Echo Energy plc, the Latin American focused upstream oil and gas company, is pleased to announce its audited results for the financial year ended 31 December 2019.

2019 Highlights

· Completed acquisition of 70% non-operating interest in five mature producing blocks, Santa Cruz Sur, in November 2019:

-  Estimated reserve base as of end 2019 was 3.8 MMboe 1P & 12.1 MMboe 2P*

-  Producing at 2,505 boepd net to Echo (70% interest) in November and December 2019

-  Total production in November and December 2019 of 152,819boe

-  Campo Limite exploration well (spud in Q4 2019) on Palermo Aike block at Santa Cruz Sur

· Completed 3D seismic acquisition over 1,200km2 in Tapi Aike

· Delivered first well in 4Q 2019  at (Chiripa Oeste) Tapi Aike

· Successful restructuring of asset portfolio and US $1m reduction of G&A expenses over 2018 levels

Commenting, Martin Hull, Echo's Chief Executive Officer, said:

"We started 2019 with the seismic acquisition campaign across Tapi Aike, safely acquiring 1,200km⊃; worth of quality data on schedule and on budget and then ended the year with our first well in the Tapi Aike block, the culmination of a tremendous amount of work. During the year we successfully restructured our portfolio, relinquishing assets without future growth, 'rightsized' our interest in Tapi Aike and made the important acquisition of producing assets with a strong reserves base in Santa Cruz Sur. This brought cash-generation into the business along with a pipeline of development opportunities and additional near field exploration potential, with a second exploration well spud before year end. Although 2020 has brought with it some very serious global challenges, the work Echo accomplished in 2019, and the team that we have in place, means we are well positioned to meet these challenges and maximise the value creation potential from our existing portfolio and look to positively move forward with further future value creation opportunities. "

* Evaluated in accordance with the Petroleum Resource Management System ("PRMS")

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Note

The information communicated within this announcement is deemed to constitute inside information as stipulated under the Market Abuse Regulation (EU) No. 596/2014. Upon the publication of this announcement, this inside information is now considered to be in the public domain.

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;  bopd means barrels of oil per day; and mmbtu means million British thermal units.

Chairman's and Chief Executive Officer's Statement

Activities across 2019 have continued apace for Echo as it continues to execute against its Latin American growth strategy. In line with this strategy, the Company secured a significant production asset and reserve base in Santa Cruz Sur ("SCS") in November 2019, which has enabled the Company to diversify its portfolio and brings with it a revenue stream capable of further growth.

Argentina

Santa Cruz Sur

In November 2019, Echo completed the acquisition of a 70% non-operated working interest in the Santa Cruz Sur package of five mature producing blocks from Petrolera El Trebol S.A. ("PETSA"), a subsidiary of Phoenix Global Resources plc.  The addition of these assets has provided material production to the Group as the foundation of a balanced, revenue-generating portfolio with a strong reserves base. These assets also bring significant upside from relatively low-risk production enhancement opportunities and exciting near-term drilling opportunities.

At the end of 2019 Santa Cruz Sur's 1P net Echo reserves base stood at an estimated 3.8 MMboe for 1P and 12.1 MMboe respectively for 2P (net to a 70% interest) illustrating the significance of this acquisition. At year end 2018 the Company had no reserve base, and at the end of 2019 the SCS transaction has enabled the Company to book material reserves.

Prior to Echo's acquisition of the SCS licences on 1 November 2019, production across the 5 licences in H1 2019 period was approximately 3,687 boepd (2,581 boepd, including 587bbls of oil per day net production to a 70% interest). Total net production in the period from 1 November 2019 to 31 December 2019 net to Echo was 34,466 bbls of oil and 710 MMscf of gas.

The Campo Limite exploration well ("CLix-1001") on the Palermo Aike concession was spud in late December 2019. The cost of this well, corresponding to Echo's interest, was paid for by the previous owner of the concession, PETSA, as part of the acquisition agreement. At year end drilling of the well had begun targeting a conventional Springhill reservoir on a structure located two kilometres from the Chilean border. Post-period, the well reached total depth on 20 January 2020 and completion and testing will be required to assess the commerciality of the well. Unfortunately, testing of this well has been interrupted due to travel restrictions imposed as a result of the global Covid-19 pandemic. Well testing activities will resume as soon as practicable and the project remains a priority for 2020.

