Otto Energy Limited has executed a sale and purchase agreement (SPA) to divest 100% of the shares in Galoc Production Company WLL (GPC), the holder of Otto’s 33% interest in the Galoc oil field located in Service Contract 14C to a Singapore-based energy investment company Risco Energy Investments Pte Ltd.
Under the SPA, Risco has agreed to pay Otto US$101.4 million as at 1 July 2014. Risco has already paid a US$10.14m deposit and will assume all production rights and liabilities associated with the Galoc Interest (including abandonment costs) with effect from 1 July 2014.
Completion of the transaction, which is conditional on Otto shareholder approval, the Directors believe represents an outstanding opportunity to focus on executing the highly prospective exploration program in onshore East Africa and SC55.
“The ability to monetise a key asset through the GPC sale and deliver a significant capital return to shareholders whilst at the same time funding a highly prospective exploration program demonstrates this commitment to creating shareholder value,” says Otto’s Chairman, Rick Crabb.
The divestment whilst at the same time provide the financial strength to fund an expansion of Otto’s acreage position in onshore East Africa which is the focus of management’s new business initiatives.
Otto adds that should the transaction be approved by the shareholders the money will fully fund the company’s exploration, new business development and working capital activities for two years.
“The divestment of the Galoc Interest on such favorable terms is an excellent result for Otto and is consistent with the focus on unlocking value for shareholders. 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,” says Otto Chief Executive Officer, Matthew Allen.
Otto Energy has projects in East Africa and South Eastern Asia. In East Africa Otto has a direct interest on 50% of the Pangani and Kilosa-Kilombero Production Sharing Contract through its wholly owned subsidiary Otto Energy (Tanzania) Pty Ltd with Swala Oil and Gas (Tanzania) Ltd (a subsidiary of Swala Energy Limited being the operator and holding the other 50% equity interest.
In Tanzania Swala and Otto Energy are preparing to commence acquisition of further seismic data, and are also planning for drilling of the Kito prospect in 2015.