Deltic Energy Plc, the AIM-quoted natural resources investing company with a high impact exploration and appraisal portfolio focused on the Southern and Central North Sea, is pleased to announce its interim results for the six months ended 30 June 2023.

Highlights

•    Significantly increased estimate of oil and gas resources for the transformational Pensacola discovery on Licence P2252 (Deltic interest 30%) in the Southern North Sea ("SNS").

o  Discovery contains total gross P50 Estimated Ultimate Recovery ("EUR") of c.99 mmboe, nearly double initial expectations
o  Pensacola now estimated to contain material volumes of oil, representing c. 30% of the combined recoverable hydrocarbons
o  Work is progressing with partners to develop the appraisal and development programme for Pensacola, with an appraisal well targeted for Q4 2024

•    The well planning process for drilling the Selene prospect (Deltic interest 50%) in the SNS is progressing well.

o  The geophysical site survey currently underway with the geotechnical survey planned for later in the year
o  Selene still expected to be drilled in Q3 2024

•    Deltic is withdrawing from three Licences (P2560, P2561 and P2562) it held with Capricorn Energy ("Capricorn"), and the partnership will move to relinquish these licences as soon as practicable.

•   Deltic intends to continue with Licences P2567 (Cadence) and P2428 (Cupertino), the two most prospective licences in this acreage, and apply for extensions to both licences as it seeks to attract another partner.

•    Deltic has submitted multiple applications for blocks and part blocks in the Southern and Central North Sea during the UK's 33rd Offshore Licensing Round in FY 2022, with awards expected to be announced before the end of Q3 2023.

•    Cash position of £9.1 million at 30 June 2023 (31 December 2022: £20.4 million), with a net cash outflow for the period of £11.3 million (H1 2022:  £2.5 million).  The first half of 2023 saw significant planned investment and use of capital to complete the drilling of the Pensacola discovery.

Graham Swindells, CEO, commented:
"It is no exaggeration to say that the first half of 2023 has been transformational for Deltic, following the discovery of material quantities of hydrocarbons at Pensacola in the Southern North Sea. With an estimated 100 million barrels of oil equivalent, the majority of which is natural gas, this represents one of the biggest UK discoveries in over a decade, and is particularly significant considering the enormous energy security issues that the country currently faces. I am very proud of the entire Deltic team which has delivered this success, and I am confident that we will continue to build upon this going forward."

Operating Review

Southern North Sea Assets

P2252 Pensacola (30% Deltic, 65% Shell, 5% ONE-Dyas) & P2558 Pensacola North (30% Deltic, Shell 70%)
Following the announcement of the successful flow of hydrocarbons to surface from the Shell-operated well 41/5a-2 on the Pensacola structure on 8 February 2023, work has focused on the completion of the post-well laboratory analysis and integration of the various geotechnical datasets into the geological and reservoir models for the Pensacola discovery. 

This work included the updating of the intra-salt seismic interpretation, velocity model and depth conversion using the recently acquired well base data as well as updating various reservoir parameters including porosity and permeability based on the revised geological model and updated analogue analysis. This work predicts the presence of thicker, higher quality oolitic shoal reservoir over the reef top area and when combined with the updated depth conversion pushing the southern part of Pensacola slightly deeper, results in the northern part of Pensacola being filled with gas while the southern part is anticipated to be filled with oil.

Based on the outcome of this work, Deltic updated its volumetric assessment of the Pensacola discovery and now estimates that Pensacola contains P50 Estimated Ultimate Recovery of 99 mmboe as reported on 12 July 2023.  The majority of this increase has resulted from the incorporation of the oil resources into the model and these liquids now comprise approximately 30% of the total combined recoverable resources.

Deltic continues to work closely with Shell and our JV partners to develop the appraisal programme for the Pensacola discovery. Subject to JV and other regulatory approvals, the drilling of an appraisal well on Pensacola remains targeted for Q4 2024. In parallel, the JV will undertake various studies to define optimal development plans for the Pensacola discovery.

In line with the Company's stated strategy, Deltic has also commenced a formal process to pursue the value crystallisation options that exist for the Pensacola discovery which may involve monetisation and/or farm down of an element of its equity interest in it.

