Bowleven is scheduled to announce its preliminary results for the year to June 30, 2009 on November 4, 2009. In advance of these results Bowleven is providing information on recent operations since the last update on the March 23, 2009.
Kevin Hart, Chief Executive said, "The recent farm-out agreement reached with Vitol for our Etinde PSC is a significant milestone for Bowleven in delivering our strategy for Cameroon. This new partnership brings together considerable expertise, and provides access to additional finance that will enable us to accelerate the multiple exploration and development opportunities that exist across our acreage. In addition to the acquisition of further seismic data, an intensive drilling campaign of up to four wells is being planned on Etinde, and drilling is also envisaged on Epaemeno. With financing now in place, primary focus can now return to the optimization of our asset base and we look forward to exploiting our opportunities into 2010."
Etinde Permit -- MLHP-5, MLHP-6 and MLHP-7 (Bowleven group 100% -- operator)
Bowleven announced on August 12, 2009 that it had entered into a farm-out agreement with Vitol E&P Limited in respect of the Etinde Permit (Etinde) in Cameroon. This transaction was unanimously approved by Bowleven shareholders at an EGM held on August 28, 2009. The proposed farm-out is conditional upon normal regulatory approval by the Cameroon Government.
Under the terms of the VEP farm-in agreement, VEP will fund an initial agreed $100 million (gross) exploration/appraisal work program on the Etinde acreage in return for a 25 percent stake in the license. VEP also has an option to acquire a further 25 percent interest in the Etinde Permit that, if exercised will result in the commitment by VEP to fund a further $100 million (gross) on agreed exploration, appraisal and development activities on Etinde and a $25 million cash payment to Bowleven to be invested on the Etinde Permit. This option expires on September 30, 2010. In the event that the option is exercised it is intended that operatorship transfer to VEP with Bowleven continuing to provide technical input on work program and operational activities. Assuming option exercise, Bowleven and VEP would each hold a 50 percent interest in the Etinde Permit, subject to the right of SNH to take a 20 percent participating interest in development activity.
Forward work program
As outlined previously, an immediate priority for Etinde is the drilling of at least one appraisal well on the IF field (the IF-2 appraisal well) and the acquisition and reprocessing of seismic over existing discoveries on the acreage, including IF. The IF-2 well and seismic activities form part of the planned work program agreed with VEP during farm-out discussions and will be covered by the initial carry outlined above.
Since agreement was reached between Bowleven and VEP on the farm-out, the new partnership has been consulting on the forward work programme for Etinde given the various opportunities identified on the acreage. Following a detailed review of proposed activities and work programme scheduling it is envisaged that the immediate focus of operational activities will be on seismic acquisition and reprocessing to ensure optimal development, appraisal and exploration well locations can be identified. It is intended that drilling activity be scheduled to dovetail with output from these seismic operations to facilitate a continuous drilling program. Following a tender process, site survey operations have been initiated over the IF, IM and IE locations. As a result, a continuous drilling program of up to four wells is currently being considered for Etinde, commencing in early 2010.
Exploration/Appraisal -- MLHP-7
The IF oil discovery in 2008 was the first oil discovery on the Etinde Permit and further appraisal of the IF oil discovery is a priority in underpinning the potential MLHP-7 developments.
On June 1, 2009 the Company announced the results of an independent assessment completed by TRACS of the contingent resources of the IF oil discovery. This assessment by TRACS supports Bowleven's positive view of the potential of the IF fields and confirms that further appraisal of the IF field is warranted to evaluate its commercial development potential.
The proposed location of the IF-2 appraisal well is in the process of being identified. A 2D OBC survey was recently undertaken to facilitate this process. Further 3D seismic acquisition over the IF discovery is also being planned for 2009/10 and this will be integral in well planning and well location.
3D seismic acquisition and reprocessing is also planned over the existing IE discovery. It is envisaged that an IE appraisal well would form part of any planned 2010 drilling program. In addition, further appraisal of the existing IM gas field in the north is also considered to be a near term priority if potential for gas offtake were to be identified. An IM well proposal has already been prepared by Bowleven's technical team.
