Echelon Faces Exploration Setbacks Despite Strong Revenue and Cash Flow Gains
Echelon Resources reports a robust 34% revenue increase and 26% production growth for FY2025, driven by expanded stakes and drilling success at the Mereenie field. The company balances strong cash flow with strategic reinvestment and a modest dividend.
- Revenue rises 34% to A$115.3 million
- Production volumes increase 26% to 1.7 million barrels oil equivalent
- Net profit after tax excluding impairments up 42% to A$16.5 million
- Operating cash flow surges 62% to A$54.1 million
- Final dividend set at 0.75 cents per share, prioritizing growth reinvestment
Strong Financial Performance Anchored by Mereenie
Echelon Resources Limited (ASX, ECH) has delivered a solid financial year ending 30 June 2025, with revenue climbing 34% to A$115.3 million. This growth is largely attributed to the full-year impact of acquiring an additional 25% interest in the Mereenie gas and oil field, located in Australia's Northern Territory. Production volumes rose 26% to 1.7 million barrels of oil equivalent, reflecting successful drilling campaigns and favourable commodity prices.
The company’s net profit after tax (NPAT), excluding impairment and exploration costs, surged 42% to A$16.5 million, underscoring operational improvements. Operating cash flows also saw a significant boost, increasing 62% to A$54.1 million, providing a strong liquidity foundation for future investments.
Balancing Growth and Strategic Reinvestment
Despite the encouraging headline numbers, Echelon reported a lower NPAT attributable to shareholders of A$3.2 million, influenced by impairments including a A$3.2 million write-down on its stake in the mature Kupe field and a A$2.0 million impairment related to exploration withdrawal in the Perth Basin. Exploration expenditure rose sharply to A$8.5 million, reflecting ongoing efforts to discover new reserves despite some unsuccessful drilling.
The company declared a final dividend of 0.75 cents per share, bringing the full-year dividend to 2.25 cents per share. This dividend is unfranked and deliberately set at a conservative level to prioritise reinvestment into strategic growth initiatives, including the recent acquisition of a 100% interest in the EP145 exploration permit adjacent to Mereenie. A large 3D seismic survey is planned to unlock further potential in this underexplored area.
Strategic Positioning in Australia’s Energy Transition
Managing Director Andrew Jefferies highlighted the company’s strategic pivot towards gas to support Australia’s energy transition. The Mereenie field not only supplies critical process heat for manufacturing but also provides 85% of the Northern Territory’s electricity, positioning Echelon as a key player in firming renewable energy supply. The recent reserves upgrade at Mereenie and new gas sales agreements underpin confidence in the field’s long-term value.
Additionally, Echelon’s near 50% stake in Cue Energy Resources continues to contribute positively, with Cue generating A$42.4 million in revenue from Indonesian and New Zealand operations, up 10% year-on-year. This diversified portfolio supports Echelon’s growth while maintaining a low-cost base.
Looking Ahead
With robust cash flows and a strengthened asset base, Echelon is well positioned to capitalise on development opportunities in the Amadeus Basin and beyond. The company’s focus on disciplined capital allocation and exploration in known, infrastructure-rich regions aims to sustain growth and shareholder returns amid evolving energy markets.
Bottom Line?
Echelon’s FY2025 results showcase growth tempered by strategic reinvestment and exploration risks, setting the stage for its next phase of expansion.
Questions in the middle?
- How will the planned 3D seismic survey at EP145 impact reserve estimates and development timelines?
- What are the implications of impairments on Echelon’s mature assets for future profitability?
- How will fluctuating commodity prices and gas contract renewals in the Northern Territory affect cash flow stability?
