REG - Challenger Energy - URUGUAY AREA-OFF 1 UPDATE

Challenger EnergyAnnouncement

26/04/2023 07:00

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RNS Number : 4228X  Challenger Energy Group PLC  26 April 2023

26 April 2023

Challenger Energy Group PLC

("Challenger Energy" or the "Company")

 

URUGUAY AREA-OFF 1 UPDATE

Challenger Energy (AIM: CEG), the Caribbean and Americas focused oil and gas
company, with a range of oil production, development, appraisal, and
exploration assets, provides the following highlights from its technical
assessment of the AREA OFF-1 block, offshore Uruguay.

HIGHLIGHTS

•     An initial prospect inventory of 1 to 2 billion barrels has been
defined from CEG's 2D seismic reprocessing work

•     Three sizeable prospects have thus far been identified, derived
from a range of play types consistent with those de-risked by recent
successful conjugate margin drilling in Namibia by TotalEnergies and Shell

•     Prospects are seismically-derived, and supported / further
de-risked by Amplitude Variation with Offset ("AVO") analysis

•     Play robustness is corroborated by geochemical sampling and
satellite seep analysis

•     Conjugate margin success, competitive recent licensing rounds in
Uruguay, and technical uplift from CEG's 2023 work will drive farm-out
process, soon to be initiated

SUMMARY

·    The geotechnical assessment programme of the Company's AREA OFF-1
licence is on-track to be completed by Q3 2023. This accelerated work will
satisfy the entire minimum work obligations for the block's initial four-year
exploration period (i.e., to August 2026).

·    Reprocessing of 2,100 kms of legacy 2D seismic (completed) and
interpretation and mapping (ongoing) has confirmed considerable value uplift
for the AREA OFF-1 licence, with at least three high potential prospects
identified from two material play types to date.

·    Technical de-risking has resulted from a range of workstreams,
including AVO analysis, geochemistry seabed sampling, and satellite seep and
slick imagery.

·    Prospect details are:

o "Teru Teru" prospect - a Cretaceous turbidite play; analogous petroleum
system and reservoir age to Namibian ultra-deepwater discoveries; 460 km(2) in
areal extent; Class II AVO supported; an estimated ultimate recoverable
resource in excess of 700 MMboe; located in approximately 750 metres water
depth; and with a reservoir depth of approximately 4,300 metres.

o "Anapero" prospect - a Cretaceous turbidite play; analogous petroleum system
and reservoir age to Namibian ultra-deepwater discoveries; 500 km(2) in areal
extent; Class III AVO supported; an estimated ultimate recoverable resource in
excess of 500MMboe; located in approximately 750 metres water depth; and with
reservoir depth of approximately 3,800 metres.

o "Lenteja" prospect - an Early Cretaceous alluvial fan representing a large
stratigraphic trap; analogous to proven legacy shelf discoveries in Namibia
and South Africa; 425 km(2) in areal extent; an estimated ultimate recoverable
resource c. 500MMboe; located in approximately 85 meters water depth; and with
a reservoir depth of approximately 5,000 metres.

·    Continuing discretionary technical work will seek to define
additional leads and prospects, further refine previous mapping of identified
prospects, generate volumetrics of identified prospects, and seek to further
constrain key technical risks.

·    The Company has compiled a comprehensive data-room, which includes
all new work completed, and following unsolicited interest from a number of
industry counterparties a farm-out process is to be formally launched. Further
announcements will be made as appropriate.

·    The objective is for the Company to accelerate value realisation from
the AREA OFF-1 licence in Uruguay by introducing a strategic partner(s) during
2023, to fast-track 3D seismic acquisition, potentially via a multi-client
acquisition in early 2024, as a precursor to further value-creating field
activity.

An update Uruguay AREA OFF-1 presentation is now also available on the
Company's website at www.cegplc.com (http://www.cegplc.com) . Additional
details are also set out in the Appendix to this RNS.

 

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

"In 2020, when no other parties were ready to commit, Challenger Energy was
first-mover into offshore Uruguay, securing the AREA OFF-1 block on an
uncontested basis and on highly advantageous work terms. Since then,
margin-opening discoveries offshore Namibia by TotalEnergies and Shell have
made it possible to correlate what are now proven, oil producing source rocks
directly across into the conjugate margin basins of Uruguay's waters.

