TIDMCEG
RNS Number : 5725B
Challenger Energy Group PLC
05 June 2023
5 June 2023
Challenger Energy Group PLC
("Challenger Energy" or the "Company")
AREA-OFF 3 - URUGUAY
Challenger Energy (AIM: CEG), the Caribbean and Americas focused
oil and gas company, with a range of oil production, development,
appraisal, and exploration assets, is pleased to advise that it has
bid for, and now anticipates being awarded, the AREA OFF-3 licence,
offshore Uruguay.
HIGHLIGHTS
-- CEG has bid for and expects to be awarded the AREA OFF-3 licence, offshore Uruguay.
-- AREA OFF-3 is the sole remaining available block offshore
Uruguay; all other offshore exploration licences are held by energy
majors Shell and Apache and YPF, the Argentinian national oil
company.
-- The AREA OFF-3 licence is 13,252 km(2) , and will increase
CEG's total Uruguay acreage holdings to 2 8,000 km(2) , making CEG
the second largest offshore acreage holder in Uruguay behind
Shell.
-- AREA OFF-3 is located in relatively shallow water, with
existing 2D and 3D seismic coverage. The block has a current
estimated resource potential of up to 500 million barrels of oil
equivalent ("mmboe") and up to 9 trillion cubic feet gas ("TCF"),
from multiple exploration plays.
-- CEG's AREA OFF-3 bid consisted of an initial 4-year
exploration period, with a work program limited to reprocessing and
reinterpretation of 1,000 kms of 2D seismic data.
-- Award of the AREA OFF-3 licence to CEG will represent a
successful expansion of the Company's high quality, frontier play
opportunity in Uruguay - a fast emerging global exploration
"hotspot" - and is consistent with a strategy of targeting high
impact Atlantic margin opportunities.
Eytan Uliel, Chief Executive Officer of Challenger Energy,
said:
"We are delighted to advise that on 2 June 2023, ANCAP publicly
announced the details of Challenger Energy's offer for the AREA
OFF-3 licence, which is the precursor step for the formal award of
the licence to CEG, and which we understand should occur in the
next 3-4 weeks.
AREA OFF-3 possesses identified prospects of material scale, and
our immediate work focus will be a comprehensive technical
reassessment of the block, applying modern 2D seismic re-imaging
and our subsurface knowledge of the Uruguayan offshore margin,
similar to the successful geotechnical de-risking approach we have
applied on AREA OFF-1.
Strategically, the award of this licence will cement CEG's
position as a significant participant in Uruguay, a country that
has fast become one of the world's frontier exploration hotspots.
At the same time, our bid for the AREA OFF-3 block demonstrated the
same disciplined and opportunistic approach we have taken in the
past: acting strategically and nimbly to secure large and promising
acreage, yet with low-cost work obligations, discretionary
expenditure phasing, and no new seismic acquisition or drilling
commitments.
We are especially appreciative of the confidence shown in CEG by
the Uruguayan regulatory authority, ANCAP. Over the next four years
we intend to further grow that confidence by applying our basin
expertise and fully evaluating the licence's potential. We
anticipate that we can create an opportunity of comparable value
and industry interest to what we have thus far identified with AREA
OFF-1, to the benefit of both Challenger and ANCAP."
Overview
As part of the Open Uruguay Round, First Instance of 2023, CEG
submitted a bid for the AREA OFF-3 block, offshore Uruguay. The
Company is pleased to advise that on 2 June 2023, Administración
Nacional de Combustibles Alcohol y Pórtland ("ANCAP"), the
Uruguayan national regulatory agency, published on its website that
CEG 's offer for AREA OFF-3 was received, outlined the terms of
CEG's offer, and noted that there are now no further available
offshore blocks in Uruguay. No other offers for AREA OFF-3 are
referenced in ANCAP's communication.
