REG - Deltic Energy PLC - Interim Results
22/08/2023 07:00
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RNS Number : 9946J Deltic Energy PLC 22 August 2023
22 August 2023
Deltic Energy Plc / Index: AIM / Epic: DELT / Sector: Natural Resources
Deltic Energy Plc ("Deltic" or "the Company")
Interim 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 interim results for the six
months ended 30 June 2023.
Highlights
· Significantly increased estimate of oil and gas resources for the
transformational Pensacola discovery on Licence P2252 (Deltic interest 30%) in
the Southern North Sea ("SNS").
o Discovery contains total gross P50 Estimated Ultimate Recovery ("EUR") of
c.99 mmboe, nearly double initial expectations
o Pensacola now estimated to contain material volumes of oil, representing
c. 30% of the combined recoverable hydrocarbons
o Work is progressing with partners to develop the appraisal and development
programme for Pensacola, with an appraisal well targeted for Q4 2024
· The well planning process for drilling the Selene prospect (Deltic
interest 50%) in the SNS is progressing well.
o The geophysical site survey currently underway with the geotechnical
survey planned for later in the year
o Selene still expected to be drilled in Q3 2024
· Deltic is withdrawing from three Licences (P2560, P2561 and P2562) it
held with Capricorn Energy ("Capricorn"), and the partnership will move to
relinquish these licences as soon as practicable.
· Deltic intends to continue with Licences P2567 (Cadence) and P2428
(Cupertino), the two most prospective licences in this acreage, and apply for
extensions to both licences as it seeks to attract another partner.
· Deltic has submitted multiple applications for blocks and part blocks
in the Southern and Central North Sea during the UK's 33rd Offshore Licensing
Round in FY 2022, with awards expected to be announced before the end of Q3
2023.
· Cash position of £9.1 million at 30 June 2023 (31 December 2022:
£20.4 million), with a net cash outflow for the period of £11.3 million (H1
2022: £2.5 million). The first half of 2023 saw significant planned
investment and use of capital to complete the drilling of the Pensacola
discovery.
Graham Swindells, CEO, commented:
"It is no exaggeration to say that the first half of 2023 has been
transformational for Deltic, following the discovery of material quantities of
hydrocarbons at Pensacola in the Southern North Sea. With an estimated 100
million barrels of oil equivalent, the majority of which is natural gas, this
represents one of the biggest UK discoveries in over a decade, and is
particularly significant considering the enormous energy security issues that
the country currently faces. I am very proud of the entire Deltic team which
has delivered this success, and I am confident that we will continue to build
upon this going forward."
Chairman's Statement
While a Chairman's statement rightly covers the broader outlook, leaving the
CEO and COO to focus on the results and plans, it wouldn't make sense to open
this statement without highlighting the recent success of our well at
Pensacola in the North Sea off the coast of Teesside.
This prospect was acquired 100% by Deltic in an exploration licence round.
Following the thorough technical assessment which we consider a hallmark of
our operations, we were able to demonstrate the potential to Shell and bring
them on-board to work with us as an experienced operator. We drilled the well
together with a common understanding that it had a roughly 50/50 chance of
success. Not only did it discover hydrocarbons, but subsequent evaluation of
data from the well by ourselves and the operator show it to be at the high end
of our expectations and approximately twice the volumes of recoverable
resource of our 'most likely' case prior to drilling.
Doing this and doing it again and again is, quite simply, our business model.
I'll leave it to Graham and Andrew to go into detail on this and our wider
portfolio of exploration opportunities.
Many have commented upon some tough external factors in recent months and
years, but we remain focused on the fundamental aspects which support our
business model.
Our portfolio is in the UK North Sea where we have a lot of experience in a
small team, primarily on gas in the Southern North Sea ("SNS").
Over the years we have built a conveyor belt which begins with high quality,
low cost technical screening of available licences; acquiring attractive
licences; working acquired licences to the level that attracts an operator
with the technical, commercial and financial resources to take a Joint Venture
("JV") through exploration and to migrate theoretical in-place volumes to
discovered recoverable resources which can be developed.
We now have assets at all stages along this conveyor belt; a portfolio of
opportunities which are moving through the process from a successful Pensacola
discovery, far along the conveyor belt, to Selene drilling plans, through to
opportunities that are under assessment, and back to licences expected to be
added via the current licensing round.
Alongside this, on the demand side, we have a society highly dependent upon
these resources, spending more on the import of these resources than on
national defence or education, based on the Government's own figures for 2022.
