REG - Deltic Energy PLC - Interim Results
26/09/2024 07:00
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RNS Number : 7064F Deltic Energy PLC 26 September 2024
Prior to publication, the information contained within this announcement was
deemed by the Company to constitute inside information as stipulated under the
UK Market Abuse Regulation. With the publication of this announcement, this
information is now considered to be in the public domain.
Deltic Energy Plc / Index: AIM / Epic: DELT / Sector: Natural Resources
26 September 2024
Deltic Energy Plc ("Deltic" or "the Company")
Interim Results
Deltic Energy Plc (https://delticenergy.com/) , 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 2024.
Highlights
· Farmed down a 25% interest in Licence P2437 including the Selene
prospect to Dana Petroleum (E&P) Limited ("Dana"), resulting in Deltic now
being fully carried for the estimated success case cost of the well.
· The Shell operated Selene exploration well, targeting Gross P50
Prospective Resources of 318 BCF in the UK Southern North Sea, was spudded on
28 July. Operations are expected to take approximately 90 days from spud and
the Company will update the market as appropriate.
· Deltic accepted two out of the four licences provisionally awarded by
the North Sea Transition Authority ("NSTA") in the UK's 33rd Offshore
Licensing Round. Both licences contain attractive low risk, low cost,
infrastructure led exploration opportunities with nominal capital commitments
in Phase A of the licences.
· On 10 June Deltic notified its Joint Venture ("JV") partners on
Licence P2252, containing the Pensacola discovery, of the Company's intention
to withdraw from the licence.
· Deltic has now reached agreement with the JV partners on Licence
P2252, limiting the Company's liabilities associated with withdrawal from
licence P2252 to £1.9 million with payment of circa 50% of this amount
deferred for a period of 24 months.
· Cash position of £3.7 million at 30 June 2024 (31 December 2023:
£5.6 million)
Graham Swindells, CEO, commented:
"There is no doubt that the first half of the year has been one of the most
challenging periods for the Company since its inception, with highly
publicised fiscal and political pressures impacting companies operating across
the UK's domestic oil and gas sector. Despite these unprecedented headwinds,
the Company continues to make significant commercial and operational progress,
which has resulted in a farm-down to Dana which limits our potential cost
exposure to the high impact Selene exploration well which is currently being
drilled, as well as the award of two new UK licences located close to key
production hubs in the Central and Southern North Sea.
Despite our necessary withdrawal from Pensacola, Deltic remains in a strong
position to extract significant value for shareholders from our existing UK
asset portfolio over the coming months and years. While limiting our cost
exposure to UK exploration, the Company remains committed to continuing its
exploration-led growth strategy and is actively evaluating investment
opportunities in other jurisdictions where we can leverage our team's core
strengths and where a more supportive approach to the future oil and gas
exploration and development prevails."
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 / Charlie Hammond
Vigo Consulting (IR Tel: +44 (0) 20 7390 0230
Adviser)
Patrick d'Ancona / Finlay Thomson / Kendall Hill
Chairman's Statement
Looking back at over 40 years of my career in this sector, of which about half
was spent in the North Sea, each year would have been a story of good news and
bad news. An explorationist will tend to dwell on the good news and optimism
but a good explorationist will reflect and learn from the less good news.
The outcome for Pensacola was undoubtedly a disappointment. We worked hard to
interrogate the data and find an opportunity overlooked by others. The
discovery was a cause for celebration. To lose it subsequently was a blow to
the team. When we brought Pensacola forward for drilling, reservoir quality
was the main uncertainty; an exploration risk. Fortunately, reservoir quality
appeared good. Instead, timing of the next phase of investment got caught up
in the politics of an election campaign where energy and the future of the
North Sea sector were treated as a political football and our involvement in
Pensacola ended for a different reason.
But we are prepared for this. Our business model was built to cope with some
prospects inevitably falling by the wayside for various reasons. This was why
we created a conveyor belt of opportunities; a portfolio of exploration
opportunities which allow us to continue with our programme of discovering the
oil and gas our country needs for decades, according to the Committee of
Climate Change and our new Prime Minister.
We should be optimistic that the new government will eventually recognise the
importance of our domestic natural resources for jobs, for treasury receipts,
for energy security and for emissions, compared with imported supplies.
And this leads us to the good news: a jack-up drilling rig is currently
conducting drilling operations at our Selene prospect. Selene is another
prospect the Deltic team uncovered and successfully brought in Shell and Dana,
not only to share in the resources of the opportunity but to cover our costs
of technical work and exploration drilling. The whole team is happy to be
back to the part of exploration where we open the box and find out what's in
it.
This is exploration in a mature basin. You examine, you discover, and you move
on.
