TIDMECHO
RNS Number : 4557N
Echo Energy PLC
30 September 2021
30 September 2021
Echo Energy plc
("Echo" or "the Company")
Interim Results
Echo Energy, the Latin American focused upstream energy company,
announces its unaudited interim results for the six months ended 30
June 2021.
H1 2021 Highlights:
-- Refocus of capex away from high-risk exploration into lower
risk-production opportunities with swift pay back.
-- Gross profit of US $0.4 million (H1 2020: loss of US$ 1.6 million).
-- Revenue increase of 5% to US $5.9 million in H1 2021 (H1 2020: US $5.6 million).
-- Reduction in cost of sales of 33% in H1 2021 compared to equivalent period in H1 2020
-- Total net aggregate H1 2021 production of 304,639 boe
(including 37,159 bbls of oil and condensate and 1,605 MMscf
gas).
-- New gas sales contracts in place from May 2021 with premium
pricing from innovative price auction.
-- Strong domestic gas prices supported enhanced cashflow
generation with a 28% increase in gas price compared to same period
a year ago with premium gas prices only coming into effect in last
two months of the period.
-- Successful completion of the restructuring of both the
Company's EUR 20.0m 8.0% secured notes and the Company's EUR 5.0m
8.0% secured convertible debt facility loan.
-- Echo received a successful VAT cash disbursement from the
Argentine Government of US $0.5 million, a further signal that the
country is progressing towards more regular activity.
Enquiries:
Echo Energy
Martin Hull, Chief Executive Officer via Vigo Communications
Vigo Communications (PR Advisor) +44 (0) 20 7390 0230
Patrick d'Ancona
Chris McMahon
Cenkos Securities (Nominated Adviser) +44 (0) 20 7397 8900
Ben Jeynes
Katy Birkin
Shore Capital (Corporate Broker) +44 (0) 20 7408 4090
Jerry Keen
Certain of the information communicated within this announcement
is deemed to constitute inside information for the purposes of
Article 7 of EU Regulation 596/2014 (as amended), which forms part
of domestic UK law pursuant to the European Union (Withdrawal) Act
2018. Upon the publication of this announcement, this inside
information is now considered to be in the public domain.
Chairman and Chief Executive Officer's Statement
The first six months of 2021 have seen Echo Energy plc ("Echo"
or the "Company") emerge from the previous year's challenges both
operationally and financially stronger. The Company moved swiftly
to successfully restructure its debt, continue to conserve
cashflow, begin to reinstate previously shut in production wells,
and refocus its portfolio on progressing cashflow enhancing rapid
return production opportunities. We have executed our strategy of
moving away from high-risk exploration spend into lower
risk-production opportunities with attractive pay back periods.
These important achievements and the improving macro environment
combined with our commercial successes, including the renegotiation
of gas sale agreements at substantial market premiums during the
period, are reflected in an improved financial performance for the
period.
As Echo continues its return to full liquids production at Santa
Cruz Sur, and improved financial flexibility, we continue to
identify and progress growth options across the existing portfolio,
and the wider region, and work towards overcoming remaining
challenges whilst maintaining our commitment to delivering value
for our shareholders.
COVID-19 recovery and progress on production
At the beginning of the 2020 COVID-19 pandemic, extreme
volatility in the energy markets resulted in the inability of the
Company to sell crude oil and precipitated a decision to preserve
cash through the temporary shut in of a significant number of
Echo's oil producing wells. However, following continued
improvements in market conditions, including a return to regular
oil sales, Echo agreed, together with its Santa Cruz Sur partners,
to upgrade and debottleneck the existing liquid pipelines that were
previously shut in Q2 2020, as a path to returning to full oil
production.
Expenditures of approximately US $0.3 million were injected by
the Company to replace and upgrade parts of the Santa Cruz Sur
infrastructure and reduce maintenance costs. By June 2021, Echo
successfully delivered the project, demonstrating the effectiveness
of the Company's in-country operational capability and enabling
production previously shut in in April 2020 to be systematically
brought back on line. A detailed update on liquid production
increases was provided to the market in August 2021 with around a
50% increase in liquids production. This has enabled the Company to
benefit from the upswing in global oil prices and the improved
macro-outlook, symbolising a strong recovery from the challenges of
the previous year. Whilst overall production, including gas remains
below pre pandemic levels, the company continues to work towards
improving production by undertaking the necessary operational
activities and investments. With improved economic tailwinds and
new infrastructure installed in the field, Echo now has the
capacity to commission incremental enhancement projects within its
portfolio. The reinvestment of available cashflow to drive further
production increases remains an ongoing focus.
These increasing cashflows are expected to enable further
production investments to be funded and demonstrate Echo's
commitment to and confidence in its organic growth strategy within
the Santa Cruz Sur asset base.
Successful execution of sales contracts at premium prices
In March 2021, Echo secured two new gas sales contracts at
significant premiums to both prevailing spot market rates and 2020
contracted rates, with approximately 70% of gross daily gas
production from Santa Cruz Sur allocated to industrial customers
now committed under secured contracts until April 2022.
Following the Company's announcement in March 2021 relating to
new gas sales contracts for 2021-2022, the Company agreed summer
and winter pricing for its annual industrial clients, with the
contracted winter premium providing substantially increased
cashflow in the near term, helping to grow future operations
through production enhancement work activities supported by
infrastructure and compressor maintenance programmes.
In Q2, increasing liquids production represented delivery upon
the Company's strategy to leverage the marked upswing in global
commodity prices. With the additional liquids production expected
to continue to contribute to a material cashflow increase, Echo
continues to benefit from an improving domestic market situation.
In May 2021, the Company sold gas to the spot market at an average
price representing a 151% increase in prices compared to the March
2021 average spot price. All gas production, as of May 2021, was
sold under the new gas sales agreements, reflecting significantly
increased winter pricing. Any gas volumes not sold under the
long-term contracts was sold to the spot market.