Imports are bad for jobs, bad for Treasury receipts, bad for energy security
and bad for emissions compared with the domestic supply within our portfolio.
With an election looming, once again our sector is a political football, but
we should have confidence that the demand is there and we have the supply. The
external environment may seem hostile at times, but the political environment
isn't picking on Deltic specifically. With or without future licensing, the
Deltic portfolio remains robust.
Mark Lappin
Chairman
21 August 2023
CEO Statement
The first half of 2023 has been transformational for Deltic, having drilled
our first exploration well at Pensacola and resulting in a major discovery. At
the same time, the Company has continued to progress its other key licence
with Shell over the Selene gas prospect while also maintaining the potential
to further enhance the Company's portfolio of assets through the current UK
licensing round.
Having commenced drilling towards the end of last year, we were delighted to
announce details of a very significant discovery of gas at Pensacola in
February which was very much in line with pre-drill estimates. The well also
discovered relatively light oil, although at that point it was too early to
provide a meaningful indication of the scale of the oil opportunity.
Following the discovery, the JV has carried out the necessary post-well
analysis which has allowed us to quantify the potential volume of the oil and
associated gas, and we were delighted to report in July that the contribution
of the oil and associated gas has led to a near doubling in our original
expectations of P50 Estimated Ultimate Recovery from approximately 50 mmboe to
99 mmboe.
The positive results of the post-well analysis mean that Pensacola is now at
the upper end of our expectations. At current estimated volumes, Pensacola is
the largest discovery in the SNS in a decade and arguably one of the most
significant discoveries in the North Sea in many years, particularly bearing
in mind Pensacola's play opening potential.
The JV will now move forward its appraisal and development plans while
assessing development concepts and is working towards an appraisal well being
drilled in Q4 2024.
This well has been a fantastic result for Deltic. This first discovery
reinforces the quality of our technical team and the Deltic model of taking
licences from award through to successful drilling. Critically for Deltic,
this well moves Pensacola from an exploration opportunity to being a highly
valuable appraisal and development asset and the Company is now undertaking a
process to seek to farm down an element of its interest in Pensacola while
retaining exposure to its successful development and ensuing cash flow.
We look forward to working with our partners, Shell and ONE-Dyas to continue
moving this exciting asset through the appraisal phase and onward towards
development.
Having achieved success at our first well at Pensacola, we are increasingly
excited about the prospect of drilling our next exploration well at Selene,
again with Shell as our JV partner. Selene is another similarly-sized prospect
with gross P50 Prospective Resources of 318 BCF, in excess of 50 mmboe. Unlike
the play-opening Pensacola discovery, Selene is an established play, with a
high (70%) geological chance of success and in close proximity to existing
infrastructure.
The planning process for Selene is already well underway with the focus on
detailed well design, planning, rig procurement and other key preparations to
support drilling operations. Long lead items are in the process of being
ordered and the geophysical site survey over the proposed well location has
already commenced. We also anticipate the rig contract for Selene to be put in
place in the coming months which will represent another significant milestone
as we move further down the runway towards the drilling of this high impact
prospect. Depending on the exact timing of the Pensacola appraisal well,
Selene and Pensacola may also have the added benefit of forming part of the
same drilling programme.
Having found gas and oil at our first well at Pensacola, we are excited about
drilling this prospect and having the potential to add another discovery to
Deltic's asset base. Accordingly, we look forward to providing regular updates
as we progress through the planning phase towards the commencement of
operations.
Having only brought Capricorn Energy PLC ("Capricorn") into our five
contiguous licences in an underexplored area of the SNS in 2021, changes in
ownership, management and strategy have prevented Capricorn from being able to
continue to invest in assets outside of Egypt, resulting in their withdrawal
from these licences. Despite this, as a result of promising technical work
already undertaken, Deltic has decided to focus on the two most prospective
licences in this acreage, being P2567 (Cadence) and P2428 (Cupertino) and
retain 100% equity in each of these licences. An extensive work programme has
been progressed by Capricorn over these licences which has identified multiple
prospects and leads in the Carboniferous, with a total estimated P50
gas-initially-in-place of more than 2.6 TCF.
As the current phase of licences P2567 and P2428 ends on 30 November 2023 and
31 March 2024 respectively, Deltic is applying to the North Sea Transition
Authority ("NSTA") to seek an extension to both of the licences to allow time
to attract another partner with the ultimate aim of drilling one or more of
these prospects.
This year has also presented Deltic with the opportunity to further enhance
its portfolio of licences. Applications over various blocks and licences were
made in the UK's 33(rd) Licensing Round in January. The Company had its
interviews with the NSTA in June and awards are expected to be made before the
end of Q3 2023.
