Deltic Energy Plc
1st Floor
150 Waterloo Road
London
SE1 8SB
United Kingdom
+44 (0)20 7887 2630
www.delticenergy.com
Deltic Energy Plc
Annual Report & Accounts 2023
Contents
Company Information
Strategic Report
1 Chairman’s Statement
2 Chief Executive’s Statement
5 Operational Review
12 Environment Social and Governance
14 Financial Review
16 Business Risks
17 Section 172 Statement
18 Investing Policy
Corporate Governance
19 Introduction
19 Corporate Governance Statement
22 Audit Committee Report
23 Remuneration Committee Report
24 Board of Directors and Senior Management
25 Report of the Directors
27 Statement of Directors’ Responsibilities
28 Independent Auditor’s Report
Financial Statements
33 Income Statement
33 Statement of Comprehensive Income
34 Balance Sheet
35 Statement of Changes in Equity
36 Statement of Cash Flows
37 Notes to the Financial Statements
Directors
M S Lappin (Chairman)
G C Swindells (Chief Executive Officer)
A J Nunn (Chief Operating Officer)
P N Cowley (Non-Executive)
P W Nicol (Non-Executive)
Joint Secretary
S M McLeod
Gravitas Company Secretarial Services Limited
Registered Office
1st Floor
150 Waterloo Road
London
SE1 8SB
Registered Number
07958581 (England and Wales)
Nominated Adviser
Allenby Capital Limited
5 St Helen's Place
London
EC3A 6AB
Joint Corporate Broker
Stifel Nicolaus Europe Limited
150 Cheapside
London
EC2V 6ET
Canaccord Genuity Limited
88 Wood Street
London
EC2V 7QR
Auditors
PKF Littlejohn LLP
15 Westferry Circus
Canary Wharf
London
W1U 7EU
Solicitors
K&L Gates LLP
One New Change
London
EC4M 9AF
Financial Public Relations
Vigo Consulting
Sackville House
40 Piccadilly
London
W1J OHR
Registrar
Share Registrars Limited
3 The Millennium Centre
Crosby Way
Farnham
Surrey
GU9 7XX
267547_Deltic_2023_AR_pp01-pp18.qxp 02/05/2024 11:43 Page 01
Chairman’s Statement
Chairman’s Statement
The past year has seen great advances in Deltic’s programme across our assets. The detail will be covered in the CEO and
operational reports but we have made major strides in our operations, moving assets along as planned when we set up this
exploration business.
Pensacola was awarded to us in a licence round, we worked through its technical programme and succeeded in bringing in a
world class partner, Shell, who was brought into the licence in 2019. As promised, Pensacola was drilled and resulted in a
significant discovery. Data from drilling showed it to be at the high end of expectations in terms of volumes of gas discovered.
An appraisal well is planned for the coming months with a contract in place for rig operations. We await our place in the rig-line
and look forward to safe operations and good results.
Selene has followed a similar path and will also be drilled later this year, back-to-back with Pensacola, with partners Shell and
Dana who will carry us through the Selene drilling following successful farmout processes.
Progress has been made on other assets in the Deltic conveyor belt towards farm-out agreements to bring in partners and
repeat the process in-line with Deltic’s business plan.
And right at the start of this repeating process, we have achieved success in the UK’s 33rd Offshore Licensing Round. Work has
already begun to mature assets identified on these licences; to present them to potential partners and proceed towards
exploration drilling.
Against this background of progress, we and others in our sector are facing significant headwinds in the political environment
in which our business operates. Various issues have made energy a key policy area and, heading into an election in the UK,
support for our sector appears to have become divided along party political lines. Some of this is likely pre-election rhetoric but
it has a negative effect on many of our activities and slows decisions with regulators. At Deltic, we remain focussed on moving
our assets along the conveyor belt as quickly as possible.
We and others in the industry are engaging with policy makers across the political spectrum to emphasise the importance of
our sector and to show that we at Deltic and colleagues across the sector are ready to play our part in delivering the energy
needed, delivering the energy transition and protecting jobs, communities and treasury receipts.
Our message is simple: we will need oil and gas in our energy mix for decades. A domestic supply is better for jobs, better for
treasury receipts, better for energy security and better for emissions compared with imported supplies.
Mark Lappin
Chairman
16 April 2024
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Chief Executive’s Statement
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2023 – a transformational year
2023 was a transformational year for Deltic. The Company completed drilling of its first exploration well on the Pensacola
prospect which was at the upper end of pre-drill estimates and resulted in the largest discovery in the Southern North Sea in
the last decade. Following the Pensacola discovery, the Company has continued to progress planning of the next well to be
drilled with Shell over the Selene gas prospect as well as the appraisal well for Pensacola which means we are now in the
enviable position of drilling two consecutive wells in the second half of 2024. Further success in the UK’s most recent licensing
round has also enabled Deltic to further expand and enhance the Company’s asset portfolio and potential future drilling
opportunities in line with the Company’s strategy, with the Company awaiting the outcome of the third and final tranche of
licence awards.
Pensacola – largest discovery in Southern North Sea in a decade
Drilling at Pensacola completed in early 2023, resulting in a major discovery. The somewhat unexpected discovery of light oil
also added an extra dimension to the Pensacola discovery. Post discovery, the partnership undertook an extensive process of
post-well analysis which has allowed us to better quantify the estimated volumes of gas and oil at Pensacola and support
progression to the appraisal phase.
Following completion of this work, at the end of 2023 the Joint Venture finalised and confirmed the positive well investment
decision and approved the 2024 work programme and budget that allows for drilling the Pensacola appraisal well in late 2024.
The Company subsequently engaged RPS Energy Ltd (“RPS”) to carry out an independent assessment and valuation of
Pensacola. RPS assessed Pensacola on the basis of a combined gas and oil case and a gas only case. In the combined case, the
gross estimate of 2C contingent resource was 72.6 mmboe (21.8 mmboe net to Deltic), towards the upper end of our pre-drill
estimates and in the gas only case the gross estimate of 2C contingent resource was 50 mmboe (15mmboe net). RPS also
estimated a Post tax NPV10 in the combined case of $683m (gross) or $205m net to Deltic and $663m (gross) in the gas only
case or $199m net to Deltic. We expect these potential development scenarios to be further refined and optimised following
appraisal and as we continue to work with our partners at Shell and ONE-Dyas to mature the opportunity.
In the meantime, RPS’s work has further validated our technical assessment of the Pensacola discovery and confirms
Pensacola’s position as the largest discovery in the SNS in a decade. It is also one of the most significant discoveries in the
North Sea in many years given its potential to lead the development of the Zechstein geological play in the SNS.
This well has been a very positive step for the Company and encapsulates Deltic’s model given the Company applied for the
licence, identified the prospect, and attracted world class partners which in turn has led to seismic acquisition followed by
successful drilling. This moved the opportunity from a pure exploration prospect to a valuable appraisal and development asset.
Pensacola appraisal well planning is now at an advanced stage. The geophysical site survey was completed in March 2024, with
the geotechnical survey is ongoing and planned to be completed by the end of April 2024. The rig contract was entered into in
February 2024, with the appraisal well scheduled to be drilled in Q4 this year, immediately after the Selene well.
We look forward to working with our partners Shell and ONE-Dyas throughout the rest of 2024 to continue moving this
exciting asset through the appraisal phase and onward towards development.
Selene – largest untested structure of its kind in the SNS
Having achieved success at our first well at Pensacola, we are increasingly excited about the potential to add a further
discovery with the imminent drilling of our next well at Selene. Selene is another similarly sized prospect with gross P50
Prospective Resources of 318 BCF (gross) (c.53 mmboe) and which we believe is the largest untested known structure in the
Leman Sandstone play fairway of the SNS. Selene is an established, well understood play, with a high (70%) geological chance
of success, in close proximity to existing infrastructure which has the ability to be brought onstream relatively quickly following
discovery.
With drilling scheduled for July 2024, the planning process for Selene is in its final stages. The geotechnical and geophysical
site surveys on the preferred surface location of the well were successfully completed and the results incorporated into the
operational drilling plan.
The rig contract mentioned earlier has been structured such that both Selene and Pensacola will be drilled back to back using
the Valaris 123, a heavy duty jack-up rig. This also creates the potential for operational efficiencies associated with being part of
an extended programme of wells.
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Chief Executive’s Statement
continued
Having made a major discovery at our first well at Pensacola, we are excited about drilling this high impact prospect and having
the potential to add another discovery to Deltic’s asset base. Accordingly, we look forward to progressing through the final
planning phase towards the commencement of operations.
Farm out success – Dana Petroleum (E&P) Ltd
As part of the process to mitigate cost exposure to its upcoming wells, the Company embarked on a process to farm out an
element of equity in its Selene and Pensacola licences while bringing in further high quality partners. In February this year, we
were pleased to announce a transaction to farm-out 25% of Selene to Dana Petroleum (E&P) Ltd (“Dana”). In combination with
the existing Shell carry, this transaction, effective from 1 January 2024, has resulted in Deltic retaining a 25% interest in Licence
P2437 and having no exposure to 2024 drilling and testing costs up to a gross cap of $49m which exceeds the operator’s
current success case well cost estimates, with any costs in excess of these caps being split along equity lines.
Having received consent from Shell and the standard NSTA regulatory consents, we were pleased to announce completion of
the transaction on 3 April 2024.
We are delighted to have strengthened the Selene joint venture with the addition of an established operator like Dana, who has
a long history of successful exploration and development in the SNS. 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 success
case cost exposure to the exploration well.
This success further demonstrates Deltic’s ability to attract world class partners and our priority now is to build on the Selene
farm out success with Pensacola. We are progressing an active and ongoing process to realise value and farm down our
Pensacola discovery with the aim of bringing in another high quality partner and reducing cost exposure to the well.
Other assets
Capricorn Joint Venture
Despite having brought Capricorn into our five contiguous licences in an underexplored area of the SNS as recently as 2021,
new ownership, management and a change in strategy saw Capricorn deciding to focus on its Egyptian assets, resulting in their
withdrawal from each of these UK exploration licences. While Deltic chose to retain the two most prospective licences, being
P2567 (Cadence) and P2428 (Cupertino), the relatively short time remaining on these licences and the requirement to commit
to a well meant that both of these licences were relinquished.
Despite this, the extensive work programme undertaken has advanced our understanding of the potential of the area and
further demonstrated the excellent prospectivity, particularly on the two most advanced licences such that the Company will
consider reapplying for these licences in any upcoming licensing round.
Syros Licence (P2542)
A farm out process remains ongoing in relation to the Company’s Syros prospect which is located in the Central North Sea
(“CNS”) in close proximity to the Montrose-Arbroath fields, currently held by Ithaca and Repsol. The Company is in dialogue
with potential counterparties with a view to securing a farm out before the end of this year when a well commitment is required
to progress to the next phase of the licence.
Expansion of asset portfolio
2023 provided Deltic with the opportunity to further enhance its portfolio of licences through the UK’s 33rd Offshore Licensing
Round. The Company has achieved further success with the third and final tranche of awards still to be announced. In particular,
we are pleased to have been re-awarded the Dewar licence which is an attractive low risk infrastructure-led exploration
opportunity in the CNS and look forward to the outcome of the remaining awards.
These awards are a direct result of the hard work that our technical team put into the application process and the blocks
awarded have the potential to create additional drilling opportunities in the future.
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Chief Executive’s Statement
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Outlook
Our sector continues to face a number of challenges in relation to the political and fiscal environment and the Energy Profits
Levy (“EPL”) continues to create a significant degree of uncertainty. While the EPL creates instability for UK operators, the
investment allowance currently in place does however continue to enhance the attractiveness of investing in Deltic projects
which attract tax relief. Nonetheless, the existence of the EPL does nothing for investor or industry confidence, noting that a
stable, reliable fiscal regime is essential if domestic production is to be maintained.
Although an element of uncertainty also exists over the scope and nature of future licensing, Deltic remains committed to
exploration within the UK and believes that a regular, predictable licensing process remains critical to maintaining domestic gas
production, supporting jobs and delivering energy security.
Despite political and fiscal challenges, Deltic has continued to deliver on its model of taking licences from award through to
drilling as we have done with Pensacola and now Selene. The simultaneous progression of Pensacola and Selene has meant
that we are now about to commence a two well drilling programme on Selene and Pensacola which is going to make for a very
exciting second half of the year.
I would like to take this opportunity to thank the entire Deltic team throughout the year for their continued hard work and
teamwork which has been key to the Company’s continued success.
Graham Swindells
Chief Executive Officer
16 April 2024
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Operational Review
P2252 Pensacola (30% Deltic, 65% Shell, 5% ONE-Dyas)
The Pensacola discovery well, 41/05a-2, operated by Shell, reached a total depth of 1,965m TVDSS on 28 December 2022 and,
following a period of logging and well testing, which produced both gas and light oil to surface, the discovery was announced
on 8 February 2023. This was followed by a period of laboratory testing on samples collected during drilling and the
integration of all new data into the sub-surface model for the Pensacola prospect.
Following the completion of the post-well analysis, Deltic commissioned RPS Energy Ltd (“RPS”) to undertake an
independent audit of the Pensacola discovery and produce a Competent Person’s Report (“CPR”). This resulted in Deltic’s first
independently verified contingent resource estimate in relation to two potential development scenarios – a gas only
development and a combined gas and oil development.
Contingent Resources and Valuation of the Combined Gas and Oil Development
The contingent resources (development pending) associated with the oil and gas development scenario for Pensacola as
estimated by RPS are summarised in the table below:
Full Field Deltic Net Working
Gross Resources1,2 Interest3
Hydrocarbon Type Units 1C 2C 3C 1C 2C 3C
Gas Bscf 113.6 313.0 616.7 34.1 93.9 185.0
Oil MMstb 4.7 19.8 50.9 1.4 5.9 15.3
Condensate MMstb 0.2 0.6 1.4 0.1 0.2 0.4
Oil Equivalent MMboe4 23.9 72.6 155.1 7.2 21.8 46.5
1 Gross field contingent resources (100% basis) after economic limit test after removal of 10% CO2 and fuel and flare gas
2 Chance of Development (“Pd”) is the estimated probability that a known accumulation, once discovered, will be commercially developed. At this early stage in the
project, given the understanding of the range of volumes, of oil in particular, and the development options still being considered, RPS consider assigning a chance of
development is premature
3 Deltic holds a 30% working interest in P2252 which is operated by Shell
4 Conversion rate of 6,000 Scf per boe
Net Present Value (“NPV”) estimates as of 1 January 2024 for the combined oil and gas development, as calculated by RPS,
based on RPS (Q4 2023) long term forecasts for Brent Crude (for oil and condensate sales) and UK National Balancing Point
(“NBP”) for sales gas, are summarised below:
Post-Tax NPV – Net to Deltic1
USD$ Million
(money of the day)
Combined Oil and Gas Case ELT Date at different Discount Rates
Discount Rate 0% 10% 12% 15%
1C 2036 (29) (114) (121) (127)
2C 2048 792 205 148 84
3C 2058 2,236 566 437 296
1 Deltic holds a 30% working interest in P2252
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Operational Review
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Contingent Resources and Valuation of the Gas Only Development
The Contingent Resources (development pending) associated with the gas only development scenario for Pensacola as
estimated by RPS are summarised in the table below:
Full Field Deltic Net Working
Gross Resources1 Interest3
Hydrocarbon Type Units 1C 2C 3C 1C 2C 3C
Gas Bscf 112.4 296.8 631.7 33.7 89.0 189.5
Condensate MMstb 0.2 0.6 1.5 0.1 0.2 0.4
Oil Equivalent MMboe2 18.9 50.0 106.7 5.7 15.0 32.0
1 Gross field contingent resources (100% basis) after economic limit test after removal of 10% CO2 and fuel and flare gas
2 Chance of Development (“Pd”) is the estimated probability that a known accumulation, once discovered, will be commercially developed. At this early stage in the
project, given the understanding of the range of volumes, of oil in particular, and the development options still being considered, RPS consider assigning a chance of
development is premature
3 Deltic holds a 30% working interest in P2252 which is operated by Shell
4 Conversion rate of 6,000 Scf per boe
NPV estimates as of 1 January 2024 for the gas only development as calculated by RPS, based on RPS (Q4 2023) long term
forecasts for Brent Crude (for oil and condensate sales) and UK NBP for sales gas, are summarised below:
Post-Tax NPV – Net to Deltic1
USD$ Million
(money of the day) at
Gas Only Case ELT Date different Discount Rates
Discount Rate 0% 10% 12% 15%
1C 2034 124 20 8 (6)
2C 2044 599 199 158 111
3C 2058 1,664 412 323 226
1 Deltic holds a 30% working interest in P2252
The gas only scenario recovers less hydrocarbons than the combined case development but has a significantly lower capital
and operational cost base, resulting in higher NPV10 valuations under certain scenarios.
Post CPR Zechstein Play Update
Following completion of the CPR, the North Sea Transition Authority released summary well information for the Crosgan
Zechstein appraisal well drilled in early 2023 by ONE-Dyas, with its joint venture partner Shell. Crosgan, located approximately
60km to the east of Pensacola, is highly analogous to the Pensacola discovery and the appraisal well (42/15a-4) drilled on the
crest of the Crosgan reef structure is reported to have encountered a Hauptdolomite reservoir that was 140m thick and which
flowed at a maximum rate of 26.5 MMscf/day on test.
