REG - Deltic Energy PLC - Final Results
25/04/2022 07:00
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RNS Number : 1247J Deltic Energy PLC 25 April 2022
25 April 2022
Deltic Energy Plc / Index: AIM / Epic: DELT / Sector: Natural Resources
Deltic Energy Plc ("Deltic" or "the Company")
Final Results
Deltic Energy Plc, the AIM-quoted natural resources investing company with a
high impact exploration and appraisal portfolio focused on the Southern
and Central North Sea, is pleased to announce its audited results for the
year ended 31 December 2021 ('FY 2021').
Highlights
· Confirmation of Deltic's first exploration well on the Pensacola
Prospect (Licence P2252)
· Well planning rapidly progressing with site survey completed October
2021.
· Rig selection and contract process is well advanced with Deltic-Shell
JV scheduling drilling the Pensacola well in late Q3 2022.
· Transformational farm-out deal completed with Capricorn Energy PLC
("Capricorn") (previously Cairn Energy PLC) to form an exploration partnership
over five licences in the Southern North Sea gas basin.
· Introduction of Capricorn has further enhanced Deltic's strong
partner base.
· Capricorn partnership is an endorsement of Deltic's business model
which identifies high quality exploration opportunities and then attracts high
quality exploration partners.
· The deal will accelerate Deltic's Southern North Sea exploration
programme and see significant investment towards drilling decisions.
· Capricorn will fund 100% of the agreed work programme for each of the
five licences up to the point of making a drill or drop decision on each
licence. Capricorn will fund 70% of the costs of the first well.
· Deltic received a USD$1m contribution towards historic costs.
Deltic retains a 40% interest in Licences P2428 (Cupertino Area) and P2567
(Cadence) and a 30% interest in each of Licences P2560, P2561 and P2562.
· Strong progress made since farm-out, with the JV aiming to make a
well investment decision in Q3 2022.
· Acquired approximately 680 km(2) of new 3D seismic data over the
P2428 Licence, which includes the Plymouth prospect.
· Net cash outflow from operations and investing activity for the year
of £1.8 million (2020: £1.8 million).
· Cash position of £10.1 million at 31 December 2021 (2020: £12.0
million) with no debt. As at 31 March 2022, the Company had cash on hand
(unaudited) of £8.6 million, with £0.9m of the post-year end spending
related to progressing Pensacola well planning.
Graham Swindells, Chief Executive of Deltic Energy, commented:
"The last year has been a period of considerable achievement and progress for
our company. The completion of a ground-breaking farm out transaction with
Capricorn Energy (formerly Cairn Energy), covering five gas licences in the
Southern North Sea was a major highlight. As well as broadening our partner
base, it serves as a further endorsement of the quality of our licences, of
our expertise in the gas basin, and of our strategy of identifying
opportunities and attracting high quality partners to support drilling. We are
particularly looking forward to drilling the Pensacola Prospect in the coming
months, as well as continuing our work with Shell and Capricorn and advancing
our other licences in what should be a very active and exciting period for our
company."
Chairman's Statement
Looking back at my statement of a year ago, with the pandemic dominating the
news, I couldn't have imagined what we are faced with today, with a global
power having launched an attack on a neighbour in Europe.
As a result, we have learned that there are very real consequences to relying
on natural gas from Russia. Whatever the outcome of the situation in Ukraine,
Europe's position on Russian gas has undoubtedly changed for the foreseeable
future.
At the same time, and partly as a consequence of these events, we have seen
energy prices spiralling upwards. The UK gets a relatively small portion of
its gas from Russia by pipeline and by Liquified Natural Gas (LNG), brought on
ships. However, moves away from Russian natural gas for our European
neighbours causes further escalation of prices from global producers which
then itself leads to further escalation of the cost of living and household
spending.
With that background, our business is positioned to play its part in providing
these vital natural resources. Contributing to the essential domestic supply
of natural gas from North Sea waters has always been the very core of our
business.
The UK Government is supportive of our sector, sharing our view that a
domestic gas supply is better for energy security, jobs, Treasury receipts and
the environment compared with importing higher emission supplies. This is
apparent in the North Sea Transition Deal of 2021 and the Energy Security
Strategy published just a few weeks ago.
Direction towards favourable policy has helped our business in attracting
high-quality international joint venture partners, but the bumps along the
road, machinery of policy-making and the volatility of recent months have
undoubtedly impacted the exact timing of commitment towards operations and
contracts.
Our industry continues to face challenges. The challenges change but they are
always there. As a responsible nation, aware of the potential risks from
climate change, we need to use this valuable resource wisely and deal with the
associated greenhouse gas emissions in order to prevent them from being
released into the atmosphere. Some do not see this as the solution. A popular
narrative is to transition away from oil and gas rather than continuing to
reap its benefits alongside other natural resources such as wind, solar and
nuclear. All predictions from independent sources such as the Climate Change
Committee and United Nations Climate Panel show oil and gas as part of the
future energy mix for the UK and the world for decades to come.
Deltic Energy is committed to being part of the energy transition while
continuing to explore for natural resources in the North Sea with a focus on
natural gas. Natural gas heats homes, lights rooms and cooks meals. Fuels such
as natural gas are needed to make cement, steel, glass and bricks; materials
that are integral to our society.
Each member of the Deltic team is proud to play this role.
Our business model is a simple but a highly effective one. We have developed a
conveyor belt of opportunities from picking up licences in areas where we have
demonstrated expertise such as the Southern North Sea, developing prospects by
thorough technical work and new data acquisition where appropriate, bringing
in world-class operators as partners for exploration well drilling in order to
get these valuable resources to the UK shores. We currently have acreage at
each stage along our conveyor belt up to drilling, and are preparing to drill
our first exploration well at Pensacola with operator Shell within the coming
months. Acreage farmed out to Shell and Capricorn Energy PLC ("Capricorn")
(previously Cairn Energy PLC) is moving forward along this process to a
similar conclusion and other acreage is being worked towards farm-out.
The Deltic business is in good shape and poised for an exciting period of
exploration in the coming months.
