Bowleven, the Africa focused oil and gas exploration group traded on AIM, has delivered its strategic intent to sell part of its interest in the Etinde Permit, offshore Cameroon, by entering into a conditional agreement with LUKOIL and NewAge.
Bowleven will reduce its interest in the Etinde permit from 75% to 25% and receive aggregate consideration of approximately $250 million (subject to final working capital adjustment) comprising: $170 million cash payment at completion; $40 million staged deferred cash payment due at Etinde development project FID and on completion of appraisal drilling; and $40 million (net) carry for two appraisal wells.
LUKOIL will acquire a 37.5% interest and NewAge will acquire an additional 12.5% interest in the Etinde Permit to increase its group holding from 25% to 37.5%
Camop (a wholly-owned subsidiary of NewAge) will become Operator of the Etinde Permit following completion, allowing Bowleven to focus on its proven exploration skillset.
Bowleven will retain a 25% interest in the Etinde Permit, ensuring continued exposure to the considerable resource and future development potential of the acreage.
The significant cash consideration strengthens the Group’s balance sheet providing funding flexibility for Bowleven’s pre-production share of Etinde development expenditure and the progression of exploration activities. The two acquisitions are interconditional and the principal conditions precedent to completion of the transaction are normal regulatory approval by the Cameroon government and approval by Bowleven shareholders to be sought at a General Meeting.
Kevin Hart, Chief Executive of Bowleven plc, said: “We are extremely proud of the substantial progress that we have made with Etinde in discovering resource and creating markets. With the Exploitation Authorisation approved and nearing formal award, gas sales discussions well advanced, and significantly increased scope for expansion to additional gas offtake solutions, in particular CLNG, we believe now is the right time to bring in a new partner and transfer operatorship. “
“I am delighted that LUKOIL are joining us as a value-adding partner in Cameroon, alongside our existing co-venturer, NewAge. LUKOIL are a major international integrated oil and gas group with extensive operating and marketing expertise globally and a track record of delivering world class oil and gas developments. The expanded joint venture will work together to realise the considerable potential of this world class asset.”
“Bowleven’s strategy is to focus on our core strengths of exploration and appraisal and enable the conversion of resources to reserves, ensuring that we realise value for shareholders at the appropriate time. This transaction endorses the value of Etinde while allowing us ongoing participation in its significant remaining potential.
Going forward, having transferred the operatorship of Etinde and significantly strengthened our balance sheet, we are well-positioned to both fund our share of Etinde’s ongoing
appraisal and development programme and also to progress the potential of our exciting African exploration portfolio in Cameroon, Kenya and Zambia.”
The farm-out transaction relates to the Etinde Permit (currently comprising blocks MLHP-5, MLHP-6 and MLHP-7), offshore Cameroon. EurOil, a subsidiary of Bowleven, is currently
the operator of that Permit.
Both exploration and appraisal activity has been undertaken by Bowleven on Etinde and several hydrocarbon discoveries have been made. The Group’s current P50 net contingent
resources for Etinde, prior to this transaction and any state participation, are 263 mmboe. Initial development concepts have centred around a phased hub-and-spoke approach, with the IM field on block MLHP-7 delivering the first phase of liquids and associated gas production. Initial dry gas sales are envisaged to be into the planned fertiliser plant, but with significant upside resource potential on the Permit, additional gas offtake solutions are being considered, principally CLNG.
Pending development activity, there is currently no production on Etinde. Support and approval of the Etinde Exploitation Authorisation Application (EEAA) over block MLHP-7
was given by the Cameroon State following a Special Operating Committee Meeting (OCM) held in late May 2014 and the formal decree awarding the Exploitation Authorisation (EA) is expected to follow in due course. The EA will give development and exploitation rights over block MLHP-7 for an initial period of 20 years.