WTI (May) $61.53 +3c, Brent (June) $64.88 +12c, Diff -$3.35 +9c
USNG (May) 3.33 -20c, UKNG (May) 85.26p +1.01p, TTF (May) €34.225 -€0.025

Oil price

Oil is listless at the moment and today is no exception, as I write it’s down 30 odd cents but in these markets…Tariffs remain the obvious market mover and we are in a state of calm, maybe before another storm. 

The USA are still hawkish on Iran and the talks continued over the weekend but at present the likelihood of sanctions is high. Interestingly China is the biggest buyer of Iranian crude and will have to source its requirements elsewhere which will shake up the market somehow.  

The EIA, Opec and IEA have published their reports, they all remain leaning to their patrons and are respectively rarely worth setting too much stand by, better to look at stock numbers today and tomorrow and of course the US rig count and note last week there were 7 rigs down overall but 9 rigs down in oil…..

Deltic Energy

Deltic has provided the following operational and commercial update in relation to the Selene Gas Project in the UK Southern North Sea:

Highlights

• Deltic now estimates Gross 2C Contingent Resources of 174 BCF at Selene, a 33% increase on earlier estimates
• Analysis of core samples from well 48/8b-3Z is now substantially complete
• Porosity and permeability characteristics improved over previous assumptions
• Reservoir modelling indicates enhanced production potential from key B-sand interval 
• Updated post-tax NPV10 of USD$83M net to Deltic at 80 pence per therm gas price and USD$114M at 100 pence per therm gas price

Selene Gas Project – Licence P2437

Deltic has a 25% non-operated interest in the Shell-operated Selene gas discovery in the Southern North Sea.

Following the successful drilling of the well in 2024, the Joint Venture (“JV”) partners unanimously voted to move into the second term of the licence and committed to the various engineering, commercial and regulatory workflows required to support a Field Development Plan (“FDP”) and a future Final Investment Decision (“FID”) scheduled for early 2027.

Reservoir Properties

The licence Operator, Shell UK Ltd, has provided porosity and permeability measurements on 176 core plugs taken from drill core samples over the Leman B-Sand, which is the key producing interval within the much thicker Leman Sandstone package. 

The core analysis indicates significantly better porosity and permeability than previously assumed in Deltic’s P50 volumetric estimates and reservoir modelling. A comparison of the updated B-sand porosity assumptions based on the core analysis and the previously utilised assumptions are summarised in the table below:     

                1 Klinkenberg corrected for Net Overburden Pressure

The improved view of porosity has been incorporated into Deltic’s static subsurface model and our estimates of gas-initially-in-place (or “GIIP”) for the Selene structure.

Reservoir Modelling Update

Incorporating the new porosity and permeability data into Deltic’s dynamic reservoir model has resulted in improved overall recovery factors, higher initial flow rates, extended plateau production periods and increased estimates of gas recovered over a 20-year production life.  A comparison of our 6 month post-well view with the previous reservoir modelling is set out below:

  1 Field production metrics are reported on a Gross basis, reflects mid-case (ie P50) reservoir assumptions

Gas Quality Analysis 

Analysis of the gas samples collected from the 48/8b-3Z well have proven the presence of a very dry, methane dominated natural gas with nominal concentrations of contaminants including CO2 and N2 and our expectation is that gas produced from Selene will require minimal processing to reach National Grid entry specifications.

Updated Volumetric Estimate

The core analysis data has allowed Deltic to refine and update its volumetric estimates for the Selene Gas Project utilising the recently delivered porosity data from the core samples and updated recovery factors from the reservoir modelling. 

1 Deltic’s in-house estimates of Contingent Resources                 
2 % Improvement compared to EUR volumes announced via RNS on 31 October 2024

Given the commerciality of the project, maturity of the technical analysis and ongoing pre-development workflows it was considered appropriate to move from using Estimated Ultimate Recovery (or ‘EUR’) to Contingent Resources – Development Pending to describe the status of the Selene project.