Delivery of successful debt restructuring preserving cash
resources
In March 2021, Echo undertook a process of restructuring its
debt to build a solid financial platform for reinvestment of its
increasing cashflows into the Company's assets to deliver growth.
The restructuring was successfully completed in April 2021, when
holders of the Company's publicly listed bonds voted in favour of
the restructuring of those securities. As a result, cash interest
payments on the Company's listed bonds have been deferred until
mid-May 2025. The completion of the bond restructuring also
fulfilled the remaining condition of the Lombard Odier debt
restructuring, which similarly pushed back maturity and preserved
cash resources.
The company's balance sheet remains highly leveraged, and trade
creditor levels are elevated reflecting the challenges presented by
the pandemic, but the restructuring, along with the increased oil
production following the ongoing infrastructure upgrades, provides
a markedly improved and outlook for shareholders.
In May 2021, Echo received a partial VAT repayment from the
Argentine Government as it resumed normal activity following months
of COVID-19 related shut down. This process provided both material
cash funds and further evidence of the normalisation of in-country
activities following delays in 2020 caused by COVID-19.
Growth Opportunities
Campo Limite remains a potentially material well for the Company
which could increase reserves and resources in the Palermo Aike
concession and open up additional commercial options in the area.
Well testing activities remain an operational and commercial focus
and work remains ongoing to optimise commercial arrangements to
enable activities to resume once pandemic constraints (which were
in place throughout H1 2021) are lifted.
At the start of the year, the Company announced a five-year
Cooperation Agreement with GTL International S.A, which has
interests in both the hydrocarbon and renewables sectors. Both
companies continue to collaborate and combine skill-sets to jointly
promote their business development initiatives in the wider region,
and identify and assess new business development opportunities
across the full energy spectrum.
Financial
The six month period ended 30 June 2021 has seen Echo
successfully manage value chains, enabling the Company to improve
efficiencies at both corporate and asset level.
The Group posted a gross profit of US $0.4 million for the first
time since the acquisition of the SCS asset for the six month
period ended June 2021 compared to a loss of US $1.6 million for
the comparable period in 2020, attributable to a decrease in cost
of sales from US $7.3 million in H1 2020 to US $5.5 million in H1
2021, demonstrating enhanced operational efficiency and commodity
prices.
Total revenue for the period was US $5.9 million (H1 2020: US $
5.6 million), and comprised of US $2.1 million of Oil sales and US
$ 3.8 million of Gas sales. Oil prices realised in H1 2021 were on
average 21% higher during the period than in H1 2020. Volume
weighted average realised gas prices increased by 28% compared to
H1 2020.
Financial income of US $3.1 million recognised the interest
gained on the Argentine VAT paid to the Group in May 2021 of US
$0.24 million and net foreign exchange gains of US $2.9 million.
Finance expense of US $ 3.2 million for H1 2021 is on a par with
the prior comparable period (H1 2020: US $ 3.2 million).
Total comprehensive loss for the Group for the 6 month period
ending 30 June 2021 was US $1.5 million (H1 2020: US $ 5.7
million)
The Group's balance sheet and overall financial positioning has
materially strengthened during the period due to the successful
debt re negotiation of its bonds and debt facility and the
reduction in short term loan liabilities from US $2.3 million at 30
December 2020 to $0.14 million at 30 June 2021.
In January 2021, the Company's EUR 5.0m 8% secured convertible
debt facility maturity date was extended to April 2025, with no
furthercash interest payments due until maturity date. In addition,
in April 2021, the Company's Luxembourg listed EUR 20.0m 8% secured
bonds were successfully structured, extending the maturity of the
notes to May 2025, and removing all cash interest payments prior to
maturity date.
The Company's cash balance as at 30 June 2021 was US $ 0.9
million, a substantial increase from the balance as at 31 December
2020.
A 30% reduction of Trade and other payables from 30 December
2020 to 30 June 2021 is primarily due to the renegotiation of the
Bond and debt facilities, but also reduction in joint venture
payables.
Post Period End Highlights
The positive market changes seen in H1 2021 continue post
period, and coupled with the restructuring completed in H1 2021,
enable the Company to operate from a significantly more stable
platform.
At the Santa Cruz Sur asset level, successful commissioning of
the liquids pipeline enabled the Campo Molino oil field to be
brought back online, contributing to an almost 50% increase in
total liquids production in August 2021.
The maturation of the Company's investment in Santa Cruz Sur,
and ongoing careful cost management have increased cashflows,
enabling development in our producing asset, and release of capital
which can be invested into the business to support business growth,
maximising value for shareholders.
James Parsons Martin Hull
Chairman Chie f Executive Officer
Consolidated Statement of Comprehensive Income
Period ended 30 June 2021
Unaudited Unaudited Year to
1 January 1 January 2020 31 December
2021 2020
30 June 2021 30 June 2020 Audited
Notes US $ US $ US $
---------------------------------------- ------- -------------- ---------------- -------------
Continuing operations
Revenue 3 5,891,413 5,656,740 11,126,520
Cost of sales 4 (5,497,993) (7,287,234) (13,437,010)
---------------------------------------- ------- -------------- ---------------- -------------
Gross profit 393,420 (1,630,494) (2,310,490)
Exploration expenses (45,807) (68,554) (215,512)
Administrative expenses (1,492,010) (1,480,136) (3,240,934)
Impairment of intangible assets - - -
Impairment of property, plant and - - -
equipment
Operating loss (1,537,817) (3,179,184) (5,766,936)
Financial income 5 3,140,024 1,847 7,142
Financial expense 6 (3,287,229) (3,212,440) (10,174,047)
Derivative financial income 7 17,575 642,678 666,306
---------------------------------------- ------- -------------- ---------------- -------------
Loss before tax (1,274,027) (5,747,099) (15,267,535)
Taxation 8 -
---------------------------------------- ------- -------------- ---------------- -------------
Loss from continuing operations (1,274,027) (5,747,099) (15,267,535)
Discontinued operations
Profit/(loss) after taxation for
the year from discontinued operations (10,724,108)
---------------------------------------- ------- -------------- ---------------- -------------
Loss for the period (1,274,027) (5,747,099) (25,991,643)
Other comprehensive income:
To be reclassified to profit or
loss in subsequent periods (net
of tax)
Exchange difference on translating
foreign operations (177,930) - (1,041,995)
---------------------------------------- ------- -------------- ---------------- -------------
Total comprehensive loss for the
period (1,451,957) (5,747,099) (27,033,578)
---------------------------------------- ------- -------------- ---------------- -------------
Loss attributable to: Owners of
the parent (1,451,957) (5,747,099) (27,033,598)
---------------------------------------- ------- -------------- ---------------- -------------
Total comprehensive loss attributable
to: Owners of the parent (1,451,957) (5,747,099 (27,033,598)
---------------------------------------- ------- -------------- ---------------- -------------
Loss per share (cents) 9
Basic (0.10) (0.81) (3.38)
---------------------------------------- ------- -------------- ---------------- -------------
Diluted (0.10) (0.81) (3.38)
---------------------------------------- ------- -------------- ---------------- -------------
Loss per share (cents) for continuing
operations
Basic (0.10) (0.81) (1.99)
---------------------------------------- ------- -------------- ---------------- -------------
Diluted (0.10) (0.81) (1.99)
---------------------------------------- ------- -------------- ---------------- -------------
The notes included below form an integral part of these
financial statements.
