Proactive - Interviews for investors
Challenger Energy's transformational first half with Chevron farm-out
Challenger Energy Group PLC (AIM:CEG, OTC:BSHPF) CEO Eytan Uliel talked with Proactive about the company's transformational progress in the first half of 2024, focusing on the successful farm-out deal with Chevron for the OFF-1 block in Uruguay.
Uliel emphasised that this agreement is pivotal for the company's future, with Challenger set to receive $12.5 million once the deal closes. He stated, "We will be fully funded for the immediate future," as the company is carried through Chevron's upcoming 3D seismic campaign, planned for early 2024.
Uliel also discussed plans for a similar farm-out deal for the OFF-3 acreage, highlighting that technical work is progressing well, with potential well drilling in both blocks over the next few years. Additionally, Uliel addressed the company's core assets in Trinidad and Tobago, where a shift in strategy has seen improved operational efficiencies and cost reductions.
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- Broadcast on:
- 03 Oct 2024
- Audio Format:
- other
- Hello, you're watching Pro-Active. I'm joined by challenger energy CEO, Etan Yuliel. Etan, very good to speak with you. You're asked your interim results this week and you describe it as a transformational first half. As you moved forward with the far mark deal with Chevron, tell us more about the highlights. - Hi, well, first of all, thanks for having me again. Always lovely to be here. Yeah, look, the first half of 2024 has really been transformational for us. The main highlight, the thing that everybody's focused on, is we have the area of one blocking Uruguay. And in March, after a process that took quite some time, we announced that we had farmed that out to Chevron on what I think is a really excellent far-mount agreement. And subsequent, I guess, to the period end, but pleasingly last week, we were able to advise that the government of Uruguay has approved the far-mount. There's now a little bit of administrative stuff that needs to be done, and as we said last week, we think we'll get through all of that in the next four to eight weeks. So really, that far-mount is on track for closing soon. When it closes, firstly, we receive a check for $12.5 million, which means that the company is really, everyone likes to say it, but in our case, it will be true. We will be fully funded for the immediate future. We have a very low overhead operating cost. The more important thing is, as soon as it closes, Chevron are intent on getting one with an accelerated 3D seismic campaign. They want to start that in the next available seismic shoot window, which is early next year. And the deal with Chevron is we're carried through that program. So really, there's a lot of activity that'll come up, and that activity is what we think is going to add a lot of value to the asset and to our company. So it really is transformational. It's also very exciting times for us. It's taken a long time to get here, and now we're at the beginning of the next phase. - Eitan, you're also looking at doing a similar deal with the off three acreage, also off the coast of Uruguay. How are you progressing with that? - We're progressing well. I mean, off three, we picked that license up only at the middle of last year. That license is slightly different to off one, in that it already has 3D seismic data, off one doesn't. So the work we did on off one was reprocessing of 2D seismic, which we were then able to shop successfully in a farmout, and Chevron will be moving forward and shooting 3D. With off three, there already is 3D. So what needs to happen is that 3D needs to get licensed, reprocessed and reinterpreted, some new technologies applied, ABO analysis, and then we can launch straight into a farmout process. So we've started that technical work. I think we said last week, we expect that to be finished in the next six to nine months. And so by the middle of next year, we will have new data, new information, we can start a formal farmout process. And again, we hope to really follow the exact same trajectory as we did for Area Off One, bringing in a reputable international, ideally super major who can carry that project. And there, unlike Area Off One, there's no need for shooting 3D. You can move directly into well drilling. So if everything goes well, we'll see wells being drilled on both blocks in the next couple of years. - And the in-time business as usual with your core assets and Trinidad and Tobago? - Business as usual, I mean, I've made no secret of the fact that it's been hard-going. We originally purchased these assets through a merger, and the expectation is we'd be able to apply an assortment of mature oil field management techniques and EOR projects and really boost production. The age and character of the fields meant that that hasn't happened. And so during the course of last year, we shifted strategy. The idea was, well, at least let's get these fields to a place where they cover their own costs, they break even operationally, and anything that's non-core to that will dispose of exit monetize in some way. And we've done really well according to that revised plan. We've got rid of a bunch of non-core assets. We sold a few, we exited a couple. And the things that remain, we've really focused on stabilizing production. Tick, we did that, reducing costs, that's happened. And we're now at a place where those really are break even covering themselves. And it affords us now the space over the next little while to decide how to take that business to the next stage. We do have to find a way to improve it so that it becomes profitable and worth holding onto or find a way to monetize our position and really focus in on Uruguay. - Well, as you move into the next phase with your area of one license, what is the second half-holding store for the company at home? - Well, firstly, completion of the farm out, I mean, that's everybody's looking to that. And, you know, until it's done, it's not done. As I said, we're really into the final administrative parts. Immediately after that, people will be able to see activity kick off Chevron planning for the 3D campaign, activity on all three. So a busy time for the company over the next six months. And this is what we're in it for. You know, if you're an exploration company, it's all about getting out and exploring and developing your data, getting new data, seeing size, seeing Wells drill. So we have a pretty clear trajectory over the next couple of years that we'll see all of those things happening. - I hope you'll keep us posted on any progress you make. Thank you very much for speaking with us today. - We will do. Thanks. Bye. - That's a challenge. Our energy CEO, Aitane Leon. (air whooshing)