Echo Energy share price, company news, analysis and interviews

Echo Energy plc (LON:ECHO), the Latin American focused upstream energy company, has announced the following Board changes.

Stephen Birrell has been appointed as Chief Executive Officer (‘CEO’) of the Company with immediate effect. Stephen is highly experienced geoscientist who has worked in the upstream oil and gas and mining industry for over 35 years with a particular focus on gas developments across multiple jurisdictions with Britoil, BP and Elf and Sterling Resources, where he discovered and initiated the development of the Black Sea gas field complex, Ana/Doina in Romania. Stephen has a BSc Honours in Applied Geology and is a member of the Association of International Energy Negotiators and the Society of Petroleum Engineers.

Christian Yates, current non-executive director, will assume the position of non-executive chairman. 

Martin Hull, the Company’s existing CEO, and James Parsons, the Company existing Non Executive Chairman, are both transitioning into the role of non-executive director and both individuals have been asked to provide additional support to the new chairman and CEO for an interim period.

These changes will take place with immediate effect. 

Christian Yates, Non-Executive Chairman of the Company, said:

“I am delighted to confirm Stephen’s appointment as Chief Executive Officer. Stephen brings a wealth of technical and commercial experience, holding executive positions across a range of oil and gas businesses and we look forward to leveraging his experience as we look to deliver our strategy. I would also like to thank James and Martin personally and on behalf of the Board for their leadership and commitment to the Company over the last few turbulent years and I look forward to their continued support as non-executive directors.“

Regulatory Disclosures:

In addition to his appointment to the Echo Energy Board, Stephen James Birrell, aged 60, has held the following directorships and/or partnerships in the past five years:

Stephen Birrell was appointed as a director to Iconic Labs plc (“Iconic Labs”) (formerly Widecells Group PLC) on 9 February 2021 and resigned as a director on 19 March 2021. Iconic Labs was placed into administration on 4 June 2021 following an unsatisfied demand for payment from Iconic Labs’ secured creditor. The administrators’ progress report, issued on 30 August 2022, cites that the Company, Greencastle Media, Arch Capital Partners LLP, Mr D Sefton and the European High Growth Opportunities Securitization Fund have entered into a Settlement Agreement. As a result, all litigation proceedings have been dismissed, and all claims, counter claims, including defamation claims, among the parties, have been waived. The Company announced on 13 October 2023 that the Creditors Voluntary Arrangement (“CVA”) has now been completed.

Stephen Birrell does not hold any Ordinary Shares in the Company and there are no further disclosures to be made pursuant to Schedule 2 paragraph (g) of the AIM Rules.

Echo Energy PLC (LON:ECHO) has announced its Interim Results for the period ended 30 June 2023.

Chairman’s and Chief Executive Officer’s Statement

In the 2022 Annual Report, released at the same time as this 2023 Interim Report, the following statement was made.

“Echo Energy, similar to many companies in the oil and gas sector, faced exceptional challenges during recent years, with the global pandemic impacting all aspects of the Company’s operations and finances in Argentina. The Company emerged from the COVID-19 period (during which the assets were sub economic) with a large creditor position, 100%+ per annum inflation in Argentina and Argentine currency exchange controls, which have prevented funds being withdrawn from the country without significant penalties. As a result of these factors, the raising of additional equity for an Argentine business was challenging and the Company took the decision in November 2022 to partially sell its Santa Cruz Sur portfolio.

This partial sale enabled to the Company to:

·      Address its near-term funding challenges by providing near-term cash, enabling the Company to transfer to buyers the significant in-country creditors which had built up during the COVID-19 period and providing access to funding for the Santa Cruz assets.

·      Benefit from continued exposure (both directly through the retained 5% working interest, the contingent payments, the further 5% option and the indirect holding in the Operator) to a well-funded Santa Cruz portfolio, with the concessions likely to be extended as a result of the provision of guarantee.

