264206 Echo Annual Report cov-ifc.qxp 06/09/2022 11:04 Page 1
Echo Energy plc
Annual Report 2021
264206 Echo Annual Report cov-ifc.qxp 06/09/2022 11:04 Page 2
Annual Report 2021
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.
Financial Statements
Auditor’s Report
Consolidated Statement of
Comprehensive Income
Consolidated Statement of Financial
Position
Company Statement of Financial Position
Consolidated Statement of Changes
in Equity
38
38
44
45
46
47
Company Statement of Changes in Equity
48
Consolidated Statement of Cash Flows
Company Statement of Cash Flows
Notes to the Financial Statements
Shareholder Information
49
50
51
80
Contents
Strategic Report
Key Highlights
Chairman’s and CEO’s Statement
Business Model
Strategy and KPIs
Assets
Portfolio
Operational Review
Sustainability Review
Managing Risks
Stakeholder Engagement
Financial Review
Governance
Corporate Governance Statement
Health and Safety Review
The Team
Directors’ Remuneration Report
Directors’ Report
Statement of Directors’ Responsibilities
1
1
3
5
6
8
9
11
13
15
18
21
23
23
30
31
33
35
37
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Key Highlights
Santa Cruz Sur
l
Production capacity increased during the period pursuant to Santa Cruz Sur facilities upgrades
in Q1 2021.
l
Average net daily production in 2021 was:
–
–
–
8.0 mmscf/d of natural gas
222 bbls/d of oil and condensate
Total: 1,554 boepd
l
Net cumulative production in 2021 was:
–
–
–
Natural gas: 2,918 mmscf
Oil and condensate: 81,076 bbls
Total: 567,371 boe
l
Reserves and resources at end 2021 were:
–
–
1P (Proved): 2.53 MMboe
2P (Proved & Probable): 3.15 MMboe
– MMboe Contingent Resources (High Estimate): 5.39 MMboe
l Announced a five-year Cooperation Agreement with GTL International S.A., which has interests
in both the hydrocarbon and renewables sector.
l
l
l
Began process of reopening oil wells that had been shut-in during 2020.
Developed new customers for liquids products.
VAT refunds received in Argentina (US $0.5 million) and additional credit balances (approx.
US$0.7m) are being amortised until the end of 2022, benefiting cashflow for 2021 and 2022.
Post Period End Highlights
l
New gas contracts for 2022-2023, which was significantly above the 2021 annual pricing.
l Agreement by the Santa Cruz Sur partners to materially increase Santa Cruz Sur production by
c.40% above average H1 2022 production levels.
l
Post period fundraising and conditional debt restructuring.
Corporate
COVID-19
l Major travel restrictions imposed by the Argentine government impacted local operations at the
continued intermittently through the year.
l
Continued to address challenges presented by COVID-19.
–
–
Liaised with partners to ensure on-ground employees and personnel continue to operate in
a safe environment.
Remote working maintained in the UK, with a smaller Guildford office now in place when
‘normal’ working conditions returned to the UK.
Annual Report 2021 1
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Key Highlights (continued)
Financial
l
Revenue of US $11.1 million in 2021 (US $11.1 million in 2020).
l
l
8% saving in Administration expenses due to a reduction in corporate staff.
Secured improved pricing with average net oil prices for the period of US $43.3/bbl (2020:
US $22.8/bbl) and a 2H average Gas price of US $2.7/mmbtu, although total gas production was
down 23% year-on-year.
Debt Restructuring
l
Successfully restructured all corporate dates including the following:
–
–
extending bond maturity date and deferring all cash payments until repayment of the
principal on the Lombard Odier debt facility.
extending bond maturity date and deferring all cash payments to May 2025 on the
Eurobonds.
l
Extension of Spartan loan facility by 2 years to March 2024, deferring interest and principal.
£127,500 of remaining £850,000 principal converted into shares.
2 Echo Energy plc
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Chairman’s and Chief Executive Officer’s Statement
Echo Energy, similar to many companies in the oil and gas sector, faced exceptional challenges during
2021, with the global pandemic impacting all aspects of the Company’s operations and finances.. We
are delighted to report however that Echo now, buoyed by recent structural increases in commodity
prices, the delivery of production enhancing opportunities and the recently launched conditional debt
restructuring process, is both underpinned by much firmer foundations and positioned as a regional
platform for growth. We are grateful to shareholders, lenders and partners for their continued support
throughout the year.
Argentina
Santa Cruz Sur (SCS)
The SCS assets provide material production and, revenues from a strong reserves base. The SCS
portfolio also includes significant upside from relatively low risk production enhancement opportunities
combined with exciting higher impact projects.
During 2021 the Company began to restore previously shut-in liquids production which was supported
by infrastructure upgrades. Improved market conditions enabled Echo Energy to capitalise on this by
executing cashflow enhancing production opportunities. Throughout the period liquids production
increased quarter-on-quarter and production during 2021 averaged 1,554 boepd throughout the year
net to the Company’s 70% interest (including 8.0 MMscf/d of gas). Total net cumulative production
was 567,371 boe (including 2,918 mmscf of gas) in the year. Both infrastructure maintenance and the
commercial focus on high-quality blends at Santa Cruz Sur led to an increased frequency of oil sales
during Q4 2021. This increase in liquids production helped to offset the expected natural decline in gas
production over the year. Post period, work to optimise production and improve infrastructure has
continued, especially relating to the provision of power generation capacity at some of the key
producing assets, and this work continues.
In 2021 the Company was able to increase the proved SCS reserves base, after considering production
in the year, and the impact of eventual licence expiry. The Company estimates that, as at 31 December
2021, the SCS reserve base stood at an estimated 2.53 MMboe for 1P (Proved) and 3.15 MMboe for 2P
(Proved & Probable) each net to the Company’s 70% non-operated working interest. The assignment
of Echo's 70% non-operated participation in the Santa Cruz Sur licences is subject to the authorisation
of the Executive Branch of Santa Cruz's Province, which is part of the overall process of title transfer
that is proceeding as anticipated.
Finance
Revenue for the period remained constant at US $11.1 million in 2021 (US $11.1 million in 2020). Whilst
prices increased, particularly in oil during the year, there remained production challenges which resulted
in the flat revenue year-on-year . Losses for the year reduced to US $11.6 million, compared to US
$27.0 million in 2020, reflecting the expected trend toward recovery, in 2022.
The SCS asset joint venture continues to have high creditor balances, as a result of difficult trading
conditions in 2020 and 2021. Whist the level of local creditors remains a key concern, the Company is
working exceptionally hard to mitigate any risk and to reduce the balances in a controlled manner,
whilst not at the cost of future investment in order to further increase production and increase SCS
asset value.
Whilst management are prudently reporting a material uncertainty in respect of going concern,
management have prepared the financial statements on a going concern basis based on the post year
end proposed 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.
Annual Report 2021 3
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Chairman’s and Chief Executive Officer’s Statement (continued)
Post period conditional debt restructuring and fundraising
On 12 August 2022, the Company announced the conditional conversion of an aggregate of €15.0
million of existing debt principal, together with accrued interest thereon, into new Ordinary Shares –
the significant majority of which is proposed to be converted into new Ordinary Shares at a price of
0.45p. In doing so, the Company also confirmed that it would be proposing a conditional reduction of
the coupon on the remaining €10.0 million of Euro Note debt (the “Notes”) from 8% to 2% with
suspension of further cash interest payments for two years and an extension on maturity on the
remaining Notes to 2032.
The Company subsequently announced publication of its proposals to restructure the Notes on 5
September 2022. The debt restructuring remains conditional on both the approval of the holders of
the Note and on the approval of the Company’s shareholders. The changes are aimed at
comprehensively restructuring and strengthening the Company’s balance sheet and accelerating
growth.
On 14 August 2022 the Company was also pleased to confirm that it had successfully raised £600,000
(before expenses) pursuant to a placing of new ordinary shares. The net proceeds of this placing
provided the Group with additional resources to fund working capital, including expenses related to
the proposed debt restructuring, and enable operating cashflows in Argentina to be focused on
activities in country in the near term, including the plan to increase production by c. 40% over
approximately the next 6 months.
Outlook and Continuing Growth
2021 was a year that saw important progress for Echo both operationally and commercially, which
culminated in early July 2022 with the Company confirming an agreement by the Santa Cruz Sur
partners to materially increase Santa Cruz Sur production by c.40% above average H1 2022 production
levels. We will continue to prioritise the delivery of the production focused operational programme
and the important conditional debt restructuring announced in August this year. Subject to the
successful completion of the debt restructuring, we see a very positive outlook for Echo as we
accelerate our production led activities on the ground and take advantage of the many regional growth
opportunities.
James Parsons Martin Hull
Non-Executive Chairman Chief Executive Officer
4 Echo Energy plc
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Business Model
Key Resources
l
Diversified portfolio of exploration and production licences in Latin America
l
Supportive institutional lenders
l Active business development focus
l
l
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. Our gas-dominated production achieves premium pricing in
the domestic Argentinian market on long-term contracts.
Grow
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.
Monetise
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 focused 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.
Annual Report 2021 5
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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 focused on the following five areas: Growth, Asset Performance, Safety
& Environment, Funding and Corporate. How the Board has delivered against these new metrics in
2021 is evidenced in the Performance column below.
2021 KPI MEASURE PERFORMANCE
1. GROWTH
Diversify asset base with
further asset or corporate
acquisitions to build on the
existing Argentinian position
Mature longer-term
opportunities in to leverage
Echo’s commercial and
technical capabilities across
the wider energy spectrum
Mature the Bolivian
opportunities
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
Identify and
collaborate with
suitable Partners at
low cost
Post-period signed an exclusive option
agreement to enter the Chilean market with a
70% interest in a 3MW solar project with LAS
(Land and Sea S.A)
Formalise
relationships in
country
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
Oil and gas production
Daily production
Increase productivity of the
existing assets
Increase in boepd of
existing wells
3. SAFETY AND ENVIRONMENT
Sustained high quality safety,
reporting and performance
As expected throughout the year with delivery of
gas continuing uninterrupted to customers
during the period. COVID-19 has not hindered
production. Liquids production increased in each
quarter throughout the year
Installed pipeline on time and on budget and
Phase 1 oil brought onstream, with a decision
made to maximise value over volume and focus
on the highest quality blends
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 plc
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Strategy and KPIs (continued)
2021 KPI MEASURE PERFORMANCE
4. FUNDING
Fund the subsequent
development of new business
ventures and continued
operational programme
Identify opportunities to
monetise assets following
success
Successful fund
raises
Successful additional funding through issue of
equity, to allow Echo to pursue value accretive
transactions
Increase production
from asset base
SCS cost reduction/deferment measures were
implemented in the field, and the Company has
successfully navigated through 2021’s
challenging economic 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
Maintain transparent
relationship with investors
Regular investor
engagement
Staff diversity
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. Pipeline
installed on time and on budget
Web-based investor forums were held and direct
investor enquiries answered. Maintained a
measured approach to expectation
No additional hiring required given operating
circumstances, although Accounting staff
departures were/are to be replaced like-for-like
2021 KPIs
The 2021 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:
l Maximise shareholder value from the Santa Cruz Sure assets acquired in Q4 2019;
l
l
Identify and mature high-quality opportunities for the operational programme;
Continue to seek opportunities to diversify asset base with further asset or corporate
acquisitions;
l Mature the Bolivian opportunities in the portfolio;
l
Pursue opportunities to monetise assets following success; and
l 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.
The assets in Santa Cruz Sur provides a strong revenue-generating gas-dominated production base
underpinned by a material reserve base, with significant proved reserves. Echo continues to be highly
leveraged to the commodity-price super-cycle, which is forecast to continue post-period.
Annual Report 2021 7
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Assets
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 Energy has an exciting and well-defined growth portfolio across the risk-reward spectrum. The
assets provide a balanced opportunity set with short payback periods with optionality and flexibility.
The gas-dominated production achieves premium pricing in the domestic Argentinian market on long-
term contracts. 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 energy demand
continues to increase bringing on existing wells or undertaking low cost/low risk/high value production
enhancement opportunities with short payback times. The project portfolio includes targeted
infrastructure projects, a well-defined work over programme, and new development wells on existing
assets. The assets also contain impact exploration upside, which includes recommencing the Campo
Limite (CLi.x-1001) well test. These combined opportunities provide a risk-reward-cost balance
providing optionality to enable flexible decision making with cashflow reinvestment.
