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Echo Energy sizes up massive potential for Tapi Aike licence

Tapi Aike, located in the Austral basin, was one of most hotly contested blocks when it was put out to tender
Oil and gas workers
First oil sales from Echo's Argentine blocks were priced at more than US$70 per barrel

At the start of 2018, Echo Energy PLC (LON:ECHO) acquired a 50% working interest in four onshore blocks in Argentina.

Of these, Fraccion C, Fraccion D, and Laguna De Los Capones, either have previously or are in production while the fourth was an exploration permit for the hugely promising Tapi Aike block.

READ: Echo Energy pushing ahead with programmes in Argentina

According to valuation estimates by Gaffney Cline & Associates (GCA), net 2P and 2C reserves for Echo are worth a total of US$49.3mln, with the Fraccion C and Fraccion D sites containing reserves of US$14mln.

Tapi Aike, located in the Austral basin, is at a much earlier stage but a provisional estimate for the field suggests a risked value net to Echo of approximately US$87mln.

Tapi Aike was one of the most hotly contested blocks when it was put out to tender recently, with a competent person’s report identifying the largest two leads as potentially containing 3.8 and 2.6 trillion cubic feet (Tcf) worth of gas in place, with three other leads containing potentially more than 1 Tcf each.

Echo has earmarked US$26mln for exploration at the licence.

Oil and gas prices moving positively

Argentina has been a difficult place to explore for oil and gas in the past but the mood has improved markedly since a new government was elected last year.

Global oil and gas prices are also starting to move in its favour.

First oil sales from its Argentine blocks were priced at more than US$70 per barrel or close to a three-year high for Brent crude.

Joint evaluation in Bolivia

Away from Argentina, Echo has an involvement in the neighbouring Latin American country of Bolivia, where it is currently partnered in a joint evaluation agreement with Pluspetrol for the Huayco block in the prolific Tarija basin.

Tarija is believed to be home to 85% of Bolivia’s gas reserves, and with natural gas making up 40% of the country’s exports, the national government is keen to increase sales as it recently sanctioned a direct export pipeline to Paraguay.

Like Argentina, the political situation has been uncertain in the past but like its neighbour, sentiment about the industry is improving rapidly as the government looks to build up its internal production.

Calculating the potential of all its assets, and deducting farm-in costs, GCA has estimated the value of Echo (excluding warrants and options) at US$172.4mln, or £129.6mln.

As of midday on 18 April 2018, Echo’s market cap stood at £60.3mln.

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