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#ECHO Echo Energy – Directorate Changes

echo

Echo Energy, the Latin American focused full cycle energy company,   is pleased to announce the appointment of Christian Yates as an independent non-executive director, with effect from 17 January 2022.

Christian is Chairman of Gresham House Renewable Energy VCT 2 plc, one of two listed investment companies he co-founded in 2010. He has been investing in, advising on and promoting investments in renewable energy since 2009.

Following eight years in the British Army, Christian began his career in fund management in 1988. He has worked for several investment houses holding senior positions at Bear Stearns Asset Management where he was CEO International, Julius Baer Investments as CEO London, Chase Asset Management as MD EMEA and Lazard Asset Management.

Since 2012, Christian has combined being an entrepreneur and consultant with being a non-executive director, with significant experience across  sectors including renewable energy (including wind, waste to energy and BESS), real estate, hospitality, fund management and wealth management where until October 2020 he was Chairman of the Bowmore Wealth Group.

The Company also announces that Gavin Graham, a non-executive director of the Company, will be stepping down as a director of the Company concurrently with Christian’s appointment in order to maintain a fit for purpose board composition and size.

James Parsons, Non-executive Chairman, commented: 

“I am delighted to welcome Christian to the Board.  His deep background across the renewable energy space is a critical enabler for our energy transition in Latin America and will add a vital and relevant dimension to our thinking. We will benefit hugely from Christian’s wealth of experience throughout the energy arena and I look forward to working with him.

I am also extremely grateful to Gavin for his support at Echo over the years, his contributions to our board discussions  and I wish him all the best for his future endeavours.”

The directorships and partnerships currently held by Christian Yates and over the five years preceding the date of appointment are as follows:

Mr Christian James Kurt Yates , aged 59

 

Current directorships/partnerships Previous directorships/partnerships
Aura Sustainable Capital Investments Ltd

Away Birmingham Limited

Away Cheltenham Limited

Away Holdings Limited

Away Storage Limited

Away Storage Liverpool Limited

CJK & RA Yates LLP

Gresham House Renewable Energy VCT 2 plc

New Radiation (2008) LLP

Remount T/A Future for Heroes Ltd

Weirs Drove Development Limited

 

127 Piccadilly Plc

Aura Renewables Infrastructure Trust plc

Bowmore Asset Management Limited

Bowmore Financial Planning Limited

Bowmore Wealth Group Limited

Canvenue Limited

Cherif Barnes Developments Limited

Cherif Hampton Row Holdco Ltd

Cherif Investment Properties Ltd

Hampton Row (Barnes) Management Limited

Managed Storage Services (1) Ltd

W4B (UK) Limited

 

Mr Yates was appointed as a director of W4B Bristol Limited on 27 April 2009. Liquidators were appointed to W4B Bristol Limited on 17 March 2015 and that company was dissolved on 12 April 2016. Unsecured creditors were paid a first and final dividend totalling £30,350, equating to 19.96 pence per GBP on unsecured claims of £152,048.

Christian Yates does not hold any ordinary shares in the Company and there are no further disclosures to be made pursuant to Schedule 2 paragraph (g) of the AIM Rules.

For further information please contact:

 

Echo Energy plc

Martin Hull, Chief Executive Officer

 

Via Vigo Communications Ltd

 

 

 

Cenkos Securities plc (Nominated Adviser)

Ben Jeynes

Katy Birkin

 

 

Tel: 44 (0)20 7397 8900
Vigo Communications Ltd (PR Advisor)

Patrick d’Ancona

Chris McMahon

 

 

Tel: 44 (0)20 7390 0230
Shore Capital (Corporate Broker)

Anita Ghanekar

#ECHO Echo Energy – Production Update, Acquisition and Issue of Equity

echo

Echo Energy, the Latin American focused upstream energy company, is pleased to provide a   Q4 2021 production update regarding its Santa Cruz Sur assets, onshore Argentina.

 

In addition, further to Echo’s long stated intention to leverage its commercial and technical capabilities across the wider energy spectrum, including solar, the Company is pleased to announce its entry into the Chilean solar energy market with the entry of an option agreement to purchase a 70% interest in a 3MW solar project in Chile (the “Option”) and the forming of a partnership with Chilean company, Land & Sea SpA (“LAS”), a highly experienced developer of solar projects in Chile, to fund, construct and operate the project.  

 

Q4 2021 Argentinian Production Update

 

During Q4 2021 daily operations in the field at Santa Cruz Sur continued with the delivery of produced gas and liquids to key industrial customers and total 2021 cumulative production from Santa Cruz Sur net to Echo’s 70% interest reached an aggregate of 567,370 boe (including 2,920 MMscf of gas).

 

During Q4 2021, net liquids production averaged 240 bopd whilst net gas production averaged 7.0 MMscf/d. These production levels have been achieved despite a province-wide strike that temporarily reduced production levels over a six-day period in mid-December. Production for the first eight days of 2022 has been strong, with liquids production net to Echo averaging 262 bopd and net gas production averaging 8.3 MMscf/d.

 

As previously announced, the successful implementation of the Company’s strategy with the commercial focus on high-quality blends at Santa Cruz Sur, has continued to lead to an increased frequency of liquids sales throughout Q4 2021. Total liquids sales net to Echo over Q4 2021 reached 25,881 bbls which is an increase of 71% over the previous quarter (Q3 2021: 15,050 bbls). 

 

Entry into Chilean Solar Market – Highlights

 

· Option in relation to the 3 MW Vincente Méndez solar project (the “Project”) and Joint Venture with LAS, a highly experienced developer of solar projects in Chile

· On exercise of the Option, Echo will loan 100% of capex to construct the Project in return for a 70% indirect equity interest in the Zorro Solar SpA holding the rights to the Project (the “Project SPV”) with the remaining 30% interest in the Project SPA held by LAS

· Entry into the Project requires no upfront acquisition payment and instead provides Echo with access to attractive ‘ground floor terms’

· LAS will manage the Project locally, without a management fee, whilst Echo will maintain its 70% controlling interest in the Project SPV

· Following construction and on the sale of the Project, the construction loan provided will be repaid to Echo at 4% interest, with remaining sale proceeds split 70% Echo and 30% LAS, after reimbursement of US$100,000 of historical LAS costs

· If the option is exercised by Echo, gross construction capex for the Project is currently estimated at US$2.6 million and Echo will control the timing of expenditure

 

Under the Option agreement, the Company has the right to acquire a 70% interest in the Project, subject to certain conditions including the provision by the Company of the funding described below, with the intention to form a Joint Venture to construct and operate the Project. The Option is exercisable by the Company, in its sole discretion, at any time during the period up to 4 weeks from the date on which sufficient documentation has been provided to the Company required to enable a Final Investment Decision (“FID”). Echo’s current intention is to exercise the Option providing final documentation, including supplier and service contracts, is provided confirming the attractiveness of potential Project returns and the availability of non-recourse or project finance funds sufficient to meet Echo’s potential capex obligations. Further announcements will be made by the Company in this regard as appropriate.

 

By diversifying its asset portfolio via the entry of the Option, Echo will be well placed to capitalise on a new business segment that has the potential to provide low risk, stable cash flows, and attractive risk weighted returns that can support future investments in the base business in Santa Cruz Sur, whilst capitalising on complementary skills sets and geographic focus. Furthermore, Chile is a country with world class renewable energy resources; an established renewable energy industry and fiscal regime; excellent infrastructure; and ambitious energy transition targets.

 

Following careful analysis of multiple renewable energy projects, the Echo Board believe the Option to acquire an interest in the Project provides an important and exciting opportunity in the continued growth of the Company.

 

The Vincente Méndez Solar Project

 

The Vincente Méndez solar project is located 4 km from Chillan, a city of around two hundred thousand people, in central Chile, less than 0.2 km from the grid connection point and near to trunkline electricity and transport infrastructure to the capital Santiago. In this area, where solar radiation levels are similar to Mediterranean Europe, 3 MW capacity is expected to produce around 5,800 MWh/year, which is approximately double the average output of a UK solar plant of the same size.

 

Importantly, the Project will be part of the Chilean PMGD Scheme (Pequeños Medios de Generación Distribuida) which provides access to a favourable and stabilised long-term price regime and a fast- tracked approval process. These aspects make the project low risk to the Company in the construction phase and attractive to potential future purchasers / investors once operational.

 

Following any FID and successful commercial negotiation of construction contracts, total gross capex for the Project is currently anticipated to be approximately US$2.6 million. Subject to FID, construction is expected to begin in Q2 2022 and to complete in Q3 2023.

 

Whilst Echo will maintain a controlling equity interest in the Project SPV, on the ground, the Project will be led by LAS, who have demonstrated their expertise by managing solar projects through construction to operation, most recently, a similar 3 MW solar plant with another international partner. The Company’s partnership with LAS also provides access to LAS’ pipeline of similar solar projects already in the planning stage, which can be used by the Company to scale up the renewables business.  The Company expects to be able to secure project finance to fund this project in due course.

 

Terms of the Option agreement

 

The transaction has been structured to ensure that the project is low risk to the Company, whilst providing exposure to the potential upside associated with the interest, with no capital risk prior to FID. LAS are responsible for any remaining costs prior to the exercise of the Option and FID and the timing of FID is controlled by the Company.

