Echo Energy PLC Tapi Aike Restructuring (1497T)
16 July 2020 - 4:05PM
UK Regulatory
TIDMECHO
RNS Number : 1497T
Echo Energy PLC
16 July 2020
16 July 2020
Echo Energy plc
("Echo" or "the Company")
Successful Tapi Aike Restructuring
Echo Energy, the Latin American focused upstream oil and gas
company, announces that it has successfully restructured its
relationship with Compañia General de Combustibles S.A. ("CGC" or
"the Operator") on an interest in the Tapi Aike licence (the
"Licence" or "Tapi Aike"). The new agreement, in line with the
Company's immediate focus on optimising capital allocation, enables
Echo to cease commitments to ongoing pre-drill expenditure at Tapi
Aike, whilst maintaining an option for the Company to re-enter the
western cube (Traversia de Arriba) of the Licence (the "Western
Cube") once pre-drill technical activities have been completed by
the Operator and Echo has assessed the data available.
In line with the Company's focus within its portfolio on cash
generative production and on reducing costs, while maintaining
exposure to exploration and development opportunities, Echo has
entered into an agreement with the Operator to reposition the
Company's 19% participating interest in Tapi Aike such that Echo is
relieved of all Licence funding requirements including ongoing
pre-drill work and remaining Licence commitments (including well
costs, abandonment fees and decommissioning liabilities) through a
withdrawal from Tapi Aike with an effective date of 1 July 2020 and
the grant of an option to the Company allowing the Company to
re-enter a 19% participating interest in the Western Cube (the
"Option") ahead of the next well spud in the Western Cube drill
programme (the "Relevant Well") providing access to exploration
upside.
The Western Cube and the exploration potential it provides
remains strategically important for the Company and while
management's technical view of its prospectivity remains unchanged
ahead of final data evaluation, the restructuring affords the
Company an opportunity to re-evaluate its ongoing commitment to the
Western Cube and to the related future costs and liabilities at a
later date - with the benefit of being able to make that commitment
with greater visibility of well costs, technical data and market
conditions at the time.
Before the exercise by the Company of the Option, the
restructuring is expected to save the Company approximately USD
36,000 a month in operating costs and enables Echo to delay and,
importantly, possibly avoid all near term costs and future
liabilities associated with a participating interest in the
Licence. The consideration payable by the Company to the Operator
for the entry of the Option of USD 339,000 represents an amount
equivalent to a proportion of amounts that Echo would otherwise be
required to meet under existing arrangements in respect of
technical work which has already been executed on the Licence but
not yet settled. This payment is deferred until the earlier of: (i)
the Company receiving a VAT cash refund from the Argentine
authorities expected to be in excess of US 1 million, (ii) 12
months from the signing of the Option, or (iii) at the point of the
Operator spudding the Relevant Well.
The Option is exercisable by the Company at any time up until 30
days prior to the drilling of the Relevant Well for an additional
payment to the Operator by the Company of USD 503,000, equivalent
to the cost of technical work which has already been completed on
the Licence. Prior to exercise of the Option, Echo will be provided
with access to all pre-drill technical information, data and the
Operator's interpretations on the then proposed Relevant Well. In
addition, and once the results of the Relevant Well are confirmed,
Echo will also have a further right to elect to withdraw from the
Western Cube for no additional cost or to continue with subsequent
exploration wells in the area. The Board of Echo believes that
immediate cessation of operating costs paid by the Company to the
Operator, will better align the Company and its partners in Tapi
Aike, in concluding the ongoing technical work in a timely manner,
in advance of a decision regarding the Relevant Well.
Martin Hull, Chief Executive Officer of Echo Energy,
commented:
"We have taken a series of steps in recent months to reinforce
our financial platform and deliver innovative mechanisms to reduce
upfront cost while maintaining both exploration and development
optionality. We continue to adapt Echo's strategy for the current
oil and gas price environment, with a clear focus on production,
cost reduction and on investing where we can most effectively add
value for shareholders. We are therefore delighted to have
restructured our relationship with CGC which will enable us to
sharpen our near term strategic focus on our low-risk production
and substantial development and exploration opportunities at Santa
Cruz Sur, while also streamlining our overall operational costs by
eliminating immediate expenditure at Tapi Aike. It is important
that we retain optionality and can, at the Company's discretion,
participate in the drilling of the next well at Tapi Aike should we
elect to following assessment of the technical data and prevailing
commercial circumstances.
We have also continued to screen multiple assets in the LatAm
region, looking for opportunities to deploy innovative financing
solutions and look forward to updating the market on progress right
across our portfolio as we look to progress opportunities both in
the near term and further out."
A presentation outlining the new restructured relationship and
interest in Tapi Aike is available on the Company website at
www.echoenergyplc.com.
For further information, please contact:
Echo Energy via Vigo Communications
Martin Hull, Chief Executive Officer
Vigo Communications (PR Advisor)
Patrick d'Ancona
Chris McMahon +44 (0) 20 7390 0230
Cenkos Securities (Nominated Adviser)
Ben Jeynes
Katy Birkin +44 (0) 20 7397 8900
Shore Capital (Corporate Broker)
Jerry Keen +44 (0) 20 7408 4090
The information communicated within this announcement is deemed
to constitute inside information as stipulated under the Market
Abuse Regulation (EU) No. 596/2014. Upon the publication of this
announcement, this inside information is now considered to be in
the public domain.
This information is provided by RNS, the news service of the
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END
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