BowLeven Posts Loss for Second Half 2006
BowLeven Plc on Thursday announced its interim results for the six months ended December 31, 2006.
--Announced and completed a successful takeover of First Africa Oil plc. --Equity fundraisings of a total of £67 million net of expenses, including a £56 million placing in December 2006. --Commenced a potentially high-impact drilling program. --Successfully flow tested the first well as an appraisal of the E field at 30 mmcfd of gas and 3,800 bpd of condensate. --Strengthened its Board and technical team composition. --Commenced discussions regarding the possible future sale of gas and liquids from the Etinde permit in Cameroon. --Net cash of £89 million.
Commenting, Kevin Hart, BowLeven's CEO, said:
"I'm delighted with the progress we are making on numerous fronts at BowLeven. The high-caliber team we are assembling has already helped increase the value of our acreage, and has begun to identify further attractive opportunities which have the potential to create shareholder value."
From statement by BowLeven Chairman R.G. Hanna:
Over the past few years the Company has built up an extensive database of 2D and 3D seismic coverage over its Etinde Permit, which comprises Blocks MLHP 5,6 and 7. Ongoing interpretation of the 3D seismic data on Block 7 has resulted in new opportunities on this acreage coming to light. In particular this work helped identify the potential for commercial volumes of condensate rich gas in the region of the IE-1 discovery well, which was first drilled by Total in 1981. Consequently the first well in the drilling campaign, IE-2, was drilled to appraise this discovery.
As announced earlier this month the IE-2 well successfully tested gas and condensate from the Isongo formation. The well flowed at a stabilized rate of 30 mmscfd and 3800 bpd through a 60/64 inch choke with a flowing well head pressure of 2126 psi. The production test indicated excellent reservoir deliverability with no evident depletion. Whilst further evaluation is required to determine the extent of the E Field and associated reserves the result of the IE-2 well have been very encouraging, especially as the flow rates were constrained by the test equipment. The well also encountered 50 feet of net pay in good quality gas bearing sandstone in the Biafra formation. The IE -2 well has been suspended as a possible future producer.
A substantial amount of technical work has been carried out and is still ongoing to evaluate the recently acquired 3D seismic data over Blocks 5 and 6 in the sparsely explored Douala Basin. Whilst still at a relatively early stage, the interpretation of this data has already generated a number of leads and prospects. One such prospect ("D") located in Block 5 is the target for the second well in the current drilling campaign. The Adriatic VI drilling rig has now been moved a short distance to Block 5 of the Etinde Permit to begin drilling the higher risk "D" exploration prospect. This well was spudded on 21 March 2007 with the primary objective of exploring the Upper Miocene channelized turbidite sands, which are believed to be similar to those that were found by Noble Energy to be hydrocarbon bearing 10km downslope in the O-1 Belinda discovery in Equatorial Guinea.
Following this second well it is likely that the rig will return to Block 7 and drill an exploration prospect that is located up dip from the adjacent E Field.
The decision on where, and if, to drill a fourth well in this campaign is still being evaluated. This will depend, in part, on the results of the prior wells and the status of our extensive ongoing review of the recently acquired seismic data in both Cameroon and Gabon.
A key objective for the Company in the next 12 -18 months is to seek to monetize our existing resource base in Block 7 in Cameroon together with any additional gas/liquids discovered in Blocks 5&6. Of particular encouragement is the Cameroon Government's announcement in early 2007 of a cooperation agreement with the Government of Equatorial Guinea to investigate the possibilities of a project to export gas from Cameroon to the gas liquefaction plant on Bioko Island. It is proposed that Limbe in Cameroon would be the gathering hub for any such scheme. The close proximity (approximately 27 km) of the Company's resource base to Limbe combined with the high well deliverability and liquids content experienced at IE-2 should help ensure that BowLeven is ideally positioned to participate in any future gas export project.
