Shell gives Deltic more time to secure funds for its share of appraisal costs at North Sea discovery

AIM-listed natural resources investing company Deltic Energy has managed to obtain additional time to ensure that its share of costs will be secured for the appraisal of a gas discovery in the Southern North Sea, which Shell, a UK-headquartered energy giant, operates.

Shell’s partner in the Pensacola gas discovery in license P2252, Deltic Energy, embarked on a farm-out process to meet its share of funding requirements. However, no farm-out partner has been secured so far.

In April 2024, Deltic explained that the difficulty in securing a farm-out partner stemmed from the continual tinkering with the Energy Profits Levy (EPL) and resultant fiscal uncertainty created by the government, along with recent rhetoric emanating from the Labour Party.

At the time, the AIM-listed player underscored that these circumstances negatively impacted the ability of UK exploration and production (E&P) companies to commit to long-term investments in the North Sea. 

While confirming a short period of additional time, which will allow it to progress discussions with potential counterparties until June 12 concerning a possible transaction, Deltic highlights that there is no guarantee that discussions will be concluded successfully within that timeframe.

If no deal is struck, the AIM-listed firm would be required to withdraw from the Pensacola license and transfer its interest to its joint venture partners.

Following gas discovery at the Pensacola well in 2023, Shell worked to develop an appraisal strategy for the discovery and hired the Valaris 123 jack-up rig to spud the Pensacola appraisal well in 2024.

The Valaris 123 heavy-duty jack-up rig will drill both the Selene exploration well and the Pensacola appraisal well, with the latter due to be drilled immediately following the completion of operations at the former.

Deltic recently wrapped up a farm-out agreement with Dana Petroleum for a 25% interest in Shell’s license P2437, containing the Selene prospect.