Last checked at 2 Feb 2023 07:00
2 February 2023
Echo Energy plc
("Echo" or the "Company")
Commercial and Financial Update
Echo Energy, the Latin American focused energy company, is pleased to provide 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 (the "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."
For further information, please contact:
Echo Energy Martin Hull, Chief Executive Officer
| via Vigo Consulting |
Vigo Consulting (IR & PR Advisor) Patrick d'Ancona Finlay Thomson
| +44 (0) 20 7390 0230 |
Cenkos Securities (Nominated Adviser) Ben Jeynes Katy Birkin
| +44 (0) 20 7397 8900 |
Zeus Capital Limited (Corporate Broker) Simon Johnson (Corporate Broking) John Llewellyn-Lloyd (Corporate Finance)
| +44 (0) 20 3829 5000 |
Note
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.
MMscf/d means million standard cubic feet of gas per day and Mmbtu means million British thermal units.
Certain of the information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulation (EU 596/2014) pursuant to the Market Abuse (Amendment) (EU Exit) Regulations 2018. Upon the publication of this announcement via a Regulatory Information Service ("RIS"), this inside information is now considered to be in the public domain.