Tag: ECHO

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:

Current Directorships/Partnerships	Past Directorships/Partnerships
Coro Energy plc Live Company Group plc Ossian Energy Limited	Ascent Resources plc Iconic Labs plc Surus Geo BV Transition Analytics Ltd Ossian Energy BV

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 www.echoenergyplc.com.

Background to and reasons for the Disposal

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 see the Proposed Disposal as a pathway to address the Company’s near-term funding challenge by enabling the Company to transfer to the Buyers the significant in-country creditors that had built up during the COVID-19 period and providing access to funding for the Santa Cruz assets.

The disposal 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 the guarantee.

Furthermore, the disposal provides the Company a new platform from which to move forward with an option 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.

The Directors do not see a viable alternative to this transaction without a significant improvement in the Argentine macro-economic situation or the availability of alternative funding.

Vision For the Future

Echo Energy sees significant opportunities at this point in the economic cycle to secure new oil and gas assets in the region at attractive valuations. Therefore, whilst this Transaction puts the Company on a much more financially stable trajectory, the Company also expects to be very active acquiring new assets and is already in discussions on various opportunities.  The Company is introducing a series of cash preservation measures to ensure the funding from this transaction is preserved whilst the Company seeks to grow the business through the acquisition of new oil & gas and energy assets and / or the exercise of the existing Options. These measures include the current VP Exploration and Chief Financial Officer leaving Company service whilst a new Chief Operation Officer is being recruited, on a consultancy basis initially. The Directors also intend to take a portion of both their historic accrued salaries / fees and their forward salaries / fees in shares.

The Board views the 10 year concessions extension at Santa Cruz Sur as a critical value enabler and is therefore delighted that the Buyers will provide a financial guarantee to the Company sufficient to meet domestic regulatory requirements which is expected to help secure the extension. The Company will continue to have exposure to production upside through the contingent payments and Interoil shares, 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 £0.1 million.

The potential to enter Colombia has the potential 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. The Chief Executive has extensive experience in Columbia.

Details of the Transaction

Further to the binding Term Sheet announced on 9 May 2023, the Company has now signed the SPA to sell 65% of its 70% holding in the Santa Cruz Sur business to Selva Maria Oil SA and Interoil Exploration & Production ASA. On Completion the Company 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 £0.825 million with:

·        An upfront payment of £75,000 on execution of transaction documents (the “Execution Fixed

         Consideration”), with the balance of £750,000

         due on completion once shareholder approval has been obtained.

·        Payment in kind of £0.4 million 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 £0.4 million should production from the assets rise to 4,000 boepd

         (gross).

·        Further contingent payment of £0.1 million should production from the assets rise to 6,000 boepd (gross)

The Company’s subscription for shares in Interoil is subject to lock-up provisions, which prevent the Company from disposing of the Consideration Shares during the first 12 months of the lock-up period (without exception) and then in limited tranches until the end of the 24-month lock-up period. In conjunction with this, the Company, Interoil and Selva María Oil S.A. have also entered into a ‘right of first refusal’ agreement under which, subject to the lock-up provisions contained in the subscription agreement, where the Company wishes to dispose of any of the Consideration Shares the Company must first offer such Consideration Shares to Interoil and Selva María Oil S.A.

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 concessions 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 £0.1 million over a 6 month period, providing optionality in the event concessions extension or other value catalysts are achieved.

Additionally, the transaction is intended to provide, subject to the future agreement of terms between the parties, the Company with an ability 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 Concessions. The Company can recover twice the cost of that well from associated production.

Further to the above, Interoil Exploration & Production ASA has 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 mid-market price on 5 May 2023, the last trading day prior to announcement.

In addition to the approval of Echo shareholders, completion of the Proposed Disposal is also conditional on, amongst other things, a financial guarantee provided by the Buyers for the benefit of Echo for the National Secretary of Energy & the Province of Santa Cruz.

In case the approval of Echo shareholders is not obtained and Buyers terminate the SPA on that basis, the Company shall reimburse the Execution Fixed Consideration and pay £60,000 to Interoil, unless the Company decides not to make those payments. In this last case, a transfer of 10% out of the Company’s current 70% working interest in Santa Cruz Sur business to Interoil will be completed.

Background to the Buyers

Founded in 2002, Selva María Oil S.A. is a natural resources exploration and exploitation company, which develops its activities mainly in the oil sector.

Interoil Exploration and Production ASA is an independent oil and gas exploration and production company that is listed on the Oslo Stock Exchange. Interoil is involved in the acquisition, exploration, development and operation of oil and natural gas properties in South America.

