Echo Energy plc
Annual Report 2022
1
Annual Report 2022
Echo Energy is a growth-focussed energy company seeking balanced risk reward opportunities
across the energy value chain. Whilst historically centred on Latin America, the divestment of the
majority of its Argentina production portfolio provides new opportunities to extend its reach across
new geographies whilst maintaining upside exposure with reduced risk to the Austral Basin. The
company’s future strategy is to seek to build the asset base through both organic and transaction-
led growth taking advantage of the successfully restructured balance sheet and extensive experience
in executing transactions, with a disciplined approach to delivering shareholder value.
Echo maintains its philosophy of equitable treatment and open communication with all our
stakeholders and the communities in which we operate.
Contents
Strategic Report
Chairman’s and CEO’s Statement
Business Model
Strategy & KPIs
Sustainability Review
Managing Risks
Shareholder Engagement
Financial Review
Governance
Corporate Governance Statement
QCA Code
The Board
Health and Safety Review
The Team
Directors’ Remuneration Report
Directors’ Report
Statement of Directors’ Responsibilities
3
3
4
5
7
9
10
12
13
13
14
16
20
21
23
25
27
Financial Statements
28
28
Auditor’s Report
Consolidated Statement of Comprehensive Income 31
Consolidated Statement of Financial Position 32
Company Statement of Financial Position
33
Consolidated Statement of Changes in Equity 34
35
Company Statement of Changes in Equity
36
Consolidated Statement of Cash Flows
37
Company Statement of Cash Flows
38
Notes to the Financial Statements
66
Shareholder Information
2
Chairman’s and Chief Executive Officer’s Statement
Chairman and Chief Executive Statement:
Strategic Report
Echo Energy, similar to many companies in the oil and gas sector, faced exceptional challenges during recent
years, with the global pandemic impacting all aspects of the Company’s operations and finances in Argentina.
The Company emerged from the COVID-19 period (during which the assets were sub economic) with a large
creditor position, 100%+ per annum inflation in Argentina and Argentine currency exchange controls, which have
prevented funds being withdrawn from the country without significant penalties. As a result of these factors,
the raising of additional equity for an Argentine business was challenging and the Company took the decision in
November 2022 to partially sell its Santa Cruz Sur portfolio.
This partial sale enabled to the Company to:
• Address its near-term funding challenges by providing near term cash, enabling the Company to
transfer to Buyers the significant in-country creditors which had built up during the COVID-19 period
and providing access to funding for the Santa Cruz assets.
• Benefit from continued exposure (both directly through the retained 5% working interest, the
contingent payments, the further 5% option and the indirect holding in the Operator) to a well-funded
Santa Cruz portfolio, with the concessions likely to be extended as a result of the provision of guarantee.
The Company, now with significantly reduced creditors and a heavily reduced cost base, sits with a 5% interest
in a producing Santa Cruz Sur portfolio and an equity position in the operator InterOil Exploration and Production
ASA. In addition to the divestment the Company successfully completed a restructuring of its legacy debt
position, converting the majority of previously outstanding debt into equity, substantially improving the balance
sheet and providing the additional flexibility to best manage the financial requirements going forward. The Board
see significant and opportunities at this point in the economic cycle to secure new energy assets at attractive
valuations and is currently exploring a number of these opportunities.
James Parsons
Non-Executive Chairman
Martin Hull
Chief Executive Officer
3
Business Model
Key Resources
Strategic Report
- Active business development focus to regrow the business leveraging deal making
capability
- Asset base reduced in size but maintaining positive exposure to existing production and
growth opportunities
Supportive institutional lenders
Prudent cost management with strong focus on safe and efficient operations
Strong relationships with leading energy industry players
-
-
-
➢ Explore & Produce
Committed to targeting acreage positions that have the capacity to deliver substantial
portfolio value through the E&P cycle, initiating drilling campaigns that will provide the
opportunity to significantly increase our reserves and resources base.
➢ Grow
Renewed focus on business development to grow the asset base from its current position.
We have demonstrated our origination, deal-making and fund-raising capability and
continue to seek new corporate and high-impact asset acquisition opportunities across the
energy spectrum, with the continued stringent implementation of shareholder return
criteria.
➢ Monetise
Executing commercial agreements at strategically correct points in time to ensure that the
value of the existing and future 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 seek to operate across the energy spectrum in proven
hydrocarbon basins and energy systems 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 across the
sector.
4
Strategy and KPIs
Strategic Report
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
2022 is evidenced in the Performance column below.
2022 KPI
MEASURE
PERFORMANCE
1. GROWTH
Diversify asset base with further
asset or corporate acquisitions to
build on the existing Argentinian
position
Develop opportunity
pipeline and inventory
Mature longer-term opportunities in
to leverage Echo’s commercial and
technical capabilities across the
wider energy spectrum
Identify and collaborate with
suitable Partners at low cost
2. ASSET PERFORMANCE
Oil and gas production
Daily production
In light of the ongoing and increasing challenges
associated with the SCS portfolio the Board made
the decision to divest the majority of the
Argentine portfolio in return for cash funding
plus continued upside exposure through future
contingent payments
Rebuilding the growth strategy and expanding
the asset base is a priority focus post the
completion of the divestment in Argentina. The
Company is maturing multiple opportunities and
hopes to be a position to announce details
shortly
Whilst consist progress was being made
throughout the year with increasing
production figures, the mounting financial
challenges driven by external factors
(Argentine inflation over 100% and currency
controls) meant that ultimately the board
decided to divest the majority of the
Argentine portfolio
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
3. SAFETY AND ENVIRONMENT
Sustained high quality safety,
reporting and performance
4. FUNDING
Fund the development of new
business ventures and continued
operational programme
Identify opportunities to monetise
assets
Successful fund raises
Successfully completed additional funding
through issue of equity
Completion of the divestment of Argentine assets
enabling the funding of the Company’s financial
commitments
Improve corporate level debt status,
allowing increased flexibility and
options.
Restructuring of Company
bonds
Successfully completed the restructuring of the
corporate debt position in November, converting
the majority of the outstanding debt into equity
5
5. CORPORATE
Safety and
environment
Cost control
Maintain transparent
relationship with
investors
Staff diversity
2023 KPIs
Regular investor engagement
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.
Continued direct investor
communication through multiple
events and direct enquiries answered.
Maintained a measured approach to
expectation
Major cost cutting initiatives resulted in
significant cuts to staff numbers whilst
always mindful of staff diversity
The 2023 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:
Prioritise business development opportunities to deliver growth and rebuild the asset base
-
- Meet future funding needs for the company with the flexible management of the balance
sheet
- Maximise value from the legacy Argentine assets including the future contingent payments
and back-in rights in conjunction with operator
- 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.
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Sustainability Review
Strategic Report
As a corporate citizen operating across Latin America and in the UK, Echo believes in
conducting a business that brings positive impact in the medium to long term, drives
progress and respects the resources on which our future depends.
Our Corporate and Social Responsibility (“CSR”) Objectives
Echo seeks to manage and maintain positive and respectful relationships with our stakeholders. To
meet these objectives, Echo aims to:
-
Protect the health, safety and wellbeing of our staff, contractors and the local communities
our operations impact upon;
- Manage and maintain positive and respectful relationships with the communities with which
we conduct business and in which we operate;
- Maintain a high standard of care for the natural environment and adopt appropriate
environment management systems on our contract areas; and
- Reduce our environmental footprint by efficient use of resources, management of water and
energy consumption and management of waste and emissions.
Anti-Bribery and Corruption (“ABC”)
Echo has zero tolerance for bribery, corruption or unethical conduct in our business. Our policies
require compliance with all applicable ABC laws, in particular, the UK Bribery Act, and the Argentine
Foreign Corrupt Practices Act. The majority of our operations are based in Argentina. The
Transparency International’s Corruption Perception Index (“CPI”) assesses corruption in the public
sector when ranking different countries. In 2022, the CPI ranked Argentina 94 out of 180 participating
countries worldwide with a score of 38/100. Bolivia is ranked 126 out of 180 with a score of 30/100.
By comparison, the UK is ranked at 18 out of 180 with a score of 73/100.
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.
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Sustainability Review (continued)
Environmental Responsibility
Strategic Report
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.
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.
8
Managing Risks
Strategic Report
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.
Identify
2. Assess
3. Mitigation options
4. Manage and execute
5. Review
As a result of the divestment of the discontinued business as defined in the Financial Statements the
risk profile of the Company has changed significantly. Risks identified in previous years relating to
detailed operational outcomes such as subsurface performance and Argentine gas prices no longer
represent the major risks to the business going forward. The priority risks relating to the business as
identified by the board are as follows;
Funding risk – where the Company is unable to meet its financial obligations as a result of
insufficient funds. This is a high priority and significant risk that could lead to the company
not being able to continue as a going concern. Strategies to mitigate this funding risk include
the cost reduction programme already implemented and the ongoing ability to raise new
funds (potentially equity and debt) in the future
Business development risk – the Company growth strategy relies upon the successful
identification, execution and completion of acquisitions to grow the asset base. Failure to
successfully complete such transactions, due to lack of attractive opportunities or any other
reasons would result in the growth strategy having failed and could directly impact future
funding potential. The Company has prioritised business development and has further
increased its internal capacity in this important area
Regulatory and reporting risk – Critical to delivering on its current strategy is the ability to
meet its ongoing regulatory and reporting requirements. As a result of the financial
challenges and necessary cost reduction programme the internal capacity in these areas has
been eroded. Following the successful implementation of the growth strategy, including
funding internal resources in this specific area are intended to be strengthened
9
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 7 and in the HSE Review on page 20.
Review of the key decisions and issues discussed in Board meetings and by various committees in
2022 is contained in the Corporate Governance Statement from page 21 to 23.