Mark Lappin
Chairman
25 September 2024
CEO Statement
I reflect on the year to date with mixed emotions, ranging from the hugely
disappointing forced withdrawal from the Pensacola licence to the positive
progress on Selene with a successful farm-out to Dana in February, the
spudding of the high impact Selene exploration well in July and the award of
new licences with significant potential as a result of success in the 33(rd)
offshore licensing round. All this has been achieved against the highly
publicised backdrop of continual degradation of the UK fiscal regime, as it
pertains to exploration and production operations on the UK Continental Shelf
(UKCS), and negative sentiment driven by policy announcements from a Labour
government in waiting in the run-up to the general election in July.
Despite this the Company has always believed in the strength of its portfolio
to deliver value for shareholders and through selective acceptance of 33(rd)
Round awards we have moved our UK portfolio away from higher risk greenfield
exploration to a more infrastructure-led asset base which we believe will be
relevant and valuable under any future regime, especially as access to further
new licences is likely to be highly restricted.
Over the next year the focus will be on limiting our cost exposure, through
farm-down or deferral of planned work programmes on our existing assets, while
looking to extract value from our investment in the UK to date. The team has
demonstrated its ability to identify high quality opportunities, execute the
technical work that much larger organisations respect and to attract
investment from these larger oil and gas companies to move projects forward
into drilling and hopefully beyond. These core skillsets can continue to be
leveraged as we look to deliver value both from our existing portfolio but
also as we look forwards towards future opportunities and expansion of the
portfolio.
Pensacola
Despite an exhaustive process, increasing political and fiscal uncertainty
exacerbated by the timing of the general election meant that Deltic was
ultimately unable to secure a farm-out or an alternative funding solution
which would allow the Company to fulfil its future commitments with respect to
the Pensacola appraisal well which was due to be drilled in the second half of
this year. Consequently, Deltic had to withdraw from the licence prior to
being required to formally undertake further drilling obligations in early
June.
In the course of this process, the Company examined a wide variety of funding
solutions which included potential industry partners, including existing
partners, via traditional farm-out or asset sale, the equity capital markets,
strategic investors and debt providers. However, paralysis amongst potential
farm in partners unable to make investment decisions in such a politically
toxic environment, coupled with erosion of confidence amongst the investor
community, resulted in the Company being unable to find a solution to continue
with Pensacola.
The Company subsequently notified the partners of Licence P2252 of the
Company's intention to withdraw from the licence. An agreement with the JV
partners to limit Deltic's trailing liabilities for costs incurred prior to
withdrawal under the Joint Operating Agreement (JOA) has been reached along
with a deferred repayment agreement which is positive for Deltic's short term
working capital position. Further details of this agreement are set out below.
While the withdrawal from Pensacola has been extremely disappointing, this
draws a line under what has been a very difficult period for Deltic and its
shareholders. Now this has been settled we can look forward to the results of
the ongoing Selene well operations in the coming months.
Selene - Farm-out and Drilling
Excellent progress was made on Selene throughout the course of the first half
of 2024. The farm out to Dana was completed and the rig contract was entered
in February for the Valaris 123, a heavy duty jackup rig. The Valaris rig was
mobilised in July with drilling operations commencing on 28 July 2024. Well
operations are underway and are planned to take approximately 90 days after
which the rig will be demobilised from the Selene well location.
The farm-out to Dana formed part of the strategy to mitigate Deltic's cost
exposure to the upcoming well while bringing in a further high-quality
partner. As a result of this transaction, and when combined with the existing
Shell carry, Deltic retains a 25% interest in Licence P2437 and has no
exposure to the success case drilling costs up to a gross cap of $49M, which
is in excess of the success case well cost estimates.
The Selene exploration well is the first exploration well drilled on the UKCS
in 2024 and is an equally important milestone for Deltic. The Selene prospect
is a high impact, infrastructure-led exploration opportunity which, in the
case of exploration success, we believe should remain commercially viable
under any envisaged future fiscal regime.
In contrast to Pensacola, the 318 BCF (Gross P50 Prospective Resources) Selene
prospect is a simple Leman Sandstone structure in an established, well
understood play and located close to existing production infrastructure. In a
successful outcome, Selene is not expected to require further appraisal prior
to field development planning commencing and could therefore be brought into
production relatively quickly following discovery given the proximity of
existing infrastructure.
We note the proposed acquisition of a package of Shell and ExxonMobil's South
North Sea assets, which includes the Selene prospect, by Viaro Energy
("Viaro"). Based on released information we would expect this transaction to
complete in mid-2025 with Viaro assuming operatorship of the Selene asset and
the proposed evacuation route via Barque, Clipper and the Bacton Gas Terminal
onshore Norfolk. It is encouraging that Viaro continue to take a positive
counter-cyclical approach to the UK exploration and production sector and we
believe that they will inherit the same significant commercial drivers that
should support a rapid development of Selene in the event of exploration
success, that initially attracted Shell to the asset in the first place.
