North Sea minnow Deltic Energy set to reap rewards for exploration success

NORTH Sea-focused exploration specialist Deltic Energy is set to drill a well on a big gas prospect, after making a find last year which looks to be attracting attention in the industry.

Deltic announced yesterday that it has completed a deal to sell a 25% stake in the Selene prospect to Korea National Oil Corporation (KNOC). Deltic sold a 50% stake in Selene to Shell in 2019.

Chief executive Graham Swindells said yesterday that Deltic expects to start drilling work on Selene with Shell and Knocowned Dana Petroleum in the summer. The results will be studied with interest in the industry.

When the farm-out deal with KNOC was announced in February, Mr Swindells described Selene as “one of the highest impact UK exploration wells planned in 2024”.

The prospect is estimated to contain more than 50 million barrels oil equivalent.

Deltic underlined the potential to make big finds in the North Sea with a well it drilled last year on the Pensacola prospect. Mr Swindells said in July that the results of the well indicated Pensacola could be one of the most significant discoveries made in the North Sea in many years.

Shell bought a 70% stake in Pensacola in 2019. Mr Swindells said in February that Deltic was in an active and ongoing process to realise value from the Pensacola discovery. This could involve selling down its remaining 30% interest through a farm-out.

Yesterday, Mr Swindells said Deltic is firmly focused on drawing the Pensacola farm-out process to a successful conclusion.

Under the terms of the deals agreed with Shell and KNOC, Deltic’s partners will cover the first $49m costs of a successful well on Selene. The partners will pay the first $40m in respect of a dry well.

KNOC was due to pay Deltic $500,000 on completion of the farmout deal agreed in February.

The deal with KNOC required the approval of Shell and the North Sea regulator. KNOC became a significant force in the North Sea following the £1.9 billion acquisition of the Dana Petroleum business developed by Tom Cross.

Industry leaders have highlighted the uncertainty that firms have faced following the introduction of the windfall tax in May 2022, amid the surge in oil and gas prices fuelled by Russia’s war on Ukraine. The rate of the levy was increased in November of that year.

The month after Deltic agreed the terms of the Selene deal with KNOC, Chancellor Jeremy Hunt extended the term of the windfall tax by a year, to 2029, in his spring Budget.

Deltic Energy shares closed down 0.75p at 34.75p on the Aim market. The company has a stock market capitalisation of around £33m, compared with £148bn for Shell.