Otto Energy Limited, the Australian exchange-listed oil company, has sold its stake in the Galoc field, in the Philippines, to Risco Energy Investments for $101.4 million.
Under the agreement, Risco energy Investments a Singapore-based energy investment company will acquire Galoc Production Company WLL (GPC), the holder of Otto’s 33% interest in the Galoc oil field located in Service Contract 14C, in the Palawan basin offshore the Philippines. According to information on Otto Energy’s website, Galoc is currently producing from four wells, through the Rubicon Intrepid FPSO.
Risco has already paid a US$10.14m deposit and will assume all production rights and liabilities associated with the Galoc Interest (including abandonment costs) with effect from 1 July 2014.
Completion of the transaction is subject to Otto shareholders’ approval. Assuming shareholder approval, and other non-regulatory consents are obtained, Otto expects the transaction to complete around December 2014.
“The Directors of Otto believe the transaction represents an outstanding opportunity to maximise and monetise the inherent value of the Galoc Interest after the successful completion of the Galoc Phase II expansion. The Directors of Otto unanimously recommend the transaction to Otto shareholders, in the absence of a superior proposal,” Otto Energy said in a statement.
The divestment will allow Otto to focus on executing the highly prospective exploration program in onshore East Africa and SC55 whilst at the same time providing 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, the company has explained.
Otto Chief Executive Officer, Matthew Allen, said, “The divestment of the Galoc Interest on such favourable terms is an excellent result for Otto and is consistent with the focus on unlocking value for shareholders. Prior to the divestment, the underlying value of the Galoc Interest was not being adequately reflected in Otto’s share price. Proceeds from the sale will allow Otto to fund its exploration activities for the next two years and pay a proposed capital return to shareholders.”