Mark Lappin
Chairman
22 April 2022
Chief Executive's Statement
2021 has been a year of significant achievement and continued progress. The
major highlights for the year have been the positive well investment decision
and firm commitment to drill our Pensacola Prospect as well as successfully
attracting a new high-quality partner into five of our Southern North Sea gas
licences by way of a wide ranging farm-out. I am particularly excited that as
a direct result of this progress, we are now on the verge of drilling our
first exploration well this year. It has also been a significant development
for Deltic to have broadened its partner base with another well-established
operator who clearly sees the opportunity that the Southern North Sea
presents. As well as providing further endorsement of our prospects and high
quality technical work, the additional partnership will ensure significant
additional operational activity across our portfolio in the course of the
coming year. Having created a portfolio of highly prospective opportunities
which is now being progressed with multiple partners, I believe Deltic is in a
strong position and geared for exploration success.
Pensacola
The early part of 2021 was focussed on the completion of the technical work to
support a well investment decision to drill Pensacola. The outcome of that
work was very positive with the evaluation of the new 3D data acquired
resulting in a significant de-risking of the prospect, with the geological
chance of success increasing from 20% to 55%. The final stage of the technical
(and commercial) work supported the positive decision to commit to a firm well
on Pensacola which will see Deltic drilling its first well this year.
Following the commitment to drill Pensacola, the focus of activity moved to
well planning which progressed rapidly. The geophysical site survey over the
planned well location was completed in September and the geotechnical survey,
representing the final phase of the site survey programme, was completed in
October. The surveys, conducted by Fugro GB North Marine Limited, were
completed on time and without incident. The successful completion of the
programme, which is a key part of well planning and the final phase of
offshore activities ahead of drilling, represented another important milestone
in our steady progress towards drilling the Pensacola prospect.
Preparations for the key catalyst of the drilling of Pensacola are advancing
on a range of fronts as the JV gets closer to the start of operations.
Analysis of site survey data, undertaken as a standard but important part of
the ongoing well planning process, has identified hard seabed conditions at
the well location which have in part informed Shell's well-advanced rig
selection and contracting process as the JV seeks to ensure straightforward,
safe and efficient operations. This process is being factored into the
planning schedule, with Shell now indicating that drilling is expected to
commence towards the end of Q3 2022.
Pensacola is a Zechstein Reef prospect located to the northwest of the Breagh
gas field in the Southern North Sea. Deltic estimates the Prospect to contain
gross P50 Prospective Resources of 309 BCF which will rank Pensacola as one of
the highest impact exploration targets to be drilled in the gas basin in
recent years. Drilling success will be transformational both for Deltic and
the emerging Zechstein reef play.
The Pensacola well is also being highly anticipated by the industry for its
potential to unlock a significant new source of gas to the UK from the
Zechstein Reef play, which has been successfully produced in NW Europe from
Poland to The Netherlands. It also has the potential to demonstrate that the
UK still has a significant level of previously unrecognised exploration upside
which can deliver cost competitive natural gas to UK based businesses and
homes and support the UK's Net Zero targets.
Selene
On the Company's Selene Prospect on Licence P2437, Deltic's other licence with
Shell, the JV has continued to refine its technical and commercial work to
support a well investment decision, which the Company is continuing to target
within the coming months. Deltic's conviction in Selene has further increased
throughout this process resulting in an uplift in estimated P50 recoverable
resources to 318 BCF. With Phase A of the licence due to conclude in September
this year, in line with good licence management, the JV has taken the prudent
step of approaching the North Sea Transition Authority ('NSTA') to seek an
extension to Phase A. Deltic continues to consider Selene to represent the
largest undrilled structure of its kind in this part of the SNS, and with an
estimated 70% geological chance of success remains committed to progressing
this material prospect to drilling.
Capricorn Energy Farm-in to Licences P2560, P2561, P2562, P2567 and P2428
A key highlight of 2021 was the farm-out of five of our gas licences in the
Southern North Sea to Capricorn which represented a further endorsement of the
quality of the assets that our team has developed and our gas-focussed
exploration strategy, as we continue to develop our portfolio of opportunities
and attract the highest quality partners.
The farm-out was announced in August and completed in November 2021 with the
key terms being as follows:
· Capricorn acquired a 60% interest in each of Licences P2428 (Cupertino
Area) and P2567 (Cadence) and a 70% interest in each of Licences P2560, P2561
and P2562 which are located between the Breagh and Tolmount Gas Fields.
· Deltic received consideration of USD$1 million as a contribution
towards historic costs
· Deltic retained a 40% interest in licences P2428 and P2567 and a 30%
interest in licences P2560, P2561 and P2562.
· Capricorn is funding 100% of an agreed work programme for each of the
five licences up to the point of making a drill or drop decision on each
licence, which includes the acquisition of new seismic data over Licence P2428
(which was acquired in Autumn 2021).
· Following a drilling decision being made on either of P2428 and P2567,
Capricorn will fund 70% of the costs of whichever well is drilled first,
subject to a gross well cost cap of USD$25 million.
· Capricorn became Operator of each of the licences.
This transformational and wide-ranging farm-out across multiple licences and
our partnership with Capricorn will see significant investment being made
across Deltic's strategic Southern North Sea gas exploration portfolio. It has
been particularly encouraging to see the pace at which activity on the
licences has already occurred.
Acquisition of the 3D seismic survey over Licence P2428 commenced in
September. Approximately 680km(2) of new data over the Plymouth Zechstein Reef
prospect and surrounding areas was acquired and completed in November. The
data collected is now being processed with the results expected during the
course of May 2022. The results of this high quality modern 3D seismic survey
are expected to significantly enhance our understanding of the multiple gas
prospects on P2428 and will be key to de-risking future drilling on this
licence as was the case with the Pensacola Prospect which was derisked
following the acquisition of new seismic. The acquisition and processing of
the seismic data already fulfils the work programme commitments of this
licence. The final processed data will allow Capricorn and Deltic to fast
track the assessment of prospectivity and the JV is now aiming to be in a
position to make a drilling decision by the end of Q3 this year.
