Deltic Energy, the AIM-quoted natural resources investing company with a high impact exploration and appraisal portfolio focused on the Southern and Central North Sea, today announced its audited results for the year ended 31 December 2021. 

Highlights

• Cash position of £10.1 million at 31 December 2021 (2020: £12.0 million) with no debt. As at 31 March 2022, the Company had cash on hand (unaudited) of £8.6 million, with £0.9m of the post-year end spending related to progressing Pensacola well planning.
• Acquired approximately 680 km² of new 3D seismic data over the P2428 Licence, which includes the Plymouth prospect.
• Net cash outflow from operations and investing activity for the year of £1.8 million (2020: £1.8 million).

Confirmation of Deltic's first exploration well on the Pensacola Prospect (Licence P2252)

• Well planning rapidly progressing with site survey completed October 2021.
• Rig selection and contract process is well advanced with Deltic-Shell JV scheduling drilling the Pensacola well in late Q3 2022.

Transformational farm-out deal completed with Capricorn Energy PLC ("Capricorn") (previously Cairn Energy PLC) to form an exploration partnership over five licences in the Southern North Sea gas basin.

• Introduction of Capricorn has further enhanced Deltic's strong partner base.
• Capricorn partnership is an endorsement of Deltic's business model which identifies high quality exploration opportunities and then attracts high quality exploration partners.
• The deal will accelerate Deltic's Southern North Sea exploration programme and see significant investment towards drilling decisions.
• Capricorn will fund 100% of the agreed work programme for each of the five licences up to the point of making a drill or drop decision on each licence. Capricorn will fund 70% of the costs of the first well.
• Deltic received a USD$1m contribution towards historic costs.  Deltic retains a 40% interest in Licences P2428 (Cupertino Area) and P2567 (Cadence) and a 30% interest in each of Licences P2560, P2561 and P2562.
• Strong progress made since farm-out, with the JV aiming to make a well investment decision in Q3 2022.

Graham Swindells, Chief Executive of Deltic Energy, commented:
"The last year has been a period of considerable achievement and progress for our company. The completion of a ground-breaking farm out transaction with Capricorn Energy (formerly Cairn Energy), covering five gas licences in the Southern North Sea was a major highlight.  As well as broadening our partner base, it serves as a further endorsement of the quality of our licences, of our expertise in the gas basin, and of our strategy of identifying opportunities and attracting high quality partners to support drilling. We are particularly looking forward to drilling the Pensacola Prospect in the coming months, as well as continuing our work with Shell and Capricorn and advancing our other licences in what should be a very active and exciting period for our company."

Operational Review

Significant progress has been made across the portfolio during the reporting period with key highlights being confirmation of exploration drilling on the Pensacola prospect in March 2021 and securing a successful outcome to the farm-out process on Licence P2428 which ultimately resulted in Capricorn committing to a significant work programme investment across a total of five of Deltic's Southern North Sea licences as announced on the 12th August 2021.

P2252 - Pensacola (30% Deltic)
On 29 March 2021, the Shell-Deltic JV confirmed its intention to drill the Pensacola exploration well. Preparatory works are well advanced: the site survey works completed in October 2021, long lead items have been ordered and environmental permitting for the drilling activities are underway.

Preparations for the key catalyst of the drilling of Pensacola are advancing on a range of fronts as the JV gets closer to the start of operations. Analysis of site survey data, undertaken as a standard but important part of the ongoing well planning process, has identified hard seabed conditions at the well location which have in part informed Shell's well-advanced rig selection and contracting process as the JV seeks to ensure straightforward, safe and efficient operations. This process is being factored into the planning schedule, with Shell now indicating that drilling is expected to commence towards the end of Q3 2022.

Licence P2252, located in the Southern North Sea Gas Basin, contains the Pensacola prospect which is estimated to contain gross P50 Prospective Resources of 309 BCF in a Zechstein carbonate build-up. The licence was farmed out to Shell U.K. Ltd in 2019, which resulted in the Company being fully carried through the 3D seismic acquisition and processing-based work programme through to well investment decision. Following the well investment decision on 29 March 2021, Deltic is now paying its 30% share of costs associated with this well and remains fully funded for its share.

During the period, a review of the additional potential prospectivity associated with the P2252 licence, but unrelated to Pensacola, was completed by the Operator and the JV took the decision to relinquish the southern portion of P2252 licence and realise a significant saving on annual licence rental costs. The relinquished area represented approximately 40% of the overall licence area and contained the Lytham prospect which was not considered sufficiently attractive to retain.

P2437 - Selene (50% Deltic)
During the period, Deltic continued to refine its subsurface models and development scenarios for the Selene prospect. This work has resulted in an uplift in Gross P50 Prospective Resources from 271 BCF to 318 BCF and a tightening of the P90-10 range from 82-552 BCF to 132-581 BCF. The geological chance of success (GCoS) remains unchanged at 70%.

Deltic remains convinced that the Selene prospect is a significant and strategic exploration opportunity in the mature Leman Sandstone fairway and remains fully committed to drilling an exploration well on the prospect at the soonest practicable opportunity.

