Challenger Energy, the Atlantic margin focused energy company, has entered into a legally binding term sheet for an investment by Charlestown Energy Partners.

Highlights:

• Charlestown will invest £1.5m in the Company, initially in the form of a loan, which upon closing of the AREA OFF-1 farm-out to Chevron and subject to prior completion of an agreed share consolidation shall convert at a fixed price of 0.168 pence per share, being a c. 20% premium to the current share price. This will result in Charlestown holding a c. 8.7% shareholding in Challenger Energy, thus making Charlestown one of the Company's largest shareholders
• Charlestown is a New York-based specialist energy investor with a successful track record of making early cornerstone investments in listed exploration companies, most recently as the lead investor in a listed Namibian-focused conjugate margin player
• Charlestown Managing Member Mr. Robert Bose to join the Board of the Company
• Charlestown's investment ensures the Company's ability to commence technical work on AREA OFF-3 at the earliest opportunity by underpinning the licence requirement to place cash on restricted deposit, ahead of the anticipated completion of the AREA OFF-1 farm-out to Chevron at which time the Company will receive $12.5 million in cash proceeds. Thereafter, Challenger Energy is expected to be fully funded for the foreseeable future, with no need for additional capital, whether equity or debt

Eytan Uliel, Chief Executive Officer of Challenger Energy, said:
"The strong progress of our business in Uruguay has seen a noted increase in interest from investors familiar with the E&P space who appreciate the value potential of our assets. We are pleased to advise of today's agreement with Charlestown, a specialist energy investor with an enviable track record of successful cornerstone investments in various listed and unlisted E&P companies, including being an early investor in the success story that the Namibian conjugate margin now represents. Charlestown's investment in Challenger Energy will initially be as a loan, but once the Chevron AREA OFF-1 farm-in closes and we have completed a necessary share consolidation that loan will convert at a premium into an approximately 8.7% shareholding, and Charlestown will become a major shareholder in our Company. Charlestown's investment, coupled with our low overhead and the attractive carry arrangements in the Chevron farm-out, puts us in an excellent financial position, with no need for further capital for the foreseeable future. As part of their strategic investment, Charlestown's Managing Member Mr. Robert Bose will be joining our board, and together we will be working to ensure that Challenger Energy provides Charlestown, alongside all shareholders, with the same outstanding return that their investment in the Namibian conjugate margin has".

Robert Bose, Charlestown Managing Member, said:
"I am very pleased to be joining the Challenger Energy board. Charlestown Energy Partners has been an active investor in global exploration opportunities, including in Namibia where we have developed significant insights into the conjugate margin's opportunity through our exposure to multiple blocks in the Orange and Walvis offshore basins, including PEL83 which is home to the recent multi-billion-barrel light oil discoveries by Galp Energia. We believe over time these results should translate across to the Uruguay conjugate margin. Challenger Energy's unique position in Uruguay, capital strength and upcoming catalysts position the Company for significant growth and value creation over the coming years. We are extremely excited to be part of the Challenger Energy story."

Charlestown is a specialist energy investor that is associated with Charlestown Capital Advisors, a family office founded in New York in 2005. 

Charlestown has been making investments globally in E&P since 2016 and has been the cornerstone shareholder in Sintana Energy, a TSX-listed exploration company since 2019. Sintana maintains an indirect interest in a portfolio of exploration licenses in Namibia including in the emerging Orange Basin, where several multi-billion-barrel discoveries have been made by Shell, TotalEnergies and Galp Energia.  As a result of its early entry and the subsequent exploration success, Sintana's share price has appreciated more than six-fold in the past two years. 

Intended Board Appointment

Commensurate with the intended long-term cornerstone shareholding in the Company by Charlestown, Mr. Robert Bose will be invited to join the Board.

Mr. Bose has been the Managing Member of Charlestown since 2016, having joined Charlestown Capital Advisors as a principal in 2014. Prior, he spent 17 years in the Global Investment Banking Group at the Bank of Nova Scotia, most recently as Managing Director and Head of the Power & Utilities Group, with a specifical focus on the energy and power sectors. Mr. Bose is currently also serving as Chief Executive Officer of Sintana, which as noted represents a significant holding in Charlestown's current portfolio.  Mr. Bose has an Honors Degree in Economics from Queen's University in Kingston, Ontario and is a CFA Charterholder.

Subject to completion of usual onboarding processes, Mr. Bose's appointment will take effect at such time as funding is advanced by Charleston, anticipated in mid-May 2024. 

Commentary

Following this announcement, industry expert Malcolm Graham Wood provided the following commentary:

Believe me this is a sensational piece of news, fantastic for CEG shareholders and if you aren’t one already you should be. Charlestown is all over the energy space, supporting exploration and already have history in a number of successful investments. The ones I know about best are at Eco Atlantic and of course Sintana where they have been on board through the Mopane well that I have been writing about recently. 

And don’t forget that Charlestown approached CEG, they saw a similarity in their Namibian investments, including farm-downs to Chevron and ‘got’ that Uruguay might just be the next Namibia and decided to invest. There are some transactional issues such as CEG needing a share consolidation to satisfy Pershing and obviously the Chevron deal has to close before the investment can complete. But they are paying a 20% premium for the privilege and there aren’t many times that happens…

Admittedly Robert Bose gets a board seat for only one and a half million quid, as someone said to me this morning thats cheap but I happen to think that this deal, the more I look at it may be something that changes life as we know it in the sector. 

The companies that CEP are investing in are of a kind, they look like a portfolio of high end assets and in the most desirable post codes in the business. They have a recurring theme of doing the early years work which oil and gas entrepreneurs are the best at and to raise seed money, but the key thing is knowing when to let go, or to let someone else participate in order to share the upside by doing the heavy lifting. 

So, CEG have a new long term partner, CEP are not going to hassle them for short term share price activity and I expect them to be long term supporters of Eytan and the team. They can and will get on and close the AREA-1 deal with Chevron and can start spending on things to make AREA-3 ready to farm-out. Given that it was the AREA-1 data that led them to CEG then I can see that process going well. 

CEG shares are up very modestly on this deal, done at a 20% premium as I said but if ever there was a ten-bagger staring you in the face then this is it, ignore taking shares at 0.14p at your peril, it could well be a eureka moment right in front of your very eyes…

KeyFacts Energy: Challenger Energy Trinidad and Tobago country profile