AS Deltic Energy changes its strategic focus to concentrate on its core UK assets – an announcement that comes very quickly after the North Sea oil operator parted company with its chief executive Graham Swindells last week – it is worth taking a deeper dive into oil and gas sector.
In an operational and strategic update, the company makes clear that “the UK is not the ideal place in which to invest in new oil and gas exploration or appraisal opportunities”.
New chief executive Andrew Nunn, who replaced Mr Swindells last week after serving as Deltic’s chief operating officer since 2015, said: “Our immediate focus is the ongoing Selene exploration well, where initial drilling indications are encouraging.”
Deltic Energy chief quits as windfall tax hits North Sea
The board, he noted, “has considered the best way to deploy the company’s experience and expertise to create value for its shareholders”, adding: “As always, the balance of geological, operational, and political risk must be considered, and we are actively assessing a number of attractive opportunities in geographies where more supportive policies towards oil and gas development exist.”
Well-documented political and fiscal headwinds have posed challenges for the UK oil and gas industry in recent years, but Deltic’s focus on core UK assets, principally the Selene prospect, while eliminating or deferring expenditure on non-core assets, is a new strategy that it says will cut costs by 40% amid continue concern over the Labour governments windfall tax plans.
While the exploration pioneer alludes to high-impact exploration always being “an integral part of Deltic’s DNA”, it notes it is “actively assessing a number of attractive opportunities in geographies where more supportive policies towards oil and gas development exist”, and must consider “the balance of geological, operational, and political risk”.
That comment sends a clear message to the UK Government which, under the Conservatives, imposed a windfall tax in 2022 after companies benefited from a significant boost to their profitability from the surge in oil and gas prices triggered by Russia’s war on Ukraine.
Deltic Energy races to secure funding for North Sea well
It is also interesting to note comments by Malcolm Webb, who was chief executive of the trade body UK Oil & Gas – which has since been rebranded as Offshore Energies UK – between 2004 and 2015.
Writing in yesterday's Press & Journal newspaper, Mr Webb accuses UK politicians of demonstrating “a staggering level of ignorance and incompetence” towards the industry, stating that numerous chancellors have “carelessly treated the industry as a cash cow” which they have “aggressively milked without regard for its role as a vital provider of jobs, wealth and energy security for the UK”.
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