OTTO Energy Ltd. is finalizing its withdrawal from the Service Contract 55 oil and gas project in offshore Palawan, where newly drilled resources failed to meet expectations.
In a project update, Otto said it was pushing through with plans to assign its working interest to its joint venture partners.
“Documentation to give effect to this assignment is being finalized, the company said in its disclosure to the Australian Securities Exchange.
Otto earlier told its joint venture partners that it would not continue with further activity in SC55.
Managing director and CEO Matthew Allen said Otto had repositioned itself strategically in petroleum provinces that offered the opportunity for significant returns in the “lower-for-longer” oil price environment.
Otto has moved away from high-cost frontier exploration into mature petroleum provinces with proven hydrocarbon plays. Otto has a fully funded and highly active drilling program across Louisiana, Alaska and Tanzania with the first discovery in South Marsh Island 71 license announced in May.
In the meantime, the SC55 partners have received from DOE an extension of their deadline until Dec. 23, 2017 on required work activity under SC 55.
“The joint venture will undertake a specialized geophysical study in the interim period to determine if further drilling activity is warranted is SC55,” Otto said.
Otto led the $35-million drilling of the Hawkeye-1 exploration well in 2015, delivering the well on time and under budget. The volume of gas discovered in the Hawkeye-1 well was below a level that would be economic to develop.
The company later announced that the SC55 partners were abandoning the Hawkeye-1 exploration well offshore Palawan.