Echo Energy, YPFB Sign Technical Evaluation Agreement For Rio Salado Block

(Echo Energy plc, 15.Oct.2018) — Echo Energy plc signed on 12 October 2018 a Technical Evaluation Agreement (TEA) for the Rio Salado Block, onshore Bolivia, directly with YPFB (Yacimientos Petrolíferos Fiscales Bolivianos).

The agreement was signed by Andres Brockman (Echo Regional Representative) and Oscar Barriga (President of YPFB) in the presence of James Thornton (Her Majesty’s Ambassador to the Plurinational State of Bolivia) in Santa Cruz de la Sierra, Bolivia.

The work programme will include the interpretation and integration of three 2D seismic lines, acquired in 2015 / 2016 and only recently made available, which transect part of the block. These will be important in further refining the definition of a deep structure mapped across the Rio Salado and Huayco blocks. Management estimates for Original Gas In Place are 1.75 TCF (mean) for the whole structure, across both blocks.

At the end of the TEA period the company will have the right to negotiate contract terms with YPFB for the Rio Salado licence should it elect to do so.

Huayco Block

Echo also announced it is continuing the Joint Evaluation Agreement with Pluspetrol over the Huayco block. During the past 12 months Echo completed a full reprocessing of a 250 km2 cube of 3D data across Huayco and part of Rio Salado. This was integrated into a 3D structural model, which will form the basis of the ongoing work with Pluspetrol.

“We are delighted to have signed the TEA with YPFB for the Rio Salado block, as well as extended our agreement with Pluspetrol regarding Huayco, given the potential we see running across both blocks. Much technical work has been done and we are pleased that by extending our agreement with Pluspetrol we have given ourselves time to further analyse what we still believe to be exciting potential as we evaluate newly available industry data across the licence areas,” said Echo Energy plc CEO Fiona MacAulay.

The acquisition of an interest by Echo in Rio Salado remains contingent on final commercial terms being agreed. Accordingly, the company does not have an interest or the right to acquire any interest at this stage.

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Engie And Caisse Said To Plan $9B Pipeline Bid

(Bloomberg, Cristiane Lucchesi, Francois Beaupuy, Scott Deveau, 15.Oct.2018) — French utility Engie SA and a Canadian pension fund plan to offer as much as $9 billion (34 billion reals) for Petrobras’s natural gas pipeline network, potentially a $1 billion boost from their initial bid, according to people with knowledge of the matter.

Petroleo Brasileiro SA is now finalizing terms with Engie and the Canadian fund, Caisse de Depot et Placement du Quebec, the people said, asking not to be named because the talks are private. Petrobras then plans to touch base with other groups for a second round of bids that must meet the terms agreed to with Engie. In April, Mubadala Development, in a consortium with EIG Global Energy Partners, and Macquarie Group Ltd. presented two separate bids, people said at the time.

Spokesmen from Engie, Caisse and Petrobras declined to comment.

The 2,800-mile (4,500 kilometer) pipeline network, Transportadora Associada de Gas, or TAG, spans ten states in northeastern Brazil. It’s being sold as part of a wider push by Petrobras to sell $21 billion in assets to slash debt. If consummated, it would be the company’s biggest divestment ever.

Engie, whose initial $8 billion bid including debt was the highest, is planning to raise its offer to ensure it prevails at a time when cheap credit is available to help finance the acquisition, the people with knowledge of the talks said.

Petrobras aims to conclude a deal this year, the people said, but the divestment program still faces uncertainty. In July, Ricardo Lewandowski, a Supreme Court judge, ruled that the sale of any government-owned company asset, including subsidiaries, must be approved by Congress.

Petrobras will try to resume negotiations over TAG even without a final decision from the court, Valor newspaper reported Oct. 10.

In 2017, Petrobras sold Nova Transportadora do Sudeste, a similar but smaller pipeline network in Brazil’s southeast, to a consortium led by Brookfield Asset Management for $5.2 billion.

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Petrobras Expects To Revive TAG Deal Over The Next Month: Sources

(Reuters, Tatiana Bautzer, 15.Oct.2018) — Brazil’s state-controlled oil company Petroleo Brasileiro SA expects to revive the sale of its pipeline operator TAG over the next month, if it can get a Supreme Court injunction lifted, with the support of the country’s solicitor-general, a person with knowledge of the matter said.

In July, Petrobras, as the oil company is known, was wrapping up exclusive talks with France’s Engie SA when the process was blocked by a Supreme Court injunction ordering asset sales by state companies be approved by Congress.[nL1N1TZ0IO]

The source, who asked for anonymity to discuss the matter, said Petrobras plans to use a section of Brazil’s 1997 oil law regarding privatizations in an appeal before the Supreme Court.

The company is not planning to circumvent the injunction, the source said, contradicting local media reports.

Petrobras did not immediately respond to a request for comment.

If Petrobras is allowed to proceed with the deal, the company will finish drafting the sale contract with Engie and then allow new bids from the other two groups interested in the gas pipeline network.

However, Petrobras and Engie have not yet restarted talks, which are currently forbidden by the Supreme Court injunction, the source added.

Engie may have to beat bids from two rival consortia after its exclusivity period ends.

One is led by investor EIG Global Energy Partners and United Arab Emirates’ sovereign wealth fund Mubadala Development Co PJSC. The second is led by Australia’s Macquarie Bank Ltd.

The competing consortia have not yet been contacted by Petrobras, two other people with knowledge of the matter added.

