Deltic Energy has decided to withdraw from participation in a gas discovery in the southern North Sea. This decision is due to the company’s inability to secure the necessary funds for its share of appraisal costs. Deltic Energy attributes these difficulties directly to the political and fiscal uncertainty in the UK.
Shell’s share of gas discovery
After initiating a relinquishment process to meet its share of the financial requirements, Deltic Energy, Shell’s partner in the Pensacola gas discovery in the P2252 license, was granted a short extension to advance negotiations with potential counterparties until June 12.
In the absence of an assignment of rights or an alternative financing solution, Deltic decided to withdraw from the license to avoid further financial liability after Shell’s issuance of the expenditure authorization.
Deltic Energy CEO Graham Swindells detailed that the recent history of large-scale discoveries such as Cambo and Rosebank has demonstrated the difficulties of advancing developments on the UKCS.
The withdrawal of the Pensacola project
Although Deltic was unable to secure future participation in the Pensacola project, this does not diminish the team’s accomplishments in identifying the opportunity, attracting a partner such as Shell and raising the capital necessary to drill the initial initial discovery well.
The decision to withdraw from Pensacola was not taken lightly. The company explored various financing solutions, including potential industry partners, its existing joint venture partners, divestitures, asset sales, equity capital markets, strategic investors, debt providers and commodity traders that can prepay for future gas deliveries.
Finally, having exhausted all avenues, Deltic formally notified its joint venture partners of its intention to withdraw from the P2252 license and commence the transfer of its equity to the remaining partners pursuant to the joint operating agreement. Notwithstanding its withdrawal, the UK company is expected to meet certain expenditures related to the appraisal of the well, agreed prior to issuing the notice of withdrawal.
Finally, Deltic states that the value of the committed expenditure will be established with Shell following the formal withdrawal process, and that these costs may not be fully payable until the first half of 2025. Since the Pensacola gas discovery in 2023, the operator has worked to develop an appraisal strategy, contracting the Valaris 123 rig to drill the appraisal well in 2024.
Follow us on social networks and don’t miss any of our publications!
YouTube LinkedIn Facebook Instagram X
Source: Offshore Energy
Photo: Valaris