We are particularly excited at the prospect of continuing to build our
partnership with Capricorn, with both parties sharing a commitment to pursuing
high impact exploration opportunities in the Southern North Sea and
successfully developing these gas prospects.
Central North Sea
The Company holds two licences in the Central North Sea, P2352 (which contains
the Dewar prospect) and P2542 (which contains the Syros prospect).
The Dewar Prospect is a 30th Round licence which, despite attracting initial
farm-out interest, saw the progression of discussions adversely affected by
Covid. However, Dewar remains an attractive, highly prospective and relatively
low risk opportunity located in close proximity to other fields and existing
infrastructure and one which could be developed very quickly. As such, Dewar
remains an attractive drill-ready prospect with strong economics. Continued
strengthening in the oil price has seen renewed interest and engagement from
interested parties and Deltic remains committed to seeking a suitable partner
to ultimately drill the prospect, in line with our strategy.
P2542, also located in the Central North Sea, contains the Syros Prospect and
is a more recent licence award. Technical work has commenced, and the new data
having recently been obtained with initial work looks encouraging. This work
will continue with a view to commencing a farm-out process in due course.
Board appointment
In November, I was delighted to welcome Peter Nicol to the Board of Deltic.
Peter has outstanding experience in the energy sector both in industry and in
senior investment banking positions. Peter has worked with several listed oil
and gas companies and is currently an independent non-executive director of a
number of exploration focussed companies. We are already benefitting from
Peter's wealth of energy sector, financial, city and public company experience
which will be invaluable to Deltic as we continue to build our business.
Outlook
As I write, recent events mean that energy security has never felt more
important. Soaring energy prices with its impact on energy intensive industry
and households alike has acutely highlighted the consequences of having
domestic production. UK domestic production does not come close to meeting
even half of national demand. There is heavy dependence on imports from
foreign countries, including Russia. The effect of this reliance is compounded
when considering the significantly higher emissions associated with gas
imported in the form of LNG. It is abundantly clear that a secure supply of
domestically produced oil and gas is much better for jobs, the UK economy and,
importantly, the environment. Accordingly, it is imperative that the UK
continues to encourage further exploration. The UK still has a significant
level of previously unrecognised exploration upside which we know can deliver
cost competitive and low carbon intensity natural gas to UK-based businesses
and homes while at the same time supporting the UK's Net Zero targets.
The UK oil and gas industry has a vital role to play in the energy transition.
Deltic is fully supportive of 'net zero' ambitions and, with a largely gas
dominated portfolio, we believe we have the potential and ability to
contribute to this transition. Indeed, we are confident that all of our
Southern North Sea gas prospects have the potential to be developed in a
manner which is entirely consistent with Net Zero goals.
Deltic welcomes the UK Government's Energy Security Strategy announced earlier
this month. In addition to committing to maximise North Sea production, it
confirmed that a new North Sea licensing round will be brought forward and
launched in the Autumn. Previous licensing rounds have been a key source of
success and growth of Deltic's portfolio in recent years, and as such we are
particularly encouraged by this development. Accordingly, Deltic is already
commencing its plans to invest in applications both individually and in
partnership as we look to continue to expand the Company's conveyor belt of
drilling opportunities.
The progress made throughout 2021 has created the foundation for what has the
potential to be a very exciting year ahead. We will shortly be drilling our
first well with Shell on the Pensacola Prospect with success being potentially
transformational for our company. At the same time, we expect to significantly
progress the five licences we now have in partnership with Capricorn. We
should see the results of the newly acquired and processed 3D seismic data
over Licence P2428 before the end of Q2 which will enable the JV to fast-track
an assessment of prospectivity in this area and support a well investment
decision later in the year. We will also continue to progress our 100% owned
licences in the Central North Sea with a view to farm-out and drilling and
look forward to the launch of the UK's 33(rd) Licensing Round in the Autumn.
With our conveyor belt of opportunities, high quality partners, and activity,
we anticipate a potentially transformational year as we continue to strive to
create value for our shareholders.
Graham Swindells
Chief Executive Officer
22 April 2022
Operational Review
Introduction
Significant progress has been made across the portfolio during the reporting
period with key highlights being confirmation of exploration drilling on the
Pensacola prospect in March 2021 and securing a successful outcome to the
farm-out process on Licence P2428 which ultimately resulted in Capricorn
committing to a significant work programme investment across a total of five
of Deltic's Southern North Sea licences as announced on the 12th August 2021.
P2252 - Pensacola (30% Deltic)
On 29 March 2021, the Shell-Deltic JV confirmed its intention to drill the
Pensacola exploration well. Preparatory works are well advanced: the site
survey works completed in October 2021, long lead items have been ordered and
environmental permitting for the drilling activities are underway.
Preparations for the key catalyst of the drilling of Pensacola are advancing
on a range of fronts as the JV gets closer to the start of operations.
Analysis of site survey data, undertaken as a standard but important part of
the ongoing well planning process, has identified hard seabed conditions at
the well location which have in part informed Shell's well-advanced rig
selection and contracting process as the JV seeks to ensure straightforward,
safe and efficient operations. This process is being factored into the
planning schedule, with Shell now indicating that drilling is expected to
commence towards the end of Q3 2022.
Licence P2252, located in the Southern North Sea Gas Basin, contains the
Pensacola prospect which is estimated to contain gross P50 Prospective
Resources of 309 BCF in a Zechstein carbonate build-up. The licence was farmed
out to Shell U.K. Ltd in 2019, which resulted in the Company being fully
carried through the 3D seismic acquisition and processing-based work programme
through to well investment decision. Following the well investment decision on
29 March 2021, Deltic is now paying its 30% share of costs associated with
this well and remains fully funded for its share.
During the period, a review of the additional potential prospectivity
associated with the P2252 licence, but unrelated to Pensacola, was completed
by the Operator and the JV took the decision to relinquish the southern
portion of P2252 licence and realise a significant saving on annual licence
rental costs. The relinquished area represented approximately 40% of the
overall licence area and contained the Lytham prospect which was not
considered sufficiently attractive to retain.
