TIDMECHO
RNS Number : 6983X
Echo Energy PLC
06 May 2021
6 May 2021
Echo Energy plc
("Echo Energy" or the "Company")
Final Results
Echo Energy plc, the Latin American focused full cycle energy
Company, is pleased to announce its audited results for the
financial year ended 31 December 2020.
2020 Highlights:
-- Fourfold increase in revenue to US $11.1 million (2019: US $2.6 million)
-- Favourable fiscal environment have led to the receipt of
certain VAT payments, improving business cashflow.
-- Santa Cruz Sur net daily production in 2020 totalled 1,966 boepd:
- 10.2 mmscf/d of natural gas
- 259 bbls/d of oil and condensate
-- In 2020, Echo's net cumulative production was 0.72 MMboe:
- 3,750 mmscf of natural gas
- 94,693 bbls oil and condensate
-- Company estimated reserves and resources as at 31 December 2020 net to Echo's 70% interest:
- 1P (Proved): 3.13 MMBoe
- 2P (Proved & Probable): 4.06 MMboe
- Contingent Resources (High estimate): 7.20 MMboe (Best
estimate 6.51 MMboe)
-- Adapted swiftly during the period to challenges presented by
COVID-19, reorganisation along value chains enabled Echo to lower
operating costs and improve efficiencies
Post period end
-- Company successfully completed 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. This represented a
landmark step for the business by materially improving the
financial outlook through the deferral of maturity until Q2 2025
and no cash interest payments prior to the maturity date. The
agreement, with the support of the debt holders not only
substantially strengthens the balance sheet it enables for the
reinvestment of cashflow into the business to drive further
growth.
-- Secured new gas sales contracts at premium rates to the
prevailing spot markets in early Q1 2021.
-- Echo entered into a cooperation agreement with GTL
International S.A. ("GTLI") to seek future opportunities in
Bolivia.
Martin Hull, Echo's Chief Executive, commented:
"Echo's resilience during a very challenging year has ensured
that we have been able to continue our operations efficiently and
build firm foundations commercially and operationally despite the
difficult external conditions. Not only have we made significant
cost-saving efforts across the Company and rebalanced our financial
position to provide increased flexibility, but we have also
achieved tremendous operational progress across our SCS assets
where we currently benefit from a favourable fiscal environment and
attractive gas sales agreements with key customers. Moving forward,
we are excited by the continuing expansion opportunities at our SCS
assets, where we aim to maximise production potential, and we are
also encouraged by the potential for new hydrocarbon and/or
renewable energy prospects in neighbouring Bolivia and elsewhere in
the Region. The framework for 2021 and beyond has now been set in
place, and we look forward to capitalising on our various growth
catalysts."
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 volumes included in this announcement are in accordance with
SPE standards and the information contained in this announcement
has been reviewed by Echo Energy's Vice President, Exploration, Dr.
Julian Bessa Msc, DPhil, MBA a Fellow of the Geological Society and
a President Elect of the Petroleum Exploration Society of Great
Britain.
bbl(s) means barrel(s) of oil; bcf means billion cubic standard
feet of gas; boe means barrels of oil equivalent; boepd means
barrels of oil equivalent per day; MMboe means million barrels of
oil equivalent; MMbbl means million barrels of oil; MMscf means
million standard cubic feet of gas; MMscf/d means million standard
cubic feet of gas per day; and bopd and bbl/d means barrels of oil
per day.
Chairman's and Chief Executive Officer's Statement
Similar to many businesses and the communities in which Echo
Energy plc operates, the Company faced unprecedented challenges
during 2020 with the global pandemic having an impact upon all
aspects of the Company's operations and fundamentally changing the
financial environment in which we operate. Your Company has emerged
from these challenges operationally stronger, financially more
robust (following the successful debt restructuring) with a renewed
focus on its positive growth strategy. This is testament to the
strength of the underlying business, the combined efforts of team
and partners and at times the patience of shareholders and
wider stakeholders. We are grateful for your support throughout the turbulent year.
2020 marked the first full year of operations at the Santa Cruz
Sur ("SCS") assets following the successful integration of the
acquisition completed in November 2019. The acquisition of the 70%
interest in SCS was an important step in delivering against our
strategy of building a full cycle Latin America focussed energy
Company.
With its strong asset base and improved financial flexibility
Echo is now very well placed to benefit from an active operational
programme and is highly leveraged to improving economic and market
conditions.
Argentina
Santa Cruz Sur
The SCS assets provide material production, generating material
cash flow from a strong reserves base. The portfolio also includes
significant upside from relatively low risk production enhancement
opportunities combined with exciting higher impact projects.
Production remained in line with expectations during 2020 after
a decision was made in April 2020, to temporarily shut in the
majority of oil production and focus on gas. This was a response to
the significant oil price drop at the end of Q1 2020. Average daily
production throughout the year net to the Company was 1,966 boepd
(including 10.2 MMscf/d of gas). Total net cumulative production
was 720,000 boe (including 3,750 MMscf of gas) in the year.
The Company estimates that as at 31 December 2020, the SCS
reserves base stood at an estimated 3.13 MMboe for 1P (Proved) and
4.06 MMboe for 2P (Proved & Probable) each net to the Company's
70% non-operated working interest. The reduction in 1P (Proved)
reserves from the position as at December 2019 was less than the
production from the assets during the year (0.72 MMboe net to Echo)
and as such demonstrated the positive impact of the activities
undertaken to migrate 2P reserves (Proved & Probable) into the
1P (Proved) category during the period. As commodity prices fell in
March 2020, the Company took the financially prudent decision to
defer capital expenditure and postpone final investment decisions
on select activities. The volumes associated with these activities
(6.51 MMboe net to Echo's 70% interest) have now been reclassified
into Contingent Resources from 2P reserves (Proved & Probable),
but are expected to return to reserves once future investment
decisions are taken, and the current commercial contingencies to
development are removed.
The Campo Limite exploration well ("CLi.x-1001") on the Palermo
Aike concession, was successfully drilled in the early months of
2020. As a result of government restrictions imposed in response to
the Covid-19 pandemic testing of this well was however interrupted.
The well remains a material potential upside for the Company with
the potential to increase reserves and resources in the Palermo
Aike concession and open up additional commercial options. Well
testing activities remain an operational priority and will resume
once pandemic constraints are lifted, and within an optimised work
schedule. The wider portfolio of opportunities within SCS was
expanded by maturing a set of workovers and interventions to
increase production. In addition, the Monte Aymond gas project was
also assessed as commercially viable and, given the location near
to Campo Limite, a hub development approach is being considered.
These activities represent an exciting future work programme
designed to expand production and generate continuing growth for
the future.
Tapi Aike
In line with the Company's focus within its portfolio on cash
generative production and on reducing costs, while maintaining
upside exposure, Echo entered into an agreement with the operator
of Tapi Aike to reposition the Company's 19% participating interest
in Tapi Aike. This agreement enabled Echo to cease commitments to
ongoing pre-drill expenditure at Tapi Aike, whilst maintaining an
option for the Company to re-enter the western area of the Licence.
At the end of the period, having reviewed all available data, the
Company decided to continue with its production led strategy and
therefore allowed the option to re-enter the Tapi Aike asset to
lapse.
Bolivia
The Board believes that that there remain considerable
opportunities across the energy spectrum in Bolivia. Building on
existing long-term relationships and to enhance business
development initiatives in the country, post period Echo signed a
cooperation agreement with GTL International S.A pursuant to which
the parties intend to collaborate and jointly assess new
opportunities across the full energy spectrum, including solar and
wind in the renewables space and E&P opportunities.
Finance
From Q1 2020, the Group sought to strengthen our financial
position, firstly through the restructure of the unlisted debt
facilities, releasing capital which could then be invested directly
into the business to accelerate growth projects or support
accretive optionality.
2020 was the Company's first full year of operations at the SCS
assets. As a result, revenue saw a more than fourfold increase over
2019 levels and at more than US $11million represented the largest
annual figure in Echo's history. Despite the material increase in
the business' size and associated complexities, the Board moved
quickly to adapt to the realities of the difficult 2020 operating
circumstances to preserve cash and reduce costs. General
administrative costs, including head office costs, were reduced by
approximately 15% from 2019 levels.
In the prior year management reported a material uncertainty in
respect of going concern. Based on the post year end debt
restructuring, the current level of revenue and cash generation and
the sensitivities considered in respect of the cashflow forecasts,
and the mitigating actions that could be taken to conserve cash in
a worse- case scenario, management do not consider there to be a
material uncertainty in the current year.
Successful debt restructuring
In Q1 2021 the Company successfully completed of the
restructuring of both the Company's Bonds and the Company's EUR
5.0m 8.0% secured convertible debt facility loan. This represented
a landmark step for the business by materially improving the
financial outlook through the deferral of maturity until Q2 2025
and no cash interest payments prior to the maturity date. The
agreement, with the support of the debt holders not only
substantially strengthens the balance sheet it enables for the
reinvestment of cashflow into the business to drive further
growth.
Outlook and Continuing Growth
Whilst 2020 brought extreme market volatility and a significant
decline in commodity prices, 2021 has already seen a markedly
improved market environment. As an example, Echo has recently
secured gas prices averaging $2.64/mmbtu from industrial clients
for the period May 2021 to April 2022 which represents an
approximate 126% increase from the corresponding previous year.
Similarly, the market for the Company's liquid production has now
normalised with regular sales taking place and global benchmarks
returning to pre pandemic levels. These factors combined with the
underlying operational and financial progress make for a
much-improved outlook in 2021 and beyond.
