Bowleven Posts 3Q Preliminary Results for 2010

Bowleven reported its preliminary results for the year ended June 30, 2010.


  • Operational
    • IE-3 appraisal well, offshore Cameroon, tested cumulative maximum rate of around 23,000 boepd.
    • Group P90 contingent resource volumes increased by 13% following initial update post IE-3 well; planned appraisal activity continues and further updates are anticipated.
    • Oil discovered on IE highlights additional potential of the IE field and surrounding area; optimal IE-4 appraisal well location is being identified.
    • Sapele-1 exploration well, located in block MLHP-5 offshore Cameroon, has encountered two potentially significant Miocene discoveries.
    • Sapele-1 deeper targets, including the Cretaceous Epsilon Complex, still to be drilled.
    • Extensive seismic programs carried out to refine the exploration upside on Etinde and Bomono, Cameroon.
  • Corporate
    • Etinde farm-out transaction with Vitol E&P Limited (Vitol) completed June 2010; revised option arrangement agreed end September 2010.
    • Forecast group cash post Sapele-1 drilling and EOV disposal circa $115 million.
    • Group is well positioned to fund current planned work program; significant financing flexibility.
  • Outlook
    • Convert resources to reserves; progress IE and IF development projects towards sanction.
    • Ongoing exploration/appraisal activity on Etinde is likely to include:
      • Completion of drilling and testing activities on Sapele-1 exploration well; targeting multiple stacked reservoirs including the Tertiary and Cretaceous fairways;
      • IE and IF appraisal wells on MLHP-7; and
      • Completion of the evaluation of extensive 3D seismic data acquired and reprocessed.
    • Further 2D seismic acquisition and up to two wells planned on Bomono during 2011.
    • Epaemeno Permit operator, Addax, preparing groundwork for drilling activity; well planned early 2012.

Kevin Hart, Chief Executive of Bowleven plc, said, "We are delighted with the results so far of our drilling and seismic campaigns on Etinde. Through the IE-3 well we have established the presence of oil in the IE field area and have taken a positive step towards the realisation of our strategy to transfer resources to reserves on block MLHP-7. Appraisal activity on block MLHP-7 is continuing and this is likely to include further drilling on the IE and IF fields. The spotlight is now on our exploration strategy and our plans to further evaluate the significant exploration potential of the Douala Basin. The high potential Sapele-1 exploration well in block MLHP-5 in the Douala Basin is currently drilling. Initial indications from the Tertiary targets have been extremely encouraging and it is now planned to drill to the deeper Cretaceous target interval. The momentum is building on our operations in Cameroon. Unlocking a development scheme that exploits the multiple proven hydrocarbon pools in block MLHP-7 and testing the very significant promise of the Douala Basin offers multiple opportunities to create value for shareholders into 2011 and beyond."


2010 is proving to be one of the busiest years in Bowleven's history. A strong financial platform was built in 2009 through the combination of a $113 million equity placing and subsequent farm-out of 25% of Etinde to Vitol for a $100 million gross carry. This, together with vital technical groundwork and operational planning, has allowed the Group to proceed with extensive drilling and seismic programs on its acreage in Cameroon.

One of the two primary objectives of this ongoing activity, as highlighted in last year's Annual Report, is to enable a substantial proportion of the Group's discovered hydrocarbons to be moved from "Resources to Reserves" through the appraisal and subsequent sanction of the IE and IF discoveries on the Etinde Permit, offshore Cameroon. The first major step on this path to development was completed in September with the successful drilling and testing of the IE-3 appraisal well. The results of the well, which tested at a combined maximum rate of around 23,000 boepd, are noteworthy as they highlight the presence of oil in the IE field area and have taken us closer to confirming the commercial viability of IE and the other discoveries in block MLHP-7.

The second primary objective of this year's work program was to further investigate the potential of our acreage position in the under-explored Douala Basin. In this regard we have recently completed a 527 km² 3D survey over the majority of block MLHP-6 and on areas of block MLHP-5 where there is no existing coverage. In addition, the Sapele-1 well on block MLHP-5 is currently drilling. The well, which is targeting multiple independent exploration targets, has so far made two potentially significant hydrocarbon discoveries in Miocene reservoirs, based on the results of drilling and initial wireline logs and pressure data. It is planned to drill the well to a total depth of approximately 4,450 meters to test further prospective horizons, including the deeper Cretaceous Epsilon Complex. Drilling activity is expected to take a further 30 to 40 days, excluding testing.

