REG - Deltic Energy PLC - Selene Update and Economic Model

Deltic EnergyAnnouncement

14/11/2024 07:00

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RNS Number : 1705M  Deltic Energy PLC  14 November 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

 

14 November 2024

 

 

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

Selene Update and Economic Model

 

Deltic Energy Plc (https://delticenergy.com/) , the AIM quoted natural
resources investing company, is pleased to provide the following update in
relation to the recent drilling operations at the Selene prospect in the UK
Southern North Sea:

 

Rig Demobilisation and Well Cost Estimates

 

The Valaris 123 drilling rig was demobilised from the Selene site on 10
November 2024.

 

Following confirmation of demobilisation, the well Operator has provided an
updated cost estimate for the well of USD$48M which is within the USD$49M
carry cap pursuant to Deltic's farm-out arrangements in relation to the 2024
Selene drilling and testing costs. Therefore, Deltic does not expect to have
any residual cost exposure to the well drilling costs.

 

The estimate of well costs will be subject to variation as the Operator
receives final invoices from service providers over the coming months. As at
31 October 2024, Deltic had an unaudited cash balance of £1.9M.

 

Entry to Second Term of the Licence

 

Following the announcement of the Selene discovery on 31 October 2024, Shell,
in its role as licence Operator, has recommended that the Joint Venture ("JV")
enter into the Second Term of Licence P2437 and will now seek to agree a
low-cost work programme and timeline with the NSTA to support the maturation
of the discovery towards a potential Final Investment Decision ("FID") in
relation to the development of the Selene discovery.

 

During the Second Term of the licence, the JV will complete the post-well
analytical work and the various studies required to finalise a development
concept. No further drilling is required prior to FID. Work will also commence
on the various environmental studies to support the regulatory permitting and
approvals required to progress to development.

 

Selene Preliminary Development Concept

 

Deltic has completed its preliminary reservoir modelling, and updated its
preferred development concept, based on analysis of the data available from
the 48/8b-3Z well. The technical work completed indicates that a potential
development consisting of two horizontal wells would be sufficient to drain
the majority of the Selene structure, based on the improved reservoir
characteristics seen in the 48/8b-3Z well. Deltic's base case assumption is
that a minimum facilities, normally unmanned, installation positioned on
Selene will be tied back to the Barque field infrastructure via a c. 20km
subsea pipeline.  The Barque-Clipper-Bacton gathering system and onshore gas
processing plant has sufficient capacity to accept the gas production from the
proposed Selene development.

 

Deltic will be promoting this potential development scenario with its Joint
Venture ("JV") partners, however ultimately the maturation of the field
development plan will be led by the licence Operator and will be subject to
further review once the detailed post-well analysis has been completed.

 

Selene Updated Economic Model

 

Deltic has updated its internal development success case economic model, based
on cost data provided by S&P Global in 2023, for the two well development
concept summarised above and in light of recent changes to the UK's fiscal
regime announced in the budget on 30 October 2024.  The results from this
update are summarised below:

 

 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          2028
 Capital expenditure (Gross)              USD$          $310 million
 Operational expenditure (Gross)          USD$/bbl      $15
 Fiscal Regime                            As per Budget announced

                                          30 October 2024

 

 Economic Evaluation              Units  Value*
 Gross Gas Sales (cumulative)     USD$   $1.5 billion
 NPV10 (pre-tax, gross)           USD$   $288 million
 NPV10 (post-tax, net to Deltic)  USD$   $61 million
 Payback Period                   Years  In year 2 of production
 Internal Rate of Return          %      34%

 

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

 

This preliminary economic evaluation indicates that the P50 discovered volume
is more than twice the minimum economic field size and in the proposed assumed
development scenario, Selene would have a post-tax NPV10, net to Deltic, of
$61M (50 pence/share equivalent) which supports Deltic's decision to support
the entry into the second term of Licence P2437 and progress the work required
to reach FID.

 

Andrew Nunn, CEO, commented:

 

"I am pleased to report that the Selene discovery well was completed safely
and within the carry resulting from the farm-outs to Shell and Dana. Getting
JV agreement on moving into the Second Term of the licence is another key
milestone on the journey from discovery to development for Selene. It also
reflects the high quality nature of Selene's reservoir and the expectation of
a low cost development with enhanced production and economic potential from
the asset.

 

This decision to move into the second term of the licence kicks off an
incredibly busy period, as we support the Operator through the various
engineering, environmental and regulatory workstreams that need to be pulled
together to support a potential Final Investment Decision. The workstreams now
in train are an important signal to our investors as you wouldn't commence
this process if you didn't believe there was a material commercial return at
the end it. We look forward to updating the market in due course."

 

 

**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.

 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.

 MMscf:                                million standard cubic feet.

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

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

 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.

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

 

 

 

 

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