REG - Deltic Energy PLC - Operational Update

Deltic EnergyAnnouncement

11/03/2025 07:15

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RNS Number : 0891A  Deltic Energy PLC  11 March 2025

 

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

 

11 March 2025

 

 

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

Operational Update

 

Deltic Energy Plc (https://delticenergy.com/) , the AIM quoted natural
resources investing company, is pleased to provide the following operational
update in relation to its portfolio of UK gas development and exploration
assets:

 

Highlights

 

·    Post-well analysis and pre-Field Development Planning work on Selene
Gas Project underway

·    Selene gas project NPV10 of USD$58M, net to Deltic, based on updated
economic model

·    Selene project - Endymion prospect maturation demonstrates low-cost
upside on block

·    Farm-out process on Blackadder licence commenced

 

Selene Gas Project - Licence P2437

 

Deltic has a 25% non-operated interest in the Selene gas discovery in the
Southern North Sea ("SNS").

 

Following the successful drilling of the discovery well in 2024, the Joint
Venture ("JV") partners unanimously supported the move into the second term of
the licence and committed to the various engineering, commercial and
regulatory workflows required to support a Field Development Plan ("FDP") and
a future Final Investment Decision ("FID") in early 2027.

 

This work has initially focused on the analysis of data and samples collected
from the 2024 well and integration of this information into the various
subsurface and reservoir models. This process is progressing well, and Deltic
expects significant amounts of data to become available over the coming months
which will enhance the Company's understanding of the reservoir and provide a
higher degree of confidence around potential future flow rates in a production
scenario.

 

Given the legacy 3D seismic dataset over the development area was last
reprocessed more than 10 years ago, the JV is considering upgrading the
dataset and utilising modern processing techniques to improve seismic image
quality and refine the structural model up-dip from the discovery well
location. Should the JV decide to proceed with this work, which would run in
parallel to other workflows, it would result in reprocessed data being
available towards the first quarter of 2026 .

 

Updated Economic Model

 

Deltic has revised its internal economic model for an indicative two well
development of the Selene discovery, with gas export via the existing Barque
production infrastructure, which incorporates updated cost and time estimates
for the development recently provided by the Operator and Deltic's internal
modelling, as follows:

 

 

 Assumptions                              Units         Value*
 Deltic Working Interest                  %             25
 P50 Estimated Ultimate Recovery ('EUR')  BCF           131
 Initial Field Production Rate            MMscf/day     50
 Gas Price                                pence/therm   80
 First Gas                                Year          2029
 Cost per BOE                             USD$          $13 CAPEX & $16 OPEX
 Fiscal Regime                            As per Budget announced

                                          30 October 2024

 

 Economic Evaluation              Units  Value*
 Gross Gas Sales (cumulative)     USD$   $1.6 billion
 NPV10 (pre-tax, gross)           USD$   $279 million
 NPV10 (post-tax, net to Deltic)  USD$   $58 million
 Payback Period                   Years  In year 2 of production
 Internal Rate of Return          %      35%

 

*Values are estimates based on Deltic's own internal economic model and have
not been subject to any third-party review.

 

The Company's sensitivity modelling demonstrates that the Selene Gas Project
is a commercially robust development. Gas prices utilised in the model
represent a significant discount to both current spot price and long-term
forward gas prices indicating the potential for material upside to the NPV10
valuation quoted above.

 

On Block Upside

 

Based on data acquired during the drilling of the Selene exploration well in
2024, Deltic has also reviewed the prospectivity associated with the Endymion
structure located on the north-eastern corner of the P2437 licence area.
Endymion is a structural extension of the depleted Mimas gas field and,
following recent model updates completed after the Selene well drilling,
Deltic estimates that the Endymion prospect contains P50 Prospective Resources
of 70 BCF (with a P90-P10 Range of 45 to 106 BCF) with a geological chance of
success ("GCoS") of >75%.

 

It is envisaged that the Endymion structure would be developed via a single
subsea tie-back to the proposed Selene development infrastructure. Any
additional gas produced from Endymion could further materially enhance the
overall Selene licence project economics and could maximise the use of the
proposed Selene infrastructure for a number of additional years. It is
expected that any drilling on Endymion would only occur after FID on the core
Selene development had been secured.

