Perth-based oil and gas explorer Otto Energy plans to start drilling the Santa Rosa tenements in Argentina in June this year after the approval of a near $6 million exploration budget.
The company will initially earn a 32.48 per cent interest in the exploration licence after entering into an agreement with Oromin Explorations in 2005.
Otto will fund the first $US1.4 million ($A2 million) of the $US4.1 million ($A5.8 million) exploration program.
Shares in Otto closed down one cent to 14c today.
The announcement is below:
Otto Energy Limited (ASX: OEL) is pleased to advise it has executed agreements formalising the farm-in into the Santa Rosa exploration licence in Argentina and has approved the Exploration Work Program and Budget totalling US$4.1 million with the view to start drilling in H1 2009.
The Santa Rosa Block is a large 7,694 square kilometre onshore concession located in the oil prolific Cuyana Basin of the Mendoza Province of Argentina.
In November 2005, Otto and Oromin Explorations Limited ("Oromin") agreed to a Letter of Intent to farm‐in to the Santa Rosa Block, whereby Otto would initially earn a 32.48% indirect working interest from Oromin.
The Letter of Intent has now been formalised with Otto executing a number of agreements in which Otto will earn a 32.48% shareholding in an Oromin-owned British Virgin Islands company Cynthia Holdings Ltd that wholly owns an Argentinean company Exploraciones Oromin SA, which in turn holds 100% of the rights to explore and produce from the Santa Rosa Block.
The farm-in consideration is for Otto to fund the first US$1.4 million of the approved Exploration Work Program and Budget, after which it contributes its pro rata equity share.
The interest holders in the Santa Rosa Licence are now indirectly Oromin 67.52% (Operator) and Otto 32.48%. Otto is entitled to take an equivalent direct interest in the Santa Rosa Block at anytime subject only to Argentinean government approvals.
