Annual Report
FOR THE YEAR ENDED 31 DECEMBER 2020
Echo Energy Annual Report 2020
Echo Energy is a balanced, Latin
America focussed, full cycle energy
Company with a portfolio centred on
the onshore Austral basin, Argentina.
The portfolio comprises a significant
production base, with enhancement
opportunities, in combination with
high impact exploration acreage.
Echo Energy’s growth strategy targets both near-term, lower
risk options across the energy spectrum alongside longer-term
acquisitions, with a disciplined approach to delivering shareholder
value from its existing portfolio and new opportunities.
Echo maintains its philosophy of equitable treatment and open
communication with all our stakeholders and the communities in
which we operate.
Contents
Strategic Report
Key Highlights
Chairman’s and Chief Executive Officer’s Statement
Business Model
Strategy & KPIs
Assets
Portfolio
Operational Review
Sustainability Review
Managing Risks
Stakeholder Engagement
Financial Review
Governance
Corporate Governance Statement
Health and Safety Review 2020
The Team
Directors’ Remuneration Report
Directors’ Report
Statement of Directors’ Responsibilities
1
2
5
6
8
9
10
12
14
16
19
23
29
30
32
34
36
Financial Statements
Auditor’s Report
38
Consolidated Statement of Comprehensive Income 43
Consolidated Statement of Financial Position
Company Statement of Financial Position
Consolidated Statement of Changes in Equity
Company Statement of Changes in Equity
Consolidated Statement of Cash Flows
Company Statement of Cash Flows
Notes to the Financial Statements
Shareholder Information
44
45
46
47
48
49
50
80
Strategic Report
Corporate
COVID-19
• Major travel restrictions imposed by the Argentine
government impacted local operations at the beginning of the
period.
• Adapted swiftly to challenges presented by COVID-19.
- Liaised with partners to ensure on-ground employees
and personnel continue to operate in a safe environment.
- Implemented remote working in the UK, which has been
made permanent thereby reducing material costs of
office space.
GTL International S.A.
• Post-period, Echo entered into a cooperation agreement
with GTL International S.A. (“GTLI”) to seek future
opportunities in Bolivia.
• Opportunities span both hydrocarbon and renewables
sectors.
Financial
• Fourfold increase in revenue from US $2.6 million in 2019 to
US $11.1 million in 2020.
• During the period, successful restructure of the Spartan
£1.0 million 12.0% loan facility with all 2020 interest
payments deferred to the principle’s date of maturity.
Additionally, the Company’s Luxembourg listed EUR
20.0m 8.0% secured notes (“Bonds”) deferred all interest
due in 2020 to repayment on maturity in May 2022.
• Successfully completed equity fund raises in August and
December 2020, raising gross proceeds of US $1.54 million
(£1.18 million).
Post Period End Debt Restructuring
• Post period restructure of the Lombard Odier debt facility,
extending bond maturity date and deferring all cash
payments until repayment of the principal. The Bonds
were further restructured, extending bond maturity
date and deferring all cash payments to May 2025. This
restructuring materially transposes the Group’s position,
with only a £250k debt facility cash payment commitment
for 2021.
Key Highlights
Santa Cruz Sur
• Average net daily production in 2020 was:
- 10.2 mmscf/d of natural gas
- 259 bbls/d of oil and condensate
- Total: 1,966 boepd
• Overall, in 2020, Echo’s net cumulative production was:
- Natural gas: 3,750 mmscf
- Oil and condensate: 94,693 bbls
- Total: 0.72 MMboe
• Reserves and resources1:
- 1P (Proved): 3.13 MMBoe
- 2P (Proved & Probable): 4.06 MMboe
- 7.20 MMboe Contingent Resources (High estimate)
• Rapidly adjusted to oil price reduction in March 2020
by significantly reducing operating costs, shutting in oil
production and postponing significant capital spending.
• Restored a portion of the previously shut-in oil production
before year end, with no adverse impact on the wells during
the offline period. Production capacity will be further
increased by the facilities upgrade announced in Q1 2021.
• Matured the workover programme including the Monte
Aymond project to retain flexibility on a risk-reward scale
and the opportunity to take advantage of commodity price
upswings.
• Favourable fiscal environment has led to the receipt of
certain VAT payments, improving business cashflow.
• Secured new gas sales contracts at premium rates to the
prevailing spot markets.
• Four gas compressors, previously leased to Santa Cruz Sur
(“SCS”) partners, have been purchased outright to improve
output and operational efficiency.
Tapi Aike
• Entered into an option agreement with Compañia
General de Combustibles S.A. (“CGC”) to reposition
Echo’s participating interest to relieve all licence funding
requirements.
• Echo allowed the option to lapse to focus on cost reduction
and cash generative production opportunities, as well as
other opportunities across the energy spectrum.
1 Company estimate as at 31 December 2020
“Echo’s resilience during a very challenging year has ensured that we have been able to continue our operations efficiently
and build firm foundations commercially and operationally despite the difficult external conditions. Not only have we made
significant cost-saving efforts across the Company and rebalanced our financial position to provide increased flexibility, but
we have also achieved tremendous operational progress across our SCS assets where we currently benefit from a favourable
fiscal environment and attractive gas sales agreements with key customers. Moving forward, we are excited by the continuing
expansion opportunities at our SCS assets, where we aim to maximise production potential, and we are also encouraged by
the potential for new hydrocarbon and/or renewable energy prospects in neighbouring Bolivia and elsewhere in the Region. The
framework for 2021 and beyond has now been set in place, and we look forward to capitalising on our various growth catalysts.”
Martin Hull,
Chief Executive Officer
1
Echo Energy Annual Report 2020
Chairman’s and Chief Executive
Officer’s Statement
James Parsons
Non-Executive Chairman
Martin Hull
Chief Executive Officer
2
Similar to many businesses and the
communities in which Echo Energy
plc operates, the Company faced
unprecedented challenges during
2020 with the global pandemic
having an impact upon all aspects
of the Company’s operations and
fundamentally changing the financial
environment in which we operate.
Your Company has emerged from
these challenges operationally
stronger, financially more robust
(following the successful debt
restructuring) with a renewed focus
on its positive growth strategy. This
is testament to the strength of the
underlying business, the combined
efforts of team and partners and at
times the patience of shareholders
and wider stakeholders. We are
grateful for your support throughout
the turbulent year.
2020 marked the first full year of
operations at the Santa Cruz Sur
assets following the successful
integration of the acquisition
completed in November 2019. The
acquisition of the 70% interest
in SCS was an important step in
delivering against our strategy of
building a full cycle Latin America
focussed energy Company.
With its strong asset base and
improved financial flexibility Echo is
now very well placed to benefit from
an active operational programme
and is highly leveraged to improving
economic and market conditions.
Argentina
Santa Cruz Sur
The SCS assets provide material production, generating
material cash flow from a strong reserves base. The
portfolio also includes significant upside from relatively
low risk production enhancement opportunities
combined with exciting higher impact projects.
Production remained in line with expectations during
2020 after a decision was made in April 2020, to
temporarily shut in the majority of oil production and
focus on gas. This was a response to the significant
oil price drop at the end of Q1 2020. Average daily
production throughout the year net to the Company
was 1,966 boepd (including 10.2 MMscf/d of gas). Total
net cumulative production was 720,000 boe (including
3,750 MMscf of gas) in the year.
The Company estimates that as at 31 December 2020,
the SCS reserves base stood at an estimated 3.13
MMboe for 1P (Proved) and 4.06 MMboe for 2P (Proved
& Probable) each net to the Company’s 70% non-
operated working interest. The reduction in 1P (Proved)
reserves from the position as at December 2019 was
less than the production from the assets during the year
(0.72 MMboe net to Echo) and as such demonstrated the
positive impact of the activities undertaken to migrate
2P reserves (Proved & Probable) into the 1P (Proved)
category during the period. As commodity prices fell in
March 2020, the Company took the financially prudent
decision to defer capital expenditure and postpone
final investment decisions on select activities. The
volumes associated with these activities (6.51 MMboe
net to Echo’s 70% interest) have now been reclassified
3
Strategic Report Echo Energy Annual Report 2020
into Contingent Resources from 2P reserves (Proved &
Probable), but are expected to return to reserves once
future investment decisions are taken, and the current
commercial contingencies to development are removed.
The Campo Limite exploration well (“CLi.x-1001”) on
the Palermo Aike concession, was successfully drilled
in the early months of 2020. As a result of government
restrictions imposed in response to the COVID-19
pandemic testing of this well was however interrupted.
The well remains a material potential upside for the
Company with the potential to increase reserves and
resources in the Palermo Aike concession and open up
additional commercial options. Well testing activities
remain an operational priority and will resume once
pandemic constraints are lifted, and within an optimised
work schedule. The wider portfolio of opportunities
within SCS was expanded by maturing a set of
workovers and interventions to increase production.
In addition, the Monte Aymond gas project was also
assessed as commercially viable and, given the location
near to Campo Limite, a hub development approach is
being considered. These activities represent an exciting
future work programme designed to expand production
and generate continuing growth for the future.
Tapi Aike
In line with the Company’s focus within its portfolio
on cash generative production and on reducing costs,
while maintaining upside exposure, Echo entered into an
agreement with the operator of Tapi Aike to reposition
the Company’s 19% participating interest in Tapi Aike.
This agreement enabled Echo to cease commitments
to ongoing pre-drill expenditure at Tapi Aike, whilst
maintaining an option for the Company to re-enter the
western area of the Licence. At the end of the period,
having reviewed all available data, the Company decided
to continue with its production led strategy and therefore
allowed the option to re-enter the Tapi Aike asset to lapse.
Bolivia
The Board believes that there remain considerable
opportunities across the energy spectrum in Bolivia.
Building on existing long-term relationships and to
enhance business development initiatives in the country,
post period Echo signed a cooperation agreement with
GTL International S.A. pursuant to which the parties
intend to collaborate and jointly assess new opportunities
across the full energy spectrum, including solar and wind
in the renewables space and E&P opportunities.
Finance
From Q1 2020, the Group sought to strengthen our
financial position, firstly through the restructure of the
unlisted debt facilities, releasing capital which could
then be invested directly into the business to accelerate
growth projects or support accretive optionality.
2020 was the Company’s first full year of operations at
the SCS assets. As a result, revenue saw a more than
fourfold increase over 2019 levels and at more than US
$11 million represented the largest annual figure in Echo’s
4
history. Despite the material increase in the business’ size
and associated complexities, the Board moved quickly
to adapt to the realities of the difficult 2020 operating
circumstances to preserve cash and reduce costs. General
administrative costs, including head office costs, were
reduced by approximately 15% from 2019 levels.
In the prior year management reported a material
uncertainty in respect of going concern. Based on the
post year end debt restructuring, the current level
of revenue and cash generation and the sensitivities
considered in respect of the cashflow forecasts, and the
mitigating actions that could be taken to conserve cash
in a worse- case scenario, management do not consider
there to be a material uncertainty in the current year.
Successful Debt Restructuring
In Q1 2021 the Company successfully completed the
restructuring of both the Company’s Bonds and the
Company’s EUR 5.0m 8.0% secured convertible debt
facility loan. This represented a landmark step for the
business by materially improving the financial outlook
through the deferral of maturity until Q2 2025 and
no cash interest payments prior to the maturity date.
The agreement, with the support of the debt holders
not only substantially strengthens the balance sheet
it enables for the reinvestment of cashflow into the
business to drive further growth.
Outlook and Continuing Growth
Whilst 2020 brought extreme market volatility and a
significant decline in commodity prices, 2021 has already
seen a markedly improved market environment. As an
example, Echo has recently secured gas prices averaging
$2.64/mmbtu from industrial clients for the period May
2021 to April 2022 which represents an approximate
126% increase from the corresponding previous year.
Similarly, the market for the Company’s liquid production
has now normalised with regular sales taking place and
global benchmarks returning to pre pandemic levels.
These factors combined with the underlying operational
and financial progress make for a much-improved
outlook in 2021 and beyond.
The Board remains committed to the Latin America energy
growth strategy, and, alongside the continued expansion of
the SCS portfolio, continues to consider potential growth
options. The rapid and ongoing changes to the global
energy mix, and the market and political response to the
climate change challenge offer considerable potential for
companies with the right capabilities and vision. As such
Echo expects to consider investments across the energy
spectrum in future and assess them against its strict
operational and profitability criteria.
The framework for 2021 and beyond has now been
established, and we look forward with renewed
confidence to capitalising on the opportunities ahead.
James Parsons
Non-Executive Chairman
Martin Hull
Chief Executive Officer
Business Model
e
r
Ex pl o
G r o w
Mo
n
e
t
i
s
e
Create
value
Key Resources
• Highly experienced team with proven track record
• Diversified portfolio of exploration and production licences in Latin America
• Active business development focus
• Prudent cost management with strong focus on safe and efficient operations
• Leading regional partners
Explore &
Produce
Committed to targeting acreage
positions that have the capacity
to deliver substantial portfolio
value through the E&P cycle,
initiating drilling campaigns
that will provide the opportunity
to significantly increase our
reserves and resources base.
Grow Monetise
We have demonstrated our
origination and deal-making
capability and continue to seek
new corporate and high-impact
asset acquisition opportunities
across the energy spectrum, which
further strengthens our position.
Echo looks to add value to our
existing assets by optimising the
asset infrastructure, efficiently
drilling new wells and/or initiating
and completing workovers.
Executing commercial
agreements at strategically
correct points in time to ensure
that the value of the portfolio
is maximised to the benefit of
the shareholders. Our team
is experienced and set up to
execute such deals.
How We Create Value
We have an energy focussed agenda and operate in proven hydrocarbon basins that benefit from existing
infrastructure, enabling us to create value through an active operational programme whilst simultaneously
building the business through further acquisitions. We create value by acquiring high-quality acreage, generating
high-grade opportunities while operating with a cost-effective focus. This allows us to maximise the risk reward
profile of the business while actively pursuing merger and acquisition opportunities across the energy spectrum
Echo’s market position and size enables it to be a nimble and proactive player in Latin America.
5
Strategy and KPIs
The Key Performance Indicators
(“KPIs”) are how we measure the
performance of our board of directors,
executive team and staff against the
strategic objectives of the business.
Echo has strategic objectives focussed on the following
five areas: Growth, Asset Performance, Safety &
Environment, Funding and Corporate. How the Board
has delivered against these metrics in 2020 is evidenced
in the Performance column below.
2020 KPI
1. Growth
Measure
Performance
Diversify asset base with
further asset or corporate
acquisitions to build on the
existing Argentinian position
Develop opportunity
pipeline and inventory
After successful integration of the SCS assets
during 2020, the Group successfully matured the
Monte Aymond project, proving this to be an exciting
commercial project.
Mature the Bolivian
opportunities
Formalise relationships
in country
A decision was made to exit Tapi Aike, in keeping with Echo’s
focus on high impact cash generative production and focus
on the lower risk potential in other SCS assets
Post period, Echo signed a cooperation agreement with GTL
International S.A. over a five-year period. Both companies
intend to collaborate and jointly assess new opportunities
across the full energy spectrum
2. Asset Performance
Measure
Performance
Oil and gas production
Daily production
Increase productivity of the
existing assets
Increase in boepd of
existing wells
Reposition portfolio to focus
on high-impact cash generative
production and lower-risk
potential upside
As expected throughout the year with delivery of
gas continuing uninterrupted to customers during the
period. COVID-19 has not hindered production
Matured a portfolio of workovers and other opportunities
with optionality around risk-reward balance and ability to
rapidly respond to commodity price upswings
Decision to exit Tapi Aike and associated capital
expenditure
3. Safety and Environment
Measure
Performance
Sustained high quality safety,
reporting and performance
Systems for HSE reporting and review of
Operator HSE systems have been implemented.
All non-routine operations are subject to a rigorous
HSE review with the Operator prior to start up
6
Echo Energy Annual Report 2020 4. Funding
Fund the subsequent
development of new business
ventures and continued
operational programme
Measure
Performance
Successful fund raises
Successful additional funding through issue of
equity, to allow Echo to pursue value accretive
transactions
Identify opportunities to
monetise assets following
success
Increase production
from asset base
SCS cost reduction measures were implemented in the
field, and the Company has successfully navigated through
2020’s challenging economic and unprecedented times
Improve corporate level debt
status, allowing increased
flexibility and options
Restructuring of
Company bonds
Effective debt restructuring of all existing long term loans,
enhancing cashflow and strategic flexibility available to
the Company
5. Corporate
Safety and environment
Cost control
Measure
Performance
Maintain transparent
relationship with investors
Regular investor
engagement
Staff diversity
2020 KPIs
Maintain a clean safety record with no significant
incidents in periods of production and operation
under Company operated control
Progress made with large reductions to G&A both in the
field and at corporate level, while maintaining an active
work programme
Regular web-based investor forums were held and direct
investor enquiries are always answered. Maintained a
measured approach to expectation
No additional hiring required given operating
circumstances, therefore staff losses not replaced
The 2020 performance of the business and its staff will be
measured across both financial and operational functions
and is captured in a corporate scorecard. The scorecard
is made up of various KPIs and is tracked throughout the
year. The Board’s and executives’ performance are judged
on the delivery of the desired outcomes and a summary of
these targets is listed below:
•
•
Maximise shareholder value from newly acquired
assets;
Identify and mature high-quality opportunities for the
operational programme;
•
•
•
•
Continue to seek opportunities to diversify asset base
with further asset or corporate acquisitions;
Mature the Bolivian opportunities in the portfolio;
Pursue opportunities to monetise assets following
success; and
Maintain cost control with expenditures appropriate
to size and scale of company.
General corporate and operational objectives include HSE,
sustainability, cost control, investor support, and staff
diversity.
7
Strategic Report Assets
The portfolio has now been
restructured following the withdrawal
from Tapi Aike to provide a strong
revenue-generating gas-dominated
production base underpinned by a
material reserve base. Significant
revenue growth is now possible given
Echo is now leveraged to the global
demand recovery through continued
increase in commodity prices.
The SCS assets represent the material production
base of the Company. The assets consist of five
production concessions, which produce gas and oil
that contribute significant revenues to the Company.
The assets are located in the east of the onshore
Austral basin, with infrastructure in place for gas
transport by pipeline to Buenos Aires and oil sales
at the Punta Loyola terminal for both domestic and
export sales.
Echo has an exciting and well-defined growth
portfolio across the risk-reward spectrum. Providing
a balanced opportunity set with short payback
periods and, optionality and flexibility to respond
to continued upswings in commodity prices. The
Company is looking to enhance these existing assets
with new opportunities across the energy spectrum
in Latin America, utilising its reputation for M&A and
commercial innovation.
Multiple opportunities exist within the current portfolio
to increase base production as oil demand continues to
rebound bringing on existing wells or undertaking low
cost/low risk production enhancement opportunities
with short payback times. The assets also high impact
exploration upside, which includes recommencing the
Campo Limite (CLi.x-1001) well test. The assets provide
a risk-reward-cost balance providing optionality to
enable flexible decision making to take advantage of
market conditions.
Licence
Tapi Aike
Campo Bremen
Chorrillos
Océano
Moy Aike
Palermo Aike
Status
Exploration
Production
Concession
Production
Concession
Production
Concession
Production
Concession
Production
Concession
Echo
Participation
Non operator
19%
Non operator
70%
Non operator
70%
Non operator
70%
Non operator
70%
Non operator
70%
Expiry
Withdrew
effective
April 2020
April 2026
April 2026
August 2026
April 2026
August 2026
Area (km2)
5,187
687
647
108
714
537
8
Echo Energy Annual Report 2020 Portfolio
The Company is well positioned to
build a diversified energy portfolio
with a strong cash generating E&P
foundation to support value accretive
activities across the energy spectrum.
Echo is a significant acreage holder in the basin with
access to over 2,600 km2 of licences containing 12 oil and
gas fields and 82 production wells. This demonstrates
Echo’s commitment to the future of exploration and
production potential of this part of Argentina.
Santa Cruz Sur is a gas dominated portfolio, and the
Company’s majority 70% non-operated interest provides
an ability to significantly influence operational strategy.
This gas focussed E&P portfolio is appropriate for energy
transition and, provides oil price upside. The Company
is now significantly leveraged to the current increase in
commodity prices and can continue to take advantage
as global demand recovers from 2020. Production
from SCS is revenue generating for the Company, and
the portfolio of opportunities provides a flexible and
range of well-balanced risk-reward upside options. This
portfolio provides potential high-reward exploration
upside with potential success at Campo Limite, low
cost/low risk production enhancement opportunities
with short payback times and the ability to increase
base production as oil demand rebounds.
In 2020 the Company was able to partially replace the
loss in 1P (Proved) reserves due to realised production
(0.72 MMboe), through the technical maturity of the
opportunity set within the portfolio. 1P (Proved) reserves
at year end were 3.13 MMboe, which is higher than would
otherwise be the case given production in the year. The
original acquisition of the SCS assets in 2019 was based
on proved reserves economics. Current proved reserves
1,966 boepd
Average net daily production 2020
720,000 boe
Total production net to Echo 2020
3.12 MMboe
Net 1 P (Proved) reserves
per December 2020 remain similar to those at acquisition,
adjusted for production. As commodity prices fell in
March 2020, The Company took the financially prudent
approach to push back capital spending and postpone
final investment decisions on some activities. The
volumes associated with these activities have now been
reclassified into Contingent Resources from 2P reserves
(Proved and Probable), but once future investment
decisions are made, these are expected to mature back
into 2P (Proved and Probable) reserves.
Building on existing long-term relationships in Bolivia,
and to enhance business development initiatives in
the country, post period, Echo signed a cooperation
agreement with GTL International S.A. over a five-year
period. GTLI is a majority owned subsidiary of the Bolivian
company UruboCorp and has interests in both the Bolivia
hydrocarbon and renewables sectors. Both companies
intend to collaborate and jointly assess new opportunities
across the full energy spectrum, including solar and
wind in the renewables space. GTLI is a leading Bolivian
energy operator and holds the El Palmar operational
hydrocarbon contract with the Government of Bolivia.
This cooperation agreement reflects the Company’s focus
on growing a gas led energy portfolio in Latin America by
combining the enhancement of existing assets with new
growth opportunities across the energy spectrum. The
process will always follow strict criteria for value accretive
M&A whilst utilising the Company’s M&A recognised
expertise and skills for commercial innovation.
