Otto, Incremental Confirm Edirne Gas Strike as Future Producer

Australian oil and gas exploration and development company Otto Energy, together with joint venture partner Incremental Petroleum, on Tuesday announced that the Koyustu-1 gas exploration well, in the Edirne License, Thrace Basin, Turkey flowed gas from the first of three intervals interpreted to be gas-bearing.

In the release on 9th January Otto and Incremental indicated that the shallower main zone was planned to be tested following the flow test on the deeper interval. As the log interpretation was clearly accurate for the first interval and therefore unambiguous for the main zone, a test of the main zone was deemed unnecessary to prove its gas flow potential pre-development.

The testing of the shallower main interval (247-255m) would have required:

--Co-mingling gas flows from both intervals with different pressures , or
--Isolating the first tested interval and testing the shallower main interval separately.

Based on the good results of the flow test from zone 1 and given the unambiguous log interpretation for the other two zones, it was deemed that both options were less desirable than postponing the opening of the interval 247-255m to when it is required during the production life of the well.

Although final analysis and post well studies are ongoing, it is Otto's belief that the total net pay encountered in the well is approximately 17.5m which compares favorably to the pre-drill pay prognosis for the well of 10m. Assuming a commercial development of the field is feasible, the separate intervals will be produced sequentially from deepest to shallowest to optimize sustainable flow rates.

Forward Program

The rig is now being moved to Bati Umur-1 for flow testing. Bati Umur was drilled by the Joint Venture in December 2005 and several zones of potential gas pay were identified on wire line logs. The well was not flow tested due to the severe winter conditions at the time of completion (frozen flow-lines).

The Joint Venture is meeting in mid-January in Turkey to discuss the test results of both wells and to select one or more prospects for early follow-up drilling. The partners will also discuss the parameters of a feasibility study to commercialize these fields in the shortest possible time frame.

Reporting Schedule: Otto will continue to report the progress of the operations each Wednesday until completion of the drilling and testing operations, unless receipt of specific market sensitive data requires otherwise.

Joint Venture

The Edirne License Joint Venture comprises Otto 65%, Incremental 15% and Turkish Operators Merty Energy and Petrako Limited – 10% each.

Incremental will contribute a total of A$3million to Otto towards exploration expenses to earn their 15% in the Edirne License.

Commenting on the announcement, Otto's CEO Alex Parks said:

"Whilst the detailed studies are still required, the JV is confident that combined with success at Bati Umur we'll have commercially viable volumes of gas that warrant development."