Otto Energy executed a sale and purchase agreement (SPA) to divest 100% of the shares in Galoc Production Company WLL (GPC), the holder of Otto's 33% interest in the Galoc oil field, to Singapore-based Risco Energy Investments.
Under the terms of agreement, Risco has agreed to pay Otto US$101.4 million, of which Risco has already paid a $10.14 million deposit. Risco will assume all production rights and liabilities associated with the Galoc interest that includes abandonment costs, with effect from 1 July 2014.
The Galoc oil field is located in service contract 14C (SC14C) in 290m of water about 65km northwest of Palawan Island and 350km south of Manila in the Republic of the Phillipines.
Completion of the transaction is conditional on Otto shareholder approval, expected by December 2014.
According to Otto, its directors believe the transaction represents an outstanding opportunity to maximize and monetize the inherent value of the Galoc Interest after the successful completion of the Galoc Phase II expansion.
Otto says that the divestment will allow them to focus on executing the exploration program in onshore East Africa and SC55, and at the same time provide the financial strength to fund an expansion of Otto’s acreage position in onshore East Africa which is the focus of management’s new business initiatives.
Should the divestment be successful, it will fully fund the company's exploration, new business development and working capital activities for two years.
Otto announced drilling two wells in the second phase of development at Galoc field in 2013.
Image from Otto Energy
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