Echo Energy, the Latin American focused energy company, has provided production update regarding its Santa Cruz Sur assets, onshore Argentina, for Q1 2023 whilst also providing a commercial and corporate update.
Production Update
Production over the period from 1 January 2023 to 31 March 2023 was an aggregate of 113,270 boe net to Echo, including 19,205 bbls of oil and condensate and 564 MMscf of gas.
Net gas production averaged 6.3 MMscf/d during Q1 2023, which was down on Q4 2022 levels (Q4 2022: 7.3 MMscf/d) as a result of facilities maintenance, to allow for increased future facilities uptime, which was carried out across several assets (Oceano, Cerro Note & Campo Bremen) during Q1 2023 and before the onset of winter in the southern hemisphere.
Net liquids production in Q1 2023 averaged 213 bopd, a reduction of c.29% on the Q4 2022 average of 298 bopd, as a result of an overstock of fuel oil within the Argentinian domestic market during February and March. As a result, and with a number of customers either reducing or suspending liquid offtake from the Joint Venture, the Santa Cruz Sur partners took the commercial decision to temporarily shut in several oil wells at Campo Molino. This had the impact of reducing aggregate liquids sales volumes by around 72% in Q1 2023 (Q1 2023: 7,803 boe) when compared to Q4 2022. The domestic market situation now appears to be improving with a number of sales from Santa Cruz Sur having already taken place during April.
The Company also notes that Argentina's National Secretary of Energy has extended its Gas Plan regime to the Santa Cruz basin (Gas Plan 5.2). The Gas Plan enables companies to tender for long-term contracts lasting until December 2028. The Company's local subsidiaries are on the authorised list of potential participants, and the closing date for submission of tenders is 30 April 2023.
Commercial and Corporate Update
The Company announced on 2 February 2023 that the Company's unaudited cash balance as at 2 January 2023 was US$1.1 million, with total creditors of approximately US$19.5 million reported in the Company's unaudited Interim Results announced on 30 September 2022. A significant proportion of these creditors continue to be related to the Company's interest in its joint venture in Argentina, where the impacts of the COVID pandemic have hit hard and ongoing costs remain subject to domestic inflation, currently running at c.100% per annum.
Notwithstanding the recent improvement in the local domestic market, recent reductions in liquid sales volumes during Q1 2023 and high levels of domestic inflation in Argentina have significantly weakened both group and, as a result of prohibitive foreign exchange costs, UK cash balances. As at 17 April 2023, the Company's UK cash balances are less than £0.1m albeit the Company expects a revenue receipt net to Echo of approximately ARS$ 135 million (c.£0.5m) in Argentina on or around the end of April.
Whilst the Company continues to explore means of monetising current liquid stocks and future liquid sales in Argentina, the Company has also received a proposal from a significant Argentine investor which has the potential to inject cash and an asset into the business. The Company is considering this proposal, albeit cautions that it is very early stage in its nature and until definitive documents are signed there can be no certainty of any proposal concluding.
In the meantime, and whilst the Company has received feedback that due to its large creditor position and Argentine macro-economic factors the raising of additional equity without a transformational transaction would likely be challenging, the Board continues to explore financing options to provide Echo with additional working capital resources to provide near term funding.
Further announcements will be made, as appropriate, in due course.
Source: Echo Energy
