Challenger Energy is pleased to announce its audited Annual Results for the year ended 31 December 2024.
The 2024 Annual Report and Financial Statements will be posted to shareholders by 18 June 2025 along with the notice of the Company's Annual General Meeting to be held on 24 July 2025 at 11.00 a.m. British Summer Time at The Engine House, Alexandra Road, Castletown, Isle of Man IM9 1TG.
The 2024 Annual Report and Financial Statements are set out in full below and are also available on the Company's website https://www.cegplc.com/.
Chairman's Letter to the Shareholders
Dear Shareholders,
It is my pleasure to report to you as Chairman of your Company.
In my last report I commented on our considerable progress with regard to our strategic objectives. Again I am pleased to report that through 2024 and the early part of 2025 we have continued to deliver considerable value to shareholders, which has been partially re?ected in our market capitalisation: adding value for our Uruguay AREA OFF-1 and AREA OFF-3 licences, announcing the sale of our business in Trinidad and Tobago, exposing the Company to the wider and deeper US investment market, and all whilst maintaining a stringent cash policy resulting in capital requirements being funded for our foreseeable work programmes.
In Trinidad and Tobago, we announced a sale of the Company's subsidiary companies that consist of our whole business in that country. Assuming a successful completion of that transaction in 2025, we will have made the Company entirely focused on Uruguay. It is a credit to our team in Trinidad and Tobago that we continue to have safe and sustained operations whilst the sale progresses, and I take this opportunity of thanking that team on behalf of shareholders and the Board for their continued hard work and diligent approach in a period of change.
In Uruguay, we completed the farm-out of AREA OFF-1. We have worked extensively and proactively with Chevron since then to continue the pace of work on that block, and look forward to a successful start of seismic operations later this year. The technical work on AREA OFF-3 continues to progress as planned and the Company anticipates results of that work in Q3 2025, enabling us to commence a farmout process on that block. Overall, 2026 is shaping up to be a hugely exciting year for Challenger Energy in respect of our Uruguayan position. We remain unique as the only smaller cap company present in that region, holding substantial acreage positions in our blocks. Eytan gives far more detail on our plans in his CEO Report.
In May 2024, we reported on the strategic investment by Charlestown Energy in the Company. Robert Bose has proven to be a great addition to the Board. In addition, we have exposed our Company to the US investment market by listing on the OTCQB Venture Market in April 2025. Initial results show considerable interest in the Company.
Finally, and as always, I thank the staff of Challenger Energy for their efforts last year, the Board for their guidance and insight and, of course, our shareholders for their continued support.
Dear fellow Shareholders,
This is my ?fth report to you, the owners of the Company, in my capacity as Chief Executive Officer.
The 2024 period under review was a transformational one for Challenger Energy. Highlights were that we farmed out the AREA OFF-1 block in Uruguay to Chevron, we advanced our second Uruguay block (AREA OFF-3), we made progress on achieving value from our other assets, and we continued our efforts to reshape the Company in a corporate sense.
As we look to the second half of 2025 and beyond, I am more convinced than ever that we are at an in?ection point. Financially and operationally, we are in the best position we have been in for many years. The hard work of the last few years means that over the coming 12-24 months a signi?cant value-creation opportunity lies ahead of us. Details are provided in my
commentary below.
URUGUAY
What a difference a few years can make in the frontier hydrocarbon exploration industry!
Shareholders will recall that Challenger Energy ?rst started doing business in Uruguay in May 2020, when we secured the AREA OFF-1 licence, offshore Uruguay. At that time the Covid-19 pandemic was engul?ng the world, and Uruguay was not yet on the global industry's radar. This meant that when we decided to enter Uruguay, we were the sole licence holder in that country.
In early 2022, very large, globally relevant discoveries were made by supermajors (TotalEnergies and Shell) from exploration wells drilled offshore Namibia (and subsequently multiple additional discoveries have followed, including most notably GALP Energia's Mopane discovery and Rhino Resources' recent Capricornus well). The Orange Basin in Namibia, which is where these discoveries have been made, is in geological terms the conjugate margin to offshore Uruguay. This is a fact of enormous signi?cance to those active in the industry, in that the data emerging from the discoveries in Namibia signi?cantly increases the likelihood of the presence of oil-producing source rock offshore Uruguay.
