Otto Energy has transferred its participating interest in an offshore Philippines Block, Service Contract 55 (SC 55) to its partners, following confirmation from the country’s Department of Energy.
The Philippine Department of Energy ratified the request for the transfer of participating interests in SC 55 from Otto to its partner Century Red Pte. Ltd., a subsidiary of Red Emperor Resources, Palawan55 Exploration & Production Corporation, and Pryce Gases.
Otto decided to exit the block to focus on its North American assets back in January 2016.
The Department of Energy found the partners to be “financially qualified to assume the proposed interests. Legally qualified to assume the participating interest from Otto Energy considering that they are existing petroleum companies operating either as operator and/or consortium members in petroleum service contracts; And technically qualified, as exemplified by the joint cooperation and completion of previous exploration activities, such as the drilled Hawkeye-1 well.”
Red Emperor said on Thursday that Palawan 55 will be the new operator with a 37.50 percent interest, Red Emperor through Century Red now holds a 37.50 percent while the third partner, Pryce Gases, holds the remaining 25 percent in SC 55.
Also, the timeline for the moratorium period and Sub-Phase 5 (SF) has been revised to reflect the transfer of interest. The minimum work program and budget for the moratorium period and SF 5 are unaffected by the transfer of interest
Namely, under the moratorium period, the companies must conduct a qualitative interpretation (QI) study of the greater Hawkeye area, lithology and petrophysical modeling, and a contingent program of AVO studies worth $478,750.
As far as SF 5 is concerned, the companies must drill one ultra-deepwater well with an investment of $3 million.
Concerning the committed work program, Palawan 55 is currently conducting an inventory of the technical data turned over by Otto Energy. The operator is also engaging with consulting groups regarding the programmed specialized geophysical studies to refine the budget.
According to Red Emperor, Palawan 55, as the nominated operator, suggested that partners hold an operating committee meeting to formalize its appointment as successor operator, establish an operating committee, and agree on related amendments to the joint operating agreement.
Red Emperor added that it participated in a $25 million Hawkeye-1 exploration well within the block in 2015 and contributed more than $3.9 million (AUD 5 million) towards drilling costs.
Over $50 million has been spent exploring the block to date, and a number of drill-ready targets remain, including the “Cinco” gas prospect which has a best estimate prospective resource of 1.6tcf recoverable gas.
Given that the Hawkeye well discovered gas and a working petroleum system relatively close to Cinco, Red Emperor said that block SC 55 remained a key asset for the company.
It is worth reminding that Red Emperor was thinking about abandoning its interest in SC 55 back in January frustrated by the government’s lengthy delays in ratifying the company’s interest increase in the block.