Initiation: Exploration pure play in Philippines and Tanzania
After completing the sale of its Galoc oil field in the Philippines for US$108m, Otto Energy’s (OEL) investment case has shifted from a production-driven story to a pure exploration play in the Philippines and Tanzania. It plans to return US$58m to shareholders, leaving enough cash to fund planned exploration activities over the next 18-24 months, a luxurious position for a small-cap E&P in this environment. Otto has farmed down part of its Philippine interests to mitigate risks and fund exploration wells. Although Otto is well funded and is exposed to up to four wells, the stock trades at a discount to cash and our core NAV of A$0.11/share. Our RENAV sits at A$0.22/share, with further upside if Otto secures cost carries and is successful with the drill bit.Otto Energy is engaged in investment in oil and gas exploration and development in Turkey, the Philippines, Italy and Argentina.
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