The Company, now with significantly reduced creditors and a heavily reduced cost base, sits with a 5% interest in a producing Santa Cruz Sur portfolio and an equity position in the operator InterOil Exploration and Production ASA. In addition to the divestment, the Company successfully completed a restructuring of its legacy debt position, converting the majority of previously outstanding debt into equity, substantially improving the balance sheet and providing the additional flexibility to best manage the financial requirements going forward. The Board see significant opportunities at this point in the economic cycle to secure new energy assets at attractive valuations and is currently exploring a number of these opportunities. “

In addition, the directors draw attention to the Accounting Policy notes regarding Going Concern, Estimates and the previous audit.

Echo Energy Plc (LON:ECHO), the Latin American focused energy company, has announced that, further to the Heads of Terms announced on 9 May 2023, the Company has now signed binding transaction documents, subject to shareholder approval, on broadly the terms outlined in the Heads of Terms.

The Board of the Company is requesting shareholder approval for the partial sale of its Santa Cruz Sur assets on the basis that it:

·      Addresses the Company’s near-term funding challenges by providing near term funding, enabling the Company to transfer to Buyers the significant in-country creditors which had built up during the COVID-19 period and providing access to funding for the Santa Cruz assets.

·      Provides continued exposure (both directly through the retained 5%, the contingent payments, the further 5% option and the indirect holding in the Operator) to a well-funded Santa Cruz portfolio, with the concessions likely to be extended as a result of the provision of guarantee.

·      Provides the company a new platform from which to move forward with an opportunity to drill an exploratory well on a strong Colombian portfolio with its corresponding lower risk jurisdiction and a clean balance sheet whilst still receiving cash flow from its 5% position in the producing assets of Santa Cruz Sur.

Transaction Highlights

–      Sale and Purchase Agreement signed with Selva Maria Oil S.A. and Interoil Exploration and Production ASA, conditional on Echo shareholder approval, for the proposed disposal of 65% out of the Company’s current 70% working interest in Santa Cruz Sur for a cash consideration of up to £1.725 million, consisting of:

–               a cash consideration of £0.825 million, with an initial cash payment of £75,000 due immediately; and

–               contingent cash payments of up to an aggregate of £0.5 million; and

–               payment in kind of £0.4 million via issue of new shares of Interoil Exploration and Production ASA upon completion, providing the Company with additional upside exposure to the Santa Cruz Sur assets.

–       The Company would retain a 5% non-operated working interest, with significantly lower exposure to ongoing costs and legacy in-country liabilities.

–       As part of the transaction, the Company’s remaining 5% working interest would receive a financial guarantee from Selva Maria Oil S.A. for a period of 10 years sufficient to meet the requirements of the Argentine authorities such that all owners of the Santa Cruz portfolio, including the Echo Argentine subsidiaries, will qualify for full title to the concessions and qualify for a 10 year extension to the concessions.  The concessions extension is a critical value inflexion point for the concessions.

–       The parties intend to evaluate the prospect of the potential future acquisition by the Company of a producing Colombian portfolio from the Buyers resulting from an option to drill an exploratory well therein subject to due diligence and future agreements as to terms.

–       Interoil to subscribe for 115,384,615 new ordinary shares in Echo, representing 0.02% of the Company’s enlarged issued share capital, at an issue price of 0.0625 pence per new ordinary share.  This price is a 100% premium to the mid-price on 5 May 2023.

The SPA covering the Proposed Disposal, the ancillary Guarantee and the Option, is conditional, inter alia, upon Echo shareholder approval pursuant to Rule 15 of the AIM Rules for Companies and the Issue of Equity is conditional upon, inter alia, a required capital re-organisation of the Company to enable the issue of new ordinary shares at the Issue Price. Further details of the Proposed Reorganisation are set out below.