The Board remains committed to the Latin America energy growth
strategy, and, alongside the continued expansion of the SCS
portfolio, continues to consider potential growth options. The
rapid and ongoing changes to the global energy mix, and the market
and political response to the climate change challenge offer
considerable potential for companies with the right capabilities
and vision. As such Echo expects to consider investments across the
energy spectrum in future and assess them against its strict
operational and profitability criteria.
The framework for 2021 and beyond has now been established, and
we look forward with renewed confidence to capitalising on the
opportunities ahead.
James Parsons Martin Hull
Non-Executive Chairman Chief Executive Officer
Portfolio
The Company is well positioned to build a diversified energy
portfolio with a strong cash generating E&P foundation to
support value accretive activities across the energy spectrum.
Echo is a significant acreage holder in the basin with access to
over 2,600 km(2) of licences containing 12 oil and gas fields and
82 production wells. This demonstrates Echo's commitment to the
future of exploration and production potential of this part of
Argentina.
Santa-Cruz Sur is a gas dominated portfolio, and the Company's
majority 70% non-operated interest provides an ability to
significantly influence operational strategy. This gas focused
E&P portfolio is appropriate for energy transition and,
provides oil price upside. The Company is now significantly
leveraged to the current increase in commodity prices and can
continue to take advantage as global demand recovers from 2020.
Production from SCS is revenue generating for the Company, and the
portfolio of opportunities provides a flexible and range of
well-balanced risk-reward upside options. This portfolio provides
potential high-reward exploration upside with potential success at
Campo Limite, low cost/low risk production enhancement
opportunities with short payback times and the ability to increase
base production as oil demand rebounds.
In 2020 the Company was able to partially replace the loss in 1P
(Proved) reserves due to realised production (0.72 MMboe), through
the technical maturity of the opportunity set within the portfolio.
1P (Proved) reserves at year end were 3.13 MMboe, which is higher
than would otherwise be the case given production in the year. The
original acquisition of the SCS assets in 2019 was based on proved
reserves economics. Current proved reserves per December 2020
remain similar to those at acquisition, adjusted for production. As
commodity prices fell in March 2020, The Company took the
financially prudent approach to push back capital spending and
postpone final investment decisions on some activities. The volumes
associated with these activities have now been reclassified into
Contingent Resources from 2P reserves (Proved and Probable), but
once future investment decisions are made, these are expected to
mature back into 2P (Proved and Probable) reserves.
Building on existing long-term relationships in Bolivia, and to
enhance business development initiatives in the country, post
period, Echo signed a cooperation agreement with GTL International
S.A over a five-year period. GTLI is a majority owned subsidiary of
the Bolivian company UruboCorp and has interests in both the
Bolivia hydrocarbon and renewables sectors. Both companies intend
to collaborate and jointly assess new opportunities across the full
energy spectrum, including solar and wind in the renewables space.
GTLI is a leading Bolivian energy operator and holds the El Palmar
operational hydrocarbon contract with the Government of
Bolivia.
This cooperation agreement reflects the Company's focus on
growing a gas led energy portfolio in Latin America by combining
the enhancement of existing assets with new growth opportunities
across the energy spectrum. The process will always follow strict
criteria for value accretive M&A whilst utilising the Company's
M&A recognised expertise and skills for commercial
innovation.
Average net daily production 2020 1,966 boepd
Total production net to Echo 2020 720,000 boe
Net 1P (Proved) reserves 3.12MMboe
Company Reserves & Resources are classified in accordance
with the Society of Petroleum Engineers' PRMS 2018 update and are
shown in accompanying tables as estimated by the Company as at 31
December 2020.
Oil & Gas - Reserves
(all figures in Gross Net attributable (70%) Operator
MMbbls or Bcf)
Proved Proved, Proved Proved,
Proved & Probable Probable Proved & Probable Probable
& Possible & Possible
-------- ----------- ----------- -------- ----------- -----------
Selva Maria
Oil & Liquids Reserves Oil and
(MMbbls) 1.00 1.34 1.60 0.70 0.94 1.12 Gas S.A.
-------- ----------- ----------- -------- ----------- ----------- -----------
Selva Maria
Gas Reserves Oil and
(Bcf) 19.51 25.00 27.79 13.66 17.50 19.45 Gas S.A.
-------- ----------- ----------- -------- ----------- ----------- -----------
Selva Maria
Total Oil Equivalents Oil and
(MMboe) 4.47 5.80 6.55 3.13 4.06 4.59 Gas S.A
-------- ----------- ----------- -------- ----------- ----------- -----------
Oil & Gas - Contingent Resources
(all figures in Gross Net attributable (70%) Operator
MMbbls or Bcf)
Low Estimate Best Estimate High Estimate Low Estimate Best Estimate High Estimate
------------ ------------- ------------- ------------ ------------- -------------
Oil & Liquids
Contingent Selva Maria
Resources Oil and Gas
(MMbbls) 0.00 1.70 1.90 0.00 1.19 1.33 S.A.
------------ ------------- ------------- ------------ ------------- ------------- ------------
Gas Contingent Selva Maria
Resources Oil and Gas
(Bcf) 0.00 42.69 47.13 0.00 29.88 32.99 S.A.
------------ ------------- ------------- ------------ ------------- ------------- ------------
Total Oil Selva Maria
Equivalents Oil and Gas
(MMboe) 0.00 9.30 10.28 0.00 6.51 7.20 S.A.
------------ ------------- ------------- ------------ ------------- ------------- ------------
Oil & Gas - Prospective Resources
(all figures in Gross Net attributable (70%) Risk Operator
MMbbls or Bcf) Factor
(%)
Low Estimate Best High Low Estimate Best High
Estimate Estimate Estimate Estimate
------------ ----------- ----------- ------------ ------------ ------------
Oil & Liquids Prospective Resource (MMbbls)
Selva
Maria
Campo Limite Oil and
(Springhill) 0.50 1.41 3.94 0.35 0.99 2.76 70% Gas S.A.
------------ ----------- ----------- ------------ ------------ ------------ ------- ---------
Gas Prospective Resources (Bcf)
Selva
Maria
Campo Limite Oil and
(Springhill) 13.4 34.1 97.4 9.4 23.9 68.2 70% Gas S.A.
------------ ----------- ----------- ------------ ------------ ------------ ------- ---------
El Pedrero
(Tobifera) 1.3 27.3 557.2 0.9 19.1 390.0 13%
------------ ----------- ----------- ------------ ------------ ------------ ------- ---------
Total Gas (Bcf) 14.7 61.4 654.6 10.3 43.0 458.2 -
------------ ----------- ----------- ------------ ------------ ------------ ------- ---------
Consolidated Statement of Comprehensive Income
Year ended 31 December 2020
Year to Year to
31 December 31 December
Notes 2020 2019
US $ US $
---------------------------------------- -------- --------------- ---------------
Continuing operations
Revenue 3 11,126,520 2,586,069
Cost of sales 4 (13,437,010) (3,127,542)
---------------------------------------- -------- --------------- ---------------
Gross profit (2,310,490) (541,473)
Exploration expenses (215,512) (647,546)
Administrative expenses (3,240,934) (3,797,861)
Impairment of intangible assets - -
Impairment of property, plant and - -
equipment
Operating loss (5,766,936) (4,986,880)
Financial income 7,142 92,445
Financial expense 5 (10,174,047) (5,475,616)
Derivative financial gain/(loss) 6 666,306 339,219
---------------------------------------- -------- --------------- ---------------
Loss before tax (15,267,535) (10,030,832)
Taxation - -
---------------------------------------- -------- --------------- ---------------
Loss from continuing operations (15,267,535) (10,030,832)
Discontinued operations
Profit/(loss) after taxation for
the year from discontinued operations 7 (10,724,108) (3,441,230)
---------------------------------------- -------- --------------- ---------------
Loss for the year (25,991,643) (13,472,062)
Other comprehensive income:
Other comprehensive income to be
reclassified to profit or loss in
subsequent periods (net of tax)
Exchange difference on translating
foreign operations (1,041,955) 182,478
---------------------------------------- -------- --------------- ---------------
Total comprehensive loss for the
year (27,033,598) (13,289,584)
---------------------------------------- -------- --------------- ---------------
Loss attributable to:
Owners of the parent (27,033,598) (13,472,062)
---------------------------------------- -------- --------------- ---------------
Total comprehensive loss attributable
to:
Owners of the parent (27,033,598) (13,289,584)
---------------------------------------- -------- --------------- ---------------
Loss per share (cents) 8
Basic (3.38) (2.61)
---------------------------------------- -------- --------------- ---------------
Diluted (3.38) (2.61)
---------------------------------------- -------- --------------- ---------------
Loss per share (cents) for continuing
operations
Basic (1.99) (1.94)
---------------------------------------- -------- --------------- ---------------
Diluted (1.99) (1.94)
---------------------------------------- -------- --------------- ---------------
The notes form an integral part of the financial statements
Consolidated Statement of Financial Position
Year ended 31 December 2020
31 December 31 December
Notes 2020 2019
US $ US $
--------------------------------------- -------- -------------- -------------
Non-current assets
Property, plant and equipment 9 2,552,693 1,101,210
Other intangibles 10 8,511,622 20,573,586
11,064,315 21,674,796
Current Assets
Inventories 11 541,230 420,844
Other receivables 12 7,229,263 8,677,279
Cash and cash equivalents 13 682,159 1,698,012
--------------------------------------- -------- -------------- -------------
8,452,652 10,796,135
Current Liabilities
Trade and other payables 15 (13,249,146) (7,022,255)
Derivative financial liabilities (62,477) (728,783)
--------------------------------------- -------- -------------- -------------
(13,311,623) (7,751,038)
Net current assets (4,858,970) 3,045,097
--------------------------------------- -------- -------------- -------------
Total assets less current liabilities 6,205,345 24,719,893
Non-current liabilities
Loans due in over one year 16 (27,276,015) (20,604,302)
Provisions 17 (2,979,956) (2,940,000)
Right of use liability - -
--------------------------------------- -------- -------------- -------------
(30,255,971) (23,544,302)
Total Liabilities (43,567,594) (31,295,340)
--------------------------------------- -------- -------------- -------------
Net (Liability) /Assets (24,050,627) 1,175,591
--------------------------------------- -------- -------------- -------------
Equity attributable to equity
holders of the parent
Share capital 6,288,019 5,190,877
Share premium 64,961,905 64,817,662
Warrant reserve 11,373,966 11,142,290
Share option reserve 1,417,285 1,159,580
Foreign currency translation
reserve (3,319,767) (2,277,812)
Retained earnings (104,772,035) (78,857,006)
--------------------------------------- -------- -------------- -------------
Total Equity (24,050,627) 1,175,591
--------------------------------------- -------- -------------- -------------
The financial statements were authorised for issue and approved
by the board of directors on 5 May 2021
Martin Hull
The notes form an integral part of the financial statements.