As a result, Uruguay has become a new global exploration hotspot, evidenced by
the fact that in the last 12 months all but one of the available offshore
blocks have been licenced by oil majors and NOCs, bidding sizeable work
programs.

In direct response to the exploration success in adjacent analogue basins and
the emerging industry interest it generated, we committed to remaining ahead
of the game, and in late 2022 opted to accelerated our AREA OFF-1 work
program. The goal was to generate a newly derived, modern dataset supporting
prospect definition. The resulting prospect inventory is now informed by
reprocessed legacy 2D seismic, supported by AVO attribute analysis (hugely
significant as this technique is widely used in the industry as a key
indicator of potential hydrocarbons), and corroborated by additional
geochemical and seep analysis studies.

The results from this work have been extremely promising, in that we are now
able to announce a technically supported prospect inventory of between 1 to 2
billion barrels in this globally attractive exploration hotspot.

Our next-step objective is to farm-out to an industry partner(s), so we can
fast-track a 3D seismic acquisition. The high-quality data set we have now
compiled, and the intellectual property created, positions us well, and we
will shortly be initiating a formal farm-out process.

The world for Challenger Energy is changing rapidly. I look forward to
updating shareholders as the year progresses."

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 / Enzo Aliaj
 Zeus Capital Limited - 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 a Caribbean and Americas focused oil and gas company,
with a range of oil production, development, appraisal and exploration assets
and licences, located onshore in Trinidad and Tobago, and Suriname, and
offshore in the waters of Uruguay and The Bahamas. In Trinidad and Tobago,
Challenger Energy has a number of producing fields and appraisal / development
projects. In Suriname, Challenger Energy has on onshore appraisal /
development project. Challenger Energy's exploration licences in Uruguay and
The Bahamas offer high-impact value exposure within the overall portfolio
value.

 

Challenger Energy is quoted on the AIM market of the London Stock Exchange.

 

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

 

COMPETENT PERSON STATEMENT

Technical work referred to in this announcement has been undertaken by various
independent third-party specialist advisors. This technical work has been
overseen by Mr. Randolph Hiscock the Company's New Business Director
and Uruguay Managing Director.

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 presentation. 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. Randolph Hiscock consents to
the inclusion of the information in the form and context in which it appears.

APPENDIX - AREA OFF-1 UPDATE: ADDITIONAL INFORMATION

Background

·    The Company was awarded the AREA OFF-1 block, offshore Uruguay, in
June 2020. Following presidential approval, formal signing of the licence took
place on 25 May 2022, and the initial four-year exploration term commenced on
25 August 2022.

·    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 has a 100% working interest in the AREA OFF-1 licence.

·    The Company's minimum work commitments in the initial four-year
exploration period required licencing 2,000 kms of legacy 2D seismic data from
ANCAP (the Uruguayan national oil company and energy regulatory body),
reprocessing of same 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. The Company is,
however, permitted to accelerate work from future exploration periods into the
current initial exploration period, with any accelerated work credited against
subsequent period obligations.

Conjugate context - the significance of Namibian super-discoveries

·    The AREA OFF-1 licence is located in the Punta del Este Basin, along
the Uruguay-Argentina continental margin. This basin is a direct conjugate to
the Orange Basin offshore southern Namibia and northern South Africa - i.e.,
these two basins were co-joined prior to continental separation and, are
believed to have similar geological characteristics (as demonstrated by
correlating regional 2D seismic data across the South Atlantic), particularly
in terms of the potential presence of source rocks and petroleum systems.

·    Offshore Namibia, two substantial margin-opening discoveries have
been made over the past 15 months, being TotalEnergies' Venus well (February
2022), later confirmed by Shell's Jonker well (March 2023) and a second play
by Shell with its Graff & La Rona discoveries (February and April 2022).

