Echo Energy plc, the Latin American focused upstream oil and gas company, has announced its audited results for the financial year ended 31 December 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 1,200km² 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")

Operational Review

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.

KeyFacts Energy: Echo Energy Argentina country profile