A circular containing detailed information about the Proposed Disposal, the Guarantee, the Option, the Proposed Reorganisation and the Issue of Equity will shortly be published and available from the Company’s website at 

Echo Energy plc (LON:ECHO), the Latin American focused energy company, has announced the execution of a binding Term Sheet for a transaction, subject inter alia to shareholder approval, designed to provide much needed funding for the Company through the sale of 65% of the Company’s 70% of the current Working Interest in Santa Cruz Sur to Selva Maria Oil S.A. and Interoil Exploration and Production ASA for a cash consideration of up to £1.725M, an award of an option to purchase a producing Columbian portfolio and the issue of equity in Echo Energy PLC at 0.065 pence per share (a more than 100% premium to the closing price on 5 May).  This transaction would enable the Company to retain a much smaller interest in Santa Cruz Sur, whilst also seeing the Company’s liability for the previously announced significant in-country creditors and other liabilities reduced significantly. In addition the transaction would see the Buyer providing in country licence financial guarantees and provides a potentially attractive entry point into Columbia.

The Proposed Transaction

Pursuant to the term sheet and subject to contract, Echo will sell 65% per cent of its current 70% Working interest in the Santa Cruz Sur assets to Selva Maria Oil SA and Interoil Exploration & Production ASA. On Completion the Company Echo therefore will retain a 5% working interest in the assets, will have an option to buy another 5% back and will have an indirect exposure through equity in the Operator.

Total consideration for the sale is up to £1.725M of which:

·    Consideration of £825,000 with:

·    An upfront payment of £75,000 on execution of transaction documents, with the balance of £750,000 due on completion once shareholder approval has been obtained.

·    Payment in kind of £400,000 via transfer of Interoil shares upon completion, providing upside exposure to the Santa Cruz asset via an equity position in the Operator

·    Additional contingent payment of £400,000 should production from the assets rise to 4,000 boepd (gross).

·    Further contingent payment of £100,000 should production from the assets rise to 6,000 boepd (gross)

Furthermore the Buyers will provide a financial guarantee to cover Echo’s remaining 5% interest which is a critical step to enabling the securing of the licence extension and was not something Echo could easily achieve on its own.

Echo will also retain an option to repurchase a 5% interest in the asset for a consideration of £100,000 over a 6 month period, providing optionality in the event licence extension or other value catalysts are achieved

Additionally the transaction will provide the Company with the option to acquire an interest in Interoil’s Colombian assets (for a consideration and on terms to be agreed in future) after drilling and testing of an exploration well on the Maná Licence. The Company can recover twice the cost of that well from associated production.

Further to the above, Selva Maria Oil SA and Interoil Exploration & Production ASA have agreed to subscribe to approximately 115.38 million shares at a price of 0.065 pence per share (raising £75,000).  This represents a more than 100% premium to the closing share price on 5 May, the last trading day prior to announcement. Such an issue of equity would take place following completion and is likely to be subject to a capital reorganisation (likely requiring shareholder approval) and meeting other regulatory obligations. 

Benefits of Transaction to Echo

This transaction fundamentally:

·    Addresses the Company’s near-term funding challenges by providing near term funding, enabling the Company to walk away from the significant in-country creditors which had build up during the COVID-19 period and providing access to funding for the Santa Cruz assets.

·    Provides continued exposure (both directly through the retained 5%, the contingent payments, the further 5% option and the indirect holding in the Operator) to a well funded Santa Cruz portfolio, likely with a licence extension supported by the guarantee.

·    Provides the company  a new platform from which to move forward with an option on a strong Columbian portfolio with its corresponding lower risk jurisdiction and a clean balance sheet whilst still receiving cash flow from its 5% position in the producing assets of Santa Cruz Sur.

Given the Company’s large creditor position which originated from the COVID-19 period where the asset was sub-economic, 100%+ per annum inflation in Argentina and Argentine currency exchange controls, which have prevented funds being withdrawn from the country without significant penalties, the raising of additional equity for an Argentine business has been challenging. Having continued to explore all means of raising required near term funding, the Directors therefore see this alternative, which addresses the Company’s near-term funding challenge whilst providing continued exposure to Santa Cruz Sur, both through the retained 5% and the equity position in the Operator, and also a pathway to revenue generating assets in Columbia, as highly attractive at this juncture.

