Perth, July 8, 2008 AEST (ABN Newswire) - Australian-based international oil and gas company Otto Energy Limited (ASX:OEL)(PINK:OTTEF), is pleased to provide the following update with respect to the exploration activities in the Philippines.
Otto is one of the largest acreage holders in the Philippines with a gross area of 20,803 square kilometers (5.14 million acres) held across four Service Contract (SC) areas. In addition Otto holds an 18.3% indirect interest in the Galoc Field in Block SC14c.
Highlights:
- Two years of detailed technical review and evaluation has identified considerable potential in Otto's Philippines acreage portfolio that warrants commitment to the drilling of multiple explorations wells.
- In SC55 numerous potentially "billion barrel" in place structures have been identified in the heart of an established petroleum system.
- The Argao structure in SC51 consists of eight stacked target zones that each could contain 40 - 300MMbbls in place.
- Otto has invited bonafide parties to evaluate the work done with a view to acquiring equity in the projects via partial purchase or via exploration carry commitments.
Otto became operator of SC50, SC51 and SC55 following acquisition of NorAsian Energy in 2005/06. The Company has very high equity of between 80 and 85 per cent in each of these three Service Contract areas.
A "Farm Out Flyer" is being provided to companies expressing interest in these farm out opportunities, and contains updated estimates for volumetric ranges for leads and prospects, specifically in SC51 and SC55. Below is a brief summary of the work undertaken and the conclusions of the studies by permit area. A copy of the flyer can be downloaded from Otto's website at www.ottoenergy.com
SC 55 (Otto 85%) is a 9,000km2 deep water block west off Palawan Island. Otto has acquired two 2D seismic surveys in SC55, totaling 1,400km of new seismic data, and undertook reprocessing of almost all the existing deep water 2D data in the block. Hundreds of manhours have been invested to interpret this entire data set, and to model and understand the petroleum system and prospectively of theblock.
The Nido Limestone formation has been extensively mapped and at least eight structures have been identified, each with the potential to hold over a billion barrels of oil in place. The overlying turbidite systems also have the potential to form further traps, as proven by several recently discovered giant oilfields only a few 100k's to the south off the west coast of Borneo. These turbidites require 3D seismic coverage before they can be considered "drill ready". Otto's work has clearly demonstrated that the block has considerable potential and that an extensive exploration program is warranted.
Deep water rigs are currently in high demand and there is a long lead time in securing a rig slot. Otto is therefore currently seeking a farm in partner to join us in the block this year, to allow firm commitment to securing a rig slot in 2009/2010. Whilst waiting on the rig to arrive, an extensive 3D seismic program may be undertaken to evaluate the turbidite potential of SC55 and to better delineate some of the sparsely covered limestone structures.
SC51 (Otto 80%), which lies in the Cebu-Bohol Straits in the Visayan Basin, is considered to be highly prospective, but under explored. Otto has invested considerable efforts to understand the petroleum system and to "mature" the Argao structure to drillable status. All the existing 2D seismic in the area has been re-processed and reinterpreted and during 2007, Otto acquired a high quality 3D seismic survey over the Argao structure and surrounding area. The Argao structure consists of potentially eight stacked intervals that could contain hydrocarbons.
One of the horizons is interpreted to contain a small gas cap at the crest of the structure. A petroleum system modeling study indicates that the hydrocarbon charge in the area is predominantly oil, supported by oil seeps in the area. Otto therefore interprets this being a gas cap over a potential oil column. Detailed well design and planning is underway and Otto intends to acquire a sea bed site survey in the next few weeks to identify any sea bed hazards and shallow gas pockets, to allow safe mooring of a drilling rig in 2009.
SC50 (Otto 85%) is a smaller offshore block north of Palawan Island. The block contains the Calauit and Calauit South oil discoveries. The fields, whilst modest in size, are considered to be potentially commercial in the current oil price environment. They lie in only 90m of water and can be drilled with a jack-up rig. Otto acquired 3D seismic over the fields in 2007 to better delineate the structures and to map "fracture swarms" that are the potential "sweet spots" of the reservoir.
Otto has conceptually designed an appraisal program that is intended to be "cost neutral". An appraisal well will be drilled in the known Calauit oil reservoir and flow tested into an adjacent storage tanker. The oil will be sold to pay for the drilling costs and perhaps more. This is possible due to the high productivity of wells drilled in fractured reservoirs such as Calauit and the likely high oil price. Otto is conducting site surveying and seabed coring of the selected well site in the coming weeks to plan for drilling and testing Calauit in the first half of 2009.
In May 2008, Otto was awarded SC69 in a joint application with TranAsia Oil and Energy Development Corporation. The participating interests are Otto at 70% and TransAsia with 30%. Otto as Operator has started acquiring existing data not previously available to it to evaluate the prospectively and potential for hydrocarbons and to guide future activities. Plans are being made to reprocess all the existing digital seismic data acquired by previous operators.
Otto's Chief Executive Officer Mr Alex Parks explained how the farm out program is consistent with Otto's strategy to build and maintain a balanced asset portfolio that provides a statistically significant drilling program designed to maximise the chance of success.
"Through acquisition of modern seismic data and good technical work, Otto has significantly de-risked these highly prospective targets and brought a number of them to ready-to-drill status".
"Otto has an exciting exploration program with up to 10 exploration wells planned in the Philippines in the next 4-6 years. We intend to fund this activity through a combination of cash flow from Galoc and farming out equity in the blocks. By farming down to retain a working interest of between 25% and 50% in each service contract Otto can participate in a greater number of wells and thereby increase the chance of success."
"We are already receiving interest from a number of companies ranging from mid tier to the majors, who are keen to explore for oil and gas in the Philippines, which has tremendous hydrocarbon potential, but still remains relatively unexplored."
Access to the data rooms will only be granted to bonafide interested parties that sign a Confidentiality Agreement. Otto anticipates indicative bids to be submitted by interested parties for review in September 2008. Further announcements on the outcome of the farm out process will be made once a formal agreement is reached, which is expected to be in the fourth quarter 2008.
Contact
Alex Parks
Chief Executive Officer
Tel: +618 9481 8696
Fax: +618 9481 2394
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