Chevron Farms In to Deepwater Uruguay License

The supermajor will gain a 60% working interest and assume operatorship in the AREA OFF-1 block.

AREA OFF-1 is located around 100 km off the Uruguay coast.
SOURCE: Administración Nacional de Combustibles, Alcohol y Portland (ANCAP)

Chevron has struck a deal with Caribbean and Americas-focused Challenger Energy's subsidiary CEG Uruguay SA to farm in to the AREA OFF-1 block offshore Uruguay for $12.5 million.

The area offers potential target opportunities, hoped to be similar to those being found in Namibia’s Orange basin. Shell, APA Corporation, and Argentina’s YPF have been securing acreage in the region in the hopes of repeating the early Namibian success from TotalEnergies and others.

Chevron will acquire a 60% participating interest in the block and will assume operatorship of the block; Challenger Energy will retain a 40% nonoperating interest.

Financial terms are $12.5 million cash due on completion of the transaction. The funds will be used by Challenger to support further development of its business.

"We are absolutely delighted to announce the farmout of our AREA OFF-1 block in Uruguay to Chevron,” said Eytan Uliel, CEO of Challenger. “We firmly believe that AREA OFF-1 holds enormous potential, and this farmout is strong validation of the high-quality technical work CEG has done to-date. Our stated strategy for AREA OFF-1 was to introduce a larger industry player as operating partner, with a view to rapidly progressing the block via an accelerated 3D seismic campaign followed by, we hope, exploration well drilling. The farmout achieves this aim, and we look forward to continuing on our exciting journey in Uruguay, both on AREA OFF-1, now in partnership with Chevron, and also on our still wholly owned AREA OFF-3 block.”

Chevron will carry 100% of Challenger’s share of the costs associated with a 3D seismic campaign on AREA OFF-1, up to a maximum of $15 million.

Following the 3D seismic campaign, should Chevron decide to drill an initial exploration well, it will carry 50% of Challenger’s share of costs associated with that well, up to a maximum of $20 million.

The AREA OFF-1 block covers approximately 14557 km2, located about 100 km offshore Uruguay in water depths ranging from 80 to 1000 m.

Challenger was awarded the AREA OFF-1 license in June 2020 under the Open Uruguay Round process. The license was formally signed in May 2022, and the initial 4-year exploration term began in August 2022.

Challenger completed a volumetric assessment of AREA OFF-1’s three primary prospects—Teru Teru, Anapero, and Lenteja—last spring. Results have estimated a recoverable resource of approximately 2 billion bbl, with a potential upside case of over 4.9 billion bbl.