Tapi Aike

The Tapi Aike block remains one of the most underexplored licence blocks in the basin. The acreage has three wells with interpreted gas presence, existing 2D seismic and partial 3D seismic. The block also benefits from the identification of three highly prospective independent gas exploration plays and one oil play. For much of 2019 the activity on the licence focused on the 3D seismic acquisition programme, with UGA Seismic S.A. ("UGA") shooting a total of 1,200 km2 of new 3D seismic data across the Tapi Aike licence. The seismic acquisition was completed on time and on budget and the data was subsequently processed by highly experienced teams: Wellfield Services Ltda. for Chiripa Oeste and Seismic Prospect S.R.L. for Travesia de Arriba, both based in Buenos Aires. In Novemberthe Company and its partner  spudded the Campo La Mata exploration well ("CLM x-1") on the newly acquired eastern cube (Chiripa Oeste). The primary target of the well was a stratigraphic trap ("Magallanes 20"), with secondary targets in deeper and shallower intervals. At year end we had reached total depth and the initial wireline log results were sufficiently encouraging to move to completion and hydraulically stimulate the formation and test the well. Post-period, we undertook these testing operations and announced a non-commercial gas discovery in February 2020. Interpretation of the newly acquired 3D seismic continues to progress and at year end processing on the western cube (Travesia de Arriba) was progressing.

Bolivia 

As announced in our half-year report in September 2019, the Board believes that while there is potential on the Huayco and Rio Salado blocks, the opportunities present there are not currently compatible with the Company's strategy, in part due to the extremely high cost of exploration drilling on the block and the soft farm-out market. Echo continues to evaluate the best route to maximise shareholder value in relation to the Bolivian position.

Corporate

2019 has seen management changes with the appointment of Martin Hull as Chief Executive Officer and Fiona MacAulay stepping down from the Board as Non-Executive Director.

Following the drilling campaign on the Fracción C, Fracción D, and Laguna De Los Capones concessions ("CDL"), the Board conducted a portfolio review and seeing relatively limited remaining upside for shareholders in CDL, in May 2019 the Company negotiated and agreed an accelerated close of the initial phase of works on CDL with Compañia General de Combustibles S.A. ("CGC"). This resulted in Echo withdrawing from its interests and liabilities under the CDL concessions prior to the commencement of the second stage of works on CDL in accordance with the terms of the CDL farm-out agreement thereby enabling Echo to focus on Tapi Aike.   Echo now holds a 19% interest in the Tapi Aike licence, ending the previous carry arrangement and significantly lowering its capital needs with regard to the drilling programme.

Post-Period Events

Post-period, 2020 has delivered some extremely challenging conditions from a human and an economic perspective. The impact of the OPEC+ price war combined with the demand destruction caused by Covid-19 created unprecedented downward forces on the oil and gas price and for the first time, we witnessed negative pricing for WTI. The Company acted quickly to mitigate the impact of these challenges and engaged in a renegotiation of the Company's debt, which has recently been successfully concluded. The Company has materially reduced its G&A and capital expenditure with reductions and deferrals which have resulted in lower field costs. The reduction of field costs was a stated aim following the SCS acquisition. The Company has also refocused its attention on its producing gas assets which benefit from a more robust pricing environment. We believe that the rapid actions which the Company has taken to reduce costs and streamline the operational part of the business stands us in good stead to weather this unprecedented storm and to grow the business as global activity and demand returns. We believe we have the right team in place to do this and look forward positively to the opportunities ahead.

James Parsons - Non-Executive Chairman

Martin Hull - Chief Executive Officer

Operational Review

Significant milestones achieved in Tapi Aike exploration alongside the acquisition of a material production and reserve base.

Strengthened Argentinian Portfolio

Tapi Aike

For Echo, 2019 was a year of significant milestones for operational activity in the Tapi Aike exploration licence, as the Company completed an extensive 3D seismic acquisition programme, leads were upgraded to prospects following processing and interpretation of this newly acquired seismic data. Technical work matured these prospects to drill-ready status, culminating in the spud of the first exploration well, Campo La Mata x-1, in November 2019.

Mobilisation of the seismic crew began in December 2018 and the extensive seismic acquisition programme was completed in June 2019. Following a competitive tender process, the 3D seismic acquisition was undertaken by Argentinian contractor UGA who have considerable experience executing projects in the Austral Basin. The project was completed without any Lost Time Incidents and with minimum environmental impact.