Consolidated Statement of Changes in Equity
Year ended 31 December 2020
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 2019 (65,964,357) 4,444,999 58,329,880 11,142,290 1,195,106 (2,095,334) 7,052,584
Loss for the year (10,030,832) - - - - - (10,030,832)
Discontinued
operations (3,441,230) - - - - - (3,441,230)
Exchange Reserve 182,478 - - - - (182,478) -
------------------ --------------- ---------- ----------- ----------- ---------- -------------- ---------------
Total
comprehensive
loss for the
year (13,289,584) - - - - (182,478) (13,472,062)
New shares issued - 745,878 6,924,246 - - - 7,670,124
Share issue costs - - (436,464) - - - (436,464)
Share options
lapsed 396,935 - - - (396,935) - -
Share-based
payments - - - - 361,409 - 361,409
------------------ --------------- ---------- ----------- ----------- ---------- -------------- ---------------
31 December 2019 (78,857,006) 5,190,877 64,817,662 11,142,290 1,159,580 (2,277,812) 1,175,591
------------------ --------------- ---------- ----------- ----------- ---------- -------------- ---------------
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 (10,724,108) - - - - - (10,724,108)
Exchange Reserve - - - - - (1,041,955) (1,041,955)
Total
comprehensive
loss for the
year (25,991,643) - - - - (1,041,955) (27,033,598)
New shares issued - 1,097,142 467,935 - - - 1,565,077
Warrants - - (231,676) 231,676 - - -
Share issue costs - - (92,016) - - - (92,016)
Share options
lapsed 76,614 - - - (76,614) - -
Share-based
payments - - - - 334,319 - 334,319
------------------ --------------- ---------- ----------- ----------- ---------- -------------- ---------------
31 December 2020 (104,772,035) 6,288,019 64,961,905 11,373,966 1,417,285 (3,319,767) (24,050,627)
------------------ --------------- ---------- ----------- ----------- ---------- -------------- ---------------
The notes form an integral part of the financial statements.
Consolidated Statement of Cash Flows
Year ended 31 December 2020
Year to Year to
31 December 31 December
2020 2019
US $ US $
------------------------------------------ ------------- -------------
Cash flows from operating activities
Loss from continuing operations (15,267,535) (10,030,832)
Loss from discontinued operations (10,724,108) (3,441,230)
------------------------------------------- ------------- -------------
(25,991,643) (13,472,062)
Adjustments for:
Depreciation and depletion of
property, plant and equipment 182,211 190,383
Depreciation and depletion of
intangible assets 1,874,810 369,874
Loss on disposal of property,
plant and equipment 10,822 22,040
Impairment of intangible assets
and goodwill 10,383,461 2,802,239
Impairment of property, plant - -
and equipment
Share-based payments 334,319 361,409
Right of use liability (64,180) -
Financial income (7,142) (352,579)
Financial expense 10,174,047 5,738,338
Exchange differences (2,265,180) -
Derivative financial gain (666,306) (339,219)
------------------------------------------- ------------- -------------
19,956,862 8,792,485
Decrease/(Increase) in inventory (120,386) 381,341
Decrease/(Increase) in other receivables 311,275 (3,359,213)
(Decrease)/increase in trade and
other payables 5,844,002 3,753,130
------------------------------------------- ------------- -------------
Cash used in operations 6,034,891 9,567,743
Net cash used in operating activities 112 (3,904,319)
Cash flows from investing activities
Purchase of intangible assets (470,637) (19,245,768)
Purchase of property, plant and
equipment (1,644,516) (979,164)
------------------------------------------- ------------- -------------
Net cash used in investing activities (2,115,153) (20,224,932)
Cash flows from financing activities
Proceeds from debt - 5,434,727
Debt issue costs - (388,852)
Interest received 7,142 180,648
Interest paid - (2,085,954)
Bank fees and other finance costs (189,520) -
Repayment of right of use liability - (156,269)
Issue of share capital 1,565,077 7,670,124
Share issue costs (92,016) (436,464)
------------------------------------------- ------------- -------------
Net cash from financing activities 1,290,682 10,217,960
------------------------------------------- ------------- -------------
Net (decrease)/increase in cash
and cash equivalents (824,360) (13,911,291)
Cash and cash equivalents at 1
January 2020 1,698,012 15,609,303
------------------------------------------- ------------- -------------
Foreign exchange gains/(losses) (191,493) -
on cash and cash equivalents
------------------------------------------ ------------- -------------
Cash and cash equivalents at 31
December 2020 682,159 1,698,012
------------------------------------------- ------------- -------------
The notes form an integral part of the financial statements.
Notes to the Financial Statements
Year ended 31 December 2020
1. Accounting Policies
General Information
The figures for the year ended 31 December 2020 have been
extracted from the audited statutory financial statements for the
year on which the auditors have issued an unqualified opinion. The
financial information attached has been prepared in accordance with
the recognition and measurement requirements of international
financial reporting standards (IFRS) as adopted by the EU and
international financial reporting interpretations committee (IFRIC)
interpretations issued and effective at the time of preparing those
financial statements.
The financial information for the year ended 31 December 2020
and 31 December 2019 does not constitute statutory financial
information as defined in Section 434 of the Companies Act 2006 and
does not contain all of the information required to be disclosed in
a full set of IFRS financial statements. This announcement was
approved by the Board of Directors and authorised for issue on 5
May 2021. The auditor's report on the financial statements for 31
December 2020 was unqualified, and did not include reference to any
matters to which the auditors drew attention by way of emphasis
without qualifying their reports and did not contain a statement
under either Section 498 (2) or 498 (3) of the Companies Act
2006.
The principal accounting policies are summarised below:
(a) Basis of preparation
The financial statements have been prepared in accordance with
International Financial Reporting Standards ("IFRS") as adopted by
the European Union. The financial statements are for the year 1
January 2020 to 31 December 2020. The comparatives shown are for
the year 1 January 2019 to 31 December 2019 .
New standards and interpretations not applied
At the date of authorisation of these financial statements, a
number of standards and interpretations were in issue but not yet
effective. The directors do not anticipate that the adoption of
these standards and interpretations, or any amendments to existing
standards as a result of the annual improvements cycle, will have a
material effect on the financial statements in the year of initial
application.
(b) Basis of consolidation
The Group financial statements consolidate the financial
statements of the Company and its subsidiaries under the
acquisition method. The financial statements of subsidiaries are
included in the consolidated financial statements from the date
that control commences until the date control ceases. Control is
achieved where the Company has the power to govern the financial
and operating policies of an investee entity so as to obtain
benefits from its activities.
(c) Joint Arrangements
A joint arrangement is one in which two or more parties have
joint control. Joint control is the contractually agreed sharing of
control of an arrangement, which exists only when decisions about
the relevant activities require the unanimous consent of the
parties sharing control. Certain of the Group's licence interests
are held jointly with others. Accordingly, the Group accounts for
its share of assets, liabilities, income and expenditure of these
joint operations, classified in the appropriate statement of
financial position and income statement headings.
(d) Revenue
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. Our joint venture partner 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 national transportation
system, control of the gas passes at the point at which the gas
enters this network, this is the point at which gas revenue would
be 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. Oil shipments are priced in advance of a cargo and revenue
is recognised at the point at which cargoes are loaded onto
shipping vessel at terminal.
(e) Property, plant and equipment
Property, plant and equipment is stated at cost, or deemed cost
less accumulated depreciation, and any recognised impairment loss.
Land is stated at cost and is not depreciated. Depreciation is
charged so as to write off the cost or valuation of assets less any
residual value over their estimated useful lives, using the
straight- line method, on the following bases:
Fixtures & fittings 12% to 33.3% straight-line
Motor vehicles 25% straight-line
Oil and gas properties are depleted on a unit of production
basis commencing at the start of commercial production or
depreciated on a straight-line basis over the relevant asset's
estimated useful life. Expenditure is depreciated on a unit of
production basis; the depletion charge is calculated according to
the proportion that production bears to the recoverable reserves
for each property. Depreciation will not be charged on an asset in
the course of construction, depreciation commences when the asset
is brought into use and will be depleted according to the
proportion that production bears to the recoverable reserves for
each property.
