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Time to consider Echo Energy at a 30% discount to its recent placing price? (ECHO)

Echo Energy (LSE:ECHO) ended last year with an acquisition of interests in oil and gas assets in Argentina. The farm-in offers significant potential upside with a substantial drilling program in 2018. At the end of October the company had cash in the region of $30m and raised a further £4.7m in a placing at the time of the acquisition, meaning Echo is well funded to carry out its operations this year. Today’, Echo is 12.3p to buy, which represents a 30% discount to the last placing price, which was 17.5p.

Earlier this month, ValueTheMarkets.com highlighted the potential upside on offer should the company’s work program be successful. A glance at Echo’s chart today shows price action is narrowing into a possible ‘Falling Wedge’. The general consensus is that this pattern usually concludes with a continuation of the previous price trend, which, prior to the last placing was upward. I also note that there is an alternative downward trend formed from the last share price highs. However, I believe the company’s fundamental story and its strong cash balance, give sufficient weight to a bullish interpretation.

Author: Stuart Langelaan

Disclosure:
The author of this piece owns shares in the company written about above

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