The Australian-listed oil and gas explorer Otto Energy Limited is raising cash for its U.S. Gulf of Mexico oil project.
The company said on Monday it would raise $8.2 million through an issue of secured convertible notes.
Otto has signed a binding deal under which Molton Holdings Limited, a major Otto shareholder, will subscribe for convertible notes with an aggregate face value of $8 million.
John Jetter, Otto’s Chairman, will subscribe for convertible notes with an aggregate face value of $0.2 million. The notes issue is subject to shareholder approval at a General Meeting to be held in July 2017.
The cash will will be used to develop Otto’s oil project located in the South Marsh Island 71 license (‘SM-71’) offshore Gulf of Mexico.
The construction of the SM-71 manned platform facility is already underway and current expectations are that the field will be in production by the end of 2017.
Initial flow rates of 1500 to 2000 bopd (gross field production) are expected from the completion of the first development well.
Otto’s Managing Director, Matthew Allen , said: “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. 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.
“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/onshore Louisiana and Alaska,” Allen said.