Challenger

20 Dec 2022

  Challenger Energy  entered  into a binding heads of terms with Predator Oil & Gas Holdings and relevant subsidiary entities, providing for:

• • (i) the conditional sale of the Company’s interest in the non-producing Cory Moruga licence in Trinidad,
  • (ii) a framework for future CO2 collaboration between the Company and Predator and
  • (iii) a mutually agreed settlement in relation to all matters relating to the Inniss-Trinity CO2 enhanced oil recovery (‘EOR’) pilot project previously conducted by Predator at the Company’s Inniss-Trinity block.

Highlights

Binding heads of terms signed for the conditional sale of CEG’s 83.8% interest in the non-producing Cory Moruga licence in Trinidad, including the Snowcap oil field, to Predator, by way of sale of 100% of the issued share capital of T-Rex Resources (Trinidad) Limited, with retention of 25% future back-in right based on future drilling / EOR activity and associated future production

Up to US$9m aggregate value proposition for Challenger Energy, comprising:

1. US$2m in staged cash consideration, US$1m in contingent cash consideration,
2. removal of all liabilities and potential exposures associated with the Cory Moruga licence,
3. retention of residual back-in rights, and a full settlement with Predator in respect of all matters relating to the Inniss-Trinity CO2 EOR pilot project

About Cory Moruga and Transaction Background

The Cory Moruga licence is a direct licence from the Ministry of Energy and Energy Industries (“MEEI”) in which the Company’s wholly-owned subsidiary T-Rex Resources (Trinidad) Limited (“T-Rex”) holds an 83.8% operating interest, alongside its partner Touchstone Exploration Inc. which has a non-operating 16.2% interest.
The Cory Moruga licence includes the Snowcap oil discovery, with oil previously having been produced on test from the Snowcap-1 and Snowcap-2ST wells.

On the basis of the production tests, a development plan was submitted in 2018, prior to the Company taking control of the asset, however, the block has not been further developed since that time.

Subsequent to the acquisition of Columbus Energy Resources PLC in 2020, the Company undertook a detailed technical review of its Trinidad portfolio and assessed that Cory Moruga field required further appraisal before a commercial development decision could be made. There is currently no production from the Cory Moruga licence.

As a consequence of the lack of current production and the need for further appraisal, the Company considers the Cory Moruga licence to be non-core to its cash flow generative production-focused business in Trinidad, and therefore no further work has been planned for the Cory Moruga field in the near-term.

In contrast, Predator considers the Cory Moruga field to represent an ideal candidate for a CO2 EOR project.

The Company’s wholly owned Trinidadian subsidiary, CEG Inniss-Trinity Trinidad Limited, was a party to a Well Participation Agreement (and subsequent amendments) (“WPA”) with Predator and its subsidiaries, pursuant to which Predator agreed to carry out a CO2 EOR pilot project in a restricted part of the Company’s Inniss-Trinity field in Trinidad. The pilot project was carried out in 2020 and 2021, with the WPA terminated by the Company in August 2021.

Following mutual discussions, the Company and Predator consider that a broader collaboration in relation to CO2 EOR projects in the Company’s existing portfolio of mature oil fields across Trinidad could provide a mutually beneficial outcome for both parties, leveraging shared past experiences utilising CO2 EOR techniques and methodologies.

The Company and Predator have therefore entered into the binding Term Sheet, summary details of which are set out in this announcement, to reflect the parties’ strategic intent and the agreed commercial terms between the parties in respect of the Transaction.

Key terms of the Transaction

Predator will acquire 100% of the issued share capital of T-Rex, an indirectly wholly-owned subsidiary of the Company that holds the Company’s 83.8% interest in, and is the operator of, the Cory Moruga licence.

The Company will retain a “back-in right” which will afford the Company the option in the future to repurchase 25% of Predator’s share in T-Rex (and thus representing a 20.95% interest in the underlying Cory Moruga asset).

CEG and Predator have also agreed to establish a collaboration in relation to CO2 EOR activities and projects in other areas in Trinidad, including but not limited to potential application of CO2 EOR techniques across the Company’s other fields.

