WEST PERTH, Australia – Australian oil and gas company Otto Energy Ltd. says it will raise $8.2 million for its SM-71 oil project in the Gulf of Mexico, according to the Maritime Herald.
The company will raise the cash through an issue of secured convertible bonds. According to the report, the company already signed binding agreement with the main shareholder for the issue of convertible notes, but final decision will be taken at the general shareholder meeting, scheduled for July.
The cash will be used to develop the company’s oil project located in the South Marsh Island 71 license (SM-71) offshore Louisiana. The construction of the platform is reportedly underway and production is expected to start by the end of 2017.
“We are very pleased that an existing major shareholder, Molton Holdings Limited, has agreed to financially support the SM-71 development in the Gulf of Mexico through to production,” said the Managing Director of Otto Energy, Matthew Allen. “The issue of convertible notes with the conversion price set at a substantial premium to the current share price demonstrates the growth potential from the SM-71 development and future exploration,” Allen was quoted to say in the report. “With the SM-71 development funded, Otto can now utilize some of its existing cash reserves of $14 million for the next stage of growth through participating in exploration drilling of conventional new ventures in the Gulf of Mexico, and in onshore Louisiana and Alaska.”
According to estimates, the initial flow rates from the completion of the first development well at SM-71 project are expected to be 1,500 to 2,000 b/d of oil.