Licence
Tapi Aike
Status
Exploration
Echo Participation
Expiry
Non-operator 19%
Withdrew effective
April 2020
Area (km2)
5,187
Campo Bremen
Production Concession
Non-operator 70%
April 2026
Chorrillos
Océano
Moy Aike
Production Concession
Non-operator 70%
April 2026
Production Concession
Non-operator 70%
August 2026
Production Concession
Non-operator 70%
April 2026
Palermo Aike
Production Concession
Non-operator 70%
August 2026
687
647
108
714
537
8 Echo Energy plc
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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, whilst remaining
high-leveraged to the continued upswing in the global commodity price super-cycle.
Echo is a significant acreage holder in the Austral basin, onshore Argentina, with over 2,600 km2 of
licence area containing 12 oil and gas fields and 82 production wells. This demonstrates Echo Energy’s
commitment to the future of exploration and production potential of this part of Argentina.
Oil and gas 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. 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 focused E&P portfolio is appropriate
for energy transition, and long-term premium-priced gas contracts driving locked-in cashflow to
support further opportunities. The portfolio is balanced across the risk-reward spectrum with shorty-
payback periods and focused on low-risk opportunities, infrastructure enhancement and cashflow
reinvestment.
Following a successful auction process for industrial clients, the Company secured new gas sales
contracts for the twelve-month period in May 2021 at significant a premium to contracted rates from
the previous year. These new contracts provided for a 126% increase over annual industrial pricing
achieved the previous year.
In 2021 the Company was able to increase the proved reserves base, after considering production in
the year, and the impact of eventual licence expiry. The assignment of Echo's 70% non-operated
participation in the Santa Cruz Sur licences is subject to the authorisation of the Executive Branch of
Santa Cruz's Province, which is part of the overall process of title transfer that is proceeding as
anticipated. 1P (Proved) reserves at year end were 2.53 MMboe, which is around 0.5 Mmboe higher
than would otherwise be the case given these factors on the previous year’s figures. The original
acquisition of the SCS assets in 2019 was based on proved reserves economics. Current proved
reserves per December 2020 remain similar to those at acquisition, adjusted for production and date
of licence expiry.
At the start of the year, the Company announced a five-year Cooperation Agreement with GTL
International S.A, which has interests in both the hydrocarbon and renewables sectors. Both
companies continue to collaborate and combine skill sets to jointly promote their business
development initiatives in the wider region, and identify and assess new business development
opportunities across the full energy spectrum
Average net daily production 2021
1,554 boepd
Total production net to Echo 2021
567,371 boe
Net 1 P (Proved) reserves
2.53 MMboe
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 2021.
Santa Cruz Sur Net Reserves
Oil (MMbbls) Gas (Bcf) Oil Equivalents (MMboe)
Proved Proved, Proved,
Proved & Probable Proved & Probable Proved & Probable
Proved Probable & Possible Proved Probable & Possible Proved Probable & Possible
Reserves Net to 70% Working Interest
0.61 0.77 0.89 10.76 13.36 14.84 2.53 3.15 3.53
Annual Report 2021 9
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Portfolio (continued)
Santa Cruz Sur Net Contingent Resources
Contingent Resources Net to 70% Working Interest
Oil (MMbbls) Gas (Bcf) Oil Equivalents (MMboe)
Low Best High Low Best High Low Best High
Estimate Estimate Estimate Estimate Estimate Estimate Estimate Estimate Estimate
0.00 0.92 0.98 0.00 22.89 24.78 0.00 4.99 5.39
Santa Cruz Sur Net Prospective Resources
Prospective Resources (Bcf) Net to 70% working interest
Low Estimate Best Estimate High Estimate
Gas (bcf) 10.3 43.0 458.2
Oil (MMbbls) 0.4 1.0 2.8
MMboe 2.1 8.2 79.1
10 Echo Energy plc
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Operational Review
Santa Cruz Sur
During the year the Company began to restore previously shut-in liquids production which was
supported by infrastructure upgrades. Improved market conditions enabled Echo Energy to capitalise
on this by executing cashflow enhancing production opportunities. Throughout the period liquids
production increasing quarter-on-quarter throughout.
Production
Production remained in line with expectation in 2021. Average daily production throughout the year
net to the Company was 1,554 boepd (including 8 MMscf/d of gas). Total net cumulative production
was 567,371 boe (including 2,918 MMscf of gas) in the year.
Continued Infrastructure Investment for Driving Production Increases
As the economic recovery continued into 2021, expenditures of approximately US $0.3 million were
injected by the Company to replace and upgrade parts of the Santa Cruz Sur pipeline infrastructure
and reduce maintenance costs. By June 2021, Echo successfully delivered the project, demonstrating
the effectiveness of the Company’s in-country operational capability and enabling production
previously shut-in in April 2020 to be systematically brought back on line.
The electrical infrastructure in the field was also upgraded to support the first tranche of production
from the Campo Molino and Chorillos oil fields. The investment was designed to provide sufficient
power to support sustained production from the Springhill reservoir from the associated wells. It was
also part of the Company’s strategy to control critical infrastructure that was previously rented from
contractors.
With the focus to increase revenue, every quarter throughout the period saw an increase in liquids
production delivering upon the Company’s strategy to leverage the marked upswing in global
commodity prices. Net to Echo, liquids production did increase from an average of 198 bopd in Q1 2021
to 239 bopd in Q4 2021. This has continued post period, with net liquids production in Q1 2022 showing
a further 12% over Q4 2021 levels. Q1 2022 represents the sixth quarter in row a of liquid production
increases from the Santa Cruz Sur asset. Production levels from the reactivated oil wells continue to
indicate that the shut-in period has not had a detrimental impact on reservoir behaviour.
Liquids production at Santa Cruz Sur can cater for a variety of blend types, as and when required
from customers. Given the opportunity presented by improving markets, and significant increases in
realisable prices for high-quality products, the Company has optimised its commercial position by
focussing production and sales on the higher-quality blends, the prices of which have rebound more
quickly than other blends.
The portfolio is balanced across the risk-reward spectrum with shorty-payback periods and focused
on low-risk opportunities. This includes the well intervention programme, which consists of 39 oil and
gas opportunities divided into three tiers. The robustness of this programme was demonstrated in
quarter four where the first candidate in the programme was successfully tested to bring non-
producing reserves back into production.
With continued economic tailwinds and new infrastructure installed in the field, Echo now has the
capacity to commission incremental enhancement projects within its portfolio. The reinvestment of
available cashflow to drive further production increases remains an ongoing focus. The pipeline
upgrades also provide additional capacity for those production enhancement projects that have been
identified in the Company’s opportunity portfolio at SCS.
Annual Report 2021 11
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Operational Review (continued)
Exploration Upside
Campo Limite remains a potentially material well for the Company which could increase reserves and
resources in the Palermo Aike concession and open up additional commercial options in the area. Well
testing activities remain an operational and commercial focus and work remains ongoing to optimise
commercial arrangements to enable activities to resume.
Post Period Events
In May the Company announced new gas contracts for 2022-2023, which was significantly above the
2021 annual pricing and reflected the strong competition amongst customers to secure gas supplies.
These contracts have a term of 12 months, starting in May 2022, with a 65% increase in average annual
contract pricing over the 2021-2022 contracts. It is anticipated that the increased revenues will provide
additional resources that could be applied towards the acceleration of the Company’s operational
programme to increase production whilst also being applied to the outstanding Santa Cruz Sur Joint
Venture historical creditor balances.
At the end of May 2022, Echo Energy confirmed that daily gas production has materially increased in
the Oceano field which delivers gas to residential suppliers. This was a result of a successful facilities
maintenance and upgrading programme focussed on improvements in efficiency, reliability and load
capacity of the gas facilities at Oceano.
In early July 2022 the Company confirmed an agreement by the Santa Cruz Sur partners to materially
increase Santa Cruz Sur production by c.40% above average H1 2022 production levels. This is an
important next step for production growth and is focused on low-risk infrastructure upgrades to
sustain the increased production from existing well stock. Over a six-month period, anticipated to
commence in Q3 2022, the Joint Venture intends to seek to increase production by approximately 40%
H1 2022. If achieved, this Enhancement Plan would increase total daily production from Santa Cruz
Sur to around 2,000 boepd, net to Echo’s 70%. This Enhancement Plan is the agreed next step for
production growth from Santa Cruz Sur and is focused on low-risk infrastructure upgrades to sustain
the increased production from existing well stock.
Around 30 or more wells from the existing well stock are intended to be gradually brought back into
production over the six-month period utilising an existing pulling rig owned by the Joint Venture. This
plan is in addition to and will come ahead of full execution of the workover portfolio and will be
supported by infrastructure upgrades to sustain and contribute to elevated production levels. Intended
infrastructure upgrades will be focussed around three operational priorities; installation of additional
electrical power generation capacity, maintenance, and optimisation of the compressors to enable
the increased volumes of associated gas to be processed and then sold into the main gas export line
and, prioritise a substantial increase of quality of the Santa Cruz liquid blends.
In advancing production increases, the Santa Cruz Sur partners also announced an intention to engage
with the local province around an extension to the term of the Santa Cruz Sur licences.
12 Echo Energy plc
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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:
l
Protect the health, safety and wellbeing of our staff, contractors and the local communities our
operations impact upon;
l Manage and maintain positive and respectful relationships with the communities with which we
conduct business and in which we operate;
l Maintain a high standard of care for the natural environment and adopt appropriate environment
management systems on our contract areas; and
l
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 2021, the CPI ranked Argentina 96 out of 180 participating countries
worldwide with a score of 38/100. Bolivia is ranked 128 out of 180 with a score of 30/100.
By comparison, the UK is ranked at 11 out of 180 with a score of 78/100.
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 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 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.
Annual Report 2021 13
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Strategic Report
Sustainability Review (continued)
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.
14 Echo Energy plc
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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.
Identify
Assess
3. Mitigation options
4. Manage and execute
5.
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
Assessment
Risk Description Mitigation 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
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
Reputational damage
Appropriate insurance
Subsurface and surface
risk to production
Reservoirs do not perform as
expected and do not provide an
adequate return on investment
Monitor all current and future
production carefully tracking
daily performance
Wells opened up after a period
of shut in may underperform
due to well integrity of reservoir
issues
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
Annual Report 2021 15
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Strategic Report
Managing Risks (continued)
Assessment
Risk Description Mitigation of Risk Level
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
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
Loss of key personnel
Can happen through
resignation, illness, injury, or
death
Valuable knowledge and
relationships could be lost
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
Travel policy in place to ensure
safe business travel activity
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
16 Echo Energy plc
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Strategic Report
Managing Risks (continued)
Assessment
Risk Description Mitigation of Risk Level
Financial Risk
Insufficient funding
There are insufficient funds for
the Company to meet its
financial obligations or carry out
new capital investment
opportunities
Raise equity following
operational success to take
advantage of share price
strength in order to fund future
activities
Echo is dependent on the
availability of external finance
to fund the development of new
discoveries
Cost overruns on the
operational work programme
and/or delay in payments from
sales of existing hydrocarbon
production
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
Annual Report 2021 17
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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 13 and in the HSE Review on page 30. Review of the
key decisions and issues discussed in Board meetings and by various committees in 2021 is contained
in the Corporate Governance Statement from page 23 to 29.
Why is it important to engage? How do we engage?
Shareholders
Lenders
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:
l Sustainable financial and operational
performance
l Continued execution of E&P projects
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:
l Sustainable financial and operational
performance
l Capital allocation
l Refinancing plan
There is regular dialogue between both
institutional and retail investors through
meetings, calls, conferences, presentations and
our virtual “Time with the Team” Q&As.
With the Covid-19 pandemic face to face
meetings with shareholders have been limited
over the last year, although the shareholders
did have the opportunity to meet with
members of the Board face to face at the
General meeting held in August 2021.
Management continued to engage with
shareholders during the year on a virtual basis.
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:
l Restructuring of the Company Bonds to
include the removal of all cash interest
payments; and extension of maturity to May
2025
l Amendment of the $5Million Euro Lombard
debt facility with maturity extended to April
2025
l Extension of the Spartan £1m loan by two
years and restructuring of the interest
payments.
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Stakeholder Engagement (continued)
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.
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.
Important issues include:
Highlights include:
l Operational performance & HSE
l Continue to maintain production within
l Project ranking and work programmes
Argentina
l Budget setting
Customers &
Suppliers
The SCS supply chain is managed by our
partners who operate on our behalf. We have
further developed strong relationships with key
corporate suppliers.