As part of the overall Transaction, the Company (and its relevant subsidiaries) and Predator (and its relevant subsidiaries), without admission of fault and liability on either party’s part, have agreed to a mutual settlement and discharge of all disputes and claims in relation to the Inniss-Trinity CO2 EOR pilot project previously undertaken by Predator, including the repayment of all loans and debts owed or claimed to be owed by either party to the other in respect of the Inniss-Trinity CO2 EOR pilot project.

The Transaction represents a gross potential value proposition to Challenger Energy of up to US$9 million (as estimated by the parties to the Transaction), comprising:

US$2.0 million payable to the Company by Predator in cash, in instalments as follows:

• • • (i) US$1 million upon completion of the transaction (the “Completion Date”), and
    • (ii) a further US$1 million on the date that is six months after the Completion Date;
    • a further US$1 million conditional cash payment, payable once the Cory Moruga field production first reaches 100 barrels of oil per day;
    • the option-value embedded in the retained back-in right;
    • the removal of all ongoing T-Rex financial obligations, and
    • the elimination of all T-Rex associated liabilities from the Challenger Energy balance sheet, as well as the elimination of all contingent and potential liabilities associated with the Cory Moruga licence, whether crystalised or not;
    • the settlement of any outstanding loan amounts in respect of the Inniss-Trinity CO2 EOR pilot project (recognising that absent a settlement between the parties, such amounts would be recoverable only from incremental production from the Inniss-Trinity CO2 EOR pilot project area); and
    • a full and final mutual settlement in respect of all disputes and claims between the parties in relation to the Inniss-Trinity CO2 EOR pilot.

In relation to the back-in right, it may be exercised at the Company’s sole election at any time in the period commencing three years after the Completion Date or first commercial production from Cory Moruga field (whichever is earlier) and ending six years after the Completion Date.

Consideration payable if the Company elects to exercise the back-in right is a fixed cash amount of US$2.25 million, plus a variable percentage of the costs incurred by Predator on the Cory Moruga field subsequent to the Completion Date, the percentage dependent on the P50 Resource attributable to the Cory Moruga field at that time, as follows:

• (i) 50% of costs incurred if the P50 Resource is less than 5 million barrels of oil (MMbbls),
• (ii) 75% of costs incurred if the P50 Resource is more than 5 MMbbls but less than 10 MMbbls, and
• (iii) 100% of costs incurred if the P50 resource exceeds 10 MMbbls.

Predator will have until 31 January 2023 to complete confirmatory due diligence, prior to which time the parties will also work in good faith to enter into long-form transaction documentation in respect of the Transaction.

However, the Term Sheet is expressed to be legally binding, and will remain as the operative legal document in respect of the Transaction until long-form transaction documentation is entered into.

Thereafter, completion of the Transaction will be conditional on consent of the Ministry of Energy and Energy Industries (“MEEI”) to a revised work programme for the Cory Moruga licence proposed by Predator (to include technical work, CO2 EOR activity, and new well drilling), as well as agreement of MEEI to a revision of future fees for the Cory Moruga licence and a settlement / cancellation of past claimed dues and other amounts pertaining to the Cory Moruga licence.

Completion of the Transaction will occur 7 days after satisfaction of this condition and any other relevant conditions precedent that may be stipulated in the long-form transaction documentation. The parties agreed to work together to secure the required consents and agreements with MEEI and thus achieve completion of the Transaction as soon as reasonably practicable on or before 30 May 2023, with a long stop date of 31 August 2023.

For the year to 31 December 2021 T-Rex made a loss of approximately TT$4.5 million (or approximately US$674,000), largely reflective of the annual licence fees and dues in respect of the Cory Moruga licence. As at 31 December 2021, T-Rex had net liabilities of approximately TT$48.0 million (or approximately US$7.1 million) of which approximately TT$31.7 million (or approximately US$4.7 million) is intra-group and will be written-off as at the Completion Date.

