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Challenger Energy Group PLC
Presentation to UK Investor Magazine
25 May 2021
cegplc.com
Disclaimer This presentation (“Presentation”) has been prepared by Challenger Energy Group PLC (“Challenger” or the “Company”) solely for purposes of providing introductory information on the Company and its projects. This Presentation should not be considered as the giving of investment advice by the Company or any persons, including to any of its shareholders, officers or advisers. If you are in any doubt about the contents of this Presentation or the action you should take, you should consult an independent adviser authorised to render such advice. This Presentation has not been independently verified and is subject to material updating, revision and further amendments without notice. The Presentation does not purport to contain all information that an investor in the Company or its projects may wish to receive for the purposes of assessment or valuation of that investment and is not intended to form the basis of any investment decision. While the information contained herein has been prepared in good faith, neither the Company nor its shareholders, directors, officers, agents, employees, or advisors give, has given or has authority to give, any representations or warranties (express or implied) as to the achievement or reasonableness of future projections, management targets, estimates, prospects or returns contained in this presentation, or in relation to the accuracy, reliability or completeness of the information in this Presentation, or any revision thereof, or of any other written or oral information made or to be made available to any investor (all such information being referred to as “Information”). So far as permitted by law, neither the Company nor any of its shareholders, directors, officers, agents, employees or advisers take any responsibility for, or will accept any liability in respect of, the accuracy, reliability or completeness of the Information or for any loss, howsoever arising from the use of this Presentation. In furnishing this Presentation, the Company does not undertake any obligation to provide any additional information or to update this Presentation or to correct any inaccuracies in, or omissions from, this Presentation which may become apparent. This Presentation contains certain statements which may constitute forward-looking statements. All statements in this Presentation, other than statements of historical facts, that address future activities and events of developments that the Company expects, are forward-looking statements. Although the Company believes that the expectations reflected in these statements are based on reasonable assumptions, such statements are only predictions and are subject to inherent risks and uncertainties and changes in the underlying assumptions which could cause actual values, results, performance or achievements to differ materially from those expressed, implied or projected in any forward-looking statements. Factors that could cause actual results to differ materially from those in forward-looking statements include market prices, continued availability of capital and financing, and general economic, market or business conditions. Investors are cautioned that any such statements are not guarantees of future performance and that actual results or developments may differ materially from those projected in forward-looking statements. The Company will not undertake any obligation to release publicly any revisions to these forward-looking statements to reflect events, circumstances or unanticipated events occurring after the date of this Presentation, except as required by law or by any appropriate regulatory authority. Nothing in this Presentation or in documents referred to in it should be considered as a profit forecast. Past performance of the Company or its shares cannot be relied on as a guide to future performance. This Presentation does not constitute, or form part of or contain any offer or invitation to sell or issue, or any offer to subscribe for, underwrite or otherwise acquire, or dispose of, any securities in the Company in any jurisdiction and is directed at, and is only for distribution in the United Kingdom to persons reasonably believed to fall within Article 19 (Investment professionals) or Article 49 (High net worth companies, unincorporated associations etc.) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (SI 2005/1529) or to whom this Presentation may otherwise lawfully be distributed. Neither this Presentation nor any part of or copy of it may be taken or transmitted, directly or indirectly, into the United States of America or Canada or distributed or re-distributed directly or indirectly, in the United States of America, its territories or possessions, or Canada, or to any resident thereof except in compliance with applicable securities laws. Any failure to comply with these restrictions may constitute a violation of applicable U.S. or Canadian securities laws. This Presentation and the information contained herein do not constitute an offer of securities for sale in the United States. By accepting this Presentation, the recipient represents and warrants that it is a person to whom this Presentation may be delivered or distributed without a violation of the laws of any relevant jurisdiction. This Presentation is not to be disclosed to any other person or used for any other purpose and any other person who receives this Presentation should not rely or act upon it. The delivery or distribution of this Presentation in or to persons in certain jurisdictions may be restricted by law and persons into whose possession this Presentation comes should inform themselves about, and observe, any such restrictions. Any failure to comply with these restrictions may constitute a violation of the laws of the relevant jurisdiction. By attending a meeting where this Presentation is made or distributed, or by reading the Presentation slides, you agree to be bound by these provisions. Challenger Energy – Presentation to UK Investor Magazine – 25 May 2021 2 cegplc.com