(f) Property right of use asset
The Group recognises a right-of-use asset and a lease liability
at the lease commencement date. The right of use lease is initially
measured at cost, which comprises the initial amount of the lease
liability adjusted for any lease payments made at or before
commencement date plus any initial direct costs incurred and an
estimate of costs to dismantle and remove the underlying asset. The
right-of-use asset is subsequently depreciated using the
straight-line method from the commencement date to the earlier of
the end of the useful life of the right-of-use asset or the end of
the lease term. The lease liability is initially measured at the
present value of the lease payments that are not paid at the
commencement date discounted using the incremental borrowing rate
of the individual Company which is the lessee.
(g) Other intangible assets - exploration and evaluation
costs
Exploration and evaluation (E&E) expenditure comprises costs
which are directly attributable to researching and analysing
exploration data. It also includes the costs incurred in acquiring
mineral rights, the entry premiums paid to gain access to areas of
interest and amounts payable to third parties to acquire interests
in existing projects. When it has been established that a mineral
deposit has development potential, all costs (direct and applicable
overhead) incurred in connection with the exploration and
development of the mineral deposits are capitalised until either
production commences or the project is not considered economically
viable. In the event of production commencing, the capitalised
costs are amortised over the expected life of the mineral reserves
on a unit of production basis. Other pre-trading expenses are
written off as incurred. Where a project is abandoned or is
considered to be of no further interest, the related costs are
written off.
(h) Impairment of tangible and intangible assets excluding
goodwill
At the date of each statement of financial position, the Group
reviews the carrying amounts of its tangible and intangible assets
to determine whether there is any indication that those assets have
suffered an impairment loss. If any such indication exists, the
recoverable amount of the asset is estimated in order to determine
the extent of the impairment loss (if any). Where it is not
possible to estimate the recoverable amount of an individual asset,
the Group estimates the recoverable amount of the cash-generating
unit ("CGU") to which the asset belongs.
The recoverable amount is the higher of fair value less costs to
sell or value in use. In assessing value in use, the estimated
future cash flows are discounted to their present value using a
pre-tax discount rate that reflects the current market assessments
of the time value of money and the risks specific to the asset. If
the recoverable amount of an asset (or CGU) is estimated to be less
than its carrying amount, the carrying amount of the asset is
reduced to its recoverable amount. An impairment loss is recognised
immediately in profit or loss, unless the relevant asset is carried
at a revalued amount, in which case the impairment loss is treated
as a revaluation decrease.
Where an impairment loss subsequently reverses, the carrying
amount of the asset is increased to the revised estimate of its
recoverable amount, but so that the increased carrying amount does
not exceed the carrying amount that would have been determined had
no impairment loss been recognised for the asset (CGU) in prior
years. A reversal of an impairment loss is recognised immediately
in profit or loss, unless the relevant asset is carried at a
re-valued amount, in which case the reversal of the impairment loss
is treated as a revaluation increase.
(i) Taxation
Current taxation
Current tax assets and liabilities for the current and prior
periods are measured at the amount expected to be recovered from,
or paid to, the tax authorities. The tax rates and the tax laws
used to compute the amount are those that are enacted, or
substantively enacted, by the balance sheet date.
Deferred taxation
Deferred tax is the tax expected to be payable or recoverable on
differences between the current year amounts of assets and
liabilities in the financial statements and the corresponding tax
basis used in the computation of taxable profit.
Deferred tax assets are recognised to the extent the temporary
difference will reverse in the foreseeable future and it is
probable that future taxable profit will be available against which
the asset can be utilised.
Deferred tax is recognised for all deductible temporary
differences arising from investments in subsidiaries, branches and
associates, and interests in joint ventures, to the extent it is
probable that the temporary difference will reverse in the
foreseeable future.
(j) Conversion of foreign currency
Foreign currency transactions are translated at the average
exchange rates over the year, material transactions are recorded at
the exchange rate ruling on the date of the transaction. Assets and
liabilities are translated at the rates prevailing at the balance
sheet date. The Group has significant transactions and balances
denominated in Euros and GBP. The year-end exchange rate to USD was
US $1 to GBP GBP0.7319 and US $1 to EUR0.8178 (2019: US $1 to GBP
GBP0.7649, US $1 to EUR0.8906) US $1 to ARS $86.250 and the average
exchange rate during 2020 was US $1 to GBP GBP0.7793 (2019: US $1
to GBP GBP0.7822).
In the Company financial statements, the income and expenses of
foreign operations are translated at the exchange rates ruling at
the dates of the transactions. The assets and liabilities of
foreign operations, both monetary and non-monetary, are translated
at exchange rates ruling at the balance sheet date. The reporting
currency of the Company and group is United Stated Dollars (US
$).
(k) Share-based payments
The fair value of equity instruments granted to employees is
charged to the income statement, with a corresponding increase in
equity. The fair value of share options is measured at grant date,
using the binomial option pricing model or Black-Scholes pricing
model were considered more appropriate, and spread over the period
during which the employee becomes unconditionally entitled to the
award. The charge is adjusted to reflect the number of shares or
options that vest, except where forfeiture is due to market-based
criteria.
(l) Financial instruments
Financial assets and financial liabilities are recognised on the
Group's balance sheet when the Group becomes a party to the
contractual provisions of the instrument.
Trade and other receivables
Trade and other receivables are initially measured at fair value
and are subsequently reassessed at the end of each accounting
period.
Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and demand
deposits, and other short-term highly liquid investments that are
readily convertible to a known amount of cash and are subject to an
insignificant risk of changes in value.
Financial liabilities and equity
Financial liabilities and equity instruments issued by the Group
are classified according to the substance of the contractual
arrangements entered into and the definitions of a financial
liability and an equity instrument. An equity instrument is any
contract that evidences a residual interest in the assets of the
Group after deducting all of its liabilities. The accounting
policies adopted for specific financial liabilities and equity
instruments are set out below.
Trade payables
Trade payables are initially measured at fair value and are
subsequently measured at amortised cost, using the effective
interest rate method.
(l) Financial instruments
Equity instruments
Financial instruments issued by the Group are treated as equity
only to the extent that they meet the following two conditions, in
accordance with IAS 32:
-- They include no contractual obligations upon the Group to
deliver cash or other financial assets or to exchange financial
assets or financial liabilities with another party under conditions
that are potentially unfavourable to the Group; and
-- Where the instrument will or may be settled in the Group's
own equity instruments, it is either a non-derivative that includes
no obligation to deliver a variable number of the Group's own
equity instruments or is a derivative that will be settled by the
Group exchanging a fixed amount of cash or other financial assets
for a fixed number of its own equity instruments.
To the extent that this definition is not met, the financial
instrument is classified as a financial liability.
(m) Borrowings
Borrowings are recognised initially at the fair value of the
proceeds received which is determined using a discount rate which
reflects the cost of borrowing to the Group. In subsequent periods
borrowings are recognised at amortised costs, using an effective
interest rate method. Any difference between the fair value of the
proceeds costs and the redemption amount is recognised as a finance
cost over the period of the borrowings.
(n) Inventory
Echo has chosen to value crude oil inventories, a commodity
product, at net realisable value, the value is based on a
discounted observable year-end market price. Other inventory items
are valued at the lower of net realisable value and cost.
(o) Going Concern
The financial information has been prepared assuming the Group
will continue as a going concern. Please see note 2 Accounting
Estimates and Judgements for an extended disclosure on this
issue.
(p) Government assistance grants
Government assistance grants such as the Coronavirus Job
Retention Scheme (CJRS) which relates to staff who have been
furloughed due to COVID-19 are recognised as income and have been
shown in the consolidated statement of comprehensive income as
other income. During 2020, the Group received grants totalling US
$45,503 for furloughed staff.
2. Accounting Estimates and Judgements
Going Concern
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.
Despite the consolidated statement of financial position showing
a negative net asset position at 31 December 2020, the outlook for
the Group has materially changed post period.
The business market took a positive upturn from early 2021, with
oil prices increasing by a significant 30% by the end of Q1 2021,
in comparison to the end of Q4 2020. In January 2021. The Company
achieved a key customer gas sales contract at a premium to
prevailing spot market rates, and more significantly, Q2 2021 saw
the conclusion of the Company's unlisted debt restructuring,
materially changing Echo's business position. This restructuring
reduced cash loan payment cash commitments to only GBP250k for
2021, allowing increased cashflow optionality. Post period, the
Group is investing in its asset facility upgrades, maturing its
portfolio to a level that is opportunistic to higher commodity
prices and revenue growth. Due to easing of COVID 19 restrictions
in Argentina, Q1 2021 saw the recommencement of VAT repayment
process, with a portion of the outstanding VAT scheduled for
payment in Q2 2021.
Considering these factors, the Company is in a materially more
robust position post period. The Company confirms that operations
at the SCS assets are predicted to be cash flow positive at
prevailing oil and gas price levels, and have considered the impact
of a fall in commodity prices or an unexpected increase in
costs.
Use of Estimate and Judgements
The preparation of financial statements in conforming with
adopted IFRSs requires management to make judgements, estimates and
assumptions that affect the reported amounts of assets and
liabilities as well as the disclosure of contingent assets and
liabilities as at the balance sheet date and the reported amount of
revenues and expenses during the period. Actual outcomes may differ
from those estimates. 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 impairment of
assets and the Group's going concern assessment.