We look forward to successful drilling and updating the market in relation to
the well.
Other licences - Syros (P2542)
The farm-out process on the Syros prospect located in the Central North Sea,
in close proximity to the production infrastructure associated with the
Montrose and Arbroath fields, generated an encouraging level of interest from
potential farminees interested in joining Deltic on this asset. However, as
we have seen across the industry, planned farm-in discussions have been
suspended pending a review of the expected update to the UK's taxation regime
which will be presented in the October budget.
Given the impact that previous alterations to the Energy Profits Levy, the
General Election earlier in the year and the ongoing uncertainty associated
with the October budget, have had on corporate decision making, Deltic has
requested a 12 month extension to Phase A of the licence from 1 December 2024
to 1 December 2025 from the NSTA. If this extension is granted, it will
allow potential partners sufficient time to assess the impacts of any changes
to the EPL and re-engage with Deltic in relation to farming into this asset.
Licence Awards
In the first half of 2024, Deltic continued to add to its portfolio of
licences through further success in the UK's 33rd Offshore Licensing Round.
Dewar (P2646)
On 1 February 2024, we were pleased to announce the award of the Dewar licence
which has previously been licenced and matured by Deltic. Dewar is considered
a low-risk prospect in the Forties Sandstone, located close to existing and
proposed new infrastructure associated with the redevelopment of the Murlach
Field (formerly known as Skua) with P50 Prospective Resources estimated at 21
mmboe.
The work programme associated with the initial phase of the licence is
restricted to upgrading the seismic data sets held by the Company at
relatively low cost and is focussed on providing greater confidence around
prospect volumetrics and risk before embarking on a farm out process.
Blackadder (P2672)
We were subsequently pleased to confirm the formal award of Licence P2672
which lies immediately to the west of the West Sole gas field in the Southern
North Sea. The licence contains the Pharos and Teviot discoveries with Pharos
and Blackadder now considered to be one single structure with P50 Prospective
Resources of 165 BCF. The location and nature of the Blackadder project
provide it with many similarities to Selene, where the reworking of legacy
datasets has identified a potential missed pay opportunity of material scale.
Blackadder's location, in close proximity to existing infrastructure, should
enhance its value in a basin where new licences are likely to become
increasingly scarce.
Over the coming year, we will progress our work on the legacy data in
preparation for farm-out, in anticipation of drilling an appraisal well on
Blackadder.
These awards are a direct result of the hard work that our technical team put
into the application process and the licences accepted have been selected by
Deltic to have the best potential to be progressed and create additional
drilling opportunities in the future.
Outlook
The first half of 2024 has seen the outlook for the UK's oil and gas industry
become increasingly uncertain, further heightened by the recent election and
the proposals put forward by the Labour government. This uncertainty remains
following the Government's policy update on 29 July 2024, which increases and
extends the EPL, removes the uplift on allowances while leaving a decision on
other allowances until the next budget on 30 October 2024. Deltic continues
to engage in and support industry lobbying efforts and it is hoped that the
new Government's first budget will provide an element of clarity and much
needed stability if the UK oil and gas industry is to avoid an accelerated
decline.
Despite these challenges, we are nonetheless pleased to have added to the
Company's portfolio of licences with further success in the latest licensing
round with the award of the Dewar and Blackadder licences and we are
particularly excited to have started drilling at Selene with our partners
Shell and Dana.
The fact that we are in the second half of the year and Selene is the first
exploration well to be drilled in the UKCS clearly demonstrates the impact
that political and fiscal instability has had on levels of activity and
investment. Therefore, until further clarity exists Deltic intends to limit
further investment in its UK portfolio (other than Selene) and will look to
pursue opportunities overseas in jurisdictions that are more favourable and
supportive of the oil and gas industry. Our team has significant international
experience and believes that it can bring this to bear on such opportunities.
Although our industry faces ongoing uncertainty, we look forward to successful
operations at Selene, and continue to believe exploration on the UKCS has a
hugely important role to play in supporting the provision of energy security,
jobs within the energy sector and the ability to offset higher carbon
intensity imported energy.
I would like to take this opportunity to thank the entire Deltic team for
their continued hard work and dedication throughout the year to date.
Graham Swindells
Chief Executive Officer
25 September 2024
Operating Review
Pensacola - Licence P2252 and P2558
As previously announced, Deltic has withdrawn from licence P2252, which
contains the Pensacola discovery, due to an inability to secure a further
farm-out or alternative funding structures given the perceived political
threats to the industry and ongoing fiscal uncertainty in the run-up to the UK
general election on 4 July. The process of transferring Deltic's equity
share in Licence P2252 to the remaining partners Shell U.K. Ltd and ONE-Dyas
is ongoing.