Consolidated Statement of Financial Position
Period ended 30 June 2021
Unaudited Unaudited Year to
1 January 1 January 31 December
2021 2020 2020
30 June 2021 30 June 2020 Audited
Notes US $ US $ US $
------------------------------------- ------- -------------- -------------- -------------------------
Non-current assets
Property, plant and equipment 10 2,516,805 986,283 2,552,693
Other intangibles 11 7,773,210 20,725,894 8,511,622
10,290,015 21,712,177 11,064,315
Current Assets
Inventories 438,014 610,522 541,230
Other receivables 5,846,670 7,688,813 7,229,263
Cash and cash equivalents 12 945,488 1,164,408 682,159
------------------------------------- ------- -------------- -------------- -------------------------
7,230,172 9,463,743 8,452,652
Current Liabilities
Trade and other payables (10,075,368) (8,253,260) (13,249,146)
Derivatives and other liabilities (44,885) (86,105) (62,477)
(10,120,253) (8,339,365) (13,311,623)
Net current assets (2,890,081) 1,124,378 (4,858,970)
------------------------------------- ------- -------------- -------------- -------------------------
Total assets less current
liabilities 7,399,934 22,836,555 6,205,345
Non-current liabilities
Loans due in over one year 15 (28,162,903) (24,229,005) (27,276,015)
Provisions (2,959,976) (2,969,400) (2,979,956)
(31,122,879) (27,198,405) (30,255,971)
Total Liabilities (41,243,132) (35,537,770) (43,567,597)
------------------------------------- ------- -------------- -------------- -------------------------
Net Assets (23,722,945) (4,361,850) (24,050,627)
------------------------------------- ------- -------------- -------------- -------------------------
Equity attributable to equity
holders of the parent
Share capital 13 7,135,082 5,190,877 6,288,019
Share premium 14 64,748,942 64,817,662 64,961,905
Warrant reserve 12,188,032 11,153,396 11,373,966
Share option reserve 1,570,827 1,358,132 1,412,285
Foreign currency translation
reserve (3,141,836) (2,277,812) (3,319,797)
Retained earnings (106,223,992) (84,604,105) (104,772,035)
------------------------------------- ------- -------------- -------------- -------------------------
Total Equity (23,722,945) (4,361,850) (24,050,627)
------------------------------------- ------- -------------- -------------- -------------------------
The notes included below form an integral part of these
financial statements.
Consolidated Statement of Changes in Equity
Period ended 30 June 2021
Foreign
Share currency
Retained Share Share Warrant option translation
earnings capital premium reserve reserve reserve Total equity
US $ US $ US $ US $ 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
period (1,274,027) - - - - - (1,274,027)
Exchange Reserve (177,930) - - - - 177,930 -
------------------- -------------- ----------- ----------- ----------- ---------- ------------- ---------------
Total
comprehensive
loss for the
period (1,451,957) - - - - 177,930 (1,274,027)
Warrants issued - (814,066) 814,066 - - -
Warrants exercised - 274,803 86,122 - - - 360,925
Share issue - 572,260 595,153 - - - 1,167,413
Transaction costs (80,171) - - - (80,171)
Share options - - - - - - -
lapsed
Share-based
payments - - - - 153,542 - 153,542
------------------- -------------- ----------- ----------- ----------- ---------- ------------- ---------------
30 June 2021 (106,223,992) 7,135,082 64,748,943 12,188,032 1,570,827 (3,141,837) 23,722,925
------------------- -------------- ----------- ----------- ----------- ---------- ------------- ---------------
1 January 2020 (78,857,006) 5,190,877 64,817,662 11,142,290 1,159,580 (2,277,812) 1,175,591
Loss for the
period (5,747,099) - - - - - (5,747,099)
Exchange Reserve - - - - - - -
Total
comprehensive
loss for the
period (84,604,105) 5,190,877 64,817,662 11,142,290 1,159,580 (2,277,812) (4,571,508)
------------------- -------------- ----------- ----------- ----------- ---------- ------------- ---------------
Warrants issued - - - 11,106 - - 11,106
Share options - - - - - - -
lapsed
Share-based
payments - - - - 198,552 - 198,552
------------------- -------------- ----------- ----------- ----------- ---------- ------------- ---------------
30 June 2020 (84,604,105) 5,190,877 64,817,662 11,153,396 1,358,132 (2,277,812) (4,361,850)
------------------- -------------- ----------- ----------- ----------- ---------- ------------- ---------------
1 January 2020 (78,857,006) 5,190,877 64,817,662 11,142,290 1,159,580 (2,277,812) 1,175,591
Loss for the year (15,267,535) - - - - - (15,267,535)
Discontinued
operations (3,441,230) - - - - - (10,724,108)
Exchange Reserve - - - - - (1,041,995) (1,041,955)
Total
comprehensive
loss for the year (25,991,643) - - - - (1,041,955) (13,472,062)
New shares issued - 1,0971,142 467,735 - - - 1,565,077
Warrants - - (231,676) 231,676 - - -
Share issue costs - - (92,016) - - - (92,016)
Share options
lapsed 396,935 - - - (76,614) - -
Share-based
payments - - - - 334,319 - 334,319
------------------- -------------- ----------- ----------- ----------- ---------- ------------- ---------------
31 December 2020 (104,772,035) 6,288,019 64,961,906 11,373,966 1,417,285 (3,319.767) (24,050,627)
------------------- -------------- ----------- ----------- ----------- ---------- ------------- ---------------
The notes included below form an integral part of these
financial statements.
