LONDON Nov 20, 2007 (Dow Jones Newswires)
Scottish oil and gas explorer BowLeven PLC (BLVN.LN) aims to increase its West African production in the year ahead, following an agreement between Cameroon - the hub of the company's activity - and Equatorial Guinea, which will see the countries increase natural gas exports from the region.
The company, which has all its assets in West Africa but which isn't due to start producing oil until the end of 2008 at the earliest, plans to drill at least one more appraisal well off Cameroon's coast and is looking for a partner to develop some of its acreage there in the year ahead. It also plans to start production at its Epaemeno field for its nearby Gabon operations in early 2009, Chief Executive Kevin Hart told Dow Jones Newswires in an interview.
Hart said that BowLeven hopes to benefit from a recent announcement by the Cameroon government that it will use Limbe, an Atlantic port city on the Southwest coast of Cameroon, as a gathering hub for the shipping of gas to Equatorial Guinea's Bioko Island for export to the United States.
The Equatorial Guinea government approved plans to build a liquified natural gas plant on Bioko island that will supply 3.4 million tons of LNG per year to the U.S. once it is completed this year.
Bowleven said the close proximity of its resource base to Limbe, and the deliverability of the gas, make the company an obvious choice for Cameroon's government to join in any future gas-export project.
"The Cameroon government is looking to aggregate gas in country for provision to Equatorial Guinea," Hart said. "The government requires gas and we expect to provide some of it.
"There is no guarantee of our involvement in the Cameroon government's agreement and we have no control over how the agreement will pan out. However, this is good news for us, as we expect, if we are involved, for the potential deal to lift our volumes," Hart said.
The company's business plan following the dismissal, in February last year, of its then Chief Executive Philip Rhind for gross misconduct, included plans to focus on capitalizing the potential of its Etinde permit area.
BowLeven holds, through subsidiary EurOil, a 100% equity interest in the Etinde Permit area, made up of shallow-water blocks five, six and seven, in offshore Cameroon.
In total, BowLeven has 2,300 square kilometers of exploration acreage located across the Rio del Rey and Douala basins in the Etinde Permit area. The company's acreage is spread across Cameroon and Gabon.
"We are planning to drill at least one further appraisal well at block seven in Cameroon to confirm the extent of the hydrocarbons present, with a tender process to secure a rig set in place. This process is ongoing, and we hope a well can be completed during the first quarter of next year," Hart said.
The company's IF-1 well in the area was recently abandoned and its rig released after encountering very high, unsafe pressures. Here, BowLeven encountered a high level of gas and a reservoir with high condensate yields. The company considers these as ideal candidates for development.
This time around, the company is expected to use different, higher-rated equipment, designed to cope with higher pressures.
Hart said the company is seeking a technically and financially qualified partner to which it can farm out up to 50% of blocks five and six - which it considers an ideal location for exploration - in return for carrying BowLeven's share of expenditures on a future exploration and appraisal drilling program on the acreage.
The company is looking to boost profits from any additional gas or liquids it finds in blocks five and six.
BowLeven expects its first production to begin in early 2009 from contract areas in East Orovinyare and Epaemeno at the offshore block in Gabon.
Hart said he expects the production to "significantly enhance" cash flow in the year ahead.
The oil and gas explorer owns through subsidiary FirstAfrica Oil, a 100% equity interest in the offshore block in Gabon, which contains an existing oil discovery that it is seeking to develop, and a 50% equity interest in the Epaemeno Block.
The Epaemeno block holds 1,340 square kilometers of exploration acreage in onshore Gabon, and sits next to a number of recent discoveries in surrounding blocks.
"Currently, BowLeven has no production, although the East Orovinyare field in Gabon is due to commence production at the end of 2008 at a rate of approximately 6,000-7,000 barrels of oil per day," Hart said.
Hart said BowLeven's agreement to jointly develop the Epaemeno block in October with Addax Petroleum will benefit from the latter's local experience - adding value to BowLeven's position as it moves forward with seismic and drilling activities in 2008 and 2009.
Toronto and London-listed Addax Petroleum (AXC.T), with operations focused in Africa and the Middle East, already has interests in two adjoining blocks directly to the south of the Epaemeno contract area. Both of these blocks contain existing discoveries.
Bowleven's house broker ABN Amro Holding NV (ABN) increased the company price target to 385 pence from 335 pence last week. Analysts highlighted the indications that the IE and IF areas offshore Cameroon could be a significant standalone discovery as the key positive. They noted that this could support a phased condensate and gas development.
Earlier this month, BowLeven reported a steeper pretax loss versus last year, for the year ended June 30, hitting GBP4.8 million, which it blamed on the expansion of operations. The loss more than doubled the previous year's pretax loss of GBP2 million.
At 1247 GMT, BowLeven's shares traded down 0.7%, or 2 pence lower, at 304 pence in a slightly higher London market.
Copyright (c) 2007 Dow Jones & Company, Inc.
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