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Echo Energy Announces Successful Initial Perforation At EMS-1001 Well In Argentina

(Echo Energy plc, 15.Oct.2018) — Echo Energy plc announced an update on the initial perforation phase on the third Argentinian well.

The company previously drilled four wells across its onshore licences in Argentina. On 21 June 2018, the company announced that the third well in the sequence (EMS-1001 in the Fraccion C licence which reached a total depth of 2460m in the Upper Jurassic Tobifera formation) was considered potentially material and transformational. This followed initial interpretation (from the wireline logs) of an extended oil column in the Tobifera Formation.

Echo has now perforated and performed inflow tests on two representative intervals, with a view to ensuring no mobile formation water presence prior to rigless mechanical stimulation of the well (the standard technique in this basin).

The results of the inflow tests confirm intervals are suitable for mechanical stimulation.

The rig is now off contract and has been demobilised following completion of all anticipated rig based activities. Once design and planning is complete Echo expects to return to EMS-1001 and co-ordinate activity with planned stimulation of the ELM-1004 anticipated to commence by year-end.

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PDVSA Preparing $950 Million Payment On 2020 Bond: Sources

(Reuters, 15.Oct.2018) — Venezuela’s state-owned oil company PDVSA is preparing to pay holders of its 2020 bond some $950 million this month, after failing to make interest payments on most other bonds this year, sources at the company and in the local financial sector said.

PDVSA has fallen behind on more than $7 billion in principal and interest payments since the end of 2017, according to market sources and Refinitiv data, as an economic crisis in Venezuela has worsened.

But cash-strapped PDVSA has stayed current on the 2020 issue, which is backed by 50.1 percent of shares in U.S. refining network Citgo.

“Quevedo gave his approval to arrange this payment,” said one person at PDVSA familiar with the plans, referring to Manuel Quevedo, Venezuela’s oil minister who is also president of PDVSA. “It will be paid in full.”

Another source at PDVSA and three sources in Venezuela’s financial industry confirmed that the company plans to pay. The sources spoke last week and requested anonymity because they were not authorized to speak publicly.

Neither PDVSA nor Venezuela’s oil ministry immediately responded to requests for comment.

PDVSA must pay $840 million by Oct. 27 to cover an amortization payment on the bond, and then has 30 more days to make a $107 million interest payment.

“PDVSA has been making payments on the 2020 bond and they tell us they plan to keep doing so,” said one local financial operator who has spoken with the company about the plans.

To be sure, this year PDVSA has made payments only on its 2020 and 2022 bonds, prompting ratings agencies to declare the company and Venezuela’s government in selective default. The drop in crude prices that began in 2014 and an ensuing decline in production have reduced the OPEC nation’s government revenue.

Investors believe PDVSA will prioritize the 2020 bond because of the potential implications for Citgo. The remaining shares in the refiner are already pledged to Russia’s Rosneft as collateral on a $1.5 billion loan.

And it is also under threat from Canadian miner Crystallex, which has won a judge’s authorization to seize Citgo shares to collect on a $1.4 billion award stemming from a decade-long nationalization dispute.

“PDVSA has demonstrated via its legal efforts a strong preference to maintain ownership of Citgo,” JP Morgan wrote in a note to clients last week.

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Echo Energy Continues To Progress Argentina Wells, Signs New Deal In Bolivia

(Proactive Investors, 15.Oct.2018) — Echo Energy Plc told investors that it has confirmed that its third Argentinian well will be suitable for mechanical stimulation, and, it will now move on to the next stage in operations.

The company, in a statement, updated on the EMS-1001 well at the Fraccion C – which was drilled into the Jurassic Tobifera formation, previously described as “material and transformational”.

Latest operations saw the company perforate and perform inflow tests on two intervals, to ensure there’s no mobile formation water presence ahead of rigless mechanical stimulation work.

The drill rig has now been demobilised, meanwhile, design and planning are being finalised for the stimulation work. The company expects to start the stimulation of both the EMS-1001 and ELM-1004 wells before the end of this year.

Separately, Echo also announced that it has signed a new agreement in Bolivia for the onshore Rio Salado Block.

A technical evaluation agreement (TEA) was signed between Echo Energy Plc and state-owned oil and gas firm YPFB (Yacimientos Petrolíferos Fiscales Bolivianos).

It details the work commitments for Echo to undertake at Rio Salado, including the interpretation and integration of 2D seismic data with a view to better understand deep structures which have been mapped as crossing between the Rio Salado and Huayco blocks.

Echo highlighted that it has estimated the whole structure at around 1.75 trillion cubic feet of gas in place.

At the end of the TEA period, Echo will have the right to negotiate a longer-term contract with YPFB.

The company also said that it will continue to advance its joint venture at Huayco where, in the past year, it has completed a full reprocessing of 250 square kilometres of 3D seismic data.

‘We are delighted to have signed the TEA with YPFB for the Rio Salado block, as well as extended our agreement with Pluspetrol regarding Huayco, given the potential we see running across both blocks,” said Fiona MacAulay, Echo chief executive.

“Much technical work has been done and we are pleased that by extending our agreement with Pluspetrol we have given ourselves time to further analyse what we still believe to be exciting potential as we evaluate newly available industry data across the licence areas.”

Echo noted that it does not yet hold an interest in Rio Salado, and any acquisition of a stake in the exploration venture remains contingent upon agreeing to commercial terms in the future.

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