Important issues include:
l Contract management strategy
l Uninterrupted service for customers
l Enhance value
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:
l Group strategy
l Diversity of thinking
l Corporate culture
l Benefit in country from the stronger
commodity prices
Echo signed a cooperation agreement with the
Bolivian Company GTL International S.A over a
five-year period with the intention to
collaborate and jointly assess new
opportunities across the full energy spectrum.
The Company successfully formed a
partnership with the Chilean company, Land &
Sea SpA, (LSA) with the option to purchase a
70% interest in a 3MW solar project in Chile.
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.
Highlights include:
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.
During 2021, internal communications
continued so employees were kept informed of
all the workstreams across the Company and
helped to raise key issues with directors and
executives.
Highlights include:
l Production & strategy updates
l Educational presentations from each sector
of Echo
l All staff involvement on CSR initiatives
Annual Report 2021 19
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Strategic Report
Stakeholder Engagement (continued)
Why is it important to engage? How do we engage?
Governments &
Regulators
Communities &
Environment
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:
l Licence attribution
l Identifying and securing new opportunities
l Providing views on upcoming legislation and
factors that are important to the industry
l CSR commitments
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.
Important issues include:
l Operating in an open and honest and
socially responsible manner
l Social responsibility initiatives
Management continues to work closely with
the government in country.
The Company managed to successfully
monetise a portion of the Argentine VAT owed
to the Company in 2021. The business now
reduces the remaining balance owing by
netting-off payments otherwise due for VAT.
It is anticipated these credit balances will be
depleted by the end of 2022.
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.
20 Echo Energy plc
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Strategic Report
Financial Review
Another difficult year for Echo and all businesses, due to the ongoing pandemic and further lockdowns,
but despite this . the Company has been able to successfully continue its operations and produce critical
energy products in Argentina.
Income Statement
The Group’s loss from continuing operations for the year to 31 December 2021 was US $11.6 million
(2020: US $15.3 million) and total Group loss including discontinued operations was of US $11.6 million
(2020: US $26.0 million). Whilst cost of sales increased by $1.7 million (13%) in the year due to
expenditure on production not incurred in 2020 and inflationary salary costs, the reduction in losses
is a result of reduced finance expense and gains on debt revaluations.
For the year ended 31 December 2021, Group revenue was US $11.1 million (2020: US $11.1 million), The
spilt between the two commodity revenue sources were:
l Oil sales – US $ 4.1 million (2020: $2.8 million)
l Gas sales – US $ 7.0 million (2020: $8.3 million)
The increase in Oil sales was a result of some wells re-opening and production increasing after their
closures in 2020 (due to the lack of demand caused by the pandemic) combined with price increases
Echo achieved an average net oil price for the period of US $43.3/bbl (2020: US $22.8/bbl), and an
average Gas price of US $2.7/mmbtu (2020: US $1.6mmbtu).
Group operational costs were US $15.1 million (2020: US $13.4 million):
l
Exploration expenses of US $0.2 million (2020: US $0.2 million) relates to on-going business
development activity in Latin America.
l Gross administration expenses of US $3.0 million in 2021 were US $0.3 million (8%) lower than
in 2020, reflecting the management’s continued focus on cost control across the Group.
l
Finance costs are largely composed of net foreign exchange losses of US $1.0 million (2020: US
$4.4 million), interest payable and unwinding of discount costs of US $3.4 million (2020: US $4.9
million), and the amortisation of debt fees.
Balance Sheet
Careful management of cash balances, successful debt renegotiation and equity fund raises supported
business flexibility and stability. The Group ended the period with US $0.7 million cash at bank
compared to the prior year balance of US $0.7 million.
The other receivables balance of US $2.1 million (2020: US $7.2 million) principally comprise of
recoverable Argentine Value Added Tax and trade debtors. SCS joint venture receivables have been
eroded due to Echo not fully paying SCS cash calls.
The trade and other payables balance of USD $16.0 million is mainly comprised of Joint venture
payables of US $15.0 million (2020: US $9.7 million).
The Group’s non-current liabilities are represented by US $28.8 million (2020: US $27.3 million) of
unlisted debt instruments due in over a year, and US $3.0 million (2020: US $3.0 million) abandonment
provisions.
Annual Report 2021 21
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Strategic Report
Financial Review (continued)
Post Balance Sheet – Improved Market Environment and Outlook
Note 32 provides more detail around some of the extensive debt restructuring in 2022, as well as raising
funds through share issues.
This restructuring, in combination with significant price increases in the sector as a whole, 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 September 2022 and signed on its behalf by:
Martin Hull
Chief Executive Officer
5 September 2022
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Governance
Corporate Governance Statement
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 2021. 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 2021, 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
Annual Report 2021 23
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Governance
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
1.
2.
3.
4.
5.
Explain the Company’s business model and strategy, including
key challenges in their execution (and how those will be
addressed).
Seek to understand and meet shareholder needs and
expectations. Explain the ways in which the company seeks to
engage with shareholders.
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.
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 5-7 of Annual Report.
See website disclosures: Principle Two
AIM Rule 26.
See website disclosures: Principle
Three AIM Rule 26 and section 172
disclosure page 37 and pages 18-20.
See page 15 of Annual Report.
James Parsons and Christian Yates
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 29 Annual Report.
See pages 31-32 Annual Report.
See pages 31-32 Annual Report.
Explain how each director keeps his/her skillset up to date.
See page 31 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 2021.
6.
Where external advisers to the Board or any of its committees
have been engaged, explain their role.
24 Echo Energy plc
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Governance
Corporate Governance Statement (continued)
7.
8.
9.
10.
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.
Include a high-level explanation of the Board performance
effectiveness process.
See page 27 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 2021.
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 27-28 Annual Report.
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 28 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
Annual Report 2021 25
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Governance
Corporate Governance Statement (continued)
The Board
The Board comprises the non-executive chairman, two 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 2021 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.
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. He stepped down from the Board in June 2022.
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Governance
Corporate Governance Statement (continued)
Christian Yates, Non-Executive Director was appointed to the Board in January 2022. Christian has
experience of advising and promoting investments in renewable energy since 2009. He brings to the
Board experience within the renewables sector, including wind, waste to energy and BESS.
Gavin Graham, Non-Executive Director was appointed to the Board in November 2018 and stepped
down from the Board in January 2022.
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. Resulting actions are tracked for appropriate delivery and follow
up.
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. 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.
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Governance
Corporate Governance Statement (continued)
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 Christian Yates. Stephen Whyte stepped
down as a member of the Committee in January 2022 when Christian joined. 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 2021 the audit committee:
– Met with the Company’s auditor;
–
–
Approved the audited year end and interim financial statements; and
Recommended to shareholders the re-appointment of the Company’s auditor, Crowe U.K. LLP.
Remuneration Committee report
Until Gavin Graham’s departure in January 2022, he chaired the Committee, with both Marco
Fumagalli and Stephen Whyte also being members of the Committee. With Gavin’s departure from
the Board James Parsons assumed the position of Chair of the Committee, with Stephen remaining
a member until his departure in June 2022.
The Remuneration Committee meets at least twice a year to consider all material elements of the
remuneration policy of the Company, including directors’ and executive remuneration.
During the year ended 31 December 2021, the Committee met twice 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 2021
scorecard;
Reviewed and recommended the salary increments and bonus awards to the staff;
Agreed the 2022 performance targets for the executive director;
A mid-year review of the 2021 scorecard; and
Determination of the awards to be made under the Company’s EMI scheme.
28 Echo Energy plc
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Governance
Corporate Governance Statement (continued)
Nominations Committee report
The Nominations Committee consists of Stephen Whyte and Christian Yates, with Stephen Chairing
the Committee, until his departure in June 2022, from which point James Parsons took over as Chair.
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.
During the year ended 31 December 2021, the Committee met once and the following matters were
included in its deliberations:
–
–
Approval of the terms of reference of the Committee; and
Board composition and planning given the decision to move into the renewables sector.
The directors’ attendance at scheduled board meetings and board committees during 2021 is detailed
in the table below:
Board Scheduled Board Ad Hoc Nominations
Director Meeting Meeting* Audit Remuneration Committee
James Parsons (chairman) 4 9 – – –
Marco Fumagalli 4 9 2 2 –
Stephen Whyte 4 9 2 2 1
Martin Hull 4 9 – – –
Gavin Graham 4 9 – 2 1
Total meetings 4 9 2 2 1
* Ad hoc meetings:
Additional meetings called for a specific matter generally of a more administrative nature not requiring full Board
attendance
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Governance
Health and Safety Review 2021
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.
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.
30 Echo Energy plc
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Governance
The Team
Board of Directors
James Parsons
Non-Executive Chairman
In addition to his role as Non-Executive Chairman at Echo Energy plc, James is currently Chairman of
Ascent Resources plc, Coro Energy plc and Corcel 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.
Martin Hull
Chief Executive Officer
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).
Marco Fumagalli
Non-Executive Director
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
Non-Executive Director
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 resigned from the Board in June 2022.
Christian Yates
Non-Executive Director
Christian joined the Company is January 2022. He has been investing and advising on and promoting
investments in renewable energy since 2009. Christian is chairman of Gresham House Renewable
Energy VCT 2 plc, one of two listed investment companies he co-founded in 2010. Christian has
significant experience across sections including renewable energy (wind, waste to energy and BESS).
Dr Gavin Graham
Non-Executive Director
Dr Graham resigned from the Board in January 2022.
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Governance
The Team (continued)
Executive Team
Martin Hull
Chief Executive Officer
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 Julian Bessa
VP of Exploration
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.
32 Echo Energy plc
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Governance
Directors’ Remuneration Report
The remuneration committee, which consists of the 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.
Martin Hull’s contract contains a six month notice period and a twelve month change of control clause.
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. In 2021 the Remuneration Committee at that time awarded Martin Hull with a £43k
bonus for successfully restructuring the debt. Given the on-going challenging market conditions which
faced the Company it was agreed that this bonus would only be paid when the company had sufficient
cash resources. The £43k has yet to be paid but is accounted for as accrued salary. In January 2022
the Remuneration Committee at that time awarded a further bonus of 20% of Mr Hull’s base salary
at that time which would also be paid when the Company has sufficient cash resources and has not
yet been paid.
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.
Annual Report 2021 33
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Governance
Directors’ Remuneration Report (continued)
Remuneration of Directors
2021 Cash Taxable Total Total
Salary Pension Bonus award benefit 2021 2020
(US $) (US $) (US $) (US $) (US $) (US $)
Executive Director
Martin Hull** 344,700 13,700 59,288 6,016 423,704 708,724
Non-Executive Director
James Parsons 110,304 – – – 110,304 84,210
Stephen Whyte 56,531 – – – 56,531 54,135
Marco Fumagalli 54,135 – – – 54,135 54,135
Gavin Graham 54,135 – – – 54,135 54,135
**Martin Hull took a reduction in salary for 2021, annual salary is now £250,000 (US $344,700 using the year avg rate of
GBP £1: US $1.3788
Share Options Awards
Options Options
Acquisition held at held at
Date of Exercisable Price per share 1.1.21 31.12.21
Grant Date (cents)* 000’s 000’s
Martin Hull 24.10.19 11.12.23 8.87 12,000 12,000
Martin Hull 19.12.19 20.12.22 3.52 23,000 23,000
Martin Hull 28.01.21 28.01.22 0.89 – 8,000
Martin Hull 28.01.21 28.01.23 0.89 – 8,000
Martin Hull 28.01.21 28.01.24 0.89 – 8,000
James Parsons 09.03.17 09.03.20 2.20 24,000 24,000
Stephen Whyte 09.03.17 09.03.20 2.20 4,000 4,000
Marco Fumagalli 09.03.17 09.03.20 2.20 4,000 4,000
Share Options Awards
*Calculated at the exchange rate of GBP £1: US $1.3536
No directors exercised options in the year ended 31 December 2021.
This Remuneration Report was approved by a duly authorised committee of the Board on 5 Sept 2022
and signed on its behalf by:
James Parsons
Non-Executive Chairman
5 September 2022
34 Echo Energy plc
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Governance
Directors’ Report
The directors submit their report and accounts for the financial year ended
31 December 2021. The comparative period is the year ended 31 December 2020.
Principal 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 $11,124,487 (2020: US $11,126,520), and the loss before tax from
continued operations was US $11,770,112 (2020: US $15,267,535). The directors have not declared any,
dividend in respect of the year ended 31 December 2021 (2020: US $Nil).
