Otto, BHP in Philippines farm-in deal

Perth-based Otto Energy has announced BHP Billiton has entered a farm in deal for a prospective oil target owned by Otto off the Philippines island of Palawan.

Otto said BHP exercised an option to take a stake of up to 60 per cent in the block by reimbursing Otto's past costs and funding a deepwater well by 2012.

BHP would become operator of the block and have an option to drill a second well by 2013, Otto said.

Otto currently owns just over 93 per cent of the block and would retain around a 33 per cent stake.

"The past 16 months have been a very busy period for Otto as we have acquired, processed and interpreted a large volume of seismic data to identify a portfolio of significant oil and gas prospects," said Otto's managing director, Paul Moore.

"We now look forward to participating in this exciting offshore deepwater exploration programme which will provide exposure for Otto's shareholders to material exploration in highly prospective, large structure opportunities."

Otto shares spiked today on the news, closing trade 18 per cent up at 11 cents.