These positive well results further support Deltic’s view that a thicker, higher quality reservoir is likely to be present across the
crest of the Pensacola structure. The information from the Crosgan offset well will be considered in future volumetric reviews
along with additional information collected during the drilling of the Pensacola appraisal well later this year.
Next Steps on Pensacola
In parallel to the preparation of the CPR report, the Pensacola joint venture partners began work on the planning of an appraisal
well which is designed to test the commercial productivity of the thicker, higher quality reservoir which is predicted to be
present across the top of the Pensacola structure.
The joint venture committed to this appraisal well in December 2023 and the well is scheduled to be drilled in late 2024.
Enabling works have commenced with geophysical surveys over the proposed well location completed in Q1 2024 and
geotechnical investigations planned in Q2 2024.
On 5 February 2024, Shell informed Deltic that it had contracted the Valaris 123 heavy duty jack-up drilling unit to drill both the
Selene exploration well and Pensacola appraisal well as a two well programme starting in the summer of 2024, with the Selene
well to be drilled first and the rig moving to Pensacola on completion of Selene operations.
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Operational Review
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P2437 Selene (50% Shell, 25% Deltic & 25% Dana)
Following the positive well investment decision in the summer of 2022, the joint venture has been focussed on well design,
specification of the data acquisition programme and other enabling works including the geophysical and geotechnical site
surveys which were completed during the second half of 2023.
As set-out above, the well will be drilled with the Valaris 123 with mobilisation expected to commence in late June/early July
2024. The well has been designed as a low cost exploration well with very specific data collection objectives required to
support future field development decisions in this mature Leman Sandstone play. As such, there will be no conventional surface
flow test and key reservoir information will be gathered from a combination of drill core, wireline logs and reservoir fluid
samples collected during the planned mini-drill stem test (“mini-DST”).
On 7 February 2024, the Company announced that it had farmed out a portion of its equity position in the Selene licence to
Dana, a wholly owned subsidiary of the Korean National Oil Company (“KNOC”). As a result of this transaction, Deltic retains a
25% interest in the Selene asset with no cost exposure to the exploration well up to USD$40M in a dry hole scenario or
USD$49M in a success case, both on a gross basis. Recent communications from the Licence Operator, Shell, indicate a total
success case cost of the Selene well of $47M including operational and weather-related contingencies.
Following receipt of NSTA and partner approvals, the farm-out to Dana was completed on 2 April 2024.
Deltic remains convinced that the Selene prospect is one of the largest unappraised structures in the Leman Sandstone fairway
of the Southern Gas Basin and estimates that it contains gross P50 Prospective Resources of 318 BCF of gas (with a P90 to P10
range of 132 to 581 BCF) with a geological chance of success of 70%.
P2542 Syros (100% Deltic)
Deltic has completed the Phase A work programme on licence P2542 located in the Central North Sea, which contains the
Syros prospect. This work included the purchase of the latest 3D Evolution seismic dataset across the acreage and the
completion of a Joint Impedance and Facies Inversion (“Ji-Fi”) inversion of the seismic data, in conjunction with IKON Science.
This work has significantly de-risked the Syros prospect and Deltic considers it to be ‘drill ready’.
The Syros prospect is located immediately to the west of the Montrose-Arbroath production platforms and in close proximity to
a number of fields which produce from the same Fulmar sandstones which are expected to be present within the Syros rotated
fault block.
The Syros prospect is expected to contain a gassy light oil, similar to producing offset fields and is estimated to contain P50
prospective resources of 24.5mmboe (P90 to P10 Range = 13.7 to 39.7 mmboe) with a geological chance of success of 58%.
As previously announced, a farm-out process is ongoing and Deltic has had significant engagement with a number of operators
in relation to Syros. Management remain confident of attracting a joint venture partner.
Portfolio Management
Following changes in management and strategy at Capricorn in the first half of 2023, in July 2023 the Company was formally
notified of Capricorn's intention to withdraw from the five SNS licences it held in partnership with Deltic. As part of ongoing
rationalisation and high grading of its portfolio, Deltic also decided to withdraw from three of the Licences (P2560, P2561 and
P2562) and these were relinquished immediately.
Deltic retained the high graded licences P2567 and P2428 with the aim of seeking an extension of the Phase A terms in order to
allow sufficient time in which to bring in alternative partners and progress to the drilling phases of the licences. Deltic’s requests
for extension on both licences were rejected by the NSTA and, as a result, Licence P2567 expired on 30 November 2023 and
Licence P2428 expired on 31 March 2024.
33rd Licensing Round
The NSTA announced the launch of the UK’s 33rd Offshore Licensing round on 7 October 2022, with 931 blocks and part blocks
available for licensing. The round closed for applications on 12 January 2023.
A first tranche of provisional awards announced on 30 October 2023 offered 27 licences focusing on production and drill ready
opportunities in the Central North Sea, Northern North Sea and West of Shetland regions.
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Operational Review
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A second tranche of provisional awards announced on 31 January 2024 offered a further 24 licences mainly in the Central North
Sea area. Deltic was provisionally awarded two licences in the Central North Sea with the primary area of interest being the
Dewar area incorporating blocks 24/24f (part) & 22/25e (part). Deltic has previously held the acreage and matured the Dewar
prospect before being forced to relinquish the acreage. However, new seismic data is available over the area and there have
been a number of changes in the operator community around the Dewar prospect, including a commitment from BP to
redevelop the adjacent Skua field which has reinvigorated interest in the area.
A second provisional award over block 29/4b in the Central Graben area, which was part of a larger multi-block application
made by Deltic, with the bulk of the application area awarded to Shell in tranche 1. Given the adjacent blocks awarded to Shell
contained the primary targets identified during the application process, Deltic has informed the NSTA that it does not intend to
accept the provisional award over 29/4b given the relatively high costs associated with the work programme and significant
uncertainty around the potential prospectivity on block 29/4b.
The Company awaits the third tranche of provisional awards which will include the Southern North Area which was the primary
focus of Deltic’s application assets. We will update the market as and when the third tranche awards are announced by the
NSTA.
Portfolio and Resource Summary
The Company’s current licence portfolio and prospect inventory, as of the end March 2024, is summarised below:
Southern North Sea – Contingent Resources
Net to Deltic
Contingent Resources2
(mmboe3)
Licence Deltic Development GCoS
Ref: Block ID Equity Project ID Scenario 1C 2C 3C %
P22521
41/5a,
41/10a &
42/1a
30%
Pensacola Zechstein
Gas Only Development 5.7 15.0 32.0
Combined Gas and Oil Development 7.2 21.8 46.5
100
1 Operated by Shell
2 Estimated by RPS following independent audit
3 Conversion rate of 6,000 Scf per boe
Southern North Sea – Prospective Resources
Net to Deltic
Prospective
Discovery (D) Resource (BCF)
Licence Deltic Prospect (P) P90 P50 P10 GCoS
Ref: Block ID Equity Project ID Lead (L) Low Best High %
P25581
41/5b &
42/1b
30%
Pensacola North - Zechstein To Be Determined
P24371
Sloop - Leman D 2 4 10 100
Selene - Leman P 33 80 145 70
Endymion - Leman L 9 12 15 27
Rig & Jib - Leman L 4 9 15 35
48/8b
25%
1 Operated by Shell
08
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Operational Review
continued
Central North Sea
Net to Deltic
Prospective
Discovery (D) Resource (MMBOE)
Licence Deltic Prospect (P) P90 P50 P10 GCoS
Ref: Block ID Equity Project ID Lead (L) Low Best High %
P2542 22/17a 100% Syros - Fulmar P 13.7 24.5 39.7 58
Andrew Nunn
Chief Operating Officer
16 April 2024
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Operational Review
Our Locations - Southern North Sea
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PENSACOLA
P2558
Deltic Licences
Licensed Blocks
P2252
CROSGAN
BREAGH
TOLMOUNT
Hull
Fields
GAS
OIL
10 Deltic Energy Plc Annual Report & Accounts 2023
SELENE
P2437
267547_Deltic_2023_AR_pp01-pp18.qxp 02/05/2024 11:43 Page 11
Operational Review
Our Locations - Central North Sea
N
Deltic Licences
Licensed Blocks
SYROS
MONTROSE
CAYLEY
GODWIN
CARNOUSTIE
ARBROATH
WOOD
P2542
GANNET D
SHAW
BRECHIN
ARKWRIGHT
MUNGO
MONAN
MIRREN
DEWAR
MARNOCK
P2646
MURLACH
GANNET G
ANNET A
MADOES
EGRET
SEAGULL
HERON
CULZEAN
MERGANSER
SCOTER (oil)
Fields
OIL
BANFF
CONDENSATE
SHEARWATER
ELGIN
GLENELG
FRANKLIN
Deltic Energy Plc Annual Report & Accounts 2023
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Environment Social and Governance
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Recommendations of the Task Force for Climate-related Financial Disclosures
Given the micro-cap scale of the Deltic business, mandatory compliance with the Recommendations of the Task Force for
Climate-related Financial Disclosures (or “TCFD”) is not required. However, Deltic is working towards compliance with relevant
aspects of the guidance.
The disclosures set out below are therefore voluntary and are focused on the areas which Deltic believes are most directly
relevant to the business. They are made in good faith and are a demonstration of Deltic’s ambitions to comply with the
recommendations as and when they become applicable to the business and are not intended to demonstrate full compliance
with the recommendations at this point in time.
TCFD disclosures are categorised into 4 key areas – Metrics and Targets, Risk Management, Strategy and Governance as
summarised in the table below:
TCFD Recommendations
Deltic Disclosures
Metrics and Targets
Disclose the metrics and targets
used to assess and manage relevant
climate related risks and
opportunities where such
information is material
Deltic has historically disclosed management’s estimates of the Company’s Scope 1 &
2 emissions. In 2023, Deltic engaged Carbon Neutral Britain Ltd (“Carbon Neutral
Britain”) to provide an independent assessment of the Company’s Scope 1, 2 & 3
emissions based on information provided by the Company.
Deltic’s combined Scope 1, 2 & 3 emissions for the period 1 November 2022 to
31 October 2023 were estimated at 21.78 Tones CO2e by Carbon Neutral Britain.
Methodologies used by Carbon Neutral Britain comply with ISO 14064 and the GHG
Emissions Protocol Accounting Standard.
Carbon offsets, equivalent to Deltic’s Scope 1, 2 & 3 emissions, were purchased
through Carbon Neutral Britain’s Climate FundTM Portfolio such that Deltic Energy has
been certified as a carbon neutral business.
Risk Management
Disclose how the Company identifies,
assesses and manages climate
related risks
The Company is in the process of extending its Risk Management Procedure to
address Climate Related Risks including the compilation of a Risk and Opportunity
Register which incorporate ESG and political factors in additional to more traditional
technical and corporate risk factors.
Key areas of focus include:
• Political and Government Policy Risks including net zero policies, changes to the
hydrocarbon licensing regime & fiscal regime changes impacting both E&P
taxation and environmental taxation
• Social Licence to Operate and changing views of the E&P industry
• Emerging Technology – CCS, Hydrogen & emissions reduction opportunities
The Deltic Board recognises a range of risks and opportunities within the climate
related space that may affect the business and is supportive of adopting a
transparent and auditable approach to risk management at a strategic and
operational level.
The inclusion of climate related risks within the Risk Register is the first step to
ensuring that the Company’s strategy and activities in the UKCS are resilient to a
range of climate change scenarios.
Strategy
Disclose the actual and potential
impacts of climate related risks and
opportunities on the organisation’s
businesses, strategy, and financial
planning where such information is
material
Governance
Disclose the organisation’s
governance around climate related
risks and opportunities
The implementation of a robust risk management process for all of Deltic’s activities
is a key focus for the Board. An extension of the Company’s risk management
process to encompass climate related risks will ensure that relevant climate related
risks are identified and managed in a transparent and consistent manner.
The output of the risk management process will be reviewed by the Board on a
regular basis and be incorporated into reviews of Company strategy and direction to
Deltic management.
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Environment Social and Governance
continued
Climate Related Emissions and Energy Performance
As a non-producing office-based organisation with no operated offshore activity in the 2023 reporting period, the magnitude
of climate-related emissions associated with the Company’s activities is limited. During 2023, Deltic engaged Carbon Neutral
Britain to undertake an independent assessment of Deltic’s Scope 1, 2 & 3 climate related emissions between 1 November 2022
and 31 October 2023. Carbon Neutral Britain’s report, including emissions estimation methodology, is available on the
Company’s website.
Deltic reports its GHG emissions in relation to its operated assets in the UK.
Reporting Units 2023a 2022b 2021b
Direct GHG Emissions (Scope 1) kgCO2e 0 0 0
Indirect GHG Emissions (Scope 2) kgCO2e 6,807 6,419 5,939
Indirect GHG Emissions (Scope 3) kgCO2e 14,968c N/A N/A
Total Scope 1 & 2 Emissions kgCO2e 6,807 6,419 5,939
Carbon Intensity kgCO2/boe N/A N/A N/A
Methane Intensity % N/A N/A N/A
Energy Consumption kWh 32,872 34,427 27,974
a) Deltic’s 2023 climate related emissions as estimated by Carbon Neutral Britain
b) Deltic’s Scope 1 & 2 climate related emissions as estimated by Deltic Management
c) Since 20 Jan 2020 our Fixed Business Plan, which accounts for 23,481 kWh of our total Scope 2 emissions in 2023 is on a 100% renewable electricity tariff.
Deltic has offset 21.78 tonnes CO2e, equivalent to Deltic’s total Scope 1, 2 & 3 emissions, through Carbon Neutral Britain’s
Climate FundTM Portfolio of verified carbon offsetting projects around the world and, as a result, the Company has been
certified as a Carbon Neutral business.
Health & Safety Performance
The health and safety of our staff, contractors and other stakeholders is a key focus as we continue to grow the business and
our operational scope. There were no reportable incidents or lost time injuries (“LTIs”) reported in conjunction with the
Company’s activities in 2023.
The Company records health and safety performance and statistics in compliance with the Reporting of Injuries, Diseases and
Dangerous Occurrences Regulations 2013 (“RIDDOR”).
2023 2022 2021
First Aid Incidents 0 0 0
Lost Time Injuries (1-7 days) 0 0 0
RIDDOR Reportable 0 0 0
Fatalities 0 0 0
Estimated Total Work Hours 11,403 10,624 9,064
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Financial Review
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Overview
Following Deltic’s equity fundraise of £16.0 million (gross) in
September 2022 (the “2022 Fundraise”), the Company
started the year with a cash balance of £20.4 million and
ended the year to 31 December 2023 with a cash balance of
£5.6 million. 2023 saw significant planned investment and use
of capital to complete the drilling of the Pensacola discovery
as well as planning for the Pensacola appraisal well and
Selene exploration well both of which are scheduled to be
drilled in the second half of 2024. Over the year, the
Company invested £12.5 million (2022: £2.6 million) on
completing Pensacola drilling operations and planning for
future Pensacola appraisal and Selene exploration drilling.
Loss for the year
The Company incurred a loss for the year to 31 December
2023 of £3.0 million (2022: £3.0 million). Administrative
expenses of £3.0 million (2022: £2.7 million) were incurred
during the year. Finance income of £0.4 million (2022:
£0.1 million) was earned on short term high interest-bearing
deposits on funds following the 2022 Fundraise. In the year,
an impairment of £0.2 million (2022: nil) was recognised for
the subsequent relinquishment of P2428 (Cupertino) which
occurred at the end of March 2024. There were no further
significant impairments nor write-offs associated with the
relinquishment of Licences P2560, P2561, P2562 and P2567.
Corporation tax is payable on finance income earned, and
accordingly the Company has recognised an income tax
expense in the year of £0.1 million (2022: nil).
Balance Sheet
The Company had total Capital and Reserves as at
31 December 2023 of £21.7 million (2022: £24.2 million).
The value of exploration assets increased by £7.7 million
(2022: £7.6 million increase) mainly reflecting completion of
Pensacola drilling operations in February 2023 and planning
for 2024 drilling.
Property, plant and equipment of £0.2 million
(2022: £0.3 million) includes a right of use asset relating to
the office lease with a net book value of £0.1 million
(2022: £0.2 million). Property, Plant and Equipment
reduced by £0.1 million to £0.2 million, mainly reflecting
the depreciation charge for the year on the office lease,
fixtures and fittings and computer equipment.
The Company’s cash position at 31 December 2023 was
£5.6 million (2022: £20.4 million) with the year-on-year
decrease mainly arising from Pensacola drilling and
investment into 2024 drilling.
Total current liabilities, which include short-term creditors,
accruals, provisions and lease liabilities decreased to
£1.6 million (2022: £6.4 million). Liabilities of £0.4 million
(2022: £3.3 million) are due to the joint venture partner for
payments associated with drilling operations. Other payables
and accruals of £0.6 million (2022: £1.3 million) mainly
represent drilling value of work done but yet to be billed by
the joint venture partner. In the prior year, a provision of
£1.3 million was recognised for the costs incurred in early
2023 for the pre-planned plug and abandonment of the
Pensacola exploration well.