Consolidated Statement of Cash Flows
Period ended 30 June 2021
Unaudited Unaudited
1 January 1 January Year to
2021 2020
30 June 2021 30 June 31 December
2020 2020
US $ US $ US $
----------------------------------------- ------------------------ --------------------------------- --------------
Cash flows from operating activities
Loss from continuing operations (1,274,027) (5,747,099) (15,267,535)
Loss from discontinued operations - - (10,724,108)
----------------------------------------- ------------------------ --------------------------------- --------------
(1,274,027) (5,747,099) (25,991,643)
Adjustments for:
Depreciation and depletion of
property, plant and equipment 35,887 102,442 182,211
Depreciation and depletion of
intangible assets 738,412 982,102 1,874,810
(Gain)/Loss on disposal of property,
plant and equipment - - 10,822
(Gain)/Loss on disposal on Right - (66,473) -
of use
Impairment of intangible assets
and goodwill
Impairment of intangible assets -
and goodwill - - 10,383,461
Share-based payments 153,542 209,658 334,319
Right to use liability - - (64,180)
Financial income (3,140,024) (1,845) (7,142)
Financial expense 3,287,229 728,821 10,174,047
Exchange difference (1,656,272) - (2,265,180)
Derivative financial gain (17,575) (642,678) (666,306)
----------------------------------------- ------------------------ --------------------------------- --------------
(598,801) 1,312,027 19,956,865
(Increase) in inventory 103,215 (191,382) (120,386)
Decrease/(Increase) in other receivables 1,700,723 988,467 311,275
(Decrease)/increase in trade and
other payables (1,020,415) 3,354,669 5,844,002
----------------------------------------- ------------------------ --------------------------------- --------------
Cash used in operations 783,523 5,463,781 (6,034,891)
Net cash used in operating activities (1,089,305) (283,318) 112
Cash flows from investing activities
Purchase of intangible assets - (248,092) (470,637)
Purchase of property, plant and
equipment - - (1,644,516)
----------------------------------------- ------------------------ --------------------------------- --------------
Net cash used in investing activities - (248,092) (2,115,153)
Cash flows from financing activities
Interest received 166,820 1,845 7,142
Interest paid (208,900) (1,746) -
Bank Fees and other finance cost (63,136) - (185,520)
Repayment of right of use liability - (2,293) -
Issue of share capital 1,167,413 - 1,565,077
Share issue costs (80,171) - (92,016)
Proceeds from Warrant exercise 360,925 - -
----------------------------------------- ------------------------ --------------------------------- --------------
Net cash from financing activities 1,342,951 (2,194) 1,290,682
----------------------------------------- ------------------------ --------------------------------- --------------
Net (decrease)/increase in cash
and cash equivalents 253,646 (533,604) (824,360)
Cash and cash equivalents at the
beginning of the period 682,159 1,698,012 1,698,012
----------------------------------------- ------------------------ --------------------------------- --------------
Foreign Excahnge gains(losses)
on cash and cash equivalents 9,683 - (191,439)
----------------------------------------- ------------------------ --------------------------------- --------------
Cash and cash equivalents at the
end of the period 945,488 1,164,408 682,159
----------------------------------------- ------------------------ --------------------------------- --------------
The notes included below form an integral part of these
financial statements.
Notes to the Financial Statements
Period ended 30 June 2021
1. Accounting Policies
General Information
These financial statements are for Echo Energy plc ("the
Company") and subsidiary undertakings ("the Group"). The Company is
registered, and domiciled, in England and Wales and incorporated
under the Companies Act 2006.
Basis of Preparation
The condensed and consolidated interim financial statements for
the period from 1 January 2021 to 30 June 2021 have been prepared
in accordance with International Accounting Standards ("IAS") 34
Interim Financial Reporting, and on the going concern basis. They
are in accordance with the accounting policies set out in the
statutory accounts for the year ended 31 December 2020 and are
expected to be applied for the year ended 31 December 2021.
The comparatives shown are for the period 1 January 2020 to 30
June 2021, and 31 December 2020 and do not constitute statutory
accounts, as defined in section 435 of the Companies Act 2006, but
are based on the statutory financial statements for the year ended
31 December 2020.
A copy of the Company's statutory accounts for the year ended 31
December 2020 has been delivered to the Registrar of Companies; the
accounts are available to download from the Company website at
www.echoenergyplc.com.
Going Concern
The Group's business activities, together with the factors
likely to affect its future development, performance and position
are set out in the Chairman and Chief Executive Officer's Statement
above. The financial position of the Group, its cash flows and
liquidity position are set out in these Condensed Interim Financial
Statements.
The directors have performed a robust assessment, including
consideration of the principal risks faced by the Group and taking
into account the ongoing impact of the global Covid-19 pandemic on
the macroeconomic situation and any potential impact to
operations.