For this reason, the exploration success in Namibia saw an almost instant surge in industry interest to secure offshore licences in Uruguay and the surrounding region. Activity commenced on long dormant blocks in Argentina, and in late 2023 a number of majors picked up multiple blocks in a Brazil bid round (with another scheduled for later this year).
In the speci?c case of Uruguay, the impact was even more pronounced: by the end of 2023, 100% of Uruguay's offshore blocks had been licensed, with Challenger Energy holding two of the seven available blocks, and the other ?ve blocks having been awarded to much larger industry players. That is to say, in under two years (and unique to anywhere else in the world) Uruguay went from being almost entirely unlicensed and unheralded, to being fully licensed and, apart from Challenger Energy, only to industry 'heavyweights' who had made sizeable work programme commitments in order to secure those licences.
It is thus no exaggeration to say that offshore Uruguay has, in the past few years, emerged as a global exploration "hotspot". And within that "hotspot", our Company has emerged not only as one of the largest acreage-holders, but also as the only junior E&P (exploration and production) company with any position in the region, with two world class assets and a growing prospect inventory.
Consequently, as shareholders are aware, through 2022 and 2023 we rapidly shifted our strategy, to prioritize Uruguay so as to meet the enormous industry interest that we could see was building. The full effect of this shift became evident in 2024, the period under review, when our assets in Uruguay unambiguously became the central focus of Challenger Energy's business.
AREA OFF-1
As I noted in the last Annual Report, through the course of 2023 Challenger Energy had undertaken a high-quality technical work programme for AREA OFF-1, the result of which was the identi?cation of three primary prospects in the licence area. In aggregate, we delineated a robust prospect inventory of approximately 2 billion barrels (Pmean) and up to 5 billion barrels (P10), thus
establishing that AREA OFF-1 is a world-class asset.
In 2023 we had also commenced a formal, adviser-led farmout process, with the objective of securing a partner for AREA OFF-1. Our aim was to introduce a respected industry participant who could provide the further expertise and capital needed to rapidly take the block forward to 3D seismic acquisition and, ultimately, exploration well drilling.
The results of our efforts - technical and commercial - became evident during the period under review, when in March 2024 we announced a farmout agreement with Chevron. A series of regulatory approvals followed, which took most of 2024 to ?nalise, but on 28th October 2024 the transaction with Chevron was completed. This represented the culmination of a huge body of work by many people over an extended period of time, and is an outcome we are extremely proud of.
The transaction agreed with Chevron saw the US-based supermajor assume a 60% operating interest in AREA OFF-1, paying us
$12.5 million in cash as an entry fee, agreeing to carry 100% of the costs of 3D seismic acquisition campaign (up to a gross total cost of $37.5 million, net value to Challenger Energy of up to $15 million), and thereafter if the decision is made to proceed to drilling of an initial exploration well, carrying 50% of our share of costs associated with that well (up to a total gross cost of
$100 million, net value to Challenger Energy of up to $20 million).
As I have said in many forums over the past 12 months, we believe these transaction terms, as agreed with Chevron, are very attractive.
Firstly, whilst all CEOs will claim that their company is undervalued, in this case, if properly analysed, the embedded value to our Company in the AREA OFF-1 farmout arrangement represents multiples of our current share price - something I believe the equity market is yet to fully appreciate.
Secondly, and far more importantly, the AREA OFF-1 farm-out has transformed Challenger Energy, in that (i) our strategy and technical work has been validated by one of the world's leading energy companies - the resulting intangible bene?t in terms of our industry "credentials" is immeasurable, (ii) going forward, the AREA OFF-1 project will be operated by a highly capable partner who has made a clear commitment to accelerated activity, and (iii) we have retained a material stake of 40% in the licence, which gives us enormous ?exibility when it comes time to consider how we participate in any future success case.
