(MENAFN- ProactiveInvestors - Australia) Otto Energy (ASX: OEL) and its partners have approved the A$181.9 million Phase II development of the Galoc oil field in the Palawan Basin offshore Philippines that will more than double oil production to 12,000 barrels per day (bpd).
The Phase II development consists of the drilling of two subsea wells that will be tied back to the existing Floating Production, Storage & Offloading facility Rubicon Intrepid with first oil expected in the second half of 2013.
Otto has already secured the Ocean Patriot semi-submersible drilling rig to drill the two development wells. This includes an option for additional exploration drilling in the northern area of the Galoc field.
Current production at Galoc is about 5,600bpd of oil.
This follows a 156% increase in proven reserves to 8.9 million barrels (MMbbls) and a 134% increase in proven and probable reserves to 13.4MMbbls.
The upgrade by independent consulting firm RISC is due to higher well recoveries based on pressure data analysis and booking of reserves from previously reported contingent resources.
Future reserve and resource increases are likely to come from incorporation of the results of the recent 3D seismic not yet incorporated into the RISC report, successful appraisal/exploration activities on the field, further in-fill drilling, facilities optimisation and tertiary recovery.
Financing
Otto will fund its US$62 million (A$60 million) share of capital expenditure independent consulting firm.
It has mandated BNP Paribas to arrange a US$37.4m project finance term loan secured against Otto's interests in the Galoc field with a 3 year tenor.
This facility is expected to achieve financial close in the fourth quarter of 2012 with first drawdown required in early 2013.
Joint venture partners, including fellow Australian Nido Petroleum (ASX: NDO), have either made the necessary undertakings that they have their financing in place or are in the process of satisfying conditions precedent to achieve financial close, to satisfy funding their respective shares of the project.
Otto has a 33% operating interest in Service Contract 14C, which contains the field, while Nido holds 22.88%. Other partners include Galoc Production Company (2) with 26.84%, Oriental Petroleum & Minerals with 7.78%, Philodrill Corporation with 7.2% and Forum Energy with 2.3%.
SC 51 acquisition
Otto has also increased its interest in SC51 North Block onshore Leyte Island, Philippines, to 80% after purchasing a 40% working interest from SWAN Oil & Gas Limited for A$1.25 million.
The agreement does not cover SC51 South Block, which it relinquished in February 2011.
Otto will pay 100% of future costs through to drilling of the Duhat-2 exploration well to earn the full 80% working interest. The well is expected to be drilled in 2013.
The current 100 kilometre 2D seismic acquisition programis planned to be complete by October, depending on weather conditions.
Otto is focused on maturing the Duhat prospect located on the San Isidro anticline that was drilled with the Duhat-1/1A well in 2011.
During the drilling of this well, oil and gas indications were observed and the presence of an active petroleum system, a working seal and a structure conducive to hydrocarbon entrapment were proven. The Duhat structure is mapped to have mean in place volumes of 76MMbbls of oil.
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