 

Following a FID, when the Project cost has been accurately defined with contracts, the Company will fund 100% of the Project capex in the form of a loan to the Project SPV. In the event of any future sale of the Project post-construction, the proceeds would be utilised to cover the 4% per annum interest on the loan, the loan principal and a US$100k historical cost reimbursement to LAS. The remaining net proceeds would then be distributed according to the partner’s working interests. 

 

If following construction, the attractiveness of pricing in the wholesale power markets is such that the JV believes it would be preferable to retain the project and sell electricity into the grid, the cash flows generated from electricity sales will be used to satisfy the historical cost repayment obligations in the same way. As at 31 December 2021 the Project SPV had estimated net assets of approximately US$100,000.

 

Key Project milestones

 

Currently the Project is approaching Ready-To-Build (“RTB”) status, with LAS securing permits with relevant authorities and finalising the Engineering, Procurement & Construction (“EPC”) contract and the provision of solar panels. Following successful FID, it is expected that the Project would begin construction around Q2 2022. The completion of construction and commencement of commercial operations, when electricity is supplied to the grid, is currently anticipated around Q3 2023.

 

Echo Energy post transaction

 

This transaction is the next step towards becoming a full spectrum energy company leveraging the Company’s Latin America strategic focus and strong relationships. The Company’s base business in the Santa Cruz Sur assets in Argentina remains robust and a vital component of the ongoing business. In combination this transaction provides the Company with the ability, on exercise of the option, to better diversify the Company’s portfolio, across commodity type and country risk, yet is still positioned to take advantage of strengthening oil and gas prices and production enhancement opportunities. Going forward the Company is well positioned to grow its renewables business and provide stable cash flows to further support investment activities in Santa Cruz Sur.

 

The Company continues to evaluate other opportunities in the renewable energy space in Latin America with its local partners, alongside its existing investment programme including the ongoing well workover programme in its Santa Cruz Sur portfolio. This innovative, low risk structure transaction is indicative of how the Company will aim to bring further assets into the Company at a low upfront cost to shareholders.

 

Issue of equity and warrants

 

The Company announces that it has raised gross proceeds of £660,000 through the issue of 143,478,260 new ordinary shares in the Company (the “Subscription Shares”) at 0.46 pence per share (the “Subscription Price”) to new investors pursuant to a direct subscription with the Company (the “Subscription”), conditional on admission of the Subscription Shares to trading on AIM.

In connection with the Subscription, the Company has  issued 65,217,391 warrants to subscribe for new Ordinary Shares exercisable at 0.65 pence per new Ordinary Share at any time until the second anniversary of issue (the “First Subscription Warrants”) subject to admission of the Subscription Shares to trading on AIM.  

In addition, the Company has also conditionally agreed to issue a further 78,260,869 warrants to subscribe for new Ordinary Shares exercisable at 0.65 pence per new Ordinary Share at any time until the second anniversary of issue (the “Second Subscription Warrants”) subject to the receipt of the necessary share issuance authorities at the Company’s 2022 annual general meeting.

The Subscription Shares will, when issued, rank pari passu in all respects with the Company’s existing ordinary shares of 0.25 pence each (“Ordinary Shares”) and application will be made for the Subscription Shares to be admitted to trading on AIM (“Admission”). Admission is expected to take place on or around 8.00 a.m. on 24 January 2022.

The net proceeds of the Subscription of approximately £600,000 will add to the Company’s working capital resources and be applied towards the formation of the solar project Joint Venture to construct and operate the Project. As at 30 December 2021 the Company’s unaudited cash balance, excluding Echo’s 70% entitlement to cash balances held by the Santa Cruz Sur joint venture in Argentina, was approximately US$520,000.

Following Admission, the Company’s issued share capital will comprise 1,452,491,345 Ordinary Shares. Each Ordinary Share has one voting right and no shares are held in treasury and this figure may be used by shareholders in the Company as the denominator for the calculation by which they will determine if they are required to notify their interest in, or a change to their interest in, the share capital of the Company under the Financial Conduct Authority’s Disclosure Guidance and Transparency Rules. 

 

Martin Hull, Chief Executive Officer of Echo Energy, commented:

 

“I am very pleased to be able to announce our first steps into the solar energy space via the entry of the partnership with LAS and this option agreement. The resultant JV represents what we hope will be the start of a long and fruitful relationship with LAS. This agreement is another example of Echo leveraging its in-house transactional capabilities to bring exciting and potentially highly value accretive assets into the business while at the same time minimising upfront cost to its shareholders.

 

Our Santa Cruz Sur assets provide Echo with a very robust base business, highlighted by the strong production numbers at the start of this year, and a strong foundation on which to add a new business segment. Chile is a sweet spot for renewable energy in Latin America, and our entry to the region diversifies our geographic footprint whilst providing near term catalysts as we progress the new project.

 

Our focus remains on balancing risk and reward in the most efficient way possible for our shareholders – as we broaden the range of our energy investment opportunities, we will be able to identify the best paths to value creation across both hydrocarbons and renewables, whilst also positioning the business for the energy transition.

 

 

 

For further information, please contact:

 

Echo Energy

Martin Hull, Chief Executive Officer

 

via Vigo Communications

Vigo Consulting (IR & PR Advisor)

Patrick d’Ancona

Chris McMahon

 

+44 (0) 20 7390 0230

Cenkos Securities (Nominated Adviser)

Ben Jeynes

Katy Birkin

 

+44 (0) 20 7397 8900

Shore Capital (Corporate Broker)

Anita Ghanekar

 

+44 (0) 20 7408 4090

#ECHO Echo Energy – Operational Update

echo

Echo Energy, the Latin American focused energy company, is pleased to provide an operational update regarding its Santa Cruz Sur assets, onshore Argentina for Q4 2021 to 30 November 2021.

 

Daily operations across the asset base in Santa Cruz Sur and the delivery of produced gas to industrial customers under contract have continued uninterrupted during the first two months of Q4 2021. Production over the period from 1 January 2021 to 30 November 2021 reached an aggregate of 523,735 boe net to Echo, including 74,605 bbls of oil and condensate and 2,695 mmscf of gas.

 

As a result of the completion of capacity increasing infrastructure works, gas production in November 2021 averaged 7.1 MMscf/d net to Echo, an increase over the 6.7 MMscf/d net production rate during the previous month.

 

Net liquids production in the first two months of Q4 2021 averaged 255 bopd, and is an increase of 31% over Q1 2021   levels prior to the commencement of production optimisation and the bringing of shut in wells back on line. The benefit of both infrastructure maintenance and the previously announced commercial focus on high-quality blends at Santa Cruz Sur has also led to an increased frequency of oil sales during Q4 2021 to date, with total liquids sales net to Echo in  quarter four to date of 16,855 bbls (Q3 2021 total of: 15,050 bbls).  This increase in liquids production has helped to offset the expected natural decline in gas production over the year.

 

The Company looks forward to updating shareholders on production levels on a quarterly basis going forward.

For further information, please contact:

 

Echo Energy

Martin Hull, Chief Executive Officer

 

via Vigo Communications

Vigo Consulting (IR & PR Advisor)

Patrick d’Ancona

Chris McMahon

 

+44 (0) 20 7390 0230

Cenkos Securities (Nominated Adviser)

Ben Jeynes

Katy Birkin

 

+44 (0) 20 7397 8900

Shore Capital (Corporate Broker)

+44 (0) 20 7408 4090

MetalNRG #MRNG – Italian Waste to Energy Plant Update

MRNG

MetalNRG plc, (LON:MNRG), the natural resources and energy investment company, is pleased to provide an update on progress being made on the recommissioning of EQTEC Italia MDC waste-to-energy plant.

 

MetalNRG is part of a consortium of co-investors, led by EQTEC plc (AIM: EQT) (“EQTEC”), which recently formalised the intention to recommission the 1 MW biomass-to-energy plant in Tuscany, Italy.

 

The facility, originally commissioned in 2015, is built around EQTEC Advanced Gasification Technology and when operational, Italia MDC will  transform straw and forestry wood waste sustainably sourced from local farms and forests into green electricity and heat for the local community.  

 

EQTEC recently stated that recommissioning of the project is continuing on track, with recent developments including that:

· the EQTEC technical team has been on site, completing engineering surveys, as well as meeting EPC partners and local stakeholders;

· the site has been fully cleaned;

· disassembly of relevant components was completed earlier this month; and

· EQTEC Advanced Gasification Technology and associated technology items, including the syngas filter, water treatment unit, heat exchanges and thermal cracker reactor burner, have now been ordered and deliveries are due to start arriving in late November.

 

 

 

We announced to the market at the financial close of this transaction that we expected the plant to be fully recommissioned by Q2 2022. We are confident, at this stage of proceedings, that this announced time-line will be maintained. We expect to provide another update on progress to the market in early 2022.

 

A series of pictures can be viewed on the Company’s web site, www.metalnrg.com .  

The release of this information was arranged by Rolf Gerritsen, Chief Executive Officer.

 

 

  END

 

Contact details:

MetalNRG PLC

Rolf Gerritsen
Christopher Latilla-Campbell

+44 (0) 20 7796 9060

Corporate Adviser
PETERHOUSE CAPITAL LIMITED
Lucy Williams/Duncan Vasey

+44 (0) 20 7469 0930

Corporate Broker
SI CAPITAL LIMITED
Nick Emerson

+44 (0) 1483 413500

#Echo Echo Energy – Well Intervention Programme

echo

 

Increase in high-quality oil production potential

Echo Energy, the Latin American focused upstream energy  company, is pleased to announce, further to the Company’s announcement of 5 October 2021, that it has completed the first in a programme of sixteen proposed well interventions and workovers to bring non-producing reserves back in to production at Santa Cruz Sur.