 

Funding Options

 

Deltic is currently evaluating a number of options, both at the corporate and
asset level, which should allow it to secure the funding required to meet its
medium-term requirements in relation to the Selene development. The options
under evaluation include, but are not limited to, a further farm-down of
Deltic's current equity position in Selene, a partial sale of its interest in
Selene, a pre-payment against future gas sales, and seeking to add new
strategic shareholders to the Company's register.

 

This is a key area of focus for the management team and board as the Company
determines the best way forward for the benefit of all shareholders.

 

Blackadder - Licence P2672

 

Deltic has a 100% working interest in Licence P2672 which is located in a
mature area of the Southern North Sea Gas Basin.

 

Updated structural mapping completed by Deltic, incorporating knowledge gained
from the Selene discovery, suggests that the legacy Blackadder prospect and
the Pharos discovery (Well 47/05d-6 drilled in 2013) are likely a single
structure which has been extensively de-risked by the Pharos well.

 

Deltic estimates the updated structure to contain P50 Prospective Resources of
165 BCF (P90 to P10 range of 66 to 293 BCF) with a GCoS of 65%, with the key
outstanding risks being related to reservoir quality and producibility.

 

The proposed forward work programme will be focussed on improving the quality
of existing 3D seismic data which Deltic believes will enhance its
understanding of the local depositional model and partially de-risk issues
around reservoir quality and refine the Company's volumetric estimates.

 

A farm-out process in relation to this opportunity was launched at an industry
event last week. Deltic expects this process to run over a number of months
and looks forward to updating the market once this process has concluded.

 

Dewar - Licence P2646

 

Deltic has a 100% working interest in Licence P2646 which is located in the
Central North Sea and contains the Dewar oil exploration prospect. The Dewar
licence remains in 'care and maintenance' mode and, other than nominal licence
rental and NSTA levy fees, the Company expects to incur no further costs on
this licence during 2025.

 

The subsurface opportunity is well understood, given legacy work completed by
Deltic, and while the prospect is robust there are significant challenges in
terms of access to export infrastructure. The Company's intention is to review
potential development and export options for this low-risk exploration
prospect again in 2026, before looking to introduce a partner to help take
this project forward.

 

Andrew Nunn, Deltic CEO, commented:

 

"The magnitude of the divergence between Deltic's share price and the
Company's valuation of its stake in the Selene Gas Project is clearly a cause
of frustration for both shareholders and the Board, especially given the
quality of the asset and commitment of the JV partners. The Board considers
that actions taken in late 2024 to reduce ongoing G&A costs, and Deltic's
previously communicated year end cash position of £1.4m, provides the Board
with sufficient flexibility to progress potential funding options to enable
the business to move to Selene FID and beyond.

 

There has now been a period of stability in the UK oil and gas industry
following the UK Budget in October 2024, and while the overall environment
remains extremely challenging, we believe there has been a slight improvement
in sentiment towards the sector. Deltic, and in particular our Chairman, have
been and will continue to provide leadership and input into industry-led
initiatives to educate government, ministers and other stakeholders on the
environmental, employment, economic, and energy security benefits of producing
oil and gas from UK waters. As recent events have demonstrated, it has never
been clearer that a secure domestic energy supply is a vital national asset
and Deltic's work could be a key contributor to delivering that for the UK in
the coming years."

 

**ENDS**

 

For further information please contact the following:

 

 Deltic Energy Plc                                                                    Tel: +44 (0) 20 7887 2630

 Andrew Nunn / Sarah McLeod

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

 Canaccord Genuity Limited                                                            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

 

Qualified Person

Andrew Nunn, a Chartered Geologist and Chief Executive 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.

 

Standard

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

 

Glossary of Technical Terms

 BCF:                                   Billion Cubic Feet.

 BOE                                    barrels of oil equivalent. Gas is converted at a conversion rate of 6,000
                                        standard cubic feet of gas per BOE.

 Estimated Ultimate Recovery ('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.

 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.

 MMscf:                                 million standard cubic feet.

 NPV10:                                 estimated net present value using a discount rate of 10%.

 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.

 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.

 Therm:                                 the energy equivalent of approximately a hundred cubic feet of natural gas.

 

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