Exploration -- MLHP-5 and MLHP-6
The prospect inventory for MLHP-5 and MLHP-6 continues to evolve as more information on discoveries on neighboring acreage materializes. Recent successful drilling nearby has highlighted the highly prospective nature of the acreage and the potential for oil on block MLHP-5 in particular. In order to fully assess prospectivity, additional 3D seismic acquisition is being planned for 2010 over the southwest corner of the block where there is no existing 3D coverage. The next step would then be to drill a high impact exploration well and current activity is focused on determining the most favourable well location. Once the preferred prospect has been identified, this well is likely to form part of the 2010 drilling campaign.
Exploitation/commercialization -- Etinde Permit
Conceptual development planning on the MLHP-7 developments continues. Particular focus is being given to the initial core development of the IF oil field. Consideration is also being given to plans for a phased development whereby the period to first oil is minimized whilst also ensuring potential synergies between the IF oil field and the IE/ID and IM gas/condensate fields are captured.
Cameroon Gas Monetization
There remains a strong strategic push from SNH and the Cameroon government to harness Cameroon's indigenous gas reserves. A key initial step in this process is the evaluation by SNH and GdF Suez of LNG export alternatives for Cameroon, following the announcement of their strategic partnership in November 2008 to develop an LNG export plant in Cameroon. Project momentum has been maintained with the recent conclusion of phase one of the LNG feasibility study. The initial phase of the study identified an onshore plant at Kribi as the preferred configuration for an LNG facility, with gas sourced from across Cameroon. Timing for allocation of certified reserves has been tentatively scheduled for H1 2011.
Bomono (Bowleven group 100% -- operator)
The airborne gravity and magnetic survey over the Bomono Permit area has been completed and processing of associated output data is ongoing. A tender process has been initiated for the provision of 2D seismic data acquisition services over the acreage.
EOV (Bowleven group 100% -- operator)
Project sanction for the EOV field development remains deferred, pending possible further drilling on the block to enhance the resource base and improve returns for all stakeholders. Following completion of interpretation work on the North West Kowe prospect, a provisional well location has been selected for drilling.
Farm-out discussions in relation to the EOV Permit are ongoing and the outcome of those discussions will be influential in shaping planned activity on the acreage.
Epaemeno (Bowleven group 50%, Addax 50% -- operator)
The acquisition and initial processing of 2D seismic data across the acreage has been completed. In addition, the output from the recently processed airborne gradiometry survey is being interpreted for integration with the new seismic dataset. Interpretation work is ongoing by Bowleven (under a TSA with operator Addax) to identify leads and mature potential prospects with a view to selecting suitable drilling targets over the entire block. Drilling activities are due to commence in 2010.
The Group had net funds of approximately $130 million and no debt at the end of June 2009. Under the initial stage of the farm-out agreement outlined above, VEP are committed to funding a $100 million (gross) work program on Etinde. In the event of option exercise by VEP under the second stage of the farm-out agreement, they will finance a further $100 million (gross) work programme in addition to paying Bowleven $25 million in cash. This funding coupled with Bowleven's existing cash balances provides the Bowleven Group with significant financing flexibility to pursue the various exploration and development opportunities identified in its portfolio.
2008/2009 has provided a challenging backdrop for Bowleven's activities. The global slowdown, oil price weakness and unprecedented turmoil in the banking and capital markets have all had an impact on Bowleven and its wider sector. Despite these difficult conditions Bowleven has made substantial progress on the evaluation of its asset portfolio and the preparations for its forthcoming exploration and appraisal program. Strong support was demonstrated by the backing of the shareholder base for the June equity fundraising. The farm-out agreement with Vitol reinforces the value potential of Bowleven and marks the start of a new era of opportunity for the Company. 2010 promises to be an active and exciting time for the Group.
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