 

The first intervention has now been successfully completed on a well in the Chorillos block. For the operation, a surface hydraulic pumping unit was used to induce flow and over a 100-hour period, the well delivered a cumulative 305 bbls of high-quality oil as part of this intervention and flow induction process, a rate equivalent to c.76 bopd.

 

The intervention focused on assessing the production potential and delivery of high-quality oil at low water cut from a well last fully online in 2013. Prior to the intervention the relevant field was producing 17 bopd from a small number of active wells.

 

The  intervention and workover programme is in addition to the Company’s previously announced programme of reactivating, at the appropriate time, previously shut-in wells at the Campo Molino oilfield and has been commenced in line with the current strategy of focussing upon production to deliver the highest quality and highest-priced blend oil production at Santa Cruz Sur. 

 

The Company intends to optimise the timing of when the well is brought into full production to maximise cost and operational efficiencies within the larger work programme for the Santa Cruz Sur assets. 

 

As previously announced by the Company,  prior to the completion of the well intervention, liquids production net to Echo averaged approximately 290 bopd in September 2021.

 

 

Martin Hull, Chief Executive Officer of Echo Energy, commented:

“I am pleased to announce that we have successfully completed an initial well intervention on  Santa Cruz Sur. This well delivered high-quality production capacity and demonstrates the quality and production potential of opportunities available from our assets at Santa Cruz Sur. We look forward to further updating the market as our work programme progresses.”

 

 

For further information, please contact:

 

Echo Energy

Martin Hull, Chief Executive Officer

 

via Vigo Communications

Vigo Consulting (IR & PR Advisor)

Patrick d’Ancona

Chris McMahon

 

+44 (0) 20 7390 0230

Cenkos Securities (Nominated Adviser)

Ben Jeynes

Katy Birkin

 

+44 (0) 20 7397 8900

Shore Capital (Corporate Broker)

Jerry Keen

+44 (0) 20 7408 4090

#Echo Echo Energy – Successful Loan Restructuring

Echo Energy, the Latin American focused upstream oil and gas company, is pleased to announce that it has successfully agreed the restructuring of the Company’s £1.0 million loan originally provided to the Company in March 2017 and now held by Spartan Class O (the “Lender”), a sub-fund of Spartan Fund Limited SAC (the “Loan”) with the Lender.

The terms of the amendment to the Loan (the “Amendment”) are as follows:

· Maturity extended by 2 years such that the then outstanding remaining principal and accumulated accrued interest will mature on 8 March 2024 (“Maturity”) following four quarterly cash prepayments of £25,000 commencing on 31 March 2023.

· Interest reduction such that all Loan interest will be accrued and paid on Maturity at a reduced rate of 8% per annum from Amendment (previously 12% per annum) on outstanding principal on a non-compounding basis.

· 15% of the remaining £850,000 Loan principal, representing £127,500, has now been converted into 10,200,000 new Echo ordinary shares (the “Conversion Shares”) at an effective issue price of 1.25p – a premium of 108% to the closing mid market price per Echo ordinary share on 30 September 2021.  

· Conversion Shares to be locked-in for a period of 6 months from Admission (as defined below).

Prior to the Amendment the full Loan, together with interest, had been due to mature on 8 March 2022 – with quarterly cash repayments of £50,000 prior to that maturity date.  

In connection with the Amendment, the Lender has been issued with 3,096,429 warrants to subscribe for new ordinary shares in the Company at a price of 0.7 pence per new ordinary share, exercisable from the date of grant and with an expiry date of 30 September 2022.

Application has been made for the Conversion Shares, which rank pari passu with the Company’s existing ordinary shares, to be admitted to trading on AIM. It is expected that admission of the Conversion Shares, will occur at 8.00 a.m. on 7 October (“Admission”).

Following Admission, the Company’s issued ordinary share capital will comprise 1,309,013,085 Ordinary Shares, none of which are held in treasury. Therefore, following Admission, the total number of ordinary shares with voting rights in the Company will be 1,309,013,085 which may be used by shareholders as the denominator for the calculations by which they will determine if they are required to notify their interest in, or a change to their interest in, the Company under the Financial Conduct Authority’s Disclosure Guidance and Transparency Rules.

Martin Hull, Chief Executive Officer of Echo Energy, commented: “The successful restructuring of the loan represents an important and positive step for the business as we continue to make great progress in 2021 both commercially and operationally. It materially reduces the near term cash outflow by delaying maturity whilst additionally reducing ongoing debt servicing costs, further strengthening our financial platform. These steps free additional resources to support our ongoing strategy of reinvestment in rapid payback production growth opportunities at a time of commodity price strength, reinforced by our attractively priced gas contracts. By investing in Echo at a more than 100% premium to the prevailing share price and agreeing to the lock up period, not only are the Lenders strengthening the balance sheet but also demonstrating confidence in the business and its strategy. 

For further information, please contact:

 

Echo Energy

Martin Hull, Chief Executive Officer

 

via Vigo Communications

Vigo Consulting (IR & PR Advisor)

Patrick d’Ancona

Chris McMahon

 

+44 (0) 20 7390 0230

Cenkos Securities (Nominated Adviser)

Ben Jeynes

Katy Birkin

 

+44 (0) 20 7397 8900

Shore Capital (Corporate Broker)

Jerry Keen

+44 (0) 20 7408 4090

#ECHO Echo Energy Plc – Interim Results

Echo Energy, the Latin American focused upstream energy company, announces its unaudited interim results for the six months ended 30 June 2021.

 

H1 2021 Highlights:

· Refocus of capex away from high-risk exploration into lower risk-production opportunities with swift pay back.

· Gross profit of US $0.4 million (H1 2020: loss of US$ 1.6 million).

· Revenue increase of 5% to US $5.9 million in H1 2021 (H1 2020: US $5.6 million).

· Reduction in cost of sales of 33% in H1 2021 compared to equivalent period in H1 2020

· Total net aggregate H1 2021 production of 304,639 boe (including 37,159 bbls of oil and condensate and 1,605 MMscf gas).

· New gas sales contracts in place from May 2021 with premium pricing from innovative price auction.

· Strong domestic gas prices supported enhanced cashflow generation with a 28% increase in gas price compared to same period a year ago with premium gas prices only coming into effect in last two months of the period.

· Successful completion of the restructuring of both the  Company’s EUR 20.0m 8.0% secured notes  and  the Company’s EUR 5.0m 8.0% secured convertible debt facility loan.

· Echo received a successful VAT cash disbursement from the Argentine Government of US $0.5 million, a further signal that the country  is progressing towards more regular activity.

Enquiries:

Echo Energy

Martin Hull, Chief Executive Officer  via Vigo Communications

Vigo Communications (PR Advisor)  +44 (0) 20 7390 0230

Patrick d’Ancona

Chris McMahon

Cenkos Securities (Nominated Adviser)   +44 (0) 20 7397 8900

Ben Jeynes

Katy Birkin

Shore Capital (Corporate Broker)   +44 (0) 20 7408 4090

Jerry Keen

Certain of the information communicated within this announcement is deemed to constitute inside information for the purposes of Article 7 of EU Regulation 596/2014 (as amended), which forms part of domestic UK law pursuant to the European Union (Withdrawal) Act 2018. Upon the publication of this announcement, this inside information is now considered to be in the public domain.

 

Chairman and Chief Executive Officer’s Statement

 

The first six months of 2021 have seen Echo Energy plc (“Echo” or  the “Company”) emerge from the previous year’s challenges both operationally and financially stronger. The Company moved swiftly  to successfully restructure its debt, continue to conserve cashflow, begin to reinstate previously shut in production wells, and refocus its portfolio on progressing cashflow enhancing rapid return production opportunities. We have executed our strategy of moving away from high-risk exploration spend into lower risk-production opportunities with attractive pay back periods.

These important achievements and the improving macro environment combined with our commercial successes, including the renegotiation of gas sale agreements at substantial market premiums during the period, are reflected in an improved financial performance for the period.

As Echo continues its return to full liquids production at Santa Cruz Sur, and improved financial flexibility, we continue to identify and progress growth options across the existing portfolio, and the wider region, and work towards overcoming remaining challenges whilst maintaining our commitment to delivering value for our shareholders.

COVID-19 recovery and progress on production

At the beginning of the 2020 COVID-19 pandemic, extreme volatility in the energy markets resulted in the inability of the Company to sell crude oil and precipitated a decision to preserve cash through the temporary shut in of a significant number of Echo’s oil producing wells. However, following continued improvements in market conditions, including a return to regular oil sales, Echo agreed, together with its Santa Cruz Sur partners, to upgrade and debottleneck the existing liquid pipelines that were previously shut in Q2 2020, as a path to returning to full oil production.

