Fossil Energy – Farm-out Deal
Celtic Energy announced an agreement regarding licence P2437 and the Selene Prospect on Wednesday, as it entered into a farm-out deal with Dana Petroleum, transferring a 25% interest in the licence while retaining a 25% non-operated equity interest.
The AIM-traded firm said the transaction, combined with an existing carry from Shell UK, ensured it had no exposure to drilling and testing costs for 2024, up to a certain cap.
Under the agreement, Deltic would receive $0.5m in cash from Dana on completion, covering back costs incurred by Deltic.
Additionally, Dana would carry Deltic for its residual cost exposure to the Selene well, with a value of $5m in a dry hole scenario and $6m in a success case.
Dana would also cover its 25% share of costs from 1 January 2024.
With the Dana and Shell carries, Deltic said its cost exposure to the Selene exploration well was eliminated up to total amounts of $40m for a dry hole and $49m for a success case.
Recent estimates from Shell indicated a total success case cost of $47m for the Selene well.
The rig contract for the Valaris 123, announced on 5 February, would ensure that the Selene well remained on track for drilling in the third quarter.