Otto Energy eyes BHP Billiton stake in SC 55 in Palawan

MANILA, Philippines - Otto Energy Ltd., an oil and gas exploration firm listed at the Australian Stock Exchange, is eyeing to take in BHP Billiton Petroleum’s (BHPB) stake in Service Contract 55 in offshore Palawan.

This as BHPB, the lead operator of SC 55, earlier decided to pull out of the project. Its partners are Otto Energy and Trans-Asia.

In its disclosure to the Australian Stock Exchange, Otto Energy said it has executed a letter of intent with BHP Billiton Petroleum proposing to terminate the farm-out agreement between the two parties over SC 55.

Otto Energy chief executive officer Gregor McNab said: “This letter of intent with BHPB represents a favorable outcome for Otto shareholders, providing us with material funding to allow drilling in SC 55. This licence is a material and high potential permit with a number of exciting prospects and leads within it. We have commenced drilling planning activities and we look forward to unlocking the value from this permit through drilling the first well. The prospectivity of the carbonate trend, including the Cinco prospect, and the Hawkeye turbidite clastic prospect demonstrates the high impact potential to be tested by exploration drilling in SC 55.”

“T’he letter of intent contemplates the re-assignment of BHPB’s 60-percent working interest to Otto Energy, taking Otto’s working interest to 93.18 percent, subject to approval of the re- assignment by the Philippines’ Department of Energy (DOE),” Otto Energy said in its disclosure.

A binding termination agreement is expected to be executed in the coming weeks, the company said.

Upon approval of the re-assignment by the DOE, Otto Energy will accept the re-assignment of BHPB’s 60-percent working interest and BHPB will pay $3 million to Otto Energy.

Furthermore, once the agreement receives the greenlight from the energy department, BHPB has no enduring rights to any future exploration outcomes or obligations.

Otto Energy noted that it has access to all 3D seismic data that has been acquired in the permit to date and has commenced a handover process for work undertaken by BHPB as the former operator of SC 55.

Upon execution of a definitive agreement, Otto Energy intends to submit a 2014 work program and budget to the energy department outlining the intention to undertake drilling of the 3D seismically defined exploration well in Sub-Phase 4.

Otto Energy will also commence a farm-out process intended to introduce a new partner into the joint venture to participate in this program.

BHPB has engaged with the DOE regarding the revised timing of the work program commitments following the suspension due to delays in the receipt of the strategic environmental plan.