·    These discoveries have transformed industry perception not just of
Namibia, but also of the potential of the South Atlantic conjugate margin
(i.e., those basins across the Uruguay-Argentina continental margin, including
the AREA OFF-1 in the Punta del Este Basin). This is because the Early
Cretaceous Aptian source interval that charges Venus and Jonker can be
seismically correlated to the South Atlantic (Uruguay-Argentina) conjugate
basins, including the Punta del Este Basin in which AREA OFF-1 is located.
This establishes the potential for a new, prolific petroleum system along the
South Atlantic (Uruguay-Argentina) conjugate basins.

Impact on activity in Namibia

·    The recent discoveries in Namibia have resulted in considerable
additional industry activity in Namibia now being planned over the next 12 to
18 months. TotalEnergies has commenced a drilling campaign to drill up to four
appraisal wells from March 2023, the objective being to define the scale and
scope of the Venus discovery, and fast-track an ultra- deepwater development.
It has been announced that over 50% of TotalEnergies' global exploration
budget for 2023 is earmarked for Namibia.

·    Similarly, Shell has indicated that it intends to drill up to ten
Namibian wells in 2023 / 2024 (a mix of exploration and appraisal wells), GALP
has advised it will be drilling a well in 2023 on PEL83 in Namibia, and Maurel
& Prom have indicated a five well campaign offshore Namibia, commencing
2023.

·    Additionally, the recent discoveries in Namibia have seen an increase
in high-value transactional activity relating to Namibian licences. In October
2022, Chevron farmed-in to PEL 90 offshore Namibia, for a reported majority
interest and operatorship, and with a carry to the farminee that covers a
seismic campaign and initial exploration well drilling - estimated transaction
value circa US$80 million. In March 2023, Woodside secured an exclusive option
to acquire 56% working interest in PEL 87 offshore Namibia by funding a fully
carried 3D seismic survey - estimated value at US$35m - and an optional carry
on an initial exploration well.

·    The Company believes a similar activity trajectory is likely over the
coming years in Uruguay and northern Argentina.

Impact on activity regionally

·    The recent discoveries in Namibia have also had an impact south of
Uruguay, offshore Argentina. There, the country's first ultra-deepwater well
(Argerich-1) is planned for spud during Q2 2023 with Equinor (the Norwegian
state-owned oil and gas company) as the operator and Shell as partner. The
well is to be drilled approximately 300 kms offshore Argentina, in water
depths of approximately 1,500 meters, to a projected total depth (TD) of
approximately 4,050 meters. The well is targeting Cretaceous basin floor
sandstones similar to TotalEnergies' Venus well offshore Namibia.

·    Additionally, Equinor in conjunction with partner YPF has received
environmental approvals to acquire 3D seismic across three blocks offshore
Argentina, and other operators including Shell and TotalEnergies, along with
partners BP and Qatar Energy, are likewise anticipated to acquire 3D seismic
during 2023 / 2024.

·    The Company considers that Uruguay will benefit from these activities
/ operations being conducted in the broader area and which are now being
accelerated as a result of the Namibian conjugate margin discoveries.

Uruguay licensing activity

·    The Company considers that the conjugate margin discoveries in
Namibia have also validated its early entry strategy in Uruguay.

·    Specifically, the Company was the first operator to enter Uruguay in
2020, pre-dating the conjugate margin discoveries offshore Namibia. Until the
start of 2022, the Company was the only offshore acreage holder in Uruguay,
having bid for the AREA OFF-1 licence on the basis of a modest, low-cost work
programme.

·    However, since the discoveries offshore Namibia, five blocks offshore
Uruguay have been awarded, all in 2022, to Shell, APA Corporation (formerly,
Apache) and YPF (the Argentinian state-owned oil and gas company), such that
now all but one available Uruguay offshore blocks is licenced, and the Company
is the only junior present.

·    These new entrants have made substantial work programme commitments
for the first four-year exploration periods of their relevant licences,
including 3D seismic licensing, acquisition and reprocessing, exploration well
drilling and geological and geophysical studies. The estimated aggregate value
of the work program bid for these subsequent licences is approximately US$250
million (in aggregate, across the five blocks).