Updated Economic Model & Project Valuation

Given the material uplift in recoverable gas volumes, the economic model for Selene has been updated from that previously announced in the Company’s announcement released on 11 March 2025.  Deltic’s base case development assumptions remain unchanged and incorporate a two well development with a new normally unmanned installation tied back to existing production infrastructure on the Barque field via a new c. 20km subsea pipeline.    

This model reflects the revised volumetrics and production profiles and has been run at a 80 pence per therm gas price reflecting recent average National Balancing Point (‘NBP’) and a 100 pence per therm gas price which more closely reflects the average NBP gas price over the last six months.   

Andrew Nunn, Deltic CEO, commented:
“The six month post discovery checkpoint is always a key stage gate on the path from a gas discovery to a gas development project, and as the technical work gathers momentum we narrow the inherent uncertainties of a new find and get greater clarity on the discovery and its potential. The integration of the core data into the volumetric and economic analysis has led to a significant refinement and improvement in Deltic’s understanding of the Selene asset which continues to impress. This updated understanding will be critical as the JV moves forward into project scoping and early project design workflows. The circa 45% increase in the NPV10 of Selene net to Deltic is particularly pleasing, especially within the context of the current market cap of the Company.

Recent global events have reinforced the case for maximising the benefits from the United Kingdom’s domestic resources.  With continued government support for the development of new fields on existing licences there appears to have been a realisation that, while we continue to consume hydrocarbons as a society, then the focus should be on maximising the proportion of ‘good barrels’ in the energy mix. These barrels are, or will be, produced locally and, in the case of newer developments, from facilities which are specifically designed with a net zero target in mind. Hydrocarbons produced in the UK have a lower emissions footprint than imported oil and gas and are operated under the strictest environmental regulations. They also support high quality UK jobs and provide important tax revenues to the Exchequer. 

We continue to explore various avenues as we work to secure the funding required to maintain our interest in the Selene project as the JV works toward a Final Investment Decision in early 2027. We believe that it has never been more important for the UK to develop and maximise the benefit of its own resources, like Selene, and thereby maximising the proportion of ‘good barrels’ in the mix as we become increasingly dependent on imported oil and gas.”

This is a fantastic announcement in a number of ways, but obviously, primarily due to the fact that Deltic now estimates Gross 2C Contingent Resources of 174 BCF at Selene, a 33% increase on earlier estimates. Add to that the ‘circa 45% increase in the NPV10 of Selene net to Deltic is particularly pleasing, especially within the context of the current market cap of the Company’ and its huge discount to asset value estimates.

The next way is that Deltic are blessed by good partners who are considered to be amongst the best technical operators in the sector and specifically on gas developments such as this. With this brings best evaluation and treatment of such present day issues such as emissions. 

The paragraph above in CEO Andrew Nunn’s comments in which he refers to ‘good barrels’ is the perfect analysis of the current situation which I can’t better in terms of language to describe how much of a competitive advantage the Selene asset has. Produced locally to the UK and with net zero in mind it has the opportunity to allow the political decisions to be made in its favour rather than buying imported gas or LNG. 

Recent political announcements have indicated that these factors are being increasingly understood by those making such decisions and the ability of the North Sea to be able to achieve the lowest of low carbon developments, thus achieving as close to net zero as any comparable, whilst bringing in much needed tax revenues not realised on imported gas should tip the balance in its favour.

I have stayed with Deltic for many years as I believe that its management has, under historically difficult decisions, brought the company to where it is today. The value of Selene is a significant part of my Target Price for the company of some 200p, a number that shows amongst the largest discounts of all my Bucket List selections. But this asset is a no-brainer, its management and that of the JV is world class and I have rarely seen a better risked investment opportunity in the sector. 

Original article   l   KeyFacts Energy Industry Directory: Malcy's Blog