Challenger Energy Group (LON:CEG) has officially signed the AREA OFF-3 licence agreement, marking a significant step in its offshore operations in Uruguay. This agreement initiates the first exploration period starting on June 7, 2024, and extending through June 6, 2028.
The AREA OFF-3, covering an area of 13,352 square kilometres in water depths ranging from 20 to 1,000 meters, is situated approximately 100 kilometres off the Uruguayan coast. It boasts extensive seismic data and contains two major prospects with potential resources estimated at up to 2 billion barrels of oil and 9 trillion cubic feet of natural gas.
The initial exploration phase involves manageable minimum work commitments, including the licensing and reprocessing of existing 2D seismic data and the completion of two geotechnical studies. Challenger Energy plans to potentially exceed these requirements to enhance the area’s attractiveness for partnership opportunities, following the successful model used in their AREA OFF-1 licence.
The company’s strategy aims to mirror the success achieved with AREA OFF-1, anticipating a swift farm-out process for AREA OFF-3. This approach is expected to expedite technical advancements, enhance prospect evaluation, and attract strategic partnerships, thereby diversifying the company’s portfolio and increasing the likelihood of exploratory drilling upon successful collaboration.
Brendan Long, Analyst at WH Ireland said, “This expected development is positive for Challenger Energy because it sets the scene for technical work to be advanced on an accelerated basis with the objective of high-grading existing prospects and identifying new plays and prospects, and ultimately will allow for the introduction of a strategic partner into AREA OFF-3.
The development is significantly positive to the extent that it increases diversification into the company’s portfolio and will ultimately lead to more exploratory drilling, assuming a successful farmout.
Based on our assessment, we are highly confident that AREA OFF-3 will farmout in due course on the basis that it is the last available offshore block in Uruguay that is prospective for exploration concepts that are comparable to the super-giant Cretaceous margin, shelf and basin plays being successfully explored in the offshore Orange Basin of Namibia. As a reminder, Uruguay is the geological mirror of Namibia because they shared a common seaway during the Cretaceous period; although, over time, the rifting of the Atlantic ocean subsequently separated Africa from South America, they share a common petroleum system for Cretaceous targets.
We see interest in the exploration prospectivity offshore Uruguay growing further given the scale of the success in Namibia and the successful exploration hit rates being observed there combined with increased confidence in the price of crude oil and corresponding financial strength of the oil & gas sector to fund exploration. This belief is corroborated by the advantageous terms of Chevron’s farmin to the company AREA OFF-1, which we believe might be replicated, in due course, for AREA OFF-3.”
Challenger Energy Group plc (LON:CEG) is a Caribbean and Atlantic margin focused oil and gas company, with a range of petroleum assets located onshore in Trinidad and Tobago, and Suriname, and offshore in the waters of The Bahamas and Uruguay.