Transaction Subject to Shareholder Agreement

The transaction requires additional execution of a Sales & Purchase Agreement and a financial guarantee provided by the buyers for the benefit of Echo for the National Secretary of Energy & the Province of Santa Cruz. In addition the proposed option remains subject to agreement between the parties and completion will then require shareholder approval at an Extraordinary Shareholders’ Meeting of the Company to be held within 25 calendar days from execution of documents by all parties.

Vision For the Future

This transaction puts the Company on a much more financially stable trajectory with the transfer of liabilities associated with the Company’s current working interest in the assets to the buyers. A decision has been made to significantly reduce the Company’s corporate level cost base.

The Buyers will provide a financial guarantee for Company sufficient to meet domestic regulatory requirements. This is expected to help secure a 10-year licence extension for the Santa Cruz Sur assets as the new majority parties can fund the asset requirements to increase production. The Company will continue to have exposure to production upside through the contingent payments, and moving forward will continue to receive its 5% share of production revenue plus has the option to repurchase a further 5% interest at a price of £100,000.

The option to enter Colombia provides an opportunity to rebuild the E&P portfolio in a new territory that does not suffer the macro inflationary and economic factors that Argentina does. It is a much more business friendly jurisdiction with a vibrant small-medium cap E&P sector – an exciting growth opportunity.

Revenue Receipts

The Company confirms that it has received some of, but not all of, the expected c. ARS$ 135 million (c.£0.5m) revenue in Argentina around the end of April. The Company continues to expect that the remaining revenue will be paid to the company and is working with the operator and suppliers to accelerate its payment. The signing of the binding termsheet demonstrating a pathway to a stronger financial footing is considered an important step in this process. Prior to the receipt of this revenue or the completion of the proposed transaction the financial situation at the company remains challenging. Current cash balances in the UK bank accounts are below  £50,000.

Production from the Company’s assets in Argentina remains stable. Production over the period from 1 January 2023 to 05 May 2023 was an aggregate of 148,503 boe net to Echo, including 23,104 bbls of oil and condensate and 752 MMscf of gas. Average total daily production during the same period net to Echo was 1,198 boepd, with 6.07 MMscf/d gas and 186 bopd liquid.

Martin Hull, Chief Executive Officer of Echo Energy, commented: ‘This is a transformational moment for the Company as we look to put our recent challenges behind us and create a new, stronger and more financially robust platform from which to take the Company forward. Not only does it immediately improve our balance sheet, it also brings optionality with the Colombian opportunity, as well as giving us continuing revenues, with additional upside should the Buyers of the asset interest be able to deliver the investment and production growth that our financial limitations have prevented us from doing. I am excited about the future and the opportunities that lie before us and look forward to progressing the transaction in the coming weeks and updating shareholders on our progress.’

Echo Energy plc (LON:ECHO), the Latin American focused energy company, has provided the following commercial update regarding the Company’s gas sales from the producing Santa Cruz Sur assets, onshore Argentina, and a financial update.

New Gas Sales Contracts

The Company confirms that, following a successful commercial process for industrial clients, it has secured two new gas sales contracts for the upcoming 2023-2024 period with materially improved terms compared with the contracts announced on 3 May 2022.

The Contracts have an initial term of 12 months, with gas sales under the Contracts beginning in May 2023. The Contracts provide gross 6.8 MMscf/d of committed production (4.8 MMscf/d net to Echo) at an increased average price of US$4.48 per Mmbtu for the 2023-2024 period (compared with US$4.33 per Mmbtu for the previous period). In addition, an upfront gross cash payment of US$1 million (US$0.7 million, net to Echo) will immediately be paid and applied towards the working capital of the Santa Cruz joint venture.

The Company is able to elect to sell additional volumes of up to 0.7 MMscf/d (net to Echo) under the Contracts. This optionality, at the election of the Santa Cruz Sur partners, allows for the potential sale of additional volumes under the Contract at contract pricing, whilst also providing the Santa Cruz partners with a degree of flexibility with which to capitalise on spot market or other pricing when attractive. The Contracts additionally enable the potential for the parties to mutually extend arrangements for a further two years, subject to future negotiation and market pricing.  

