REG - Challenger Energy - FARM-OUT OF 60% OF AREA OFF-1 BLOCK TO CHEVRON

Challenger EnergyAnnouncement

06/03/2024 07:00

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RNS Number : 7842F  Challenger Energy Group PLC  06 March 2024

6 March
2024

Challenger Energy Group PLC

("Challenger Energy", "CEG" or the "Company")

 

FARM-OUT OF 60% OF AREA OFF-1 BLOCK IN URUGUAY TO CHEVRON

Challenger Energy (AIM: CEG), the Caribbean and Americas focused energy
company, with production, development, appraisal, and exploration assets in
the region, is pleased to announce that it and its wholly-owned Uruguayan
subsidiary, CEG Uruguay SA ("CEG Uruguay") have entered into a farm-out
agreement with Chevron Uruguay Exploration Limited ("Chevron"), a wholly-owned
subsidiary of Chevron Corporation (NYSE: CVX), related to a 60% interest in
the AREA OFF-1 block, offshore Uruguay (the "Transaction").

The primary terms of the Transaction are:

·    Chevron will acquire a 60% participating interest in the AREA OFF-1
block, and will assume operatorship of the block.

·    CEG Uruguay will retain a 40% non-operating interest in the block.

·    Chevron will pay to CEG US$12.5 million cash on completion of the
Transaction, these funds will be used to support the further development of
the Company's business.

·    Chevron will carry 100% of CEG Uruguay's share of the costs
associated with a 3D seismic campaign on AREA OFF-1, up to a maximum of US$15
million net to CEG Uruguay.

·    Following the 3D seismic campaign, should Chevron decide to drill an
initial exploration well on the AREA-OFF 1 block, Chevron will carry 50% of
CEG Uruguay's share of costs associated with that well, up to a maximum of
US$20 million net to CEG Uruguay.

·    Completion and financial close of the Transaction will be subject to
the satisfaction of conditions precedent and customary third-party approvals
from the Uruguayan regulatory authorities, which are anticipated to take
several months to finalise - the parties have commenced engagement with the
regulators.

 

Eytan Uliel, Chief Executive Officer of Challenger said:

"We are absolutely delighted to announce the farm-out of our AREA OFF-1 block
in Uruguay to Chevron, a globally recognised industry leader. We firmly
believe that AREA OFF-1 holds enormous potential, and this farm-out is strong
validation of the high-quality technical work CEG has done to-date.  Our
stated strategy for AREA OFF-1 was to introduce a larger industry player as
operating partner, with a view to rapidly progressing the block via an
accelerated 3D seismic campaign followed by, we hope, exploration well
drilling. The farm-out achieves this aim, and we look forward to continuing on
our exciting journey in Uruguay, both on AREA OFF-1, now in partnership with
Chevron, and also on our still wholly owned AREA OFF-3 block. We are grateful
to ANCAP for the confidence shown in CEG when awarding these blocks, and we
thank our stakeholders for their continuing support."

 

Gneiss Energy Limited acted as financial advisor to CEG on the Transaction.

 

ABOUT CHEVRON CORPORATION

 

Chevron is one of the world's leading integrated energy companies and believes
that affordable, reliable and ever-cleaner energy is essential to enabling
human progress. Chevron produces crude oil and natural gas; manufactures
transportation fuels, lubricants, petrochemicals and additives; and develops
technologies that enhance its business and the industry. Chevron aims to grow
its oil and gas business, lower the carbon intensity of its operations and
grow lower carbon businesses in renewable fuels, carbon capture and offsets,
hydrogen and other emerging technologies. More information about Chevron is
available at www.chevron.com. (http://www.chevron.com/)

 

ABOUT AREA OFF-1

 

The AREA OFF-1 block is a large offshore block covering approximately 14,557
km(2), located approximately 100 kms offshore Uruguay in water depths ranging
from 80 meters to 1,000 meters. The Company was awarded the AREA OFF-1 licence
in June 2020 under the Open Uruguay Round process. Formal signing of the
licence took place on 25(th) May 2022, and the licence's initial four-year
exploration term commenced on 25(th) August 2022.

