Challenger Energy, through its wholly-owned Uruguayan subsidiary CEG Uruguay, has entered into a farm-out agreement with Chevron for a 60% stake in the AREA OFF-1 block offshore Uruguay.
As part of the agreement, Chevron will acquire a 60% interest in the AREA OFF-1 block and assume operation of the block, while CEG Uruguay will maintain a 40% non-operating interest in the block.
Chevron will pay CEG US$12.5 million in cash upon completion of the transaction, and these funds will be used to support the company's future business development.
Additionally, Chevron will bear 100% of CEG Uruguay's share of the costs associated with a 3D seismic campaign in the OFF-1 AREA, up to a maximum of US$15 million net for CEG Uruguay.
After the 3D seismic campaign, if Chevron decides to drill an initial exploration well in the AREA-OFF 1 block, Chevron will pay 50% of CEG Uruguay's share of the costs associated with that well, up to a maximum of US$20 million net for CEG Uruguay. .
The completion and financial closing of the transaction will be subject to the fulfillment of conditions precedent and customary third-party approvals from Uruguayan regulatory authorities, which are expected to take several months to be finalized – the parties have begun engagement with regulators.
“We firmly believe that AREA OFF-1 has enormous potential, and this farm-out is a strong validation of the high-quality technical work that CEG has carried out to date. Our stated strategy for AREA OFF-1 was to introduce a larger industry player as an operating partner, with a view to rapidly progressing the block through an accelerated 3D seismic campaign followed, we hope, by the drilling of exploration wells.
“The farm-out achieves this goal and we look forward to continuing our exciting journey in Uruguay, both in AREA OFF-1, now in partnership with Chevron, and in our AREA OFF-3 block, still wholly owned,” said Eytan Uliel, CEO of Challenger.
The AREA OFF-1 block is a large offshore block covering approximately 14,557 km2, located approximately 100 km off the coast of Uruguay, in water depths ranging from 80 meters to 1,000 meters.
CEG Uruguay received the AREA OFF-1 license in June 2020 as part of the Uruguay Open Round process. The formal signing of the license took place on May 25, 2022, and the initial four-year exploration term of the license began on August 25, 2022.
