REG - Challenger Energy - STRATEGIC INVESTMENT BY CHARLESTOWN ENERGY

Challenger EnergyAnnouncement

18/04/2024 07:00

For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20240418:nRSR1411La&default-theme=true

RNS Number : 1411L  Challenger Energy Group PLC  18 April 2024

18 April 2024

Challenger Energy Group PLC

 

("Challenger Energy" or the "Company")

 

STRATEGIC INVESTMENT BY CHARLESTOWN ENERGY

Challenger Energy (AIM: CEG), the Atlantic margin focused energy company, is
pleased to announce that it has entered into a legally binding term sheet for
an investment by Charlestown Energy Partners LLC (together with its affiliates
and assignees "Charlestown").

 

Highlights:

 

·    Charlestown will invest £1.5m in the Company, initially in the form
of a loan, which upon closing of the AREA OFF-1 farm-out to Chevron and
subject to prior completion of an agreed share consolidation shall convert at
a fixed price of 0.168 pence per share, being a c. 20% premium to the current
share price. This will result in Charlestown holding a c. 8.7% shareholding in
Challenger Energy, thus making Charlestown one of the Company's largest
shareholders

 

·    Charlestown is a New York-based specialist energy investor with a
successful track record of making early cornerstone investments in listed
exploration companies, most recently as the lead investor in a listed
Namibian-focused conjugate margin player

 

·    Charlestown Managing Member Mr. Robert Bose to join the Board of the
Company

 

·    Charlestown's investment ensures the Company's ability to commence
technical work on AREA OFF-3 at the earliest opportunity by underpinning the
licence requirement to place cash on restricted deposit, ahead of the
anticipated completion of the AREA OFF-1 farm-out to Chevron at which time the
Company will receive $12.5 million in cash proceeds. Thereafter, Challenger
Energy is expected to be fully funded for the foreseeable future, with no need
for additional capital, whether equity or debt

 

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

 

"The strong progress of our business in Uruguay has seen a noted increase in
interest from investors familiar with the E&P space who appreciate the
value potential of our assets. We are pleased to advise of today's agreement
with Charlestown, a specialist energy investor with an enviable track record
of successful cornerstone investments in various listed and unlisted E&P
companies, including being an early investor in the success story that the
Namibian conjugate margin now represents. Charlestown's investment in
Challenger Energy will initially be as a loan, but once the Chevron AREA OFF-1
farm-in closes and we have completed a necessary share consolidation that loan
will convert at a premium into an approximately 8.7% shareholding, and
Charlestown will become a major shareholder in our Company. Charlestown's
investment, coupled with our low overhead and the attractive carry
arrangements in the Chevron farm-out, puts us in an excellent financial
position, with no need for further capital for the foreseeable future. As part
of their strategic investment, Charlestown's Managing Member Mr. Robert Bose
will be joining our board, and together we will be working to ensure that
Challenger Energy provides Charlestown, alongside all shareholders, with the
same outstanding return that their investment in the Namibian conjugate margin
has".

 

Robert Bose, Charlestown Managing Member, said:

"I am very pleased to be joining the Challenger Energy board. Charlestown
Energy Partners has been an active investor in global exploration
opportunities, including in Namibia where we have developed significant
insights into the conjugate margin's opportunity through our exposure to
multiple blocks in the Orange and Walvis offshore basins, including PEL83
which is home to the recent multi-billion-barrel light oil discoveries by Galp
Energia. We believe over time these results should translate across to the
Uruguay conjugate margin. Challenger Energy's unique position in Uruguay,
capital strength and upcoming catalysts position the Company for significant
growth and value creation over the coming years. We are extremely excited to
be part of the Challenger Energy story."

 

About Charlestown:

 

Charlestown is a specialist energy investor that is associated with
Charlestown Capital Advisors, a family office founded in New York in 2005.

 

Charlestown has been making investments globally in E&P since 2016 and has
been the cornerstone shareholder in Sintana Energy Inc ("Sintana"), a
TSX-listed exploration company since 2019. Sintana maintains an indirect
interest in a portfolio of exploration licenses in Namibia including in the
emerging Orange Basin, where several multi-billion-barrel discoveries have
been made by Shell, TotalEnergies and Galp Energia.  As a result of its early
entry and the subsequent exploration success, Sintana's share price has
appreciated more than six-fold in the past two years.

 

Principal Terms:

 

The principal terms of the agreement entered into between Charlestown and
Challenger Energy are:

 

·    On closing, Charlestown will advance a loan of £1.5m to the Company
(the "Loan").

