TIDMECHO
RNS Number : 5346H
Echo Energy PLC
25 March 2020
25 March 2020
Echo Energy plc
("Echo" or "the Company")
Operational Update
Proposed Debt Restructuring
Echo Energy, the Latin American focused upstream oil and gas
company, provides a further update in relation to initiatives in
response to prevailing global oil prices to preserve existing cash
resources at a corporate level and, together with the operator of
Santa Cruz Sur, to effect field cost reductions to seek to ensure
that operations at the Company's producing assets at Santa Cruz Sur
are sustainable at current commodity prices.
Since the time of the Company's 17 March 2020 announcement,
operations at Santa Cruz Sur have continued uninterrupted and
production levels remain, and are expected to remain, in line with
the Company's expectations. Production over the period from 1
November 2019 to 23 March 2020 reached an aggregate of 351,797 boe
net to Echo (including 78,858 bbls of oil and condensate and 1,632
mmscf of gas).
The Company confirms that since 17 March it has now received
payments totalling US$ 1,312,576 in respect of the second February
2020 oil cargo and ongoing gas sales and a further US$ 360,434 in
cash receipts are expected in the next two weeks. Additionally,
further sales invoices for a total of US$ 610,140 have been issued
since 17 March and a substantial cargo of approximately 26,000 bbls
of oil (net to Echo) is due to be loaded in mid-April. Echo
confirms that it currently has approximately 15,000 bbls of oil in
storage underpinning this mid-April cargo.
The Company is also pleased to announce that it has received
confirmation that, with effect from 1 April 2020, one of Echo's
operating subsidiaries in Argentina, Eco Energy CDL Op Ltd (the
"Subsidiary"), will no longer be required to pay VAT retentions on
invoiced domestic income.
Prior to 1 April 2020, the Subsidiary has been required to pay
VAT retentions of 50% of the VAT amount on all invoices from
domestic sales - equating to 10.5% of domestic sales revenues. The
Subsidiary holds a 45% interest (of Echo's total 70% interest) in
the Santa Cruz Sur assets and this change in VAT status is
therefore expected to improve receipts from domestic sales by
approximately 7% with effect from 1 April 2020. The Company's
subsidiary which holds Echo's remaining 25% interest in the Santa
Cruz Assets, Eco Energy TA Op Limited, is currently subject to full
VAT retentions of 21% of domestic sales revenue. Confirmation of a
change in the registration status of that subsidiary would improve
the position further.
The Company continues to make progress with cost reduction
initiatives at both the Santa Cruz Sur assets and corporate levels,
with ongoing discussions with major suppliers and stakeholders to
align the Santa Cruz Sur cost base with prevailing global oil
prices and a review of costs at corporate level is ongoing. The
Company looks forward to providing further updates in this regard
in due course.
In addition to seeking to reduce field operating costs, the
Company is also focused on reducing annual capital costs and if, as
anticipated, the cost reduction measures now under discussion are
all put in place, the Board believes that the Santa Cruz Sur assets
would be cash flow positive at prevailing global oil prices.
As previously announced, the Company has been exploring all
options available to it to preserve existing cash resources. As
part of its programme to conserve cash at the current time, the
Company announces that it will be asking the holders of its debts
to defer all cash interest payments during 2020.
The next such interest payments, in respect of quarterly
interest payments on the Company's EUR 5.0m 8.0% secured
convertible debt facility, the Company's GBP1.0 million 12.0% loan
facility and the Company's Luxembourg listed EUR 20.0m 8.0% secured
notes (the "Notes"), will otherwise be due for payment on 31 March
2020.
The Company has commenced discussions with the holders of the
Company's unlisted debt instruments and based on the indications of
support received to date from those debt holders, the Company
currently believes that it will be able to achieve a restructuring
of those debts to defer 2020 interest payments.
However, deferral of Note interest payments will require
approval at a meeting of the holders of the Notes (the "Note
Holders"). The Company is today notifying the Note Holders of the
Company's proposal to delay payment of interest due on the Notes on
31 March 2020. The Company will now finalise its proposals in this
regard and will be seeking to convene a Note Holder general meeting
shortly.
The Company cautions that the process of seeking Note Holder
approval at a meeting of the Note Holders is not expected to be
concluded prior to 31 March 2020 and as a result, if the next
quarterly Note interest payment is not made on 31 March 2020, the
Company would be in default on the Notes until such time as Note
Holder approval is received for a restructuring of Note interest
payments.
Martin Hull, Echo's Chief Executive, commented:
"The COVID-19 pandemic and market conditions have rapidly
evolved in recent weeks and the welfare of the Company's employees
and contractors is of critical importance to Echo. The significant
majority of the Company's employees in London are now effectively
working remotely and suitable precautions are being taken on site
at Santa Cruz Sur to ensure the safety of workers in the field
whilst maintaining important domestic production for the
Argentinian market.
Echo is proactively managing its assets and cost base with a
clear strategy in place to reduce costs and conserve existing cash.
If fully implemented, these actions would lead to a sustainable and
cash positive business in the current environment and position the
Company well for the future."
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
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.
bbl means barrels; boe means barrels of oil equivalent; and
mmscf means million standard cubic feet of gas.
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.
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END
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