Amounts Capitalised to the Consolidated Statement of Financial
Position
In accordance with the Group policy, expenditures are
capitalised only where the Group holds a licence interest in an
area. All expenditure relating to the Bolivian company has been
expensed to the statement of comprehensive income, as the Group has
not yet been assigned any licence interests in the country. The
Group has capitalised its participation in the SCS assets. The
assignment of Echo's participation in these Argentine licences is
still subject to the authorisation of the Executive Branch of Santa
Cruz Province, Echo are supported in this process by their joint
venture partners Interoil & IAG in the SCS assets, and the
process of title transfer is proceeding as anticipated, however due
to the COVID-19 pandemic, this process has been delayed.
Valuation of Assets
Expenditures recognised as exploration and evaluation
("E&E") assets are tested for impairment whenever facts and
circumstances suggest that they may be impaired, which includes
when a licence is approaching the end of its term and is not
expected to be renewed, or there are no substantive plans for
continued exploration or evaluation of an area, or whilst
development of a licence is still likely to proceed in an area but
there are indications that the E&E assets are unlikely to be
recovered in full.
When considering whether E&E assets are impaired the Group
first considers the IFRS 6 indicators. IFRS 6 requires an entity to
assess whether E&E assets require impairment when facts and
circumstance suggest that the carrying amount of the assets may
exceed their recoverable amount, these include:
-- The period for which the entity has the right to explore in
the specific area has expired during the period or will expire in
the near future and is not expected to be renewed;
-- Substantive expenditure on further exploration for and
evaluation of mineral resources in the specific area is neither
budgeted nor planned;
-- Exploration for and evaluation of mineral resources in the
specific area have not led to the discovery of commercially viable
quantities of mineral resources and the entity has decided to
discontinue such activities in the specific area;
-- Sufficient data exists to indicate that, although a
development in the specific area is likely to proceed, the carrying
amount of the E&E assets is unlikely to be recovered in full
from successful development or by sale.
In 2020 the Tapi Aike assets were written down, as Echo decided
to leave the license and impaired the balance sheet values as at
the end of 2020, the cost of subsequent licence activity was
impaired in the current accounting period. The determination of
recoverable amounts in any resulting impairment test requires
judgement around key assumptions, such as future costs, both
capital and operating. There are no indications of impairment on
the SCS assets.
Included within receivables are amounts due in respect of VAT of
US $ 2.0 million, which span Tax reclaim amounts for the period of
2020 and 2019 and current operational tax movements. The claims all
comply with local tax law and are at various stages of approval and
awaiting payment. The processing of these tax credits have been
hindered in the past due to COVID-19 Pandemic delays, with the
government tax office being officially closed since March 2020.
There is no reason as to why the Group believes it will not receive
the tax credits, and therefore no impairment provision required.
The speed at which the tax credits are being processed is
increasing, with AFIP (Argentine tax authority) notifying Echo that
a portion of the owed tax will be paid in Q2 2021, and therefore
the remaining credits are expected to be paid in the very near
future.
Determination of Discount Rates
Determination of derivative financial liabilities
Judgement is requirement when determining the classification of
financial instruments in terms of liability or equity. These
judgements include an assessment of whether the financial
instrument include any embedded derivative features, whether they
include contractual obligations upon the Group to deliver cash or
other financial assets or to exchange financial assets or financial
liabilities with another party, and whether that obligation will be
settled by the Company exchanging a fixed amount of cash or other
financial assets for a fixed number of its own equity
instruments.
Valuation of derivative financial liabilities
The Group has issued warrants over ordinary shares as
fundraising commission in respect of debt fundraisings during the
year which can be converted to share capital at the option of the
holder. These warrants are accounted for as an embedded derivative
which is recognised at fair value through profit or loss. The
Directors estimated the fair value of the derivative component
using the Black Scholes option pricing model. This required making
certain estimates on the share price volatility of the Group which
inevitably involved a degree of judgement and the actual outcome
may vary.
Inter-Group Balances
In determining whether parent company investments in
subsidiaries have been impaired, we review subsidiary assets and
liabilities to determine whether Group investment is recoverable.
The only entity where an impairment trigger might be recognised was
the Bolivian entity where the Group holds no licence assets. A
determination was made that because of ongoing negotiations and
Company strategic intent, investment would ultimately still be
recoverable.
However, the Group recognises that in order to pursue organic
and inorganic growth opportunities and fund on-going operations it
may require additional funding. This funding may be sourced through
debt finance, joint venture equity or share issues.
In the prior year management reported a material uncertainty in
respect of going concern. Based on the post year end debt
restructuring, the current level of revenue and cash generation and
the sensitivities considered in respect of the cashflow forecasts
to December 2022, and the mitigating actions that could be taken to
conserve cash in a worse- case scenario, management do not consider
there to be a material uncertainty in the current year.
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 financial statements.
3. Revenue
Year to Year to
31 December 31 December
2020 2019
US $ US $
Oil revenue 2,784,248 1,395,356
Gas revenue 8,279,416 1,190,713
Other income 62,856 -
Total Revenue 11,126,520 2,586,069
--------------- ------------- -------------
4. Cost of Sales
Year to Year to
31 December 31 December
2020 2019
US $ US $
Production costs 10,021,578 2,794,339
Selling and distribution costs 1,567,963 311,161
Movement in stock of crude oil (89,410) (351,170)
Depletion 1,936,879 373,212
Total Costs 13,437,010 3,127,542
-------------------------------- ------------- -------------
Cost of sales arising from operations in the Tapi Aike licences
has been reclassified as part of discontinued operations.
5. Financial Expense
Year to Year to
31 December 31 December
2020 2019
US $ US $
----------------------------------------- ------------- -------------
Interest payable 1,991,535 1,940,527
Net foreign exchange losses 4,409,732 1,247,936
Unwinding of discount on long term loan 2,936,831 1,688,536
Amortisation of loan fees 614,913 464,283
Accretion of right of use liabilities 2,293 17,401
Unwinding of abandonment provision 39,956 -
Finance cost of holding bonds 11,971 -
Bank fees and overseas transaction tax 166,816 116,933
----------------------------------------- ------------- -------------
Total 10,174,047 5,475,616
----------------------------------------- ------------- -------------
6. Derivative Financial Gain/Loss
Year to Year to
31 December 31 December
2020 2019
US $ US $
----------------- ------------- -------------
Fair value gain 666,306 339,219
Total 666,306 339,219
----------------- ------------- -------------
Represents fair value gain on valuation of derivatives
instruments at period end.
7. Discontinued Operations
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 finally withdrawing its interests and liabilities
under the Tapi Aike concessions prior to the drilling of the next
exploration well in the Tapi Aike Western cube.
The results of the discontinued operations, are presented
below:
Year to Year to
31 December 31 December
2020 2019
US $ US $
---------------------------------------------- ------------- -------------
Revenue - 2,838,880
Operating expenses - (3,478,991)
---------------------------------------------- ------------- -------------
Operating loss before impairment - (640,111)
Administrative Expenses - -
Impairment of the historic cost and carrying
value of intangible assets (10,724,108) (2,802,239)
Impairment of the historic cost and carrying - -
value of PPE
Net current assets receivable - -
Loss on disposal of foreign subsidiary - 1,120
---------------------------------------------- ------------- -------------
Operating (loss)/gain after liquidation (10,724,108) (3,441,230)
Financial income - -
Financial expense - -
---------------------------------------------- ------------- -------------
(Loss)/Gain on ordinary activities before
taxation (10,724,108) (3,441,230)
Taxation - -
---------------------------------------------- ------------- -------------
(Loss)/Gain for the year from discontinued
operations (10,724,108) (3,441,230)
---------------------------------------------- ------------- -------------
The cash flows associated with the discontinued operations
are:
Year to Year to
31 December 31 December
2020 2019
US $ US $
------------------- -------------- -------------
Operations - (640,111)
Investing - -
Financing - -
------------------- -------------- -------------
Net cash out flow - (640,111)
------------------- -------------- -------------
8. Loss Per Share
The calculation of basic and diluted loss per share at 31
December 2020 was based on the loss attributable to ordinary
shareholders. The weighted average number of ordinary shares
outstanding during the year ending 31 December 2020 and the effect
of the potentially dilutive ordinary shares to be issued are shown
below.
Year to Year to
31 December 31 December
2020 2019
------------------------------------------ ------------- -------------
Net loss for the year (US $) (25,991,643) (13,472,062)
------------------------------------------ ------------- -------------
Basic weighted average ordinary shares
in issue during the year 768,598,277 515,840,359
------------------------------------------ ------------- -------------
Diluted weighted average ordinary shares
in issue during the year 768,598,277 515,840,359
------------------------------------------ ------------- -------------
Loss per share (cents)
Basic (3.38) (2.61)
------------------------------------------ ------------- -------------
Diluted (3.38) (2.61)
------------------------------------------ ------------- -------------
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.