We are now working closely with our new partner in anticipation of upcoming activity on AREA OFF-1. We share a common goal with Chevron, which is to see a 3D seismic acquisition commence as soon as possible - as at the date of this report, the expectation is that this will be in Q4 2025, subject to ?nalization of permitting by the Uruguayan Ministry of Environment. It is this activity, and subsequent well drilling, which we believe will ultimately unlock the considerable value potential we see in this asset.
AREA OFF-3
Whilst AREA OFF-1 might be described as "the jewel in the crown" of Challenger Energy's portfolio, our second block in Uruguay, AREA OFF-3, offers considerable promise as well: based on initial assessment, a resource potential of up to 2 billion barrels and up to 5 trillion cubic feet gas (c. 1 billion barrels equivalent), from multiple exploration plays.
In June 2023, Challenger Energy had been designated as the party to whom the AREA OFF-3 licence would be awarded, on attractive terms. This award was ?nalised in March 2024, with the initial four-year exploration period for AREA OFF-3 commencing in June 2024.
As soon as the initial four-year exploration period commenced, we began our technical work programme for the block on an accelerated basis. Unlike AREA OFF-1, the AREA OFF-3 block has not only existing 2D seismic coverage, but 3D seismic coverage as well, which means our work programme can be focused on 3D seismic reprocessing. Having existing 3D seismic to work with is a signi?cant advantage the value of which to Challenger Energy may not be fully appreciated: the existing 3D seismic of interest on AREA OFF-3 would, if acquired today, cost up to $40 million and take 1-2 years to acquire - whereas we now have the bene?t of this prior expense, and the ability to accelerate the AREA OFF-3 timeline by several years.
Through the second half of 2024 and the ?rst half of 2025, we have made solid progress on the technical work programme. As at the date of this report, reprocessing of 1,250 km2 of 3D seismic data from the previously acquired BP survey is complete, and a satellite seep and slick study, a seabed geochemistry study and a multibeam echo sound survey have also been completed, with encouraging complementary results to ongoing seismic work. The next stage of our work programme for AREA OFF-3 is now underway: technical analysis and interpretation ahead of updated mapping, prospect de?nition and volumetrics, with anticipated completion in Q3 2025.
Once ?nalised, this work programme (similar in scope to that undertaken for AREA OFF-1) is expected to underpin a formal farmout process for AREA OFF-3 through the second half of 2025. That is, our strategy for AREA OFF-3 is to follow the same formula that produced a successful outcome for AREA OFF-1: ?rst, undertake high quality technical work to establish the prospectivity of the block and then, with the bene?t of that technical work, seek to bring in a partner via a farmout process.
OTHER ASSETS
Trinidad and Tobago
Our strategy in Trinidad and Tobago, where we have small onshore production ?elds, has been twofold: achieve ?nancial breakeven from core assets, and streamline operations / divest assets, so as to release value from them.
In terms of results, total 2024 production from the producing ?elds was constant (on a like-for-like basis almost identical to 2023 production), and total operating expenses and G&A (general and administrative expenses) was similarly constant. We were thus successful in our desire to operate the business on a generally cash?ow breakeven basis. As in previous years, we did record a (relatively small) net operating loss, and we once again reconsidered the carrying value of the Trinidadian licences on our balance sheet, taking a further write-down in the asset values associated with the business.
More signi?cantly, during 2024 we made progress with our desire to extract value from the assets in Trinidad and Tobago. In February 2024 we exited the Bonasse licence, in a way that relieved us of liabilities and commitments, and thereafter we were able to focus effort on ?nding a monetisation pathway for the remainder of the business. This effort culminated in February 2025, when we reached agreement to sell all of our remaining business, assets and operations in Trinidad and Tobago. As at the date of this report that transaction remains pending regulatory approvals, but we expect it to close by 30 June 2025, at which time we will see the complete exit from Trinidad ?nalised. This means the entirety of the Trinidad and Tobago business - with all associated income, assets, liabilities, exposures and administrative cost - will thereafter no longer feature in our ?nancial statements.
The Bahamas
In relation to the Company's licences in The Bahamas, throughout the course of 2024 we continued to pursue a renewal of those licences into a third exploration period. In parallel we continued to explore various alternative strategies seeking to monetise our Bahamian position. Tangible progress in the period was limited, but we are persevering, with a view to achieving a result in the coming 12 months.
