Deltic axes three licences after Capricorn exit, but Cadence still on the cards

North Sea firm Deltic Energy (LON: DELT) has given up on three exploration licences after its partner decided to exit the permits.

The London-listed company holds five Southern North Sea prospects in partnership with Edinburgh-headquartered Capricorn Energy (LON: CNE).

As part of a wider shakeup of the company, Capricorn recently announced plans to walk away from all its prospects outside Egypt, with numerous job losses as a result.

The Edinburgh-headquartered firm subsequently notified Deltic of its intention to withdraw from licences P2560, P2561 and P2562.

In turn Deltic, as part of an ongoing rationalisation and high grading of its portfolio, has opted to drop the permits, and the pair will move to relinquish them as soon as possible.

Keeping 2 of the 5

The company will hold onto the remaining two licences though, believing them to have “excellent potential”.

Following technical work programmes completed by Capricorn, Deltic recognises the “significant prospectivity” of P2567 and P2428.

© Supplied by Capricorn Energy

Licences P2567 holds the Cadence prospect, believed to hold some 120 million barrels of oil equivalent, and tipped as a well to watch by Wood Mackenzie.

Meanwhile P2428 contains Cupertino, and Deltic, with the landmark Pensacola find now under its belt, intends to continue with both licences despite Capricorn dropping out.

Time and effort gone into prospects

A committed work programme has already been completed across two permits, and Deltic has “been fully carried by Capricorn through nearly $10 million” of technical studies to date.

That includes the pre-funding of nearly 700km2 of new 3D seismic, as well as the reprocessing of a number of legacy surveys.

During the geological evaluation the joint venture partners identified and matured 17 leads and prospects in the Carboniferous formation.

Combined the two prospects are believed to have gross P50 gas-initially-in-place of more than 2.6 trillion cubic feet (TCF).

Moreover Deltic says many of these prospects are “analogous” with the Pegasus and Andromeda discoveries, located in blocks immediately to the south.

Plans to apply for extensions

Licences P2567 and P2428 are due to expire on November 30, 2023, and March 31, 2024, respectively.

Once Deltic has been re-appointed as Administrator of these licences, it will request an extension of the current licence terms from regulator the North Sea Transition Authority.

Should they be approved, the company plans to “continue to assure and high grade the prospects”, while trying to bring on another partner or partners to help with future drilling.

Graham Swindells, chief executive of Deltic, said: “While we would have preferred to continue in partnership with Capricorn on these exploration licences, Capricorn has recently changed strategic direction. Our extensive work together has advanced our understanding of the potential of the area; further demonstrated the excellent prospectivity present on the two most advanced licences and allowed us to focus on those licences showing excellent potential. We look forward to advancing the key exploration prospects on this acreage.

“Following our success earlier this year with the Pensacola gas and oil discovery, Deltic remains committed to exploring in the Southern North Sea which has the potential to provide high quality UK based employment, tax revenues and energy security while at the same time offsetting higher carbon intensity imports as the UK continues its transition towards a net zero future.”