Over the first half of the year our sector has, as ever, been impacted by
certain challenges. Gas prices have inevitably continued to soften from the
record levels seen in the course of 2022, but nonetheless remain above long
term historic averages. In any event, our projects do not rely on elevated gas
prices and remain economically robust at very low gas prices.
The Windfall Tax and political risk have also been factors which have created
uncertainty, albeit the investment allowance associated with the Energy
Profits Levy continues to make the economics associated with investing in
Deltic projects very attractive. Despite these factors, Deltic has continued
to deliver on its business plan of taking licences from award through to
drilling and now has its all-important first major discovery. The success at
Pensacola also now means that we expect to be drilling wells at both Selene
and Pensacola next year such that Deltic and our shareholders have much to
look forward to as we progress towards these key catalysts.
I would like to take this opportunity to thank the entire Deltic team for
their continued hard work which has been instrumental in a successful first
half of the year.
Graham Swindells
Chief Executive Officer
21 August 2023
Operating Review
Southern North Sea Assets
P2252 Pensacola (30% Deltic, 65% Shell, 5% ONE-Dyas) & P2558 Pensacola
North (30% Deltic, Shell 70%)
Following the announcement of the successful flow of hydrocarbons to surface
from the Shell-operated well 41/5a-2 on the Pensacola structure on 8 February
2023, work has focused on the completion of the post-well laboratory analysis
and integration of the various geotechnical datasets into the geological and
reservoir models for the Pensacola discovery.
This work included the updating of the intra-salt seismic interpretation,
velocity model and depth conversion using the recently acquired well base data
as well as updating various reservoir parameters including porosity and
permeability based on the revised geological model and updated analogue
analysis. This work predicts the presence of thicker, higher quality oolitic
shoal reservoir over the reef top area and when combined with the updated
depth conversion pushing the southern part of Pensacola slightly deeper,
results in the northern part of Pensacola being filled with gas while the
southern part is anticipated to be filled with oil.
Based on the outcome of this work, Deltic updated its volumetric assessment of
the Pensacola discovery and now estimates that Pensacola contains P50
Estimated Ultimate Recovery of 99 mmboe as reported on 12 July 2023. The
majority of this increase has resulted from the incorporation of the oil
resources into the model and these liquids now comprise approximately 30% of
the total combined recoverable resources.
PENSACOLA DISCOVERY - EUR (gross, Deltic WI: 30%)
Hydrocarbon Type Units P90 P50 P10
Gas BCF 198 320 499
Oil MMBO 11 30 67
Associated gas BCF 24 95 272
COMBINED TOTAL MMBOE* 48 99 196
* Gas is converted at 5.98 BCF to 1 MMBOE
Licence P2252 which contains the Pensacola discovery is operated by Shell
Deltic continues to work closely with Shell and our JV partners to develop the
appraisal programme for the Pensacola discovery. Subject to JV and other
regulatory approvals, the drilling of an appraisal well on Pensacola remains
targeted for Q4 2024. In parallel, the JV will undertake various studies to
define optimal development plans for the Pensacola discovery.
In line with the Company's stated strategy, Deltic has also commenced a formal
process to pursue the value crystallisation options that exist for the
Pensacola discovery which may involve monetisation and/or farm down of an
element of its equity interest in it.
P2437 - Selene (50% Deltic, 50% Shell)
Following the progression of Licence P2437 into Phase C on 31 October 2022,
and with Shell assuming the role of Licence Operator, the preparatory work to
support drilling operations at Selene has continued at pace during the period.
While rig schedules for 2024 are yet to be finalised, the JV is still working
towards a spud date during Q3 2024.
The geophysical site survey is already underway and the geotechnical survey is
planned for later this year. Following completion of the well design process,
critical long lead items including casing have been identified with
procurement processes underway. It is expected that final well costings will
not be available until after a suitable rig has been contracted, however
Deltic is planning for gross well costs in the order of US$30-40m.
Given the increase in drilling costs since the farm-out to Shell in 2019,
Deltic is also planning to reduce its working interest position in Licence
P2437, and therefore capital exposure to the Selene well, and has launched a
farm-out process to attract interest from industry in the Selene opportunity.
Deltic remains convinced that the Selene prospect is one of the largest
unappraised structures in the Leman Sandstone fairway of the Southern Gas
Basin and estimates that it contains gross P50 Prospective Resources of 318
BCF of gas (with a P90 to P10 range of 132 to 581 BCF) with a geological
chance of success of 70%.
