Bowleven Boasts Successful Third Quarter Operations

Bowleven has announced its preliminary results for the year ended June 30, 2008.

Kevin Hart, Chief Executive, said, "In terms of exploration and portfolio development, Bowleven has had a highly successful year. As a result, despite unprecedented turmoil and collapsing values in capital and commodity markets, Bowleven's asset base has never looked better. The key to realizing value from our portfolio is access to capital. Even given the extreme environment, we remain confident that we will be able to obtain the capital required to make substantial progress and create value for shareholders."

Bowleven has achieved considerable operational success during the year, against a backdrop of looming global slowdown, tumbling oil prices and unprecedented capital market conditions. Despite the current market environment, the Group's portfolio has never looked so promising.

The significant milestones which the Group has achieved over the last year include:

  • Completion of a successful three well drilling campaign on Etinde Permit in 2007.
  • IF oil discovery in 2008, the first oil discovery on the Etinde Permit.
  • IE/ID development plans progressed.
  • Agreement reached on Etinde PSC terms including further exploration phase.
  • Expanded and enhanced resources and exploration portfolio.
  • Securing an option over EOV FPSO.
  • Bomono PSC signed.

Our next step is to build on this success, and this will need more financial resources. Despite the difficult environment we are confident that we will be able to secure the capital to support further development of the significant potential of our acreage. Key to the process of adding value for shareholders is the commercial exploitation of our existing resource base and the discovery of new fields.

RESOURCE TO RESERVES

The Group's combined P50 resource base has increased to approximately 203 mmboe (2007: 167 mmboe) following the IF oil discovery, the upgrade of the resource estimate for the IE field and the completion of the EOV subsurface review and dynamic modelling.

Work is underway to bring the Group's liquid hydrocarbon resource to project sanction and ultimately production. In particular, we have a high degree of confidence that both the IE/ID gas/condensate discoveries and the recent IF oil discovery in block MLHP-7 on the Etinde Permit in Cameroon, will provide attractive commercial developments. Likewise in Gabon we have secured an option to utilise an FPSO for the EOV field development. Advancing these projects towards sanction is a key objective for Bowleven over the next year.

In addition the Group has a mean unrisked in place exploration prospect inventory comprising over 2.4 billion boe (2007: 1.8 billion boe). This has been significantly enhanced through the work undertaken by the Bowleven technical team to further mature the prospect inventory across the Etinde Permit.

GAS MONETIZATION

The options for monetising the gas on the Etinde Permit have been significantly expanded and enhanced by our exploration success in adding potential development synergies following the IF oil discovery.

Positive steps have also been made towards monetising the substantial undeveloped gas resource within Cameroon. Several options are being examined, including gas export to Equatorial Guinea and indigenous smaller scale LNG solutions. Whatever the final outcome, we are confident that Bowleven's substantial gas resource base will provide a significant proportion of the required feed stock.

EXPLORATION AND OPERATIONAL OVERVIEW

OVERVIEW

2008 was another extremely successful year for Bowleven.

In Cameroon we made a significant oil discovery with the drilling of the IF-1r well in block MLHP-7. This is the first oil discovery in the Rio del Rey basin since 2004 and is a highly significant event both for Bowleven, and for the country, as the understanding of the distribution of oil and gas across Cameroon's sedimentary basins has been changed significantly.

Following our successful 2007 and 2008 drilling on the Etinde Permit, we have completed a full interpretation of the 3D seismic datasets acquired earlier on the Permit. This review has revealed a significant number of prospects and leads and the Permit is now recognised to have potential for both gas/condensate and oil.

During the year the Group also secured an 18 month extension of the exploration period for the Etinde Permit (to September 2009), and in late October 2008 Bowleven reached agreement in principle on the key fiscal terms for the Etinde Permit PSC, incorporating a further three year extension to the exploration phase commencing on the date of signature of the contract. The PSC is subject to final approval by the relevant government ministries. It is anticipated that the PSC will be signed before the end of 2008.

In December 2007 we also signed a PSC for two onshore blocks, collectively known as the Bomono Permit, and we have already commenced field survey work on this acreage with the objective of undertaking a seismic campaign in 2009.

In Gabon we have continued with development planning for the EOV field in the EOV Permit and in addition to completing subsurface studies, we have also agreed an option for the lease of the Knock Taggart FPSO operated by Fred Olsen Production. This option is exercisable up to 15 December 2008. Assuming the development receives project sanction by the end of 2008, the EOV field is expected to be on stream by early Q2 2010.

Also in Gabon, seismic and airborne geophysical operations commenced in the Epaemeno Permit and we expect to commence the exploration drilling campaign, together with the operator, Addax, in 2009.

HEALTH, SAFETY, SECURITY & ENVIRONMENT

Over the past 12 months we have maintained our record of operating free of lost time injurious incidents. The planning and diligence of our staff drilling team in Cameroon is a key reason for this achievement, together with the safety culture of our main contractors. As we extend our operations into seismic surveying (in Bomono and Epaemeno) and probable development activity (in EOV and in due course Etinde), the effort of all those who work in the Group and with the Group will remain crucial to providing a safe working environment. All incidents are avoidable and we will continue to plan all our operations in such a way as to make safety the priority.

