TIDMECHO
RNS Number : 2312O
Echo Energy PLC
29 September 2023
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.
29 September 2023
Echo Energy plc
("Echo Energy", "Echo" or the "Company")
Publication of Annual Report and Accounts, Notice of General
Meeting
Resumption of Share Trading and Equity Raise
Echo Energy PLC is pleased to announce its results for the year
ended 31 December 2022. In a separate announcement being issued
today, the Company will also publish its interim results for the
period ended 30 June 2023. The Company understand that following
publication of its results, the suspension its Shares from trading
on the AIM market of the London Stock Exchange will be lifted at
7.30am on Monday 2 October 2023.
Furthermore, the Company is pleased to announce an equity raise,
following the approach from an existing shareholder, to raise gross
proceeds of GBP80,000 through the issue of 285,714,286 new ordinary
shares in the Company at an issue price of 0.028p per new ordinary
share, being the last closing price of the Company's ordinary
shares prior to their suspension.
The proceeds from the share issue will enable the Company's
existing financial resources to be focused on pursuing the
previously announced growth strategy and application for the new
ordinary shares, which will rank pari passu with the Company's
existing ordinary shares, to be admitted to AIM at 8.00 a.m. on or
around 6 October 2023 ("Admission").
Following Admission, the Company's total issued ordinary share
capital will consist of 5,961,717,451 Ordinary Shares with one
voting right per share. The Company does not hold any Ordinary
Shares in treasury. Accordingly, the total number of voting rights
in the Company is 5,961,717,451. The above figure of 5,961,717,451
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
FCA's Disclosure Guidance and Transparency Rules.
The Company also announces that following completion of due
diligence and identification of other more exciting opportunities
which it is actively pursuing, that it has declined to take forward
its previously announced option to farm into an opportunity in
Columbia.
In conjunction with the announcement of the results for the year
ended 31 December 2022, the Company is pleased to confirm that its
audited 2022 Annual report and accounts have now been published,
are being sent to shareholders and are available on the Company's
website at www.echoenergyplc.com together with a notice convening a
general meeting of the Company to be held at 14.00 on 31 October
2023 at the offices of Field Fisher LLP, Riverbank House, 2 Swan
Lane, London EC4R 3TT.
Following the successful completion of the transaction to
partially divest of the Company's assets in Argentina, Echo has
undertaken a rigorous cost reduction programme with ongoing fixed
G&A costs reduced by approximately 40%. Cash management remains
a priority and the Company continues to work with suppliers and
creditors closely. Total cash, cash equivalent and other short term
liquid assets (after the placing) are circa GBP415,000 of which
approximately GBP230,000 is held in shares of Interoil Exploration
and Production ASA and the cash balance after receipt of the
placing proceeds will be approximately GBP185,000.
Progress at the Company's assets in Argentina continues with the
operator finalising investment plans to increase production in
conjunction with improved commercial arrangements to reflect the
improving energy market outlook and prices in Argentina and
globally. Gross production in August was approximately 1,600 BOEPD
(c. 80 BOEPD net to Echo's 5% interest) .
The Company is actively pursuing long term growth strategies and
expects to make announcements updating on these efforts in the
future.
Change of Name of Nominated Adviser
The Company also announces that its Nominated Adviser has
changed its name to Cavendish Securities plc following completion
of its own corporate merger.
Echo Energy via Vigo Consulting
Martin Hull, Chief Executive Officer
Vigo Consulting (IR & PR Advisor)
Patrick d'Ancona
Finlay Thomson +44 (0) 20 7390 0230
Cavendish Securities (Nominated Adviser)
Ben Jeynes
Adrian Hadden +44 (0) 20 7397 8900
Zeus (Corporate Broker)
Simon Johnson +44 (0) 20 3829 5000
Chairman's and Chief Executive Officer's Statement
Chairman and Chief Executive Statement:
Echo Energy, similar to many companies in the oil and gas
sector, faced exceptional challenges during recent years, with the
global pandemic impacting all aspects of the Company's operations
and finances in Argentina. The Company emerged from the COVID-19
period (during which the assets were sub economic) with a large
creditor position, 100%+ per annum inflation in Argentina and
Argentine currency exchange controls, which have prevented funds
being withdrawn from the country without significant penalties. As
a result of these factors, the raising of additional equity for an
Argentine business was challenging and the Company took the
decision in November 2022 to partially sell its Santa Cruz Sur
portfolio.
This partial sale enabled to the Company to:
-- Address its near-term funding challenges by providing near
term cash, enabling the Company to transfer to Buyers the
significant in-country creditors which had built up during the
COVID-19 period and providing access to funding for the Santa Cruz
assets.
-- Benefit from continued exposure (both directly through the
retained 5% working interest, the contingent payments, the further
5% option and the indirect holding in the Operator) to a
well-funded Santa Cruz portfolio, with the concessions likely to be
extended as a result of the provision of guarantee.
The Company, now with significantly reduced creditors and a
heavily reduced cost base, sits with a 5% interest in a producing
Santa Cruz Sur portfolio and an equity position in the operator
InterOil Exploration and Production ASA. In addition to the
divestment the Company successfully completed a restructuring of
its legacy debt position, converting the majority of previously
outstanding debt into equity, substantially improving the balance
sheet and providing the additional flexibility to best manage the
financial requirements going forward. The Board see significant
opportunities at this point in the economic cycle to secure new
energy assets at attractive valuations and is currently exploring a
number of these opportunities.
James Parsons Martin Hull
Non-Executive Chairman Chief Executive Officer
Financial Review
Income Statement
The Group's loss from continuing operations for the year to 31
December 2022 was US $4.4 million (2021: US $1.9 million) and total
Group loss including discontinued operations was of US $9.6million
(2021: US $11.8 million).
For the year ended 31 December 2022, Group revenue (including
within discontinued operations) was US $14.1 million (2021: US
$11.1 million), The spilt between the two commodity revenue sources
were;
Ø Oil sales - US $ 5.4 million (2021: $4.1 million)
Ø Gas sales- US $ 8.7 million (2021: $7.0 million)
The increase in Oil sales was a result of some wells re-opening
and production increasing combined with price increases.
Group operational costs (including within discontinued
operations) were US $18.3 million (2021: US $13.4 million).,
Ø Exploration expenses of US $0.3 million (2021: US $0.2
million) relates to on-going business development activity in Latin
America before the decision was made to divest of the SCS
operations.
Ø Gross administration expenses were US $3.0 million (2021: US
$2.5 million)
Ø Finance costs are largely composed of interest payable and
unwinding of discount costs of US $3.0 million (2021: US $3.4
million), and the amortisation of debt fees.
Balance Sheet
Careful management of cash balances, successful debt
renegotiation and equity fund raises supported business flexibility
and stability. The Group ended the year with US $1.1 million cash
at bank compared to the prior year balance of US $0.7 million.
The balance sheet reflects the Board's commitment in December
2022, to divest of the SCS operations. Accordingly, assets and
liabilities of the operations in Argentina have been separated out
within the balance sheet and the accounts.
Post Balance Sheet
Note 25 to 27 provides more detail around some of the extensive
debt restructuring in 2022, as well as raising funds through share
issues.
In particular, the reduction in amount, extension of the
repayment date for the Euro bonds to 2032 and reduction in interest
rate from 8% to 2% relieve a funding pressure on the business.
This Strategic Report was approved by the Board on 29 September
2023 and signed on its behalf by:
Martin Hull
Chief Executive Officer
29 September 2023
Financial Statements
Consolidated Statement of Comprehensive Income
Year ended 31 December 2022
Year to Year to
31 December 31 December
Notes 2022 2021
US $ US $
--------------------------------------- -------- ------------- ---------------
Continuing operations
Revenue 4 86 23,318
Cost of sales 5 - -
--------------------------------------- -------- ------------- ---------------
Gross profit 86 23,318
Exploration expenses - -
Administrative expenses (2,951,806) (2,454,739)
Operating loss 6 (2,951,720) (2,431,421)
Financial income 8 1,618,844 4,105,983
Financial expense 9 (2,981,409) (3,630,649)
Derivative financial gain - 62,477
--------------------------------------- -------- ------------- ---------------
Loss before tax (4,314,285) (1,893,610)
Taxation 12 (68,142) -
--------------------------------------- -------- ------------- ---------------
Loss from continuing operations (4,382,427) (1,893,610)
Discontinued operations
Loss after taxation for the year
from discontinued operations 11 (5,204,409) (9,876,301)
--------------------------------------- -------- ------------- ---------------
(9,586,836
Loss for the year ) (11,769,911)
Other comprehensive income:
Other comprehensive income to be
reclassified to profit or loss in
subsequent periods (net of tax)
Exchange difference on translating
foreign operations - 211,820
--------------------------------------- -------- ------------- ---------------
Total comprehensive loss for the (9,586,836
year ) ( 11,558,091)
--------------------------------------- -------- ------------- ---------------
Loss attributable to: (9,586,836 ( 11,558,091
Owners of the parent ) )
--------------------------------------- -------- ------------- ---------------
Total comprehensive loss attributable
to: (9,586,836 ( 11,558,091
Owners of the parent ) )
--------------------------------------- -------- ------------- ---------------
Loss per share (US cents) 13
Basic (0.50) (0.78)
--------------------------------------- -------- ------------- ---------------
Diluted (0.50) (0.78)
--------------------------------------- -------- ------------- ---------------
Loss per share (cents) for continuing
operations
Basic (0.27) (0.15)
--------------------------------------- -------- ------------- ---------------
Diluted (0.27) (0.15)
--------------------------------------- -------- ------------- ---------------
The notes form an integral part of these financial
statements.
