Challenger Energy has announced that it and its wholly-owned Uruguayan subsidiary, CEG Uruguay SA have entered into a farm-out agreement with Chevron Uruguay Exploration Limited , a wholly-owned subsidiary of Chevron Corporation related to a 60% interest in the AREA OFF-1 block, offshore Uruguay.
The primary terms of the Transaction are:
- Chevron will acquire a 60% participating interest in the AREA OFF-1 block, and will assume operatorship of the block.
- CEG Uruguay will retain a 40% non-operating interest in the block.
- Chevron will pay to CEG US$12.5 million cash on completion of the Transaction, these funds will be used to support the further development of the Company's business.
- 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 US$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 US$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.
Eytan Uliel, Chief Executive Officer of Challenger said: "We are absolutely delighted to announce the farm-out of our AREA OFF-1 block in Uruguay to Chevron, a globally recognised industry leader. 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. We are grateful to ANCAP for the confidence shown in CEG when awarding these blocks, and we thank our stakeholders for their continuing support."