The Company has no debt.
Share consolidation
On 25 May 2023, the Company undertook a Share
Consolidation (the “Consolidation”). The Consolidation
consisted of a consolidation of the existing 1,861,932,000
Ordinary Shares of 0.5 pence each in the capital of the
Company ("Existing Ordinary Shares"), such that every
20 Existing Ordinary Shares were consolidated into one new
ordinary share of 10p each ("New Ordinary Shares").
Following the Consolidation, the Company has a single class
of ordinary shares of 10p each in issue, being 93,096,600
New Ordinary Shares.
Pensacola drilling operations commenced in November 2022
and continued through to February 2023. The total net cost
to Deltic of drilling the Pensacola well was £12.8 million. The
value of work undertaken during 2023 was £5.7 million
(2021/2022: £7.1 million). In accordance with IAS 37, in the
prior year, the Company recognised a provision with a
corresponding asset of £1.3 million for the planned plugging
and abandonment of the Pensacola well in February 2023.
Cash flow
As at 31 December 2023, the Company held cash and cash
equivalents totalling £5.6 million (2022: £20.4 million). The
Company had a net cash outflow for the year of £14.8 million
(2021: inflow £10.3 million) mainly for Pensacola exploration
drilling and other exploration investments. The cash increase
in the prior year was driven by the Fundraise proceeds of
£16.0 million (gross).
The Company spent £2.2 million (2022: £0.7 million) further
progressing the Company’s licence portfolio, in particular the
Selene and Syros Licences, and to progress the Pensacola
licence to appraisal drilling in 2024. All costs associated with
the five licences previously held jointly with Capricorn Energy
PLC were fully paid by Capricorn Energy Plc.
A net cash outflow from operating activities of £2.6 million
(2022: £2.2 million) was incurred for general and
administrative costs.
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Financial Review
continued
Net cash of £12.1 million (2022: £2.5 million) was used in
investing activities including £12.5 million (2022: £2.6 million)
on exploration and evaluation assets, offset by interest
received on short term deposits of £0.4 million (2022:
£0.1 million). The total net cash paid to the Pensacola joint
venture partner during 2023 for the Pensacola exploration
well and post well cost was £12.0 million (2022: £2.1 million).
A further £0.5 million (2022: £0.5 million) was spent
developing the other licences in the exploration portfolio.
Going concern
The inherent nature of the Company means it is dependent
on its existing cash resources, farming down of assets and its
ability to access additional capital in order to progress its
operational programme on an ongoing basis. Having
undertaken careful assessment, the Directors are of the view
the Company will need to access additional capital during
2024 in order to fund on-going operations. It is anticipated
these funds will primarily be sourced through farm downs,
asset disposal, issuing new equity or a combination of these
actions. The financial statements for the year to 31 December
2023 have been prepared assuming the Company will
continue as a going concern. In support of this, the directors
believe the liquid nature of the UK asset market combined
with historical shareholder support, means it is likely that
adequate funds can be accessed when required. However, the
ability to access capital is not guaranteed at the date of
signing these financial statements. As a consequence, this
funding requirement represents a material uncertainty that
may cast significant doubt on the Company’s ability to
continue as a going concern. The Independent Auditor’s
Report to the members of Deltic Energy Plc for the year
ended 31 December 2023 refers to this material uncertainty
surrounding going concern.
Sarah McLeod
Chief Financial Officer
16 April 2024
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Deltic Energy Plc Annual Report & Accounts 2023 15
Operational
Exploration and development risk
Activities within the Company’s licences may not result in
commercial development or otherwise realise value. There is
no certainty of success from the existing portfolio of licences.
The Company seeks to mitigate the exploration risk through
the experience and expertise of the Company’s specialists,
and the selection criteria used by the Company when
identifying prospective areas for licence applications. The
Company also has an objective to seek additional exploration
and development assets, in order to diversify the Company’s
portfolio of assets and hence risk.
Other business risks
In addition to the current principal risks identified above and
general business risks, the Company’s business is subject to
risks inherent in hydrocarbon exploration, development and
production activities. There are a number of potential risks
and uncertainties which could have a material impact on the
Company’s long-term performance and could cause actual
results to differ materially from expected and historical
results.
The Directors regularly monitor such risks, using information
obtained or developed from external and internal sources,
and will take actions as appropriate to mitigate these.
Effective risk mitigation may be critical to the Company in
achieving its strategic objectives and protecting its assets,
personnel and reputation. The Company assesses its risk on
an ongoing basis to ensure it identifies key business risks and
takes measures to mitigate these. Other steps include regular
Board review of the business, monthly management
reporting, financial operating procedures and anti-bribery
management systems. The Company reviews its business
risks and management systems on a regular basis, and
through this process, the Directors believe they have
identified the principal risks.
267547_Deltic_2023_AR_pp01-pp18.qxp 02/05/2024 11:43 Page 16
Business Risks
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Principal business risks
The Directors have identified the following current principal
risks in relation to the Company’s future performance. The
relative importance of risks faced by the Company can, and is
likely to change, with progress in the Company’s strategy and
developments in the external business environment. The
Directors have considered the potential impact of the
geopolitical environment and have concluded there are no
material risks associated to the Company.
Financial
The Company’s core risk is that its ability to effectively
implement its business strategy and to continue as a going
concern over time depends on its ability to potentially raise
additional capital and/or enter into further commercial and
financial arrangements. The need for and amount of any
additional capital and/or further commercial partnership
arrangements will depend on numerous factors related to the
Company’s current and future activities. The Company is
seeking additional capital, through partnership arrangements,
as it has successfully done in the past. There can be no
assurance that joint venture financing will be available to the
Company in a timely manner, on favourable terms, or at all. If
adequate capital is not available on acceptable terms, the
Company may not be able to take advantage of
opportunities, as well as possibly resulting in the delay or
indefinite postponement of the Company’s activities.
Strategic
Strategy risk
The Company’s strategy may not deliver the results expected
by shareholders. The Directors regularly monitor the
appropriateness of the strategy, taking into account both
internal and external factors, and the progress in
implementing the strategy, and modify the strategy as may
be required based on developments. Key elements of this
process are regular strategy reviews, monthly reporting, and
regular Board meetings.
Competition risk
The addition of exploration licences to the Company’s
portfolio is subject to competition from other companies.
Many of the Company’s larger competitors have greater
financial and technical resources and are able to devote more
to the development of their business. The Company mitigates
this risk by choosing where and when to deploy its business
development resources.
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Section 172 Statement
Section 172 of the Companies Act 2006 requires Directors to
take into consideration the interests of stakeholders and
other matters in their decision making. The Directors continue
to have regard to the interests of the Company's employees
and other stakeholders, the impact of its activities on the
community, the environment and the Company's reputation
for good business conduct, when making decisions. In this
context, acting in good faith and fairly, the Directors consider
what is most likely to promote the success of the Company
for its members in the long term. We explain in this annual
report, and reference below, how the Board engages with
stakeholders.
Likely consequence of any decision in the long term
The Chairman’s and Chief Executive's Statements at
pages 1-4 in this Annual Report, set out the Company's
long-term rationale and strategy.
Impact of operations on the community and environment
However, the Company has a commitment to ensure
operations are conducted with as limited as possible
environmental impact.
The Company regularly reviews its Health, Safety &
Environment (‘HSE’) and other policies and works responsibly
with suppliers, and performance is monitored on an on-going
basis.
Maintain a reputation for high standards of business
conduct
The Corporate Governance section of this Annual Report at
pages 19-21 sets out the Board and Committee structures and
extensive board and committee meetings held during 2023,
together with the experience of executive management and
the Board and the Company's policies and procedures.
Interests of Employees
The Company’s Corporate Governance Statement at
pages 19-21 of this Annual Report sets out under board
responsibilities the processes in place to safeguard the
interests of employees.
Act fairly between stakeholders
The Board regularly reviews the Company’s principal
stakeholders and how it engages with them. This is achieved
through information provided by management and by direct
engagement with stakeholders themselves.
The Board has considered how employee working practices
have developed beyond the COVID crisis of 2020/2021 and
have implemented a more flexible and efficient ways of
working.
Further information is also provided in the Environment
Social and Governance statement at pages 12-13 of this
Annual Report.
Foster business relationships with suppliers, joint venture
partners and others
Potential suppliers and joint venture partners are considered
in the light of their suitability to comply with the Company’s
policies.
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Investing Policy
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In addition to the development of the North Sea gas licences
the Company has acquired to date, the Company proposes
to continue to evaluate other potential oil and gas projects in
line with its investing policy, as it aims to build a portfolio of
resource assets and create value for shareholders. As
disclosed in the Company’s AIM Admission Document in May
2012, the Company’s substantially implemented Investment
Policy is as follows:
The proposed investments to be made by the Company may
be either quoted or unquoted; made by direct acquisition or
through farm-ins; either in companies, partnerships or joint
ventures; or direct interests in oil & gas and mining projects. It
is not intended to invest or trade in physical commodities
except where such physical commodities form part of a
producing asset. The Company’s equity interest in a
proposed investment may range from a minority position to
100% ownership.
The Board initially intends to focus on pursuing projects in
the oil & gas and mining sectors, where the Directors believe
that a number of opportunities exist to acquire interests in
attractive projects. Particular consideration will be given to
identifying investments which are, in the opinion of the
Directors, underperforming, undeveloped and/or
undervalued, and where the Directors believe that their
expertise and experience can be deployed to facilitate
growth and unlock inherent value.
The Company will conduct initial due diligence appraisals of
potential projects and, where it is believed further
investigation is warranted, will appoint appropriately qualified
persons to assist with this process. The Directors are currently
assessing various opportunities which may prove suitable
although, at this stage, only preliminary due diligence has
been undertaken.
It is likely that the Company’s financial resources will be
invested in either a small number of projects or one large
investment which may be deemed to be a reverse takeover
under the AIM Rules. In every case, the Directors intend to
mitigate risk by undertaking the appropriate due diligence
and transaction analysis. Any transaction constituting a
reverse takeover under the AIM Rules will also require
Shareholder approval.
Investments in early stage and exploration assets are
expected to be mainly in the form of equity, with debt being
raised later to fund the development of such assets.
Investments in later stage projects are more likely to include
an element of debt to equity gearing. Where the Company
builds a portfolio of related assets, it is possible that there
may be cross holdings between such assets.
18
Deltic Energy Plc Annual Report & Accounts 2023
The Company intends to be an involved and active investor.
Accordingly, where necessary, the Company may seek
participation in the management or representation on the
Board of an entity in which the Company invests with a view
to improving the performance and use of its assets in such
ways as should result in an upward re-rating of the value of
those assets.
Given the timeframe the Directors believe is required to fully
maximise the value of an exploration project or early stage
development asset, it is expected that the investment will be
held for the medium to long term, although disposal of assets
in the short term cannot be ruled out in exceptional
circumstances.
The Company intends to deliver Shareholder returns
principally through capital growth rather than capital
distribution via dividends, although it may become
appropriate to distribute funds to Shareholders once the
investment portfolio matures and production revenues are
established.
Given the nature of the Investing Policy, the Company does
not intend to make regular periodic disclosures or
calculations of its net asset value.
The Directors consider that as investments are made, and
new investment opportunities arise, further funding of the
Company will be required.
This strategic report contains certain forward-looking
statements that are subject to the usual risk factors and
uncertainties associated with the oil and gas exploration and
production business. Whilst the Directors believe the
expectation reflected herein to be reasonable in light of the
information available up to the time of their approval of this
report, the actual outcome may be materially different owing
to factors either beyond the Company’s control or otherwise
within the Company’s control but, for example, owing to a
change of plan or strategy. Accordingly, no reliance may be
placed on the forward-looking statements.
On behalf of the Board
Mark Lappin Graham Swindells
Chairman Chief Executive Officer
16 April 2024
16 April 2024
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Corporate Governance
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Chairman’s Introduction
As Chairman of the Company, I provide leadership, ensuring that the Board is performing its role effectively, and has the
capacity, ability, structure and support to enable it to continue to do so.
As an AIM quoted company, the Company has chosen to follow the Quoted Companies Alliance’s (“QCA”) Corporate
Governance Code 2018 (the ‘QCA Code’) published in April 2018. The Board recognises the value and importance of high
standards of corporate governance and believes that this provides the most appropriate framework for a company of our size
and stage of development.
This Governance section of the Annual Report provides an update on our Corporate Governance policy, and includes the
Audit Committee Report, Remuneration Committee Report and the Directors’ Report. In these reports we set out our
governance structures and explain how we have applied the QCA Code and where we have departed from the code during the
year. The QCA Code is set out in detail on the Company’s website at www.delticenergy.com/investor-relations/corporate-
governance, including an explanation as to how the Company addresses the ten key governance principles defined in the
QCA Code.
In May 2019, the Company appointed me as independent non-executive Chairman. My extensive Oil & Gas technical and
commercial experience including the three years I previously served as an independent non-executive director of the Company
underpin my effectiveness in this role, as the Company enters its next stage of development.
Corporate Governance Statement
Board responsibilities
The Board is responsible to the Company’s shareholders for the leadership, control and management of the Company. It is
responsible for the long-term success of the Company and for ensuring its appropriate management and operation in pursuit of
its objectives.
The Board is in constant communication and meets regularly. Its responsibilities include:
•
Setting the Company’s strategy
• Determining policies and values
• Establishing and maintaining the Company’s system of internal control and reviewing effectiveness annually
Identifying the major business risks faced by the Company and determining appropriate risk management
•
•
Investing decisions
• Fundraising decisions
• Management appointments
Whilst there is a formal schedule of matters specifically reserved for approval by the Board, the two executive directors have
been given responsibility for specific functional aspects of the Company’s affairs.
The Board seeks to maintain the highest standards of integrity and probity in the conduct of the Company’s activities.
These values are enshrined in the written policies and working practices adopted by all employees. An open culture is
encouraged within the Company, with regular communications to staff regarding progress and staff feedback being regularly
sought. This is especially important as a small company, in order to fully harness its human capital in pursuit of the effective
development of the Company’s assets, and so achieve the objectives and strategy set out in the Strategic Report and to seek to
mitigate the risks and uncertainties described in the Business Risks section of the Strategic Report. The executive directors
work closely with the small number of employees, so the Board is well placed to assess its culture. The Board are prepared to
take appropriate action against unethical behaviour, violation of company policies or misconduct.
Composition of the Board
The Board currently comprises five Directors, of whom two are executive and three are non-executive. The Directors are all
identified on page 24, together with a summary of their current and past experience, skills and personal qualities.
Non-executive Chairman
As Chairman, Mark Lappin oversees the adoption, delivery and communication of the Company’s corporate governance model
and is responsible for ensuring that it is maintained in line with appropriate practice and policies agreed by the Board. He is also
the Company’s leading ambassador, which includes presenting the Company’s aims and policies to investors and other outside
parties. He promotes active communication with shareholders and other stakeholders, including speaking regularly with
investors and other stakeholders. He chairs the AGM and as chairman of the Board, he chairs Board meetings, ensuring that the
Board regularly reviews the Company’s strategy. He also oversees the composition and structure of the Board which involves
regularly reviewing the overall size of the Board, the balance between executive and non-executive, age, experience, skills and
personalities of the Directors.
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Corporate Governance
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Non-executive Directors
The three Non-executive Directors (Mark Lappin, Peter Cowley and Peter Nicol) have a responsibility to challenge
independently and constructively the performance of management and to help develop proposals on strategy. They each sit on
the Remuneration and Audit committees, enabling them to have a role in determining the pay and benefits of the executive
directors, to review internal control and financial reporting matters, and to have a direct relationship with the external auditors.
Independence and Commitments
The three Non-executive Directors are considered by the Board to be independent of management. The Board believes that
they continue to demonstrate an independence of character in the performance of their roles as Non-executive Directors.
Their director’s fees are fixed, and they do not benefit from share option awards.
The Directors are expected to attend Board meetings, meetings of Board Committees of which they are members, annual
general meetings, and any other shareholder meetings convened from time to time.
All Directors have disclosed any significant commitments outside their respective duties as Directors and confirmed that they
have sufficient time to discharge their duties.
Appointments
The Board believes there is an appropriate balance of skills, knowledge and personal qualities on the Board, which provides a
wide range of expertise on issues relating to the Company’s mission, operations, strategies and its standards of conduct.
The Chairman of the Board monitors the suitability of the Board’s composition on a continuing basis and will make
recommendations to the Board as and when appropriate.
Board support and external advice
Internal management is available to the Board to ensure all Board and Committee meetings are conducted properly and
procedures are in place for distributing meeting agendas and reports so that the Directors receive the appropriate information
to be discussed in a timely manner. The Directors each receive reports which include monthly finance and management results
and operational updates from the Chief Executive Officer, the Chief Operating Officer and the Chief Financial Officer. Board
minutes are taken by internal management and circulated for approval at the next meeting. The Company Secretary assists the
Board by maintaining statutory registers and filings and assisting with organising shareholder general meetings.
Aside from the Directors’ stated roles, the Board members do not have any particular internal advisory responsibilities. Where it
considers it necessary to do so, the Board and Board committees may utilise external professional advisers to provide advice
and guidance on any matter where they consider it prudent to seek such advice, at the Company’s expense. No such external
advice was sought during the year.