Company Reserves & Resources are classified in
accordance with the Society of Petroleum Engineers’
PRMS 2018 update and are shown in accompanying
tables as estimated by the Company as at
31 December 2020.
Santa Cruz Sur Net Reserves
Reserves Net to 70% Working Interest
Oil (MMbbls)
Gas (Bcf)
Oil Equivalents (MMboe)
Proved &
Probable
Proved,
Probable
& Possible Proved
Proved &
Probable
Proved,
Probable
& Possible Proved
Proved &
Probable
Proved,
Probable
& Possible
Proved
0.70
0.94
1.12
13.66
17.50 19.45
3.13
4.06
4.59
Santa Cruz Sur Net Contingent Resources
Contingent Resources Net to 70% Working Interest
Oil (MMbbls)
Gas (Bcf)
Oil Equivalents (MMboe)
Low
Estimate
Best
Estimate
High
Estimate
Low
Estimate
Best
Estimate
High
Estimate
Low
Estimate
Best
Estimate
High
Estimate
0.00
1.19
1.33
0.00 29.88 32.99 0.00
6.51
7.20
Santa Cruz Sur Net Prospective Resources
Prospective Resources (Bcf) Net to 70% working interest
P90
10.3
P50
43.0
Pmean
90.5
P10
458.2
9
Strategic Report Operational Review
Santa Cruz Sur
As a response to the significant
drop in global oil prices in Q1 2020,
significant progress was made to
restructure operations in Santa Cruz
Sur and focus on gas production.
This later enabled the Company to
capitalise on the improved market
conditions, which later materalised,
and quickly restart oil production.
Production
Production remained in line with expectation in 2020.
Average daily production throughout the year net to
the Company was 1,966 boepd (including 10.2 MMscf/d
of gas). Total net cumulative production was 720,000
boe (including 3,750 MMscf of gas) in the year.
As the implications of the COVID-19 pandemic began to
be felt in Q1 2020 through the significant fall in global
oil prices, the Company quickly began to restructure
operations in the SCS assets to focus field operations
on the production of gas. As part of this initiative, the
majority of producing oil wells were temporarily shut in,
easing the management of ongoing monthly cash costs
with the intention of opening up the production when
oil prices recovered. That economic recovery was well
underway by September 2020, with improved market
conditions enabling an initial phase of oil production
to be brought back online. These were wells that have
historically shown a lower volume of produced water.
Subsequent production data were positive and showed
that there had been no detrimental impact during the
period of shut in. In early December, a second phase to
bring shut in production back online was completed for
several Springhill and Tobifera fields in the Chorrillos
and Palermo Aike licences. Again, the production levels
from those wells previously shut in indicates that the
shut-in period did not have a detrimental impact on
reservoir behaviour. The third and final phase to bring
production online is expected to be complete in 2021.
Investing In Infrastructure For Future
Production
As a response to improved market conditions towards
the end of Q3 2020, the Group and its partners in
the SCS Joint Venture, took the decision to purchase
four gas compressors that were previously leased on
a monthly basis. This new arrangement is expected to
reduce gross monthly operating expenditure by around
US$100,000 when compared to the previous lease
arrangement, as well as providing security for future
gas production.
10
Echo Energy Annual Report 2020 During the period, the Company expanded the wider
portfolio of activities within SCS by maturing an
opportunity set of workovers and interventions to
increase production. The cost of workover potentials
identified is low, as compared to the cost of a new well,
and given that the workovers sit in the developed part
of the field, they are straight forward to bring on line.
In addition, the Company completed an assessment
of the Monte Aymond gas project. The Monte Aymond
project located 5.2 km to the west of Campo Limite on
the Company’s existing Palermo Aike licence at SCS,
involves working over the Monte Aymond well which
was drilled successfully in 1984, targeting a Springhill
reservoir structure imaged on 3D seismic.
The well successfully discovered and tested gas and
condensate at an initial flowrate of 2.4 MMscf/d,
and subsequently at an average rate of 5 MMscf/d
over a longer 10-month period of production. Whilst
this well was previously abandoned, the Company is
considering the development of Monte Aymond via a
hub development approach.
Post period and following continued improvements in
market conditions, the Group decided together with
the SCS partners, to invest in our capital assets via an
upgrade and debottleneck the existing liquids pipelines
in the SCS assets, to accelerate the return to full oil
production and to bring the remaining volumes previously
shut in Q2 2020 back online. The pipeline upgrades will
also provide additional capacity for those production
enhancement projects that have been identified in the
Company’s opportunity portfolio at SCS.
Exploration
At the start of the year the Campo Limite CLi.x-1001
well was drilled in the Palermo Aike concession, part of
the SCS assets.
The target for the well is a conventional Springhill
sandstone reservoir, where a truncation geometry onto
a basement high has been identified on 3D seismic. The
target is supported by a negative seismic amplitude
anomaly and by gas encounters in nearby wells.
The reservoir was encountered at 2,124m in January
2020 and initial analyses of the wireline log data
highlighted a zone of interest comprised of fine-grained
sandstones and elevated gas shows in the target
section. Combined with the wire line log data, this was
taken as a potentially positive indication and resulted in
the decision to move to completion and testing.
Due to travel restrictions imposed by the Argentine
authorities in response to the COVID-19 pandemic
completion and testing have been suspended. It is
expected to resume as soon as practically possible and
this remains an operational priority for the Group.
Tapi Aike
In line with the Company’s focus within its portfolio
on cash generative production and on reducing costs,
while maintaining upside exposure, Echo entered into
an agreement with CGC to reposition the Company’s
19% participating interest in Tapi Aike. This agreement
enabled Echo to cease commitments to ongoing
pre-drill expenditure at Tapi Aike, whilst maintaining
an ‘Option’ for the Company to re-enter the western
are of the Licence once pre-drill technical activities
have been completed and Echo had assessed the data
available. This enabled the Company to sharpen its
near-term strategic focus on low-risk high-impact cash
generative production and substantial development
and exploration opportunities at SCS, whilst
streamlining overall operational costs. At the end of the
period, having reviewed all available data, the Company
decided to allow the Option to lapse consistent with
its strategy.
Average Daily Production, 2020
Campo Bremen
Chorrillos
Océano
Moy Aike
TOTAL
Net Cumulative boe
Net boe/d
138,568
440,575
117,953
22,616
719,711
379
1,204
322
62
1,966
11
Strategic Report Sustainability Review
As a corporate citizen operating
across Latin America and in the
UK, Echo believes in conducting a
business that brings positive impact
in the medium to long term, drives
progress and respects the resources
on which our future depends.
Our Corporate and Social
Responsibility (“CSR”) Objectives
Echo seeks to manage and maintain positive and
respectful relationships with our stakeholders. To meet
these objectives, Echo aims to:
•
•
•
•
Protect the health, safety and wellbeing of our
staff, contractors and the local communities our
operations impact upon;
Manage and maintain positive and respectful
relationships with the communities with which we
conduct business and in which we operate;
Maintain a high standard of care for the natural
environment and adopt appropriate environment
management systems on our contract areas; and
Reduce our environmental footprint by efficient use
of resources, management of water and energy
consumption and management of waste and
emissions.
Anti-Bribery and Corruption (“ABC”)
Echo has zero tolerance for bribery, corruption or
unethical conduct in our business. Our policies require
compliance with all applicable ABC laws, in particular,
the UK Bribery Act, and the Argentine Foreign Corrupt
Practices Act. The majority of our operations are
based in Argentina. The Transparency International’s
Corruption Perception Index (“CPI”) assesses corruption
in the public sector when ranking different countries.
In 2020, the CPI ranked Argentina 78 out of 180
participating countries worldwide with a score of
42/100. Bolivia is ranked 124 out of 180 with a score of
31/100. By comparison, the UK is ranked at 11 out of
180 with a score of 77/100.
Echo operates in a competitive market and faces
competition in securing and maintaining licence
interests, forming partnerships, attracting, and
retaining the most efficient service providers and
building cooperative relationships with all stakeholders.
We are very aware of the pressures and challenges that
we face. However, we are committed to upholding the
highest levels of corporate and operational behaviour
and our objective is to develop our business responsibly
and with integrity at all levels. We have worked
closely with our legal advisors to create a system of
documented ABC policies and procedures that provide
a consistent policy framework which all staff are issued
with and trained in. Our policy and training encompass
anti-bribery and corruption, gifts and entertainment,
third-party representatives and whistle blowing.
Social Responsibility
Echo is committed as an organisation beyond our core
business objectives, to be a responsible and ethical
participant in the global community. Placing great
consideration and aim to protect the health, safety
and wellbeing of our staff, contractors, and the local
communities.
Environmental Responsibility
Echo is very conscious of the natural environment
in which it operates, and the Company works hard
to minimise its impact on that environment. Echo
is committed to the responsible stewardship of the
environment and, on the conclusion of the Company’s
operations, and to return our sites to the condition in
which Echo found them. Echo seeks to operate from
compact drill sites in order to minimise disruption to
the natural habitat. Echo is also committed to working
closely with our partners and the various agencies
12
Echo Energy Annual Report 2020 Strategic Report
30% Female workforce
Reducing our
environmental footprint
Maintaining positive
relationships with the
communities where we
conduct business
in the jurisdictions in which it operates to make sure
that all environmental and other regulations are fully
satisfied as the Company undertakes its activities.
The health and safety of our employees, contractors
and partners on our sites is also paramount and more
information is available in the Health, Safety and
Environment (“HSE”) review.
Diversity and Inclusion
Everyone at Echo is proud to embrace a culture of
inclusivity across our organisation. Echo is an equal
opportunities employer and has a stated policy as part
of its Code of Conduct to deal fairly and equitably
with all our employees in the workplace. The Company
is dedicated to encouraging inclusion and diversity
at all levels of the business, acknowledging that a
more diverse workforce, with the right mix of skills,
experience, culture, ethnicity, nationality, gender, and
knowledge, can make a valuable contribution to the
Company. Echo has made a commitment to extend
equal employment opportunities to all, irrespective of
race, colour, gender, sexual orientation, religion or belief,
age, nationality, ethnicity, marital or civil partnership
status, pregnancy and maternity, or disability. In
addition, the Group not only provides direct support
to employees, should they have any issues or concerns,
by way of appropriate HR functions but also offers
external training should it be deemed necessary.
Echo strives to maintain high levels of ethical and
business practices at all times and has implemented
clearly defined policies to assist employees with these
issues. The primary aim is to protect the health, safety
and wellbeing of our staff, partners, contractors, and
the local communities in which the Company operates,
moreover, Echo desires to go that one step further and
invest in the future and sustainability of our business,
our communities and our environment.
13
13
Strategic Report Managing Risks
Echo is dedicated to managing the risks of the business in a structured manner.
Our internal risk management system has five key steps in dealing with risks.
The five key steps in dealing with risk are:
1
2
3
4
5
Identify
Assess
Mitigation
options
Manage
and execute
Review
Identified risks and mitigation options are summarised in the risk management table which provides a continual
reference point for operations and review.
Risk Management Table
Risk
Description
Mitigation
Assessment
of Risk Level
Operational Risk
Operational
incidents
Operations carry risks of health, safety
and environmental
incidents typical of the industry
Operations are not executed as planned
and result in cost overruns
Litigation exposure
Reputational damage
Subsurface and
surface risk to
production
Reservoirs do not perform as expected
and do not provide an adequate return on
investment.
Wells opened up after a period of shut in
may underperform due to well integrity of
reservoir issues
High HSE ethic with Joint Venture
(“JV”) procedures in place to deliver a
safe operation. Echo also influences the
Operator through its majority stake in
the JV
Ensuring staff are competent and
appropriately trained
Appropriate insurance
Monitor all current and future production
carefully tracking daily performance
Establish new sources of production
through maturation of workover
programmes and new drilling on existing
assets with business development to
diversify risk
Strategic Risk
Political
instability
Fiscal and political pressure in either
the UK or Latin America could result in
changes to the investment landscape
post COVID-19, delaying projects and
changing the potential value associated
with the assets
Argentina and Bolivia have a history
of expropriation but in very different
forms
Work with our local partners to manage
any situation that may arise and build
strong relationships with governments
and local authorities
Assess the political climate on a regular
basis to ensure the best possible
awareness when making investment
decisions
Breach of
Bribery Act
The Company, its contractors or
partners, breach the UK Bribery Act
leading to prosecution and reputational
damage
Maintain and continuously improve
the Company Anti-Bribery policy, Risk
Assessment procedure and ensure that
all staff are suitably trained
All vendors and contractors will be risk
assessed and all contracts awarded will
have strict requirements to adhere to the
policy
14
Echo Energy Annual Report 2020 Risk
Description
Mitigation
Assessment
of Risk Level
Strategic Risk
Macroeconomic
uncertainty
Relates to the movement in
macroeconomic parameters e.g. foreign
exchange (“FX”) rates, interest rates
and inflation
Management of the Group’s cash
position and FX exposure
Treasury policy developed for the
treatment of JV cash in Argentina
COVID-19
pandemic
Risk of interruption to operations,
continued global downturn in demand
for hydrocarbons
Implemented procedures with operators
to ensure operations continued safely
Where appropriate shut-in productions
to preserve value in wells
Adaptable working practices and
systems in place to facilitate working
from home
Loss of key
personnel
Can happen through resignation, illness,
injury, or death
Travel policy in place to ensure safe
business travel activity
Valuable knowledge and relationships
could be lost
Knowledge sharing across disciplines to
minimise impact of lost capacity
Can result in a lack of leadership and
direction
Adequate remuneration to ensure staff
retention
Portfolio
diversification
Echo is exposed to a range of E&P
assets located in one jurisdiction
exacerbating political risk
Active process to evaluate new business
opportunities in Latin America to
secure additional asset beyond existing
jurisdictions
Argentina
company
registration
The Government of Santa Cruz does
not assign the title of acquired assets
to Echo
Through our local lawyers and CGC
continue the support to the local
authorities ahead of the final approval
Financial Risk
Insufficient
funding
There are insufficient funds for
the Company to meet its financial
obligations or carry out new capital
investment opportunities
Echo is dependent on the availability
of external finance to fund the
development of new discoveries
Cost overruns on the exploration work
programme and/or delay in payments
from sales of existing hydrocarbon
production
Raise equity following exploration success
to take advantage of share price strength
in order to fund the development of new
discoveries
Control finances through annual
budgeting and variance analysis
Negotiate and manage commercial
contracts that provide certainty and
allow for flexibility if required
Delay capital expenditure and other
discretionary spending
15
Strategic Report Stakeholder Engagement
Echo considers collaborative
engagement with all stakeholders as
vital for our business. It remains at
the core of what we do. Stakeholders
include not only our shareholders,
lenders, and our partners, but also our
suppliers & customers, our workforce,
governments & regulators, and the
communities in which we operate.
By maintaining regular dialogue, we
receive feedback on our strategy,
performance and governance which
can then be factored into the Board’s
decision-making process.
The table below, describes how the directors of the Company
have regard for the matters set out in Section 172(1) of the
Companies Act 2006 these are:
(a) the likely consequences of any decision in the long term
(b) the interests of the Company’s employees,
(c) the need to foster the Company’s business relationships
with suppliers, customers, and others,
(d) the impact of the Company’s operations on the
community and the environment,
(e) the desirability of the Company maintaining a reputation
for high standards of business conduct, and
(f) the need to act fairly as between members of the
Company.
This table forms the Board’s statement on such matters
as required by the Act. Further information regarding
Echo’s assessment of environmental and community
issues associated with our operations, can be found in the
Sustainability Review on page 12 and in the HSE Review on
page 29. Review of the key decisions and issues discussed
in Board meetings and by various committees in 2020 is
contained in the Corporate Governance Statement from
page 23-28.
Why is it important to engage?
How do we engage?
Shareholders
Echo seeks to develop an investor base of long-term
holders that are aligned with our strategy. By clearly
communicating our strategy and objectives, we
maintain continued support for what we do.
Important issues include:
• Sustainable financial and operational performance
• Continued execution of E&P projects
Lenders
There is regular dialogue between both institutional and
retail investors through meetings, calls, conferences,
presentations and our virtual “Time with the Team” Q&As
Upstream oil and gas is a capital intensive business and
by maintaining supportive relationships with our lending
group, we can ensure access to long-term debt finance
that enables us to invest in high quality assets that
generate sustainable long-term cash flows.
Important issues include:
Echo has continued to fulfil our obligations and engage
with noteholders such that we were able to restructure our
existing long-term debts, through renegotiation and issue of
warrants and equity.
Highlights include:
• Spartan loan extended by 2 years and restructure of
• Sustainable financial and operational performance
interest payments due
• Post period, the Company Bonds were restructured to
include the removal of all cash interest payments; and
extension of maturity to May 2025
• Post period, successful amendment of the $5Million Euro
Lombard debt facility with maturity extended to April 2025
• Capital allocation
• Refinancing plan
16
Echo Energy Annual Report 2020 Why is it important to engage?
How do we engage?
Partners
Sharing of risk is a fundamental component of our
industry and by maintaining aligned and collaborative
relationships with our joint venture partners, we can
ensure that maximum value can be extracted from our
operations in a safe and sustainable manner.
Important issues include:
Echo ensures that we maintain an open dialogue with
both partners in the SCS licences. We seek to ensure that
all partners are aligned around common objectives for the
asset and maintain safe and efficient operations.
Highlights include:
• Successful negotiated exit of the Tapi Aike licences, with no
• Operational performance & HSE
cost on exit
• Project ranking and work programmes
• Effective collaboration with partners to reduce operational
• Budget setting
costs in the assets
Customers & Suppliers
Through the acquisition of SCS we gained several
established gas customers with existing contracts
which require renegotiation at expiration. The SCS
supply chain is managed by our partners who operate
on our behalf. We have further developed strong
relationships with key corporate suppliers.
Engagement with suppliers usually takes place with the
operator but we are closely involved and help shape the
strategy and timing. Sales of crude are also negotiated
by the operators, but our regional representative works in
collaboration with our partners to negotiate contracts and
timings.
Important issues include:
• Contract management strategy
• Uninterrupted service for customers
• Enhance value
Highlights include:
• The Argentinian natural gas market was volatile in 2020,
not only due to the pandemic effect, but also due to an
increasing pressure over the supply/demand balance given
the output of Vaca Muerta. At the end of 1Q 2020 it was
clear that an oversupply market would threaten the price
for any new term industrial commitment starting in April
2020. Therefore, it was decided to maximize our Spot
sales. This strategy paid off, since Spot prices later in 2020
were double the value of the contracts signed at the end
of 1Q 2020, given the market outlook at that time. The
Company was able to keep its term commitment with the
utilities related demand, keeping the same conditions as
the previous year.
• Fast and efficient onboarding as a supplier for SCS
customers
• Post period in Q1 2021 as the recovery continued and,
following a successful auction process for industrial clients,
the Company secured two new gas sales contracts at
significant premiums to both prevailing spot market rates
and 2020 contracted rates. These contracts have a term of
12 months, with gas sales beginning in May 2021.
17
Strategic Report Why is it important to engage?
How do we engage?
Workforce
Our current and future success is underpinned by our
ability to engage, motivate, and adapt our workforce.
Creating the right environment for employees where their
various strengths are recognised and their contributions
are valued, helps to ensure that we can deliver our shared
objectives.
Important issues include:
• Group strategy
• Diversity of thinking
• Corporate culture
Governments & Regulators
Maintaining respectful and collaborative relationships with
our host governments and local regulatory authorities is vital
to our ‘licence to operate’. We believe that the strength of
these relationships will allow us to make a sustainable and
beneficial contribution to the regions in which we operate.
Important issues include:
• Licence attribution
• Identifying and securing new opportunities
• Providing views on upcoming legislation and factors that
are important to the industry
• CSR commitments
Communities & Environment
During 2020, internal communications were upscaled, so
employees were kept informed of all the workstreams
across the Company and helped to raise key issues with
directors and executives.
Highlights include:
• Production & strategy updates
• Educational presentations from each sector of Echo
• All staff involvement on CSR initiatives
Andres Brockman was Echo´s regional representative
in Latin America serving as a Board Director, at the
Hydrocarbons and Energy Bolivian Chamber in 2019 and
2020. His position enabled Echo to focus on enhancing
value to Upstream investment projects and developments,
through a series of negotiations with the government
to secure Exploration and Production Incentives for any
new project. In addition, his membership enabled Echo
to access top government officials across the region and
actively participates in legislative initiatives, analysis, and
discussions.
Minimal environmental impact in the localities in which
we operate ultimately help Echo reach its corporate
objectives as well as just being the right thing to do.
Building and maintaining the Company’s reputation
fosters Echo’s long-term goals and the support and
commitment of all employees.
Echo has engaged with all employees to choose community
projects to support. All employees trained in ABC standards
and all counterparties must adhere to these. Regular
engagement with operator HSE officers occurs through
operational committee meetings maintaining positive focus
on health, safety, and the environment.
Important issues include:
• Operating in an open and honest and socially
responsible manner
• Social responsibility initiatives
18
Echo Energy Annual Report 2020 Financial Review
This year Echo has navigated a
range of unprecedented challenges
which have touched all aspects of
our business. Through adaptation to
the new reality, decisive action and
a deep appreciation of the issues,
the Company has been able to
successfully continue its operations,
and produce critical energy products
in Argentina.
The Group reacted quickly to the challenges brought
about by the global COVID-19 pandemic uncertainty
and corresponding volatility in the energy markets.
Reorganisation along value chains enabled Echo to
lower operating costs and improve efficiencies at
both corporate and asset level, allowing the Company
to react proactively, whilst integrating SCS as an
established business into the Echo Group.
Income Statement
The Group loss from continuing operations for the
year to 31 December 2020 was US $15.3 million
(2019: US $10 million) and total Group loss including
discontinued operations was of US $25.9million (2019:
US $13.5million). The vast majority of this increased
loss compared to the prior year is due to the write
off of the Tapi Aike asset (US $10.7 million). The
Group successfully negotiate an exit from the Tapi
Aike exploration acreage, following the unsuccessful
CLix-1001 well, and was a demonstration of the decisive
action that preserved cash resources.
For the year ended 31 December 2020, Group revenue
was US $11.1 million (2019: US $2.6million), representing
more than a four-fold increase year on year. The spilt
between the two commodity revenue sources were
-
-
Oil sales - US $2.8 million (2019: $1.4 million)
Gas sales- US $8.3 million (2019: $1.2 million)
The Groups realised 2020 Oil revenue was substantially
below initial expectations, and its lower value was
a result of the necessary action to shut in certain
producing wells in response to extreme oil market
volatility, including the unprecedented negative
oil prices seen at points during the year. With the
stabilisation of the markets, and return to pre
pandemic oil prices, operations are currently underway
to resume this shut in production.
Echo achieved an average net oil price for the period
of US $43.4/bbl (2019: US $51.52/bbl), and an average
Gas price of US $2.60/mmbtu (2019: US $2.36mmbtu).
19
Strategic Report Financial Review continued
Group operational costs were US $13.4 million (2019:
US $3.1 million), reflecting a full 12 month cost period
from SCS operations, compared to the 2 months in
2019.
The trade and other payables balance of USD $13.2
million is mainly comprised of US $2.3 million (2019: US
$1.2 million) unlisted debt liability, and Joint venture
payables of US $9.7 million (2019: US $4.9 million).
-
-
-
-
Exploration expenses of US $0.2 million (2019:
US $0.6 million) relates to on-going business
development activity in Latin America.
