REG - Challenger Energy - AREA OFF-3 Work Program Update

Challenger EnergyAnnouncement

04/11/2024 07:00

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RNS Number : 7503K  Challenger Energy Group PLC  04 November 2024

4 November 2024

Challenger Energy Group PLC

("Challenger Energy" or the "Company")

 

AREA OFF-3 Work Program Update

 

Challenger Energy (AIM: CEG), the Atlantic margin focused energy company, is
pleased to provide the following update for its AREA OFF-3 block, offshore
Uruguay.

 

Highlights

 

·    The Company has entered into a licence agreement to secure access to
necessary historic 3D seismic data over AREA OFF-3, for the purposes of
reprocessing.

 

·    The program of reprocessing work is underway, and the Company expects
preliminary outputs prior to year end, with the work expected to be fully
completed in Q2, 2025. 3D seismic reprocessing work will be supplemented with
a range of other seismic workflows including Amplitude Variation with Offset,
which was utilised successfully on AREA OFF-1.

 

·    The objective of this work is to mature the available data set for
AREA OFF-3 in an accelerated time frame, sufficient to enable a robust
prospect inventory to be mapped and for potential drill locations to be
identified, in support of a formal farmout process which the Company is
targeting to commence in mid-2025.

 

·    The Company and the vendor of the seismic data have agreed an uplift
licencing model, whereby agreed licence fees will become payable only if/when
a farmout for AREA OFF-3 is concluded. The total of other costs associated
with the AREA OFF-3 work program in 2024 and 2025 (reprocessing,
interpretation, mapping and complementary technical work) is expected to be in
the range of US$1 million -$1.5 million.

 

Eytan Uliel, Chief Executive Officer of Challenger Energy, said:

"Over the last few months, while focussing on finalizing the farmout for our
AREA OFF-1 licence in Uruguay, we also have been preparing the initial AREA
OFF-3 work program, centred on reprocessing of existing 3D seismic in support
of defining the block's prospect and lead inventory and possible well
locations, which we believe will be the key inputs into the farmout process we
are aiming to begin in mid-2025. Following the close of the AREA OFF-1
farmout, we have now moved to immediately accelerate work on AREA OFF-3, given
our view that the block has significant exploration upside and scope and, like
AREA OFF-1, presents an exciting near-term value-creation opportunity. We will
keep shareholders informed of our progress".

 

ABOUT AREA OFF-3

·    As part of the Open Uruguay Round, Third Instance of 2023, CEG
submitted a bid for the AREA OFF-3 block, offshore Uruguay. On 2(nd) June
2023, Administración Nacional de Combustibles Alcohol y Pórtland ("ANCAP"),
the Uruguayan national regulatory agency, advised that CEG 's offer for AREA
OFF-3 had been accepted. Following final regulatory approvals, the AREA OFF-3
licence was signed in Montevideo on 7(th) March 2024, and thus the licence's
first four-year exploration period commenced on 7(th) June 2024.

 

·    The AREA OFF-3 licence covers 13,252 km(2) and is situated in
relatively shallow water depths, from 20 to 1,000 meters, approximately 150
kms off the Uruguayan coast. To the west the block is adjacent to the AREA
OFF-2 block held by Shell, with the Amalia prospect straddling both the AREA
OFF-2 and AREA OFF-3 blocks. To the east the block is adjacent to the
Brazilian maritime border, an area that was subject to considerable licencing
in December 2023, with thirteen nearby Brazilian blocks licenced variously to
Chevron, Shell, CNOOC and Petrobras. To the south, the block is adjacent to
two deepwater Uruguayan blocks, AREA OFF-6, held by APA Corporation (and on
which block APA has a commitment to drill an initial exploration well in that
block's initial four-year exploration period), and AREA OFF-7, which is held
by Shell.

 

·    There has been considerable prior seismic activity on the AREA OFF-3
block, comprising ~4,000 kms of legacy 2D (various vintages) and ~7,000 km(2)
of legacy 3D (2012 & 2016). There are no wells on the block. Based on this
prior data, AREA OFF-3 is believed to be prospective, with two material-sized
prospects having previously been identified and mapped by prior operators in
water depths of approximately 250 meters, being:

 

-  The legacy Amalia prospect, with P10/50/90 resource estimates of 2,189
/ 980 / 392 (EUR mmboe, gross; source: ANCAP). Prior mapping indicate the
Amalia prospect straddles AREA OFF-2 (Shell) and AREA OFF-3 (CEG), and it is
expected that latest 3D reprocessing technology and amplitude analysis will
assist to delineate the extent of the play and coverage onto AREA OFF-3.

 

-     The Morpheus prospect, with P10/50/90 resource estimate of 8.96 /
2.69 / 0.84 (EUR TCF, gross; source: ANCAP). The Morpheus prospect is entirely
contained with AREA OFF-3.