Proposed Reorganisation

In order to proceed with the Issue of Equity, it is proposed that the existing ordinary shares in the capital of the Company (“Existing Ordinary Shares“) will be sub-divided into one New Ordinary Share with a nominal value of 0.0001 pence and one 2023 Deferred Share with a nominal value of 0.2499 pence. As the New Ordinary Shares will have a lower nominal value than the Existing Ordinary Shares, the Company will be able to undertake the Issue of Equity at the issue price of 0.0625 pence and otherwise be capable of issuing further New Ordinary Shares in the future at price(s) below 0.25 pence (being the nominal value of the Existing Ordinary Shares).

The number and percentage of New Ordinary Shares held by each shareholder following the Proposed Reorganisation will be the same as the number and percentage of Existing Ordinary Shares held by them. The rights attaching to the New Ordinary Shares will be identical in all respects to those of the Existing Ordinary Shares, including voting, dividend, return of capital and other rights. The 2023 Deferred Shares shall have limited rights. Namely, the 2023 Deferred Shares will not be entitled to receive any dividend out of the profits of the Company available for distribution, nor shall they be entitled to receive notice of or attend any general meeting of the Company, nor vote on the resolutions at the same.

The Proposed Reorganisation remains subject to shareholder approval.

New Conditional Gas Sales contract

As previously announced  on 18 April the Company’s Argentine subsidiaries previously made an application to Argentina’s National Secretary of Energy under the Gas Plan regime (Gas Plan 5.2).  The company is delighted to report it, and its joint venture partners, have now received the response that the application was successful.  This is illustrative of the value which can be created at the Santa Cruz Sur assets in the event the portfolio is properly funded.

The new conditional contract under Gas Plan 5.2 (Santa Cruz Sur Basin) is with ENARSA (Energía Argentina Sociedad Anónima) and is for production volumes outside of those delivered under the existing gas contracts with industrial clients, as announced on 2nd February 2023.The new contract is applicable across all the assets in Santa Cruz Sur and will be in force over the period May 2023-Dec 2028. It has a base volume and an incremental volume. The base volume of 1.06 MMscf/d (gross 100% JV) attracts a price of US$3.46 per MMBTU. Any incremental production volume delivered above this base volume, and above the existing gas contracts with industrial clients, would achieve a gas price of US$9.975 per MMBTU until April 2026, a price of US$ 9.50 per MMBTU from May 2026 to Dec 2026 which reduces to US$ 5.90 per MMBTU for the remaining period of the Gas Plan Contract to December 2028. These prices are materially higher than the existing average sales prices achieved by the Company.

Achieving these incremental production volumes requires an additional investment of around US$ 5.3 million with an operational programme that includes approximately 13 individual workovers/well interventions, which the Company believes will be enabled by this transaction due to the Guarantee and the funding status of the Buyer.

The Company has therefore granted authorisation for the Operator of the Santa Cruz Sur assets to accept on behalf of the Company the terms of the Gas Plan 5.2 contract.   The Company views this as one of many future value accretive consequences of the Proposed Divestment.

General Meeting

The Proposed Disposal of the Working Interest in Santa Cruz is subject to Echo shareholder approval pursuant to Rule 15 of the AIM Rules for Companies. A circular containing detailed information about the Proposed Disposal of the Working Interest in Santa Cruz will shortly be published and available from the Company’s website at www.echoenergyplc.com.  A notice convening the General Meeting will be set out at the end of the Circular.

Recommendation and Voting Intentions

The Directors consider the transaction to be in the best interests of the Company and its Shareholders as a whole and do not see a viable alternative to the transaction without changes to the Argentina macro economic situation or a significant new external funding source. Accordingly, the Directors unanimously recommend that the Shareholders vote in favour of the Resolution to be proposed at the General Meeting

Martin Hull, Chief Executive Officer of Echo Energy, commented: “I am delighted that we have progressed from the Head of Terms agreed recently to the signature of binding transaction documents. The transaction’s strategic importance to Echo is reinforced by the new gas contract we also announce today, through which the resulting new investment by the purchasers in the Santa Cruz Sur assets will secure exciting additional commercial upside for Echo. The contract also serves to demonstrate the positive future potential ahead for the company should we complete the transaction and see a step change in operational activity across the portfolio from which all parties in the transaction will benefit. With the completion of the transaction we will put the challenges resulting from the Covid pandemic behind us, and I look forward to updating shareholders on our further progress.”

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.