Gross administration expenses of US $3.2 million
in 2020 were US $0.5 million lower than in 2019,
reflecting the management’s continued focus on
cost control across the Group. The London office
was relinquished, while staff numbers reduced,
reflecting changes in operational activity.
Finance costs are largely composed of foreign
exchange losses of US $4.4million (2019: US $1.24
million), interest payable and unwinding of discount
costs of US $4.9 million (2019: US $3.6 million), and
the amortisation of debt fees.
Movement in the value of the embedded derivative
associated with the Company’s EUR 5.0m 8.0%
secured convertible debt facility credited US $0.66
million to the income statement.
Balance Sheet
In alignment with Echo’s focus on high impact
cash generative production assets, the Company
relinquished its interest in the Tapi Aike concession
during the year. All historic Tapi Aike capitalised costs of
US $10.4 million were written off, reducing the Groups
non-current asset balance from US $21.7 million in 2019
to US $11.0 million at the end of the period.
Careful management of cash balances, successful
debt renegotiation and equity fund raises supported
business flexibility and stability. The Group ended the
period with US $0.6 million cash at bank compared
to the prior year balance of US $1.7 million. During
the year, Group funds were supplemented through a
successful US $608k (GBP £475k) placing in August
2020, and an additional US $ 934k (GBP £700k) fund
raise in December 2020.
The other receivables balance of US $7.2 million (2019:
US $8.8 million) principally comprise of recoverable
Argentine Value Added Tax and SCS joint venture
receivables. Due to the easing of COVID-19 restrictions
and opening of the Argentine tax office, processing of
the VAT owed has resumed, and the Company expect to
receive a portion of the owed funds in very near future.
The Group’s non-current liabilities are represented by
US $27.3 million (2019: US $20.6 million) of unlisted
debt instruments due in over a year, and US $3.0 million
(2019: US $2.9 million) abandonment provision.
Bond Restructuring
During the year and into 2021, Echo successfully
renegotiated the terms of its unlisted debt instruments,
strengthening the Company’s cashflow flexibility and
position, and providing significant optionality.
At 31 December 2020, the Company’s reported finance
position only considered the following debt restructure
amendments effective;
-
The Company’s £1.0 million 12.0% loan facility
interest payments were all deferred. With effect
from 1 January 2020, interest on the £1 million Loan
accrued at an unchanged annual interest rate of
12.0% and, at the end of each quarterly interest
period, added to the aggregate principal amount
owing under the £1 million Loan, for payment on
maturity in March 2022.
-
The Company’s Bond deferred all interest due in
2020 to repayment on maturity in May 2022.
Post Balance Sheet – Improved
Market Environment and Outlook
There have been sizable positive market changes in Q1
2021, and Echo has taken advantage of this by securing
new gas contracts at a premium to the prevailing spot
market rates, successfully raising further funds of £856k,
and materially restructuring the remaining unlisted debt
instruments.
In early Q1 2021, the Company’s EUR 5.0m 8.0% secured
convertible debt facility loan maturity date was extended
to April 2025, with no more cash interest payments until
maturity date. Additionally, the Company’s Luxembourg
listed EUR 20.0m 8.0% secured bonds were successfully
renegotiated, extending the maturity of the notes to May
2025, and removing all cash interest payments prior to
the maturity date.
20
Echo Energy Annual Report 2020 The net effect of these restructures meant that the
Company’s cash payment commitments to this debt will
significantly reduce to only USD $341k in 2021. If the loan
restructures were in effect at 31 December 2020, then
the short term debt facility liability would reduce from US
$2.3 million to US$ 0.3 million.
This restructuring enables the Company to operate from
a significantly more stable platform from which to focus
on increasing revenue, invest in its producing asset, and
release capital which can instead be invested directly into
the business to accelerate growth projects or support
future acquisitions.
In light of this, and the anticipated improved market
conditions, the Board looks confidently to the future.
This Strategic Report was approved by the Board on 5
May 2021 and signed on its behalf by:
Martin Hull
Chief Executive Officer
5 May 2021
21
Strategic Report Echo Energy Annual Report 2020
22
22
Echo Energy Annual Report 2020 Corporate Governance Statement
James Parsons
Non-Executive Chairman
Strong corporate governance is a
key building block that allows an
organisation to be successful.
Dear Shareholder
As the Chairman of the Company, it is my pleasure to
present the Corporate Governance Statement for the
year ended 31 December 2020. I firmly believe that
strong corporate governance enables an organisation
to grow successfully and to win confidence of the
stakeholders. The Board is committed to good
governance across the business, at an executive level
and throughout its operations. The importance of
solid governance within the organisation has been
highlighted during 2020, which has been a challenging
year for the business and for the economy as a whole
with the global pandemic together with the downturn
in the oil and gas sector. A strong foundation has
helped steer the business through these challenging
times.
Following the adoption of the Quoted Companies
Alliance Corporate Governance Code in 2018 (the
“QCA Code”) the Company embarked on compliance
and adherence to the corporate governance practices
recommended by the QCA Code. The QCA Code
requires AIM listed companies to adopt a “comply or
explain” approach in respect of the recommended
guidelines and the Board maintains that the Company
complies with the QCA code in all aspects of the
business.
The QCA has ten principles of corporate governance
that the Company has committed to apply within
the foundations of the business. These principles are
listed below and the Board and employees across
the business work to ensure that these principles are
adhered to as much as the Company is able. Both
within the annual report and accounts and on the
corporate website, stakeholders can see how the
Company complies with these principles.
The Board not only sets expectations for the business
but also works towards ensuring that strong values are
set and carried out by the directors across the business.
A strong corporate culture is paramount to the success
of a business. The Board strives to ensure that the
objectives of the business, the principles and risks are
underpinned by values of good governance that are fed
down throughout the organisation.
The importance of engaging with our shareholders
underpins the essence of the business, ensuring that
there are numerous opportunities for investors to
engage with both the Board and executive team.
During the period under review, there had been no
major changes to the corporate governance structure
of the Company.
James Parsons
Non-Executive Chairman
23
Governance 1.
2.
3.
4.
5.
Corporate Governance Statement continued
The Principles of the QCA Code
The QCA Code has ten principles of corporate governance that the Company has committed to apply within the
foundations of the business. The table below sets out the principles and how the Company applies them:
QCA Code
Principle
Disclosure
Explain the Company’s business model and strategy, including
key challenges in their execution (and how those will be
addressed).
See pages 5-7 of Annual Report
Seek to understand and meet shareholder needs and
expectations. Explain the ways in which the company seeks to
engage with shareholders.
See website disclosures: Principle Two AIM
Rule 26
Take into account wider stakeholder and social responsibilities
and their implications for long term success. Explain how the
business model identified the key resources and relationships
on which the business relies. Explain how the Company obtains
feedback from stakeholders.
See website disclosures: Principle Three AIM
Rule 26 and section172 disclosure page 36
and pages 16-18.
Describe how the Board has embedded effective risk
management in order to execute and deliver strategy. This
should include a description of what the board does to identify,
assess and manage risk and how it gets assurance that the risk
management and related control systems in place are effective.
Identify those directors who are considered to be independent;
where there are grounds to question the independence of a
director, through length of service or otherwise, this must be
explained.
Describe the time commitment required from directors
(including non-executive directors).
Include the number of meetings of the Board (and any
committees) during the year, together with the attendance
record of each director.
6.
Identify each director.
Describe the relevant experience, skills and personal qualities
and capabilities that each director brings to the board (a
simple list of current and past roles is insufficient); the
statement should demonstrate how the board as a whole
contains (or will contain) the necessary mix of experience, skills,
personal qualities (including gender balance) and capabilities
to deliver the strategy of the Company for the benefit of the
shareholders over the medium to long-term.
See pages 14-15 of Annual Report.
Gavin Graham, James Parsons and Stephen
Whyte are considered to be independent.
The Chief Executive Officer is expected to
devote substantially the whole of his time
to the duties with the Company. The non-
executives have a lesser time commitment. It
is anticipated that each of the non-executives,
including the chairman will dedicate 12 days
a year.
See page 28 Annual Report
See pages 30-31 Annual Report
See pages 30-31 Annual Report
Explain how each director keeps his/her skillset up to date.
See page 26 Annual Report
Where the board or any committee has sought external advice
on a significant matter, this must be described and explained.
No such advice was sought in 2020.
Where external advisers to the Board or any of its committees
have been engaged, explain their role.
24
Echo Energy Annual Report 2020 QCA Code
Principle
Disclosure
6.
Describe any internal advisory responsibilities, such as the
roles performed by the Company secretary and the senior
independent director, in advising and supporting the Board.
The Company secretary helps keep the Board
up to date on areas of new governance
and liaises with the Nomad on areas of
AIM requirements. The Company secretary
has frequent communication with both the
chairman and the chief executive officer and
is available to other members of the Board if
required.
7.
Include a high-level explanation of the Board performance
effectiveness process.
See page 26 Annual Report
Where a board performance evaluation has taken place in the
year, provide a brief overview of it, how it was conducted and
its results and recommendations. Progress against previous
recommendations should also be addressed.
Include in the Chair’s corporate governance statement how the
culture is consistent with the Company’s objectives, strategy
and business model in the strategic report and with the
description of principal risks and uncertainties. The statement
should explain what the Board does to monitor and promote a
healthy corporate culture and how the board assesses the state
of the culture at present.
No such evaluation took place in 2020.
However, the Chairman and the directors are
mindful of the performance of the Board as
a whole and ensure that each director works
to support the Executive team and deliver as
best they can for the business
See page 23 Annual Report
See website disclosures Principle Eight AIM
Rule 26
Maintain governance structures and processes that are fit for
purpose and support good decision making by the board. Roles
and responsibilities of the Chair, CEO and other directors with
commitments. Describe the roles of the committees.
See website disclosures: Principle Nine AIM
Rule 26
See pages 26-28 Annual Report
8.
9.
10.
Describe the work of any board committees undertaken during
the year.
See page 27 Annual Report
Include an audit committee report (or equivalent report if such
committee is not in place).
See page 27 Annual Report
Include a remuneration committee report (or equivalent
report if such committee is not in place).
See page 27 Annual Report
If the Company has not published one or more of the
disclosures set out under Principles 1-9, the omitted disclosures
must be identified and the reason for their omission explained.
N/A
25
25
Governance Corporate Governance Statement continued
The Board
The Board comprises the non-executive chairman, three
non-executive directors and the Chief Executive Officer
(CEO).
The CEO has a strong executive team to offer the
support required to fulfil the demands of the business
and to deliver the strategy to stakeholders.
The Board has significant industry, financial, public
markets and governance experience, possessing the
necessary mix of experience, skills, personal qualities
and capabilities to deliver the strategy of the Company
for the benefit of the shareholders over the medium to
long-term.
The role of the chairman and CEO are split in
accordance with best practice. The chairman has the
responsibility of ensuring that the Board discharges its
responsibilities and is also responsible for facilitating
full and constructive contributions from each member
of the Board in determination of the Group’s strategy
and overall commercial objectives. The CEO leads
the business and the executive team ensuring that
strategic and commercial objectives are met. The CEO
is accountable to the Board for the operational and
financial performance of the business.
The Board as a whole is kept abreast with
developments of governance and AIM regulations. The
Company’s lawyers provide updates on governance
issues and the Company’s NOMAD provides annual
board room training as well as the initial training as
part of a director’s onboarding.
The directors have access to the Company’s NOMAD,
Company secretary, lawyers and auditors and are able
to obtain advice from other external bodies as and
when required.
The 2020 performance of the business and its staff
will be measured across both financial and operational
functions and is captured in a corporate scorecard.
The scorecard is made up of various KPIs and is
tracked throughout the year. The Board and executives’
performance within the year was judged on the delivery
of certain desired outcomes.
James Parsons, Non-Executive Chairman, was
appointed to Board in March 2017. James is a
qualified accountant and has a BA (Hons) in Business
Administration. James brings a wealth of knowledge
and expertise to lead the business forward. He is a
specialist in restructuring, funding and transforming
companies and has strong public markets experience.
26
Martin Hull, CEO, was appointed to the Board in
October 2018, initially holding the position of chief
financial officer (“CFO”). Martin has over 18 years
experience in oil and gas investment banking at
Rothschild. Martin, with his experience on many
transactions at both the corporate and asset level,
including debt and equity, has the knowledge to drive
the business forward. His transaction experience and
contacts in the energy sector will prove invaluable to
building the Company.
Marco Fumagalli, Non-Executive Director, was
appointed to the Board in March 2017. Marco is a
qualified accountant and holds a degree in Business
Administration. Marco, with his financial background,
provides the experience required as chairman of the
audit committee to challenge the business internally
and also the Group auditors.
Stephen Whyte, Non-Executive Director was appointed
to the Board in March 2017. Stephen’s background
provides the Board with the operational expertise
to review and challenge decisions and opportunities
presented both within the formal arena of the
boardroom and as called upon when needed by the
executives.
Gavin Graham, Non-Executive Director was appointed
to the Board in November 2018. Gavin’s wealth of
experience in the oil and gas sector brings further
technical and operational expertise to the Board.
Furthermore, Gavin is considered to be an independent
non-executive director.
Board Performance
The directors consider seriously the effectiveness of
the Board, committees and individual performance.
The Board meets formally five times a year with ad hoc
board meetings as the business demands. There is a
strong flow of communication between the directors,
in particular the relationship between the CEO and the
chairman. The agenda is set with the consultation of
both the CEO and chairman, with consideration being
given to both standing agenda items and the strategic
and operational needs of the business. Papers are
circulated in advance of the meetings, giving directors
ample time to review the documentation, and enabling
an effective meeting. Resulting actions are tracked for
appropriate delivery and follow up.
Echo Energy Annual Report 2020 In addition to the above, the directors have a wide
knowledge of the business and requirements of
directors’ fiduciary duties. The directors have access
to the Company’s NOMAD and auditors if and when
required. They are also able, at the Company’s expense,
to obtain advice from external bodies if required.
During the year, the Board continuously strived to
further strengthen the governance structure already
in place. Regular consultations are held with the
Company’s NOMAD, Company Secretary and lawyers in
respect of compliance with the QCA Code, Companies
Act and other statutory requirements, and to ensure
that best practices are followed. An effective investor
relation strategy was maintained and regulatory
disclosure obligations were met, through a consistent
flow of news releases to the market. All members of
the Board are well acquainted and understand global
regulations on ethical business practices and ensure
that adequate internal policies and a supervisory
mechanism is established in the business, through
senior management. Whilst being mindful of the size
and stage of development of the Company, the Board
reviews and ensures the highest level of governance is
maintained at all levels.
Matters Reserved for the Board
The directors adopted a schedule of those matters that
should be reserved for the Board, which is reviewed on
an annual basis. Those matters include:
• Approval of the Group’s strategy and objectives;
•
•
•
•
Approval of the Group budgets, including operating
and expenditure budgets;
Growth of activities into new business or
geographical locations;
Material changes to the Group’s structure and
management; and
Changes to the Company’s listing, governance or
business processes.
Board Committees
The Board has established an audit committee, a
remuneration and a nominations committee. At
present, a decision has been made not to establish an
HSE committee due to the fact that the Company is
non-operating and still in the developing stage. The
HSE matters are dealt with within the Board meetings.
Audit committee report
The audit committee is comprised of Marco Fumagalli
and Stephen Whyte. Mr Fumagalli chairs the audit
committee. The committee generally meets twice a
year. The committee has engaged Crowe UK LLP to act
as external auditors and they are also invited to attend
committee meetings, unless they have a conflict of
interest. The CEO and the Financial Controller of the
Company also join the Committee by invitation.
An important part of the role of the committee is
its responsibility for reviewing and monitoring the
effectiveness of the Group’s financial reporting, internal
control policies, and procedures for the identification,
assessment, and reporting of risk. The audit committee is
also responsible for overseeing the relationship with the
external auditor.
The main functions of the audit committee include:
•
•
•
Reviewing and monitoring internal financial control
systems and risk management systems on which the
Company is reliant;
Considering annual and interim accounts and audit
reports; and
Making recommendations to the Board in relation to
the appointment and remuneration of the Company’s
auditor as well as annually reviewing and monitoring
their independence, objectivity, and effectiveness.
During 2020 the audit committee:
•
•
Approved the audited year end and interim financial
statements; and
Recommended to shareholders the re-appointment of
the Company’s auditor, Crowe UK LLP.
Remuneration committee report
During Q4 2020 the Board agreed that, in line with
recommended governance, it would be appropriate for
James Parsons (Chairman of the Company) to step
down as chair of the Remuneration Committee. It was
agreed that Gavin Graham would join the Committee as
Chair, with both Marco Fumagalli and Stephen Whyte
the remaining members. The decision was also made
to separate the Nominations Committee from the
Remuneration Committee.
The Remuneration Committee meets regularly to
consider all material elements of the remuneration
policy of the Company, including directors’ and executive
remuneration.
27
Governance
Corporate Governance Statement continued
During the year ended 31 December 2020, the Committee
met three times and the following matters were included
in its deliberations:
•
•
•
•
Assessed the performance targets of the executive
director;
Reviewed the pay and benefits of the executive
director in line with the achievement of his 2020
scorecard;
Reviewed and recommended the salary increments
and bonus awards to the staff;
Agreed the 2020 performance targets for the
executive director;
• A mid-year review of the 2020 scorecard
•
•
Determination of the awards to be made under the
Company’s EMI scheme; and
Review of the revised terms of reference of the
Committee and recommended that the Board
should approve the terms presented.
Nominations committee report
The Nominations Committee was established during
Q4 of 2020. The Committee consists of Stephen Whyte,
Chair, and Gavin Graham. The Committee will meet
as and when required. The terms of reference for the
Committee were approved by the Board.
The Nominations Committee is responsible for Board
recruitment and succession planning. Keeping under
review the leadership of the organisation and ensuring
that the Board has the right skill set required for the
business.
The directors’ attendance at scheduled board meetings and board committees
during 2020 is detailed in the table below:
Director
James Parsons
(chairman)
Marco Fumagalli
Stephen Whyte
Martin Hull
Gavin Graham
Total meetings
Board-
Scheduled
Meeting
Board Ad Hoc
Meeting *
Audit
Remuneration
Nominations
Committee
5
5
5
5
5
5
9
9
9
9
9
9
-
2
2
-
-
2
3
3
3
-
-
3
-
-
-
-
-
0
* Ad hoc meetings : Additional meetings called for a specific matter generally of a more administrative nature not requiring full Board
attendance
28
Echo Energy Annual Report 2020 Health and Safety Review 2020
In the Santa Cruz Sur assets, the Company has been
instrumental in maturing an infrastructure project that
upgrades brownfield pipelines to modern materials
with a lower corrosion risk.
During the COVID-19 pandemic the Company rapidly
moved to a model of remote working, even before the
official ‘stay at home’ order was announced by the UK
government in March 2020. All staff have adapted
well to the remote working model with no loss or
productivity and maintaining regular contact via virtual
communications with our partners in Argentina and
Bolivia.
Echo is committed to conducting
its business and operations in a
manner that safeguards the health
of employees, contractors and the
public, and minimises the impact of
operations on the environment.
The Company is committed to ensure that these
objectives are achieved through:
•
•
•
•
•
Providing all employees with training of a high
standard and only using equipment that is certified
and appropriate for its scope;
Using only qualified contractors, who can work to
the highest possible HSE standards;
Ensuring near-misses and incidents, whether Echo
or partner operated, are fully investigated and
improvements implemented;
Fostering a working culture where openness and
reporting leads to standout operational and health,
safety and environmental performance; and
Working with our operating partners to make sure
that health and safety hazards and environmental
impacts have been fully assessed and appropriately
mitigated.
HSE performance is regularly reported to the Board,
which ensures that appropriate resources are provided
to achieve these objectives in full. Where the Company
participates in, but does not operate joint ventures, it
seeks to ensure that similar standards are adopted by
its operators. These commitments are in addition to
our basic obligation to comply with applicable laws and
regulations where we work.
29
Governance The Team
Board of Directors
James Parsons
Non-Executive Chairman
Martin Hull
Chief Executive Officer
Marco Fumagalli
Non-Executive Director
Stephen Whyte
Non-Executive Director
Martin has over 18 years’
experience in oil & gas
investment banking at
Rothschild & Sons in London
where he was a Managing
Director in the global energy
team with a focus on Latin
America and Africa.
Previously he was Head of
Oil & Gas, SE Asia, based
out of Singapore. Martin
has corporate finance
expertise across the value
chain with a particular focus
on the upstream sector. He
has advised on numerous
transactions, including debt
and equity, at both the
corporate and asset level.
Martin holds a BA (Hons)
from Exeter University.
In addition to his role as
Non-Executive Chairman
at Echo Energy plc, James
is currently Executive
Chairman of both Corcel Plc
and Ascent Resources pls
and Non-Executive Chairman
at Coro Energy Plc.
James has over 20 years’
experience in the fields of
strategy, management,
finance and corporate
development in the energy
industry. He started his
career with the Royal
Dutch Shell Group where
he spent 12 years working
in Brazil, the Dominican
Republic, Scandinavia, the
Netherlands and London.
James was previously
Chief Executive at Sound
Energy Plc for eight years,
is a qualified accountant
and has a BA Honours in
Business Economics.
Marco is a founding Partner
at Continental Investment
Partners SA, a Swiss based
investment firm, and leading
shareholder in Nusakan plc
(formerly Greenberry plc),
a cornerstone shareholder
in Echo Energy. Previously a
Group Partner at 3i; Marco
is a qualified accountant.
Stephen Whyte has over
30 years’ experience in the
oil and gas industry.
He was chief operating
officer and executive
director for Exploration and
Production at Galp Energia
until 2014 and Senior Vice
President, Commercial at
BG Group. He had previously
spent a total of 14 years
with Shell and six years with
Clyde Petroleum. Stephen is
currently a Board observer
of Nostrum Oil and Gas plc
on behalf of Bondholders.
Stephen was formerly Shell
Country Chairman in Brazil
and speaks Portuguese.
30
Echo Energy Annual Report 2020 Executive Team
Dr. Gavin Graham
Non-Executive Director
Martin Hull
Chief Executive Officer
Dr. Julian Bessa
VP of Exploration
Andres Brockmann
Regional Representative
Martin has over 18 years’
experience in oil & gas
investment banking at
Rothschild & Sons in London
where he was a Managing
Director in the global energy
team with a focus on Latin
America and Africa.
Previously he was Head of
Oil & Gas, SE Asia, based
out of Singapore. Martin
has corporate finance
expertise across the value
chain with a particular focus
on the upstream sector. He
has advised on numerous
transactions, including debt
and equity, at both the
corporate and asset level.
Martin holds a BA (Hons)
from Exeter University.
Dr Bessa is a geologist with
over 20 years of exploration
experience across Latin
America, including at BG
Group plc where he spent
time as Bolivian Exploration
Manager and VP Exploration
Brazil. Additionally, Julian
has managed significant
exploration programmes
offshore Uruguay and
Honduras.
