Final Results

RNS Number : 1247J

Deltic Energy PLC

25 April 2022

 

25 April 2022

Deltic Energy Plc / Index: AIM / Epic: DELT / Sector: Natural Resources

Deltic Energy Plc ("Deltic" or "the Company")

Final Results

Deltic Energy Plc, the AIM-quoted natural resources investing company with a high impact exploration and appraisal portfolio focused on the Southern and Central North Sea, is pleased to announce its audited results for the year ended 31 December 2021 ('FY 2021'). 

Highlights

· Confirmation of Deltic's first exploration well on the Pensacola Prospect (Licence P2252)

· Well planning rapidly progressing with site survey completed October 2021.

· Rig selection and contract process is well advanced with Deltic-Shell JV scheduling drilling the Pensacola well in late Q3 2022.

· Transformational farm-out deal completed with Capricorn Energy PLC ("Capricorn") (previously Cairn Energy PLC) to form an exploration partnership over five licences in the Southern North Sea gas basin.

· Introduction of Capricorn has further enhanced Deltic's strong partner base.

· Capricorn partnership is an endorsement of Deltic's business model which identifies high quality exploration opportunities and then attracts high quality exploration partners.

· The deal will accelerate Deltic's Southern North Sea exploration programme and see significant investment towards drilling decisions.

· Capricorn will fund 100% of the agreed work programme for each of the five licences up to the point of making a drill or drop decision on each licence. Capricorn will fund 70% of the costs of the first well.

· Deltic received a USD$1m contribution towards historic costs.  Deltic retains a 40% interest in Licences P2428 (Cupertino Area) and P2567 (Cadence) and a 30% interest in each of Licences P2560, P2561 and P2562.

· Strong progress made since farm-out, with the JV aiming to make a well investment decision in Q3 2022.

· Acquired approximately 680 km² of new 3D seismic data over the P2428 Licence, which includes the Plymouth prospect.

· Net cash outflow from operations and investing activity for the year of £1.8 million (2020: £1.8 million).

· Cash position of £10.1 million at 31 December 2021 (2020: £12.0 million) with no debt. As at 31 March 2022, the Company had cash on hand (unaudited) of £8.6 million, with £0.9m of the post-year end spending related to progressing Pensacola well planning.

Graham Swindells, Chief Executive of Deltic Energy, commented:

"The last year has been a period of considerable achievement and progress for our company. The completion of a ground-breaking farm out transaction with Capricorn Energy (formerly Cairn Energy), covering five gas licences in the Southern North Sea was a major highlight.  As well as broadening our partner base, it serves as a further endorsement of the quality of our licences, of our expertise in the gas basin, and of our strategy of identifying opportunities and attracting high quality partners to support drilling. We are particularly looking forward to drilling the Pensacola Prospect in the coming months, as well as continuing our work with Shell and Capricorn and advancing our other licences in what should be a very active and exciting period for our company."
 

Chairman's Statement

Looking back at my statement of a year ago, with the pandemic dominating the news, I couldn't have imagined what we are faced with today, with a global power having launched an attack on a neighbour in Europe.  

As a result, we have learned that there are very real consequences to relying on natural gas from Russia. Whatever the outcome of the situation in Ukraine, Europe's position on Russian gas has undoubtedly changed for the foreseeable future.

At the same time, and partly as a consequence of these events, we have seen energy prices spiralling upwards. The UK gets a relatively small portion of its gas from Russia by pipeline and by Liquified Natural Gas (LNG), brought on ships. However, moves away from Russian natural gas for our European neighbours causes further escalation of prices from global producers which then itself leads to further escalation of the cost of living and household spending.

With that background, our business is positioned to play its part in providing these vital natural resources. Contributing to the essential domestic supply of natural gas from North Sea waters has always been the very core of our business.

The UK Government is supportive of our sector, sharing our view that a domestic gas supply is better for energy security, jobs, Treasury receipts and the environment compared with importing higher emission supplies. This is apparent in the North Sea Transition Deal of 2021 and the Energy Security Strategy published just a few weeks ago.

Direction towards favourable policy has helped our business in attracting high-quality international joint venture partners, but the bumps along the road, machinery of policy-making and the volatility of recent months have undoubtedly impacted the exact timing of commitment towards operations and contracts.

Our industry continues to face challenges. The challenges change but they are always there. As a responsible nation, aware of the potential risks from climate change, we need to use this valuable resource wisely and deal with the associated greenhouse gas emissions in order to prevent them from being released into the atmosphere. Some do not see this as the solution. A popular narrative is to transition away from oil and gas rather than continuing to reap its benefits alongside other natural resources such as wind, solar and nuclear. All predictions from independent sources such as the Climate Change Committee and United Nations Climate Panel show oil and gas as part of the future energy mix for the UK and the world for decades to come.

Deltic Energy is committed to being part of the energy transition while continuing to explore for natural resources in the North Sea with a focus on natural gas. Natural gas heats homes, lights rooms and cooks meals. Fuels such as natural gas are needed to make cement, steel, glass and bricks; materials that are integral to our society.

Each member of the Deltic team is proud to play this role.

Our business model is a simple but a highly effective one. We have developed a conveyor belt of opportunities from picking up licences in areas where we have demonstrated expertise such as the Southern North Sea, developing prospects by thorough technical work and new data acquisition where appropriate, bringing in world-class operators as partners for exploration well drilling in order to get these valuable resources to the UK shores. We currently have acreage at each stage along our conveyor belt up to drilling, and are preparing to drill our first exploration well at Pensacola with operator Shell within the coming months. Acreage farmed out to Shell and Capricorn Energy PLC ("Capricorn") (previously Cairn Energy PLC) is moving forward along this process to a similar conclusion and other acreage is being worked towards farm-out.

The Deltic business is in good shape and poised for an exciting period of exploration in the coming months.

