Granby, the oil and gas exploration and production company with interests in the UK North Sea and the Philippines, signs an agreement for the sale of its interest in the Galoc Oil Field offshore development in the Republic of the Philippines for US$19.25 million cash plus one million shares and four million options at 34 Australian cents per share in the purchaser, Otto Energy Limited.

Granby is selling its wholly owned subsidiary Team Oil, which has a 9.14% indirect interest in the Galoc field through its 15.69% shareholding in Galoc Production Company W.L.L (“GPC”), operator of the Galoc oil field. As announced on 8 October 2007, drilling has commenced and first oil production from the field is expected in Q1 2008. Granby’s net share of the Galoc reserves is 1.83 million barrels of oil equivalent. Team Oil has no turnover and had audited net assets of approximately £0.05 million at 31 March 2007.

Otto is acquiring an identical interest in GPC held by Cape Energy Philippines SA, and has today announced that it is funding the acquisition by placing 226 million new shares at a price of 30 Australian cents per share. The funding has been fully underwritten, with completion of the sale subject only to the approval of Otto’s shareholders. Completion of the transaction is expected in early December 2007.

The total cash consideration payable to Granby is US$25.5 million (approximately £12.44 million based on the current exchange rate of US$2.05=£1.00), comprising:

a) US$16.66 million payable at Completion; b) repayment of existing Shareholder Loan amounts to GPC of approximately US$2.59 million; and c) repayment of the approximately US$6.3 million deposit held in escrow with Banca Intesa as security for the project financing.

In addition, Otto will issue to Granby one million shares in Otto (to be held in escrow for a period of 12 months from completion of the transaction) and four million options (without performance conditions) at an exercise price of 34 Australian cents per share (to be held in escrow for a period of 12 months from completion of the transaction) and which lapse if not exercised within 24 months from their issue.

Based on the cash available of £4.69 million at 30 September, expected expenditure in the period prior to completion, and receipt of the US$25.5 million cash consideration at completion of the transaction, Granby is expected to have approximately £17 million of cash available to fund further development of the business.

Tristone Capital acted for both Granby and Cape Energy by conducting the process resulting in the sale to Otto.

David Grassick, Managing Director of Granby Oil & Gas, said, “We are delighted to announce the sale of our interest in Galoc which very clearly demonstrates our ability to create value for shareholders. Granby has sought to optimise the value that can be obtained in the medium term and is ready to reinvest some of the proceeds in financing our third development, which we aim to announce shortly. As a key part of the consideration, Granby’s shareholding and options in Otto will provide Granby’s shareholders with potential upside should the development exceed current expectations.”

Tags: Galoc Oil Field, Otto Energy Limited