Agenda
1 Why invest in Challenger Energy?
An attractive value proposition
2 What to look out for in 2021?
An active period of work across the portfolio
3 What will 2021 success look like for Challenger Energy?
Increasing production and thus cashflow = underlying value growth
4 Update on progress of the corporate ‘reset’
Positioning to restore and thereafter build value
Challenger Energy – Presentation to UK Investor Magazine – 25 May 2021 3 cegplc.com
The Challenger Energy
Investment Proposition
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Business overview
PRODUCTION & CASHFLOW ASSETS
Trinidad and Tobago – Saffron project and onshore
producing fields: growing production and cashflow
Suriname – onshore Weg Naar Zee project:
infrastructure-led sales and cashflow
PORTFOLIO E&P BUSINESS
FOCUSSED ON CARIBBEAN
& ATLANTIC MARGIN EXPLORATION ASSETS
• 4 countries Trinidad and Tobago: onshore SWP – ‘on the doorstep’
• 13 licences
• Existing production Uruguay: offshore low cost optionality
• Clear route to production The Bahamas: offshore longer-term upside
and cashflow growth
• Long-term, low cost
exploration upside
Challenger Energy – Presentation to UK Investor Magazine – 25 May 2021 5 cegplc.com
Competitive ‘edge’
PRODUCING ASSETS ATTRACTIVE PORTFOLIO STRONG CAPABILITY
• Existing production and income • ‘Hopper’ of development, • Committed, experienced
that underpins value appraisal and growth options management team
• Scope to grow production from • Portfolio spreads risk and • Strong industry capabilities
existing producing assets and offers multiple routes to value
known discoveries • Transactional and operational
• Ability to retain exposure to track record
• Saffron: could add material high-impact exploration at low
production, leading to full field cost; with production success • Operational team in place,
development and meaningful can be self-funding largely in-country
cashflow
Challenger Energy – Presentation to UK Investor Magazine – 25 May 2021 6 cegplc.com
Route to value
BASELINE PRODUCTION EXPLORATION UPSIDE &
PRODUCTION & CASHFLOW GROWTH BUSINESS DEVELOPMENT DRIVEN GROWTH
PRODUCTION
GROWTH ENGINE
Existing assets; known discoveries
SAFFRON-2 TRINIDAD SOUTH WEST PENINSULA EXPLORATION
BASELINE
MAINTENANCE WEG NAR ZEE APPRAISAL / EWT BAHAMAS AND URUGUAY OPTIONALITY
ACTIVITIES
INITIAL DEVELOPMENT WELLS BUSINESS DEVELOPMENT / ACQUISITIONS
400 – 500 bopd
~US$3M p.a. cash
CONSOLIDATION; 90MMBBL/D SECTOR;
INFILL PRODUCTION WELLS
OIL PRICE LEVERAGE; ENERGY TRANSITION
POTENTIAL: >4,000 BOPD
2021 2022 - 2024 Longer term
Challenger Energy – Presentation to UK Investor Magazine – 25 May 2021 7 cegplc.com
Value proposition
Pro-forma value is fully underpinned by producing assets, with near-term
upside potential from drilling at multiple locations over next 3–6 months
125 Shares outstanding
(post-consolidation)
c. 789m
Oil ‘Supercycle’?
Market capitalisation 100
100
(at open offer price)
c. £28m
90
80
Brent crude (US$ / bbl)
75 70
NAV (US$m)
60
50
50
40
30
25 Market cap at open offer price 20
10
0
- May-16 May-17 May-18 May-19 May-20 May-21
Goudron Inniss South Erin Icacos, Total Saffron Weg Naar G&A and Core NAV Risked
Trinity Cedros & production Zee net cash upside
Bonasse assets
Note: Based on the average risked NAVs from Auctus Advisors (26 April 2021) and Investec (16 February 2021) research notes
Challenger Energy – Presentation to UK Investor Magazine – 25 May 2021 8 cegplc.com
Work Program to Deliver Value
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Saffron
• Saffron-1 well (March 2020) resulted in a discovery Saffron core metrics (projections)
— Located in South West Peninsula of Trinidad
• Saffron-2 appraisal well May/June 2021, to assess field producibility Saffron-2
• Production: 200 - 300 bopd
— High CoS given drilling a known discovery, same location as Saffron-1
• Cost: US$3m
— Field activity underway • CF: US$1.8m - US$2.6m p.a.
— 30-day drilling timetable; production leads directly to sales • ROI 200%+ | payback < 2 years
• Successful Saffron-2 well will enable a full Saffron field development Initial phase post Saffron-2
• Wells: 5 - 9 additional in 2021
• Production: 1,000 - 1,500 bopd
• Gross capex: US$15m - US$20m
• CF: US$8 – US$12m p.a.