Board performance evaluation
The Board evaluates its performance as a whole, informally on an ongoing basis. This falls under the overall responsibility of the
Chairman. There have been no recommendations concerning the Board structure arising from the Company’s Board appraisals
over the year ended 31 December 2023.
Board meetings
The Board meets formally a minimum of eleven times a year, excluding Board committee meetings. The table below sets out
the total number of meetings held by the Board and its Committees and records of attendance by each member eligible to
attend during the year ended 31 December 2023:
Board meetings Audit committee1 Remuneration committee1
Possible Attended Possible Attended Possible Attended
G C Swindells 13 13 4 4 – –
A J Nunn 13 12 – – – –
S M McLeod 13 12 4 4 – –
P N Cowley 13 9 4 2 2 2
M S Lappin 13 12 4 4 2 2
P W Nicol 13 12 4 4 2 2
1 Only Non-executive Directors are entitled to vote in the meetings of these Board Committees.
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Corporate Governance
continued
Other senior members of the management team and external advisors will attend, at the invitation of the Board, and as
appropriate to the matters under discussion.
Board committees
The Board has established an audit committee, remuneration committee and AIM compliance committee with formally
delegated duties and responsibilities, as described below. Each committee’s terms of reference are included on the Company’s
website.
Audit committee
The audit committee is responsible for monitoring the integrity of the Company’s financial statements, reviewing significant
financial reporting issues, reviewing the effectiveness of the Company’s internal control and risk management systems,
monitoring the effectiveness of the internal audit function and overseeing the relationship with the external auditors (including
advising on their appointment, agreeing the scope of the audit and reviewing the audit findings).
The audit committee comprises Peter Nicol, Peter Cowley and Mark Lappin and is chaired by Peter Nicol. The audit committee
aims to meet at appropriate times in the reporting and audit cycle and otherwise as required. The audit committee also meets
regularly with the Company’s external auditors.
Remuneration committee
The remuneration committee is responsible for determining and agreeing with the Board the framework for the remuneration
of the Chairman and the executive directors and, within the terms of the agreed framework, determining the total individual
remuneration packages of such persons including, where appropriate, bonuses, incentive payments and share options or other
share awards. The remuneration of Non-executive Directors is a matter for the chairman and the executive members of the
Board. No Director is involved in any decision as to his or her own remuneration.
The remuneration committee comprises Peter Cowley, Peter Nicol and Mark Lappin and is chaired by Peter Cowley.
The remuneration committee meets at least twice a year and otherwise as required.
AIM compliance committee
The AIM compliance committee is responsible for ensuring that the Company complies with its obligations under the AIM Rules
for Companies (“AIM Rules”) and the Market Abuse Regulation (Regulation EU 596/2014) (“MAR”) and, in particular makes
timely and accurate disclosure of all information that is required to be disclosed to meet its disclosure obligations arising from
the admission of its shares to trading on AIM and, under MAR.
The AIM compliance committee comprises Graham Swindells, Mark Lappin, Andrew Nunn and Sarah McLeod. The AIM
compliance committee meets as and when required, in order to undertake its responsibilities.
Share dealing code
The Company has adopted a share dealing code for the Directors, persons discharging managerial responsibilities and
applicable employees of the Company for the purpose of ensuring compliance by such persons with the provisions of the AIM
Rules relating to dealings in the Company’s securities (including, in particular, Rule 21 of the AIM Rules and MAR). The Directors
consider that this share dealing code is appropriate for a company whose shares are admitted to trading on AIM.
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On behalf of the Board
Mark Lappin
Chairman
16 April 2024
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Audit Committee Report
Overview
The audit committee met four times during the year. The external auditor, PKF Littlejohn LLP, also attended the meeting at the
invitation of the audit committee chairman.
External audit
On behalf of the board, the Audit Committee is responsible for managing the relationship with external auditor. PKF Littlejohn
LLP was appointed as the auditor of the Company during the prior year following a formal tender process, and will be
proposed for reappointment in accordance with section 485 of the Companies Act 2006.
The objectivity and independence of the external auditors is safeguarded by reviewing the auditors’ formal declarations,
monitoring relationships between key audit staff and the Company and reviewing the non-audit fees payable to the auditor.
Non-audit services are not performed by the auditor if this would have a material effect on, or relevance to, the production of
the Company’s financial statements and/or involve taking decisions or making significant subjective judgements that should be
the responsibility of management. During the year, amounts accrued to PKF Littlejohn LLP for audit services totalled £40,000
(2022: £37,500) and £2,100 (2022: nil) was paid for non-audit services.
Financial reporting
The audit committee monitored the integrity of the annual financial statements and reviewed the significant financial reporting
issues and accounting policies and disclosures in the financial reports. The external auditor, PKF Littlejohn LLP, attended the
audit committee meetings during the year. The process included the consideration of reports from the external auditor
identifying the primary areas of accounting judgements and key audit risks identified as being significant to the financial
statements.
Audit committee effectiveness
Although no formal review of the effectiveness of the audit committee has been undertaken, the Board and the chairman of the
audit committee believe this to be satisfactory. The chairman of the audit committee will continue to assess whether such a
formal review would be appropriate or otherwise, however, it is currently not considered necessary.
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Internal audit
In light of the size of the Company and its current stage of development, the committee did not consider it necessary or
appropriate to operate an internal audit function during the year.
Peter Nicol
Chairman, Audit Committee
16 April 2024
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Remuneration Committee Report
The remuneration committee reviews the scale and structure of the executive directors' remuneration and the terms of their
service contracts.
The remuneration and terms and conditions of appointment of the Non-executive Directors are set by the Board.
The remuneration committee met twice during 2023 in consideration of: changes in remuneration, share option awards, bonus
awards and reporting of 2023 objectives.
During the year there were no changes to the Company's remuneration and employment conditions and all director salary
changes and bonuses were approved by the remuneration committee. A major independent, executive reward company,
Mercer Kepler Limited undertook a benchmarking exercise during 2019 on the Company's senior executive and board's
remuneration and this has been updated internally by the remuneration committee each year to determine appropriate salaries
and bonuses. The Company plans to undertake another independent benchmarking exercise during 2024.
Although no formal review of the effectiveness of the remuneration committee has been undertaken, the Board and the
chairman of the remuneration committee believe this to be satisfactory. The chairman of the remuneration committee will
continue to assess whether such a formal review would be appropriate or otherwise.
Peter Cowley
Chairman, Remuneration Committee
16 April 2024
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Board of Directors and Senior Management
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There is an appropriate breadth of experience, skills and personal qualities covering the key aspects of the business including
technical, operational and financial. It is the responsibility of each Director to keep skills up to date with the assistance of the
Chairman who has a core responsibility in addressing the development needs of the Board as a whole, with a view to enhancing
its overall effectiveness.
Mark Lappin
Non-Executive Chairman
Mark has over 40 years of experience in the oil and gas
industry. Mark joined Deltic Energy as non-executive director
in 2016 and became Chairman in May 2019. Prior to that Mark
was Technical Director at Cuadrilla and Subsurface Director
for UK and Netherlands at Centrica. Mark began his career at
Phillips Petroleum and has held senior technical and
commercial roles with ExxonMobil and Dart Energy. Mark is
also a Visiting Professor at University of Strathclyde Centre
for Energy Policy in Glasgow.
Mark’s extensive technical, commercial and senior
management experience in the oil and gas sector ensures that
he has the ability to support the executive directors, challenge
strategy and decision-making, scrutinise performance and to
perform his role as Non-Executive Chairman as the Company
enters its next stage of development. Mark is also a member
of the Company’s audit, remuneration and AIM compliance
committees.
Graham Swindells
Chief Executive Officer
Graham Swindells joined the Company in 2013 as Chief
Financial Officer and became Chief Executive Officer in 2018.
He joined the Company from Ernst & Young where he was a
Director in Public Company M&A. Graham graduated from the
University of Glasgow with a Bachelor of Accountancy
Degree and after qualifying as a Chartered Accountant spent
two years at PricewaterhouseCoopers specialising in
corporate recovery and restructuring. He subsequently
specialised in corporate finance, becoming a director in
corporate finance at Arbuthnot Securities during which time
he focused on advising and broking small and mid-cap public
companies across various sectors, but with a particular focus
on natural resources. Graham is chairman of the Company’s
AIM compliance committee.
Graham’s professional, commercial and finance experience
ensures that he has the necessary ability to develop and
implement the Company’s strategy, undertake fundraising,
and oversee the management of the Company.
Andrew Nunn
Chief Operating Officer
Andrew Nunn joined the Company in 2014 and later that year
was appointed to the Board as Chief Operating Officer.
Andrew is a Chartered Geologist with over 20 years of
experience working on exploration, mining and geo-
environmental projects in Europe, Australasia and Africa. For
the last 10 years he has worked on a wide variety of UK and
European conventional and unconventional gas projects with
a primary focus on Carboniferous aged reservoirs. Andrew’s
previous role was as Exploration Manager for Dart Energy. He
holds a B.Sc. (Hons) in Economic Geology and an M.Sc. in
Environmental Management. Andrew became a Director of
the Oil and Gas Independents’ Association (OGIA) in
February 2020. Andrew is a member of the Company’s AIM
compliance committee.
Andrew’s technical and operational experience and
professional qualifications ensure that he has the necessary
ability to lead and manage the Company’s technical
development and operational matters.
Sarah McLeod
Chief Financial Officer
Sarah joined Deltic as Chief Financial Officer in January 2020.
Sarah has 20 years of experience in the international oil and
gas industry. She previously held the position of Group
Financial Controller at New Age. Sarah spent 10 years with
ConocoPhillips in a variety of senior financial and strategic
roles and also two years with Maersk Oil. She started her
career with Deloitte, spending six years in its oil and gas team
during which time she qualified as a Chartered Accountant.
Sarah’s professional qualifications, finance and industry
experience ensures that she has the necessary ability to
manage the Company’s financial matters.
Peter Cowley
Non-Executive Director
Peter Cowley is a geologist with over 50 years of international
experience in the minerals industry and has been involved in
the discovery and development of a number of gold mines in
Africa. Peter was previously Managing Director of Ashanti
Exploration Limited, Group Technical Director of Cluff
Resources Plc, CEO of Banro Corporation and is currently
President and a Director of Loncor Resources Inc. He holds
M.Sc. and M.B.A. degrees and is a Fellow of I.M.M.M. Peter is
chairman of the Company’s Remuneration Committee and
member of the Audit Committee.
Peter’s many years of technical experience and senior
management positions in publicly listed companies ensure
that he has the ability to support the executive directors,
challenge strategy and decision-making, and to scrutinise
performance.
Peter Nicol
Non-Executive Director
Peter Nicol joined the Company in November 2021. Peter has
40 years of experience in the energy sector. He was
previously Head of Oil & Gas at GMP Securities Europe, Global
Sector Director of Oil & Gas Research at ABN Amro & Head of
European Oil & Gas Research at Goldman Sachs. Peter is a
non-executive director of exploration focused Touchstone
Exploration Inc. and Eco (Atlantic) Oil & Gas Ltd, both of
which are AIM quoted. He is also an independent director of
ERC Equipoise Limited. Peter started his career with British
National Oil Corporation and holds a Bachelor of Science in
Mathematics & Economics from Strathclyde University. Peter
is chairman of the Company’s Audit Committee and member
of the Remuneration Committee.
Peter’s wealth of energy, financial, city and public company
experience will be invaluable to Deltic as it progresses to the
next stage in development, and ensures he has the ability to
support the executive directors, challenge strategy and
decision-making, and to scrutinise performance.
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Report of the Directors
The Directors present their report with the financial statements of the Company for the year ended 31 December 2023.
Principal Activity
The Company’s principal activity is the exploration, evaluation and development of mineral exploration targets, with a principal
focus on the development of its gas and oil licences in the Southern and Central North Sea.
Review of Business
Further details of the Company’s business and expected future development are also set out in the Strategic Report starting on
page 1, commencing with the Chairman’s Statement.
Dividends
No dividends will be distributed for the year ended 31 December 2023 (2022: nil).
Directors
The Directors of the Company during the year and their beneficial interest in the ordinary shares and share options of the
Company at 31 December 2023 are set out below:
Ordinary shares Share options
2023 2022* 2023 2022*
G C Swindells 155,456 155,456 3,532,600 2,932,600
A J Nunn 61,765 61,765 3,532,600 2,932,600
M S Lappin 58,744 58,744 – –
P N Cowley 50,924 50,924 – –
P W Nicol 150,000 50,000 – –
1,032,589 376,889 7,065,200 5,865,200
* Restated for the effect of the 20:1 share consolidation during the year.
Director’s Remuneration
The following table sets out an analysis of the pre-tax remuneration for the year ended 31 December 2023 for the individual
Directors who held office in the Company during the year.
2023 2023 2023 2023 2023 2022
Salaries Bonus Benefits
and fees payments Pension in Kind Total Total
£ £ £ £ £ £
G C Swindells 301,839 60,368 30,184 7,129 399,518 468,648
A J Nunn 282,979 56,596 28,298 3,598 371,471 436,542
M S Lappin 66,660 – – – 66,660 60,000
P N Cowley 33,330 – – – 33,330 30,000
P W Nicol 33,330 – – – 33,330 30,000
718,138 116,964 58,482 10,725 904,309 1,025,190
The directors did not receive any other emoluments, compensation or cash or non-cash benefits other than as disclosed above.
Share options
The share-based payment of £320,660 (2022: £262,505) to Directors represents the share-based expense relating to unvested
share options during the year.
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Report of the Directors
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The following share options table comprises share options held by Directors who held office during the year ended 31
December 2023:
Options held at Options Options Options held at
31 December granted exercised 31 December Exercise Exercisable Exercisable
2022* in period in period 2023 price (p)* from to
G C Swindells – 600,000 – 600,000 28.25 23 August 2024 23 August 2032
499,980 – – 499,980 51.00 12 July 2025 12 July 2032
499,980 – – 499,980 41.00 22 Sept 2022 22 Sept 2031
999,960 – – 999,960 35.00 8 July 2022 8 July 2029
450,000 – – 450,000 46.40 07 June 2019 07 June 2028
110,000 – – 110,000 75.00 30 April 2015 30 April 2024
372,680 – – 372,680 26.50 10 June 2017 10 June 2026
A J Nunn – 600,000 – 600,000 28.25 23 August 2024 23 August 2032
499,980 – – 499,980 51.00 12 July 2025 12 July 2032
499,980 – – 499,980 41.00 22 Sept 2022 22 Sept 2031
999,960 – – 999,960 35.00 8 July 2022 8 July 2029
410,000 – – 410,000 46.40 07 June 2019 07 June 2028
150,000 – – 150,000 77.60 6 Sept 2015 22 May 2024
372,680 – – 372,680 26.50 10 June 2017 10 June 2026
* Restated for the effect of the 20:1 share consolidation during the year.
Further details of share-based payments are set out in note 17.
Financial Instruments
Details of the use of financial instruments by the Company are contained in note 22 of the financial statements.
Subsequent Events
Events subsequent to 31 December 2023 are set out in note 26 to the financial statements on page 55.
Business Risks
A summary of the principal and general business risks can be found in the Strategic Report on page 16 and in note 22 to the
financial statements.
Key Performance Indicators
At this stage in its development, the Company is focusing on the development of its North Sea gas and oil assets, applying for
new licences, maintaining and extending existing licences, as well as the evaluation of various oil and gas opportunities.
The Directors closely monitor certain financial information, in particular the levels of overheads and other administrative
expenditure, exploration expenditure and cash and deposit balances, as set out in the Financial Review. As and when the
Company moves into production, other financial, operational, health and safety and environmental KPIs will become relevant
and will be measured and reported as appropriate.
Disclosure of Information to Auditors
So far as the Directors are aware, there is no relevant audit information (as defined by Section 418 of the Companies Act 2006)
of which the Company’s auditors are unaware, and each Director has taken all the steps that he ought to have taken as a
director in order to make himself aware of any relevant audit information and to establish that the Company’s auditors are
aware of that information.
Auditors
PKF Littlejohn LLP will be proposed at the Annual General Meeting for reappointment in accordance with section 485 of the
Companies Act 2006.
On behalf of the Board
Graham Swindells
Chief Executive Officer
16 April 2024
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Statement of Directors’ Responsibilities
The Directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law
and regulations.
Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have
elected to prepare the financial statements in accordance with UK Adopted International Accounting Standards in conformity
with the requirements of the Companies Act 2006. Under Company law the Directors must not approve the financial
statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the profit or
loss of the Company for that period. The Directors are also required to prepare financial statements in accordance with the
rules of the London Stock Exchange for companies trading securities on the Alternative Investment Market (AIM).
In preparing these financial statements, the Directors are required to:
• Select suitable accounting policies and then apply them consistently;
• Make judgements and accounting estimates that are reasonable and prudent;
• State whether they have been prepared in accordance with UK adopted International Accounting Standards in conformity
with the requirements of the Companies Act 2006; subject to any material departures disclosed and explained in the
financial statements; and
• Prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will
continue in business.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company’s
transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to
ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the
assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
Website publication
The Directors are responsible for ensuring the Annual Report and the financial statements are made available on a website.
