Challenger Energy has, through its wholly-owned Uruguayan subsidiary CEG Uruguay, entered into farm-out agreement with Chevron for the 60% interest in the AREA OFF-1 block offshore Uruguay.
As part of the agreement, Chevron will acquire a 60% participating interest in the AREA OFF-1 block, and will assume operatorship of the block, while CEG Uruguay will retain a 40% non-operating interest in the block.
Chevron will pay to CEG $12.5 million cash on completion of the transaction, and these funds will be used to support the further development of the company’s business.
Also, Chevron will carry 100% of CEG Uruguay’s share of the costs associated with a 3D seismic campaign on AREA OFF-1, up to a maximum of $15 million net to CEG Uruguay.
Following the 3D seismic campaign, should Chevron decide to drill an initial exploration well on the AREA-OFF 1 block, Chevron will carry 50% of CEG Uruguay’s share of costs associated with that well, up to a maximum of $20 million net to CEG Uruguay.
Completion and financial close of the transaction will be subject to the satisfaction of conditions precedent and customary third-party approvals from the Uruguayan regulatory authorities, which are anticipated to take several months to finalise - the parties have commenced engagement with the regulators.
“We firmly believe that AREA OFF-1 holds enormous potential, and this farm-out is strong validation of the high-quality technical work CEG has done to-date. Our stated strategy for AREA OFF-1 was to introduce a larger industry player as operating partner, with a view to rapidly progressing the block via an accelerated 3D seismic campaign followed by, we hope, exploration well drilling.
“The farm-out achieves this aim, and we look forward to continuing on our exciting journey in Uruguay, both on AREA OFF-1, now in partnership with Chevron, and also on our still wholly owned AREA OFF-3 block,” said Eytan Uliel, Chief Executive Officer of Challenger.
The AREA OFF-1 block is a large offshore block covering approximately 14,557 km2, located approximately 100 kms offshore Uruguay in water depths ranging from 80 meters to 1,000 meters.
CEG Uruguay was awarded the AREA OFF-1 license in June 2020 under the Open Uruguay Round process. Formal signing of the license took place on May 25, 2022, and the license’s initial four-year exploration term started on August 25, 2022.