REG - Deltic Energy PLC - Pensacola Update and Competent Person’s Report

Deltic EnergyAnnouncement

19/01/2024 07:00

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RNS Number : 2164A  Deltic Energy PLC  19 January 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

 

19 January 2024

 

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

 

Pensacola Update and Competent Person's Report

 

Deltic Energy Plc, the AIM-quoted natural resources investing company with a
high impact exploration and appraisal portfolio focused on the Southern North
Sea, is pleased to present the results of a Competent Person's Report (or
"CPR") in relation to the Pensacola Discovery on Licence P2252 in the Southern
North Sea in which Deltic holds a 30% interest.

 

Following completion of post-well analysis of data collected by the 41/05a-2
discovery well, Deltic commissioned RPS Energy Ltd (or "RPS") to undertake a
technical review of the volumes and a commercial review of the Pensacola
discovery.  This independent assessment of Contingent Resources builds on the
Company's previous estimates of technically recoverable volumes and for the
first time illustrates the commercial potential of the Pensacola discovery
based on two potential development scenarios - a gas and oil (or "combined")
development and a gas only development. A copy of the Summary CPR Report can
be found
here: http://www.rns-pdf.londonstockexchange.com/rns/2164A_1-2024-1-18.pdf
(http://www.rns-pdf.londonstockexchange.com/rns/2164A_1-2024-1-18.pdf)

 

Highlights

 

·    Maiden Contingent Resource estimate completed for the Pensacola
Zechstein Reef discovery by RPS, a leading provider of CPR services in the UK

·    RPS estimates the Pensacola structure to contain gross P50
Hydrocarbons Initially in Place of 326 MMboe, in-line with Deltic's previous
estimate of 342 MMboe

·    RPS estimates 2C Contingent Resources, net to Deltic, of 21.8 MMboe
in the combined case and 15 MMboe in the gas only case

·    Based on the two development scenarios assessed, RPS estimates a 2C
Post Tax NPV10 of USD$205M net to Deltic (combined case) and USD$199M net to
Deltic (gas only case)

·    These project NPV10 valuations equate to approximately 169p - 174p
per Deltic share

·    Subsequent to the CPR work, appraisal well data from the analogous
Crosgan Zechstein discovery has been released that supports the potential for
thicker, higher quality reservoir across the crest of Pensacola

·    Progress continues to be made on both the Pensacola and Selene
farm-out processes with a significant level of interest from industry

 

Hydrocarbons Initially in Place

 

Prior to the drilling of an appraisal well, which is currently planned for
late 2024, RPS estimates of the Hydrocarbons Initially in Place, as discovered
by the 41/05a-2 well, are summarised in the table below.

 

 Hydrocarbon Type      Units       Gross Hydrocarbons Initially in Place(6)
                       Low (P90)                Best (P50)   High         Mean

                                                             (P10)
 Free Gas(1),(2)       Bscf        194          384          663          411
 Oil (STOIIP)(2)       MMstb       87           239          482          266
 Associated Gas (2,3)  Bscf        49           135          276          152
 Oil Equivalent        MMboe(4,5)  128          326          636          360
 (1) Raw gas - includes inerts

 (2) Probabilistic sum of the hydrocarbons on the flank and crest of the
 structure, volumes of which have been estimated separately.

 (3) Associated gas is gas dissolved in the oil leg

 (4) Conversion rate of 6,000 Scf per boe.

 (5) Arithmetic sum of hydrocarbons above.

 (6) Deltic has a 30% working interest in Licence P2252 which contains the
 Pensacola discovery and is operated by Shell

 

Possible Developments

 

Prior to the drilling of the planned appraisal well, a number of uncertainties
in relation to the potential development of the oil volumes discovered at
Pensacola remain and therefore Deltic provided RPS with two possible
development scenarios as summarised below:

 

·    A combined oil and gas development requiring two separate production
platforms and six horizontal wells (three gas and three oil producers) with
hydrocarbons exported to Teesside via a new pipeline.

·    A lower capex gas only development scenario comprising three
horizontal development wells producing via a normally unmanned installation
exporting gas through a new pipeline to Teesside.

 

Capital and operational costs for both scenarios were estimated for Deltic by
S&P Global and reviewed by RPS as part of the CPR process.  The gas only
scenario assumes significantly lower capital expenditure than that required to
support the combined oil and gas development.