Quarter	Aggregate Net Production(boe)	Average Net Production rate (boe/d)	Aggregate Net Liquids Production (bbls)	Average Net Liquids Production rate(bbls/d)	Aggregate Net Gas Production(MMscf)	Average Net Gas Production(MMscf/d)
Q1 2022	134,167	1,491	23,830	265	662	7.4
Q2 2022	127,123	1,397	24,770	272	618	6.8
Q3 2022	130,963	1,424	25,527	276	629	6.9
Q4 2022	149,049	1,522	27,447	298	675	7.3
2022	532,302	1,458	101,574	278	2,584	7.1

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.”

Echo Energy plc (LON:ECHO), the Latin American focused energy company, has announced that in respect of completion of the restructuring of the Company’s Luxembourg listed EUR 20.0m 8.0% secured notes and the Company’s 5.0 million 8.0% secured convertible debt facility, it has today made application for 3,570,766,386 new ordinary shares in the Company to be admitted to trading on AIM. The New Ordinary Shares will rank pari passu with the Company’s existing ordinary shares and it is expected that Admission will occur at 8.00 a.m. on 8 December 2022.

As a result, the restructuring of the Notes and the Facility first announced by the Company on 12 August 2022 and subsequently approved by Echo shareholders and holders of the Notes will complete on Admission, with an aggregate of €15.0 million of debt principal, together with accrued interest thereon having been converted into the New Ordinary Shares.

Following Admission, the Company’s issued ordinary share capital will comprise 5,527,427,674 ordinary shares, none of which are held in treasury. Therefore the total number of ordinary Shares with voting rights in Echo following Admission will be 5,527,427,674.

The above figure of 5,527,427,674 may be used by shareholders as the denominator for the calculations by which they will determine if they are required to notify their interest in or a change to their interest in the Company under the FCA’s Disclosure Guidance and Transparency Rules.

Martin Hull, Echo Energy’s Chief Executive Officer, commented:

“Completion of the restructuring of the Company’s balance sheet is a very significant and positive milestone for Echo Energy. I would like to thank our note and debt holders, and of course Echo’s shareholders, for their continued support.

With our ambitious strategy to increase production and value in Santa Cruz sur, we remain focused on delivering on our operational and commercial goals.”

Echo Energy plc (LON:ECHO), the Latin American focused energy company, has provided an operational update regarding further progress in the execution of the Santa Cruz Sur assets production and infrastructure enhancement plan first announced by the Company on 7 July 2022.

Upgrades to the workover rig owned by the Santa Cruz joint venture partners have now been successfully completed.

As previously announced, the Enhancement Plan is targeting a total of approximately 30 or more wells with interventions to commence on mobilisation of the workover rig to the field. The scheduling of activities, on a well-by-well basis, remains dependent on the availability of materials required for individual well interventions and operational activities, including the timing of the future mobilisation of the now upgraded workover rig, will also be optimised from cash flow at the asset level in order to maximise the benefit of funds available.

Detailed scheduling and optimisation of the well re-opening programme under the Enhancement Plan has been undertaken and three additional oil wells have been identified which do not require the mobilisation of the workover rig. These wells have been offline for four years due to surface constraints. However, recently completed infrastructure upgrades have now removed these constraints and enable these wells to now be reactivated with the objective of bringing them back into production.

These three additional wells will be prioritised by the Santa Cruz Sur partners in  seeking to further increase liquids production from the Chorillos field. This three well programme has now commenced and operations are expected to take around three weeks.

Following the previously announced successful completion of the first phase of the Enhancement plan focused on the power generation facilities, the already commenced programme to upgrade compressor capacity across the Santa Cruz Sur assets remains ongoing. Efforts continue to optimise the balance between maximising production and cashflow, minimising disruption and shortening the time required to complete the upgrades.      

Production at Santa Cruz Sur in the first month of Q4 2022 has been strong with average daily production in October of 1,610 boe, net to Echo Energy’s 70% interest. This represents the highest monthly average production achieved in 2022 and a 13% increase over the monthly average during Q3 2022.

These increased production levels demonstrate the positive impact of the successful implementation of the initial phases of the Enhancement Plan.

Corresponding net gas production for October was 7.7 MMscf/d with liquids production of 325 bopd. This represents the highest monthly average achieved for liquids in 2022, and a 27% increase over the levels achieved in January 2022, as the Company has prioritised liquids production given current commodity markets.

Echo Energy looks forward to continuing to update shareholders on further operational progress.

Echo Energy plc (LON:ECHO), the Latin American focused energy company, has provided a production update regarding its Santa Cruz Sur assets, onshore Argentina, for Q3 2022.

