REG - Bowleven plc - Interim Results
30/03/2023 07:00
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RNS Number : 6941U Bowleven plc 30 March 2023
This announcement contains inside information for the purposes of Article 7 of
the Market Abuse Regulation (EU) 596/2014 as it forms part of UK domestic law
by virtue of the European Union (Withdrawal) Act 2018 ("MAR"), and is
disclosed in accordance with the Company's obligations under Article 17 of
MAR.
30 March 2023
Bowleven plc
('Bowleven' or 'the Group' or 'the Company')
Interim Results
Bowleven, the Africa focused oil and gas, Exploration and Production Company
with key interests in Cameroon, today announces its unaudited interim results
for the six months ended 31 December 2022.
HIGHLIGHTS
Operational
Etinde
· Etinde operations are currently in a "care and maintenance" mode with
limited ongoing activity other than New Age's maintenance of the Cameroon
project office. This activity level is expected to continue until the
conditions precedent to the completion of the disposal of New Age's Etinde
operating interest to Perenco are satisfied and regulatory approval is
provided. As such Bowleven expects minimal capital outlay related to the
Etinde asset until the completion of New Age's disposal.
Corporate
· The loss for the 6-month period was $1.0 million compared to $1.3
million for the same period in the prior year. The decreased loss is primarily
due to lower recharges from Etinde, as project development activities have
been reduced, and further expenditure reduction measures imposed by Bowleven's
Board.
· The Group cash balance as at 31 December 2022 was approximately $0.25
million with a further $2.2 million held in a financial investment, with no
debt or material financial commitments. As at the end of March 2023 the
financial investment has been partly converted to cash to be used to fund
ongoing operations, with the net financial investment now at $1.4 million. As
at 29 March 2022 the Group cash balance is circa $0.9 million.
· The Directors have temporarily reduced UK staffing and overhead costs
from January 2023 until Perenco become the operator at Etinde and further
financing is secured. As a result, the current Bowleven expenditure run rate
has been temporarily reduced to between $125,000 and $200,000 per month (with
actual monthly expenditure depending on Etinde cash call amounts) to extend
Bowleven's current cash resources.
· As set out in the Group's final results statement on 1 November 2022,
whilst expenditure on the Etinde project is currently low, Bowleven
anticipates a higher expenditure later in 2023 on the basis that, once
Perenco's Etinde interest acquisition has been completed, it may seek to take
a fresh look at Etinde development options and put in place a full development
team. Assuming Perenco and New Age's transaction completes in June 2023,
Bowleven estimates that FID could be in late 2024, subject to Perenco's
initial review of the Etinde development options. Based upon this potential
timing, when combined with Bowleven's current cash and liquid resources, the
Directors' cash flow forecasts and projections indicate a material risk that
Bowleven will fully utilise its existing cash resources by the end of 2023.
This gives rise to a material uncertainty regarding the going concern status
of the Group.
· The Board has therefore been considering its fundraising options and
expects to seek to raise additional equity capital in 2023 to help to finance
the Group's ongoing corporate activities and to assist financing its share of
the future expenditure as the Etinde project progresses towards FID. Planning
for an equity fundraising remains at an early stage and there can be no
certainty that a fundraising will be concluded, nor as to the structure or
terms of any such fundraising. To the extent possible, the Board will seek to
respect shareholders' pre-emption rights. Bowleven will make further
announcements as appropriate.
Eli Chahin, Chief Executive Officer of Bowleven plc, said:
"We remain on the verge of what we believe to be a major turning point in the
business with the expected upcoming change of the Etinde operatorship once
Perenco secures regulatory approval.
This is expected to be a key milestone in progressing what is hoped to be a
transformational energy project for Cameroon, accelerating what has to date
been a challenging timetable towards hydrocarbon production at Etinde for the
benefit of all the JV Partners. As demonstrated by the recent signing of a
bilateral co-operation agreement on hydrocarbon monetization with neighboring
Equatorial Guinea, we are on the cusp of a new energy horizon for Cameroon
that will impact the lives of many. We look forward to keeping our
shareholders abreast of the anticipated positive developments over the coming
months."
