet been drilled

 

 

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