P2437 - Selene (50% Deltic)
During the period, Deltic continued to refine its subsurface models and
development scenarios for the Selene prospect. This work has resulted in an
uplift in Gross P50 Prospective Resources from 271 BCF to 318 BCF and a
tightening of the P90-10 range from 82-552 BCF to 132-581 BCF. The geological
chance of success (GCoS) remains unchanged at 70%.
Deltic remains convinced that the Selene prospect is a significant and
strategic exploration opportunity in the mature Leman Sandstone fairway and
remains fully committed to drilling an exploration well on the prospect at the
soonest practicable opportunity.
Licence P2437 is located in the Leman Sandstone fairway of the Southern North
Sea Gas Basin and contains the Selene prospect which we believe is the largest
undrilled prospect in this mature play. The P2437 licence was farmed out to
Shell U.K. Ltd in 2019 with Deltic retaining a 50% interest and operatorship
until a final well investment decision is made. Under the terms of the
farm-out, once the well investment decision is taken, Shell assume
operatorship and pay for 75% of the costs of the initial exploration well up
to a gross well cost of USD$25M.
P2428 - Cupertino / Plymouth Area (40% Deltic)
Licence P2428 contains prospects in each of the Carboniferous, Leman Sandstone
and Zechstein Carbonates and was included in the farm-out to Capricorn
announced in August. Following completion of that transaction, a 60% working
interest in licence P2428, along with licence operatorship, has been
transferred to Capricorn. Under the terms of the farm-in agreement Capricorn
are paying 100% of the costs of the technical evaluation for the licence up
until the point at which a firm well investment decision is made.
The primary target on the P2428 licence area is the Plymouth Zechstein reef
prospect and as part of the farm-out agreement Capricorn funded the
acquisition of 680km(2) of new multi-client 3D data over the Plymouth prospect
and surrounding areas. The 3D seismic acquisition was completed in late
November 2021 and data processing is ongoing with final deliverables expected
in May 2022. Early versions of the seismic data have been viewed and a clearer
picture of the Plymouth prospect and other potential opportunities on block
are starting to emerge. Once the processing workflows have been completed, we
expect that this new 3D seismic data will allow a full evaluation of the
Plymouth prospect and other opportunities in the underlying Leman and
Carboniferous Sandstones.
A drilling decision is expected to be made in the second half of this year
once this new data has been fully evaluated by the Capricorn-Deltic JV.
P2567 - Cadence (40% Deltic)
Licence P2567 contains prospects in both the Carboniferous and Triassic Bunter
Sandstone and was included in the farm-out to Capricorn announced in August.
Following completion of that transaction, a 60% working interest in licence
P2567, along with licence operatorship, has been transferred to Capricorn.
Under the terms of the farm-out agreement Capricorn are paying 100% of the
costs of the technical evaluation of the licence up until the point at which a
firm well investment decision is made.
It is anticipated that technical work over the coming months will focus on the
reprocessing of the legacy 3D seismic survey that covers 100% of the licence
area which will in turn be followed by detailed technical evaluation of the
previously identified prospectivity.
P2560, P2561 & P2562 - South Breagh Area (30% Deltic)
Licences P2560, P2561 and P2562 were awarded in the most recent 32(nd)
Licensing Round. The licences contain early stage exploration opportunities
located between the Breagh and Tolmount gas fields and have significant
potential in the Carboniferous sandstones, Permian Leman Sandstones and the
Zechstein carbonates.
All three licences were included in the farm-out to Capricorn and following
completion of that transaction, a 70% working interest in each of the three
licences, along with licence operatorship, has been transferred to Capricorn.
Under the terms of the farm-out agreement Capricorn are paying 100% of the
costs of the technical evaluation for each licence up until the point at which
a firm well investment decision is made on each licence.
During and post the transaction process, Deltic has worked closely with
Capricorn to ensure that the JV is fully aligned with respect to the
exploration potential over the area and Capricorn continue to evaluate the
existing legacy datasets and develop a comprehensive exploration work
programme for the area. We expect that reprocessing a number of the legacy 3D
seismic datasets will be the priority over the coming 6 to 12 months which
will provide a sound basis for the more detailed geological evaluation
required to mature a number of the identified leads into potential drilling
opportunities.
P2352 - Dewar (100% Deltic)
Licence P2352, located in the Central North Sea, was awarded to the Company in
the 30th UK Offshore Licensing Round with an effective date of 1 October 2018.
During the period, work continued on fully integrating the previously
completed AVO study into the company's geological model for the Dewar
prospect. As a result of this work, the geological model for this Forties
Sandstone channel prospect is now much more robust. However, the gross P50
Prospective Resources have been reduced from 39.5mmbo to 20.8mmbo with a
P90-P10 range of 10 to 38.2mmbo. The GCoS of 41% remains unchanged.
In the event of exploration success, the Dewar Prospect will represent a
highly attractive commercial proposition as it is located approximately 5km
east of BP's Eastern Trough Area Project (ETAP) Central Processing Facility.
With the recent recovery in oil prices, there has been a renewed interest in
the Dewar Prospect and over the coming months we will continue to pursue
farm-out discussions with companies that have shown recent interest and those
with whom we had established a positive dialogue prior to the Covid enforced
lockdowns.
P2542 - Syros (100% Deltic)
Licence P2542 located in the Central North Sea and which contains the Syros
prospect, was awarded to Deltic in the most recent 32(nd) Licensing Round.
Technical work on this licence, has commenced with newly reprocessed seismic
data having recently been obtained. Work will focus on maturing the Syros
prospect using recently released seismic and offset well datasets not
available to previous licence operators such that farm-out marketing can be
commenced in mid-2022.
Portfolio Management
As disclosed in our interim statement in September 2021, during the period our
technical review of Licence P2424 was completed. Although we identified
significant resource potential associated with the Licence, the prospects
identified were particularly high risk when compared to other opportunities
within the portfolio. The currently available seismic datasets are not of
sufficient quality to adequately de-risk the prospects and therefore it was
considered unlikely that a positive well decision could be made on any
prospect within the licence area without the acquisition of new 3D seismic
data. Therefore, the decision was taken to allow this licence to lapse at the
end of its Phase A on 30 September 2021.
