Member Info for Exploration

j1osf

Thanks

There is a system in place to punish Deltic Board members for messing up. So I won’t be sending a complaint e-mail.

Mssrs Swindells and Nunn have a lot of options under water at the moment and they should be feeling sorry for themselves owning lots of worthless paper. So they’ll be gambling on big bonuses and salary hikes.

But non execs Cowley and Nicol are vastly experienced and the recent shenanigans of the press release will have reduced their confidence in Deltic’s leadership. They’ll be gathering feedback from the investment community to guide them on the next steps.

Big shareholders like Michael Spencer et al will call the shots.

I wouldn’t be surprised if a covert search for new, experienced leadership at Deltic is underway right now. It will all be very ‘genteel’ culminating in phrases such as ‘decided to step down’ or ‘pursue other interests’.

Xxpro

Actually, for the first time Snoop has made a valid point.

There’s nothing wrong with the Pensacola geology or the testing programme. It’s the way the results were communicated which prompted the market sell-off leaving the share price at pre-drill levels.

Deltic’s investment proposition is to generate returns to shareholders via capital appreciation and its essential to be clear on how they will achieve this.

Deltic has never explained clearly what their exploration plan at Pensacola involved and then announced sub-commercial flow rates with vague references to better production rates in future and comments on drilling at Selene.

In reality, the exploration well at Pensacola had three objectives. i.e.drill a vertical well;

- to test the geological model and presence of gas
- demonstrate moveable gas is present
- determine whether an appraisal programme is justifiable

Simple, measurable objectives all of which have been met and rank as 100% success.

But the market had no prior knowledge of what constituted success due to lack of adequate communications pre-drill and investors have lost out as result.

Deltic’s IR consultants have dropped the ball on Pensacola and Deltic management need to sharpen up their communications with investors and the market in general.

“Post acidization, the well flowed gas at peak rates of c. 4.75 mmscf/day declining to 1.75mmscf/day after the 12 hours of the test”.

But the well achieved its primary exploration objectives to;

determine if mobile oil/gas is present
assess whether appraisal drilling can be justified

If only Deltic had laid out this strategy earlier, then perhaps there would have been a more positive market reaction.

But now we’re asking lots more questions such as;

Q1; Did the well flow naturally at all before acidization?

Q2; Gas flow rate declined by 60% in 12 hours - did it continue to decline at the same rate in the next 12 hours?

Q3; Did flow stabilise and at what rate?

Once again, more self-inflicted damage to value.

Compare Deltic’s announcement with Shell’s level-headed response.

"A Shell spokesperson said: “Shell can confirm that exploratory drilling on the Pensacola prospect in the Southern North Sea and subsequent well tests have indicated the presence of gas. We are now evaluating the feasibility of any development."

Deltic really does need to sharpen up how it publicises its strategy and operations and think through the consequences of public announcements. The Pensacola announcement has snatched defeat from the jaws of victory - again.

Rot 1

Capricorn operates the Deltic Blocks they farmed into which means they control cost and schedule + will charge `deltic operator fees - so Deltic will have to start paying if a drilling decision is made.

Cairn disclosed in a 2022 update. Here is is in quotes.

“In the second half of 2021, the Capricorn Group farmed into and became operator of five Southern North Sea licences: P2428 and P2567 (Capricorn 60 per cent. WI) and P2560, P2561 and P2562 (Capricorn 70 per cent. WI) with partner Deltic Energy.

The Capricorn Group also completed the acquisition of nearly 700 km2 of broadband 3D seismic data over the P2428 licence and surrounding area in November 2021, which fulfils its work programme commitments for the current and next licence phases and will inform a drilling decision in the future.

Naturally, the Plymouth prospect was the initial focus, given the potential read-across from the Pensacola well to be drilled later this year. However, the new 3D data does not support the earlier interpretation made on the legacy 2D seismic and the prospect has been downgraded in relation to the other prospects and leads which exist on the licence. Interpretation of the new data is ongoing, with Capricorn now directing its attention towards maturing the other prospects and leads in the Carboniferous, Leman Sandstone, and the Triassic Bunter Sandstone, including the Cupertino and Richmond prospects which were the original focus of the licence application”

Plymouth is a large Z2 Hauptdolomit carbonate build up which is highly analogous to the Pensacola prospect on Deltic Licence P2252 and to the 2019 discovery at Darach. The structure is a four way dip closure with the best reservoir expected on the reef edges.

It is expected that Shell will drill a well on Pensacola in Q2 2022 which will further de-risk the play and have significant read across to the Plymouth prospect.

Plymouth was estimated P50 Prospective Resources of 282 BCF with a Geological CoS of 20%.

