Nido Petroleum (ASX:NDO) has offered US$108 million in cash for...

Nido Petroleum (ASX:NDO) has offered US$108 million in cash for Otto Energy’s (ASX:OEL) 33% working interest in the producing Galoc oil field offshore Philippines.

The offer has been recommended by Otto’s board as superior to the previous sale agreement with Risco Energy Investments.

The acquisition will more than double Nido’s interest in the field to 55.88% from 22.88%.

Its production base will also increase to more than 4,000 barrels of oil per day.

Nido plans to fund the acquisition through a combination of existing cash reserves and debt.

As part of the funding arrangements, its major shareholder Bangchak Petroleum Public Company Limited has committed to providing a revolving debt facility of up to US$120 million at an arm’s length basis.

This will have an initial interest rate of 6% per annum plus LIBOR. The interest rate increases by 2% annually with a maximum rate of 12% plus LIBOR.

The company intends to seek shareholder approval for the loan security package at its next Annual General Meeting in 2015.

Nido will pay Otto a US$10.8 million deposit and will assume all production rights and liabilities associated with Otto’s 33% working interest (including abandonment costs) with effect from 1 July 2014.

Completion of the transaction is conditional on Otto shareholder approval.   

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