Julian has a D.Phil from the
University of Oxford and an
MBA from the Rotterdam
School of Management.
Andres Brockmann, a
Bolivian national, joined
Echo Energy in October
2017 from Petrobras
Bolivia where he has held a
number of senior executive
roles both in Bolivia and
internationally for over
15 years.
Andres is a Production
Engineer, with an MBA from
the University of Zaragoza,
Spain. Additionally, he
was also a director of
the Bolivian Chamber of
Hydrocarbons and Energy
until the end of 2020, and
represents Echo’s best
interests since the Company
has joined the Chamber.
Dr Graham is a geologist
by background and, after
29 years in Shell, initially in
Exploration and later as Vice
President New Business/
Commercial for the Middle
East, Caspian and South
Asia regions, he joined
Petrofac, the oilfield services
Company, and gained
experience working for six
years on the upstream side
of their business in the U.K.,
Tunisia, Malaysia and Mexico.
Dr Graham joined Polish
state company Grupa
LOTOS in 2017, where he has
most recently been Chief
Executive Officer of LOTOS
Upstream, co-ordinating
the start-up of this new
20,000 boe/d company,
which has producing assets,
development projects
and exploration activity
in Norway, Poland and
Lithuania.
31
Governance Directors’ Remuneration Report
The CEO’s scorecard, bonus award and options granted
are agreed by the remuneration committee.
A pension scheme is provided to all employees into
which, subject to certain criteria, the Company
contributes 5% of the individual’s base salary.
Chairman and Non-Executive
Directors’ Fees
The fees paid to the Chairman and non-executive
directors are set at a level both in line with the market
and to appropriately reward and retain individuals
of a high calibre. The fees paid reflects the level of
commitment and contribution to the Company.
Fees are paid monthly in cash and are inclusive of all
committee roles and responsibilities.
The remuneration committee, which
consists of the three non-executive
directors, along with the Board as a
whole is committed to attracting and
retaining talent within the boardroom
and the wider executive group to
ensure the success of the Company.
The remuneration committee works
to ensure that the policies and
framework are in place to reward
staff for achievements and targets
met, which in turn creates value for
shareholders.
The Company offers a fixed remuneration package of
salary, pension and certain benefits. In addition, there
is a discretionary bonus award and EMI/share option
scheme in place. As the business grows it may consider
implementing a performance related LTIP for senior
executives and executive directors.
The bonus and option awards are presented to the
remuneration committee by the CEO for approval.
The bonus awards are made to individuals taking
account of their own performance and the Company’s
performance as a whole over the previous year.
Members of the executive team have their level of
bonus reviewed in line with their individual scorecards
that are agreed at the beginning of the financial year.
The amount of bonus and options awarded is set within
a pre-agreed range for each level of staff.
32
Echo Energy Annual Report 2020 Remuneration of Directors
Executive Director
Martin Hull**
Non-Executive Director
James Parsons
Stephen Whyte
Marco Fumagalli
Gavin Graham
Salary
(US $)
Pension
(US $)
2020 Cash
Bonus award
(US $)
Taxable
benefit
(US $)
Total
2020
(US $)
Total
2019
(US $)
383,443
12,746
307,969*
4,566
708,724
389,617
84,210
54,135
54,135
54,135
–
–
–
–
–
–
–
–
–
–
–
–
84,210
54,135
54,135
54,135
185,677
57,471
57,471
57,471
* The assessment of the 2020 bonus award to the CEO by the Rem Com, in Q1 2021, included both a review of the performance during 2020
and also considered the fact that the Company was in distress in the previous period and was not therefore able to award any form of bonus
** Martin Hull took a reduction in salary for 2021, annual salary is now £250,000 (US $320,000 using GBP £1: US $1.2832)
Share Options Awards
Martin Hull
Martin Hull
James Parsons
Stephen Whyte
Marco Fumagalli
Date of
Grant
24.10.19
19.12.19
09.03.17
09.03.17
09.03.17
Exercisable
Date
11.12.23
20.12.22
09.03.20
09.03.20
09.03.20
Acquisition
Price per share
(cents)*
Options held at
1.1.20
000’s
Options held at
31.12.20
000’s
8.69
3.45
2.16
2.16
2.16
12,000
23.000
24,000
4,000
4,000
12,000
23,000
24,000
4,000
4,000
*Calculated at the exchange rate of GBP £1: US $1.2832.
No directors exercised options in the year ended 31 December 2020.
This Remuneration Report was approved by a duly authorised committee of the Board on 5 May 2021 and signed on
its behalf by:
James Parsons
Non-Executive Chairman
5 May 2021
33
Governance Directors’ Report
The directors submit their report and
accounts for the financial year ended
31 December 2020. The comparative
period is the year ended 31 December
2019.
Principle Activities
Echo Energy plc is the holding Company for a group
of companies. The Group’s principal long-term focus is
developing as a full-cycle exploration led, gas focused
E&P Company in Latin America. The Group’s growth
strategy is to deliver shareholder value from both the
existing asset portfolio and new opportunities.
Results and Dividends
Turnover for the year was US $11,126,520
(2019: US $2,586,069), and the loss before tax
from continued operations was US $ 15,267,535
(2019: US $ 10,030,832). The directors have not
declared any dividend in respect of the year ended
31 December 2020 (2019: US $Nil).
Future Developments
The Group will continue to optimise value creation and
efficiency in the SCS assets, beginning in Q1 2021 with
an investment and upgrade of the pipeline facilities.
Details of plans of the SCS assets and other future
developments are discussed in the Strategic Report on
page 3 of this report.
Directors
The directors who served during the period were
as follows:
• James Parsons
• Marco Fumagalli
• Stephen Whyte
• Martin Hull
• Dr Gavin Graham
34
Directors’ Insurance
The Group has taken out an insurance policy to
indemnify the directors and officers of the Group
against liability when acting for the Group.
Auditor
Each person who is a director at the date of approval
of this annual report confirms to the best of their
knowledge that:
•
•
•
so far as the director is aware, there is no relevant
audit information of which the Company’s auditor
is unaware; and
the director has taken all steps that he ought to
have taken as a director to make himself aware of
any relevant audit information and to establish that
the auditor is aware of that information.
This information is given and should be interpreted
in accordance with the provisions of s418 of the
Companies Act 2006.
A resolution to reappoint the auditor Crowe U.K. LLP.
will be proposed at the Annual General Meeting.
Directors’ Shareholding and
Interests in Shares
Directors and connected persons
James Parsons
Marco Fumagalli (Nusakan plc)
Stephen Whyte
Martin Hull
Gavin Graham
No. of shares at
31.12.20
–
40,118,865
–
600,000
–
Subsequent Events
Events which have occurred since 31 December 2020
are included in Note 33 to the attached financial
statements.
The financial information for the year to 31 December
2020 has been prepared assuming the Group will
continue as a going concern.
Under the going concern assumption, an entity is
ordinarily viewed as continuing in business for the
foreseeable future with neither the intention nor the
necessity of liquidation, ceasing trading or seeking
protection from creditors pursuant to laws or
regulations.
Echo Energy Annual Report 2020
Information Set Out in the
Strategic Report
The directors have chosen to set out the following
information relating to the assessment of financial risk
on both page 15 of the Strategic Report, and in Note 22
of the Financial Statements.
Signed by order of the directors
Martin Hull
Chief Executive Officer
5 May 2021
In 2021, the Company materially enhanced its business
position through the restructuring of loan notes,
improved key customer sales contracts, and plan
investment in facilities upgrades at asset level, which
will allow the Company to fully draw on increased
commodity prices available.
Whilst the directors remain acutely cost conscious and
value focussed, the Group recognises that in order to
pursue organic and inorganic growth opportunities
it may require additional funding, this may be
sourced through debt finance, joint venture equity
or share issues.
An assessment has been made based on the Group’s
anticipated activities which have been included in
the financial forecast to period ended 30 December
2022. The Directors are of the opinion that the Group
has adequate financial resources to enable it to
undertake its planned work programme for at least
12 months and additionally the board has considered
downside scenarios including the event where there
is a delay to the expected generation of cash. In the
event of financial distress, the directors are confident
that the implementation of austerity measures, the
Groups proven success in raising capital, financing and
strategic options available, will enable the Company’s
ability to continue as a going concern. Therefore,
the going concern basis is adopted in preparing the
financial statements.
35
Governance Statement of Directors’
Responsibilities
Directors are responsible for preparing
the Strategic Report, the Directors’
Report, and the Financial Statements
in accordance with applicable law and
regulations.
the auditor accepts no responsibility for any changes
that may have occurred in the accounts since they
were initially presented on the website. Legislation
in the United Kingdom governing the preparation
and dissemination of the accounts and the other
information included in the Annual Report may differ
from legislation in other jurisdictions.
We confirm to the best of our knowledge:
• The Financial Statements, prepared in accordance
with the relevant financial reporting framework, give
a true and fair view of the assets, liabilities, financial
position and profit or loss of the Company and the
undertaking included in the consolidation taken as
a whole.
• The Strategic Report includes a fair review of the
development and performance of the business and
the position of the Company and the undertakings
included in the consolidation taken as a whole,
together with a description of the principal risks and
uncertainties that they face.
The Annual Report and Financial Statements, taken as
a whole, are fair, balanced, understandable and provide
the information necessary for shareholders to assess
the Company’s performance, business model and
strategy.
Martin Hull
Chief Executive Officer
Company law requires the directors to prepare financial
statements for each financial year. Under that law
the directors have elected to prepare the financial
statements in accordance with International Financial
Reporting Standards (“IFRSs”) as adopted by the
European Union and applicable law. Under company
law the directors must not approve the financial
statements unless they are satisfied that they give
a true and fair view of the state of affairs of the
Company and the Group and of the profit or loss of the
Company and the Group for that period.
In preparing these financial statements the directors
are required to:
• Select suitable accounting policies and then apply
them consistently;
• Make judgements and accounting estimates that
are reasonable and prudent;
• State whether applicable accounting standards have
been followed, subject to any material departures
disclosed and explained in the financial statements;
and
• Prepare the financial statements on the going
concern basis unless it is inappropriate to presume
that the Company will continue in business.
The directors are responsible for keeping adequate
accounting records that are sufficient to show and
explain the Company’s transactions and to disclose
with reasonable accuracy at any time the financial
position of the company and enable them to ensure
that the financial statements comply with the
Companies Act 2006. They are also responsible for
safeguarding the assets of the Company and hence
for taking reasonable steps for the prevention and
detection of fraud and other irregularities. They are
further responsible for ensuring that the Strategic
Report, the Directors’ Report, other information
included in the Annual Report and Financial Statements
are prepared in accordance with applicable laws in the
United Kingdom. The maintenance and integrity of the
Company’s website is the responsibility of the directors:
the work carried out by the auditor does not involve
the consideration of these matters and accordingly,
36
Echo Energy Annual Report 2020 Financial Statements
37
37
Governance Auditor’s Report
Opinion
Basis for Opinion
We have audited the financial statements of Echo
Energy Plc (the “Parent Company”) and its subsidiaries
(the “Group”) for the year ended 31 December 2020,
which comprise:
• the Group statement of comprehensive income for
the year ended 31 December 2020;
• the Group and Parent Company statements
of financial position as at 31 December 2020;
• the Group and Parent Company statements
of changes in equity for the year then ended;
• the Group and Parent Company statements of cash
flows for the year then ended; and
• the notes to the financial statements, including
a summary of significant accounting policies and
other explanatory information.
The financial reporting framework that has been
applied in the preparation of the Group and Parent
Company financial statements is applicable law and
International Financial Reporting Standards (“IFRSs”)
as adopted by the European Union and, as regards
the Parent Company financial statements, as applied
in accordance with the provisions of the Companies
Act 2006.
In our opinion:
• the financial statements give a true and fair view
of the state of the Group’s and of the Parent
Company’s affairs as at 31 December 2020 and of
the Group’s loss for the period then ended;
• the Group’s financial statements have been properly
prepared in accordance with IFRSs as adopted by
the European Union;
• the Parent Company financial statements have
been properly prepared in accordance with IFRSs
as adopted by the European Union as applied in
accordance with the provisions of the Companies
Act 2006; and
• the financial statements have been prepared in
accordance with the requirements of the Companies
Act 2006.
We conducted our audit in accordance with
International Standards on Auditing (UK) (ISAs (UK))
and applicable law. Our responsibilities under those
standards are further described in the Auditor’s
responsibilities for the audit of the financial statements
section of our report. We are independent of the Group
in accordance with the ethical requirements that are
relevant to our audit of the financial statements in the
UK, including the FRC’s Ethical Standard, and we have
fulfilled our other ethical responsibilities in accordance
with these requirements. We believe that the audit
evidence we have obtained is sufficient and appropriate
to provide a basis for our opinion.
Conclusions Relating to Going
Concern.
In auditing the financial statements, we have
concluded that the directors’ use of the going
concern basis of accounting in the preparation of the
financial statements is appropriate. Our evaluation
of the directors’ assessment of the company’s ability
to continue to adopt the going concern basis of
accounting included the following:
• reviewed and challenged management’s going
concern assessment and assumptions used covering
a minimum of 12 months from the date of approval
of these financial statements;
• tested mathematical accuracy of the models used by
management in their assessment;
• discussed with management and evaluated their
assessment of the group and the company’s liquidity
requirement;
• assessed the reasonableness of management’s
budget/forecasts, including comparison to actual
results achieved in the year and the evaluation of
downside sensitivities; and
• challenged the recoverability of the outstanding VAT
from the Argentinian tax authorities.
Based on the work we have performed, we have not
identified any material uncertainties relating to events
of conditions that, individually or collectively, may cast
significant doubt on the group or parent company’s
ability to continue to as a going concern for a period
of at least twelve months from when the financial
statements are authorised for issue.
38
Echo Energy Annual Report 2020 Financial Statements
Our responsibilities and the responsibilities of the
directors with respect to going concern are described in
the relevant sections of this report.
in our opinion as auditor, disclosure was required on
qualitative grounds.
Overview of Our Audit Approach
Materiality
In planning and performing our audit we applied the
concept of materiality. An item is considered material if
it could reasonably be expected to change the economic
decisions of a user of the financial statements. We used
the concept of materiality to both focus our testing and
to evaluate the impact of misstatements identified.
Based on our professional judgement, we determined
overall materiality for the Group financial statements
as a whole to be US$215,000 (FY19: US$300,000),
which represents 1.1% of the Group’s total assets which
we have considered to be the appropriate benchmark
for an exploration company.
We use a different level of materiality (‘performance
materiality’) to determine the extent of our testing for
the audit of the financial statements. Performance
materiality is set based on the audit materiality as
adjusted for the judgements made as to the entity risk
and our evaluation of the specific risk of each audit
area having regard to the internal control environment.
Where considered appropriate performance materiality
may be reduced to a lower level, such as, for related
party transactions and directors’ remuneration.
We agreed with the Audit Committee to report to
it all identified errors in excess of US$7,000. Errors
below that threshold would also be reported to it if,
Key audit matter
Revenue recognition
Revenue consists of oil and gas sales from Argentina. We
considered the risk that revenue was recognised in an
incorrect accounting period or prior to delivery being made
to the customer.
Carrying value of O&G Properties and Exploration and
Evaluation expenditure
Echo owns both exploration and evaluation assets and
producing assets, we have considered the risk that these
assets are impaired.
Overview of the Scope of Our
Audit
The Group and its subsidiaries are accounted for from
one central operating location in the UK until national
lockdown where all staff worked remotely. Our audit
was conducted remotely this year, due to the travel
restriction imposed by the COVID-19 pandemic, with all
group companies being within the scope of our audit
testing. We also engaged local specialist to assist us
with review on Argentinian tax matters.
Key Audit Matters
Key audit matters are those matters that, in our
professional judgement, were of most significance in
our audit of the financial statements of the current
period and include the most significant assessed risks
of material misstatement (whether or not due to
fraud) that we identified. These matters included those
which had the greatest effect on: the overall audit
strategy, the allocation of resources in the audit; and
directing the efforts of the engagement team. These
matters were addressed in the context of our audit of
the financial statements as a whole, and in forming
our opinion thereon, and we do not provide a separate
opinion on these matters.
In addition to the matter described in the ‘Conclusion
relating to going concern’ section, we have determined
the following key audit matters. This is not a complete
list of all risks identified by our audit.
How the scope of our audit addressed the key audit matter
Our work focussed on validating whether revenue has been
recognised in accordance with the accounting policy.
We reviewed the compliance of the accounting policy, along
with the disclosures, per the requirements of IFRS 15. We
have agreed a sample of sales to underlying documentation
to confirm revenue was being recognised in accordance
with the policies. We also reviewed cut off to ensure
revenue is recognised in the correct period.
We have reviewed management’s assessment which
included their internal model which concluded that there
are no facts or circumstances that suggest the carrying
amount of the asset exceeds the recoverable amount. This
includes:
• Challenging management’s inputs and assumptions in
the valuation model to available market data and other
sources of evidence; and
• Assessed the application of discount rate, market price
and reserves.
39
Auditor’s Report continued
Key audit matter
Carrying value of Interest in subsidiary undertakings
and Amounts receivable from Group undertakings
(Company only)
We have considered the risk that Interest in subsidiary
undertakings and Amounts receivable from Group
undertakings assets are impaired.
Our audit procedures in relation to these matters were
designed in the context of our audit opinion as a whole.
They were not designed to enable us to express an
opinion on these matters individually and we express
no such opinion.
Other Information
The directors are responsible for the other information
contained within the annual report. The other
information comprises the information included in the
annual report, other than the financial statements
and our auditor’s report thereon. Our opinion on
the financial statements does not cover the other
information and, except to the extent otherwise
explicitly stated in our report, we do not express any
form of assurance conclusion thereon.
Our responsibility is to read the other information and,
in doing so, consider whether the other information is
materially inconsistent with the financial statements
or our knowledge obtained in the audit or otherwise
appears to be materially misstated. If we identify
such material inconsistencies or apparent material
misstatements, we are required to determine whether
this gives rise to a material misstatement in the
financial statements or a material misstatement
of the other information. If, based on the work we
have performed, we conclude that there is a material
misstatement of this other information, we are
required to report that fact. We have nothing to report
in this regard.
40
How the scope of our audit addressed the key audit matter
In addition we have considered the following sources of
evidence for potential indications of impairment:
• Board minutes and budgets setting out the group’s
plans for the continued commercial appraisal of the
exploration assets; and
• Discussing plans and intentions with management.
The ‘Interest in subsidiary undertakings’ and ‘Amounts
receivable from Group undertakings’ in relation to the
companies with operations in Argentina recoverability is
supported by the internal model prepared to support the
carrying value of exploration assets and so are considered
and discussed within the ‘Carrying value of O&G Properties
and Exploration and Evaluation expenditure’ above.
In respect of the Bolivian company we have considered
management’s assessment of recoverability and have
considered the following sources of evidence for potential
indications of impairment:
• Board minutes and budgets setting out the group’s
plans for the continued commercial appraisal; and
• Discussing plans and intentions with management.
Opinion on Other Matter
Prescribed by the Companies
Act 2006
In our opinion based on the work undertaken in the
course of our audit
• the information given in the Strategic Report and
the Directors’ Report for the financial year for which
the financial statements are prepared is consistent
with the financial statements; and
• the Strategic Report and the Directors’ Report have
been prepared in accordance with applicable legal
requirements.
Matters on Which We are
Required to Report by Exception
In light of the knowledge and understanding of the
group and the parent company and their environment
obtained in the course of the audit, we have not
identified material misstatements in the Strategic
Report or the Directors’ Report.
Echo Energy Annual Report 2020 Financial Statements
We have nothing to report in respect of the following
matters where the Companies Act 2006 requires us to
report to you if, in our opinion:
• adequate accounting records have not been kept
by the Parent Company, or returns adequate for
our audit have not been received from branches not
visited by us; or
• the Parent Company financial statements are not in
agreement with the accounting records and returns;
or
• certain disclosures of Directors’ remuneration
specified by law are not made; or
• we have not received all the information and
explanations we require for our audit.
Responsibilities of the Directors
for the Financial Statements
As explained more fully in the directors’ responsibilities
statement set out on page 36, the directors are
responsible for the preparation of the financial
statements and for being satisfied that they give
a true and fair view, and for such internal control as
the directors determine is necessary to enable the
preparation of financial statements that are free from
material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors
are responsible for assessing the Group’s and
Parent Company’s ability to continue as a going
concern, disclosing, as applicable, matters related
to going concern and using the going concern basis
of accounting unless the directors either intend to
liquidate the group or the parent company or to cease
operations, or have no realistic alternative but to do so.
Auditor’s Responsibilities for
the Audit of the Financial
Statements
Our objectives are to obtain reasonable assurance
about whether the financial statements as a whole
are free from material misstatement, whether due
to fraud or error, and to issue an auditor’s report
that includes our opinion. Reasonable assurance is a
high level of assurance, but is not a guarantee that
an audit conducted in accordance with ISAs (UK) will
always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are
considered material if, individually or in the aggregate,
they could reasonably be expected to influence the
economic decisions of users taken on the basis of these
financial statements.
Irregularities, including fraud, are instances of non-
compliance with laws and regulations. We design
procedures in line with our responsibilities, outlined
above, to detect material misstatements in respect
of irregularities, including fraud. The extent to which
our procedures are capable of detecting irregularities,
including fraud is detailed below:
We obtained an understanding of the legal and
regulatory frameworks within which the company
operates, focusing on those laws and regulations
that have a direct effect on the determination of
material amounts and disclosures in the financial
statements. The laws and regulations we considered
in this context were the Companies Act 2006, UK and
Argentinian taxation legislation, health & safety law
and environmental agency legislation.
We identified the greatest risk of material impact on
the financial statements from irregularities, including
fraud, to be the override of controls by management
and judgement surrounding the capitalisation of
exploration & evaluation assets. Our audit procedures
to respond to these risks included enquiries of
management about their own identification and
assessment of the risks of irregularities, sample testing
on the posting of journals and reviewing accounting
estimates for biases. Owing to the inherent limitations
of an audit, there is an unavoidable risk that we may
not have detected some material misstatements in the
financial statements, even though we have properly
planned and performed our audit in accordance
with auditing standards. We are not responsible for
preventing non-compliance and cannot be expected to
detect non-compliance with all laws and regulations.
These inherent limitations are particularly significant
in the case of misstatement resulting from fraud as
this may involve sophisticated schemes designed to
avoid detection, including deliberate failure to record
transactions, collusion or the provision of intentional
misrepresentations.
A further description of our responsibilities for the
audit of the financial statements is located on the
Financial Reporting Council’s website at: www.frc.org.
uk/auditorsresponsibilities. This description forms part
of our auditor’s report.
41
the preparation of financial statements that are free from material misstatement, whether due to
fraud or error.
