my wish - roadmap for otto

We had good 2 months trading with better volumes and handful of positive news from Galoc and SEP clearance for SC55 even though we had a hiccup in relinquishing SC69 license and then came the mother of all blows in last 2 years, BHP withdraws from SC55 drilling and opt to walk out from JV.

Though it came as a surprise and from no where, Otto could do very little as it is not in their capacity to control BHP. The only grudge I hold is, if BHP were not interested, they should have given enough time to Otto and DOE to look for alternative when they were waiting for SEP clearance. It pains even more when all paper work were done and project is ready to start, BHP pulls the plug. IMO, if at all Otto or DOE decides to take legal path, we would never get a solution and out of court settlement would be the best solution for all parties concerned. BHP have not given in writing that they are walking out from SC55 yet but chances are very slim they would want to drill Cinco.

BHP's loss is someone else's gain and I hope Shell or Total partners with Otto which could be Win/Win situation for Otto and them. BHP cannot claim seismic and Otto can reuse the seismic with new partners which could save millions of dollars. Risk/Reward ratio is very high and 3-D seismic results were very encouraging for any major to have a go at Cinco and Hawkeye. I can understand the concern of Otto Management not to drill the well on their own as it will risk everything and in case of failure (even though chances are slim), it will put Otto as a company in jeopardy. On the other hand, if they can bring in a partner with solid financial banking and experience in Oil & Gas sector, it would be a different ball game altogether.

Personally, I wish below road map in coming months (within 6-12 months timeframe) and everyone have their own opinions and below are my opinion only

1. Successfully complete Galoc phase II and improve 2P resources. Pay back debt facility got from BNP Paribas. Going by estimate, Otto should be able to re-pay debt 9 months from now or may be earlier (considering current revenue, cash in hand and solid cash growth from Galoc II)

2. Galoc has proved once again that commercial OIL exist in the region and is worth drilling Galoc North which would add to our 2P resources and could come in handy to increase the life time of OIL wells

3. I wish to see Duhat to spud and Oil to flow from wells. Mean estimate of Duhat is worth a try once more and with 80% interest, any success there would have direct +ve impact on our SP and stamp the authority of Otto as an Operator.

4. Bring in Shell or Total or any other major to partner us to drill SC55. BHP walking out may turn out to be blessing in disguise for Otto if they can get a new partner. If DOE supports Otto for SC55 and Otto can pull in a major, I expect Otto to have better than 33% W.I they had before as new partner do not have much exploration work left and all they would have to do is fund exploration well and drill Cinco and Hawkeye. If this happens soon, expect a sharp rise in SP. Any +ve news on SC55 would skyrocket the SP and if we get exploration well in Cinco/Hawkeye, I expect SP to be at least in 40 cps

5. Last but not the least, I expect K-K and Pangani licenses to have major impact on Otto portfolio. Going by the seismic results and upbeat from our partners (Swala), we have handful of Oil in all three basins where we completed 2-D seismic with 2 more basins in progress. I still could not believe Otto got 50% interest in K-K and Pangani license by paying 1.4 million to Swala when they were private as part of funding deal. This could turn out to be master stroke for Otto going by recent discoveries of Africa Oil and Tullow in EARS. As of today, all exploration wells and wild cat wells drilled by Tullow resulted in OIL discovery and success rate is 100%. Once Market understands the importance of Otto's 50% interest in these two licenses, SP will get a boost. CPR for K-K and Pangani will give us insights to the potential and when we are in drilling stage, I expect these 5 basins alone to be worth at least 30-40 cps.

Otto's potential is wider than what we think and SP anything below 10c is a bargain on short/mid/long term. These are my opinions only and positive discussions are always welcome.!