Future Developments
The Group will continue to optimise value creation and efficiency in the SCS assets. In addition, and
as announced in January 2022, the Company is forming a partnership with a Chilean company, Land
& Sea SpA and has acquired an option to purchase a 70% interest in a 3MW solar project in Chile.
Details of plans of the SCS assets, the solar project in Chile 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
Post year-end, Gavin Graham resigned and Christian Yates was appointed on 17 January 2022.
Subsequently, Stephen Whyte resigned on 27 June 2022.
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.
Annual Report 2021 35
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Governance
Directors’ Report (continued)
Directors’ Shareholding and Interests in Shares
Directors and connected persons No. of shares at 31.12.21
James Parsons –
Marco Fumagalli 10,029,716
Stephen Whyte –
Martin Hull 600,000
Gavin Graham –
Subsequent Events
Events which have occurred since 31 December 2021 are included in Note 32 to the attached financial
statements.
The financial information for the year to 31 December 2021 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 2021, the outlook for the Group has materially changed post period.
The business market took a positive upturn from early 2021, with gas and liquid prices increasing
significantly through 2021 and again into 2022. Average Gas prices in July 2022 are US$4.53 (mmbtu,
converted at ARS$133.57 to US$1) compared with December 2020 of US$1.59 (mmbtu, converted at
ARS$82.6 to US$1). The same period has seen Liquids (m3) sell at US$51 in July 2022 compared to
US$28.8 in December 2020.
In Q2 2021 Echo saw the conclusion of the Company’s unlisted debt restructuring, materially changing
Echo’s business position and the subsequent Post Balance Sheet restructure in August 2022 has
reduced the debt even further (by €15m plus accrued interest), whilst extending the remaining debt’s
repayment period by two years (to 2032) and reducing the coupon rate from 8% to 2%. The share
placing raised £0.6m in the UK for working capital and potential asset enhancement funding.
Post year end deals with customers allowing for a prepayment of $1.6m in May 2022, in combination
with a large increase in cash receipts from higher prices from June 2022 onwards has alleviated the
immediate creditor concern in Argentina.
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 the
revised oil and gas price levels.
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 17 of the Strategic Report, and in Note 22 of the Financial Statements.
Martin Hull
Chief Executive Officer
5 September 2022
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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.
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 UK-
adopted international accounting standards 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, 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
Annual Report 2021 37
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Financial Statements
Independent auditor’s report to the members of Echo Energy Plc
Qualified 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 2021, which comprise:
•
•
•
•
•
the Group statement of comprehensive income for the year ended 31 December 2021;
the Group and Parent Company statements of financial position as at 31 December 2021;
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 UK-adopted international accounting standards
and as regards the parent as applied in accordance with the provisions of the Companies Act 2006.
In our opinion, except for the possible effects of the matter descried in the basis for qualified opinion
section of our report:
•
•
•
•
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 2021 and of the Group’s loss for the year then ended;
the Group’s financial statements have been properly prepared in accordance with UK-adopted
international accounting standards;
the Parent company financial statements have been properly prepared in accordance with UK
adopted International Accounting Standards 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.
Basis for qualified opinion
Due to the limitations of the joint venture operator’s computerised system to identify the dates of
addition of materials and spare parts, we have not been able to perform tests to confirm their
valuation. We have also been unable to obtain reasonable assurance by alternative procedures
regarding the valuation of materials and spare parts in inventories at the year-end. As a result, we
have not been able to determine whether any adjustments would have been necessary to the valuation
of the inventories of materials and spare parts as at 31 December 2021, which are included in the
statement of financial position at $359,000, and to the relevant expense in the statement of
comprehensive income, which amount to $497,000. In addition, were any adjustment to the inventories
balance to be required, the strategic report would also need to be amended.
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 as applied to listed entities, 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.
Material uncertainty related to going concern
We draw attention to note 2 in the financial statements, which indicates the group and company
requires further funding through debt financing, joint venture equity or share issues in order to fund
ongoing operations. As stated in note 2, these events or conditions, along with the other matters as
set forth in note 2, indicate that a material uncertainty exists that may cast significant doubt on the
company’s ability to continue as a going concern. Our opinion is not modified in respect of this matter.
38 Echo Energy plc
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Financial Statements
Independent auditor’s report to the members of Echo Energy Plc
(continued)
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 group and 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
considered the company’s options in raising further funding.
Our responsibilities and the responsibilities of the directors with respect to going concern are described
in the relevant sections of this report.
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$160,000 (2020: US$215,000), which represents 1.0% of the Group’s
total assets which we have considered to be the appropriate benchmark for an exploration company.
Materiality for the Parent Company financial statements as a whole was set at $112,000 (2020:
$160,000) based on 1% of the parent company’s total assets.
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. This is set at $115,000 (2020:
$150,500) for the group and $80,000 (2020: $112,000) for the parent.
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$3,500. Errors
below that threshold would also be reported to it if, in our opinion as auditor, disclosure was required
on qualitative grounds.
Overview of the scope of our audit
We audit the parent company and its subsidiary companies. Our audit approach was developed by
obtaining an understanding of the group’s activities, the key functions undertaken on behalf of the
Board by management and the overall control environment. Based on this understanding we assessed
those aspects of the group and subsidiary companies transactions and balances which were most
likely to give rise to a material misstatement and were most susceptible to irregularities including
fraud or error. Specifically, we identified what we considered to be key audit matters and planned our
audit approach accordingly. We also engaged local specialist to assist us with review on Argentinian
tax matters.
Annual Report 2021 39
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Financial Statements
Independent auditor’s report to the members of Echo Energy Plc
(continued)
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 basis for qualified opinion section and the ‘Material
uncertainty related 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.
Key audit matter How the scope of our audit addressed the 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.
(Accounting policy 1(d), Note 4)
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.
(Accounting policy 1(e) & 1(g), Note
16 & 17)
Our work focused 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.
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. We are satisfied that there is
adequate headroom in the internal model of the CGU to support
the recoverability of ‘Interest in subsidiary undertakings’ and
‘Amounts receivable from Group undertakings’.
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.
Interest
in
Carrying value of
subsidiary
and
Amounts receivable from Group
undertakings (Company only)
undertakings
We have considered the risk that
Interest in subsidiary undertakings
and Amounts receivable from
Group undertakings assets are
impaired.
(Note 2 & 18)
40 Echo Energy plc
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Financial Statements
Independent auditor’s report to the members of Echo Energy Plc
(continued)
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.
As described in the basis for qualified opinion section of our report, we were unable to satisfy ourselves
concerning the valuation of materials and spare parts held in inventories of $359,000 at 31 December
2021. We have concluded that where the other information refers to the inventory balance or related
balances, such as expenses, it may be materially misstated for the same reason.
Opinion on other matter prescribed by the Companies Act 2006
Except for the possible effects if the matter described in the basis for qualified opinion section of our
report, 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
Except for the matter described in the basis for qualified opinion section of our report 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.
Arising solely from the limitation on the scope of our work relating to inventories, referred to above:
•
we have not obtained all the information and explanations that we considered necessary for the
purpose of our audit.
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.
Annual Report 2021 41
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Financial Statements
Independent auditor’s report to the members of Echo Energy Plc
(continued)
Responsibilities of the directors for the financial statements
As explained more fully in the directors’ responsibilities statement set out on page 37, 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, judgement surrounding the
capitalisation of exploration & evaluation assets and inappropriate revenue recognition. 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.
42 Echo Energy plc
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Financial Statements
Independent auditor’s report to the members of Echo Energy Plc
(continued)
Use of our report
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part
16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the
company’s members those matters we are required to state to them in an auditor’s report and for no
other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to
anyone other than the company and the company’s members as a body, for our audit work, for this
report, or for the opinions we have formed.
Matthew Stallabrass (Senior Statutory Auditor)
for and on behalf of
Crowe U.K. LLP
Statutory Auditor
London
Annual Report 2021 43
264206 Echo Annual Report pp44-pp50 FINANCIAL TABLES.qxp 06/09/2022 10:36 Page 44
Financial Statements
Consolidated Statement of Comprehensive Income
Year ended 31 December 2021
Continuing operations
Revenue
Cost of sales
Notes
4
5
Gross profit
Exploration expenses
Administrative expenses
Operating loss
Financial income
Financial expense
Derivative financial gain/(loss)
Loss before tax
Taxation
Loss from continuing operations
Discontinued operations
Profit/(loss) after taxation for the year from discontinued
operations
Loss for the year
Other comprehensive income:
Other comprehensive income to be reclassified to profit or
loss in subsequent periods (net of tax)
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
6
8
9
10
13
11
14
Year to
31 December
2021
US$
Year to
31 December
2020
US$
11,124,487
(15,147,779)
(4,023,292)
(205,651)
(2,965,548)
(7,194,491)
4,355,334
(8,993,432)
62,477
(11,770,112)
–
11,126,520
(13,437,010)
(2,310,490)
(215,512)
(3,240,934)
(5,766,936)
7,142
(10,174,047)
666,306
(15,267,535)
–
(11,770,112)
(15,267,535)
–
(10,724,108)
(11,770,112)
(25,991,643)
211,820
(1,041,955)
(11,558,292)
(27,033,598)
(11,558,292)
(27,033,598)
(11,558,292)
(27,033,598)
(0.93)
(0.93)
(0.93)
(0.93)
(3.38)
(3.38)
(1.99)
(1.99)
The notes on pages 51 to 79 form part of these financial statements.
44 Echo Energy plc
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Financial Statements
Consolidated Statement of Financial Position
Year ended 31 December 2021
Non-current assets
Property, plant and equipment
Intangibles assets
Current Assets
Inventories
Trade and other receivables
Cash and cash equivalents
Current Liabilities
Trade and other payables
Derivative financial liabilities
Net current liabilities
Total assets less current liabilities
Non-current liabilities
Loans due in over one year
Provisions
Total Liabilities
Net Liabilities
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
2021
US$
31 December
2020
US$
Notes
16
17
19
20
21
23
24
27
28
25
26
26
26
2,674,405
7,131,907
2,552,693
8,511,622
9,806,312
11,064,315
1,365,225
2,108,438
742,339
4,216,002
541,230
7,229,263
682,159
8,452,652
(16,023,500)
–
(16,023,500)
(11,807,498)
(13,249,146)
(62,477)
(13,311,623)
(4,858,970)
(2,001,186)
6,205,345
(28,768,380)
(3,039,911)
(31,808,291)
(47,831,791)
(27,276,015)
(2,979,956)
(30,255,971)
(43,567,594)
(33,809,477)
(24,050,627)
7,209,086
64,977,243
12,177,786
1,522,499
(3,531,587)
(116,164,504)
6,288,019
64,961,905
11,373,966
1,417,285
(3,319,767)
(104,772,035)
(33,809,477)
(24,050,627)
These financial statements were authorised for issue and approved by the board of directors on
5 September 2022
Martin Hull
Company registration number 05483127
The notes on pages 51 to 79 form part of these financial statements.
Annual Report 2021 45
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Financial Statements
Company Statement of Financial Position
Year ended 31 December 2021
Non-current assets
Property, plant and equipment
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 liabilities
Non-current liabilities
Loans due in over one year
Total Liabilities
Net (Liability)/Assets
Equity
Share capital
Share premium
Warrant reserve
Share option reserve
Foreign currency translation reserve
Retained earnings
Equity Shareholders’ Funds
Notes
16
17
18
20, 29
20
21
23
24
31 December
2021
US$
31 December
2020
US$
2,177
445,585
16,005,044
11,813,525
8,039
326,869
16,005,044
12,504,108
28,266,330
28,844,060
172,589
37,008
209,596
(864,697)
–
(864,697)
(655,100)
156,034
437,230
593,264
(3,306,206)
(62,477)
(3,368,684)
(2,775,420)
27,678,195
26,068,640
27
(28,768,380)
(27,276,015)
(28,768,380)
(29,633,077)
(27,276,015)
(30,644,699)
(1,157,151)
(1,207,374)
25
26
26
26
7,209,086
64,977,243
12,177,786
1,522,499
(2,255,402)
(84,788,362)
6,288,019
64,961,905
11,373,966
1,417,285
(2,255,402)
(82,993,147)
(1,157,151)
(1,207,374)
These financial statements were authorised for issue and approved by the board of directors on
5 September 2022
The Company has not presented its own profit and loss account. Its loss for the year was US$1,961,039
(2020: US$10,045,487).
Martin Hull
Company registration number 05483127
The notes on pages 51 to 79 form part of these financial statements.
