Fiona Interview Comments29 May 2018 12:23
Currently, we are studying around five or six new potential workover targets. If we can generate anywhere above 20bbls/d of revitalised production from a workover well, then it will be well worth it, economically speaking. We have put together a plan so we can get the workover rig back in and launch a pretty rapid regeneration programme for several wells. We are hoping to deliver a slow and steady track of workover news.�
Fraccion C Programme:
The piece of the picture that is massively important is that in the success case any of these wells can be brought into production literally within a couple of months of completion. They are all close to infrastructure, and this is about getting incremental barrels into the facilities. The relative operational expenditure for additional gas, for example, is just 14 cents per MMBtu. So, the more we can get going through these facilities that are running at about 10pc of their capacity, the better.�
�In our modelling assumptions, we assume that two out of the four exploration wells are successful, and if we do that, we think we are in line for a 4X growth of EBITDA throughout the year. What that tells you is that we are more than covering OPEX costs, and any new molecules produced have a high impact on EBITDA. Depending on success, we will then look at putting a contingent well into Fracci�n C at the end of the programme.�
Tapi
Fully completing the 3-D seismic at Tapi Aike will be a transformational piece of the picture for Echo. We have done some independent analyst economic modelling that goes along with our thoughts on the site�s potential and believe that it could generate a value net to Echo of about $500m. Just one discovery there could be incredibly valuable and lead us into a different sphere of valuation.�
�The FX exchange risk in Argentina is kind of under control. The country�s government has to control the peso and ensure it comes down to an appropriate value to get funding from the IMF. There is no longer any short-term requirement to pay back bonds that had been due to expire imminently, and we have had a settling of the peso/dollar rate over the last few days. That gives us a good indication of where things lie. It is not ideal for the volatility to have occurred, but Argentina is an emerging market, and these things happen. I think the responses that the government have made and the speed at which they have made them show they are working effectively, as far as the outside world is concerned.�
At the end of the day, I need to build a strong enough core NAV to ensure we have an appropriate valuation. We are doing that slowly but surely by transferring prospective resources into contingent resources and even reserves. We intend to build up a strong offering that is difficult to knock back. Once we get that intrinsic value, we will slowly bring the value up.�
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