Otto Increases Stake in Galoc Oil Field

- Otto Increases Stake in Galoc Oil Field

Friday, August 12, 2011
Otto Energy Ltd.

Otto has entered into various definitive agreements to increase its stake in the producing Galoc Oil Field offshore the Philippines from an indirect 18.78% to direct 33.0% under Service Contract 14C (Galoc). Otto will assume 100% ownership of the Operating Company of the field, which is currently producing 6,800 oil barrels per day, on a 100% basis.

Under the terms of the transaction, Otto has agreed to acquire a 68.62% interest in the Galoc Production Company WLL (GPC), the operator of Galoc, from Vitol Group, increasing Otto's interest in GPC from 31.38% to 100%. Through the acquisition Otto will initially increase its stake to 59.84% of Service Contract 14C. Otto has then agreed to cause GPC to on-sell, on the same per percentage point terms, a 26.84% of this stake to Singapore energy investment company Risco Energy Pte Ltd, bringing Otto's post acquisition stake in Galoc to 33.0%. This transaction is subject to relevant Philippines government approvals.

The effective date of the purchase agreement is April 1, 2011. The total purchase price for Otto's share of the purchase price is US $18.7 million. The acquisition will be funded from Otto's existing cash reserves. Completion is scheduled to occur prior to September 30, 2011.

Attractively Priced, Low-Risk Opportunity

The acquisition will increase Otto's proved and probable (2P) reserves by 0.98 million barrels, with an additional 0.64 million barrels of contingent resources (2C). Recently the SC14C joint venture approved the upgrade to the mooring and riser system for the Galoc FPSO. This is expected to substantially increase the operating uptime of the field, and is crucial infrastructure to facilitate a Phase 2 development.

The purchase price for the acquisition is equivalent to US $19 per barrel for proved and probable reserves and US $11.50 per barrel with the inclusion of contingent resources, which relate to Phase 2. The field currently enjoys a net back of around US $50 per barrel after all costs, taxes and other charges.

Through 100% ownership of GPC, Otto becomes the Operator of the field, a crucial step in the development from an exploration to an integrated oil and gas company. The acquisition will also realize cost synergies as Otto consolidates the operating office of GPC in Manila with its current Perth and Manila offices.

Otto Acting Chief Executive Officer Matthew Allen said, "This acquisition represents an attractively priced, low-risk opportunity for Otto to increase its share of revenue from Galoc, as well as to better leverage the expertise within the group through assuming Operatorship. Galoc is a proven producing asset that we know well and that complements our high potential Philippines exploration portfolio. The revenue from Galoc continues to provide a valuable source of funds for reinvestment and this is set to grow as we move towards a Phase 2 expansion of the project. We look forward to working with our joint venture partners and the Philippine Department of Energy to advance the successful Galoc project under Otto's Operatorship."

Strong Current Production Performance

Recent performance at Galoc has been encouraging with current production at approximately 6,800 barrels per day. The field has delivered 23 offtakes to refinery customers to date with one additional cargo scheduled for delivery prior to the FPSO being taken out of the field in September.

Galoc has had an average operating uptime of 100% over the past four months, and now has a year-to-date 12-month rolling average uptime of 88%. The upgrade to the mooring and riser system is planned for the fourth quarter of 2011, and following installation is expected to improve FPSO operating uptime to in excess of 95%. The cost to Otto of the mooring and riser upgrade is modest at US $3.6 million based on a 33.0% interest in SC14C.

It is anticipated that final investment approval for a Phase 2 development of Galoc will be targeted for early 2012, subject to satisfactory results from a planned 3D seismic acquisition.

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Seismic Prog. Completed at Otto's Well Offshore Philippines

- Seismic Prog. Completed at Otto's Well Offshore Philippines

Thursday, June 23, 2011
Otto Energy Ltd.

Otto announced that the 3D seismic acquisition program commenced earlier in June at SC69, offshore Visayas, Philippines, has successfully been completed. The marine operations for the acquisition along with the onshore support teams have all run very smoothly resulting in successfully acquiring of over 210 km2 of high quality 3D seismic data.

Otto will now move to process the newly acquired seismic data. This will take approximately six months, prior to interpretation.

Otto's Managing Director Paul Moore said "We would like to thank all of our staff, contractors, Government representatives and involved parties in supporting the execution of this project. The program has been run efficiently resulting in a high quality product. We look forward to maturing the Lampos and Lampos South prospects following the interpretation of these new seismic data over the coming months."

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Otto Begins Seismic Acquisition Offshore Philippines

- Otto Begins Seismic Acquisition Offshore Philippines

Wednesday, June 08, 2011
Otto Energy Ltd.

Otto has commenced a 3D seismic data acquisition program in Service Contract 69 (SC 69) in the Visayan Basin of the Republic of Philippines.

The seismic vessel BGP Explorer, operated by Exploiter Pte Ltd (a subsidiary of BGP ), has been contracted to record the seismic data. Otto plans to acquire approximately 210 km2 of 3D seismic data in SC69 (as outlined in the attached map).
SC69 covers an area of 5,280 km2 in the central Visayan Basin where the data acquired from the successful 2D seismic campaign last year confirmed the presence of two sizable reef structures, Lampos and Lampos South that sit immediately adjacent to the Calamangan Trough which is modeled to generate both oil and gas. Current “success case” estimates of oil initially in place in the combined structures range between 22 mmbbls and 713 mmbbls with a mean in place volume of 290 mmbbls.