Expenditures of approximately US $0.3 million were injected by the Company to replace and upgrade parts of the Santa Cruz Sur infrastructure and reduce maintenance costs. By June 2021, Echo successfully delivered the project, demonstrating the effectiveness of the Company’s in-country operational capability and enabling production previously shut in in April 2020 to be systematically brought back on line.  A detailed update on liquid production increases was provided to the market in August 2021 with around a 50% increase in liquids production. This has enabled the Company to benefit from the upswing in global oil prices and the improved macro-outlook, symbolising a strong recovery from the challenges of the previous year. Whilst overall production, including gas remains below pre pandemic levels, the company continues to work towards improving production by undertaking the necessary operational activities and investments. With improved economic tailwinds and new infrastructure installed in the field, Echo now has the capacity to commission incremental enhancement projects within its portfolio. The reinvestment of available cashflow to drive further production increases remains an ongoing focus.

These increasing cashflows are expected to enable further production investments to be funded and demonstrate Echo’s commitment to and confidence in its organic growth strategy within the Santa Cruz Sur asset base.

Successful execution of sales contracts at premium prices

In March 2021, Echo secured two new gas sales contracts at significant premiums to both prevailing spot market rates and 2020 contracted rates, with approximately 70% of gross daily gas production from Santa Cruz Sur allocated to industrial customers now committed under secured contracts until April 2022.

Following the Company’s announcement in March 2021 relating to new gas sales contracts for 2021-2022, the Company agreed summer and winter pricing for its annual industrial clients, with the contracted winter premium providing substantially increased cashflow in the near term, helping to grow future operations through production enhancement work activities supported by infrastructure and compressor maintenance programmes.

In Q2, increasing liquids production represented delivery upon the Company’s strategy to leverage the marked upswing in global commodity prices. With the additional liquids production expected to continue to contribute to a material cashflow increase, Echo continues to benefit from an improving domestic market situation. In May 2021, the Company sold gas to the spot market at an average price representing a 151% increase in prices compared to the March 2021 average spot price. All gas production, as of May 2021, was sold under the new gas sales agreements, reflecting significantly increased winter pricing. Any gas volumes not sold under the long-term contracts was sold to the spot market.

Delivery of successful debt restructuring preserving cash resources

In March 2021, Echo undertook a process of restructuring its debt to build a solid financial platform for reinvestment of its increasing cashflows into the Company’s assets to deliver growth. The restructuring was successfully completed in April 2021, when holders of the Company’s publicly listed bonds voted in favour of the restructuring of those securities. As a result, cash interest payments on  the Company’s listed bonds have been deferred until mid-May 2025. The completion of the bond restructuring also fulfilled the remaining condition of the Lombard Odier debt restructuring, which similarly pushed back maturity and preserved cash resources.

 The company’s balance sheet remains highly leveraged, and trade creditor levels are elevated reflecting the challenges presented by the pandemic, but the restructuring, along with the increased oil production following the ongoing infrastructure upgrades, provides a markedly improved and outlook for shareholders.

In May 2021, Echo received a partial VAT repayment from the Argentine Government as it resumed normal activity following months of COVID-19 related shut down. This process provided both material cash funds and further evidence of the normalisation of in-country activities following delays in 2020 caused by COVID-19.

Growth Opportunities

Campo Limite remains a potentially material well  for the Company which could increase reserves and resources in the Palermo Aike concession and open up additional commercial options in the area. Well testing activities remain an operational and commercial focus and work remains ongoing to optimise commercial arrangements to enable activities to resume once pandemic constraints (which were in place throughout H1 2021) are lifted.

At the start of the year, the Company announced a five-year Cooperation Agreement with GTL International S.A, which has interests in both the hydrocarbon and renewables sectors. Both companies continue to collaborate and combine skill-sets to jointly promote their business development initiatives in the wider region, and identify and assess new business development opportunities across the full energy spectrum.

Financial

The six month period ended 30 June 2021 has seen Echo successfully manage value chains, enabling the Company to improve efficiencies at both corporate and asset level.

The Group posted a gross profit of US $0.4 million for the first time since the acquisition of the SCS asset for the six month period ended June 2021 compared to a loss of US $1.6 million for the comparable period in 2020,  attributable to a decrease in cost of sales from US $7.3 million in H1 2020 to US $5.5 million in H1 2021, demonstrating enhanced operational efficiency and commodity prices.

Total revenue for the period was US $5.9 million (H1 2020: US $ 5.6 million), and comprised of US $2.1 million of Oil sales and US $ 3.8 million of Gas sales. Oil prices realised in H1 2021 were on average 21% higher during the period than in H1 2020. Volume weighted average realised gas prices increased by 28% compared to H1 2020.

Financial income of US $3.1 million recognised the interest gained on the Argentine VAT paid to the Group in May 2021 of US $0.24 million and net foreign exchange gains of US $2.9 million. Finance expense of US $ 3.2 million for H1 2021 is on a par with the prior comparable period (H1 2020:  US $ 3.2 million).

Total comprehensive loss for the Group for the 6 month period ending 30 June 2021 was US $1.5 million (H1 2020: US $ 5.7 million)

The Group’s balance sheet and overall financial positioning has materially strengthened during the period due to the successful debt re negotiation of its bonds and debt facility and the reduction in  short term loan liabilities from US $2.3 million at 30 December 2020 to $0.14 million at 30 June 2021.

In January 2021, the Company’s EUR 5.0m 8% secured convertible debt facility maturity date was extended to April 2025, with no furthercash interest payments due until maturity date. In addition, in April 2021, the Company’s Luxembourg listed EUR 20.0m 8% secured bonds were successfully structured, extending the maturity of the notes to May 2025, and removing all cash interest payments prior to maturity date.

The Company’s cash balance as at 30 June 2021 was US $ 0.9 million, a substantial increase from the balance as at 31 December 2020.

A 30% reduction of Trade and other payables from 30 December 2020 to 30 June 2021 is primarily due to the renegotiation of the Bond and debt facilities, but also reduction in joint venture payables.

Post Period End Highlights

The positive market changes seen in H1 2021 continue post period, and coupled with the restructuring completed in H1 2021, enable the Company to operate from a significantly more stable platform.

At the Santa Cruz Sur asset level, successful commissioning of the liquids pipeline enabled the Campo Molino oil field to be brought back online, contributing to an almost 50% increase in total liquids production in August 2021.

The maturation of the Company’s investment in Santa Cruz Sur, and ongoing careful cost management have increased cashflows, enabling development in our producing asset, and release of capital which can be invested into the business to support business growth, maximising value for shareholders.

 

James Parsons            Martin Hull 

Chairman             Chief Executive Officer

Consolidated Statement of Comprehensive Income

Period ended 30 June 2021

 

 

 

Notes

Unaudited

1 January 2021

30 June 2021

US $

Unaudited

1 January 2020

30 June 2020

US $

Year to

31 December 2020

  Audited

US $

Continuing operations

Revenue

3

5,891,413

5,656,740

11,126,520

Cost of sales

4

(5,497,993)

(7,287,234)

(13,437,010)

Gross profit

393,420

(1,630,494)

(2,310,490)

Exploration expenses

(45,807)

(68,554)

(215,512)

Administrative expenses

(1,492,010)

(1,480,136)

(3,240,934)

Impairment of intangible assets

Impairment of property, plant and equipment

Operating loss

(1,537,817)

(3,179,184)

(5,766,936)

Financial income

5

3,140,024

1,847

7,142

Financial expense

6

(3,287,229)

(3,212,440)

(10,174,047)

Derivative financial income

7

17,575

642,678

666,306

Loss before tax

(1,274,027)

(5,747,099)

(15,267,535)

Taxation

8

Loss from continuing operations

(1,274,027)

(5,747,099)

(15,267,535)

Discontinued operations

Profit/(loss) after taxation for the year from discontinued operations

(10,724,108)

Loss for the period

(1,274,027)

(5,747,099)

(25,991,643)

Other comprehensive income:

To be reclassified to profit or loss in subsequent periods (net of tax)

Exchange difference on translating foreign operations

(177,930)

(1,041,995)

Total comprehensive loss for the period

(1,451,957)

(5,747,099)

(27,033,578)

Loss attributable to: Owners of the parent

(1,451,957)

(5,747,099)

(27,033,598)

Total comprehensive loss attributable to: Owners of the parent

(1,451,957)

(5,747,099

(27,033,598)

Loss per share (cents)

9

Basic

(0.10)

(0.81)

(3.38)

Diluted

(0.10)

(0.81)

(3.38)

Loss per share (cents) for continuing operations

Basic

(0.10)

(0.81)

(1.99)

Diluted

(0.10)

(0.81)

(1.99)

The notes included below form an integral part of these financial statements.