Resources to Reserves

The Group remains focused on converting its considerable resources on block MLHP-7 to reserves. A notable step towards this was achieved in 2010 with the IE-3 appraisal well which included the first discovery of oil in the IE field area.

Bowleven's interest in the Etinde Permit reduced from 100% to 75% during the year as a result of the Vitol transaction completing. This has been the prime factor behind a 54 mmboe reduction in the Group's P50 contingent resource volumes to 163 mmboe on a net basis from the previous year (2009: 217 mmboe).

On a gross basis the P50 contingent resource volumes for the Group's assets are relatively unchanged at 215 mmboe (2009: 217 mmboe), but the gross P90 volumes have increased by 13% to 128 mmboe. This upward revision relates to the initial revised volumetrics produced following the recent successful IE-3 appraisal well. Planned appraisal activity on IE continues. This includes biostratigraphy and chemostratigraphy studies, seismic inversion investigations, petrophysical work, field modeling and remapping, core logging and analysis and geochemical studies. Further volumetric updates are anticipated as ongoing appraisal work is completed and further appraisal drilling (including the planned wells on IE and IF) is carried out. 

In addition to our contingent resource for block MLHP-7 included above, there remains a significant unrisked prospective resource inventory across the Etinde Permit. The drilling of further exploration wells is now required to confirm this resource potential and the high potential Sapele-1 exploration well is part of that process. There is also the potential to materially increase this existing unrisked prospective resource inventory, particularly on blocks MLHP-5 and MLHP-6. The acquisition during the year of an additional 527 km² of 3D seismic data to infill areas of those two blocks where there was previously no existing coverage, and the reprocessing of existing 3D seismic over the Permit, continues to broaden the Permit-wide prospect inventory. 

Detailed prospect and lead inventories are also being refined for both Bomono and Epaemeno and these also have the potential to generate significant exploration resource for the Group. On Bomono, in excess of 435 km of 2D seismic data is currently being acquired across the acreage in a two stage seismic campaign and this, alongside reprocessed vintage seismic, will be used to identify locations for drilling in the second half of 2011. Drilling is also planned on Epaemeno in early 2012 and, as the first well on the Permit, this will test the potential prospectivity of the acreage. 

Exploring the Douala Basin

The Douala Basin is an emerging hydrocarbon province that is significantly underexplored in comparison to its other West African neighbors and, until very recently, has seen limited exploration activity. The initial industry perception was that the Basin was gas prone and therefore, in the absence of a gas market, it has seen little investment since the 1980s. That perception has changed over the last five years with the advent of 3D imagery, drilling success including oil discoveries and the steady increase in activity promoted by regional LNG schemes. Bowleven's Cameroon acreage is very well-positioned to access this emerging opportunity. Seismic and drilling activities are now being carried out by several operators across the Douala Basin, including Bowleven. Oil and gas condensate development activity is increasing in the region and this provides practical benchmarks for Bowleven's planned activities.

During 2010, Bowleven acquired new seismic over the Bomono Permit and blocks MLHP-5 and MLHP-6 on the Etinde Permit, all of which are located in the Douala Basin. In addition, Bowleven is currently drilling the potentially high-impact Sapele-1 exploration well in block MLHP-5. The Sapele-1 well location has been selected to intersect multiple independent exploration targets in both the Tertiary and Cretaceous intervals from a single location.

The Tertiary objectives in our program are at the same stratigraphic level as other existing discoveries and developments in the Basin. As stated above, the results of drilling and the initial wireline logs and pressure data from the Miocene reservoir targets indicate that the Group has made two potentially significant hydrocarbon discoveries. Drilling is expected continue to the deeper Cretaceous fairway, to a total depth of approximately 4,450 feet. The Cretaceous stratigraphic represents a new play untested within this part of the Douala Basin and, if successful, could materially transform the prospectivity of the acreage. The Cretaceous oil target is estimated to have unrisked P90 to P10 STOIIP of 104 million barrels to 3.7 billion barrels.

Results from the Sapele-1 well will be used to calibrate and potentially de-risk other prospects and leads in the area. Further prospects with analogous characteristics have already been identified, highlighting the additional potential on the acreage in the event of a successful outcome on this well.

Although it is still early we believe that the Douala Basin has the potential to become a major hydrocarbon producing area.


It has been an active period for the Group with the resumption of operational activities across the portfolio. This increased activity level is expected to continue into 2011 and onwards. 