P2428 Cupertino & P2567 Cadence (Deltic 40%, Capricorn 60%)
Following Capricorn's well publicised change in corporate strategy away from
exploration to focus on building an Egyptian production-focused company,
Capricorn and Deltic have agreed to end the JV over five licences P2428,
P2567, P2560, P2561 and P2562. As part of ongoing rationalisation and high
grading of its portfolio, Deltic has decided to withdraw from three of the
Licences (P2560, P2561 and P2562) and therefore the JV partnership will move
to relinquish these three licences as soon as practicable.
Since the farm-out to Capricorn was completed in November 2021, Deltic has
been fully carried through an extensive subsurface work programme which has
included the acquisition of nearly 700km(2) of new 3D seismic and reprocessing
of a number of legacy 3D data sets, which has confirmed the significant
exploration potential within licences P2428 and P2567. The Capricorn-led work
has matured 17 leads and prospects with a combined P50 GIIP of more than c.
2.6 TCF within the early Carboniferous play, which has been proven at Pegasus
and Andromeda located immediately to the south of the licences.
Deltic recognises the significant prospectivity identified and intends to
continue with these two licences at the 100% level. The current licence terms
of P2567 and P2428 are due to expire on 30 November 2023 and 31 March 2024
respectively and, once Deltic has been re-appointed as Administrator of these
licences, Deltic intends to request an extension of the current licence terms
from the NSTA. If the extension requests are approved by the NSTA, Deltic
would continue to assure and high grade the prospects identified by Capricorn
while seeking to attract another partner or partners to assist with future
drilling activity across the licences.
The firm work programme has been completed in relation to both licences and
Deltic does not anticipate further capital expenditure in relation to either
licence unless, and until, a suitable partner to progress drilling activity on
theses licences opportunity can be secured.
Central North Sea Assets
P2542 - Syros (Deltic 100%)
The Syros prospect is located immediately to the west of the Montrose-Arbroath
production platforms in the Central North Sea and in close proximity to a
number of fields which produce from the same Fulmar sandstones which are
expected to be present within the Syros rotated fault block. The Syros
prospect is estimated to contain P50 Prospective Resources of 24.5 mmboe (P90
to P10 Range = 13.7 to 39.7 mmboe), with a geological chance of success of
58%.
While efforts are ongoing to find a partner to drill the Syros opportunity,
Deltic has experienced a significant drop-off in interest in the farm-out
process for this particular asset following the UK Government's introduction
of further windfall taxes on the industry in November 2022.
The firm work programme has been completed in relation to Syros and there has
been no material expenditure on the P2542 licence during the reporting period.
Phase A of the current licence runs until 30 November 2024 and Deltic does not
anticipate further capital expenditure in relation to this licence unless a
suitable partner to progress this attractive opportunity can be secured.
33rd Offshore Licensing Round
The NSTA announced the launch of the 33rd Licensing Round on 7 October 2022,
with 931 blocks and part blocks available for licensing. The round closed for
applications on 12 January 2023 and following an extensive review of a large
number of opportunities Deltic submitted a number of applications for blocks
and part blocks in both the Southern and Central North Sea.
Deltic attended licensing interviews with the NSTA on 14 June 2023. Following
completion of that process we expect that the NSTA will begin to award new
licences resulting from the 33rd Licensing Round before the end of Q3 2023.
Andrew Nunn
Chief Operating Officer
21 August 2023
Qualified Person
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.
Financial Review
Overview
Following, Deltic's equity fundraise of £16.0 million (gross) in September
2022 ("the Fundraise"), the Company started the year with a cash balance of
£20.4 million and ended the period to 30 June 2023 with a cash balance of
£9.1 million. The first half of 2023 saw significant planned investment and
use of capital to complete the drilling of the Pensacola discovery. Over the
period, the Company invested £10.0 million (2022: £2.1 million) on
completing Pensacola drilling operations.
Income Statement
The Company incurred a loss for the period of £1.2 million compared with a
loss of £1.0 million for the six months to 30 June 2022. Administrative
expenses of £1.4 million (1H 2022: £1.0 million) were incurred during the
period. Finance income of £0.2 million (1H 2022: nil) was earned on short
term high interest-bearing deposits on surplus funds following the Fundraise.
Corporation tax is payable on finance income earned, and accordingly the
Company has recognised an income tax expense in the period of less than £0.1
million (1H 2022: nil).
