Australian firm Otto Energy Ltd. (Otto) said its shareholders have approved the sale of the company’s 33 percent working interest in the Galoc oil field off Palawan.
Otto Energy said its shareholders gave the green light for the stake sale during a general meeting on Tuesday.
The company said closing of the transaction is expected to occur within two weeks.
In a statement, it said “the Resolution to approve the sale of shares in the Galoc Production Co. W.L.L. put to the General Meeting of Otto Energy Limited held on 20 January 2015 was passed on a show of hands.”
Nido Petroleum acquired Otto’s 33 percent working interest in the Galoc oil field for $108 million. The acquisition raises Nido’s interest in the field to 55.88 percent from 22.88 percent previously.
Otto plans to complete the turn-over of the Galoc stake to its new owner Nido Petroleum Ltd. within this year. The Galoc oil field is situated in the North West Palawan Basin on Block C of Service Contract 14 (SC14). Galoc production averaged 6,703 barrels per day for the last quarter of 2014.
With the acquisition, Nido will assume all production rights and liabilities associated with Otto’s working interest, including abandonment costs. 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. has committed to provide a revolving debt facility of up to $120 million at an arm’s length basis.
This will have an initial interest rate of 6 percent per annum plus the 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.
A sandstone reservoir holding approximately 10 MMbo (million barrels of oil) in proven reserves and 23.5 MMbo in proven and probable reserves, the Galoc oil 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.