Cameroon - Etinde Permit

Drilling work program

Drilling activity is centered on Bowleven's dual strategy of transferring resources to reserves and further investigating the potential of the Group's acreage through high impact exploration wells. On the former, the initial focus is on drilling appraisal wells on IE and IF on block MLHP-7 with a view to sanctioning these projects as soon as practicable. On the latter, the spotlight is on the high impact exploration well, Sapele-1, that is currently drilling on block MLHP-5.

A rig has been contracted for a program of two firm plus up to two contingent wells. The drilling program commenced early May 2010 with the IE-3 appraisal well. This well was drilled to 3,048 metres and multiple intervals were subsequently tested. A cumulative maximum flow rate of 14,576 bpd of liquids and in excess of 50 mmscfd of gas (total 22,909 boepd) was produced on test from these intervals. The rig was then mobilised to block MLHP-5 and Sapele-1 drilling operations commenced mid-September 2010.

Given the multiple hydrocarbon bearing reservoirs and the discovery of the first oil in the IE field area, encountered in the deeper exploration targets on IE-3, a further appraisal well is anticipated.

An IF appraisal well remains essential to plans for a potential fast track oil development on block MLHP-7 and consequently forms part of the proposed drilling program. New seismic has been acquired over IF during 2010 to improve imaging of the field area and facilitate location selection. This is being processed and interpretation is expected to be completed during the first quarter of 2011.

Bowleven continues to monitor the availability of rigs in West Africa for future drilling activity. The rig market appears relatively stable with a number of rigs operating and available in the area at day rates similar to those prevailing in 2009. 

Seismic work program

An extensive campaign to acquire additional 3D seismic and reprocess the existing 3D seismic over Etinde was carried out during 2010. The reprocessed survey has significantly improved seismic imaging across the Permit and will be integral in planning future appraisal/development activities. The new program, consisting of multi-streamer marine 3D seismic, was acquired to: (1) bridge the gap between the existing 3D surveys in the Douala Basin and over MLHP-7 (2) infill the seismic gap in the eastern edge of MLHP-5 and (3) improve imaging over IF in MLHP-7. The data acquired is being processed and the results are expected over the next three months. The interpretation process follows and the output will be used to support planned appraisal activity on IF and to generate a Permit-wide prospect inventory. 


Conceptual development planning to optimize the monetization of the MLHP-7 fields is continuing in association with our partner, Vitol. The preferred route to development, ensuring potential synergies are exploited, is an FPSO utilized by both the IE and IF fields. The recent successful flow test at IE has validated the potential for a commercial discovery on block MLHP-7 and the confirmed presence of oil at IE further promotes the rationale for a combined development. Further appraisal activities are planned on IE and IF with the aim of achieving development project sanction and ultimately production from MLHP-7 as soon as practicable.

Initial analysis of the IE-3 well results indicates that the IE field area has a degree of compartmentalization and therefore a gas depletion development scheme is now also being considered alongside gas recycling for the southern compartments. Ultimate recoverability will depend on the final development scheme selected.

The path to development is evolving as extensive appraisal activity continues including further drilling. As part of this overall process the Group is planning to submit an application for an exploitation authorization in respect of an area that includes at least the MLHP-7 block in order to secure this area for further development. The optimal development strategy may be expanded to include block MLHP-5 in light of the Sapele-1 results. 

Cameroon Gas Monetization

Further momentum has been seen on the GDF and SNH project to progress the monetization of the substantial undeveloped gas resource within Cameroon. Following completion of an initial feasibility study that confirmed the viability of an LNG scheme for Cameroon, significant time and resource has been invested in the initiative. A pre-FEED contract has been awarded and the work under this contract is expected to be completed in the first half of 2011. Bowleven's fields are seen as key potential contributors of feed gas to the proposed LNG facility.

Cameroon - Bomono Permit

The program to acquire in excess of 435 km of 2D seismic commenced in March 2010. The seismic is being acquired in two phases due to seasonal conditions. Data from phase one of the survey (circa 300 km) has been collected and processed. Mobilisation and preparation work for the second part of the survey commenced in late October. The new seismic will be used to provide an updated prospects and leads inventory for the Permit. Surface samples were also acquired for geochemical analysis during phase one of the seismic campaign, and these will be used in ranking the prospects in preparation for drilling. The process for attaining all necessary environmental approvals is underway and the drilling of up to two wells (targeting Tertiary and possibly Cretaceous prospects) is currently scheduled for the second half of 2011. 

