TIDMDELT
RNS Number : 2164A
Deltic Energy PLC
19 January 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
19 January 2024
Deltic Energy Plc ("Deltic" or "the Company")
Pensacola Update and Competent Person's Report
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 present the
results of a Competent Person's Report (or "CPR") in relation to
the Pensacola Discovery on Licence P2252 in the Southern North Sea
in which Deltic holds a 30% interest.
Following completion of post-well analysis of data collected by
the 41/05a-2 discovery well, Deltic commissioned RPS Energy Ltd (or
"RPS") to undertake a technical review of the volumes and a
commercial review of the Pensacola discovery. This independent
assessment of Contingent Resources builds on the Company's previous
estimates of technically recoverable volumes and for the first time
illustrates the commercial potential of the Pensacola discovery
based on two potential development scenarios - a gas and oil (or
"combined") development and a gas only development. A copy of the
Summary CPR Report can be found here:
http://www.rns-pdf.londonstockexchange.com/rns/2164A_1-2024-1-18.pdf
Highlights
-- Maiden Contingent Resource estimate completed for the
Pensacola Zechstein Reef discovery by RPS, a leading provider of
CPR services in the UK
-- RPS estimates the Pensacola structure to contain gross P50
Hydrocarbons Initially in Place of 326 MMboe, in-line with Deltic's
previous estimate of 342 MMboe
-- RPS estimates 2C Contingent Resources, net to Deltic, of 21.8
MMboe in the combined case and 15 MMboe in the gas only case
-- Based on the two development scenarios assessed, RPS
estimates a 2C Post Tax NPV10 of USD$205M net to Deltic (combined
case) and USD$199M net to Deltic (gas only case)
-- These project NPV10 valuations equate to approximately 169p - 174p per Deltic share
-- Subsequent to the CPR work, appraisal well data from the
analogous Crosgan Zechstein discovery has been released that
supports the potential for thicker, higher quality reservoir across
the crest of Pensacola
-- Progress continues to be made on both the Pensacola and
Selene farm-out processes with a significant level of interest from
industry
Hydrocarbons Initially in Place
Prior to the drilling of an appraisal well, which is currently
planned for late 2024, RPS estimates of the Hydrocarbons Initially
in Place, as discovered by the 41/05a-2 well, are summarised in the
table below.
Hydrocarbon Type Units Gross Hydrocarbons Initially
in Place (6)
Low (P90) Best High Mean
(P50) (P10)
----------- -------- ------- -----
Free Gas(1) ,(2) Bscf 194 384 663 411
--------- ----------- -------- ------- -----
Oil (STOIIP)(2) MMstb 87 239 482 266
--------- ----------- -------- ------- -----
Associated Gas (2,3) Bscf 49 135 276 152
--------- ----------- -------- ------- -----
MMboe
Oil Equivalent (4,5) 128 326 636 360
--------- ----------- -------- ------- -----
(1) Raw gas - includes inerts
(2) Probabilistic sum of the hydrocarbons on the flank and
crest of the structure, volumes of which have been estimated
separately.
(3) Associated gas is gas dissolved in the oil leg
(4) Conversion rate of 6,000 Scf per boe.
(5) Arithmetic sum of hydrocarbons above.
(6) Deltic has a 30% working interest in Licence P2252 which
contains the Pensacola discovery and is operated by Shell
Possible Developments
Prior to the drilling of the planned appraisal well, a number of
uncertainties in relation to the potential development of the oil
volumes discovered at Pensacola remain and therefore Deltic
provided RPS with two possible development scenarios as summarised
below:
-- A combined oil and gas development requiring two separate
production platforms and six horizontal wells (three gas and three
oil producers) with hydrocarbons exported to Teesside via a new
pipeline.
-- A lower capex gas only development scenario comprising three
horizontal development wells producing via a normally unmanned
installation exporting gas through a new pipeline to Teesside.
Capital and operational costs for both scenarios were estimated
for Deltic by S&P Global and reviewed by RPS as part of the CPR
process. The gas only scenario assumes significantly lower capital
expenditure than that required to support the combined oil and gas
development.