We are progressing the Environmental Impact Assessment (EIA) for our onshore Bomono Permit in Cameroon and we will also be submitting an updated EIA for the EOV Permit development to the authorities in Gabon.

CAMEROON

Etinde Permit - MLHP-5, MLHP-6 and MLHP-7 (Bowleven group 100% - operator)

Exploration - MLHP-7

The Trident IV jack-up rig operated by Transocean's subsidiary GlobalSantaFe was contracted to drill the IF-1r well in the MLHP-7 block of the Etinde Permit during Q2 and Q3 2008. This well was a re-drill of the original IF-1 well drilled in 2007, which had to be abandoned following a high pressure kick of hydrocarbons in the uppermost Isongo formation, the primary objective. The IF prospect is located on the same structural trend and is 7 km south and structurally up dip of the IE gas/condensate field which we successfully appraised in 2007.

The IF-1r well encountered hydrocarbon shows over a gross interval of approximately 800 ft from 5750 ft MD to an oil water contact (OWC), defined by pressure data, at 6548ft MD in the uppermost Isongo formation. Pressure data recorded in the well confirmed an oil column of at least 200 ft above the OWC and beneath the equivalent kick zone in the original IF-1 well.

On test, the well produced an average rate of 3,371 bopd through a half inch choke with peak rates in excess of 4,000 bopd and with a gas oil ratio (GOR) of about 1200 scf/bbl. Unfortunately the test had to be curtailed prematurely as a failed cement job allowed cross flow from adjacent formations causing an influx of water into the test zone from the aquifer below the OWC.

Nevertheless, the well proved excellent deliverability from the encountered thin bed reservoir section in the uppermost Isongo formation. Initial analysis of the well results indicates a mean in place volume of discovered hydrocarbons of 137 million barrels of oil. The structure continues to the south of the IF-1r well location and the initial estimate of the mean STOIIP for this untested southern compartment is 142 million barrels.

Drilling in 2008 successfully built upon the 2007 programme, significantly enhancing the value of the Etinde Permit with the discovery of an oil field alongside the cluster of gas and condensate fields already discovered on the MLHP-7 block. This has completely transformed the traditional perception and understanding of Cameroon's petroleum systems, which ascribed oil potential only to the northern part of the Rio del Rey basin with all acreage south of this historically considered to be gas and gas/condensate prone.

Furthermore, the recognition of highly productive thin bed pay in the IF-1r well will lead to a review and expected upgrade of the resource potential of the other MLHP-7 Isongo discoveries. Considerable undrilled exploration potential is also recognised in other structures in MLHP-7 mapped on the 3D seismic.

We have now completed a full integrated review of MLHP-7 based on the 3D seismic volume and have identified a number of prospects and leads within the Isongo formation predominantly adjacent to the existing discoveries. Mean unrisked in place volumes for the prospect inventory of MLHP-7 are estimated at 142 million barrels of oil and 1.6 tcf of gas with 73 million barrels of associated condensate.

Exploration - MLHP-5 and MLHP-6

The discovery of oil in offshore acreage in the Douala basin adjacent to our MLHP-5 block of the Etinde Permit has also significantly changed the historical perception that this area is predominantly gas prone. Together with multiple onshore oil seeps and oil shows in historical wells, our emphasis has been on re-evaluating MLHP-5 to identify high grade oil prone prospects for priority drilling. We have now completed this work and have mapped a number of prospects and leads with multiple stratigraphic objectives within the Miocene, Eocene and Cretaceous aged sections. Mean unrisked in place volumes for the prospect inventory for MLHP-5 are estimated at 727 million barrels of oil and 4.5 tcf of gas with 251 million barrels of associated condensate.

Exploitation/commercialisation - Etinde Permit

Conceptual development planning has continued through the year for the MLHP-7 discoveries. We stated last year that the development of our existing gas/condensate discoveries (initially the IE and ID fields) was likely to be based on a gas recycling scheme to maximise liquids recovery and, in fact, this concept also fits well with the development of the high GOR IF oil discovery. It could also incorporate a gas depletion commercialisation scheme in later years.

Early appraisal of the IF discovery is important in order to anchor the development of the fields in MLHP-7 and we will be seeking to drill appraisal wells in 2009.

Contingent resources for the Etinde Permit are shown in the Resources table below. These resource totals now include LPGs in the IE and ID fields not previously included in the liquids volumes, as well as the oil and gas volumes attributable to the IF discovery.

As announced yesterday, agreement in principle has now been reached with SNH on the key terms of a PSC for the Etinde Permit. This will contain the fiscal terms attaching to the acreage and also envisages a further 3 year extension to the exploration phase commencing from the date of signature of the contract. The award of the PSC is subject to final approval by the relevant government ministries, with signing anticipated by the end 2008. This PSC will provide the framework for Bowleven and the Government of Cameroon to move forward quickly with further exploration, appraisal and development of the Etinde Permit for the benefit of all stakeholders.

