kelman on otto

"Otto Energy OEL
• Otto Energy announced that it will acquire 50% of the Bastiglia-Cento Exploration Permits in the Po Valley, Italy. These Po Valley exploration permits are considered to be “highly prospective with multiple hydrocarbon prospects and leads already identified�. Significantly this region is a proven hydrocarbon basin with over 13Tcf of gas and 340 MMbbl of oil being discovered to date. The Bastiglia-Cento Block is surrounded by a number of substantial oil and gas fields. Typically the gas prospects are at depths of between 1,600 metres and 3,500 metres.
• The first well, Gazzata-1, will be drilled around September 2008, targeting prospective gas resources of over 100 billion cubic feet (bcf). According to Otto, this well has a potential value $200 million. Total cost of these gas prospects which includes Seismic data and the drilling the first well is $10 million. The initial funding for Seismic data will come from current funds and the cost of the September drilling will be from surplus revenues generated at their Philippine Galoc Oil Field, which is scheduled to commence production in April 2008.
• Commenting on this diversification into onshore Italy, CEO of Otto Energy, Alex Parks said: “This new acquisition is a perfect fit for Otto as we continue to build our portfolio of onshore and offshore oil and gas assets with a pipeline of projects that span across exploration, development and production. The Bastiglia-Cento Exploration permits are considered to be highly prospective and relatively low risk.� Importantly the gas price in Italy is very attractive at around US$10/Mscf and hence small gas discoveries are potentially commercial.
• Otto Energy has embarked on an impressive expansion program over the last 4 months with the purchase of an 18% interest in the Galoc offshore oil project in the Philippines for $45 million and an increased share in their own Philippine oil prospects.
• It is interesting to see that Otto are attracting some substantial Europe investors, namely the Switzerland based, Santo Group. This investment company has recently increased their holdings to 18%. Obviously their latest purchase of Italian gas prospects will appeal to these investors.
• 2008 is set to be an exciting year with production due to come on stream in April from the Galoc field in the Philippines. I believe development drilling for natural gas in Turkey is due to begin sometime in the New Year; this should lead to an early gas field development and hence cash flow. In Argentina the company is waiting on a drilling permit for their highly prospective Cuyana Basin oil prospect. In late 2008, Otto will begin drilling the Calauit offshore oil and gas prospects in the Philippines. Importantly this prospect is known to contain oil and this appraisal drilling program should lead onto oil production in early 2009.
• It appears that there will be a raft of exploration action next year which should excite investors. The company has a diverse range of oil and gas prospects with differing levels of risk. No doubt this strategy should reward patient investors. There are a number of valuations put on these shares ranging from 60 cents to over a $2. It is not hard to justify paying in excess of 50 cents for these shares and I doubt they will stay at the 35 cents level for long. BUY"

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Sounds good!

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