P2437 - Selene (50% Deltic, 50% Shell)
Following the progression of Licence P2437 into Phase C on 31 October 2022, and with Shell assuming the role of Licence Operator, the preparatory work to support drilling operations at Selene has continued at pace during the period. While rig schedules for 2024 are yet to be finalised, the JV is still working towards a spud date during Q3 2024. 

The geophysical site survey is already underway and the geotechnical survey is planned for later this year. Following completion of the well design process, critical long lead items including casing have been identified with procurement processes underway. It is expected that final well costings will not be available until after a suitable rig has been contracted, however Deltic is planning for gross well costs in the order of US$30-40m.

Given the increase in drilling costs since the farm-out to Shell in 2019, Deltic is also planning to reduce its working interest position in Licence P2437, and therefore capital exposure to the Selene well, and has launched a farm-out process to attract interest from industry in the Selene opportunity.

Deltic remains convinced that the Selene prospect is one of the largest unappraised structures in the Leman Sandstone fairway of the Southern Gas Basin and estimates that it contains 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%.

P2428 Cupertino & P2567 Cadence (Deltic 40%, Capricorn 60%)
Following Capricorn's well publicised change in corporate strategy away from exploration to focus on building an Egyptian production-focused company, Capricorn and Deltic have agreed to end the JV over five licences P2428, P2567, P2560, P2561 and P2562. As part of ongoing rationalisation and high grading of its portfolio, Deltic has decided to withdraw from three of the Licences (P2560, P2561 and P2562) and therefore the JV partnership will move to relinquish these three licences as soon as practicable.

Since the farm-out to Capricorn was completed in November 2021, Deltic has been fully carried through an extensive subsurface work programme which has included the acquisition of nearly 700km2 of new 3D seismic and reprocessing of a number of legacy 3D data sets, which has confirmed the significant exploration potential within licences P2428 and P2567. The Capricorn-led work has matured 17 leads and prospects with a combined P50 GIIP of more than c. 2.6 TCF within the early Carboniferous play, which has been proven at Pegasus and Andromeda located immediately to the south of the licences.

Deltic recognises the significant prospectivity identified and intends to continue with these two licences at the 100% level. The current licence terms of P2567 and P2428 are due to expire on 30 November 2023 and 31 March 2024 respectively and, once Deltic has been re-appointed as Administrator of these licences, Deltic intends to request an extension of the current licence terms from the NSTA. If the extension requests are approved by the NSTA, Deltic would continue to assure and high grade the prospects identified by Capricorn while seeking to attract another partner or partners to assist with future drilling activity across the licences.

The firm work programme has been completed in relation to both licences and Deltic does not anticipate further capital expenditure in relation to either licence unless, and until, a suitable partner to progress drilling activity on theses licences opportunity can be secured.

Central North Sea Assets

P2542 - Syros (Deltic 100%)
The Syros prospect is located immediately to the west of the Montrose-Arbroath production platforms in the Central North Sea and in close proximity to a number of fields which produce from the same Fulmar sandstones which are expected to be present within the Syros rotated fault block. The Syros prospect is estimated to contain P50 Prospective Resources of 24.5 mmboe (P90 to P10 Range = 13.7 to 39.7 mmboe), with a geological chance of success of 58%.

While efforts are ongoing to find a partner to drill the Syros opportunity, Deltic has experienced a significant drop-off in interest in the farm-out process for this particular asset following the UK Government's introduction of further windfall taxes on the industry in November 2022.

The firm work programme has been completed in relation to Syros and there has been no material expenditure on the P2542 licence during the reporting period. Phase A of the current licence runs until 30 November 2024 and Deltic does not anticipate further capital expenditure in relation to this licence unless a suitable partner to progress this attractive opportunity can be secured.

33rd Offshore Licensing Round

The NSTA announced the launch of the 33rd Licensing Round on 7 October 2022, with 931 blocks and part blocks available for licensing. The round closed for applications on 12 January 2023 and following an extensive review of a large number of opportunities Deltic submitted a number of applications for blocks and part blocks in both the Southern and Central North Sea.

Deltic attended licensing interviews with the NSTA on 14 June 2023. Following completion of that process we expect that the NSTA will begin to award new licences resulting from the 33rd Licensing Round before the end of Q3 2023.

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