46 Echo Energy plc
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Financial Statements
Consolidated Statement of Changes in Equity
Year ended 31 December 2021
Foreign
Share currency
Retained Share Share Warrant option translation Total
earnings capital premium reserve reserve reserve equity
US$ US$ US$ US$ US$ US$ US$
1 January 2020 (78,857,006) 5,190,877 64,817,662 11,142,290 1,159,580 (2,277,812) 1,175,591
Loss for the year (15,267,535) – – – – – (15,267,535)
Discontinued
operations (10,724,108) – – – – – (10,724,108)
Exchange Reserve – – – – – (1,041,955) (1,041,955)
Total comprehensive
loss for the year (25,991,643) – – – – (1,041,955) (27,033,598)
New shares issued – 1,097,142 467,935 – – – 1,565,077
Warrants – – (231,676) 231,676 – – –
Share issue costs – – (92,016) – – – (92,016)
Share options
lapsed 76,614 – – – (76,614) – –
Share-based
payments – – – – 334,319 – 334,319
31 December
2020 (104,772,035) 6,288,019 64,961,905 11,373,966 1,417,285 (3,319,767) (24,050,627)
1 January 2021 (104,772,035) 6,288,019 64,961,905 11,373,966 1,417,285 (3,319,767) (24,050,627)
Loss for the year (11,558,292) – – – – – (11,558,292)
Discontinued
operations – – – – – –
Exchange Reserve – – – – – (211,820) (211,820)
Total comprehensive
loss for the year (11,558,292) (211,820) (11,770,112)
New shares issued – 646,265 813,207 – – – 1,459,472
Warrants exercised – 274,803 105,484 (19,362) – – 360,925
Warrants – – (823,182) 823,182 – – –
Share issue costs – – (80,171) – – – (80,171)
Share options
lapsed 165,824 – – – (165,824) – –
Share-based
payments – – – – 271,038 – 271,038
31 December 2021 (116,164,504) 7,209,086 64,977,243 12,177,786 1,522,499 (3,531,587) (33,809,477)
The notes on pages 51 to 79 form part of these financial statements.
Annual Report 2021 47
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Financial Statements
Company Statement of Changes in Equity
Year ended 31 December 2021
Foreign
Share currency
Retained Share Share Warrant option translation Total
earnings capital premium reserve reserve reserve equity
US$ US$ US$ US$ US$ US$ US$
1 January 2020 (73,024,274) 5,190,877 64,817,662 11,142,290 1,159,580 (2,255,402) 7,030,733
Loss for the year (10,045,487) – – – – – (10,045,487)
Discontinued
operations – – – – – – –
Total comprehensive
loss for the year (10,045,487) – – – – – (10,045,487)
New shares issued – 1,097,142 467,935 – – – 1,565,077
Warrants issued – – (231,676) 231,676 – – –
Share issue costs – – (92,016) – – – (92,016)
Share options
lapsed 76,614 – – – (76,614) – –
Share-based
payments – – – – 334,319 – 334,319
31 December 2020 (82,993,147) 6,288,019 64,961,905 11,373,966 1,417,285 (2,255,402) (1,207,374)
1 January 2021 (82,993,147) 6,288,019 64,961,905 11,373,966 1,417,285 (2,255,402) (1,207,375)
Loss for the year (1,961,039) – – – – – (1,961,039)
Discontinued
operations – – – – – – –
Total comprehensive
loss for the year (1,961,039) – – – – – (1,961,039)
New shares issued – 646,265 813,207 – – – 1,459,472
Warrants Exercised – 274,803 105,484 (19,362) – – 360,925
Warrants issued – – (823,182) 823,182 – – –
Share issue costs – – (80,171) – – – (80,171)
Share options
lapsed 165,824 – – – (165,824) – –
Share-based
payments – – – – 271,038 – 271,038
31 December 2021 (84,788,362) 7,209,086 64,977,243 12,177,786 1,522,499 (2,255,402) (1,157,151)
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.
Warrant reserve represents the cumulative fair value of share warrants granted which are not lapsed,
cancelled or exercised.
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 income statement.
The notes on pages 51 to 79 form part of these financial statements.
48 Echo Energy plc
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Financial Statements
Consolidated Statement of Cash Flows
Year ended 31 December 2021
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
Share-based payments
Right of use liability
Financial income
Financial expense
Exchange differences
Derivative financial gain
Decrease/(Increase) in inventory
(Increase)/Decrease in other receivables
increase in trade and other payables
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
Interest received
Bank fees and other finance costs
Issue of share capital
Share issue costs
Warrants exercise
Net cash from financing activities
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at 1 January 2021
Foreign exchange gains/(losses) on cash and cash equivalents
Cash and cash equivalents at 31 December 2021
Year to
31 December
2021
US$
Year to
31 December
2020
US$
(11,558,292)
–
(15,267,535)
(10,724,108)
(11,558,292)
(25,991,643)
127,656
1,498,431
1,858
–
271,038
–
(4,355,334)
8,993,432
(5,612,490)
(62,477)
862,114
(823,995)
5,120,825
5,072,974
9,369,804
(1,538,194)
182,211
1,874,810
10,822
10,383,461
334,319
(64,180)
(7,142)
10,174,047
(2,265,180)
(666,306)
19,956,862
(120,386)
311,275
5,844,002
6,034,891
112
(118,716)
(251,226)
(470,637)
(1,644,516)
(369,942)
(2,115,153)
249,351
(169,991)
1,459,472
(80,171)
360,925
7,142
(189,520)
1,565,077
(92,016)
–
1,819,586
1,290,682
123,270
682,159
(63,090)
742,339
(824,360)
1,698,012
(191,493)
682,159
The notes on pages 51 to 79 form part of these financial statements.
Annual Report 2021 49
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Financial Statements
Company Statement of Cash Flows
Year ended 31 December 2021
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
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
(Increase)/Decrease in other receivables
(Decrease)/Increase in trade and other payables
Decrease/(Increase) in amounts owing by subsidiary undertakings
Net cash used in operating activities
Cash flows from investing activities
Purchase of intangible assets
Net cash (used in)/from investing activities
Cash flows from financing activities
Interest received
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 2021
Foreign exchange gains/(losses) on cash and cash equivalents
Cash and cash equivalents at 31 December 2021
Year to
31 December
2021
US$
Year to
31 December
2020
US$
(1,961,039)
(9,721,880)
(323,607)
(1,961,039)
(10,045,487)
–
5,862
–
118,716
271,038
–
–
(475,965)
(62,477)
(142,826)
(16,555)
(142,872)
690,583
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
(481,022)
531,156
(1,572,709)
318,151
(2,014,381)
(118,716)
(118,716)
(288,475)
(288,475)
–
1,459,472
(80,171)
1,847
1,565,076
(92,016)
1,379,301
1,474,907
(312,124)
437,230
(88,099)
37,008
(827,949)
1,259,468
5,711
437,230
The notes on pages 51 to 79 form part of these financial statements.
50 Echo Energy plc
264206 Echo Annual Report pp51-pp67 NOTES.qxp 06/09/2022 10:37 Page 51
Financial Statements
Notes to the Financial Statements
Year ended 31 December 2021
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 35.
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 UK-adopted international accounting
standards. These financial statements are for the year 1 January 2021 to 31 December 2021. The
comparatives shown are for the year 1 January 2020 to 31 December 2020.
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.
(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.
Annual Report 2021 51
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Financial Statements
Notes to the Financial Statements (continued)
Year ended 31 December 2021
(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 metred 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
Motor vehicles
12% to 33.3% straight-line
25% straight-line
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.
52 Echo Energy plc
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Financial Statements
Notes to the Financial Statements (continued)
Year ended 31 December 2021
(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.
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.
Annual Report 2021 53
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Financial Statements
Notes to the Financial Statements (continued)
Year ended 31 December 2021
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 £0.7388 and US $1 to €0.8790 (2020: US $1 to GBP £0.7319, US $1 to €0.8178) US $1
to ARS $102.397 (2020: US $1 to ARS $86.250) and the average exchange rate during 2021 was US $1
to GBP £0.7253 (2020: US $1 to GBP £0.7793).
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.
(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.
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.
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.
54 Echo Energy plc
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Financial Statements
Notes to the Financial Statements (continued)
Year ended 31 December 2021
(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:
l
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
l 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.
(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 included
in the consolidated statement of comprehensive income as other income. During 2021, the Group
received grants totalling US $23,118 for furloughed staff. Grants ceased, in line with Government policy,
during H2 of 2021.
Annual Report 2021 55
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Financial Statements
Notes to the Financial Statements (continued)
Year ended 31 December 2021
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 2021, the outlook for the Group has materially changed post period.
2021 represented a year of financial stabilisation and then progress and improvement, particularly
driven by a marked increase in energy commodity prices, following the worst impacts of the COVID 19
pandemic in 2020. Production of oil & gas stabilised during the year after the falls in 2020 and
increased in the final quarter of the 2021. The successful restructuring of all the company’s loans during
the year means that minimal cash servicing of these loans is required during 2022 materially improving
the cashflow outlook and enabling greater investment on increasing production levels further
improving revenues. Post period the improvement has continued. The company has executed new gas
sales agreements for the majority of its gas production. Average Gas prices in July 2022 are US$4.53
(mmbtu, converted at ARS$133.57 to US$1) compared with December 2020 of US$1.59 (mmbtu,
converted at ARS$82.6 to US$1). The same period has seen Liquids (m3) sell at US$51 in July 2022
compared to US$28.8 in December 2020.
Post year end agreements with customers allowing for a prepayment receipt of $1.6m in April 2022,
in combination with a revenue increase in cash receipts from June 2022 has alleviated the immediate
creditor concern in Argentina, whilst the additional share offering has raised further funds in the UK.
However, financial challenges remain ahead for the company as it emerges and recovers from the
impact of the covid pandemic and whilst the company forecast the SCS assets to be cashflow positive
at prevailing oil and gas price levels in the long term, there is still a short term requirement for
additional funding through debt financing, joint venture equity or share issues. These conditions
indicate the existence of a material uncertainty which may cast significant doubt about the company’s
ability to continue as a going concern. 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.
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.
56 Echo Energy plc
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Financial Statements
Notes to the Financial Statements (continued)
Year ended 31 December 2021
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.
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:
l
l
l
l
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.
DETERMINATION AND VALUATION OF DERIVATIVE FINANCIAL
LIABILITIES
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.
CARRYING VALUE OF INVESTMENT IN SUBSIDIARIES
In determining whether parent company investments in subsidiaries have been impaired, we review
subsidiary assets and liabilities to determine whether Group investment is recoverable. 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.
Annual Report 2021 57
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Financial Statements
Notes to the Financial Statements (continued)
Year ended 31 December 2021
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.
c.
