Otto sells oil field assets for $113m

Otto Energy says the sale of its Galoc oil field assets in the Philippines to Singapore-based energy company Risco Energy Investments for $113.4 million will help fund exploration activities for two years and return capital to shareholders.

The Perth-based resources company said the divestment would allow the company to focus on its exploration program in East Africa and at SC55 in the Philippines.

It would also provide Otto with enough financial strength to buy more acreage in East Africa.

“The ability to monetise a key asset through the sale and deliver a significant capital return to shareholders whilst at the same time funding a highly prospective exploration program demonstrates its commitment to creating shareholder value,” Otto chairman Rick Crabb said.

The Galoc oil field is located in a water depth of about 290 metres in Palawan's oil and gas fairway.

Otto said that following the sale, $69.4 million would be used to pay a capital return to its shareholders of 6 cents per share, with the remaining $43.6 million would be put into exploration programs and new acquisitions.

It has already received an $11.3 million deposit from Risco for the sale.

“The divestment of the Galoc interest on such favourable terms is an excellent result for Otto and consistent with the focus on unlocking value for shareholders,” Otto chief executive officer Matthew Allen said.

“Prior to the divestment, the underlying value of the Galoc interest was not being adequately reflected in Otto’s share price.

“Proceeds from the sale will allow Otto to fund its exploration activities for the next two years and pay a proposed capital return to shareholders,” he said.

Otto said it was the right time to sell as future development to maintain production rates would expose the company to financial and execution risk.

“The board has carefully considered where the asset is currently positioned in the life-cycle of an oil field, as well as the possible future risks and rewards of developing any identified field/near-field upside that could  offset naturally declining production rates,” Mr Crabb said.

“The board determined that a divestment now was in the best interests of shareholders.”

The deal is still subject to shareholder approval and Otto will hold a shareholders' general meeting before the end of the year.

Otto’s share price rose 18 per cent to 9.8 cents per share at 9:40am.