The financial information has been prepared assuming the Group
will continue as a going concern. Under the going concern
assumption, an entity is ordinarily viewed as continuing in
business for the foreseeable future with neither the intention nor
the necessity of liquidation, ceasing trading or seeking protection
from creditors pursuant to laws or regulations. Whilst rigorously
pursuing cost control and value maximising strategies, the Group
recognises that in order to pursue organic and inorganic growth
opportunities and fund on-going operations it will require
additional funding. This funding may be sourced through debt
finance, joint venture equity or share issues.
The directors have formed a judgement based on Echo's proven
success in raising capital and a review of the strategic options
available to the Group, that the going concern basis should be
adopted in preparing the Condensed Interim Consolidated Financial
Statements.
Estimates
The preparation of the interim financial information requires
management to make judgements, estimates and assumptions that
affect the application of accounting policies and the reported
amounts of assets and liabilities, income and expense. Actual
results may differ from these estimates.
In preparing this condensed interim financial information, the
significant judgements made by management in applying the Group's
accounting policies and the key sources of estimation uncertainty
were the same as those applied to consolidated financial statements
for the year ended 31 December 2020. The key sources of uncertainty
in estimates that have a significant risk of causing material
adjustment to the carrying amounts of assets and liabilities,
within the next financial year, are the Group's going concern
assessment.
Revenue Recognition
Revenue comprises the invoice value of goods and services
supplied by the Group, net of value added taxes and trade
discounts. Revenue is recognised in the case of oil and gas sales
when goods are delivered and title has passed to the customer. This
generally occurs when the product is physically transferred into a
pipeline or vessel. Echo recognised revenue in accordance with IFRS
15. We have a contractual arrangement with our joint venture
partner who markets gas and crude oil on our behalf. Gas is
transferred via a metred pipeline into the regional gas
transportation system, which is part of the national transportation
system, control of the gas is transferred at the point at which the
gas enters this network, this is the point at which gas revenue is
recognised. Gas prices vary from month to month based on seasonal
demand from customer segments and production in the market as a
whole. Our partner agrees pricing with their portfolio of gas
clients based on agreed pricing mechanisms in multiple contracts.
Some pricing is regulated by government such as domestic supply.
Echo receive a monthly average of gas prices attained. Oil
shipments are priced in advance of a cargo and revenue is
recognised at the point at which cargoes are loaded onto a shipping
vessel at termina
2. Business Segments
The Group has adopted IFRS 8 Operating Segments. Per IFRS 8,
operating segments are regularly reviewed and used by the board of
directors being the chief operating decision maker for strategic
decision-making and resources allocation, in order to allocate
resources to the segment and assess its performance.
The Group's reportable operating segments are as follows:
a. Parent Company
b. Eastern Austral Basin
c. Tapi Aike
d. Bolivia
Performance is based on assessing progress made on projects and
the management of resources used. Segment assets and liabilities
are presented inclusive of inter-segment balances. Reportable
segments are based around licence activity, although the reportable
segments are reflected in legal entities, certain corporate costs
collate data across legal entities and the segmental analysis
reflects this.
Information regarding each of the operations of each reportable
segment within continuing operations is included in the following
table.
All revenue, which represents turnover, arises within Argentina
and relates to external parties:
Parent Company Santa Cruz Tapi Aike Bolivia Total
Sur
US $ US $ US $ US $ US $
Period to 30 June 2021
Revenues - 5,891,413 - - 5,891,413
Cost of sales - (5,497,993) - - (5,497,993)
Exploration expense (45,807) - - - (45,807)
Administration expense (1,332,349) (113,839) (48,928) (115,043) (1,610,158)
Impairment of intangible
assets - - - - -
Impairment of property,
plant and equipment - - - - -
Financial income 2,898,300 77,101 164,616 3,140,024
Financial expense (1,823,398) (898,236) (467,375) (61) (3,186,081)
Derivative Financial
Expense 17,592 - - - 17,575
Income tax - - - - -
Loss before tax (285,662) (541,554) (351,687) (115,104) (1,262,545)
Non-current assets 28,792,797 4,740,757 3,362,308 (453,174) 36,442,688
Assets 28,940,599 9,214,984 5,947,869 (413,628) 43,689,824
Liabilities (28,816,764) (7,943,328) (4,421,895) (81,125) (41,263,112)
Parent Santa
Company Cruz Sur Tapi Bolivia Consolidation Total
US $ US $ Aike US $ US $ US $
US $
Period to 30 June 2020
Revenues - 5,656,740 - - - 5,656,740
Cost of sales - (7,656,740) - - - (7,287,740)
Exploration expense (68,554) - - - - (68,554)
Administration expense (1,300,419) (120,701) 56,538 (115,554) - (1,480,136)
Impairment of intangible - - - - - -
assets
Impairment of property, - - - - - -
plant and equipment
Financial income 1,847 - - - - 1,847
Financial expense (2,340,434) (872,069) (1,015) 1,078 - (3,212.440)
Depreciation 642,678 - - - - 642.678
Income tax - - - - - -
Loss before tax (3,064,882) (2,632,263) 55,523 (114,476) - (5,747,099)
Non-current assets 35,265,014 6,822,530 5,935,643 (271,171) (26,032,839) 21,712,177
Assets 45,181,992 (12,916,982) (656,675) (240,370) (26,026,010) 31,175,919
Liabilities (23,073,545) (12,406,577) (2,314) (49,335) - (35,537,770)
Consolidation adjustments in respect of assets relate to the
impairment of intercompany assets .