Cash received in relation to the Transaction will be used for general working capital in the Company’s operations.

Eytan Uliel, Chief Executive Officer of Challenger Energy, said:

‘I am pleased to advise of today’s commercial agreement, to sell our interest in the Cory Moruga block to Predator. Subject to Ministry consent and agreement, Predator intend to aggressively take the block forward to production, through a combination of new technical studies, CO2 enhanced oil recovery activities, and new well drilling. In the event Predator are successful, we retain a future ability to come back in to a 25% interest, and we have put in place a new framework to work with Predator on considering the application of CO2 EOR techniques on our other Trinidadian assets.

In financial terms, subject to completion, the transaction will result in cash receipts of US$2 million through 2023, and a further US$1 million in the event of commercial production being achieved at the Cory Moruga field. In addition, we will see tangible realisation of value in the form of the embedded option value of the back-in right retained, all liabilities and potential liabilities associated with the Cory Moruga entity being removed, and a resolution of all outstanding matters between us and Predator being achieved in an amicable manner.

It is worth noting though that whilst Cory Moruga may currently be non-producing and thus non-core to our existing business in Trinidad, the block does have future production potential, albeit new wells and the application of innovative, environmentally-friendly EOR techniques will be required to unlock that potential. We will thus be working with Predator in the coming months to seek the consents and agreements necessary from the Ministry to enable the future work program intended by Predator to proceed. This will not only be to the benefit of our Company and Predator, but will meet the Trinidadian Government’s objective of seeing EOR deployment in Trinidadian onshore fields, with a view to establishing the basis for new oil production in the future. Further updates will be provided as appropriate.’

Source: Challenger Energy

 

Rig workers evacuated

December 19, 2022, by Melisa Cavcic

Noble Corporation evacuated all rig personnel after an issue was found on one of the legs of a Noble Corporation-owned jack-up rig. The offshore drilling contractor disclosed on 16 December 2022 that the Noble Regina Allen jack-up rig experienced a mechanical issue on , 15 December 2022 while preparing to move from its location approximately 26 miles off the coast of Trinidad.

 

Rig workers evacuated following issue on Noble jack-up Noble Regina Allen : Noble Corporation

Technical failure in the jacking gear appears to have caused damage to the bow leg braces and joints, preventing the rig from being able to fully retract one of its legs. As the structural integrity of the leg is compromised, all rig personnel have been evacuated after confirming watertight integrity. The 2013-built rig has been working for an undisclosed operator in Trinidad and Tobago since August 2022. This contract, which is scheduled to end in September 2023, is for six firm wells plus three two-well options with a day rate of $107,000.

The rig completed all well operations before the event occurred, thus, the well is secure. The company is “working closely with our customer and local authorities in response to the incident.”

The Noble Regina Allen jack-up rig is of Friede & Goldman JU3000N design. It was constructed at Jurong Shipyard and can accommodate 150 people. With a drilling depth capability of 35,000 feet, this rig is capable of operating in water depths of up to 400 ft.

Among recent deals, Noble secured a long-term contract for one of its jack-up rigs with BP earlier this month.

 

 

Phoenix Park Gas

Phoenix Park Gas Processors Ltd (PPGPL) completed acquisition of a propane terminal located in Rush City, Minnesota, USA through its wholly-owned subsidiary Phoenix Park Energy Marketing LLC (PPEM), on December 13. The terminal was purchased from Interstate Fuel & Energy, LLC. (Interstate), a subsidiary of Interstate LLC.

PPGPL said with this transaction, it has recorded its third acquisition in the US in the last two years. PPGPL is the first state company to acquire assets in North America and is well poised to grow further.

Operating under the Phoenix Park brand, PPEM is engaged in the business of marketing, trading, and transportation of natural gas liquids in Canada, USA and Mexico. With this latest acquisition, PPEM intends to increase its utilisation of the terminal and continue to grow its markets in the midwestern US.

 

National Energy

Dec 24 2022

National Energy president Dr Vernon Paltoo and chairman Dr Joseph Khan. were present when the Ministry of Energy through its State enterprise, National Energy transferred 1,000 steel sheet piles from’ its Couva Storage Facility to the Ministry of Works and Transport.