Mark Lappin

Chairman

22 April 2022

Chief Executive's Statement

2021 has been a year of significant achievement and continued progress. The major highlights for the year have been the positive well investment decision and firm commitment to drill our Pensacola Prospect as well as successfully attracting a new high-quality partner into five of our Southern North Sea gas licences by way of a wide ranging farm-out. I am particularly excited that as a direct result of this progress, we are now on the verge of drilling our first exploration well this year. It has also been a significant development for Deltic to have broadened its partner base with another well-established operator who clearly sees the opportunity that the Southern North Sea presents. As well as providing further endorsement of our prospects and high quality technical work, the additional partnership will ensure significant additional operational activity across our portfolio in the course of the coming year. Having created a portfolio of highly prospective opportunities which is now being progressed with multiple partners, I believe Deltic is in a strong position and geared for exploration success.

Pensacola

The early part of 2021 was focussed on the completion of the technical work to support a well investment decision to drill Pensacola. The outcome of that work was very positive with the evaluation of the new 3D data acquired resulting in a significant de-risking of the prospect, with the geological chance of success increasing from 20% to 55%. The final stage of the technical (and commercial) work supported the positive decision to commit to a firm well on Pensacola which will see Deltic drilling its first well this year.

Following the commitment to drill Pensacola, the focus of activity moved to well planning which progressed rapidly. The geophysical site survey over the planned well location was completed in September and the geotechnical survey, representing the final phase of the site survey programme, was completed in October. The surveys, conducted by Fugro GB North Marine Limited, were completed on time and without incident. The successful completion of the programme, which is a key part of well planning and the final phase of offshore activities ahead of drilling, represented another important milestone in our steady progress towards drilling the Pensacola prospect.

Preparations for the key catalyst of the drilling of Pensacola are advancing on a range of fronts as the JV gets closer to the start of operations. Analysis of site survey data, undertaken as a standard but important part of the ongoing well planning process, has identified hard seabed conditions at the well location which have in part informed Shell's well-advanced rig selection and contracting process as the JV seeks to ensure straightforward, safe and efficient operations. This process is being factored into the planning schedule, with Shell now indicating that drilling is expected to commence towards the end of Q3 2022.

Pensacola is a Zechstein Reef prospect located to the northwest of the Breagh gas field in the Southern North Sea. Deltic estimates the Prospect to contain gross P50 Prospective Resources of 309 BCF which will rank Pensacola as one of the highest impact exploration targets to be drilled in the gas basin in recent years. Drilling success will be transformational both for Deltic and the emerging Zechstein reef play.

The Pensacola well is also being highly anticipated by the industry for its potential to unlock a significant new source of gas to the UK from the Zechstein Reef play, which has been successfully produced in NW Europe from Poland to The Netherlands. It also has the potential to demonstrate that the UK still has a significant level of previously unrecognised exploration upside which can deliver cost competitive natural gas to UK based businesses and homes and support the UK's Net Zero targets.

Selene

On the Company's Selene Prospect on Licence P2437, Deltic's other licence with Shell, the JV has continued to refine its technical and commercial work to support a well investment decision, which the Company is continuing to target within the coming months. Deltic's conviction in Selene has further increased throughout this process resulting in an uplift in estimated P50 recoverable resources to 318 BCF. With Phase A of the licence due to conclude in September this year, in line with good licence management, the JV has taken the prudent step of approaching the North Sea Transition Authority ('NSTA') to seek an extension to Phase A. Deltic continues to consider Selene to represent the largest undrilled structure of its kind in this part of the SNS, and with an estimated 70% geological chance of success remains committed to progressing this material prospect to drilling.

Capricorn Energy Farm-in to Licences P2560, P2561, P2562, P2567 and P2428

A key highlight of 2021 was the farm-out of five of our gas licences in the Southern North Sea to Capricorn which represented a further endorsement of the quality of the assets that our team has developed and our gas-focussed exploration strategy, as we continue to develop our portfolio of opportunities and attract the highest quality partners.

The farm-out was announced in August and completed in November 2021 with the key terms being as follows:

· Capricorn acquired a 60% interest in each of Licences P2428 (Cupertino Area) and P2567 (Cadence) and a 70% interest in each of Licences P2560, P2561 and P2562 which are located between the Breagh and Tolmount Gas Fields.

· Deltic received consideration of USD$1 million as a contribution towards historic costs

· Deltic retained a 40% interest in licences P2428 and P2567 and a 30% interest in licences P2560, P2561 and P2562.

· Capricorn is funding 100% of an agreed work programme for each of the five licences up to the point of making a drill or drop decision on each licence, which includes the acquisition of new seismic data over Licence P2428 (which was acquired in Autumn 2021).

· Following a drilling decision being made on either of P2428 and P2567, Capricorn will fund 70% of the costs of whichever well is drilled first, subject to a gross well cost cap of USD$25 million.

· Capricorn became Operator of each of the licences.

This transformational and wide-ranging farm-out across multiple licences and our partnership with Capricorn will see significant investment being made across Deltic's strategic Southern North Sea gas exploration portfolio. It has been particularly encouraging to see the pace at which activity on the licences has already occurred.

Acquisition of the 3D seismic survey over Licence P2428 commenced in September. Approximately 680km² of new data over the Plymouth Zechstein Reef prospect and surrounding areas was acquired and completed in November. The data collected is now being processed with the results expected during the course of May 2022. The results of this high quality modern 3D seismic survey are expected to significantly enhance our understanding of the multiple gas prospects on P2428 and will be key to de-risking future drilling on this licence as was the case with the Pensacola Prospect which was derisked following the acquisition of new seismic. The acquisition and processing of the seismic data already fulfils the work programme commitments of this licence. The final processed data will allow Capricorn and Deltic to fast track the assessment of prospectivity and the JV is now aiming to be in a position to make a drilling decision by the end of Q3 this year.