Licence P2384 in the Central North Sea which was awarded as a remnant of a
much larger multi-block licence application in the 30(th) Offshore Licensing
Round and retained purely for its option value. Following a review of the
prospectivity associated with this very small licence it was clear that it
only captured the very fringes of the prospects targeted in the original
licence application. Given that there was no obvious drilling target located
on block it was decided to also relinquish this licence on 30 September 2021.
33(rd) Licensing Round
The UK government recently announced its British Energy Security Strategy on 6
April 2022 in which a new offshore licensing round, scheduled to commence in
the Autumn of 2022, was confirmed. Deltic has been busy working on identifying
and maturing a number of potential opportunities in the Southern and Central
North Seas which we plan to use to support multiple licence applications on
both a 100% basis and in conjunction with established industry partners.
Full details of the round, blocks available for licensing and submission
timelines are expected to be announced by the NSTA in due course.
Andrew Nunn
Chief Operating Officer
22 April 2022
Southern North Sea
Portfolio and Resource Summary
The Company's current licence portfolio and prospect inventory, as of the end
of March 2022, is summarised below:
Licence Ref: Block ID Deltic Equity Project ID GCoS
%
Discovery (D) Net Prospective Resource
Prospect (P) (BCF)
Lead (L)
P90 P50 P10
Low Best High
P2252(1) 41/5a, 41/10a & 42/1a 30% Pensacola - Zechstein Reef P 12 93 354 55
P2437 48/8b 50% Sloop - Leman D 4 9 19 100
Selene - Leman P 66 159 290 70
Endymion - Leman L 18 24 31 27
Rig & Jib - Leman L 7 18 29 35
P2428(2) 43/7 40% Cupertino - Scremerston P 37 148 454 26
&
43/8
Richmond - Leman P 25 84 219 20
Plymouth - Zechstein P 13 113 507 19
P2567(2) 43/11 40% Cadence - Scremerston P 12 57 189 26
&
43/12b
Cadence - Fell L 75 182 344 16
Cordova - Millstone Grit L 13 50 131 26
Bassett - Bunter Sst P 14 51 121 37
Bathurst - Bunter Sst L 48 110 228 22
P2435(3) 47/10d & 48/6c 25% Bob (Teviot) - Leman D 2.8 5.5 10.3 100
Blackadder - Leman P 17.8 28.3 42.5 45
P2258(1) 41/5b & 42/1b 30% Pensacola North To Be Determined
P2560(2) 42/13b 42/17 & 42/18 30% To Be Determined
P2561(2) 42/19 & 42/20b 30% To Be Determined
P2562(2) 42/22 & 42/23 30% To Be Determined
(1 )Operated by Shell
(2) Operated by Capricorn
(3) Operated by Parkmead
Central North Sea
Licence Ref: Block ID Project ID GCoS
%
Deltic Net Prospective
Resource
Discovery (D)
Equity
(MMBOE)
Prospect (P)
Lead (L)
P90 P50 P10
Low Best High
P2352 22/24f & 22/25g 100% Dewar - Forties P 10 20.8 38.2 40
Tesla - Pentland D To
be
dete
rmin
ed -
mean
STOI
IP
esti
mate
d @
24
mmbo
e
P2542 22/17a 100% Syros To be determined
Andrew Nunn
Chief Operating Officer
22 April 2022
Financial Review
All major expenditure in the last five years has been focussed on the
development of the Company's portfolio of conventional North Sea assets in
accordance with the Company's investing policy, in addition to on-going
administrative expenditure.
Loss for the year
The Company incurred a loss for the year to 31 December 2021 of £1,935,052
(2020: £1,665,575), which includes a gain of £298,173 (2020: nil) recognised
on the farm out of Licence P2428 (Cupertino Prospect), Licence P2567 (Cadence
Prospect) and Licences P2560/P2561/P2562 (Breagh South Area) to Capricorn
Energy PLC and is included as other operating income in the Income Statement
for the year. A charge of £288,551 (2020: nil) is recognised resulting from
the write down on relinquished intangible assets following the decision to
relinquish Licences P2384 (Manhattan Prospect) and P2424 (Cortez Prospect).
Administrative expenses of £1,912,987 (2020: £1,699,344) were incurred
during the year reflecting an increased level of activity across the Company
and its portfolio of assets. Finance income of £2,905 (2020: £59,818)
decreased due to lower interest-bearing deposits on surplus funds. Finance
costs of £34,592 (2020: £26,049) represent the interest charge on a lease
liability recognised.
Financial position
The Company's cash was £10,092,205 at 31 December 2021 (2020: £11,968,858)
with the year-on-year decrease in cash being explained below.
The increase in intangible assets to £2,203,118 (2020: £1,430,915) reflects
the development of the Company's exploration portfolio and in particular
progress towards drilling Licence P2252 (Pensacola Prospect), offset by the
relinquishment of P2384 (Manhattan Prospect) and P2424 (Cortez Prospect), and
the gain recognised on the proceeds from farm-out of Licences P2428 (Cupertino
Area), P2567 (Cadence Prospect) and P2560/P2561/P2562 (Breagh South Area).
The Company was fully carried from the point of farm out for costs associated
with Licences P2428, P2567, P2560, P2561 and P2562.
Property, plant and equipment of £385,240 (2020: £496,542) includes a right
of use asset relating to the office lease with a net book value of £269,767
(2020: £350,697). Total current liabilities, which include short-term
creditors, accruals and lease liabilities increased to £1,030,143 (2020:
£246,041).
The decrease in total equity to £11,663,005 (2020: £13,437,735) mainly
represents the loss for the year and other movements set out in the Statement
of Changes in Equity.
