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(Sharecast News) - Natural resources investing company Deltic Energy announced a significant agreement regarding licence P2437 and the Selene Prospect on Wednesday, as it entered into a farm-out deal with Dana Petroleum, transferring a 25% interest in the licence while retaining a 25% non-operated equity interest.
The AIM-traded firm said the transaction, combined with an existing carry from Shell UK, ensured it had no exposure to drilling and testing costs for 2024, up to a certain cap.
Under the agreement, Deltic would receive $0.5m in cash from Dana on completion, covering back costs incurred by Deltic.
Additionally, Dana would carry Deltic for its residual cost exposure to the Selene well, with a value of $5m in a dry hole scenario and $6m in a success case.
Dana would also cover its 25% share of costs from 1 January 2024.
Any well costs exceeding $40m for a dry hole or $49m for a success case, as well as non-well related costs after 1 January, would be split along equity lines.
With the Dana and Shell carries, Deltic said its cost exposure to the Selene exploration well was eliminated up to total amounts of $40m for a dry hole and $49m for a success case.
Recent estimates from Shell indicated a total success case cost of $47m for the Selene well.
Completion of the farm-out agreement was now subject to consent from Shell and standard regulatory approvals from the North Sea Transition Authority.
Meanwhile, preparations for the Selene well were progressing as planned, with geophysical and geotechnical surveys completed, critical long lead items ordered, and procurement processes advanced.
The rig contract for the Valaris 123, announced on 5 February, would ensure that the Selene well remained on track for drilling in the third quarter.
"We are delighted to have strengthened the P2437 JV with the addition of an established operator like Dana who has a long history of successful exploration and development in the Southern North Sea," said chief executive officer Graham Swindells.
"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, which remains scheduled to commence in the third quarter of 2024.
"I look forward to updating the market as we progress through a very exciting year for Deltic, including our active and ongoing process to realise value and farm down our Pensacola discovery."
At 1248 GMT, shares in Deltic Energy were up 14% at 30.21p.
Reporting by Josh White for Sharecast.com.