ENQUIRIES
For further information, please contact:
Bowleven plc
Eli Chahin, Chief Executive 00 44 203 327 0150
Camarco (Financial PR)
Owen Roberts 00 44 203 757 4980
Charlotte Hollinshead
Hugo Liddy
Shore Capital (NOMAD and Broker)
Robert Finlay 00 44 207 601 6100
Daniel Bush
Angus Murphy
A copy of this announcement is available on the Bowleven website
www.bowleven.com (http://www.bowleven.com)
Notes to Editors:
Bowleven plc is an African focused oil and gas group, based in London and
traded on AIM. It is dedicated to realising material shareholder value from
its Etinde asset in Cameroon, whilst maintaining capital discipline and
employing a rigorously selective approach to other value-enhancing
opportunities. Bowleven holds a strategic equity interest in the offshore,
shallow water Etinde permit (operated by New Age) in Cameroon.
Notes to Announcement:
The information in this release reflects the views and opinions of Bowleven
and has not been reviewed in advance by its joint venture partners.
Terms not otherwise defined have the meanings given to them in the definitions
section at the foot of this announcement.
CEO's REVIEW
The 6 month period ending 31 December 2022, has been another frustrating
period with little in the way of positive developments to report on regarding
our stake in the Etinde development project following the agreement of the
conditional sale of the Operator's stake to Perenco in June 2022.
Whilst New Age and Perenco seek governmental approval and the resolution of a
number of other conditions precedent to completion, New Age has placed the
project on hiatus with little other than "care and maintenance" based
operations.
On the regulatory side, New Age has assisted SNH in completing an audit of
expenditure at Etinde covering the period from 2015 to 2020 and they are in
negotiations regarding the 2023 work plan and budget.
Perenco has not, to date, sought to directly discuss its plans for the future
of Etinde development with Bowleven or LUKOIL, although we have been made
aware of some of their potential ideas indirectly. We consider the financial
and strategic acquisition merits of Perenco's purchase to be compelling and
there are options we think are currently being assessed that would lead to
commencement of production at Etinde in a cost effective and profitable way
for the benefit of all Etinde JV Partners.
The Board believes that Bowleven will need to raise additional funds in 2023
in order to fund its corporate overheads and the likely expenditure required
of Bowleven from the point that Perenco becomes Etinde operator, which we
currently anticipate by June 2023, towards a potential FID date in late 2024.
It should be noted however that the timing of FID and the level of future
expenditure required of Bowleven is an area of considerable uncertainty, as
discussed later in this interim report. Alongside this, the Directors have
reduced UK staff costs. The Board sees this as a temporary measure, which will
be in place during 2023 until Perenco become operator and the Company has
sufficient cash resources after additional finance is secured.
New Age's transaction with Perenco
New Age agreed to sell its 37.5% stake and Operatorship in Etinde to Perenco
for an undisclosed amount in June 2022. Under the terms of the deal, a number
of conditions precedent remain outstanding. Completion of this transaction is
notably dependent on Perenco reaching both governmental agreement with SNH as
well as commercial agreement with LUKOIL relating to some logistical matters.
We understand from New Age that regulatory approval is expected to be issued
by SNH and the Government of Cameroon in mid-2023, and that discussions are
ongoing between LUKOIL and Perenco. Bowleven has no involvement in these
discussions. Under the terms of the June 2022 transaction, unless completed
beforehand, the transaction termination date ('long stop date') is 12 months
after signature (June 2023).
Going concern
The Directors' singular focus is to accelerate the path to FID and sanction a
project that maximises the potential economics of Etinde's significant
hydrocarbon resources.
As at 28th February 2023, the Company had (unaudited) liquid resources
(comprising cash and a financial investment) of approximately $2.3 million.
The Group needs to secure funding to underpin the reduced cost base we have
implemented during 2023, to fund our share of current and future joint venture
spend as aligned with the preferred development plan, and the necessary cash
buffer to meet cost contingencies.
As set out above, the Board is currently working on plans to raise additional
equity capital in 2023 to help to finance the Group's ongoing corporate
activities and to assist to finance its share of the future expenditure as the
Etinde project progresses towards FID. However, planning for an equity
fundraising remains at an early stage and there can be no certainty that an
equity fundraising will be concluded, nor as to the terms of any such
fundraising.
Since December 2022, the business has made further cost reductions, through a
combination of redundancy and moving all remaining staff onto a part time
basis to reduce the Group's controllable cash burn as far as possible. This is
a temporary measure which Bowleven anticipates to change once it has
sufficient cash resources after a fundraising occurs and Perenco completes its
acquisition.
Monthly expenditure at Etinde remains low as New Age continues to operate the
business on a largely suspended, care and maintenance basis. However, we
expect that, on transfer of ownership to the new operator, Perenco will
rapidly put a new project team in place and commence development planning
activity over a short period of time. As previously discussed, the timing and
financial impact of this remains uncertain, but its impact on Bowleven's
current expenditure levels will likely be substantial. Without a further cash
injection to fund the period to FID, there is a material uncertainty around
the Group's ability to operate as a going concern.