9. Property, Plant and Equipment
CDL Licence Property
PPE - Areas Fixtures Right-of-Use
O&G Discontinued & Fittings Assets Total
Properties US $ US $ US $ US $
US $
---------------------- ------------- -------------- ------------- --------------------- ------------
31 DECEMBER 2020
Cost
1 January 2020 979,164 - 131,122 309,804 1,420,090
Exchange differences
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
---------------------- ------------- -------------- ------------- --------------------- ------------
31 DECEMBER 2019
Cost
1 January 2019 - 1,270,832 156,554 334,625 1,762,011
Exchange differences - - - - -
Additions 979,164 - - - 979,164
Disposals - (1,270,832) (25,432) (24,821) (1,321,085)
---------------------- ------------- -------------- ------------- --------------------- ------------
31 December 2019 979,164 - 131,122 309,804 1,420,090
---------------------- ------------- -------------- ------------- --------------------- ------------
Depreciation
1 January 2019 - 1,270,832 66,400 89,167 1,426,399
Exchange differences - - - - -
Charge for the year 3,338 - 38,279 148,766 190,383
Impairment charge - - - - -
Disposals - (1,270,832) (13,313) (13,757) (1,297,902)
---------------------- ------------- -------------- ------------- --------------------- ------------
31 December 2019 3,338 - 91,366 224,176 318,880
---------------------- ------------- -------------- ------------- --------------------- --------------
Carrying amount
31 December 2019 975,826 - 39,756 85,628 1,101,210
---------------------- ------------- -------------- ------------- --------------------- --------------
31 December 2018 - - 90,155 245,458 335,612
---------------------- ------------- -------------- ------------- --------------------- --------------
Included within property, plant and equipment are amounts of US
$745,279 (2019: US $942,976) in relation to assets in construction
and as a result are not depreciation on the unit of production
basis, this will commence when they are available for use.
10. Other Intangible Assets
SCS Production
Assets TA License CDL Licence Ksar Hadada
US $ Areas Areas Exploration Total
Discontinued Discontinued Acreage US $
US$ US $ US $
----------------- --------------- ----------------- --------------- -------------- ------------------------------
31 DECEMBER 2020
Cost
1 January 2020 10,802,524 10,140,936 - - 20,943,460
Additions 228,112 242,525 - - 470,637
Disposals - (10,383,461) - - (10,383,341)
Decommissioning - - - - -
Asset
Transfers (274,330) - - - (274,330)
31 December 2020 10,756,306 - - - 10,756,306
----------------- --------------- ----------------- --------------- -------------- ------------------------------
Impairment and
depletion
1 January 2020 369,874 - - - 369,874
Disposals - (10,383,461) - - (10,383,461)
Depletion 1,752,310 - - - 1,752,310
Depreciation
decommissioning
assets 122,500 - - - 122,500
Impairment
charge
for the year - 10,383,461 - - 10,383,461
31 December 2020 2,244,684 - - - 2,244,684
----------------- --------------- ----------------- --------------- -------------- ------------------------------
Carrying amount
31 December 2020 8,511,622 - - - 8,511,622
----------------- --------------- ----------------- --------------- -------------- ------------------------------
31 December 2019 20,573,586 - - - 20,573,586
----------------- --------------- ----------------- --------------- -------------- ------------------------------
31 DECEMBER 2019
Cost
1 January 2019 1,559,930 - 14,148,371 2,043,430 17,751,731
Additions 16,443,530 - 2,802,239 - 19,245,769
Disposals - - (16,950,610) (2,043,430) (18,994,040)
----------------- --------------- ----------------- --------------- -------------- ------------------------------
Decommissioning
Asset 2,940,000 - - - 2,940,000
----------------- --------------- ----------------- --------------- -------------- ------------------------------
31 December 2019 20,943,460 - - - 20,943,460
----------------- --------------- ----------------- --------------- -------------- ------------------------------
Impairment and
depletion
1 January 2019 - - 14,148,371 2,043,430 16,191,801
Disposals - - (16,950,610) (2,043,430) (18,994,040)
Depletion 369,874 - - - 369,874
Impairment
charge
for the year - - 2,802,239 - 2,802,239
31 December 2019 369,874 - - - 369,874
----------------- --------------- ----------------- --------------- -------------- ------------------------------
Carrying amount
31 December 2019 20,573,586 - - - 20,573,586
----------------- --------------- ----------------- --------------- -------------- ------------------------------
31 December 2018 1,559,931 - - - 1,559,931
----------------- --------------- ----------------- --------------- -------------- ------------------------------
All intangible assets relate to oil & gas activities. The
Group's oil and gas assets were assessed for impairment at 31
December 2020. One CGU's is recognised: the SCS licence
concession.
Impairment assessments are prepared on the basis of comparing
the present value of discounted cash flows with the carrying value
of the assets.
11. Inventories
31 December 31 December 2019
2020
Group Company Group Company
US $ US $ US $ US $
-------------------- -------- -------- --------- --------
Crude oil 510,254 - 420,844 -
-------------------- -------- -------- --------- --------
Parts and supplies 30,976 - - -
-------------------- -------- -------- --------- --------
Total 541,230 - 420,844 -
-------------------- -------- -------- --------- --------
Crude oil inventories are measured at Net Realisable Value,
other inventory items are measured at the lower of cost and net
realisable value. These crude oil inventories are held in the SCS
asset.
12. Other Receivables
31 December 2020 31 December 2019
Group Company Group Company
US $ US $ US $ US $
----------------------------- ---------- ----------- ---------- -----------
Non-current
Amounts owing by subsidiary
undertakings - 12,504,108 - 12,893,354
Amounts provided against - - - (870,268)
----------------------------- ---------- ----------- ---------- -----------
Total - 12,504,108 - 12,023,086
----------------------------- ---------- ----------- ---------- -----------
Current
Trade receivables 1,218,350 - 1,002,295 -
Accrued income 573,842 - 1,181,838 -
Other receivables 5,163,981 84,791 6,056,470 142,910
Prepayments 273,090 71,243 436,676 100,764
----------------------------- ---------- ----------- ---------- -----------
Total 7,229,263 156,034 8,677,279 243,674
----------------------------- ---------- ----------- ---------- -----------
Other receivables in the Group and the Company principally
comprise recoverable Value Added Tax and joint venture receivables.
The directors consider that the carrying amount of trade and other
receivables approximated their fair value.
13. Cash and Cash Equivalents
31 December 2020 31 December 2019
Group Company Group Company
US $ US $ US $ US $
------------------------------------- --------- -------- ---------- ----------
Cash held by joint venture partners 27,479 - 300,746 -
Cash and cash equivalents 654,680 437,230 1,397,266 1,259,468
------------------------------------- --------- -------- ---------- ----------
Total 682,159 437,230 1,698,012 1,259,468
------------------------------------- --------- -------- ---------- ----------
Echo have advanced cash to our joint venture partners; this cash
is held by our partners in a ring-fenced account. We recognise our
equity share of the balance held.
14 Financial Instruments and Treasury Risk Management
Fair Value of Financial Assets and Liabilities
The carrying values of financial assets and liabilities are
considered to be material equivalent to their fair values.
Treasury Risk Management
The Group manages a variety of market risks, including the
effects of changes in foreign exchange rates, liquidity and
counterparty risk.
Credit Risk
The Group's principal financial assets are bank balances and
cash and other receivables.
The credit risk on liquid funds is limited because the
counterparties are UK, Argentine and Bolivian banks with high
credit ratings. The Group operates with positive cash and cash
equivalents as a result of issuing share capital in anticipation of
future funding requirements. The Group's policy is therefore one of
achieving high returns with minimal risks. In order to provide a
degree of certainty, the Group primarily invests in short-term
fixed-interest treasury deposits giving a low risk profile to these
assets.
In Echo's SCS assets, acquired in November 2019, operating
partner Interoil markets our hydrocarbon, primarily to well
established utilities. Echo carries a marginally higher credit risk
exposure as Echo deals directly with counterparties for payment,
however as the Group's principle customers are substantial oil and
gas utility companies and refiners, as such credit risk is
considered to be low. There is no history of credit loss,
non-payment or default by the inherited counterparties and the
calculated amount of the potential 12-month credit risk loss is not
material. The Company has low credit risk in respect of receivables
as a result of supplying reputable oil and gas purchasers. All
receivables have been recovered in full since 1 January 2020. The
group has applied the expected credit loss model as required by the
adoption of IFRS 9. Given current contractual arrangements where
pricing has already been determined at the point where receivables
from hydrocarbon sales are recognised as revenue, and the fact that
contract counterparties are large corporate entities or utilities
no provision was made for losses as any potential losses would be
immaterial.
The maximum exposure due to credit risk for the Group on other
receivables and amounts due from equity accounted joint operations
during the year was US $3,253,335 (2019: US $6,928,450). No
collateral is held in respect of these amounts.
The maximum exposure due to credit risk for the Company on
intercompany receivables and other receivables during the year was
US $28,509,152 (2019: US $28,028,144). No collateral is held in
respect of these amounts. Intergroup funding is assessed for
indications of impairment on a periodic basis. Investments and
subsidiaries and intergroup loans in the amount of US $14,516,604
(2019: US $14,516,586) are considered to be impaired and have been
provided against in full. All other amounts are expected to be
received in full.
Currency Risk
The Group's operations are primarily located in the South
America, and the United Kingdom, with the main exchange risk being
between the US Dollar and the Argentine Peso. The Argentine Peso
has devalued by approximately 9% (2019: 37%) over the year. The
Group addressed this risk by minimising exposure to the currency.
The majority of Group revenues for the year were denominated in US
Dollars but certain liabilities and revenues were denominated in
Argentine Pesos. In certain instances the counterparty for
settlement of pesos income and expenditure was the same. In these
instances pesos balances were offset. Balances were held in dollars
until settlement was due, and where short-term pesos balances were
held these were placed on overnight deposit.