Consolidated Statement of Financial Position
Year ended 31 December 2022
31 December 31 December
Notes 2022 2021
US $ US $
Total
--------------------------------- -------- -------------- --------------
Non-current assets
Property, plant and equipment 15 2,299 2,674,405
Intangibles assets 16 - 7,131,907
--------------------------------- -------- -------------- --------------
2,299 9,806,312
--------------------------------- -------- -------------- --------------
Current Assets
Inventories 18 - 1,365,225
Trade and other receivables 19 769,551 2,108,438
Cash and cash equivalents 20 1,132,616 742,339
--------------------------------- -------- -------------- --------------
1,902,166 4,216,002
Assets of disposal group
held for sale 10 18,739,291 --
Total Assets 20,643,756 14,022,314
Current Liabilities
Trade and other payables 22 (1,329,991) (16,023,500)
(1,329,991) (16,023,500)
Liabilities of disposal
group held for sale 10 (29,620,264) -
Non-current liabilities
Loans due in over one
year 26 (5,463,301) (28,768,380)
Provisions 27 - (3,039,911)
(5,463,301) (31,808,291)
Total Liabilities (36,413,556) (47,831,791)
--------------------------------- -------- -------------- --------------
Net Liabilities (15,769,800) (33,809,477)
--------------------------------- -------- -------------- --------------
Equity attributable to
equity holders of the
parent
Share capital 24 19,795,863 7,209,086
Shares not issued 24 97,523 -
Share premium 25 83,790,504 64,977,243
Capital contribution 7,212,492 -
reserve
Warrant reserve 24 1,433,428 12,177,786
Share option reserve 24 644,560 1,522,499
Foreign currency translation
reserve (3,481,041) (3,531,587)
Retained earnings (125,263,129) (116,164,504)
Total Equity (15,769,800) (33,809,477)
--------------------------------- -------- -------------- --------------
These financial statements were authorised for issue and
approved by the board of directors on 29 September 2023
Martin Hull
Company registration number 05483127
The notes form an integral part of these financial
statements.
Company Statement of Financial Position
Year ended 31 December 2022
31 December 31 December
Notes 2022 2021
US $ US $
-------------------------------- -------- -------------- -------------
Non-current assets
Property, plant and
equipment 15 1 2,177
Intangible assets 16 - 445,585
Interest in subsidiary
undertakings 17 1,562,321 16,005,044
Amounts receivable
from Group undertakings 10 - 11,813,525
-------------------------------- -------- -------------- -------------
1,562,322 28,266,330
-------------------------------- -------- -------------- -------------
Current assets
Other receivables 19 234,178 172,589
Cash and cash equivalents 20 146,928 37,007
-------------------------------- -------- -------------- -------------
381,106 209,596
-------------------------------- -------- -------------- -------------
Total assets 1,943,428 28,475,926
Current liabilities
Trade and other payables 22 (944,369) (864,697)
(944,369) (864,697)
-------------------------------- -------- -------------- -------------
Non-current liabilities
Loans due in over
one year 26 (5,463,301) (28,768,380)
-------------------------------- -------- -------------- -------------
Total Liabilities (6,407,670) (29,633,077)
-------------------------------- -------- -------------- -------------
Net Liabilities (4,464,242) (1,157,151)
-------------------------------- -------- -------------- -------------
Equity
Share capital 24 19,795,863 7,209,086
Shares not issued 24 97,523 -
Share premium 25 83,790,504 64,977,243
Capital contribution 7,212,492 -
reserve
Warrant reserve 24 1,433,428 12,177,786
Share option reserve 24 644,560 1,522,499
Foreign currency translation
reserve (2,228,569) (2,255,402)
Retained earnings (115,210,043) (84,788,363)
Equity Shareholders'
Funds (4,464,242) (1,157,151)
-------------------------------- -------- -------------- -------------
These financial statements were authorised for issue and
approved by the board of directors on 29 September 2023.
The Company has not presented its own profit and loss account.
Its loss for the year was
US $30,909,889 (2021: US $10,045,487).
Martin Hull
Company registration number 05483127
The notes form an integral part of these financial
statements.
Consolidated Statement of Changes in Equity
Year ended 31 December 2022
Foreign
Capital Share currency
Share Shares Share contribution Warrant option translation
Retained capital to be premium reserve reserve reserve reserve Total
earnings US $ issued US $ US $ US $ US $ US $ equity
US $ US 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
year (1,681,991) - - - - - - (1,681,991)
Discontinued
operations (9,876,301) - - - - - - (9,876,301)
Exchange
Reserve - - - - - - (211,820) (211,820)
--------------- -------------- ----------- -------- ----------- -------------- ------------- ------------ ------------- -------------
Total
comprehensive
loss
for the year (11,558,292) - - - - - - (211,820) (11,770,112)
New shares
issued - 646,265 - 813,207 - - - 1,459,472
Warrants
exercised - 274,803 - 105,484 - (19,362) - - 360,925
Warrants - - - (823,182) - 823,182 - - -
Share issue
costs - - - (80,173) - - (80,173)
Share options
lapsed 165,824 - - - - - (165,824) - -
Share-based
payments - - - - - - 271,038 - 271,038
--------------- -------------- ----------- -------- ----------- -------------- ------------- ------------ ------------- -------------
31 December
2021 (116,164,503) 7,209,087 - 64,977,241 - 12,177,786 1,522,499 (3,531,587) (33,809,477)
--------------- -------------- ----------- -------- ----------- -------------- ------------- ------------ ------------- -------------
1 January 2022 (116,164,503) 7,209,086 - 64,977,243 - 12,177,786 1,522,499 (3,531,587) (33,809,477)
Loss for the
year (4,382,425) - - - - - - (4,382,425)
Discontinued
operations (5,204,409) - - - - - - (5,204,409)
Exchange
Reserve - - - - - - 50,546 50,546
Total
comprehensive
loss
for the year (9,586,834) - - - -- - - 50,546 (9,536,288)
New shares
issued - 12,586,777 - 7,521,415 - - - 20,108,192
Capital
contribution
on debt
restructuring - - - - 7,212,492 - - - 7,212,492
Cash received
for shares
not issued 97,523 97,523
Warrants
lapsed (547,488) - - - - 547,488 - - -
Warrants
issued - - - 11,291,846 - (11,291,846) - - -
Share options
lapsed 1,035,696 - - - - - (1,035,696) - -
Share-based
payments - - - - - - 157,757 - 157,757
--------------- -------------- ----------- -------- ----------- -------------- ------------- ------------ ------------- -------------
31 December
2022 (125,263,129) 19,795,863 97,523 83,790,504 7,212,492 1,433,428 644,560 (3,481,041) (15,769,800)
--------------- -------------- ----------- -------- ----------- -------------- ------------- ------------ ------------- -------------
The notes form an integral part of these financial
statements.
Company Statement of Changes in Equity
Year ended 31 December 2022
Foreign
Capital currency
Retained Share Shares Share contribution Warrant Share translation
earnings capital to be Premium reserve reserve option reserve Total
US $ US $ issued US $ US $ US $ reserve US $ equity
US US $ US $
$
--------------- -------------- ----------- -------- ----------- -------------- ------------- ------------ ------------ -------------
1 January 2021 (82,993,147) 6,288,019 64,961,905 11,373,966 1,417,285 (2,255,402) (1,207,374)
Loss for the
year (1,961,039) - - - - - (1,961,039)
New shares
issued - 646,264 813,207 - - - 1,459,471
Warrants
exercised - 274,803 105,484 (19,362) - - 360,925
Warrants
issued - - (823,182) 823,182 - - -
Share issue
costs - - (80,171) - - (80,171)
Share options
lapsed 165,824 - - - (165,824) - -
Share-based
payments - - - 271,038 - 271,038
--------------- -------------- ----------- -------- ----------- -------------- ------------- ------------ ------------ -------------
31 December
2021 (84,788,362) 7,209,086 64,977,243 12,177,786 1,522,499 (2,255,402) (1,157,151)
--------------- -------------- ----------- -------- ----------- -------------- ------------- ------------ ------------ -------------
1 January 2022 (84,788,362) 7,209,086 64,977,243 12,177,786 1,522,499 (2,255,402) (1,157,151)
Loss for the
year (30,115,152) - - - - - (30,115,152)
Discontinued
operations (794,736) - - - - - (794,736)
Exchange
reserve 26,834 26,834
--------------- -------------- ----------- -------- ----------- -------------- ------------- ------------ ------------ -------------
Total
comprehensive
loss for the
year (30,909,889) - - - - 26,834 (30,883,055)
New shares
issued - 12,586,777 7,521,415 - - - 20,108,192
Capital
contribution
on debt
restructuring 7,212,492 7,212,492
Cash received
for shares
not issued 97,523 97,523
Warrants
lapsed (547,488) - - - 547,488 - - -
Warrants
issued - - 11,291,846 (11,291,846) - - -
Share options
lapsed 1,035,696 - - - (1,035,696) - -
Share-based
payments - - - - 157,757 - 157,757
--------------- -------------- ----------- -------- ----------- -------------- ------------- ------------ ------------ -------------
31 December ( 115,210,043
2022 ) 19,795,863 97,523 83,790,504 7,212,492 1,433,428 644,560 (2,228,569) (4,464,242)
--------------- -------------- ----------- -------- ----------- -------------- ------------- ------------ ------------ -------------
Share premium represents the amounts subscribed for share
capital in excess of the nominal value of the shares issued, net of
cost of issue.
Capital Contribution Reserve represents a contribution to Group
made as part of the 2022 debt restructuring, through forgiveness of
debt.
Warrant reserve represents the cumulative fair value of share
warrants granted which are not lapsed, cancelled or exercised.
Share options reserve represents the cumulative fair value of
share options granted.
Foreign currency translation reserve arises on the retranslation
of the prior period results and financial position of foreign
operations into presentation currency.
Retained earnings represents the cumulative net gains and losses
recognised in the income statement.
The notes form an integral part of these financial statements
.