 

As noted, in December 2023, Chevron, Petrobras, Shell & CNOOC acquired 13
blocks in the Brazil Bid Round, a development of high significance for AREA
OFF-3 in that the Pelotas Basin play fairway extension likely continues from
the shelf margin and could extend from AREA OFF-3 into Brazil; i.e., the
recent licencing activity in Brazil, along with more recent data available to
the Company, raises the potential for new play types to be identified on AREA
OFF-3 (in addition to the already identified prospects referred to above)
given the potential duality in petroleum systems identified in both the Upper
and Lower Cretaceous. (This is similar to what occurred in AREA OFF-1, where
new data and reprocessing lead to the identification of a new play type and
material prospects - Teru Teru and Anapero, in addition to previously mapped
legacy prospect - Lenteja).

 

·    The Company's minimum work obligation during AREA OFF-3's first
four-year exploration period is modest, consisting of licencing, reprocessing
and reinterpretation of legacy seismic data (primarily 3D), and undertaking
two geotechnical studies. The Company has no obligation to acquire new seismic
data or to drill an exploratory well during the block's initial four-year
exploration period. The work currently underway will satisfy all relevant work
program obligations for the first exploration period of the AREA OFF-3 licence
(with the exception of the requisite geological studies, which the Company
expects can be completed in the period immediately following completion of the
3D seismic reprocessing).

 

·    CEG's technical focus will be on the re-evaluation of the existing
seismic data on the block, given the renewed interest in the types of plays
present in Uruguay triggered by the recent conjugate margin discoveries
offshore Southwest Africa. In particular, the data and enhanced technical
understanding provided from recent activities in Namibia provides greater
confidence that the regional petroleum system charging Venus, Graff and Mopane
(offshore Namibia) is believed to be present offshore Uruguay. As a result,
with the emergence of Lower Cretaceous Aptian petroleum system offshore
Namibia, in this area of the Pelotas basin a potentially shallower Upper
Cretaceous source interval may previously have been overlooked or not
considered viable, are now potential exploration targets.

 

·    Moreover, AREA OFF-3 has the advantage of the majority of the block
being covered by 3D (2012 vintage, proprietary acquisition by BP and PGS) that
will accelerate a drilling decision sooner without the need to acquire further
seismic data, in terms of identifying potential new prospects / plays. In
addition, with the Amalia prospect straddling the border with AREA OFF-2, it
potentially facilitates a joint exploration assessment with Shell (the AREA
OFF-2 licence holder).

 

Competent Person Statement:

 

Technical work in relation to the AREA OFF-3 block offshore Uruguay referred
to in this announcement has been and is being undertaken by various
independent third-party specialist advisors, overseen by Mr. Randolph
Hiscock, the Company's Uruguay General Manager. In accordance with the AIM
Note for Mining and Oil & Gas Companies, CEG discloses
that Mr. Randolph Hiscock is the qualified person who has reviewed the
technical information contained in this announcement. He has a Masters in
Science (Geology) and is a member of the AAPG & PESGB, and has over 35
years' experience in the oil and gas industry specializing in the Atlantic
offshore margins.  Randolph Hiscock consents to the inclusion of the
information in the form and context in which it appears.

 

For further information, please contact:

 

 Challenger Energy Group PLC                         Tel: +44 (0) 1624 647 882

 Eytan Uliel, Chief Executive Officer
 Zeus - Nomad and Joint Broker                       Tel: +44 (0) 20 3829 5000

 Simon Johnson / Antonio Bossi / Darshan Patel
 Stifel - Joint Broker                               Tel: +44 (0) 20 7710 7600

 Ashton Clanfield / Callum Stewart / Simon Mensley
 Gneiss Energy Limited - Financial Adviser           Tel: +44 (0) 20 3983 9263

 Jon Fitzpatrick / Paul Weidman / Doug Rycroft
 CAMARCO - Financial PR                                Tel: +44 (0) 20 3757 4980

 Billy Clegg / Georgia Edmonds / Tomisin Ibikunle
 Jonathan Paterson - Investor Relations                Tel: +1 475 477 9401

 jonathan.paterson@harbor-access.com

 

Notes to Editors

 

Challenger Energy is an Atlantic-margin focused energy company, with
production, development, appraisal, and exploration assets in the region.
Challenger Energy's primary assets are located in Uruguay, where the Company
holds two high impact offshore exploration licences, totalling 19,000km(2)
(gross) and is partnered with Chevron on the AREA-OFF 1 block Challenger
Energy is quoted on the AIM market of the London Stock Exchange.

 

https://www.cegplc.com (https://www.cegplc.com/)

 

ENDS

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