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:
• Sustainable financial and operational
performance
• 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:
• Sustainable financial and operational
performance
• Capital allocation
• Refinancing plan
10
There is regular dialogue between both institutional
and retail investors through meetings, calls,
conferences, presentations
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:
• Restructuring of the Company Bonds
• Conversion and cancellation of the $5Million Euro
Lombard debt facility
Echo ensures that we maintain an open dialogue with
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.
We maintain an ongoing open and transparent
dialogue with our customers and suppliers were
relevant
During 2022, 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:
• Production & strategy updates
• Educational presentations from each sector of Echo
• All staff involvement on CSR initiatives
Management continues to work closely with the
government and regulators where relevant
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.
Partners
Customers &
Suppliers
Workforce
Governments
& Regulators
Communities
& Environment
Sharing of risk is a fundamental component of
our industry and by maintaining aligned and
collaborative relationships with our joint
venture partners, we can ensure that
maximum value can be extracted from our
operations in a safe and sustainable manner.
Important issues include:
• Operational performance & HSE
• Project ranking and work programmes
• Budget setting
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:
• Contract management strategy
• Uninterrupted service for customers
• Enhance value
Our current and future success is underpinned
by our ability to engage, motivate, and adapt
our workforce. Creating the right environment
for employees where their various strengths
are recognised and their contributions are
valued, helps to ensure that we can deliver our
shared objectives.
Important issues include:
• Group strategy
• Diversity of thinking
• Corporate culture
Maintaining respectful and collaborative
relationships with our host governments and
local regulatory authorities is vital to our
‘licence to operate’. We believe that the
strength of these relationships will allow us to
make a sustainable and beneficial contribution
to the regions in which we operate.
Important issues include:
• Licence attribution
• Identifying and securing new opportunities
• Providing views on upcoming legislation and
factors that are important to the industry
• CSR commitments
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:
• Operating in an open and honest and socially
responsible manner
• Social responsibility initiatives
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Strategic Report
Financial Review
Income Statement
The Group’s loss from continuing operations for the year to 31 December 2022 was US $4.4 million
(2021: US $1.9 million) and total Group loss including discontinued operations was of US $9.6million
(2021: US $11.8 million).
For the year ended 31 December 2022, Group revenue (including within discontinued operations) was
US $14.1 million (2021: US $11.1 million), The spilt between the two commodity revenue sources
were;
➢ Oil sales - US $ 5.4 million (2021: $4.1 million)
➢ Gas sales- US $ 8.7 million (2021: $7.0 million)
The increase in Oil sales was a result of some wells re-opening and production increasing combined
with price increases.
Group operational costs (including within discontinued operations) were US $18.3 million (2021: US
$13.4 million).,
➢ Exploration expenses of US $0.3 million (2021: US $0.2 million) relates to on-going business
development activity in Latin America before the decision was made to divest of the SCS
operations.
➢ Gross administration expenses were US $3.0 million (2021: US $2.5 million)
➢ Finance costs are largely composed of interest payable and unwinding of discount costs of US
$3.0 million (2021: US $3.4 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 year with US $1.1 million cash at bank compared
to the prior year balance of US $0.7 million.
The balance sheet reflects the Board’s commitment in December 2022, to divest of the SCS operations.
Accordingly, assets and liabilities of the operations in Argentina have been separated out within the
balance sheet and the accounts.
Post Balance Sheet
Note 25 to 27 provides more detail around some of the extensive debt restructuring in 2022, as well
as raising funds through share issues.
In particular, the reduction in amount, extension of the repayment date for the Euro bonds to 2032
and reduction in interest rate from 8% to 2% relieve a funding pressure on the business.
This Strategic Report was approved by the Board on 29 September 2023 and signed on its behalf by:
Martin Hull
Chief Executive Officer
29 September 2023
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Corporate Governance Statement
Governance
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 2022. 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 and 2022,
which have been challenging years for the business and for the economy as a whole with the global
pandemic together with the downturn in the oil and gas sector.
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
13
The Principles of the QCA Code
Governance
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
1
2.
3.
4
5
Disclosure
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.
See pages 4-6 of Annual Report
See website disclosures: Principle Two AIM
Rule 26
See website disclosures: Principle Three AIM
Rule 26 and section172 disclosure page 24
and page 9.
See pages 17 of Annual Report.
James Parsons and Christian 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 19 Annual Report
6
Identify each director.
See page 21 Annual Report
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.
Explain how each director keeps his/her skillset up to
date.
Where the board or any committee has sought external
advice on a significant matter, this must be described
and explained.
14
See pages 21 Annual Report
See page 32 Annual Report
No such advice was sought in 2022.
6
7
8
9
10
Where external advisers to the Board or any of its
committees have been engaged, explain their role.
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.
Include a high-level explanation of the Board
performance effectiveness process.
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.
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.
Describe the work of any board committees
undertaken during the year.
Include an audit committee report (or equivalent
report if such committee is not in place).
Include a remuneration committee report (or
equivalent report if such committee is not in place).
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.
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.
See page 17 Annual Report
No such evaluation took place in 2022.
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 13 Annual Report
See website disclosures Principle Eight AIM
Rule 26
See website disclosures: Principle Nine AIM
Rule 26
See page 17 Annual Report
See pages 18-19 Annual Report
See page 18 Annual Report
See page 18 Annual Report
N/A
15
The Board
Governance
The Board comprises the non-executive chairman, one non-executive director 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 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 2022 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.
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.
16
The Board (continued)
Gavin Graham, Non-Executive Director was appointed to the Board in November 2018 and stepped
down from the Board in January 2022. Stephen Whyte, Non-Executive Director was appointed to the
Board in March 2017 and stepped down from the Board in June 2022. Marco Fumagalli, Non-Executive
Director, was appointed to the Board in March 2017 and stepped down from the Board in January
2023.
Governance
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.
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.
17
Audit Committee Report
Governance
For the majority of the year, the audit committee 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 chaired the audit committee until he stepped down from the Board in January 2023,
when he was replaced as audit committee chair by James Parsons. 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 of the Company
also joins 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 2022 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. 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. Marco Fumagalli stepped down from the Committee at the time Gavin
Graham left the Company. In November 2022 James Parsons, whilst remaining on the Committee
stepped down from Chair of the Committee and Christian Yates joined as Chair.
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 2022, the Committee met twice 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;
- Consider salary increments and bonus awards to the staff;
- Agreed the 2022 performance targets for the executive director;
- A mid-year review of the 2022 scorecard; and
- Review of Committee membership
18
Nominations Committee report
Governance
The Nominations Committee consisted 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 meets 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 2022 the Committee did not formally meet.
The directors’ attendance at scheduled board meetings and board committees during 2022 is detailed
in the table below:
Director
Board
Meeting
James Parsons (chairman)
Marco Fumagalli
Stephen Whyte*
Martin Hull
Gavin Graham**
Christian Yates***
Total meetings
* Ad hoc meetings:
4
3
2
4
0
4
4
Scheduled
Ad
Audit
Remuneration
Nominations
Committee
Board
Hoc
Meeting *
8
8
2
8
2
6
8
-
2
-
-
-
2
2
2
-
1
-
-
1
2
-
-
-
-
-
-
Additional meetings called for a specific matter generally of a more administrative nature not requiring full Board attendance
** Mr Whyte resigned 27 June 2022
** Dr Graham resigned 17 January 2022
*** Mr Yates appointed to the Board on 17 January 2022
19
Health and Safety Review 2022
Governance
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.
20
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 and Coro Energy. 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).
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. For 20 years prior to that he worked in the investment
management industry with a focus on strategy, management and business development. 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 many sectors including renewable
energy (solar, wind, and BESS), property and wealth management.
Dr Gavin Graham
Non-Executive Director
Dr Graham resigned from the Board in January 2022.
Stephen Whyte
Non-Executive Director
Mr Whyte resigned from the Board in June 2022
Marco Fumagalli
Non-Executive Director
Mr Fumagalli resigned from the Board in January 2023.
21
Executive Team
Martin Hull
Chief Executive Officer
Governance
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).
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.
Julian left the firm in July 2023.
22
Directors’ Remuneration Report
Governance
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 2022 the Remuneration Committee noted that the £43k bonus for successfully
restructuring the debt, that had been awarded to Mr Hull in 2021 remained unpaid. The Committee
agreed that half of that bonus would be paid in 2022, with the remaining half being paid at such time
that the Company had sufficient cash resources. In January 2022 the Committee awarded a further
discretionary bonus of 20% of Mr Hull’s base salary in respect of the 2021 financial year which would
also be paid when the Company had sufficient cash resources and at such time that the Remuneration
Committee gave its approval. This 20% bonus award remains unpaid. There were no cash bonus or
option awards made in January 2023 in respect of the 2022 financial year.
Any bonus awards and options made to the CEO are agreed by the remuneration committee and are
discretionary based on individual and Company performance.
A pension scheme is provided to all employees into which, subject to certain criteria, the Company
contributes 5% of the individual’s base salary.
23
Directors’ Remuneration Report (continued)
Chairman and Non-Executive Directors’ Fees
Governance
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 and are inclusive of all committee roles and responsibilities.