The acquisition was split across two areas in order to focus on the most prospective parts of the Tapi Aike licence, after high grading the portfolio of leads based on existing 2D seismic and well data. Firstly, the Chiripa Oeste survey, covering 414km2 in the east of the licence, aimed to better define a series of high negative amplitude features. The survey was designed to subsequently allow high quality amplitude versus offset ("AVO") analysis to further de-risk the prospectivity of the amplitude features.

The resulting Chiripa Oeste 3D seismic volume was processed by Wellfield Services and successfully demonstrated that the high amplitude features were present in the target intervals on the 3D data. Echo subsequently undertook advanced geophysical analysis by working with rock physics and AVO experts in collaboration with the operator CGC. This work identified the presence of Class III AVO anomalies that aided the high grading of prospects and the finalisation of the CLM x-1 well location.

Immediately following completion of the Chiripa Oeste seismic acquisition, the seismic equipment mobilised to the Travesia de Arriba survey, a 790km2 area in the west of the Tapi Aike licence. Here the aim of the 3D seismic shot was to better image the target reservoir intervals. Seismic acquisition was successfully completed in June 2019 and the seismic equipment demobilised. Processing of the 3D volume by Seismic Prospect S.R.L. is near completion and will be followed by geological and geophysical interpretation to finalise a well location.

The CLM x-1 exploration well in the Chiripa Oeste 3D area was spudded in November 2019 using the Petreven H-205 rig. It was drilled to a TD of 2,513m TVD, with the primary objective, the Magallanes 20 interval encountered at approximately 2,181m TVD. Additionally, two secondary targets existed, the Magallanes 60 and the Anita formation at approximately 1,977m TVD and 2,265m TVD respectively. The well encountered gas shows elevated above background levels whilst drilling through each target interval, including 1,000,000 parts per million ("ppm") in the Anita formation which indicated that the gas chromatography machine was fully saturated. Following the acquisition of 38m of core and wireline log analysis multiple zones of interest were identified. The results were sufficiently encouraging to move to completion and testing of the well, by rigless mechanical stimulation using coiled tubing and nitrogen lift. Post-period the well was hydraulically tested and stimulated and, on 19 February 2020, the Company announced it as a non-commercial gas discovery. To achieve the threshold of commerciality, it is estimated the well would require a stabilised production rate across the intervals of approximately 1.0 MMscf/d, which was not achieved from the Anita and Magallanes 20 targets. The secondary Anita target flowed at surface at an estimated rate of up to 0.57 MMscf/d with an estimated average rate of 0.35 MMscf/d. The Anita target also yielded condensate with an API gravity of 50 degrees, with a flow rate as measured at the well head at an estimated 7.5 to 18 bbls/d. The primary Magallanes 20 target flowed at surface at an estimated rate up to 0.28 MMscf/d with an estimated average rate of 0.25 MMscf/d. No condensate was retrieved from the interval. Whilst the lack of commerciality from the tested intervals was disappointing, the CLM x-1 well has proven the presence of a working petroleum system on the Chiripa Oeste 3D seismic in Tapi Aike, with the Class III amplitude vs offset characteristics being a successful predictor of the presence of gas.

Santa Cruz Sur

Exploration

Following demobilisation from the CLM x-1 location in December 2019, the Petreven H-205 rig mobilised to the Campo Limite (CLix-1001) well location in the Palermo Aike concession, part of the Santa Cruz Sur assets.

The target for the CLix-1001 well is a conventional Springhill sandstone reservoir, where a truncation geometry on to a basement high has been identified on 3D seismic. The target is supported by a negative seismic amplitude anomaly and by gas encounters in nearby legacy wells. Having spud in late December 2019, post-period the reservoir was encountered at 2,124m in January 2020. Initial analyses of the wireline log data highlighted a zone of interest comprised of fine-grained sandstones and coincided with elevated gas shows of 193,000 ppm against a background of 20,000 ppm. The presence of elevated gas shows in the target section combined with wireline log data was positive and has resulted in the Company taking the decision to move to completion and testing.

Completion and testing initially commenced at the end of February 2020 as planned but were temporarily suspended due to travel restrictions imposed by the Argentine authorities in response to the Covid-19 pandemic. Testing will resume as soon as practically possible.

Production

From 1 November 2019 Echo has been entitled to its 70% working interest share of production from the Santa Cruz Sur assets. The table below details average production by concession for November-December 2019. The Santa Cruz assets bring an important reserve base.