As previously announced, Echo Energy has made significant progress during the quarter on the Production and Infrastructure Enhancement Plan priorities. The first operational priority under the Plan has been successfully achieved with all three power generation units fully operational. Work on the second operational milestone has commenced with maintenance and optimisation of the existing compressors. The third operational priority, upgrading the Eagle workover rig which will be used for the well opening campaign, also began during the quarter.

Q3 2022 Production Update

Production over the period from 1 January 2022 to 30 September 2022 has reached an aggregate of 392,253 boe net to Echo during the period, including 74,127 bbls of oil and condensate and 1,909 MMscf of gas.

Notwithstanding production disruption resulting from certain facilities being unavailable as upgrades to infrastructure have been made, net production in Q3 increased from Q2 levels.

Net liquids production in Q3 2022 averaged 276 bopd, (Q2 2022: 272 bopd) and represents the eighth consecutive quarter of liquid production growth.  

Net gas production averaged 6.9 MMscf/d during Q3 2022, up on Q2 2022 (6.8 MMscf/d). Q3 2022 production was directly impacted as a result of the Oceano field production being brought temporarily offline due to additional infrastructure upgrades focused on increasing the amount of available sales gas, including the reconfiguration of the compressor to utilise electricity from the newly installed generator rather than gas. Additionally, production across other fields was impacted during the installation and commissioning of the new generators which as previously announced has now been successfully completed.

The ability of the various measures already undertaken to improve infrastructure is evident in increased production capacity. In the twelve-day period following completion of the works described above, net gas production averaged 7.9 MMscf/d and net liquids production averaged 320 bopd, equating to an average net 1,638 boepd over that same period. This represents a significant increase over the average production levels of 1,398 boepd for Q2 2022 immediately prior to the announcement of the Production and Infrastructure Enhancement Plan. It remains the Company’s expectation that production will increase materially as shut in wells are reopened  with the  workover rig now being upgraded.   

Echo Energy looks forward to continuing to update shareholders on production levels on a quarterly basis.

Echo Energy plc (LON:ECHO), the Latin American focused upstream energy company, has announced its unaudited interim results for the six months ended 30 June 2022. 

H1 2022 Highlights:

·    Revenue increase of 6% to US$6.2 million in H1 2022 (H1 2021: US$5.9 million)

·    Secured new gas contracts for 2022-2023 significantly above the 2021 annual pricing

·    Total net aggregate H1 2022 production of 261,290 boe, including 48,600 bbls of oil and condensate and 1,280 MMscf of gas

·    Continued to prioritise production opportunities with swift payback, a key component of the Group’s overarching growth strategy

Post Period-End Highlights

·    Agreement by the Santa Cruz Sur partners to a production and infrastructure enhancement plan to materially increase Santa Cruz Sur production by c.40% above average H1 2022 production levels

·    Post period fundraising and conditional debt restructuring

Chairman and Chief Executive Officer’s Statement

In the six months ended 30 June 2022, despite a number of legacy challenges resulting from the pandemic, the Company has taken clear steps forward, underpinned by considerable operational and commercial progress. Echo has continued to bolster its financial foundations, facilitating the development of cashflow enhancing rapid return production opportunities, which remains a a key component of the Group’s long-term growth strategy.

The successful negotiation of the new premium priced gas sales agreements, coming into effect in May 2022, are expected to underpin significantly increased gas revenues from the Santa Cruz Sur asset base.  The additional cashflows which will be delivered from the Santa Cruz Sur Enhancement Plan announced post period-end will enable the Company to broaden the scope of choices available to bring additional reserves and resources into production from the many opportunities the portfolio presents.

Amid the current favourable macro environment and with the potential debt restructuring on the horizon, Echo remains well-placed to evolve its existing portfolio. Whilst the Santa Cruz Sur assets remain a strategic priority, Echo is also  pursuing additional business development opportunities across the full energy spectrum in Latin America, aimed at enhancing the Company’s reputation as a leading sector  player in the wider region.

Progress on Production

Echo is highly focused on delivering near term production increases following the prudent financial stabilisation of the business across 2020 and 2021, and the normalisation of operating and trading conditions, albeit against a strong commodity price backdrop, across the energy sector as the impact of the Covid-19 pandemic continues to ease.

In April 2022, the compressor at the Santa Cruz Sur assets was successfully upgraded, and important maintenance was performed whilst the Oceano field was temporarily shut-in. This was a significant and planned operational milestone and the programme has delivered on its target of substantially increasing production from the Santa Cruz Sur assets since the compressor was brought back online, with the full impact expected to be seen in future production figures. Post period additional work at a number of fields has been undertaken to improve power generation capacity as part of the production enhancement plan, and these efforts continue.