Contingent Resources and Valuation of the Combined Gas and Oil
Development
The Contingent Resources (development pending) associated with
the oil and gas development scenario for Pensacola as estimated by
RPS are summarised in the table below:
Hydrocarbon Units Full Field Gross Deltic Net Working
Type Resources (1,2) Interest (3)
1C 2C 3C 1C 2C 3C
-------- -------- -------- ------- ------ -------
Gas Bscf 113.6 313.0 616.7 34.1 93.9 185.0
--------- -------- -------- -------- ------- ------ -------
Oil MMstb 4.7 19.8 50.9 1.4 5.9 15.3
--------- -------- -------- -------- ------- ------ -------
Condensate MMstb 0.2 0.6 1.4 0.1 0.2 0.4
--------- -------- -------- -------- ------- ------ -------
MMboe
Oil Equivalent (4) 23.9 72.6 155.1 7.2 21.8 46.5
--------- -------- -------- -------- ------- ------ -------
(1) Gross field contingent resources (100% basis) after economic
limit test after removal of 10% CO(2) and fuel and flare gas
(2) Chance of Development ("Pd") is the estimated probability
that a known accumulation, once discovered, will be commercially
developed. At this early stage in the project, given the understanding
of the range of volumes, of oil in particular, and the development
options still being considered, RPS consider assigning a chance
of development is premature
(3) Deltic holds a 30% working interest in P2252 which is
operated by Shell
(4) Conversion rate of 6,000 Scf per boe
Net Present Value ("NPV") estimates as of 1 January 2024 for the
combined oil and gas development as calculated by RPS, based on RPS
(Q4 2023) long term forecasts for Brent Crude (for oil and
condensate sales) and UK National Balancing Point (NBP) for sales
gas, are summarised below:
Combined ELT Date Post-Tax NPV - Net to Deltic(1)
Oil and USD$ Million (money of the day) at
Gas Case different Discount Rates
Discount Rate 0% 10% 12% 15%
--------- --------- --------- ---------
1C 2036 (29) (114) (121) (127)
--------- --------- --------- --------- ---------
2C 2048 792 205 148 84
--------- --------- --------- --------- ---------
3C 2058 2,236 566 437 296
--------- --------- --------- --------- ---------
(1) Deltic holds a 30% working interest in P2252
Contingent Resources and Valuation of the Gas Only
Development
The Contingent Resources (development pending) associated with
the gas only development scenario for Pensacola as estimated by RPS
are summarised in the table below:
Hydrocarbon Units Full Field Gross Deltic Net Working
Type Resources (1,2) Interest (3)
1C 2C 3C 1C 2C 3C
-------- -------- -------- ------- ------ -------
Gas Bscf 112.4 296.8 631.7 33.7 89.0 189.5
--------- -------- -------- -------- ------- ------ -------
Condensate MMstb 0.2 0.6 1.5 0.1 0.2 0.4
--------- -------- -------- -------- ------- ------ -------
MMboe
Oil Equivalent (4) 18.9 50.0 106.7 5.7 15.0 32.0
--------- -------- -------- -------- ------- ------ -------
(1) Gross field contingent resources (100% basis) after economic
limit test after removal of 10% CO(2) and fuel and flare gas
(2) Chance of Development ("Pd") is the estimated probability
that a known accumulation, once discovered, will be commercially
developed. At this early stage in the project, given the understanding
of the range of volumes, of oil in particular, and the development
options still being considered, RPS consider assigning a chance
of development is premature
(3) Deltic holds a 30% working interest in P2252 which is
operated by Shell
(4) Conversion rate of 6,000 Scf per boe
Net Present Value ("NPV") estimates as of 1 January 2024 for the
gas only development as calculated by RPS , based on RPS (Q4 2023)
long term forecasts for Brent Crude (for oil and condensate sales)
and UK National Balancing Point (NBP) for sales gas, are summarised
below:
Gas Only ELT Date Post-Tax NPV - Net to Deltic (1)
Case USD$ Million (money of the day) at
different Discount Rates
Discount Rate 0% 10% 12% 15%
------------ -------- -------- --------
1C 2034 124 20 8 (6)
--------- ------------ -------- -------- --------
2C 2044 599 199 158 111
--------- ------------ -------- -------- --------
3C 2058 1,664 412 323 226
--------- ------------ -------- -------- --------
(1) Deltic holds a 30% working interest in P2252
The gas only scenario recovers less hydrocarbons than the
combined case development but has a significantly lower capital and
operational cost base, resulting in similar 2C NPV10 valuations to
the combined development scenario.
