Shell (LON: SHEL) and Deltic Energy (LON: DELT) have decided to invest in a high-impact exploration well in the UK North Sea.
Selene is targeting P50 (best estimate) prospective resources of 318 billion cubic feet of gas, with a geological chance of success of 70%.
The decision, coming ahead of Shell’s Q2 results on Thursday, comes hot off news last night that the oil giant will invest in the Jackdaw gas project in the central North Sea.
As a result of the investment call, Shell is now the operator of the Selene licence, P2437 in the Southern North Sea.
The oil giant is covering 75% of the costs of drilling and testing the well up to $25m as part of the farm-in arrangement made in 2019.
Exciting time
It’s one of two high-impact wells Shell is partnered with AIM-listed Deltic Energy on in the region; the other, Pensacola, is eagerly awaited and due to start drilling in September.
That well is targeting similar resources of 309 bcf of gas.
Deltic Energy chief executive Graham Swindells said: “This is a very exciting time for Deltic as we move into the next phase of our strategy, building on the strong platform created by farm outs to both Shell and Capricorn.
“The commitment to drill this material, high impact, low risk gas prospect is another highly significant milestone for Deltic and our team.
“Adding another committed well to our programme, following recent confirmation that Pensacola will be drilled in September, represents further endorsement of the quality of Deltic’s assets as well as demonstrating the success of our strategy to create a conveyor belt of exploration opportunities moving from licensing to drilling with world-class partners in place.”
Work ahead
Deltic said the North Sea Transition Authority (NSTA) is aware of the decision, allowing the licence to enter its next phase.
The timing of a well slot is yet to be confirmed, but the joint venture said that will be firmed up as work progresses.
They are now moving on to detailed well design, planning, rig procurement and other key preparations to support drilling operations.
Shell farmed in to both Selene and Pensacola in 2019.
It had been hoped a decision on the former could take place as early as that year.
The decision today comes amid renewed focus on domestic gas supply following a surge in prices and attempts to reduce reliance on overseas imports.
Deltic has identified various options for Pensacola, should it be successful.
The firm said Selene is a “strategic asset located close (to) infrastructure” but hasn’t yet named any tie-back options should it be successful.
Shares in Deltic are up 2.84% today (07.45) to 2.9pence.
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