Oil explorer Otto Energy (ASX: OEL) has started an eight well drilling program across the US Gulf Coast, with the Big Tex exploration oil well the first off the rank and expected to take 55 days to reach its total depth.
Otto is earning a 37.5% working interest in the Big Tex prospect by funding 50% of the drilling and associated costs, which is anticipated to cost Otto US$4.23 million.
Once the well has been completed, Otto will contribute 37.5% to all future costs.
US-based private company Hilcorp Energy remains the operator of the prospect with its 62.5% share.
Big Tex has prospective resources of 16.9 million barrels of oil equivalent (P10). Separately that equates to 13MMbbl of oil and 23.5 billion standard cubic feet.
According to Otto, the well will be drilled to a maximum depth of 13,175 feet.
“Otto is excited to be participating in the Gulf Coast drilling program with Hilcorp,” Otto managing director Matthew Allen said.
“Big Tex is the first of an eight well program that provides Otto with the opportunity to materially grow its position in the Gulf of Mexico area of focus and deliver upon our strategy of growing production to 5,000 barrels of oil equivalent per day by 2020,” he added.
Gulf of Mexico assets
Otto announced it was farming into eight Hilcorp prospects either onshore or near shore on the Gulf of Mexico in late July.
The company carried out a $20 million entitlement offer to top up its cash reserves to fund its US$37.5 million share of the 18 month drilling program across the prospects.
Otto plans to expand its production to 5,000boepd by the end of 2020 and is targeting reservoir systems in the US Gulf of Mexico shelf and Gulf Coast.
The company believes the capital costs in this area are “manageable” and that the available infrastructure will shorten the discovery to production time-frame.
Otto currently holds a 50% interest in the SM 71 oil field in the Gulf of Mexico shelf. The SM 71 oil field is currently generating 2,000bopd for Otto.
Hilcorp and Otto plan to begin drilling the next prospect Lightning in October.