Challenger Energy shares rally as Chevron deal nears approval in Uruguay

Challenger Energy Group PLC (AIM:CEG, OTC:BSHPF) shares gained around 10% on Monday, boosted by the news that its farm-out deal with Chevron in Uruguay was nearing approval in the South American country.

It struck the deal with Chevron back in the first quarter of the year, and it has supported the share price to the tune of 34% in the year-to-date.

The deal itself sees Challenger bank $12.5 million of cash, along with a substantial carry on future exploration spending to advance the high-potential offshore project.

Chevron will own around 60% of the exploration going forward, and its committed to fund a 3D seismic data acquisition programme and after that, subject to results, would cover some $20 million of Challenger’s share of well costs.

A key approval

Challenger today told investors that the deal received a key approval, and final sign-off is expected in a matter of weeks.

It saw Challenger’s shares rise 9.84% to 6.7p – albeit the price reached 7.5p at one point in the day’s trading.

The company, in a statement, said that on 19 September the proposed transaction was approved by ANCAP, the Uruguayan state-owned oil company with regulatory responsibility for offshore licences.

It now awaits the final regulatory steps – notification of the deal to the Uruguayan Ministry of Industry, Energy and Mining, and filing of the agreement with the Uruguayan Ministry of Economy and Finance for registration.

Challenger chief executive Eytan Uliel told investors that the company expect the transaction to complete in four to eight weeks.

"The farmout of our AREA OFF-1 block in Uruguay is transformational for Challenger Energy,” he said in a statement.

“Since entering into the farmout agreement we have been diligently working through various regulatory approval processes, culminating in ANCAP now having formally approved the farmout, which is the key approval required.

“We do not anticipate that remaining procedural processes will take long to complete, so we expect full completion of the farmout within the next four to eight weeks.”

Uliel added: “This in turn will enable Chevron, as incoming operator of the block, to move forward with 3D seismic acquisition on an accelerated basis, targeting commencement in early 2025.

“The coming months will thus be a busy and exciting time for our Company - we will keep shareholders advised of continued progress."