Otto takes Pryce offer for PH gas exploration plan

Otto Energy Ltd. of Australia has accepted an offer from a unit of Philippine listed firm Pryce Corp. to participate in the Hawkeye-1 gas well drilling and testing project offshore Palawan.

In separate disclosures, Otto and Pryce Corp. said Pryce Gases Inc. (PGI) acquired from Otto Energy Philippines Inc. a 10-percent stake in Service Contract 55 (SC 55) for $3.225 million.

“The said participating interest would entitle PGI to 10 percent of the earnings and the cost recovery pool,” Pryce Corp. said in its disclosure to the Philippine Stock Exchange.

The amount to be paid by PGI is equivalent to 10 percent of the cost of drilling and testing of the Hawkeye-1 exploration well within SC 55. The initial well was estimated to cost $30 million to $35 million.

“Any adjustments to the well cost contribution will be made once the well is completed,” Otto said in a filing in Australia.

Otto Energy Philippines is a subsidiary of the Australian firm while Pryce Gases is a subsidiary of the Filipino company. PGI and Otto Energy Philippines signed their farm-in agreement on July 30, 2015.

SC 55 refers to the exploration, development and exploitation of petroleum resources in the offshore area of Southwestern Palawan covering 9,880 square kilometers. The DOE awarded the service contract in 2005.

Final preparations to mobilize the ship carrying the drilling rig to the well location is underway. Drilling is expected to start early this month.

After paying, PGI has 60 days following the completion of drilling and testing of the Hawkeye-1 well to have a 10-percent working interest transferred to it.

If the option is not exercised within the said period, the option will expire and Pryce Gases option payment is not refundable, Otto said.

Assuming no further acquisition or divestment after PGI’s farm-in stake assignment, the venture partners and their respective interests would be as follow: Operator Otto Energy Investments Ltd. (wholly owned subsidiary of Otto Energy Ltd.), 33.18 percent; Otto Energy Philippines Inc. (wholly owned subsidiary of Otto Energy Ltd), 35 percent; Century Red Pte Ltd. (wholly owned subsidiary of Red Emperor Resources NL), 15 percent; Palawan55 Exploration and Production Co. (wholly owned subsidiary of Trans-Asia Petroleum Corp.) 6.82 percent; Pryce Gases Inc. (wholly owned subsidiary of Pryce Corp.) 10 percent.

Otto also said the expression of interest from Philippine National Oil Co.-Exploration Co. to farm-in for a 15 percent interest in SC55 was “still valid.”

Approvals from the Office of the President are required before this transaction can be finalized.