 

Contingent Resources and Valuation of the Combined Gas and Oil Development

 

The Contingent Resources (development pending) associated with the oil and gas
development scenario for Pensacola as estimated by RPS are summarised in the
table below:

 

 Hydrocarbon Type  Units     Full Field Gross Resources(1,2)        Deltic Net Working Interest(3)
                   1C                     2C           3C           1C           2C           3C
 Gas               Bscf      113.6        313.0        616.7        34.1         93.9         185.0
 Oil               MMstb     4.7          19.8         50.9         1.4          5.9          15.3
 Condensate        MMstb     0.2          0.6          1.4          0.1          0.2          0.4
 Oil Equivalent    MMboe(4)  23.9         72.6         155.1        7.2          21.8         46.5
 (1) Gross field contingent resources (100% basis) after economic limit test
 after removal of 10% CO(2) and fuel and flare gas

 (2) Chance of Development ("Pd") is the estimated probability that a known
 accumulation, once discovered, will be commercially    developed. At this
 early stage in the project, given the understanding of the range of volumes,
 of oil in particular, and the development options still being considered, RPS
 consider assigning a chance of development is premature

 (3) Deltic holds a 30% working interest in P2252 which is operated by Shell

 (4) Conversion rate of 6,000 Scf per boe

 

Net Present Value ("NPV") estimates as of 1 January 2024 for the combined oil
and gas development as calculated by RPS, based on RPS (Q4 2023) long term
forecasts for Brent Crude (for oil and condensate sales) and UK National
Balancing Point (NBP) for sales gas, are summarised below:

 

 Combined Oil and Gas Case  ELT Date  Post-Tax NPV - Net to Deltic(1)

                                      USD$ Million (money of the day) at different Discount Rates
 Discount Rate                        0%                10%               12%               15%
 1C                         2036      (29)              (114)             (121)             (127)
 2C                         2048      792               205               148               84
 3C                         2058      2,236             566               437               296

(           1) Deltic holds a 30% working interest in P2252

 

Contingent Resources and Valuation of the Gas Only Development

 

The Contingent Resources (development pending) associated with the gas only
development scenario for Pensacola as estimated by RPS are summarised in the
table below:

 

 Hydrocarbon Type  Units     Full Field Gross        Deltic Net Working

                             Resources(1,2)          Interest(3)
                   1C                2C      3C      1C       2C       3C
 Gas               Bscf      112.4   296.8   631.7   33.7     89.0     189.5
 Condensate        MMstb     0.2     0.6     1.5     0.1      0.2      0.4
 Oil Equivalent    MMboe(4)  18.9    50.0    106.7   5.7      15.0     32.0
 (1) Gross field contingent resources (100% basis) after economic limit test
 after removal of 10% CO(2) and fuel and flare gas

 (2) Chance of Development ("Pd") is the estimated probability that a known
 accumulation, once discovered, will be commercially developed. At this early
 stage in the project, given the understanding of the range of volumes, of oil
 in particular, and the development options still being considered, RPS
 consider assigning a chance of development is premature

 (3) Deltic holds a 30% working interest in P2252 which is operated by Shell

 (4) Conversion rate of 6,000 Scf per boe

 

Net Present Value ("NPV") estimates as of 1 January 2024 for the gas only
development as calculated by RPS, based on RPS (Q4 2023) long term forecasts
for Brent Crude (for oil and condensate sales) and UK National Balancing Point
(NBP) for sales gas, are summarised below:

 

 Gas Only Case  ELT Date  Post-Tax NPV - Net to Deltic(1)

                          USD$ Million (money of the day) at different Discount Rates
 Discount Rate            0%                10%               12%               15%
 1C             2034      124               20                8                 (6)
 2C             2044      599               199               158               111
 3C             2058      1,664             412               323               226

(           1) Deltic holds a 30% working interest in P2252

 

The gas only scenario recovers less hydrocarbons than the combined case
development but has a significantly lower capital and operational cost base,
resulting in similar 2C NPV10 valuations to the combined development scenario.