Consolidated Statement of Cash Flows
Year ended 31 December 2022
Year to Year to
31 December 31 December
2022 2021
US $ US $
------------------------------------------- --- ------------- -------------
Cash flows from operating activities
( 1,893,811
Loss from continuing operations (4,382,425) )
Loss from discontinued operations (5,204,409) (9,664,481)
------------------------------------------------ ------------- -------------
(9,586,834) (11,558,292)
Adjustments for:
Depreciation and depletion of
property, plant and equipment 16,537 127,656
Depreciation and depletion of
intangible assets 1,419,193 1,498,431
Loss on disposal of property,
plant and equipment - 1,858
Impairment of intangible assets 506,818 -
and goodwill
Share-based payments 157,757 271,038
Right of use liability - -
Financial income - (4,355,334)
Financial expense 2,980,994 8,993,432
Exchange differences (1,582,441) (5,612,490)
Derivative financial gain - (62,477)
------------------------------------------------ ------------- -------------
Total adjustments 3,498,858 862,114
Decrease/(Increase) in inventory 863,196 (823,995)
(Increase)/Decrease in other receivables 978,758 5,120,825
increase in trade and other payables 2,150,092 5,072,974
------------------------------------------------ ------------- -------------
Total working capital movement 3,992,046 9,369,804
Net cash used in operating activities (2,095,912) (1,326,374)
Cash flows from investing activities
Purchase of intangible assets (61,233) (118,716)
Purchase of property, plant and
equipment (217,578) (251,226)
------------------------------------------------ ------------- -------------
Net cash used in investing activities (278,811) (369,942)
Cash flows from financing activities
Interest received - 249,351
Bank fees and other finance costs - (169,991)
Issue of share capital 2,714,574 1,459,472
Share issue costs - (80,171)
Warrants exercise - 360,925
------------------------------------------------ ------------- -------------
Net cash from financing activities 2,714,574 1,819,586
------------------------------------------------ ------------- -------------
Net increase in cash and cash equivalents 339,853 123,270
Cash and cash equivalents at 1
January 742,339 682,159
------------------------------------------------ ------------- -------------
Foreign exchange gains/(losses)
on cash and cash equivalents 50,424 (63,090)
------------------------------------------------ ------------- -------------
Cash and cash equivalents at 31
December 1,132,616 742,339
------------------------------------------------ ------------- -------------
The notes form an integral part of these financial
statements.
Company Statement of Cash Flows
Year ended 31 December 2022
Year to Year to
31 December 31 December
2022 2021
US $ US $
--------------------------------------- ------------- -------------
Cash flows from operating activities
Loss from continuing operations (5,081,487) (1,961,039)
Loss from discontinued operations - -
--------------------------------------- ------------- -------------
Loss before taxation (5,081,487) (1,961,039)
Adjustments for:
Depreciation of property, plant
and equipment 2,176 5,862
Impairment of intangible assets
and goodwill 506,818 118,716
Share-based payments 157,757 271,038
Exchange differences (1,582,441) -
Financial expense 2,980,994 (475,965)
Derivative financial gain - (62,477)
---------------------------------------- ------------- -------------
(2,065,304 (142,826)
(Increase)/Decrease in other
receivables (61,589) (16,555)
(Decrease)/Increase in trade
and other payables (79,672) (142,872)
Decrease/(Increase) in amounts
owing by subsidiary undertakings 454,680 690,583
---------------------------------------- ------------- -------------
472,763 531,156
Net cash used in operating activities (6,674,028) (1,572,709)
Cash flows from investing activities
Purchase of intangible assets (61,233) (118,716)
Net cash (used in)/from investing
activities (61,233) (118,716)
Cash flows from financing activities
Issue of share capital 2,714,574 1,459,472
Share issue costs - (80,171)
---------------------------------------- ------------- -------------
Net cash from financing activities 2,617,052 1,379,301
---------------------------------------- ------------- -------------
Net (decease)/increase in cash
and cash equivalents 109,922 (312,124)
Cash and cash equivalents at
1 January 37,008 437,230
---------------------------------------- ------------- -------------
Foreign exchange gains/(losses)
on cash and cash equivalents - (88,099)
---------------------------------------- ------------- -------------
Cash and cash equivalents at
31 December 146,930 37,008
---------------------------------------- ------------- -------------
The notes form an integral part of these financial
statements.
Notes to the Financial Statements
Year ended 31 December 2022
1. Accounting Policies
General Information
The Company is registered, and domiciled, in England and Wales
and incorporated under the Companies Act 2006. The nature of the
Company's operations and its principal activities are set out in
the Directors' Report.
The financial information set out above does not constitute the
Group's statutory financial statements for 2022 or 2021 but is
derived from these financial statements. Statutory financial
statements for 2021 have been delivered to the Registrar of
Companies and those for 2022 will be delivered shortly. The
statutory financial statements for the year ended 31 December 2022
included a disclaimer of opinion. Further details are included in
the independent auditors' report included within the financial
statements.
The Company's functional currency is the United States dollar
(US $). Transactions arising in currencies other than the US $ are
translated at average exchange rates for the relevant accounting
period, with material transactions being accounted at the rate of
exchange on the date of the transaction.
The Group presents its financial information in US $. The
results and position of subsidiary undertakings that have a
different functional currency to US $ are treated as follows:
Ø Assets and liabilities for each financial reporting date
presented are translated at the closing rate of that financial
reporting period.
Ø Income and expenses for each income statement (including
comparatives) is translated at exchange rates at the dates of
transactions. For practical reasons, the Company applies straight
average exchange rates for the period.
Ø All resulting changes are recognised as a separate component
of equity.
Ø Equity items are translated at exchange rates at the dates of
transactions.
The principal accounting policies are summarised below:
(a) Basis of preparation
The financial statements have been prepared in accordance with
UK-adopted international accounting standards. These financial
statements are for the year 1 January 2022 to 31 December 2022. The
comparatives shown are for the year 1 January 2021 to 31 December
2021
New standards and interpretations not applied
At the date of authorisation of these financial statements, a
number of standards and interpretations were in issue but not yet
effective. The directors do not anticipate that the adoption of
these standards and interpretations, or any amendments to existing
standards as a result of the annual improvements cycle, will have a
material effect on the financial statements in the year of initial
application.
(b) Basis of consolidation
The Group financial statements consolidate the financial
statements of the Company and its subsidiaries under the
acquisition method. The financial statements of subsidiaries are
included in the consolidated financial statements from the date
that control commences until the date control ceases. Control is
achieved where the Company has the power to govern the financial
and operating policies of an investee entity so as to obtain
benefits from its activities.
(c) Joint Arrangements
A joint arrangement is one in which two or more parties have
joint control. Joint control is the contractually agreed sharing of
control of an arrangement, which exists only when decisions about
the relevant activities require the unanimous consent of the
parties sharing control. Certain of the Group's licence interests
are held jointly with others. Accordingly, when the company holds a
majority stake, the Group accounts for its share of assets,
liabilities, income and expenditure of these joint operations,
classified in the appropriate statement of financial position and
income statement headings.
Where the Group's interest is in a minority, relinquishing
control and having only a right to profits, with an indemnity
against future costs, the Group account on an investment basis,
only recognising income on receipt of, effectively, dividend
income.
(d) Revenue
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. Our joint venture partner 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 national transportation
system, control of the gas passes at the point at which the gas
enters this network, this is the point at which gas revenue would
be 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. 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 terminal.
(e) Property, plant and equipment
Property, plant and equipment is stated at cost, or deemed cost
less accumulated depreciation, and any recognised impairment loss.
Depreciation is charged so as to write off the cost or valuation of
assets less any residual value over their estimated useful lives,
using the straight- line method, on the following bases:
Fixtures & fittings 12% to 33.3% straight-line
Oil and gas properties are depleted on a unit of production
basis commencing at the start of commercial production or
depreciated on a straight-line basis over the relevant asset's
estimated useful life. Expenditure is depreciated on a unit of
production basis; the depletion charge is calculated according to
the proportion that production bears to the recoverable reserves
for each property. Depreciation will not be charged on an asset in
the course of construction, depreciation commences when the asset
is brought into use and will be depleted according to the
proportion that production bears to the recoverable reserves for
each property.
(f) Property right of use asset
The Group recognises a right-of-use asset and a lease liability
at the lease commencement date. The right of use lease is initially
measured at cost, which comprises the initial amount of the lease
liability adjusted for any lease payments made at or before
commencement date plus any initial direct costs incurred and an
estimate of costs to dismantle and remove the underlying asset. The
right-of-use asset is subsequently depreciated using the
straight-line method from the commencement date to the earlier of
the end of the useful life of the right-of-use asset or the end of
the lease term. The lease liability is initially measured at the
present value of the lease payments that are not paid at the
commencement date discounted using the incremental borrowing rate
of the individual Company which is the lessee.
(g) Other intangible assets - exploration and evaluation
costs
Exploration and evaluation (E&E) expenditure comprises costs
which are directly attributable to researching and analysing
exploration data. It also includes the costs incurred in acquiring
mineral rights, the entry premiums paid to gain access to areas of
interest and amounts payable to third parties to acquire interests
in existing projects. When it has been established that a mineral
deposit has development potential, all costs (direct and applicable
overhead) incurred in connection with the exploration and
development of the mineral deposits are capitalised until either
production commences or the project is not considered economically
viable. In the event of production commencing, the capitalised
costs are amortised over the expected life of the mineral reserves
on a unit of production basis. Other pre-trading expenses are
written off as incurred. Where a project is abandoned or is
considered to be of no further interest, the related costs are
written off.
(h) Impairment of tangible and intangible assets excluding
goodwill
At the date of each statement of financial position, the Group
reviews the carrying amounts of its tangible and intangible assets
to determine whether there is any indication that those assets have
suffered an impairment loss. If any such indication exists, the
recoverable amount of the asset is estimated in order to determine
the extent of the impairment loss (if any). Where it is not
possible to estimate the recoverable amount of an individual asset,
the Group estimates the recoverable amount of the cash-generating
unit ("CGU") to which the asset belongs.
The recoverable amount is the higher of fair value less costs to
sell or value in use. In assessing value in use, the estimated
future cash flows are discounted to their present value using a
pre-tax discount rate that reflects the current market assessments
of the time value of money and the risks specific to the asset. If
the recoverable amount of an asset (or CGU) is estimated to be less
than its carrying amount, the carrying amount of the asset is
reduced to its recoverable amount. An impairment loss is recognised
immediately in profit or loss, unless the relevant asset is carried
at a revalued amount, in which case the impairment loss is treated
as a revaluation decrease.
Where an impairment loss subsequently reverses, the carrying
amount of the asset is increased to the revised estimate of its
recoverable amount, but so that the increased carrying amount does
not exceed the carrying amount that would have been determined had
no impairment loss been recognised for the asset (CGU) in prior
years. A reversal of an impairment loss is recognised immediately
in profit or loss, unless the relevant asset is carried at a
re-valued amount, in which case the reversal of the impairment loss
is treated as a revaluation increase.
(i) Discontinued operations, assets and businesses held for
sale
Cash flows and operations that relate to a major component of
the business or geographical region that has been sold or is
classified as held for sale are shown separately from continuing
operations.
Assets and businesses classified as held for sale are measured
at the lower of carrying amount and fair value less costs to sell.
No depreciation is charged on assets and businesses classified as
held for sale.