This survey fulfils the service contract commitments in the current sub-phase.

Otto's Managing Director Paul Moore said, "the ongoing exploration program in the Visayan region of the Philippines is a core part of Otto's exploration program with the 3D seismic currently being acquired ahead of the drilling obligation, in the next sub-phase."

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Otto to Commence Abandonment Ops at Duhat Sidetrack

- Otto to Commence Abandonment Ops at Duhat Sidetrack

Wednesday, May 25, 2011
Otto Energy Ltd.

Otto provided the following update on the progress of the Duhat-1A sidetrack well, located in the Philippines.

Since the last update, the well was drilled to 321 m TVD (True Vertical Depth) in the 12 ¼” section before becoming stuck, again due to unstable hole conditions (similar to those experienced in the Duhat-1 nearby well).

The well was subsequently plugged back to 200 m TVD and abandonment operations have commenced.

Information obtained during drilling from both Duhat-1 and the Duhat-1A sidetrack are very encouraging. In both wells, high general background gas levels have been observed during drilling, consistent with the presence of an oil generative area. These high gas levels, in formations of relatively weak rock strength coupled with unexpected shallow overpressure in the Miocene Tagnocot interval require further study prior to the recommencement of exploration in the block.

Drilling further ahead in Duhat-1A is now considered to be imprudent on safety grounds and abandonment is now in progress.
Otto Energy Ltd and its partners in SC-51 are excited by the geotechnical results of this initial drilling campaign and further work will be programmed once the data from recent operations have been fully analyzed.

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Otto Notes Drilling Ops at Duhat Well

- Otto Notes Drilling Ops at Duhat Well

Monday, May 16, 2011
Otto Energy Ltd.

Otto provided the following update on the progress of the Duhat-1 well. Since the last update, the well was drilled to 325m TVD (True Vertical Depth) in the 12 ¼" section before becoming stuck due to unstable hole conditions (similar to those experienced at this depth in the nearest offset well).

The well was subsequently plugged back to 224 meters TVD and successfully sidetracked. The well is currently drilling ahead at 295 meters TVD.

Geological prognosis is unchanged and rig performance is satisfactory to execute the work program.

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Otto Drills Ahead at Duhat Well

Otto Drills Ahead at Duhat Well

Otto provided the following update on the progress of the Duhat-1 well that was spudded on April 19, 2011. The well has been drilled to 205m TVD (True Vertical Depth) and 13 3/8" casing has been set and cemented. Current operations are pressure testing the Blow Out Preventer and installing flare lines prior to drilling ahead in 12 ¼" hole.

Performance of both the rig and mud system has been satisfactory with the well being on track to reach TD (Total Depth) as programmed.

Otto Spuds Duhat-1 Well

Otto Spuds Duhat-1 Well

Tuesday, April 19, 2011
Otto Energy Ltd.

Otto has commenced drilling the Duhat-1 well with the official spud of the well April 19.

The DESCO Rig-1 drilling unit is being used for the well which is expected to take approximately 27 days to reach target depth of 1,000 meters.

DUHAT-1 WELL BACKGROUND INFORMATION

Service Contract Summary:

• OEL (through its wholly-owned subsidiary NorAsian Energy Ltd) 40% Interest and Operator
• Area 3,320 km2
• Work commitment in the current sub-phase requires drilling of 1 exploration well by July 2011
• This license has recently been farmed down from 80% Working Interest to 40% to SWAN Oil and Gas Ltd in exchange for a US $1.5 mm contribution to the Duhat-1 well, to be drilled Q2 2011

Current Status:

The Duhat-1 well is programmed to reach a total depth of 1,000 meters and will test potential hydrocarbon accumulations within the sandstones of the Miocene Tagnocot formation of the San Isidro anticline. Pre-Spud "success case" volumetric estimates are in the range of 12 to 263 MMbbl Oil Initially in Place with a P50 estimate of 76 MMbbl.

With its programmed total depth (T.D) of 1,000m, the Duhat-1 will be the only modern deep exploration well in northwest Leyte. Hydrocarbon shows in several of the shallow wells drilled in the block and the presence of numerous oil seeps in the area indicate the presence of an active petroleum system. A success at Duhat-1 could be followed-up by additional exploration drilling on nearby look-alike structures.

The minimum reserves volume required for an economic discovery in the area is less than 1 MMbbl recoverable.

Otto Energy successfully executed a farm-out agreement with SWAN Oil and Gas in January 2011 and is now awaiting approval of the Philippine Department of Energy for this assignment.

Otto Managing Director to Resi

Otto Managing Director to Resi

Tuesday, April 05, 2011
Otto Energy Ltd

Otto advised that Mr. Paul Moore, Managing Director of Otto has given notice of his resignation effective close of business Friday, July 1, 2011.

Mr. Moore has explained that his decision, not made lightly, was for personal reasons and he will be relocating overseas.

The Board has commenced a formal search for a new CEO. Mr. Moore will work closely with the Board and management over the coming 3 months to continue with ongoing business growth and operations and ensure a smooth transition.

Non executive director Mr. Ian Boserio will provide assistance to the management team and new CEO where necessary to further ensure successful business delivery.

The Company has an experienced and stable senior management team in Perth and Manila who will ensure all Company operations remain on schedule.

Although disappointed to be losing his services, the Board understands Mr. Moore's decision and we wish him and his family all the best for the future.