Otto Energy (OEL:ASX) resumed trading today after a two day trading halt pending the release of news relating to the sale of their stake in the Galoc oil field in the Philippines. Under the sale and purchase agreement, Risco Energy Investments Pte Ltd are to pay USD101.4m (approx AUD114.34m) to Otto Energy, pending shareholder approval. Shares closed up over 12% to 9.3c, having reached a high of 10c in intraday trade.
Figure 1.1 : Otto Energy (OEL : ASX) 12 Month Chart
Otto’s management today flagged a 6c capital return to existing shareholders and plans to use the remaining USD39m to fund exploration in their Tanzanian prospects. Additionally the management team hope to complete a farm-in deal and subsequently drill their SC55 targets in the Philippines. In their most positive tone yet, management refer to two remaining potential farm-in prospects. A well is due to be drilled before the end of 2014 pending a successful farm in.
It remains to be seen whether a competing offer for their Galoc assets will be forthcoming. Valuations appear fair and the offer is unanimously endorsed by the existing management team. Given the recent purchase of Nido’s share in the Galoc oil fields, there does appear to be serious potential for a bidding war, so we watch with a keen eye. We see Otto being worth at least 10cps based on these developments and will look to buy on any real weakness.
Disclaimer: The owners/writers for YourWeathWatch are indirect shareholders in Otto Energy.