The improved pricing terms and the upfront cash payment (without financing costs), combined with volume flexibility, represent a significant step for the Company in its strategy to maximise the commercial value of its production as it continues with the ongoing programme of increasing production. 

Reduction in Joint Venture Creditor Balances

The Company reported total creditors of approximately US$19.5 million in its unaudited Interim Results announced on 30 September 2022. Of this total, approximately US$11.5 million related to the Company’s joint venture in Argentina (net to Echo), which has since been estimated to have reduced to approximately US$9.3 million (unaudited) as at 31 December 2022 using the official ARS$ to US$ exchange rate of 177. This estimated creditor amount when calculated using the current ARS$ to US$ international market exchange rate (blue chip swap) of 368, is US$4.5 million (unaudited). This reduction is due to a combination of creditor negotiations, positive business developments, favourable exchange rate movements and the repayment of creditors from production cash flows.

The Company continues to focus on successfully reducing its creditor balances in a controlled manner, whilst also pursuing the strategic objective of investing in order to further increase production and asset value at Santa Cruz Sur.

The Company’s unaudited cash balance as at 2 January 2023 was US$1.1 million.

Martin Hull, Chief Executive of Echo, commented: “We are very pleased to see our financial and commercial positions continuing to improve and provide firmer foundations for our growth strategy, as we look to increase production and revenues across our asset base. These enhanced gas sales contracts will contribute to that process while the decrease in our joint venture creditors contributes to a stronger financial footing for Echo as we grow the business.”

Echo Energy Plc (LON:ECHO), the Latin American focused energy company, has provided an operational update regarding its Santa Cruz Sur assets, onshore Argentina, for the quarter ended 31 December 2022 (“Q4 2022”).

Operational Update

During Q4 2022, daily operations in the field at Santa Cruz Sur continued to deliver produced gas and liquids to key industrial customers and total 2022 cumulative production from Santa Cruz Sur, net to Echo’s 70% interest, reached an aggregate of 532,302 boe (including 101,574 bbls of oil and condensate and 2,584 MMscf of gas).

During Q4 2022, net liquids production averaged 298 boepd whilst net gas production averaged 7.3 MMscf/d. Net daily production averaged 1,522 boepd during the quarter. The combined Q4 2022 oil and gas production levels were the highest quarterly levels achieved in 2022 and reflect the measures undertaken under the Company’s Production and Infrastructure Enhancement Plan (the “Plan”) to improve infrastructure. Liquids production during Q4 2022 was the ninth continuous quarter of production growth, and a 12% production increase over Q1 2022. Average liquids production over the course of 2022 was 278 bbls per day, 25% higher than that in the previous year.

As previously announced on 10 November 2002, the scheduling of activities under the Plan is currently being optimised from cash flow at the asset level in order to maximise the benefit of funds available. Given the success of the Plan to date, the Company is also looking at options to increase working capital availability which can be used for the benefit of accelerating production increases in early 2023 under the Plan. These production increases target the reactivation of a total of approximately 30 or more wells in Santa Cruz Sur which, when combined with the infrastructure upgrades under the Plan, could result in further increases to net production.

The Company looks forward to updating shareholders on further progress on production growth under the Plan.

Martin Hull, Chief Executive Officer of Echo Energy, commented:

“I am pleased to report that we continue to make progress with our Plan. This is a strong set of quarterly production results, with liquids production showing a ninth continuous quarterly increase. This production growth is a direct result of the infrastructure investments that we made under the Plan during 2022. We remain committed to delivering on our strategy to grow production and are looking at working capital options that can build on the initial success of the programme and accelerate production growth from Santa Cruz Sur. I look forward to reporting further progress that will deliver value to our shareholders.”

Directorate Change

The Company also announces that further to the announcement on 13 October 2022, the Company confirms that Marco Fumagalli has stepped down as a Director of the Company with immediate effect.

