Otto Energy Takes Over BHP Billiton's Stake in SC55
Otto Energy Limited reported Tuesday that the company has executed final binding agreements with BHP Billiton Petroleum (Philippines) Corporation (BHPB) to terminate the farm-out agreement between the two parties over Service Contract 55 (SC55), offshore the Philippines.
Otto has submitted a request to the Philippines Department of Energy (DOE) for re-assignment of BHPB's 60 percent working interest to Otto, taking Otto’s working interest in SC55 to 93.18 percent.
The key terms of the termination deeds provide for the following:
- Upon approval of the re-assignment by the DOE, Otto will accept the re-assignment of BHPB's 60 percent working interest and BHPB will pay $3.0 million to Otto
- Otto to lodge a Sub-Phase 4 work program and budget with the DOE, to drill the Hawkeye-1 exploration well
- BHPB will pay a further $24.5 million to Otto upon completion of drilling the first exploration well in SC55; and
- BHPB has no enduring rights to any future exploration outcomes or obligations
Otto has briefed the DOE of the intention to undertake drilling of the 3D seismically defined and DHI (Direct Hydrocarbon Indicator) supported Hawkeye-1 exploration well in Sub-Phase 4. Hawkeye is a turbidite clastic reservoir target in 5,542 feet (1,690 meters) of water with top reservoir prognosed to be at 8,963 feet (2,732 meters). Drilling could commence as early as 4Q 2014.
SC55 contains a number of distinct exploration play types including the carbonate gas/condensate trend, that has the potential for an oil charge, and the turbidite clastic prospects. The permit provides material opportunity and a series of possible drilling targets in an exploration campaign that will be undertaken during the remaining term of the service contract.
Otto has commenced drilling planning preparations, including development of well designs, planning studies and the necessary equipment procurement required to undertake this program. Otto has invited expressions of interest from drilling rig owners to determine availability of drilling units to drill the Hawkeye-1 exploration well within the required timeframe.
Otto has commenced a farm-out process intended to introduce a new partner into the joint venture to participate n the drilling of the Hawkeye-1 exploration well. Otto is targeting suitably qualified partners to join the program. A number of parties have commenced due diligence reviews of the data room ahead of the formal launch of the farm-out campaign.
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