Challenger Energy Group PLC (AIM:CEG, OTC:BSHPF) is a ‘buy’ as the pure play on Atlantic margin specialist goes after “the world’s last unexplored frontier basin”, according to analysts at Stifel.
With a price target pitched at 50p per share, the stockbroker reckons Challenger can be worth close to five times more than its current price on the AIM-market suggests.
Key to Challenger delivering against these lofty expectations will be the small-cap’s joint venture alongside US major Chevron – which dealt into one of two projects in Uruguay via a ‘farm-out’ in 2024.
Challenger is pushing ahead with a second farm-out of its other high-potential project this year, and, if the negotiations go the same way, it promises to be another value catalyst.
The share is already up around 60% since last spring, after confirming the details of the Chevron deal.
Another deal like that would add “significant upside”, Stifel analysts highlighted.
Progress towards Chevron-led exploration drilling will be the primary focus for investors, however, with work programmes due to get underway this year ahead of a projected ‘spud date’ sometime from 2027 onwards.
First, it's anticipated that 3D seismic will be shot later this year to define targets.
Small-caps with big potential offshore exploration projects like this a few and far between nowadays, so Challenger is likely to capture investor attention and imagination.
And, Stifel sees Challenger as being on-trend.
“Deepwater exploration has seen a resurgence in activity since the invasion of Ukraine in 2022, as fears over future oil supplies have grown, which has led to successful discoveries in, for example, Suriname and Namibia,” Stifel said in an initiation note.
“We believe Uruguay is the next frontier basin in the queue for the industry to carry out that exploration and appraisal work.”