Echo Shifts Focus to Gas in Argentina
London-listed Echo Energy is seeking to ramp up gas output at its Santa Cruz Sur assets at the expense of oil production, it said in a statement on April 15, following the collapse in oil prices.
Echo said its decision was also driven by expectations of higher gas prices in the southern hemisphere autumn and winter. As part of the shift in focus, it will temporarily shut in 10 oil wells, lowering extraction by 130 barrels/day. Closing wells with a low associated gas yield will reduce costs, freeing up resources to spend on gas production.
The shut-in wells can be restarted within five days if oil prices sufficiently recover, it said. The company will also hold back 12,613 barrels of oil it has in storage from the market, for sale at a later point.
Echo added it had just extended an existing gas contract with a key customer for two further months, covering peak volumes of 4.77mn ft3 (135,000 m3)/day in June 2020. This gas will be sold at an "advantageous" price of $4.2/mn Btu, it said. The company is also targeting a 50% reduction in cash outflow by the end of April compared with the level last year.
"We have moved quickly to materially reduce our expenditure during this period of low oil prices and uncertainty arising from the Covid-19 pandemic," Echo CEO Martin Hull said. "I am pleased with progress made, in collaboration with Echo's partners, to prioritise higher-margin gas sales and focus our workover rig on the potential near term upside of rehabilitating existing wells, whilst deferring non-essential activities and maintaining critical operations."
Echo has postponed well tests at the Campo Limite project because of Covid-19 travel and transport restrictions. It has redeployed the rig, which it owns, for a well intervention and maintenance programme. Efforts continue to restructure Echo's debt, the company said.