Depreciation is included in administration expenses
The geographical split of non-current assets arises as
follows:
United
Kingdom South America Total
US $ US $ US $
------------------------------- --------- ---------------- -----------
30 June 2021
Property, plant and equipment 2,457 2,514,348 2,516,805
Other intangible assets 326,869 7,446,341 7,773,210
------------------------------- --------- ---------------- -----------
30 June 2020
Property, plant and equipment 19,025 967,258 986,283
Other intangible assets - 20,725,894 20,725,894
------------------------------- --------- ---------------- -----------
3. R evenue
Unaudited Unaudited Year to
1 January 1 January 31 December
2021 - 2020 - 2020
30 June 2021 30 June 2020 Audited -Continued
US $ US $ operations
US $
Oil revenue 2,024,421 2,090,922 2,784,248
Gas revenue 3,833,857 3,565,818 8,279,416
Other Income 33,135 - 62,856
Total Revenue 5,891,413 5,656,740 11,126,520
--------------- -------------- -------------- --------------------
4. Cost of Sales
Unaudited Unaudited Year to
1 January 1 January 31 December
2021 - 2020 - 2020
30 June 2021 30 June 2020
US $ US $ US $
Production costs 3,794,486 5,723,033 10,021,578
Selling and distribution
costs 863,065 764,918 1,567,963
Movement in stock of crude
oil 72,239 (191,382) (89,410)
Depletion 768,203 990,665 1,936,879
Total Costs 5,497,993 7,287,234 13,437,010
---------------------------- -------------- -------------- -------------
5. Finance Income
Period to Period to Year to
30 June 2021 30 June 2020 31 December
US $ US$ 2020
US $
---------------------------- -------------- -------------- -------------------------------
Interest income 241,716 1,847 7,142
Net foreign exchange gains 2,898,308 - -
Total 3,140,024 1,847 7,142
---------------------------- -------------- -------------- -------------------------------
The Interest income principally relates to interest gained on
Argentine VAT balances owed and paid to the Group in May 2021.
6. Financial Expense
Period to Period to Year to
30 June 2021 30 June 2020 31 December
US $ US$ 2020
US $
------------------------------------ -------------- -------------- ----------------------------------
Interest payable 1,299,079 1,191,065 1,991,535
Unwinding of discount on
long term loan 404,081 1,131,249 2,936,831
Amortisation of loan fees 119,526 150,199 614,913
Warrant Valuation expense - 11,106 -
Accretion of right of use
liabilities - 2,293 2,293
Unwinding of abandonment
provision 19,980 - 39,956
Finance cost of holding bonds - - 11,971
Foreign Exchange Losses 1,242,035 660,018 4,409,732
Bank fees and overseas transaction
taxes 202,528 66,510 166,816
------------------------------------ -------------- -------------- ----------------------------------
Total 3,287,229 3,212,440 10,174,047
------------------------------------ -------------- -------------- ----------------------------------
7. Derivative Financial Gain/Loss
Period Period Year to
to to 31 December
30 June 30 June 2021
2021 2020 US $
US $ US $
----------------- --------- --------- -------------
Fair value gain 17,575 642,678 666, 306
----------------- --------- --------- -------------
Total 17,575 642,678 666, 306
----------------- --------- --------- -------------
Represents fair value gain on valuation of derivatives
instruments at period end.
8. Taxation
The Group has tax losses available to be carried forward in
certain subsidiaries and the parent company. Due to uncertainty
around timing of the Group's projects, management have not
considered it appropriate to anticipate an asset value for them. No
tax charge has arisen during the six month period to 30 June 2021,
or in the six months period to June 2020, or the year to 31
December 2020.
9. Loss Per Share
The calculation of basic and diluted loss per share at 30 June
2021 was based on the loss attributable to ordinary shareholders.
The weighted average number of ordinary shares outstanding during
the period ending 30 June 2021 and the effect of the potentially
dilutive ordinary shares to be issued are shown below.
Period to Period to Year to
30 June 2021 30 June 31 December
2020 2020
----------------------------------- -------------- ------------ -------------
Net loss for the year (US $) (1,294,027) (5,747,099) (25,991,664)
----------------------------------- -------------- ------------ -------------
Basic weighted average ordinary
shares in issue during the
year 1,236,231,219 711,717,587 768,598,277
----------------------------------- -------------- ------------ -------------
Diluted weighted average ordinary
shares in issue during the
year 1,236,231,219 711,717,587 768,598,277
----------------------------------- -------------- ------------ -------------
Loss per share (cents)
Basic (0.10) (0.81) (3.38)
----------------------------------- -------------- ------------ -------------
Diluted (0.10) (0.81) (3.38)
----------------------------------- -------------- ------------ -------------
In accordance with IAS 33 and as the entity is loss making,
including potentially dilutive share options in the calculation
would be anti-dilutive. Deferred shares have been excluded from the
calculation of loss per share due to their nature.