Assets and businesses are classified as held for sale if their
carrying amount will be recovered or settled principally through a
sale transaction rather than through continuing use. This condition
is regarded as being met only when the sale is highly probable and
the assets or businesses are available for immediate sale in their
present condition. Management must be committed to the sale, which
should be expected to qualify for recognition as a completed sale
within one year from the date of classification.
Finance income or costs are included in discontinued operations
only in respect of financial assets or liabilities classified as
held for sale or derecognised on sale.
(j) Taxation
Current taxation
Current tax assets and liabilities for the current and prior
periods are measured at the amount expected to be recovered from,
or paid to, the tax authorities. The tax rates and the tax laws
used to compute the amount are those that are enacted, or
substantively enacted, by the balance sheet date.
Deferred taxation
Deferred tax is the tax expected to be payable or recoverable on
differences between the current year amounts of assets and
liabilities in the financial statements and the corresponding tax
basis used in the computation of taxable profit.
Deferred tax assets are recognised to the extent the temporary
difference will reverse in the foreseeable future and it is
probable that future taxable profit will be available against which
the asset can be utilised.
(k) Taxation (continued)
Deferred tax is recognised for all deductible temporary
differences arising from investments in subsidiaries, branches and
associates, and interests in joint ventures, to the extent it is
probable that the temporary difference will reverse in the
foreseeable future.
(l) Conversion of foreign currency
Foreign currency transactions are translated at the average
exchange rates over the year, material transactions are recorded at
the exchange rate ruling on the date of the transaction. Assets and
liabilities are translated at the rates prevailing at the balance
sheet date. The Group has significant transactions and balances
denominated in Euros and GBP. The year-end exchange rate to USD was
US $1 to GBP GBP0.8292 and US $1 to EUR0.8869 (2021: US $1 to GBP
GBP0.7388, US $1 to EUR0.8790) US $1 to ARS $147.423 2021: US $1 to
ARS $102.397) and the average exchange rate during 2022 was US $1
to GBP GBP0.8019 (2021: US $1 to GBP GBP0. 7253).
In the Company financial statements, the income and expenses of
foreign operations are translated at the exchange rates ruling at
the dates of the transactions. The assets and liabilities of
foreign operations, both monetary and non-monetary, are translated
at exchange rates ruling at the balance sheet date. The reporting
currency of the Company and group is United Stated Dollars (US
$).
(m) Share-based payments
The fair value of equity instruments granted to employees is
charged to the income statement, with a corresponding increase in
equity. The fair value of share options is measured at grant date,
using the binomial option pricing model or Black-Scholes pricing
model were considered more appropriate, and spread over the period
during which the employee becomes unconditionally entitled to the
award. The charge is adjusted to reflect the number of shares or
options that vest.
(n) Financial instruments
Financial assets and financial liabilities are recognised on the
Group's balance sheet when the Group becomes a party to the
contractual provisions of the instrument.
Trade and other receivables
Trade and other receivables are initially measured at fair value
and are subsequently reassessed at the end of each accounting
period.
Cash and cash equivalents
Cash and cash equivalents comprise cash in hand and demand
deposits.
Financial liabilities and equity
Financial liabilities and equity instruments issued by the Group
are classified according to the substance of the contractual
arrangements entered into and the definitions of a financial
liability and an equity instrument. An equity instrument is any
contract that evidences a residual interest in the assets of the
Group after deducting all of its liabilities. The accounting
policies adopted for specific financial liabilities and equity
instruments are set out below.
Trade payables
Trade payables are initially measured at fair value and are
subsequently measured at amortised cost, using the effective
interest rate method.
(n) Financial instruments
Equity instruments
Financial instruments issued by the Group are treated as equity
only to the extent that they meet the following two conditions, in
accordance with IAS 32:
-- They include no contractual obligations upon the Group to
deliver cash or other financial assets or to exchange financial
assets or financial liabilities with another party under conditions
that are potentially unfavourable to the Group; and
-- Where the instrument will or may be settled in the Group's
own equity instruments, it is either a non-derivative that includes
no obligation to deliver a variable number of the Group's own
equity instruments or is a derivative that will be settled by the
Group exchanging a fixed amount of cash or other financial assets
for a fixed number of its own equity instruments.
To the extent that this definition is not met, the financial
instrument is classified as a financial liability.
(o) Borrowings
Borrowings are recognised initially at the fair value of the
proceeds received which is determined using a discount rate which
reflects the cost of borrowing to the Group. In subsequent periods
borrowings are recognised at amortised costs, using an effective
interest rate method. Any difference between the fair value of the
proceeds costs and the redemption amount is recognised as a finance
cost over the period of the borrowings.
(p) Inventory
Echo has chosen to value crude oil inventories, a commodity
product, at net realisable value, the value is based on a
discounted observable year-end market price. Other inventory items
are valued at the lower of net realisable value and cost.
(q) Going Concern
The financial information has been prepared assuming the Group
will continue as a going concern. Please see note 2 Accounting
Estimates and Judgements for an extended disclosure on this
issue.
(r) Government assistance grants
Government assistance grants such as the Coronavirus Job
Retention Scheme (CJRS) which relates to staff who have been
furloughed due to COVID-19 are recognised as income and have been
included in the consolidated statement of comprehensive income as
other income. During 2021, the Group received grants totalling US
$23,118 for furloughed staff. Grants ceased, in line with
Government policy, during H2 of 2021.
2. Accounting Estimates and Judgements
Going Concern
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.
The consolidated statement of financial position at 31 December
2022 again shows a negative net asset position. Moreover, after
persistent difficulties, the board made the difficult decision in
late 2022 to divest its operating assets in Argentina. This
decision came to fruition in June 2023 when, apart from a small 5%
retention holding, Echo Energy sold its interest in the SCS assets
to its joint venture partner and obtained a full, 100%, indemnity
against any future costs arising from those SCS operations.
The cash received from that sale was sufficient to partly, but
not fully, pay down backlog creditors. Further, the delay in
publishing the December 2022 Annual Report gave rise to an
automatic suspension of the trading in the company's shares on AIM,
preventing any equity fund raising until the Annual Report is
published and the suspension lifted.
Nevertheless, the directors have held positive discussions with
potential financial intermediaries with a view to raise additional
funding and also are in advanced negotiations to acquire a number
of assets including outside South America to replace the SCS
assets.
Consequently, the directors consider the going concern
assumption continues to be appropriate although there remain
material uncertainties as to;
1. Successfully raising sufficient funds.
2. Finding an appropriate investment within a suitable timescale
3. That investment being sufficiently cash-positive to fund the Group going forwards.
Use of Estimate and Judgements
The preparation of financial statements in conforming with
adopted IFRSs requires management to make judgements, estimates and
assumptions that affect the reported amounts of assets and
liabilities as well as the disclosure of contingent assets and
liabilities as at the balance sheet date and the reported amount of
revenues and expenses during the period. Actual outcomes may differ
from those estimates. 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 impairment of
assets and the Group's going concern assessment.
Amounts Capitalised to the Consolidated Statement of Financial
Position
In accordance with the Group policy, expenditures are
capitalised only where the Group holds a licence interest in an
area. All expenditure relating to the Bolivian company has been
expensed to the statement of comprehensive income, as the Group has
not yet been assigned any licence interests in the country. The
Group has capitalised its participation in the SCS assets.
Prior to the decision to dispose of the majority of its SCS
interest, expenses incurred in the UK relating to SCS were
capitalised. All such capitalised UK costs were then impaired to
nil value following the disposal decision.
Valuation of Assets
In line with the requirements of IFRS 5, management have
considered impairment in the assets held for sale by comparing the
expected fair value less costs to sell (which was agreed in June
2023 and the carrying value of the disposal group. On the basis the
fair value less costs to sell were in excess of the carrying value
of the disposal group no impairments were considered necessary.
The parent company's investment in subsidiary has been written
down to the fair value less costs to sell as the value achieved is
indicative of the value at the balance sheet date and the majority
of the activity of the subsidiaries is linked to the discontinued
operations.
Management have impaired $506,818 of intangible assets which
were costs associated with asset capitalised in the parent company.
This intangible has not been disposed of but is linked to the
activities of the discontinued operations and therefore have been
fully impaired at 31 December 2022.
Functional currency
The groups principal activities, prior to the criteria of
discontinued operation being met, are undertaken in Argentina.
Judgement is required to assess to the functional currency of the
group's subsidiaries. Consistent with previous years, management
have determined that the functional currency is USD on the basis
that revenues, a portion of the cost base and financing activities
are denominated in USD. If a different judgement was made and if
Argentine Peso was considered the functional currency management
would need to consider the impacts of IAS 29. On the basis the
activities have been discontinued, this judgement will not impact
the group significantly in future accounting periods.
Settlement of financial liabilities
As detailed in Note 26, during the year the company renegotiated
and / or settled certain financial liabilities. These were on
favourable terms to the group judgement is required to assess
whether the counterparties to the liabilities were acting in their
capacity as shareholders of the group. On the basis of the
favourable terms management have determined they were acting in
their capacity as shareholders and have accounted for the
renegotiation or settlement accordingly as detailed in Note 26.
C ARRYING VALUE OF INVESTMENT IN SUBSIDARIES
An impairment provisions has been made on the carrying value of
investment in subsidiaries, writing them down to the disposal value
achieved on the sale of the underlying SCS interests in June
2023.
3. 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.
At the balance sheet date, there is only one business segment,
being the company, its activity disclosed in within continuing
operations.
Activity in Argentina, being the Santa Cruz Sur operations are
set out within discontinued operations within note 10.
Activity within the group's Bolivian subsidiary is
immaterial.
4. Revenue
Year to Year to
31 December 31 December
2022 2021
US $ US $
Oil revenue - -
Gas revenue - -
Other income 86 23,318
Total Revenue 86 23,318
--------------- ------------- -------------
Revenue for 2022 all derives from discontinued operations held
for resale and is shown in Note 10.
