New seismic contract sees Echo Energy take major step forward at Tapi Aike (ECHO)

By Patricia Miller

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Today saw Echo Energy (LSE:ECHO) sign a contract to survey new leads across its Argentinean portfolio, including several opportunities within its highly-prospective Tapi Aike licence. However, with the market already anticipating the news, the firm failed to recover any of the losses it suffered last week following the failure of a key well, with shares sitting flat at 12.6p as at the time of writing.

In today’s update, Echo announced that, through local partner CGC, it has signed a deal with UGA Seismic SA (UGA), to acquire 1960km2 of 3D seismic data. UGA will set up in Tapi Aike in November this year before moving to Fraccíon C and Fraccíon D. The acquisition programme is expected to complete in Q2 2019. Echo will target at least three independent exploration plays at Tapi Aike in a bid to de-risk the drilling of four exploration wells in the area next year.

The news marks a crucial step forward for Echo at Tapi Aike, its potentially game-changing exploration permit in the foothills of the Andes Mountains. A Competent Person’s Report has identified 41 leads over three independent plays at the site, with 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, with the total high case potential of over 20 trillion cubic feet of gross gas in place.

Fiona MacAulay, chief executive officer at Echo, said: ‘We are very pleased to have been able to finalise the contract award for seismic acquisition with UGA Seismic SA, a renowned Argentinian operator and part of the South American Seismic group of companies. The negotiation of the competitively priced contract has provided us with significant cost savings against our originally forecast budget and means that we will be able to shoot the entire committed seismic in one of our most exciting licence areas over the next few months. We look forward to updating our shareholders further as the programme progresses.’

The potential on offer following today’s news will be music to the ears of Echo’s investors after the business’s shares fell by 11.5pc to 12.5p last Thursday. The fall followed the news that its CSo-2001(d) well in Fraccíon D was unlikely to ‘contribute economically’ after being hit by major pressure depletion. Speaking to ValueTheMarkets, McAulay admitted that the news was disappointing. However, she added that it is unlikely to have much long-term impact thanks to Echo’s low drilling costs and the potential still on offer at Fraccion D:

‘The gas shows were very impressive when drilling, and the log data was very encouraging, but when we came to test it, the unit was just really depleted. Obviously, we would not have drilled it unless we wanted it to add production and it would have been nice for Cso-2001(d) to add into the gas development we have in Fraccíon D. However, the long-term impacts are likely to be minimal- the wells in this programme are being drilled at less than $1.5m each and are then tested for around $500,000. We are talking about numerous, really low-cost catalysts that, when taken together, can get us to a much bigger scenario.’

Author: Daniel Flynn

The author does not own shares in the company mentioned in this article

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This article does not provide any financial advice and is not a recommendation to deal in any securities or product. Investments may fall in value and an investor may lose some or all of their investment. Past performance is not an indicator of future performance.

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