Echelon Resources Completes Cue Divestment, Advances Palm Valley Drilling
Echelon Resources has finalised its divestment of Cue Energy shares, boosting cash and cutting debt, while progressing key drilling and gas supply agreements.
- Divested Cue Energy shares for over A$17 million
- Reduced debt by A$19 million during the quarter
- Maintained steady production at 4,198 boe per day
- Commenced two-well drilling program at Palm Valley
- Secured new gas supply agreements for Kupe and Palm Valley
Cue Energy Divestment Strengthens Balance Sheet
Echelon Resources (ASX:ECH) has completed the sale of its Cue Energy shareholding through Horizon Oil's takeover offer, receiving more than A$17 million in cash proceeds. This divestment marks a significant portfolio streamlining, leaving Echelon with a 6.64% stake in Horizon Oil and a strengthened balance sheet. The cash inflow was promptly deployed to reduce debt by A$19 million during the quarter, lowering the loan facility balance to A$10.5 million and improving financial flexibility.
Stable Production Amid Portfolio Transition
Production volumes remained broadly flat at 381,992 barrels of oil equivalent (boe) for the quarter, averaging 4,198 boe per day. This stability includes Cue's operations up to the divestment date, with higher production receipts driven by increased output from Maari, Mereenie, and Kupe fields, partly offset by declines at Sampang. Notably, Maari field production rose 12% quarter-on-quarter following a successful well workover, while Kupe benefited from improved plant reliability and stronger condensate pricing.
Advancing Gas Supply and Drilling Initiatives
Echelon executed new long-term gas supply agreements for both the Kupe and Palm Valley joint ventures, underpinning future sales and investment in key producing assets. At Palm Valley, preparations culminated in the commencement of a two-well drilling program on 25 July 2026, targeting first gas sales by October. This campaign is expected to span four and a half months, aiming to restore and enhance production capacity following a planned five-day shutdown earlier in the quarter.
Ongoing Development and Exploration Efforts
In Indonesia, production from mature fields like Oyong and Wortel continued to decline, but Mahato field showed a strong recovery after resolving regional infrastructure issues. Development drilling has commenced with two infill wells targeting the Bekasap Formation, while the operator advances the Phase 3 development plan pending government approval. Meanwhile, Echelon is progressing technical evaluation of its EP145 permit in the Amadeus Basin, integrating geological data and engaging with regulators and stakeholders to inform next steps.
Cash Flow and Financial Management
Operating cash inflows improved by 32% to A$16.0 million this quarter, supported by higher production receipts and reduced expenditure. Despite paying down debt and funding development activities; including A$4.5 million in drilling and field work; Echelon maintained a healthy cash balance of A$25.0 million at quarter-end, excluding Cue-related cash. The company retains capacity to redraw on its loan facility to support ongoing development in the Amadeus Basin if required.
Bottom Line?
Echelon’s divestment and disciplined cash management set a solid foundation as drilling ramps up at Palm Valley and exploration advances in the Amadeus Basin.
Questions in the middle?
- How will the Palm Valley drilling outcomes influence Echelon’s production profile and cash flow later this year?
- What impact will the Phase 3 development plan approval at Mahato have on Indonesian production and revenues?
- How might Echelon’s 6.64% stake in Horizon Oil shape its strategic positioning in the regional energy market?