5. Cost of Sales
Year to Year to
31 December 31 December
2022 2021
US $ US $
Production costs - -
Selling and distribution costs - -
Movement in stock of crude oil - -
Depletion - -
Total Costs - -
------------------------------- ------------- -------------
Cost of sales for 2022 all derives from discontinued operations
held for resale and is shown in Note 10
6. Expenses and Auditor's Remuneration
Year to Year to
31 December 31 December
2022 2021
US $ US $
----------------------------------------------- ------------- -------------
The operating loss is stated after charging
the following amounts:
Depreciation of property, plant and equipment
- owned 92 127,656
Loss on disposal of property, plant and
equipment - 1,858
Fees payable to the Company's auditor
for the audit of the Company's annual
accounts 60,587 53,977
Fees payable to the overseas auditor and
its associates for other services:
* Corporate finance services - 11,456
* Audit and subsidiaries 10,502 10,499
Share-based payments - 271,038
----------------------------------------------- ------------- -------------
7. Staff Costs and Numbers
The average number of persons employed by the Group during the
year including executive directors is analysed below:
Year to Year to
31 December 31 December
2022 2021
---------------- ------------- -------------
Administration 10 7
---------------- ------------- -------------
Group employment costs - all employees including executive
directors:
Year to Year to
31 December 31 December
2022 2021
US $ US $
--------------------------------------- ------------- -------------
Wages and salaries 1,159,651 1,066,589
Social security costs 147,922 131,487
Pension contributions 37,574 45,764
Share-based payments - equity-settled 157,757 271,038
--------------------------------------- ------------- -------------
Total 1,502,904 1,514,878
--------------------------------------- ------------- -------------
Directors' remuneration is set out in the Directors Remuneration
Report of this report.
Remuneration of Key Personnel is set out in the table below.
Year to Year to
31 December 31 December
2022 2021
US $ US $
-------------------------- ------------- -------------
Wages and salaries 541,915 583,974
Social security costs 61,098 103,329
Bonus - 59,288
Pension Contributions 12,239 25,099
Private Health Insurance 5,963 13,107
Share-Based Payments 157,757 244,383
-------------------------- ------------- -------------
Total 621,215 1,029,180
-------------------------- ------------- -------------
8. Financial Income
Year to Year to
31 December 31 December
2022 2021
US $ US $
--------------------------- ------------- -------------
Interest income 622 249,351
Net foreign exchange gain 1,618,222 4,105,983
--------------------------- ------------- -------------
Total 1,618,884 4,355,334
--------------------------- ------------- -------------
9. Financial Expense
Year to Year to
31 December 31 December
2022 2021
US $ US $
------------------------------------------ ------------- -------------
Interest payable 415 11,912
Net foreign exchange losses - 5,122,810
Unwinding of discount on long- term loan 2,980,994 3,394,647
Unwinding of abandonment provision - 59,955
Bank fees and overseas transaction tax - 170,007
------------------------------------------ ------------- -------------
Total 2,981,409 8,993,432
------------------------------------------ ------------- -------------
10. Discontinued Operations
In November 2022 the company committed to selling virtually all
of its interest in the Santa Cruz oil and gas operations in
Argentina to its joint-venture partner Interoil. A term of the sale
was for Echo to relinquish any management and accounting in respect
of the joint venture, instead receiving a profit share in
proportion to the remaining 5% holding in the joint venture,
effectively as investment income.
The sale was completed on 26 June 2023, satisfied by GBP750,000
in cash, shares to the value of GBP400,000 in Interoil and
GBP150,000 investment in Echo Energy PLC shares by Interoil. At 31
December 20222 the Argentinian operations were classified as a
disposal group held for sale and as discontinued operations.
With the classification as discontinued operations, the Santa
Cruz operations in Argentina have been excluded from the segmental
note (note 3).
The results of the Argentinian operations for the year are
presented below
31 December 31 December
2022 2021
US $ US $
Revenue
Oil revenue 5,365,928 4,060,802
Gas revenue 8,748,402 7,036,861
Other income - 3,707
----------------------------------- -------------- --------------
14,114,331 11,101,369
----------------------------------- -------------- --------------
Cost of sales
Production costs (16,933,985) (12,024,454)
Selling and distribution costs - (1,684,320)
Movement in stock of crude oil - 181,274
Depletion (1,419,193) (1,620,279)
----------------------------------- -------------- --------------
Total cost of sales (18,353,178) (15,147,779)
----------------------------------- -------------- --------------
Gross loss (4,238,847) (4,046,410)
Exploration expenses (287,919) (205,651)
Impairment of plant and equipment (506,818) -
Administrative expenses (578,011) (510,807)
Operating loss from discontinued
operations (5,611,595) (4,762,869)
Finance revenue - 249,351
Finance expense (788,847) (5,362,783)
Foreign exchange gain 1,208,083 -
----------------------------------- -------------- --------------
Loss for the year before taxation
from discontinued operations (5,192,359) (9,876,301)
----------------------------------- -------------- --------------
Deferred tax asset write-off (12,050) -
----------------------------------- -------------- --------------
Loss for the year after taxation
from discontinued operations (5,204,409) (9,876,301)
----------------------------------- -------------- --------------
The major classes of assets and liabilities of the Argentinian
operations classified as held for sale as at 31 December 2022 are
as follows
31 December 2022
US $
Assets
Property, plant and equipment 2,658,382
Intangible assets 5,267,129
Inventories 716,794
Joint venture receivables 9,729,937
Other receivables 279,012
Prepayments 87,916
Cash 121
Assets of disposal group held for sale 18,739,291
--------------------------------------------- -------------------
Liabilities
Trade and other payables (14,095)
Joint venture payables 26,594,448
Provisions 3,039,911
Liabilities of disposal group held for sale 29,620,264
--------------------------------------------- -------------------
Net liabilities (10,880,974)
--------------------------------------------- -------------------
The net cash flows of the Argentinian operations were
31 December 31 December
2022 2021
US $ US $
Net cash flow from operating activites (5,830,067) (434,026)
Net cash flow from investing activities (217,578) -
Net cash flow from financing activites - 249,351
----------------------------------------- ------------ ------------
Net cash outflow (6,047,645) (184,675)
----------------------------------------- ------------ ------------
11 . Joint Arrangements
As described in both the strategic and governance reports, in
particular in the Financial Review, Echo has joint arrangements
within the SCS concessions. Previously, the Group accounted for its
share of assets, liabilities, income and expenditure of these joint
operations in accordance with its equity interest in each, being
70% of the SCS working interest. Joint venture assets and
liabilities were separately disclosed throughout the financial
statements.
As set out in Note 10, in December 2022 to the decision was made
to divest the SCS concessions, following which, in June 2023 that
interest was reduced to a 5% holding and the joint arrangement
thereby has been treated in the accounts as discontinued
operations.
12. Taxation
Year to Year to
31 December 31 December
2022 2021
US $ US $
------------------------------------------- ------------- -------------
Tax on profit on ordinary activities
Taxation charged based on profits for the - -
period
UK corporation tax based on the results - -
for the period
Deferred tax asset write-off in Bolivian
subsidiary 68,142
------------------------------------------- ------------- -------------
Total tax expense in income statement 68,142 -
------------------------------------------- ------------- -------------
Reconciliation of the Tax Expense
The tax assessed for the year is different from the standard
rate of corporation tax in the UK of 19% (2021: 19%). The
references are explained below:
Year to Year to
31 December 31 December
2022 2021
US $ US $
------------------------------------------------ ------------- -------------
Loss on ordinary activities before taxation (4,382,425) (11,770,112)
Loss from discontinued operations (5,204,409) -
------------------------------------------------ ------------- -------------
Loss for the year before tax (9,586,834) (11,770,112)
------------------------------------------------ ------------- -------------
Loss on ordinary activities multiplied by
standard rate of corporation tax in the
UK of 19% (1,821,498) (2,236,321)
Effects of:
Expenses disallowed for tax purposes 92 40,246
Deferred tax not provided - tax losses carried
forward 1,821,406 2,196,075
Deferred tax asset in Bolivian subsidiary 68,142 -
written off
------------------------------------------------ ------------- -------------
Total current tax 68,142 -
------------------------------------------------ ------------- -------------
The parent entity has tax losses available to be carried
forward, and further tax losses are available in certain
subsidiaries. With anticipated substantial lead times for the
Group's projects, and the possibility that these may expire before
their use, it is not considered appropriate to anticipate an asset
value for them. The amount of tax losses carried forward for which
a deferred tax asset has not been recognised is US $50,533,098
(2021: US $48,711,692)
No amounts have been recognised within tax on the results of the
equity-accounted joint ventures.
13. Loss Per Share
The calculation of basic and diluted loss per share at 31
December 2022 was based on the loss attributable to ordinary
shareholders. The weighted average number of ordinary shares
outstanding during the year ended 31 December 2022 and the effect
of the potentially dilutive ordinary shares to be issued are shown
below.
Year to Year to
31 December 31 December
2022 2021
Net loss for the year (US $) before exchange
on translating foreign operations (9,586,834) (1,893,811)
---------------------------------------------- -------------- --------------
Net loss on continuing operations (US ( 4,382,425
$) ) (9,876,301)
---------------------------------------------- -------------- --------------
Basic weighted average ordinary shares
in issue during the year (No.) 1,909,205,746 1,270,891,563
---------------------------------------------- -------------- --------------
Diluted weighted average ordinary shares
in issue during the year (No.) 1,909,205,746 1,270,891,563
---------------------------------------------- -------------- --------------
Loss per share (cents)
Basic and diluted (cents) (0.50) (0.15)
---------------------------------------------- -------------- --------------
Loss per share on continuing operations
(cents) (0.23) (0.78)
---------------------------------------------- -------------- --------------
In accordance with IAS 33 and as the entity is loss making,
including potentially dilutive share options in the calculation
would be anti-dilutive.
14 . Loss of the Parent Company
The parent company is not required to produce its own profit and
loss account (or IFRS equivalent) because of the exemption
provision in Section 408 of the Companies Act 2006.