Post CPR Regional Update
The 41/05a-2 well targeted the flank of the Pensacola structure
proving the presence of thinner flank dolomites sourced from the
erosion of dolomites deposited up-dip over the crest of the
structure. While thicker, better quality reservoir is predicted to
be present updip, the properties of the dolomite reservoir over the
crestal part of the field are one of the main uncertainties in the
estimate of both hydrocarbons in place and contingent resources for
Pensacola.
Following completion of the CPR, the North Sea Transition
Authority released summary well information for the Crosgan
Zechstein appraisal well drilled in early 2023 by ONE-Dyas, with
its JV partner Shell. Crosgan, located approximately 60km to the
east of Pensacola, is highly analogous to the Pensacola discovery
and the appraisal well (42/15a-4) drilled on the crest of the
Crosgan reef structure is reported to have encountered a
Hauptdolomit reservoir that was 140m thick and which flowed at a
maximum rate of 26.5 MMscf/day on test.
These positive well results further support Deltic's view that a
thicker, higher quality reservoir is likely to be present across
the crest of the Pensacola structure. The information from the
Crosgan offset well will be considered in future volumetric reviews
along with additional information collected during the drilling of
the Pensacola appraisal well later this year.
Farm-out Process Update
As previously communicated, Deltic continues to work on a number
of potential options to both realise value and mitigate exposure to
future drilling expenditure on both Pensacola and Selene and has
received a significant level of interest. Deltic is continuing to
engage with a number of different counterparties in relation to a
range of potential transactions on both of these assets and looks
forward to updating the market in due course.
Graham Swindells, Chief Executive of Deltic Energy,
commented:
"RPS's validation of our technical assessment of the Pensacola
discovery is another step forward for Deltic as we progress towards
drilling the appraisal well in late 2024. In particular, we are
pleased with the potential valuation that RPS ascribe to the
discovery net to Deltic, particularly within the context of our
current share price. It's clear that Pensacola is a regionally
significant hydrocarbon accumulation and we will continue to work
with our partners at Shell and ONE-Dyas to mature the opportunity
and optimise the potential development scenarios as we go
forward."
**S**
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 Adviser) Tel: +44 (0) 20 3328
5656
David Hart / Alex Brearley (Corporate Finance)
Stifel Nicolaus Europe Limited (Joint Broker) Tel: +44 (0) 20 7710
7600
Callum Stewart / Simon Mensley / Ashton
Clanfield
Canaccord Genuity Limited (Joint Broker) Tel: +44 (0) 20 7523
Adam James / Ana Ercegovic 8000
Vigo Consulting (IR Adviser) Tel: +44 (0) 20 7390
0230
Patrick d'Ancona / Finlay Thomson / K endall
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
API: a measure of the density of
crude oil, as defined by the
American Petroleum Institute
1C: represents the low case estimates
of Contingent Resources as defined
by PRMS
-----------------------------------------
2C: represents the best case estimates
of Contingent Resources as defined
by PRMS
-----------------------------------------
3C: represents the high case estimates
of Contingent Resources as defined
by PRMS
-----------------------------------------
Bscf: Billion Standard Cubic Feet
-----------------------------------------
Contingent Resources: those quantities of petroleum
which are estimated, on a given
date, to be potentially recoverable
from known accumulations, but
which are not currently considered
to be commercially recoverable,
as defined by PMRS
-----------------------------------------
ELT: Economic Limit Test. The economic
limit is defined as the production
rate at the time when the maximum
cumulative net cash flow occurs
for a project.
-----------------------------------------
Mean or Pmean: Reflects a mid-case volume estimate
of resource derived using probabilistic
methodology. This is the mean
of the probability distribution
for the resource estimates and
may be skewed by resource numbers
with relatively low probabilities
-----------------------------------------
MMboe or million barrels of million barrels of oil equivalent.
oil equivalent: Gas is converted at a conversion
rate of 6,000 Scf per boe
-----------------------------------------
MMstb: million stock tank barrels
-----------------------------------------
MMscf: million standard cubic feet
-----------------------------------------
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
-----------------------------------------
Scf: standard cubic feet
-----------------------------------------
Stb: stock tank barrel
-----------------------------------------
STOIIP: stock tank oil initially in
place
-----------------------------------------
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