The initiative was the product of collaboration among all parties to transfer of the material from Couva to locations for restoration of major roads and critical infrastructure where landslips affected connectivity and access and for construction of retaining walls and permanent repairs of landslips along the main road network.

Energy Minister Stuart Young and Transport Minister Rohan Sinanan expressed gratitude to National Energy for expediting the request. Young said (MEEI) was happy to authorize the transfer given the importance of the road system for economic activity. Sinanan added the materials will assist with critical repairs to major landslips

 

 

Obituary

Indar Maharaj 1959-2022

 

Former NGC president and WASA chairman  Indar Maharaj.

Indar Maharaj, former president of National Gas Company (NGC), died aged 63. His funeral service was held at 48 Joyce Road, Chaguanas and he was cremated at Waterloo.

Maharaj served as a plant manager at Farmland Misschem/Point Lisas Nitrogen Ltd, chairman of the Water and Sewerage Authority (WASA) and president of NGC.

Though he held many titles, his greatest accomplishment was his family. He was a loving son, husband, father, brother, uncle and friend. Maharaj was “an engineer at heart who lived his life to the fullest with courage, resilience and few regrets.”

The board of directors at the Energy Chamber extended its sincerest condolences to the family and colleagues of Maharaj .

“Mr Maharaj held several leadership roles in the energy sector including the NGC of TT where he was a former president. He was also a plant manager at Point Lisas Nitrogen (PLNL).”

PLNL also issued a statement of condolences, saying Maharaj was with the company from 1996 to 2012 where he held positions including technical services manager, operations manager and plant manager.

“Indar Maharaj will always be remembered for his outstanding service.”

 

 

Winter weather

   

 

 

As the Arctic blast influenced the North Atlantic Ocean, an orange-level advisory for rough seas, issued by the Met Office, warned of danger from large breaking waves of 3.5 metres along the nearshore, north-exposed coastlines. Choppy conditions were likely, especially along the northern-facing coastlines in the Gulf of Paria. Conditions would be amplified during high tides and exacerbated at spring tides. Effects would first be experienced on the northern shorelines of Tobago.

Conditions will be dangerous for swimming and small craft operations while very high surf and dangerous rip currents are expected near the affected coastlines. The alert advised the public to keep monitoring the sea conditions, follow instructions from lifeguards and keep abreast of information from official news sources. At the Store Bay Beach, there were no bathers in the water, however, people sat on the shore and on benches enjoying the scenery.

One said, “We were aware of the advisory, so we just came out to take a break from the Christmas work and enjoy outside a little bit. We’re definitely not going into the water.”

One woman said she wasn’t interested in the water as she had always heard that the sea was rough around Christmas, confirming the public is aware of global cooling.

 

UWI don reports 510,000 squatters

Dec 16 2022

Michelle Mycoo, Professor of Urban and Regional Planning at the University of the West Indies (UWI), St Augustine, says 396 squatter sites are located on state lands in her keynote on the first day of a three-day Water Efficiency Conference on Water Resources Resilience for Small Island Developing States (SIDS) at the Faculty of Engineering.

“Between 1980 and 1990, 22 per cent of new housing units were in full compliance with regulations and 65 per cent were built outside the formally sanctioned housing delivery system. If there are an estimated 85,000 squatter households, using a conservative average household size of six persons in these settlements, then it can be extrapolated that roughly 40 per cent or 510,000 of the total population of 1.3 million persons are squatting.

“State tolerance toward squatting continues to send a perverse incentive toward land grabbing in watersheds, flood plains and coastal zones. Illegal land occupation in ecologically fragile zones is incentivised by the existing law of adverse possession and squatter regularisation policies (Toppin-Allahar, 2001).

“The Certificate of Comfort is another instrument used by the state to give squatters a sense of security on state lands despite their location in environmentally sensitive areas such as hillside and flood-prone areas.”

