UK's Echo Farms into Argentine Gas

UK-listed Echo Energy has entered into a farm-in agreement with CGC, a subsidiary of Argentinian conglomerate Corporacion America International, for half of the latter's licences in Fraccion C, Fraccion D, Laguna de los Capones and Tapi Aike, it said November 2.

CEO Fiona MacAulay said that this was a "transformational acquisition" for Echo, a South and Central America-focused upstream producer set up in March 2017, and forms "the backbone of our gas business, blending exploration, appraisal and production." 

The four licences all sit in the "prolific Austral Basin of Santa Cruz province in Argentina," and the deal brings a "compelling blend of multi-trillion ft³ of exploration potential, appraisal and production," said Echo. Completion depends on third party, legal and regulatory approvals or consents and Echo shareholder approval.

The deal gives access also to existing gross production of about 11.4mn ft³/day on the two Fraccion licences, with the potential to boost this to about 80mn ft³/d, underpinned by strong local Argentinian gas prices. 

Echo, "now positioned as a leading regional gas explorer with a unique platform for growth and a staged work programme," will "continue to review further opportunities in the region," said MacAulay. Echo expects to be drilling its first well in Q1 2018.

The Tapi Aike licence, one of the largest new block awards in Argentina, has 3,400 km of 2-D seismic and three gas discoveries. Echo puts exploration potential at "multi-trillion ft³" (unrisked gas originally in place).

Echo will carry CGC for 15% of total Tapi Aike work programme costs, including four exploration wells, during the initial work programme period of three years (or four in the event of tight gas classification). This is estimated at $9mn net to Echo.

For the two Fraccion licences, with gross production of 11mn ft³/d, Echo estimates that exploration potential in the block is in excess of 1 trillion ft³ on a gross unrisked gas initially in place basis.

All discoveries across these licences are expected to be brought on stream rapidly and with low incremental costs due to the proximity to existing infrastructure, it said.

Echo will meet 100% of the costs of the initial 18-month work programme, estimated to be between $9mn and $12mn net to Echo. Thereafter there will be further costs and payments depending on the scope of work, which Echo has the cash to cover.

Echo will pay a non-refundable $2.5mn cash on signature of the farm-in to the Fraccion and the Laguna de los Capones licences, and a further $2.5mn in the event it fails to secure shareholder approval.

William Powell