Bowleven Farms-Out Stake in Etinde Permit Offshore Cameroon

Bowleven has entered into a farm-out agreement with Vitol E&P Limited (VEP) in respect of the Etinde Permit (Etinde), Cameroon.

The transaction comprises (1) the acquisition by VEP of an initial 25 percent interest in Etinde, in return for funding a $100 million gross work program; and (2) an option to acquire a further 25 percent interest, in return for funding an additional $100 million gross work program and paying $25 million in cash to the Bowleven group to progress Etinde activities.

This funding coupled with the proceeds from the recent placing provides Bowleven with increased financing flexibility to pursue the various exploration and development opportunities identified in its portfolio.

VEP is part of the Vitol Group, a major independent energy trading company, headquartered in Geneva, with a breadth of experience in the oil and gas industry. This includes development, marketing and project finance expertise. Bowleven consider that this expertise should be of real benefit to the resulting joint venture as it moves from exploration to development in Cameroon.

Etinde Development

The Etinde Permit area comprises three shallow water blocks (MLHP-5, MLHP-6 and MLHP-7) in offshore Cameroon, West Africa. The Etinde PSC was signed on December 22, 2008 and includes a three year exploration period from the date of signing. Both exploration and appraisal activity has been undertaken by Bowleven on the acreage. The Bowleven group has drilled four wells on Etinde since 2007, all of which have been successful. Bowleven's current estimated Contingent Discovered Resources (Mean Volumes Initially In Place) for the Etinde Permit are 225 MMbbls of oil, 129 MMbbls of NGLs and approximately 1 tcf of gas. Pending development activity, there is currently no production on the acreage.

The immediate priority for Etinde is to drill at least one appraisal well on the IF field (IF-2 appraisal well). Bowleven is in the process of securing a suitable drilling rig for this activity. Seismic activity (3D reprocessing and a new 100 km² 3D OBC seismic survey over the IE/IF discoveries) is also planned in the near term. The IF-2 well and seismic activities form part of the initial work program agreed with VEP and will be covered by the initial carry outlined above.

On June 9, 2009 Bowleven raised approximately $114 million (gross) via a share placing. The Board also indicated its intention to continue to consider farm-out proposals that facilitate progression of the Bowleven group's business and the development of its portfolio of assets. This transaction supports this objective, enabling the rapid appraisal and potential development of the existing IF and IE discoveries whilst also facilitating near term exploration activity across the Bowleven portfolio.

Transaction details

Bowleven and VEP entered into a farm-out agreement in respect of the transaction on August 12, 2009. Pursuant to that agreement, VEP will acquire a 25 percent initial interest in the Etinde Permit in return for a commitment to fund $100 million (gross) on an agreed exploration/appraisal work programme on the acreage. The Bowleven group's interest in the Etinde Permit will be 75 percent following the farm-out of this initial interest and Bowleven will retain operatorship of all activities during this period.

Under the terms of the farm-out agreement, VEP also has an option to acquire a further 25 percent interest in the Etinde Permit that, if exercised, will result in a commitment 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 of the Etinde Permit will transfer to VEP with the Bowleven group continuing to provide technical support to the work programme and activities. Assuming option exercise, the Bowleven group's interest in the Etinde Permit would be 50 percent.

The above interests are prior to the exercise of any back-in rights by SNH. Under the Etinde PSC, SNH has the right to elect to take a 20 percent participating interest in development activity.

The effective date for the transaction is July 1, 2009. Bowleven will retain the benefit for cost recovery and tax purposes of all historic expenditure prior to the effective date.

The proposed farm-out is conditional upon normal regulatory approval by the Cameroon Government.

The transaction is also conditional upon approval by Bowleven shareholders and this will be sought at an EGM scheduled for August 28, 2009. A circular will be posted to shareholders shortly and a copy will be made available on the Company's website.

Kevin Hart, CEO of Bowleven, commented, "It is great to be bringing Vitol in as a value adding partner to our Etinde PSC in Cameroon. The combination of our exploration skills together with their development and extensive marketing experience makes us an excellent fit.

"This transaction, which endorses the value of our Etinde position, enables us to push forward together with significant exploration, appraisal and development activities in order to fully realize the potential of the Etinde acreage for all stakeholders."