Otto Energy a joint venture partner in Kilosa-Kilombero Licence with 50% interest has announced that it has reached an agreement with MV Upstream Tanzania Limited (MV Upstream), a joint venture between Vegas Oil & Gas Limited, (Vegas) and Motor Oil Hellas SA (MOH) in respect of the assignment of a 25% participating interest in the Licence onshore Tanzania.
Under the terms of the farm down agreement with MV Upstream:
- MV Upstream shall pay to Otto the sum of US$2.3 million (inclusive of applicable taxes) for a 25% participating interest in the Licence as reimbursement of historical costs incurred by Otto.
- In addition to paying its 25% participating interest share of well costs, MV Upstream shall carry Otto’s remaining 25% working interest through the drilling of the Kito prospect up to an amount of US$2 million. Costs over and above this capped amount shall be payable by Otto in accordance with its remaining 25% participating interest. Well costs are currently estimated at around US$10 million.
- In the event of a discovery at Kito, MV Upstream shall carry Otto’s remaining 25% working interest through the drilling of an appraisal well up to an amount of US$1 million.
According to Otto’s Managing Director, Matthew Allen the inclusion of Vegas and its successful track record in exploration, development and production will inject much needed experience to the joint venture as well as leaves Otto’s balance sheet conserved.
“The Vegas group has an extremely successful track record in exploration, development and production, particularly in Egypt, where the group has operated for more than 30 years and MOH is a substantial business with interests and holdings across all aspects of the downstream value chain. The farm down provides Otto shareholders with meaningful exposure to the high-impact exploration well targeting the 194MMbbl (gross Prospective Resource) Kito prospect, whilst conserving the Company’s balance sheet,” he says.
The joint venture continues to make preparations for drilling, with final rig selection and permitting continuing ahead of an expected spud date in the second half of 2016. A discovery at Kito would open up several follow up targets within the Kilosa-Kilombero Licence.
“The carried drilling in Tanzania extends what continues to be an active period for Otto post the Company’s recent maiden discovery in the Gulf of Mexico and ahead of its planned multi-well campaign on the Alaskan North Slope,” adds Mathew.
The transaction is conditional upon customary Tanzanian regulatory and joint venture approvals prior to completion.
Otto was advised on this transaction by First Energy Capital in London.
Swala is the block operator wth 25% interest after a successful farm-out to Tata Petrodyne Limited a subsidiary of the multinational Tata Sons Limited at a cost US$5.7 million. If approved the new equity holding will be Swala Energy (operator) 25%, Otto Energy 25%,Tata Petrodyne 25% and MV Upstream 25%.