Deltic Deadline to Find Farm-Out Partner Extended to June 12

North Sea-focused investing company Deltic Energy Plc has been granted a short period of additional time by Shell UK Ltd to complete the farm-out process for License P2252 and the Pensacola discovery.

Deltic has until June 12 to advance discussions with potential counterparties regarding a possible transaction. “There is however no guarantee that discussions will be concluded successfully within that timeframe and, in such circumstances, Deltic will be required to withdraw from the Pensacola license and transfer its interest in Pensacola to its Joint Venture partners,” the company said in an announcement on the London Stock Exchange.

Deltic holds a 30 percent interest in the Pensacola discovery. The London-based company said it had a hard time securing a farm-out partner, according to an earlier statement. Deltic needs to meet its 30 percent share of the Pensacola well, estimated at $19.14 million (GBP 15 million) net to the company.

Shell UK is the operator of License P2252 with a 65 percent stake.

“[T]he continual tinkering with the Energy Profits Levy and resultant fiscal uncertainty created by the current government, along with recent rhetoric emanating from the Labour Party, have had a severely negative effect on the ability of UK Exploration and Production (E&P) companies to commit to long term investments in the North Sea,” Deltic said in the statement.

“This has resulted in many operators diverting capital away from the UKCS [United Kingdom Continental Shelf] or delaying investment decisions, especially with respect to new large-scale opportunities like Pensacola,” it added.

“We remain of the view that Pensacola represents an excellent value-driven opportunity for the right partner and would be willing to engage with any additional potential partners,” the company remarked.

Graham Swindells, Chief Executive of Deltic Energy, said, "The struggle to find a way forward on a project like Pensacola, which is one of the largest discoveries in the North Sea in recent decades, is a real-world consequence of our political leadership using the nationally important oil and gas industry as a political football at a time when energy security is of paramount importance”.

“Given the impact of fiscal and political uncertainty on investment decisions we have seen a shift away from investment in larger standalone projects, like Pensacola, towards more affordable, lower risk opportunities which defer decommissioning or increase infrastructure life such as Selene, and the Company's Syros prospect in the Central North Sea, where we have seen an enhanced level of interest,” Swindells continued.

We look forward to the start of drilling operations on the high impact Selene exploration well, in which Deltic is fully carried for the estimated cost of the success case well, which remains due to spud in July 2024. In the meantime, we will continue to pursue all avenues to progress Pensacola and will update the market in due course,” he concluded.

In February 2023, Deltic announced a “significant” gas and oil discovery at Pensacola on License P2252 in the Southern North Sea. In July 2023, Deltic revised its estimates in Pensacola to contain gross P50 initially in place volumes of gas and oil of 342 million barrels of oil equivalent (MMboe), which it said indicated that Pensacola could contain total gross P50 Estimated Ultimate Recovery of around 99 million barrels of oil equivalent, “almost double” the volume of recoverable oil and gas originally estimated, according to a separate news release.

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