Otto Energy subsidiary Otto Energy Philippines has entered into a letter of intent with Maersk Drilling for one of its ultra-deepwater drillships to drill a frontier wildcat offshore south-west Palawan.

The Maersk Venturer will spud the Hawkeye-1 exploration well later this year in 1,690 m (5,545 ft) of water in Block SC55, into which Red Emperor Resources has agreed to farm-in for a 15% stake in the block.

The well has been designed to reach the top of a target reservoir approximately 1,000 m (3,281 ft) below the seabed and intersect the gas oil contact to prove or otherwise the presence of the oil leg.

The dual derrick Maersk Venturer was commissioned last year after being built at the Samsung Heavy Industries yard in South Korea. It recently completed work for Total offshore Malaysia.

All required long lead items have been procured and stored in yards in Labuan, Malaysia. Drilling of the well is expected to get underway in the third quarter of this year, although detailed contractual arrangements with Maersk still need to be finalised over the coming weeks.

Otto Energy says it is now fully funded for the drilling of the wildcat, which will target the large turbidite clastic prospect. The gross prospective resource best estimate for Hawkeye is put at 112 MMbbl (Net Prospective Resource 74 MMbbl to Otto). Otto has previously stated that if successful with a ‘mid-case’ discovery, it would target an FPSO development with tanker offtake.

Red Emperor’s farm-in, along with the US $24.5m funding committed by BHP Billiton and the expression of interest received in January this year from state-owned PNOC-EC for a further 15% working interest, ensures that Otto is fully funded and has mitigated significant financial risk associated with the drilling of the well.

Red Emperor’s well cost exposure is capped at $5.625 million, beyond which it has the option to reduce equity from the 15% working interest level.