15 . Property, Plant and Equipment (Group)
PPE - Fixtures
O&G & Fittings Total
Properties US $ US $
US $
---------------------- ------------- ------------- ------------
31 DECEMBER 2022
Cost
1 January 2022 2,873,147 95,397 2,968,544
Additions - 2,813 2,813
Reclassification of
assets of disposal
group held for sale
(note 10) (2,873,147) - (2,873,147)
----------------------- ------------- ------------- ------------
31 December 2022 - 98,210 98,210
----------------------- ------------- ------------- ------------
Depreciation
1 January 2022 202,718 91,421 294,139
Charge for the year 12,047 4,490 16,537
Reclassification of
assets of disposal
group held for sale
(note 10) (214,765) - (214,765)
31 December 2022 - 95,911 95,911
----------------------- ------------- ------------- ------------
Carrying amount
31 December 2022 - 2,299 2,299
----------------------- ------------- ------------- ------------
31 December 2021 2,670,429 3,976 2,674,405
----------------------- ------------- ------------- ------------
31 DECEMBER 2021
Cost
1 January 2021 2,621,921 97,255 2,719,176
Additions 251,226 - 251,226
Disposals - (1,858) (1,858)
----------------------- ------------- ------------- ------------
31 December 2021 2,873,147 95,397 2,968,544
----------------------- ------------- ------------- ------------
Depreciation
1 January 2021 79,941 86,542 166,483
Charge for the year 122,777 4,879 127,656
Disposals - - -
---------------------- ------------- ------------- ------------
31 December 2021 202,718 91,421 294,139
----------------------- ------------- ------------- --------------
Carrying amount
31 December 2021 2,670,429 3,976 2,674,405
----------------------- ------------- ------------- --------------
31 December 2020 2,541,980 10,713 2,552,693
----------------------- ------------- ------------- --------------
Included within property, plant and equipment are amounts of US
$nil (2021: US $996,505) in relation to assets in construction and
as a result these are not depreciated on the unit of production
basis; this commenced when they became available for use.
15. Property, Plant and Equipment (Company)
Fixtures
& Fittings
US $
--------------------- -------------
31 DECEMBER 2022
Cost
1 January 2022 92,903
Additions -
Disposals -
--------------------- -------------
31 December 2022 92,903
----------------------- -------------
Depreciation
1 January 2022 90,726
Charge for the year 2,176
Disposals -
31 December 2022 90,902
----------------------- -------------
Carrying amount
31 December 2022 1
----------------------- -------------
31 December 2021 2,177
----------------------- -------------
31 DECEMBER 2021
Cost
1 January 2021 92,903
Additions -
Disposals -
--------------------- -------------
31 December 2021 92,903
----------------------- -------------
Depreciation
1 January 2021 84,864
Charge for the year 5,862
Disposals -
31 December 2021 90,726
----------------------- -------------
Carrying amount
31 December 2021 2,177
----------------------- -------------
31 December 2020 8,039
----------------------- -------------
16. Intangible Assets (Group)
SCS Production
Assets
US $
------------------------------ -----------------
31 DECEMBER 2022
Cost
1 January 2022 10,875,022
Additions 61,233
Reclassification of
assets of disposal group
held for sale (note
10) (10,429,437)
31 December 2022 506,818
-------------------------------- -----------------
Depletion
1 January 2022 3,743,115
Depletion 1,419,193
Depreciation decommissioning -
assets
Impairment 506,818
Reclassification of
assets of disposal group
held for sale (note
10) (5,162,308)
31 December 2022 506,818
-------------------------------- -----------------
Carrying amount
31 December 2022 -
------------------------------ -----------------
31 December 2021 7,131,907
-------------------------------- -----------------
31 DECEMBER 2021
Cost
1 January 2021 10,756,306
Additions 118,716
Disposals -
Transfers -
------------------------------ -----------------
31 December 2021 10,875,022
-------------------------------- -----------------
Depletion and impairment
1 January 2021 2,244,684
Disposals -
Depletion 1,375,931
Depreciation decommissioning
assets 122,500
Impairment charge for -
the year
------------------------------ -----------------
31 December 2021 3,743,115
-------------------------------- -----------------
Carrying amount
31 December 2021 7,131,907
-------------------------------- -----------------
31 December 2020 8,511,622
-------------------------------- -----------------
All intangible assets relate to oil & gas activities. The
Group's oil & gas assets were assessed for impairment at 31
December 2022. The intangibles are held within one CGU, the SCS
licence concession.
In 2022, the Santa Cruz operations were reclassified as
Discontinued operations held for sale. No further general
impairment was considered necessary as the proceeds of the sale
exceed the net liabilities of the discontinued operations. However,
in exception, the value of UK costs capitalised up to the time of
the decision to sell of $506,818 was assessed as irrecoverable and
has been fully impaired.
16. Intangible Assets continued (Company)
Argentina Production
assets Total
US $ US $
-------------------------------- --------------------- --------
31 DECEMBER 2022
Cost
1 January 2022 445,585 445,585
Additions 61,233 61,233
31 December 2022 506,818 506,818
-------------------------------- --------------------- --------
Impairment
1 January 2022 - -
Provided 516,818 516,818
31 December 2022 506,818 506,818
-------------------------------- --------------------- --------
Carrying amount
31 December 2022 - -
-------------------------------- --------------------- --------
31 December 2021 445,585 445,585
-------------------------------- --------------------- --------
31 DECEMBER 2021
Cost
1 January 2021 326,869 326,869
Additions 118,716 118,716
31 December 2021 445,585 445,585
-------------------------------- --------------------- --------
Impairment
1 January 2021 - -
Impairment charge for the year - -
31 December 2021 - -
-------------------------------- --------------------- --------
Carrying amount
31 December 2021 445,585 445,585
-------------------------------- --------------------- --------
31 December 2020 326,869 326,869
-------------------------------- --------------------- --------
17 . Interest in Subsidiary Undertakings
Year to Year to
31 December 31 December
2022 2021
US $ US $
------------------- ------------- -------------
Cost
1 January 30,521,648 30,521,648
Additions in year - -
------------------- ------------- -------------
31 December 30,521,648 30,521,648
------------------- ------------- -------------
Impairment
1 January 14,516,604 14,516,604
Impairment 14,442,723 -
------------------- ------------- -------------
31 December 28,959,327 14,516,604
------------------- ------------- -------------
Carrying amount
31 December 1,562,321 16,005,044
------------------- ------------- -------------
Details of the subsidiaries are as follows:
Class % Country
Subsidiary of Share Owned of Nature of Business
Registration
Echo Energy Holdings (UK) Ordinary 100% England Holding company
Limited & Wales
Echo Energy Argentina Holdings Ordinary 100% England Holding company
Limited & Wales
Echo Energy Tapi Aike Limited Ordinary 100% England Holding company
& Wales
Eco Energy TA Op Limited Ordinary 100% England Holder of Argentinian
& Wales branch assets
Echo Energy C D & LLC Limited Ordinary 100% England Holding company
& Wales
Eco Energy CDL Op Limited Ordinary 100% England Holder of Argentinian
& Wales branch assets
Echo Energy Bolivia (Hold Ordinary 100% England Holding company
Co 1) Limited & Wales
Echo Energy Bolivia (Op Ordinary 100% England Holder of Bolivian
Co 1) Limited & Wales branch assets
Echo Energy Bolivia (Hold Ordinary 100% England Holding company
Co 2) Limited & Wales
Echo Energy Bolivia (Op Ordinary 100% England Dormant
Co 2) Limited & Wales
The registered address for all of the above subsidiaries is: 85
Great Portland Street, London, W1W 7LT
18. Inventories
31 December 31 December 2021
2022
Group Company Group Company
US $ US $ US $ US $
------------------- ------ -------- ---------- --------
Crude oil - - 691,528 -
Parts and supplies - - 673,697 -
Total - - 1,365,225 -
------------------- ------ -------- ---------- --------
19. T RADE AND Other Receivables
31 December 2022 31 December 2021
Group Company Group Company
US $ US $ US $ US $
----------------------------- -------- ------------- ---------- -----------
Non-current
Amounts owing by subsidiary
undertakings - 11,358,845 - 11,813,525
Impairment in year - (11,358,845)
Total - - - 11,813,525
----------------------------- -------- ------------- ---------- -----------
Current
Trade receivables 531,815 - 387,965 -
Accrued income - - 291,336 -
Other receivables 61,243 57,685 1,322,407 82,818
Prepayments 176,493 176,493 106,730 89,771
Total 769,551 234,178 2,108,438 172,589
----------------------------- -------- ------------- ---------- -----------
Other receivables in the Group principally comprise recoverable
Value Added Tax and, in 2021, joint venture receivables and, for
the company, inter-company balances. The directors consider that
the carrying amount of trade and other receivables approximated to
their fair value.
20. Cash and Cash Equivalents
31 December 31 December 2021
2022
Group Company Group Company
US $ US $ US $ US $
------------------------------------- ---------- -------- --------- --------
Cash held by joint venture partners - - 500,719 37,007
Cash and cash equivalents 1,132,616 146,928 241,620 -
------------------------------------- ---------- -------- --------- --------
Total 1,132,616 146,928 742,339 37,007
------------------------------------- ---------- -------- --------- --------
In 2021 Echo had advanced cash to joint venture partners; this
cash was held by our partners in a ring-fenced account. We
recognised our equity share of the balance held.
21. Financial Instruments and Treasury Risk Management
Fair Value of Financial Assets and Liabilities
The carrying values of financial assets and liabilities are
considered to be materially equivalent to their fair values, with
the exception of the Eurobond loan which is calculated at present
value as disclosed in note 26. The fair value is approximately
$7.2m higher due to the impact of using a market rate of
interest.
Treasury Risk Management
The Group manages a variety of market risks, including the
effects of changes in foreign exchange rates, liquidity and
counterparty risk.
Credit Risk
The Group's principal financial assets are bank balances and
cash and other receivables.
The credit risk on liquid funds is limited because the
counterparties are UK, Argentine and Bolivian banks with high
credit ratings. The Group operates with positive cash and cash
equivalents as a result of issuing share capital in anticipation of
future funding requirements. The Group's policy is therefore one of
achieving high returns with minimal risks. In order to provide a
degree of certainty, the Group looks, when appropriate, to invest
in short-term fixed-interest treasury deposits giving a low risk
profile to these assets.
In Echo's SCS assets, acquired in November 2019, operating
partner Interoil marketed our hydrocarbons primarily to well
established utilities. Echo carried a marginally higher credit risk
exposure as Echo dealt directly with counterparties for payment,
however as the Group's principal customers were substantial oil and
gas utility companies and refiners, as such credit risk is
considered to be low. There is no history of credit loss,
non-payment or default by the inherited counterparties and the
calculated amount of the potential 12-month credit risk loss is not
material. The Company had low credit risk in respect of receivables
as a result of supplying reputable oil and gas purchasers. The
group has applied the expected credit loss model under IFRS 9.
Given current contractual arrangements where pricing has already
been determined at the point where receivables from hydrocarbon
sales are recognised as revenue, and the fact that contract
counterparties are large corporate entities or utilities no
provision was made for losses as any potential losses would be
immaterial.