We are particularly excited at the prospect of continuing to build our partnership with Capricorn, with both parties sharing a commitment to pursuing high impact exploration opportunities in the Southern North Sea and successfully developing these gas prospects.

Central North Sea

The Company holds two licences in the Central North Sea, P2352 (which contains the Dewar prospect) and P2542 (which contains the Syros prospect).

The Dewar Prospect is a 30th Round licence which, despite attracting initial farm-out interest, saw the progression of discussions adversely affected by Covid. However, Dewar remains an attractive, highly prospective and relatively low risk opportunity located in close proximity to other fields and existing infrastructure and one which could be developed very quickly. As such, Dewar remains an attractive drill-ready prospect with strong economics. Continued strengthening in the oil price has seen renewed interest and engagement from interested parties and Deltic remains committed to seeking a suitable partner to ultimately drill the prospect, in line with our strategy.

P2542, also located in the Central North Sea, contains the Syros Prospect and is a more recent licence award. Technical work has commenced, and the new data having recently been obtained with initial work looks encouraging. This work will continue with a view to commencing a farm-out process in due course.

Board appointment

In November, I was delighted to welcome Peter Nicol to the Board of Deltic. Peter has outstanding experience in the energy sector both in industry and in senior investment banking positions. Peter has worked with several listed oil and gas companies and is currently an independent non-executive director of a number of exploration focussed companies.  We are already benefitting from Peter's wealth of energy sector, financial, city and public company experience which will be invaluable to Deltic as we continue to build our business.

Outlook

As I write, recent events mean that energy security has never felt more important. Soaring energy prices with its impact on energy intensive industry and households alike has acutely highlighted the consequences of having domestic production. UK domestic production does not come close to meeting even half of national demand.  There is heavy dependence on imports from foreign countries, including Russia. The effect of this reliance is compounded when considering the significantly higher emissions associated with gas imported in the form of LNG. It is abundantly clear that a secure supply of domestically produced oil and gas is much better for jobs, the UK economy and, importantly, the environment. Accordingly, it is imperative that the UK continues to encourage further exploration. The UK still has a significant level of previously unrecognised exploration upside which we know can deliver cost competitive and low carbon intensity natural gas to UK-based businesses and homes while at the same time supporting the UK's Net Zero targets.

The UK oil and gas industry has a vital role to play in the energy transition. Deltic is fully supportive of 'net zero' ambitions and, with a largely gas dominated portfolio, we believe we have the potential and ability to contribute to this transition. Indeed, we are confident that all of our Southern North Sea gas prospects have the potential to be developed in a manner which is entirely consistent with Net Zero goals.

Deltic welcomes the UK Government's Energy Security Strategy announced earlier this month. In addition to committing to maximise North Sea production, it confirmed that a new North Sea licensing round will be brought forward and launched in the Autumn. Previous licensing rounds have been a key source of success and growth of Deltic's portfolio in recent years, and as such we are particularly encouraged by this development. Accordingly, Deltic is already commencing its plans to invest in applications both individually and in partnership as we look to continue to expand the Company's conveyor belt of drilling opportunities.

The progress made throughout 2021 has created the foundation for what has the potential to be a very exciting year ahead. We will shortly be drilling our first well with Shell on the Pensacola Prospect with success being potentially transformational for our company. At the same time, we expect to significantly progress the five licences we now have in partnership with Capricorn.  We should see the results of the newly acquired and processed 3D seismic data over Licence P2428 before the end of Q2 which will enable the JV to fast-track an assessment of prospectivity in this area and support a well investment decision later in the year. We will also continue to progress our 100% owned licences in the Central North Sea with a view to farm-out and drilling and look forward to the launch of the UK's 33^rd Licensing Round in the Autumn.

With our conveyor belt of opportunities, high quality partners, and activity, we anticipate a potentially transformational year as we continue to strive to create value for our shareholders.

Graham Swindells

Chief Executive Officer

22 April 2022

 

Operational Review

Introduction

Significant progress has been made across the portfolio during the reporting period with key highlights being confirmation of exploration drilling on the Pensacola prospect in March 2021 and securing a successful outcome to the farm-out process on Licence P2428 which ultimately resulted in Capricorn committing to a significant work programme investment across a total of five of Deltic's Southern North Sea licences as announced on the 12th August 2021.

P2252 - Pensacola (30% Deltic)

On 29 March 2021, the Shell-Deltic JV confirmed its intention to drill the Pensacola exploration well. Preparatory works are well advanced: the site survey works completed in October 2021, long lead items have been ordered and environmental permitting for the drilling activities are underway.

Preparations for the key catalyst of the drilling of Pensacola are advancing on a range of fronts as the JV gets closer to the start of operations. Analysis of site survey data, undertaken as a standard but important part of the ongoing well planning process, has identified hard seabed conditions at the well location which have in part informed Shell's well-advanced rig selection and contracting process as the JV seeks to ensure straightforward, safe and efficient operations. This process is being factored into the planning schedule, with Shell now indicating that drilling is expected to commence towards the end of Q3 2022.

Licence P2252, located in the Southern North Sea Gas Basin, contains the Pensacola prospect which is estimated to contain gross P50 Prospective Resources of 309 BCF in a Zechstein carbonate build-up. The licence was farmed out to Shell U.K. Ltd in 2019, which resulted in the Company being fully carried through the 3D seismic acquisition and processing-based work programme through to well investment decision. Following the well investment decision on 29 March 2021, Deltic is now paying its 30% share of costs associated with this well and remains fully funded for its share.

During the period, a review of the additional potential prospectivity associated with the P2252 licence, but unrelated to Pensacola, was completed by the Operator and the JV took the decision to relinquish the southern portion of P2252 licence and realise a significant saving on annual licence rental costs. The relinquished area represented approximately 40% of the overall licence area and contained the Lytham prospect which was not considered sufficiently attractive to retain.

