Challenger Energy (LON:CEG) continues to surge forward in its strategic shift towards high-impact exploration, particularly in Uruguay. In a recent operational update, the company detailed its advancing efforts on the OFF-1 and OFF-3 licences, highlighting its transformation into a focused offshore explorer with material near-term catalysts.
The partnership with Chevron on the OFF-1 licence remains a central pillar of this transformation. The joint venture is progressing towards executing a wide-ranging 3D seismic survey, now targeted to commence in Q4 2025. This milestone is contingent upon securing environmental permits – a process being coordinated with Uruguayan authorities alongside similar approvals for other operators in the region. Such collaborative efforts may yield efficiencies through shared seismic operations, while also streamlining future permitting pathways.
“We are pleased to see the OFF-1 3D seismic moving closer,” says Daniel Slater, CFA, Research Analyst at Zeus. “This schedule allows for availability of data and analysis in 2026, continuing to support a potential exploration well in winter 2027/28.”
Challenger is replicating this model with its 100%-owned OFF-3 licence. Desktop analysis is well underway, laying the groundwork for a farm-out process anticipated in the second half of 2025. Notably, this asset already benefits from existing 3D seismic data, potentially enabling partners to fast-track towards exploration drilling.
Beyond Uruguay, Challenger is finalising the sale of its Trinidad operations, a strategic divestment that will generate cash and sharpen management’s focus. While the timing has been impacted by local political developments, Zeus expects the deal to close by the end of June 2025.
“We believe the Trinidad sale is the right move for Challenger, and look forward to the deal completing in the coming months,” Slater adds.
Financially, the company is on stable footing, bolstered by the US$12.5 million upfront payment from Chevron. Zeus maintains its positive outlook on the shares, assigning a total risked NAV of 35.4p – a significant premium to the current market valuation.
Thoughts
Challenger Energy’s transition from a small-cap producer to an offshore exploration contender is gathering momentum. The combination of strategic partnerships, upcoming seismic activity, and disciplined capital management sets the stage for a potentially transformative period. With growing interest from global majors in the region and high-impact drilling on the horizon, Challenger is positioning itself at the forefront of South America’s next offshore frontier.
