Real gamblers might like to take a look at the shares of Deltic Energy (LON:DELT) – they are currently bumping along on their backside at just 4.65p, after having fallen from the 44p last seen in mid-April this year.
A Big Change
Yesterday morning the group announced an Operational and Strategic Update, together with a non-executive Board change, as well as a change of Broker.
So, it is quite a corporate change of face for the company.
Allenby Capital will continue as its Nomad, while Canaccord Genuity will assume the role of sole broker for the company.
The company announced that:
“For the last decade, Deltic has invested in its UK portfolio and achieved material exploration success despite the well-publicised political and fiscal headwinds that have hampered the UK’s oil and gas industry in recent years.
It is clear that, while this situation persists, the UK is not the ideal place in which to invest in new oil and gas exploration or appraisal opportunities.
Therefore, the Board has carefully considered the best way to leverage the Company’s international experience and expertise to create value for shareholders going forward.”
Concentration On Selene Well
Deltic has a 25% working interest in the Selene licence which is located in the heart of the long-established Leman Sandstone gas play in the Southern North Sea.
In a success case, the intention would be to proceed directly to field development planning as further appraisal drilling is not considered to be necessary to support a future development investment decision.
Deltic holds a 25% interest in Selene after farming-out the project to Shell in 2019 and to Dana Petroleum in February this year.
In late July Shell mobilised its Valaris 123 drilling unit to drill 2024’s first well at Deltic Energy’s Selene prospect in licence P2437.
The well is designed to collect all key information in relation to reservoir quality and gas composition that is required to support, assuming a successful drilling outcome, a field development plan and final investment decision on the potential development of the Selene gas field without the requirement for a further appraisal well.
Deltic estimates the Selene structure to contain gross P50 prospective resources of 318bcf of gas in the Leman Sandstone reservoir, which is the key reservoir interval in all adjacent gas fields including Barque, Clipper and West Sole.
Earlier this year, former CEO Graham Swindells stated that:
“We are excited to be commencing drilling operations on Selene with our partners Shell and Dana, and for which we are fully carried for the estimated success case cost.
This will be the first exploration well spudded on the UKCS in 2024 and is an equally important milestone for Deltic.
The Selene prospect is a high impact infrastructure-led exploration opportunity which demonstrates the strength and depth of the portfolio that we have built over the last few years, and which we estimate to be worth multiples of the company’s current market value.
Despite ongoing political uncertainty, we look forward to commencing operations and continue to believe exploration on the UKCS has a hugely important role to play in supporting the provision of energy security, vital jobs within the energy sector and offsetting higher carbon intensity imported energy.”
Management Comment
Yesterday new CEO Andrew Nunn commented that:
“Our immediate focus is the ongoing Selene exploration well, where initial drilling indications are encouraging.
I look forward to updating the market on the progress of this highly material well.
The Board has considered the best way to deploy the Company’s experience and expertise to create value for its shareholders.
As always, the balance of geological, operational and political risk must be considered and we are actively assessing a number of attractive opportunities in geographies where more supportive policies towards oil and gas development exist.
The key changes we have announced today, in addition to a raft of other less significant changes, will have an immediate and material impact on the Company’s operational expenditure and are expected to result in savings of 40% compared to costs previously budgeted by management for 2025.
These savings are key to extending the time period in which to identify and incubate those new opportunities that we believe will help towards stabilising the business and providing a platform for future growth supporting our objective of creating positive returns for shareholders.”
Analysts Charlie Sharp and Phil Hallam at Canaccord Genuity Capital Markets rated the group’s shares as a Speculative Buy – but with an unchanged Price Objective of 80p – yes 80p!
They consider that the ‘strategic reset’ makes sense.
The process is still at an early stage and there is little indication of geographical focus, but they would be surprised if opportunities in sub-Saharan Africa were not high on the agenda.
They feel that in the very short term all eyes will be on the key Selene logging/sampling results.
The shares closed last night at 4.65p, valuing the whole company at just £4.32m.