P2437 - Selene (50% Deltic)

During the period, Deltic continued to refine its subsurface models and development scenarios for the Selene prospect. This work has resulted in an uplift in Gross P50 Prospective Resources from 271 BCF to 318 BCF and a tightening of the P90-10 range from 82-552 BCF to 132-581 BCF. The geological chance of success (GCoS) remains unchanged at 70%.

Deltic remains convinced that the Selene prospect is a significant and strategic exploration opportunity in the mature Leman Sandstone fairway and remains fully committed to drilling an exploration well on the prospect at the soonest practicable opportunity.

Licence P2437 is located in the Leman Sandstone fairway of the Southern North Sea Gas Basin and contains the Selene prospect which we believe is the largest undrilled prospect in this mature play. The P2437 licence was farmed out to Shell U.K. Ltd in 2019 with Deltic retaining a 50% interest and operatorship until a final well investment decision is made. Under the terms of the farm-out, once the well investment decision is taken, Shell assume operatorship and pay for 75% of the costs of the initial exploration well up to a gross well cost of USD$25M.

P2428 - Cupertino / Plymouth Area (40% Deltic)

Licence P2428 contains prospects in each of the Carboniferous, Leman Sandstone and Zechstein Carbonates and was included in the farm-out to Capricorn announced in August. Following completion of that transaction, a 60% working interest in licence P2428, along with licence operatorship, has been transferred to Capricorn. Under the terms of the farm-in agreement Capricorn are paying 100% of the costs of the technical evaluation for the licence up until the point at which a firm well investment decision is made.

The primary target on the P2428 licence area is the Plymouth Zechstein reef prospect and as part of the farm-out agreement Capricorn funded the acquisition of 680km² of new multi-client 3D data over the Plymouth prospect and surrounding areas. The 3D seismic acquisition was completed in late November 2021 and data processing is ongoing with final deliverables expected in May 2022. Early versions of the seismic data have been viewed and a clearer picture of the Plymouth prospect and other potential opportunities on block are starting to emerge. Once the processing workflows have been completed, we expect that this new 3D seismic data will allow a full evaluation of the Plymouth prospect and other opportunities in the underlying Leman and Carboniferous Sandstones.

A drilling decision is expected to be made in the second half of this year once this new data has been fully evaluated by the Capricorn-Deltic JV.

P2567 - Cadence (40% Deltic)

Licence P2567 contains prospects in both the Carboniferous and Triassic Bunter Sandstone and was included in the farm-out to Capricorn announced in August. Following completion of that transaction, a 60% working interest in licence P2567, along with licence operatorship, has been transferred to Capricorn. Under the terms of the farm-out agreement Capricorn are paying 100% of the costs of the technical evaluation of the licence up until the point at which a firm well investment decision is made.

It is anticipated that technical work over the coming months will focus on the reprocessing of the legacy 3D seismic survey that covers 100% of the licence area which will in turn be followed by detailed technical evaluation of the previously identified prospectivity.

P2560, P2561 & P2562 - South Breagh Area (30% Deltic)

Licences P2560, P2561 and P2562 were awarded in the most recent 32^nd Licensing Round. The licences contain early stage exploration opportunities located between the Breagh and Tolmount gas fields and have significant potential in the Carboniferous sandstones, Permian Leman Sandstones and the Zechstein carbonates.

All three licences were included in the farm-out to Capricorn and following completion of that transaction, a 70% working interest in each of the three licences, along with licence operatorship, has been transferred to Capricorn. Under the terms of the farm-out agreement Capricorn are paying 100% of the costs of the technical evaluation for each licence up until the point at which a firm well investment decision is made on each licence.

During and post the transaction process, Deltic has worked closely with Capricorn to ensure that the JV is fully aligned with respect to the exploration potential over the area and Capricorn continue to evaluate the existing legacy datasets and develop a comprehensive exploration work programme for the area. We expect that reprocessing a number of the legacy 3D seismic datasets will be the priority over the coming 6 to 12 months which will provide a sound basis for the more detailed geological evaluation required to mature a number of the identified leads into potential drilling opportunities.

P2352 - Dewar (100% Deltic)

Licence P2352, located in the Central North Sea, was awarded to the Company in the 30th UK Offshore Licensing Round with an effective date of 1 October 2018.

During the period, work continued on fully integrating the previously completed AVO study into the company's geological model for the Dewar prospect. As a result of this work, the geological model for this Forties Sandstone channel prospect is now much more robust.  However, the gross P50 Prospective Resources have been reduced from 39.5mmbo to 20.8mmbo with a P90-P10 range of 10 to 38.2mmbo. The GCoS of 41% remains unchanged.

In the event of exploration success, the Dewar Prospect will represent a highly attractive commercial proposition as it is located approximately 5km east of BP's Eastern Trough Area Project (ETAP) Central Processing Facility.

With the recent recovery in oil prices, there has been a renewed interest in the Dewar Prospect and over the coming months we will continue to pursue farm-out discussions with companies that have shown recent interest and those with whom we had established a positive dialogue prior to the Covid enforced lockdowns.

P2542 - Syros (100% Deltic)

Licence P2542 located in the Central North Sea and which contains the Syros prospect, was awarded to Deltic in the most recent 32^nd Licensing Round. Technical work on this licence, has commenced with newly reprocessed seismic data having recently been obtained. Work will focus on maturing the Syros prospect using recently released seismic and offset well datasets not available to previous licence operators such that farm-out marketing can be commenced in mid-2022.

Portfolio Management

As disclosed in our interim statement in September 2021, during the period our technical review of Licence P2424 was completed.  Although we identified significant resource potential associated with the Licence, the prospects identified were particularly high risk when compared to other opportunities within the portfolio. The currently available seismic datasets are not of sufficient quality to adequately de-risk the prospects and therefore it was considered unlikely that a positive well decision could be made on any prospect within the licence area without the acquisition of new 3D seismic data. Therefore, the decision was taken to allow this licence to lapse at the end of its Phase A on 30 September 2021.

