2020 AGM Q&A
2020 ANNUAL GENERAL MEETING ADDITIONAL Q&A
At the conclusion of our 2020 Annual General Meeting held on 19 November 2020, we discovered an issue that not all of the questions raised were actually visible to the Company. The questions have since been made available to the Company, and we would like to take this opportunity to answer them. We apologize for this technical difficulty.
Q: Isn't it a better time to consolidate capital when a distribution is imminent, not during the exploration and development Phase?
A: The Company is driven by a highly disciplined approach to capital management. Otto will evaluate all facets of the value creation life cycle, including acquisitions, divestments, exploration and development, mergers, dividend distributions and share buybacks. Evaluating all these options against the backdrop of a right-sized capital structure and share price is imperative to providing the optimal overall outcome for shareholders.
Q: Why 50:1? This would leave free float of circa 50m.....which would make the company very illiquid.
A: With 4.795 billion shares issued currently, a 50:1 consolidation would leave approximately 96 million shares outstanding - which is more typical and appropriate for a Company of Otto’s size.
Q: What are Otto's total drill and development costs for GC21?
A: This project is projected to cost a total of US$39.5 million, net to Otto, as follows (in US$ millions).
Drilling $ 16.7
Subsea Tieback $ 12.6
Platform Modifications $ 3.2
Completion Costs $ 7.0
Q: Is it the intention to participate in Talitha drill if PANR gets funding?
A: The State of Alaska has approved the asset owners request to form the Talitha Unit as of Nov 13, 2020. In granting this Unit, the state of Alaska requires a commitment of the asset owners to drill either 2 wells in 4 years or 1 well in the next 2 years. Otto’s exposure is limited contractually to US$2.6 million per well, plus its interest in a US$3.3 million performance bond (US$0.4 million net to Otto). We are and will work with the operator in planning to meet those commitments.
Q: What approximate oil price is required to enable the company to fully repay the Macquarie loan by the scheduled due date of September 2022?
A: The Company’s direct and indirect lifting costs are c.a. $11.00/bbl as presented in the materials provided during the AGM. Going forward, as presented we are targeting the cost of finding and developing invested in our base assets to be c.a $8 – 10/bbl. These projected forward costs against our hedged and market-based production give us confidence that we can fully meet the obligations associated with our funding partner, Macquarie.
Q: What is your impression of the current mood in Houston and what new prospect opportunities are there in the GOM?
A: As stated by both the Chairman and the CEO during the AGM, the oil and gas industry is experiencing incredible volatility in demand, pricing, geo-political uncertainties and consumer confidence. While there is cautious optimism for demand and pricing recoveries over the next few years, companies from small to large have been challenged. In that challenge, we are seeing many opportunities, assets and companies seeking funding, selling assets, utilizing bankruptcy protection and even liquidations that, given capital discipline, create real opportunities. Sound balance sheet and business fundamentals will position Otto to be able to evaluate and consider these opportunities as they emerge. The Company has a very experienced technical team capable of reacting quickly to develop detailed evaluations to identify opportunities that are consistent with our stated technical and financial screening criteria. This disciplined assessment process should yield a robust pipeline of value creation opportunities.
Bank Debt Facility
Q: Was there a MLA covenant on the Debt Facility on the Feb 17 2020? If so, what amount?
A: The Company refers to the announcement made on 6 May 2020 which provided details relating to the Macquarie Facility.