• Otto’s partner Byron has been advised by the BOEM that VR 232 has been awarded
• VR 232 will provide additional drilling opportunities near Otto’s SM 71 producing oil field
• Otto has the right to participate for a 50% working interest in VR 232

Otto Energy Limited advises that Byron Energy Inc, a wholly owned subsidiary of Byron Energy Limited, has been advised by the Bureau of Ocean Energy Management (“BOEM”) that its bid for VR 232 is deemed acceptable by the BOEM and the leases have been awarded to Byron. The lease is subject to a 12.5% Federal Government royalty.

VR 232 is adjacent to Otto’s 50% owned South Marsh Island Block 71 (“SM 71”) oil field and upon award, will add drilling opportunities and increase Otto’s potential upside around the SM 71 facilities.

The Operator, Byron, has mapped a gas and gas condensate prospect on the block with in-house calculated gross prospective resource potential of 11 Bcf and 170,000 barrels. This prospect could be tested from Otto’s SM 71 F platform. There are currently no plans to drill VR 232 until production levels at the platform would allow a successful VR 232 well to be produced efficiently. The Operator has also identified two other prospects in VR 232 which require further geophysical evaluation before a drilling decision is made.

Byron evaluated these blocks with the same high-quality Reverse Time Migrated 3D seismic data and proprietary Inversion processed seismic data used in the discovery of oil and gas at SM 71 in 2016. Upon award, Otto’s working interest would be 50% and net revenue interest would be 43.75%.

Pursuant to a Participation Agreement, effective 1 December 2015, between Byron and Otto, Otto has the right to participate for a fifty percent (50%) working interest in VR 232. Under that agreement, Otto must pay an amount equal to a gross one hundred thirty-three percent (133%) of Otto’s fifty percent (50%) interest share of lease acquisition costs and the initial test well (dry hole costs) plus a gross fifty percent (50%) of other past costs paid by Byron. Under Byron’s bid of US$1.101 million for VR 232, Otto’s share would be US$734,000. Having elected to participate in a staged farm-in at Bivouac Peak and upon the award of VR 232, Otto’s right to participate in new assets or projects under the December 2015 Participation Agreement has been fulfilled.