In preparing the financial statements, the directors are responsible for assessing the Group’s and
Parent Company’s ability to continue as a going concern, disclosing, as applicable, matters related to
going concern and using the going concern basis of accounting unless the directors either intend to
liquidate the group or the parent company or to cease operations, or have no realistic alternative
but to do so.
Auditor’s Report continued
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a
whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s
report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a
guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered
material if, individually or in the aggregate, they could reasonably be expected to influence the
Use of Our Report
economic decisions of users taken on the basis of these financial statements. A further description of
our responsibilities for the audit of the financial statements is located on the Financial Reporting
This report is made solely to the company’s members,
Council’s website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our
as a body, in accordance with Chapter 3 of Part 16 of
auditor’s report.
the Companies Act 2006. Our audit work has been
undertaken so that we might state to the company’s
Use of our report
members those matters we are required to state to
This report is made solely to the company's members, as a body, in accordance with Chapter 3 of
them in an auditor’s report and for no other purpose.
Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to
To the fullest extent permitted by law, we do not accept
the company's members those matters we are required to state to them in an auditor's report and
or assume responsibility to anyone other than the
for no other purpose. To the fullest extent permitted by law, we do not accept or assume
company and the company’s members as a body, for
responsibility to anyone other than the company and the company's members as a body, for our
our audit work, for this report, or for the opinions we
audit work, for this report, or for the opinions we have formed.
have formed.
Matthew Stallabrass
(Senior Statutory Auditor)
Matthew Stallabrass (Senior Statutory Auditor)
for and on behalf of
for and on behalf of
Crowe U.K. LLP
Crowe U.K. LLP
Statutory Auditor
London
Statutory Auditor
5 May 2021
London
11 June 2020
Page 51 of 93
42
Echo Energy Annual Report 2020
Consolidated Statement of
Comprehensive Income
Year ended 31 December 2020
Continuing operations
Revenue
Cost of sales
Gross profit
Exploration expenses
Administrative expenses
Impairment of intangible assets
Impairment of property, plant and equipment
Operating loss
Financial income
Financial expense
Derivative financial gain/(loss)
Loss before tax
Taxation
Loss from continuing operations
Discontinued operations
Year to
31 December 2020
Year to
31 December 2019
Notes
US $
US $
4
5
6
8
9
10
13
11,126,520
2,586,069
(13,437,010)
(3,127,542)
(2,310,490)
(215,512)
(541,473)
(647,546)
(3,240,934)
(3,797,861)
–
–
–
–
(5,766,936)
(4,986,880)
7,142
92,445
(10,174,047)
(5,475,616)
666,306
339,219
(15,267,535)
(10,030,832)
–
–
(15,267,535)
(10,030,832)
Profit/(loss) after taxation for the year from discontinued operations
11
(10,724,108)
(3,441,230)
Loss for the year
Other comprehensive income:
Other comprehensive income to be reclassified to profit or loss in subsequent
periods (net of tax)
(25,991,643)
(13,472,062)
Exchange difference on translating foreign operations
Total comprehensive loss for the year
Loss attributable to:
Owners of the parent
Total comprehensive loss attributable to:
Owners of the parent
Loss per share (cents)
Basic
Diluted
Loss per share (cents) for continuing operations
Basic
Diluted
The notes on pages 50-78 form an integral part of these financial statements
(1,041,955)
182,478
(27,033,598)
(13,289,584)
(27,033,598)
(13,472,062)
(27,033,598)
(13,289,584)
14
(3.38)
(3.38)
(1.99)
(1.99)
(2.61)
(2.61)
(1.94)
(1.94)
43
Financial Statements Consolidated Statement of
Financial Position
Year ended 31 December 2020
Non-current assets
Property, plant and equipment
Other intangibles
Current Assets
Inventories
Other receivables
Cash and cash equivalents
Current Liabilities
Trade and other payables
Derivative financial liabilities
Net current assets
Total assets less current liabilities
Non-current liabilities
Loans due in over one year
Provisions
Right of use liability
Total Liabilities
Net (Liability)/Assets
Equity attributable to equity holders of the parent
Share capital
Share premium
Warrant reserve
Share option reserve
Foreign currency translation reserve
Retained earnings
Total Equity
31 December 2020
31 December 2019
Notes
US $
US $
16
17
19
20
21
23
24
27
28
29
25
26
2,552,693
8,511,622
1,101,210
20,573,586
11,064,315
21,674,796
541,230
7,229,263
682,159
420,844
8,677,279
1,698,012
8,452,652
10,796,135
(13,249,146)
(7,022,255)
(62,477)
(728,783)
(13,311,623)
(7,751,038)
(4,858,970)
3,045,097
6,205,345
24,719,893
(27,276,015)
(20,604,302)
(2,979,956)
(2,940,000)
–
–
(30,255,971)
(23,544,302)
(43,567,594)
(31,295,340)
(24,050,627)
1,175,591
6,288,019
5,190,877
64,961,905
64,817,662
11,373,966
1,417,285
11,142,290
1,159,580
(3,319,767)
(2,277,812)
(104,772,035)
(78,857,006)
(24,050,627)
1,175,591
These financial statements were authorised for issue and approved by the board of directors on 5 May 2021
Martin Hull
Company registration number 05483127
The notes on pages 50-78 form an integral part of these financial statements.
44
Echo Energy Annual Report 2020 Company Statement of
Financial Position
Year ended 31 December 2020
Non-current assets
Property, plant and equipment
Other intangible assets
Interest in subsidiary undertakings
Amounts receivable from Group undertakings
Current assets
Other receivables
Cash and cash equivalents
Current liabilities
Trade and other payables
Derivative financial liabilities
Net current assets
Non-current liabilities
Loans due in over one year
Right of use liability
Total Liabilities
Net (Liability)/Assets
Equity
Share capital
Share premium
Warrant reserve
Share option reserve
Foreign currency translation reserve
Retained earnings
Equity Shareholders’ Funds
31 December 2020
31 December 2019
Notes
US $
US $
16
17
18
30
20
21
23
24
27
29
25
26
8,039
326,869
121,710
362,001
16,005,044
16,005,058
12,504,108
12,023,086
28,844,060
28,511,855
156,034
437,230
593,264
243,674
1,259,468
1,503,142
(3,306,206)
(62,477)
(1,651,179)
(728,783)
(3,368,684)
(2,379,962)
(2,775,420)
(876,820)
26,068,640
27,635,035
(27,276,015)
(20,604,302)
–
–
(27,276,015)
(20,604,302)
(30,644,699)
(22,984,264)
(1,207,374)
7,030,733
6,288,019
5,190,877
64,961,905
64,817,662
11,373,966
1,417,285
11,142,290
1,159,580
(2,255,402)
(2,255,402)
(82,993,147)
(73,024,274)
(1,207,374)
7,030,733
These financial statements were authorised for issue and approved by the board of directors on 5 May 2021.
The Company has not presented its own profit and loss account. Its loss for the year was US $10,045,487
(2019: US $8,263,607).
Martin Hull
Company registration number 05483127
The notes on pages 50-78 form an integral part of these financial statements.
45
Financial Statements Consolidated Statement of
Changes in Equity
Year ended 31 December 2020
Total comprehensive loss for the year
(13,289,584)
Total comprehensive loss for the year
(25,991,643)
1 January 2019
Loss for the year
Discontinued operations
Exchange Reserve
New shares issued
Share issue costs
Share options lapsed
Share–based payments
31 December 2019
1 January 2020
Loss for the year
Discontinued operations
Exchange Reserve
New shares issued
Warrants
Share issue costs
Share options lapsed
Share–based payments
31 December 2020
Retained
earnings
US $
Share capital
US $
Share
premium
US $
Warrant
reserve
US $
Share option
reserve
US $
Foreign
currency
translation
reserve
US $
Total equity
US $
(65,964,357)
4,444,999
58,329,880
11,142,290
1,195,106
(2,095,334)
7,052,584
(10,030,832)
(3,441,230)
182,478
–
–
–
–
–
–
–
–
–
–
396,935
–
745,878
6,924,246
–
–
–
(436,464)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(396,935)
361,409
–
–
(10,030,832)
(3,441,230)
(182,478)
–
(182,478)
(13,472,062)
–
–
–
–
7,670,124
(436,464)
–
361,409
(78,857,006)
5,190,877
64,817,662
11,142,290
1,159,580
(2,277,812)
1,175,591
(78,857,006)
5,190,877
64,817,662
11,142,290
1,159,580
(2,277,812)
1,175,591
(15,267,535)
(10,724,108)
–
–
–
–
76,614
–
–
–
–
–
1,097,142
–
–
–
–
–
–
–
–
467,935
(231,676)
(92,016)
–
–
–
–
–
–
–
231,676
–
–
–
–
–
–
–
–
–
–
(76,614)
334,319
–
–
(15,267,535)
(10,724,108)
(1,041,955)
(1,041,955)
(1,041,955)
(27,033,598)
–
–
–
–
–
1,565,077
–
(92,016)
–
334,319
(104,772,035)
6,288,019
64,961,905
11,373,966
1,417,285
(3,319,767)
(24,050,627)
The notes on pages 50-78 form an integral part of these financial statements.
46
Echo Energy Annual Report 2020 Company Statement of
Changes in Equity
Year ended 31 December 2020
1 January 2019
Loss for the year
Discontinued operations
Total comprehensive loss for the year
New shares issued
Share issue costs
Share options lapsed
Share–based payments
31 December 2019
1 January 2020
Loss for the year
Discontinued operations
New shares issued
Warrants issued
Share issue costs
Share options lapsed
Share–based payments
31 December 2020
Retained
earnings
US $
Share capital
US $
Share
Premium
US $
Warrant
reserve
US $
Share option
reserve
US $
Foreign
currency
translation
reserve
US $
Total equity
US $
(65,157,602)
4,444,999
58,329,880
11,142,290
1,195,106
(2,255,402)
7,699,271
(7,252,983)
(1,010,624)
(8,263,607)
–
–
396,935
–
–
–
–
–
–
–
745,878
6,924,246
–
–
–
(436,464)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(396,935)
361,409
–
–
–
–
–
–
–
(7,252,983)
(1,010,624)
(8,263,607)
7,670,124
(436,464)
–
361,409
(73,024,274)
5,190,877
64,817,662
11,142,290
1,159,580
(2,255,402)
7,030,733
(73,024,274)
5,190,877
64,817,662
11,142,290
1,159,580
(2,255,402)
7,030,733
(10,045,487)
–
–
–
–
76,614
–
–
–
–
1,097,142
–
–
–
–
–
–
–
467,935
(231,676)
(92,016)
–
–
–
–
–
–
231,676
–
–
–
–
–
–
–
–
–
(76,614)
334,319
–
–
–
–
–
–
–
–
(10,045,487)
–
(10,045,487)
1,565,077
–
(92,016)
–
334,319
(82,993,147)
6,288,019
64,961,905
11,373,966
1,417,285
(2,255,402)
(1,207,374)
Total comprehensive loss for the year
(10,045,487)
Share premium reserves represents the amounts subscribed for share capital in excess of the nominal value of the
shares issued, net of cost of issue. Deferred shares are a separate class of share capital.
Shares to be issued represents the fair value of shares to be issued upon satisfaction of certain criteria in respect of
services received.
Warrant reserve represents the cumulative fair value of share warrants granted.
Share options reserve represents the cumulative fair value of share options granted.
Foreign currency translation reserve arises on the retranslation of the prior period results and financial position of
foreign operations into presentation currency.
Retained earnings represents the cumulative net gains and losses recognised in the consolidated income statement.
The notes on pages 50-78 form an integral part of these financial statements.
47
Financial Statements Consolidated Statement of
Cash Flows
Year ended 31 December 2020
Cash flows from operating activities
Loss from continuing operations
Loss from discontinued operations
Adjustments for:
Depreciation and depletion of property, plant and equipment
Depreciation and depletion of intangible assets
Loss on disposal of property, plant and equipment
Impairment of intangible assets and goodwill
Impairment of property, plant and equipment
Share–based payments
Right of use liability
Financial income
Financial expense
Exchange differences
Derivative financial gain
Decrease/(Increase) in inventory
Decrease/(Increase) in other receivables
(Decrease)/increase in trade and other payables
Cash used in operations
Net cash used in operating activities
Cash flows from investing activities
Purchase of intangible assets
Purchase of property, plant and equipment
Net cash used in investing activities
Cash flows from financing activities
Proceeds from debt
Debt issue costs
Interest received
Interest paid
Bank fees and other finance costs
Repayment of right of use liability
Issue of share capital
Share issue costs
Net cash from financing activities
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at 1 January 2020
Foreign exchange gains/(losses) on cash and cash equivalents
Cash and cash equivalents at 31 December 2020
The notes on pages 50-78 form an integral part of these financial statements.
48
Year to
31 December 2020
Year to
31 December 2019
US $
US $
(15,267,535)
(10,030,832)
(10,724,108)
(3,441,230)
(25,991,643)
(13,472,062)
182,211
1,874,810
10,822
190,383
369,874
22,040
10,383,461
2,802,239
–
334,319
(64,180)
(7,142)
–
361,409
–
(352,579)
10,174,047
5,738,338
(2,265,180)
–
(666,306)
(339,219)
19,956,862
8,792,485
(120,386)
381,341
311,275
(3,359,213)
5,844,002
6,034,891
3,753,130
9,567,743
112
(3,904,319)
(470,637)
(19,245,768)
(1,644,516)
(979,164)
(2,115,153)
(20,224,932)
–
–
7,142
–
(189,520)
–
1,565,077
(92,016)
5,434,727
(388,852)
180,648
(2,085,954)
–
(156,269)
7,670,124
(436,464)
1,290,682
10,217,960
(824,360)
(13,911,291)
1,698,012
15,609,303
(191,493)
682,159
–
1,698,012
Echo Energy Annual Report 2020 Company Statement of
Cash Flows
Year ended 31 December 2020
Cash flows from operating activities
Loss from continuing operations
Loss from discontinued operations
Loss before taxation
Adjustments for:
Provision against amounts owing by subsidiary undertakings
Depreciation of property, plant and equipment
(Gain)/Loss on disposal of property, plant and equipment
Impairment of intangible assets and goodwill
Share–based payments
Right of use liability
Financial income
Financial expense
Derivative financial gain
Decrease/(increase) in other receivables
(Decrease)/increase in trade and other payables
Investment in subsidiaries
(Increase) in amounts owing by subsidiary undertakings
Cash used in operations
Net cash used in operating activities
Cash flows from investing activities
Purchase of intangible assets
Purchase of property, plant and equipment
Net cash (used in)/from investing activities
Cash flows from financing activities
Proceeds from debt
Debt issue costs
Interest received
Interest paid
Repayment of right of use liability
Issue of share capital
Share issue costs
Net cash from financing activities
Net (decease)/increase in cash and cash equivalents
Cash and cash equivalents at 1 January 2020
Foreign exchange gains/(losses) on cash and cash equivalents
Cash and cash equivalents at 31 December 2020
The notes on pages 50-78 form an integral part of these financial statements.
Year to
31 December 2020
Year to
31 December 2019
US $
US $
(9,721,880)
(7,252,983)
(323,607)
(1,010,624)
(10,045,487)
(8,263,607)
13
104,552
9,119
323,607
334,319
(64,180)
(1,847)
7,673,678
(666,306)
7,712,955
87,640
711,533
870,268
189,111
2,566
140,356
361,409
–
(311,663)
4,112,123
(339,219)
5,024,951
317,888
(48,897)
–
(11,117,531)
(481,022)
(8,938,493)
318,151
(14,762,082)
(2,014,381)
(23,025,689)
(288,475)
(410,469)
(288,475)
(410,469)
–
–
–
1,847
–
–
1,565,076
(92,016)
5,434,727
(388,852)
139,732
(2,007,356)
(156,269)
7,670,124
(436,464)
1,474,907
10,255,642
(827,949)
(13,180,516)
1,259,468
14,439,984
5,711
437,230
–
1,259,468
49
Financial Statements Notes to the Financial Statements
Year ended 31 December 2020
1. Accounting Policies
General Information
These financial statements are for Echo Energy plc
(“the Company”) and subsidiary undertakings (“the
Group”). The Company is registered, and domiciled,
in England and Wales and incorporated under the
Companies Act 2006. The nature of the Company’s
operations and its principal activities are set out in the
Directors’ Report on page 34.
The Company’s functional currency is the United States
dollar (US $). Transactions arising in currencies other
than the US $ are translated at average exchange
rates for the relevant accounting period, with material
transactions being accounted at the rate of exchange
on the date of the transaction.
The Group presents its financial information in US $.
Transactions relating to subsidiary undertakings that
have a different functional currency to US $ are treated
as follows:
• Assets and liabilities for each financial reporting
date presented (including comparatives) are
translated at the closing rate of that financial
reporting period.
•
Income and expenses for each income statement
(including comparatives) is translated at exchange
rates at the dates of transactions. For practical
reasons, the Company applies average exchange
rates for the period.
• All resulting changes are recognised as a separate
component of equity.
• Equity items are translated at exchange rates at the
dates of transactions.
The principal accounting policies are summarised
below:
(a) Basis of preparation
The financial statements have been prepared in
accordance with International Financial Reporting
Standards (“IFRS”) as adopted by the European Union.
These financial statements are for the year 1 January
2020 to 31 December 2020. The comparatives shown
are for the year 1 January 2019 to 31 December 2019.
New standards and interpretations not applied
At the date of authorisation of these financial
statements, a number of standards and interpretations
were in issue but not yet effective. The directors do
not anticipate that the adoption of these standards
and interpretations, or any amendments to existing
standards as a result of the annual improvements cycle,
will have a material effect on the financial statements
in the year of initial application.
50
(b) Basis of consolidation
The Group financial statements consolidate the financial
statements of the Company and its subsidiaries under
the acquisition method. The financial statements of
subsidiaries are included in the consolidated financial
statements from the date that control commences until
the date control ceases. Control is achieved where the
Company has the power to govern the financial and
operating policies of an investee entity so as to obtain
benefits from its activities.
(c) Joint arrangements
A joint arrangement is one in which two or more parties
have joint control. Joint control is the contractually agreed
sharing of control of an arrangement, which exists only
when decisions about the relevant activities require the
unanimous consent of the parties sharing control. Certain
of the Group’s licence interests are held jointly with
others. Accordingly, the Group accounts for its share of
assets, liabilities, income and expenditure of these joint
operations, classified in the appropriate statement of
financial position and income statement headings.
(d) Revenue
Revenue comprises the invoice value of goods and services
supplied by the Group, net of value added taxes and trade
discounts. Revenue is recognised in the case of oil and
gas sales when goods are delivered and title has passed
to the customer. This generally occurs when the product
is physically transferred into a pipeline or vessel. Echo
recognised revenue in accordance with IFRS 15. Our joint
venture partner markets gas and crude oil on our behalf.
Gas is transferred via a metered pipeline into the regional
gas transportation system, which is part of national
transportation system, control of the gas passes at the
point at which the gas enters this network, this is the point
at which gas revenue would be recognised. Gas prices vary
from month to month based on seasonal demand from
customer segments and, production in the market as a
whole. Our partner agrees pricing with their portfolio of
gas clients based on agreed pricing mechanisms in multiple
contracts. Some pricing is regulated by government such
as domestic supply. Oil shipments are priced in advance
of a cargo and revenue is recognised at the point at which
cargoes are loaded onto shipping vessel at terminal.
(e) Property, plant and equipment
Property, plant and equipment is stated at cost, or
deemed cost less accumulated depreciation, and any
recognised impairment loss. Land is stated at cost
and is not depreciated. Depreciation is charged so as
to write off the cost or valuation of assets less any
residual value over their estimated useful lives, using
the straight- line method, on the following bases:
Fixtures & fittings
12% to 33.3% straight-line
Motor vehicles
25% straight-line
Echo Energy Annual Report 2020 1. Accounting Policies (continued)
Oil and gas properties are depleted on a unit of
production basis commencing at the start of
commercial production or depreciated on a straight-
line basis over the relevant asset’s estimated useful
life. Expenditure is depreciated on a unit of production
basis; the depletion charge is calculated according
to the proportion that production bears to the
recoverable reserves for each property. Depreciation
will not be charged on an asset in the course of
construction, depreciation commences when the asset
is brought into use and will be depleted according
to the proportion that production bears to the
recoverable reserves for each property.
(f) Property right of use asset
The Group recognises a right-of-use asset and a lease
liability at the lease commencement date. The right of
use lease is initially measured at cost, which comprises
the initial amount of the lease liability adjusted for any
lease payments made at or before commencement
date plus any initial direct costs incurred and an
estimate of costs to dismantle and remove the
underlying asset. The right-of-use asset is subsequently
depreciated using the straight-line method from the
commencement date to the earlier of the end of the
useful life of the right-of-use asset or the end of the
lease term. The lease liability is initially measured at
the present value of the lease payments that are not
paid at the commencement date discounted using the
incremental borrowing rate of the individual Company
which is the lessee.
(g) Other intangible assets - exploration
and evaluation costs
Exploration and evaluation (E&E) expenditure
comprises costs which are directly attributable to
researching and analysing exploration data. It also
includes the costs incurred in acquiring mineral
rights, the entry premiums paid to gain access to
areas of interest and amounts payable to third
parties to acquire interests in existing projects.
When it has been established that a mineral deposit
has development potential, all costs (direct and
applicable overhead) incurred in connection with the
exploration and development of the mineral deposits
are capitalised until either production commences or
the project is not considered economically viable. In
the event of production commencing, the capitalised
costs are amortised over the expected life of the
mineral reserves on a unit of production basis. Other
pre-trading expenses are written off as incurred.
Where a project is abandoned or is considered
to be of no further interest, the related costs are
written off.
(h) Impairment of tangible and
intangible assets excluding goodwill
At the date of each statement of financial position,
the Group reviews the carrying amounts of its tangible
and intangible assets to determine whether there
is any indication that those assets have suffered an
impairment loss. If any such indication exists, the
recoverable amount of the asset is estimated in order
to determine the extent of the impairment loss (if any).
Where it is not possible to estimate the recoverable
amount of an individual asset, the Group estimates
the recoverable amount of the cash-generating unit
(“CGU”) to which the asset belongs.
The recoverable amount is the higher of fair value less
costs to sell or value in use. In assessing value in use,
the estimated future cash flows are discounted to
their present value using a pre-tax discount rate that
reflects the current market assessments of the time
value of money and the risks specific to the asset. If the
recoverable amount of an asset (or CGU) is estimated
to be less than its carrying amount, the carrying
amount of the asset is reduced to its recoverable
amount. An impairment loss is recognised immediately
in profit or loss, unless the relevant asset is carried at a
revalued amount, in which case the impairment loss is
treated as a revaluation decrease.
Where an impairment loss subsequently reverses,
the carrying amount of the asset is increased to the
revised estimate of its recoverable amount, but so
that the increased carrying amount does not exceed
the carrying amount that would have been determined
had no impairment loss been recognised for the asset
(CGU) in prior years. A reversal of an impairment
loss is recognised immediately in profit or loss, unless
the relevant asset is carried at a re-valued amount,
in which case the reversal of the impairment loss is
treated as a revaluation increase.
