Echelon Resources Posts 341% Profit Surge and Cuts Debt After Cue Sale
Echelon Resources (ASX:ECH) reported a 341% jump in net profit to A$28.2 million for FY26, driven by stronger gas prices and a A$12.1 million gain from its exit of Cue Energy. The group also repaid A$37 million of debt, leaving it well positioned for upcoming gas drilling at Palm Valley.
- 341% net profit increase to A$28.2 million
- 5% revenue growth to A$63.4 million from Amadeus Basin
- Completed sale of 49.7% stake in Cue Energy, gaining A$12.1 million
- Voluntary debt repayments of A$37 million reduce borrowings to A$10.5 million
- Palm Valley appraisal drilling underway targeting October 2026 gas
Profit Boom Fueled by Gas Prices and Cue Sale
Echelon Resources (ASX:ECH) delivered a striking turnaround in the year ended 30 June 2026, with net profit after tax soaring 341% to A$28.2 million. The jump was underpinned by a 5% lift in revenue to A$63.4 million, largely from stronger realised gas prices in the Amadeus Basin assets, and a significant A$12.1 million gain on the sale of its 49.7% stake in Cue Energy Resources Limited.
Profit attributable to shareholders rose even more sharply, climbing 657% to A$24.4 million compared to just A$3.2 million the previous year. The continuing operations alone swung from a near breakeven A$0.1 million in FY25 to a solid A$8.6 million in FY26, reflecting improved gas pricing, lower operating costs, and reduced exploration expenditure. The sale of Cue also contributed A$7.4 million of operating profit before disposal.
Cue Exit Realises Value and Streamlines Portfolio
The disposal of Cue was a defining event for Echelon this year. After entering a pre-bid agreement and accepting Horizon Oil Limited’s takeover offer, Echelon lost control of Cue on 17 June 2026, leading to its deconsolidation. The total consideration received and receivable was A$42.1 million, comprising cash and Horizon shares valued at A$23.5 million, giving Echelon a 6.64% stake in Horizon and ongoing exposure to the combined entity’s future prospects.
This move crystallised value from a decade-long investment, while allowing Echelon to focus capital and management on its core producing assets. The gain on disposal was recognised within discontinued operations, boosting the group’s bottom line substantially.
Debt Reduction Strengthens Financial Flexibility
Strong operating cash flow of A$49.9 million, combined with proceeds from the Cue sale, enabled Echelon to voluntarily repay A$37 million of debt during the year. This slashed external bank borrowings from A$47.5 million at the end of FY25 to just A$10.5 million at 30 June 2026, an almost 80% reduction.
Cash on hand was A$25 million at year-end, down from A$36.8 million, reflecting the debt repayments and the deconsolidation of Cue’s cash balances. The group’s debt facility remained largely undrawn with approximately A$47.3 million available, positioning Echelon well for future investment opportunities.
Production Steady, Focus on Gas Growth
Production from continuing operations was slightly lower year-on-year due to natural field declines at Kupe and Palm Valley and lower liquids volumes at Mereenie. Total production from Echelon’s assets reached 1.02 million barrels of oil equivalent (mmboe), with Cue contributing 0.57 mmboe prior to disposal.
Gas sales revenue rose 12% to A$59.5 million, driven by the Amadeus Basin where Mereenie gas sales remained steady and Dingo delivered higher volumes. Crude oil and condensate revenue fell to A$3.9 million from A$7.2 million, reflecting changes in liquids handling and offtake.
Looking ahead, Echelon is investing in growth with A$16 million spent on oil and gas assets during the year. Drilling has commenced on the PV-14 appraisal well, the first of a two-well program at Palm Valley, aiming for first gas by October 2026. Further drilling plans are in place to expand production and meet strong demand for reliable local gas supply.
Dividend Pause and Ongoing Compliance
The board opted not to declare a final dividend for FY26, following an interim dividend of 0.40 cents per share paid in March 2026. While Echelon expects to receive dividends from its Horizon Oil investment, distribution restrictions tied to current debt arrangements mean timing and amounts remain uncertain.
On the regulatory front, Echelon remains compliant with loan covenants and continues to monitor evolving accounting standards, including IFRS 18, which will affect financial statement presentation from FY27. The group also disclosed ongoing litigation with Triangle Energy over permit agreements but does not currently expect material financial impact.
Independent auditor KPMG issued an unqualified opinion, highlighting the Cue disposal and rehabilitation provisions as key audit matters due to their judgemental nature and significance.
Bottom Line?
Echelon’s FY26 results mark a turning point with stronger profits, a leaner balance sheet, and a clear focus on gas growth, but investors should watch Palm Valley drilling outcomes and Horizon Oil dividend timing closely.
Questions in the middle?
- How will Echelon’s 6.64% Horizon Oil stake influence its future earnings and strategy?
- Can the Palm Valley appraisal drilling deliver the expected production growth on schedule?
- What impact might ongoing litigation with Triangle Energy have on Echelon’s exploration permits and costs?