Financial statements are published on the Company’s website in accordance with legislation in the United Kingdom
governing the preparation and dissemination of financial statements, which may vary from legislation in other jurisdictions.
The maintenance and integrity of the Company’s website is the responsibility of the Directors. The Directors’ responsibility also
extends to the on-going integrity of the financial statements contained therein.
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Independent Auditor’s Report
to the members of Deltic Energy Plc
Opinion
We have audited the financial statements of Deltic Energy Plc (the ‘Company’) for the year ended 31 December 2023 which
comprise the Income Statement, the Statement of Comprehensive Income, the Balance Sheet, the Statement of Changes in
Equity, the Statement of Cash Flows and notes to the financial statements, including significant accounting policies.
The financial reporting framework that has been applied in their preparation is applicable law and UK-adopted international
accounting standards.
In our opinion, the financial statements:
• give a true and fair view of the state of the company’s affairs as at 31 December 2023 and of its loss for the year then ended;
•
•
have been properly prepared in accordance with UK-adopted international accounting standards; and
have been prepared in accordance with the requirements of the Companies Act 2006.
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Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK) and applicable law. Our
responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial
statements section of our report. We are independent of the company in accordance with the ethical requirements that are
relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard as applied to listed entities, and
we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence
we have obtained is sufficient and appropriate to provide a basis for our opinion.
Material uncertainty related to going concern
We draw attention to note 1 in the financial statements, which indicates that the company incurred a net loss of £2,961,353
during the year ended 31 December 2023 and incurred operating cash outflows of £2,625,521 and is not expected to generate
any revenue or positive cash outflows from operations in the 12 months from the date at which financial statements were
signed. These indicate that additional capital will need to be secured to finance the Company’s budgeted exploration and
development programme and to enable the Company to meet its other operational obligations as they fall due. As stated in
note 1, these events or conditions, along with the other matters as set forth in note 1, indicate that a material uncertainty exists
that may cast significant doubt on the company’s ability to continue as a going concern. Our opinion is not modified in respect
of this matter.
In auditing the financial statements, we have concluded that the director’s use of the going concern basis of accounting in the
preparation of the financial statements is appropriate. Our evaluation of the directors’ assessment of the company’s ability to
continue to adopt the going concern basis of accounting included:
• We obtained and reviewed the latest cash flow forecasts for the Company which included the period of 12 months from the
date of approval of these financial statements. In doing so we challenged and corroborated management’s key assumptions
included in the cash flow forecasts. This included comparing forecast operating costs to historical cost levels and evaluating
whether the work commitments are appropriately costed and consistent with the budgeted licence work programme;
• Discussing with management how they intend to secure capital to finance the exploration and development programme
necessary for the Company to continue as a going concern, in the required timeframe and considering this in light of the
Company’s track record to secure farm-outs and its ability to access equity funding; and,
• Critically assessing the disclosure made within the financial statements for consistency with management’s assessment of
going concern.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections
of this report.
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Independent Auditor’s Report
continued
Our application of materiality
The scope of our audit was influenced by our application of materiality. The quantitative and qualitative thresholds for
materiality determine the scope of our audit and the nature, timing and extent of our audit procedures. We determined
materiality for the financial statements to be:
£ Basis
Overall materiality 434,000 (2022:242,000) 2% of Net assets (2022: 1% of net assets)
Performance materiality 303,800 (2022:145,000) 70% of materiality (60% of materiality)
Triviality 21,700 (2022: 12,000) 5% of materiality
The benchmark for materiality was selected as 2% of net assets. Net assets were deemed to be the most appropriate metric for
materiality given the Company's status as an oil and gas exploration company with limited liabilities. Moreover, the expected
main focus of the users of the financial statements is the recoverability of the assets invested in the exploration and evaluation
stage. The percentage applied to this benchmark has been selected to bring into scope all significant classes of transactions,
account balances and disclosures considered relevant for the shareholders, and also to ensure that matters that would have a
significant impact on the results during the year were appropriately considered.
We use performance materiality to reduce to an appropriately low level the probability that the aggregate of uncorrected and
undetected misstatements exceeds overall materiality. Specifically, we use performance materiality in determining the nature
and extent of our testing of account balances, classes of transactions and disclosures.
We agreed with the audit committee that we would report to the committee all individual audit differences identified during
our audit in excess of £21,700 in addition to other audit misstatements below that threshold that we believe warrant reporting
on qualitative grounds.
We evaluate any uncorrected misstatements against both the quantitative measures of materiality discussed above and in light
of other relevant qualitative considerations in forming our opinion.
Our approach to the audit
Our audit is risk based and is designed to focus our efforts on the areas at greatest risk of material misstatement, aspects
subject to significant management judgement as well as greatest complexity, risk and size.
As part of designing our audit, we determined materiality, as above, and assessed the risk of material misstatement in the
financial statements. In particular, we looked at areas involving significant accounting estimates and judgement by the directors
and considered future events that are inherently uncertain. These areas of estimate and judgement included:
• Valuation and recoverability of exploration intangible assets; and
• Valuation of share options.
We also addressed the risk of management override of internal controls, including among other matters consideration of
whether there was evidence of bias that represented a risk of material misstatement due to fraud.
The key audit matters and how these were addressed are outlined below.
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Independent Auditor’s Report
continued
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial
statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to
fraud) we identified, including those which had the greatest effect on: the overall audit strategy, the allocation of resources in the
audit; and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the
financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
In addition to the matter described in the Material uncertainty related to going concern section we have determined the matters
described below to be the key audit matters to be communicated in our report.
Key Audit Matter
How our scope addressed this matter
As part of our audit, we have performed the following procedures:
• We critically assessed whether impairment indicators exist in line with
IFRS 6, including the following:
–
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–
–
Obtained evidence that the licences are still held by the Company
and expiry is not imminent or there is evidence to support the
likelihood of licence extension;
Reviewed the results of any exploration activities in the period; and
Reviewed the project work programme, where available, and
evaluated any associated commitments and obligations for each
project;
Discussed with management their plans regarding future exploration
on the licence areas.
• We obtained evidence to confirm the relinquishment of licences P2567
Cadence P2560/P2561/P2562 Breagh and P2428 Cupertino and reviewed
the appropriateness of the accounting entries made to intangible assets
and the impairment charge to the statement of comprehensive income.
• We performed tests of detail on additions to intangible assets during the
year to assess the appropriateness of capitalisation under IFRS 6.
• We reviewed the disclosures in the financial statements to ensure that they
are appropriate.
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Valuation and recoverability of exploration
intangible assets
The carrying amount of intangible assets
related to exploration and evaluation assets
amounted to £17,463,225 as at 31 December
2023.
During the year, the Company relinquished
licences P2567 Cadence and
P2560/P2561/P2562 Breagh. In connection
with the relinquishment, the Company wrote
off the full amount of the costs capitalised
amounting to £21,127. Moreover, the Company
impaired the costs capitalised relating to
P2428 Cupertino amounting to £163,115 since it
was relinquished on 31 March 2024.
Based on management’s review performed
under IFRS 6 Exploration for and evaluation of
mineral resources, there were no further
indications of impairment for other licences as
at 31 December 2023.
Given the inherent judgement involved in the
assessment of whether there are indications of
impairment to the carrying amount of
exploration and evaluation assets, we
considered the carrying amount of exploration
assets to be a key audit matter.
Other information
The other information comprises the information included in the annual report, other than the financial statements and our
auditor’s report thereon. The directors are responsible for the other information contained within the annual report. Our opinion
on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our
report, we do not express any form of assurance conclusion thereon. Our responsibility is to read the other information and,
in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge
obtained in the course of the audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies
or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the
financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of
this other information, we are required to report that fact.
We have nothing to report in this regard.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of the audit:
•
the information given in the strategic report and the directors’ report for the financial year for which the financial
statements are prepared is consistent with the financial statements; and
the strategic report and the directors’ report have been prepared in accordance with applicable legal requirements.
•
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Independent Auditor’s Report
continued
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Matters on which we are required to report by exception
In the light of the knowledge and understanding of the company and its environment obtained in the course of the audit,
we have not identified material misstatements in the strategic report or the directors’ report.
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to
report to you if, in our opinion:
•
adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches
not visited by us; or
the financial statements are not in agreement with the accounting records and returns; or
•
•
certain disclosures of directors’ remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit.
Responsibilities of directors
As explained more fully in the directors’ responsibilities statement, the directors are responsible for the preparation of the
financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors
determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due
to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the company’s ability to continue as a going
concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the
directors either intend to liquidate the company or to cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is
a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a
material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or
in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these
financial statements.
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our
responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to
which our procedures are capable of detecting irregularities, including fraud is detailed below:
• We obtained an understanding of the company and the sector in which it operates to identify laws and regulations that
could reasonably be expected to have a direct effect on the financial statements. We obtained our understanding in this
regard through discussions with management, and our expertise of the sector.
• We determined the principal laws and regulations relevant to the company in this regard to be those arising from
Companies Act 2006, UK-adopted international accounting standards, the AIM Rules for Companies and the UK tax law
and regulations.
• We designed our audit procedures to ensure the audit team considered whether there were any indications of
non-compliance by the company with those laws and regulations. These procedures included, but were not limited to:
–
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conducting enquiries of management regarding potential instances of non-compliance;
reviewing RNS announcements;
reviewing legal and professional fees for evidence of any litigation or claims against the company; and
reviewing board minutes and other correspondence from management.
• We also identified the risks of material misstatement of the financial statements due to fraud. We considered, in addition to
the non-rebuttable presumption of a risk of fraud arising from management override of controls, whether key management
judgements could include management bias in relation to the valuation and recoverability of exploration intangible assets
and valuation of share options. We addressed the recoverability of the exploration intangible assets as outlined in the Key
audit matters section above.
• As in all of our audits, we addressed the risk of fraud arising from management override of controls by performing audit
procedures which included, but were not limited to: the testing of journals; reviewing accounting estimates for evidence of
bias; and evaluating the business rationale of any significant transactions that are unusual or outside the normal course of
business.
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Independent Auditor’s Report
continued
Because of the inherent limitations of an audit, there is a risk that we will not detect all irregularities, including those leading to a
material misstatement in the financial statements or non-compliance with regulation. This risk increases the more that
compliance with a law or regulation is removed from the events and transactions reflected in the financial statements, as we will
be less likely to become aware of instances of non-compliance. The risk is also greater regarding irregularities occurring due to
fraud rather than error, as fraud involves intentional concealment, forgery, collusion, omission or misrepresentation.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting
Council’s website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
Use of our report
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies
Act 2006. Our audit work has been undertaken so that we might state to the company’s members those matters we are
required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not
accept or assume responsibility to anyone, other than the company and the company's members as a body, for our audit work,
for this report, or for the opinions we have formed.
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Daniel Hutson (Senior Statutory Auditor)
For and on behalf of PKF Littlejohn LLP
Statutory Auditor
16 April 2024
15 Westferry Circus
Canary Wharf
London E14 4HD
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Income Statement
for the year ended 31 December 2023
2023 2022
Continuing operations Notes £ £
Administrative expenses:
Write down on relinquished intangible assets 12 (184,242) (347,610)
Other administrative expenses (3,035,896) (2,745,350)
Total administrative expenses (3,220,138) (3,092,960)
Other operating income - -
Operating loss (3,220,138) (3,092,960)
Finance income 4 388,403 129,301
Finance costs 5 (16,788) (25,745)
Loss before tax 6 (2,848,523) (2,989,404)
Income tax expense 8 (112,830) -
Loss for the year (2,961,353) (2,989,404)
Loss per share from continuing operations
expressed in pence per share:
Basic 9 (3.18)p (3.94)p
Statement of Comprehensive Income
for the year ended 31 December 2023
2023 2022
£ £
Loss for the year (2,961,353) (2,989,404)
Other comprehensive income - -
Total comprehensive expense for the year attributable to the equity holders of the Company (2,961,353) (2,989,404)
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The notes on pages 37 to 55 form part of the financial statements.
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Balance Sheet
as at 31 December 2023
2023 2022
Notes £ £
Assets
Non-current assets
Intangible assets 12 17,463,225 9,769,477
Property, plant and equipment 13 171,627 279,545
Investments in subsidiary 10 1 -
Other receivables 14 37,422 37,422
Total non-current assets 17,672,275 10,086,444
Current assets
Trade and other receivables 14 112,598 181,102
Cash and cash equivalents 5,580,259 20,409,692
Total current assets 5,692,857 20,590,794
Total assets 23,365,132 30,677,238
Capital and reserves attributable to the equity holders of the Company
Shareholders’ equity
Share capital 15 9,309,660 9,309,660
Share premium 33,145,477 33,150,786
Share-based payment reserve 17 1,999,834 1,535,202
Accumulated retained deficit (22,716,617) (19,802,953)
Total equity 21,738,354 24,192,695
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Liabilities
Current liabilities
Trade and other payables 19 1,402,375 4,988,307
Current tax payable 88,775 -
Lease liabilities 20 124,282 90,132
Provisions 21 - 1,281,000
Total current liabilities 1,615,432 6,359,439
Non-current liabilities
Lease liabilities 20 11,346 125,104
Total non-current liabilities 11,346 125,104
Total liabilities 1,626,778 6,484,543
Total equity and liabilities 23,365,132 30,677,238
The financial statements of Deltic Energy Plc, registered number 7958581, were approved by the Board of Directors on 16 April
2024 and were signed on its behalf by:
Graham Swindells
Chief Executive Officer
The notes on pages 37 to 55 form part of the financial statements.
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Statement of Changes in Equity
for the year ended 31 December 2023
Share-based Accumulated
Share Share payment retained Total
capital premium reserve deficit equity
£ £ £ £ £
Balance at 1 January 2023 9,309,660 33,150,786 1,535,202 (19,802,953) 24,192,695
Comprehensive income for the year
Loss for the year - - - (2,961,353) (2,961,353)
Total comprehensive loss for the year - - - (2,961,353) (2,961,353)
Contributions by and distributions to owners
Issue of shares - 22 - - 22
Costs of share issue & consolidation - (5,331) - - (5,331)
Expired share options - - (47,689) 47,689 -
Share-based payment - - 512,321 - 512,321
Total contributions by and distributions to owners - (5,309) 464,632 47,689 507,012
Balance at 31 December 2023 9,309,660 33,145,477 1,999,834 (22,716,617) 21,738,354
Balance at 1 January 2022 7,029,824 20,296,030 1,150,700 (16,813,549) 11,663,005
Comprehensive income for the year
Loss for the year - - - (2,989,404) (2,989,404)
Total comprehensive loss for the year - - - (2,989,404) (2,989,404)
Contributions by and distributions to owners
Issue of shares 2,279,836 13,679,014 - - 15,958,850
Costs of share issue - (824,258) - - (824,258)
Share-based payment - - 384,502 - 384,502
Total contributions by and distributions to owners 2,279,836 12,854,756 384,502 - 15,519,094
Balance at 31 December 2022 9,309,660 33,150,786 1,535,202 (19,802,953) 24,192,695
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The notes on pages 37 to 55 form part of the financial statements.
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Statement of Cash Flows
for the year ended 31 December 2023
2023 2022
£ £
Cash flows from operating activities
Loss before tax (2,848,523) (2,989,404)
Finance income (388,403) (129,301)
Finance costs 16,788 25,745
Depreciation 115,099 114,698
Loss on disposal of property, plant and equipment 500 -
Write down on relinquished intangible assets / impairment of intangible assets 184,243 347,610
Share-based payment 512,321 384,502
(2,407,975) (2,246,150)
Decrease in other receivables 10,112 81,991
Decrease in trade and other payables (203,603) (18,228)
Tax paid (24,055) -
Net cash outflow from operating activities (2,625,521) (2,182,387)
Cash flows from investing activities
Purchase of intangible assets (12,547,872) (2,557,582)
Purchase of property, plant and equipment (1,130) (9,003)
Interest received 446,795 56,606
Net cash outflow from investing activities (12,102,207) (2,509,979)
Cash flows from financing activities
Proceeds from share issue 22 15,958,850
Expense of share issue (5,331) (824,258)
Payment of principal portion of lease liabilities (79,608) (98,994)
Lease interest paid (16,788) (25,745)
Net cash (outflow) / inflow from financing activities (101,705) 15,009,853
(Decrease) / increase in cash and cash equivalents (14,829,433) 10,317,487
Cash and cash equivalents at beginning of year 20,409,692 10,092,205
Cash and cash equivalents at end of year 5,580,259 20,409,692
Cash and cash equivalents comprise the following items:
2023 2022
£ £
Cash at bank and in hand 580,259 2,909,692
Short term bank deposits 5,000,000 17,500,000
5,580,259 20,409,692
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The notes on pages 37 to 55 form part of the financial statements.
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Notes to the Financial Statements
for the year ended 31 December 2023
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1. Accounting Policies
Basis of preparation
The financial statements have been prepared in accordance with UK adopted International Accounting Standards (‘IAS’) and with
those parts of the Companies Act 2006 applicable to companies reporting under International Accounting Standards (‘IAS’).
On 24 April 2023, the Company incorporated a subsidiary, Deltic Energy One Limited, a company incorporated in England and
registered at 1st Floor 150 Waterloo Road, London, SE1 8SB. This subsidiary has been dormant from the date of incorporation.
