TIDMECHO
RNS Number : 6055R
Echo Energy PLC
07 July 2022
7 July 2022
Echo Energy plc
("Echo" or the "Company")
H1 2022 Production and Operational Update
Santa Cruz Sur - Production and Infrastructure Enhancement
Plan
Echo Energy, the Latin American focused energy company, is
pleased to provide an operational update regarding its Santa Cruz
Sur assets, onshore Argentina for H1 2022 to 30 June 2022. In
addition, the Company confirms the agreement by the Santa Cruz Sur
partners to a plan to materially increase Santa Cruz Sur production
by c.40% above average H1 2022 production levels.
H1 2022 Production and Operational Update
Production over the period from 1 January 2022 to 30 June 2022
has continued to remain strong and reached an aggregate of 261,290
boe net to Echo during the period, including 48,600 bbls of oil and
condensate and 1,280 MMscf of gas.
Net liquids production in Q2 2022 averaged 272 bopd, an increase
over Q1 levels (Q1 2022: 265bopd) despite, as previously announced,
a 35-day maintenance and upgrade programme on the Oceano field
during the quarter, when oil and gas production from the field was
temporarily brought offline.
Net gas production averaged 6.8 MMscf/d during Q2 2022 (Q1 2022:
7.4 MMscf/d), with Q2 2022 production again impacted as a result of
the Oceano field production being brought temporarily offline for
maintenance and upgrades to the compressor and associated
infrastructure.
As previously announced, the successful upgrade to the
compressor was an important and planned operational milestone and
has resulted in substantial increases to production from the Oceano
field since being being brought back on line, with the full impact
expected to be seen in future quarterly production figures.
Santa Cruz Sur - Production and Infrastructure Enhancement
Plan
The Company is additionally pleased to announce that the Santa
Cruz Sur joint venture partners have agreed to a detailed plan to
materially increase production at Santa Cruz Sur and to improve the
quality of sales liquids from the Santa Cruz Sur assets (the
"Enhancement Plan").
Over a six month period, anticipated to commence in Q3 2022, the
Santa Cruz Sur partners intend to seek to increase production by
approximately 40% from the levels previously achieved over H1 2022.
If achieved, the Enhancement Plan would increase total daily
production from Santa Cruz Sur to around 2,000 boepd, net to Echo's
70% interest in Santa Cruz Sur.
Under the newly agreed Enhancement Plan, the Santa Cruz Sur
partners will seek to increase production levels through the
recommissioning and bringing into production of existing oil wells
currently offline. Around 30 or more wells from the existing well
stock are intended to be gradually brought back into production
over the six month period utilising an existing pulling rig and
field personnel owned and employed by the Santa Cruz Sur joint
ventures. The re-opening of the existing wells could increase
production levels by up to c. 240 bopd of liquids and 2 MMsf/d of
associated gas, net to Echo.
The plan to bring existing wells in to production under the
Enhancement Plan is in addition to, and will come ahead of,
previously announced intentions regarding identified portfolios of
well workover candidates in respect of Santa Cruz Sur
resource/reserves not currently in production.
The additional producing wells will be supported by
infrastructure upgrades to sustain and contribute to elevated
production levels. Intended infrastructure upgrades under the
Enhancement Plan will be focussed around three operational
priorities.
The first is the installation of additional electrical power
generation capacity across the Cerro Molino Oeste, El Indio Oeste
and Oceano fields. Installation is anticipated to take a month from
commencement. A second set of planned infrastructure improvements
will be focused on the maintenance and optimisation of the
compressors at Cerro Norte and Campo Bremen to enable the increased
volumes of associated gas to be processed and then sold into the
main gas export line. This operation is anticipated to take
approximately three months from commencement and will be carried
out with the intention of minimising any disruption to existing gas
production, although some temporary impact is expected.
The third set of infrastructure upgrades will prioritise a
substantial increase of quality of Santa Cruz liquid blends. This
will be achieved through the the installation of mercury removal
facilities at Cerro Norte. When operational, this facility will
enable premium export pricing to be achieved for a higher volume of
liquids than is currently the case. During H1 2022, the
higher-quality export liquid blends achieved on average a premium
of US$ 21 per bbl over lower-quality blends. The operation from
installation to commissioning is anticipated to take around four
months from commencement.
The Company estimates that, on completion, the aggregate effect
of the three sets of infrastructure upgrades described above could,
including the up to 240 bopd of liquids and up to 2 MMsf/d of
associated gas (net to Echo) that would be expected to be delivered
from the well reopening programme, result in up to an additional
600 boepd of production net to the Company.
With the agreement between the Santa Cruz Sur partners as to the
Enhancement Plan, the delivery of the intended operations is
expected to require an estimated US$2.1 million (gross to 100%
Santa Cruz Partnership) to deliver in full over the entire duration
of the Enhancement Plan's implementation and, notwithstanding
existing Santa Cruz Sur joint venture creditor balances of an
estimated (unaudited) c.$13.9m ($9.7m net to Echo's 70% interest)
as at 30 April 2022, the Santa Cruz Sur partners currently believe
that a significant proportion of the cost of the Enhancement Plan
can be met from existing, and to be increased, Santa Cruz Sur cash
flows.
In advancing the Enhancement Plan, the Santa Cruz Sur partners
intend to engage with the local province in respect of a proposed
extension to the term of the Santa Cruz Sur licences.
This Enhancement Plan is the agreed next step for production
growth from Santa Cruz Sur and is focused on low-risk
infrastructure upgrades to sustain the increased production from
existing well stock. In addition, the Santa Cruz Sur assets
includes a portfolio of other opportunities across the risk-reward
spectrum and additional cash flows which would be delivered from
the implementation of the Enhancement Plan will broaden the scope
for portfolio choices in bringing additional existing reserves and
resources into production.
The Company looks forward to continuing to update shareholders
on progress on these plans throughout this year.
Martin Hull, Chief Executive Officer of Echo, commented:
"Following a strong H1 2022 of production, we are pleased to
announce an important and material step in the Company's strategy
to deliver organic growth from the Santa Cruz Sur assets. The
ability to now materially increase production levels from Santa
Cruz Sur is a result of the right choices that were made during the
Pandemic creating a strong operational platform on which to build.
Having stabilised the business, we are now able to pivot the asset
towards the current momentum in commodity prices. By significantly
increasing production we drive a virtous circle of cash flow
strengthening our financial position and providing additional
potential for future growth. This is underpinned by the strong
pipeline of identified opportunities within the Santa Cruz Sur
asset base. We look forward to working with our Partners on this
and to further update the market as our work programme
progresses."
For further information, please contact:
Echo Energy via Vigo Communications
Martin Hull, Chief Executive Officer
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
Arden Partners plc (Corporate Broker) +44 (0) 20 74614 5900
Simon Johnson (Corporate Broking)
John Llewellyn-Loyd (Corporate Finance)
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. bopd means barrels of oil per day; boepd means barrels
of oil equivalent per day; bbl means barrel; MMscf means million
standard cubic feet of natural gas; and MMscf/d means million
standard cubic feet of natural gas per day. The information
contained in this announcement has been reviewed by Echo Energy's
Vice President, Exploration, Dr. Julian Bessa Msc, DPhil, MBA ,a
Fellow of the Geological Society and President of the Petroleum
Exploration Society of Great Britain.
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.
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END
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