(i) Taxation
Current taxation
Current tax assets and liabilities for the current and
prior periods are measured at the amount expected to
be recovered from, or paid to, the tax authorities. The
tax rates and the tax laws used to compute the amount
are those that are enacted, or substantively enacted, by
the balance sheet date.
Deferred taxation
Deferred tax is the tax expected to be payable or
recoverable on differences between the current year
amounts of assets and liabilities in the financial
statements and the corresponding tax basis used in the
computation of taxable profit.
51
Financial Statements Notes to the Financial Statements continued
1. Accounting Policies (continued)
Deferred tax assets are recognised to the extent the
temporary difference will reverse in the foreseeable
future and it is probable that future taxable profit will
be available against which the asset can be utilised.
Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and
demand deposits, and other short-term highly liquid
investments that are readily convertible to a known
amount of cash and are subject to an insignificant risk
of changes in value.
Deferred tax is recognised for all deductible temporary
differences arising from investments in subsidiaries,
branches and associates, and interests in joint ventures,
to the extent it is probable that the temporary
difference will reverse in the foreseeable future.
(j) Conversion of foreign currency
Foreign currency transactions are translated at
the average exchange rates over the year, material
transactions are recorded at the exchange rate ruling
on the date of the transaction. Assets and liabilities
are translated at the rates prevailing at the balance
sheet date. The Group has significant transactions and
balances denominated in Euros and GBP. The year-end
exchange rate to USD was US $1 to GBP £0.7319 and
US $1 to €0.8178 (2019: US $1 to GBP £0.7649, US $1
to €0.8906) US $1 to ARS $86.250 and the average
exchange rate during 2020 was US $1 to GBP £0.7793
(2019: US $1 to GBP £0.7822).
In the Company financial statements, the income and
expenses of foreign operations are translated at the
exchange rates ruling at the dates of the transactions.
The assets and liabilities of foreign operations,
both monetary and non-monetary, are translated
at exchange rates ruling at the balance sheet date.
The reporting currency of the Company and group is
United Stated Dollars (US $).
(k) Share-based payments
The fair value of equity instruments granted to employees
is charged to the income statement, with a corresponding
increase in equity. The fair value of share options is
measured at grant date, using the binomial option pricing
model or Black-Scholes pricing model were considered
more appropriate, and spread over the period during
which the employee becomes unconditionally entitled to
the award. The charge is adjusted to reflect the number
of shares or options that vest, except where forfeiture is
due to market-based criteria.
(l) Financial instruments
Financial assets and financial liabilities are recognised
on the Group’s balance sheet when the Group becomes
a party to the contractual provisions of the instrument.
Trade and other receivables
Trade and other receivables are initially measured at
fair value and are subsequently reassessed at the end
of each accounting period.
52
Financial liabilities and equity
Financial liabilities and equity instruments issued by
the Group are classified according to the substance
of the contractual arrangements entered into and
the definitions of a financial liability and an equity
instrument. An equity instrument is any contract that
evidences a residual interest in the assets of the Group
after deducting all of its liabilities. The accounting
policies adopted for specific financial liabilities and
equity instruments are set out below.
Trade payables
Trade payables are initially measured at fair value and
are subsequently measured at amortised cost, using
the effective interest rate method.
(l) Financial instruments
Equity instruments
Financial instruments issued by the Group are treated
as equity only to the extent that they meet the
following two conditions, in accordance with IAS 32:
•
They include no contractual obligations upon the
Group to deliver cash or other financial assets or to
exchange financial assets or financial liabilities with
another party under conditions that are potentially
unfavourable to the Group; and
• Where the instrument will or may be settled in
the Group’s own equity instruments, it is either
a non-derivative that includes no obligation to
deliver a variable number of the Group’s own equity
instruments or is a derivative that will be settled
by the Group exchanging a fixed amount of cash or
other financial assets for a fixed number of its own
equity instruments.
To the extent that this definition is not met, the
financial instrument is classified as a financial liability.
(m) Borrowings
Borrowings are recognised initially at the fair value
of the proceeds received which is determined using
a discount rate which reflects the cost of borrowing
to the Group. In subsequent periods borrowings are
recognised at amortised costs, using an effective
interest rate method. Any difference between the
fair value of the proceeds costs and the redemption
amount is recognised as a finance cost over the period
of the borrowings.
Echo Energy Annual Report 2020 1. Accounting Policies (continued)
portion of the outstanding VAT scheduled for payment
in Q2 2021.
(n) Inventory
Echo has chosen to value crude oil inventories, a
commodity product, at net realisable value, the value
is based on a discounted observable year-end market
price. Other inventory items are valued at the lower of
net realisable value and cost.
(o) Going Concern
The financial information has been prepared assuming
the Group will continue as a going concern. Please see
note 2 Accounting Estimates and Judgements for an
extended disclosure on this issue.
(p) Government assistance grants
Government assistance grants such as the Coronavirus
Job Retention Scheme (CJRS) which relates to staff
who have been furloughed due to COVID-19 are
recognised as income and have been shown in the
consolidated statement of comprehensive income as
other income. During 2020, the Group received grants
totalling US $45,503 for furloughed staff.
2. Accounting Estimates and
Judgements
Going concern
The financial information has been prepared assuming
the Group will continue as a going concern. Under
the going concern assumption, an entity is ordinarily
viewed as continuing in business for the foreseeable
future with neither the intention nor the necessity of
liquidation, ceasing trading or seeking protection from
creditors pursuant to laws or regulations.
Despite the consolidated statement of financial
position showing a negative net asset position at
31 December 2020, the outlook for the Group has
materially changed post period.
The business market took a positive upturn from
early 2021, with oil prices increasing by a significant
30% by the end of Q1 2021, in comparison to the end
of Q4 2020. In January 2021. The Company achieved
a key customer gas sales contract at a premium to
prevailing spot market rates, and more significantly,
Q2 2021 saw the conclusion of the Company’s unlisted
debt restructuring, materially changing Echo’s business
position. This restructuring reduced cash loan payment
cash commitments to only £250k for 2021, allowing
increased cashflow optionality. Post period, the Group
is investing in its asset facility upgrades, maturing
its portfolio to a level that is opportunistic to higher
commodity prices and revenue growth. Due to easing
of COVID-19 restrictions in Argentina, Q1 2021 saw the
recommencement of VAT repayment process, with a
Considering these factors, the Company is in a
materially more robust position post period. The
Company confirms that operations at the SCS assets
are predicted to be cash flow positive at prevailing oil
and gas price levels, and have considered the impact of
a fall in commodity prices or an unexpected increase in
costs.
Use of estimate and judgements
The preparation of financial statements in conforming
with adopted IFRSs requires management to make
judgements, estimates and assumptions that affect
the reported amounts of assets and liabilities as well
as the disclosure of contingent assets and liabilities as
at the balance sheet date and the reported amount
of revenues and expenses during the period. Actual
outcomes may differ from those estimates. The
key sources of uncertainty in estimates that have a
significant risk of causing material adjustment to the
carrying amounts of assets and liabilities, within the
next financial year, are the impairment of assets and
the Group’s going concern assessment.
Amounts capitalised to the consolidated
statement of financial position
In accordance with the Group policy, expenditures
are capitalised only where the Group holds a licence
interest in an area. All expenditure relating to the
Bolivian company has been expensed to the statement
of comprehensive income, as the Group has not yet
been assigned any licence interests in the country.
The Group has capitalised its participation in the SCS
assets. The assignment of Echo´s participation in these
Argentine licences is still subject to the authorisation of
the Executive Branch of Santa Cruz Province, Echo are
supported in this process by their joint venture partners
Interoil & IAG in the SCS assets, and the process of title
transfer is proceeding as anticipated, however due to
the COVID-19 pandemic, this process has been delayed.
Valuation of assets
Expenditures recognised as exploration and evaluation
(“E&E”) assets are tested for impairment whenever
facts and circumstances suggest that they may be
impaired, which includes when a licence is approaching
the end of its term and is not expected to be renewed,
or there are no substantive plans for continued
exploration or evaluation of an area, or whilst
development of a licence is still likely to proceed in an
area but there are indications that the E&E assets are
unlikely to be recovered in full.
53
Financial Statements Notes to the Financial Statements continued
2. Accounting Estimates and
Judgements (continued)
When considering whether E&E assets are impaired
the Group first considers the IFRS 6 indicators. IFRS 6
requires an entity to assess whether E&E assets require
impairment when facts and circumstance suggest that
the carrying amount of the assets may exceed their
recoverable amount, these include:
• The period for which the entity has the right to
explore in the specific area has expired during the
period or will expire in the near future and is not
expected to be renewed;
• Substantive expenditure on further exploration for
and evaluation of mineral resources in the specific
area is neither budgeted nor planned;
• Exploration for and evaluation of mineral resources
in the specific area have not led to the discovery of
commercially viable quantities of mineral resources
and the entity has decided to discontinue such
activities in the specific area;
• Sufficient data exists to indicate that, although a
development in the specific area is likely to proceed,
the carrying amount of the E&E assets is unlikely to
be recovered in full from successful development or
by sale.
In 2020 the Tapi Aike assets were written down, as
Echo decided to leave the license and impaired the
balance sheet values as at the end of 2020, the cost
of subsequent licence activity was impaired in the
current accounting period. The determination of
recoverable amounts in any resulting impairment test
requires judgement around key assumptions, such as
future costs, both capital and operating. There are no
indications of impairment on the SCS assets.
Included within receivables are amounts due in respect
of VAT of US $ 2.0 million, which span Tax reclaim
amounts for the period of 2020 and 2019 and current
operational tax movements. The claims all comply with
local tax law and are at various stages of approval
and awaiting payment. The processing of these
tax credits have been hindered in the past due to
COVID-19 Pandemic delays, with the government tax
office being officially closed since March 2020. There
is no reason as to why the Group believes it will not
receive the tax credits, and therefore no impairment
provision required. The speed at which the tax credits
are being processed is increasing, with AFIP (Argentine
tax authority) notifying Echo that a portion of the
owed tax will be paid in Q2 2021, and therefore the
remaining credits are expected to be paid in the very
near future.
54
Determination of discount rates
Determination of derivative financial
liabilities
Judgement is requirement when determining the
classification of financial instruments in terms
of liability or equity. These judgements include an
assessment of whether the financial instrument include
any embedded derivative features, whether they include
contractual obligations upon the Group to deliver
cash or other financial assets or to exchange financial
assets or financial liabilities with another party, and
whether that obligation will be settled by the Company
exchanging a fixed amount of cash or other financial
assets for a fixed number of its own equity instruments.
Valuation of derivative financial
liabilities
The Group has issued warrants over ordinary shares as
fundraising commission in respect of debt fundraisings
during the year which can be converted to share
capital at the option of the holder. These warrants
are accounted for as an embedded derivative which
is recognised at fair value through profit or loss. The
Directors estimated the fair value of the derivative
component using the Black Scholes option pricing
model, as described in note 24. This required making
certain estimates on the share price volatility of the
Group which inevitably involved a degree of judgement
and the actual outcome may vary.
Inter-group balances
In determining whether parent company investments in
subsidiaries have been impaired, we review subsidiary
assets and liabilities to determine whether Group
investment is recoverable. The only entity where an
impairment trigger might be recognised was the
Bolivian entity where the Group holds no licence assets.
A determination was made that because of ongoing
negotiations and Company strategic intent, investment
would ultimately still be recoverable.
However, the Group recognises that in order to pursue
organic and inorganic growth opportunities and fund
on-going operations it may require additional funding.
This funding may be sourced through debt finance, joint
venture equity or share issues.
In the prior year management reported a material
uncertainty in respect of going concern. Based on the
post year end debt restructuring, the current level
of revenue and cash generation and the sensitivities
considered in respect of the cashflow forecasts to
December 2022, and the mitigating actions that could
be taken to conserve cash in a worse- case scenario,
management do not consider there to be a material
uncertainty in the current year.
Echo Energy Annual Report 2020 2. Accounting Estimates and Judgements (continued)
The directors have formed a judgement based on Echo’s proven success in raising capital and a review of the
strategic options available to the Group, that the going concern basis should be adopted in preparing the financial
statements.
3. Business Segments
The Group has adopted IFRS 8 Operating Segments. Per IFRS 8, operating segments are regularly reviewed and
used by the board of directors being the chief operating decision maker for strategic decision-making and resources
allocation, in order to allocate resources to the segment and assess its performance. The Group’s reportable
operating segments are as follow:
a. Corporate and Administrative
b. Santa Cruz Sur
c. Tapi Aike (discontinued)
d. Bolivia
Performance is based on assessing progress made on projects and the management of resources used. Segment
assets and liabilities are presented inclusive of inter-segment balances. Reportable segments are based around
licence activity, although the reportable segments are reflected in legal entities, certain corporate cost costs collate
data across legal entities and the segmental analysis reflects this.
Information regarding each of the operations of each reportable segment within continuing operations is included in
the following table.
All revenue, which represents turnover, arises within Argentina and relates to external parties:
Year to 31 December 2020
Revenues
Cost of sales
Exploration expense
Administration expense
Financial income
Financial expense
Derivative financial gain
Depreciation
Income tax
Loss before tax
Non-current assets
Assets
Liabilities
Corporate &
Administrative
US $
Santa Cruz
Sur
US $
Tapi Aike
US $
Bolivia
US $
Total
US $
45,503
11,081,017
–
(13,437,010)
(215,512)
(3,036,478)
–
–
1,771
5,371
(8,801,106)
(1,372,978)
666,306
–
(101,151)
(1,936,878)
–
–
(11,339,516)
(3,723,600)
383,790
11,053,602
3,994,325
15,858,507
(30,791,002)
(12,732,808)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
11,126,520
(13,437,010)
(215,512)
(204,456)
(3,240,934)
–
37
–
7,142
(10,174,047)
666,306
(1,031)
(2,039,060)
–
–
(204,419)
(15,267,535)
(373,077)
11,064,315
(335,865)
19,516,967
(43,784)
(43,567,594)
55
Financial Statements Notes to the Financial Statements continued
3. Business Segments (continued)
Year to 31 December 2019
Revenues
Cost of sales
Exploration expense
Administration expense
Financial income
Financial expense
Derivative financial gain
Depreciation
Income tax
Loss before tax
Non-current assets
Assets
Liabilities
Corporate &
Administrative
US $
Santa Cruz
Sur
US $
Tapi Aike
US $
Bolivia
US $
Total
US $
–
–
2,586,069
(3,127,542)
–
–
–
–
2,586,069
(3,127,542)
(587,640)
(3,545,328)
92,445
(5,475,203)
339,219
175,798
–
–
–
–
–
–
373,212
–
(40,043)
(19,863)
(647,546)
–
–
–
–
–
–
(252,533)
(3,797,861)
–
92,445
(413)
(5,475,616)
–
339,219
(15,822)
(564,832)
–
–
(9,176,507)
(541,473)
(40,043)
(272,809)
(10,030,832)
233,174
10,871,059
10,566,890
3,673
21,674,796
6,943,503
14,154,248
11,328,060
45,120
32,470,931
(23,142,362)
(7,205,500)
(905,979)
(41,499)
(31,295,340)
The geographical split of non-current assets arises as follows:
31 December 2020
Property, plant and equipment
Other intangible assets
31 December 2019
Property, plant and equipment
Other intangible assets
United
Kingdom
US $
8,039
326,869
121,710
362,001
South America
US $
Total
US $
2,544,654
8,184,753
2,552,693
8,511,622
979,500
1,101,210
20,211,585
20,573,586
Revenue arising from operations in the Tapi Aike licences has been reclassified as part of discontinued operations.
4. Revenue
Oil revenue
Gas revenue
Other income
Total Revenue
5. Cost of Sales
Production costs
Selling and distribution costs
Movement in stock of crude oil
Depletion
Total Costs
Year to
31 December 2020
US $
Year to
31 December 2019
US $
2,784,248
8,279,416
62,856
1,395,356
1,190,713
–
11,126,520
2,586,069
Year to
31 December 2020
US $
Year to
31 December 2019
US $
10,021,578
2,794,339
1,567,963
(89,410)
1,936,879
13,437,010
311,161
(351,170)
373,212
3,127,542
Cost of sales arising from operations in the Tapi Aike licences has been reclassified as part of discontinued operations.
56
Echo Energy Annual Report 2020 6. Expenses and Auditor’s Remuneration
The operating loss is stated after charging the following amounts:
Depreciation of property, plant and equipment – owned
Loss/(Gain) on disposal of property, plant and equipment
Fees payable to the Company’s auditor for the audit of the Company’s annual
accounts
Fees payable to the overseas auditor and its associates for other services:
– Corporate finance services
– Audit and subsidiaries
Share based payments
7. Staff Costs and Numbers
Year to
31 December 2020
US $
Year to
31 December 2019
US $
182,211
–
190,383
12,120
61,007
54,998
9,370
23,400
334,319
–
2,579
361,409
The average number of persons employed by the Group during the year including executive directors is analysed
below:
Administration
Group employment costs – all employees including executive directors:
Wages and salaries
Social security costs
Pension contributions
Share-based payments – equity-settled
Total
Year to
31 December 2020
Year to
31 December 2019
9
15
Year to
31 December 2020
US $
Year to
31 December 2019
US $
1,770,037
1,952,797
221,908
51,557
334,319
261,169
54,730
361,409
2,377,821
2,630,105
Directors’ remuneration is set out in the Directors Remuneration Report on page 33 of this report.
Remuneration of Key Personnel is set out in the table below.
Wages and salaries
Bonus
Pension Contributions
Private Health Insurance
Share Based Payments
Total
Year to
31 December 2020
US $
Year to
31 December 2019
US $
828,420
313,706
25,787
13,293
274,834
1,456,040
1,075,128
52,424
22,614
11,912
280,475
1,442,553
57
Financial Statements Notes to the Financial Statements continued
8. Financial Income
Interest income
Net foreign exchange loss
Total
9. Financial Expense
Interest payable
Net foreign exchange losses
Unwinding of discount on long term loan
Amortisation of loan fees
Accretion of right of use liabilities
Unwinding of abandonment provision
Finance cost of holding bonds
Bank fees and overseas transaction tax
Total
10. Derivative Financial Gain/Loss
Fair value gain
Total
Represents fair value gain on valuation of derivatives instruments at period end.
Year to
31 December 2020
US $
Year to
31 December 2019
US $
7,142
–
7,142
92,445
–
92,445
Year to
31 December 2020
US $
Year to
31 December 2019
US $
1,991,535
4,409,732
2,936,831
614,913
2,293
39,956
11,971
166,816
10,174,047
1,940,527
1,247,936
1,688,536
464,283
17,401
–
–
116,933
5,475,616
Year to
31 December 2020
US $
Year to
31 December 2019
US $
666,306
666,306
339,219
339,219
58
Echo Energy Annual Report 2020 11. Discontinued Operations
On 22 December 2020 the Company announced that it had allowed the lapse of the option to re enter the Tapi Aike
asset. This resulted in Echo finally withdrawing its interests and liabilities under the Tapi Aike concessions prior to the
drilling of the next exploration well in the Tapi Aike Western cube.
The results of the discontinued operations, are presented below:
Revenue
Operating expenses
Operating loss before impairment
Administrative Expenses
Year to
31 December 2020
US $
Year to
31 December 2019
US $
–
–
–
–
2,838,880
(3,478,991)
(640,111)
–
Impairment of the historic cost and carrying value of intangible assets
(10,724,108)
(2,802,239)
Impairment of the historic cost and carrying value of PPE
Net current assets receivable
Loss on disposal of foreign subsidiary
Operating (loss)/gain after liquidation
Financial income
Financial expense
(Loss)/Gain on ordinary activities before taxation
Taxation
(Loss)/Gain for the year from discontinued operations
The cash flows associated with the discontinued operations are:
Operations
Investing
Financing
Net cash out flow
12. Joint Arrangements
–
–
–
–
–
1,120
(10,724,108)
(3,441,230)
–
–
–
–
(10,724,108)
(3,441,230)
–
–
(10,724,108)
(3,441,230)
Year to
31 December 2020
US $
Year to
31 December 2019
US $
–
–
–
–
(640,111)
–
–
(640,111)
As described in both the strategic and governance reports, in particular in the Financial Review, Echo has joint
arrangements within the SCS concessions. The Group accounts for its share of assets, liabilities, income and
expenditure of these joint operations in accordance with its equity interest in each. Echo holds 70% of the SCS
working interest Our joint venture assets and liabilities are separately disclosed throughout the financial statements.
59
Financial Statements Notes to the Financial Statements continued
13. Taxation
Tax on profit on ordinary activities
Taxation charged based on profits for the period
UK corporation tax based on the results for the period
Total tax expense in income statement
Reconciliation of the tax expense
Year to
31 December 2020
US $
Year to
31 December 2019
US $
–
–
–
–
–
–
The tax assessed for the year is different from the standard rate of corporation tax in the UK of 19% (2019: 19%).
The references are explained below:
Loss on ordinary activities before taxation
Loss from discontinued operations
Loss for the year before tax
Year to
31 December 2020
US $
Year to
31 December 2019
US $
(15,267,535)
(10,030,832)
(10,724,108)
(3,441,230)
(25,991,643)
(13,472,062)
Loss on ordinary activities multiplied by standard rate of corporation tax in the UK
of 19%
(4,938,412)
(2,559,692)
Effects of:
Expenses disallowed for tax purposes
Deferred tax not provided – tax losses carried forward
Total current tax
76,404
4,862,008
–
346,664
2,213,028
–
The parent entity has tax losses available to be carried forward, and further tax losses are available in certain
subsidiaries. With anticipated substantial lead times for the Group’s projects, and the possibility that these may expire
before their use, it is not considered appropriate to anticipate an asset value for them. The amount of tax losses
carried forward for which a deferred tax asset has not been recognised is US $36,729,760 (2019: US $11,140,244)
No amounts have been recognised within tax on the results of the equity-accounted joint ventures.
14. Loss Per Share
The calculation of basic and diluted loss per share at 31 December 2020 was based on the loss attributable to
ordinary shareholders. The weighted average number of ordinary shares outstanding during the year ending
31 December 2020 and the effect of the potentially dilutive ordinary shares to be issued are shown below.
Net loss for the year (US $)
Year to
31 December 2020
Year to
31 December 2019
(25,991,643)
(13,472,062)
Basic weighted average ordinary shares in issue during the year
768,598,277
515,840,359
Diluted weighted average ordinary shares in issue during the year
768,598,277
515,840,359
Loss per share (cents)
Basic
Diluted
(3.38)
(3.38)
(2.61)
(2.61)
In accordance with IAS 33 and as the entity is loss making, including potentially dilutive share options in the
calculation would be anti-dilutive.