As it is not material for the purpose of giving a true and fair view, the Company has not consolidated its subsidiary, taking
advantage of the exemption available under the Companies Act 2006 section 405, and has therefore not prepared
consolidated financial statements.
The preparation of financial statements in conformity with IAS requires management to make judgements, estimates and
assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses.
The estimates and associated assumptions are based on historical experience and factors that are believed to be reasonable
under the circumstance, the result of which form the basis of making judgements about carrying values of assets and liabilities
that are not readily apparent from other sources. Actual results may differ from this estimate. The areas involving a higher
degree of judgement or complexity, or where assumptions and estimates are significant to the financial statements, are
disclosed later in this note.
Operating loss is stated after charging and crediting all items excluding finance income and expenses.
The estimates and underlying assumptions are reviewed on an on-going basis. Revisions to accounting estimates are
recognised in the period in which the estimate is revised if the revision only affects that period or in the period of revision and
future periods if the revision affects both current and future periods.
Going concern
The Directors have completed the going concern assessment, including considering cash flow forecasts up to mid-2025,
sensitivities, and stress tests to assess whether the Company is a going concern. The inherent nature of the Company means it is
dependent on its existing cash resources, farming down of assets and its ability to access additional capital in order to progress its
operational programme on an ongoing basis. Having undertaken careful assessment, the Directors are of the view the Company
will need to access additional capital during 2024 in order to fund on-going operations. It is anticipated these funds will primarily
be sourced through farm downs, asset disposal, issuing new equity or a combination of these actions. The financial statements for
the year to 31 December 2023 have been prepared assuming the Company will continue as a going concern. In support of this, the
directors believe the liquid nature of the UK asset market combined with historical shareholder support, means it is likely that
adequate funds can be accessed when required. However, the ability to access capital is not guaranteed at the date of signing
these financial statements. As a consequence, this funding requirement represents a material uncertainty that may cast significant
doubt on the Company’s ability to continue as a going concern. The Independent Auditor’s Report to the members of Deltic
Energy Plc for the year ended 31 December 2023 refers to this material uncertainty surrounding going concern.
Adoption of new and revised International Financial Reporting Standards
The Company has adopted the following standards, amendments to standards and interpretations which are effective for the first
time this year. These have not had a material effect on the reported income or net assets of the Company.
Effective period
commencing on or after:
Amendments to IAS 8: Definition of Accounting Estimates 1 January 2023
Amendment to IAS 12: Deferred Tax related to Assets and Liabilities arising from a Single Transaction 1 January 2023
Standards effective in future periods
Certain new standards, amendments and interpretations to existing standards have been published that are relevant to the
Company’s activities and are mandatory for the Company’s accounting periods commencing after 1 January 2024 or later
periods and which the Company has decided not to early adopt. These include:
Effective period
commencing on or after:
Amendments to IAS 1: Classification of Liabilities as Current or Non-current &
Disclosures of Accounting Policies 1 January 2024
Amendments to IAS 7 and IFRS 7: Supplier Finance Arrangements 1 January 2024
Deltic Energy Plc Annual Report & Accounts 2023
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Notes to the Financial Statements
for the year ended 31 December 2023
1. Accounting Policies (continued)
Management anticipates that all relevant pronouncements will be adopted in the Company's accounting policies for the first
period beginning after the effective date of the pronouncement.
There are no standards and interpretations in issue but not yet adopted that the Directors anticipate will have a material effect
on the reported income or net assets of the Company for the year ended 31 December 2023 based on current activities.
Foreign currencies
The functional currency of the Company is Sterling. Transactions denominated in currencies other than the functional currency
of the Company are recorded at the rate of exchange prevailing at the date of the transaction. Monetary assets and liabilities
are translated into the functional currency at the closing rates of exchange at the reporting date. Exchange differences arising
from the restatement of monetary assets and liabilities at the closing rate of exchange at the reporting date or from the
settlement of monetary transactions at a rate different from that at which the asset or liability was recorded are dealt with
through the Income Statement.
Exploration and evaluation assets
Pre-licence costs associated with exploring or evaluating prospects are written off as incurred to the Income Statement.
All costs associated with exploring and evaluating prospects within licence areas, including the initial acquisition of the licence
are capitalised on a project-by-project basis pending determination of the feasibility of the project. Costs incurred include
appropriate technical and administrative expenses but not general overheads. When a decision is made to proceed to
development, the related expenditures will be transferred to proven projects. Where a licence is relinquished, a project is
abandoned, or is considered to be of no further commercial value to the Company, the related costs are written off.
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Upon farming out an exploration licence the Company, as the farmor, designates expenditure previously capitalised in respect
of the licence to the partial interest retained. Cash consideration received for the farm-out is offset against the carrying value by
the farmor, with any excess above the previously capitalised expenditure being accounted as a gain on disposal. Thereafter, the
farmor capitalises its own share of subsequent expenditure and does not recognise the share of expenditure incurred by the
farmee.
The recoverability of exploration and evaluation assets is dependent upon the discovery of economically recoverable reserves,
the ability of the Company to obtain necessary financing to complete the development of reserves and future profitable
production or proceeds from the disposition of recoverable reserves.
Intangible exploration and evaluation assets are not depreciated and are carried forward, subject to the provisions of the
Company’s impairment of exploration and evaluation policy, until the technical feasibility and commercial viability of extracting
hydrocarbons are demonstrable. At such point exploration and evaluation assets are assessed for impairment and any
impairment charge is recognised before reclassification of the assets to a category of property, plant and equipment.
Plug, abandon and suspend and demobilisation costs have been included within the exploration costs where the Directors
consider that these costs will be material.
Property, plant and equipment
Property, plant and equipment are stated at cost less depreciation. Depreciation is provided on a straight-line basis at rates
calculated to write off the cost less the estimated residual value of each asset over its expected useful economic life.
The residual value is the estimated amount that would currently be obtained from disposal of the asset if the asset were already
of the age and in the condition expected at the end of its useful life.
The annual rate of depreciation for each class of depreciable asset is:
Leasehold improvements over lease term
Office lease over lease term
Fixtures & fittings 15%
Computer equipment 25%
The carrying value of property plant and equipment is assessed annually and any impairment is charged to the income
statement.
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Notes to the Financial Statements
for the year ended 31 December 2023
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1. Accounting Policies (continued)
Impairment of exploration assets
Exploration and evaluation assets are reviewed regularly for indicators of impairment following the guidance in IFRS 6
‘Exploration for and Evaluation of Mineral Resources’ and tested for impairment where such indicators exist.
In accordance with IFRS 6 the Company considers the following facts and circumstances in their assessment of whether the
Company’s exploration and evaluation assets may be impaired:
• Whether the period for which the Company has the right to explore in a specific area has expired during the period or will
expire in the near future, and is not expected to be renewed;
• Whether substantive expenditure on further exploration for and evaluation of mineral resources in a specific area is neither
budgeted nor planned;
• Whether exploration for and evaluation of reserves in a specific area have not led to the discovery of commercially viable
quantities of mineable material and the Company has decided to discontinue such activities in the specific area; and
• Whether sufficient data exists to indicate that although a development in a specific area is likely to proceed, the carrying
amount of the exploration and evaluation assets is unlikely to be recovered in full, from successful development or by sale.
If any such facts or circumstances are noted, the Company, as a next step, perform an impairment test in accordance with the
provisions of IAS 36. In such circumstances the aggregate carrying value of the exploration and evaluation asset is compared
against the expected recoverable amount of the cash-generating unit. The recoverable amount is the higher of value in use and
the fair value less costs to sell. The Company assesses each licence as a separate cash-generating unit. In accordance with the
provisions of IFRS 6 the level identified for the purposes of assessing the Company’s exploration and evaluation assets for
impairment may comprise one or more cash-generating units.
Any impairment arising is recognised in the Income Statement for the year.
Taxation
Income tax expense represents the sum of the tax currently payable and deferred tax.
The tax currently payable is based on taxable result for the year. Taxable profit differs from profit as reported in the Income
Statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes
items that are never taxable or deductible. The Company’s liability for current tax is calculated using tax rates that have been
enacted or substantively enacted by the reporting date.
Deferred tax is recognised on differences between the carrying amounts of assets and liabilities in the financial statements and
the corresponding tax bases used in the computation of taxable profit, and are accounted for using the balance sheet liability
method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are
recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences
can be utilised.
The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer
probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled, or the asset
realised. Deferred tax is charged or credited to the income statement, except when it relates to items charged or credited
directly to equity, in which case the deferred tax is also dealt with in equity.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current
tax liabilities and when they relate to income taxes levied by the same taxation authority and the Company intends to settle its
current tax assets and liabilities on a net basis.
Cash and cash equivalents
Cash comprises cash on hand and demand deposits with banks.
Cash equivalents comprise bank deposits held for the purpose of meeting short-term cash commitments that are subject to an
insignificant risk of changes in value and are readily convertible into known amounts of cash, subject to a notice period up to a
maximum of 95 days.
Deltic Energy Plc Annual Report & Accounts 2023
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Notes to the Financial Statements
for the year ended 31 December 2023
1. Accounting Policies (continued)
Financial instruments
Recognition and derecognition
Financial assets and financial liabilities are recognised when the Company becomes a party to the contractual provisions of the
financial instrument.
Financial assets are derecognised when the contractual rights to the cash flows from the financial asset expire, or when the
financial asset and substantially all the risks and rewards are transferred.
A financial liability is derecognised when it is extinguished, discharged, cancelled or expires.
Classification and initial measurement of financial assets
Except for those trade receivables that do not contain a significant financing component and are measured at the transaction
price in accordance with IFRS 15, all financial assets are initially measured at fair value adjusted for transaction costs (where
applicable).
Financial assets are classified into the following categories:
•
•
•
amortised cost
fair value through profit or loss (FVTPL)
fair value through other comprehensive income (FVOCI).
In the periods presented the Company does not have any financial assets categorised as FVTPL or FVOCI.
The classification is determined by both:
•
•
the entity’s business model for managing the financial asset
the contractual cash flow characteristics of the financial asset.
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All income and expenses relating to financial assets that are recognised in profit or loss are presented within finance costs,
finance income or other financial items.
Subsequent measurement of financial assets
Financial assets at amortised cost
Financial assets are measured at amortised cost if the assets meet the following conditions:
•
they are held within a business model whose objective is to hold the financial assets and collect its contractual cash flows
•
the contractual terms of the financial assets give rise to cash flows that are solely payments of principal and interest on the
principal amount outstanding
After initial recognition, these are measured at amortised cost using the effective interest method. Discounting is omitted
where the effect of discounting is immaterial. The Company’s cash and cash equivalents, trade and other receivables fall into
this category of financial instruments.
The Company assesses the expected credit losses on a forward-looking basis, defined as the difference between the
contractual cash flows and the cash flows that are expected to be received, associated with its assets carried at amortised cost.
The impairment methodology applied depends on whether there has been a significant increase in credit risk. For trade
receivables only, the simplified approach permitted by IFRS 9 is applied, which requires expected lifetime losses to be
recognised from initial recognition of the receivables. Losses are recognised in the income statement. When a subsequent event
causes the amount of impairment to decrease, the decrease in impairment is reversed through the income statement.
Classification and measurement of financial liabilities
The Company’s financial liabilities include trade and other payables.
Financial liabilities are initially measured at fair value, and, where applicable, adjusted for transaction costs.
Subsequently, financial liabilities are measured at amortised cost using the effective interest method.
All interest-related charges are included within finance costs or finance income.
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Notes to the Financial Statements
for the year ended 31 December 2023
1. Accounting Policies (continued)
Joint Operations
The Company is party to joint oil and gas licences which are unincorporated joint arrangements. There is a contractual
agreement that sets out the terms of the relationship over the relevant activities of the Company and at least one other party.
The Company has a legal degree of control over these joint operating arrangements through Joint Operating Agreements.
The Company classifies its interests in joint arrangements as Joint Operations: where the Company has both the rights to assets
and obligations for the liabilities of the joint arrangement.
The Company accounts for its share of assets, liabilities, income and expenditure of Joint Operations in which it holds an
interest, classified in the appropriate Balance Sheet and Income Statement headings.
A list of the Company’s interests in Joint Operations is given in note 11.
Leases
The Company assesses whether a contract is or contains a lease, at inception of the contract.
Leases with an original term not exceeding 12 months and low value leased items continue to be accounted as previously, with
amounts payable being charged to the Income Statement on a straight-line basis over the lease term.
The Company recognises a right-of-use asset and a corresponding lease liability with respect to all other lease arrangements in
which it is the lessee. The lease liability is initially measured at the present value of the lease payments that are not paid at the
commencement date, discounted by using the rate implicit in the lease. If this rate cannot be readily determined, the lessee
uses its incremental borrowing rate.
The lease liability is presented as a separate line in the Balance Sheet.
The lease liability is subsequently measured by increasing the carrying amount to reflect interest on the lease liability (using the
effective interest method) and by reducing the carrying amount to reflect the lease payments made.
The Company remeasures the lease liability (and makes a corresponding adjustment to the related right-of-use asset)
whenever:
• The lease term has changed in which case the lease liability is remeasured by discounting the revised lease payments using
a revised discount rate.
• The lease payments change due to changes in an index or rate or a change in expected payment under a guaranteed
residual value, in which cases the lease liability is remeasured by discounting the revised lease payments using an
unchanged discount rate (unless the lease payments change is due to a change in a floating interest rate, in which case a
revised discount rate is used).
• A lease contract is modified and the lease modification is not accounted for as a separate lease, in which case the lease
liability is remeasured based on the lease term of the modified lease by discounting the revised lease payments using a
revised discount rate at the effective date of the modification.
The right-of-use assets comprise the initial measurement of the corresponding lease liability, lease payments made at or before
the commencement day, less any lease incentives received and any initial direct costs. They are subsequently measured at cost
less accumulated depreciation and impairment losses.
Right-of-use assets are depreciated over the shorter of the lease term and useful life of the underlying asset.
The depreciation starts at the commencement date of the lease.
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Deltic Energy Plc Annual Report & Accounts 2023
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Notes to the Financial Statements
for the year ended 31 December 2023
1. Accounting Policies (continued)
Provisions
Provisions are recognised when the Company has a present obligation (legal or constructive) as a result of a past event, it is
probable that the Company will be required to settle the obligation, and a reliable estimate can be made of the amount of the
obligation.
The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the
end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. When a provision is
measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash
flows (when the effect of the time value of money is material).
When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, a
receivable is recognised as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable
can be measured reliably.
Decommissioning Obligation
A decommissioning (or “asset retirement”) obligation provision for plugging, abandonment and reclamation costs has been
included within the exploration assets and within liabilities based on management’s assessment of asset retirement costs that
will be incurred. Where the effect is material, the estimated current date cash flows are adjusted for inflation and are discounted
at a risk-free rate. The cash flows used in the provision are risk adjusted.
Estimates of provisions for future decommissioning and restoration costs are recognised and based on current legal and
constructive requirements, technology and price levels. Because actual cash outflows can differ from estimates due to changes
in laws, regulations, public expectations, technology, prices and conditions, the carrying amounts of provisions are regularly
reviewed and adjusted to take account of such changes. The Company expects to incur the costs within one year hence the
estimated amount is not discounted.
Share-based payments
Equity-settled share-based payments to employees and Directors are measured at the fair value of the equity instrument. The
fair value of the equity-settled transactions with employees and Directors is recognised as an expense over the vesting period.
The fair value of the equity instruments is determined at the date of grant, taking into account market-based vesting conditions
and non-vesting conditions. The fair value of goods and services received is measured by reference to the fair value of options.
The fair values of share options are measured using an appropriate valuation methodology. The expected life used in the
models is adjusted, based on management’s best estimate of the effects of non-transferability, exercise restrictions and
behavioural considerations.
The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over the period in which
the performance and/or service conditions are fulfilled, ending on the date on which the relevant employees (or other
beneficiaries) become fully entitled to the award (“the vesting date”).
The cumulative expense recognised for equity-settled transactions at each reporting date until the vesting date reflects the
extent to which the vesting period has expired and the Company’s best estimate of the number of equity instruments that will
ultimately vest.
The Income Statement charge or credit for a period represents the movement in cumulative expense recognised as at the
beginning and end of that period.
No expense is recognised for awards that do not ultimately vest, except for awards where vesting is conditional upon a market
condition or non-vesting condition, which are treated as vesting irrespective of whether or not the market or non-vesting
condition is satisfied, provided that all other performance and/or service conditions are satisfied. Where the terms of an
equity-settled award are modified, the minimum expense recognised is the expense as if the terms had not been modified.
An additional expense is recognised for any modification, which increases the total fair value of the share-based payment
arrangement or is otherwise beneficial to the employee, as measured at the date of modification.
Where an equity-settled award (share options) is cancelled, it is treated as if it had vested on the date of cancellation if it had
not yet fully vested, and any expense not yet recognised for the award is recognised immediately. However, if a new award is
substituted for the cancelled award and designated as a replacement award on the date that it is granted, the cancelled and
new awards are treated as if they were a modification of the original award, as described in the previous paragraph.