 

Post CPR Regional Update

 

The 41/05a-2 well targeted the flank of the Pensacola structure proving the
presence of thinner flank dolomites sourced from the erosion of dolomites
deposited up-dip over the crest of the structure.  While thicker, better
quality reservoir is predicted to be present updip, the properties of the
dolomite reservoir over the crestal part of the field are one of the main
uncertainties in the estimate of both hydrocarbons in place and contingent
resources for Pensacola.

 

Following completion of the CPR, the North Sea Transition Authority released
summary well information for the Crosgan Zechstein appraisal well drilled in
early 2023 by ONE-Dyas, with its JV partner Shell.  Crosgan, located
approximately 60km to the east of Pensacola, is highly analogous to the
Pensacola discovery and the appraisal well (42/15a-4) drilled on the crest of
the Crosgan reef structure is reported to have encountered a Hauptdolomit
reservoir that was 140m thick and which flowed at a maximum rate of 26.5
MMscf/day on test.

 

These positive well results further support Deltic's view that a thicker,
higher quality reservoir is likely to be present across the crest of the
Pensacola structure.  The information from the Crosgan offset well will be
considered in future volumetric reviews along with additional information
collected during the drilling of the Pensacola appraisal well later this year.

 

Farm-out Process Update

 

As previously communicated, Deltic continues to work on a number of potential
options to both realise value and mitigate exposure to future drilling
expenditure on both Pensacola and Selene and has received a significant level
of interest. Deltic is continuing to engage with a number of different
counterparties in relation to a range of potential transactions on both of
these assets and looks forward to updating the market in due course.

 

Graham Swindells, Chief Executive of Deltic Energy, commented:

 

"RPS's validation of our technical assessment of the Pensacola discovery is
another step forward for Deltic as we progress towards drilling the appraisal
well in late 2024. In particular, we are pleased with the potential valuation
that RPS ascribe to the discovery net to Deltic, particularly within the
context of our current share price. It's clear that Pensacola is a regionally
significant hydrocarbon accumulation and we will continue to work with our
partners at Shell and ONE-Dyas to mature the opportunity and optimise the
potential development scenarios as we go forward."

 

**ENDS**

 

For further information please contact the following:

 

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

 Graham Swindells / Andrew Nunn / Sarah McLeod

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

 Stifel Nicolaus Europe Limited (Joint Broker)                                  Tel: +44 (0) 20 7710 7600

 Callum Stewart / Simon Mensley / Ashton Clanfield

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

 Adam James / Ana Ercegovic

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

 Patrick d'Ancona / Finlay Thomson / Kendall Hill

 

Reporting Standard

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

 

Qualified Person's Review

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

 

Glossary of Technical Terms

 API:                                         a measure of the density of crude oil, as defined by the American Petroleum
                                              Institute
 1C:                                          represents the low case estimates of Contingent Resources as defined by PRMS
 2C:                                          represents the best case estimates of Contingent Resources as defined by PRMS
 3C:                                          represents the high case estimates of Contingent Resources as defined by PRMS
 Bscf:                                        Billion Standard Cubic Feet

 Contingent Resources:                        those quantities of petroleum which are estimated, on a given date, to be
                                              potentially recoverable from known accumulations, but which are not currently
                                              considered to be commercially recoverable, as defined by PMRS
 ELT:                                         Economic Limit Test. The economic limit is defined as the production rate at
                                              the time when the maximum cumulative net cash flow occurs for a project.
 Mean or Pmean:                               Reflects a mid-case volume estimate of resource derived using probabilistic
                                              methodology. This is the mean of the probability distribution for the resource
                                              estimates and may be skewed by resource numbers with relatively low
                                              probabilities
 MMboe or million barrels of oil equivalent:  million barrels of oil equivalent. Gas is converted at a conversion rate of
                                              6,000 Scf per boe

 MMstb:                                       million stock tank barrels
 MMscf:                                       million standard cubic feet
 P90 resource:                                reflects a volume estimate that, assuming the accumulation is developed, there
                                              is a 90% probability that the quantities actually recovered will equal or
                                              exceed the estimate.  This is therefore a low estimate of resource

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

 P10 resource:                                Reflects a volume estimate that, assuming the accumulation is developed, there
                                              is a 10% probability that the quantities actually recovered will equal or
                                              exceed the estimate.  This is therefore a high estimate of resource

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

 Scf:                                         standard cubic feet
 Stb:                                         stock tank barrel
 STOIIP:                                      stock tank oil initially in place

 

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