The Shell-Deltic JV has completed the technical review of potential follow-on
opportunities in the Zechstein on adjacent licence P2558. While exploration
potential remains within the licence area, no immediately viable drilling
opportunity has been identified by the JV and the NSTA has been notified of
the JV's intention not to proceed beyond Phase A of the licence. The licence
will be allowed to expire on 30 November 2024.
Selene - Licence P2437
The Selene prospect is a 4-way dip closed structure in the Leman Sandstone in
the heart of the play fairway and close to offtake infrastructure which is
located some 20km to the south of the well location. Deltic has a 25%
non-operated interest in the P2437 licence and estimates the Selene structure
to contain gross P50 Prospective Resources of 318 BCF (P90 to P10 range of 132
to 580 BCF) and a geological chance of success (GCoS) of 69%.
As previously announced, the Valaris 123 rig was mobilised to the Selene site
from the Central North Sea on the 21(st) July. Drilling operations commenced
on the 28(th) July with well operations expected to take approximately 90 days
to complete. The well is being operated by Shell U.K. Ltd.
The Selene opportunity with its material recoverable volumes, low development
CAPEX and proximity to existing offshore production infrastructure has what we
consider to be an almost unique combination of characteristics in the Southern
North Sea which, in the case of exploration success, we believe makes it
remain relevant and commercially viable under almost any future fiscal regime.
We will update the market in due course upon completion of drilling
operations.
Blackadder - Licence P2672
The Blackadder prospect was provisionally awarded to Deltic on a 100% basis in
Tranche 3 of the 33rd Offshore Licensing Round and formal licence
documentation was received and executed in early July.
The licence is located immediately to the west of the West Sole gas field and
covers blocks 47/5e, 47/10c and 48/6c and contains the Pharos and Teviot
discoveries. Deltic's preliminary evaluation, completed as part of the
application process, has resulted in an updated understanding of the
structural setting, which suggests that the Pharos discovery and the
Blackadder prospect are in fact a single Leman Sandstone structure.
Deltic's preliminary evaluation of the combined structure estimates P50
Prospective Resources of 165 BCF (P90 to P10 range of 66 to 293 BCF) with a
GCoS of 65%. These estimates will be reviewed and updated as part of the
Phase A work programme associated with the licence.
Blackadder is highly analogous to the Selene opportunity both in terms of its
geological setting but also in relation to access to offtake infrastructure
which should speed up commercialisation timelines in the event of a discovery.
The Phase A work programme commitments are focussed on the reprocessing of
legacy 3D seismic data to improve reservoir imaging and refine the structural
model in order to further de-risk the Blackadder structure. Total
expenditure associated with the Phase A work programme is estimated at less
than £200,000.
Syros - Licence P2542
The Syros licence is held 100% by Deltic and contains the Syros prospect,
which is hosted in the Jurassic aged Fulmar Sandstone, a prolific producing
reservoir on the western flank of the Montrose-Arbroath High in the Central
North Sea.
The prospect is mapped as simple rotated fault block on modern high quality 3D
and is estimated to contain a light gassy oil with P50 Prospective Resources
of 24.5mmboe (P90 to P10 range of 13.7 to 39.7mmboe) with a GCoS of 58%.
While a number of potential development options exist, the most likely would
be a short subsea tieback to the existing production infrastructure located on
the Montrose-Arbroath High.
Following a number of management team changes and corporate ownership changes
in licences around the Syros prospect, the Company saw an uptick in interest
in the ongoing Syros farm-out process prior to the announcement of the general
election in May 2024. The ongoing political and fiscal uncertainty is
proving extremely unhelpful in drawing these discussions to a conclusion and
Deltic has requested a 12 month extension to Phase A of the licence from the
NSTA.
Licence P2542 will expire on the 30 November 2024 unless either a farm-down
can be secured or an extension to Phase A is granted by the NSTA.
Dewar - Licence P2646
Licence P2646 containing the Dewar prospect was awarded to Deltic on a 100%
basis in Tranche 2 of the 33(rd) Offshore Licensing Round. Dewar is a
low-risk prospect in the Forties Sandstone, located close to existing and
proposed new infrastructure associated with the redevelopment of the Murlach
Field (formerly known as Skua) in the CNS.
Deltic currently estimates the Dewar prospect to contain P50 Prospective
Resources of 20.8 mmboe (P90 to P10 range of 10 to 38.2 mmboe) with a GCoS of
36%.
The Phase A work programme associated with the licence is restricted to
upgrading the key seismic data sets held by the Company at relatively low cost
and is focussed on providing greater confidence around prospect volumetrics
and risk. The early stage work will also look in detail at the alternative
development and export options that were not available last time the company
had an interest in this particular opportunity.