The purchase of FirstAfrica Oil plc ("FirstAfrica") (mentioned below) has given us both a significant development opportunity and substantial exploration acreage. We have been busy on our newly acquired Gabonese operations. Having reviewed FirstAfrica's plans we have changed the approach to production of the offshore EOV field. Good progress has been made on preparing an amended field development plan for the EOV which would involve evacuating the oil through a pipeline to nearby existing onshore facilities. This should allow the oil to be produced at lower operational costs than for the previously proposed development scheme based on an FPSO. First oil is targeted for 2H 2008.
Work has also now commenced on reprocessing the vintage 2D seismic over the onshore Epaemeno Block. This work will be completed by mid year and the new dataset will form the basis for future drilling plans.
I mentioned earlier that FirstAfrica now forms part of the BowLeven Group. We are very happy to have completed this meaningful acquisition. There is a clear logic in combining the asset portfolios of the two companies and using our existing financial resources and experience of the management team to develop the various projects that are available. FirstAfrica has a 100% equity interest in both the East Orovinyare ("EOV") offshore block in Gabon, which contains an existing oil discovery that we are seeking to develop, and the Epaemeno Block which is 1,340 km2 of exploration acreage in onshore Gabon which sits next to a number of recent discoveries in surrounding blocks.
Following on from the net £11 million placing in July 2006, the Company's finances were further significantly strengthened by the successful placing of 26.4 million shares at 220 pence a share on 19 December 2006 to raise approximately £56 million net of expenses. These funds will be used to help finance the development of the EOV field and to provide funds for exploration activities and working capital purposes.
Fostering strong external partnerships with the right risk reward profile is a sound strategy for helping develop our assets. Accordingly, we continue to consider our needs and opportunities for timing on farm-outs.
As yet we have no operating income. Against this background, the Group reported a loss of £2.1 million for the six months ended 31st December 2006. The main contributor to this loss was administrative expenses of £3.1 million reflecting the Group's efforts to develop its assets. This was also the first period that the Company had applied FRS20, which requires all companies to recognize the fair value of employee share based benefits in the financial statements. This resulted in a charge of £0.3 million for the six months ended 31 December 2006 which has been included within administrative expenses. Also included within administrative expenses was an amount of £1.1 million primarily relating to various translation differences on foreign exchange transactions that have been charged to the income statement. This partly occurred as a consequence of the Company managing currency exposures by, to the extent practical, matching receipts and payments in the same currency.
The balance sheet is healthy, with net cash of £89 million at the period end.
Long Term Incentive Plan ("LTIP")
A LTIP was approved by Shareholder's at an EGM of the Company held on 6 December 2006. The plan seeks to help align the remuneration of senior management with the underlying long term performance of the business.
This has been a period of quite a few Board changes.
I am delighted that Kevin Hart has joined the Company as Chief Executive Officer. His combination of skills, enthusiasm determination and leadership will prove to be a key appointment for the organization.
As well as being appointed Non Executive Chairman myself following the AGM on 6 December 2006, I was also joined on the Board at that date by Caroline Cook as a Non Executive Director. She has considerable experience in the oil and gas sector and I welcome her to the Company and look forward to her valuable contributions.
I would like to register my thanks to Terry Heneaghan and Easton Wren who stepped down as Executive Chairman and Non Executive Director respectively at the AGM in 2006. Both gentlemen deserve much credit for their efforts in helping secure the position that BowLeven is in today.
I am very sorry to report the death of Jerry Anthony, our Exploration Director. He died just before the end of 2006 after a short illness. He was a much respected and admired colleague and will be greatly missed.
It is our intention to make further appointments to the Board and management team as the business develops.
Our business is of course one of potentially high risk and high reward. Our approach is to recruit and maintain a very high-caliber and motivated team, to be highly professional in assessing and managing the risks and rewards in our operations - such that our prospects are maximized.
The outlook is positive for your Company. I believe that we have the management
team and asset base that can provide us with significant opportunities for
success in creating value for shareholders.
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