Production over H1 2022 has continued to remain strong and reached an aggregate of 261,290 boe net to Echo during the period, including 48,600 bbls of oil and condensate and 1,280 MMscf of gas. Concurrently, net liquids production in Q2 2022 averaged 272 bopd, an increase over Q1 levels (Q1 2022: 265 bopd) despite the 35-day maintenance and upgrade programme on the Oceano field during the quarter.

Net gas production averaged 6.8 MMscf/d during Q2 2022 (Q1 2022: 7.4 MMscf/d), with Q2 2022 production again impacted as a result of the Oceano field production being brought temporarily offline.

Successful Execution of Sales Contracts at Premium Prices

In May 2022, Echo extended its customer footprint, securing two new gas sales contracts (“the Contracts”) at significant premiums to 2021 contracted rates. The Contracts reflect the strong competition amongst customers to secure gas supplies from the Company for the coming year.

Alongside providing the Group with further sales options and flexibility as Echo focuses on increasing competition and prices for specific products, the Contracts demonstrate the continued implementation of the Company’s strategy to leverage the strong upswing in global commodity prices whilst seeking to underpin gas sales from Santa Cruz Sur under secure long-term supply agreements where appropriate.

The Contracts have a term of 12 months, with gas sales under the Contracts beginning in May 2022, and provide for a 65% increase in pricing over average annual contract pricing previously achieved by the Company in March 2021 and a 116% increase on the current summer pricing until end April 2022 under those same March 2021 contracts. Only 2 months of the higher gas revenues under the new contracts is reflected in the interim accounts for the 6 months to 30 June, however, they now create a much more positive outlook for revenue growth in the next 12 month period.

Financial

The Group posted a Gross Loss of US $1.0 million for the six month period ended June 2020 compared to a profit of US $0.4 million for the comparable period in 2021. Growing production costs are attributable to general inflationary increases and additional expenditure required to get operations back to a more normal environment following the pandemic.

Total revenue for the period was US $6.2 million (H1 2020: US $ 5.9 million), and comprised of US $2.5 million of Oil sales and US $3.7 million of Gas sales.

Financial income of US $2.2 million and was almost entirely the net foreign exchange gains. Finance expense of US $1.8 million for H1 2022 (H1 2020:  US $ 3.3 million) and comprised primarily of US $1.3 million unwinding of discount on long term loans..

Total comprehensive loss for the Group for the 6 month period ending 30 June 2022 was US $2.0 million (H1 2020: US $ 1.5 million)

The Company’s cash balance as at 30 June 2022 was US $1.3 million, compared to $0.7 million balance as at 31 December 2021.

Post Period-End Highlights

Post period-end, the Group has continued to build on the positive momentum generated in H1 2022 following the agreement of new gas sales contracts, focusing on proving up the Santa Cruz Sur assets which provide Echo with material production and revenues from a strong reserves base as well as the potential for exciting higher impact projects.

In July 2022, the Santa Cruz Sur joint venture partners agreed to a detailed plan to materially increase production at Santa Cruz Sur by approximately 40% from the levels previously achieved over H1 2022, as well as to improve the quality of sales liquids from the Santa Cruz Sur assets (the “Enhancement Plan”). If achieved, the Enhancement Plan would increase total daily production from Santa Cruz Sur to around 2,000 boepd, net to Echo’s 70% interest in Santa Cruz Sur.

This Enhancement Plan is the agreed next step for production growth from Santa Cruz Sur and is focused on low-risk infrastructure upgrades to sustain the increased production from existing well stock.

Echo successfully installed all three additional power generation units on schedule in the respective fields over August 2022, a key pillar of the Enhancement Plan, with the unit installed in the larger Cerro Molino Oeste field commissioned and available to support existing and future production levels. The Group is planning on delivering upgrades to the workover rig owned by the Santa Cruz joint venture, including an overhaul of the hydraulic system and the blowout preventer stack.

Conditional Debt Restructuring and Fundraising

On 12 August 2022, the Company announced the conditional conversion of an aggregate of €15.0 million of existing debt principal, together with accrued interest thereon, into new Ordinary Shares – the significant majority of which is proposed to be converted into new Ordinary Shares at a price of 0.45p. In doing so, the Company also confirmed that it would be proposing a conditional reduction of the coupon on the remaining €10.0 million of Euro Note debt (the “Notes”) from 8% to 2% with suspension of further cash interest payments for two years and an extension on maturity on the remaining Notes to 2032.