Deferred shares have been excluded from the calculation of loss per share due to their nature. Please see Note 25 for
details of their rights.
60
Echo Energy Annual Report 2020 15. Loss of the Parent Company
The parent company is not required to produce its own profit and loss account (or IFRS equivalent) because of the
exemption provision in Section 408 of the Companies Act 2006.
16. Property, Plant and Equipment (Group)
PPE – O&G
Properties
US $
CDL Licence
Areas
Discontinued
US $
Fixtures &
Fittings
US $
Property
Right-of-Use
Assets
US $
Total
US $
31 DECEMBER 2020
Cost
1 January 2020
979,164
–
–
–
–
–
–
–
–
–
–
–
–
–
Exchange differences
Additions
Disposals
31 December 2020
Depreciation
1 January 2020
Exchange differences
Charge for the year
Impairment charge
Disposals
31 December 2020
Carrying amount
31 December 2020
31 December 2019
31 DECEMBER 2019
Cost
1 January 2019
Exchange differences
Additions
Disposals
1,644,460
(1,703)
2,621,921
3,338
76,603
–
–
79,941
2,541,980
975,826
–
–
979,164
–
(1,270,832)
31 December 2019
979,164
–
Depreciation
1 January 2019
Exchange differences
Charge for the year
Impairment charge
Disposals
31 December 2019
Carrying amount
31 December 2019
31 December 2018
–
–
3,338
–
–
3,338
975,826
–
1,270,832
–
–
–
(1,270,832)
–
–
–
131,122
309,804
1,420,090
56
(33,923)
97,255
(309,804)
–
1,644,516
(345,430)
2,719,176
91,366
224,176
318,880
19,980
85,628
–
182,211
–
–
(24,804)
86,542
10,713
39,756
(309,804)
(334,608)
–
–
85,628
166,483
2,552,693
1,101,210
–
–
(25,432)
131,122
66,400
–
38,279
–
(13,313)
91,366
39,756
90,155
–
–
–
979,164
(24,821)
(1,321,085)
309,804
1,420,090
89,167
–
148,766
–
(13,757)
224,176
85,628
245,458
1,426,399
–
190,383
–
(1,297,902)
318,880
1,101,210
335,612
1,270,832
156,554
334,625
1,762,011
Included within property, plant and equipment are amounts of US $745,279 (2019: US $942,976) in relation to assets
in construction and as a result are not depreciation on the unit of production basis, this will commence when they are
available for use.
61
Financial Statements Notes to the Financial Statements continued
16. Property, Plant and Equipment (Company) (continued)
Fixtures &
Fittings
US $
Property
Right-of-Use
Assets
US $
Total
US $
126,826
309,804
436,630
–
(33,923)
92,903
90,744
18,924
–
–
(309,804)
(343,727)
–
92,903
224,176
85,628
314,920
104,552
(24,804)
(309,804)
(334,608)
–
84,864
8,039
36,082
–
–
–
85,628
–
84,864
8,039
121,710
142,704
309,804
452,508
–
(15,878)
126,826
63,712
40,343
(13,313)
–
90,744
36,082
78,992
–
–
309,804
75,410
148,765
–
–
–
(15,878)
436,630
139,122
189,109
(13,313)
–
224,176
314,920
85,628
234,394
121,710
313,386
31 DECEMBER 2020
Cost
1 January 2020
Additions
Disposals
31 December 2020
Depreciation
1 January 2020
Charge for the year
Disposals
Exchange
31 December 2020
Carrying amount
31 December 2020
31 December 2019
31 DECEMBER 2019
Cost
1 January 2019
Additions
Disposals
31 December 2019
Depreciation
1 January 2019
Charge for the year
Disposals
Exchange
31 December 2019
Carrying amount
31 December 2019
31 December 2018
62
Echo Energy Annual Report 2020 17. Other Intangible Assets (Group)
SCS
Production
Assets
US $
TA License
Areas
Discontinued
US $
CDL Licence
Areas
Discontinued
US $
Ksar Hadada
Exploration
Acreage
US $
Total
US $
31 DECEMBER 2020
Cost
1 January 2020
Additions
Disposals
Decommissioning Asset
Transfers
31 December 2020
Impairment and depletion
1 January 2020
Disposals
Depletion
Depreciation decommissioning assets
10,802,524
10,140,936
228,112
242,525
–
–
(274,330)
10,756,306
369,874
(10,383,461)
–
–
–
–
–
(10,383,461)
1,752,310
122,500
–
–
Impairment charge for the year
–
10,383,461
31 December 2020
Carrying amount
31 December 2020
31 December 2019
31 DECEMBER 2019
Cost
1 January 2019
Additions
Disposals
Decommissioning Asset
31 December 2019
Impairment and depletion
1 January 2019
Disposals
Depletion
Impairment charge for the year
31 December 2019
Carrying amount
31 December 2019
31 December 2018
2,244,684
8,511,622
20,573,586
1,559,930
16,443,530
–
2,940,000
20,943,460
–
–
369,874
–
369,874
20,573,586
1,559,931
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
20,943,460
470,637
(10,383,341)
–
(274,330)
10,756,306
369,874
(10,383,461)
1,752,310
122,500
10,383,461
2,244,684
8,511,622
20,573,586
14,148,371
2,043,430
17,751,731
2,802,239
–
19,245,769
(16,950,610)
(2,043,430)
(18,994,040)
–
–
–
–
2,940,000
20,943,460
14,148,371
2,043,430
16,191,801
(16,950,610)
(2,043,430)
(18,994,040)
–
2,802,239
–
–
–
–
–
–
–
–
369,874
2,802,239
369,874
20,573,586
1,559,931
All intangible assets relate to oil & gas activities. The Group’s oil and gas assets were assessed for impairment at
31 December 2020. One CGU’s is recognised: the SCS licence concession.
Impairment assessments are prepared on the basis of comparing the present value of discounted cash flows with
the carrying value of the assets.
63
Financial Statements Notes to the Financial Statements continued
17. Other Intangible Assets (Company) (continued)
Exploration and Evaluation
31 DECEMBER 2020
Cost
1 January 2020
Additions
Disposals
31 December 2020
Impairment
1 January 2020
Impairment charge for the year
Disposals
31 December 2020
Carrying amount
31 December 2020
31 December 2019
31 DECEMBER 2019
Cost
1 January 2019
Additions
Disposals
31 December 2019
Impairment
1 January 2019
Impairment charge for the year
Disposals
31 December 2019
Carrying amount
31 December 2019
31 December 2018
64
Argentina
Production
assets
US $
Total
US $
362,001
288,475
362,001
288,475
(323,607)
(323,607)
326,869
326,869
–
–
323,607
323,607
(323,607)
(323,607)
–
–
326,869
362,001
326,869
362,001
792,424
410,469
792,424
410,469
(840,892)
(840,892)
362,001
362,001
700,536
140,356
700,536
140,356
(840,892)
(840,892)
–
–
362,001
91,888
362,001
91,888
Echo Energy Annual Report 2020 18. Interest in Subsidiary Undertakings
Cost
1 January
Additions in year
31 December
Impairment
1 January
Impairment
31 December
Carrying amount
31 December 2020
31 December 2019
31 December 2018/2017
Year to
31 December 2020
US $
Year to
31 December 2019
US $
30,521,648
–
19,404,113
11,117,535
30,521,648
30,521,648
14,516,590
14,516,586
14
4
14,516,604
14,516,590
16,005,044
16,005,058
4,887,527
In the prior year additional capital was injected into Eco Energy CDL Op Limited and Eco Energy TA Op Limited.
Details of the subsidiaries are as follows:
Subsidiary
Class of Share
Echo Energy Holdings (UK) Limited
Ordinary
Echo Energy Argentina Holdings
Limited
Echo Energy Tapi Aike Limited
Eco Energy TA Op Limited
Echo Energy C D & LLC Limited
Eco Energy CDL Op Limited
Echo Energy Bolivia (Hold Co 1)
Limited
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
%
Owned
100%
100%
100%
100%
100%
100%
Country of
Registration
Nature of Business
England & Wales
Holding company
England & Wales
Holding company
England & Wales
Holding company
England & Wales
Holder of Argentinian branch
assets
England & Wales
Holding company
England & Wales
Holder of Argentinian branch
assets
Ordinary
100%
England & Wales
Holding company
Echo Energy Bolivia (Op Co 1) Limited Ordinary
Echo Energy Bolivia (Hold Co 2)
Limited
Ordinary
100%
100%
England & Wales
Holder of Bolivian branch assets
England & Wales
Holding company
Echo Energy Bolivia (Op Co 2) Limited Ordinary
100%
England & Wales
Dormant
The registered address for all of the above subsidiaries is: 85 Great Portland Street, London, W1W 7LT
65
Financial Statements Notes to the Financial Statements continued
19. Inventories
Crude oil
Parts and supplies
Total
31 December 2020
31 December 2019
Group
US $
510,254
30,976
541,230
Company
US $
–
–
–
Group
US $
420,844
–
420,844
Company
US $
–
–
–
Crude oil inventories are measured at Net Realisable Value, other inventory items are measured at the lower of cost
and net realisable value. These crude oil inventories are held in the SCS asset.
20. Other Receivables
Non-current
Amounts owing by subsidiary undertakings
Amounts provided against
Total
Current
Trade receivables
Accrued income
Other receivables
Prepayments
Total
31 December 2020
31 December 2019
Group
US $
Company
US $
Group
US $
Company
US $
–
–
–
12,504,108
–
12,504,108
–
–
–
12,893,354
(870,268)
12,023,086
1,218,350
573,842
5,163,981
273,090
7,229,263
–
–
84,791
71,243
156,034
1,002,295
1,181,838
6,056,470
436,676
8,677,279
–
–
142,910
100,764
243,674
Other receivables in the Group and the Company principally comprise recoverable Value Added Tax and joint venture
receivables. The directors consider that the carrying amount of trade and other receivables approximated their fair
value.
21. Cash and Cash Equivalents
Cash held by joint venture partners
Cash and cash equivalents
Total
31 December 2020
31 December 2019
Group
US $
27,479
654,680
682,159
Company
US $
–
437,230
437,230
Group
US $
300,746
1,397,266
1,698,012
Company
US $
–
1,259,468
1,259,468
Echo have advanced cash to our joint venture partners; this cash is held by our partners in a ring-fenced account. We
recognise our equity share of the balance held.
66
Echo Energy Annual Report 2020 22. Financial Instruments and Treasury Risk Management
Fair value of financial assets and liabilities
The carrying values of financial assets and liabilities are considered to be material equivalent to their fair values.
Treasury risk management
The Group manages a variety of market risks, including the effects of changes in foreign exchange rates, liquidity
and counterparty risk.
Credit risk
The Group’s principal financial assets are bank balances and cash and other receivables.
The credit risk on liquid funds is limited because the counterparties are UK, Argentine and Bolivian banks with
high credit ratings. The Group operates with positive cash and cash equivalents as a result of issuing share capital
in anticipation of future funding requirements. The Group’s policy is therefore one of achieving high returns with
minimal risks. In order to provide a degree of certainty, the Group primarily invests in short-term fixed-interest
treasury deposits giving a low risk profile to these assets.
In Echo’s SCS assets, acquired in November 2019, operating partner Interoil markets our hydrocarbon, primarily
to well established utilities. Echo carries a marginally higher credit risk exposure as Echo deals directly with
counterparties for payment, however as the Group’s principle customers are substantial oil and gas utility companies
and refiners, as such credit risk is considered to be low. There is no history of credit loss, non-payment or default by
the inherited counterparties and the calculated amount of the potential 12-month credit risk loss is not material. The
Company has low credit risk in respect of receivables as a result of supplying reputable oil and gas purchasers. All
receivables have been recovered in full since 1 January 2020. The group has applied the expected credit loss model
as required by the adoption of IFRS 9. Given current contractual arrangements where pricing has already been
determined at the point where receivables from hydrocarbon sales are recognised as revenue, and the fact that
contract counterparties are large corporate entities or utilities no provision was made for losses as any potential
losses would be immaterial.
The maximum exposure due to credit risk for the Group on other receivables and amounts due from equity
accounted joint operations during the year was US $3,253,335 (2019: US $6,928,450). No collateral is held in respect
of these amounts.
The maximum exposure due to credit risk for the Company on intercompany receivables and other receivables during
the year was US $28,509,152 (2019: US $28,028,144). No collateral is held in respect of these amounts. Intergroup
funding is assessed for indications of impairment on a periodic basis. Investments and subsidiaries and intergroup
loans in the amount of US $14,516,604 (2019: US $14,516,586) are considered to be impaired and have been provided
against in full. All other amounts are expected to be received in full.
Currency risk
The Group’s operations are primarily located in the South America, and the United Kingdom, with the main exchange
risk being between the US Dollar and the Argentine Peso. The Argentine Peso has devalued by approximately 9%
(2019: 37%) over the year. The Group addressed this risk by minimising exposure to the currency. The majority of
Group revenues for the year were denominated in US Dollars but certain liabilities and revenues were denominated
in Argentine Pesos. In certain instances the counterparty for settlement of pesos income and expenditure was the
same. In these instances pesos balances were offset. Balances were held in dollars until settlement was due, and
where short-term pesos balances were held these were placed on overnight deposit.
The Group does hold substantial receivable VAT balances denominated in pesos and have sought to expedite
recovery to mitigate devaluation losses.
67
Financial Statements
Notes to the Financial Statements continued
22. Financial Instruments and Treasury Risk Management (continued)
At year end the Group held the following cash and cash equivalent balances:
US Dollars
GBP Sterling
Euro
Argentine Peso
Bolivian Boliviano
Total
31 December 2020
US $
31 December 2019
US $
5,835
435,986
–
237,776
2,562
682,159
731,351
393,637
181,742
384,470
6,812
1,698,012
The consolidated statement of comprehensive income would be affected by US $43,599 (2019: US $44,730) if
the exchange rate between US $ and GBP changed by 10%. If the exchange rate between the US $ and the Euro
changed by 10% there would be a profit or loss of US $nil (2019: US $30,972). There would be a loss of US $21,617 if
the exchange rate between the Argentine Peso to the US Dollar weakened by 10%.
The Group has exposure to the Euro, Echo hold €25million bond notes, the Group held Euro denominated funds at
the beginning of the period to cover servicing of debt during the accounting year. The primary source of funds for the
Group in the period was equity raised in GBP, these funds were immediately translated into USD to fund exploration
and acquisition activity in Argentina. No hedging products were used during this accounting period, but management
actively review currency requirements to assess the suitability of hedging products. The Group consolidated
statement of income would be affected by approximately US $2,692,605 (2019: US $2,318,139) by a reasonably
possible 10 percentage points fluctuation in the exchange rate between US Dollars and Euros.
The VAT regime in Argentina differs from international practise as VAT investment activities are not immediately
recoverable but must be offset against revenue streams. The Company made substantial investments in Argentina
in 2018,2019 and 2020 and has accordingly built up a material VAT receivable balance. A new mechanism has been
approved by government through Law No. 27430 and Decree 813/2018. The mechanism will allow Technical VAT
credits associated with the purchase of capital assets from 1 January 2018 to be recovered through application if the
Company has not been able to recover the VAT within six months. Echo submitted an application for the recovery of
historic VAT balances as soon as the legislation permitted.
The Group used Blue Chip Swaps during the year to repatriate funds from Argentina to the UK. A Blue-Chip Swap
is when a domestic investor purchases a foreign asset and then transfers the purchased asset to an offshore entity.
The Group’s Argentine subsidiary purchased shares in highly stable and liquid companies that are traded on both
domestic and offshore stock exchanges. These shares were held for a fixed period in accordance with Argentinian
regulation. Following the end of the fixed period the shares were sold offshore and the resulting funds were then
repatriated to the parent company. This type of transaction is therefore exposed to stock price volatility during the
hold period and incurs transaction fees. During the year, the Group swapped 12,259,250 Pesos into $70,851 net of
transaction fees and forex losses.
Interest rate risk
The Group holds debt instruments that were issued at a fixed rate. As part of the Group’s policy to maximise
returns on cash held cash held in placed in interest bearing accounts where possible. During the course of 2020,
Echo invested cash into operations and did not hold significant cash balances for prolonged periods of time. The
consolidated statement of comprehensive income would be affected by US $71 (2019: US $925) by a 1% point
change floating interest rate on a full-year basis.
The Group’s actively manages its working capital to ensure the Group has sufficient funds for operations and planned
activities. Operational cash flow represents receipts from revenue, together with on-going direct operational support
costs, exploration, appraisal, administration and business development costs. The Group manages its liquidity
requirements by the use of both short-term and long-term cash flow forecasts. The Group’s policy is to ensure facilities
are available as required, to issue equity share capital and form strategic alliances in accordance with long-term cash
flow forecasts. The Group currently has no undrawn committed facilities as at 31 December 2020.
The Group’s financial liabilities are primarily obligations under joint operations, trade payables and operational costs.
All amounts are due for payment in accordance with agreed settlement terms with suppliers or statutory deadlines
and all within one year.
68
Echo Energy Annual Report 2020 22. Financial Instruments and Treasury Risk Management (continued)
Liquidity risk
The Group holds Euro denominated long-term debt. See Note 27.
The Group does not currently use derivative financial instruments to hedge currency and commodity price risk as it is
not considered necessary. Should the Group identify a requirement for the future use of such financial instruments, a
comprehensive set of policies and systems as approved by the directors will be implemented.
In accordance with IFRS 9, “Financial instruments: recognition and measurement”, the Group has reviewed
all contracts for embedded derivatives that are required to be separately accounted for if they meet specific
requirements set out in the standard.
Commodity price risk
The Group is now exposed to the risk of fluctuations on prevailing commodity market prices. The Group does not use
commodity forward contracts and futures to hedge against price risk in commodities as current volumes and market
conditions mean they are not yet appropriate for Echo.
A 10% increase in the price of Gas would have increased revenue by approximately US $827,942.
A 10% increase in the price of Oil would have increased revenue by approximately US $278,425.
Capital management
The Group’s legacy strategy has led to its capital structure being a mixture of debt and equity. The directors will
reassess the future capital structure when projects under development are sufficiently advanced and restructure
accordingly.
The Group’s financial strategy is to utilise its resources to further appraise and test the Group’s projects, forming
strategic alliances for specific projects where appropriate together with assessing target acquisitions. The Group
keeps investors and the market informed of its progress with its projects through regular announcements and raises
additional equity finance at appropriate times.
Categories of financial instruments
All of the Group’s financial assets are carried at amortised cost. The Group’s embedded derivative is classified at
fair value through profit or loss, the remaining Group’s financial liabilities are classified as financial liabilities at
amortised cost.
23. Trade and Other Payables
31 December 2020
31 December 2019
Trade payables
Taxation and social security costs
Non-trade payables
Accruals
Right of Use Liability
Other loans
Joint venture payables
Total
Group
US $
398,121
354,308
362,878
108,223
–
2,298,638
9,726,978
13,249,146
Company
US $
329,216
246,549
362,878
68,925
–
2,298,638
–
3,306,206
Group
US $
398,216
253,439
9,156
92,386
64,180
1,290,963
4,913,915
7,022,255
Company
US $
112,701
128,834
–
54,501
64,180
1,290,963
–
1,651,179
69
Financial Statements Notes to the Financial Statements continued
24. Derivative Financial Liabilities
Embedded derivative
Total
31 December 2020
US $
31 December 2019
US $
62,477
62,477
728,783
728,783
The embedded derivative represents the warrants issued along with the convertible debt facility with Lombard Odier
Asset Management (Europe) Ltd (Note 27). It is recognised at fair value through profit or loss. On conversion to
Company’s shares, the fair value of the embedded derivative is transferred to equity.
Warrants
Market stock price
Option strike price
Volatility
Expiration of the option
Risk-free rate
31 December 2020
31 December 2019
12 November 2019
0.55p
3p
99%
1.9 years
0.02%
2.3p
3.0p
67.29%
2.9 years
0.79%
2.9p
3.0p
65.55%
3 years
0.79%
An increase of 10% in the volatility measure would result in an increase in the year end fair value of US $38,925 with
a reduction in the gain.
Level 3 fair value measurements
Warrants instruments are deemed to be Level 3 liabilities under the fair value hierarchy as fair value measures of these
liabilities are not based on observable market data. The movement in their fair values is shown in the table below:
At 1 January
New issue of warrants
Fair value movements recognised through profit or loss
Total
25. Share Capital
31 December 2020
US $
31 December 2019
US $
728,783
–
–
1,068,002
(666,306)
62,477
(339,219)
728,783
Issued, Called Up and Fully Paid
1,040,050,920 0.32¢ (2019:711,717,587 0.32¢)
ordinary shares
1 January
Equity shares issued
31 December
31 December 2020
31 December 2019
Group
US $
Company
US $
Group
US $
Company
US $
5,190,877
1,097,142
6,288,019
5,190,877
1,097,142
6,288,019
4,444,999
745,878
5,190,877
4,444,999
745,878
5,190,877
The holders of 0.32¢ (0.25p) ordinary shares are entitled to receive dividends from time to time and are entitled to
one vote per share at meetings of the Company.
On 10 August 2020, Echo issued 95,000,000 ordinary shares at 0.5p per share to raise gross proceeds of £475,000
(US$621,266). The funds will be used to advance SCS operations and will enable acceleration of prioritised activities,
and for general working capital.
70
Echo Energy Annual Report 2020 25. Share Capital (continued)
On 4 December 2020, Echo issued 233,333,333 ordinary shares at 0.3p per share to raise gross proceeds of £700,000
(US$943,810). The funds will be applied towards a range of near term E&P growth projects within the existing
portfolio designed to deliver production uplift.
No further shares options were issued in the year, however a combination of warrants were issued in relation to fund
raises and debt renegotiation.
Further shares issued during the year was as follows:
1 January 2020
711,717,587
Shares issued @ .25p Placing
10/08/2020
95,000,000
Shares issued @ .25p Subscription
30/11/2020
233,333,333
31 December 2020
1,040,050,920
0.50
0.30
0.65
0.40
Date
Shares
Price (p)
Prices (¢)
26. Share Premium Account
31 December 2020
31 December 2019
Group
US $
Company
US $
Group
US $
Company
US $
1 January
64,817,662
64,817,662
58,329,880
58,329,880
Premium arising on issue of equity shares
Warrants issued
Transaction costs
31 December
467,934
(231,675)
(92,016)
467,934
(231,675)
(92,016)
6,924,246
6,924,246
–
–
(436,464)
(436,464)
64,961,905
64,961,905
64,817,662
64,817,662
(A) Share Options
The Group has a share option scheme established to reward and incentivise the executive management team and staff
for delivering share price growth. The share option scheme is administered by the remuneration committee. The expected
life of the options is based on the expected time through to exercise and is not necessarily indicative of exercise patterns.
Share options are valued using the stochastic Black-Scholes model. The inputs to the model are the market price at date
of grant, the exercise price set out in the option agreement, expected life, the risk-free rate of return and the expected
volatility. A 10-year gilt rate is used as an equivalent to risk free rate and the expected volatility was determined with
reference to the Company’s share price.
