Challenger Energy Group PLC (AIM:CEG, OTC:BSHPF) shares soared in Wednesday’s early deals thanks to its pivotal, value-adding farm-out deal with Chevron for the junior explorer’s project offshore Uruguay.
The AIM-quoted firm will receive $12.5 million of cash upfront along with funding and spending commitments for the exploration project.
Chevron will acquire a 60% interest in the project. It agrees to cover all the costs of a planned 3D seismic data acquisition programme, up to $15 million, and, up to $20 million of Challenger’s share of well costs (should the project proceed to drilling).
Challenger, meanwhile, retains 40% of the exploration project.
The transaction remains conditional on regulator approval in Uruguay, which the company said could take several months.
"We are absolutely delighted to announce the farm-out of our AREA OFF-1 block in Uruguay to Chevron, a globally recognised industry leader,” Challenger chief executive Eytan Uliel said in a statement.
“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."
Uliel added: “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."
In London, Challenger shares jumped around 76% to trade at just under 0.22p each, having traded as high as 0.28p in opening trades.