The Company subsequently announced publication of its proposals to restructure the Notes on 5 September 2022. The debt restructuring remains conditional on both the approval of the holders of the Note and on the approval of the Company’s shareholders. The changes are aimed at comprehensively restructuring and strengthening the Company’s balance sheet and accelerating growth.

On 14 August 2022, the Company was also pleased to confirm that it had successfully raised £600,000 (before expenses) pursuant to a placing of new ordinary shares. The net proceeds of this placing provided the Group with additional resources to fund working capital, including expenses related to the proposed debt restructuring, and enable operating cashflows in Argentina to be focused on activities in country in the near term, including the plan to increase production by c. 40% over approximately the next six months.

Outlook

H1 2022 was a productive period for the Group, as we consolidated our asset base in Latin America with significant long term commercial agreements and continued solid output from key licences.

Against the backdrop of strong global commodity prices, the Company has delivered on its key aspirations for the period, accelerating its strategy to deliver organic growth from the Santa Cruz Sur assets, which present material low-risk production upside and has the potential to providing potential additional benefits to all stakeholders.

Looking ahead, management is confident of the Group’s growth prospects as we continue to unlock the potential of Santa Cruz Sur, identify further commercial opportunities, and strive to deliver the important conditional debt restructuring announced in August this year.

James Parsons                                                                    Martin Hull                                                          

Chairman                                                                             Chief Executive Office

Echo Energy plc (LON:ECHO), the Latin American focused energy company, has provided an operational update regarding further progress in the execution of the Santa Cruz Sur assets Production and Infrastructure Enhancement Plan previously announced by the Company on 7 July 2022.

The first operational priority under the Plan has now been successfully completed with all three power generation units now successfully commissioned and fully operational in the Cerro Molino Oeste, El Indio Oeste and Oceano fields, providing additional power to support existing and future production levels from, inter alia, the recommissioning of shut-in wells using the existing Santa Cruz Sur joint venture rig.

Upgrades to the workover rig owned by the Santa Cruz Joint Venture are underway. The timing of key upgrade activities are being scheduled and are dependent upon the availability of materials and third party services . These activities include an overhaul of the hydraulic system and the blowout preventer (BOP) stack.

The second operational priority under the plan is focussed on the maintenance and optimisation of the existing compressors at Cerro Norte and Campo Bremen to enable future increased volumes of gas to be processed and then sold into the main gas export line. Initial maintenance work has now commenced, and the full set of operations to optimise the compressors is anticipated to take approximately three months, based on the current parts and materials availability. These operations will be carried out with the intention of minimising disruption to existing gas production, although some impact is to be expected. 

In addition to the stated objectives of the Plan, further infrastructure upgrades have been carried out in the Oceano field with the intention of increasing the amount of available sales gas.  Work to convert the Oceano compressor from gas power to electrical power has now been successfully completed during a 12 day period during which, as a result of these operations requiring the Oceano field to be shut-in, total net-gas production was temporarily reduced by approximately 2 MMscf/d and net liquids production was reduced by approximately 20 bopd over the 12 day period.

Echo Energy looks forward to continuing to update shareholders on further operational progress.

Echo Energy plc (LON:ECHO), the Latin American focussed full cycle energy Company, has announced its audited results for the twelve months ended ended 31 December 2021.

2021 Highlights

·    Production capacity increased during the period pursuant to Santa Cruz Sur facilities upgrades in Q1 2021

·    Average net daily production in 2021 was:

o  8.0  mmscf/d of natural gas

o  222 bbls/d of oil and condensate

o  Total: 1,554 boepd

·    Net cumulative production in 2021 was:

o  Natural gas:  2,918 mmscf

o  Oil and condensate: 81,076 bbls

o  Total: 567,371 boe

·    Reserves and resources at end 2021 were:

o  1P (Proved): 2.53 MMboe

o  2P (Proved & Probable): 3.15 MMboe

o  MMboe Contingent Resources (High Estimate): 5.39 MMboe

·    Announced a five-year Cooperation Agreement with GTL International S.A., which has interests in both the hydrocarbon and renewables sector

·    Began process of reopening oil wells that had been shut-in during 2020

·    Developed new customers for liquids products

·    VAT refunds received in Argentina (US $0.5 million) and additional credit balances (approx. US$0.7m) are being amortised until the end of 2022, benefiting cashflow for 2021 and 2022

Post Period End Highlights

·    New gas contracts for 2022-2023, which was significantly above the 2021 annual pricing

·    Agreement by the Santa Cruz Sur partners to materially increase Santa Cruz Sur production by c.40% above average H1 2022 production levels

