Otto Energy farms into Talos’ Gulf of Mexico license

Australia-based oil and gas company Otto Energy has farmed into Talos Energy’s Green Canyon 21 (GC 21) lease in the U.S. Gulf of Mexico.

Otto said on Friday that it would earn a 16.67% working interest in GC 21 through paying 22.22% of the cost of drilling of the Bulleit appraisal well in the lease.

According to the company, the well will be drilled by Talos using the Noble Don Taylor drillship. The rig will begin drilling the Bulleit prospect in the mid-second quarter of 2019. First production from the well is expected within 12-18 months from spud.

Otto is undertaking a capital raising for approximately A$31 million ($22 million) via an A$11 million ($7.8 million) placement to institutional and sophisticated investors and a fully-underwritten, one for five accelerated non-renounceable entitlement offer to raise around A$20 million ($14.2 million).

The funds raised will be used in conjunction with cash flows from Otto’s 50% owned SM 71 oil field and future cash flows from the Lightning development to fund Otto’s $9.0 million share of the GC 21 drilling program, redeem $8.1 million of the convertibles notes currently on issue and for working capital including contingent development wells.

Otto’s Managing Director, Matthew Allen, said: “Otto is today taking another significant step in accelerating its business growth in the Gulf of Mexico. Participation in drilling of the Green Canyon 21 Bulleit oil discovery, provides Otto access to one of the best drilling opportunities that the Otto team has screened with a high-quality and proven operator in Talos Energy.”

Following the farm-in transaction Talos Energy, as the operator, will hold 50.00% working interest while partners Enven and Otto Energy will hold 33.33% and 16.67% respectively.

Location of GC 21 (in yellow); Source: Otto Energy

Tieback to GC 18A

It is worth noting that commercial arrangements for oil and gas from the lease to be produced through Talos’s Green Canyon 18A platform are currently being finalized with Talos.

According to the company, all subsequent costs of completion and development, including any further wells, shall be at Otto’s working interest of 16.67%.

As for Bulleit, it is an amplitude-supported Pliocene prospect with similar seismic attributes to the analogous sand section in Talos’s Green Canyon 18 field, which has produced approximately 39 mmboe to date.

The prospect sits in approximately 1,200 feet of water and is 16 kilometers from the GC 18A platform.

The DTR-10 oil sand, which is the primary target of the Bulleit well, was first discovered in 1984. A sidetrack of the first well also found oil pay in both DTR-10 and deeper MP sands. Production rates expected from the MP sand when tied into a production platform are expected to deliver between 8-15,000 boepd.

No discoveries were developed in the lease, and there is no infrastructure available.

Talos’ GC 18A platform has spare capacity within tie-back distance of GC 21, and a subsea development is planned to tie the Bulleit well into the platform.

Bulleit prospective resources (P50) are 14.5 mmboe. According to Talos, the prospect’s gross prospective resources are expected to be between 10 to 30 mmboe on an unrisked basis.

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