Balance Sheet
The Company continues to retain a strong balance sheet with total Capital and
Reserves at 30 June 2023 of £23.2 million (2022: £24.2 million). On 25 May
2023, the Company undertook a Share Consolidation (the 'Consolidation'). The
Consolidation consisted of a consolidation of the existing 1,861,932,000
Ordinary Shares of 0.5 pence each in the capital of the Company ("Existing
Ordinary Shares"), such that every 20 Existing Ordinary Shares were
consolidated into one new ordinary share of 10p each ("New Ordinary Shares").
Following the Consolidation, the Company has a single class of ordinary shares
of 10p each in issue, being 93,096,600 New Ordinary Shares.
The value of exploration assets increased by £6.5 million to £16.3 million
(2022: £9.8 million), mainly reflecting the completion of Pensacola drilling
operations in February 2023. The value of Pensacola work done in the period to
30 June 2023 was £6.3 million. The total net cost to Deltic of drilling the
Pensacola well is £12.8 million.
The Company spent £0.2 million further progressing the Company's exploration
licence portfolio, in particular the Syros and Selene licences. The Selene
pre-drill expenditure will largely be incurred in H2 2023. All costs
associated with the five licences held jointly with Capricorn Energy PLC were
fully paid by Capricorn Energy PLC.
Property, plant and equipment of £0.2 million (2022: £0.3 million) includes
a right of use asset relating to the office lease with a net book value of
£0.1 million (2022: £0.2 million). The Property, Plant and Equipment
reduction reflects the depreciation charge for the year on the office lease,
fixtures and fittings and computer equipment.
The Company's cash position at 30 June 2023 was £9.1 million (2022: £20.4
million), with the year-on-year decrease arising from the investment and use
of cash to drill the Pensacola discovery. As at 30 June 2023, Deltic is still
to pay Shell, as operator of the Pensacola licence, approximately £2 million
in H2 2023.
Total current liabilities, which include short-term creditors, accruals,
provisions and lease liabilities decreased by £3.9 million to £2.5 million
(2022: £6.4 million). Trade creditors of £1.1 million (2022: £3.3 million)
are due to Shell for payments associated with Pensacola drilling operations.
Other payables and accruals of £1.1 million (2022: £1.3 million) mainly
represent the Pensacola discovery drilling value of work done but yet to be
billed by Shell. At 31 December 2022, a provision of £1.3 million was
recognised for the costs incurred in early 2023 for the planned and completed
plugging and abandonment of the Pensacola exploration well.
The Company continues to operate with no debt.
Cash Flow
As at 30 June 2023, the Company held cash and cash equivalents totalling £9.1
million (2022: £20.4 million). The Company had a net cash outflow for the
period of £11.3 million (1H 2022: £2.5 million).
A net cash outflow from operating activities of £1.5 million (1H 2022: £1.3
million) was incurred for general and administrative costs.
Net cash of £9.8 million was used in investing activities (1H 2022: £1.2
million). £10.1 million (1H 2022: £1.3 million) was invested on exploration
and evaluation assets. The total net cost of drilling the Pensacola discovery
well is £12.8 million of which £10.0 million cash (1H 2022: £1.0 million)
was paid to Shell during the period. A further £0.1 million (1H 2022: £0.3
million) was spent developing the other licences in the exploration portfolio.
Bank interest of £0.3 million (1H 2022: nil) was earned on short term high
interest-bearing deposits on surplus funds following the Fundraise.
Sarah McLeod
Chief Financial Officer
21 August 2023
UNAUDITED INCOME STATEMENT AND STATEMENT OF COMPREHENSIVE LOSS
For the period ended 30 June 2023
Note Period ended 30 June 2023 Period ended 30 June 2022 Year ended 31 December 2022
Unaudited Unaudited Audited
£ £ £
Write down on relinquished intangible assets - (48,188) (347,610)
Other administrative expenses (1,372,918) (980,673) (2,745,350)
Total administrative expenses (1,372,918) (1,028,861) (3,092,960)
Operating loss (1,372,918) (1,028,861) (3,092,960)
Finance income 239,309 11,662 129,301
Finance costs (9,366) (14,081) (25,745)
Loss before tax (1,142,975) (1,031,280) (2,989,404)
Income tax expense (77,060) - -
Loss and comprehensive loss for the period attributable to equity holders of (1,220,035) (1,031,280) (2,989,404)
the Company
Loss per share from continuing operations expressed in pence per share: 3 (1.31)p (1.47)p* (3.94)p*
Basic and diluted
* Following the Share Consolidation on 25 May 2023, loss per share amounts in
the interim financial statements and notes thereto have been retroactively
adjusted for all periods presented to illustrate the effect of the Share
Consolidation.