Portfolio and Resource Summary
The Company's current licence portfolio and prospect inventory, as of the end
July 2024, is summarised below:
Southern North Sea - Prospective Resources
Licence Ref: Block ID Deltic Equity Project ID Discovery (D) Net to Deltic GCoS
Discovery (D) Prospective Resource GCoS%
Prospect (P) (BCF)
Lead (L)
P90 P50 P10
Low Best High
P2672 48/6c, 47/5e & 47/10c 100% Pharos-Blackadder D 66 165 293 65
Teviot D 9 17 27 65
P2437(1) 48/8b 25% Sloop - Leman D 2 4 10 100
Selene - Leman P 33 80 145 70
Endymion - Leman L 9 12 15 27
Rig & Jib - Leman L 4 9 15 35
(1) Operated by Shell
Central North Sea - Prospective Resources
Licence Ref: Block ID Deltic Equity Project ID Discovery(D) Net to Deltic GCoS%
Prospect (P) Prospective Resource
Lead (L) (MMBOE)
P90 P50 P10
Low Best High
P2542 22/17a 100% Syros - Fulmar P 13.7 24.5 39.7 58
P2646 22/24f & 22/25e 100% Tesla - Jurassic D 1.9 3.6 6.4 100
Dewar - Forties P 10 20.8 38.2 36
Andrew Nunn
Chief Operating Officer
25 September 2024
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
The Company started the year with a cash balance of £5.6 million and ended
the period to 30 June 2024 with a cash balance of £3.7 million. The first
half of 2024 saw the Company farm out a 25% interest in Licence P2437,
containing the Selene Prospect, and the Company providing its notice of
withdrawal from the Pensacola licence.
Income Statement
The Company incurred a loss, before the impairment of Pensacola, for the
period of £1.3 million compared with a loss of £1.2 million for the six
months to 30 June 2023. Administrative expenses of £1.5 million (1H 2023:
£1.4 million) were incurred during the period.
Deltic farmed out a 25% interest in Licence P2437, containing the Selene
Prospect, to Dana. Dana paid the Company £1.1 million in cash on completion
in relation to back costs incurred by Deltic. The Company recognised a gain of
£0.1 million on the farm out of Licence P2437 to Dana which is included as
other operating income.
Finance income of £0.1 million (1H 2023: £0.2 million) was earned on short
term high interest-bearing deposits.
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 2023: £0.1 million). The Company has incurred expenditure since
incorporation on UK exploration and appraisal activities that gives rise to a
potential tax asset of over £57 million that can be utilised to offset future
taxation.
The Company recognised an impairment in the period of £18.0 million resulting
from the decision to notify the partners of Licence P2252 of the Company's
intention to withdraw from the Pensacola licence.
Balance Sheet
The value of exploration assets decreased by £16.5 million to £1.0 million
(31 December 2023: £17.5 million), mainly reflecting the Pensacola impairment
of £18.0 million, the Selene farm-out to Dana and operational cost spend to
June 2024.
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 2024 was £3.7 million (31 December
2023: £5.6 million), with the £1.9 million decrease in the period arising
from general and administrative costs, investment in pre-drilling operational
costs offset by proceeds from the farm-out of Selene to Dana.
Total current liabilities, which include short-term creditors, accruals,
provisions and lease liabilities increased by £0.7 million to £2.3 million
(31 December 2023: £1.6 million). Trade creditors of £0.7 million (31
December 2023: £0.1 million) are due to Shell for payments associated with
Pensacola appraisal pre-drilling operations. Other payables and accruals of
£1.2 million (31 December 2023: £0.1 million) mainly represent the Pensacola
appraisal pre-drilling value of work done but yet to be billed by Shell.
The Company continues to operate with no debt.
Cash Flow
As at 30 June 2024, the Company held cash and cash equivalents totalling £3.7
million (31 December 2023: £5.6 million). The Company had a net cash outflow
for the period of £1.8 million (1H 2023: £11.3 million).
A net cash outflow from operating activities of £1.3 million (1H 2023: £1.5
million) was incurred for general and administrative costs.
Net cash of £0.5 million was used in investing activities (1H 2023: £9.8
million). £1.6 million was invested on exploration and evaluation assets (1H
2023: £10.1 million); £0.5 million (H1 2023: £10.0 million) was paid to
Shell during the period for Pensacola appraisal pre-drilling operations, £1.0
million (H1 2023: nil) was spent on Selene pre-drill operations. The majority
of Selene costs incurred between the effective date and completion of the
Selene farm-out were reimbursed by Dana as part of the Selene farm-out. Dana
paid the Company £1.1 million (1H 2023: nil) proceeds for the farm-out of
Selene being £0.4 million initial contribution and a further £0.7 million as
repayment of Shell costs incurred by the Company between the effective date
and completion of the transaction. A further £0.1 million (1H 2023: £0.1
million) was spent developing the other licences in the exploration portfolio.
