Challenger Energy Regulatory News (CEG)

25 August 2021

Challenger Energy Group PLC

("Challenger Energy" or the "Company")

Appraisal Update: Saffron-2 Production Test

Challenger Energy (AIM: CEG), the Caribbean and Atlantic margin focused oil and gas company, with production, appraisal, development and exploration assets across the region, provides the following update in relation to ongoing production testing of the Saffron-2 appraisal well.

Highlights

A commercial production rate (81 bopd) has thus far been established at Saffron-2, from approximately 66 feet of Middle Cruse reservoir units; produced oil is already being sold and generating immediate revenues for the Company

· To maximise near-term production income additional clean-up, testing, and optimisation of producing zones is currently underway; the Upper Cruse reservoir units also remain to be perforated and produced

· The Lower Cruse reservoir units exhibited good pressure and produced high-quality oil (480 API), but testing of these zones was halted due to the impact of mobile shales on the well bore; these lower zones have been isolated from the currently producing horizons, capable of being re-entered for future remedial actions in support of production

· Well data and projection of aggregated well performance is being used to reassess overall Saffron field resources and economics, with work underway to determine the optimal forward plan for development of the Saffron project as a whole

Eytan Uliel, Chief Executive Officer, commented:

"The Saffron-2 appraisal well was successfully drilled and completed in early July 2021 - Challenger Energy's first operated drilling onshore Trinidad. We have since perforated various reservoir horizons and run production tests.

Pleasingly, testing in the Middle Cruse has resulted in an economic level of production thus far being achieved, and we are working to increase production further. We are already selling the oil being produced, so for the immediate future the plan is to maximise production revenues from those Middle Cruse units, as well as bringing on additional production from the as yet unperforated Upper Cruse units, in due course.

Production tests have also proved the ability to flow high-quality hydrocarbons from the Lower Cruse reservoir at Saffron, but we did not achieve sustained production from these zones due to technical and mechanical issues encountered during those tests. That said, the Saffron project is in a tectonically active province, so challenges are to be expected, and each well builds on the learning from the previous wells. The key point is we have shown that there are moveable hydrocarbons in the Lower Cruse, and we believe that issues encountered can be addressed, such that the Lower Cruse can ultimately contribute meaningfully to production. We have preserved the ability to re-enter and produce the lower zones of Saffron-2 in the future, and we are incorporating the knowledge gained into the design of future Saffron wells.

Focus now turns to integrating what we have learned from this well, to updating our resource estimate accordingly, and to defining the best way forward for the project as a whole - building production and cashflow remains our overarching strategic imperative. We will keep shareholders appraised of material developments."

Following inspection and formal approval of both the well completion and production facilities by the Trinidadian Ministry of Energy and Energy Industries, production testing of the Saffron-2 well commenced on 23rd July 2021.

The first phase of testing focussed on the Lower Cruse formation, where approximately 133 ft of various Lower Cruse sands (at a range of depths below 4000ft) were perforated and flow tested. Pressures at surface of up to 1400psi were observed, oil was produced naturally to surface, and oil samples were collected and analysed (480 API). However, the well failed to clean up properly and sustained production was not able to achieved, due to the continual inflow of mobile non-reservoir formation materials (clay and shale influx into the wellbore). Subsequently these zones have been isolated, capable of being re-entered, remediated and produced in the future, as appropriate.

A next phase of production testing focused on the Middle Cruse formation where 66ft of various Middle Cruse sands (at a range of depths below 1300ft and above 4,000ft) were perforated and flow tested. The well continues to clean-up, but thus far oil production of approximately 81 bopd been observed (200 API), with produced oil being gathered and sold. The Company expects to be able to increase that production further by optimising the production parameters as flow rates become better understood, as well as by producing from a further 11ft of reservoir as yet unperforated in the Upper Cruse, to add to the production mix in due course. Production volumes from this horizon deliver immediate income and cashflow to the Company, and represent a material uplift in the Company's overall net production (currently ranging between 400 to 500 bopd, inclusive of Saffron-2). As such, the plan for the foreseeable future is to continue to run maximum production at Saffron-2 from the currently producing Middle Cruse reservoir units.

In aggregate, therefore, the Saffron-2 appraisal well has demonstrated the ability to drill and produce at the Saffron project on an economic basis - albeit that aggregate well production rate at this time, without the benefit of Lower Cruse production, is below that targeted pre-drill. Importantly, however, high-quality oil has been produced to surface naturally from the Lower Cruse at Saffron, thereby proving the presence of mobile hydrocarbons in those zones. The Company considers that techniques identified for remediation of the technical and mechanical issues experienced in the Lower Cruse (due to the impact of non-reservoir clay and shales) will enable these zones to ultimately contribute to production as part of any overall Saffron development.

Over the coming months, in addition to continuing clean-up operations, perforating and production testing of additional zones, and further maximising oil production revenues from the Saffron-2 well, the Company will be working to incorporate the results of the well into an optimal forward plan for the Saffron project. These operations also provide a significant input into defining the prospective and contingent resources for both the Saffron location and other targets within the Company's South West Peninsula portfolio, which will contribute to an update of resource estimates.

Further announcements will be made as appropriate.

For further information, please contact:

This announcement contains inside information for the purposes of Article 7 of EU Regulation 596/2014, which forms part of United Kingdom domestic law by virtue of the European (Withdrawal) Act 2018.

Notes to Editors

Challenger Energy is a Caribbean and Atlantic margin focused oil and gas company, with a range of exploration, appraisal, development and production assets and licences, located onshore in Trinidad and Tobago, and Suriname, and offshore in the waters of The Bahamas and Uruguay. In Trinidad and Tobago, Challenger Energy has five (5) producing fields, two (2) appraisal / development projects and a prospective exploration portfolio in the South West Peninsula. In Suriname, Challenger Energy has on onshore appraisal / development project. Challenger Energy's exploration licence in each of Uruguay and The Bahamas are highly prospective, and offer high-impact value exposure within the overall portfolio value.

Challenger Energy is quoted on the AIM market of the London Stock Exchange.

https://www.cegplc.com