Deltic Energy says the Budget must give “clarity and stability” if North Sea is to avoid accelerated decline

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Deltic Energy PLC is the latest British oil firm to lay bare the impact of the political and fiscal approach that the UK government is taking to the North Sea and offshore oil and gas, as it reports interim results today.

For Deltic, this meant the exit in June from the Pensacola project, one of the North Sea’s largest new discoveries for over a decade – and the uncertainty for investors and industry remains a headwind as the company works to advance other highly promising potential sources of gas and oil in its portfolio.

“There is no doubt that the first half of the year has been one of the most challenging periods for the company since its inception, with highly publicised fiscal and political pressures impacting companies operating across the UK's domestic oil and gas sector,” chief executive Graham Swindells said today’s interim results statement.

“Despite these unprecedented headwinds, the company continues to make significant commercial and operational progress, which has resulted in a farm-down to Dana which limits our potential cost exposure to the high-impact Selene exploration well which is currently being drilled, as well as the award of two new UK licences located close to key production hubs in the Central and Southern North Sea.”

Swindells added: “Despite our necessary withdrawal from Pensacola, Deltic remains in a strong position to extract significant value for shareholders from our existing UK asset portfolio over the coming months and years.”

The Deltic boss, meanwhile, told investors that as the explorer now limits its cost exposure in the UK, it is also actively evaluating investment opportunities in other jurisdictions.

These opportunities would be in regions where “a more supportive approach to the future oil and gas exploration and development prevails."

UK operations

Despite the challenging backdrop, Deltic’s assets continue to progress.

Significantly during the period it secured the farm-out of a 25% stake in the Selene prospect to Dana Petroleum, in a move that provides Deltic with a ‘full carry’ on its costs for a new well.

That well, operated by Shell, spudded subsequently in July – with a 90-day well schedule anticipated.

The Selene well is targeting approximately 31 billion cubic feet of prospective gas resources.

Notably, reflecting the pressured operating environment, when Selene spud in July it was the first exploration well to be drilled in British waters during 2024.

Deltic said it hopes the new government's first budget will “provide an element of clarity and much-needed stability if the UK oil and gas industry is to avoid an accelerated decline.”

During the period, Deltic also received the award of new project areas in the UK’s 33rd License Round, which was launched last year by the previous government.

In terms of financials, the pre-revenue explorer reported a £1.3mln loss before impairments – whilst some £18 million was then written off for the withdrawal from the Pensacola project.

On the balance sheet, Deltic’s exploration assets reduced in value from £16.5 million to £1 million after accounting for the new circumstances.

In cash terms, Deltic told investors it had £3.7 million of cash at the end of the reporting period (30 June).

Read the latest issue of the OGV Energy magazine HERE