Remuneration of Directors
Salary
(US $)
Pension
(US $)
Taxable benefit
(US $)
2022 Cash
Bonus
award
(US $)
Total
2022
(US $)
Total
2021
(US $)
Martin Hull**
James Parsons
Christian Yates
Marco Fumagalli
Stephen Whyte
Gavin Graham
Executive Director
325,588
12,239
Non-Executive Director
92,672
48,488
52,625
18,686
3,895
-
-
-
-
-
-
-
-
-
5,963
343,790
423,704
-
-
-
-
92,672
48,488
52,625
18,686
3,895
110,304
-
54,135
56,531
54,135
**Martin Hull took a reduction in salary for 2022, annual salary is now £250,000 (US $308,050) using the year
avg rate of GBP £1: US $1.2322 (2021: US $1.3788)
Share Options Awards
Martin Hull
Martin Hull
Martin Hull
Martin Hull
Martin Hull
James Parsons
Stephen Whyte
Marco Fumagalli
Date of
Grant
Exercisable
Date
Acquisition
Price per share
(cents)*
Options held at
1.1.22
000’s
Options held at
31.12.22
000’s
24.10.19
19.12.19
28.01.21
28.01.21
28.01.21
09.03.17
09.03.17
09.03.17
11.12.23
20.12.22
28.01.22
28.01.23
28.01.24
09.03.20
09.03.20
09.03.20
7.90
3.14
0.80
0.89
0.89
1.96
1.96
1.96
12,000
23,000
8,000
8,000
8,000
24,000
4,000
4,000
12,000
23,000
8,000
8,000
8,000
-
-
-
Share Options Awards
*Calculated at the exchange rate of GBP £1: US $1.206
No directors exercised options in the year ended 31 December 2022.
This Remuneration Report was approved by a duly authorised committee of the Board on 29
September 2023 and signed on its behalf by:
James Parsons
Non-Executive Chairman
29 September 2023
24
Directors’ Report
Governance
The directors submit their report and accounts for the financial year ended 31 December 2022. The
comparative period is the year ended 31 December 2021.
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. 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, all in the discontinued operations, was US $14.1 million (2021: US $11,1 million),
and the loss before tax from continued operations was US $4.4 million (2021: US $5.4 million). The
directors have not declared any dividend in respect of the year ended 31 December 2022 (2021: US
$Nil).
Future Developments
Having completed in June 2023 the sale of all but 5% of its interest in the SCS activities, the Board’s
focus has moved to securing new energy generation projects.
Directors
The directors who served during the period were as follows:
James Parsons
Marco Fumagalli
Stephen Whyte (resigned 27 June 2022)
Martin Hull
Dr Gavin Graham (resigned 17 January 2022)
Christian Yates (appointed 17 January 2022)
Post year-end, Marco Fumagalli resigned on 13 January 2023.
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 General Meeting.
25
Directors’ Report (continued)
Directors’ Shareholding and Interests in Shares
Directors and connected persons
James Parsons
Marco Fumagalli
Martin Hull
Christian Yates
Governance
No. of shares at 31 December 2022
-
10,029,716
600,000
-
Subsequent Events
Events which have occurred since 31 December 2022 are included in Note 32 to the attached financial
statements.
The financial information for the year to 31 December 2022 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 2022, the outlook for the Group has materially changed post period.
The SCS interests have been divested, bar a 5% minority retention, in exchange for cash.
Consequently, what had become on ongoing cash drain on the group’s resources has been ended.
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 9 of the Strategic Report, and in Note 21 of the Financial Statements.
Signed by order of the directors
Martin Hull
Chief Executive Officer
29 September 2023
26
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
27
Financial Statements
Independent auditor’s report to the members of Echo Energy Plc
Disclaimer of opinion
We were engaged to audit the financial statements of Echo Energy PLC (the parent company) and its
subsidiaries (the “group”) for the year ended 31 December 2022, which comprise the Consolidated
Statement of Comprehensive Income, the Consolidated and Parent Statements of Financial Position, the
Consolidated and Parent Statements of Changes in Equity, the Consolidated and Parent Statements and of
Cash Flows and notes to the financial statements, including a summary of significant accounting policies.
The financial reporting framework that has been applied in the preparation of the Group 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.
We do not express an opinion on the accompanying Group and parent company financial statements.
Because of the significance of the matters described in the basis for disclaimer of opinion section of our
report which we consider to be both material and pervasive, we have not been able to obtain sufficient
appropriate audit evidence to provide a basis for an audit opinion on these financial statements.
Basis for disclaimer of opinion
We were not provided with a complete set of accounting records for the company’s wholly-owned
subsidiaries Eco Energy CDL Op Limited and Eco Energy TA Op Limited as the relevant records were held in
Argentina and maintained by a separate finance team locally. We were unable to satisfy ourselves by
alternative means with regard to the transactions in these entities including the aggregated trade debtors
of $532,000 and aggregated trade and other payables of $358,000 and their associated profit and loss
items.
We have been unable to obtain sufficient audit evidence over the results from discontinued operations
and the assets and liabilities held for sale and the related disclosures, in particular the valuation of the
inventories of materials and spare parts, included in assets held for sale as at 31 December 2022, which
are included in the statement of financial position at $359,000, and to the loss from discontinued
operations in the statement of comprehensive income, which amount to $497,000. Due to the nature of
the underlying records provided and the lack of physical counts performed we have been unable to
undertake alternative audit procedures to gain assurance in these areas.
We identified concerns over whether the Group will be able to continue as a going concern as it is reliant
on future fund raising, identifying and completing a cashflow positive investment opportunity to remain a
going concern. We do not express an opinion on the appropriateness of the going concern basis of
preparation .
As a result of these matters which together we consider material and pervasive, we were unable to
determine whether any adjustments might have been necessary in the financial statement line items in
the Consolidated Statement of Comprehensive Income, the Consolidated and Parent Statements of
Financial Position, the Consolidated Statement of Changes in Equity and the Consolidated and Parent
Statements of Cash Flows.
28
Opinion on other matter prescribed by the Companies Act 2006
Because of the significance of the matters described in the basis for disclaimer of opinion section of our
report, we have been unable to form an opinion, whether based on the work undertaken in the course of
the audit:
•
•
the information given in the strategic report and 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
Notwithstanding our disclaimer of an opinion on the financial statements, in the light of the knowledge
and understanding of the company and its environment obtained in the course of the audit performed
subject to the pervasive limitation described above, we have not identified material misstatements in the
strategic report or the directors’ report.
Arising from the limitation of our work referred to above:
• we have not obtained all the information and explanations that we considered necessary for the
purpose of our audit; and
• we were unable to determine whether adequate accounting records have been kept or whether
the financial statements are in agreement with the accounting records and returns.
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006
requires us to report to you if, in our opinion:
•
•
returns adequate for our audit have not been received from branches not visited by us; or
certain disclosures of directors’ remuneration specified by law are not made;
Responsibilities of directors
As explained more fully in the Directors’ responsibilities statement, the Directors are responsible for the
preparation of the financial statements and for being satisfied that they give a true and fair view.
Auditors responsibilities for the audit of the financial statements
Our responsibility is to conduct an audit on the Group and parent company financial statements in
accordance with applicable law and International Standards on Auditing (UK) and to issue an auditor’s
report.
However, because of the matter described in the basis for disclaimer of opinion section of our report, we
were not able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion on
these financial statements.
We are independent of the group and parent company in accordance with the ethical requirements that
are relevant to our audit of the financial statements in the UK, including the FRCs Ethical Standards
applicable to listed entities, and we have fulfilled our other responsibilities in accordance with these
requirements.
29
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.
John Charlton (Senior Statutory Auditor)
For and on behalf of
Crowe U.K. LLP
Statutory Auditor
London
29 September 2023
30
Consolidated Statement of Comprehensive Income
Year ended 31 December 2022
Financial Statements
Year to
31 December 2022
US $
Year to
31 December 2021
US $
Notes
Continuing operations
Revenue
Cost of sales
Gross profit
Exploration expenses
Administrative expenses
Operating loss
Financial income
Financial expense
Derivative financial gain
Loss before tax
Taxation
Loss from continuing operations
Discontinued operations
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 (US cents)
Basic
Diluted
Loss per share (cents) for continuing operations
Basic
Diluted
4
5
6
8
9
12
11
13
86
-
86
-
(2,951,806)
(2,951,720)
1,618,844
(2,981,409)
-
(4,314,285)
(68,142)
(4,382,427)
(5,204,409)
(9,586,836)
23,318
-
23,318
-
(2,454,739)
(2,431,421)
4,105,983
(3,630,649)
62,477
(1,893,610)
-
(1,893,610)
(9,876,301)
(11,769,911)
-
(9,586,836)
211,820
(11,558,091)
(9,586,836)
(11,558,091)
(9,586,836)
(11,558,091)
(0.50)
(0.50)
(0.27)
(0.27)
(0.78)
(0.78)
(0.15)
(0.15)
The notes on pages 38 to 65 form an integral part of these financial statements
31
Consolidated Statement of Financial Position
Year ended 31 December 2022
Notes
31 December 2022
US $
31 December 2021
US $
Financial Statements
Non-current assets
Property, plant and equipment
Intangibles assets
Current Assets
Inventories
Trade and other receivables
Cash and cash equivalents
Assets of disposal group held for sale
Total Assets
Current Liabilities
Trade and other payables
Liabilities of disposal group held for sale
Non-current liabilities
Loans due in over one year
Provisions
Total Liabilities
Net Liabilities
Equity attributable to equity holders of the
parent
Share capital
Shares not issued
Share premium
Capital contribution reserve
Warrant reserve
Share option reserve
Foreign currency translation reserve
Retained earnings
Total Equity
15
16
18
19
20
10
22
10
26
27
24
24
25
24
24
Total
2,299
-
2,299
-
769,551
1,132,616
1,902,166
18,739,291
20,643,756
(1,329,991)
(1,329,991)
(29,620,264)
(5,463,301)
-
(5,463,301)
(36,413,556)
(15,769,800)
19,795,863
97,523
83,790,504
7,212,492
1,433,428
644,560
(3,481,041)
(125,263,129)
(15,769,800)
2,674,405
7,131,907
9,806,312
1,365,225
2,108,438
742,339
4,216,002
--
14,022,314
(16,023,500)
(16,023,500)
-
(28,768,380)
(3,039,911)
(31,808,291)
(47,831,791)
(33,809,477)
7,209,086
-
64,977,243
-
12,177,786
1,522,499
(3,531,587)
(116,164,504)
(33,809,477)
These financial statements were authorised for issue and approved by the board of directors on 29
September 2023
Martin Hull
Company registration number 05483127
The notes on pages 38 to 65 form an integral part of these financial statements.