·    Post period fundraising and conditional debt restructuring

Martin Hull, Echo Energy Chief Executive, commented:

“Despite significant challenges, 2021 was an important year for Echo and one which has changed the outlook for the Company for the positive, with work across a range of fronts in 2022 only reinforcing that direction of travel. With progress made on the ground operationally and supported by much higher prevailing commodity prices and premium pricing in gas contracts, the recently announced comprehensive restructuring and strengthening of our balance sheet, once completed, will ensure we have much firmer foundations for the business financially, and a platform from which we will be able to pursue the many opportunities that exist within our portfolio. We look forward to updating investors on our activities in the rest of this year and beyond.”

Chairman’s and Chief Executive Officer’s Statement

Echo Energy, similar to many companies in the oil and gas sector,  faced exceptional challenges during 2021, with the global pandemic impacting all aspects of the Company’s operations and finances. We are delighted to report however that Echo now, buoyed by recent structural increases in commodity prices, the delivery of production enhancing opportunities  and the recently launched conditional debt restructuring process, is both underpinned by much firmer foundations and positioned as a regional platform for growth.  We are grateful to shareholders, lenders and partners for their continued support throughout the year.

Argentina

Santa Cruz Sur

The Santa Cruz Sur (“SCS”) assets provide material production and revenues from a strong reserves base. The SCS portfolio also includes significant upside from relatively low risk production enhancement opportunities combined with exciting higher impact projects.

During 2021 the Company began to restore previously shut-in liquids production which was supported by infrastructure upgrades. Improved market conditions enabled Echo Energy to capitalise on this by executing cashflow enhancing production opportunities. Throughout the period liquids production increased quarter-on-quarter  and production  during 2021 averaged 1,554 boepd throughout the year net to the Company’s 70% interest (including 8.0 MMscf/d of gas). Total net cumulative production was 567,371 boe (including 2,918 mmscf of gas) in the year. Both infrastructure maintenance and the commercial focus on high-quality blends at Santa Cruz Sur led to an increased frequency of oil sales during Q4 2021. This increase in liquids production helped to offset the expected natural decline in gas production over the year. Post period, work to optimise production and improve infrastructure has continued, especially relating to the provision of power generation capacity at some of the key producing assets, and this work continues.

In 2021 the Company was able to increase the proved SCS reserves base, after considering production in the year, and the impact of eventual licence expiry.  The Company estimates that, as at 31 December 2021, the SCS reserve base stood at an estimated 2.53 MMboe for 1P (Proved) and 3.15 MMboe for 2P (Proved & Probable) each net to the Company’s 70% non-operated working interest. The assignment of Echo’s 70% non-operated participation in the Santa Cruz Sur licences is subject to the authorisation of the Executive Branch of Santa Cruz’s Province, which is part of the overall process of title transfer that is proceeding as anticipated. 

Finance

Revenue for the period remained constant at US $11.1 million in 2021 (US $11.1 million in 2020). Whilst prices increased, particularly in oil during the year, there remained production challenges which resulted in the flat revenue year-on-year. Losses for the year reduced to US $11.6 million, compared to US $27.0 million in 2020, reflecting the expected trend toward recovery, in 2022.

The SCS asset joint venture continues to have high creditor balances, as a result of difficult trading conditions in 2020 and 2021. Whist the level of local creditors remains a a key concern, the Company is working exceptionally hard to mitigate any risk and to reduce the balances in a controlled manner, whilst not at the cost of future investment in order to further increase production and increase SCS asset value.

Whilst management are prudently reporting a material uncertainty in respect of going concern, management have prepared the financial statements on a going concern basis based on the post year end proposed debt restructuring, the current level of revenue and cash generation and the sensitivities considered in respect of the cashflow forecasts, and the mitigating actions that could be taken to conserve cash in a worse-case scenario.

Post period conditional debt restructuring and fundraising

On 12 August 2022, the Company announced the conditional conversion of an aggregate of €15.0 million of existing debt principal, together with accrued interest thereon, into new Ordinary Shares – the significant majority of which is proposed to be converted into new Ordinary Shares at a price of 0.45p. In doing so, the Company also confirmed that it would be proposing a conditional reduction of the coupon on the remaining €10.0 million of Euro Note debt (the “Notes”) from 8% to 2% with suspension of further cash interest payments for two years and an extension on maturity on the remaining Notes to 2032.