10. Property, Plant and Equipment
PPE - O&G CDL Licence Property
Properties Areas Discontinued Fixtures Right-of-Use
US $ US $ & Fittings Assets Total
US $ US $ US $
-------------- --------------------- --------------------------- ------------- -------------- --------------------
30 JUNE 2021
Cost
1 January
2021 2,621,921 - 97,254 - 2,719,175
Additions - - - -
Disposals - - - -
-------------- --------------------- --------------------------- ------------- -------------- --------------------
30 June 2021 2,621,921 - 97,254 - 2,719,175
-------------- --------------------- --------------------------- ------------- -------------- --------------------
Depreciation
1 January
2020 79,941 - 86,542 - 166,483
Charge for
the
period 29,790 - 6,097 - 35,887
Disposals - - - - -
-------------- --------------------- --------------------------- ------------- -------------- --------------------
30 June 2021 109,731 - 92,639 - 202,370
-------------- --------------------- --------------------------- ------------- -------------- --------------------
Carrying
amount
30 June 2021 2,512,190 4,615 - 2,516,805
-------------- --------------------- --------------------------- ------------- -------------- --------------------
30 JUNE 2020
Cost
1 January
2020 979,164 - 131,122 309,804 1,420,090
Additions - - 35 - 35
Disposals - - (33,923) (309,804) (343,727)
-------------- --------------------- --------------------------- ------------- -------------- --------------------
30 June 2020 979,164 - 97,234 - 1,076,398
-------------- --------------------- --------------------------- ------------- -------------- --------------------
Depreciation
1 January
2019 3,338 - 91,366 224,176 318,880
Charge for
the
period 8,568 - 19,828 74,046 102,442
Disposals - - (32,985) (298,222) (331,207)
-------------- --------------------- --------------------------- ------------- -------------- --------------------
30 June 2020 11,906 - 78,209 - 90,115
-------------- --------------------- --------------------------- ------------- -------------- --------------------
Carrying
amount
30 June 2020 967,258 - 19,025 - 986,283
-------------- --------------------- --------------------------- ------------- -------------- --------------------
31 DECEMBER
2020
Cost
1 January
2020 979,164 - 131,122 309,804 1,420,090
Additions 1,644,460 - 56 - 1,644,516
Disposals (1,703) - (33,923) (309,804) (345,430)
-------------- --------------------- --------------------------- ------------- -------------- --------------------
31 December
2020 2,621,921 - 97,255 - 2,719,176
-------------- --------------------- --------------------------- ------------- -------------- --------------------
Depreciation
1 January
2020 3,338 - 91,366 224,176 318,880
Exchange - - - - -
differences
Charge for
the
year 76,603 - 19,980 85,628 182,211
Impairment - - - - -
charge
Disposals - - (24,804) (309,804) (334,608)
-------------- --------------------- --------------------------- ------------- -------------- --------------------
31 December
2020 79,941 - 86,542 - 166,483
-------------- --------------------- --------------------------- ------------- -------------- ------------------
Carrying
amount
31 December
2020 2,541,980 10,713 2,552,693
-------------- --------------------- --------------------------- ------------- -------------- ------------------
31 December
2019 975,826 - 39,756 85,628 1,101,210
-------------- --------------------- --------------------------- ------------- -------------- ------------------
11. Other Intangible Assets
Exploration and Evaluation
Argentina Ksar Hadada
Exploration CDL Licence Exploration
& Evaluation Areas Discontinued Acreage Total
US $ US $ US $ US $
------------------------------ -------------- --------------------- -------------------------------- -------------
30 June 2021
Cost
1 January 2021 10,756,306 - - 10,756,306
Disposals - - -
Decommissioning assets - - -
Additions - - -
30 June 2021 10.756,306 - - 10,756,306
------------------------------ -------------- --------------------- -------------------------------- -------------
Impairment
1 January 2020 2,244,684 - - 2,244,684
Depletion 415,912 - - 415,912
Depreciation decommissioning
assets 322,500 - - 322,500
Impairment charge for - - - -
the period
30 June 2021 2,983,096 - - 2,983,096
------------------------------ -------------- --------------------- -------------------------------- -------------
Carrying amount
30 June 2021 7,773,210 - - 7,773,210
------------------------------ -------------- --------------------- -------------------------------- -------------
31 December 2020 8,511,622 8,511,622
------------------------------ -------------- --------------------- -------------------------------- -------------
30 JUNE 2020
Cost
1 January 2020 20,943,460 - - 20,943,460
Discontinued operations 29,401 - - 29,401
Additions 1,105,009 - - 1,105,009
Transfer to PP&E
------------------------------ -------------- --------------------- -------------------------------- -------------
30 June 2020 22,077,870 - - 22,077,870
------------------------------ -------------- --------------------- -------------------------------- -------------
Impairment
1 January 2020 369,874 - - 369,874
Discontinued operations 982,102 982,102
------------------------------ -------------- --------------------- -------------------------------- -------------
Impairment charge for
the period
------------------------------ -------------- --------------------- -------------------------------- -------------
30 June 2020 1,351,976 - - 1,351,976
------------------------------ -------------- --------------------- -------------------------------- -------------
Carrying amount
30 June 2020 20,725,894 - - 20,725,894
------------------------------ -------------- --------------------- -------------------------------- -------------
31 DECEMBER 2020 20,573,587 - - 20,573,587
Cost
1 January 2020 10,802,524 10,140,936 - 20,943,460
Additions 228,112 242,525 - 470,6537
Disposals - (10,383,461) - (10,383,341)
Decommissioning assets - - - -
Transfers (274,330) - - (274,330)
------------------------------ -------------- --------------------- -------------------------------- -------------
31 December 2020 10,756,306 - - 10,756,306
------------------------------ -------------- --------------------- -------------------------------- -------------
Impairment
1 January 2020 36,874 - - 369,874
Disposals - (10,383,461) - 10,383,461)
Depletion 1,874,810 - - 1,874,810
Impairment charge for
the year - 10,383,461 - 10,383,461
31 December 2019 2,244,686 - - 2,244,686
------------------------------ -------------- --------------------- -------------------------------- -------------
Carrying amount
31 December 2020 8,511,622 - - 8,511,622
------------------------------ -------------- --------------------- -------------------------------- -------------
31 December 2019 20,575,586 - - 20,573,586
------------------------------ -------------- --------------------- -------------------------------- -------------
On 22 December 2020 the Company announced that it had allowed
the lapse of the option to re enter the Tapi aike asset. This
resulted in Echo withdrawing its interest and liabilities under the
Tapi Aike concessions prior to the drilling of the next exploration
well in the Tapi Aike Western Cube.
12. Cash and Cash Equivalents
Six months Six months
to to 31 December
30 June 30 June 2020
2021 2020
US $ US $ US $
------------------------------------- ----------- ----------- --------------
Cash held by joint venture partners 190,974 194,973 24,749
Cash and cash equivalents 754,514 969,435 654,680
------------------------------------- ----------- ----------- --------------
Total 945,488 1,164,408 682,159
------------------------------------- ----------- ----------- --------------
Echo has advanced cash to its joint venture partner. The equity
share of the balance held is recognised
13. Share Capital
Six months Six months Year to
to to 31 December
30 June 30 June 2020
2021 2020
US $ US $ US $
----------------------------------------- ----------- ----------- -------------
Issued, Called Up and Fully Paid
1,298,813 0.32c (June 2020: 711,717,587
0.32c) ordinary shares
1 January 2021 6,288,019 5,190,877 5,190,877
Equity shares issued 847,063 - 745,878
----------------------------------------- ----------- ----------- -------------
30 June / 31 December 7,135,082 5,190,877 6,288,019
----------------------------------------- ----------- ----------- -------------
The holders of 0.32c (0.25p) ordinary shares are entitled to
receive dividends from time to time and are entitled to one vote
per share at meetings of the Company.
