Otto Energy Philippines Inc. (Otto Philippines) has signed a farm-in agreement with Red Emperor Resources NL (Red Emperor) to earn a 15 percent working interest in prospective Block SC55 in offshore Palawan.
This was announced on Monday by Australia-based Otto Energy Ltd (Otto), which owns Otto Philippines.
Otto said this farm-in deal, along with the $24.5 million funding committed by BHP Billiton and the expression of interest received in January 2015 from Philippine National Oil Company-Exploration Corp. (PNOC-EC) for a further 15 percent working interest, ensures that Otto is fully funded and has mitigated significant financial risk associated with the drilling of Hawkeye-1.
Otto Energy Ltd chief executive officer Matthew Allen welcomed Red Emperor to the SC55 joint venture.
Otto has also executed a letter of intent with Maersk Drilling, one of the world’s largest offshore drilling companies, to secure the Maersk Venturer ultra-deepwater drillship to drill the Hawkeye-1 exploration well.
Hawkeye exploration prospect
Hawkeye is a large turbidite clastic prospect identified on modern 3D seismic acquired in 2010.
The gross prospective resource best estimate for Hawkeye is 112 MMbbl (net prospective resource 74 MMbbl to Otto). MMbbl is the oil industry short cut for million barrels of oil.
Success at Hawkeye will unlock a significant new hydrocarbon play in the deepwater Southern Palawan, Otto Energy said.
“With drilling now to occur in the third quarter of 2015, Otto shareholders will participate in this exciting and material opportunity,” the firm said.
The Maersk Venturer was commissioned in 2014 and was built at the Samsung Heavy Industries yard in Korea.
Capable of operating in up to 3,600 meters of water and with dual drilling derricks, high capacity mud pumps and bed space for 230 personnel, the Maersk Venturer is one of the newest and most capable drillships in the world.
The Maersk Venturer has recently completed work for Total Malaysia.
All required long lead items have now been procured and stored in yards in Labuan, Malaysia.
Drilling of the Hawkeye-1 exploration well is expected to commence in early third quarter of 2015.
Allen said securing a drillship of the capability of the Maersk Venturer for the drilling of Hawkeye-1 in third quarter 2015 is a major event for Otto.
“We are now finalizing preparations to begin drilling and we look forward to updating our shareholders during 2015 as this activity is undertaken,” he added.
Red Emperor has the right to earn a 15 percent interest in SC55 (Farm-in interest) in consideration for paying 15 percent of the well costs for the drilling and testing of the Hawkeye – 1 exploration well (Farm-in Well).
Red Emperor’s well cost exposure is capped at $5.625 million, beyond which Red Emperor has the option to reduce equity from the 15 percent working interest level.