29/10/2007 - 10:50

Otto Energy to raise $68m for Philippines oil field

29/10/2007 - 10:50

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West Perth-based oil explorer Otto Energy Ltd has struck a deal to acquire an 18 per cent interest in a Philippines oil field that is set to enter production in April next year.

Otto Energy to raise $68m for Philippines oil field

West Perth-based oil explorer Otto Energy Ltd has struck a deal to acquire an 18 per cent interest in a Philippines oil field that is set to enter production in April next year.

Otto will pay US$38.5 million (A$43 million) for its interest in the Galoc oil field, which will provide cash flow to support the company's exploration programme.

Otto will also have to pay a US$12.6 million (A$14 million) security deposit for project financing, which will be repaid when the field enters production.

To fund the acquisition, Otto intends to place 226 million shares at 30 cents to raise $67.8 million.

Euroz Securities has underwritten the placement and Max Capital was adviser to Otto.

Otto chief executive Alex Parks said he was confident in bidding for the Galoc interest, since his consulting business RPS Energy had previously done a lot of a work in the area and his chief operating officer Craig Martin previously worked for Nido Petroleum, which already has an interest in the field.

The cost of the acquisition has been estimated at approximately US$9 per barrel.

 

An Otto announcement is pasted below:

Otto acquires an 18.28% interest in the Galoc Oil Field, offshore Philippines
Highlights:
- Otto Energy has entered into agreements to acquire an 18.28% interest in the Galoc Field offshore Philippines, via acquisition of a 31.38% shareholding in Galoc Production Company WLL (GPC)
- GPC is operator and holds 58.29% equity in the Galoc Field
- Gaffney Cline, an independent reserves assessor, has certified gross 2P reserves of 23.4 MMbbls for the Galoc Field
- The Galoc Field is currently under development with "first oil" anticipated in April 2008

Alex Parks CEO of Otto Energy said, "The Galoc Field acquisition is an excellent strategic fit for Otto's Philippines portfolio and further strengthens the company's vision to becoming a significant oil and gas producer. With near-term production expected in April 2008, the Galoc Oil Field will provide cash flow to expedite the progress of Otto's other longer term exploration activities in the region."

Otto Energy Limited "Otto" (ASX: OEL) is pleased to announce that it has entered into agreements to acquire an 18.28% indirect interest in the Galoc Field through the purchase of two companies each holding a 15.69% shareholding in Galoc Production Company "GPC". Vitol Holdings Limited owns the rest of GPC. GPC is the field
operator and holds a 58.29% working interest in the Galoc Field, which is located offshore Palawan in Service Contract 14C in the Republic of the Philippines.

The Galoc Oil Field has Gaffney Cline certified gross 2P reserves of 23.4MMbbls1 and is currently under development for first commercial oil production expected in April 2008.

Drilling of the Galoc development wells is currently underway and the field is expected to commence production in April 2008 at a gross production rate of approximately 18,000 bopd. Otto's beneficial share will be approximately 3,300 bopd.

GPC has a debt finance facility in place, thus Otto's share of the project is fully funded through to first oil.
Otto's share of the profits generated from the Galoc Field production in 2008 is anticipated to be over US$30 million. Revenues will be used to fund Otto's exploration activities in the Philippines. Otto's total Philippines acreage portfolio, including this new acquisition, is summarised in Figure 1.

Terms of the Transaction

Otto Energy Limited ("Otto") has entered into agreements for the acquisition of a 31.38% shareholding in the Galoc Production Company WLL ("GPC"). Completion of the agreements is subject to necessary shareholder approvals at the Company's annual general meeting.

GPC holds a 58.29% participating interest in Service Contract 14C, Galoc Block which is located offshore in the Republic of the Philippines. Pursuant to a farm-in agreement entered into in 2004, GPC is paying approximately 78% of the development costs of the Galoc Block. The other paying party is a wholly owned subsidiary of Nido Petroleum Limited ("Nido"), a company which is listed on the Australian Securities Exchange ("ASX"). The Nido subsidiary is paying approximately 22% of the development costs of the Galoc Block.

The shares in GPC were held by Team Oil Limited ("Team") (15.69%), Cape Energy Philippines SA ("Cape") (15.69%) and Vitol Holdings Limited ("Vitol") (68.62%). Team is a wholly owned subsidiary of Granby Oil and Gas plc ("Granby"). Cape is a wholly owned subsidiary of Cape Energy SA ("Cape SA")

Otto has entered into interdependent agreements with Granby and Cape SA to acquire 100% of the share capital in each of Cape and Team (the names of these companies will be changed to reflect their inclusion in the Otto Energy Group).

The total cash consideration payable to each of Granby and Cape SA under the agreements is USD $19,250,000 being made up of:
a) USD$16,661,000 million payable at Completion;
b) The re-payment of existing Shareholder Loan amounts to GPC of approximately USD$2,590,000; and
c) In addition, Otto will issue to each of Granby and Cape SA, 1 million shares and 4 million options to each of Granby and Cape SA, at an exercise price of $0.34 per share and exercisable within 24 months from their issue. The
shares and options will be subject to a 12 month escrow period.

Otto has also agreed to replace an amount equivalent to the ~ USD$6.3 million deposit on security for project financing (the original security deposits will become assets of the Otto Energy Group).

Terms of the Funding

Otto is intends to fund the acquisition by placing 226 million new shares at a price of 30c per share to raise A$67.8 million in two tranches as follows:

- 31 million Shares at 30c per share to raise A$9.3 million will be issued immediately under the Company's 15% capacity, pursuant to ASX Listing Rule 7.1; and
- 195 million Shares at 30c per share to raise a further A$58.5 million will be issued subject to shareholder approval at the Company's annual general meeting. A Notice of Meeting in this regard will be sent to shareholders
shortly.

Euroz Securities Ltd has underwritten the placement, with Max Capital Pty Ltd acting as corporate advisors to Otto.
The placement has been oversubscribed and at time of lodging, Otto is pleased two European institutional investors are taking a significant portion of the placement with expressed commitment to investing in Otto for the longer term, as demonstrated by offering a voluntary escrow period of 12 months.

 

 

 

 

 

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