Otto Energy has signed an agreement with MV Upstream Tanzania (a joint venture between Vegas Oil & Gas and Motor Oil Hellas-MOH), regarding the farm-out of a 25% participating interest in the Kilosa-Kilombero Licence, onshore Tanzania.

Under the agreement, MV Upstream will pay $2.3 million to Otto Energy for a 25% participating interest in the licence as compensation of historical costs acquired by the latter.   

MV Upstream will also carry Otto’s outstanding 25% working interest via the drilling of the Kito prospect up to an amount of $2 million.  Expenses besides this amount shall be paid by Otto in line with its remaining 25% participating interest.  This costs are currently estimated at about $10 million. 

Upon a discovery at Kito, MV Upstream will carry Otto’s outstanding 25% working interest through the drilling of an appraisal well up to $1 million. The transaction is however, subjected to customary Tanzanian regulatory and joint venture approvals before completion. 

“Otto is very pleased to welcome Vegas and MOH to the Kilosa-Kilombero joint venture. The farm down provides Otto shareholders with meaningful exposure to the high-impact exploration well targeting the 194MMbbl (gross Prospective Resource) Kito prospect, whilst conserving the Company’s balance sheet.  The joint venture continues to make preparations for drilling, with final rig selection and permitting continuing ahead of an expected spud date in the second half of 2016.  The carried drilling in Tanzania extends what continues to be an active period for Otto post the Company’s recent maiden discovery in the Gulf of Mexico and ahead of its planned multi-well campaign on the Alaskan North Slope,” Matthew Allen (photo), Otto’s Managing Director, told Energy-pedia.

Otto Energy holds a 50% interest in the Kilosa-Kilombero licence alongside Swala Energy with 25% and Tata Petrodyne 25% interest.

Anita Fatunji