Financial Review

Echo engaged in a busy and diverse operational programme for the year ended 31 December 2019. The year began with the completion of the Tapi Aike seismic acquisition programme and ended with two exploration wells drilled, the first in Tapi Aike and a second in the newly acquired Santa Cruz Sur assets. These were made possible by the careful management of cash balances and the recapitalised balance sheet following the Santa Cruz Sur transaction, and associated fundraising. The Group exited the year with a plan to further initiate cost cutting in G&A and in-field operations with the new operator in Santa Cruz Sur.

Having exited the CDL asset on 19 May 2019, Echo had no revenue until the completion of the Santa Cruz Sur acquisition on 11 of November. Following the completion of seismic acquisition and two new exploratory drills, the Group loss for the year was US $13.3 million (2018: US $24.4 million).  The working capital profile of the Group has fluctuated in 2019 as it stopped, then returned to being a non-operating producer and as such the Group exited the year with a cash balance of US $1.7 million (2018: US $15.6 million).

Income Statement

Revenue of US $2.6 million (2018: Nil restated) was composed of US $1.4 million in oil sales (2018: Nil restated) and US $1.2 million in gas sales realised (2018: Nil restated).

Ø Average net oil price realised for the period was US $51.52/bbl.

Ø Gas sales were 15.5 million m3 with average realised price being US $2.36/mmbtu.

Ø Operational costs of US $3.1 million (2018: Nil restated). Operational costs for the SCS assets reflect period of exit by prior operator. Post-period Echo and the new operator are proactively working to implement an ambitious cost cutting programme.

Ø Value of stock of crude oil US $0.4 million (2018: US $0.7 million) was based on a discounted Brent price.

Ø Exploration expenses of US $0.6 million (2018: US $0.8 million) largely relates to on-going business development activity, including due diligence and on-going activity in Bolivia. Echo's interests in Bolivia are all pre-licence thus no costs relating to Bolivia have been capitalised.

Ø Gross administration expenses were US $1.0 million lower than in 2018 reflecting the management's continued focus on cost control across the Group while the team also contracted slightly to reflect changes in operational activity. Changes to the executive team in 2019, and amendments post-period in early 2020, have reduced our gross administrative spend going forward. Professional advisor fees this year related mainly to the new Santa Cruz Sur asset acquisition at the end of the year and were US $0.7 million (2018: US $0.9 million). Administration costs included the non-cash cost of options of US $0.4 million (2018: US $0.7 million).

Ø Finance costs are composed of interest payable costs of US $1.9 million (2018: US $2.0 million), the amortisation of debt fees, the unwinding of the discount on the debt issue, foreign exchange losses and the accretion of right of use assets bringing total finance fees to US $5.5 million (2018: US $4.0 million). Echo hold a substantial VAT receivable balance in Argentina, the devaluation of the Argentine Pesos has resulted in exchange losses of US $1.2 million (2018: US $0.05 million).

As Echo seeks to find success through the drill bit, exploration costs in the year have led to a loss from continuing operations of US $10.0 million in the year (2018: US $9.7 million).

Balance Sheet

CDL Licences

At the end of 2018 Echo took the decision to fully impair the value of the CDL assets as at 31 December 2018 (US $15.2 million). The completion of the fractural stimulation in early 2019 meant that there were further impairment costs in 2019 of US $2.8 million. CGC took on all outstanding liabilities on the CDL concessions and agreed to waive all outstanding work commitments. Additionally, CGC released US $2.06 million of Echo cash previously earmarked for CDL which was partially redirected towards the Tapi Aike drilling campaign costs.

Tapi Aike Licence

As a result of the Argentinian portfolio review, Echo also proceeded with restructuring its participation in the Tapi Aike license. Upon acquiring the Tapi Aike licence Echo had agreed to carry CGC for 65% of the work programme costs during the initial three-year period. Under the restructured participation Echo now holds a 19% interest and will pay 19% of costs in Tapi Aike, ending the previous carry arrangement and significantly lowering the Company's capital obligations. Echo funded the seismic acquisition campaign at 65% per the original commitment and this process was completed in June 2019. In November 2019, Echo commenced its drilling campaign in Tapi Aike, with initial well costs capitalised and expenditure continuing into 2020 with operations.

