NIDO Petroleum has doubled its interest in the Galoc oil field off Palawan after acquiring the 33 percent working interest of Australian firm Otto Energy for $108 million.
From 22.88 percent, Nido’s interest in the oil field will increase to 55.88 percent as a result of the acquisition, giving it majority control. Its production base will also increase to more than 4,000 barrels of oil per day.
The offer has been recommended by Otto’s board as superior to a previous offer made by Risco Energy Investments, Nido and Otto said in an announcement to the Australian Stock Exchange (ASX).
Both Nido and Otto Energy are listed on the ASX.
Nido plans to fund the acquisition through a combination of existing cash reserves and debt.
As part of the funding arrangements, its major shareholder Bangchak Petroleum Public Co. Ltd. of Thailand has committed to provide a revolving debt facility of up to $120 million.
The facility will have an initial interest rate of 6 percent per annum plus London Interbank Offered Rate (LIBOR). The interest rate increases by 2 percent annually with a maximum rate of 12 percent plus LIBOR.
LIBOR is a benchmark rate that some of the world’s leading banks charge each other for short-term loans.
The company intends to seek shareholder approval for the loan security package at its next annual general meeting in 2015.
Nido will pay Otto a $10.8 million deposit and will assume all production rights and liabilities associated with Otto’s 33 percent working interest (including abandonment costs) with effect from July 1, 2014.
Completion of the transaction is conditional on Otto shareholder approval.
Galoc oil field is located in the North West Palawan Basin in Block C of Service Contract 14, or SC 14C1.
A sandstone reservoir holding approximately 10 MMbo (million barrels of oil) in proven reserves and 23.5 MMbo in proven and probable reserves, the field is located at a total depth of 6,890 feet (2,100 meters) in water depths ranging from 951 to 1,312 feet (290 to 400 meters).
Discovered in 1981, the field was initially appraised in 1988 to be non-commercial. Subsequent 3-D seismic data was acquired in 1997, and taking into account innovations in drilling techniques, the 187-foot (57-meter) Galoc oil column was deemed commercially viable.