Perth-based Otto aims to secure initial production cash flow this year to underwrite potentially company-making exploration projects in its suite of international prospects.
Otto started shooting Philippines seismic this week.
It will acquire 116 square kilometres of 3D data over the Calauit and Calauit South Fields in SC 50. The vessel will then sail to SC 51 to acquire 145sq.km of 3D and 261km of 2D seismic. Finally, the vessel will acquire 860km of 2D data in Otto’s deepwater SC 55 permit.
The entire survey operation is expected to be complete by the end of July 2007, after which the seismic data will be processed and interpreted and drilling plans finalised.
Just three years after listing, Otto has a market capitalisation of around $30 million and $6 million in the bank and clearly defined short-term strategy.
It plans to achieve onshore gas production from one of Otto’s three licences in Turkey before the end of the year, followed by offshore production in the Philippines in early 2008, while drilling and evaluating much bigger plays in the Philippines and Argentina.
According to Parks, a petroleum engineer, Otto is a small company with big company assets, and the big boys are already showing cautious interest, particularly in LNG prospectivity in the Philippines.
Parks says Otto’s high-equity positions in all its projects is a strong chip that will be played in future farm-out deals to underwrite expansion and development aspirations.
Otto’s first cash flow will come from Turkey, where it has 65-80% interests in three gas projects, primarily focused in the Edirne Licence.
The Koyustu-1 gas exploration well recently flowed up to 2 million cubic feet a day (MMcfd) from one of three intervals.
The pay interval for the well totals about 17.5m with only a third contributing the 2MMcfd.
Bati Umur-1, about 1.5km southwest, flowed at 3.6MMcfd on a 36/64 inch choke with 266psi wellhead flowing pressure for six hours.
Bati Umur and Koyustu have current and existing reserves of about 3 billion cubic feet, an estimated development cost of $6.4 million, with production at an initial 3MMcfd for revenue of between $11 million and $14 million a year, based on current and projected pay rates.
Otto’s 65% revenue stream is estimated at between $7.7 million and $12.8 million, the current reserves having about a two-year life.
“About 1.5Bcf is commercial is this area because of the high gas price [$US8 per thousand standard cubic feet],” Parks said.
Otto plans to drill the nearby Yagci-1 gas exploration well soon and re-enter and test the Bati Umur structure this year.
Earlier drilling is thought to have bypassed gas potential within the same structural closure as Bati Umur-1 and if successful, could be used as another production well.
A 3D seismic survey later this year is expected to add between five and 15 new targets for the next drilling program.
Otto has farmed out 15% of Edirne to Incremental Petroleum for $3 million in carry through in exploration costs, which would tend to confer a $20 million value on the permit compared to Otto’s current $30 million market capitalisation.
Turkish companies Merty Energy and Petrako hold 10% each.
The JV has an expression of interest from Zorlu Petrogas to purchase all the gas from the Edirne licence gas fields.
“Turkey gives us the first step, but it pales against our Philippines assets,” Parks said.
“Turkey is worth about $500,000 a month in revenue. The Philippines has the potential for $500,000 revenue a day.”
Otto has one of the largest publicly owned acreage holdings in offshore Philippines, covering over 15,000 square kilometres.
Central to its holdings is the Calauit oil field in SC50 (Otto has a 65% interest and is the operator), which Parks expects will come onstream in the first quarter of next year at 12,000-15,000 barrels a day at a capital cost of about $26 million (but only $10.2 million to Otto).
Calauit contains an estimated 39.4 million barrels of oil, with between 6.6MMbbl and 12MMbbl being recoverable.
A custom-built semi-submersible drill rig is being built in China and will be leased exclusively by Otto from late 2007 for three years for the Calauit field and other drilling in the Philippines, giving Otto future drill-for-equity options.
The rig will have an initial production capacity of 15,000bopd, capable of being expanded to 45MMbbl of liquid per day to operate in the required 90m of water at Calauit and up to 300m of water depth for drilling elsewhere in the Philippines.
The company that owns the shipyard building the rig is now Otto’s third-largest shareholder.
Based on current reserves, Calauit has a two-to-five-year life and Otto expects it to generate revenue of $436 million (Otto $283 million), based on Brent crude at $US60 a barrel.
But Parks sees Otto’s major near-term exploration upside as being in the offshore East Visayan, Cebu, block – SC 51 – in which Otto has a 50% working interest.
Operator TransAsia has ascribed prospective resources of up to 465MMbbl to the block and the joint venture is planning a 3D seismic program over the Cabilao and Argao prospects in the middle of this year.
Further 2D seismic will also be carried out over other targets in the block and Otto is considering farm-out options to fund drilling in late 2007/early 2008, subject to rig availability.
In the SC 55 permit, which holds the high risk, high reward ultra-deepwater Palawan play and the Marantao prospect, Otto has 55% working interest.
Marantao, a carbonate reef, is interpreted to be at least five times larger than the Shell-operated Malampaya reef structure.
Malampaya is the Philippines’ largest producing oil and gas field, with up to 200MMbbl of oil and 3.5 trillion cubic feet of gas. The two giant reefs sit in the same petroleum system.
TransAsia puts potential Marantao resources at up to 2.5 billion barrels of oil or over 10Tcf of gas.
Current planning is to carry out a follow-up seismic program in the middle of this year and look to farm-out, probably to one of the major LNG players, ahead of further drilling in the middle of next year.
Canadian Vital Resources has already agreed to acquire 35% of SC 50 and 30% in SC 51 and SC 55 that will see Otto free-carried through nearly $13 million in exploration and development costs on those blocks.
Meanwhile in Argentina, Otto and operator Oromin Explorations are expecting to be awarded a six-year licence covering the onshore Santa Rose block in the oil-prolific Cuyana Basin, in which Otto can earn up to 41.24% for $2.9 million.
The Santa Rosa dome is a huge oil target that could hold a billion barrels of oil in place, with about 200MMbbl estimated as recoverable.
Current planning is for two wells within six months of licence award, expected at the end of this month.
