Otto Energy (ASX: OEL) has executed final binding agreements with BHP Billiton (ASX:BHP) to terminate the farm-out agreement between the two parties over Service Contract 55, offshore the Philippines.
Otto has submitted a request to the Philippines Department of Energy for re-assignment of BHP's 60% working interest to Otto, taking Otto’s working interest in SC55 to 93.18%.
Upon approval of the re-assignment, BHPB will pay US$3 million to Otto, and Otto will lodge a Sub-Phase 4 work program and budget with to drill the Hawkeye-1 exploration well.
BHP will pay a further US$24.5 million to Otto upon completion of drilling the first exploration well in SC55; and
BHP relinquishes all enduring rights to future exploration outcomes or obligations.
Otto has briefed the Department of Energy of its intention to drill the 3D seismically defined, Direct Hydrocarbon Indicator supported Hawkeye-1 exploration well in Sub-Phase 4.
Hawkeye is a turbidite clastic reservoir target in 1,690 metres of water with top reservoir prognosed to be at 2,732 metres, and is also prospective for a carbonate gas/condensate trend, with the potential for an oil charge.
The permit provides a significant opportunity and a series of possible drilling targets for Otto, and drilling could commence as early as Q4 2014, which will certainly garner the market's attention.
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