James Parsons, Echo Energy’s Chairman, said:

“We would like to reiterate our thanks to Marco for his contribution over the last few years and wish him well with his future plans.“

Echo Energy plc (LON:ECHO), the Latin American focused energy company, has announced that, following completion of the Company’s balance sheet restructuring, the Company intends to appoint Lindor Martin as a non-executive director of the Company.

Mr. Martin’s appointment will bring additional capabilities to the Echo Board, including in relation to additional in-country Argentina energy sector expertise.

Mr. Martin has more than 20 years of experience in the design and execution of financial strategies, market analysis, Portfolio, Risk and Treasury management in top-level international companies, banks and Economic consulting firms – including more than 15 years developing structures and managing multicultural teams across countries and sectors.

Mr. Martin worked previously at Merrill Lynch, FIEL (Argentine Think tank) and Pluspetrol and is currently the Chairman of Refinor S.A.. He has a BA Honours in economics from Buenos Aires University (ARG), Master in economics from San Andres University (ARG) and an MSc in Economics and Finance from University of York (UK).

Mr. Martin’s intended appointment to the Board follows his nomination for appointment by Andina PLC, an existing Echo shareholder which shares certain mutual shareholders with Echo’s joint venture partners in its Santa Cruz Sur assets.

A further announcement, in connection with Mr. Martin’s intended appointment to the Board, will be made in due course.

James Parsons, Echo Energy Chairman, said:

“We look forward to welcoming Lindor to the Echo board as a non-executive director in due course and look forward to benefiting from his extensive and directly relevant experience. The Company continues to make progress in delivering upon its strategy to accelerate production growth from its assets in Argentina including by way of the Santa Cruz Sur Production and Infrastructure Enhancement Plan first announced by the Company on 7 July 2022. The continued alignment of the joint venture partners to the implementation of the asset plan is further strengthened by this announcement. The appointment of Lindor to the Board will further enhance Echo’s in-country expertise. I look forward to working with him at an exciting time for Echo in its Santa Cruz Sur asset working interest.”

Echo Energy plc (LON:ECHO), the Latin American focused energy company, has provided an operational update regarding progress in the reactivation of three wells in the Chorillos field, announced by the Company on 10 November 2022.

This three well reactivation programme is in addition to the Santa Cruz Sur production and infrastructure enhancement plan first announced by the Company on 7 July 2022 (the “Enhancement Plan”) and has been prioritised by the Santa Cruz Sur partners in seeking to further increase liquids production from the Chorillos field.

As previously announced, three candidate wells (Cho-10, Cho-13, Cho-19) had been offline for four years due to surface constraints and were identified for reactivation without use of the workover rig. Recently completed infrastructure upgrades had removed prior constraints, enabling these wells to be brought back into production.

The Company is pleased to announce that operations to reactivate the three wells have now been successful and safely completed and each of the three wells is now producing oil through surface lines to a field-storage tank.

Surface commissioning has now begun and, given the length of time that these wells have been offline, infrastructure integrity is being fully confirmed. This is expected to take several weeks, during which time the flow rate from the wells will be at intentionally reduced levels to enable the surface infrastructure to be fully tested under production conditions.

Following successful commissioning, each well will then be independently assessed with a mobile test unit, to confirm the yet to be determined flow-potential of this cluster.

The Company looks forward to continuing to update shareholders on further progress on these operations and in respect of the Enhancement Plan.  

Martin Hull, Chief Executive Officer of Echo Energy, commented:

“The three well reactivation plan is an important operational development for our Santa Cruz Sur Assets. These wells were offline at the time of and prior to Echo’s acquisition of an interest in Santa Cruz Sur in 2019 and our ability to safely, and successfully, reactivate these wells back to production is a great example of the breadth of the low-risk opportunity set that exists within our assets.

“This three well programme is in addition to the previously announced Santa Cruz Sur production and infrastructure enhancement plan and in light of the initial success, we look forward to executing similar opportunities, of which we believe there to be many, in the future.  We remain committed to delivering on our strategy to grow production and look forward to reporting further progress.”