Gabon - EOV Permit

Following the initialing of an SPA last year for the disposal of the Group's entire interest in the EOV Permit, offshore Gabon, the focus for the current year has been engaging with the various authorities in Gabon to formalize the disposal. Progress has been made and completion is anticipated within the next six months. Proceeds expected include a cash consideration of $35 million and a working capital adjustment from the effective date of the transaction. 

Gabon - Epaemeno Permit

Activity in Epaemeno by operator, Addax, is currently focused on refining the geological model for the Permit and preparing for drilling operations commencing in early 2012. An 18 month extension to the exploration term has been agreed with the Gabonese authorities, allowing further time to complete planned activities. The only operational commitments on Epaemeno anticipated in 2011 relate to civil works in preparation for drilling operations.

Operational Outlook

The indications are that 2011 will once again see Bowleven being very active on the operational front. The future program of operations is likely to include the following:

  • The completion and testing of the Sapele-1 exploration well.
  • Processing and interpretation of the recently acquired 3D seismic over Etinde, including blocks MLHP-5 and MLHP-6 and the IF field area.
  • An appraisal well on the IF oil field.
  • A further appraisal well in the IE gas/condensate/oil field.
  • One or two onshore exploration wells on the Bomono Permit, Cameroon.
  • An onshore well on the Epaemeno Permit, Gabon in early 2012.


The Etinde farm-out transaction agreed with Vitol in August 2009 was completed in June 2010. Under the agreement Vitol acquired a 25% participating interest in Etinde in return for funding a $100 million (gross) exploration/appraisal work program on the Permit. The Vitol-funded activities include the extensive seismic acquired on the Permit and the IE-3 and Sapele-1 drilling undertaken during 2010. A revised option arrangement was agreed with Vitol at the end of September 2010. Under this arrangement Vitol have an option to acquire a further 10% interest in block MLHP-7 only in return for funding a further agreed $50 million (gross) appraisal program. The option expires on the earlier of the spud date of the next appraisal well on block MLHP-7 and 31 March 2011.

The principal focus of Vitol's participation in Etinde is to move the existing block MLHP-7 fields towards development sanction. Since becoming a partner, Vitol has been actively involved in Etinde joint venture activities, in particular appraisal prospect definition and selection on block MLHP-7. This is expected to continue as the joint venture progresses planned appraisal activity and formulates the optimal path to development.


The Group has reported a profit of $19.5 million for the year ended 30 June 2010 (2009: loss $10.2 million; includes an impairment charge in relation to the EOV field in Gabon of $50.5 million). The results for the year include a foreign exchange gain of $31 million (2009: $48.8 million), primarily due to the treatment under IFRS of exchange movements on intra-group funding. Administrative expenses for the Group were $12.4 million (2009: $9.8 million).

Capital expenditure cashflows in the period were $39.7 million (2009: $69.9 million). The majority of the expenditure related to seismic activities on Etinde and Bomono and the commencement of the 2010 drilling program on Etinde in May 2010. $22 million of Etinde expenditure was subsequently refunded by Vitol following the completion of the farm-out transaction after the year end.

As at the balance sheet date the Group had cash balances of $79.2 million and no debt. Given the majority of Etinde spend in the period has been covered by the $100 million gross expenditure carry from Vitol, the Group estimates that it will have approximately $80 million of cash post-Sapele-1 drilling (excluding testing) activity. In addition, a further $35 million proceeds are anticipated from the disposal of EOV. With a financial foundation of $115 million in cash, Bowleven is well-placed to fund currently planned activities on its acreage. Under the farm-out agreement Vitol continues to fund 25% of ongoing activities on Etinde and, in the event of option exercise, will cover an additional $50 million gross appraisal work program and 35% of all other costs on block MLHP-7. As the Group moves from resources to reserves alternative development funding options will also be considered.

Farm-out opportunities across Bowleven's acreage remain under review. The higher equity interest retained under the revised option arrangement with Vitol presents an opportunity to bring in additional farm-in partners on Etinde if deemed appropriate.


Bowleven's operations in Cameroon have built significant momentum during 2010, first with the success of the IE-3 appraisal well and now with the very encouraging initial indications from the Sapele-1 exploration well.

We believe our current and forthcoming exploration and appraisal program will maintain this momentum. We anticipate that our twin objectives, to convert resources to reserves and to prove up the exploration potential of our acreage, will capture and realize significant additional value for our shareholders. The next 12 to 18 months will be an exciting period of considerable operational activity and development.

Bowleven believes that the voyage of discovery, unlocking the treasures of the Douala Basin, is only just beginning.