Otto surges on BHP farm-in
Otto Energy shares surged 18 per cent yesterday after the Perth oil and gas junior announced that BHP Billiton had farmed into a highly prospective deepwater lease off the Philippines.
BHP's farm-in into Service Contract 55, a deepwater block south-west of the Palawan Island, ends almost three years of attempts by Otto to secure a senior partner to help fund the costly exploration program.
BHP was lined up as the farm-in partner in late 2008, following a five-month search. It agreed to fund up to $200 million of exploration, including 3D seismic work and two wells.
However, the proposed deal collapsed before being revised in January last year, when BHP agreed to fund the seismic work if Otto arranged for the seismic services.
In return, BHP was granted exclusivity to review the completed seismic work before deciding whether to push ahead with the farm-in.
The seismic work identified several prospects within SC55, including Cinco, which has an estimated gross recoverable resource of up to 3.8 trillion cubic feet of gas and 132 million barrels of condensate.
Subject to SC55 joint venture agreement and approval from the Philippines Department of Energy, BHP will now earn up to 60 per cent of the lease and take over operatorship, reimburse Otto for past costs and fund one exploration well by next year.
Otto will retain a 33.2 per cent interest in SC55.
Otto shares soared 1.7¢ to 11¢.