Saffron field-life metrics (15-years)
• Production: 4,000 bopd (peak)
• Wells: up to 30 wells | 11 mmbbl field
• Gross capex: up to US$60m
• CF: US$25m+ p.a. (first 5-year average)
• Total net CF: US$200m+
• ROI ~90% | PaybackWeg Naar Zee
• Weg Naar Zee (WNZ) PSC in Suriname secured in 2019 WNZ core metrics (projections)
— 70 historic wells; modest 2D seismic coverage; up to 24 mmbbls STOIIP
identified in 8 pools (c. half in a single pool) WNZ initial phase
• Production: 100 bopd
• WNZ well and EWT scheduled for July 2021, to establish producibility
• Cost: appraisal well and EWT - US$0.75m |
— Operations support from Trinidad
4 additional production wells post EWT - US$2m
— Production leads directly to refinery sales in proximity • CF: US$1m pa
• A successful well will enable a broader WNZ development • ROI 100%+ | Payback < 3 years
WNZ field-life metrics (~20-year)
• Production: 900 – 1,000 bopd (peak)
• Wells: up to 50 wells | 3.5 mmbbl 3C resource
• Gross capex: up to US$15m
• CF: US$2.5m+ p.a. (first 5-year average)
• Total net CF: US$35m+
• ROI ~70% | PaybackOrganic production growth
Disciplined technical work is being applied across the
Trinidad portfolio in pursuit of production growth
Sustaining and growing existing baseline production
• Remediation of existing wells
• Incremental production from existing wells
• New infill wells
• Automation - Weatherford/CEG automation trial
• Projects - CO2 injection in AT5X
New production from ‘ready to go’ projects Number Production Cost
in known, discovered fields (#) (bopd) (US$k)
Up to 30
• Seeking to mature two new field developments within existing Well remediations Up to 10 10 - 50 each
per well
producing fields
Up to 20
• Remodel existing wells; assess pressure compartments Additional perforations 5+ 25 - 50 each
per well
• New wells to access undrained resource Infill drilling locations 10+ 50+ per well 1,500 per well
Challenger Energy – Presentation to UK Investor Magazine – 25 May 2021 12 cegplc.comExploration
TRINIDAD BAHAMAS URUGUAY
• ‘On the doorstep’ • Post Perseverance-1, seeking farm-in • Low-cost optionality
• Significant prospect inventory to work with • Licence renewal • Farm-in potential
• 9 Saffron ‘lookalikes’ identified; c.230 mmbbl prospect • P1 validated a competent seal, good reservoir quality, • Play analogous to offshore Guyana and Suriname. Existing
inventory charge & the structural model; working petroleum system wells and data
• Targeting potential new fields capable of each producing at points to hydrocarbon potential remaining in independent, • US$800,000 commitment over 4 years initial term. No
least 2,000 bopd untested play systems and structures drilling obligation
• Confirm prospect validity and mature to drillable status • Focus shifted to high graded Jurassic subsalt • ANCAP mapped Early Cretaceous alluvial (lacustrine) fan
• Integrate P1 data, refresh prospect inventory, renew (Lenteja) prospect, estimated resource volume (EUR P50) =
licences and farm-out process based on Jurassic play 1.4 bnboe
Challenger Energy – Presentation to UK Investor Magazine – 25 May 2021 13 cegplc.comActivity summary
1H 2H
2021 2021 2022
Licences (activity)
SWP (Saffron appraisal)
SWP (Saffron development)
Goudron
(Production enhancement / water injection)
Inniss-Trinity (CO2 pilot)
Trinidad exploration (3D reprocessing)
Weg Naar Zee (Extended well test)
Weg Naar Zee (Development wells)
T&T production fields
(Development / infill wells)
Bahamas (Farmout , licence renewal)
Bahamas (Exploration – drill or drop)
Uruguay: OFF-1
(Early stage exploration / seismic reprocessing)
NOTE: 2021 / 2022 indicative schedule subject to change and further operational announcements by the Company Onshore drilling Milestones
Challenger Energy – Presentation to UK Investor Magazine – 25 May 2021 14 cegplc.comESG
Active commitment to implementing an aligned ESG Company Core ESG Values
operating and reporting framework, consistent with and
guided by Global Reporting Initiative (GRI) Sector
Standards for Oil & Gas
Accountability
KEY 2021 PLANS and FOCUS
Transparency &
Efficiency Governance Engagement
Trinidad: STOW (Safe To Work) 2-year Accreditation Climate
Change & Communities
Suriname: NIMOS approval for EWT Energy
Bahamas: Ministry and DEPP EA approval and successful Perseverance
#1 monitoring ESG
• Define impact reduction and continuous improvement targets Environment & Employment
Biodiversity