The maximum exposure due to credit risk for the Group on other
receivables and amounts due from equity accounted joint operations
during the year was US $1,880,113 (2021: US $3,253,335). No
collateral is held in respect of these amounts.
The maximum exposure due to credit risk for the Company on
inter-company receivables and other receivables during the year was
US $27,818,569 (2021: US $28,509,152). No collateral is held in
respect of these amounts. Inter-group funding is assessed for
indications of impairment on a periodic basis. Investments and
subsidiaries and inter-group loans in the amount of US $25,801,568
(2021: US $14,516,604) are considered to be impaired and have been
provided against down to the level of the disposal consideration.
All other amounts are expected to be received in full.
Currency Risk
The Group's operations are primarily located in South America,
and the United Kingdom, with the main exchange risk being between
the US Dollar and the Argentine Peso. The Argentine Peso has
devalued by approximately 72% (2021: 9%) over the year. The Group
addressed this risk by minimising exposure to the currency. The
majority of Group revenues for the year were denominated in US
Dollars but certain liabilities and revenues were denominated in
Argentine Pesos. In certain instances the counterparty for
settlement of Pesos income and expenditure was the same. In these
instances Pesos balances were offset. Balances were held in dollars
until settlement was due, and where short-term Pesos balances were
held these were placed on overnight deposit.
The Group does hold substantial receivable VAT balances
denominated in Pesos and have sought to expedite recovery to
mitigate devaluation losses.
At year-end the Group held the following cash and cash
equivalent balances:
31 December 31 December
2022 2021
US $ US $
-------------------- ------------ ------------
US Dollars 45 5,248
-------------------- ------------ ------------
GBP Sterling 146,903 35,419
-------------------- ------------ ------------
Euro (19) 41
-------------------- ------------ ------------
Argentine Peso 985,436 699,578
Bolivian Boliviano 250 2,053
-------------------- ------------ ------------
Total 1,132,616 742,339
-------------------- ------------ ------------
The consolidated statement of comprehensive income would be
affected by US $14,690 (2021: US $4,247) if the exchange rate
between US $ and GBP changed by 10%. There would be a loss of US
$98,543 (2021: US $199,162) if the exchange rate between the
Argentine Peso and the US Dollar weakened by 10%.
The Group has exposure to the Euro, Echo hold EUR3.9million
(2021: EUR25million) bond notes, the Group held Euro-denominated
funds at the beginning of the period to cover servicing of debt
during the accounting year. The primary source of funds for the
Group in the period was equity raised in GBP, these funds are
predominantly translated into USD to fund exploration, acquisition
and production activity in Argentina. No hedging products were used
during this accounting period, but management actively review
currency requirements to assess the suitability of hedging
products. The Group consolidated statement of income would be
affected by approximately US $417,009 (2021: US $2,782,192) by a
reasonably possible 10 percentage points fluctuation in the
exchange rate between US Dollars and Euros.
The VAT regime in Argentina differs from international practice
as VAT investment activities are not immediately recoverable but
must be offset against revenue streams. The Company made
substantial investments in Argentina in 2018, 2019 and 2021 and has
accordingly built up a material VAT receivable balance. A new
mechanism has been approved by government through Law No. 27430 and
Decree 813/2018. The mechanism will allow Technical VAT credits
associated with the purchase of capital assets from 1 January 2018
to be recovered through application if the Company has not been
able to recover the VAT within six months. Echo received a VAT
refund during 2022, but going forward withholds VAT received from
customers to offset any VAT credit balances.
The Group used Blue-Chip Swaps during the year to repatriate
funds from Argentina to the UK. A Blue-Chip Swap is when a domestic
investor purchases a foreign asset and then transfers the purchased
asset to an offshore entity. The Group's Argentine subsidiary
purchased shares in highly stable and liquid companies that are
traded on both domestic and offshore stock exchanges. These shares
were held for a fixed period in accordance with Argentinian
regulation. Following the end of the fixed period the shares were
sold offshore and the resulting funds were then repatriated to the
parent company. This type of transaction is therefore exposed to
stock price volatility during the hold period and incurs
transaction fees. During the year, the Group swapped 132,500,000
Pesos into $471,105 net of transaction fees and forex losses .
Interest Rate Risk
The Group holds debt instruments that were issued at a fixed
rate. As part of the Group's policy to maximise returns on cash
held, cash held is placed in interest-bearing accounts where
possible. During the course of 2022, Echo invested cash into
operations and did not hold significant cash balances for prolonged
periods of time. The consolidated statement of comprehensive income
would be affected by US $6 (2021: US $30) by a one percentage point
change floating interest rate on a full-year basis.
Liquidity Risk
The Group's actively manages its working capital to ensure the
Group has sufficient funds for operations and planned activities.
Operational cash flow represents receipts from revenue, together
with on-going direct operational support costs, exploration,
appraisal, administration and business development costs. The Group
manages its liquidity requirements by the use of both short-term
and long-term cash flow forecasts. The Group's policy is to ensure
facilities are available as required, to issue equity share capital
and form strategic alliances in accordance with long-term cash flow
forecasts. The Group had no undrawn committed facilities as at 31
December 2022.
The Group's financial liabilities are primarily obligations
under joint operations, trade payables and operational costs. All
amounts are due for payment in accordance with agreed settlement
terms with suppliers or statutory deadlines and all within one
year.
The Group holds Euro-denominated long-term debt. See Note 26.
Other than long-term debts, all financial liabilities are due for
settlement within 12 months. The Group held cash balances of US
$1,132,616 (2021: US $742,33).
The Group does not currently use derivative financial
instruments to hedge currency and commodity price risk as it is not
considered necessary. Should the Group identify a requirement for
the future use of such financial instruments, a comprehensive set
of policies and systems as approved by the directors will be
implemented.
Commodity Price Risk
The Group is now exposed to the risk of fluctuations on
prevailing commodity market prices. The Group does not use
commodity forward contracts and futures to hedge against price risk
in commodities as current volumes and market conditions mean they
are not yet appropriate for Echo.
A 10% increase in the price of Gas would have increased revenue
in the discontinued operations by approximately US $874,840 (2021:
US $703,686).
A 10% increase in the price of Oil would have increased revenue
in the discontinued operations by approximately US $536,593 (2021:
US $406,080).
Capital management
The Group's legacy strategy has led to its capital structure
being a mixture of debt and equity. The directors will reassess the
future capital structure when new projects are sufficiently
advanced and restructure accordingly.
The Group's financial strategy is to utilise its resources to
further appraise and test the Group's projects, forming strategic
alliances for specific projects where appropriate together with
assessing target acquisitions. The Group keeps investors and the
market informed of progress with its projects through regular
announcements and raises additional equity finance at appropriate
times.
Categories of financial instruments
All of the Group's financial assets are carried at amortised
cost. The Group's embedded derivative is classified at fair value
through profit or loss, the remaining Group's financial liabilities
are classified as financial liabilities at amortised cost.
22. Trade and Other Payables
31 December 2022 31 December 2021
Group Company Group Company
US $ US $ US $ US $
------------------------------ ---------- -------- ---------- --------
Trade payables 657,923 556,536 495,379 492,190
Taxation and social security
costs 388,422 105,121 395,684 269,311
Non-trade payables 120,244 120,244 39,042 39,023
Accruals 163,401 162,468 131,137 64,173
Total 1,329,991 944,369 1,061,242 864,697
------------------------------ ---------- -------- ---------- --------
23. Derivative financial liabilities
Level 3 fair value measurements
Warrants instruments are deemed to be Level 3 liabilities under
the fair value hierarchy as fair value measures of these
liabilities are not based on observable market data. The movement
in their fair values is shown in the table below:
31 December 31 December
2022 2021
US $ US $
----------------------------------------- --------------- --------------
At 1 January - 62,477
Fair value movements recognised through
profit or loss - (62,477)
----------------------------------------- --------------- --------------
Total - -
----------------------------------------- --------------- --------------
24. Share Capital
31 December 31 December 2021
2022
Group Company Group Company
US $ US $ US $ US $
----------------------------------------- ----------- ----------- ---------- ----------
Issued, Called Up and Fully Paid
5,527,427,674 0.31c (2021 1,309,013,085
0.31c) ordinary shares
1 January 7,209,086 7,209,086 6,288,019 6,288,019
Equity shares issued 12,586,777 12,586,777 921,067 921,067
----------------------------------------- ----------- ----------- ---------- ----------
31 December 19,795,863 19,795,863 7,209,086 7,209,086
----------------------------------------- ----------- ----------- ---------- ----------
The holders of 0.31c (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.
The following shares were issued to be used to support SCS
operations and fund potential E&P growth projects as well as
for general working capital:
-- On 14 January 2022, Echo issued 143,478,260 ordinary shares
at 0.46p per share to raise gross cash proceeds of GBP660,000
(US$880,189).
-- On 29 August 2022, Echo issued 242,000,000 ordinary shares at
0.25p per share to raise gross cash proceeds of GBP605,000
(US$709,271). In addition 48,220,000 shares were issued to settle
adviser fees.
The following shares were issued pursuant to the restructuring
of the company's debt:
-- On 29 August 2022, Echo issued 213,949,943 ordinary shares in
settlement of accrued interest on the Lombard facility totalling
EUR625,803.
-- On 2 December 2022, Echo issued 3,570,766,386 ordinary shares
to in settlement of financial liabilities as part of the debt
restructuring as detailed in note 26.
Pursuant to the exercise of share warrants, on 22 December 2022
the company received cash of GBP87,977 (US$97,523), but the
33,190,876 ordinary shares were not issued until 2 January 2023.
These are shown within shareholders' funds as 'cash received on
shares to be issued'.
No further shares options were issued in the year, however a
combination of warrants were issued in relation to fund raises and
debt renegotiation.
Further shares issued during the year was as follows:
Date Shares Price Prices
(p) (US $)
----------------------- ------------ -------------- ------ --------
1 January 2022 1,309,013,085
Shares issued @ 0.25p 25/01/2022 143,478,260 0.46 0.55
Shares issued @ 0.25p 29/08/2022 504,169,943 0.25 0.30
Shares issued @ 0.25p 02/12/2022 3,570,766,386 0.27 0.54
31 December 2022 5,527,427,674
------------------------------------- -------------- ------ --------
(A) Share Options
The Group has a share option scheme established to reward and
incentivise the executive management team and staff for delivering
share price growth. The share option scheme is administered by the
remuneration committee. The expected life of the options is based
on the expected time through to exercise and is not necessarily
indicative of exercise patterns.