Cash flow
In the year to 31 December 2021, the net cash outflow from operating
activities was £1,623,057 (2020: £1,368,118). The net cash outflow from
investing activities was £136,781 (2020: £458,740), comprising £853,744
(2020: £358,672) related to expenditure on exploration assets, £5,895 (2020:
£159,886) relating to expenditure of property, plant and equipment, and
£719,953 (2020: nil) receipt of proceeds from exploration licence farm-in,
and interest received of £2,905 (2020: £59,818). The net cash outflow from
financing activities was £116,815 (2020: £53,684), comprising the principal
portion of lease liabilities and interest paid.
Consequently, in the year to 31 December 2021, the Company experienced a net
cash outflow of £1,876,653 (2020: £1,880,542).
Closing cash and cash equivalents
As at 31 December 2021, the Company held cash and cash equivalents totalling
£10,092,205 (2020: £11,968,858).
Shareholders' equity
As at 31 December 2021, there were 1,405,964,855 (2020: 1,405,964,855)
ordinary shares in issue. Additionally, a total of up to 128,840,450 (2020:
94,840,450) new ordinary shares may be issued pursuant to the exercise of
share options.
Going concern
The Directors have assessed the Company's ability to continue as a going
concern. Although the oil and gas industry faces a period of change under the
current geopolitical environment, the Company does not anticipate any negative
issues impacting its ability to operate as a going concern. Having taken the
decision to raise funds in 2019 the Company is currently well funded with no
debt. Based on the cash and cash equivalents balance at year end and the
Company's commitments, the Directors are of the opinion that the Company has
adequate financial resources to meet its committed Pensacola exploration
programme, based upon anticipated drilling costs per the planned work
schedule, and working capital requirements, and accordingly will be able to
continue and meet its liabilities as they fall due for a minimum of 12 months
from the date of signing these financial statements.
Key performance indicators
At this stage in its development, the Company is focusing on the development
of its North Sea gas and oil assets, applying for additional licences,
maintaining and extending existing licences, as well as the evaluation of
various oil and gas opportunities that may arise. The Directors closely
monitor and manage the levels of overheads and other administrative
expenditure, exploration expenditure, cash and deposit balances, as set out
above. As and when the Company's exploration licences move into production,
other key performance indictors (KPIs) will become relevant and will be
measured and reported as appropriate.
Sarah McLeod
Chief Financial Officer
22 April 2022
Investing Policy
In addition to the development of the North Sea gas licences the Company has
acquired to date, the Company proposes to continue to evaluate other potential
oil and gas projects in line with its investing policy, as it aims to build a
portfolio of resource assets and create value for shareholders. As disclosed
in the Company's AIM Admission Document in May 2012, the Company's
substantially implemented Investment Policy is as follows:
The proposed investments to be made by the Company may be either quoted or
unquoted; made by direct acquisition or through farm-ins; either in companies,
partnerships or joint ventures; or direct interests in oil & gas and
mining projects. It is not intended to invest or trade in physical commodities
except where such physical commodities form part of a producing asset. The
Company's equity interest in a proposed investment may range from a minority
position to 100% ownership.
The Board initially intends to focus on pursuing projects in the oil & gas
and mining sectors, where the Directors believe that a number of opportunities
exist to acquire interests in attractive projects. Particular consideration
will be given to identifying investments which are, in the opinion of the
Directors, underperforming, undeveloped and/or undervalued, and where the
Directors believe that their expertise and experience can be deployed to
facilitate growth and unlock inherent value.
The Company will conduct initial due diligence appraisals of potential
projects and, where it is believed further investigation is warranted, will
appoint appropriately qualified persons to assist with this process. The
Directors are currently assessing various opportunities which may prove
suitable although, at this stage, only preliminary due diligence has been
undertaken.
It is likely that the Company's financial resources will be invested in either
a small number of projects or one large investment which may be deemed to be a
reverse takeover under the AIM Rules. In every case, the Directors intend to
mitigate risk by undertaking the appropriate due diligence and transaction
analysis. Any transaction constituting a reverse takeover under the AIM Rules
will also require Shareholder approval.
Investments in early stage and exploration assets are expected to be mainly in
the form of equity, with debt being raised later to fund the development of
such assets. Investments in later stage projects are more likely to include an
element of debt to equity gearing. Where the Company builds a portfolio of
related assets, it is possible that there may be cross holdings between such
assets.
The Company intends to be an involved and active investor. Accordingly, where
necessary, the Company may seek participation in the management or
representation on the Board of an entity in which the Company invests with a
view to improving the performance and use of its assets in such ways as should
result in an upward re-rating of the value of those assets.
Given the timeframe the Directors believe is required to fully maximise the
value of an exploration project or early stage development asset, it is
expected that the investment will be held for the medium to long term,
although disposal of assets in the short term cannot be ruled out in
exceptional circumstances.
The Company intends to deliver Shareholder returns principally through capital
growth rather than capital distribution via dividends, although it may become
appropriate to distribute funds to Shareholders once the investment portfolio
matures and production revenues are established.
Given the nature of the Investing Policy, the Company does not intend to make
regular periodic disclosures or calculations of its net asset value.
The Directors consider that as investments are made, and new investment
opportunities arise, further funding of the Company will be required.
This strategic report contains certain forward-looking statements that are
subject to the usual risk factors and uncertainties associated with the oil
and gas exploration and production business. Whilst the Directors believe the
expectation reflected herein to be reasonable in light of the information
available up to the time of their approval of this report, the actual outcome
may be materially different owing to factors either beyond the Company's
control or otherwise within the Company's control but, for example, owing to a
change of plan or strategy. Accordingly, no reliance may be placed on the
forward-looking statements.
On behalf of the Board
Mark
Lappin
Graham Swindells
Chairman
Chief Executive Officer
22 April
2022
22 April 2022
Qualified Person
Andrew Nunn, a Chartered Geologist and Chief Operating Officer of Deltic
Energy Plc, is a "Qualified Person" in accordance with the AIM Note for
Mining, Oil and Gas Companies of the London Stock Exchange. Andrew has
reviewed and approved the information contained within this announcement.