UNAUDITED BALANCE SHEET
As at 30 June 2023
Note 30 June 2023 30 June 2022 31 December 2022
Unaudited Unaudited Audited
£ £ £
NON-CURRENT ASSETS
Intangible Assets 4 16,303,338 3,129,688 9,769,477
Property, Plant and Equipment 222,450 328,993 279,545
Other receivables 37,422 37,421 37,422
16,563,210 3,496,102 10,086,444
CURRENT ASSETS
Trade and other receivables 145,019 72,578 181,102
Cash and cash equivalents 9,075,911 7,627,843 20,409,692
9,220,930 7,700,421 20,590,794
TOTAL ASSETS 25,784,140 11,196,523 30,677,238
CAPITAL AND RESERVES ATTRIBUTABLE TO EQUITY HOLDERS OF THE COMPANY
Share capital 5 9,309,660 7,029,824 9,309,660
Share premium 33,145,477 20,296,030 33,150,786
Share-based payment reserve 1,789,860 1,287,041 1,535,202
Accumulated retained deficit (21,022,988) (17,844,829) (19,802,953)
TOTAL EQUITY 23,222,009 10,768,066 24,192,695
CURRENT LIABILITIES
Trade and other payables 2,310,088 162,516 4,988,307
Current tax payable 77,060 - -
Lease liability 105,806 90,588 90,132
Provisions - - 1,281,000
2,492,954 253,104 6,359,439
NON-CURRENT LIABILITIES
Lease liability 69,177 175,353 125,104
TOTAL LIABILITIES 2,562,131 428,457 6,484,543
TOTAL EQUITY AND LIABILITIES 25,784,140 11,196,523 30,677,238
UNAUDITED STATEMENT OF CHANGES IN EQUITY
For the period ended 30 June 2023
Share-based payment reserve Accumulated Retained deficit
Share capital Share premium Total
equity
£ £ £ £ £
Balance at 1 January 2023 9,309,660 33,150,786 1,535,202 (19,802,953) 24,192,695
Comprehensive income for the year
Loss for the period - - - (1,220,035) (1,220,035)
Total comprehensive loss for the period - - - (1,220,035) (1,220,035)
Contributions by and distributions to owners
Share consolidation / Issue of shares - 22 - - 22
Costs of share consolidation / issue - (5,331) - - (5,331)
Share-based payment - - 254,658 - 254,658
Total contributions by and distributions to owners - (5,309) 254,658 - 249,349
Balance at 30 June 2023 (Unaudited) 9,309,660 33,145,477 1,789,860 (21,022,988) 23,222,009
Balance at 1 January 2022 7,029,824 20,296,030 1,150,700 (16,813,549) 11,663,005
Comprehensive income for the year
Loss for the period - - - (1,031,280) (1,031,280)
Total comprehensive loss for the period - - - (1,031,280) (1,031,280)
Contributions by and distributions to owners
Share-based payment - - 136,341 - 136,341
Total contributions by and distributions to owners - - 136,341 - 136,341
Balance at 30 June 2022 (Unaudited) 7,029,824 20,296,030 1,287,041 (17,844,829) 10,768,066
Balance at 1 January 2022 7,029,824 20,296,030 1,150,700 (16,813,549) 11,663,005
Comprehensive income for the year
Loss for the year - - - (2,989,404) (2,989,404)
Total comprehensive loss for the year - - - (2,989,404) (2,989,404)
Contributions by and distributions to owners
Issue of shares 2,279,836 13,679,014 - - 15,958,850
Costs of share issue - (824,258) - - (824,258)
Share-based payment - - 384,502 - 384,502
Total contributions by and distributions to owners 2,279,836 12,854,756 384,502 - 15,519,094
Balance at 31 December 2022 (Audited) 9,309,660 33,150,786 1,535,202 (19,802,953) 24,192,695
UNAUDITED STATEMENT OF CASH FLOWS
For the period ended 30 June 2023
Period ended 30 June 2023 Period ended 30 June 2022 Year ended 31 December 2022
Unaudited Unaudited Audited
£ £ £
Cash flows from operating activities
Loss before tax (1,142,975) (1,031,280) (2,989,404)
Adjustments for:
Finance income (239,309) (11,662) (129,301)
Finance costs 9,366 14,081 25,745
Depreciation 57,615 57,276 114,698
Loss on disposal of property, plant and equipment - (279) -
Write down on relinquished intangible assets (441) 48,188 347,610
Share-based payment 254,658 136,341 384,502
(1,061,086) (787,335) (2,246,150)
Decrease in trade and other receivables 10,402 64,467 81,991
Decrease in trade and other payables (427,968) (432,495) (18,228)
Net cash used in operating activities (1,478,652) (1,155,363) (2,182,387)
Cash flows from investing activities
Purchase of intangible assets (10,102,094) (1,257,542) (2,557,582)
Purchase of property, plant and equipment (520) (749) (9,003)
Interest received 302,412 11,662 56,606
Net cash used in investing activities (9,800,202) (1,246,629) (2,509,979)