• Engagement and buy-in of staff to values and metrics Health &
No Harm Safety Inclusion
• Promote company-wide diversity
• Skills and competency development delivered through training, on-
the-job experience and opportunities Zero
• First comprehensive ESG report in 2021 Incidents
Challenger Energy – Presentation to UK Investor Magazine – 25 May 2021 15 cegplc.comCorporate Reset Update /
Financial Information
cegplc.comThe corporate reset
FOCUS SHIFT CHANGE OF NAME CAPITAL RESET RECAPITALISATION TRANSITION
PRODUCTION & CHALLENGER ENERGY 1:10 SHARE c. US$10 MILLION OPEN CHANGES TO BOARD
CASHFLOW GROWTH GROUP PLC CONSOLIDATION OFFER / PLACING & MANAGEMENT
REFRESHED SHARE CONVERTIBLE COST REDUCTION
ISSUANCE AUTHORITY NOTE RESTUCTURE PROGRAM
RATIONALE RATIONALE RATIONALE RATIONALE RATIONALE
• Focus on lower-risk • Reflects the portfolio • Investable share price • Recapitalised business • Consistent with
cash flow generation nature of the business with less volatility corporate refocus
• Simplified balance sheet
going forward
• Complemented by longer • Ability to respond quickly • Preserve funding sources
term exploration upside and flexibly to capital
needs and corporate
opportunities
ONGOING COMPLETE COMPLETE COMPLETE ONGOING
Challenger Energy – Presentation to UK Investor Magazine – 25 May 2021 17 cegplc.com2021 potential capital deployment profile
Intelligent deployment of capital to support growth in production, oil sales
and cashflow from existing producing fields and known discoveries
Production Cashflow Capital costs
(projected) (potential p.a.) (estimates)
• In a success case, total potential
Current Trinidad production 450 - 500 bopd $3m+ - capex requirement through
Incremental production programs 100 bopd $0.9m ~$1m balance of 2021 is in range of
Infill drilling programs 200 - 400 bopd $1.8m - $3.6m Up to $6m
$20 - $25m (with cash flows
generated from early wells
Saffron (Trinidad) reinvested into / funding drilling
• Saffron-2 (May / June 2021) 200 - 300 bopd $1.8m - $2.6m $3m of subsequent wells)
• Saffron phase 1 development
1,000+ bopd $8m - $12m $15m - $20m • Potential success outcome is to
(H2, 2021)
• Saffron full-field development exit 2021 with an annualised
4,000+ bopd $25m+ Up to $60m
(2022 onwards, 2-3 years) cashflow in range of $15 - $20m
WNZ (Suriname)
• WNZ initial phase (H2, 2021) 100 bopd $1m ~$2.7m
• WNZ full-field development
900+ bopd $2.5m+ Up to $15m
(2022 onwards)
Note: cash flow estimates presented are based on US$60 / bbl oil price
Challenger Energy – Presentation to UK Investor Magazine – 25 May 2021 18 cegplc.comConclusion
cegplc.comA simple value equation
CURRENT EQUITY VALUE VALUE GROWTH PORTFOLIO VALUE
Existing production assets Spreads the risk
Everything else is ‘upside’
underpin current equity value Offers multiple routes to value
‘Hopper’ of development, appraisal &
1.3 mmboe 24.7
onshore/offshore growth options
mmboe
13 licences
2P reserves
net
3C net
4 countries
resources
2
unrisked
230
production
tests mmbbls
80 producing onshore
2
wells further
discoveries >1 bnbbls
potential offshore
Challenger Energy – Presentation to UK Investor Magazine – 25 May 2021 20 cegplc.comConcluding remarks
PORTFOLIO E&P BUSINESS FOCUSSED ON
Challenger Energy has been revalued post P-1 drill result such that CARIBBEAN & ATLANTIC MARGIN
1
current equity value represents value of production assets alone 4 countries, 13 licences
• Production growth and exploration success are upside Existing production with clear route
to production and cashflow growth
Long-term, low cost exploration upside
2 Clear focus & plan on growing production and cashflow PRODUCTION & CASHFLOW ASSETS
• Saffron-2 well is the next material value driver Trinidad and Tobago – Saffron project and onshore
• Multiple other avenues to achieve production growth across portfolio producing fields: growing production and cashflow
Suriname – onshore Weg Naar Zee project:
infrastructure-led sales and cashflow
3 ‘Reset’ progressing, to put Company in position to deliver EXPLORATION ASSETS
• Regional champion – the only full cycle E&P player in the region
Trinidad and Tobago: onshore SWP – ‘on the doorstep’
• Committed / aligned management team with sector / regional expertise
Uruguay: offshore low cost optionality
The Bahamas: offshore longer-term upside
Challenger Energy – Presentation to UK Investor Magazine – 25 May 2021 21 cegplc.comThank you
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