CEO Eytan Uliel interview...CEO Eytan Uliel this week talked with Proactive about the company's transformational progress in the first half of 2024, focusing on the successful farm-out deal with Chevron for the OFF-1 block in Uruguay.
Uliel emphasized that this agreement is pivotal for the company's future, with Challenger set to receive $12.5 million once the deal closes.
Here’s the interview:
Proactive: I'm joined by Challenger Energy CEO, Eytan Uliel. Eytan, you're out with your interim results this week, and you describe it as a transformational first half as you moved forward with the farm-out deal with Chevron. Tell us more about the highlights.
Eytan Uliel: Well, first of all, thanks for having me again. The first half of 2024 has really been transformational for us.
The main highlight, the thing that everybody's focused on, is we have the area OFF-1 block in Uruguay. And in March, after a process that took quite some time, we announced that we had farmed that out to Chevron on what I think is a really excellent farm-out agreement. Subsequent to the period end, but pleasingly, last week, we were able to advise that the government of Uruguay has approved the farm-out.
There's now a little bit of administrative stuff that needs to be done. And as we said last week, we think we'll get through all of that in the next four to eight weeks. So really, that farm-out is on track for closing soon.
Proactive: And what does this farm-out mean for the company?
Eytan Uliel: When it closes, firstly, we receive a check for $12.5 million, which means that the company is, really, everyone likes to say it, but in our case, it will be true — we will be fully funded for the immediate future.
We have a very low overhead operating cost. The more important thing is, as soon as it closes, Chevron is intent on moving forward with an accelerated 3D seismic campaign. They want to start that in the next available seismic shoot window, which is early next year. And the deal with Chevron is that we are carried through that program. So there's a lot of activity coming up.
That activity is what we think will add a lot of value to the asset and to our company. So it really is transformational, and it’s a very exciting time for us. It’s taken a long time to get here, and now we’re at the beginning of the next phase.
Proactive: Eytan, you're also looking at doing a similar deal with the OFF-3 acreage, also off the coast of Uruguay. How are you progressing with that?
Eytan Uliel: We're progressing well. I mean, OFF-3, we picked that license up in the middle of last year. That license is slightly different from OFF-1 in that it already has 3D seismic data, whereas OFF-1 doesn't. So the work we did on OFF-1 was reprocessing 2D seismic, which we were then able to successfully market in a farm-out. And Chevron will be moving forward and shooting 3D on OFF-1.
With OFF-3, there already is 3D data, so what needs to happen is that the data needs to be reprocessed and reinterpreted, and some new technologies like AVO analysis need to be applied. Then we can launch straight into a farm-out process. We've started that technical work, and we expect it to be finished in the next six to nine months.
So by the middle of next year, we'll have new data and new information, and we can start a formal farm-out process. Again, we hope to follow the same trajectory as with OFF-1, bringing in a reputable international, ideally a super major, to carry that project. And unlike OFF-1, where Chevron needs to shoot 3D seismic, for OFF-3 we can move directly into well drilling.
So if everything goes well, we’ll see wells being drilled on both blocks in the next couple of years.
Proactive: In the meantime, business as usual with your core assets in Trinidad and Tobago?
Eytan Uliel: Business as usual. I’ve made no secret of the fact that it's been hard going. We originally purchased these assets through a merger, and the expectation was that we’d be able to apply an assortment of mature oilfield management techniques and enhanced oil recovery (EOR) projects to really boost production. However, the age and character of the fields meant that this hasn't happened. So, last year we shifted strategy.
The idea was to at least get these fields to a place where they cover their own costs and break even operationally. Anything that's non-core, we would dispose of, exit, or monetize in some way. We’ve done really well with that revised plan. We've gotten rid of a bunch of non-core assets, sold a few, and exited a couple. And for the remaining assets, we’ve focused on stabilizing production and reducing costs.
We've achieved that, and now the fields are breaking even. This gives us some space over the next little while to decide how to take that business to the next stage. We need to find a way to improve the profitability of those assets or monetize them and focus more on Uruguay.
Proactive: As you move into the next phase with your area OFF-1 license, what does the second half hold in store for the company, Eytan?
Eytan Uliel: Firstly, the completion of the farm-out. That’s what everybody’s focused on, and until it’s done, it’s not done. But as I said, we're into the final administrative stages. Once that’s completed, we’ll immediately kick off activity, with Chevron planning for the 3D seismic campaign.
There will also be ongoing activity on OFF-3, so it’s going to be a busy time for the company over the next six months. And this is what we’re in it for — as an exploration company, it’s all about exploring, developing data, getting new data, seeing seismic, and seeing wells drilled.
So we have a pretty clear trajectory over the next couple of years that will see all of those things happening.
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