Otto Energy Limited, on behalf of the Philippines Department of Energy (DOE) and the Galoc oil field Joint Venture, announced Thursday that production has commenced from the Galoc-5H and 6H wells drilled and completed under the Phase II development of the field in Service Contract (SC) 14C in the Palawan Basin, Philippines. Commissioning of the Galoc Phase II project represents a major achievement for the DOE, Otto Energy (the Operator) and the other partners within the Galoc Joint Venture. Initial production is 14,500 barrels of oil per day (bopd) and the four well system is expected to be operated at 12,000 bopd going forward.

Galoc has produced more than 11 million barrels of oil since it was commissioned in 2008. Ultimate recovery from the field, with the addition of Galoc-5H and 6H, is expected to be approximately 25 million barrels of oil with end-of-field life extended beyond 2020.

Otto, as operator, has delivered Phase II from sanction to commencement of production in just over 14 months. Phase II has been delivered safely and close to both the original budget and schedule set in August 2012. The project has experienced many challenges including maintaining safe operations during the recent Super Typhoon Haiyan and successful drilling of the horizontal wells through the Galoc reservoir. Otto CEO Gregor McNab said:

“Development of any offshore field presents unique challenges – particularly so for a field like Galoc in a remote location – and so I would like to thank the Otto team who have committed their significant experience and professionalism to successfully bring Galoc Phase II into production. This achievement is a credit to the Department of Energy which has worked relentlessly to promote oil and gas activity in the Philippines, our joint venture partners and all of our contractors.” McNab added:

“For Otto shareholders this represents a significant milestone, with our share of cash flow from Galoc set to increase substantially, providing the company with additional funds to finance our exploration and development activities in South East Asia and East Africa. It also represents a major validation of our capability as an operator as we consider new ways in which to grow the company and deliver returns to shareholders.”

PROJECT OVERVIEWThe Galoc field is located in Service Contract SC14C (Galoc Sub Block) in 951 feet (290 meters) of water approximately 40 miles (65 kilometers) North West of Palawan Island and 217 miles (350 kilometers) south of Manila in the Republic of the Philippines. The Galoc-5H and Galoc-6H development wells were drilled within the existing producing field that has delivered over 11 million barrels of production since the field was commissioned in 2008.

The Galoc-5H and Galoc-6H development wells have been drilled to a total vertical depth of 7,185 feet (2,190 meters) with 5,830 feet (1,777 meters) of horizontal section in the G-5H well and 4,557 feet (1,389 meters) of horizontal section in the G-6H well.

After drilling of both Galoc-5H and Galoc-6H was completed, the DOF operated Skandi Skansen construction vessel successfully installed the subsea equipment and the hooked-up both wells to the FPSO Rubicon Intrepid. Production commenced from the Phase II wells Dec. 4.