Shares in Echo Energy (LSE:ECHO) rose today after the oil & gas business told investors it had loaded its first export cargo of oil produced from its Fracción C and Fracción D fields in Argentina. Echo was up 4.3pc, or 0.7p, to 15.7p as at the time of writing after reporting that its shares of the cargo from Q1 oil production at the sites came in at around 25,000 barrels.
The cargo was loaded over the weekend and sold to commodities firm Vitol at a discount of around $6 per barrel to the average Brent price, which currently sits above $71.50 per barrel. Echo also announced that all its gas produced during Q1, which comes in at nearly 250m standard cubic feet, has been sold into the Argentinian market for an average of $4.21 per MMBtu. As a result, total sales receipts net to Echo before royalty, tax, and operating expenses for Q1 this year are expected to come in at around $2.7m.
Fiona MacAulay, chief executive of Echo, said: ‘Loading our first cargo was a significant step for Echo, particularly with Brent currently trading at a sustained US$70 / barrel for the first extended period during 2018. We are also delighted that gas sales have remained strong and our realised blended price for those has been in excess of US$4.20 per MMBtu throughout the summer season in Argentina. Receipt of maiden LATAM revenues in Q1 marks an important milestone in the company’s mission to become an exploration-led gas-focused mid-cap E&P, delivering value for shareholders.’
Last week, Echo announced that it had successfully flowed gas to surface on the first well in its much-anticipated three-well workover campaign at the Fracción assets. Well CSo-85 was perforated across the Springhill Formation and successfully flowed gas to surface without intervention. Following this, the well flowed through Echo’s rig de-gassing system at an estimated rate of 2mmscf/d through a 20/64 inch choke with a tubing head pressure of 1,100psi.
Today’s news and the workover programme form the first steps of Echo’s 18-month work programme for its 50/50 farm-in with CGC on several Argentinian assets. Following the workovers, Echo will drill four exploration wells across its producing licences in Fraccion C and Laguna De Los Capones.
We have previously covered the potential upside for Echo Energy and pointed to it as a buying opportunity at the end of last month when it was sat at around 12.5p, around 30pc below its placing price. As we wrote earlier this year, the total farm-in agreement offers significant potential upside, and two of Echo’s projects are already producing oil and gas. Furthermore, the company has more than enough cash on its books to cover the estimated £26.9m total costs of the farm-in agreement.
