Deltic Energy plc has agreed to farm out a 25% interest in licence P2437, containing the Selene gas prospect, to Dana Petroleum (E&P) Ltd.
STRENGTHEN
The transaction, along with the existing carry by operator Shell UK Ltd, leaves the company with a 25% non-operated interest in the licence.
Deltic also has no exposure to 2024 drilling and testing costs up to a cap in excess of current success case well cost estimates provided by the operator.
Dana will pay $500,000 in cash in relation to back costs incurred by Deltic and will carry Deltic’s residual cost exposure to the Selene well of $5 million and $6m in a success case.
Dana, a subsidiary of Korean National Oil Corporation, will pay its 25% share of costs from 1 January 2024.
Any gross well costs incurred in excess of $40m (dryhole) or $49m (success case) and any non-well related costs incurred after the effective date of 1 January 2024 will be split along equity lines.
Shell’s recent estimate of well costs indicate a total success case cost of the Selene well at $47m.
Completion of the farm-out is subject to approvals from Shell and the North Sea Transition Authority.
Deltic said that preparatory works for the Selene well are on schedule with geophysical and geotechnical site surveys completed and critical long lead items including casing ordered.
Procurement processes are well advanced and with the rig contract for the Valaris 123, the Selene well is on course for drilling during Q3 2024.
Chief executive Graham Swindells added: “We are delighted to have strengthened the P2437 JV with the addition of an established operator like Dana who have a long history of successful exploration and development in the southern North Sea.
“As a result of the transaction Deltic retains a material stake in one of the highest impact UK exploration wells planned in 2024 while effectively eliminating our estimated cost exposure to the exploration well.”