AREA OFF-1 Technical work update

·    Following the conjugate margin drilling successes in Namibia referred
to above, and given the interest this has generated in Uruguay, in late 2022
the Company decided to accelerate its initial work program for the AREA OFF-1
block. The objective was to rapidly improve the geotechnical understanding of
the block and to assemble a state-of-the-art offshore data set, thereby
optimally positioning the Company for securing a farm-out partner.

·    Work commenced in late 2022, and since that time the minimum work
program obligation of licencing and reprocessing legacy 2D seismic has been
substantially completed. The Company is on-track to fully complete the minimum
work program obligation in Q3 2023, through the preparation of required
Geological and Geophysical ("G&G") reports. Thereafter, the Company will
have no obligatory work program commitments until the second exploration
period, which will only commence in August 2026.

·    In addition to work required to satisfy the minimum work program
obligation, over the past six months the Company has also executed certain
additional technical work items, aimed at further de-risking and high-grading
the identified leads and prospects. This includes 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. Each of these is discussed in brief detail below.

2D Seismic reprocessing and interpretation

·    The Company acquired 4,760 kilometres of legacy 2D seismic data from
ANCAP (the Uruguayan energy regulatory body), and licenced a further ~2,100
kilometres of high-graded legacy 2D seismic data from ANCAP for seismic
reprocessing. This licenced 2D seismic data has now been fully reprocessed in
both time and depth domains, the work having been conducted by Down Under
Geophysics, a specialist seismic reprocessing firm in the United Kingdom.

·    This work has resulted in a substantial uplift in seismic imaging and
improved data resolution. This in turn, has provided enhanced fault
definition, and enabled better identification of seismic facies and refined
prospect mapping. The newly reprocessed 2D data has also facilitated an AVO
attribute analysis study referred to below.

AVO attribute analysis

•     Amplitude Variation with Offset (AVO) attribute analysis is an
advanced processing workflow used in the international hydrocarbon exploration
industry because (in general terms) certain AVO anomalies are considered to be
indicators of the presence of reservoir zones (sand vs. shale) and
potentially, hydrocarbons / fluids in reservoir.

•     The Company selected six reprocessed high-graded 2D seismic lines
for an initial AVO screening. This work was undertaken by LEAN Geosolutions, a
specialist firm in advanced seismic attribute evaluation based in Houston.
This initial AVO analysis has led to the identification and definition of
three primary prospects (described further below) from the reprocessed and
reinterpreted 2D seismic data, and corroborated by the other geochemical
studies described below.

•     Based on the excellent results from AVO attribute analysis thus
far, a further seven lines of reprocessed 2D seismic data have now been
selected for similar assessment, with work commenced - this is expected to be
completed in approximately two months.

Seabed geochemistry study

•     The Company acquired and integrated a seabed geochemistry study
conducted by Applied Geochemical Imaging, Houston, in 2017. In this study, 59
box core seabed samples were acquired across all Uruguay offshore maritime
areas, to determine the presence of active petroleum systems and detect
micro-petroleum seepage from subsurface reservoirs. 117 geochemical samples
from these 59 locations were analyzed for hydrocarbons.

•     This study indicates that the highest hydrocarbon values are to be
found within the AREA OFF-1 block. The hydrocarbon compound responses and
signatures are consistent with active petroleum micro-seepage along the
continental shelf break of AREA OFF-1 that forms an anomalous fairway along
the block's southern boundary and directly overlies seep and slick anomalies
(described below) - thus increasing geological confidence.

Satellite seep and slicks imagery

·    A second study commissioned by the Company was a review of available
satellite seep and slick imagery. Satellite images covering approximately
4,000 km(2) of AREA OFF-1, analysed over several decades for repeatability,
were analysed for seeps and slicks. The study was conducted by SAR Satellite
Oil Seeps, a specialist firm in France.

·    This study validated the presence of 31 oil seeps. When overlaid on
the Company's seismic data set, good geospatial alignment of those identified
seeps to mapped seismic prospects is observed, thus providing additional
corroboration of seismically defined prospects at the same locations.

