Echo Energy PLC Argentina Commercial Update (9759J)
03 May 2022 - 4:01PM
UK Regulatory
TIDMECHO
RNS Number : 9759J
Echo Energy PLC
03 May 2022
3 May 2022
Echo Energy plc
("Echo" or "the Company")
Argentina Commercial Update
New gas contracts for 2022-2023 significantly above 2021 annual
pricing
Echo Energy, the Latin American focused upstream energy company,
is pleased to provide a commercial update regarding the Company's
gas sales from the producing Santa Cruz Sur assets, onshore
Argentina.
The Company confirms that, following a successful commercial
process for industrial clients, it has secured two new gas sales
contracts (the "Contracts") at significant premiums to 2021
contracted rates, reflecting the strong competition amongst
customers to secure gas supplies from the Company for the coming
year.
The Contracts have a term of 12 months, with gas sales under the
Contracts beginning in May 2022, and provide for a 65% increase in
pricing over average annual contract pricing previously achieved by
the Company in March 2021 and a 116% increase on the current summer
pricing until end April 2022 under those same March 2021
contracts.
The Contracts provide gross 6.0 MMscf/d of committed production,
4.2 MMscf/d net to Echo, at an average price of US$ 4.33 per mmbtu,
with the Company able to elect to sell additional volumes of up to
1.25 MMscf/d net to Echo under the Contracts. This optionality, at
the election of the Santa Cruz Sur partners, allows for the
potential sale of additional volumes under the Contract at Contract
pricing whilst also providing the Santa Cruz partners with a degree
of flexibility with which to capitalise on attractive spot market
pricing.
As a result of the Contracts and at Q1 2022 production levels,
approximately 85% of net daily Santa Cruz Sur gas production
allocated to industrial customers will now be committed under
secured contracts until April 2023. Remaining uncontracted
production volumes, where not sold as additional volumes under the
Contracts, will be sold into the spot market. The Company believes
this balance of contracted versus uncontracted volumes achieves an
attractive balance for the Company in securing future sales at
fixed prices whilst maintaining a degree of exposure to a buoyant
spot market, particularly in light of the Company's ongoing
intention to increase future production as a result of its
operational programme.
In addition to receipts from Santa Cruz Sur gas sales outside of
the Contracts (including all gas sales from the Santa Cruz Sur
Oceano field), the minimum committed gas volumes under the
Contracts (excluding associated VAT receipts and any sales of
additional volumes, net to Echo, of up to 1.25 MMscf/d under the
Contracts at the Company's election) have an annualised gross value
of c.US$ 10m at Contract prices (c.US$7m net to Echo).
It is anticipated that the increased revenues arising from the
Contracts will provide additional resources over the course of the
Contracts capable of being applied towards the acceleration of the
Company's operational priogramme to increase production whilst also
being applied to the outstanding Santa Cruz Sur Joint Venture
historical creditor balances. As of 30 November 2021 this Santa
Cruz Sur Joint Venture balance is estimated (unaudited) at US$12.9
million gross or US$9.0 million net to Echo's 70% interest. These
Santa Cruz Sur Joint Venture creditor balances are prior to
Argentinian VAT credits due to the Company.
The Contracts demonstrate a continued implementation of the
Company's strategy to be leveraged to the strong upswing in global
commodity prices whilst seeking to underpin gas sales from Santa
Cruz Sur under secure long term supply agreements where
appropriate.
As a result, and following completion of the Company's
commercial assessment of the previously announced potential Chilean
Vincente Méndez solar project (the "Project"), details of which
were announced by the Company on 14 January 2022, the Company has
now decided that it will not be exercising its option to acquire an
interest in the Project.
Whilst the Company remains strategically committed to pursuing
additional opportunities within the renewable energy sector, focus
remains on seeking to maximise shareholder returns and Echo's Santa
Cruz Sur assets therefore remain the Company's priority. In this
regard the Board continues to explore means of increasing
shareholder value, including through the further acquisition of
accretive assets in combination with cornerstone industrial
partners, potential further balance sheet reorganisation and
additionally considering means of more closely aligning the
interests of the Santa Cruz sur partners.
Martin Hull, Chief Executive Officer of Echo Energy,
commented:
"I am pleased to be able to report that our strategy continues
both to strengthen Echo's operational and commercial position and
to focus on how best to deliver returns for our shareholders. The
successful negotiation of the new gas contracts, at large premiums
to last year's pricing, represents an important step forward for
Echo. Strong prevailing international commodity prices coupled with
our premium priced gas sales agreements are expected to underpin
substantially increased gas revenues from the Santa Cruz Sur asset
base and demonstrates our strategy in action. Increased revenues
will provide further funds to drive forward growth whilst also
providing additional Argentinian cash flows with which to tackle
the ongoing historical Santa Cruz Sur creditor position. We
continue to identify means to enhance cash generation at these
fields both through commercial and operational means, and in
combination these are strengthening Echo's financial platform as
the commodity tailwinds remain strong."
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)
Anita Ghanekar +44 (0) 20 7408 4090
Note
The assignment of Echo's 70% non-operated participation in the
Santa Cruz Sur licences is subject to the authorisation of the
Executive Branch of Santa Cruz's Province, which is part of the
overall process of title transfer that is proceeding as
anticipated. MMscf/d means million standard cubic feet of gas per
day; and Mmbtu means million British thermal units.
The information communicated within this announcement is deemed
to constitute inside information as stipulated under the Market
Abuse Regulation (EU) No. 596/2014 as amended by the Market Abuse
(Amendment) (EU Exit) Regulations 2019/310 . Upon the publication
of this announcement, this inside information is now considered to
be in the public domain.
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END
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