© Supplied by Deltic Energy The UK Labour government is starting to “starting to recognise the potential” of the North Sea oil and gas sector to contribute to its energy security and net zero goals, the chief executive of Deltic Energy has said.
Deltic CEO Andrew Nunn has been a vocal opponent of the Labour government’s tax and regulatory policies, which he described as an “ongoing act of self-harm”.
Nunn made the comments in a statement outlining Deltic’s 2024 financial, which came after the company earlier announced a takeover bid from rival Viaro Energy.
While 2024 had been “another tumultuous year for the UK oil and gas industry”, Nunn said “perhaps we are now starting to see some more positive signs after a very difficult period”.
Since taking office in July last year, the Labour government has increased the windfall tax on oil and gas firms and extended it to 2030.
Prior to the election, Labour also vowed not to issue new licences for “new fields” while promising to manage North Sea production “in a way that does not jeopardise jobs”.
The offshore sector has vehemently opposed Labour’s policies, arguing it has put investment, jobs and energy security at risk.
Deltic has blamed the windfall tax changes for its withdrawal from the Pensacola licence last year, amid “frustration” over a lack of appetite from investors for its North Sea assets.
Alongside its withdrawal from Pensacola, Deltic also revealed it has handed back the Syros licence after failing to secure a farm-out deal or an extension from the regulator.
North Sea oil and gas
But despite the challenges Nunn said Deltic had “continued to make progress”, although the firm incurred a loss of £2.8m over the year ending 31 December 2024.
Nunn said while the operating environment in the UK “remains far from optimal”, the firm recognised there “was a perfect storm of events” that prevented Deltic from raising funds for Pensacola.
But with ongoing consultations on the future of the North Sea, and positive signals from Labour on major projects such as Rosebank and Jackdaw, Nunn sees signs for optimism.
“A government focused on growth and live consultations, in relation to a new fiscal regime and the future of North Sea licensing, gives me further confidence that the UK government is starting to recognise the potential of the UK [exploration and production] industry to help meet its own energy security and net zero objectives,” Nunn said.
© Supplied by Deltic EnergyNunn attributed the change in government signals to “significant progress being made in the background as the industry continues to educate government on the importance of the UK’s domestic E&P industry in terms of local jobs, tax revenue, energy security and Scope 3 emissions”.
“The government restating its commitment to progressing extant licences to development is, of course, critical to the Selene gas project and Deltic’s other licences,” he added.
‘Political hostility’ to North Sea firms
Deltic Energy chairman Mark Lappin echoed Nunn’s comments, and said “political hostility” towards the North Sea sector “continues”.
“Both the previous UK government and the new government applied political expediency and populism as well as ideology to create or amplify a negative attitude towards UK oil and gas from NGO and investor communities,” Lappin said.
“But this is strange when you consider that, fundamentally, all parties including the Committee on Climate Change and leaders in government accept the need for continued supply of gas, and, while we accept that demand will fall in the coming years, it is clear that domestic gas demand forecasts greatly exceed forecasts of production.
“Meeting that demand by increasing imported supplies does not make sense for the desired economic growth we hear so much about, nor from an environmental perspective given imports’ much greater emissions.”
Lappin said there are “clear signs of the government understanding this” and the “direction of travel appears more positive or at least less negative”.
“The current government has offered repeated assurances of support for existing assets and licences, but the industry must work hard to ensure the pace is consistent with its development goals,” he said.
Selene, Blackadder and Dewar
While Deltic lost hold of its Pensacola and Syros discoveries in 2024, the firm retains interests in the Selene, Blackadder and Dewar prospects.
Viaro Energy chief executive Francesco Mazzagatti named Selene as a “key driver” for the proposed £7m takeover of Deltic.
Deltic said it is working with joint venture partners Shell and Dana Petroleum to develop a field development plan for Selene, with a final investment decision (FID) planned for 2027.
Connected to Selene, Deltic said it has also identified a prospect within the Endymion structure within the P2437 licence, part of the depleted Mimas gas field.
Deltic said the Endymion structure would be developed via a single subsea tie-back to the proposed Selene development infrastructure.
“Any additional gas produced from Endymion could further materially enhance the overall Selene licence project economics and could maximise the use of the proposed Selene infrastructure for a number of additional years,” Deltic said.
The firm said any drilling on Endymion would only come after reaching a FID on Selene.
Elsewhere, Deltic said it is working to secure a farm-out for Blackadder but “although a number of potential counterparties have looked at the asset, it has been difficult to gain significant momentum to date given the prevailing fiscal and political backdrop”.
As for its Dewar prospect, secured as part of the 33rd offshore licensing round, Deltic said it will revie w potential development and export options in 2026 before looking for a farm-out partner.
Viaro Energy takeover
Meanwhile, analysts said the Viaro Energy takeover of Deltic highlighted the difficulties facing exploration-based E&P firms in the North Sea.
SP Angel energy analyst David Mirzai said the acquisition of Deltic for £7m “looks cheap” for Viaro.
Mirzai described the takeover deal as an “unhappy end to a best-in-class small-cap E&P” as a result of “deteriorating sentiment and policy towards the UK oil and gas industry”.
“The deal looks cheap, with Deltic reporting a potential tax asset of £60m in the UK and the company’s internal economic model estimating the unrisked valuation of its 25% stake in the proposed Selene gas project at $83m net NPV10,” Mirzai said.
“The company unsuccessfully examined a wide variety of funding solutions that included potential industry partners, via traditional farm-out or asset sale, the equity capital markets, strategic investors, debt providers and commodity traders.
“However, the declining level of support offered by the market in combination with the difficult political and fiscal backdrop impacting the UK E&P industry has called into question the traditional funding model for exploration-based E&Ps.”
