Malky's Blog12 Jun 2024 21:17
So Deltic has announced that it has had to finally quit the Pensacola process, this has been an increasingly likely prospect as the existing tax burden, added to by the uncertainty of the future offered by the Labour party in the current election has made everything unclear at best.
As the company say, fiscal volatility, negative political rhetoric and such has meant that any of the multiple solutions to the problem have been taken off the desk and left Deltic with no place to go. Uncertainty is the biggest enemy of investment and whilst we can understand that Deltic has tried every possible route we know that recent stoppages in developments, temporary of permanent have led to this.
Of course, with the clock ticking and the imminent arrival of the AFE from Shell ahead of the Pensacola well, Deltic are in a corner not of their own making and again as they say, have to take the only action left available to them and withdrawn from the process. Having spoken to Graham Swindells, every possible financing known to man, and a few not, have been tried recently to avoid this.
It is worth noting that Deltic has made a point of building a portfolio of opportunities to provide diversification and ensure their eggs are not all in one basket, indeed, unlike Pensacola which was a new play, Selene is a simple structure in an established well understood play fairway (Leman Sandstone) and the proximity to existing infrastructure means lower risk and accelerated timeline to first gas.
So investors should remember that Deltic is not just about Pensacola, notwithstanding the loss of the licence, Pensacola was nonetheless a significant discovery which exceeded expectations and the company is going into Selene with a 100% success rate.
Whilst the shares have taken a big hit since this was first announced, the company has other, significant assets in the portfolio to consider. With drilling on Selene imminent, understood to be next month for what might be described as an appraisal well, the future, despite what has happened today has significant upside.
The shares have clearly lost some of the unrisked upside from the price but with a portfolio that now includes Selene, with drilling on the way and already farmed-out to Dana Petroleum to the tune of $49m for an asset with substantial potential as it could possibly be brought onstream quite swiftly as it is close to infrastructure.
With Syros and a portfolio of 33rd Round acreage looking quite prospective there is still plenty to get excited about in Deltic and I feel that a Target Price of around 100p is not unrealistic, in which case the future does actually look very promising after the harsh fall in the share price this morning.
There is still at least two people who think there is a profit in this company.
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