Cash flows from financing activities
Proceeds from share consolidation / issue 22 - 15,958,850
Expense of share consolidation / issue (5,331) - (824,258)
Payment of principal portion of lease liabilities (40,252) (48,289) (98,994)
Interest on lease liabilities (9,366) (14,081) (25,745)
Net cash (outflow)/inflow from financing activities (54,927) (62,370) 15,009,853
(Decrease) / increase in cash and cash equivalents (11,333,781) (2,464,362) 10,317,487
Cash and cash equivalents at beginning of period / year 20,409,692 10,092,205 10,092,205
Cash and cash equivalents at end of period / year 9,075,911 7,627,843 20,409,692
NOTES TO THE FINANCIAL INFORMATION
For the period ended 30 June 2023
1. GENERAL
The interim financial information for the period to 30 June 2023 is unaudited
and does not constitute statutory accounts within the meaning of Section 434
of the Companies Act 2006.
2. ACCOUNTING POLICIES
The interim financial information in this report has been prepared on the
basis of the accounting policies set out in the audited financial statements
for the period ended 31 December 2022 together with new and amended standards
applicable to periods commencing 1 January 2023, which complied with UK
adopted International Accounting Standards in conformity with the requirements
of the Companies Act 2006, and with those parts of the Companies Act 2006
applicable to companies reporting under UK adopted International Financial
Reporting Standards (IFRS).
UK adopted IFRS is subject to amendment and interpretation by the
International Accounting Standards Board ("IASB") and the IFRS Interpretations
Committee and there is an on-going process of review and endorsement by the UK
Endorsement Board since January 2021 (previously the European Commission).
The financial information has been prepared on the basis of IFRS that the
Directors expect to be applicable as at 31 December 2023, with the exception
of IAS 34 Interim Financial Reporting.
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 2022 the Company is currently funded during the
going concern period with no debt. Based on the cash and cash equivalents
balance at 30 June 2023 and the Company's commitments in the going concern
period, the Directors are of the opinion that the Company has adequate
financial resources to fund the final working capital commitments on the
Pensacola exploration programme, Pensacola appraisal pre-drilling costs and
Selene pre-drilling costs, based upon anticipated costs per the planned work
schedule, and its general 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 interim financial statements.
The condensed financial information for the period ended 31 December 2022 set
out in this interim report does not comprise the Group's statutory accounts as
defined in section 434 of the Companies Act 2006.
The statutory accounts for the year ended 31 December 2022, which were
prepared under UK adopted International Accounting Standards in conformity
with the requirements of the Companies Act 2006, and with those parts of the
Companies Act 2006 applicable to companies reporting under IFRS, have been
delivered to the Registrar of Companies. The auditors reported on these
accounts; their report was unqualified and did not contain a statement under
section 498(2) or 498(3) of the Companies Act 2006.
3. 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 period.
Given the Company's reported loss for the period, share options and warrants
are not taken into account when determining the weighted average number of
ordinary shares in issue during the year and therefore the basic and diluted
loss per share are the same.
Basic and diluted loss per
share
Period ended 30 June 2023 Period ended 30 June 2022 Year ended 31 December 2022
Loss for the period (£) (1,220,035) (1,031,280) (2,989,404)
Weighted average number of ordinary shares (number) 93,096,600 70,298,243 75,919,756
Loss per share from continuing operations (1.31)p (1.47)p* (3.94)p*
* Following the Share Consolidation on 25 May 2023, loss per share amounts in
the interim financial statements and notes thereto have been retroactively
adjusted for all periods presented to illustrate the effect of the Share
Consolidation.
