Deltic Energy (AIM:DELT) has announced an agreement to farm-out a 25% interest in the Selene prospect to Dana Petroleum.
Located in the Southern North Sea, Selene has estimated gross P50 prospective resources of 318 billion cubic feet of gas, with a geological chance of success of 70%.
Deltic flagged a potential farming-out of an interest in its stake in a pair of Shell-operated North Sea targets, including Selene, towards the end of last year.
Deltic will retain a 25% non-operated interest in licence P2437, the company said, with Shell retaining its 50% operating stake.
Dana will pay $500,000 in cash on completion for the transfer of the Selene stake, as well as carrying Deltic for its residual cost exposure to the Selene well to a value of $5 million, and $6 million in a success case.
Dana will also pay 25% share of costs from January 1 this year.
Meanwhile, any gross well costs incurred in excess of $40 million (dry hole) or $49 million (success case) and any non-well related costs incurred after January 1 will be split along equity lines.
The transaction results in Deltic having no exposure to 2024 drilling and testing costs up to a cap in excess of current success well case cost estimates provided by operator Shell, Deltic said.
Deltic Energy Selene prospect
Completion of the farm-out deal is conditional on obtaining consent from Shell as well as standard regulatory consents from the North Sea Transition Authority, Deltic said.
Deltic Energy chief executive Graham Swindells said:
“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, which remains scheduled to commence in Q3 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.”
Earlier this week, Shell confirmed a drilling contract for the Valaris 123 jackup rig for the Selene exploration well and the Pensacola appraisal well.
Along with its Selene and Pensacola interests, Deltic was also among the North Sea firms to pick up licences in the latest NSTA licensing round.