Santa Cruz Sur Licences

In October 2019 Echo announced its proposed acquisition of a 70% non-operated interest in the Santa Cruz sur package of five mature producing blocks from PETSA, a subsidiary of Phoenix Global Resources plc. Purchase of the assets was finalised on 11 November 2019 for a non-contingent fee of US $8.5 million and a contingent cash consideration of US $1.5 million if as of 1 October 2020 there is an increase in the proven reserves attributable to the Santa Cruz Sur assets. Production in the assets began to accrue to Echo from 1 November 2019 the effective date of the acquisition. Between 1 November 2019 and 31 December 2019 there was a total 24,149 bbls of oil net sold by Echo, with sales totalling US $1,395,355. Gas revenues in the period were US $ 1,190,713 for 15.5m3. At the end of December 2019, the exploration well CLix-1001 in the Palermo Aike license spud. As part of the acquisition agreement, the costs of the CLix-1001 that correspond to Echo's interest will be paid for by PETSA, the previous owner of the interest. Echo will reimburse up to 60% of these costs at a later date in a mixture of cash and ordinary shares. Total reimbursement will not exceed the maximum amount of US $1.1 million. 

Financing

The early exit from the CDL producing assets and the acquisition late in the year of the SCS assets, meant that Echo only participated in production for the first four and last two months of 2019. To fund the acquisition of the Santa Cruz Sur assets, the Company raised aggregate proceeds of US $12.8 million, consisting of approximately US $6.1 million through the issue of 193,820,000 new ordinary shares in the Company at a subscription price of 2.5 pence per new ordinary share and a €5 million secured convertible debt facility provided by Lombard Odier Asset Management (Europe) Limited and associated grant of warrants to subscribe for 74,200,000 ordinary shares exercisable at 3.0 pence per Ordinary Share. Proceeds from the subscription and the debt facility were applied towards the cash consideration of the SCS acquisition. Placing funds were subsequently used to fund operational activity in Argentina.

Working Capital

The year-on-year change in the working capital profile of Echo reflects the move away from producing activities for six months of the year, before a return in November 2019 via the acquisition of the Santa Cruz Sur concession working interest. The high level of receivables as at 31 December 2019 includes US $1.0 million from PETSA, the vendor of the Santa Cruz Sur concession working interest, reflecting post acquisition working capital adjustments. Trade receivables and accrued income from operations are US $2.2 million (2018: US $1.1 million) with additional joint venture receivables of US $0.9 million (2018: US $0.7 million). Echo's high level of investment in the previous period has built-up a VAT and retention tax balance of US $4.1 million. At the end of 2019 legislation was enacted which enables Echo to submit a claim for VAT balances that are more than six months old.  The trade payables value at year end recognises Echo's share of payables for both Argentine joint ventures of US $4.9 million.

As at 31 May 2020 Group unaudited cash balances were US $1.1 million. Whilst the directors remain acutely cost conscious and value focused, the Group recognises that in order to pursue organic and inorganic growth opportunities and fund on-going operations it may require access to additional funding. This may be sourced through debt finance, joint venture equity or share issues.

Post Balance Sheet

Echo moved quickly to materially reduce expenditure during this period of low oil prices and uncertainty arising from the Covid-19 pandemic. Substantial progress has been made with cost reduction initiatives in the Santa Cruz Sur assets. As previously announced, the Company has been exploring all options available to it to preserve existing cash resources. As part of its programme to conserve cash the Company announced that it would be asking the holders of its debts to defer all cash interest payments during 2020. At a meeting of the holders of the Company's EUR 20 million Luxembourg listed notes held on  22 May 2020 consent was given to waive the event of default in relation to the non-payment by the Company of quarterly note interest on 31 March 2020.   This restructuring followed earlier amendments to the Company's existing £1.0million secured loan and €5million secured facility such that no interest payments will be required of the Company during 2020. Instead, 2020 interest under the loan instruments shall accrue and be calculated on the last business day of December 2020 so as to form part of the principal amount of the instruments and no interest payments shall be made until March 2021.

Echo continues to work collaboratively with partners to prioritise higher margin gas sales and focus our workover rig at Santa Cruz Sur on potential near term upside of rehabilitating existing wells, whilst deferring non-essential activities and maintaining critical operations. Combined with continuing progress in the restructuring of Echo's debt, these efforts provide the Board with significant confidence for the future.

Consolidated Statement of Comprehensive Income

Year ended 31 December 2019

Consolidated Statement of Financial Position

Year ended 31 December 2019

Consolidated Statement of Changes in Equity

Year ended 31 December 2019

Consolidated Statement of Cash Flows

Year ended 31 December 2019