Consolidated Statement of Financial Position

Period ended 30 June 2021

 

 

 

Notes

Unaudited

1 January 2021

30 June 2021

US $

Unaudited

1 January 2020

30 June 2020

US $

Year to

31 December 2020

Audited

US $

Non-current assets

  Property, plant and equipment

10

2,516,805

986,283

2,552,693

  Other intangibles

11

7,773,210

20,725,894

8,511,622

10,290,015

21,712,177

11,064,315

Current Assets

  Inventories

438,014

610,522

541,230

  Other receivables

5,846,670

7,688,813

7,229,263

  Cash and cash equivalents

12

945,488

1,164,408

682,159

7,230,172

9,463,743

8,452,652

Current Liabilities

  Trade and other payables

(10,075,368)

(8,253,260)

(13,249,146)

  Derivatives and other liabilities

(44,885)

(86,105)

(62,477)

(10,120,253)

(8,339,365)

(13,311,623)

Net current assets

(2,890,081)

1,124,378

(4,858,970)

Total assets less current liabilities

7,399,934

22,836,555

6,205,345

Non-current liabilities

  Loans due in over one year

15

(28,162,903)

(24,229,005)

(27,276,015)

  Provisions

(2,959,976)

(2,969,400)

(2,979,956)

(31,122,879)

(27,198,405)

(30,255,971)

Total Liabilities

(41,243,132)

(35,537,770)

(43,567,597)

Net Assets

(23,722,945)

(4,361,850)

(24,050,627)

Equity attributable to equity holders of the parent

  Share capital

13

7,135,082

5,190,877

6,288,019

  Share premium

14

64,748,942

64,817,662

64,961,905

  Warrant reserve

12,188,032

11,153,396

  11,373,966

  Share option reserve

1,570,827

1,358,132

1,412,285

  Foreign currency translation reserve

(3,141,836)

(2,277,812)

(3,319,797)

  Retained earnings

(106,223,992)

(84,604,105)

  (104,772,035)

Total Equity

(23,722,945)

(4,361,850)

  (24,050,627)

The notes included below form an integral part of these financial statements.

Consolidated Statement of Changes in Equity

Period ended 30 June 2021

 

 

Retained earnings

US $

 

 

Share capital

US $

 

 

Share

premium

US $

 

 

Warrant reserve

US $

 

Share option

reserve

US $

Foreign currency translation reserve

US $

 

 

 

Total equity

US $

1 January 2021

(104,772,035)

6,288,019

64,961,905

11,373,966

1,417,285

(3,319,767)

(24,050,627)

Loss for the period

(1,274,027)

(1,274,027)

Exchange Reserve

(177,930)

177,930

Total comprehensive loss for the period

(1,451,957)

177,930

(1,274,027)

Warrants issued

(814,066)

814,066

Warrants exercised

274,803

86,122

360,925

Share issue

572,260

595,153

1,167,413

Transaction costs

(80,171)

(80,171)

Share options lapsed

Share-based payments

153,542

153,542

30 June 2021

(106,223,992)

7,135,082

64,748,943

12,188,032

1,570,827

(3,141,837)

23,722,925

1 January 2020

(78,857,006)

5,190,877

64,817,662

11,142,290

1,159,580

(2,277,812)

1,175,591

Loss for the period

(5,747,099)

(5,747,099)

Exchange Reserve

Total comprehensive loss for the period

(84,604,105)

5,190,877

64,817,662

11,142,290

1,159,580

(2,277,812)

(4,571,508)

Warrants issued

11,106

11,106

Share options lapsed

Share-based payments

198,552

198,552

30 June 2020

(84,604,105)

5,190,877

64,817,662

11,153,396

1,358,132

(2,277,812)

(4,361,850)

1 January 2020

(78,857,006)

5,190,877

64,817,662

11,142,290

1,159,580

(2,277,812)

1,175,591

Loss for the year

(15,267,535)

(15,267,535)

Discontinued operations

(3,441,230)

(10,724,108)

Exchange Reserve

(1,041,995)

(1,041,955)

Total comprehensive loss for the year

(25,991,643)

(1,041,955)

(13,472,062)

New shares issued

1,0971,142

467,735

1,565,077

Warrants

(231,676)

231,676

Share issue costs

(92,016)

(92,016)

Share options lapsed

396,935

(76,614)

Share-based payments

334,319

334,319

31 December 2020

(104,772,035)

6,288,019

64,961,906

11,373,966

1,417,285

(3,319.767)

(24,050,627)

The notes included below form an integral part of these financial statements.

Consolidated Statement of Cash Flows

Period ended 30 June 2021

Unaudited

1 January 2021

30 June 2021

US $

Unaudited

1 January 2020

30 June 2020

US $

 

Year to

31 December 2020

US $

Cash flows from operating activities

Loss from continuing operations

(1,274,027)

(5,747,099)

 

(15,267,535)

Loss from discontinued operations

(10,724,108)

(1,274,027)

(5,747,099)

(25,991,643)

Adjustments for:

Depreciation and depletion of property, plant and equipment

35,887

102,442

182,211

Depreciation and depletion of intangible assets

738,412

982,102

1,874,810

 (Gain)/Loss on disposal of property, plant and equipment

10,822

(Gain)/Loss on disposal on Right of use

(66,473)

  Impairment of intangible assets and goodwill

  Impairment of intangible assets and goodwill

  –

 –

10,383,461

  Share-based payments

153,542

209,658

334,319

  Right to use liability

(64,180)

  Financial income

(3,140,024)

(1,845)

(7,142)

  Financial expense

3,287,229

728,821

10,174,047

  Exchange difference

(1,656,272)

(2,265,180)

  Derivative financial gain

(17,575)

(642,678)

(666,306)

  (598,801)

  1,312,027

19,956,865

(Increase) in inventory

103,215

(191,382)

(120,386)

Decrease/(Increase) in other receivables

1,700,723

988,467

311,275

(Decrease)/increase in trade and other payables

(1,020,415)

3,354,669

5,844,002

Cash used in operations

783,523

5,463,781

(6,034,891)

Net cash used in operating activities

(1,089,305)

(283,318)

112

Cash flows from investing activities

Purchase of intangible assets

(248,092)

(470,637)

Purchase of property, plant and equipment

(1,644,516)

Net cash used in investing activities

(248,092)

(2,115,153)

Cash flows from financing activities

Interest received

166,820

1,845

7,142

Interest paid

(208,900)

(1,746)

Bank Fees and other finance cost

(63,136)

(185,520)

Repayment of right of use liability

(2,293)

Issue of share capital

1,167,413

1,565,077

Share issue costs

(80,171)

(92,016)

Proceeds from Warrant exercise

360,925

Net cash from financing activities

1,342,951

(2,194)

1,290,682

Net (decrease)/increase in cash and cash equivalents

253,646

(533,604)

(824,360)

Cash and cash equivalents at the beginning of the period

682,159

1,698,012

1,698,012

Foreign Excahnge gains(losses) on cash and cash equivalents

9,683

  –

(191,439)

Cash and cash equivalents at the end of the period

945,488

  1,164,408

682,159

The notes included below form an integral part of these financial statements.

 

Notes to the Financial Statements

Period ended 30 June 2021

 

1. Accounting Policies 

General Information 

These financial statements are for Echo Energy plc (“the Company”) and subsidiary undertakings (“the Group”). The Company is registered, and domiciled, in England and Wales and incorporated under the Companies Act 2006.

Basis of Preparation

The condensed and consolidated interim financial statements for the period from 1 January 2021 to 30 June 2021 have been prepared in accordance with International Accounting Standards (“IAS”) 34 Interim Financial Reporting, and on the going concern basis. They are in accordance with the accounting policies set out in the statutory accounts for the year ended 31 December 2020 and are expected to be applied for the year ended 31 December 2021.

The comparatives shown are for the period 1 January 2020 to 30 June 2021, and 31 December 2020 and do not constitute statutory accounts, as defined in section 435 of the Companies Act 2006, but are based on the statutory financial statements for the year ended 31 December 2020.

A copy of the Company’s statutory accounts for the year ended 31 December 2020 has been delivered to the Registrar of Companies; the accounts are available to download from the Company website at www.echoenergyplc.com.

Going Concern

The Group’s business activities, together with the factors likely to affect its future development, performance and position are set out in the Chairman and Chief Executive Officer’s Statement  above. The financial position of the Group, its cash flows and liquidity position are set out in these Condensed Interim Financial Statements.

The directors have performed a robust assessment, including consideration of the principal risks faced by the Group and taking into account the ongoing impact of the global Covid-19 pandemic on the macroeconomic situation and any potential impact to operations.

The financial information has been prepared assuming the Group will continue as a going concern. Under the going concern assumption, an entity is ordinarily viewed as continuing in business for the foreseeable future with neither the intention nor the necessity of liquidation, ceasing trading or seeking protection from creditors pursuant to laws or regulations. Whilst rigorously pursuing cost control and value maximising strategies, the Group recognises that in order to pursue organic and inorganic growth opportunities and fund on-going operations it will require additional funding. This funding may be sourced through debt finance, joint venture equity or share issues.

The directors have formed a judgement based on Echo’s proven success in raising capital and a review of the strategic options available to the Group, that the going concern basis should be adopted in preparing the Condensed Interim Consolidated Financial Statements.

Estimates

The preparation of the interim financial information requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates.

In preparing this condensed interim financial information, the significant judgements made by management in applying the Group’s accounting policies and the key sources of estimation uncertainty were the same as those applied to consolidated financial statements for the year ended 31 December 2020. The key sources of uncertainty in estimates that have a significant risk of causing material adjustment to the carrying amounts of assets and liabilities, within the next financial year, are the Group’s going concern assessment.