32
Company Statement of Financial Position
Year ended 31 December 2022
Notes
31 December 2022
US $
31 December 2021
US $
Financial Statements
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
Total assets
Current liabilities
Trade and other payables
Non-current liabilities
Loans due in over one year
Total Liabilities
Net Liabilities
Equity
Share capital
Shares not issued
Share premium
Capital contribution reserve
Warrant reserve
Share option reserve
Foreign currency translation reserve
Retained earnings
Equity Shareholders’ Funds
15
16
17
10
19
20
22
26
24
24
25
24
24
1
-
1,562,321
-
1,562,322
234,178
146,928
381,106
1,943,428
(944,369)
(944,369)
2,177
445,585
16,005,044
11,813,525
28,266,330
172,589
37,007
209,596
28,475,926
(864,697)
(864,697)
(5,463,301)
(28,768,380)
(6,407,670)
(29,633,077)
(4,464,242)
(1,157,151)
19,795,863
97,523
83,790,504
7,212,492
1,433,428
644,560
(2,228,569)
(115,210,043)
(4,464,242)
7,209,086
-
64,977,243
-
12,177,786
1,522,499
(2,255,402)
(84,788,363)
(1,157,151)
These financial statements were authorised for issue and approved by the board of directors on 29
September 2023.
The Company has not presented its own profit and loss account. Its loss for the year was
US $30,909,889 (2021: US $10,045,487).
Martin Hull
Company registration number 05483127
The notes on pages 38 to 65 form an integral part of these financial statements.
33
Financial Statements
Consolidated Statement of Changes in Equity
Year ended 31 December 2022
1 January 2021
Loss for the year
Discontinued operations
Exchange Reserve
Total comprehensive loss for the year
New shares issued
Warrants exercised
Warrants
Share issue costs
Share options lapsed
Share-based payments
31 December 2021
1 January 2022
Loss for the year
Discontinued operations
Exchange Reserve
Total comprehensive loss for the year
New shares issued
Capital contribution on debt restructuring
Cash received for shares not issued
Warrants lapsed
Warrants issued
Share options lapsed
Share-based payments
31 December 2022
Retained earnings
US $
(104,772,035)
(1,681,991)
(9,876,301)
-
(11,558,292)
-
-
-
-
165,824
-
(116,164,503)
Share
capital
US $
6,288,019
-
-
-
-
646,265
274,803
-
-
-
-
7,209,087
Shares to
be issued
US $
-
-
-
-
-
-
-
-
-
-
-
-
(116,164,503)
(4,382,425)
(5,204,409)
-
(9,586,834)
-
-
7,209,086
-
-
-
-
12,586,777
-
(547,488)
-
1,035,696
-
(125,263,129)
-
-
-
-
19,795,863
-
-
-
-
-
-
-
97,523
-
-
-
-
97,523
Share
premium
US $
64,961,905
-
-
-
-
813,207
105,484
(823,182)
(80,173)
-
-
64,977,241
64,977,243
-
-
-
-
7,521,415
-
-
11,291,846
-
-
83,790,504
Capital
contribution
reserve
US $
-
-
-
-
-
-
-
-
--
7,212,492
-
-
-
-
7,212,492
Warrant
reserve
US $
11,373,966
-
-
-
-
-
(19,362)
823,182
-
-
12,177,786
12,177,786
-
-
-
-
-
-
Share
option
reserve
US $
1,417,285
-
-
-
-
-
-
-
-
(165,824)
271,038
1,522,499
1,522,499
-
-
-
-
-
-
547,488
(11,291,846)
-
-
1,433,428
-
-
(1,035,696)
157,757
644,560
The notes on pages 38 to 65 form an integral part of these financial statements.
34
Foreign
currency
translation
reserve
US $
(3,319,767)
-
-
(211,820)
(211,820)
-
-
-
-
-
-
(3,531,587)
(3,531,587)
-
-
50,546
50,546
-
-
-
-
-
-
(3,481,041)
Total equity
US $
(24,050,627)
(1,681,991)
(9,876,301)
(211,820)
(11,770,112)
1,459,472
360,925
-
(80,173)
-
271,038
(33,809,477)
(33,809,477)
(4,382,425)
(5,204,409)
50,546
(9,536,288)
20,108,192
7,212,492
97,523
-
-
-
157,757
(15,769,800)
Company Statement of Changes in Equity
Year ended 31 December 2022
Shares to
be issued
US $
Retained
earnings
US $
(82,993,147)
(1,961,039)
-
-
-
-
165,824
(84,788,362)
Share
capital
US $
6,288,019
-
646,264
274,803
-
-
-
-
7,209,086
(84,788,362)
(30,115,152)
(794,736)
7,209,086
-
-
(30,909,889)
-
-
12,586,777
Share
Premium
US $
64,961,905
-
813,207
105,484
(823,182)
(80,171)
-
-
64,977,243
64,977,243
-
-
-
7,521,415
Capital
contribution
reserve
US $
Warrant
reserve
US $
11,373,966
-
-
(19,362)
823,182
-
-
12,177,786
Share option
reserve
US $
1,417,285
-
-
-
-
-
(165,824)
271,038
1,522,499
12,177,786
-
-
1,522,499
-
-
-
-
-
-
7,212,492
97,523
1 January 2021
Loss for the year
New shares issued
Warrants exercised
Warrants issued
Share issue costs
Share options lapsed
Share-based payments
31 December 2021
1 January 2022
Loss for the year
Discontinued operations
Exchange reserve
Total comprehensive loss for the year
New shares issued
Capital contribution on debt
restructuring
Cash received for shares not issued
Warrants lapsed
Warrants issued
Share options lapsed
Share-based payments
31 December 2022
(547,488)
-
1,035,696
-
(115,210,043)
-
-
-
-
19,795,863
Share premium represents the amounts subscribed for share capital in excess of the nominal value of the shares issued, net of cost of issue.
Capital Contribution Reserve represents a contribution to Group made as part of the 2022 debt restructuring, through forgiveness of debt.
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 38 to 65 form an integral part of these financial statements.
547,488
(11,291,846)
-
-
1,433,428
-
11,291,846
-
-
83,790,504
-
-
(1,035,696)
157,757
644,560
7,212,492
97,523
-
35
Financial Statements
Foreign
currency
translation
reserve
US $
(2,255,402)
-
-
-
-
-
-
-
(2,255,402)
(2,255,402)
-
-
26,834
26,834
-
-
-
-
-
(2,228,569)
Total equity
US $
(1,207,374)
(1,961,039)
1,459,471
360,925
-
(80,171)
-
271,038
(1,157,151)
(1,157,151)
(30,115,152)
(794,736)
26,834
(30,883,055)
20,108,192
7,212,492
97,523
-
-
-
157,757
(4,464,242)
Consolidated Statement of Cash Flows
Year ended 31 December 2022
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
Total adjustments
Decrease/(Increase) in inventory
(Increase)/Decrease in other receivables
increase in trade and other payables
Total working capital movement
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 increase in cash and cash equivalents
Cash and cash equivalents at 1 January
Foreign exchange gains/(losses) on cash and cash equivalents
Cash and cash equivalents at 31 December
Financial Statements
Year to
31 December 2022
US $
Year to
31 December 2021
US $
(4,382,425)
(5,204,409)
(9,586,834)
16,537
1,419,193
-
506,818
157,757
-
-
2,980,994
(1,582,441)
-
3,498,858
863,196
978,758
2,150,092
3,992,046
(2,095,912)
(61,233)
(217,578)
(278,811)
-
-
2,714,574
-
-
2,714,574
339,853
742,339
50,424
1,132,616
(1,893,811)
(9,664,481)
(11,558,292)
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
(1,326,374)
(118,716)
(251,226)
(369,942)
249,351
(169,991)
1,459,472
(80,171)
360,925
1,819,586
123,270
682,159
(63,090)
742,339
The notes on pages 38 to 65 form an integral part of these financial statements.
36
Company Statement of Cash Flows
Year ended 31 December 2022
Cash flows from operating activities
Loss from continuing operations
Loss from discontinued operations
Loss before taxation
Adjustments for:
Depreciation of property, plant and equipment
Impairment of intangible assets and goodwill
Share-based payments
Exchange differences
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
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
Foreign exchange gains/(losses) on cash and cash equivalents
Cash and cash equivalents at 31 December
Financial Statements
Year to
31 December 2022
US $
Year to
31 December 2021
US $
(5,081,487)
-
(5,081,487)
2,176
506,818
157,757
(1,582,441)
2,980,994
-
(2,065,304
(61,589)
(79,672)
454,680
472,763
(6,674,028)
(61,233)
(61,233)
2,714,574
-
2,617,052
109,922
37,008
-
146,930
(1,961,039)
-
(1,961,039)
5,862
118,716
271,038
-
(475,965)
(62,477)
(142,826)
(16,555)
(142,872)
690,583
531,156
(1,572,709)
(118,716)
(118,716)
1,459,472
(80,171)
1,379,301
(312,124)
437,230
(88,099)
37,008
The notes on pages 38 to 65 form an integral part of these financial statements.
Financial Statements
37
Notes to the Financial Statements
Year ended 31 December 2022
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 25.
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 $. The results and position of subsidiary
undertakings that have a different functional currency to US $ are treated as follows:
➢ Assets and liabilities for each financial reporting date presented 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
straight 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 2022 to 31 December 2022. The
comparatives shown are for the year 1 January 2021 to 31 December 2021
.
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.
38
1. ACCOUNTING POLICIES (CONTINUED)
(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, when the company holds a majority
stake, 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.