·    The Loan will have a maximum term of 12 months.

·    The Loan will accrue interest at the rate of 1% per month, with all
principal and interest to be repaid in full at conclusion of the term, unless
repaid earlier.

·    The Loan will be unsecured.

·    Funds from the Loan are to be applied by the Company for:

o the requirement to place US$500,000 on restricted deposit in support of
commencement of work on the newly awarded AREA OFF-3 block, and

o general working capital purposes, including, in particular, meeting the
Company's funding needs through to completion of the previously announced
farm-in by Chevron to the AREA OFF-1 block in Uruguay (the "Chevron Farm-in").

·    At any time during its term, either Charlestown or the Company can
elect for early repayment of the Loan (plus interest), to be made by way of
conversion of the Loan into newly issued ordinary shares in the Company, but
only if the following conditions have first been satisfied:

o the Chevron Farm-in has completed (this is anticipated once Uruguayan
regulatory approvals are finalised, which is expected will be in the next 2-3
months; on completion of the Chevron Farm-in, as previously advised, the
Company will receive US$12.5 million in gross cash proceeds); and

o the Company's shareholders have approved, and the Company has thereafter
undertaken, a share consolidation on the basis of at least 50:1 (this being a
necessary requirement to enable Charlestown's share custodian to hold shares
in the Company).

·    Assuming the above-noted conditions are satisfied and the Loan (plus
interest) is repaid early in the form of newly issued ordinary shares, those
will be issued to Charlestown at a price, on a pre-consolidation basis, of
0.168 pence per share, representing a premium of approximately 20% to the
current share price, and ordinary shares would be issued to Charlestown
representing an equity interest of approximately 8.7% in the Company. This
would have the effect of making Charlestown a major shareholder and
cornerstone financial investor in the Company.

·    The Company will issue warrants to Charlestown in respect of
provision of the Loan, valid for 24 months from the date of their issue (which
will be on or around financial close of the Charlestown investment), which
will entitle Charlestown to subscribe for an additional 105 million ordinary
shares in the Company at a subscription price of 0.2 pence per share (pre
consolidation). This represents a premium of approximately 45% to the current
share price. These warrants, if all exercised, would result in the Company
receiving total additional proceeds of approximately £215,000, and would
result in Charlestown's shareholding in the Company increasing to
approximately 9.5%.

·    The agreement entered into between Charlestown and the Company is in
the form of a legally binding Term Sheet. Completion of the transaction with
Charlestown will require the parties to enter into full-form legal
documentation by 30 April 2024, with financial close to follow by 15 May 2024
(and with a long-stop date of 31 May 2024).

·    Following financial close, and so as to facilitate the desired
cornerstone investment from Charlestown, the Company will proceed to convene a
shareholder meeting for the purposes of proposing a share consolidation. It is
expected that documentation will be despatched to shareholders in early June
2024, and with the shareholder meeting to follow approximately four weeks
thereafter.

 

Intended Board Appointment

 

Commensurate with the intended long-term cornerstone shareholding in the
Company by Charlestown, Mr. Robert Bose will be invited to join the Board.

 

Mr. Bose has been the Managing Member of Charlestown since 2016, having joined
Charlestown Capital Advisors as a principal in 2014. Prior, he spent 17 years
in the Global Investment Banking Group at the Bank of Nova Scotia, most
recently as Managing Director and Head of the Power & Utilities Group,
with a specifical focus on the energy and power sectors. Mr. Bose is currently
also serving as Chief Executive Officer of Sintana, which as noted represents
a significant holding in Charlestown's current portfolio.  Mr. Bose has an
Honors Degree in Economics from Queen's University in Kingston, Ontario and is
a CFA Charterholder.

 

Subject to completion of usual onboarding processes, Mr. Bose's appointment
will take effect at such time as funding is advanced by Charleston,
anticipated in mid-May 2024. Additional details pertaining to his appointment
will be provided at that time.

 

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
 CAMARCO                                          Tel: +44 (0) 20 3757 4980

 Billy Clegg / Hugo Liddy / Sam Morris

 

Notes to Editors

 

Challenger Energy is an Atlantic-margin focussed energy company, with
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. Challenger Energy is quoted on the AIM
market of the London Stock Exchange.

 

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

 

ENDS

 

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
 or visit
www.rns.com (http://www.rns.com/)
.

RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
.   END  MSCEASLPFLXLEEA