The Company is advised that this thus represents the precursor
step to formal award of the block to CEG, with the process of
finalising the award expected to take 3-4 weeks. Refer to
https://exploracionyproduccion.ancap.com.uy/innovaportal/file/18158/1/2023-05-rua-first-instance-2023-v3.pdf
The award of AREA OFF-3 will expand the Company's licence
holding in Uruguay to two blocks, in the offshore Punta del Este
and Pelotas sedimentary basins (AREA OFF-1 and AREA OFF-3), and
will position the Company's acreage on either side of Shell's AREA
OFF-2 block.
AREA OFF-3 has many operational and subsurface similarities to
the AREA OFF-1 licence: comparable size acreage in similar water
depths, both exhibit multiple, stratigraphic plays and complement
each other with play diversity while demonstrating similar
exploration upside.
The commercial terms and work program bid by CEG for the AREA
OFF-3 licence are similar to those for the AREA OFF-1 licence,
providing for an initial 4-year exploration period, during which
CEG will be required to reprocess approximately 1,000 kilometres of
legacy 2D seismic and undertake two new geotechnical studies. The
Company expects that the cost of the work program in the initial
4-year exploration period will be approx. US$100,000 per annum.
Apart from the costs of completion of the minimum work program
there are no annual licence fee payments, no seismic acquisition
(2D or 3D) or drilling is required in the initial 4-year period,
and extension into a second exploration period is at CEG's
discretion.
About AREA OFF-3
The AREA OFF-3 licence has a total area of 13,252 km(2) and is
situated in water depths from 20 to 1,000 meters, approximately 100
kilometres off the Uruguayan coast (refer to the map link in
Appendix A). Mapped prospects of interest are in relatively modest
water depths of 250 metres.
There has been considerable prior seismic activity and interest
on the AREA OFF-3 block, comprising 4,000 kms of legacy 2D (various
vintages) and 7,000 kms legacy 3D (2012 proprietary acquisition by
BP and leading seismic vendor PGS). The block was previously held
by BP, but was relinquished in 2016. There are no prior wells on
the block.
Two material-sized prospects have previously been identified and
mapped on AREA OFF-3 (BP & ANCAP), as follows:
-- Amalia: resource estimate (EUR mmboe, gross): P10/50/90
(ANCAP) 2,189 / 980 / 392 - the Amalia prospect straddles the
boundary with Shell's AREA OFF-2, with an estimated 25% of the
Amalia prospect contained within AREA OFF-3, and
-- Morpheus: resource Estimate (EUR TCF, gross): P10/50/90
(ANCAP) - 8.96 / 2.69 / 0.84 - the Morpheus prospect is entirely
contained with AREA OFF-3.
During the initial 4-year exploration period, CEG's technical
focus will be on the re-evaluation of the existing 2D and 3D
seismic data on the block, given the renewed interest in the types
of plays present in Uruguay triggered by the recent conjugate
margin discoveries offshore Southwest Africa. In particular, the
data and enhanced technical understanding provided from recent
activities in Namibia provides greater confidence that the regional
petroleum system charging Venus and Graff (offshore Namibia) is
likely to be present offshore Uruguay. As a result, traps that
exhibit effective sealing mechanisms, and which may previously have
been overlooked or not considered viable, are now potential
exploration targets.
Moreover, AREA OFF-3 has the advantage of the majority of the
block being covered by 3D (2012 vintage, proprietary acquisition by
BP and PGS) that could be reassessed and subjected to the latest
reprocessing technology - both in terms of reviewing existing known
prospects / plays and identifying potential new prospects / plays.
In addition, with the Amalia prospect straddling the border with
AREA OFF-2, it potentially facilitates a joint exploration
assessment with Shell (since May 2022 the AREA OFF-2 licence
holder).
As noted by ANCAP, "with this new offer [to CEG], there are no
more areas available under the Open Uruguay Round". An updated map
indicating the current and proposed licence position in Uruguay, as
published by ANCAP on 2 June 2023, is included in Appendix A.
AREA OFF-3 Licence Terms
The following Table 1 presents a summary of the key AREA OFF-3
licence terms, as bid by CEG. As noted, these are similar to the
terms applicable for AREA OFF-1, apart from the minimum work
commitment obligation and associated cost for the 2D seismic
reprocessing commitment: i.e., 1000 kms for AREA OFF-3 vs 2,000 kms
for AREA OFF-1.