Bank interest of £0.1 million (1H 2023: £0.3 million) was earned on short
term high interest-bearing deposits on surplus funds following the 2022
Fundraise.
Going concern
The Directors have completed the going concern assessment, including
considering cash flow forecasts up to the end of Q3 2025, sensitivities, and
stress tests to assess whether the Company is a going concern. The inherent
nature of the Company means it is dependent on its existing cash resources,
farming down of assets and its ability to raise additional funding in order to
progress its operational programme on an ongoing basis.
Although it was expected that Deltic may be required to honour further
expenditure in relation to the Pensacola appraisal well which was approved by
the JV prior to the withdrawal notice being issued, agreement has been reached
with the other Pensacola JV parties that these liabilities will be capped at
£1.9 million of pre-drilling costs incurred on the Pensacola appraisal well
up until the date of withdrawal on 10 June 2024. These costs are recognised in
the interim financial statements. Under a deferred repayment agreement
agreed with the JV, Deltic will pay £1.0 million in September 2024 with the
payment of the remaining £0.9 million deferred for a 24 month period. The
deferred payment terms include a non-compounding interest of Bank of England
Base Rate plus 8%, repayable quarterly in arrears commencing in December 2024.
Having undertaken careful assessment, the Directors are of the view the
Company will need to access additional funds within twelve months in order to
fund on-going operations. It is anticipated these funds will primarily be
sourced through farm downs, asset disposal, issuing new equity or a
combination of these actions. The interim statements for the period to 30 June
2024 have been prepared assuming the Company will continue as a going concern.
In support of this, the Directors believe the liquid nature of the UK asset
market means it is likely that adequate funds can be accessed when required.
However, the ability to access funds is not guaranteed. As a consequence, this
funding requirement represents a material uncertainty that may cast
significant doubt on the Company's ability to continue as a going concern.
Sarah McLeod
Chief Financial Officer
25 September 2024
UNAUDITED INCOME STATEMENT AND STATEMENT OF COMPREHENSIVE LOSS
For the period ended 30 June 2024
Note Period ended 30 June 2024 Period ended 30 June 2023 Year ended 31 December 2023
Unaudited Unaudited Audited
£ £ £
Other administrative expenses (1,487,503) (1,372,918) (3,035,896)
Exceptional administrative expenses: Impairment on intangible assets (17,974,542) - (184,242)
4
Total administrative expenses (19,462,045) (1,372,918) (3,220,138)
Other operating income 4 108,987 - -
Operating loss (19,353,058) (1,372,918) (3,220,138)
Finance income 84,643 239,309 388,403
Finance costs (6,223) (9,366) (16,788)
Loss before tax (19,274,638) (1,142,975) (2,848,523)
Income tax expense (21,161) (77,060) (112,830)
Loss and comprehensive loss for the period attributable to equity holders of (19,295,799) (1,220,035) (2,961,353)
the Company
Loss per share from continuing operations expressed in pence per share: 3 (20.73)p (1.31)p (3.18)p
Basic and diluted
UNAUDITED BALANCE SHEET
As at 30 June 2024
Note 30 June 2024 30 June 2023 31 December 2023
Unaudited Unaudited Audited
£ £ £
NON-CURRENT ASSETS
Intangible Assets 4 958,721 16,303,338 17,463,225
Property, Plant and Equipment 119,547 222,450 171,627
Investment in subsidiary 1 - 1
Other receivables 37,422 37,422 37,422
1,115,691 16,563,210 17,672,275
CURRENT ASSETS
Trade and other receivables 189,400 145,019 112,598
Cash and cash equivalents 3,731,200 9,075,911 5,580,259
3,920,600 9,220,930 5,692,857
TOTAL ASSETS 5,036,291 25,784,140 23,365,132
CAPITAL AND RESERVES ATTRIBUTABLE TO EQUITY HOLDERS OF THE COMPANY
Share capital 5 9,309,660 9,309,660 9,309,660
Share premium 33,145,477 33,145,477 33,145,477
Share-based payment reserve 2,288,196 1,789,860 1,999,834
Accumulated retained deficit (42,012,416) (21,022,988) (22,716,617)
TOTAL EQUITY 2,730,917 23,222,009 21,738,354
CURRENT LIABILITIES
Trade and other payables 2,112,891 2,310,088 1,402,375
Current tax payable 109,935 77,060 88,775
Lease liability 82,548 105,806 124,282
2,305,374 2,492,954 1,615,432
NON-CURRENT LIABILITIES
Lease liability - 69,177 11,346
TOTAL LIABILITIES 2,305,374 2,562,131 1,626,778
TOTAL EQUITY AND LIABILITIES 5,036,291 25,784,140 23,365,132
UNAUDITED STATEMENT OF CHANGES IN EQUITY