Where the Group’s interest is in a minority, relinquishing control and having only a right to profits,
with an indemnity against future costs, the Group account on an investment basis, only recognising
income on receipt of, effectively, dividend income.
(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 a 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. Depreciation is charged so as to write off the cost or valuation of
assets less any residual value over their estimated useful lives, using the straight- line method, on the
following bases:
Fixtures & fittings
12% to 33.3% straight-line
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.
39
1. ACCOUNTING POLICIES (CONTINUED)
(f) Property right of use asset
The Group recognises a right-of-use asset and a lease liability at the lease commencement date. The
right of use lease is initially measured at cost, which comprises the initial amount of the lease liability
adjusted for any lease payments made at or before commencement date plus any initial direct costs
incurred and an estimate of costs to dismantle and remove the underlying asset. The right-of-use asset
is subsequently depreciated using the straight-line method from the commencement date to the
earlier of the end of the useful life of the right-of-use asset or the end of the lease term. The lease
liability is initially measured at the present value of the lease payments that are not paid at the
commencement date discounted using the incremental borrowing rate of the individual Company
which is the lessee.
(g) Other intangible assets - exploration and evaluation costs
Exploration and evaluation (E&E) expenditure comprises costs which are directly attributable to
researching and analysing exploration data. It also includes the costs incurred in acquiring mineral
rights, the entry premiums paid to gain access to areas of interest and amounts payable to third parties
to acquire interests in existing projects. When it has been established that a mineral deposit has
development potential, all costs (direct and applicable overhead) incurred in connection with the
exploration and development of the mineral deposits are capitalised until either production
commences or the project is not considered economically viable. In the event of production
commencing, the capitalised costs are amortised over the expected life of the mineral reserves on a
unit of production basis. Other pre-trading expenses are written off as incurred. Where a project is
abandoned or is considered to be of no further interest, the related costs are written off.
(h) Impairment of tangible and intangible assets excluding goodwill
At the date of each statement of financial position, the Group reviews the carrying amounts of its
tangible and intangible assets to determine whether there is any indication that those assets have
suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is
estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to
estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount
of the cash-generating unit (“CGU”) to which the asset belongs.
The recoverable amount is the higher of fair value less costs to sell or value in use. In assessing value
in use, the estimated future cash flows are discounted to their present value using a pre-tax discount
rate that reflects the current market assessments of the time value of money and the risks specific to
the asset. If the recoverable amount of an asset (or CGU) is estimated to be less than its carrying
amount, the carrying amount of the asset is reduced to its recoverable amount. An impairment loss is
recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in
which case the impairment loss is treated as a revaluation decrease.
Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the
revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed
the carrying amount that would have been determined had no impairment loss been recognised for
the asset (CGU) in prior years. A reversal of an impairment loss is recognised immediately in profit or
loss, unless the relevant asset is carried at a re-valued amount, in which case the reversal of the
impairment loss is treated as a revaluation increase.
40
1. ACCOUNTING POLICIES (CONTINUED)
(i) Discontinued operations, assets and businesses held for sale
Cash flows and operations that relate to a major component of the business or geographical region
that has been sold or is classified as held for sale are shown separately from continuing operations.
Assets and businesses classified as held for sale are measured at the lower of carrying amount and fair
value less costs to sell. No depreciation is charged on assets and businesses classified as held for sale.
Assets and businesses are classified as held for sale if their carrying amount will be recovered or settled
principally through a sale transaction rather than through continuing use. This condition is regarded
as being met only when the sale is highly probable and the assets or businesses are available for
immediate sale in their present condition. Management must be committed to the sale, which should
be expected to qualify for recognition as a completed sale within one year from the date of
classification.
Finance income or costs are included in discontinued operations only in respect of financial assets or
liabilities classified as held for sale or derecognised on sale.
(j) 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.
(k) Taxation (continued)
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.
(l) 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 £0.8292 and US $1 to €0.8869 (2021: US $1 to GBP £0.7388, US $1 to €0.8790) US $1 to ARS
$147.423 2021: US $1 to ARS $102.397) and the average exchange rate during 2022 was US $1 to GBP
£0.8019 (2021: US $1 to GBP £0. 7253).
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 $).
41
1. ACCOUNTING POLICIES (CONTINUED)
(m) 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.
(n) 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 in hand and demand deposits.
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.
(n) Financial instruments
Equity instruments
Financial instruments issued by the Group are treated as equity only to the extent that they meet the
following two conditions, in accordance with IAS 32:
• They include no contractual obligations upon the Group to deliver cash or other financial
assets or to exchange financial assets or financial liabilities with another party under
conditions that are potentially unfavourable to the Group; and
• Where the instrument will or may be settled in the Group’s own equity instruments, it is either
a non-derivative that includes no obligation to deliver a variable number of the Group’s own
equity instruments or is a derivative that will be settled by the Group exchanging a fixed
amount of cash or other financial assets for a fixed number of its own equity instruments.
To the extent that this definition is not met, the financial instrument is classified as a financial liability.
42
1. ACCOUNTING POLICIES (CONTINUED)
(o) 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.
(p) 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.
(q) 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.
(r) 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.
43
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.
The consolidated statement of financial position at 31 December 2022 again shows a negative net
asset position. Moreover, after persistent difficulties, the board made the difficult decision in late
2022 to divest its operating assets in Argentina. This decision came to fruition in June 2023 when,
apart from a small 5% retention holding, Echo Energy sold its interest in the SCS assets to its joint
venture partner and obtained a full, 100%, indemnity against any future costs arising from those SCS
operations.
The cash received from that sale was sufficient to partly, but not fully, pay down backlog creditors.
Further, the delay in publishing the December 2022 Annual Report gave rise to an automatic
suspension of the trading in the company’s shares on AIM, preventing any equity fund raising until the
Annual Report is published and the suspension lifted.
Nevertheless, the directors have held positive discussions with potential financial intermediaries with
a view to raise additional funding and also are in advanced negotiations to acquire a number of assets
including outside South America to replace the SCS assets.
Consequently, the directors consider the going concern assumption continues to be appropriate
although there remain material uncertainties as to;
1. Successfully raising sufficient funds.
2. Finding an appropriate investment within a suitable timescale
3. That investment being sufficiently cash-positive to fund the Group going forwards.
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.
Prior to the decision to dispose of the majority of its SCS interest, expenses incurred in the UK relating
to SCS were capitalised. All such capitalised UK costs were then impaired to nil value following the
disposal decision.
44
VALUATION OF ASSETS
In line with the requirements of IFRS 5, management have considered impairment in the assets held
for sale by comparing the expected fair value less costs to sell (which was agreed in June 2023 and the
carrying value of the disposal group. On the basis the fair value less costs to sell were in excess of the
carrying value of the disposal group no impairments were considered necessary.
The parent company’s investment in subsidiary has been written down to the fair value less costs to
sell as the value achieved is indicative of the value at the balance sheet date and the majority of the
activity of the subsidiaries is linked to the discontinued operations.
Management have impaired $506,818 of intangible assets which were costs associated with asset
capitalised in the parent company. This intangible has not been disposed of but is linked to the
activities of the discontinued operations and therefore have been fully impaired at 31 December 2022.
FUNCTIONAL CURRENCY
The groups principal activities, prior to the criteria of discontinued operation being met, are
undertaken in Argentina. Judgement is required to assess to the functional currency of the group’s
subsidiaries. Consistent with previous years, management have determined that the functional
currency is USD on the basis that revenues, a portion of the cost base and financing activities are
denominated in USD. If a different judgement was made and if Argentine Peso was considered the
functional currency management would need to consider the impacts of IAS 29. On the basis the
activities have been discontinued, this judgement will not impact the group significantly in future
accounting periods.
Settlement of financial liabilities
As detailed in Note 26, during the year the company renegotiated and / or settled certain financial
liabilities. These were on favourable terms to the group judgement is required to assess whether the
counterparties to the liabilities were acting in their capacity as shareholders of the group. On the
basis of the favourable terms management have determined they were acting in their capacity as
shareholders and have accounted for the renegotiation or settlement accordingly as detailed in Note
26.
CARRYING VALUE OF INVESTMENT IN SUBSIDARIES
An impairment provisions has been made on the carrying value of investment in subsidiaries, writing
them down to the disposal value achieved on the sale of the underlying SCS interests in June 2023.
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.
At the balance sheet date, there is only one business segment, being the company, its activity
disclosed in within continuing operations.
Activity in Argentina, being the Santa Cruz Sur operations are set out within discontinued operations
within note 10.
Activity within the group’s Bolivian subsidiary is immaterial.
45
4. REVENUE
Oil revenue
Gas revenue
Other income
Total Revenue
Year to
31 December 2022
US $
Year to
31 December 2021
US $
-
-
86
86
-
-
23,318
23,318
Revenue for 2022 all derives from discontinued operations held for resale and is shown in Note 10.
5. COST OF SALES
Production costs
Selling and distribution costs
Movement in stock of crude oil
Depletion
Total Costs
Year to
31 December 2022
US $
Year to
31 December 2021
US $
-
-
-
-
-
-
-
-
-
-
Cost of sales for 2022 all derives from discontinued operations held for resale and is shown in Note 10
6. EXPENSES AND AUDITOR’S REMUNERATION
The operating loss is stated after charging the following amounts:
Depreciation of property, plant and equipment – owned
Losson disposal of property, plant and equipment
Fees payable to the Company’s auditor for the audit of the Company’s annual
accounts
Fees payable to the overseas auditor and its associates for other services:
-
-
Corporate finance services
Audit and subsidiaries
Share-based payments
Year to
31 December 2022
US $
Year to
31 December 2021
US $
92
-
60,587
-
10,502
-
127,656
1,858
53,977
11,456
10,499
271,038
46
7. STAFF COSTS AND NUMBERS
The average number of persons employed by the Group during the year including executive
directors is analysed below:
Administration
Year to
31 December 2022
10
Year to
31 December 2021
7
Group employment costs – all employees including executive directors:
Wages and salaries
Social security costs
Pension contributions
Share-based payments – equity-settled
Total
Year to
31 December 2022
US $
1,159,651
147,922
37,574
157,757
1,502,904
Year to
31 December 2021
US $
1,066,589
131,487
45,764
271,038
1,514,878
Directors’ remuneration is set out in the Directors Remuneration Report on page 23 of this report.