CORPORATE
With the bene?t of the validation provided by the Chevron farmout, in 2024 we also took the opportunity to focus on a number of corporate 'housekeeping' actions. At the heart of which was a simple objective: to attract new investors to the Company especially longer-term institutional investors - who understand what we are trying to do in Uruguay, and the timeframes involved.
During the period, we undertook a share consolidation, reducing the number of outstanding shares from about 10 billion to about 250 million. This was necessary because the large number of shares in issue, combined with the relatively low trading value per share, was a bar to investment in the Company by various parties, including in particular many institutional investors (a number of leading global share custodians are not permitted, in accordance with their custody rules, to hold shares in a company where its share trading value is below 1 penny per ordinary share).
This proved crucial to securing a meaningful equity investment from Charlestown Energy Partners LLC, initially in the form of a debt instrument (May 2024), which converted into equity - at a premium price - on closing of the Chevron farmout (October 2024), and in the process making Charlestown Energy one of the Company's largest shareholders.
Charlestown Energy is a specialist energy investor associated with Charlestown Capital Advisors, a family office located in New York that was founded in 2005, and that has been making investments globally in E&P since 2016. Of particular relevance is the fact that since 2019 Charlestown Energy has been a cornerstone shareholder in Sintana Energy Inc, a TSX-listed exploration company. Sintana maintains an indirect interest in a portfolio of exploration licences in Namibia, including in particular having an interest in the GALP Energia discovery in the Orange Basin. Given the parallel between what has happened in Namibia in recent years and what we hope may happen in Uruguay in the coming years, we were thus very pleased to have been able to attract an investor such as Charlestown Energy to Challenger Energy.
Consistent with the long-term, strategic nature of Charlestown Energy's investment, Mr. Robert Bose was also invited to join the Board (May 2024). Robert has been the Managing Member of Charlestown Energy 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 speci?cal focus on the energy and power sectors. Robert is currently also serving as Chief Executive Officer of Sintana, which as noted represents a signi?cant holding in Charlestown Energy's current portfolio. Robert's addition to our Board is extremely complementary, giving us the bene?t of his experience, network, and industry insights that are highly relevant to Challenger Energy's position in Uruguay.
Indeed, the combination of the Chevron partnership for AREA OFF-1, and adding Charlestown Energy to the register and Robert to the Board, appears to have made a difference, in that over the course of the past 18 months we have seen an increasing number of new (and longer-term focused) institutions, family offices and high net worth investors join our register. In particular, we have seen a strong increase in interest from North American-based investors, and we have thus made a concerted effort to market our Company more widely, alongside our normal investor engagement activities in the UK. As part of this effort, we listed on the OTCQB Ventures Market (April 2025), which affords US-based investors a much easier route to becoming shareholders in Challenger Energy - early uptake from investors in that market has been encouraging.
FINANCIAL PERFORMANCE AND FUNDING
For the 2024 period under review, we recorded a loss of $1.1 million (2023: $13.4 million). This includes the impact of the gain made on completion of the AREA OFF-1 farmout, as well as various non-cash items, most notably non-cash losses arising from accounting impairments associated with the Trinidadian assets.
Given the nature of our business, in past Annual Reports we have identi?ed "burn" as the most relevant metric to evaluating our ?nancial performance - that is, the amount of cash used in running/sustaining our business across any given period. In that respect, as noted, during 2024 our Trinidad and Tobago operations continued to operate on a largely self-sustaining basis (thus requiring minimal cash support), and the G&A cost for the rest of our business was $3.9 million, or approximately $324,000 per month. This is an increase of 37% as compared to 2023 ($2.4 million), but the 2024 ?gure includes a number of sizeable one-off amounts associated with the Chevron farmout (for example, legal and commercial advisory fees and success fees). If these are excluded, our 2024 overhead was consistent with that of 2023, and below the $200,000 per month cash "burn" target that we have had for many years: a level which represents the basic costs needed to stay in business as an AIM-listed vehicle, and which compares favourably with most of our peers.
