Challenger Energy (CEG ), a Caribbean and Americas-focused oil and gas producer, announced a heads of terms with Predator Oil & Gas Holdings for the sale of Challenger's 83%-owned Cory Moruga license in Trinidad.
Additionally, Challenger and Predator agreed a framework for future CO2 collaboration, as well as a settlement in relation to the Inniss-Trinity CO2 enhanced oil recovery (EOR) pilot project, previously carried out by Predator at Challenger's Inniss-Trinity block.
Terms of sale
The binding heads of terms has been signed for the conditional sale of Challenger's 83% interest to Predator in the Cory Moruga license in Trinidad, including the Snowcap oil field, by way of sale of 100% of T-Rex Resources' share capital, with retention of 25% future back-in right based on future drilling EOR activity and associated future production.
T-Rex Resources is Challenger's wholly owned subsidiary.
The agreement stipulates for up to a US$9m aggregate value proposition for Challenger, including US$2m in staged cash consideration, US$1m in contingent cash consideration, removal of all liabilities and potential exposures associated with Cory Moruga, retention of residual back-in rights, and a full settlement with Predator of all matters relating to the Inniss-Trinity CO2 EOR pilot project.
Cory Moruga
Cory Moruga is a direct license from the Trinidadian Ministry of Energy and Energy Industries (MEEI), in which Challenger's wholly-owned T-Rex Resources holds an 83.8% operating interest, alongside its partner Touchstone Exploration, which has a non-operating 16.2% interest.
The Cory Moruga license includes the Snowcap oil discovery, with oil was previously produced on test from the Snowcap-1 and Snowcap-2ST wells. On the basis of these production tests, a development plan was submitted in 2018, prior to Challenger taking control of the asset. However, the block has not been further developed since that time.
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This is a beneficial agreement to both Challenger and Predator:
- For Challenger, Cory Moruga is a non-core and currently non-producing asset. Following the acquisition of Columbus Energy Resources in 2020 and a detailed review of its Trinidad portfolio, Challenger concluded that further appraisal was needed for Cory Moruga, and the project has been tabled since.
- In contrast, Cory Moruga is an ideal candidate for Predator's CO2 enhanced oil recovery (EOR) pilot project. Predator therefore intends to take the block forward to production on an aggressive schedule. Should Predator be successful, Challenger retains the ability to come back in to a 25% interest.
Additionally, per terms of the agreement, Challenger and Predator will establish a broad collaboration in relation to CO2 EOR activities as well as potential application of CO2 EOR techniques across Challenger's other assets, which will benefit both companies. EOR is a more environmentally-friendly method of extraction that will be needed to unlock Cory Moruga's value.
The transaction will result in cash receipts of US$2m for Challenger through 2023, and a further US$1m contingent on commercial production at Cory Moruga, in addition to value from the aforementioned back-in right.
Investors can learn more about the progress Challenger Energy has made this year HERE:
Challenger stock climbed as much as 14% on the news today, and is currently up c. 3% as holiday volatility settles in amid thin trading volumes.
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