Licence P2384 in the Central North Sea which was awarded as a remnant of a much larger multi-block licence application in the 30^th Offshore Licensing Round and retained purely for its option value. Following a review of the prospectivity associated with this very small licence it was clear that it only captured the very fringes of the prospects targeted in the original licence application. Given that there was no obvious drilling target located on block it was decided to also relinquish this licence on 30 September 2021.

33^rd Licensing Round

The UK government recently announced its British Energy Security Strategy on 6 April 2022 in which a new offshore licensing round, scheduled to commence in the Autumn of 2022, was confirmed. Deltic has been busy working on identifying and maturing a number of potential opportunities in the Southern and Central North Seas which we plan to use to support multiple licence applications on both a 100% basis and in conjunction with established industry partners.

Full details of the round, blocks available for licensing and submission timelines are expected to be announced by the NSTA in due course.

Andrew Nunn

Chief Operating Officer

22 April 2022

 

Southern North Sea

Portfolio and Resource Summary

The Company's current licence portfolio and prospect inventory, as of the end of March 2022, is summarised below:

Licence Ref:	Block ID	Deltic Equity	Project ID	Discovery (D)   Prospect (P)   Lead (L)	Net Prospective Resource    (BCF)			GCoS %
					P90   Low	P50   Best	P10   High
P22521	41/5a, 41/10a & 42/1a	30%	Pensacola - Zechstein Reef	P	12	93	354	55
P2437	48/8b	50%	Sloop - Leman	D	4	9	19	100
			Selene - Leman	P	66	159	290	70
			Endymion - Leman	L	18	24	31	27
			Rig & Jib - Leman	L	7	18	29	35
P24282	43/7 & 43/8	40%	Cupertino - Scremerston	P	37	148	454	26
			Richmond - Leman	P	25	84	219	20
			Plymouth - Zechstein	P	13	113	507	19
P25672	43/11 & 43/12b	40%	Cadence - Scremerston	P	12	57	189	26
			Cadence - Fell	L	75	182	344	16
			Cordova - Millstone Grit	L	13	50	131	26
			Bassett - Bunter Sst	P	14	51	121	37
			Bathurst - Bunter Sst	L	48	110	228	22
P24353	47/10d & 48/6c	25%	Bob (Teviot) - Leman	D	2.8	5.5	10.3	100
			Blackadder - Leman	P	17.8	28.3	42.5	45
P22581	41/5b & 42/1b	30%	Pensacola North	To Be Determined
P25602	42/13b 42/17 & 42/18	30%	To Be Determined
P25612	42/19 & 42/20b	30%	To Be Determined
P25622	42/22 & 42/23	30%	To Be Determined

¹ Operated by Shell

² Operated by Capricorn

³ Operated by Parkmead

Central North Sea

Licence Ref:	Block ID	Deltic   Equity	Project ID	Discovery (D)   Prospect (P)   Lead (L)	Net Prospective Resource    (MMBOE)			GCoS %
					P90 Low	P50 Best	P10 High
P2352	22/24f & 22/25g	100%	Dewar - Forties	P	10	20.8	38.2	40
			Tesla - Pentland	D	To be determined - mean STOIIP estimated @ 24 mmboe
P2542	22/17a	100%	Syros	To be determined

Andrew Nunn

Chief Operating Officer

22 April 2022

 

Financial Review

All major expenditure in the last five years has been focussed on the development of the Company's portfolio of conventional North Sea assets in accordance with the Company's investing policy, in addition to on-going administrative expenditure.

Loss for the year

The Company incurred a loss for the year to 31 December 2021 of £1,935,052 (2020: £1,665,575), which includes a gain of £298,173 (2020: nil) recognised on the farm out of Licence P2428 (Cupertino Prospect), Licence P2567 (Cadence Prospect) and Licences P2560/P2561/P2562 (Breagh South Area) to Capricorn Energy PLC and is included as other operating income in the Income Statement for the year.  A charge of £288,551 (2020: nil) is recognised resulting from the write down on relinquished intangible assets following the decision to relinquish Licences P2384 (Manhattan Prospect) and P2424 (Cortez Prospect).

Administrative expenses of £1,912,987 (2020: £1,699,344) were incurred during the year reflecting an increased level of activity across the Company and its portfolio of assets. Finance income of £2,905 (2020: £59,818) decreased due to lower interest-bearing deposits on surplus funds. Finance costs of £34,592 (2020: £26,049) represent the interest charge on a lease liability recognised.

Financial position

The Company's cash was £10,092,205 at 31 December 2021 (2020: £11,968,858) with the year-on-year decrease in cash being explained below.

The increase in intangible assets to £2,203,118 (2020: £1,430,915) reflects the development of the Company's exploration portfolio and in particular progress towards drilling Licence P2252 (Pensacola Prospect), offset by the relinquishment of P2384 (Manhattan Prospect) and P2424 (Cortez Prospect), and the gain recognised on the proceeds from farm-out of Licences P2428 (Cupertino Area), P2567 (Cadence Prospect) and P2560/P2561/P2562 (Breagh South Area).  The Company was fully carried from the point of farm out for costs associated with Licences P2428, P2567, P2560, P2561 and P2562.

Property, plant and equipment of £385,240 (2020: £496,542) includes a right of use asset relating to the office lease with a net book value of £269,767 (2020: £350,697). Total current liabilities, which include short-term creditors, accruals and lease liabilities increased to £1,030,143 (2020: £246,041).

The decrease in total equity to £11,663,005 (2020: £13,437,735) mainly represents the loss for the year and other movements set out in the Statement of Changes in Equity.

