Challenger Energy (CEG ), a Caribbean and Americas-focused oil and gas producer, updated markets on its 2023 strategy and work programme in 4 countries of operation: Uruguay, Trinidad, Suriname, and the Bahamas.
Uruguay
Uruguay will be Challenger's main focus in 2023, given the industry's increasing interest in the country, and particularly the AREA OFF-1 block where Challenger operates. The block has seen successful drilling by Shell, TotalEnergies, and further awards of offshore Uruguayan licences to major oil developers including Shell, APA, and YPF.
Challenger said it expects to complete its 4-year initial exploration commitment of AREA OFF-1 in 2Q23 while simultaneously seeking farm-out partners. Challenger also said it is considering offshore green energy opportunities on or near AREA OFF-1.
Trinidad
In Trinidad, Challenger will focus on its core operations in the Goudron and Inniss-Trinity fields. It is also considering new license applications, M&A, and joint programmes with neighbouring operators. Outside this core area, Challenger has focused on offloading assets while maintaining upside exposure, most recently with the disposals of its Cory Moruga licence and subsidiary Caribbean Rex.
Surinam
In Suriname, Challenger has secured an extension to the initial exploration term of its Weg Naar Zee PSC. Following completion of a technical study by end of April 2023, Challenger will undertake drilling and testing of a pilot well over the next 12 months, while also looking at farmout options.
Bahamas
In the Bahamas, Challenger said it continues discussions with the government in relation to expanding its license into a third 3-year exploration period.
In terms of cash and funding, Challenger had c. US$2.7m in the bank at the start of 2023 and no debt.
View from Vox
Challenger presented an ambitious plan for 2023 to focus on core assets, near-term value, and cut costs. Markets welcomed the company's new direction, sending CEG shares up 4% in early trading.
Challenger's plan for Uruguay's AREA OFF-1 offers the most near-term value, as the company nears the end of its work programme, seeking a farmout this year while looking at broader opportunities in the country, including offshore renewables.
In Trinidad, we reported on Challenger's US$9m Cory Moruga sale to Predator in December, and this week's US$1.5m sale of subsidiary Caribbean Rex. Both deals are in keeping with Challenger's strategy in Trinidad to drive profits from its core assets and offload its small/non-core assets to offset operating and financial risks while retaining exposure to success upsides.
Following the aforementioned disposals in Trinidad, Challenger will have no drilling obligations in the country in 2023, therefore all 2023 Trinidad field activities will be supported from local operating cashflows. Including the disposals in Trinidad, Challenger expects cash inflows through 2023 of more than US$3m, possibly more should a successful farmout in Uruguay also take place.
Challenger is starting 2023 with a strong balance sheet and no debt. Existing cash and identified cashflows mean the company is not under funding pressure.
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