 

Recent conjugate margin discoveries offshore Southwest Africa have triggered
renewed interest in the types of plays present in Uruguay. In particular, the
data and enhanced technical understanding provided from recent discoveries
offshore Namibia (Venus - TotalEnergies, Graff and Jonker - both Shell)
provides greater confidence that the regional petroleum system charging those
discoveries is likely to be present offshore Uruguay. As a result, new
exploration plays, in addition to the Lower Cretaceous deepwater turbidites
discovered by Venus and others, are believed to be present and charged by the
same petroleum system and source rock.

 

Consequently, since the award of AREA OFF-1 to the Company, there has been
considerable licencing activity in Uruguay, with all other available offshore
exploration blocks now licenced to Shell, APA Corporation and YPF, with
significant work program commitments including 3D seismic acquisition and new
well drilling. To the south, AREA OFF-1 is adjacent to AREA OFF-4, a block
jointly held by APA Corporation and Shell (APA is the operator), and where two
key prospects of interest straddle both blocks. To the east, AREA OFF-1 is
adjacent to AREA OFF-2, which is licenced to Shell, and to the west AREA OFF-1
is adjacent to the Argentinian maritime boundary.

 

The Company's minimum work commitment in the initial four-year exploration
period of AREA OFF-1 required licencing 2,000 kms of legacy 2D seismic data
from ANCAP (the Uruguayan national oil company and energy regulatory body),
reprocessing of that 2D seismic data, and completion of a geological and
resource potential study. There is no requirement to acquire 3D seismic or
drill a well during the initial four-year exploration period.

 

As at 31 December 2023, the minimum work commitment for AREA OFF-1's initial
four-year exploration period had been fulfilled by the Company. In addition,
the Company also completed additional work on a discretionary basis, designed
to further enhance the technical understanding of the block. This additional
work included Amplitude Variation with Offset (AVO) attribute analysis of
select 2023 reprocessed 2D seismic lines, seabed geochemistry analysis, and
acquiring a satellite seeps and slicks imaging study.

 

The body of technical work undertaken by the Company led, through the course
of 2023, to the identification and delineation of three primary prospects on
AREA OFF-1, with total estimated recoverable resource (EUR) of ~ 2.0 billion
barrels of oil equivalent (BBOE) across three prospects (Pmean, unrisked), and
approximately 5.0 billion BBOE in an upside case (P10, unrisked). A table
summarising the estimated recoverable resource is set out below:

 

                  AREA OFF-1 EUR (mmboe), unrisked
 Prospect         P10        Pmean      P50        P90
 Teru Teru        1,647      740        547        158
 Anapero          1,627      670        445        88
 Lenteja          1,666      576        198        17
 Total            4,940      1,986      1,190      263

 

For the financial year ended 31 December 2023, the were no losses attributable
to the asset and capitalised costs in relation to the work carried out by the
Company amounted to approximately US$2.1 million.

 

The proposed farm-out of a 60% participating interest in the AREA OFF-1
licence to Chevron (pending regulatory approvals) aims to facilitate and fund
an accelerated 3D seismic acquisition (and associated interpretation work),
with the intention being that such 3D seismic acquisition will occur during
the initial four-year exploration period. Further announcements will be made
as appropriate.

 

The information contained within this announcement is deemed by the Company to
constitute inside information as stipulated under the Market Abuse Regulations
(EU) No. 596/2014 which forms part of domestic UK law pursuant to the European
Union (Withdrawal) Act 2018 ("UK MAR"). With the publication of this
announcement via a Regulatory Information Service, this inside information is
now considered to be in the public domain.

 

For further information, please contact:

 

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

 Eytan Uliel, Chief Executive Officer
 WH Ireland - Nomad and Joint Broker             Tel: +44 (0) 20 7220 1666

 Antonio Bossi / Darshan Patel / Isaac Hooper
 Zeus Capital - Joint Broker                     Tel: +44 (0) 20 3829 5000

 Simon Johnson
 Gneiss Energy Limited - Financial Adviser       Tel: +44 (0) 20 3983 9263

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

 Billy Clegg / Hugo Liddy / Sam Morris
 Chevron                                         Tel: +44 78 2725 3868

 Sally Jones

 

Notes to Editors

 

Challenger Energy is a Caribbean and Americas focused energy company, with oil
production, development, appraisal, and exploration assets in the region. The
Company's primary assets are located in Uruguay, where the Company holds high
impact offshore exploration licences, and in Trinidad and Tobago, where the
Company has a number of producing fields and earlier-stage exploration /
appraisal projects. 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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