Otto Energy Ltd , the 33%-owner and operator of the producing Galoc oil field joint venture offshore the Philippines, has provided the following update in relation to the Galoc Phase II development.
Execution of Financing Facility Agreement
Otto has entered into a binding agreement with BNP Paribas to provide US$37.4 million in project financing for its share of capital expenditure committed to the Galoc Phase II development.
BNP Paribas is a recognised global leader in oil and gas project finance and Otto believes that this financing facility underlines the robustness of the Galoc project.
Otto’s share of the US$188 million capital expenditure (100% basis) for Galoc Phase II is now fully funded through a combination of this project financing and cash flows generated from production from Phase I of the field.
Key terms of the facility are:
• 3-year tenor term loan facility expiring 31 December 2015
• Principal repayments commencing Q1 2014. Voluntary prepayments may be made without penalty
• A competitive interest margin on USD LIBOR
• Galoc project level security provided as is usual for a loan of this nature
Financial close for the facility is expected in the coming weeks once the conditions precedent are met. First drawdown of the facility will be in Q1 2013, consistent with projections set in August 2012 ahead of the Final Investment Decision (FID) taken by Otto.
Galoc Phase II Development Update
The Galoc joint venture took the Final Investment Decision (FID) on Phase II in September 2012. Since then, substantial progress has been made towards achieving safe production start-up from the Phase II wells anticipated in 2H 2013. Developments since the FID was taken include:
• Contracts awarded for key vendors including:
o Drilling Rig Ocean Patriot – Diamond Offshore (Australia) LLC.
o Offshore Construction Skandia Hercules – DOF Subsea Asia Pacific Pte Ltd.
o Subsea Wellheads & Trees – Dril-Quip Asia Pacific Pte Ltd.
• Key equipment has started to arrive in forward operating bases in Southeast Asia ahead of mobilisation and transfer to the Galoc field.
• Expected mobilisation of the drilling rig is early Q2 2013.
• 3D seismic interpretation finalised and subsequent completion of Galoc-5 and Galoc-6 well designs.
• Proposal issued to the Galoc joint venture partners for an exploration well in the northern field area currently awaiting joint venture sanction.
• Cost estimates remain unchanged from 1st August 2012 FID budget estimate.
• Otto’s funding arranged as planned from cash and ongoing revenue from Galoc Phase I production.
• First oil from Phase II remains on track for 2H 2013.
Otto Chief Executive Gregor McNab said: “The past year has been a transformational period for the Galoc joint venture, with a significant upgrade undertaken on the FPSO, an increase in reserves achieved and the commitment made to proceed with Phase II. As operator, Otto is pleased with the progress to date and with preparations to deliver a significant programme of activity at Galoc through 2013.
“Galoc continues to be an important project for Otto, with the cashflow from Phase I underpinning our exploration activity in Southeast Asia and East Africa, and providing Otto with the funding to pursue new initiatives to drive shareholder value.”
Press Release, December 21, 2012