Otto Energy has entered into a joint venture with Hilcorp Energy which will see it earn a 37.5% working interest in an eight-well portfolio of prospects in the Onshore/Near Shore USA Gulf Coast (Gulf of Mexico).
The wells will be drilled by Hilcorp, a highly experienced, privately-owned operator based in Houston, over the next 18 months.
Under a Joint Exploration and Development Agreement (JEDA) with Hilcorp Energy Otto has committed to an eight-well drilling program with an estimated cost of US$75 million (100%).
Otto will earn a 37.5% working interest by paying 50.0% of the costs of drilling and either setting casing or plugging and abandoning the well plus lease acquisition costs at each of the eight prospects. The estimated cost of the commitment to Otto is US$37.5 million. US$4 million will be paid immediately to cover initial land and other costs.
Otto has said it has a clear strategy to grow production in the Gulf of Mexico to 5,000 boepd by the end of 2020.
“More specifically Otto’s target area for new opportunities lies within the Pliocene, Miocene and Oligocene reservoir systems of the US Gulf of Mexico shelf and Gulf Coast where capital costs are manageable for Otto and the availability of infrastructure means the time from discovery to production is short,“ the company said.
Otto’s Managing Director, Matthew Allen, commented: “This program provides an outstanding opportunity to execute our strategic objective of becoming a 5,000 boepd producer in the Gulf of Mexico by the end of 2020. It represents an exciting time for Otto shareholders, with the program complementing our near-term exploration campaigns at Bivouac Peak in the GoM and in Alaska.
“The eight independent prospects announced today are in our geological and geographical sweet spot and provide a unique opportunity to substantially grow our Gulf of Mexico business in one transaction with an outstanding operator and partner in Hilcorp.”