Philippine Daily Inquirer
9:55 am | Friday, November 29th, 2013
MANILA, Philippines—Australian firm Otto Energy Ltd. has executed a letter of intent to acquire the 60-percent stake of BHP Billiton in Service Contract 55 off Palawan.
Otto Energy was forced to make the move after BHP Billiton decided earlier this month to dump its interest in SC 55. The company faced oppositions and delays in implementing the proposed oil and gas exploration work program for SC 55.
In a regulatory filing, Otto Energy said that the letter of intent also proposed the termination of its farm-out agreement with BHP Billiton, which now would need to pay its obligations to the service contract.
Upon approval by the parties involved, as well as by the Philippine Department of Energy, Otto Energy will have a 93.18-percent interest in SC 55. The remaining 6.82 percent will still be held by Palawan55 Exploration and Production Corp., a subsidiary of publicly listed Trans-Asia Oil and Energy Development Corp.
BHP Billiton will also be required to pay $3 million to Otto Energy, which will then submit to the DOE its work program and budget under the fourth exploration subphase of SC 55.
BHP will also need to settle another $24.5 million to Otto Energy upon drilling the first exploration well in SC 55, touted as the country’s next Malampaya field.
According to Otto Energy, it has started a handover process for work undertaken by BHP Billiton as the former operator of SC55.
“This letter of intent with BHP Billiton represents a favorable outcome for Otto shareholders, providing us with material funding to allow drilling in SC 55. This license is a material and high potential permit with a number of exciting prospects and leads within it,” said Otto Energy chief executive officer Gregor McNab.
“We have commenced drilling planning activities and we look forward to unlocking the value from this permit through drilling the first well. The prospectivity of the carbonate trend, including the Cinco prospect, and the Hawkeye turbidite clastic prospect demonstrates the high impact potential to be tested by exploration drilling in SC55,” McNab added.
Service Contract 55 reportedly contains huge unrisked potential resource in the area, with the Cinco prospect alone holding about 2.2 trillion cubic feet (tcf) of gas. This potential resource is said to be almost similar to Malampaya’s proven reserves, which stood at 2.7 tcf.
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Tags: Australia , BHP Billiton , Energy , oil and gas-upstream activities , oil exploration , Otto Energy , Palawan , Philippines , Service Contract 55
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