Echo Energy upbeat on developments at Santa Cruz Sur

The AIM-traded firm said the Santa Cruz Sur joint venture recently purchased four gas compressors, which were previously leased on a monthly basis.

Two of those compressors are located on the Cerro Norte field, one on Oceano and one on Campo Bremen.

The compressors were being used to increase the pressure of the gas for pipeline transportation from the fields.

Echo Energy said the purchase of the compressors at a gross cost of $2.2m (£1.7m) would be paid off over 36 monthly instalments, with a three-month grace period before the first payment is required.

The arrangement was expected to reduce gross monthly operating expenditure by around $0.1m when compared to the previous lease arrangement, as well as providing security for future gas production.

By securing ownership of such infrastructure, the company said the joint venture would be better able to facilitate anticipated future increases in production levels resulting from planned production enhancement activities.

As a result of improved market conditions, Echo Energy said it had also been undertaking upfront work focused on increasing liquids production at Santa Cruz Sur, in a phased approach, by bringing wells back into production that had previously been shut in earlier in the year as a response to the oil price at that time.

The initial phase of those operations was focussed on oil wells that had historically shown a lower volume of produced water, with five oil wells now successfully brought back on stream.

That had increased average gross liquids daily production by 108 barrels of oil per day across the Santa Cruz Sur assets.

Projected into the fourth quarter, the board said additional oil production from the initial phase of reinstated wells was expected to generate gross additional monthly operating revenue from liquids, being oil and condensate, of around $0.12m, assuming a Brent oil price of $45 per barrel.

The wells, which had now successfully been brought back online, were producing at an average rate about 13% higher than the pre shut-in levels, potentially due to pressure build-up in the reservoir during the period of shut-in.

Echo Energy said it was continuing to monitor that development, with a view to understanding whether similar initial production increases could be achieved across the remaining inventory of wells which were previously shut in.

Santa Cruz Sur 2020 production, net to Echo, over the period from 1 January to 7 September, was a total of 511,416 barrels of oil equivalent, with an average production rate of 2,040 barrels of oil equivalent per day.

“We are now moving into a period where we are both looking to invest in infrastructure in anticipation of future growth, to add value for shareholders wherever we can, such as through our purchase of the compressors at Santa Cruz Sur, and also increase output from certain wells to maximise returns from our assets,” said chief executive officer Martin Hull.

“This combination of investment and active management of the portfolio demonstrates that we are now entering an important period of growth for Echo, as we look to the future and deploy both time and resource above and beneath the surface to build our business.”

At 1247 BST, shares in Echo Energy were down 2.06% at 0.48p.