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(Sharecast News) - Challenger Energy announced on Tuesday that it has completed the farm-out of a 60% interest in its AREA OFF-1 block offshore Uruguay to Chevron.
The AIM-traded firm said that with the transaction now legally effective, it had received an immediate cash payment of $12.5m and retained a 40% non-operating stake in the block.
Chevron had assumed operatorship, and would fully fund Challenger's share of costs for an upcoming 3D seismic survey, up to $15m.
Should Chevron proceed to drill an initial exploration well, it would cover 50% of Challenger's costs for that operation, capped at $20m.
Challenger said it was working alongside Uruguay's regulatory body, ANCAP, and Chevron to ensure a smooth transition of operatorship, while planning for the seismic survey, set to begin in the first half of 2025.
"Completion of the AREA OFF-1 farmout is a game-changer for Challenger Energy - we've achieved an outcome that introduces Chevron, a recognised industry leader, as operator of the block, who will now commence with executing a considerable value-creating work program," said chief executive officer Eytan Uliel.
"The cash received and farmout terms will ensure that our company is fully funded for the foreseeable future.
"And, just as important, this farmout validates our capabilities in terms of securing early-access to promising exploration blocks, and progressing them rapidly via high-quality technical work."
Uliel said that in the coming months, the company expected to communicate plans for 3D seismic acquisition on AREA OFF-1, and at the same time it would be fully engaged in a technical work programme for its second Uruguay licence, AREA OFF-3, applying the learnings from work on AREA OFF-1.
"Our objective is to be in a position to kick off a farm-out process for that block in mid-2025.
"The next year will thus be an exciting and busy time for Challenger Energy."
At 1546 GMT, shares in Challenger Energy were up 6.74% at 6.14p.
Reporting by Josh White for Sharecast.com.