The Group does hold substantial receivable VAT balances
denominated in pesos and have sought to expedite recovery to
mitigate devaluation losses.
At year end the Group held the following cash and cash
equivalent balances:
31 December 31 December
2020 2019
US $ US $
-------------------- ------------ ------------
US Dollars 5,835 731,351
-------------------- ------------ ------------
GBP Sterling 435,986 393,637
-------------------- ------------ ------------
Euro - 181,742
-------------------- ------------ ------------
Argentine Peso 237,776 384,470
Bolivian Boliviano 2,562 6,812
-------------------- ------------ ------------
Total 682,159 1,698,012
-------------------- ------------ ------------
The consolidated statement of comprehensive income would be
affected by US $43,599 (2019: US $44,730) if the exchange rate
between US $ and GBP changed by 10%. If the exchange rate between
the US $ and the Euro changed by 10% there would be a profit or
loss of US $nil (2019: US $30,972). There would be a loss of US
$21,617 if the exchange rate between the Argentine Peso to the US
Dollar weakened by 10%.
The Group has exposure to the Euro, Echo hold EUR25million bond
notes, the Group held Euro denominated funds at the beginning of
the period to cover servicing of debt during the accounting year.
The primary source of funds for the Group in the period was equity
raised in GBP, these funds were immediately translated into USD to
fund exploration and acquisition activity in Argentina. No hedging
products were used during this accounting period, but management
actively review currency requirements to assess the suitability of
hedging products. The Group consolidated statement of income would
be affected by approximately US $2,692,605 (2019: US $2,318,139) by
a reasonably possible 10 percentage points fluctuation in the
exchange rate between US Dollars and Euros.
The VAT regime in Argentina differs from international practise
as VAT investment activities are not immediately recoverable but
must be offset against revenue streams. The Company made
substantial investments in Argentina in 2018,2019 and 2020 and has
accordingly built up a material VAT receivable balance. A new
mechanism has been approved by government through Law No. 27430 and
Decree 813/2018. The mechanism will allow Technical VAT credits
associated with the purchase of capital assets from 1 January 2018
to be recovered through application if the Company has not been
able to recover the VAT within six months. Echo submitted an
application for the recovery of historic VAT balances as soon as
the legislation permitted.
The Group used Blue Chip Swaps during the year to repatriate
funds from Argentina to the UK. A Blue-Chip Swap is when a domestic
investor purchases a foreign asset and then transfers the purchased
asset to an offshore entity. The Group's Argentine subsidiary
purchased shares in highly stable and liquid companies that are
traded on both domestic and offshore stock exchanges. These shares
were held for a fixed period in accordance with Argentinian
regulation. Following the end of the fixed period the shares were
sold offshore and the resulting funds were then repatriated to the
parent company. This type of transaction is therefore exposed to
stock price volatility during the hold period and incurs
transaction fees. During the year, the Group swapped 12,259,250
Pesos into $70,851 net of transaction fees and forex losses .
Interest Rate Risk
The Group holds debt instruments that were issued at a fixed
rate. As part of the Group's policy to maximise returns on cash
held cash held in placed in interest bearing accounts where
possible. During the course of 2020, Echo invested cash into
operations and did not hold significant cash balances for prolonged
periods of time. The consolidated statement of comprehensive income
would be affected by US $71 (2019: US $925) by a 1% point change
floating interest rate on a full-year basis.
The Group's actively manages its working capital to ensure the
Group has sufficient funds for operations and planned activities.
Operational cash flow represents receipts from revenue, together
with on-going direct operational support costs, exploration,
appraisal, administration and business development costs. The Group
manages its liquidity requirements by the use of both short-term
and long-term cash flow forecasts. The Group's policy is to ensure
facilities are available as required, to issue equity share capital
and form strategic alliances in accordance with long-term cash flow
forecasts. The Group currently has no undrawn committed facilities
as at 31 December 2020.
The Group's financial liabilities are primarily obligations
under joint operations, trade payables and operational costs. All
amounts are due for payment in accordance with agreed settlement
terms with suppliers or statutory deadlines and all within one
year.
Liquidity Risk
The Group holds Euro denominated long-term debt. See Note
16.
The Group does not currently use derivative financial
instruments to hedge currency and commodity price risk as it is not
considered necessary. Should the Group identify a requirement for
the future use of such financial instruments, a comprehensive set
of policies and systems as approved by the directors will be
implemented.
In accordance with IFRS 9, "Financial instruments: recognition
and measurement", the Group has reviewed all contracts for embedded
derivatives that are required to be separately accounted for if
they meet specific requirements set out in the standard.
Commodity Price Risk
The Group is now exposed to the risk of fluctuations on
prevailing commodity market prices. The Group does not use
commodity forward contracts and futures to hedge against price risk
in commodities as current volumes and market conditions mean they
are not yet appropriate for Echo.
A 10% increase in the price of Gas would have increased revenue
by approximately US $827,942.
A 10% increase in the price of Oil would have increased revenue
by approximately US $278,425 .
Capital management
The Group's legacy strategy has led to its capital structure
being a mixture of debt and equity. The directors will reassess the
future capital structure when projects under development are
sufficiently advanced and restructure accordingly.
The Group's financial strategy is to utilise its resources to
further appraise and test the Group's projects, forming strategic
alliances for specific projects where appropriate together with
assessing target acquisitions. The Group keeps investors and the
market informed of its progress with its projects through regular
announcements and raises additional equity finance at appropriate
times.
Categories of financial instruments
All of the Group's financial assets are carried at amortised
cost. The Group's embedded derivative is classified at fair value
through profit or loss, the remaining Group's financial liabilities
are classified as financial liabilities at amortised cost.
15. Trade and Other Payables
31 December 2020 31 December 2019
Group Company Group Company
US $ US $ US $ US $
------------------------------ ----------- ---------- ---------- ----------
Trade payables 398,121 329,216 398,216 112,701
Taxation and social security
costs 354,308 246,549 253,439 128,834
Non-trade payables 362,878 362,878 9,156 -
Accruals 108,223 68,925 92,386 54,501
Right of Use Liability - - 64,180 64,180
Other loans 2,298,638 2,298,638 1,290,963 1,290,963
Joint venture payables 9,726,978 - 4,913,915 -
------------------------------ ----------- ---------- ---------- ----------
Total 13,249,146 3,306,206 7,022,255 1,651,179
------------------------------ ----------- ---------- ---------- ----------
16. Loans Due in Over One Year
31 December 31 December
2020 2019
US $ US $
---------------------- ------------- ------------- ------------ -------------- --------------
Five-year secured
bonds (22,167,419) (16,388.586)
Additional net
funding (5,766,544) (4,215,716)
Other loans (1,640,693) -
---------------------- ------------- ------------- ------------ -------------- --------------
Total (29,574,656) (20,604,302)
---------------------- ------------- ------------- ------------ -------------- --------------
Balance Reclassified
a at from short Amortised Exchange 31 December
31 December term loans finance adjustments 2020
2019 US$ charges US $ US $
US $ US $
---------------------- ------------- ------------- ------------ -------------- --------------
EUR20 million
five-year secured
bonds 17,396,519 - 3,682,625 1,757,001 22,836,146
EUR5 million
Lombard Odier
secured convertible
debt facility 4,583,289 - 943,434 461,078 5,987,801
Other loans - 1,290,963 293,867 55,863 1,640,693
Loan fees (1,007,933) - 443,650 (104,443) (668,726)
Incremental loan
fees (367,573) - 171,263 (24,947) (221,257)
---------------------- ------------- ------------- ------------ -------------- --------------
Total 20,604,302 1,290,963 5,534,839 2,144,552 29,574,656
---------------------- ------------- ------------- ------------ -------------- --------------
US$27,276,018 of the total loan balance is shown in non-current
liabilities and US $2,298,638 is shown in current liabilities (see
Note 15)
In March 2020, to ensure the business is robustly positioned in
the event of continued downward pressure on oil demand and prices
driven by recent global events, and as part of its programme to
conserve cash, the Company announced that it would enter
negotiations with holders of its debt to extend the loans or defer
all cash interest during 2020.
EUR20 million five-year secured bonds
On 22 May 2017 the Company announced that Nusakan plc
("Nusakan") subscribed for five-year non-amortising secured bonds
with an aggregate issue value of EUR20million ("EUR20m Bond").
Alongside the EUR20m Bond, the Company issued 169,402,469 warrants
to subscribe for new ordinary shares in the Company at an exercise
price of 15.1875 pence per ordinary share and an exercise period of
approximately five years, concurrent with the terms of the EUR20m
Bond to Nusakan ("the Warrants"). The EUR20m Bond are secured over
the share capital of Echo Energy Limited. The EUR20m Bond have an
8% coupon and were issued at a 20% discount to par value. A total
cash fee of GBP GBP1.7 million (EUR2 million) was payable by the
Company.
The Warrants were recorded within equity at fair value on the
date of issuance and the proceeds of the notes net of issue costs
were recorded as non-current liability. The coupon rate for the
Bonds ensures that the Company's on-going cash out-flow on interest
payments remains low, conserving the Company's cash resources. The
effective interest rate is approximately 21.55%. The five-year
secured Bonds are due in May 2022.