Where an equity-settled award is forfeited, the cumulative charge expensed up to the date of forfeiture is credited to the
Income Statement. Upon expiry of an equity-settled award, the cumulative charge expensed is transferred from the
Share-based payment reserve to the Accumulated retained deficit.
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Deltic Energy Plc Annual Report & Accounts 2023
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Notes to the Financial Statements
for the year ended 31 December 2023
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1. Accounting Policies (continued)
Equity
Financial instruments issued by the Company are treated as equity only to the extent that they do not meet the definition of a
financial liability. The Company’s ordinary shares are classified as equity instruments.
For the purposes of the capital management disclosures given in note 18, the Company considers its capital to be total equity.
Critical accounting estimates and judgements
The Company makes estimates and assumptions concerning the future, which by definition will seldom result in actual results
that match the accounting estimate. The estimates and assumptions that have a significant risk of causing a material
adjustment to the carrying amount of assets and liabilities within the next financial year are discussed below.
Judgements
Impairment of exploration and evaluation assets (note 12)
Qualifying exploration and evaluation costs are initially classified and held as intangible assets rather than being expensed.
In recording costs as exploration and evaluation assets, judgement is required as to the extent to which the costs are attributable
to the discovery of specific hydrocarbon resources and include both internal and external costs. Expenditure is capitalised by
reference to appropriate Cash Generating Unit (‘CGU’) and is assessed for impairment with reference to IFRS 6 indicators of
impairment. This assessment involves judgement as to the status of licences and the likelihood of renewal of licences which
expire in the near future including the ability to meet licence obligations, budgets and plans for future exploration activity and
expenditure, the results of exploration activity, and assessments of future recoverable values upon development.
Where impairment indicators are identified, an impairment test is performed which requires judgment regarding factors such as:
(i) The timing of future development of the asset;
(ii) Funding structures and financing costs of development;
(iii) Commercial development opportunities for extracting value from the asset; and
(iv) Modelling inputs such as the appropriateness of discount rates, reserve and resource estimates, oil and gas pricing
predictions, etc.
The carrying value of exploration and evaluation assets were assessed for indicators of impairment at 31 December 2023.
In forming this assessment, the Company considered external competent person’s reports, the status of the licences, the extent
of ongoing exploration activity and steps to secure farm-in partners and other financing which supported the carrying value.
As detailed in note 12, a charge of £21,127 was recognised during the year (2022: £nil) resulting from the write down on
relinquished intangible assets following the decision to relinquish P2567 (Cadence). Additionally, an impairment charge of
£163,115 was recognised during the year (2022: £nil) resulting from the impairment of P2428 (Cupertino) following likely
decision not to renew the licence in 2024. In the prior year, following the relinquishment of Licences P2435 and P2537, a write
down on relinquished intangible assets of £56,545 and £291,065 respectively being their carrying values were recognised in
2022.
The carrying amount of exploration and evaluation assets at the end of the period is shown in note 12.
Estimates
Determination of share-based payment costs (note 17)
The determination of these costs is based on financial models. The inputs to these models are based on the Directors’
judgements and estimates and are not capable of being determined with precision. Estimates were required including the
expected life of the option and volatility. In addition, for options issued in 2021 management were required to assess the extent
to which the minimum share price vesting criteria would be met and the most likely period over which those criteria would
be met.
Management concluded that the vesting criteria would be met, and the most likely outcome for the share options issued during
2021 was that the share price vesting criteria would be met within three years for 2,025,000 share options issued during the
year as detailed in note 17. In reaching this conclusion management considered factors including the historical share price
performance, their assessment of possible developments with respect to licences, in particular Licence P2437 and Licence
P2252 following the farm-outs to Shell.
Deltic Energy Plc Annual Report & Accounts 2023
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Notes to the Financial Statements
for the year ended 31 December 2023
2. Segmental Reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision
maker. The chief operating decision maker, who is responsible for allocating resources, assessing the performance of the
operating segment and making strategic decision, has been identified as the Board of Directors.
The Board of Directors consider that the Company has only one operating segment at corporate level, therefore no additional
segmental information is presented.
3. Employees
2023 2022
£ £
Wages and salaries 1,369,296 1,573,414
Short-term non-monetary benefits 33,895 30,993
Defined contribution pension costs 98,112 89,471
Social security costs 176,303 218,153
Share-based payment expense 512,321 384,502
2,189,927 2,296,533
2023 2022
The average monthly number of employees during the year was as follows:
Directors 5 5
Staff 4 4
9 9
Key management personnel remuneration
Key management personnel are those persons having authority and responsibility for planning, directing and controlling the
activities of the Company.
2023 2022
£ £
Salaries and bonuses 1,045,161 1,214,318
Short-term non-monetary benefits 26,958 22,216
Defined contribution pension costs 75,987 68,395
Social security costs 140,420 170,391
Share-based payment expense 390,876 308,021
1,679,402 1,783,341
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Directors’ remuneration is disclosed in the Directors’ Report on page 25, including the remuneration of the highest-paid
director.
Details regarding share options are set out in note 17 to the financial statements.
4. Finance Income
2023 2022
£ £
Bank interest 388,403 129,301
5. Finance Costs
2023 2022
£ £
Effective interest expense on lease liabilities (see note 20) 16,788 25,745
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Notes to the Financial Statements
for the year ended 31 December 2023
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6. Loss before Tax
2023 2022
£ £
The loss before tax is stated after charging/(crediting):
Write down on relinquished intangible assets (see note 12) 21,127 347,610
Impairment of intangible assets (see note 12) 163,115 -
Depreciation – owned assets 34,168 33,768
Depreciation – right of use leased assets (office lease) 80,931 80,930
7. Auditors’ Remuneration
2023 2022
£ £
Fees payable to the Company’s auditors for the audit of the Company’s financial statements 40,000 37,500
Fees payable to the Company’s auditors for non-audit related services 2,100 -
Fees payable to the Company’s auditors for other audit-related services - -
8. Income Tax
Analysis of income tax expense
2023 2022
£ £
Current tax 89,326 -
Current tax – prior year 23,504 -
Income tax expense 112,830 -
Factors affecting the income tax expense
The tax assessed for the year is different to the standard rate of corporation tax in the UK as explained below:
2023 2022
£ £
Loss on ordinary activities before taxation (2,848,523) (2,989,404)
Loss on ordinary activities multiplied by the standard rate of corporation tax in the UK
(19%/25%) (2022: 19%) (669,973) (567,987)
Effects of:
Current tax – prior year 23,504 -
Capital allowances in excess of depreciation - 4,706
Expenses not deductible for tax purposes 759,299 1,451
Adjustment in relation to share based payment - 58,524
Unrelieved losses carried forward - 503,306
Income tax expense 112,830 -
As at 31 December 2023, the Company has pre-trading expenditure of £23,270,116 (2022: £18,274,880).
9. Loss per Share
Basic loss per share is calculated by dividing the loss attributable to ordinary shareholders by the weighted average number of
ordinary shares outstanding during the year.
Due to the losses incurred during the year, a diluted loss per share has not been calculated as this would serve to reduce the
basic loss per share. There were 10,067,023 (2022: 8,142,023*) share options outstanding at the end of the year that could
potentially dilute basic earnings per share in the future.
Basic and diluted loss per share
2023 2022
Loss per share from continuing operations (3.18)p (3.94)p*
Deltic Energy Plc Annual Report & Accounts 2023
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Notes to the Financial Statements
for the year ended 31 December 2023
9. Loss per Share (continued)
The loss and weighted average number of ordinary shares used in the calculation of loss per share are as follows:
2023 2022
£ £
Loss used in the calculation of total basic loss per share (2,961,353) (2,989,404)
Number of shares 2023 2022
Number Number
Weighted average number of ordinary shares for the purposes of basic loss per share 93,096,600 75,919,756*
* Following the Share Consolidation on 25 May 2023, number of shares and share options and loss per share amounts have been retroactively adjusted for all periods
presented to illustrate the effect of the 20 for 1 Share Consolidation.
10. Investments in Subsidiary
Shares in Group
undertakings
£
Cost
Brought forward -
Additions 1
At end of year 1
The Company has one directly held subsidiary that was incorporated during the year:
Registered Office Class of shares Holding
Deltic Energy One Limited 1st Floor 150 Waterloo Road, London, SE1 8SB Ordinary 100%
This subsidiary has been dormant from the date of incorporation. As it is not material for the purpose of giving a true and fair
view, the Company has not consolidated its subsidiary, taking advantage of the exemption available under the Companies Act
2006 section 405.
11. Joint Operations
The Company has entered into the following unincorporated Joint Operations, which are included within the Company’s
financial statements:
Name of Project Principal Activities Company Interest
P2252 Pensacola Oil and gas exploration 30%
P2437 Selene Oil and gas exploration 50%*
P2428 Cupertino/Richmond Oil and gas exploration 40%**
P2567 Cadence Oil and gas exploration 40%
P2258 Pensacola North Oil and gas exploration 30%
P2560/P2561/P2562 Breagh Area Oil and gas exploration 30%
* As disclosed in note 26, on 2 April 2024, Deltic farmed -out a 25% interest in Licence P2437, containing the Selene licence, to Dana Petroleum (E&P) Limited
** As disclosed in note 26, on 31 March 2024, the Company relinquished Licence P2428 (Cupertino)
On 30 November 2023, P2567 Cadence and P2560/P2561/P2562 Breagh Area were relinquished.
At the reporting date there were no contingent liabilities or contingent assets in respect of any of the Joint Operations other
than those disclosed in these financial statements in note 21.
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Notes to the Financial Statements
for the year ended 31 December 2023
12. Intangible Assets
Exploration &
evaluation Software
assets licences Total
£ £ £
Cost
At 1 January 2022 2,203,118 39,257 2,242,375
Additions 7,913,969 - 7,913,969
Write down on relinquished assets (347,610) - (347,610)
At 31 December 2022 9,769,477 39,257 9,808,734
Additions 7,877,990 - 7,877,990
Write down on relinquished assets (21,127) - (21,127)
At 31 December 2023 17,626,340 39,257 17,665,597
Amortisation and impairment
At 1 January 2022 - 39,257 39,257
Charge for the year - - -
At 31 December 2022 - 39,257 39,257
Impairment charge 163,115 - 163,115
At 31 December 2023 163,115 39,257 202,372
Net Book Value
At 31 December 2023 17,463,225 - 17,463,225
At 31 December 2022 9,769,477 - 9,769,477
At 1 January 2022 2,203,118 - 2,203,118
The net book value of exploration and evaluation assets at 31 December 2023 and 2022 relates solely to the Company’s North
Sea Licences.
Additions of £7,877,990 (2022: £7,913,969) differ to the cash flows in the Statement of Cash Flows owing to a decrease in trade
and other payables of £3,388,882 (2022: £3,052,066 increase) and a decrease in provisions of £1,281,000 (2022: £1,281,000
increase) relating to the plug and abandonment of the Pensacola exploration well that was completed in February 2023.
A charge of £21,127 was recognised during the year (2022: £nil) resulting from the write down on relinquished intangible assets
following the decision to relinquish P2567 (Cadence).
An impairment charge of £163,115 was recognised during the year (2022: £nil) resulting from the impairment of P2428
(Cupertino) following likely decision not to renew the licence in 2024.
No impairment was recognised for the relinquishment of P2560, P2561 and P2562.
In the prior year, £347,610 (2023: nil) impairment was recognised resulting from the write down on relinquished intangible
assets following the decision to relinquish Licence P2435 (Blackadder) and Licence P2537 (Dewar).
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Notes to the Financial Statements
for the year ended 31 December 2023
13. Property, Plant and Equipment
Leasehold Office Fixtures Computer
improvements lease and fittings equipment Total
£ £ £ £ £
Cost
At 1 January 2022
Additions
At 31 December 2022
Additions
Disposals
At 31 December 2023
Depreciation
At 1 January 2022
Charge for year
At 31 December 2022
Charge for year
Disposals
At 31 December 2023
Net Book Value
At 31 December 2023
At 31 December 2022
At 1 January 2022
87,769
3,931
91,700
-
-
91,700
25,927
18,901
44,828
19,314
-
64,142
27,558
46,872
61,842
404,650
-
404,650
-
-
404,650
134,883
80,930
215,813
80,931
-
296,744
107,906
188,837
269,767
45,800
-
45,800
-
(544)
45,256
9,758
6,870
16,628
6,870
(336)
23,162
35,239
5,072
40,311
7,680
(4,560)
43,431
17,650
7,997
25,647
7,984
(4,269)
29,362
573,458
9,003
582,461
7,680
(5,104)
585,037
188,218
114,698
302,916
115,099
(4,605)
413,410
22,094
29,172
36,042
14,069
14,664
17,589
171,627
279,545
385,240
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The office lease category reflects a right of use asset relating to the office premises occupied by the Company.
14. Trade and Other Receivables
2023 2022
£ £
Current:
Other receivables 15,433 92,652
Other tax receivables 14,297 14,221
Prepayments 82,868 74,229
112,598 181,102
Non-current:
Rental deposit 37,422 37,422
Total receivables 150,020 218,524
During the year, no impairments were recognised.
The Directors consider that the carrying amount of trade and other receivables approximates to their fair value.
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Notes to the Financial Statements
for the year ended 31 December 2023
15. Share Capital
Allotted, issued and fully paid
Year ended December 2023 Number £
At beginning of the year Ordinary shares of 0.5 pence each 1,861,931,992 9,309,660
Issue of shares -
Effect of share consolidation (1,768,835,392) -
At end of the year Ordinary shares of 10 pence each 93,096,600 9,309,660
Year ended December 2022 Number £
At beginning of the year Ordinary shares of 0.5 pence each 1,405,964,855 7,029,824
Issue of shares 455,967,137 2,279,836
At end of the year Ordinary shares of 0.5 pence each 1,861,931,992 9,309,660
On 25 May 2023, the Company undertook a Share Consolidation. The Share Consolidation consisted of a consolidation of the
existing ordinary shares of 0.5 pence each in the capital of the Company ("Existing Ordinary Shares"), such that every
20 Existing Ordinary Shares were consolidated into one new ordinary share of 10p each ("New Ordinary Shares"). Following
the Share Consolidation, the Company has a single class of ordinary shares of 10p each in issue, being the New Ordinary Shares.
On 30 September 2022, and prior to the share consolidation on 25 May 2023, the Company announced that it had raised
approximately £16 million, before expenses, through the aggregate placing and subscription and open offer of 455,967,137 new
Existing Ordinary Shares of 0.5 pence per share at 3.5 pence per share. The shares were allotted and admitted to trading on
AIM on 3 October 2022.
16. Reserves
Reserves Description and purpose
Share capital Nominal value of shares issued.
Share premium Amount subscribed for share capital in excess of nominal value.
Share-based payment reserve Fair value of share options issued.
Accumulated retained deficit Cumulative net losses recognised in the statement of comprehensive income.
Details of movements in each reserve are set out in the Statement of Changes in Equity on page 35.
17. Share-Based Payments
The Company share options are equity-share-based payments as defined in IFRS 2. This standard requires that a recognised
valuation methodology be employed to determine the fair value of share options granted. The total share-based payment
charge for the year has been derived through applying the Black Scholes model.
Share options
The Company’s Share Option Plan pursuant to which options over ordinary Shares may be granted to Directors and employees
of the Company, commenced on 4 May 2012. On 31 July 2014, an Enterprise Management Incentives Plan (EMI Plan) was
adopted and options held by employees under the Share Option Plan became governed by the EMI Plan at that date.
Any employed Director or employee of the Company is eligible to receive grants under the EMI Plan. Non-executive Directors
are not eligible to receive grants. Options are non-transferable except in the case of an option holder’s death, in which case the
outstanding options may be exercised by the personal representatives of the option holder.
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Notes to the Financial Statements
for the year ended 31 December 2023
17. Share-Based Payments (continued)
The maximum number of ordinary Shares in respect of which options can be granted under the EMI Plan is 20 per cent. of the
Company’s issued ordinary share capital, including all awards made over the 10 years preceding the date of the grant. This limit
also includes any rights granted under any other employee share incentive arrangements operated by the Company but
excludes rights that: (i) have lapsed, been forfeited or released; (ii) will be met by the transfer of shares already in issue; or
(iii) are granted to replace an award over shares in a Company acquired by the Company.
The Board of Directors has absolute discretion to grant options, subject to any time vesting or performance conditions that it
outlines. The grant of options will be evidenced by an option agreement.
2,025,000 options were granted during the year to 31 December 2023 under the scheme (2022: 1,699,840 restated for the
20:1 share consolidation) and 100,000 options expired (2022: nil).
No share options were exercised during the current or prior year.
The Company recognised a total share-based payment expense of £512,321 for the year ended 31 December 2023 (2022:
£384,502) in respect of share options.
The inputs to the Black-Scholes model for options issued in the current and prior year were as follows:
Black Scholes Model 12 July 2022* 24 August 2023
Share Price 51.00p 28.25p
Exercise price 51.00p 28.25p
Expected Volatility 57.98% 87.09%
Risk Free Rate of Interest 1.7521% 4.4794%
Expected Dividend Yield 0.00% 0.00%
Expected Life 5.5-6.5 years 5.5-6.5 years
Number of options issued 1,699,840 2,025,000
Under the terms of the options granted during the year, 674,999 options will vest one year after the grant date. A further
674,999 options will vest 2 years after the grant date. The remaining 675,002 options will vest 3 years after the grant date.