Bomono Permit (Bowleven group 100% - operator)

On December 12, 2007 we signed a PSC for the new 2,328 km2 Bomono Permit, which comprises blocks OLHP-1 and OLHP-2 onshore Cameroon. The Permit covers the onshore extension of the highly prospective Douala basin, which is characterised by numerous surface oil seeps but is virtually unexplored by modern exploration methods. Previous exploration in the area was conducted predominantly in the 1950s when 11 wells were drilled, most with hydrocarbon shows. The area was licensed again in the 1970s and the 1980s when some regional 2D seismic was acquired but no further drilling took place and there has been an exploration hiatus until the present day. The Permit has an initial term of five years, with minimum work obligations including an airborne gravity and magnetics survey, 500km of 2D seismic and one well. We are currently preparing to initiate the airborne survey and conduct surface field work.

GABON

East Orovinyare (EOV) Permit (Bowleven group 100% - operator)

EOV field development

2008 has seen significant process on the commercialisation of the EOV field. The development plan for the EOV field was re-evaluated and three different evacuation routes were assessed. Discussions took place with the owners of available fixed infrastructure evacuation routes and also with the operators of available FPSOs. In addition, after initial evaluation of the field and the reservoir planning undertaken by the previous operator, we decided that a complete subsurface review was required, commencing with a re-evaluation of the 3D seismic interpretation. This remapping exercise was followed by the development of a new static model, which was then taken forward to a dynamic reservoir simulation. The production profiles derived from this work demonstrate potential recoverable volumes ranging from 6 to 12 million barrels of oil which are included in the table of the Group's Resources set out below.

Following this subsurface review, the consideration of evacuation infrastructure and further significant negotiations with Fred Olsen Production, an option to contract the Knock Taggart FPSO for use at the EOV field was agreed. A full contract containing the option and covering the lease of the FPSO and operational responsibility for the field once in production, was signed with a subsidiary of Fred Olsen Production on 28 August 2008. This option is available until December 15, 2008 and if the option is exercised the option fee is available for offset against the initial mobilization fee. Assuming the development receives project sanction by the end of 2008, it is expected that oil production will commence early in Q2 2010.

EOV - exploration

The EOV Permit also contains a number of exploration leads and prospects. During 2008 we received 3D seismic covering previously unmapped portions of probably the largest feature on the Permit, the North West Kowe prospect. We have now matured this prospect to drillable status. The mean in place volumes are assessed as 234 million barrels in multiple reservoir objectives, which we believe can be accessed by a single deviated exploration well. Plans to drill this prospect are being considered in conjunction with the EOV development drilling proposals.

Epaemeno Permit (Bowleven group 50%, Addax 50% - operator)

Activity has progressed as planned on the Epaemeno Permit. A 2D seismic survey is currently being acquired by the operator Addax and the 600km program is scheduled for completion early in 2009. Interpretation of the dataset will then be undertaken by Bowleven under its technical services agreement with the operator, Addax.

The outcome of this work will be a high-graded prospect inventory that will serve as the basis for locating future wells. Addax is now proceeding with Phase 2 of the seismic program with a view to accelerating the 2009 drilling plan for the acreage.

New Opportunities

Strategically, our objective is to collaborate with indigenous companies in the Gulf of Guinea region and focus on opportunities onshore and offshore in shallow water in up to three countries. Bowleven currently has the potential for such an opportunity in connection with onshore blocks to be offered in the forthcoming Angolan licencing round. We continue to actively pursue opportunities to secure attractive acreage in Cameroon, Gabon and other Gulf of Guinea countries, both as a farm-in partner and in direct negotiation with national authorities.

PROGRAM FOR 2009

On the Etinde Permit we are currently working up potential appraisal locations for the IF discovery in Cameroon and we expect to drill at least one of these wells in H1 2009. In addition we also plan to drill further exploration and appraisal wells in both MLHP-5 and MLHP-7 during 2009. It is also likely that further 3D seismic data will be acquired over an area of MLHP-6 adjacent to MLHP-7 and possibly over part of MLHP-5. We will continue with development planning for both oil and gas/condensate development in MLHP-7, with the objective of sanctioning our first Cameroonian development by early 2010.

On the Bomono Permit, once we have completed fieldwork, we intend to acquire airborne magnetic and gravity surveys and 2D seismic data during 2009.

In Gabon, it is our hope to sanction the EOV field development by the end of 2008 with the target of the production of first oil by early Q2 2010. Financing and partnership options are under review and these, alongside the overall macro-economic environment that we are currently experiencing, remain integral considerations to project sanction decision timing.

On the Epaemeno Permit, following the completion of seismic acquisition it is intended to commence exploration drilling in the second half of 2009.

Our portfolio now has an exciting range of assets with operations ranging from early exploration activities to appraisal drilling and development. We look forward to making substantial progress on all these fronts in the coming year.
 

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