4. INTANGIBLE ASSETS
Exploration & evaluation assets Software
licences
£
Total
£
£
Cost
At 1 January 2022 2,203,118 39,257 2,242,375
Additions 7,913,969 - 7,913,969
Write down on relinquished assets (347,610) - (347,610)
At 31 December 2022 9,769,477 39,257 9,808,734
Additions 6,533,861 - 6,533,861
At 30 June 2023 16,303,338 39,257 16,342,595
Amortisation and impairment
At 1 January 2022 - 39,257 39,257
Charge for the year - - -
At 31 December 2022 - 39,257 39,257
Charge for the period - - -
At 30 June 2023 - 39,257 39,257
Net Book Value
At 30 June 2023 16,303,338 - 16,303,338
At 31 December 2022 9,769,477 - 9,769,477
At 1 January 2022 2,203,118 - 2,203,118
The net book value of exploration and evaluation assets at 30 June 2023 and 31
December 2022 relates solely to the Company's North Sea Licences.
Additions in H1 2023 of £6.5 million (2022: £7.9 million) mainly reflect the
completion of Pensacola drilling operations in February 2023. The value of
Pensacola work done in the period to 30 June 2023 was £6.3 million. The total
net cost to Deltic of drilling the Pensacola well is £12.8 million.
5. SHARE CAPITAL
a) Share Capital
The Company has one class of ordinary share which carries no right to fixed
income nor has any preferences or restrictions attached.
Issued and fully paid:
30 June 2023 30 June 2022 31 December 2022
£ £ £
93,096,600 ordinary shares of 10p each (30 June 9,309,660 7,029,824 9,309,660
2022: 1,405,964,855 ordinary shares of 0.5p each)
On 30 September 2022, the Company announced that it had raised approximately
£16 million, before expenses, through the aggregate placing and subscription
and open offer of 455,967,137 new ordinary shares at 3.5 pence per share. The
shares were allotted and admitted to trading on AIM on 3 October 2022.
On 25 May 2023, the Company undertook a Share Consolidation. The Share
Consolidation consisted of a consolidation of the existing ordinary shares
of 0.5 pence each in the capital of the Company ("Existing Ordinary
Shares"), such that every 20 Existing Ordinary Shares were consolidated into
one new ordinary share of 10p each ("New Ordinary Shares"). Following the
Share Consolidation, the Company has a single class of ordinary shares of 10p
each in issue, being the New Ordinary Shares.
6. SUBSEQUENT EVENTS
Following Capricorn Energy's publicly stated decision to exit from its assets
outside of Egypt, the Company has been formally notified of Capricorn Energy's
intention to withdraw from the licences that were farmed out to Capricorn
Energy in 2021. As part of ongoing rationalisation and high grading of its
portfolio, Deltic has also decided to withdraw from three of these licences
(P2560, P2561 and P2562) and therefore the partnership will move to relinquish
these three licences as soon as practicable.
With respect to Licences P2567 and P2428, Deltic recognises the significant
prospectivity highlighted by the technical work programmes completed by
Capricorn, on behalf of the JV, and intends to continue with these two
licences following the withdrawal of Capricorn. Deltic has been fully
carried by Capricorn, and accordingly there is no impairment to be recognised.
7. COPIES OF INTERIM REPORT
Copies of the interim report are available to the public free
of charge from the Company at Deltic Energy Plc, First Floor, 150 Waterloo
Road, London, SW1P 3JS during normal office hours, Saturdays and Sundays
excepted, for 14 days from today and will shortly be available on the
Company's website at www.delticenergy.com (http://www.delticenergy.com) .
Investing Policy
In addition to the development of the North Sea Oil & Gas assets Deltic
Energy Plc has acquired to date, the Company proposes to continue to evaluate
other potential oil & gas and mining projects globally 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 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 per cent. 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.
Forward looking statements
This interim 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.
Glossary of Technical Terms
BCF: Billion Cubic Feet
Estimated Ultimate Recovery or EUR: Estimated Ultimate Recovery is defined as those quantities of petroleum which
are estimated, on a given date, to be potentially recoverable from an
accumulation, plus those quantities already produced therefrom
Gas Initially in Place or GIIP: The quantity of gas that is estimated to exist originally in naturally
occurring accumulations before any extraction or production
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.
MMBO: Million Barrels of Oil
MMBOE or million barrels of oil equivalent: million barrels of oil equivalent. Gas is converted at 5.98 BCF to 1 MMBOE
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
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.
PRMS: the June 2018 Society of Petroleum Engineers ("SPE") Petroleum Resources
Management System
TCF: Trillion Cubic Feet
WI: Working Interest
Standard
Estimates of resources have been prepared in accordance with the PRMS as the
standard for classification and reporting.
**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 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 / Gordon Hamilton
Vigo Consulting (IR Tel: +44 (0) 20 7390 0230
Adviser)
Patrick d'Ancona / Finlay Thomson / Kendall Hill
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