Santa Cruz Sur
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:
Corporate &
Administrative Santa Cruz Sur Bolivia Total
US $ US $ US $ US $
Year to 31 December 2021
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
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
58 Echo Energy plc
23,118
(205,651)
(2,316,947)
4,105,983
(3,630,018)
62,477
11,101,369
(15,147,779)
(510,807)
249,351
(5,362,783)
(4,879)
(122,777)
(1,961,039)
2,089,878
2,306,271
(29,633,059)
(9,670,649)
8,260,790
12,224,994
(18,189,591)
45,503
–
(215,512)
(3,036,478)
1,771
(8,801,106)
666,306
11,081,017
(13,437,010)
–
–
5,371
(1,372,978)
–
11,124,487
(15,147,779)
(205,651)
(2,965,547)
4,355,334
(8,993,432)
62,477
(127,656)
(11,770,112)
9,806,312
14,022,314
(47,831,773)
11,126,520
(13,437,010)
(215,512)
(3,240,934)
7,142
(10,174,047)
666,306
(137,792)
(632)
(138,424)
(544,355)
(508,951)
(9,123)
–
–
–
(204,456)
–
37
–
(101,151)
–
(1,936,878)
–
(1,031)
–
(2,039,060)
–
(11,339,516)
383,790
3,994,325
(30,791,002)
(3,723,600)
11,053,602
15,858,507
(12,732,808)
(204,419)
(373,077)
(335,865)
(43,784)
(15,267,535)
11,064,315
19,516,967
(43,567,594)
264206 Echo Annual Report pp51-pp67 NOTES.qxp 06/09/2022 10:38 Page 59
Financial Statements
Notes to the Financial Statements (continued)
Year ended 31 December 2021
The geographical split of non-current assets arises as follows:
United Kingdom South America Total
US $ US $ US $
31 December 2021
Property, plant and equipment 2,177 2,672,228 2,674,405
Other intangible assets 445,585 6,686,322 7,131,907
31 December 2020
Property, plant and equipment 8,039 2,544,654 2,552,693
Other intangible assets 326,869 8,184,753 8,511,622
4. REVENUE
Year to Year to
31 December 31 December
2021 2020
US $ US $
Oil revenue 4,060,802 2,784,248
Gas revenue 7,036,861 8,279,416
Other income 26,824 62,856
Total Revenue 11,124,487 11,126,520
5. COST OF SALES
Year to Year to
31 December 31 December
2021 2020
US $ US $
Production costs 12,024,454 10,021,578
Selling and distribution costs 1,684,320 1,567,963
Movement in stock of crude oil (181,274) (89,410)
Depletion 1,620,279 1,936,879
Total Costs 15,147,779 13,437,010
6. EXPENSES AND AUDITOR’S REMUNERATION
Year to Year to
31 December 31 December
2021 2020
US $ US $
The operating loss is stated after charging the following amounts:
Depreciation of property, plant and equipment – owned 127,656 182,211
Loss/(Gain) on disposal of property, plant and equipment 1,858 –
Fees payable to the Company’s auditor for the audit of the
Company’s annual accounts 53,977 61,007
Fees payable to the overseas auditor and its associates for
other services:
– Corporate finance services 11,456 9,370
– Audit and subsidiaries 10,499 23,400
Share based payments 271,038 334,319
Annual Report 2021 59
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Financial Statements
Notes to the Financial Statements (continued)
Year ended 31 December 2021
7. STAFF COSTS AND NUMBERS
The average number of persons employed by the Group during the year including executive directors
is analysed below:
Year to Year to
31 December 31 December
2021 2020
Administration 7 9
Group employment costs – all employees including executive directors:
Year to Year to
31 December 31 December
2021 2020
US $ US $
Wages and salaries 1,066,589 1,770,037
Social security costs 131,487 221,908
Pension contributions 45,764 51,557
Share-based payments – equity-settled 271,038 334,319
Total 1,514,878 2,377,821
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.
Year to Year to
31 December 31 December
2021 2020
US $ US $
Wages and salaries 583,974 713,134
Social security costs 103,329 115,286
Bonus 59,288 313,706
Pension Contributions 25,099 25,787
Private Health Insurance 13,107 13,293
Share Based Payments 244,383 274,834
Total 1,029,180 1,456,040
8. FINANCIAL INCOME
Year to Year to
31 December 31 December
2021 2020
US $ US $
Interest income 249,351 7,142
Net foreign exchange gain 4,105,983 –
Total 4,355,334 7,142
60 Echo Energy plc
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Financial Statements
Notes to the Financial Statements (continued)
Year ended 31 December 2021
9. FINANCIAL EXPENSE
Year to Year to
31 December 31 December
2021 2020
US $ US $
Interest payable 11,912 1,991,535
Net foreign exchange losses 5,122,810 4,409,732
Unwinding of discount on long term loan 3,394,647 2,936,831
Amortisation of loan fees 234,101 614,913
Accretion of right of use liabilities – 2,293
Unwinding of abandonment provision 59,955 39,956
Finance cost of holding bonds – 11,971
Bank fees and overseas transaction tax 170,007 166,816
Total 8,993,432 10,174,046
10.DERIVATIVE FINANCIAL GAIN/LOSS
Year to Year to
31 December 31 December
2021 2020
US $ US $
Fair value gain 62,477 666,306
Total 62,477 666,306
Represents fair value gain on valuation of derivatives instruments at period end.
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:
Year to Year to
31 December 31 December
2021 2020
US $ US $
Impairment of the historic cost and carrying value of intangible assets – (10,724,108)
Operating (loss)/gain after liquidation – (10,724,108)
(Loss)/Gain on ordinary activities before taxation – (10,724,108)
Taxation – –
(Loss)/Gain for the year from discontinued operations – (10,724,108)
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Financial Statements
Notes to the Financial Statements (continued)
Year ended 31 December 2021
The cash flows associated with the discontinued operations are:
Year to Year to
31 December 31 December
2021 2020
US $ US $
Operations – –
Investing – –
Financing – –
Net cash out flow – –
12. JOINT ARRANGEMENTS
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.
13. TAXATION
Year to Year to
31 December 31 December
2021 2020
US $ US $
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
The tax assessed for the year is different from the standard rate of corporation tax in the UK of 19%
(2020: 19%). The references are explained below:
Year to Year to
31 December 31 December
2021 2020
US $ US $
Loss on ordinary activities before taxation (11,770,112) (15,267,535)
Loss from discontinued operations – (10,724,108)
Loss for the year before tax (11,770,112) (25,991,643)
Loss on ordinary activities multiplied by standard rate of corporation
tax in the UK of 19% (2,236,321) (4,938,412)
Effects of:
Expenses disallowed for tax purposes 40,246 76,404
Deferred tax not provided – tax losses carried forward 2,196,075 4,862,008
Total current tax – –
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 $48,711,692 (2020: US $36,729,760).
No amounts have been recognised within tax on the results of the equity-accounted joint ventures.
62 Echo Energy plc
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Financial Statements
Notes to the Financial Statements (continued)
Year ended 31 December 2021
14. LOSS PER SHARE
The calculation of basic and diluted loss per share at 31 December 2021 was based on the loss
attributable to ordinary shareholders. The weighted average number of ordinary shares outstanding
during the year ending 31 December 2021 and the effect of the potentially dilutive ordinary shares to
be issued are shown below.
Year to Year to
31 December 31 December
2021 2020
Net loss for the year (US $) before exchange on translating
foreign operations (11,770,112) (25,991,643)
Basic weighted average ordinary shares in issue during the year 1,270,891,563 768,598,277
Diluted weighted average ordinary shares in issue during the year 1,270,891,563 768,598,277
Loss per share (cents)
Basic (cents) (0.93) (3.38)
Diluted (cents) (0.93) (3.38)
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 24 for details of their rights.
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.
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Financial Statements
Notes to the Financial Statements (continued)
Year ended 31 December 2021
16. PROPERTY, PLANT AND EQUIPMENT (GROUP)
PPE – O&G
Properties
US $
Fixtures &
Fittings
US $
Property
Right-of-Use
Assets
US $
Total
US $
31 DECEMBER 2021
Cost
1 January 2021 2,621,921 97,255 – 2,719,176
Additions 251,226 – – 251,226
Disposals – (1,858) – (1,858)
31 December 2021 2,873,147 95,397 – 2,968,544
Depreciation
1 January 2021 79,941 86,542 – 166,483
Charge for the year 122,777 4,879 – 127,656
Disposals – – – –
31 December 2021 202,718 91,421 – 294,139
Carrying amount
31 December 2021 2,670,429 3,976 – 2,674,405
31 December 2020 2,541,980 10,713 – 2,552,693
31 December 2020
Cost
1 January 2020 979,164 131,122 309,804 1,420,090
Additions 1,644,460 56 1,644,516
Disposals (1,703) (33,923) (309,804) (345,430)
31 December 2020 2,621,921 97,255 – 2,719,176
Depreciation
1 January 2020 3,338 91,366 224,176 318,880
Charge for the year 76,603 19,980 85,628 182,211
Disposals – (24,804) (309,804) (334,608)
31 December 2020 79,941 86,542 – 166,483
Carrying amount
31 December 2020 2,541,980 10,713 – 2,552,693
31 December 2019 975,826 39,756 85,628 1,101,210
Included within property, plant and equipment are amounts of US $996,505 (2020: US $745,279) 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.
64 Echo Energy plc
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Financial Statements
Notes to the Financial Statements (continued)
Year ended 31 December 2021
16. PROPERTY, PLANT AND EQUIPMENT (COMPANY)
Fixtures &
Fittings
US $
Property
Right-of-Use
Assets
US $
Total
US $
31 DECEMBER 2021
Cost
1 January 2021 92,903 – 92,903
Additions – – –
Disposals – – –
31 December 2021 92,903 – 92,903
Depreciation
1 January 2021 84,864 – 84,864
Charge for the year 5,862 – 5,862
Disposals – – –
31 December 2021 90,726 – 90,726
Carrying amount
31 December 2021 2,177 – 2,177
31 December 2020 8,039 – 8,039
31 DECEMBER 2020
Cost
1 January 2020 126,826 309,804 436,630
Additions – – –
Disposals (33,923) (309,804) (343,727)
31 December 2020 92,903 – 92,903
Depreciation
1 January 2020 90,744 224,176 314,920
Charge for the year 18,924 85,628 104,552
Disposals (24,804) (309,804) (334,608)
31 December 2020 84,864 – 84,864
Carrying amount
31 December 2020 8,039 – 8,039
31 December 2019 36,082 85,628 121,710
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Financial Statements
Notes to the Financial Statements (continued)
Year ended 31 December 2021
17. INTANGIBLE ASSETS (GROUP)
SCS Production
Assets
US $
TA License
Areas
Discontinued
US$
Total
US$
31 DECEMBER 2021
Cost
1 January 2021 10,756,306 – 10,756,306
Additions 118,716 – 118,716
Disposals
–
–
–
31 December 2021 10,875,022 – 10,875,022
Depletion
1 January 2021 2,244,684 – 2,244,684
Disposals – –
Depletion 1,375,931 – 1,375,931
Depreciation decommissioning assets 122,500 – 122,500
31 December 2021 3,743,115 – 3,743,115
Carrying amount
31 December 2021 7,131,907 – 7,131,907
31 December 2020 8,511,622 – 8,511,622
31 DECEMBER 2020
Cost
1 January 2020 10,802,524 10,140,936 20,943,460
Additions 228,112 242,525 470,637
Disposals – (10,383,461) (10,383,341)
Transfers (274,330) – (274,330)
31 December 2020 10,756,306 – 10,756,306
Depletion and impairment
1 January 2020 369,874 – 369,874
Disposals – (10,383,461) (10,383,461)
Depletion 1,752,310 – 1,752,310
Depreciation decommissioning assets 122,500 – 122,500
Impairment charge for the year – 10,383,461 10,383,461
31 December 2020 2,244,684 – 2,244,684
Carrying amount
31 December 2020 8,511,622 – 8,511,622
31 December 2019 20,573,586 – 20,573,586
All intangible assets relate to oil & gas activities. The Group’s oil and gas assets were assessed for
impairment at 31 December 2021. The intangibles are held within one CGU, 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.
66 Echo Energy plc
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Financial Statements
Notes to the Financial Statements (continued)
Year ended 31 December 2021
17. INTANGIBLE ASSETS CONTINUED (COMPANY)
Argentina
Production
assets
US $
Total
US $
31 DECEMBER 2021
Cost
1 January 2021 326,869 326,869
Additions 118,716 118,716
31 December 2021 445,585 445,585
Impairment
1 January 2021 – –
Impairment charge for the year – –
31 December 2021 – –
Carrying amount
31 December 2021 445,585 445,585
31 December 2020 326,869 326,869
31 DECEMBER 2020
Cost
1 January 2020 362,001 362,001
Additions 288,475 288,475
Disposals (323,607) (323,607)
31 December 2020 326,869 326,869
Impairment
1 January 2020 – –
Impairment charge for the year 323,607 323,607
Disposals (323,607) (323,607)
31 December 2020 – –
Carrying amount
31 December 2020 326,869 326,869
31 December 2019 362,001 362,001
Annual Report 2021 67
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Financial Statements
Notes to the Financial Statements (continued)
Year ended 31 December 2021
18. INTEREST IN SUBSIDIARY UNDERTAKINGS
Cost
1 January
Additions in year
31 December
Impairment
1 January
Impairment
31 December
Carrying amount
31 December 2020 & 2021
Details of the subsidiaries are as follows:
Year to
31 December
2021
US$
Year to
31 December
2020
US$
30,521,648
–
30,521,648
–
30,521,648
30,521,648
14,516,604
–
14,516,590
14
14,516,604
14,516,604
16,005,044
16,005,044
Subsidiary
Class of
Share
%
Owned
Country of
Registration
Nature of Business
Echo Energy Holdings (UK) Limited
Ordinary
Echo Energy Argentina Holdings Limited Ordinary
Ordinary
Echo Energy Tapi Aike Limited
Ordinary
Eco Energy TA Op Limited
100% England & Wales Holding company
100% England & Wales Holding company
100% England & Wales Holding company
100% England & Wales Holder of Argentinian
branch assets
Echo Energy C D & LLC Limited
Eco Energy CDL Op Limited
Ordinary
Ordinary
100% England & Wales Holding company
100% England & Wales Holder of Argentinian
Echo Energy Bolivia (Hold Co 1) Limited Ordinary
Ordinary
Echo Energy Bolivia (Op Co 1) Limited
100% England & Wales Holding company
100% England & Wales Holder of Bolivian
Echo Energy Bolivia (Hold Co 2) Limited Ordinary
Ordinary
Echo Energy Bolivia (Op Co 2) Limited
100% England & Wales Holding company
100% England & Wales Dormant
branch assets
branch assets
The registered address for all of the above subsidiaries is: 85 Great Portland Street, London, W1W 7LT
19. INVENTORIES
31 December 2021 31 December 2020
Group Company
US$ US$
Group
US$
Company
US$
Crude oil
Parts and supplies
Total
691,528
673,697
1,365,225
–
–
–
510,254
30,976
541,230
–
–
–
These crude oil inventories are held in the SCS assets.