P2428 covers Block 43/7 and 43/8. Below is a presentation from late 2020. In fact, it has probably worked out well because the Carboniferous tilted fault blocks forming the early Carboniferous source system are similar to the Cygnus gas field.

https://www.delticenergy.com/wp-content/uploads/2020/12/Deltic-Presentation-PROSPEX-2020.pdf

While PI’s are salivating over possible good drilling results, the sideshow at Deltic is how the new Capricorn Board intends to progress its interests in the North Sea.

Capricorn was a well-run company operating within its means until Tullow’s approach which was recently upended by Palliser Capital.

Maybe the new Capricorn Board might gear up activity which might light a firework under Deltic’s boardroom table.

https://www.capricornenergy.com/news-media/news/2023/new-board-to-undertake-strategic-review/#Tabundefined=1

Push

I enjoy your enthusiastic contributions. I recommend you ‘tone it down’ a bit. You and I both know an encouraging flow test will lead to a multi-well appraisal programme over years - which is precisely what Shell/Deltic has planned.

Since Deltic’s investment proposition is to reward investors by capital appreciation, a step-by-step programme to increase the value of our money is essential.

I wouldn’t like my investment to turn into a ‘flash in the pan’ as a sudden but brief success which is not repeated or repeatable.

Incidently, by way of analogy the French invented flintlock guns which had small ‘pans’ to hold gunpowder. An attempt to fire he musket in which the gunpowder flared up without a bullet being fired was a 'flash in the pan'. The term has been known since the late 17th century but seems appropriate for some AIM companies.

Ecologist

If you’re looking at historic drilling statistics in UK for Zechstein gas discoveries the results are grim.

In the onshore extension of the play exploration in North Yorkshire began in 1937, targeting Triassic and Permian reservoirs below the surface expression of the Cleveland Anticline.

Eskdale-2, marked the first gas discovery in the Zechstein carbonates in the UK. Since then approximately 100 wells have been drilled in the onshore part of the basin with exploration success relatively high. Out of the 25 pure exploration wells in the region, 13 have found hydrocarbon accumulations (flowed gas) - which is 50%. Commercially, eight of the discoveries have been developed to date - so roughly 10%.

The primary reservoir onshore is the Permian-aged Zechstein carbonate sequence and, more specifically, the ‘Z2’ , Kirkham Abbey Formation, which is a tight carbonate (dolomite) reservoir overprinted by a high permeability fracture system.

In fact, you can see Zechstein reservoir rocks all over London where used as building stone.

https://www2.bgs.ac.uk/mineralsuk/download/EHCountyAtlases/North_Yorkshire_East_York_Building_Stone_Atlas.pdf
Despite considerable investment and effort over the years, the historical development story of these Yorkshire fields has been very much one of repeated technical and investment failure, with approximately 39 Bcf (billion cubic feet) of the mapped gas initial in-place (GIIP) of c 0.33 Bcf produced to date, an estimated recovery factor of 12%.

Historical production data show that all the UK onshore Zechstein reservoirs have experienced early water breakthrough, leading to impaired gas rates and low recoveries. The water influx is due to a highly mobile, but finite aquifer, which under field production conditions preferentially flows through the high permeability fracture system, bypassing the gas stored in the tighter matrix.

Just look at West Newton, where a few cubic kilometres of tight, gas saturated rock is present with little chance of a commercial return.

Offshore UK is rather different;

What distinguishes the current Pensacola well is a deliberate attempt to evaluate a fringing reef play which, to best of my knowledge has not been done before. That’s one reason sub-surface experts using a commercial lens are interested to see the outcome, especially as it provides technical evidence for extening the play into a multi-tcf fairway.

Push

Thanks v much for your insight into the objective of 41/5-2. It seems completely consistent with the other reef build-ups in Zechstein ‘Reef Play Fairway’ such as Crosgan and Ossian/Darach. If I am not mistaken, these are all associated with the second, ’Z2’ transgressive cycle and re-flooding of the Zechstein Sea which reduced the salinity to such an extent that sedimentation changed from halite & anhydrite to carbonates and created perfect conditions for reef build ups between shelf/lagoon and basin.

And yes, your assertion that Pensacola is a play opener for the ‘Reef Play’ now makes perfect sense. Let’s remember all previous Zechstein gas/oil shows in this area were ‘accidental’ resulting from exploration wells targeting deeper Carboniferous reservoirs in traps defined by maps of Base Permian Unconformity highs. Even the much vaunted Ossian/Darach Zechstein discovery was targeted at the underlying Carboniferous. Centrica (now Spirit) hummed and harred for years about drilling until One-Dyas took it on and drilled 42/4-1 in 2019. As I understand it, this ‘Darach Central’ well proved gas in the Carboniferous but penetrated the Main Dolomite in a lagoon facies, which flowed up to 3500 bbl/day liquids (condensate & water) + associated gas. But the average water cut was 80% over a 3-day well test. The area was then relinquished after One-Dyas handed operator-ship back to Spirit.

