Otto Energy has farmed into the South Timbalier 224 (ST 224) lease, taking 25% stake in the Gulf of Mexico, with drilling expected to start later this year, and first production set for the end of 2018.
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Map of SM 71 (left) and ST 224 (right). Map from Otto Energy. |
ST 224 is on the GoM shelf offshore Louisiana, and sits in about 170ft of water.
According to Otto, the prospect contains a large, amplitude supported, high CGR, gas condensate exploration prospect located in the prolific Bul. 1 trend, which is expected to be drilled in Q4 2017.
Otto says ST 224 is surrounded by analogue high CGR discoveries, which present a similar amplitude expression on 3D seismic data making this a very attractive low risk exploration opportunity.
“Several existing production platforms fall within tie-back distance of the proposed well, enhancing economics and making development of any discovered hydrocarbons both quick and cost effective,” says Otto. “Additional follow up drilling potential exists on the lease.”
The terms of the deal require Otto Energy to fund 25% of the initial test well in the ST 224 lease (up to casing point) to earn a 25% working interest in the ST 224 lease.
Otto has committed to a financial investment of about US$2.7 million, including funds to evaluate the well using wireline techniques and in a failure case to plugging and abandonment at the location. Otto will also pay $81,250 in back costs.
Along with Otto’s 25% stake, operator W&T Offshore holds 39% interest, with partners Houston Energy (11%), and an unnamed private US company (25%).
“The farm-in structure with no promote on the initial test well, and a back in after payout only in the success case after all costs have been recovered minimizes up front entry costs. In the success case, pre-drill economics support a very robust development project at current oil price, which W&T Offshore have indicated could have first production by end 2018,” says Otto Managing Director Matthew Allen.
“This complements our existing SM 71 [South Marsh 71] development in the Gulf of Mexico, which is due to commence production in late 2017,” says Allen.
In May, Otto entered into binding agreements to raise $8.2 million to develop its oil projects in SM 71. Shareholder approval for the deal is scheduled for this month.
Otto plans on using the funds for the construction of the SM-71 manned platform facility, which is already underway with current expectations for the field to be in production by the end of 2017.
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