Otto Energy has received approval from the Philippines Department of Energy for a two-year moratorium, until December 23, 2017, on required work activity under Service Contract 55 (SC 55), offshore Palawan Basin in the Philippines.
Otto Energy informed in January 2016 of its plans to exit the Block SC 55 as part of a strategy to focus on its North American assets.
Otto is the operator of SC55 with 78.18% interest and the partners are Red Emperor Resources, with 15% interest, and Palawan 55, with 6.82% interest.
Otto said it will assign its working interest to the remaining joint venture partners. Documentation to give effect to this assignment is being finalised, the company added on Friday.
Red Emperor said it intends to have its full, proportionate interest be assigned and as a result its working interest will increase from 15% to 37.5%.
During the moratorium period, the consortium will conduct specialized geophysical studies in the area surrounding the Hawkeye prospect which encountered gas shows when it was drilled last year.
Although the Hawkeye well did not encounter gas in commercial quantities, it proved the presence of an active petroleum system in the contract area which hosts the “Cinco Prospect” as well as several other leads, Red Emperor noted.
Otto’s Managing Director, Matthew Allen, said: “Whilst disappointing that SC55 has not delivered the significant discovery that was being sought, Otto has managed to undertake this large exploration program without exposing its balance sheet to the risk of the exploration outcome. Otto has repositioned itself strategically in petroleum provinces that offer the opportunity for significant returns in the “lower-for-longer” oil price environment. Otto has moved away from high-cost frontier exploration into mature petroleum provinces with proven hydrocarbon plays.”