Cash flow

In the year to 31 December 2021, the net cash outflow from operating activities was £1,623,057 (2020: £1,368,118). The net cash outflow from investing activities was £136,781 (2020: £458,740), comprising £853,744 (2020: £358,672) related to expenditure on exploration assets, £5,895 (2020: £159,886) relating to expenditure of property, plant and equipment, and £719,953 (2020: nil) receipt of proceeds from exploration licence farm-in, and interest received of £2,905 (2020: £59,818). The net cash outflow from financing activities was £116,815 (2020: £53,684), comprising the principal portion of lease liabilities and interest paid.

Consequently, in the year to 31 December 2021, the Company experienced a net cash outflow of £1,876,653 (2020: £1,880,542).

Closing cash and cash equivalents

As at 31 December 2021, the Company held cash and cash equivalents totalling £10,092,205 (2020: £11,968,858).

Shareholders' equity

As at 31 December 2021, there were 1,405,964,855 (2020: 1,405,964,855) ordinary shares in issue. Additionally, a total of up to 128,840,450 (2020: 94,840,450) new ordinary shares may be issued pursuant to the exercise of share options.

Going concern

The Directors have assessed the Company's ability to continue as a going concern. Although the oil and gas industry faces a period of change under the current geopolitical environment, the Company does not anticipate any negative issues impacting its ability to operate as a going concern.  Having taken the decision to raise funds in 2019 the Company is currently well funded with no debt. Based on the cash and cash equivalents balance at year end and the Company's commitments, the Directors are of the opinion that the Company has adequate financial resources to meet its committed Pensacola exploration programme, based upon anticipated drilling costs per the planned work schedule, and working capital requirements, and accordingly will be able to continue and meet its liabilities as they fall due for a minimum of 12 months from the date of signing these financial statements.

Key performance indicators

At this stage in its development, the Company is focusing on the development of its North Sea gas and oil assets, applying for additional licences, maintaining and extending existing licences, as well as the evaluation of various oil and gas opportunities that may arise. The Directors closely monitor and manage the levels of overheads and other administrative expenditure, exploration expenditure, cash and deposit balances, as set out above. As and when the Company's exploration licences move into production, other key performance indictors (KPIs) will become relevant and will be measured and reported as appropriate.

Sarah McLeod

Chief Financial Officer

22 April 2022

Investing Policy

In addition to the development of the North Sea gas licences the Company has acquired to date, the Company proposes to continue to evaluate other potential oil and gas projects in line with its investing policy, as it aims to build a portfolio of resource assets and create value for shareholders. As disclosed in the Company's AIM Admission Document in May 2012, the Company's substantially implemented Investment Policy is as follows:

The proposed investments to be made by the Company may be either quoted or unquoted; made by direct acquisition or through farm-ins; either in companies, partnerships or joint ventures; or direct interests in oil & gas and mining projects. It is not intended to invest or trade in physical commodities except where such physical commodities form part of a producing asset. The Company's equity interest in a proposed investment may range from a minority position to 100% ownership.

The Board initially intends to focus on pursuing projects in the oil & gas and mining sectors, where the Directors believe that a number of opportunities exist to acquire interests in attractive projects. Particular consideration will be given to identifying investments which are, in the opinion of the Directors, underperforming, undeveloped and/or undervalued, and where the Directors believe that their expertise and experience can be deployed to facilitate growth and unlock inherent value.

The Company will conduct initial due diligence appraisals of potential projects and, where it is believed further investigation is warranted, will appoint appropriately qualified persons to assist with this process. The Directors are currently assessing various opportunities which may prove suitable although, at this stage, only preliminary due diligence has been undertaken.

It is likely that the Company's financial resources will be invested in either a small number of projects or one large investment which may be deemed to be a reverse takeover under the AIM Rules. In every case, the Directors intend to mitigate risk by undertaking the appropriate due diligence and transaction analysis. Any transaction constituting a reverse takeover under the AIM Rules will also require Shareholder approval.

Investments in early stage and exploration assets are expected to be mainly in the form of equity, with debt being raised later to fund the development of such assets. Investments in later stage projects are more likely to include an element of debt to equity gearing. Where the Company builds a portfolio of related assets, it is possible that there may be cross holdings between such assets.

The Company intends to be an involved and active investor. Accordingly, where necessary, the Company may seek participation in the management or representation on the Board of an entity in which the Company invests with a view to improving the performance and use of its assets in such ways as should result in an upward re-rating of the value of those assets.

Given the timeframe the Directors believe is required to fully maximise the value of an exploration project or early stage development asset, it is expected that the investment will be held for the medium to long term, although disposal of assets in the short term cannot be ruled out in exceptional circumstances.

The Company intends to deliver Shareholder returns principally through capital growth rather than capital distribution via dividends, although it may become appropriate to distribute funds to Shareholders once the investment portfolio matures and production revenues are established.

Given the nature of the Investing Policy, the Company does not intend to make regular periodic disclosures or calculations of its net asset value.

The Directors consider that as investments are made, and new investment opportunities arise, further funding of the Company will be required.

This strategic report contains certain forward-looking statements that are subject to the usual risk factors and uncertainties associated with the oil and gas exploration and production business. Whilst the Directors believe the expectation reflected herein to be reasonable in light of the information available up to the time of their approval of this report, the actual outcome may be materially different owing to factors either beyond the Company's control or otherwise within the Company's control but, for example, owing to a change of plan or strategy. Accordingly, no reliance may be placed on the forward-looking statements.

On behalf of the Board

Mark Lappin  Graham Swindells

Chairman  Chief Executive Officer

22 April 2022  22 April 2022

Qualified Person

Andrew Nunn, a Chartered Geologist and Chief Operating Officer of Deltic Energy Plc, is a "Qualified Person" in accordance with the AIM Note for Mining, Oil and Gas Companies of the London Stock Exchange. Andrew has reviewed and approved the information contained within this announcement.