Licence P2437 is located in the Leman Sandstone fairway of the Southern North Sea Gas Basin and contains the Selene prospect which we believe is the largest undrilled prospect in this mature play. The P2437 licence was farmed out to Shell U.K. Ltd in 2019 with Deltic retaining a 50% interest and operatorship until a final well investment decision is made. Under the terms of the farm-out, once the well investment decision is taken, Shell assume operatorship and pay for 75% of the costs of the initial exploration well up to a gross well cost of USD$25M.

P2428 - Cupertino / Plymouth Area (40% Deltic)
Licence P2428 contains prospects in each of the Carboniferous, Leman Sandstone and Zechstein Carbonates and was included in the farm-out to Capricorn announced in August. Following completion of that transaction, a 60% working interest in licence P2428, along with licence operatorship, has been transferred to Capricorn. Under the terms of the farm-in agreement Capricorn are paying 100% of the costs of the technical evaluation for the licence up until the point at which a firm well investment decision is made.

The primary target on the P2428 licence area is the Plymouth Zechstein reef prospect and as part of the farm-out agreement Capricorn funded the acquisition of 680km2 of new multi-client 3D data over the Plymouth prospect and surrounding areas. The 3D seismic acquisition was completed in late November 2021 and data processing is ongoing with final deliverables expected in May 2022. Early versions of the seismic data have been viewed and a clearer picture of the Plymouth prospect and other potential opportunities on block are starting to emerge. Once the processing workflows have been completed, we expect that this new 3D seismic data will allow a full evaluation of the Plymouth prospect and other opportunities in the underlying Leman and Carboniferous Sandstones.

A drilling decision is expected to be made in the second half of this year once this new data has been fully evaluated by the Capricorn-Deltic JV.

P2567 - Cadence (40% Deltic)
Licence P2567 contains prospects in both the Carboniferous and Triassic Bunter Sandstone and was included in the farm-out to Capricorn announced in August. Following completion of that transaction, a 60% working interest in licence P2567, along with licence operatorship, has been transferred to Capricorn. Under the terms of the farm-out agreement Capricorn are paying 100% of the costs of the technical evaluation of the licence up until the point at which a firm well investment decision is made.

It is anticipated that technical work over the coming months will focus on the reprocessing of the legacy 3D seismic survey that covers 100% of the licence area which will in turn be followed by detailed technical evaluation of the previously identified prospectivity.

P2560, P2561 & P2562 - South Breagh Area (30% Deltic)
Licences P2560, P2561 and P2562 were awarded in the most recent 32nd Licensing Round. The licences contain early stage exploration opportunities located between the Breagh and Tolmount gas fields and have significant potential in the Carboniferous sandstones, Permian Leman Sandstones and the Zechstein carbonates.

All three licences were included in the farm-out to Capricorn and following completion of that transaction, a 70% working interest in each of the three licences, along with licence operatorship, has been transferred to Capricorn. Under the terms of the farm-out agreement Capricorn are paying 100% of the costs of the technical evaluation for each licence up until the point at which a firm well investment decision is made on each licence.

During and post the transaction process, Deltic has worked closely with Capricorn to ensure that the JV is fully aligned with respect to the exploration potential over the area and Capricorn continue to evaluate the existing legacy datasets and develop a comprehensive exploration work programme for the area. Deltic expect that reprocessing a number of the legacy 3D seismic datasets will be the priority over the coming 6 to 12 months which will provide a sound basis for the more detailed geological evaluation required to mature a number of the identified leads into potential drilling opportunities.

P2352 - Dewar (100% Deltic)
Licence P2352, located in the Central North Sea, was awarded to the Company in the 30th UK Offshore Licensing Round with an effective date of 1 October 2018.

During the period, work continued on fully integrating the previously completed AVO study into the company's geological model for the Dewar prospect. As a result of this work, the geological model for this Forties Sandstone channel prospect is now much more robust.  However, the gross P50 Prospective Resources have been reduced from 39.5mmbo to 20.8mmbo with a P90-P10 range of 10 to 38.2mmbo. The GCoS of 41% remains unchanged.

In the event of exploration success, the Dewar Prospect will represent a highly attractive commercial proposition as it is located approximately 5km east of BP's Eastern Trough Area Project (ETAP) Central Processing Facility.

P2542 - Syros (100% Deltic)
Licence P2542 located in the Central North Sea and which contains the Syros prospect, was awarded to Deltic in the most recent 32nd Licensing Round. Technical work on this licence, has commenced with newly reprocessed seismic data having recently been obtained. Work will focus on maturing the Syros prospect using recently released seismic and offset well datasets not available to previous licence operators such that farm-out marketing can be commenced in mid-2022.

33rd Licensing Round
The UK government recently announced its British Energy Security Strategy on 6 April 2022 in which a new offshore licensing round, scheduled to commence in the Autumn of 2022, was confirmed. Deltic has been busy working on identifying and maturing a number of potential opportunities in the Southern and Central North Seas which they plan to use to support multiple licence applications on both a 100% basis and in conjunction with established industry partners.

KeyFacts Energy: Deltic Energy UK country profile