Pensacola Update and Competent Person’s Report
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 Place6 |
|||
|
Low (P90) |
Best (P50) |
High (P10) |
Mean |
||
|
Free Gas1,2 |
Bscf |
194 |
384 |
663 |
411 |
|
Oil (STOIIP)2 |
MMstb |
87 |
239 |
482 |
266 |
|
Associated Gas 2,3 |
Bscf |
49 |
135 |
276 |
152 |
|
Oil Equivalent |
MMboe4,5 |
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 Type |
Units |
Full Field Gross Resources1,2 |
Deltic Net Working Interest3 |
||||
|
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 |
|
Oil Equivalent |
MMboe4 |
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% CO2 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 Oil and Gas Case |
ELT Date |
Post-Tax NPV - Net to Deltic1 USD$ Million (money of the day) at 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 Type |
Units |
Full Field Gross Resources1,2 |
Deltic Net Working Interest3 |
||||
|
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 |
|
Oil Equivalent |
MMboe4 |
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% CO2 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 Case |
ELT Date |
Post-Tax NPV - Net to Deltic1 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."
**ENDS**
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) Adam James / Ana Ercegovic
|
Tel: +44 (0) 20 7523 8000 |
|
Vigo Consulting (IR Adviser) |
Tel: +44 (0) 20 7390 0230 |
|
Patrick d'Ancona / Finlay Thomson / Kendall 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 oil equivalent: |
million barrels of 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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