For the period ended 30 June 2024
Share-based payment reserve Accumulated Retained deficit
Share capital Share premium Total
equity
£ £ £ £ £
Balance at 1 January 2024 9,309,660 33,145,477 1,999,834 (22,716,617) 21,738,354
Comprehensive income for the year
Loss for the period - - - (19,295,799) (19,295,799)
Total comprehensive loss for the period - - - (19,295,799) (19,295,799)
Contributions by and distributions to owners
Share-based payment - - 288,362 - 288,362
Total contributions by and distributions to owners - - 288,362 - 288,362
Balance at 30 June 2024 (Unaudited) 9,309,660 33,145,477 2,288,196 (42,012,416) 2,730,917
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
Issue of shares - 22 - - 22
Costs of share 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 2023 9,309,660 33,150,786 1,535,202 (19,802,953) 24,192,695
Comprehensive income for the year
Loss for the year - - - (2,961,353) (2,961,353)
Total comprehensive loss for the year - - - (2,961,353) (2,961,353)
Contributions by and distributions to owners
Issue of shares - 22 - - 22
Costs of share issue - (5,331) - - (5,331)
Expired share options - - (47,689) 47,689 -
Share-based payment - - 512,321 - 512,321
Total contributions by and distributions to owners - (5,309) 464,632 47,689 507,012
Balance at 31 December 2023 (Audited) 9,309,660 33,145,477 1,999,834 (22,716,617) 21,738,354
UNAUDITED STATEMENT OF CASH FLOWS
For the period ended 30 June 2024
Period ended 30 June 2024 Period ended 30 June 2023 Year ended 31 December 2023
Unaudited Unaudited Audited
£ £ £
Cash flows from operating activities
Loss before tax (19,274,638) (1,142,975) (2,848,523)
Adjustments for:
Finance income (84,643) (239,309) (388,403)
Finance costs 6,223 9,366 16,788
Depreciation 57,250 57,615 115,099
Loss on disposal of property, plant and equipment - - 500
Gain on farm in (108,987) - -
Impairment of intangible assets 17,974,542 (441) 184,243
Foreign exchange movement in operating loss (9,589) - -
Share-based payment 288,362 254,658 512,321
(1,151,480) (1,061,086) (2,407,975)
(Increase)/Decrease in trade and other receivables (84,326) 10,402 10,112
Decrease in trade and other payables (92,631) (427,968) (203,603)
Tax paid - - (24,055)
Net cash used in operating activities (1,328,437) (1,478,652) (2,625,521)
Cash flows from investing activities
Purchase of intangible assets (1,632,008) (10,102,094) (12,547,872)
Purchase of property, plant and equipment (12,330) (520) (1,130)
Proceeds from licence farm in 1,091,345 - -
Interest received 92,167 302,412 446,795
Net cash used in investing activities (460,826) (9,800,202) (12,102,207)
Cash flows from financing activities
Proceeds from share consolidation / issue - 22 22
Expense of share consolidation / issue - (5,331) (5,331)
Payment of principal portion of lease liabilities (50,873) (40,252) (79,608)
Interest on lease liabilities (8,430) (9,366) (16,788)
Net cash outflow from financing activities (59,303) (54,927) (101,705)
Decrease in cash and cash equivalents (1,848,566) (11,333,781) (14,829,433)
Cash and cash equivalents at beginning of period / year 5,580,259 20,409,692 20,409,692
Effect of exchange rate changes on balance of cash held in foreign currencies (493) - -
Cash and cash equivalents at end of period / year 3,731,200 9,075,911 5,580,259
NOTES TO THE FINANCIAL INFORMATION
For the period ended 30 June 2024
1. GENERAL
The interim financial information for the period to 30 June 2024 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 2023 together with new and amended standards
applicable to periods commencing 1 January 2024, 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 Accounting
Standards (IAS).
UK adopted IAS 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 2024, with the exception
of IAS 34 Interim Financial Reporting.
The condensed financial information for the period ended 31 December 2023 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 2023, 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 UK adopted IAS,
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.
Going Concern
The Directors have completed the going concern assessment, including
considering cash flow forecasts up to the end of Q3 2025, sensitivities, and
stress tests to assess whether the Company is a going concern. The inherent
nature of the Company means it is dependent on its existing cash resources,
farming down of assets and its ability to raise additional funding in order to
progress its operational programme on an ongoing basis.
