--Otto has increased its equity position in SC 51 and SC 55 to 70% and 75%, respectively, through negotiation with farminee Vital. --Vital agreed to adjust their farm in to earn 10% (was 30%) in each exploration permit, paying their share of the Filipino partner carry and contribution of a total of US$200,000 in carry towards seismic (reduced from US$600,000). Plus paying 13.75% of each of the first wells in each permit (was 41.25%). --The US$ 1.125 million entry fee and the Vital acquisition of 35% interest in SC 50 by paying 60% towards the US$20 million development remains unaffected.
Otto initiated discussions with Vital to accelerate the exploration programs across all three permits in the Philippines this year to include a US$ 6-7 million 2D & 3D seismic program and drill the 100MMbbls + Argao prospect in SC 51 before year end (subject to seismic vessel and rig availability).
The accelerated program was beyond the original budget set out for the permits and Vital opted to re-allocate the funds they have paid to date towards seismic acquisition in SC55 in October 2006 towards the planned 3D program over Calauit and surrounding prospects in SC50.
By doing so Vital reduces their equity position in SC 51 and SC55 to allow the accelerated program to go ahead in the exploration permits and concentrate their resources in SC50, where the Calauit field is expected to be put on production in early 2008 at a gross rate of 12-15,000 bopd.
Otto may seek an additional farm in partner for SC51 & 55 to participate in the drilling after the seismic program.
Otto will provide more details on the seismic programs in an ASX release once a final program and contract is in place with the seismic contractor CGG Veritas.
Otto's CEO, Alex Parks, said:
"Vital are very supportive of the accelerated exploration program in SC51 & 55 but understandably wish to concentrate their resources on SC50 program over the more imminent development at Calauit. Otto intends to proceed with the 2D/3D program at its new equity position and intends to shoot the various seismic programs around mid 2007."
West Perth-based oil and gas explorer Otto Energy Limited has assembled a balanced portfolio of oil and gas exploration and production projects in the Philippines, Turkey and Argentina.
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