 

Revenue Recognition

Revenue comprises the invoice value of goods and services supplied by the Group, net of value added taxes and trade discounts. Revenue is recognised in the case of oil and gas sales when goods are delivered and title has passed to the customer. This generally occurs when the product is physically transferred into a pipeline or vessel. Echo recognised revenue in accordance with IFRS 15. We have a contractual arrangement with our joint venture partner who markets gas and crude oil on our behalf. Gas is transferred via a metred pipeline into the regional gas transportation system, which is part of the national transportation system, control of the gas is transferred at the point at which the gas enters this network, this is the point at which gas revenue is recognised. Gas prices vary from month to month based on seasonal demand from customer segments and production in the market as a whole. Our partner agrees pricing with their portfolio of gas clients based on agreed pricing mechanisms in multiple contracts. Some pricing is regulated by government such as domestic supply. Echo receive a monthly average of gas prices attained. Oil shipments are priced in advance of a cargo and revenue is recognised at the point at which cargoes are loaded onto a shipping vessel at termina

 

2. Business Segments 

The Group has adopted IFRS 8 Operating Segments. Per IFRS 8, operating segments are regularly reviewed and used by the board of directors being the chief operating decision maker for strategic decision-making and resources allocation, in order to allocate resources to the segment and assess its performance.

The Group’s reportable operating segments are as follows:

  a.  Parent Company

                b.  Eastern Austral Basin

                c.           Tapi Aike

                d.            Bolivia

Performance is based on assessing progress made on projects and the management of resources used. Segment assets and liabilities are presented inclusive of inter-segment balances. Reportable segments are based around licence activity, although the reportable segments are reflected in legal entities, certain corporate costs collate data across legal entities and the segmental analysis reflects this.

Information regarding each of the operations of each reportable segment within continuing operations is included in the following table.

 

All revenue, which represents turnover, arises within Argentina and relates to external parties:

 

Parent Company

Santa Cruz Sur

Tapi Aike

Bolivia

Total

US $

US $

US $

US $

US $

Period to 30 June 2021

Revenues

5,891,413

5,891,413

Cost of sales

(5,497,993)

(5,497,993)

Exploration expense

(45,807)

(45,807)

Administration expense

(1,332,349)

(113,839)

(48,928)

(115,043)

(1,610,158)

Impairment of intangible assets

Impairment of property, plant and equipment

Financial income

2,898,300

77,101

164,616

3,140,024

Financial expense

(1,823,398)

(898,236)

(467,375)

(61)

(3,186,081)

Derivative Financial Expense

17,592

17,575

Income tax

Loss before tax

(285,662)

(541,554)

(351,687)

(115,104)

(1,262,545)

Non-current assets

28,792,797

4,740,757

3,362,308

(453,174)

36,442,688

Assets

28,940,599

9,214,984

5,947,869

(413,628)

43,689,824

Liabilities

(28,816,764)

(7,943,328)

(4,421,895)

(81,125)

(41,263,112)

 

 

 

Parent Company

US $

 

Santa Cruz Sur

US $

 

 

Tapi Aike

US $

 

 

Bolivia

US $

 

 

Consolidation

US $

 

 

Total

US $

Period to 30 June 2020

Revenues

5,656,740

5,656,740

Cost of sales

(7,656,740)

(7,287,740)

Exploration expense

  (68,554)

(68,554)

Administration expense

(1,300,419)

(120,701)

56,538

(115,554)

(1,480,136)

Impairment of intangible assets

Impairment of property, plant and equipment

Financial income

  1,847

1,847

Financial expense

(2,340,434)

(872,069)

(1,015)

1,078

(3,212.440)

~Depreciation

  642,678

642.678

Income tax

Loss before tax

(3,064,882)

(2,632,263)

55,523

(114,476)

(5,747,099)

Non-current assets

35,265,014

6,822,530

5,935,643

(271,171)

(26,032,839)

21,712,177

Assets

  45,181,992

  (12,916,982)

(656,675)

(240,370)

(26,026,010)

31,175,919

Liabilities

(23,073,545)

  (12,406,577)

(2,314)

(49,335)

(35,537,770)

 

Consolidation adjustments in respect of assets relate to the impairment of intercompany assets .

~Depreciation is included in administration expenses

The geographical split of non-current assets arises as follows:

 

United

Kingdom

US $

 

South America

US $

 

Total

US $

30 June 2021

Property, plant and equipment

2,457

2,514,348

2,516,805

Other intangible assets

326,869

7,446,341

7,773,210

30 June 2020

Property, plant and equipment

19,025

967,258

986,283

Other intangible assets

20,725,894

20,725,894

 

 

3. Revenue

Unaudited

1 January 2021 –

30 June 2021

US $

Unaudited

1 January 2020 –

30 June 2020

US $

Year to

31 December 2020

Audited -Continued operations  US $

Oil revenue

2,024,421

2,090,922

2,784,248

Gas revenue

Other Income

3,833,857

33,135

3,565,818

8,279,416

62,856

Total Revenue

5,891,413

5,656,740

11,126,520

4. Cost of Sales

Unaudited

1 January 2021 –

30 June 2021

US $

Unaudited

1 January 2020 –

30 June 2020

US $

Year to

31 December 2020

 

US $

Production costs

3,794,486

5,723,033

10,021,578

Selling and distribution costs

863,065

764,918

1,567,963

Movement in stock of crude oil

72,239

(191,382)

(89,410)

Depletion

768,203

990,665

1,936,879

Total Costs

7,287,234

13,437,010

5. Finance Income

Period to

30 June 2021

US $

Period to

30 June 2020

US$

Year to

31 December 2020

US $

Interest income

241,716

1,847

7,142

Net foreign exchange gains

2,898,308

Total

3,140,024

1,847

  7,142

The Interest income principally relates to interest gained on Argentine VAT balances owed and paid to the Group in May 2021.

 6. Financial Expense

Period to

30 June 2021

US $

Period to

30 June 2020

US$

Year to

31 December 2020

US $

Interest payable

1,299,079

1,191,065

1,991,535

Unwinding of discount on long term loan

404,081

1,131,249

2,936,831

Amortisation of loan fees

119,526

150,199

614,913

Warrant Valuation expense

11,106

  –

Accretion of right of use liabilities

2,293

2,293

Unwinding of abandonment provision

19,980

39,956

Finance cost of holding bonds

11,971

Foreign Exchange Losses

1,242,035

660,018

4,409,732

Bank fees and overseas transaction taxes

202,528

66,510

166,816

Total

3,287,229

3,212,440

10,174,047

 

7.Derivative Financial Gain/Loss

Period to

30 June 2021

US $

Period to

30 June 2020

US $

Year to

31 December 2021

US $

Fair value gain

17,575

642,678

666, 306

Total

17,575

642,678

666, 306

Represents fair value gain on valuation of derivatives instruments at period end.

 

8.Taxation

The Group has tax losses available to be carried forward in certain subsidiaries and the parent company. Due to uncertainty around timing of the Group’s projects, management have not considered it appropriate to anticipate an asset value for them. No tax charge has arisen during the six month period to 30 June 2021, or in the six months period to June 2020, or the year to 31 December 2020. 

 

9. Loss Per Share

The calculation of basic and diluted loss per share at 30 June 2021 was based on the loss attributable to ordinary shareholders. The weighted average number of ordinary shares outstanding during the period ending 30 June 2021 and the effect of the potentially dilutive ordinary shares to be issued are shown below.

 

Period to

30 June 2021

Period to

30 June 2020

Year to

31 December 2020

Net loss for the year (US $)

(1,294,027)

(5,747,099)

(25,991,664)

Basic weighted average ordinary shares in issue during the year

1,236,231,219

711,717,587

768,598,277

Diluted weighted average ordinary shares in issue during the year

1,236,231,219

711,717,587

768,598,277

Loss per share (cents)

Basic

(0.10)

(0.81)

(3.38)

Diluted

(0.10)

(0.81)

(3.38)

 

In accordance with IAS 33 and as the entity is loss making, including potentially dilutive share options in the calculation would be anti-dilutive. Deferred shares have been excluded from the calculation of loss per share due to their nature.

 

 

10. Property, Plant and Equipment

PPE – O&G

Properties

US $

CDL Licence Areas Discontinued

US $

 

Fixtures & Fittings

US $

Property Right-of-Use

Assets

US $

 

 

Total

US $

30 JUNE 2021

Cost

1 January 2021

2,621,921

97,254

2,719,175

Additions

Disposals

30 June 2021

2,621,921

97,254

2,719,175

Depreciation

1 January 2020

79,941

86,542

166,483

Charge for the period

29,790

6,097

35,887

Disposals

30 June 2021

109,731

92,639

202,370

Carrying amount

30 June 2021

2,512,190

4,615

2,516,805

30 JUNE 2020

Cost

1 January 2020

979,164

131,122

309,804

1,420,090

Additions

35

35

Disposals

(33,923)

(309,804)

(343,727)

30 June 2020

979,164

97,234

1,076,398

Depreciation

1 January 2019

3,338

91,366

224,176

318,880

Charge for the period

8,568

19,828

74,046

102,442

Disposals

(32,985)

(298,222)

(331,207)

30 June 2020

11,906

78,209

90,115

Carrying amount

30 June 2020

967,258

19,025

986,283

 

 

 

31 DECEMBER 2020

Cost

1 January 2020

  979,164

  –

131,122

309,804

  1,420,090

Additions

1,644,460

56

  1,644,516

Disposals

(1,703)

(33,923)

(309,804)

(345,430)

31 December 2020

2,621,921

97,255

2,719,176

Depreciation

1 January 2020

3,338

91,366

224,176

318,880

Exchange differences

Charge for the year

76,603

19,980

85,628

182,211

Impairment charge

Disposals

(24,804)

(309,804)

(334,608)

