Gulf Coast Package
Under a Joint Exploration and Development Agreement (JEDA) with Hilcorp Energy Otto committed to an eight well drilling program with an estimated cost of US$75 million (100%). The first well, Big Tex, has been drilled - see below.
Otto will earn a 37.5% working interest by paying 50.0% of the costs of drilling and either setting casing or plugging and abandoning the well plus lease acquisition costs at each of the eight prospects. The estimated cost of the commitment to Otto is US$37.5 million. US$4 million was paid immediately to cover initial land and other costs.
Well Cap - Otto has the option to discontinue participation in each prospect well if actual costs exceed the approved expenditure budget by 20%. If Otto elects to not continue, it will forfeit rights to that prospect. If Otto proceeds, costs from then on will be at working interest percentages.
Program Cap - Once Otto has incurred a total amount relating to the initial eight wells of US$42.5m, it will have the option to elect (but not the obligation) to participate in the remaining undrilled prospects in the initial eight well program at working interest percentages. If Otto elects to not participate in any undrilled prospects, it will forfeit rights in those prospects.
Should either the Tarpon or Mustang prospects be successful then Otto has ground floor rights (ie pays only its working interest) to participate in the nearby Damsel and Corsair/Hellcat opportunities. These wells are in addition to the eight wells.
Under the JEDA Otto has a right of first offer to a subsequent Gulf Coast program, if Hilcorp elect to offer such a program to third parties.
About Hilcorp Energy
Founded in 1989, Hilcorp is one of the largest privately held oil and natural gas companies in North America. Hilcorp specializes in reinvigorating legacy oil and gas fields across North America; including in the US Gulf Coast, Alaska and the Rockies and currently produces approximately 325,000 boepd. To put this into context, Australia’s largest oil and gas company, Woodside, produces ~230,000 boepd.
Hilcorp has nearly 2,000 employees and has been consistently recognized for its strong culture, values and ethics both within the firm and in the communities in which it operates.
Otto is very pleased to be partnering with a Gulf Coast operator with proven capability to take exploration prospects into production.
Details of the Drilling Program
Information regarding the remaining seven wells is set out below.
The range of prospective resources for each prospect is set out below.
Prospective Resources Cautionary Statement
The estimated quantities of petroleum that may potentially be recovered by the application of future development projects relate to undiscovered accumulations. These estimates have both an associated risk of discovery and a risk of development. Further appraisal and evaluation is required to determine the existence of a significant quantity of potentially moveable hydrocarbons.
Risked Summary data - 8 Well Portfolio, Gross (8/8ths)
Portfolio-level risked information for the eight well portfolio is set out below. These are probabilistic additions of each prospect’s expectation curve, using a monte carlo approach. Refer to the Competent Person’s Statement for further information on these calculations.
Big Tex Well
The initial exploration well on the Big Tex prospect, SL 192 PP 031, commenced on 28 August 2018 and reached a final total depth of 13,722ft MD (13,172ft TVD). A triple combo wireline logging suite was subsequently acquired over the target prospective Middle Miocene Tex W16 and Tex W18 Sand intervals as well as several sidewall cores. Petrophysical log evaluation indicated the presence of a number of hydrocarbon bearing zones, however insufficient producible reservoir was encountered to justify the additional cost of completing the well for production. The Joint Venture elected to plug and abandon the SL 192 PP 031 well as sub-commercial on 12 October 2018.