Remuneration of Key Personnel is set out in the table below.
Year to
31 December 2022
US $
541,915
61,098
-
12,239
5,963
157,757
621,215
Year to
31 December 2021
US $
583,974
103,329
59,288
25,099
13,107
244,383
1,029,180
Year to
31 December 2022
US $
622
1,618,222
1,618,884
Year to
31 December 2021
US $
249,351
4,105,983
4,355,334
Year to
31 December 2022
US $
415
-
2,980,994
-
-
2,981,409
Year to
31 December 2021
US $
11,912
5,122,810
3,394,647
59,955
170,007
8,993,432
Wages and salaries
Social security costs
Bonus
Pension Contributions
Private Health Insurance
Share-Based Payments
Total
8. FINANCIAL INCOME
Interest income
Net foreign exchange gain
Total
9. FINANCIAL EXPENSE
Interest payable
Net foreign exchange losses
Unwinding of discount on long- term loan
Unwinding of abandonment provision
Bank fees and overseas transaction tax
Total
47
10. DISCONTINUED OPERATIONS
In November 2022 the company committed to selling virtually all of its interest in the Santa Cruz oil
and gas operations in Argentina to its joint-venture partner Interoil. A term of the sale was for Echo
to relinquish any management and accounting in respect of the joint venture, instead receiving a
profit share in proportion to the remaining 5% holding in the joint venture, effectively as investment
income.
The sale was completed on 26 June 2023, satisfied by £750,000 in cash, shares to the value of
£400,000 in Interoil and £150,000 investment in Echo Energy PLC shares by Interoil. At 31 December
20222 the Argentinian operations were classified as a disposal group held for sale and as
discontinued operations.
With the classification as discontinued operations, the Santa Cruz operations in Argentina have been
excluded from the segmental note (note 3).
The results of the Argentinian operations for the year are presented below
Revenue
Oil revenue
Gas revenue
Other income
Cost of sales
Production costs
Selling and distribution costs
Movement in stock of crude oil
Depletion
Total cost of sales
Gross loss
Exploration expenses
Impairment of plant and equipment
Administrative expenses
Operating loss from discontinued operations
Finance revenue
Finance expense
Foreign exchange gain
Loss for the year before taxation from discontinued operations
Deferred tax asset write-off
Loss for the year after taxation from discontinued operations
31 December 2022
US $
31 December 2021
US $
5,365,928
8,748,402
-
14,114,331
(16,933,985)
-
-
(1,419,193)
(18,353,178)
(4,238,847)
(287,919)
(506,818)
(578,011)
(5,611,595)
-
(788,847)
1,208,083
(5,192,359)
(12,050)
(5,204,409)
4,060,802
7,036,861
3,707
11,101,369
(12,024,454)
(1,684,320)
181,274
(1,620,279)
(15,147,779)
(4,046,410)
(205,651)
-
(510,807)
(4,762,869)
249,351
(5,362,783)
-
(9,876,301)
-
(9,876,301)
48
10. DISCONTINUED OPERATIONS (CONTINUED)
The major classes of assets and liabilities of the Argentinian operations classified as held for sale as
at 31 December 2022 are as follows
Assets
Property, plant and equipment
Intangible assets
Inventories
Joint venture receivables
Other receivables
Prepayments
Cash
Assets of disposal group held for sale
Liabilities
Trade and other payables
Joint venture payables
Provisions
Liabilities of disposal group held for sale
Net liabilities
31 December 2022
US $
2,658,382
5,267,129
716,794
9,729,937
279,012
87,916
121
18,739,291
(14,095)
26,594,448
3,039,911
29,620,264
(10,880,974)
The net cash flows of the Argentinian operations were
Net cash flow from operating activites
Net cash flow from investing activities
Net cash flow from financing activites
Net cash outflow
11. JOINT ARRANGEMENTS
31 December 2022
US $
(5,830,067)
(217,578)
-
(6,047,645)
31 December 2021
US $
(434,026)
-
249,351
(184,675)
As described in both the strategic and governance reports, in particular in the Financial Review, Echo
has joint arrangements within the SCS concessions. Previously, the Group accounted for its share of
assets, liabilities, income and expenditure of these joint operations in accordance with its equity
interest in each, being 70% of the SCS working interest. Joint venture assets and liabilities were
separately disclosed throughout the financial statements.
As set out in Note 10, in December 2022 to the decision was made to divest the SCS concessions,
following which, in June 2023 that interest was reduced to a 5% holding and the joint arrangement
thereby has been treated in the accounts as discontinued operations.
49
12. TAXATION
Tax on profit on ordinary activities
Taxation charged based on profits for the period
UK corporation tax based on the results for the period
Deferred tax asset write-off in Bolivian subsidiary
Total tax expense in income statement
Year to
31 December 2022
US $
Year to
31 December 2021
US $
-
-
68,142
68,142
-
-
-
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%
(2021: 19%). The references are explained below:
Loss on ordinary activities before taxation
Loss from discontinued operations
Loss for the year before tax
Loss on ordinary activities multiplied by standard rate of corporation tax in the UK
of 19%
Effects of:
Expenses disallowed for tax purposes
Deferred tax not provided – tax losses carried forward
Deferred tax asset in Bolivian subsidiary written off
Total current tax
Year to
31 December 2022
US $
(4,382,425)
(5,204,409)
(9,586,834)
(1,821,498)
Year to
31 December 2021
US $
(11,770,112)
-
(11,770,112)
(2,236,321)
92
1,821,406
68,142
68,142
40,246
2,196,075
-
-
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 $50,533,098 (2021: US $48,711,692)
No amounts have been recognised within tax on the results of the equity-accounted joint ventures.
13. LOSS PER SHARE
The calculation of basic and diluted loss per share at 31 December 2022 was based on the loss
attributable to ordinary shareholders. The weighted average number of ordinary shares outstanding
during the year ended 31 December 2022 and the effect of the potentially dilutive ordinary shares to
be issued are shown below.
Year to
31 December 2022
(9,586,834)
Year to
31 December 2021
(1,893,811)
Net loss for the year (US $) before exchange on translating foreign
operations
Net loss on continuing operations (US $)
Basic weighted average ordinary shares in issue during the year (No.)
Diluted weighted average ordinary shares in issue during the year (No.)
Loss per share (cents)
Basic and diluted (cents)
Loss per share on continuing operations (cents)
In accordance with IAS 33 and as the entity is loss making, including potentially dilutive share options
in the calculation would be anti-dilutive.
(4,382,425)
1,909,205,746
1,909,205,746
(0.50)
(0.23)
(9,876,301)
1,270,891,563
1,270,891,563
(0.15)
(0.78)
50
14. 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.
15. PROPERTY, PLANT AND EQUIPMENT (GROUP)
31 DECEMBER 2022
Cost
1 January 2022
Additions
Reclassification of assets of disposal group
held for sale (note 10)
31 December 2022
Depreciation
1 January 2022
Charge for the year
Reclassification of assets of disposal group
held for sale (note 10)
31 December 2022
Carrying amount
31 December 2022
31 December 2021
31 DECEMBER 2021
Cost
1 January 2021
Additions
Disposals
31 December 2021
Depreciation
1 January 2021
Charge for the year
Disposals
31 December 2021
Carrying amount
31 December 2021
31 December 2020
PPE – O&G
Properties
US $
Fixtures &
Fittings
US $
Total
US $
2,873,147
-
(2,873,147)
95,397
2,813
-
2,968,544
2,813
(2,873,147)
-
98,210
98,210
202,718
12,047
(214,765)
91,421
4,490
-
294,139
16,537
(214,765)
-
95,911
95,911
-
2,670,429
2,299
3,976
2,299
2,674,405
2,621,921
251,226
-
2,873,147
79,941
122,777
-
202,718
2,670,429
2,541,980
97,255
-
(1,858)
95,397
86,542
4,879
-
91,421
2,719,176
251,226
(1,858)
2,968,544
166,483
127,656
-
294,139
3,976
2,674,405
10,713
2,552,693
Included within property, plant and equipment are amounts of US $nil (2021: US $996,505) in relation
to assets in construction and as a result theseare not depreciated on the unit of production basis; this
commenced when they became available for use.
51
Fixtures &
Fittings
US $
92,903
-
-
92,903
90,726
2,176
-
90,902
1
2,177
92,903
-
-
92,903
84,864
5,862
-
90,726
2,177
8,039
15. PROPERTY, PLANT AND EQUIPMENT (COMPANY)
31 DECEMBER 2022
Cost
1 January 2022
Additions
Disposals
31 December 2022
Depreciation
1 January 2022
Charge for the year
Disposals
31 December 2022
Carrying amount
31 December 2022
31 December 2021
31 DECEMBER 2021
Cost
1 January 2021
Additions
Disposals
31 December 2021
Depreciation
1 January 2021
Charge for the year
Disposals
31 December 2021
Carrying amount
31 December 2021
31 December 2020
52
16. INTANGIBLE ASSETS (GROUP)
31 DECEMBER 2022
Cost
1 January 2022
Additions
Reclassification of assets of disposal
group held for sale (note 10)
31 December 2022
Depletion
1 January 2022
Depletion
Depreciation decommissioning assets
Impairment
Reclassification of assets of disposal
group held for sale (note 10)
31 December 2022
Carrying amount
31 December 2022
31 December 2021
31 DECEMBER 2021
Cost
1 January 2021
Additions
Disposals
Transfers
31 December 2021
Depletion and impairment
1 January 2021
Disposals
Depletion
Depreciation decommissioning assets
Impairment charge for the year
31 December 2021
Carrying amount
31 December 2021
31 December 2020
SCS Production
Assets US $
10,875,022
61,233
(10,429,437)
506,818
3,743,115
1,419,193
-
506,818
(5,162,308)
506,818
-
7,131,907
10,756,306
118,716
-
-
10,875,022
2,244,684
-
1,375,931
122,500
-
3,743,115
7,131,907
8,511,622
All intangible assets relate to oil & gas activities. The Group’s oil & gas assets were assessed for
impairment at 31 December 2022. The intangibles are held within one CGU, the SCS licence
concession.