**ENDS**
For further information please contact the following:
Deltic Energy Plc Tel: +44 (0) 20 7887 2630
Graham Swindells / Andrew Nunn / Sarah McLeod
Allenby Capital Limited (Nominated Adviser & Joint Tel: +44 (0) 20 3328 5656
Broker)
David Hart / Alex Brearley (Corporate Finance)
Kelly Gardiner (Sales and Corporate Broking)
Stifel Nicolaus Europe Limited (Joint Tel: +44 (0) 20 7710 7600
Broker)
Callum Stewart / Simon Mensley / Ashton Clanfield
Vigo Consulting (IR &PR Tel: +44 (0) 20 7390 0230
Adviser)
Patrick d'Ancona / Finlay Thomson / Oliver Clark
Glossary of Technical Terms
PRMS:
Petroleum Resources Management System (2007)
BCF:
Billion Cubic Feet
GIIP:
Gas Initially In Place
SCF:
Standard Cubic Feet
STOIIP
Stock-Tank Oil Initially In Place
Mmbbl
Million barrels
mmboe:
Million barrels of oil equivalent
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.
Chance of Success (GCoS): for prospective resources, means the chance
or probability of discovering hydrocarbons in sufficient quantity for them to
be tested to the surface. This, then, is the chance or probability of the
prospective resource maturing into a contingent resource. Prospective
resources have both an associated chance of discovery (geological chance of
success) and a chance of development (economic, regulatory, market and
facility, corporate commitment and political risks). The chance of
commerciality is the product of these two risk components. These estimates
have been risked for chance of discovery but not for chance of development.
TCF: Trillion
Cubic Feet
P90 resource:
reflects a volume
estimate that, assuming the accumulation is developed, there is a 90%
probability that the quantities actually recovered will equal or exceed the
estimate. This is therefore a low estimate of resource.
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.
P10
resource: reflects
a volume estimate that, assuming the accumulation is developed, there is a 10%
probability that the quantities actually recovered will equal or exceed the
estimate. This is therefore a high estimate of resource.
Pmean: is
the mean of the probability distribution for the resource estimates. This is
often not the same as P50 as the distribution can be skewed by high resource
numbers with relatively low probabilities.
The GIIP volumes and Prospective Resources have been presented in accordance
with the 2007 Petroleum Resources Management System (PRMS) prepared by the Oil
and Gas Reserves Committee of the Society of Petroleum Engineers (SPE),
reviewed, and jointly sponsored by the World Petroleum Council (WPC), the
American Association of Petroleum Geologists (AAPG) and the Society of
Petroleum Evaluation Engineers (SPEE).
Income Statement
for the year ended 31 December 2021
Continuing operations Notes 2021 2020
£ £
Administrative expenses:
Write down on relinquished intangible assets 10 (288,551) -
Other administrative expenses (1,912,987) (1,699,344)
Total administrative expenses (2,201,538) (1,699,344)
Other operating income 10 298,173 -
Operating loss (1,903,365) (1,699,344)
Finance income 4 2,905 59,818
Finance costs 5 (34,592) (26,049)
Loss before tax 6 (1,935,052) (1,665,575)
Income tax expense 8 - -
Loss for the year (1,935,052) (1,665,575)
Loss per share from continuing operations
expressed in pence per share:
Basic 9 (0.14)p (0.12)p
Statement of Comprehensive Income
for the year ended 31 December 2021
2021 2020
£ £
Loss for the year (1,935,052) (1,665,575)
Other comprehensive income - -
Total comprehensive expense for the year attributable to the equity holders of (1,935,052) (1,665,575)
the Company
Balance Sheet
as at 31 December 2021
Notes 2021 2020
£ £
Assets
Non-current assets
Intangible assets 10 2,203,118 1,430,915
Property, plant and equipment 11 385,240 496,542
Other receivables 12 37,422 37,422
Total non-current assets 2,625,780 1,964,879
Current assets
Trade and other receivables 12 190,398 53,887
Cash and cash equivalents 10,092,205 11,968,858
Total current assets 10,282,603 12,022,745
12,908,383 13,987,624
Total assets
Capital and reserves attributable to the equity holders of the Company
Shareholders' equity
Share capital 13 7,029,824 7,029,824
Share premium 20,296,030 20,296,030
Share-based payment reserve 21 1,150,700 990,378
Accumulated retained deficit (16,813,549) (14,878,497)
11,663,005 13,437,735
Total equity
Liabilities
Current liabilities
Trade and other payables 15 931,148 153,436
Lease liabilities 17 98,995 92,605
1,030,143 246,041
Total current liabilities
Non-current liabilities
Lease liabilities 17 215,235 303,848
215,235 303,848
Total non-current liabilities
1,245,378 549,889
Total liabilities
12,908,383 13,987,624
Total equity and liabilities
Statement of Changes in Equity
for the year ended 31 December 2021
Share Share Share-based payment reserve Accumulated retained Total
capital
premium
£
deficit
equity
£
£ £
£
Balance at 1 January 2021 7,029,824 20,296,030 990,378 (14,878,497) 13,437,735
Comprehensive income for the year
Loss for the year - - - (1,935,052) (1,935,052)
Total comprehensive loss for the year - - - (1,935,052) (1,935,052)
Contributions by and distributions to owners
Share-based payment - - 160,322 - 160,322
Total contributions by and distributions to owners - - 160,322 - 160,322
Balance at 31 December 2021 7,029,824 20,296,030 1,150,700 (16,813,549) 11,663,005
Balance at 1 January 2020 7,029,824 20,296,030 842,644 (13,212,922) 14,955,576
Comprehensive income for the year
Loss for the year - - - (1,665,575) (1,665,575)
Total comprehensive loss for the year - - - (1,665,575) (1,665,575)
Contributions by and distributions to owners
Share-based payment - - 147,734 - 147,734
Total contributions by and distributions to owners - - 147,734 - 147,734
Balance at 31 December 2020 7,029,824 20,296,030 990,378 (14,878,497) 13,437,735
Statement of Cash Flows
for the year ended 31 December 2021
2021 2020
£ £
Cash flows from operating activities
Loss before tax (1,935,052) (1,665,575)
Finance income (2,905) (59,818)
Finance costs 34,592 26,049
Gain from farm-out of licence interest (298,173) 2,783
Depreciation 115,355 106,029
Amortisation 5,625 6,712
Loss on disposal of property, plant and equipment 1,842 -
Write down on relinquished intangible assets 288,551 -
Share-based payment 160,322 147,734
(1,629,843) (1,436,086)
Decrease/(increase) in other receivables (136,511) 38,269
Increase in trade and other payables 143,297 29,699
Net cash outflow from operating activities (1,623,057) (1,368,118)
Cash flows from investing activities
Purchase of intangible assets (853,744) (358,672)
Purchase of property, plant and equipment (5,895) (190,108)
Property, plant & equipment landlord contributions - 30,222
Proceeds from exploration licence farm-in 719,953 -
Interest received 2,905 59,818
Net cash outflow from investing activities (136,781) (458,740)
Cash flows from financing activities
Payment of principal portion of lease liabilities (82,223) (27,635)
Interest paid (34,592) (26,049)
Net cash outflow from financing activities (116,815) (53,684)
Decrease cash and cash equivalents (1,876,653) (1,880,542)
Cash and cash equivalents at beginning of year 11,968,858 13,849,400
Cash and cash equivalents at end of year 10,092,205 11,968,858
Notes to the Financial Information
for the year ended 31 December 2021
1. Basis of preparation
The financial statements have been prepared in accordance with UK adopted
International Accounting Standards ('IAS'), as adopted by the EU and with
those parts of the Companies Act 2006 applicable to companies reporting under
International Financial Reporting Standards ('IFRS').