31 December 2020

79,941

86,542

  166,483

Carrying amount

31 December 2020

2,541,980

10,713

2,552,693

31 December 2019

975,826

39,756

85,628

1,101,210

 

11. Other Intangible Assets 

Exploration and Evaluation

Argentina

Exploration & Evaluation

US $

 

CDL Licence Areas Discontinued

US $

  Ksar Hadada

Exploration Acreage

US $

 

 

Total

US $

30 June 2021

Cost

1 January 2021

10,756,306

10,756,306

Disposals

Decommissioning assets

Additions

30 June 2021

10.756,306

10,756,306

Impairment

1 January 2020

2,244,684

2,244,684

Depletion

415,912

415,912

Depreciation decommissioning assets

322,500

322,500

Impairment charge for the period

30 June 2021

2,983,096

2,983,096

Carrying amount

30 June 2021

7,773,210

7,773,210

31 December 2020

8,511,622

8,511,622

30 JUNE 2020

Cost

1 January 2020

20,943,460

20,943,460

Discontinued operations

29,401

29,401

Additions

1,105,009

1,105,009

Transfer to PP&E

30 June 2020

22,077,870

22,077,870

Impairment

1 January 2020

369,874

369,874

Discontinued operations

982,102

982,102

Impairment charge for the period

30 June 2020

1,351,976

1,351,976

Carrying amount

30 June 2020

20,725,894

20,725,894

31 DECEMBER 2020

20,573,587

20,573,587

Cost

1 January 2020

10,802,524

10,140,936

20,943,460

Additions

228,112

242,525

470,6537

Disposals

(10,383,461)

(10,383,341)

Decommissioning assets

Transfers

(274,330)

(274,330)

31 December 2020

10,756,306

10,756,306

Impairment

1 January 2020

36,874

  –

369,874

Disposals

(10,383,461)

10,383,461)

Depletion

1,874,810

1,874,810

Impairment charge for the year

10,383,461

10,383,461

31 December 2019

2,244,686

2,244,686

Carrying amount

31 December 2020

8,511,622

8,511,622

31 December 2019

20,575,586

20,573,586

On 22 December 2020 the Company announced that it had allowed the lapse of the option to re enter the Tapi aike asset. This resulted in Echo withdrawing its interest and liabilities under the Tapi Aike concessions prior to the drilling of the next exploration well in the Tapi Aike Western Cube.

12.Cash and Cash Equivalents

Six months to

30 June 2021

Six months to

30 June 2020

 

31 December 2020

US $

US $

US $

Cash held by joint venture partners

190,974

194,973

24,749

Cash and cash equivalents

754,514

969,435

654,680

Total

945,488

1,164,408

682,159

Echo has advanced cash to its joint venture partner. The equity share of the balance held is recognised

 

13. Share Capital

Six months to

30 June 2021

Six months to

30 June 2020

Year to

31 December 2020

US $

US $

US $

Issued, Called Up and Fully Paid

1,298,813 0.32¢ (June 2020: 711,717,587 0.32¢) ordinary shares

1 January 2021

6,288,019

5,190,877

5,190,877

Equity shares issued

847,063

745,878

30 June / 31 December

7,135,082

5,190,877

6,288,019

The holders of 0.32c (0.25p) ordinary shares are entitled to receive dividends from time to time and are entitled to one vote per share at meetings of the Company.

 

During the six month period to 30 June 2021, 258,762,165 share were issued.

14. Share Premium Account

Six months to

Six months to

Year to

30 June 2021

US $

30 June 2020

US $

31 December 2020

US $

1 January

64,961,905

64,817,662

68,817,662

Premium arising on issue of equity shares

595,153

467,934

Premium arising on exercise of warrants

86,122

Warrants lapsed or exercised

(814,066)

(231,675)

Transaction costs

(80,171)

(92,016)

30 June

64,748,942

64,817,662

64,961,905

 

 

15. Loans

30 June 2021

US $

30 June 2020

US$

31 December 2020

US $

Five-year secured bonds

Additional net funding

 

 

  (20,907,802)

  (5,940,825)

(18,429,737)

(22,167,419)

(5,766,544)

Other loans

(1,452,341)

(5,799,268)

(1,640,693)

Total

(28,300,968)

(24,229,005)

(29,574,656)

 

 

Balance as at

31 December 2020

US $

Amortised finance charges less cash

interest paid

US $

Repayment of principle

 

US$

 

Exchange

adjustments

US $

 

 

30 June 2021

US$

20 million five-year secured bonds

 

22,836,146

 

1,246,109 

 

 

 

(2,583,675)

 

21,498,580

€5 million Lombard Odier debt

Other loans

5,987,801

1,640,692

311,220

145,831

 

(208,900)

(178,515)

(125,282)

6,120,506

1,452,341

Loan fees

(668,726)

77,948

(590,778)

Incremental loan fees

(221,257)

  41,576

(179,681)

Total

29,574,656

1,822,684

(208,900)

(2,887,472)

28,300,968

US $ 138,065 of the total loan balance is shown in current liabilities and US $28,162,903 is shown non-current liabilities.

Bond restructure

On 22 February 2021, Echo announced further to the Company’s announcement of 1 December 2020, its proposals in respect of a restructuring of the Company’s Bonds, it proposed to:

• Extend the maturity of the Bonds by three years to 15 May 2025 (the “Maturity Date”); and

• Remove all cash interest payments on the Notes prior to the Maturity Date.

On approval, all interest on the Bonds accruing from 31 December 2019 shall be paid in cash on the Maturity Date save that Noteholders will be provided with the ability, from 30 September 2021, to elect to receive Bond interest payments in respect of the immediately preceding quarter in new ordinary Shares in the Company (“Elections”), subject inter alia to the Company having the required share issuance authorities in place from time to time to satisfy elections and to Noteholders holding at least 50 per cent of the Bonds having made Elections in respect of the relevant quarter. Any new ordinary shares issued as a result of elections would be issued at an effective issue price equal to the volume weighted average price of an Echo ordinary share for the 10 Business Days before the relevant interest conversion date.

As part of the Proposals, the Company agreed that it will not, without the prior consent of Noteholders, drill an exploration well with a budgeted cost to the Company of in excess of EUR 5.0 million for so long as the Bonds are outstanding and that it will not, in the last 18 months prior to the Maturity Date, make an acquisition of an interest in an oil and gas property, lease or licence if the cash consideration for such acquisition exceeds EUR 10.0 million.

A payment of EUR 100,000, payable to Bondholders, was satisfied by the issue of new ordinary shares in the Company at an issue price equal to the average mid-market closing price per Echo ordinary share for the five days ending, and including, 18 February 2021.

Subsequently on 30 March 2021, a requisite majority of Bondholders approved the Debt restructuring proposals. Echo issued a total of 11,473,929 new ordinary shares in the Company (representing c.0.9% of the Company’s current issued ordinary share capital) to Bondholders.

16. Subsequent Events

Operational Update

On 26 August 2021, following installation of the pipeline required to bring back online the liquids production which was shut in April 2020, the infrastructure was successfully commissioned for operation and shut-in wells are being brought online.  This follows an upgrade of the electrical infrastructure, which was designed to support the first tranche of production from the Campo Molino and Chorillos oil fields to provide sufficient power to support sustained production from the associated ten wells.

To date, the Campo Molino oil field has been brought back online with four of the shut-in wells now back in operation and producing from the Springhill reservoir. This first tranche of restored production will increase the number of active producing oil wells at Santa Cruz Sur to 18.

As of 23 August 2021, the recently reactivated wells have contributed to an almost 50% increase in total liquids production at Santa Cruz Sur compared to the period immediately prior to this (281 bopd gross, 197 bopd net to Echo – during the period 1 -17 August 2021). This represents an increase of 137 bopd gross, 95 bopd net to Echo and work continues to bring the remainder of the first tranche of shut-in production back online. The production levels from the initial reactivated wells indicate that the shut-in period has not had a detrimental impact on reservoir behaviour in the Campo Molino oil field. Prior to shut-in, the combined gross production from the ten oil wells was approximately 138 bopd gross, 96 bopd net to Echo, approximately the same level now being achieved from the initial four wells, with the associated upgraded infrastructure.

Does EV and battery tech really sound the death knell for Oil and Gas?

Future of Oil and Gas

In an era of rising demand and hype for electric vehicles (EV) and battery technology, commodities and ETFs linked to oil and gas have managed to hold their prices. EV stocks like Tesla and Nio have increased by 71% and 100% respectively in the past year. The price of WTI Crude Oil has also increased by 76%, while prices of micro-cap oil stocks like #ECHO Echo Energy and #MSMN Mosman Oil and Gas have increased by 58% and 13% respectively.

This clearly signifies that even after the rise in demand of EVs, commodities like oil and gas are here to stay in the short and long term.

Consumers are under the impression that they could be in an oil-free world by 2030 and most consumers perceive batteries and electricity as the primary source of energy. However, this is highly unlikely and nothing but a series of myths planted in our brains due to effective marketing.

The International Energy Agency (IEA) that analyses trends in energy industry, released its annual World Energy Outlook in November 2019. It looks at potential energy demand and supply under different scenarios to explore different possible futures. The IEA scenario stated a global increase in energy demand by 24% by 2040 of which, oil and natural gas will supply 64% of the world’s energy needs. In accordance with the Paris Climate Agreement, if based on the Sustainable Development Scenario, the oil and natural gas will still supply 47% of the world’s energy by 2040.

