Challenger Energy Group PLC's (AIM:CEG, OTC:BSHPF) progress in Uruguay should “herald a period of significant news flow”, that’s according to analysts at Zeus Capital, which sees substantial upside to the current price.
The stockbroker, in a note, today repeated a net asset value of 27p – versus a market price of 9.42p.
“The company’s Uruguay position is the key focus, and this is gaining greater industry prominence on the back of drilling in Namibia and South Africa, and from numerous larger companies taking acreage in the country, including Shell, APA Corp (Apache), and YPF,” Zeus analyst Daniel Slater said.
Challenger on Wednesday told investors it continues to make progress towards a farm-out process for the OFF-3 Block planned for the back end of 2025, as it is gaining a better understanding of the exploration area.
In a stock market statement alongside a summit in London, it highlighted progress of its technical work – with the reprocessing of seismic data now nearly complete.
Randolph Hiscock, Challenger’s managing director for Uruguay, said that the updated data provides an improved view of the asset.
OFF-3 is one asset in the Challenger portfolio, with the OFF-1 project being the most advanced.
At OFF-1, the company is partnered with Chevron following a recent farm-out that promises to drive the project forward.
Zeus highlighted that Challenger has identified ‘three multi-hundred million barrel’ prospects in the OFF-1 licence.
Chevron will later this year shoot 3D seismic to advance the project, ahead of potential future drilling campaigns (at which point Challenger will be carried for 50% of an exploration well).
“The company is also working up the OFF-3 licence, for a potential farm-out process in mid-2025 which could target funding drilling,” Slater highlighted.
The analyst added: “There is additional potential in the company’s offshore Bahamas licence position, and Challenger is also in the process of selling its producing assets in Trinidad which will deliver cash to help support the wider business.”
Challenger’s financial position is solid – it ended 2024 with US$1.8m, before the recent receipt of US$12.5m farm-out cash from Chervron.