The expected life used in the model has been adjusted, based on management’s best estimate, for the effects of
non-transferability, exercise restrictions and behavioural considerations. The cost of options is amortised to the
statement of comprehensive income over the service period of the option.
Details of the tranches of share options outstanding at the year end are as follows:
Share Options
Outstanding as at 1 January
Granted during the year
Expired during the year
Forfeited during the period
Exercised during the year
Options outstanding as at 31 December
Exercisable at 31 December
*Weighted Average Exercise Price (WAEP)
Number
31/12/2020
102,218,073
–
–
(6,726,966)
–
95,491,106
41,010,000
WAEP*
(¢)
31/12/2020
5
–
–
7
–
5
3
Number
31/12/2019
54,882,803
57,085,270
–
(9,750,000)
–
102,218,073
10,000
WAEP*
(¢)
31/12/2019
7
5
–
19
–
5
100
71
Financial Statements Notes to the Financial Statements continued
26. Share Premium Account (continued)
The fair values on the grant date and each reporting date were determined using the Black Scholes option pricing
model. The following key assumptions were used in determining the derivative’s fair value at the reporting date:
The weighted average outstanding life of vested share options is 1.3 years. The weighted average price for
outstanding options ranges between 2.2¢ and 102¢ (1.6p and 75.0p). The outstanding share options are not subject
to any share performance-related vesting conditions, but vesting is conditional upon continuity of service.
The Group recognises total expenses of US $334,319 (2019: US $361,409) related to equity-settled, are share-based
payment transactions during the year.
A deferred taxation asset has not been recognised in relation to the charge for share-based payments due to the
availability of tax losses to be carried forward.
(B) Warrants over ordinary shares
The Company issued warrants over ordinary shares to subscribers of new ordinary shares and as fundraising
commission in respect of debt fundraisings completed during the years to 31 December 2020.
Details of the tranches of warrants outstanding at the year-end are as follows:
Warrants
Outstanding as at 1 January
Granted during the year
Forfeited during the period
Exercised during the year
Number
2020
355,951,093
104,271,428
–
–
Outstanding as at 31 December
460,222,521
*Weighted Average Exercise Price (WAEP)
WAEP*
(¢)
2020
14
1
–
–
10
Number
2019
281,751,093
74,200,000
–
–
355,951,093
WAEP*
(¢)
2019
16
4
–
–
14
Warrants values are calculated using the Black Scholes option pricing model using the following inputs.
Warrants
Market stock price
Option strike price
Volatility
Expiration of the option
Risk-free rate
9 March 2020
10 August 2020
10 August 2020
0.7p
1.4p
97.05%
2 years
0.086%
0.5p
0.8p
0.5p
1.0p
96.81%
96.81%
1.96 years
1.96 years
-0.101%
-0.101%
The weighted average price for outstanding warrants as at 31 December 2020 ranges between 1.1¢ and 22.2¢
(0.8p and 16.2p). The residual weighted average contractual life for the warrants is 1.49 years.
27. Loans Due in Over One Year
Five-year secured bonds
Additional net funding
Other loans
Total
72
31 December
2020
US $
31 December
2019
US $
(22,167,419)
(16,388.586)
(5,766,544)
(4,215,716)
(1,640,693)
–
(29,574,656)
(20,604,302)
Echo Energy Annual Report 2020 27. Loans Due in Over One Year (continued)
Balance as at
31 December
2019
US $
Reclassified
from short
term loans
US $
€20 million five-year secured bonds
17,396,519
€5 million Lombard Odier secured convertible
debt facility
4,583,289
–
–
Amortised
finance charges
US $
Exchange
adjustments
US $
31 December
2020
US $
3,682,625
1,757,001
22,836,146
943,434
461,078
5,987,801
Other loans
Loan fees
Incremental loan fees
Total
–
1,290,963
293,867
55,863
1,640,693
(1,007,933)
(367,573)
–
–
443,650
(104,443)
(668,726)
171,263
(24,947)
(221,257)
20,604,302
1,290,963
5,534,839
2,144,552
29,574,656
US$27,276,018 of the total loan balance is shown in non-current liabilities and US $2,298,638 is shown in current
liabilities (see Note 23)
In March 2020, to ensure the business is robustly positioned in the event of continued downward pressure on oil
demand and prices driven by recent global events, and as part of its programme to conserve cash, the Company
announced that it would enter negotiations with holders of its debt to extend the loans or defer all cash interest
during 2020.
€20 million five-year secured bonds
On 22 May 2017 the Company announced that Nusakan plc (“Nusakan”) subscribed for five-year non-amortising
secured bonds with an aggregate issue value of €20million (“€20m Bond”). Alongside the €20m Bond, the Company
issued 169,402,469 warrants to subscribe for new ordinary shares in the Company at an exercise price of 15.1875
pence per ordinary share and an exercise period of approximately five years, concurrent with the terms of the €20m
Bond to Nusakan (“the Warrants”). The €20m Bond are secured over the share capital of Echo Energy Limited. The
€20m Bond have an 8% coupon and were issued at a 20% discount to par value. A total cash fee of GBP £1.7 million
(€2 million) was payable by the Company.
The Warrants were recorded within equity at fair value on the date of issuance and the proceeds of the notes net
of issue costs were recorded as non-current liability. The coupon rate for the Bonds ensures that the Company’s
on-going cash out-flow on interest payments remains low, conserving the Company’s cash resources. The effective
interest rate is approximately 21.55%. The five-year secured Bonds are due in May 2022.
Debt renegotiation
On 22 May 2020, the Company announced that at a meeting of the holders of the €20m Bond (the “Noteholders”),
the Noteholders gave their consent to waive the event of default in relation to the non-payment by the Company of
the quarterly interest due on 31 March 2020. Furthermore, the Company obtained consent to defer quarterly interest
payments which would otherwise be due on 31 March 2020, 30 June 2020, 30 September 2020 and 31 December
2020 (the “2020 Interest Payments”) such that the 2020 Interest Payments will be payable by the Company on
maturity of the bonds in May 2022. The Company will continue to be required to make quarterly interest payments
on the €20m Bond in 2021 and 2022. In addition, the Company granted security in the form of a share charge
over 100% of the shares in Echo Argentina Holdings Limited. Such security will be shared pari passu between the
Noteholders and Lombard Odier in its capacity as lender under the Company’s €5m Loan. Further restructuring of
these Bonds occurred post period. Please refer to note 33.
€5 million Lombard Odier secured convertible debt facility
As part of the acquisition of the SCS assets, the Company announced on 21 October 2019 that it had entered into
a secured convertible debt facility with Lombard Odier Asset Management (Europe) Ltd (“Lombard Odier”) for a
five-year non-amortising €5.0 million 8.0% secured convertible debt facility (the “€5m Loan”) maturing in 2022.
Of the €5million received, as described in Note 27, €0.97m (US $1.1m) has been allocated to the warrants which
were issued alongside the €5m Loan and are recorded as a financial liability and held at fair value through the
profit or loss.
73
Financial Statements Notes to the Financial Statements continued
27. Loans Due in Over One Year (continued)
Debt renegotiation
The terms of the €5m Loan were amended in 2020. In order to provide parties with the time to conclude an
amendment to the €5m Loan, the holder Lombard Odier waived default rights under the €5m Loan for non-payment
of the 31 March 2020 interest. On 1 December 2020 the Company concluded an agreement (subject to conditions
that were subsequently met post period see note 33) with Lombard Odier to:
• Extend the maturity by 3 years such that the debt facility will mature on the last business day of April 2025.
• Make no more cash interest payments until the maturity date. Interest will be rolled up and added to the then
outstanding debt facility principle.
Other loans
On 6 March 2020, Echo announced that it had agreed a two-year extension of the Company’s existing £1.0m Loan
originally provided to the Company in March 2017 and now held by Spartan Class O, a sub fund of Spartan Fund
Limited SAC (“Spartan”). The interest rate of the £1m Loan remains unchanged.
The Company agreed that the extended Loan will now be repayable as follows: (a) £100,000 on 30 November 2020;
(b) four quarterly instalments of £50,000 on the last business day of the relevant month commencing in
March 2021; and (c) the balance of £700,000 on 8 March 2022. In connection with the extension of the Loan,
Spartan was issued with 3,571,428 warrants to subscribe for new ordinary shares in the Company at a price of
1.4 pence per new share and with an expiry date of 9 March 2022.
On 1 April 2020, the Company further announced entry of an amendment to the Company’s £1m Loan facility
such that interest payment due 31 March 2020 was postponed and no interest payments were required prior to
31 March 2021. With effect from 1 January 2020, interest on the £1m Loan will now accrue at an unchanged annual
interest rate of 12.0% and, at the end of each quarterly interest period, be added to the aggregate principal amount
owing under the £1m Loan, for payment on maturity. The Company agreed that, as amended, the £1m Loan will
now be repayable as follows: (a) £100,000 in March 2021; (b) three quarterly instalments of £50,000 on the last
business day of the relevant month commencing in June 2021; and (c) the balance of £750,000, together with
accrued interest, on 8 March 2022. The other terms of the £1m Loan remain unchanged.
Maturity analysis
Contractual undiscounted cash flows:
Amounts due within one year
Amounts due between one and five years
Amounts due over five years
28. Provisions
Assessment of decommissioning provision
74
31 December 2020
US $
31 December 2019
US $
2,293,290
1,396,157
35,628,948
33,291,406
–
–
37,922,238
34,687,563
31 December 2020
US $
31 December 2019
US $
2,979,956
2,979,956
–
2,940,000
2,940,000
Echo Energy Annual Report 2020 28. Provisions (continued)
Provision has been made for the discounted future cost of abandoning wells and restoring sites to a condition
acceptable to the relevant authorities. It is likely that some abandonments will occur in 2021. The provisions are
based on Operators’ internal estimate at 31 December 2020, and the movement from the prior year relates
to the unwinding of the provision. Assumptions are based on the current experience from decommissioning
wells. The estimates are reviewed regularly to take account of any material changes to the assumptions. Actual
decommissioning costs will ultimately depend upon future costs for decommissioning which will reflect market
conditions and regulations at that time. Furthermore, the timing of decommissioning is uncertain and is likely to
depend on when the fields cease to produce at economically viable rates. This, in turn, will depend on factors such as
future oil and gas prices, which are inherently uncertain.
29. Right-of-use Liability
The Group’s right-of-use asset comprises the lease of its London office (See Note 16).
These liabilities are included in the statement of financial position:
Amounts due within one year
Amounts due after more than one year
Amounts recognised in the statement of comprehensive income:
Interest on leasehold liabilities
Amounts recognised in the statement of cash flows:
Repayment of lease liabilities
31 December 2020
31 December 2019
US $
–
–
–
US $
64,180
–
64,180
31 December 2020
31 December 2019
US $
2,293
US $
17,402
31 December 2020
31 December 2019
US $
74,046
US $
156,269
During 2019 the office in Bolivia exited its leasehold premise resulting in the unwinding of the right of use liability.
The London office lease was exited in May 2020 and resulted in the unwinding of the right of use liability. Interest on
the financing amount was imputed as that of bond financing at 20%.
Maturity analysis
Contractual undiscounted cash flows:
Amounts due within one year
Amounts due after more than one year
31 December 2020
31 December 2019
US $
–
–
–
US $
64,180
–
64,180
75
Financial Statements Notes to the Financial Statements continued
30. Related Party Transactions
Inter-group balances
In order for individual subsidiary companies to carry out the objectives of the Group, amounts are loaned to them on
an unsecured basis. At the year end the following amounts were outstanding:
Amounts owed to Echo Energy plc from:
Echo Energy Bolivia Op Co 1
Eco Energy CDL Op Limited
Eco Energy TA Op Limited
Independent Resources (Ksar Hadada) Limited
31 December 2020
31 December 2019
US $
US $
380,941
2,488,765
9,634,401
–
176,773
2,816,915
9,029,398
–
12,504,108
12,023,086
Lombard Odier and Nusakan (formerly Greenberry plc) are significant shareholder in the Company. Please refer to
Note 27 for details of the debt transactions which relate to these counterparties.
Phoenix Global Resources plc from whom Echo acquired the SCS assets in late 2019 is also a significant shareholder
in the Company following the issue by the Company of consideration shares to Phoenix Global Resources plc in
respect of the Company’s acquisition of the SCS assets.
31. Controlling Party
The directors do not consider there to be a controlling party.
32. Commitments
Echo has no committed expenditure in relation to capital projects in the SCS asset at the end of 31 December 2020.
It will continue to pay operational costs as cash called by the Joint venture partner.
33. Subsequent Events
New gas contract at premium to prevailing spot pricing
On 6 January 2021, the Company secured a further gas sales contract at a premium to prevailing spot market rates,
supplying a key customer with approximately 1.4MMscf/d gross (1.0 MMscf net to Echo) of natural gas. The price
negotiated represented a significant 28% premium to the prevailing local spot price of Q4 2020.
On 28 January 2021, the Company granted 35,750,000 options to its employees as part of an initiative to retain and
incentivise staff, with all options issued with a price of 0.66 pence per Ordinary share. 24,000,000 of the options
have been awarded to Martin Hull, the Company’s Chief Executive Officer. The options awarded to Martin Hull
will vest in three equal tranches on the first, second and third anniversaries of grant, conditional upon the Echo
Remuneration Committee being satisfied that vesting of each tranche is warranted, based on the Chief Executives
performance and/or share price growth over the year prior to vesting. These director options will be exercisable
anytime thereafter until expiry on the fifth anniversary date on which the options were granted. The options issued
to employees will vest on the third anniversary of the date of grant, and will be exercisable anytime thereafter until
expiry on the fifth anniversary on which the options were granted.
On 24 March 2021, Echo secured two new sales contracts at significant premium to both prevailing spot market
rates (39%) and 2020 contracted rates (126%).
Issue of shares in relation to 22 December 2020 fund raise
On 11 January 2021, 167,842,138 shares at 0.51p issued to satisfy the £856,00 gross proceeds fund raise announced
on the 22 December 2020. In addition, 167,843,138 warrants were issued, with half of these exercisable at 0.7p and
the remainder at 0.75p. Of these, 50% were issued on admission, and the other 50% conditional on the necessary
issuance authorities at the Company’s 2021 annual general meeting.
76
Echo Energy Annual Report 2020 33. Subsequent Events (continued)
Bolivia: cooperation agreement and exclusivity
On 8 January 2021, the Company announced that it has signed a cooperation agreement with GTLI, a majority
owned subsidiary of the Bolivian company UruboCorp focused on energy production and supply in Bolivia and with
interests in both the hydrocarbon and renewables sectors.
Echo and GTLI will collaborate to jointly promote their business development initiatives in Bolivia, through joint
efforts to identify and assess new business development opportunities across the full energy spectrum, in relation to
which the parties have granted each other a six-month period of exclusivity. The cooperation agreement will enable a
portfolio of opportunities to be matured in a cost-effective way across the Bolivian energy space.
GTLI is a leading Bolivian Energy Operator and holds the El Palmar operational hydrocarbon contract with the
Government of Bolivia and is a subsidiary within a larger investment group known as UruboCorp that includes
mining (gold), real estate and energy, and with interests in both the hydrocarbon and renewables sectors.
Cooperation between the Company and GTLI on any specific projects identified remains subject to, inter alia, the
negotiation and entry of binding agreements and Echo will focus on any opportunities that meet its stringent
profitability and positive cashflow criteria. The grant of a period of Exclusivity is the only binding term of the
Cooperation Agreement. The Cooperation Agreement has an initial term of 5 years and may be terminated by either
party without penalty on providing 6 months’ notice.
Bond restructuring
On 22 February 2021, Echo announced further to the Company’s announcement of 1 December 2020, its proposals in
respect of a restructuring of the Company’s Bonds, It proposed to
• Extend the maturity of the Bonds by three years to 15 May 2025 (the “Maturity Date”); and
• Remove all cash interest payments on the Notes prior to the Maturity Date.
On approval, all interest on the Bonds accruing from 31 December 2019 shall be paid in cash on the Maturity Date
save that Noteholders will be provided with the ability, from 30 September 2021, to elect to receive Bond interest
payments in respect of the immediately preceding quarter in new ordinary Shares in the Company (“Elections”),
subject inter alia to the Company having the required share issuance authorities in place from time to time to satisfy
elections and to Noteholders holding at least 50 per cent of the Bonds having made Elections in respect of the
relevant quarter. Any new ordinary shares issued as a result of elections would be issued at an effective issue price
equal to the volume weighted average price of an Echo ordinary share for the 10 Business Days before the relevant
interest conversion date.
As part of the Proposals, the Company agreed, subject to Bondholder approval of the Proposals at the Noteholder
Meeting, that it will not, without the prior consent of Noteholders by way of a simple majority of those Noteholders
then voting, drill an exploration well with a budgeted cost to the Company of in excess of EUR 5.0 million for so
long as the Bonds are outstanding and that it will not, in the last 18 months prior to the Maturity Date, make an
acquisition of an interest in an oil and gas property, lease or licence if the cash consideration for such acquisition
exceeds EUR 10.0 million.
A payment of EUR 100,000, payable to Bondholders voting in favour of the Proposals at the Bondholder Meeting pro
rata to votes cast at the Noteholder Meeting, will be satisfied by the issue of new ordinary shares in the Company
at an issue price equal to the average mid-market closing price per Echo ordinary share for the five days ending, and
including, 18 February 2021.
Subsequently on 30 March 2021, a requisite majority of Bondholders approved the Debt restructuring proposals.
Echo issued a total of 11,473,929 new ordinary shares in the Company (representing c.0.9% of the Company’s current
issued ordinary share capital) to Bondholders.
77
Financial Statements Notes to the Financial Statements continued
33. Subsequent Events (continued)
Facilities upgrade
On 24 February 2021, Echo announced agreement with the SCS partners to upgrade existing liquid pipelines in the
SCS assets.
Capital expenditure net to Echo’s 70% working interest of around US$ 275,000 will be injected by the Company to
replace and upgrade parts of the infrastructure primarily in the Chorillos, Campo Molino and Cerro Convento fields
with installation expected to take approximately 45 days from conclusion of successful procurement. Ten individual
upgrade projects will be completed to enable the upgrade of around 23 km of pipeline.
It is anticipated that once the pipelines are fully operational, gross daily liquids production will be restored to levels
of between 480 bopd - 600 bopd (336 - 420 bopd net Echo).
Exercise of warrants
On 12 April 2021, the Company received notice for the exercise of 74,200,000 warrants to subscribe for new ordinary
shares in the Company at an exercise price of 0.3 pence per share. As a result, an application has been made for
74,200,000 new ordinary shares in the Company (to be admitted to trading on AIM.
The admission of the new ordinary shares, rank pari passu with the Company’s existing ordinary shares. Following
Admission on the 16 April, the Company’s issued ordinary share capital will comprise 1,293,567,987.
78
Echo Energy Annual Report 2020 79
Financial Statements Shareholder Information
AIM Rule 26 information
Dealing Information
Country of incorporation
England & Wales (Registered Number 5483127)
Main country of operation
Argentina
Trading information
Shares in Echo Energy plc are only traded on AIM, a market operated by the London Stock Exchange plc, and the
Company has not applied or agreed to have any of its securities admitted or traded to any other exchange or platform.
There are no restrictions on the transfer of ordinary shares.
Address
Echo Energy plc
85 Great Portland Street
First floor
London
W1W 7LT
Nominated Adviser
Company Secretary
Cenkos Securities PLC
6-8 Token Yard
London
EC2R 7AS
Amba Secretaries Limited
400 Thames Valley Park Drive
Reading, Berkshire
RG6 1PT
Brokers
Shore Capital Stockbrokers Limited
Cassini House
57-58 St. James Street
London
SW1A 1LD
Solicitors
Field Fisher
Riverbank House
2 Swan Lane
London
W1S 4JU
Registrars
Link Group
10th floor
Central Square
29 Wellington Street
Leeds
LD1 4DL
Auditors
Crowe U.K. LLP
55 Ludgate Hill
London
EC4M 7JW
80
Echo Energy Annual Report 2020
Glossary
AAPG
American Association of Petroleum Geologists
mmbtu
million British thermal units
AIM
API
AVO
Alternative Investment Market
MMscf/d
million standard cubic feet per day
American Petroleum Institute
NAV
net asset value
amplitude versus offset
NOMAD
nominated advisor
bbl(s)
barrel(s)
bbl(s)/d
barrel(s) per day
Bcf
Board
boe
boepd
bopd
capex
CDL
CGC
CGU
billion cubic feet
the Board of Directors of Echo Energy plc
barrel(s) of oil equivalent
barrel(s) of oil equivalent per day
barrels(s) of oil per day
capital expenditure
Fracción C, Fracción D, and laguna De Los
Capones licences
Compañia General de Combustibles S.A.
Cash Generating Unit
Company
Echo Energy plc
E&E
E&P
FRC
G&A
GIIP
Group
HSE
IAPG
IAS
IFRS
exploration and evaluation
exploration and production
Financial Reporting Council
general and administration expenses
gas initially in place
the Company and its subsidiaries
health, safety and environment
International Association of Petroleum
Geologists
International Accounting Standards
OPEC+
opex
PETSA
Pmean
ppm
OPEC countries and high exporting non-
members like Russia and Kazakhstan
operations expenditure
Petrolera El Trebol S.A.
mean case
parts per million
pulling job
low cost well intervention to restart/improve
production
P10
P50
P90
high case (value with a 10% chance of being
equalled or exceeded)
moderate case (value with a 50% chance of
being equalled or exceeded)
low case (value with a 90% chance of being
equalled or exceeded)
QCA Code Quoted Companies Alliance Corporate
SCS
SPE
SPEE
spud
Tcf
TD
TVD
TEA
UGA
Governance Code
Santa Cruz Sur
Society of Petroleum Engineers
Society of Petroleum Evaluation Engineers
to commence drilling a well
trillion cubic feet
total depth
true vertical depth
technical evaluation agreement
UGA Seismic S.A.
International Financial Reporting Standards as
adopted by the European Union
WAEP
Weighted Average Exercise Price
IMF-WEO International Monetary Fund – World Economic
Workover
an invasive well intervention involving a rig
Outlook
ISAs (UK)
International Standards on Auditing
JEA
JV
KPI
LNG
joint evaluation agreement
joint venture
key performance indicators
liquid natural gas
MMbbls
million barrels
MMBOE
million barrels of oil equivalent
WPC
WTI
1C
2C
3C
2P
World Petroleum Council
West Texas Intermediary
low estimate of contingent resources
best estimate of contingent resources
high estimate of contingent resources
proven plus probable
$ / US $
United States Dollar
Registered office
85 Great Portland Street
London, W1W 7LT
Tel: +44 (0)20 7190-9930
info@echoenergyplc.com
www.echoenergyplc.com