Integration, seismic interpretation, and mapping

·    A final body of required work was to interpret the results of the
reprocessed 2D seismic, and then integrate that with the result of the AVO
attribute analysis and other workstreams, to identify leads and prospects, and
to generate prospect maps. This work (still ongoing) is being conducted by
Molyneux Advisors, geotechnical interpretation consultants based in Perth, and
has thus far resulted in three primary prospects being identified and mapped,
each of which is described briefly below.

Teru Teru prospect

·    The Teru Teru prospect is a Mid Cretaceous onlap turbidite play with
the same petroleum system and reservoir type as evident in Venus and Jonker
discoveries offshore Namibia. This prospect has been identified based on three
reprocessed seismic lines, mapped to be approximately 460 km(2) in size,
corroborated with AVO analysis indicating porous sand and potential
hydrocarbon presence, and calibrated with the geochemical seabed survey and
satellite seeps studies. On a preliminary basis the Teru Teru prospect is
estimated to contain in excess of 700 MMboe Estimated Ultimate Recovery
("EUR") (subject to final volumetric determination). Based on current mapping,
this prospect straddles the AREA OFF-1 and AREA OFF-4 boundary. However, and
critically, the up-dip termination is believed to lie on AREA OFF-1, including
the trapped area above the projected oil-water contact.

Anapero prospect

·    The Anapero prospect is a slightly younger Upper Cretaceous shelf
margin turbidite play with the same petroleum system and reservoir type as
reported in the Venus and Jonker discoveries, as with the Teru Teru prospect.
This prospect has been identified based on several reprocessed seismic lines,
mapped to be approximately 500 km(2) in size, and further corroborated with
AVO analysis indicating potential porous sands and again calibrated with the
geochemical seabed survey and the satellite seeps studies. On a preliminary
basis the Anapero prospect is estimated to contain in excess of 500 MMboe EUR
(subject to final volumetric determination). Based on mapping, this prospect
also straddles the AREA OFF-1 and AREA OFF-4 boundary however, stratigraphic
trap extents are largely contained inside AREA OFF-1.

Lenteja prospect

·    The Lenteja prospect is an Early Cretaceous stratigraphic syn-rift
clastic play similar to the Kudu field in Namibia, the AJ-1 and Ilhubhesi
discoveries in South Africa. This prospect has been identified based on
multiple reprocessed seismic lines, and mapped to be approximately 425 km(2)
in size. Early Cretaceous drift sediments overlie the Lenteja prospect, which
is sealed by a major Early Cretaceous syn-rift unconformity. The Lenteja
prospect has a highly reflective, isolated seismic facies package within a
NW-SE trending horst block that dips south along with significant
stratigraphic entrapment. On a preliminary basis the Lenteja prospect is
estimated to contain c. 500 MMboe EUR (subject to final volumetric
determination).

Remaining technical work for 2023

·    As noted, completion of the minimum work program obligation for AREA
OFF-1's initial four-year exploration period requires the Company to generate
two specified G&G reports. This work is imminent after the geophysical
mapping is complete, and the Company anticipates to finalize these studies and
report out to ANCAP in Q3 2023.

·    In parallel, further discretionary work is also ongoing, to complete
prospect mapping and integrating the 2023 reprocessed 2D with the historic 2D
seismic data, to conduct AVO analysis of a further seven reprocessed 2D
seismic lines, and to finalise volumetric assessment and risked ranking of all
identified leads and prospects.

Farm-out process

·    The Company's commercial objective through the remainder of 2023 is
to introduce an industry partner(s) to AREA OFF-1, with the objective of
providing the Company certain liquidity and at the same time to fast-track a
discretionary 3D seismic acquisition programme in early 2024 (either
independently or, more optimally, by participating in a multi-client 3D
seismic acquisition programme).

·    Various seismic vendors have already proposed a multi-client 3D
seismic acquisition programme offshore Uruguay, commencing early 2024, which
would potentially cover up to 5,000 km(2) of AREA OFF-1, encompassing all the
identified leads and prospects on AREA OFF-1. The Company understands that
these seismic vendors have already made application for requisite
environmental permits from the Uruguayan Ministry of Environment and ANCAP.

·    A virtual data room has been assembled, and the Company will shortly
be launching a formal farm-out process. The Company will make further
announcements as appropriate in due course.

 

ENDS

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