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Highlights:
- Selene Project Progress: Deltic Energy revealed economic details for the Selene gas project as it advances towards development.
- Cost Efficiency Achieved: Total drilling costs for the Selene well came in under budget at $48 million, shielding Deltic from extra expenses under its farm-out agreement.
- Strong Economic Outlook: The updated model anticipates gross gas sales of $1.5 billion, with a pre-tax NPV10 value of $288 million for the project.
Deltic Energy PLC (LSE:DELT) provided significant updates on the Selene gas project, giving investors a detailed look into the project’s economic potential. The announcement follows the completion of the discovery well’s drilling programme, with the rig demobilised earlier this week.
Cost-Efficient Drilling Operations
The total costs for the Selene well have been pegged at $48 million, comfortably below the cap outlined in Deltic’s farm-out agreement. This budget management ensures that the small-cap explorer will not incur additional cash costs from the drilling phase, a positive outcome for the company’s financial position.
Shell, the project operator, is pushing Selene into the next phase of its licence term. The focus now shifts to a series of crucial engineering and environmental studies, which will lay the groundwork for a potential Final Investment Decision (FID).
Development Strategy and Economic Potential
The Selene project is being positioned as a cost-effective development, planned to include two horizontal wells and a subsea pipeline connecting to the existing Barque field infrastructure, located about 20 kilometres away. This streamlined approach aims to maximise efficiency while minimising capital expenditure.
Deltic’s updated economic model forecasts gross gas sales of $1.5 billion over the life of the project. The company estimates a gross pre-tax NPV10 of $288 million, with Deltic’s net share after tax projected at $61 million. These figures incorporate recent updates to the UK fiscal regime, providing a strong financial outlook for the project.
Strategic Milestone Towards Final Investment Decision
The decision to move into the second term of the Selene licence marks a pivotal moment for the project. Key workstreams, including engineering, environmental, and regulatory assessments, are now in progress, setting the stage for a comprehensive evaluation ahead of the FID.
Deltic Energy’s chief executive, Andrew Nunn, highlighted the significance of this development phase. “The decision to move into the second term of the licence kicks off an incredibly busy period as we support the operator through various workstreams necessary for a potential Final Investment Decision,” Nunn said.
He added, “The workstreams now underway are an important signal to our investors, indicating confidence in a substantial commercial return. We look forward to updating the market as the project progresses.”
Outlook and Next Steps
As Deltic and Shell advance the Selene project, investor focus will likely shift towards the upcoming engineering and regulatory milestones. The progress made so far, combined with a favourable economic model, underscores the potential for Selene to deliver significant value.
With drilling complete and studies in motion, the next phase of the project could be a turning point for Deltic Energy, signalling a pathway to production and cash flow generation. Investors can anticipate further updates as the project advances towards its Final Investment Decision, which will be pivotal in unlocking the full potential of the Selene gas field.
