Deltic Energy PLC (AIM:DELT) has agreed a new farm-out deal for the upcoming Selene exploration well in the North Sea, leaving the small-cap explorer with little to no cost exposure to the project.
The deal sees Dana Petroleum take 25% and join the Shell-operated venture.
Dana is to pay US$500,000 in cash upfront, and it agrees to cover between US$5 million and US$6 million of Deltic’s remaining costs for the well.
In addition to Deltic’s existing farm-out deal with Shell, it means that the AIM-quoted firm will be covered for up to US$49 million of Selene’s well costs – and pre-drill well costs are estimated at US$47 million if the well is successful and requires testing.
Graham Swindells, Deltic's chief executive, described himself as “delighted” with the deal that he said strengthens the joint venture.
“As a result of the transaction Deltic retains a material stake in one of the highest impact UK exploration wells planned in 2024 while effectively eliminating our estimated cost exposure to the exploration well, which remains scheduled to commence in Q3 2024,” Swindells said in a statement.
“I look forward to updating the market as we progress through a very exciting year for Deltic, including our active and ongoing process to realise value and farm down our Pensacola discovery."
Deltic meanwhile noted that geophysical and geotechnical site surveys have been completed for Selene and critical long lead items including casing have been ordered. The rig is secured for the programme, and other procurement processes are well advanced.
Selene is slated to be drilled in the third quarter of 2024. Drilling is slated to start between June and July, using Valaris 123 which is described as a heavy-duty jack-up rig.
Drilling of an appraisal well to follow up the Pensacola discovery, also a Shell-operated venture, is meanwhile planned for “late 2024”.
Dana Petroleum is a wholly owned subsidiary of the Korea National Oil Corporation and it has producing assets across the UK, Netherlands and Egypt. In the North Sea, it owns 50% of Harbour Energy-operated Tolmount East amongst other assets.