Otto Energy Ltd ("Otto") (ASX:OEL) announces that it has reached agreement to purchase an additional 40% working interest in Service Contract 51 (SC51) North Block from SWAN Oil & Gas (SWAN).
Under the terms of the agreement, Otto has purchased SWAN's interest for A$1.25 million, increasing Otto’s working interest to 80%. Otto will continue as operator of SC51 North. Otto will not assume any rights in SC51 South Block, consistent with the decision to exit in February 2011.
Under the terms of a pre-existing farm-in agreement, Otto will pay 100% of future costs through to drilling of the Duhat-2 exploration well to earn the full 80% working interest. The current 100km 2D seismic acquisition programme is planned to be complete by October, depending on weather conditions. Planning has commenced for drilling of the Duhat-2 well which is due to spud in 2013.
SC51 North Block is located onshore the island of Leyte in the Philippines. Otto is focused on maturing the Duhat prospect located on the San Isidro anticline that was drilled with the Duhat-1/1A well in 2011. During the drilling of this well, oil and gas indications were observed and the presence of an active petroleum system, a working seal and a structure conducive to hydrocarbon entrapment were proven. The Duhat structure is mapped to have mean in place volume (STOIIP) of 76 mmbbl.
This acquisition is consistent with Otto’s strategy of building an integrated petroleum company, generating a sustained flow of drilling events, focusing on South East Asia and onshore East Africa. Higher equity in SC51 North Block creates further balance between our onshore and offshore assets. Our onshore assets represent lower cost exploration opportunities with the potential to commercialise subsequent discoveries in shorter time frames. Our offshore exploration assets represent higher volume opportunities but require higher investment and longer lead times to commercialise