Although it was expected that Deltic may be required to honour further
expenditure in relation to the Pensacola appraisal well which was approved by
the JV prior to the withdrawal notice being issued, final agreement was
reached with the other Pensacola JV parties Operator that liabilities will be
capped at £1.9 million of pre-drilling costs incurred on the Pensacola
appraisal well up until the date of withdrawal on 10 June 2024. These costs
are recognised in these interim financial statements. Under the Deferred
Repayment Agreement agreed with the JV, Deltic will pay £1.0 million in
September 2024 with the payment of the remaining the £0.9 million deferred
for a twenty four month period. The deferred payment terms include a
non-compounding interest of Bank of England Base Rate plus 8% repayable
quarterly in arrears, commencing in December 2024.
Having undertaken careful assessment, the Directors are of the view the
Company will need to access additional funds within twelve months in order to
fund on-going operations. It is anticipated these funds will primarily be
sourced through farm downs, asset disposal, issuing new equity or a
combination of these actions. The interim statements for the period to 30 June
2024 have been prepared assuming the Company will continue as a going concern.
In support of this, the Directors believe the liquid nature of the UK asset
market means it is likely that adequate funds can be accessed when required.
However, the ability to access funds is not guaranteed. As a consequence, this
funding requirement represents a material uncertainty that may cast
significant doubt on the Company's ability to continue as a going concern.
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 2024 Period ended 30 June 2023 Year ended 31 December 2023
Loss for the period (£) (19,295,799) (1,220,035) (2,961,353)
Weighted average number of ordinary shares (number) 93,096,600 93,096,600 93,096,600
Loss per share from continuing operations (20.73)p (1.31)p (3.18)p
4. INTANGIBLE ASSETS
Exploration & evaluation assets Software
licences
£
Total
£
£
Cost
At 1 January 2023 9,769,477 39,257 9,808,734
Additions 7,877,990 - 7,877,990
Write down on relinquished assets (21,127) - (21,127)
At 31 December 2023 17,626,340 39,257 17,665,597
Additions 2,392,971 - 2,392,971
Disposals (922,933) - (922,933)
Write down on relinquished assets - - -
At 30 June 2024 19,096,378 39,257 19,135,635
Amortisation and impairment
At 1 January 2023 - 39,257 39,257
Impairment charge for the year 163,115 - 163,115
At 31 December 2023 163,115 39,257 202,372
Impairment charge for the period 17,974,542 - 17,974,542
At 30 June 2024 18,137,657 39,257 18,176,914
Net Book Value
At 30 June 2024 958,721 - 958,721
At 30 June 2023 16,303,338 - 16,303,338
At 31 December 2023 17,463,225 - 17,463,225
Aggregate cash proceeds arising from the farm-out of the Selence licence to
Dana during the period amounted to £1,091,345, including a foreign exchange
gain of £10,082. At 30 June 2024, the Company is due £49,343 from Dana as
part of a final completion adjustment on the transaction. An amount of
£922,933 was deducted from exploration and evaluation assets, being the
previously capitalised amount relating to the licence. The surplus of the
proceeds over the carrying value amount to £108,987 and was recognised as a
gain on disposal of the partial interest and included as other operating
income in the Income Statement for the period.
The Company recognised an impairment in the period of approximately £18.0
million resulting from the decision to notify the partners of License P2252 of
the Company's intention of withdraw from the Pensacola licence.
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 2024 30 June 2023 31 December 2023
£ £ £
93,096,600 ordinary shares of 10p each 9,309,660 9,309,660 9,309,660
(30 June 2023: 93,096,600 ordinary shares of 10p each)
6. SUBSEQUENT EVENTS
It was announced on 8 July 2024 that the Company accepted one the two licences
that were provisionally awarded by the North Sea Transition Authority ("NSTA")
in Tranche 3 of the UK's 33(rd) Offshore Licensing Round ("33(rd) Round").
Licence P2672 (Deltic 100% WI) is located immediately to the west of the
West Sole gas field and covers blocks 47/5e, 47/10c and 48/6c and contains the
Pharos and Teviot discoveries.
It was announced on 30 July 2024 that the Company had been informed by Shell
U.K. Ltd, the Operator of Licence P2437, that drilling operations on the
Selene exploration well, have commenced.
In September 2024, agreement was reached with the other Pensacola JV parties
in relation to liabilities associated with Deltic's withdrawal from Licence
P2252. These liabilities have been capped at £1.9 million which relates to
expenditure incurred prior to Deltic's withdrawal on 10(th) June 2024. Under
the Deferred Repayment Agreement agreed with the JV, Deltic will pay £1.0
million in September 2024 with the remaining £0.9 million deferred for a 24
month period. The deferred payment terms include non-compounding interest of
Bank of England Base Rate plus 8% repayable quarterly in arrears, commencing
in December 2024.
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
Geological 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**
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