**ENDS**

For further information please contact the following:

Deltic Energy Plc	Tel: [phone]
Graham Swindells / Andrew Nunn / Sarah McLeod
Allenby Capital Limited (Nominated Adviser & Joint Broker)	Tel: [phone]
David Hart / Alex Brearley (Corporate Finance)
Kelly Gardiner (Sales and Corporate Broking)
Stifel Nicolaus Europe Limited (Joint Broker)	Tel: [phone]
Callum Stewart / Simon Mensley / Ashton Clanfield
Vigo Consulting (IR &PR Adviser)	Tel: [phone]
Patrick d'Ancona / Finlay Thomson / Oliver Clark

Glossary of Technical Terms

PRMS:  Petroleum Resources Management System (2007)

BCF:    Billion Cubic Feet 

GIIP:    Gas Initially In Place 

SCF:  Standard Cubic Feet

STOIIP  Stock-Tank Oil Initially In Place

Mmbbl  Million barrels

mmboe:  Million barrels of oil equivalent

Prospective Resources:   Are estimated volumes associated with undiscovered accumulations.  These represent quantities of petroleum which are estimated, as of a given date, to be potentially recoverable from oil and gas deposits identified on the basis of indirect evidence but which have not yet been drilled.

Chance of Success (GCoS):   for prospective resources, means the chance or probability of discovering hydrocarbons in sufficient quantity for them to be tested to the surface.  This, then, is the chance or probability of the prospective resource maturing into a contingent resource.  Prospective resources have both an associated chance of discovery (geological chance of success) and a chance of development (economic, regulatory, market and facility, corporate commitment and political risks).  The chance of commerciality is the product of these two risk components.  These estimates have been risked for chance of discovery but not for chance of development.

TCF: Trillion 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.

Pmean:  is the mean of the probability distribution for the resource estimates.  This is often not the same as P50 as the distribution can be skewed by high resource numbers with relatively low probabilities.

The GIIP volumes and Prospective Resources have been presented in accordance with the 2007 Petroleum Resources Management System (PRMS) prepared by the Oil and Gas Reserves Committee of the Society of Petroleum Engineers (SPE), reviewed, and jointly sponsored by the World Petroleum Council (WPC), the American Association of Petroleum Geologists (AAPG) and the Society of Petroleum Evaluation Engineers (SPEE).

Income Statement

for the year ended 31 December 2021

Continuing operations	Notes	2021 £	2020 £
Administrative expenses:
Write down on relinquished intangible assets	10	(288,551)	-
Other administrative expenses		(1,912,987)	(1,699,344)
Total administrative expenses		(2,201,538)	(1,699,344)
Other operating income	10	298,173	-
Operating loss		(1,903,365)	(1,699,344)
Finance income	4	2,905	59,818
Finance costs	5	(34,592)	(26,049)
Loss before tax	6	(1,935,052)	(1,665,575)
Income tax expense	8	-	-
Loss for the year		(1,935,052)	(1,665,575)
Loss per share from continuing operations expressed in pence per share:
Basic	9	(0.14)p	(0.12)p

Statement of Comprehensive Income

for the year ended 31 December 2021

		2021 £	2020 £
Loss for the year		(1,935,052)	(1,665,575)
Other comprehensive income		-	-
Total comprehensive expense for the year attributable to the equity holders of the Company		(1,935,052)	(1,665,575)

 

Balance Sheet

as at 31 December 2021

	Notes	2021 £	2020 £
Assets
Non-current assets
Intangible assets	10	2,203,118	1,430,915
Property, plant and equipment	11	385,240	496,542
Other receivables	12	37,422	37,422
Total non-current assets		2,625,780	1,964,879
Current assets
Trade and other receivables	12	190,398	53,887
Cash and cash equivalents		10,092,205	11,968,858
Total current assets		10,282,603	12,022,745
Total assets		12,908,383	13,987,624
Capital and reserves attributable to the equity holders of the Company
Shareholders' equity
Share capital	13	7,029,824	7,029,824
Share premium		20,296,030	20,296,030
Share-based payment reserve	21	1,150,700	990,378
Accumulated retained deficit		(16,813,549)	(14,878,497)
Total equity		11,663,005	13,437,735
Liabilities
Current liabilities
Trade and other payables	15	931,148	153,436
Lease liabilities	17	98,995	92,605
Total current liabilities		1,030,143	246,041
Non-current liabilities
Lease liabilities	17	215,235	303,848
Total non-current liabilities		215,235	303,848
Total liabilities		1,245,378	549,889
Total equity and liabilities		12,908,383	13,987,624

 

Statement of Changes in Equity

for the year ended 31 December 2021

	Share capital   £	Share premium   £	Share-based payment reserve £	Accumulated retained deficit £	Total equity £
Balance at 1 January 2021	7,029,824	20,296,030	990,378	(14,878,497)	13,437,735
Comprehensive income for the year
Loss for the year	-	-	-	(1,935,052)	(1,935,052)
Total comprehensive loss for the year	-	-	-	(1,935,052)	(1,935,052)
Contributions by and distributions to owners
Share-based payment	-	-	160,322	-	160,322
Total contributions by and distributions to owners	-	-	160,322	-	160,322
Balance at 31 December 2021	7,029,824	20,296,030	1,150,700	(16,813,549)	11,663,005
Balance at 1 January 2020	7,029,824	20,296,030	842,644	(13,212,922)	14,955,576
Comprehensive income for the year
Loss for the year	-	-	-	(1,665,575)	(1,665,575)
Total comprehensive loss for the year	-	-	-	(1,665,575)	(1,665,575)
Contributions by and distributions to owners
Share-based payment	-	-	147,734	-	147,734
Total contributions by and distributions to owners	-	-	147,734	-	147,734
Balance at 31 December 2020	7,029,824	20,296,030	990,378	(14,878,497)	13,437,735

 