In 2022, the Santa Cruz operations were reclassified as Discontinued operations held for sale. No
further general impairment was considered necessary as the proceeds of the sale exceed the net
liabilities of the discontinued operations. However, in exception, the value of UK costs capitalised up
to the time of the decision to sell of $506,818 was assessed as irrecoverable and has been fully
impaired.
53
16. INTANGIBLE ASSETS CONTINUED (COMPANY)
Argentina Production assets
US $
31 DECEMBER 2022
Cost
1 January 2022
Additions
31 December 2022
Impairment
1 January 2022
Provided
31 December 2022
Carrying amount
31 December 2022
31 December 2021
31 DECEMBER 2021
Cost
1 January 2021
Additions
31 December 2021
Impairment
1 January 2021
Impairment charge for the year
31 December 2021
Carrying amount
31 December 2021
31 December 2020
17. INTEREST IN SUBSIDIARY UNDERTAKINGS
Cost
1 January
Additions in year
31 December
Impairment
1 January
Impairment
31 December
Carrying amount
31 December
Total
US $
445,585
61,233
506,818
-
516,818
506,818
-
445,585
326,869
118,716
445,585
-
-
-
445,585
61,233
506,818
-
516,818
506,818
-
445,585
326,869
118,716
445,585
-
-
-
445,585
326,869
445,585
326,869
Year to
31 December 2022
US $
Year to
31 December 2021
US $
30,521,648
-
30,521,648
14,516,604
14,442,723
28,959,327
30,521,648
-
30,521,648
14,516,604
-
14,516,604
1,562,321
16,005,044
54
17. INTERESTS IN SUBSIDIARY UNDERTAKINGS (CONTINUED)
Details of the subsidiaries are as follows:
Subsidiary
Echo Energy Holdings (UK) Limited
Echo Energy Argentina Holdings Limited
Echo Energy Tapi Aike Limited
Eco Energy TA Op Limited
Echo Energy C D & LLC Limited
Eco Energy CDL Op Limited
Echo Energy Bolivia (Hold Co 1) Limited
Echo Energy Bolivia (Op Co 1) Limited
Echo Energy Bolivia (Hold Co 2) Limited
Echo Energy Bolivia (Op Co 2) Limited
%
Owned
Class of
Share
Ordinary 100%
Ordinary 100%
Ordinary 100%
Ordinary 100%
Ordinary 100%
Ordinary 100%
Ordinary 100%
Ordinary 100%
Ordinary 100%
Ordinary 100%
Country of
Registration
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
Nature of Business
Holding company
Holding company
Holding company
Holder of Argentinian branch assets
Holding company
Holder of Argentinian branch assets
Holding company
Holder of Bolivian branch assets
Holding company
Dormant
The registered address for all of the above subsidiaries is: 85 Great Portland Street, London, W1W 7LT
18. INVENTORIES
Crude oil
Parts and supplies
Total
19. TRADE AND OTHER RECEIVABLES
Non-current
Amounts owing by subsidiary undertakings
Impairment in year
Total
Current
Trade receivables
Accrued income
Other receivables
Prepayments
Total
31 December 2022
31 December 2021
Group
US $
-
-
-
Company
US $
-
-
Group
US $
691,528
673,697
Company
US $
-
-
-
1,365,225
-
31 December 2022
31 December 2021
Group
US $
Company
US $
Group
US $
Company
US $
-
-
-
11,358,845
(11,358,845)
-
-
-
11,813,525
11,813,525
531,815
-
61,243
176,493
769,551
-
-
57,685
176,493
234,178
387,965
291,336
1,322,407
106,730
2,108,438
-
-
82,818
89,771
172,589
Other receivables in the Group principally comprise recoverable Value Added Tax and, in 2021, joint venture receivables
and, for the company, inter-company balances. The directors consider that the carrying amount of trade and other
receivables approximated to their fair value.
20. CASH AND CASH EQUIVALENTS
Cash held by joint venture partners
Cash and cash equivalents
Total
31 December 2022
31 December 2021
Group
US $
-
1,132,616
Company
US $
-
146,928
1,132,616
146,928
Group
US $
500,719
241,620
742,339
Company
US $
37,007
-
37,007
In 2021 Echo had advanced cash to joint venture partners; this cash was held by our partners in a ring-fenced account. We
recognised our equity share of the balance held.
55
21. 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 materially equivalent to their
fair values, with the exception of the Eurobond loan which is calculated at present value as disclosed
in note 26. The fair value is approximately $7.2m higher due to the impact of using a market rate of
interest.
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.
In Echo’s SCS assets, acquired in November 2019, operating partner Interoil marketed our
hydrocarbons primarily to well established utilities. Echo carried a marginally higher credit risk
exposure as Echo dealt directly with counterparties for payment, however as the Group’s principal
customers were 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 had
low credit risk in respect of receivables as a result of supplying reputable oil and gas purchasers. 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 (2021: US $3,253,335). No
collateral is held in respect of these amounts.
The maximum exposure due to credit risk for the Company on inter-company receivables and other
receivables during the year was US $27,818,569 (2021: US $28,509,152). No collateral is held in
respect of these amounts. Inter-group funding is assessed for indications of impairment on a periodic
basis. Investments and subsidiaries and inter-group loans in the amount of US $25,801,568 (2021: US
$14,516,604) are considered to be impaired and have been provided against down to the level of the
disposal consideration. All other amounts are expected to be received in full.
CURRENCY RISK
The Group’s operations are primarily located in 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 72% (2021: 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
56
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.
21. FINANCIAL INSTRUMENTS AND TREASURY RISK MANAGEMENT (CONTINUED)
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
2022
US $
31 December
2021
US $
45
146,903
(19)
985,436
250
1,132,616
5,248
35,419
41
699,578
2,053
742,339
The consolidated statement of comprehensive income would be affected by US $14,690 (2021: US
$4,247) if the exchange rate between US $ and GBP changed by 10%. There would be a loss of US
$98,543 (2021: US $199,162) if the exchange rate between the Argentine Peso and the US Dollar
weakened by 10%.
The Group has exposure to the Euro, Echo hold €3.9million (2021: €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 $417,009 (2021: US
$2,782,192) 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 practice 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 2021 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 2022, but going forward
withholds VAT received from customers to offset any VAT credit balances.
57
21. FINANCIAL INSTRUMENTS AND TREASURY RISK MANAGEMENT (CONTINUED)
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 132,500,000 Pesos into $471,105 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 2022, 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 $6 (2021: US $30) by a one percentage point change floating interest rate on a full-year basis.
LIQUIDITY RISK
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 had no undrawn committed facilities as at 31 December 2022.
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.
The Group holds Euro-denominated long-term debt. See Note 26. Other than long-term debts, all
financial liabilities are due for settlement within 12 months. The Group held cash balances of US
$1,132,616 (2021: US $742,33).
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 in the discontinued operations by
approximately US $874,840 (2021: US $703,686).
A 10% increase in the price of Oil would have increased revenue in the discontinued operations by
approximately US $536,593 (2021: US $406,080).
58
21. FINANCIAL INSTRUMENTS AND TREASURY RISK MANAGEMENT (CONTINUED)
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 new projects 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 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.
22. TRADE AND OTHER PAYABLES
Trade payables
Taxation and social security costs
Non-trade payables
Accruals
Total
23. DERIVATIVE FINANCIAL LIABILITIES
31 December 2022
31 December 2021
Group
US $
657,923
388,422
120,244
163,401
1,329,991
Company
US $
556,536
105,121
120,244
162,468
944,369
Group
US $
495,379
395,684
39,042
131,137
1,061,242
Company
US $
492,190
269,311
39,023
64,173
864,697
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 2022
US $
-
-
-
31 December 2021
US $
62,477
(62,477)
-
59
24. SHARE CAPITAL
31 December 2022
31 December 2021
Group
US $
Company
US $
Group
US $
Company
US $
Issued, Called Up and Fully Paid
5,527,427,674 0.31¢ (2021 1,309,013,085 0.31¢) ordinary shares
1 January
Equity shares issued
31 December
7,209,086
12,586,777
19,795,863
7,209,086
12,586,777
19,795,863
6,288,019
921,067
7,209,086
6,288,019
921,067
7,209,086
The holders of 0.31¢ (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 14 January 2022, Echo issued 143,478,260 ordinary shares at 0.46p per share to raise
gross cash proceeds of £660,000 (US$880,189).
• On 29 August 2022, Echo issued 242,000,000 ordinary shares at 0.25p per share to raise
gross cash proceeds of £605,000 (US$709,271). In addition 48,220,000 shares were issued to
settle adviser fees.
The following shares were issued pursuant to the restructuring of the company’s debt:
• On 29 August 2022, Echo issued 213,949,943 ordinary shares in settlement of accrued
interest on the Lombard facility totalling €625,803.
• On 2 December 2022, Echo issued 3,570,766,386 ordinary shares to in settlement of
financial liabilities as part of the debt restructuring as detailed in note 26.
Pursuant to the exercise of share warrants, on 22 December 2022 the company received cash of
£87,977 (US$97,523), but the 33,190,876 ordinary shares were not issued until 2 January 2023.