Debt Renegotiation
On 22 May 2020, the Company announced that at a meeting of the
holders of the EUR20m Bond (the "Noteholders"), the Noteholders
gave their consent to waive the event of default in relation to the
non-payment by the Company of the quarterly interest due on 31
March 2020. Furthermore, the Company obtained consent to defer
quarterly interest payments which would otherwise be due on 31
March 2020, 30 June 2020, 30 September 2020 and 31 December 2020
(the "2020 Interest Payments") such that the 2020 Interest Payments
will be payable by the Company on maturity of the bonds in May
2022. The Company will continue to be required to make quarterly
interest payments on the EUR20m Bond in 2021 and 2022. In addition,
the Company granted security in the form of a share charge over
100% of the shares in Echo Argentina Holdings Limited. Such
security will be shared pari passu between the Noteholders and
Lombard Odier in its capacity as lender under the Company's EUR5m
Loan. Further restructuring of these Bonds occurred post period.
Please refer to note 18.
EUR5 million Lombard Odier secured convertible debt facility
As part of the acquisition of the SCS assets, the Company
announced on 21 October 2019 that it had entered into a secured
convertible debt facility with Lombard Odier Asset Management
(Europe) Ltd ("Lombard Odier") for a five-year non-amortising
EUR5.0 million 8.0% secured convertible debt facility (the "EUR5m
Loan") maturing in 2022. Of the EUR5million received, as described
in Note 16, EUR0.97m (US $1.1m) has been allocated to the warrants
which were issued alongside the EUR5m Loan and are recorded as a
financial liability and held at fair value through the profit or
loss.
Debt Renegotiation
The terms of the EUR5m Loan were amended in 2020. In order to
provide parties with the time to conclude an amendment to the EUR5m
Loan, the holder Lombard Odier waived default rights under
the EUR5m Loan for non-payment of the 31 March 2020 interest. On
1 December 2020 the Company concluded an agreement (subject to
conditions that were subsequently met post period see note 18) with
Lombard Odier to:
-- Extend the maturity by 3 years such that the debt facility
will mature on the last business day of April 2025.
-- make no more cash interest payments until the maturity date.
Interest will be rolled up and added to the then outstanding debt
facility principle.
Other loans
On 6 March 2020, Echo announced that it had agreed a two-year
extension of the Company's existing GBP1.0m Loan originally
provided to the Company in March 2017 and now held by Spartan Class
O, a sub fund of Spartan Fund Limited SAC ("Spartan"). The interest
rate of the GBP1m Loan remains unchanged.
The Company agreed that the extended Loan will now be repayable
as follows: (a) GBP100,000 on 30 November 2020; (b) four quarterly
instalments of GBP50,000 on the last business day of the relevant
month commencing in March 2021; and (c) the balance of GBP700,000
on 8 March 2022. In connection with the extension of the Loan,
Spartan was issued with 3,571,428 warrants to subscribe for new
ordinary shares in the Company at a price of 1.4 pence per new
share and with an expiry date of 9 March 2022.
On 1 April 2020, the Company further announced entry of an
amendment to the Company's GBP1m Loan facility such that interest
payment due 31 March 2020 was postponed and no interest payments
were required prior to 31 March 2021. With effect from 1 January
2020, interest on the GBP1m Loan will now accrue at an unchanged
annual interest rate of 12.0% and, at the end of each quarterly
interest period, be added to the aggregate principal amount owing
under the GBP1m Loan, for payment on maturity. The Company agreed
that, as amended, the GBP1m Loan will now be repayable as follows:
(a) GBP100,000 in March 2021; (b) three quarterly instalments of
GBP50,000 on the last business day of the relevant month commencing
in June 2021; and (c) the balance of GBP750,000, together with
accrued interest, on 8 March 2022. The other terms of the GBP1m
Loan remain unchanged.
Maturity Analysis
Contractual undiscounted cash flows:
31 December 31 December
2020 2019
US $ US $
---------------------------------- -------------- --------------
Amounts due within one year 2,293,290 1,396,157
Amounts due between one and five
years 35,628,948 33,291,406
---------------------------------- -------------- --------------
Amounts due over five years - -
---------------------------------- -------------- --------------
37,922,238 34,687,563
---------------------------------- -------------- --------------
17. Provisions
31 December 31 December
2020 2019
US $ US $
----------------------------------------- -------------- --------------
-
Assessment of decommissioning provision 2,979,956 2,940,000
----------------------------------------- -------------- --------------
2,979,956 2,940,000
----------------------------------------- -------------- --------------
Provision has been made for the discounted future cost of
abandoning wells and restoring sites to a condition acceptable to
the relevant authorities. It is likely that some abandonments will
occur in 2021. The provisions are based on Operators' internal
estimate at 31 December 2020, and the movement from the prior year
relates to the unwinding of the provision. Assumptions are based on
the current experience from decommissioning wells. The estimates
are reviewed regularly to take account of any material changes to
the assumptions. Actual decommissioning costs will ultimately
depend upon future costs for decommissioning which will reflect
market conditions and regulations
at that time. Furthermore, the timing of decommissioning is
uncertain and is likely to depend on when the fields cease to
produce at economically viable rates. This, in turn, will depend on
factors such as future oil and gas prices, which are inherently
uncertain.
18. Subsequent Events
New gas contract at premium to prevailing spot pricing
On 6 January 2021, the Company secured a further gas sales
contract at a premium to prevailing spot market rates, supplying a
key customer with approximately 1.4MMscf/d gross (1.0 MMscf net to
Echo) of natural gas. The price negotiated represented a
significant 28% premium to the prevailing local spot price of Q4
2020.
On 28 January 2021, the Company granted 35,750,000 options to
its employees as part of an initiative to retain and incentivise
staff, with all options issued with a price of 0.66 pence per
Ordinary share. 24,000,000 of the options have been awarded to
Martin Hull, the Company's Chief Executive Officer. The options
awarded to Martin Hull will vest in three equal tranches on the
first, second and third anniversaries of grant, conditional upon
the Echo Remuneration Committee being satisfied that vesting of
each tranche is warranted, based on the Chief Executives
performance and/or share price growth over the year prior to
vesting. These director options will be exercisable anytime
thereafter until expiry on the fifth anniversary date on which the
options were granted. The options issued to employees will vest on
the third anniversary of the date of grant, and will be exercisable
anytime thereafter until expiry on the fifth anniversary on which
the options were granted.
On 24 March 2021, Echo secured two new sales contracts at
significant premium to both prevailing spot market rates (39%) and
2020 contracted rates (126%).
Issue of shares in relation to 22 December 2020 fund raise
On 11 January 2021, 167,842,138 shares at 0.51p issued to
satisfy the GBP856,00 gross proceeds fund raise announced on the 22
December 2020. In addition, 167,843,138 warrants were issued, with
half of these exercisable at 0.7p and the remainder at 0.75p. Of
these, 50% were issued on admission, and the other 50% conditional
on the necessary issuance authorities at the Company's 2021 annual
general meeting.
Bolivia: Cooperation Agreement and Exclusivity
On 8 January 2021, the Company announced that it has signed a
cooperation agreement with GTLI, a majority owned subsidiary of the
Bolivian company UruboCorp focused on energy production and supply
in Bolivia and with interests in both the hydrocarbon and
renewables sectors.
Echo and GTLI will collaborate to jointly promote their business
development initiatives in Bolivia, through joint efforts to
identify and assess new business development opportunities across
the full
energy spectrum, in relation to which the parties have granted
each other a six-month period of
exclusivity. The cooperation agreement will enable a portfolio
of opportunities to be matured in a cost-effective way across the
Bolivian energy space.
GTLI is a leading Bolivian Energy Operator and holds the El
Palmar operational hydrocarbon contract with the Government of
Bolivia and is a subsidiary within a larger investment group known
as UruboCorp that includes mining (gold), real estate and energy,
and with interests in both the hydrocarbon and renewables
sectors.
Cooperation between the Company and GTLI on any specific
projects identified remains subject to, inter alia, the negotiation
and entry of binding agreements and Echo will focus on any
opportunities that meet its stringent profitability and positive
cashflow criteria. The grant of a period of Exclusivity is the only
binding term of the Cooperation Agreement. The Cooperation
Agreement has an initial term of 5 years and may be terminated by
either party without penalty on providing 6 months' notice.
Bond restructuring
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
--E xtend 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, subject to
Bondholder approval of the Proposals at the Noteholder Meeting,
that it will not, without the prior consent of Noteholders by way
of a simple majority of those Noteholders then voting, 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 voting in
favour of the Proposals at the Bondholder Meeting pro rata to votes
cast at the Noteholder Meeting, will be 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.
Facilities upgrade
On 24 February 2021, Echo announced agreement with the SCS
partners to upgrade existing liquid pipelines in the SCS
assets.
Capital expenditure net to Echo's 70% working interest of around
US$ 275,000 will be injected by the Company to replace and upgrade
parts of the infrastructure primarily in the Chorillos, Campo
Molino and Cerro Convento fields with installation expected to take
approximately 45 days from conclusion of successful procurement.
Ten individual upgrade projects will be completed to enable the
upgrade of around 23 km of pipeline.
It is anticipated that once the pipelines are fully operational,
gross daily liquids production will be restored to levels of
between 480 bopd - 600 bopd (336 - 420 bopd net Echo).
Exercise of Warrants
On 12 April 2021, the Company received notice for the exercise
of 74,200,000 warrants to subscribe for new ordinary shares in the
Company at an exercise price of 0.3 pence per share. As a result,
an application has been made for 74,200,000 new ordinary shares in
the Company (to be admitted to trading on AIM.
The admission of the new ordinary shares, rank pari passu with
the Company's existing ordinary shares. Following Admission on the
16 April, the Company's issued ordinary share capital will comprise
1,293,567,987.
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