Item Licence Provision Comment
Operator: CEG
-------------------------------------- -----------------------------------
Participating CEG 100%. ANCAP has the right to participate
Interest: ANCAP has the right to (up to 20%) in each commercial
back-in for up to a 20% field that is developed.
Participating Interest. To exercise that right ANCAP
must fund its relevant percentage
share of costs (including
back costs).
No limitation on CEG being
able to farm-down its working
interest.
-------------------------------------- -----------------------------------
Exploration Three exploration phases, No drilling obligation in
Periods and either: initial 4-year exploration
Minimum Work * Option 1: 4+3+3 or period.
Obligations
("MWO"): CEG can elect, but is not
* Option 2: 4+2+3 required, to enter into
Phase 2 or Phase 3 exploration
period.
Both Option 1 and 2 have
an initial 4-year exploration
period. Minimum work obligation
in this period is G&G studies
and reprocessing of 1,000
kms of legacy 2D seismic.
In Option 1 if the operator
elects to move into the
2(nd) exploration period
for 3 years, a single exploration
well is required, but there
is no relinquishment obligation.
Option 2 allows for a shorter
2(nd) exploration period
of 2 years with a 50% relinquishment
obligation and a requirement
to undertake technical
work to an agreed level,
but no drilling obligation.
Both Option 1 and Option
2 thereafter require drilling
of two wells if the operator
elects to move into the
final 3-year exploration
period, with a 30% relinquishment
obligation.
-------------------------------------- -----------------------------------
Minimum cost None specified. CEG estimates the Minimum
of MWO: Work Obligation in Phase
1 will be approximately
US$100,000 per annum.
-------------------------------------- -----------------------------------
Contract 30 years, with right to Development period can be
Term: extend to 40 years. declared at such time as
operator wishes - thus allowing
for development period of
+25 years.
-------------------------------------- -----------------------------------
Fiscal Terms: No royalties, signature An attractive, internationally
bonus, or annual rentals. comparable fiscal regime
Licence regime is based in a stable, well-regulated
on CEG as operator undertaking environment.
work and recovering costs
based on a Cost Oil model,
and thereafter a sharing
of income between CEG and
ANCAP based on a standard
industry "R factor" model
(a revenue/cost ratio model).
CEG net profit is then
taxed at normal Uruguay
corporate income tax rate
(25%).
-------------------------------------- -----------------------------------
Other Costs: The licence mandates annual No annual licence fees.
contributions to various
education and social funds
and initiatives, of approximately
US$50,000 per annum.
-------------------------------------- -----------------------------------
For further information, please contact:
Challenger Energy Group PLC Tel: +44 (0) 1624 647
Eytan Uliel, Chief Executive Officer 882
WH Ireland - Nomad and Joint Broker Tel: +44 (0) 20 7220
Antonio Bossi / Darshan Patel / Enzo 1666
Aliaj
Zeus - Joint Broker Tel: +44 (0) 20 3829
Simon Johnson 5000
Gneiss Energy Limited - Financial Tel: +44 (0) 20 3983
Adviser 9263
Jon Fitzpatrick / Paul Weidman / Doug
Rycroft
CAMARCO Tel: +44 (0) 20 3757
Billy Clegg / James Crothers / Hugo 4980
Liddy
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 in the region. The Company's
primary assets are located in Uruguay, where the Company holds high
impact offshore exploration licences, and in Trinidad and Tobago,
where the Company has a number of producing fields and
earlier-stage exploration / appraisal projects.
Challenger Energy is quoted on the AIM market of the London
Stock Exchange.
https://www.cegplc.com
COMPETENT PERSON STATEMENT
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
announcement. 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.
ENDS
ANNEXURE: UPDATED URUGUAY OFFSHORE LICENCE HOLDINGS
Source: ANCAP
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END
MSCFZGGVVDRGFZM
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