REG - Deltic Energy PLC - Selene farm-out to Dana Petroleum (E&P) Limited

Deltic EnergyAnnouncement

07/02/2024 07:00

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RNS Number : 2424C  Deltic Energy PLC  07 February 2024

The information contained within this announcement is deemed by the Company to
constitute inside information as stipulated under the Market Abuse Regulations
(EU) No. 596/2014 which forms part of domestic UK law pursuant to the European
Union (Withdrawal) Act 2018 ("UK MAR"). With the publication of this
announcement via a Regulatory Information Service, this inside information is
now considered to be in the public domain.

 

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

 

7 February 2024

 

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

Selene farm-out to Dana Petroleum (E&P) Limited

 

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 announce that it has entered into an agreement in respect
of the farm-out of a 25% interest in Licence P2437, containing the Selene
Prospect, to Dana Petroleum (E&P) Limited ("Dana").  This transaction, in
combination with the existing Shell UK Ltd ("Shell") carry, results in Deltic
retaining a 25% non-operated interest in Licence P2437 and having no exposure
to 2024 drilling and testing costs up to a cap in excess of current success
case well cost estimates provided by the Operator.

 

Highlights

 

·    Deltic retains a 25% non-operated equity interest in P2437

 

·    Deltic to transfer 25% equity in P2437 to Dana in return for:

o $500K in cash on completion in relation to back costs incurred by Deltic

o Dana to carry Deltic for its residual cost exposure to the Selene well
(after utilisation of the existing carry from the Shell farm-out) to a value
of $5M, and $6M in a success case

o Dana to pay its 25% share of costs from 1 January 2024

 

·    Any gross well costs incurred in excess of $40M (dryhole) or $49M
(success case) and any non-well related costs incurred after the effective
date of 1 January 2024 will be split along equity lines

 

·    As a result of the Dana carry and the Shell carry referenced above,
Deltic will have no cost exposure to the Selene exploration well up to $40M
(in the case of a dry hole) or $49M (in a success case) in aggregate

 

·    The recent estimate of well costs from the Licence Operator, Shell,
indicate a total success case cost of the Selene well at $47M

 

·    Completion of the farm-out is conditional on obtaining consent from
Shell and standard regulatory consents from the North Sea Transition Authority

 

Well Planning Update

 

Preparatory works for the Selene well continue to progress on time and
according to plan. Geophysical and geotechnical site surveys have been
completed and critical long lead items including casing have been ordered.
Procurement processes are also well advanced with the rig contract for the
Valaris 123 having been announced on 5 February meaning that the Selene well
remains on track to be drilled in Q3 2024.

 

Graham Swindells, Chief Executive of Deltic Energy, commented:

 

"We are delighted to have strengthened the P2437 JV with the addition of an
established operator like Dana who have a long history of successful
exploration and development in the Southern North Sea. As a result of the
transaction Deltic retains a material stake in one of the highest impact UK
exploration wells planned in 2024 while effectively eliminating our estimated
cost exposure to the exploration well, which remains scheduled to commence in
Q3 2024. I look forward to updating the market as we progress through a very
exciting year for Deltic, including our active and ongoing process to realise
value and farm down our Pensacola discovery."

 

About Dana Petroleum

 

Dana Petroleum is a successful exploration and production company and wholly
owned subsidiary of the Korea National Oil Corporation.  Dana produces in
excess of 40,000 boe/day (2022) from more than 50 licences across the UK,
Netherlands and Egypt.  In the Southern North Sea, Dana has a 50%
non-operated interest in the Tolmount field which produced first gas in May
2022 (with Tolmount East in December 2023), and in late 2023 operated the
successful Earn exploration well.

 

About Selene

 

The Selene Prospect is one of the largest unappraised structures in the Leman
Sandstone fairway of the Southern Gas Basin and Deltic estimates Selene to
contain 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%.

 

As a result of the original farm-out with Shell, Deltic held a 50% working
interest in the Licence but will be carried for its 25% of the gross costs of
drilling and testing the well on the Selene prospect, up to $25 million. As a
result of its farm out of a 25% working interest to Dana, Deltic will now be
fully carried for its 25% share of gross well costs up to a total of $40
million (dryhole) and $49 million (success case).

 

The Selene well remains scheduled to be drilled in Q3 of 2024.

 

**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 / 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

 

 BCF:                                  Billion Cubic Feet

 Boe or barrels of oil equivalent:     Barrels of oil equivalent. Gas is converted at a conversion rate of 6,000 Scf
                                       per boe

 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

 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

 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

 

 

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