PERTH, Australia – Otto Energy Ltd. has begun a “structured exit” from Service Contract 55 (SC 55), located in the Palawan basin offshore the Philippines, according to its most recent quarterly report.
Joint venture partner Red Emperor Resources NL said that Otto informed the company that the exit was in line with its strategy to focus on its North American assets. Otto is earning a 50% interest in the South Marsh Island 6 and South Marsh Island 70/71 developments in the Gulf of Mexico via staged farm-in with operator Byron Energy Ltd. Otto also acquired the right to earn an interest in some acreage onshore the Alaskan North Slope.
In its 4Q 2015 report, Red Emperor said that it could either maintain its present interest in the deepwater block or be assigned a percentage of Otto Energy’s interest on a pro-rata basis. In this case, its participating interest could increase by up to 22.5% to 37.5%. The company said it is currently considering its options.
It also revealed that Otto requested the Philippines Department of Energy grant a two-year moratorium on SC 55, for which the joint venture expects a response within 1Q.
Red Emperor noted that the joint venture fulfilled the work obligation under the current exploration sub-phase by drilling the Hawkeye-1 exploratory well last August. Although the well did not encounter gas in commercial quantities, Red Emperor said it proved the presence of an active petroleum system in the contract area, which hosts the Cinco prospect carbonate gas/condensate prospect as well as several other leads.
The consortium intends to undertake further technical studies during the moratorium period, including a quantitative interpretation to gain a better understanding of existing and potential petroleum reservoirs.
Otto currently holds 78.18% of SC 55 and the operatorship, with Red Emperor currently holding 15% and Palawan 55 owning 6.82%.