Bowleven in African deal
Cameroon leader approves firm’s bid to sell stake in Etinde permit
BOWLEVEN has cleared the final official hurdle in the way of completing the $250m (£163m) Cameroon stake sale it agreed in June, putting the oil and gas company in line for a big cash injection.
The Edinburgh-based company said a decree from Cameroon’s President Biya approving the deal has been officially recorded bringi ng an end to months of uncertainty.
The completion process has been attended by a series of delays that have required considerable management effort to resolve satisfactorily.
The deal to sell a total 50 per cent interest in the Etinde permit to Cameroon’s New Age and Russia’s Lukoil was originally due to complete on August 31.
The parties to the farm-down extended the deadline three times pending approval of the deal by President Biya.
In December, Bowleven’s chairman Ronnie Hanna said he was in almost hourly telephone contact with Chief Tabetando, a lawyer from Cameroon who has been on the company’s board since 2001, about the approval process for the stake sale.
On January 30, Bowleven said it had received a decree signed by President Biya but had to wait for it to be gazetted, or formally published.
The company announced yesterday the decree had finally been gazetted. All the sale conditions have now been met.
Led by chief executive Kevin Hart, Bowleven said the transaction is scheduled to complete within 15 business days. It expects to receive an initial $170m (£110m) cash from New Age and Lukoil on completion of the deal.
This is worth more than the total £107m valuation assigned to Bowleven by investors, based on the Alternative Investment Marketlisted company’s share price yesterday.
The remaining $80m will be payable as work progresses on the Etinde permit.
Mr Hart said the deal puts the company in a strong position to develop the interests it has amassed at a challenging time for oil and gas firms.
The deal was agreed before the crude price tumbled last year and looks to have been well-timed.
“Our strengthened balance sheet is a real advantage through this volatile period for the sector,” said Mr Hart.
Completion of the deal would cement a remarkable turnaround in Bowleven’s fortunes.
In December 2008 an analyst said the funding challenge faced by the company then was so severe that Bowleven was effectively dead in the water.
Yesterday, another analyst, Will Forbes, at Edison Investment Research, said: “Once complete, the farm-down transforms the company into a fully funded developer of Etinde with material cash reserves to pursue other opportunities, if sought.”
In addition to the $170m cash, Lukoil and New Age will pay a further $15m to Bowleven following appraisal drilling on the Etinde permit.
This may prove up additional resources. The buyer will also cover up to $40m drilling costs for Bowleven.
The remaining $25m will be payable if the parties decide to sanction the hefty investment which will be required to bring finds on Etinde onstream. No target date has been set for them making the relevant Final Investment Decision.
If the parties decide to proceed, then Bowleven may be able to use some of the cash it has secured through the farm-down deal to put towards its share of the development costs. The sale proceeds could also be used to fund work elsewhere in Cameroon or even perhaps further afield.
Bowleven already has early stage interests in other parts of Africa, including Kenya and Zambia.
Shares in Bowleven closed the day up 14 per cent, having risen 4p to 33p.
The shares closed at 42p on the day the farm-out deal was announced.
Cameroon’s state-owned Société Nationale des Hydrocarbure has exercised its right to take a 20 per cent stake in Etinde.
Bowleven will retain a 20 per cent holding after SNH acquires its interest and the farm-down deal completes.
Lukoil and New Age will have 30 per cent each.
New Age will take over as the operator leading on developments from Bowleven.