OTTO Energy will offload its once-prized Galoc oil asset in the Philippines to Risco Energy Investments for US$101.4 million to focus on its exploration program in onshore East Africa.

The Perth-based company revealed to the Australian market in September that it had signed a sale and purchase agreement to divest 100 per cent of the shares in Galoc Production Company which holds its 33% interest in the Galoc oil field.

Risco, a Singapore-based energy investment firm, has already paid a US$10.14 million deposit and will assume all production rights and liabilities associated with the Galoc interest, backdated to 1 July.

The deal requires approval from Otto’s shareholders, with a general meeting to be held no later than December 2014.

Otto said the transaction represented an “outstanding opportunity” to maximise and monetise the inherent value of the Galoc interest after the successful completion of the Galoc phase II expansion, with the company recommending shareholders approve the transaction in the absence of a superior proposal.

“The divestment of the Galoc interest on such favourable terms is an excellent result for Otto and is consistent with the focus on unlocking value for shareholders,” Otto chief executive Matthew Allen said.

“Prior to the divestment, the underlying value of the Galoc Interest was not being adequately reflected in Otto’s share price.”

Since the start-up of Phase II in December 2013, production has exceeded over 2 million barrels of oil, with seven cargos delivered into South East Asian refineries.

The divestment will ensure the company can focus on executing an exploration program in onshore East Africa and SC55, while concurrently providing the financial might to fund an expansion of Otto’s acreage position in onshore East Africa, specifically Tanzania.

Otto will use the cash injection from the sale to fund its exploration, new business development and working capital activities for two years as well as pay a proposed capital return of 6c to shareholders.

The proposed capital return will be paid to shareholders sometime in late 2015 or in the first quarter of 2015 following completion of the sale, receipt of a ruling from the Australian Tax Office and shareholder approval.