These are shown within shareholders’ funds as ‘cash received on shares to be issued’.
No further shares options were issued in the year, however a combination of warrants were issued
in relation to fund raises and debt renegotiation.
Further shares issued during the year was as follows:
1 January 2022
Shares issued @ 0.25p
Shares issued @ 0.25p
Shares issued @ 0.25p
31 December 2022
Date
Shares
Price (p)
Prices (US $)
25/01/2022
29/08/2022
02/12/2022
1,309,013,085
143,478,260
504,169,943
3,570,766,386
5,527,427,674
0.46
0.25
0.27
0.55
0.30
0.54
60
24. SHARE CAPITAL (CONTINUED)
(A) SHARE OPTIONS
The Group has a share option scheme established to reward and incentivise the executive
management team and staff for delivering share price growth. The share option scheme is
administered by the remuneration committee. The expected life of the options is based on the
expected time through to exercise and is not necessarily indicative of exercise patterns.
Share options are valued using the stochastic Black-Scholes model. The inputs to the model are the
market price at date of grant, the exercise price set out in the option agreement, expected life, the
risk-free rate of return and the expected volatility. A 10-year gilt rate is used as an equivalent to risk-
free rate and the expected volatility was determined with reference to the Company’s share price.
The expected life used in the model has been adjusted, based on management’s best estimate, for
the effects of non-transferability, exercise restrictions and behavioural considerations. The cost of
options is amortised to the statement of comprehensive income over the service period of the
option.
Details of the tranches of share options outstanding at the year-end are as follows:
Share Options
Outstanding as at 1 January
Granted during the year
Forfeited during the period
Cancelled during the year
Options outstanding as at 31 December
Exercisable at 31 December
*Weighted Average Exercise Price (WAEP)
Number
31/12/2022
120,254,120
-
(8,987,636)
(40,000,001)
71,266,483
33,266,483
WAEP*
(¢)
31/12/2022
3
-
2
3
3
4
Number
31/12/2021
95,491,107
35,750,000
(8,236,987)
(2,750,000)
120,254,120
41,195,714
WAEP*
(¢)
31/12/2021
5
1
4
1
3
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:
The weighted average outstanding life of vested share options is 1.5 years. The price for outstanding
options ranges between 0.8¢ and 16¢ (0.7p and 13.2p). The outstanding share options are not
subject to any share performance-related vesting conditions, but vesting is conditional upon
continuity of service.
The Group recognised total expenses of US $157,757 (2021: US $271,038) related to equity-settled,
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.
61
24. SHARE CAPITAL (CONTINUED)
(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 restructuring completed during the year to 31 December
2022.
Details of the tranches of warrants outstanding at the year-end are as follows:
Warrants
Outstanding as at 1 January
Granted during the year
Exercised during the year
Lapsed in year
Outstanding as at 31 December
*Weighted Average Exercise Price (WAEP)
Number
2022
551,716,990
402,418,260
-
(389,118,950)
565,016,300
WAEP*
(¢ )
2022
9
1
-
8
1
Number
2021
460,222,521
170,939,567
(79,445,098)
-
551,716,990
WAEP*
(¢ )
2021
10
1
4
-
9
Warrants values are calculated using the Black-Scholes option pricing model using the following
inputs.
Warrants
Market stock price
Option strike price
Volatility
Expiration of the option
Risk-free rate
Future value
Expense
14 January 2022
28 June 2022
10 October 2022
0.49p
0.65p
102.64%
2 years
0.797%
$579,447
$201,469
0.31p
0.65p
73.32%
2 years
2.121%
$620,853
$60,175
0.25p
0.25p
68.32%
2 year
4.353%
$714,610
$285,844
The weighted average price for outstanding warrants as at 31 December 2022 ranges between 0.28¢
and 0.91¢ (0.25p and 0.75p). The residual weighted average contractual life for the warrants is 1.2
years.
25. SHARE PREMIUM ACCOUNT
1 January
Premium arising on issue of equity shares
Warrants lapsed
Warrants issued
Transaction costs
31 December
31 December 2022
31 December 2021
Group
US $
64,977,243
7,521,415
-
11,291,846
-
83,790,504
Company
US $
64,977,243
7,521,415
-
11,291,846
-
83,790,504
Group
US $
64,961,905
813,207
(717,698)
-
(80,171)
64,977,243
Company
US $
64,961,905
813,207
(717,698)
-
(80,171)
64,977,243
62
26. LOANS DUE IN OVER ONE YEAR
Five-year secured bonds
Additional net funding
Other loans
Total
€20 million five-year
secured bonds
€5 million Lombard
Odier secured
convertible debt facility
Other loans
Total
31 December
2022
US $
(4,170,086)
-
(1,293,215)
(5,463,301)
Capital
contribution
reserve
US$
(7,212,492)
31 December
2021
US $
(21,385,663)
(6,059,126)
(1,323,591)
(28,768,380)
Swap to equity
31 December
2022
US$
(11,265,253)
US $
4,170,086
Balance as at
31 December
2021
US $
21,385,663
Amortised
finance
charges
US $
2,337,007
Exchange
adjustments
US $
(1,074,839)
6,059,124
509,771
(343,008)
-
(6,225,887)
-
1,323,593
28,768,380
134,216
2,980,994
(164,594)
(1,582,441)
-
(7,212,492)
(17,491,140)
1,293,215
5,463,301
Lombard Odier secured convertible debt facility renegotiation
On 2 December 2022, the company announced a settlement in full of the Lombard Odier outstanding
principle plus interest of $6.2m by Ordinary shares in the company, issuing 1,347,777,877 ordinary
shares. On the basis the settlement of the loan was on favourable terms to the group, management
considered Lombard Odier were acting in their capacity as shareholders of the Group and therefore
the criteria in IFRIC 19 – Extinguishment of financial liabilities with Equity Instruments did not apply.
Therefore the value of the shares issued have been deemed to be the same as the carrying value of
the loan.
Lombard Odier are considered a Related Party to the Group by virtue of them being a shareholder.
Euro-bond renegotiation
On the same date, a partial (50%) settlement of the principle and accrued interest was agreed on the
existing Euro-secured denominated bonds, $11.3m of the debt being settled by the issue of 2,436,938
ordinary shares. On the basis the settlement of the loan was on favourable terms to the group
management considered the counterparty was acting in their capacity as shareholders of the Group,
and therefore the criteria in IFRIC 19 – Extinguishment of financial liabilities with Equity Instruments
did not apply. Therefore the value of the shares issued has been deemed to be the same as the carrying
value of the loan.
In addition and at the same time, the repayment date for the remaining bonds was moved back from
2024 until 2032 and the interest rate reduced from 8% to 2%. This is a substantial modification to the
loan terms, management calculated the present value of the new loan and compared to the carrying
value. The difference has been recorded as a capital contribution to the group of $7.2m.
The Euro bondholders are also considered to be Related Parties by virtue of them being
shareholders.
63
26. LOANS DUE IN OVER ONE YEAR (CONTINUED)
MATURITY ANALYSIS
Contractual undiscounted cash flows:
Amounts due within one year
Amounts due between one and five years
Amounts due over five years
27. PROVISIONS
Assessment of decommissioning provision
31 December 2022
US $
-
1,293,215
4,170,086
5,463,301
31 December 2021
US $
-
28,768,380
-
28,768,380
31 December 2022
US $
-
-
31 December 2021
US $
3,039,911
3,039,911
Historically, 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 were based on
Operators’ internal estimate. Assumptions were 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.
On sale of (the majority of) the interests in the SCS licences, decommissioning becomes a liability
that will no longer fall upon the group and, accordingly, no further provision was made by the Group
in 2022.
28. 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 2022
US $
31 December 2021
US $
562,130
1,156,518
9,640,324
11,358,972
551,500
1,627,623
9,634,402
11,813,525
Lombard Odier is a significant shareholder in the Company. Please refer to Note 26 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.
64
29. CONTROLLING PARTY
The directors do not consider there to be a controlling party.
30. COMMITMENTS
Echo had no committed expenditure in relation to capital projects in the SCS asset at the end of 31
December 2022. It will continue to pay operational costs as cash called by the joint venture partner.
31. SUBSEQUENT EVENTS
As described in note 11, on 27 June 2023, the company completed the previously announced sale of
65% of its 70% interest in the joint venture operating the SCS licences.
65
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
Cavendish Financial PLC
6-8 Tokenhouse Yard
London
EC2R 7AS
Brokers
Arden Partners plc
125 Old Broad Street
London
EC2N 1AR
Auditors
Crowe U.K. LLP
55 Ludgate Hill
London
EC4M 7JW
Company Secretary
AMBA Secretaries Limited
400 Thames Valley Park Drive
Reading, Berkshire
RG6 1PT
Solicitors
Fieldfisher
Riverbank House
London
W1S 4JU
Registrars
Link Group
10th Floor
Central Square
29 Wellington Street
Leeds
LS1 4DL
66
Glossary
AIM
Board
capex
CDL
CGU
Company
E&E
E&P
FRC
G&A
Group
HSE
IAS
IFRS
ISAs (UK)
JV
KPI
NAV
NOMAD
opex
QCA Code
SCS
WAEP
$ / US $
Alternative Investment Market
the Board of Directors of Echo Energy plc
capital expenditure
Fracción C, Fracción D, and laguna De Los Capones licences
Cash Generating Unit
Echo Energy plc
exploration and evaluation
exploration and production
Financial Reporting Council
general and administration expenses
the Company and its subsidiaries
health, safety and environment
International Accounting Standards
UK-adopted international accounting standards
International Standards on Auditing
joint venture
key performance indicators
net asset value
nominated advisor
operations expenditure
Quoted Companies Alliance Corporate Governance Code
Santa Cruz Sur
Weighted Average Exercise Price
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
67