68 Echo Energy plc
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Financial Statements
Notes to the Financial Statements (continued)
Year ended 31 December 2021
20. TRADE AND OTHER RECEIVABLES
31 December 2021 31 December 2020
Group Company
US$ US$
Group
US$
Company
US$
Non-current
Amounts owing by subsidiary undertakings
Total
Current
Trade receivables
Accrued income
Other receivables
Prepayments
Total
–
–
11,813,525
11,813,525
–
–
12,504,108
12,504,108
387,965
291,336
1,322,407
106,730
2,108,438
–
573,842
82,818
89,771
172,589
1,218,350
–
5,163,981
273,090
7,229,264
–
84,791
71,243
156,034
Other receivables in the Group in 2020 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
31 December 2021 31 December 2020
Group Company
US$ US$
Group
US$
Company
US$
Cash held by joint venture partners
Cash and cash equivalents
Total
500,719
241,620
742,339
37,008
–
37,008
27,479
654,680
682,159
–
437,230
437,230
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.
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
looks, when appropriate, to invest in short-term fixed-interest treasury deposits giving a low risk profile
to these assets.
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Financial Statements
Notes to the Financial Statements (continued)
Year ended 31 December 2021
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 principal 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 trade debtors have
been recovered in full since 1 January 2022. The group has applied the expected credit loss model under
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$1,880,113 (2020: US$3,253,335). 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$27,818,569 (2020: US$28,509,152). 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 (2020:
US$14,516,604) are considered to be impaired and have been provided against in full. All other amounts
are expected to be received in full.
CURRENCY RISK
The Group’s operations are primarily located in the South America, and the United Kingdom, with the
main exchange risk being between the US Dollar and the Argentine Peso. The Argentine Peso has
devalued by approximately 19% (2020: 9%) over the year. The Group addressed this risk by minimising
exposure to the currency. The majority of Group revenues for the year were denominated in US Dollars
but certain liabilities and revenues were denominated in Argentine Pesos. In certain instances the
counterparty for settlement of pesos income and expenditure was the same. In these instances pesos
balances were offset. Balances were held in dollars until settlement was due, and where short-term
pesos balances were held these were placed on overnight deposit.
The Group does hold substantial receivable VAT balances denominated in pesos and have sought to
expedite recovery to mitigate devaluation losses.
At year end the Group held the following cash and cash equivalent balances:
US Dollars
GBP Sterling
Euro
Argentine Peso
Bolivian Boliviano
Total
31 December
2021
US$
31 December
2020
US$
5,248
35,419
41
699,578
2,053
742,339
5,835
435,986
–
237,776
2,562
682,159
The consolidated statement of comprehensive income would be affected by US$4,247 (2020:
US$43,599) if the exchange rate between US$ and GBP changed by 10%. There would be a loss of
US$199,162 (2020: US$21,617) if the exchange rate between the Argentine Peso to the US Dollar
weakened by 10%.
70 Echo Energy plc
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Financial Statements
Notes to the Financial Statements (continued)
Year ended 31 December 2021
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
are predominantly translated into USD to fund exploration, acquisition and production 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$2,782,192 (2020: US$2,692,605) 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 received a VAT refund during 2021, but going forward
withholds VAT received from customers to offset any VAT credit balances.
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 183,678,000 Pesos into
$930,733 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 is placed in interest bearing accounts where possible. During
the course of 2021, 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$30 (2020: US$71) 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 2021.
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.
LIQUIDITY RISK
The Group holds Euro denominated long-term debt. See Note 27. Other than long term debts, all
financial liabilities are due for settlement within _12 months, although Joint Venture payables will be
settled as and when cashflow allows. . The Group held cash balances of US$742,339 (2020:
US$682,159).
Annual Report 2021 71
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Financial Statements
Notes to the Financial Statements (continued)
Year ended 31 December 2021
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.
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$703,686 (2020:
US$827,942).
A 10% increase in the price of Oil would have increased revenue by approximately US$406,080 (2020:
US$278,425).
CAPITAL MANAGEMENT
The Group’s legacy strategy has led to its capital structure being a mixture of debt and equity. The
directors will reassess the future capital structure when projects under development are sufficiently
advanced and restructure accordingly.
The Group’s financial strategy is to utilise its resources to further appraise and test the Group’s
projects, forming strategic alliances for specific projects where appropriate together with assessing
target acquisitions. The Group keeps investors and the market informed of its progress with its
projects through regular announcements and raises additional equity finance at appropriate times.
CATEGORIES OF FINANCIAL INSTRUMENTS
All of the Group’s financial assets are carried at amortised cost. The Group’s embedded derivative is
classified at fair value through profit or loss, the remaining Group’s financial liabilities are classified
as financial liabilities at amortised cost.
23. TRADE AND OTHER PAYABLES
31 December 2021 31 December 2020
Group Company
US$ US$
Group
US$
Company
US$
Trade payables
Taxation and social security costs
Non-trade payables
Accruals
Other loans
Joint venture payables
495,379
395,684
39,042
131,137
–
14,962,258
492,190
269,311
39,023
64,173
–
–
398,121
354,308
362,878
108,223
2,298,638
9,726,978
329,216
246,549
362,878
68,926
2,298,638
–
Total
16,023,500
864,697
13,249,146
3,306,206
72 Echo Energy plc
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Financial Statements
Notes to the Financial Statements (continued)
Year ended 31 December 2021
24. DERIVATIVE FINANCIAL LIABILITIES
Embedded derivative
Total
31 December
2021
US$
31 December
2020
US$
–
–
62,477
62,477
The embedded derivative represents the warrants issued along with the convertible debt facility with
Lombard Odier Asset Management (Europe) Ltd (Note 27). Warrants were exercised in 2021, therefore
no value is attributed at the year end.
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
Fair value movements recognised through profit or loss
Total
31 December
2021
US$
31 December
2020
US$
62,477
(62,477)
–
728,783
(666,306)
62,477
25. SHARE CAPITAL
31 December 2021 31 December 2020
Group Company
US$ US$
Group
US$
Company
US$
Issued, Called Up and Fully Paid
1,309,013,085 0.31¢ (2020 1,040,050,920
0.31¢) ordinary shares
1 January
Equity shares issued
6,288,019
921,067
6,288,019
921,067
5,190,877
1,097,142
5,190,877
1,097,142
31 December
7,209,086
7,209,086
6,288,019
6,288,019
The holders of 0.34¢ (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.
The following shares were issued to be used to support SCS operations and fund potential E&P growth
projects as well as for general working capital:
•
•
•
•
•
On 11 January 2021, Echo issued 167,843,138 ordinary shares at 0.51p per share to raise gross
proceeds of £856,000 (US$1,167,413).
On 1 April 2021, Echo issued 11,473,929 ordinary shares at 0.75p per share to raise gross proceeds
of £85,825 (US$118,713).
On 16 April 2021, Echo issued 74,200,000 ordinary shares (Warrants exercised) at 0.30p per share
to raise gross proceeds of £222,600 (US$307,900).
On 19 April 2021, Echo issued 5,245,098 ordinary shares (Warrants exercised) at 0.70p/0.75p per
share to raise gross proceeds of £38,026 (US$52,598)
On 30 September 2021, Echo issued 10,200,000 ordinary shares at 1.25p per share to raise gross
proceeds of £127,500 (US$175,886)
No further shares options were issued in the year, however a combination of warrants were issued in
relation to fund raises and debt renegotiation.
Annual Report 2021 73
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Financial Statements
Notes to the Financial Statements (continued)
Year ended 31 December 2021
Further shares issued during the year was as follows:
Date Shares
Price (p)
Prices (¢)
1 January 2021 1,040,050,920
Shares issued @ .25p 11/01/2021 167,843,138
Shares issued @ .25p 01/04/2021 11,473,929
Shares issued @ .25p 16/04/2021 74,200,000
Shares issued @ .25p 19/04/2021 5,245,098
Shares issued @ .25p 30/09/2021 10,200,000
31 December 2021 1,309,013,085
0.51
0.75
0.30
0.70/0.75
1.25
0.65
1.04
0.41
0.97/1.04
1.72
26. SHARE PREMIUM ACCOUNT
31 December 2021 31 December 2020
Group Company
US$ US$
Group
US$
Company
US$
1 January
Premium arising on issue of equity shares
Warrants issued
Transaction costs
64,961,905
813,207
(717,698)
(80,171)
64,961,905
813,207
(717,698)
(80,171)
64,817,662
467,935
(231,676)
(92,016)
64,817,662
467,935
(231,676)
(92,016)
31 December
64,977,243
64,977,243
64,961,905
64,961,905
(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:
WAEP*
Number (¢)
Share Options 31/12/2021 31/12/2021
Outstanding as at 1 January
Granted during the year
Forfeited during the period
Cancelled during the year
Options outstanding as at 31 December
Exercisable at 31 December
*Weighted Average Exercise Price (WAEP)
95,491,107
35,750,000
(8,236,897)
(2,750,000)
120,254,120
41,195,714
5
1
4
1
3
3
Number
31/12/2020
102,218,073
–
(6,726,966)
–
95,491,107
41,010,000
WAEP*
(¢)
31/12/2020
5
–
7
–
5
3
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:
74 Echo Energy plc
264206 Echo Annual Report pp68-pp79 NOTES 18-32.qxp 06/09/2022 10:39 Page 75
Financial Statements
Notes to the Financial Statements (continued)
Year ended 31 December 2021
The weighted average outstanding life of vested share options is 1.1 years. The weighted average price
for outstanding options ranges between 0.6¢ and 103¢ (0.4p 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$193,662 (2020: US$334,319) related to equity-settled, are
share-based payment transactions during the year.
A deferred taxation asset has not been recognised in relation to the charge for share-based payments
due to the availability of tax losses to be carried forward.
(B) WARRANTS OVER ORDINARY SHARES
The Company issued warrants over ordinary shares to subscribers of new ordinary shares and as
fundraising commission in respect of debt fundraisings completed during the years to 31 December
2021.
Details of the tranches of warrants outstanding at the year-end are as follows:
WAEP*
Number (¢)
Warrants 2021 2021
Outstanding as at 1 January
Granted during the year
Exercised during the year
Outstanding as at 31 December
460,222,521
170,939,567
(79,445,098)
551,716,990
10
1
4
9
Number
2020
355,951,093
104,271,428
–
460,222,521
WAEP*
(¢)
2020
14
1
–
10
*Weighted Average Exercise Price (WAEP)
Warrants values are calculated using the Black Scholes option pricing model using the following inputs.
Warrants 11 January 2021 10 June 2021 30 September 2021
Market stock price 0.58p 0.765p 0.6p
Option strike price 0.7p 0.7p 0.7p
Volatility 99.19% 106.37% 105.89%
Expiration of the option 2 years 2 years 1 year
Risk-free rate –0.112% 0.068% –0.414%
The weighted average price for outstanding warrants as at 31 December 2021 ranges between 1.0¢
and 22.2¢ (0.7p and 16.2p). The residual weighted average contractual life for the warrants is 1.5 years.
