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Echo Energy sinks following failed well stimulation efforts (ECHO)

Shares in Echo Energy (LSE:ECHO) sank by more than a third to 5.3p on Tuesday morning following disappointing results at a critical well in Argentina.

The firm, which is currently sitting at multi-year lows, announced that it had completed mechanical stimulation and testing operations at the EMS-1001 well on its Fraccion C licence. However, after producing a mixture of pumped stimulation fluid and formation water no hydrocarbons were recovered from the site.

According to Echo, this indicates that the hydrocarbons it had interpreted at the site are not mobile. As a result, the firm has concluded that EMS-1001 is not commercial and no further testing is required. The well will now be shut in.

Echo announced that it had begun work to stimulate EMS-1001 back in December alongside the news that Fiona MacAulay would be stepping down as chief executive of the company. She is now operating as a non-executive director at the business. In her place, former chief financial officer Martin Hull was appointed managing director with immediate effect.

On Tuesday, Hull said the well’s failure demonstrates the challenges of working in a ‘new volcaniclastic play’. Despite the disappointment, he added that the business will now push on with its busy 2019 work programme in Argentina.

Much of this will focus on Tapi Aike, where a seismic acquisition programme is ongoing. In December, Echo said it expects this work to define a four-well exploration drilling campaign. Each well is estimated to cost between $2m and $5m net to Echo.

A Competent Person’s Report at Tapi Aike, based in the foothills of the Andes Mountains, has identified 41 leads over three independent plays at the site. These are thought to contains gross prospective resources of up to 4.2 trillion cubic feet of gas at the best estimate level. The most significant two leads each potentially contain 3.8 trillion cubic feet and 2.6 trillion cubic feet of gross gas in place. All-in-all, this translates to a total high case potential of over 20 trillion cubic feet of gross gas in place.

Echo will also focus on more typical reservoirs in the Springhill formation on its C, D, and L licences in the east of the Austral basin in 2019.

Author: Daniel Flynn

Disclaimer: The author does not own shares in any of the companies mentioned in this article

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