Undoubtedly the ?nancial highlight of 2024 was the receipt of $12.5 million in cash on closing of the AREA OFF-1 farmout. This enabled us to completely "clean house" in a ?nancial sense - settling all outstandings, de?nitively addressing any legacy ?nancial exposures, and ensuring that our funding needs for the coming years are fully met. We ended 2024 with approximately $8.4 million of unrestricted cash holdings (plus we had a further $1.3 million of restricted cash, which is money held in support of work programme performance guarantees and bonds, and which will be released back to us over time once work programme commitments are ful?lled). Against this robust cash position we have no debt, our "burn" is low (as noted, we target keeping it below $2.4 million per annum), the minimum work programme on AREA OFF-1 in Uruguay has been completed and our share of costs for upcoming 3D seismic will be carried by Chevron, the work programme for AREA OFF-3 is modest, and we have no unfunded forward work programme commitments.
This is signi?cant, in that it means we have adequate ?nancial resource available to ensure that all currently expected costs and future operations for all of 2025, 2026, and into 2027 are fully-funded. This level of clear ?nancial runway is a relatively rare situation for most "junior" E&P companies, and certainly puts Challenger Energy into the best position, capital-wise, it has been in for quite some time. This does not take into account the possibility of additional funding in?ows in this time frame - with AREA OFF-1 we have retained a relatively large 40% working interest and thus the ability to farmout a further interest in that asset; with AREA OFF-3, like with the AREA OFF-1 farmout, we will be seeking a cash element to any farmout transaction. Success in either case would secure the balance sheet even further into the future.
ESG (Environmental, Social, and Governance)
A core value we have sought to embed into everything we do at Challenger Energy is to ensure that achieving our commercial objectives never comes at the expense of harm to people or the environment, and that our "social licence to operate" is maintained intact at all time. We want to be known as a responsible, reliable operator and a partner / employer of choice.
I am thus pleased to report that in 2024, across all of our operations, there were no incidents of note - whether personal injury, property damage or environmental. We maintained productive and positive relationships with all relevant Governments and regulatory bodies, and we continued our policy of investing considerably in Company-wide training programs and ESG awareness activities. As in previous years, we also made a number of targeted social and welfare contributions in the communities where we operate.
In summary, in 2024, the Company's excellent ESG performance record continued. Everyone at Challenger Energy is committed to ensuring that this does not change in the future.
OUTLOOK
During 2024 we cemented our position as one of the largest acreage holders in Uruguay, and we showed that we are a company that does what it promises to do - technically, through excellent work; commercially, in being able to reach a market-leading farmout for the AREA OFF-1 block; and strategically, in developing an enviable position that no other junior player was able to develop, in what has become a global exploration "hot spot".
In the next 12-24 months we expect to see Chevron rapidly take the AREA OFF-1 project forward, initially with a 3D seismic acquisition campaign and thereafter, assuming the results of the 3D are as we anticipate, exploration well drilling. In the same timeframe we will conclude our technical work programme for AREA OFF-3, with a view to then securing a partner via a farmout process - again, the ultimate objective being to see that block move forward to exploration well drilling. All of this activity will occur against a backdrop of heightened industry interest in the region, and substantial exploration work being undertaken by others offshore Uruguay, northern Argentina, and southern Brazil. And, over the next 12 months, we also expect to conclude our efforts to extract value from our assets in Trinidad and Tobago, as well as reach a resolution in relation to our licences in The Bahamas.
In concluding my review of 2024, I wish to express my appreciation for the support we received throughout the year from our Board, stakeholders, regulators, suppliers, contractors and shareholders. I would also like to take this opportunity to especially thank all of our team. I say it each year, and I mean it sincerely: although we are a small company, we have highly-skilled, committed, and loyal employees, whose hard work and dedication is the foundation on which our success over the past few years has been built.
As I noted at the start of this report, 2024 was a transformational year for Challenger Energy, such that I believe the outlook for our Company over the coming 12-24 months is strong. Multiple value-creating opportunities now lie before us, and your management is working every day, to ensure that we are able to capitalise on these opportunities in a way that creates maximum value for shareholders.