Annual Report 2021 75
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Financial Statements
Notes to the Financial Statements (continued)
Year ended 31 December 2021
27. LOANS DUE IN OVER ONE YEAR
Five-year secured bonds
Additional net funding
Other loans
Total
31 December
2021
US$
(21,385,663)
(6,059,126)
(1,323,591)
31 December
2020
US$
(22,167,419)
(5,766,544)
(1,640,693)
(28,768,380)
(29,574,656)
Balance a at
31 December Repayment Amortised Exchange 31 December
2020 of Principle finance charges adjustments 2021
US$ US$ US$ US$ US$
€20 million five-year
secured bonds 22,836,146 – 2,542,262 (3,483,241) 21,895,166
€5 million Lombard Odier
secured convertible
debt facility 5,987,801 – 632,564 (433,223) 6,187,142
Other loans 1,640,692 (384,786) 219,821 (152,136) 1,323,591
Loan fees (668,726) – 153,014 6,209 (509,503)
(128,016)
Incremental loan fees (221,257) –
81,087
12,154
Total 29,574,656 (384,786)
3,628,748
(4,053,237)
28,768,380
€20 million five-year secured bonds
Debt Renegotiation
Announced on the 15th August 2022
The company currently seeks Noteholder approval for the restructuring of the Notes to: (a) convert
50% of Notes and accrued interest into new Ordinary Shares at a conversion price of 0.45 pence per
Ordinary Share; (b) extend the term of the remaining Notes to 2032; (c) suspend cash interest
payments on remaining Notes for two years; and (d) reduce Note coupon to 2% (from 8%) for the
remainder of the Note term. The Company intends to propose a fee payable to Noteholders on the
same terms as set out under the LO Agreement and further details of the Note Restructuring will be
announced, as appropriate, in due course. The Note Restructuring will be subject to the approval of
Noteholders and to Echo shareholder approval.
€5 million Lombard Odier secured convertible debt facility
Debt Renegotiation
Announced on the 15th August 2022
The terms of the LO Facility (as amended) were first announced by the Company on 21 October 2019
and as at 31 October 2022, the total outstanding debt and accrued interest of the LO Facility will
amount to EUR 6,225,256.
Under the LO Agreement, LO has conditionally agreed to the conversion in full of the principal of the
LO Facility together with accrued interest on the LO Facility for the periods Q1 2020 to Q2 2021
inclusive into new Ordinary Shares in the Company at a conversion price of 0.45 pence per new
Ordinary Share, subject to, inter alia, the approval of Echo shareholders and the Note Restructuring
becoming effective.
In addition, LO has conditionally agreed pursuant to the LO Agreement to the conversion of the
accrued interest on the Facility for periods Q3 2021 to 31 October 2022 inclusive to new Ordinary
Shares at a conversion price of 0.25 pence per new Ordinary Share. The accrued interest to 31 October
2022 will amount to EUR 625,803. Accordingly, the Company has conditionally agreed to issue to LO
213,949,943 LO Interest Conversion Shares.
76 Echo Energy plc
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Financial Statements
Notes to the Financial Statements (continued)
Year ended 31 December 2021
Other loans
Debt Renegotiation
Announced on the 1st October 2021
Maturity extended by 2 years such that the then outstanding remaining principal and accumulated
accrued interest will mature on 8 March 2024 (“Maturity”) following four quarterly cash prepayments
of £25,000 commencing on 31 March 2023.
Interest reduction such that all Loan interest will be accrued and paid on Maturity at a reduced rate
of 8% per annum from Amendment (previously 12% per annum) on outstanding principal on a non-
compounding basis.
15% of the remaining £850,000 Loan principal, representing £127,500, has now been converted into
10,200,000 new Echo ordinary shares (the “Conversion Shares”) at an effective issue price of 1.25p –
a premium of 108% to the closing mid market price.
In connection with the Amendment, the Lender has been issued with 3,096,429 warrants to subscribe
for new ordinary shares in the Company at a price of 0.7 pence per new ordinary share, exercisable
from the date of grant and with an expiry date of 30 September 2022.
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
31 December
2021
US$
–
28,768,380
–
31 December
2020
US$
2,293,290
35,628,948
–
28,768,380
37,922,238
31 December
2021
US$
3,039,911
3,039,911
31 December
2020
US$
2,979,956
2,979,956
Provision has been made for the discounted future cost of abandoning wells and restoring sites to a
condition acceptable to the relevant authorities. The provisions are based on Operators’ internal
estimate at 31 December 2021, 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.
Annual Report 2021 77
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Financial Statements
Notes to the Financial Statements (continued)
Year ended 31 December 2021
29. 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
31 December
2021
US$
31 December
2020
US$
551,500
1,627,623
9,634,402
380,941
2,488,765
9,634,401
11,813,525
12,504,108
Lombard Odier is a 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.
30. CONTROLLING PARTY
The directors do not consider there to be a controlling party.
31. COMMITMENTS
Echo has no committed expenditure in relation to capital projects in the SCS asset at the end of 31
December 2021. It will continue to pay operational costs as cash called by the Joint venture partner.
32. SUBSEQUENT EVENTS
On 14 January 2022, the Company announced that it has raised gross proceeds of £660,000 through
the issue of 143,478,260 new ordinary shares in the Company (the "Subscription Shares") at 0.46
pence per share (the "Subscription Price") to new investors pursuant to a direct subscription with the
Company (the "Subscription"), conditional on admission of the Subscription Shares to trading on AIM.
In connection with the Subscription, the Company has issued 65,217,391 warrants to subscribe for new
Ordinary Shares exercisable at 0.65 pence per new Ordinary Share at any time until the second
anniversary of issue (the "First Subscription Warrants") subject to admission of the Subscription
Shares to trading on AIM.
In addition, the Company has also conditionally agreed to issue a further 78,260,869 warrants to
subscribe for new Ordinary Shares exercisable at 0.65 pence per new Ordinary Share at any time until
the second anniversary of issue (the "Second Subscription Warrants") subject to the receipt of the
necessary share issuance authorities at the Company's 2022 annual general meeting.
The Subscription Shares will, when issued, rank pari passu in all respects with the Company's existing
ordinary shares of 0.25 pence each ("Ordinary Shares") and application will be made for the
Subscription Shares to be admitted to trading on AIM ("Admission"). Admission is expected to take
place on or around 8.00 a.m. on 24 January 2022.
The net proceeds of the Subscription of approximately £600,000 will add to the Company's working
capital resources and be applied towards the formation of the solar project Joint Venture to construct
and operate the Project. As at 31 December 2021 the Company's unaudited cash balance, excluding
Echo's 70% entitlement to cash balances held by the Santa Cruz Sur joint venture in Argentina, was
approximately US$520,000.
78 Echo Energy plc
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Financial Statements
Notes to the Financial Statements (continued)
Year ended 31 December 2021
Following Admission, the Company's issued share capital will comprise 1,452,491,345 Ordinary Shares.
Each Ordinary Share has one voting right and no shares are held in treasury and this figure may be
used by shareholders in the Company as the denominator for the calculation by which they will
determine if they are required to notify their interest in, or a change to their interest in, the share
capital of the Company under the Financial Conduct Authority's Disclosure Guidance and
Transparency Rules.
August 13th 2022
Proposed Debt Restructuring
The Company announced a proposed restructuring of its existing debts, pursuant to which the
Company has entered into a conditional agreement with Lombard Odier Asset Management (Europe)
Limited* ("LO") to, inter alia, convert in full the Company's existing EUR 5.0m 8.0% secured
convertible debt facility with LO (the "LO Facility") into new Ordinary Shares at a price of 0.45p per
share representing a substantial premium of 75.1% to the closing mid-market price per Ordinary Share
of 0.257p on 11 August 2022 (the "LO Agreement").
Highlights
•
Proposed conversion of an aggregate of €15.0 million of existing debt principal, together with
accrued interest thereon, excluding the LO Interest Conversion shares, into new Ordinary Shares
at a price of 0.45p representing a 75.1% premium to the closing share price on 11 August 2022.
•
•
Proposed reduction of remaining Note coupon from 8% to 2% with suspension of further cash
interest payments for two years. Remaining Note maturity extended to 2032
If completed the Proposed Debt Restructuring will comprehensively restructure and strengthen
the Company's balance sheet, transforming the balance of value in favour of equity over debt,
enabling the Company to seek to accelerate its growth strategy
August 15th 2022
Result of Placing
The Placing was oversubscribed and has raised £0.6 million (before expenses) for the Company
through the placing of 242,000,000 Placing Shares at the Placing Price of 0.25 pence per share.
Subject to shareholder approval, in connection with the Placing, for every one Placing Share subscribed
for, the Company intends to grant 1.07 Warrants to the Placees. No fractional part of a Warrant will
be issued and fractional entitlements will be rounded down to the nearest whole number. If granted,
each Warrant will give the holder the right to subscribe for one new Ordinary Share at a price of 0.25
pence per Ordinary Share for a period of two years from the date of issue.
In addition, as set out in the Launch Announcement, under the LO Agreement, LO has agreed to the
conversion of accrued interest on the LO Facility for the periods Q3 2021 to 31 October 2022 inclusive
to new Ordinary Shares at a conversion price of 0.25 pence per new Ordinary Share ("LO Interest
Conversion"). The accrued interest to 31 October 2022 will amount to EUR 625,803.58. Accordingly,
the Company has agreed to issue to LO 213,949,943 LO Interest Conversion Shares.
Under the same agreement, LO has conditionally agreed to conversion in full of the principal of the
LO Facility, however this is contingent on obtaining Noteholder approval for the Notes Restructuring
and Shareholder approval of authorities to issue the new Ordinary Shares required on conversion.
Further details of the Proposed Debt Restructuring are set out in the Launch Announcement.
Annual Report 2021 79
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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 Amba Secretaries Limited
6 7 8 Tokenhouse Yard 400 Thames Valley Park Drive
London Reading, Berkshire
EC2R 7AS RG6 1PT
Brokers Solicitors
Arden Partners plc Fieldfisher
125 Old Broad Street Riverbank House
London London
EC2N 1ARv W1S 4JU
Auditors Registrars
Crowe U.K. LLP Link Group
55 Ludgate Hill 10th Floor
London Central Square
EC4M 7JW 29 Wellington Street
Leeds
LS1 4DL
80 Echo Energy plc
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Financial Statements
Glossary
AAPG American Association of Petroleum Geologists
AIM Alternative Investment Market
API American Petroleum Institute
AVO amplitude versus offset
bbl(s) barrel(s)
bbl(s)/d barrel(s) per day
Bcf billion cubic feet
Board the Board of Directors of Echo Energy plc
boe barrel(s) of oil equivalent
boepd barrel(s) of oil equivalent per day
bopd barrels(s) of oil per day
capex capital expenditure
CDL Fracción C, Fracción D, and laguna De Los Capones licences
CGC Compañia General de Combustibles S.A.
CGU Cash Generating Unit
Company Echo Energy plc
E&E exploration and evaluation
E&P exploration and production
FRC Financial Reporting Council
G&A general and administration expenses
GIIP gas initially in place
Group the Company and its subsidiaries
HSE health, safety and environment
IAPG International Association of Petroleum Geologists
IAS International Accounting Standards
IFRS UK-adopted international accounting standards
IMF-WEO International Monetary Fund – World Economic Outlook
ISAs (UK) International Standards on Auditing
JEA joint evaluation agreement
JV joint venture
KPI key performance indicators
LNG liquid natural gas
MMbbls million barrels
MMBOE million barrels of oil equivalent
mmbtu million British thermal units
MMscf/d million standard cubic feet per day
NAV net asset value
NOMAD nominated advisor
OPEC+ OPEC countries and high exporting non-members like Russia and
Kazakhstan
opex operations expenditure
PETSA Petrolera El Trebol S.A.
Pmean mean case
ppm parts per million
pulling job low cost well intervention to restart/improve production
P10 high case (value with a 10% chance of being equalled or exceeded)
P50 moderate case (value with a 50% chance of being equalled or
exceeded)
P90 low case (value with a 90% chance of being equalled or exceeded)
QCA Code Quoted Companies Alliance Corporate Governance Code
SCS Santa Cruz Sur
SPE Society of Petroleum Engineers
Annual Report 2021 81
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Financial Statements
Glossary (continued)
SPEE Society of Petroleum Evaluation Engineers
spud to commence drilling a well
Tcf trillion cubic feet
TD total depth
TVD true vertical depth
TEA technical evaluation agreement
UGA UGA Seismic S.A.
WAEP Weighted Average Exercise Price
Workover an invasive well intervention involving a rig
WPC World Petroleum Council
WTI West Texas Intermediary
1C low estimate of contingent resources
2C best estimate of contingent resources
3C high estimate of contingent resources
2P proven plus probable
$ / US $ United States Dollar
Echo Energy plc
Registered office
85 Great Portland Street
First Floor
London, W1W 7LT
info@echoenergyplc.com
www.echoenergyplc.com
Tel: +44 (0)20 7190 9930
82 Echo Energy plc
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