Challenger Energy ‘pushing ahead’ with AREA OFF-1 work program
(CEG ) says the first four year exploration period of AREA OFF-1 licence, a licence which was awarded to the company back in May 2020, has officially come into effect this morning after the licence’s final approvals were granted from the President of Uruguay.
Since May 2020, there has been an extended period of non-activity, largely as a result of the Covid-19 pandemic, during which formal signature of the licence was pending, it explained.
The licence was formally signed on 25 May 2022 following final approvals that were granted by decree of the President of Uruguay, thus kick-starting the first four-year exploration period.
The Company’s minimum work obligation during this initial period is to undertake relatively modest, low-cost reprocessing and reinterpretation of selected historical 2D seismic data. Challenger explained to investors that there is no drilling obligation during this first phase.
Challenger said its work program and budget for the balance of 2022 and into 2023 includes sufficient allocation of funds to progress the agreed minimum work obligation on the licence.
AREA OFF-1 contains a management estimated resource potential exceeding 1 billion barrels of oil equivalent recoverable (BBOE), based on current mapping from multiple exploration plays and leads in relatively shallow waters, and with significant upside running room.
Uruguayan national oil firm, ANCAP, of 1.36 BBOE as a P50 expected ultimate recoverable resource.
The AREA OFF-1 play system is directly analogous to the recent prolific, conjugate margin discoveries made offshore
Namibia by Total (the Venus well) and Shell (the Graff well), where reported multi-billion-barrel Cretaceous turbidite reservoirs have been encountered.
The Company, which to date has received multiple indications of interest in relation to potential partnerships for the
AREA OFF-1 licence, said it intends to explore such possibilities, with a view to potentially expediting a 3D seismic acquisition into the first licence exploration period. It said further updates will be provided “as and when appropriate.”
Eytan Uliel, CEO of Challenger Energy, said: “Two years ago, at the peak of a period of industry inactivity due to the pandemic, we identified a compelling opportunity to apply for the OFF-1 licence in Uruguay. For very low cost we were able to secure an exploration licence of an extremely high quality, with a greater than 1-billion-barrel recoverable resource potential.”
In fact, Uliel believes the OFF-1 licence has become “even more attractive” since May 2020, acknowledging that “globally significant developments” are now underway along the South American Atlantic margin in Guyana and Suriname. Most significantly, he says that recent “mega-discoveries” from two wells drilled by majors in the past few months, have calibrated and confirmed the play source rock and petroleum systems evident on seismic in OFF-1.
Challenger is now actively exploring partnering options that could lead to an accelerated work program - the object of which would be “to quickly and fully evaluate the licence’s potential, and to thereby create what we hope will be an opportunity of great value to shareholders.”
Shares in Challenger Energy were trading 3.85% higher during late morning at 0.135p.
Challenger Energy told investors in April that further production enhancements over the coming months are expected to result in another 10% production increase amid a positive turnaround of its Trinidad and Tobago business unit that has already returned good results.
With Challenger’s restructuring and recapitalisation process now complete, its full attention is now on growing the core business, through building production and generating cash flow.
Earlier this year, the company said it would be moving forward some ‘low-hanging fruit’ operational items due to the higher oil price environment which it believes creates an ever greater imperative to increase production as well as to maximise “every barrel of oil sold.”
To date, Challenger said the necessary government permits for all of the planned works have been obtained, and it is expected that this work will be completed by the end of May 2022.
It is targeting a 10% or more increase in aggregate total production, with any incremental production able to be monetised immediately and thereby benefit from current oil prices.
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