Deltic Energy PLC (AIM:DELT) has received a competent persons report, authored by consultant RPS Energy, which confirms the Pensacola project as a “regionally significant” discovery in the Southern North Sea.
It is another boost for the small-cap explorer that’s partnered with Shell, which leads the Pensacola project and plans to drill an appraisal well later this year. If successful, this well will move the project towards development.
The AIM-quoted North Sea oil and gas firm, in a statement, relayed to investors the highlights of the new independent report, which includes the maiden Contingent Resource estimate for the Pensacola Zechstein Reef discovery – with ‘in-place’ resources coming in at 326 million barrels of oil equivalent.
RPS ascribes up to 21.8 million barrels of the higher confidence contingent resource for Deltic’s 30% stake in the project.
For the uninitiated, contingent resources effectively refer to the volumes of oil that are deemed retrievable via potential field development scenarios. They are typically a precursor to reserves, and, are often converted to reserves as projects advance.
The significance for Deltic is underlined by a valuation estimate by RPS which sees the discovery’s worth to Deltic, with a post-tax net present value, pitched at up to $205 million for a gas and oil field development, and $199 million for a gas-only development.
This equates to 174p and 169p per share respectively for Deltic, compared to a prevailing price on AIM of just 22.6p.
RPS’s assessment is further bolstered by additional technical data - appraisal well data from an analogous Crosgan Zechstein discovery – which suggests “the potential for thicker, higher quality reservoir across the crest of Pensacola”.
"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,” chief executive Graham Swindells said in a statement.
“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."
Deltic, meanwhile, told investors that it continues to “work on a number of potential options” to realise value and mitigate exposure to future expenditures at Pensacola and the Selene project (where it is also partnered with Shell).
A farm-out process has received “a significant level of interest” the company highlighted.
“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,” the company added.