Otto Energy Limited : SC55 - Otto Executes Binding Agreements

21 January 2014

Manager of Company Announcements

ASX Limited

Level 6, 20 Bridge Street

SYDNEY NSW 2000

By E-Lodgement SC55 - OTTO EXECUTES BINDING AGREEMENTS TO ASSUME BHP BILLITON'S INTEREST Highlights:

• Executed final binding agreements with BHP Billiton to terminate farm-out agreement over SC55.

• BHP Billiton to pay US$3m to Otto on approval of re- assignment and US$24.5m upon drilling an exploration well.

• Otto's 2014 work program and budget to include drilling of

Hawkeye-1 exploration well as early as Q4 2014.

• Commencement of farm-out campaign for Hawkeye-1.

Otto Energy Limited ("Otto") (ASX: OEL) has executed final binding agreements with BHP Billiton Petroleum (Philippines) Corporation (BHPB) (ASX: BHP) to terminate the farm-out agreement between the two parties over Service Contract 55 (SC55), offshore the Philippines.
Otto has submitted a request to the Philippines Department of Energy (DOE) for re-assignment of BHPB's 60% working interest to Otto, taking Otto's working interest in SC55 to 93.18%.
The key terms of the termination deeds provide for the following:

• Upon approval of the re-assignment by the DOE, Otto will accept the re-assignment of BHPB's 60% working interest and BHPB will pay US$3.0m to Otto;

OTTO AT A GLANCE

• ASX-listed oil and gas company with a strategy to grow its integrated oil and gas business across exploration, development and production

• Focused on South East Asia and East

Africa

• Operator of the producing Galoc oil field in the Philippines, which provides cashflow

• Opportunity rich with substantial exploration prospects and leads COMPANY OFFICERS

Rick Crabb Chairman

Ian Macliver Director Rufino Bomasang Director John Jetter Director Ian Boserio Director Gregor McNab CEO

Matthew Allen CFO/Coy Secretary

• Otto to lodge a Sub-Phase 4 work program and budget with the DOE, to drill the Hawkeye-1 exploration well;

• BHPB will pay a further US$24.5m to Otto upon completion of drilling the first exploration well in SC55; and

• BHPB has no enduring rights to any future exploration outcomes or obligations.

Otto has briefed the DOE of the intention to undertake drilling of the 3D seismically defined and DHI (Direct Hydrocarbon Indicator) supported Hawkeye-1 exploration well in Sub-Phase 4. Hawkeye is a turbidite clastic reservoir target in 1,690 metres of water with top reservoir prognosed to be at 2,732 metres. Drilling could commence as early as Q4 2014.
SC55 contains a number of distinct exploration play types including the carbonate gas/condensate trend, that has the potential for an oil charge, and the turbidite clastic prospects. The permit provides material opportunity and a series of possible drilling targets in an exploration campaign that will be undertaken during the remaining term of the service contract.

Head Office 32 Delhi Street, West Perth WA 6005 Australia PO Box 1414, West Perth, WA 6872 Australia T: [phone] F: [phone]

Manila Office 32nd Floor Philamlife Tower, 8767 Paseo de Roxas, Makati City 1226, Philippines T: [phone] F: [phone] [e-mail] ASX Code: OEL ABN: 56 107 555 046

Otto has commenced drilling planning preparations, including development of well designs, planning studies and the necessary equipment procurement required to undertake this programme. Otto has invited expressions of interest from drilling rig owners to determine availability of drilling units to drill the Hawkeye-1 exploration well within the required timeframe.
Otto has commenced a farm-out process intended to introduce a new partner into the joint venture to participate in the drilling of the Hawkeye-1 exploration well. Otto is targeting suitably qualified partners to join the program. A number of parties have commenced due diligence reviews of the data room ahead of the formal launch of the farm-out campaign.

Otto has engaged with the DOE regarding the revised timing of the work program commitments following the suspension due to delays in the receipt of the Strategic Environmental Plan(SEP) Clearance. It is expected that this revised timing will be the subject of a separate announcement shortly.
Otto Chief Executive Officer Gregor McNab said: "The termination of the farm-out agreement with BHPB represents a favourable outcome for Otto shareholders, providing us with material funding to allow drilling in SC55. This licence is a material and high potential permit with a number of exciting prospects and leads within it. We have commenced drilling planning activities and we look forward to unlocking the value from this permit through drilling the first well. The prospectivity of the carbonate trend, including the Cinco prospect, and the Hawkeye turbidite clastic prospect demonstrates the high impact potential to be tested by exploration drilling in SC55."

--Ends--

Contact: Matthew Allen

Chief Financial Officer

[phone]

[e-mail]

Media:

Rob Newton

MAGNUS Investor Relations + Corporate Communication

[phone]

[e-mail]

Head Office 32 Delhi Street, West Perth WA 6005 Australia PO Box 1414, West Perth, WA 6872 Australia T: [phone] F: [phone]

Manila Office 32nd Floor Philamlife Tower, 8767 Paseo de Roxas, Makati City 1226, Philippines T: [phone] F: [phone] [e-mail] ASX Code: OEL ABN: 56 107 555 046