Challenger Energy (CEG ) said it is selling oil from the Saffron-2 appraisal well and generating immediate revenues after establishing a commercial production rate at the site of 81 bopd. 

Challenger Energy has a 100% operating interest in the well and the broader Saffron project.  The Saffron-2 appraisal well, which was successfully drilled and completed in early July 2021, represents Challenger Energy's first operated drilling onshore Trinidad. 

To date, the Caribbean and Atlantic margin focused oil and gas company has established a commercial production rate of 81 barrels of oil equivalent per day (bopd) at the Saffron-2 appraisal well in Trinidad and Tobago from around 66 feet of Middle Cruse reservoir units. 

Challenger said produced oil is being sold and generating immediate revenues. This follows the completion of first phase of testing focussed on the Lower Cruse formation where around 133 ft of various Lower Cruse sands were perforated and flow tested. 

A second phase of testing focused on the Middle Cruse formation where 66ft of various Middle Cruse sands (below 1300ft and above 4,000ft) were perforated and flow tested. 

It said ‘the well continues to clean-up’ and reported that oil production of approximately 81 bopd has been observed (200 API), with produced oil being gathered and sold. 

The Group expects to increase production by optimising the production parameters as flow rates become better understood, as well as by producing from a further 11ft of reservoir as yet unperforated in the Upper Cruse, to add to the production mix in due course. 

“Pleasingly, testing in the Middle Cruse has resulted in an economic level of production thus far being achieved, and we are working to increase production further,” said CEO, Eytan Uliel. 

“We are already selling the oil being produced, so for the immediate future the plan is to maximise production revenues from those Middle Cruse units, as well as bringing on additional production from the as yet unperforated Upper Cruse units, in due course.” 

It outlined to investors that production volumes from this horizon deliver immediate income and cash flow to the Company and represent a material uplift in the Company's overall net production (which is currently ranging between 400 to 500 bopd, inclusive of Saffron-2). 

As such, Challenger said the plan for the foreseeable future is to continue to run maximum production at Saffron-2 from the currently producing Middle Cruse reservoir units. 

The Group said the Saffron-2 well ‘has demonstrated the ability to drill and produce at the Saffron project on an economic basis - albeit that aggregate well production rate at this time, without the benefit of Lower Cruse production, is below that targeted pre-drill.’ 

‘Importantly, however, high-quality oil has been produced to surface naturally from the Lower Cruse at Saffron, thereby proving the presence of mobile hydrocarbons in those zones.’ 

The Company considers that techniques identified for remediation of the technical and mechanical issues experienced in the Lower Cruse (due to the impact of non-reservoir clay and shales) will enable these zones to contribute to the production of the Saffron project.  

Challenger explained that well data and projection of aggregated well performance is being used to reassess overall Saffron field resources and economics, with work underway to determine the optimal forward plan for development of the Saffron project as a whole. 

It said these operations ‘also provide a significant input into defining the prospective and contingent resources for both the Saffron location and other targets within the Company's South West Peninsula portfolio, which will contribute to an update of resource estimates.’ 

“We have preserved the ability to re-enter and produce the lower zones of Saffron-2 in the future, and we are incorporating the knowledge gained into the design of future Saffron wells.    

Focus now turns to integrating what we have learned from this well, to updating our resource estimate accordingly, and to defining the best way forward for the project as a whole - building production and cash flow remains our overarching strategic imperative,” added CEO, Uliel. 

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The initial phase of developing the Saffron field will involve drilling between five to nine production wells at an estimated capital cost of US$12 - US$20m. This initial program is projected to achieve an average daily production of 1,000 - 1,500 bopd which, based on a US$60/bbl oil price, could generate annualised net operating cash flows of up to US$12m.  

Thereafter, the current anticipated full-field development for the Saffron project could ultimately comprise up to 30 wells in total, with a projected peak production of approximately 4,000 bopd, potentially generating annualised net operating cash flows of up to US$25 million.  

Following a successful first phase of development of the Saffron project, Challenger expects that it will be able to fund the balance of the overall field development from ongoing cash flow generated from Saffron field production. Accordingly, the facility contemplated under the Term Sheet is expected to be sufficient to fund the first phase of development of the Saffron project.  

In June, Challenger told investors that it was making “solid progress” against its goal to reset the business with its core strategic objective focused on growing production and cashflow.   

Reasons to  CEG

Challenger Energy is a Caribbean and Atlantic margin focused oil and gas firm with a full life cycle of exploration, appraisal, development and production assets and licences. It has assets onshore in Trinidad and Tobago, Suriname and offshore in The Bahamas and Uruguay.       

During 2020, Challenger successfully transitioned from a single purpose company into a broader, multi-faceted investment opportunity following its merger with Columbus Energy.    

The merger has enabled it to acquire and manage larger exploration licence targets across four key jurisdictions, while it also continues to advance its existing projects in the Bahamas.      

Trinidad and Tobago:    

  • Five producing fields      
  • Two appraisal / development projects      
  • A prospective exploration portfolio in the Southwest Peninsula      
  • Suriname      
  • Onshore appraisal / development project      
  • Challenger considers its exploration licences in Uruguay and The Bahamas as highly prospective and expects them to offer high-impact value exposure within its portfolio value.   

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