The financial information for the year ended 31 December 2021 and 31 December
2020 set out in this announcement does not constitute the Company's statutory
financial statements for the year ended 31 December 2021 but is extracted from
the audited financial statements for those years. The 31 December 2020
accounts have been delivered to the Registrar of Companies. The statutory
financial statements for 2021 will be delivered to the Registrar of Companies
in due course.
While the financial information included in this announcement has been
prepared in accordance with the recognition and measurement criteria of While
the financial information included in this announcement has been prepared in
accordance with the recognition and measurement criteria of UK adopted
International Accounting Standards ("UK adopted IASs") issued by the
International Accounting Standards Board and as endorsed for use by the UK
Endorsement Board, and with those parts of the Companies Act 2006 applicable
to companies preparing their accounting under UK adopted IASs, this
announcement does not itself contain sufficient information to comply with UK
adopted IASs."
The principal accounting policies adopted in the preparation of the financial
information in this announcement are set out in the Company's full financial
statements for the year ended 31 December 2021.
Going concern
The Directors have assessed the Company's ability to continue as a going
concern. Although the oil and gas industry faces a period of change under the
current geopolitical environment, the Company does not anticipate any negative
issues impacting its ability to operate as a going concern. Having taken the
decision to raise funds in 2019 the Company is currently well funded with no
debt. Based on the cash and cash equivalents balance at year end and the
Company's commitments, the Directors are of the opinion that the Company has
adequate financial resources to meet its committed Pensacola exploration
programme, based upon anticipated drilling costs per the planned work
schedule, and working capital requirements, and accordingly will be able to
continue and meet its liabilities as they fall due for a minimum of 12 months
from the date of signing these financial statements.
2. Loss per Share
Basic loss per share is calculated by dividing the loss attributable to
ordinary shareholders by the weighted average number of ordinary shares
outstanding during the year.
Due to the losses incurred during the year, a diluted loss per share has not
been calculated as this would serve to reduce the basic loss per share. There
were 128,840,450 (2020: 94,840,450) share options outstanding at the end of
the year that could potentially dilute basic earnings per share in the future.
Basic and diluted loss per share
2021 2020
Loss per share from continuing operations (0.14)p (0.12)p
The loss and weighted average number of ordinary shares used in the
calculation of loss per share are as follows:
2021 2020
£ £
Loss used in the calculation of total basic loss per share (1,935,052) (1,665,575)
Number of shares 2021 2020
Number Number
Weighted average number of ordinary shares for the purposes of basic loss per 1,405,964,855 1,405,964,855
share
3. Intangible Assets
Exploration & evaluation assets Software
licences
£
Total
£
£
Cost
At 1 January 2020 1,115,605 39,257 1,154,862
Additions 309,685 - 309,685
At 31 December 2020 1,425,290 39,257 1,464,547
Additions 1,488,159 - 1,488,159
Farm-out of licence (421,780) - (421,780)
Disposals (288,551) - (288,551)
At 31 December 2021 2,203,118 39,257 2,242,375
Amortisation and impairment
At 1 January 2020 - 26,920 26,920
Charge for year - 6,712 6,712
At 31 December 2020 - 33,632 33,632
Charge for year - 5,625 5,625
At 31 December 2021 - 39,257 39,257
Net Book Value
At 31 December 2021 2,203,118 - 2,203,118
At 31 December 2020 1,425,290 5,625 1,430,915
At 1 January 2020 1,115,605 12,337 1,127,942
The net book value of exploration and evaluation assets at 31 December 2021
and 2020 relates solely to the Company's North Sea Licences.
Aggregate cash proceeds arising from the farm-out of five Licences (P2428,
P2567, P2560, P2561, P2562) to Capricorn during the year amounted to
£719,953. An amount of £421,780 was deducted from exploration and evaluation
assets, being the previously capitalised expenditure relating to that licence.
The surplus of the proceeds over the carrying value amounted to £298,173 and
was recognised as a gain on disposal of the partial interest and included as
other operating income in the Income Statement for the year.
A charge of £288,551 (2020: nil) is recognised resulting from the write down
of relinquished intangible assets following the decision to relinquish
Licences P2384 (Manhattan Prospect) and P2424 (Cortez Prospect).
Additions of £1,488,159 (2020: £309,685) differ to the cash flows in the
Statement of Cash Flows owing to an increase in trade and other payables of
£634,415 (2020: £48,987 decrease) relating to intangible assets.
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