Share options are valued using the stochastic Black-Scholes
model. The inputs to the model are the market price at date of
grant, the exercise price set out in the option agreement, expected
life, the risk-free rate of return and the expected volatility. A
10-year gilt rate is used as an equivalent to risk-free rate and
the expected volatility was determined with reference to the
Company's share price.
The expected life used in the model has been adjusted, based on
management's best estimate, for the effects of non-transferability,
exercise restrictions and behavioural considerations. The cost of
options is amortised to the statement of comprehensive income over
the service period of the option.
Details of the tranches of share options outstanding at the
year-end are as follows:
WAEP* WAEP*
Number (c) Number (c)
Share Options 31/12/2022 31/12/2022 31/12/2021 31/12/2021
----------------------------- -------------- ------------- ------------- ------------
Outstanding as at 1 January 120,254,120 3 95,491,107 5
Granted during the year - - 35,750,000 1
Forfeited during the period (8,987,636) 2 (8,236,987) 4
Cancelled during the year (40,000,001) 3 (2,750,000) 1
----------------------------- -------------- ------------- ------------- ------------
Options outstanding as at
31 December 71,266,483 3 120,254,120 3
Exercisable at 31 December 33,266,483 4 41,195,714 3
----------------------------- -------------- ------------- ------------- ------------
*Weighted Average Exercise
Price (WAEP)
The fair values on the grant date and each reporting date were
determined using the Black-Scholes option pricing model. The
following key assumptions were used in determining the derivative's
fair value at the reporting date:
The weighted average outstanding life of vested share options is
1.5 years. The price for outstanding options ranges between 0.8c
and 16c (0.7p and 13.2p). The outstanding share options are not
subject to any share performance-related vesting conditions, but
vesting is conditional upon continuity of service.
The Group recognised total expenses of US $157,757 (2021: US
$271,038) related to equity-settled, share-based payment
transactions during the year.
A deferred taxation asset has not been recognised in relation to
the charge for share-based payments due to the availability of tax
losses to be carried forward.
(B) Warrants Over Ordinary Shares
The Company issued warrants over ordinary shares to subscribers
of new ordinary shares and as fundraising commission in respect of
debt restructuring completed during the year to 31 December
2022.
Details of the tranches of warrants outstanding at the year-end
are as follows:
WAEP* WAEP*
Number (c ) Number (c )
Warrants 2022 2022 2021 2021
------------------------------- -------------- ------- ------------- -------
Outstanding as at 1 January 551,716,990 9 460,222,521 10
Granted during the year 402,418,260 1 170,939,567 1
Exercised during the year - - (79,445,098) 4
Lapsed in year (389,118,950) 8 - -
------------------------------- -------------- ------- ------------- -------
Outstanding as at 31 December 565,016,300 1 551,716,990 9
------------------------------- -------------- ------- ------------- -------
*Weighted Average Exercise
Price (WAEP)
Warrants values are calculated using the Black-Scholes option
pricing model using the following inputs.
14 January 28 June 2022 10 October
Warrants 2022 2022
-------------------------- ----------- ------------- -----------
Market stock price 0.49p 0.31p 0.25p
-------------------------- ----------- ------------- -----------
Option strike price 0.65p 0.65p 0.25p
-------------------------- ----------- ------------- -----------
Volatility 102.64% 73.32% 68.32%
-------------------------- ----------- ------------- -----------
Expiration of the option 2 years 2 years 2 year
Risk-free rate 0.797% 2.121% 4.353%
-------------------------- ----------- ------------- -----------
Future value $579,447 $620,853 $714,610
-------------------------- ----------- ------------- -----------
Expense $201,469 $60,175 $285,844
-------------------------- ----------- ------------- -----------
The weighted average price for outstanding warrants as at 31
December 2022 ranges between 0.28c and 0.91c (0.25p and 0.75p). The
residual weighted average contractual life for the warrants is 1.2
years.
25. Share Premium Account
31 December 2022 31 December 2021
Group Company Group Company
US $ US $ US $ US $
1 January 64,977,243 64,977,243 64,961,905 64,961,905
Premium arising on issue
of equity shares 7,521,415 7,521,415 813,207 813,207
Warrants lapsed - - (717,698) (717,698)
Warrants issued 11,291,846 11,291,846 - -
Transaction costs - - (80,171) (80,171)
-------------------------- ----------- ----------- ----------- -----------
31 December 83,790,504 83,790,504 64,977,243 64,977,243
-------------------------- ----------- ----------- ----------- -----------
26. Loans Due in Over One Year
31 December 31 December
2022 2021
US $ US $
--------------------------- ---------- ------------ -------------- --------------- -------------
Five-year secured bonds ( 4,170,086) (21,385,663)
Additional
net funding - (6,059,126)
Other loans (1,293,215) (1,323,591)
---------------------- --------------- ------------ -------------- --------------- -------------
Total (5,463,301) (28,768,380)
---------------------- --------------- ------------ -------------- --------------- -------------
Balance
as at Amortised Exchange Capital Swap to 31 December
31 December finance adjustments contribution equity 2022
2021 charges reserve
US $ US $ US$ US $
US $ US$
---------------------- --------------- ------------ -------------- --------------- ------------- --------------
EUR20 million
five-year secured
bonds 21,385,663 2,337,007 (1,074,839) (7,212,492) (11,265,253) 4,170,086
EUR5 million
Lombard Odier
secured convertible
debt facility 6,059,124 509,771 (343,008) - (6,225,887) -
Other loans 1,323,593 134,216 (164,594) - 1,293,215
Total 28,768,380 2,980,994 (1,582,441) (7,212,492) (17,491,140) 5,463,301
---------------------- --------------- ------------ -------------- --------------- ------------- --------------
Lombard Odier secured convertible debt facility
renegotiation
On 2 December 2022, the company announced a settlement in full
of the Lombard Odier outstanding principle plus interest of $6.2m
by Ordinary shares in the company, issuing 1,347,777,877 ordinary
shares. On the basis the settlement of the loan was on favourable
terms to the group, management considered Lombard Odier were acting
in their capacity as shareholders of the Group and therefore the
criteria in IFRIC 19 - Extinguishment of financial liabilities with
Equity Instruments did not apply. Therefore the value of the shares
issued have been deemed to be the same as the carrying value of the
loan.
Lombard Odier are considered a Related Party to the Group by
virtue of them being a shareholder.
Euro-bond renegotiation
On the same date, a partial (50%) settlement of the principle
and accrued interest was agreed on the existing Euro-secured
denominated bonds, $11.3m of the debt being settled by the issue of
2,436,938 ordinary shares. On the basis the settlement of the loan
was on favourable terms to the group management considered the
counterparty was acting in their capacity as shareholders of the
Group, and therefore the criteria in IFRIC 19 - Extinguishment of
financial liabilities with Equity Instruments did not apply.
Therefore the value of the shares issued has been deemed to be the
same as the carrying value of the loan.
In addition and at the same time, the repayment date for the
remaining bonds was moved back from 2024 until 2032 and the
interest rate reduced from 8% to 2%. This is a substantial
modification to the loan terms, management calculated the present
value of the new loan and compared to the carrying value. The
difference has been recorded as a capital contribution to the group
of $7.2m.
The Euro bondholders are also considered to be Related Parties
by virtue of them being shareholders.
Maturity Analysis
Contractual undiscounted cash flows:
31 December 31 December
2022 2021
US $ US $
---------------------------------- -------------- --------------
Amounts due within one year - -
Amounts due between one and five
years 1,293,215 28,768,380
Amounts due over five years 4,170,086 -
---------------------------------- -------------- --------------
5,463,301 28,768,380
---------------------------------- -------------- --------------
27. Provisions
31 December 31 December
2022 2021
US $ US $
----------------------------------------- --------------- --------------
Assessment of decommissioning provision - 3,039,911
- 3,039,911
--------------------------------------------------------- --------------
Historically, provision has been made for the discounted future
cost of abandoning wells and restoring sites to a condition
acceptable to the relevant authorities. The provisions were based
on Operators' internal estimate. Assumptions were based on the
current experience from decommissioning wells. The estimates are
reviewed regularly to take account of any material changes to the
assumptions. Actual decommissioning costs will ultimately depend
upon future costs for decommissioning which will reflect market
conditions and regulations at that time. Furthermore, the timing of
decommissioning is uncertain and is likely to depend on when the
fields cease to produce at economically viable rates. This, in
turn, will depend on factors such as future oil and gas prices,
which are inherently uncertain.
On sale of (the majority of) the interests in the SCS licences,
decommissioning becomes a liability that will no longer fall upon
the group and, accordingly, no further provision was made by the
Group in 2022.
28. Related Party Transactions
Inter-Group Balances
In order for individual subsidiary companies to carry out the
objectives of the Group, amounts are loaned to them on an unsecured
basis. At the year-end the following amounts were outstanding:
31 December 31 December
2022 2021
US $ US $
Amounts owed to Echo Energy plc
from:
Echo Energy Bolivia Op Co 1 562,130 551,500
Eco Energy CDL Op Limited 1,156,518 1,627,623
Eco Energy TA Op Limited 9,640,324 9,634,402
11,358,972 11,813,525
--------------------------------- -------------- --------------
Lombard Odier is a significant shareholder in the Company.
Please refer to Note 26 for details of the debt transactions which
relate to these counterparties.
Phoenix Global Resources plc, from whom Echo acquired the SCS
assets in late 2019, is also a significant shareholder in the
Company following the issue by the Company of consideration shares
to Phoenix Global Resources plc in respect of the Company's
acquisition of the SCS assets.
29. Controlling Party
The directors do not consider there to be a controlling
party.
30. Commitments
Echo had no committed expenditure in relation to capital
projects in the SCS asset at the end of 31 December 2022. It will
continue to pay operational costs as cash called by the joint
venture partner.
31. Subsequent Events
As described in note 11, on 27 June 2023, the company completed
the previously announced sale of 65% of its 70% interest in the
joint venture operating the SCS licences.
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END
FR PPUCCBUPWGCB
(END) Dow Jones Newswires
September 29, 2023 11:45 ET (15:45 GMT)
Echo Energy (LSE:ECHO)
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