In any event, exploring this play requires top-notch petroleum geology and understanding of burial history, geochemistry, carbonate diagenesis and seismic response + much more. I hope Deltic is able to reveal more as time goes on.

CP94

You are right - the ‘committee of experts’ almost always agrees on the facts and figures. It’s a technical industry.

But it’s the way the results are communicated externally (i.e. press release) was what I was referring to. The ‘committee’ term in my experience is used to describe the suboptimal inputs that such a process may generate as a result of having to compromise between the requirements and viewpoints of the participants - in this case - Shell and Deltic. But the companies must display a united front - especially with NSTA, so good behaviour is essential.

For example, each company has a different audience and Shell isn’t obliged to announce anything, whereas the prosperity of many investors in Deltic depends on the wording of a press release.

On one hand, Shell will be ultra-factual and give nothing away about reserves, future programme and so on, on the other hand Deltic will likely be lining up a fund raise to pay for 30% of an appraisal programme if the results are encouraging.

For Deltic, financial pundits are an important audience and an announcement is essential good PR. Any ambiguity can lead to errors in interpretation of whatever is released. Remember the self-inflicted price crash last spring when the word ‘delay’ - used innocently - triggered a sell off?

In practice, a flurry of e-mails and phone calls following a simple, factual design for a ‘horse’, quickly turns into a ‘camel’. Luckily, there are only two participants, but the effort required for everyone to agree is directly proportional to the square of the number of companies involved!

Push

All the exploration wells in and around Pensacola have found gas in the main objective - Zechstein ‘Main’ dolomite. So finding gas in the current well was not a surprise. Zechstein reservoirs, with log interpreted gas pay, or gas shows on mudlogs, were encountered in the area, The best recorded flow rates were from Conoco’s 41/24a-1 and 41/25a-1 which tested gas. Conoco 41/24a-2z was a horizontal well which tested gas at circa 100 mmscfd from a fractured Zechstein reservoir but with rapid decline.

But the previous wells show the Main dolomite typically has a porosity of ~7% and very low permeability. But we have to assume the ‘uber-boffins’ at Shell have some proprietary technology developed in Netherlands to detect commercially productive zones.

Hence the three stage drilling campaign - Stage 1; drill vertical well to establish whether moveable hydrocarbons present + confirm geologic model and Stage 2; conduct testing programme to establish commerciality or not. Stage 3; plug and abandon.

I’m guessing the previous press release was created by a ‘committee’, which is why it was slightly clumsy, even to confirm the well would be P&A before drilling started.

According to Noble, Ineos has exercised a one-well option for the rig when operations at Pensacola are complete.

Push - good points. And as you know, well test vessels have now been superseded by deck-mounted equipment suitable for use on large DP supply vessels such as Tantalus which is alongside the rig right now. The whole arrangement is more cost effective and handles bigger volumes than rig-mounted systems and even clean up produced water prior to discharge overboard.

https://www.offshore-mag.com/business-briefs/equipment-engineering/article/16762297/well-testing-vessel-tests-and-processes-high-flow-volumes-on-critical-wells

https://www.youtube.com/watch?v=hYoZe3Yfyrc

FD

Well, Normand Tantalus is back on station about 100 metres from the rig and has been there for 6 hours today. So this might indicate a second phase of flow testing in underway.

I wouldn’t be surprised if retrograde condensate has been found with the gas all of which would match the Early Carboniferous (Tournaisian) source rocks in the Breagh Field, Pegasus West and in North Yorkshire.

But that doesn’t matter if the reservoir is too impermeable to deliver at commercial rates.

In the circumstances I expect Deltic to be lobbying Shell for an early announcement as soon as uncertainties are cleared up. In any event, the outcome has enormous consequences, up or down, for the value of Deltic and a press release carefully crafted, endorsed with full Board approval.

Testing completed?

Normand Tantalus now heading for Aberdeen - ETA 12.00 today.

See her arrive at;

https://www.seacroftmarine.com/webcams/east-webcam/

I guess he's not an investor in Deltic -

DAVOS, Switzerland, Jan 19 (Reuters) - Britain's opposition leader Keir Starmer said on Thursday there would be no investment in new oil and gas fields in Britain under a Labour government - a big change from current UK energy policies.

PSV Normand Tantalus has been stationed very close to the drilling rig three or four times during last 48 hours.

Assuming it is set up with west test equipment aboard it seems that testing is underway. The advantage of using a well test service vessel has been standard practice for many years and eliminates the need for the drilling rig to be equipped with separators, storage and flare etc.

