UK Explorer Expands in Argentina

London-listed Echo Energy has expanded its footprint in Argentina, acquiring non-operated stakes in five mature producing blocks in the Austral basin.

Echo will acquire 70% stakes in the Santa Cruz Sur blocks from UK-based Phoenix Global Resources, for $7mn in cash and $1.5mn worth of shares, it said in a stock exchange filing on October 21. It will pay an additional $1.5mn if there is an increase in the assets’ proven reserves by October 2020.

The blocks lie adjacent to Echo’s flagship Tapi Aike exploration project, and will add 13.7mn barrels of oil equivalent to the firm’s 2P resources. They have been producing for two decades, with output grossing 3,761 boe/day of mostly gas but also oil in the first half of this year. They generated $42.5mn in revenues, $10.9mn in Ebitda and a pre-tax loss of $3.33mn in 2018.

After completing the takeover, Echo will look to counter natural decline at the assets with a workover programme.

“On completion, the acquisition would mark a positive rebalancing of the portfolio to provide both exciting exploration upside coupled with highly material revenues for a company of Echo’s size,” company CEO Martin Hull said. “Not only will these assets broaden our footprint strategically within the Austral Basin, but with material positive cashflow they will add optionality in terms of how we finance the business in the months and years ahead.”

Echo is paying “an attractive price” for assets at a “substantial discount” considering their proven reserves, according to Hull.

“This value accretive transaction will create a new platform from which to grow Echo and adds many catalysts to our existing drilling programme at Tapi Aike,” he said.