Under the terms of the options granted during the prior year, 566,620* options will vest one year after the grant date. A further
566,620* options will vest 2 years after the grant date. The remaining 566,600* options will vest 3 years after the grant date.
The fair value includes the effect of this vesting condition. Management determined that the above options would be most
likely to vest at the earliest possible dates, being one to three years for the options granted during 2023 and one to three years
for the options granted in the prior year. The fair value of the options is therefore being amortised over those time periods.
Expected volatility was determined based on the historic volatility of the Company.
Details of the number of share options and the weighted average exercise price (WAEP) outstanding during the year are as
follows:
Number of WAEP
Year ended December 2023 Options* (pence)
Outstanding at the beginning of the year* 8,141,560 44.80
Issued 2,025,000 28.25
Expired* (100,000) 1.60
Outstanding at the end of the year 10,066,560 41.90
Number exercisable at 31 December 2023 2,942,500 38.63
* Following the Share Consolidation on 25 May 2023, the number and price of share options have been retroactively adjusted for all periods presented to illustrate the
effect of the 20 for 1 Share Consolidation.
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Notes to the Financial Statements
for the year ended 31 December 2023
17. Share-Based Payments (continued)
Number of WAEP
Year ended December 2022 Options* (pence)*
Outstanding at the beginning of the year 6,441,560 43.20
Issued 1,700,000 51.00
Outstanding at the end of the year 8,141,560 44.80
Number exercisable at 31 December 2022 2,267,076 45.20
The weighted average remaining contractual life of options outstanding as at 31 December 2023 was 6.4 years (2022:
6.8 years). The range of exercise prices relating to options outstanding at 31 December 2023 was 28.3p to 116.4p (2022:
26.6p* to 160.0p*).
* Following the Share Consolidation on 25 May 2023, the number and price of share options have been retroactively adjusted for all periods presented to illustrate the
effect of the 20 for 1 Share Consolidation.
18. Capital Management
The Company’s objectives when managing capital are to safeguard the Company’s ability to continue as a going concern, to
provide returns for shareholders and to maintain an optimal capital structure to manage the cost of capital effectively.
The Company defines capital as being share capital plus reserves. The Board of Directors monitor the level of capital as
compared to the Company’s commitments and, where necessary, adjusts the level of capital as is determined to be necessary
by issuing new shares.
The Company was financed by equity in the year ended 31 December 2023 following equity fundraising completed in October
2022. Having undertaken careful assessment, the Directors are of the view the Company will need to access additional capital
during 2024 in order to fund on-going operations. It is anticipated these funds will primarily be sourced through farm downs,
asset disposal, issuing new equity or a combination of these actions. The financial statements for the year to 31 December 2023
have been prepared assuming the Company will continue as a going concern. In support of this, the directors believe the liquid
nature of the UK asset market combined with historical shareholder support, means it is likely that adequate funds can be
accessed when required. However, the ability to access capital is not guaranteed at the date of signing these financial
statements. As a consequence, this funding requirement represents a material uncertainty that may cast significant doubt on
the Company’s ability to continue as a going concern. The Independent Auditor’s Report to the members of Deltic Energy Plc
for the year ended 31 December 2023 refers to this material uncertainty surrounding going concern.
The Company is subject to an externally imposed capital requirement of maintaining a minimum of £50,000 authorised share
capital, which it has met in both reporting periods presented.
19. Trade and Other Payables
2023 2022
£ £
Current:
Trade payables 132,062 53,749
Social security and other taxes 181,322 373,577
Joint operations payable 444,404 3,301,809
Other payables and accruals 644,587 1,259,172
1,402,375 4,988,307
The Directors consider that the carrying amounts of trade and other payables approximate to their fair value.
Joint operations payable represents £444,404 (2022: £3,301,809) relating to exploration assets.
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Notes to the Financial Statements
Notes to the Financial Statements
for the year ended 31 December 2023
for the year ended 31 December 2023
20. Lease Arrangements
Right of use assets
The Company uses leasing arrangements for its office for which a right of use asset is included in property, plant and equipment.
When a lease begins, a liability and right of use asset are recognised based on the present value of future lease payments.
The movements in the right of use asset are presented under the office lease category in note 13.
Lease liabilities
2023 2022
£ £
Amounts payable at 1 January 215,236 314,230
Effective interest expense 16,788 25,745
Lease payments (96,396) (124,739)
Amounts payable within one year at 31 December 124,282 90,132
Amounts payable after year at 31 December 11,346 125,104
21. Provisions
Asset retirement obligation
2023 2022
£ £
At 1 January 1,281,000 -
Utilised (1,281,000) -
Additions - 1,281,000
At 31 December - 1,281,000
An asset retirement obligation provision was recognised in the prior year in relation to the costs to be incurred in early 2023.
The asset retirement obligation was fulfilled and completed during 2023. Due to the short term nature of the expenditure, the
provision has not been discounted.
22. Financial Instruments
Principal financial instruments
The principal financial instruments used by the Company from which the financial risk arises are as follows:
2023 2022
£ £
Financial assets
Cash and cash equivalents – all amounts held in Sterling:
Cash at bank 5,580,259 20,409,692
5,580,259 20,409,692
Rental deposit 37,422 37,422
Other receivables 15,433 92,652
5,633,114 20,539,766
Financial liabilities
Trade payables 132,062 53,749
Other payables & accruals 1,088,991 4,560,981
Lease liabilities1 135,628 215,236
1,356,681 4,829,966
1 £124,282 of the lease liability is payable within one year and £11,346 is payable greater than one year.
General objectives and policies
The overall objective of the Board is to set policies that seek to reduce as far as practical without unduly affecting the
Company’s competitiveness and flexibility. Further details regarding these policies are:
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Notes to the Financial Statements
Notes to the Financial Statements
for the year ended 31 December 2023
for the year ended 31 December 2023
22. Financial Instruments (continued)
Policy on financial risk management
The Company’s principal financial instruments comprise cash and cash equivalents, other receivables, trade and other payables.
The Company’s accounting policies and methods adopted, including the criteria for recognition, the basis on which income and
expenses are recognised in respect of each class of financial asset, financial liability and equity instrument are set out in note 1 –
“Accounting Policies”.
The Company does not use financial instruments for speculative purposes. The carrying value of all financial assets and
liabilities approximates to their fair value.
Derivatives, financial instruments and risk management
The Company does not use derivative instruments or other financial instruments to manage its exposure to fluctuations in
foreign currency exchange rates, interest rates and commodity prices.
Foreign currency risk management
The Company has very limited transactional currency exposures as all projects currently undertaken are based in the UK.
Credit risk
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the
Company. The Company has adopted a policy of only dealing with creditworthy counterparties. The Company’s exposure and
the credit ratings of its counterparties are monitored by the Board of Directors to ensure that the aggregate value of
transactions is spread amongst approved counterparties.
The Company applies IFRS 9 to measure expected credit losses for receivables, these are regularly monitored and assessed.
Receivables are subject to an expected credit loss provision when it is probable that amounts outstanding are not recoverable
as set out in the accounting policy. The impact of expected credit losses was immaterial.
The Company’s principal financial assets are cash and cash equivalents and other receivables. Cash and cash equivalents
include amounts held on deposit with financial institutions, including deposits subject to notice periods of no more than
95 days.
The credit risk on liquid funds held in current accounts available on demand and notice account deposits is limited because the
Company’s counterparties are banks with high credit-ratings assigned by international credit-rating agencies.
No financial assets have indicators of impairment.
The Company’s maximum exposure to credit risk is limited to the carrying amount of financial assets recorded in the financial
statements.
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Borrowings and interest rate risk
The Company currently has no borrowings.
The Company’s principal financial assets are cash and cash equivalents and other receivables. Cash equivalents include
amounts held on deposit with financial institutions. The effect of variable interest rates is not significant.
Liquidity risk
During the year ended 31 December 2023, the Company was financed by cash raised through equity funding in October 2022.
Funds raised surplus to immediate requirements are held as short-term cash deposits in Sterling.
The maturities of the cash deposits are selected to maximise the investment return whilst ensuring that funds will be available
as required to maintain the Company’s operations.
In managing liquidity risk, the main objective of the Company is to ensure that it has the ability to pay all of its liabilities as they
fall due. The Company monitors its levels of working capital to ensure that it can meet its liabilities as they fall due.
The table below shows the undiscounted cash flows on the Company’s financial liabilities as at 31 December 2023 and
31 December 2022 on the basis of their earliest possible contractual maturity.
Deltic Energy Plc Annual Report & Accounts 2023
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Notes to the Financial Statements
Notes to the Financial Statements
for the year ended 31 December 2023
for the year ended 31 December 2023
22. Financial Instruments (continued)
Within 2 Within 2 – 6 Within 6 – 12 Within 1 – 2 Within 2 – 5
Total months months months years years
£ £ £ £ £ £
At 31 December 2023
Trade payables 132,062 132,062 - - - -
Other payables & accruals 1,088,991 - 1,088,991 - - -
Lease liabilities 133,463 - 61,353 60,490 11,620 -
1,354,516 132,062 1,150,344 60,490 11,620 -
At 31 December 2022
Trade payables 53,749 53,749 - - - -
Other payables & accruals 4,560,981 1,166,404 3,394,577 - - -
Lease liabilities 230,000 - 51,128 45,409 121,843 11,620
4,844,730 1,220,153 3,445,705 45,409 121,843 11,620
23. Capital Commitments
At the reporting date there were capital commitments of £2.2m relating to the Pensacola exploration site survey planned for
2024, and Selene exploration drilling long leads commitments ahead of 2024 drilling operations. In the prior year, there were
£10.7m of capital commitments relating to the Pensacola exploration drilling costs.
24. Related Party Disclosures
Parties are considered to be related if one party is under common control or can exercise significant influence over the other
party in making financial and operational decisions. In considering each possible related party relationship, attention is directed
to the substance of the relationship, not merely the legal form.
Key management personnel are considered to be the Directors of the Company and Persons Discharging Managerial
Responsibility. Disclosure regarding remuneration of key management is provided in note 3.
Prior to the share consolidation on 25 May 2023, Peter Nicol, a Non-Executive Director of the Company, acquired 1,000,000
ordinary shares of 0.5 pence per share on 15 February 2023 via a market purchase at a price of 2.60 pence per share, which
represented an amount of £26,000.00. Additional, Peter Nicol acquired a further 1,000,000 ordinary shares of 0.5 pence per
share on 4 May 2023 via a market purchase at a price of 1.79 pence per share, which represented an amount of £17,900.00.
In the prior year and prior to the share consolidation on 25 May 2023, Graham Swindells, the Company’s Chief Executive Officer,
subscribed for 714,285 new ordinary shares in a subscription of new ordinary shares on 3 October 2022 (the “Subscription”),
which represented an amount of £24,999.98 at the Subscription’s issue price of 3.50 pence per new ordinary share (the “Issue
Price”).
In the prior year and prior to the share consolidation on 25 May 2023, Andrew Nunn, the Company’s Chief Operating Officer,
subscribed for 428,571 new ordinary shares in the Subscription on 3 October 2022, which represented an amount of £14,999.99
at the Issue Price.
In the prior year and prior to the share consolidation on 25 May 2023, Sarah McLeod, the Company’s Chief Financial Officer,
subscribed for 285,714 new ordinary shares in the Subscription on 3 October 2022, which represented an amount of £9,999.99
at the Issue Price.
In the prior year and prior to the share consolidation on 25 May 2023, Peter Nicol, a Non-Executive Director of the Company,
subscribed for 857,142 new ordinary shares in the Subscription on 3 October 2022, which represented an amount of £29,999.98
at the Issue Price. Additionally, Peter Nicol acquired a further 142,858 ordinary shares of 0.5 pence per share on 25 November
2022 via a market purchase at a price of 3.15 pence per share, which represented an amount of £4,500.03.
In the prior year and prior to the share consolidation on 25 May 2023, IPGL Limited, a substantial shareholder of the Company,
as defined in the AIM Rules for Companies, subscribed for 109,857,142 new ordinary shares in a placing of new ordinary shares
(“Placing”) on 3 October 2022, which represented an amount of £3,844,999.97 at the Issue Price of 3.50 pence per new
ordinary share.
In the prior year and prior to the share consolidation on 25 May 2023, Inthallo Limited, a substantial shareholder of the
Company, as defined in the AIM Rules for Companies, subscribed for 42,857,142 new ordinary shares in the Placing on
3 October 2022, which represented an amount of £1,499,999.97 at the Issue Price of 3.50 pence per new ordinary share.
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Deltic Energy Plc Annual Report & Accounts 2023
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Notes to the Financial Statements
Notes to the Financial Statements
for the year ended 31 December 2023
for the year ended 31 December 2023
25. Control
The Company is not controlled by any other party.
26. Subsequent Events
On 31 January 2024, the Company was provisionally awarded two licences over three part blocks covering approximately
226 km2 by the North Sea Transition Authority ("NSTA") in Tranche 2 of the UK's 33rd Offshore Licensing Round
("33rd Round"). The provisional award of Block 22/24f (part) and 22/25e (part) contains the Dewar Prospect, which has
previously been licenced and matured by Deltic. The work programme associated with the initial phase of this licence is
restricted to upgrading the seismic data sets held by the Company at relatively low cost and is focussed on providing greater
confidence around prospect volumetrics and risk. Block 29/4b represents the residual part of a larger application which
included the contiguous Block 29/3b. Block 29/3b, which was provisionally awarded to Shell U.K. Ltd in Tranche 1 of the
33rd Round, was considered the most prospective part of the application area and the Company concluded there was not
sufficient technical justification to accept Block 29/4b in isolation, and accordingly the award was declined.
On 5 February 2024, the Operator of Licences P2437 and P2252, confirmed that a rig contract has been signed with Valaris for
the drilling of both the Selene exploration well and the Pensacola appraisal well. The two wells will be drilled using the Valaris
123, a heavy duty jack-up rig, with Selene and Pensacola being drilled as a two well sequence, with the contract and
mobilisation commencing in the June-July 2024 period.
On 26 February 2024, the Company was notified that Peter Cowley, A Non-Executive Director of the Company, sold and
purchased 50,924 ordinary shares of 10 p each (“Ordinary Shares”) in the Company as part of a Bed and ISA arrangement.
There has been no change to the number of Ordinary Shares beneficially held by Peter Cowley as a result of these transactions.
On 7 February 2024, the Company announced that it entered into an agreement in respect of the farm-out of a 25% interest in
Licence P2437, containing the Selene Prospect, to Dana Petroleum (E&P) Limited (“Dana”). On 2 April 2024, the required
regulatory and partner consent in respect of the farm-out of 25% in License P2437 to Dana was completed. This transaction, in
combination with the existing Shell UK Ltd ("Shell") carry, results in Deltic retaining a 25% non-operated interest in Licence
P2437 and having no exposure to 2024 drilling and testing costs up to a cost cap of USD$49M (gross), which is in excess of
current success case well cost estimates provided by the Operator.
On 31 March 2024, the Company relinquished Licence P2428 (Cupertino).
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Deltic Energy Plc Annual Report & Accounts 2023
55
Contents
Company Information
Strategic Report
1 Chairman’s Statement
2 Chief Executive’s Statement
5 Operational Review
12 Environment Social and Governance
14 Financial Review
16 Business Risks
17 Section 172 Statement
18 Investing Policy
Corporate Governance
19 Introduction
19 Corporate Governance Statement
22 Audit Committee Report
23 Remuneration Committee Report
24 Board of Directors and Senior Management
25 Report of the Directors
27 Statement of Directors’ Responsibilities
28 Independent Auditor’s Report
Financial Statements
33 Income Statement
33 Statement of Comprehensive Income
34 Balance Sheet
35 Statement of Changes in Equity
36 Statement of Cash Flows
37 Notes to the Financial Statements
Directors
M S Lappin (Chairman)
G C Swindells (Chief Executive Officer)
A J Nunn (Chief Operating Officer)
P N Cowley (Non-Executive)
P W Nicol (Non-Executive)
Joint Secretary
S M McLeod
Gravitas Company Secretarial Services Limited
Registered Office
1st Floor
150 Waterloo Road
London
SE1 8SB
Registered Number
07958581 (England and Wales)
Nominated Adviser
Allenby Capital Limited
5 St Helen's Place
London
EC3A 6AB
Joint Corporate Broker
Stifel Nicolaus Europe Limited
150 Cheapside
London
EC2V 6ET
Canaccord Genuity Limited
88 Wood Street
London
EC2V 7QR
Auditors
PKF Littlejohn LLP
15 Westferry Circus
Canary Wharf
London
W1U 7EU
Solicitors
K&L Gates LLP
One New Change
London
EC4M 9AF
Financial Public Relations
Vigo Consulting
Sackville House
40 Piccadilly
London
W1J OHR
Registrar
Share Registrars Limited
3 The Millennium Centre
Crosby Way
Farnham
Surrey
GU9 7XX
Deltic Energy Plc
1st Floor
150 Waterloo Road
London
SE1 8SB
United Kingdom
+44 (0)20 7887 2630
www.delticenergy.com
Deltic Energy Plc
Annual Report & Accounts 2023