During the six month period to 30 June 2021, 258,762,165 share
were issued.
14. Share Premium Account
Six months Six months Year to
to to
30 June 2021 30 June 31 December
US $ 2020 2020
US $ US $
------------------------------------ ------------- ----------- ------------
1 January 64,961,905 64,817,662 68,817,662
Premium arising on issue of equity
shares 595,153 - 467,934
Premium arising on exercise of
warrants 86,122
Warrants lapsed or exercised (814,066) - (231,675)
Transaction costs (80,171) - (92,016)
------------- ----------- ------------
30 June 64,748,942 64,817,662 64,961,905
------------------------------------ ------------- ----------- ------------
15. Loans
30 June 30 June 31 December
2021 2020 2020
US $ US$ US $
---------------------- -------------- -------------------------- ------------------- -------------- -------------
Five-year secured
bonds (20,907,802) (18,429,737) (22,167,419)
Additional net
funding (5,940,825) - (5,766,544)
Other loans (1,452,341) (5,799,268) (1,640,693)
---------------------- -------------- -------------------------- ------------------- -------------- -------------
Total (28,300,968) (24,229,005) (29,574,656)
---------------------- -------------- -------------------------- ------------------- -------------- -------------
Amortised Repayment
Balance as finance charges of principle Exchange
at less cash adjustments 30 June
31 December interest US$ US $ 2021
2020 paid US$
US $ US $
---------------------- -------------- -------------------------- ------------------- -------------- -------------
EUR 20 million
five-year secured
bonds 22,836,146 1,246,109 (2,583,675) 21,498,580
EUR5 million Lombard
Odier debt 5,987,801 311,220 (178,515) 6,120,506
Other loans 1,640,692 145,831 (208,900) (125,282) 1,452,341
Loan fees (668,726) 77,948 - (590,778)
Incremental loan
fees (221,257) 41,576 - (179,681)
---------------------- -------------- -------------------------- ------------------- -------------- -------------
Total 29,574,656 1,822,684 (208,900) (2,887,472) 28,300,968
---------------------- -------------- -------------------------- ------------------- -------------- -------------
US $ 138,065 of the total loan balance is shown in current
liabilities and US $28,162,903 is shown non-current
liabilities.
Bond restructure
On 22 February 2021, Echo announced further to the Company's
announcement of 1 December 2020, its proposals in respect of a
restructuring of the Company's Bonds, it proposed to:
-- Extend the maturity of the Bonds by three years to 15 May
2025 (the "Maturity Date"); and
-- Remove all cash interest payments on the Notes prior to the
Maturity Date.
On approval, all interest on the Bonds accruing from 31 December
2019 shall be paid in cash on the Maturity Date save that
Noteholders will be provided with the ability, from 30 September
2021, to elect to receive Bond interest payments in respect of the
immediately preceding quarter in new ordinary Shares in the Company
("Elections"), subject inter alia to the Company having the
required share issuance authorities in place from time to time to
satisfy elections and to Noteholders holding at least 50 per cent
of the Bonds having made Elections in respect of the relevant
quarter. Any new ordinary shares issued as a result of elections
would be issued at an effective issue price equal to the volume
weighted average price of an Echo ordinary share for the 10
Business Days before the relevant interest conversion date.
As part of the Proposals, the Company agreed that it will not,
without the prior consent of Noteholders, drill an exploration well
with a budgeted cost to the Company of in excess of EUR 5.0 million
for so long as the Bonds are outstanding and that it will not, in
the last 18 months prior to the Maturity Date, make an acquisition
of an interest in an oil and gas property, lease or licence if the
cash consideration for such acquisition exceeds EUR 10.0
million.
A payment of EUR 100,000, payable to Bondholders, was satisfied
by the issue of new ordinary shares in the Company at an issue
price equal to the average mid-market closing price per Echo
ordinary share for the five days ending, and including, 18 February
2021.
Subsequently on 30 March 2021, a requisite majority of
Bondholders approved the Debt restructuring proposals. Echo issued
a total of 11,473,929 new ordinary shares in the Company
(representing c.0.9% of the Company's current issued ordinary share
capital) to Bondholders.
16. Subsequent Events
Operational Update
On 26 August 2021, following installation of the pipeline
required to bring back online the liquids production which was shut
in April 2020, the infrastructure was successfully commissioned for
operation and shut-in wells are being brought online. This follows
an upgrade of the electrical infrastructure, which was designed to
support the first tranche of production from the Campo Molino and
Chorillos oil fields to provide sufficient power to support
sustained production from the associated ten wells.
To date, the Campo Molino oil field has been brought back online
with four of the shut-in wells now back in operation and producing
from the Springhill reservoir. This first tranche of restored
production will increase the number of active producing oil wells
at Santa Cruz Sur to 18.
As of 23 August 2021, the recently reactivated wells have
contributed to an almost 50% increase in total liquids production
at Santa Cruz Sur compared to the period immediately prior to this
(281 bopd gross, 197 bopd net to Echo - during the period 1 -17
August 2021). This represents an increase of 137 bopd gross, 95
bopd net to Echo and work continues to bring the remainder of the
first tranche of shut-in production back online. The production
levels from the initial reactivated wells indicate that the shut-in
period has not had a detrimental impact on reservoir behaviour in
the Campo Molino oil field. Prior to shut-in, the combined gross
production from the ten oil wells was approximately 138 bopd gross,
96 bopd net to Echo, approximately the same level now being
achieved from the initial four wells, with the associated upgraded
infrastructure.
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END
IR LLMRTMTITBLB
(END) Dow Jones Newswires
September 30, 2021 02:00 ET (06:00 GMT)
Echo Energy (LSE:ECHO)
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