More than 15% of oil demand goes into non-combusted use including petrochemicals which is expected to grow to 20% by 2040. Even if the demand for gasoline and other fuels may hypothetically be on the decline, the petrochemical sector, in contrast, still has room to grow. Some major companies have even pledged some $100bn into the petrochemical industry over the next decade.

Developing countries like India have one of the most aggressive renewable power capacity roll-out programmes worldwide. However, its access to affordable fossil fuels remains a priority for its government because its needs for cheap oil, gas and coal continue to rise to meet energy demand that is forecast to more than double by 2040. India’s petroleum minister Dharmendra Pradhan believes the world’s third-largest oil consumer could be the “golden goose” for crude suppliers as it buys more than 80% of its oil needs from foreign crude purchases.

The graph below demonstrates that the forecasted oil demand for 2040 is higher than present day with non-combusted being the driver to increase the demand. While in the primary energy consumption chart, oil is forecasted to maintain its consumption as a primary source by 2040. Whereas the primary consumption of gas is forecasted to rise.

 

(Financial Review, 2020)

 

Texas Oil Wells

In 2018, companies in the Permian Basin – “an ancient, oil-rich seabed that spans West Texas and South Eastern New Mexico — were producing twice as much oil as they had four years earlier” whilst forecasters expected the production to double again by 2023.

The International Energy Agency (IEA) had also predicted that American oil mostly from the Permian will account for 80% of growth in global supply over the next seven years.

Some small companies already had presence in the Permian Basin before these predictions and report in 2018. In 2017, Mosman Oil & Gas (MSMN) acquired several oil and gas leases comprising the Welch Permian Basin Project for a consideration of $310,000. Although the Welch project contributed to a gross profit of $167,000 in the year ended 30 June 2020, recently Mosman sold this Welch Project for $420,000 receiving a premium of 40% from the sale of the project alone.

Mosman is steadily growing its working interests across a number of projects in Texas, including Stanley, Falcon-1, Winters and Galaxie. These have produced a gross profit of over $500,000 in the 2020 year. Stanley also has a 100% success rate with oil production from four wells drilled to date.

Texas wells are providing high returns to oil companies, and with a growing number of projects and acreage, Mosman is well placed for future growth.

South Argentina Oil Wells

Many companies own wells in Argentina and Latin America as it is considered a region rich in resources with 4% of natural gas reserves and 20% of world oil reserves. They are also often undergoing positive development in macro conditions. A strong demand outlook for energy consumption and economic growth coupled with underdeveloped – but lower cost – onshore plays, makes Latin America a favourable region for companies like Echo Energy (ECHO) to deploy its expertise in support of an exploration-led growth strategy.

For the financial year ended 31 December 2020, Santa Cruz Sur at the south-eastern tip of Argentina helped Echo Energy to increase its revenue fourfold to US $11.1mn. This was also due to Echo securing new gas sales contracts at premium rates to the prevailing spot markets in early Q1 2021.

The increase in revenue drove an significant increase in the Echo Energy (ECHO) stock price by 51% from 55p to 83p between December 2020 and January 2021.

Major and Small Suppliers of Oil and Gas

The difference between the barrels of oil supplied can be huge when major suppliers are compared to the small suppliers. But all that glitters is not gold. High supply and production would require a higher demand to be profitable, if the demand of oil stagnates in the future it will affect the major suppliers before the small suppliers.

The big 10 companies accounted for 28% of global oil production in 2020 as shown below.

When this is compared to small oil producers like Echo Energy and Mosman Oil and Gas,  Echo Energy produced a cumulative of 94,000 barrels of oil in Santa Cruz Sur in South Argentina. While Mosman Oil and Gas produced a gross of 90,000 barrels of oil in the year ended June 2020. Based on available data, the production of Echo and Mosman combined is 0.2% of the global oil demand.

This is effective during times of recession or when the global demand is low as during unprecedented times a major oil supplier to generate profits and work at full capacity would need to sell between 5-12% of oil demand while small suppliers of oil would need to fulfil a negligible percentage of global demand of oil to turn profitable. This is due to high storing and inventory costs for major oil suppliers as well as higher fixed costs due to bigger operations.

Conclusion

Therefore, even though the oil demand is perceived to be lower in the future due to alternative resources, the demand doesn’t seem to be in decline due to oil having uses other than fuel and gas for cars and transportation like non-combusted petrochemicals. Even if the demand for oil is on the decline it would not affect small oil suppliers; as working at full capacity they fulfil just a small percentage of global oil demand and still manage to make hefty profits.

These among many, are the reasons keeping the oil prices buoyant and in the mix, not only for the present day but also for the future.

#KAV Kavango Resources – Kalahari Suture Zone (KSZ) – drilling update

kavKavango Resources plc (LSE:KAV), the exploration company targeting the discovery of world-class mineral deposits in Botswana, is pleased to announce that the Company has requested Mindea Exploration and Drilling Services (Pty) to extend Hole TA2DD002 to 1,000m depth, which is the technical limit of the drill rig on site within acceptable safety margins, to assist in further developing and refining the Company’s model of the KSZ.

At end of shift at 0500 today, 17 September,  Hole TA2DD002 was at 821m. So far the Company has encountered 170m of continuous Proterozoic mafic/ultramafic rocks. Kavango’s senior field geologists have continued to make visual inspection of the core and have reported visible alteration and interstitial blebs of chalcopyrite in different sections of the hole. The lithologies range from coarse grained to extremely pegmatitic, the latter logged in zones that extend 20-30m in thickness.

The Company advises shareholders that thorough analysis is required of all core samples retrieved from the Proterozoic Complex in Hole TA2DD002, before any conclusions can be drawn as to what has been encountered so far. This analysis will include (but not necessarily be limited to) assay testing and whole rock analysis.

The Company will make further updates as necessary.

————————————————————————————————————

Further information in respect of the Company and its business interests is provided on the Company’s website at www.kavangoresources.com and on Twitter at #KAV.

For additional information please contact:

Kavango Resources plc

Ben Turney

bturney@kavangoresources.com

+46 7697 406 06

First Equity (Joint Broker)

+44 207 374 2212

Jason Robertson 

SI Capital Limited (Joint Broker)

+44 1483 413500

Nick Emerson

Mosman Oil & Gas #MSMN – Winters Lease and Winters-2 well update

Winters Lease and Winters-2 well update

Mosman Oil and Gas Limited (AIM: MSMN) the oil exploration, development, and production company, announces an update on the Winters lease in Polk County, East Texas including increasing its Working Interest in the lease and the timing of drilling the Winters-2 well.

 

Winters Lease

Mosman acquired a 23% interest in the Winters lease as part of its recent purchase of Nadsoilco LLC, (“Nadsoilco”) in June 2021. Nadsoilco is now a subsidiary of Mosman and is the Operator of the Winters lease.  The Winters lease is held by production with circa 969 bbls of oil sold in the last 12 months from the Winters 1 well.

Mosman has now agreed to farm-in to acquire an additional 6% working interest in the Winters lease. The key terms are payment of US$12,000 for past costs, and Mosman to pay 8% of the next well costs. This will increase Mosman’s interest in the lease (including the Winters-1 well) from c23% to c29% (before royalties).

Winters-2 well

Nadsoilco is now preparing to drill the Winters-2 well on the Winters Lease. Due to the well location, the Winters lease holders have agreed to share the participation in the Winters-2 well (not the lease) with the adjacent lease holder (“Arcadia”). The Winters lease holders will have 78% and Arcadia will have 22% of the well. Therefore, Nadsoilco will have a c29% x c78% = c23% working interest in this well.

Winters-2 is a development well targeting the Wilcox formation, the same zone that is producing in adjacent wells (on other leases not held by Mosman). The well will be drilled as soon as site preparation has been completed, and the drilling rig is available, which Mosman anticipates will be in a few weeks’ time.  The Budget to drill and case the Winters-2 well has been set at cUSD600,000.

Funding of the farm-in and the drilling costs of c USD 150,000 will be from existing cash resources. A positive drill result, in line with an existing adjacent well which is producing at c190bopd,should result in the well costs being recovered from production this calendar year.

Qualified Person’s Statement

The information contained in this announcement has been reviewed and approved by Andy Carroll, Technical Director for Mosman, who has over 35 years of relevant experience in the oil industry. Mr. Carroll is a member of the Society of Petroleum Engineers.

Market Abuse Regulation (MAR) Disclosure

The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014 (‘MAR’) which has been incorporated into UK law by the European Union (Withdrawal) Act 2018. Upon the publication of this announcement via Regulatory Information Service (‘RIS’), this inside is now considered to be in the public domain.

 

Enquiries:

Mosman Oil & Gas Limited John W Barr, Executive Chairman Andy Carroll, Technical Director

jwbarr@mosmanoilandgas.com acarroll@mosmanoilandgas.com

NOMAD and Broker

SP Angel Corporate Finance LLP

Stuart Gledhill / Richard Hail / Adam Cowl

+44 (0) 20 3470 0470

Alma PR

Justine James / Joe Pederzolli

+44 (0) 20 3405 0205

+44 (0) 7525 324431

mosman@almapr.co.uk

Joint Broker

Monecor (London) Ltd trading as ETX Capital Thomas Smith

020 7392 1432

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