Deltic accepts one of two new licences as it plans Blackadder farm out

Deltic Energy (AIM:DELT) said it is “in preparation for farm out” of its stake in Blackadder, as it shared news of new licences in UK waters.

The Pharos-Blackadder discovery is located next to infrastructure at the West Sole field, as is its freshly obtained P2672 licence which covers blocks 47/5e, 47/10c and 48/6c.

Deltic had been provisionally awarded two licences from the UK’s 33rd licencing round, however, it has only accepted one.

Graham Swindells, chief executive of Deltic, commented: “The Blackadder project has many analogous attributes to the Selene prospect, where the reworking of legacy datasets has unearthed a potential missed pay opportunity of material scale.

“Blackadder’s location, in close proximity to existing infrastructure that requires new third party gas to defer decommissioning, should enhance its value in a mature basin where new licences are likely to become increasingly scarce.

“Over the coming year we will progress our work on the legacy data in preparation for farm out, in anticipation of drilling an appraisal well on Blackadder in due course.”

Earlier this year will withdraw from the licence covering the Pensacola discovery. At the time the business pointed to ongoing political uncertainty around the UK election as the reason for its decision.

At the time of this announcement, Mr Swindells said his firm would be focussing on its Selene, Syros and Blackadder projects.

Pharos and Blackadder

Today the company shared: “Deltic’s preliminary evaluation, completed as part of the application process, has resulted in an updated understanding of the structural setting, which suggests that the Pharos discovery and the Blackadder prospect are in fact a single Leman Sandstone structure.”

An updated structural reading at the site has shown the 47/05d-6 well intersected the Blackadder structure in a downdip location.

Deltic has said that its initial 3 year Phase A work programme commitments for the licence will concentrate on repurposing “legacy 3D seismic data” to refine the structural model and enhance structural imaging.

Previously, Deltic has said the Blackadder project was a “better option with respect to attracting a partner and supporting future drilling activity in the current fiscal and political environment”.

Concerns over future of oil and gas in the UK

Now that the UK has decided that the Labour Party will for the next UK government it is to be seen if stability will return to the market.

Previously, Labour has said its government will not issue exploration licences for “new fields”, but the party said it will manage North Sea production “in a way that does not jeopardise jobs”.

However, senior analyst at Wood Mac, James Reid, recently told Energy Voice: “Previously, they went down the route of no further exploration drilling and now they’re saying, we will allow you to drill on existing licenses.”

Another cause for concern among UK oil and gas operators is Labour’s proposed changes to the ever-controversial energy profits levy (EPL), or windfall tax.

© Stefan Rousseau/PA Wire

Labour is committed to raising the rate of the EPL to bring the headline rate of tax paid by UK firms to 78% while “closing loopholes” in the existing policy.

Reid also raised concern over the lack of clarity over what the Labour government may consider a loophole.

“They haven’t been 100% clear on what they are, but it sounds more and more like they’re talking about the investment allowance under the EPL.

“The worst case scenario that the industry is very worried about is the removal of the capital allowances as well.

“For a pre- production project, losing those capital allowances would significantly harm the economics of these projects.”

However, Mr Reid is not convinced that the industry will see changes until Labour’s first budget, meaning oil firms might have to wait with bated breath.