Otto Energy Limited has entered into a conditional heads of agreement with BHP Billiton Petroleum Pty Limited to farm]out 60% of its interest in Service Contract 55. SC55 covers a deepwater block located offshore southwest Palawan Island, in the Philippines.
Otto acquired its 85% interest in SC55 in 2006, through the purchase of NorAsian Energy Ltd. The Company announced in July 2008 that it was seeking to farm down its working interest in SC55 for a carried through drilling program. BHP Billiton has agreed to reimburse Otto for back costs and pay the full cost of a 3D seismic program and the drilling of two deepwater exploration wells in consideration for the transfer of a 60% interest in SC55. Otto will retain a working interest 25%. BHPB will also be appointed operator of SC55. The agreement is conditional on finalising farm]out and joint operating agreements and obtaining all necessary government and joint venture approvals.
"This farm]out is in line with Otto's exploration strategy in the Philippines, and BHP Billiton's interest and involvement in this project is a strong endorsement of our belief in the petroleum potential of the Philippines," Alex Parks, CEO of Otto said. "BHP Billiton is one of the largest and most successful companies in the resources sector, and in the event of a discovery of either oil or gas, we couldn't hope for a better partner to operate such a development. We anticipate that the 3D seismic survey will be carried out and interpreted in 2009 with drilling to follow in 2010. Otto looks forward to a positive and mutually]beneficial working relationship with BHP B."
SC55 covers an area of 9,000square kilometersin the southwest Palawan Basin. Never previously held as an exploration block, SC55 is a deepwater block in the middle of a regional oil and gas fairway that extends from the productive region offshore Borneo in the southwest to the Philippine production assets in the northeast, including the Malampaya oil and gas field, which is currently the largest producer of condensate and gas in the Philippines.
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