Challenger Energy (AIM: CEG), the Atlantic margin focused energy company, is pleased to announce that the farmout of a 60% interest in the AREA OFF-1 block, offshore Uruguay, to Chevron Mexico Finance LLC, Sucursal Uruguay ("Chevron") (a wholly-owned subsidiary of Chevron Corporation (NYSE: CVX)), has today been completed, with all required approvals from the Uruguayan regulatory authorities having been received, and the farmout taking legal effect.
As an immediate result, the Company has received a cash payment of US$12.5 million while retaining a 40% non-operating interest in AREA OFF-1. Chevron has assumed operatorship of the block and going forward will carry 100% of the Company'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 Challenger Energy). Thereafter, should Chevron decide to drill an initial exploration well on the AREA-OFF 1 block, Chevron will also carry 50% of the Company's share of costs associated with that well (up to a maximum of US$20 million net to Challenger Energy).
The Company is working closely with ANCAP, the Uruguayan regulator, and Chevron to ensure a smooth transition of operatorship, as well as participating in the detailed planning for an upcoming 3D seismic campaign, targeted to commence in the next available shoot window (H1 2025). Further updates will be provided as planning and execution of the seismic campaign progresses.
Eytan Uliel, Chief Executive Officer of Challenger said:
"Completion of the AREA OFF-1 farmout is a game-changer for Challenger Energy. We've achieved an outcome that introduces Chevron, a recognised industry leader, as operator of the block, who will now commence with executing a considerable value-creating work program. The cash received and farmout terms will ensure that our Company is fully funded for the foreseeable future. And, just as important, this farmout validates our capabilities in terms of securing early-access to promising exploration blocks, and progressing them rapidly via high-quality technical work. In the coming months we expect to communicate plans for 3D seismic acquisition on AREA OFF-1, and at the same time we will be fully engaged in a technical work program for our second Uruguay licence, AREA OFF-3, applying the learnings from work on AREA OFF-1 - our objective is to be in a position to kick off a farm-out process for that block in mid-2025. The next year will thus be an exciting and busy time for Challenger Energy."