Statement of Cash Flows

for the year ended 31 December 2021

		2021 £	2020 £
Cash flows from operating activities
Loss before tax		(1,935,052)	(1,665,575)
Finance income		(2,905)	(59,818)
Finance costs		34,592	26,049
Gain from farm-out of licence interest		(298,173)	2,783
Depreciation		115,355	106,029
Amortisation		5,625	6,712
Loss on disposal of property, plant and equipment		1,842	-
Write down on relinquished intangible assets		288,551	-
Share-based payment		160,322	147,734
		(1,629,843)	(1,436,086)
Decrease/(increase) in other receivables		(136,511)	38,269
Increase in trade and other payables		143,297	29,699
Net cash outflow from operating activities		(1,623,057)	(1,368,118)
Cash flows from investing activities
Purchase of intangible assets		(853,744)	(358,672)
Purchase of property, plant and equipment		(5,895)	(190,108)
Property, plant & equipment landlord contributions		-	30,222
Proceeds from exploration licence farm-in		719,953	-
Interest received		2,905	59,818
Net cash outflow from investing activities		(136,781)	(458,740)
Cash flows from financing activities
Payment of principal portion of lease liabilities		(82,223)	(27,635)
Interest paid		(34,592)	(26,049)
Net cash outflow from financing activities		(116,815)	(53,684)
Decrease cash and cash equivalents		(1,876,653)	(1,880,542)
Cash and cash equivalents at beginning of year		11,968,858	13,849,400
Cash and cash equivalents at end of year		10,092,205	11,968,858

Notes to the Financial Information

for the year ended 31 December 2021

1. Basis of preparation

The financial statements have been prepared in accordance with UK adopted International Accounting Standards ('IAS'), as adopted by the EU and with those parts of the Companies Act 2006 applicable to companies reporting under International Financial Reporting Standards ('IFRS').

The financial information for the year ended 31 December 2021 and 31 December 2020 set out in this announcement does not constitute the Company's statutory financial statements for the year ended 31 December 2021 but is extracted from the audited financial statements for those years.  The 31 December 2020 accounts have been delivered to the Registrar of Companies.  The statutory financial statements for 2021 will be delivered to the Registrar of Companies in due course.

While the financial information included in this announcement has been prepared in accordance with the recognition and measurement criteria of While the financial information included in this announcement has been prepared in accordance with the recognition and measurement criteria of UK adopted International Accounting Standards ("UK adopted IASs") issued by the International Accounting Standards Board and as endorsed for use by the UK Endorsement Board, and with those parts of the Companies Act 2006 applicable to companies preparing their accounting under UK adopted IASs, this announcement does not itself contain sufficient information to comply with UK adopted IASs."

The principal accounting policies adopted in the preparation of the financial information in this announcement are set out in the Company's full financial statements for the year ended 31 December 2021.

Going concern

The Directors have assessed the Company's ability to continue as a going concern. Although the oil and gas industry faces a period of change under the current geopolitical environment, the Company does not anticipate any negative issues impacting its ability to operate as a going concern.  Having taken the decision to raise funds in 2019 the Company is currently well funded with no debt. Based on the cash and cash equivalents balance at year end and the Company's commitments, the Directors are of the opinion that the Company has adequate financial resources to meet its committed Pensacola exploration programme, based upon anticipated drilling costs per the planned work schedule, and working capital requirements, and accordingly will be able to continue and meet its liabilities as they fall due for a minimum of 12 months from the date of signing these financial statements.

2. Loss per Share

Basic loss per share is calculated by dividing the loss attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the year.

Due to the losses incurred during the year, a diluted loss per share has not been calculated as this would serve to reduce the basic loss per share. There were 128,840,450 (2020: 94,840,450) share options outstanding at the end of the year that could potentially dilute basic earnings per share in the future.

Basic and diluted loss per share 

	2021	2020
Loss per share from continuing operations	(0.14)p	(0.12)p

The loss and weighted average number of ordinary shares used in the calculation of loss per share are as follows:

	2021	2020
	£	£
Loss used in the calculation of total basic loss per share	(1,935,052)	(1,665,575)

Number of shares	2021	2020
	Number	Number
Weighted average number of ordinary shares for the purposes of basic loss per share	1,405,964,855	1,405,964,855

 

3. Intangible Assets

		Exploration & evaluation assets £	Software licences £	Total £
Cost
At 1 January 2020		1,115,605	39,257	1,154,862
Additions		309,685	-	309,685
At 31 December 2020		1,425,290	39,257	1,464,547
Additions		1,488,159	-	1,488,159
Farm-out of licence		(421,780)	-	(421,780)
Disposals		(288,551)	-	(288,551)
At 31 December 2021		2,203,118	39,257	2,242,375
Amortisation and impairment
At 1 January 2020		-	26,920	26,920
Charge for year		-	6,712	6,712
At 31 December 2020		-	33,632	33,632
Charge for year		-	5,625	5,625
At 31 December 2021		-	39,257	39,257
Net Book Value
At 31 December 2021		2,203,118	-	2,203,118
At 31 December 2020		1,425,290	5,625	1,430,915
At 1 January 2020		1,115,605	12,337	1,127,942

The net book value of exploration and evaluation assets at 31 December 2021 and 2020 relates solely to the Company's North Sea Licences.

Aggregate cash proceeds arising from the farm-out of five Licences (P2428, P2567, P2560, P2561, P2562) to Capricorn during the year amounted to £719,953. An amount of £421,780 was deducted from exploration and evaluation assets, being the previously capitalised expenditure relating to that licence. The surplus of the proceeds over the carrying value amounted to £298,173 and was recognised as a gain on disposal of the partial interest and included as other operating income in the Income Statement for the year.

A charge of £288,551 (2020: nil) is recognised resulting from the write down of relinquished intangible assets following the decision to relinquish Licences P2384 (Manhattan Prospect) and P2424 (Cortez Prospect).

Additions of £1,488,159 (2020: £309,685) differ to the cash flows in the Statement of Cash Flows owing to an increase in trade and other payables of £634,415 (2020: £48,987 decrease) relating to intangible assets.

 

END

 

 

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