A hillside development policy which restricted built development above the 91-metre contour line and on slopes in excess of 10 degrees was inconsistently implemented since the 1980s resulting in housing encroaching on steep areas which should have been left under natural vegetation.

Mycoo revealed that although 60 per cent of dense forest cover had survived urbanisation, built development in steep sloping areas once under forest cover had triggered rapid surface water run-off. Empirical evidence confirmed that weak land use plan implementation had significantly increased vulnerability to climate change impacts such as flooding.

A review of the National Physical Development Plan of 1984 undertaken in 2012 by consultants revealed that the proposed spatial strategy was unsuccessfully implemented. Three main findings pointed to failed plan implementation which had intensified vulnerability of the population to flooding. Proliferation of squatter settlements throughout the country was characterised by the landless poor settling in sensitive watersheds and coastal lands or on vulnerable sites already prone to flooding.

Nearly half—46 per cent of the lands deemed suitable for agricultural purposes—were converted to housing settlements thereby increasing the level of concretised surface area which contributed to rapid surface run-off.

A third issue was the high vulnerability of approved private sector housing as well as state-subsidised housing settlements located within coastal plains composed of impermeable clay which had a natural propensity to flood.

 

Governance

Dec 18 2022

The primary objective of any government is to advance the well-being of its citizens. This objective rests on a few key pillars; the maintenance of law and order, adequate health care systems including water, food and energy security, and an education system which produces responsible future citizens. These public goods are not “free” as they are “bought” by citizens (individuals and private corporations) who pay taxes. Government must provide the appropriate institutions and administrative systems to achieve these objectives.

There is ample evidence to suggest that the institutional and administrative systems are not fit for purpose. On December 7 Town and Country Planning Division (TCPD) officials in testimony before Parliament’s Joint Select Committee (JSC) on Land and Physical Infrastructure noted that they are operating within the boundaries of staffing levels agreed in 1969. Therefore, it cannot cope with the volume of work. This is not only true for the TCPD, but for the entire civil service and explains the CPO’s current job evaluation exercise.

Evidence of the colossal chaos resulting from this deficiency was presented by Prof Michelle Mycoo, Head of Urban and Regional Planning at UWI St Augustine, a keynote speaker at a Water Efficiency Conference on Water resilience for Small Island Developing States at UWI last week.

She cited sources which indicated that “between 1980-90, (only) 22 per cent of new housing units were in full compliance with regulations and 65 per cent were built outside the formally sanctioned energy delivery system.” But that was a slow decade. More than likely that statistic worsened with the massive expansion in housing undertaken by subsequent administrations.

A review of the 1984 National Physical Development Plan undertaken in 2012 by external consultants revealed that the proposed land use strategy was unsuccessfully implemented. It confirmed that weak land-use plan implementation had significantly increased the country’s vulnerability to climate change impacts such as flooding.

46 per cent of the lands deemed suitable for agricultural purposes were converted to housing settlements. Worse, there was a proliferation of squatter settlements throughout the country in sensitive watersheds and coastal lands, all vulnerable areas already prone to flooding. This means that the entire process of the administration of land is failing with catastrophic consequences.

The Government’s fiscal management darkens the outlook further. T&T Chamber of Commerce and the Manufacturers Association noted Government’s refusal and/or inability to pay its bills on time as billions in VAT refunds, and amounts due to contractors, remain unpaid.

Key state enterprises are also affected by GORTT tardiness in paying its bills.

Paria now imports all the fuels necessary to keep T&T’s and some Caricom transportation systems operating. Without transport, there would be no economy. Government’s failure to pay Paria the subsidy in a timely fashion places the company and the country at risk.

In the current international climate, no supplier will guarantee T&T timely fuel delivery, if it habitually pays late.

Fuel shipments can easily be rerouted to energy-challenged Europe.

The billions in delayed or overdue payments by the Government suggest that the 2022 budget surplus is window dressing and the national debt is understated. Whilst the energy minister said that the matter has been settled, its occurrence speaks to a pattern of irresponsible behaviour by the State that is dysfunctional.