Echo Energy PLC - Portfolio Restructuring and appointment of CEO
("Echo" or the "Company")
Argentinian Portfolio Restructuring and appointment of Chief Executive
· Strong progress on Tapi Aike seismic acquisition reinforcing the exciting Tapi Aike prospectivity.
· Restructued Compañía
· The new relationship terms with CGC, the Company's Argentinian partner, will result in additional funding for the Company's Tapi Aike drilling campaign, a material reduction of the Company's near term capital expenditure requirements and represents a significant improvement on the original Tapi Aike acquisition economics. This consists of:
1. Restructured participation in the Tapi Aike licence, under which Echo will now hold an 19% interest and pay 19% of costs in Tapi Aike, ending the previous CGC carry arrangement and significantly lowering the Company's capital obligations. CGC will additionally release
2. Decision not to proceed to the second phase of work at CDL leading to a relinquishment of the Company's interests in the concessions and the associated liabilities including avoiding a seismic commitment which was estimated to cost the Company approximately
· As a result of the new arrangements the Company and CGC are now in a position to accelerate the exploration program and confirm plans to drill the first well in Tapi Aike in Q4 2019.
Tapi Aike Seismic Acquisition
Seismic acquisition and interpretation work continue on the Company's Tapi Aike licence to mature prospects to drill-ready status. Processing of data acquired in the Eastern Cube is well underway, and, although at an early stage, reinforces the exciting prospectivity previously identified on 2D data. The Company is now continuing to acquire data on the Western Cube, which is progressing well and the data acquisition phase remains on track to be completed by the end of H1 2019.
Echo continues to be excited by the multi Tcf exploration potential in Tapi Aike which represents significant potential upside for equity investors and looks forward to updating shareholders as it continues to progress towards anticipated drilling in Q4 2019.
Portfolio Review - CDL and Tapi Aike
The Board has reviewed Echo's onshore Argentinian portfolio following recent operations in the country with a view to establishing the best way forward in terms of risk/reward balance and capital allocation. Early seismic indications serve to reinforce the Company's positive view of Tapi Aike as Echo's key strategic priority, whilst identifying the route to best utilising the Company's funds in support of the Tapi Aike drilling campaign, has also been a key consideration.
In order to deliver this strategy, and seeing relatively limited remaining upside for shareholders in the CDL concessions, the Company has negotiated and agreed an accelerated close of the initial phase of works on the the CDL concessions (the "Initial Phase") with CGC. This will result in Echo withdrawing from its interests and liabilities under the CDL concessions prior to the commencement of the second stage of works on the CDL concessions (the "Second Phase") in accordance with the terms of the CDL farm-out agreement (the "CDL Farm-Out") thereby enabling Echo to focus its capital on Tapi Aike.
As part of this restructuring, CGC will take on all outstanding liabilities on the CDL concessions and will waive any outstanding work commitments under the Initial Phase, including the previously agreed CDL seismic commitment, which was estimated to cost approximately
Echo originally secured access to the CDL concessions in 2017 pursuant to the CDL Farm-Out entered into with CGC. The Company and CGC subsequently completed a number of workovers and drilled four exploration wells across the CDL assets in accordance with the Company's strategy. The exploration wells were designed to test the Tobifera play which runs through the CDL licences. The results of the drilling campaign were disappointing and while hydrocarbons were present in certain of the exploration wells drilled, they were not capable of being produced at commercial rates. As a result, the Company considers that no substantial commercial upside remains in the CDL licences. The CDL licences currently deliver declining production to
In order to align Echo's partnership with CGC more closely, and to seek to accelerate activities on higher margin exploration potential, Echo and CGC have also agreed to revised equity and cost-sharing arrangements on the Tapi Aike licence. The prior arrangements saw Echo hold a 50 per cent interest in the Tapi Aike licence with an agreement to pay 65 per cent of drilling costs across the four well drilling campaign. Echo and CGC have now agreed an amendment to the terms of Echo's participation in the Tapi Aike licence such that Echo will now hold an 19 per cent interest and pay 19 per cent of well costs, ending the previous carry arrangement and significantly lowering the Company's capital needs with regard to the drilling programme. CGC will also release
Chief Executive Appointment
The Company is also delighted to announce that
"I strongly believe that this transaction marks a significant turning point for
For further information please contact:
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Cenkos Securities (Nominated Adviser)
+44 (0)20 7397 8900
+44 (0)20 7907 8500
Shore Capital (Joint Corporate Broker)
+44 (0)20 7390 0230
The information communicated within this announcement is deemed to constitute inside information as stipulated under the Market Abuse Regulation (EU) No. 596/2014. Upon the publication of this announcement, this inside information is now considered to be in the public domain.
The assignment of Echo´s participation in the Tapi Aike 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. The licence is operated by Compañía
This information is provided by RNS, the news service of the
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