The Company subsequently announced publication of its proposals to restructure the Notes on 5 September 2022. The debt restructuring remains conditional on both the approval of the holders of the Note and on the approval of the Company’s shareholders. The changes are aimed at comprehensively restructuring and strengthening the Company’s balance sheet and accelerating growth.

On 14 August 2022 the Company was also pleased to confirm that it had successfully raised £600,000 (before expenses) pursuant to a placing of new ordinary shares. The net proceeds of this placing provided the Group with additional resources to fund working capital, including expenses related to the proposed debt restructuring, and enable operating cashflows in Argentina to be focused on activities in country in the near term, including the plan to increase production by c. 40% over approximately the next 6 months.

Outlook and Continuing Growth

2021 was a year that saw important progress for Echo both operationally and commercially, which culminated in early July 2022 with the Company confirming an agreement by the Santa Cruz Sur partners to materially increase Santa Cruz Sur production by c.40% above average H1 2022 production levels.  We will continue to prioritise the delivery of the production focused  operational programme and the important conditional debt restructuring announced in August this year. Subject to the successful completion of the debt restructuring, we see a very positive outlook for Echo as we accelerate our production led activities on the ground and take advantage of the many regional growth opportunities.

James Parsons                                                                                  Martin Hull

Non-Executive Chairman                                                             Chief Executive Officer

Portfolio

The Company is well positioned to build a diversified energy portfolio with a strong cash generating E&P foundation to support value accretive activities across the energy spectrum, whilst remaining high-leveraged to the continued upswing in the global commodity price super-cycle.

Echo is a significant acreage holder in the Austral basin, onshore Argentina, with over 2,600 km² of licence area containing 12 oil and gas fields and 82 production wells. This demonstrates Echo Energy’s commitment to the future of exploration and production potential of this part of Argentina.

Oil and gas production from SCS is revenue generating for the Company, and the portfolio of opportunities provides a flexible and range of well-balanced risk-reward upside options. Santa-Cruz Sur is a gas dominated portfolio, and the Company’s majority 70% non-operated interest provides an ability to significantly influence operational strategy. This gas focused E&P portfolio is appropriate for energy transition, and long-term premium-priced gas contracts driving locked-in cashflow to support further opportunities. The portfolio is balanced across the risk-reward spectrum with shorty-payback periods and focused on low-risk opportunities, infrastructure enhancement and cashflow reinvestment.

Following a successful auction process for industrial clients, the Company secured new gas sales contracts for the twelve-month period in May 2021 at significant a premium to contracted rates from the previous year. These new contracts provided for a 126% increase over annual industrial pricing achieved the previous year.

In 2021 the Company was able to increase the proved reserves base, after considering production in the year, and the impact of eventual licence expiry.  1P (Proved) reserves at year end were 2.53 MMboe, which is around 0.5 Mmboe higher than would otherwise be the case given these factors on the previous year’s figures. The original acquisition of the SCS assets in 2019 was based on proved reserves economics. Current proved reserves per December 2020 remain similar to those at acquisition, adjusted for production and date of licence expiry.

At the start of the year, the Company announced a five-year Cooperation Agreement with GTL International S.A, which has interests in both the hydrocarbon and renewables sectors. Both companies continue to collaborate and combine skill sets to jointly promote their business development initiatives in the wider region, and identify and assess new business development opportunities across the full energy spectrum

Average net daily production 2021                           1,554 boepd

Total production net to Echo 2021                            567,371 boe

Net 1 P (Proved) reserves                                            2.53 MMboe

Echo Energy plc (LON:ECHO), the Latin American focused energy company, has provided a further update regarding progress in the execution of the Santa Cruz Sur assets’ Production and Infrastructure Enhancement Plan originally announced on 7 July 2022.

The first operational priority under the Plan was to upgrade the power generation capacity sufficient to sustain and contribute to the anticipated elevated production levels. The Company is pleased to announce that following mobilisation, all three additional power generation units have now been successfully installed on schedule in the respective fields.

The power generation unit installed in the larger Cerro Molino Oeste field (1,375 Kilo Volt Amps (KVA) capacity) has also been successfully commissioned and is available to support existing and future production levels. Work continues by the Santa Cruz Joint Venture staff to plan on commissioning of the remaining two installed units in the El Indio Oeste field and Oceano fields (both 375 KVA capacity).

Upgrades to the workover rig owned by the Santa Cruz Joint Venture are also being scheduled and include an overhaul of the hydraulic system and the blowout preventer (BOP) stack.

The successful installation of the additional power generation capacity and the planned upgrades to the workover rig represent critical steps in the delivery of the Plan. Echo Energy looks forward to continuing to update shareholders on progress on the Plan throughout this year.