Echo Energy reports progress at Santa Cruz Sur

Latin America-focussed upstream oil and gas company Echo Energy updated the market on production and operations following its recent acquisition of a 70% non-operated working interest in the Santa Cruz Sur assets, onshore Argentina.

The AIM-traded firm also announced a two-year extension to its existing £1m loan originally provided in March 2017, and now held by Spartan Class O - a sub-fund of Spartan Fund.

It said average net daily production from Santa Cruz Sur during February was 2,410 barrels of oil equivalent per day, including 561 barrels of oil and condensate per day and 11.1 million standard cubic feet of gas.

Production over the period from 1 November to 29 February reached an aggregate of 298,140 barrels of oil equivalent net to Echo, including 67,823 barrels of oil and condensate and 1,382 million standard cubic feet of gas.

During the period, an aggregate net 215 million standard cubic feet of gas was used at the field, for fuel and power.

During February, two cargoes of oil and condensate were sold, including the cargo previously announced as in progress at the time of its 5 February announcement, with cumulative sales of 33,424 barrels net to Echo, with an average sales price of $47.90 per barrel of oil equivalent, which was a premium to the prevailing local market price.

“The company confirms receipt of full payment for the cargo lifted on 5 February with payment for the second cargo expected, as per normal payment terms, in the second half of March,” the board said in its statement.

It said delivery of produced gas to customers had continued without interruption, at an average realised price, reflective of the current season of $2.72 per million British thermal units.

As demonstrated by the 19% increase in the average gas price achieved during February, Echo said Argentinian summer gas prices were at a discount to annual averages, adding that it expected to achieve higher realised prices moving into the autumn and winter months.

“Whilst the company's production in Argentina has continued in line with the board's expectations since the time of the Santa Cruz Sur acquisition, and in light of the recent movements in oil prices and the potential for ongoing volatility in the short term, the company intends to put in place an additional unsecured standby credit facility, initially of £0.4m and up to £1.0m, with an interest rate broadly in line with the loan.”

As at 29 February, the company said it had unaudited cash balances of around $1.4m and expected to receive, in line with its normal payment terms, additional revenues from both the second February cargo and ongoing gas sales before the end of March.

“The company also currently intends for a further oil cargo to be lifted during March.”

Echo Energy said the implementation of the facility was a proactive step, intended to provide the company with access to additional working capital in the short term, if required, including in the event of a continued decline in oil demand driven by “recent global events” and any, as of yet unforeseen, local impacts.

Echo Energy also announced that it has agreed a two-year extension of the loan.

“The interest rate of the loan, which was previously due for repayment on 9 March, remains unchanged.”

The company agreed that the extended loan would now be repayable with £100,000 on 30 November, followed by four quarterly instalments of £50,000 on the last business day of the relevant month from March 2021, and finally with the balance of £700,000 on 8 March 2022.

In connection with the extension of the loan, Echo said the lender had been issued with 3,571,428 warrants to subscribe for new ordinary shares in the company at a price of 1.4p each, and with an expiry date of 9 March 2022.

“The company looks forward to updating shareholders on testing operations at the Campo Limite - CLix-1001- well at Palermo Aike, which are now underway,” the board said in its statement.

At 1040 GMT, shares in Echo Energy were flat at 1p.