Safer, quicker, cheaper and more eco-friendly.

https://www.seaplace.es/ship-design/well-test-service-vessels/#iLightbox[2c3e8fd998490a2aeb0]/0

I expect this will continue for a while depending on number of zones tested and various flow/pressure build up periods. Then analysis of results, followed by P&A of well - so another couple of weeks to wait.

Manwell

Spot on. They didn’t mention that many companies had looked at Simwell for over a year and there were no takers.

- and along come the Gullible Gits - - pretending to be oil men.

- - so now they plan to promote it to the same market who didn’t want Simwell on ground floor terms in the first place!

Longterm

I imagine Shell will have nominated a ‘project manager’ for the Pensacola well.

As soon as all the pre-planned logging and coring is complete and ‘hot shot’ lab results are available the project manger would have convened a meeting of Shell’s drillers, geologists, geophysicists, petrophysicists, reservoir engineers, logistics people, commercial analysts and legal staff + representatives from Mearsk operations team + representative from NSTA.

Everyone reports their findings/status/readiness to the whole team taking into account exogenous factors such as weather forecast and so on.

Rather like NASA mission control, the team will then make a collective decision to conduct a proposed testing programme.

If the decision is made to conduct a flow test including a flare, Shell will contact other organisations like FishSafe and various maritime authorities to announce there may be a temporary ‘light-house’ for a few hours.

The project manager will be accountable for the whole operation including analysis of the test results and compliance with statutory regulations.

After all that, the P2252 Operating Committee will conjure up a press release, which will look like it has been written by a committee - because it has!

In my experience, it often takes longer for partners to agree the wording of the press release than the time taken to conduct the test. The downside is that it results in clumsy, dour wording with which we are all familiar.

PaulD

Take a look at this 2015 CPR, especially pages 145 - 151, where the overall strategy to develop naturally fractured Zechstein carbonates is described, including use of under-balanced drilling and horizontal wells.

Since 2015, NAM has pioneered use of coiled tubing drilling where gas flows to the surface simultaneously while drilling using rotating head BOPs. The allows them to precisely ‘hunt down’ fractures and is relatively quick compared to a conventional rig because no connections are needed.

Of course, production rates also depend on drawdown - too much and water will flood the fractures. Too little and flow will be sub commercial.

See link to CPR below

https://www.rns-pdf.londonstockexchange.com/rns/7920H_-2015-12-2.pdf

At Pensacola Shell/Deltic has remained tight-lipped about their approach because it gives them a competitive advantage in accessing 33rd Round open acreage. Although 33rd Round closes today, competitors will continue to use their time to prepare for NSTA interviews in coming months and throw in all sorts of new ideas.

FD

Let’s remember that the Gronigen Gas Field was actually discovered by accident in 1959. Shell had drilled several wells in the mid 1950s in the area targeting gas in Zechstein carbonates mapped on land seismic and gravity surveys.

Only when they drilled deeper did they discover gas in the Rotleigendes sandstone which was sealed by the overlying Zechstein salt. Even then no-one understood Gronigen was one gigantic, 100 tcf gas field which triggered a scramble to licence and drill offshore in the North Sea. Of course, there is no Rotliegendes sandstone at Pensacola.

Over the last decade, the industry has developed offshore fracking to stimulate the lower permeability sabkha facies of the Rotliegendes reservoirs with great success. Selene is precisely that type of project with gas already discovered in tight Rotliegendes which should respond to a horizontal well and a multi-stage frac using the latest ball-drop technique. Yes, fracking is OK offshore because no-one lives there whereas fracking at Gronigen has upset life for local residents.

But fracking in Zechstein carbonates is another kettle of fish because exploiting natural fractures is the key to success, rather than fracking. It’s been studied extensively, but not so much in the North Sea to date. From previous drilling on the Pensacola licence there is gas in the ‘Haup Dolomite’ - which translates to ‘Main Dolomite’ which, in turn, was deposited in the ‘Z2 Zechstein cycle’ during Permian times as the Zechstein sea level rose and fell. In other words, the current well was not so much about finding gas, but rather part of a programme developed to engineer ways to produce it from tight carbonates by transferring technology which has worked elsewhere. All credit to Deltic for recognising this a decade ago when they applied for the licence.

Link below takes you to one of thousands of papers about Z2 carbonates. This is really just for geo-nerds/geeks and likely put several regular posters on this BB to sleep.

https://www.ebn.nl/wp-content/uploads/2022/10/Production-Analysis-of-the-Fractured-Zechstein-2-Carbonate-Member-in-NE-Netherlands-C.A.M.-Paulides.pdf