As discussed in note 2 to the interim financial statements and the Outlook
section below, the Directors have considered a number of different cash flow
forecasts. On the basis of this modelling and Bowleven's current and forecast
cash expenditure for FY 2023, the Directors have concluded that Bowleven is
highly likely to need to complete a fundraising in 2023 in order to continue
to fund the Group's operations as the Etinde project progresses towards FID,
although the timing of FID and the level of future expenditure required of
Bowleven is an area of considerable uncertainty.
Final Investment Decision for Etinde
The current JV partners have recommended to the regulator, SNH, that we move
forward on the basis of the EG development option, which leaves essential
commercial and large-scale governmental approval issues to resolve. There
would also be a significant number of commercial and technical details that
require further analysis and commercial negotiation with Marathon Oil, the
Bioko Island facility operator. In addition, the EG option would need formal
regulatory approval from both SNH and the Government of Cameroon and the
signature of an intergovernmental agreement between Cameroon and Equatorial
Guinea. In our opinion, the landmark signing during March 2023 of a bilateral
cooperation agreement between Cameroon and Equatorial Guinea to jointly
develop and monetise oil and gas projects along their respective borders bodes
well for the monetisation of hydrocarbons and energy sovereignty. Currently
the agreement is focused on two Chevron-operated fields and could serve as a
template for the Etinde field optionality.
We do not know what, if any, alternative development scenario Perenco may
propose to the JV partners nor whether these plans will meet with JV partner's
collective approval. But we draw comfort that a precedent has now been
established to mitigate the associated intergovernmental issues that
previously challenged such bilateral developments.
We are not currently able to make any firm forecast as to when the JV partners
will be able to reach a final investment decision for Etinde, although we
continue to see the development of Etinde to be financially compelling,
especially in the current global environment, with the increasing reduction of
Russian sourced oil and gas on global markets.
One of our JV partners, Lukoil PJSC, has been impacted by the imposition of
Russian sanctions, following the invasion of Ukraine. However, their
day-to-day participation in the Etinde PSC as a non-operating minority partner
has not been affected to date.
OPERATIONS REVIEW
Etinde Exploitation, Offshore Cameroon (25% equity interest)
During this 6 month operations period, New Age's technical staff completed the
SNH agreed FY2022 technical work plan making several additional internal
reports available to the JV partners. These built upon and finalised various
outstanding economic and technical modelling issues as well as presenting a
geo-technical risk and resources assessment of the IC discovery and several
exploration targets to the west of the IM discovery. These were detailed in
Bowleven's 30 June 2022 Operations Review, included within the previous annual
report.
Since October/November 2022, New Age has scaled back its remaining operations
to the maintenance of the Etinde project office in Cameroon and a small scale
watching and management brief for a handful of its London based staff.
A draft FY 2023 Work Plan and Budget has been prepared on the basis of minimal
technical activity, however this has yet to be approved. Expenditure is being
approved on a quarter by quarter basis by the JV partners. All parties,
including SNH, are aware that this interim budget will be replaced by Perenco
once their transaction with New Age completes, unless terminated if it reaches
its June 2023 long stop date.
During the second half of 2022, SNH completed a cost recovery expenditure
audit of Etinde covering the periods from 2015 to 2020. As can be expected,
SNH disallowed a percentage of the expenditure across that period, which moves
from recoverable to non-recoverable under the PSC terms. This has been the
subject of ongoing discussion with SNH by New Age, as Operator. At the current
time, the JV partners and SNH remain in dispute regarding the PSC
recoverability of $10 million of expenditure covering the period 2014 to 2020.
Volumetric Update
P50 (C2) net contingent resources to Bowleven on the current 25% licence
interest are 61 mmboe following the Resource reassessment undertaken in late
2019. The next resource update is likely to be undertaken as part of the field
development plan process to formerly re-categorise Etinde IM field Contingent
Resources to Reserves in accordance with any field development plan produced
at that point.
FINANCE REVIEW
The Group reports a loss of $1.0 million (H1 2021: loss of $1.2 million) for
the six months ended 31 December 2022.
The Group's current period G&A expense charge was $1.1 million (H1 2021:
$1.3 million) which was somewhat lower than the equivalent period in the prior
year, reflecting the impact of further cost saving measures. This includes
$0.3 million of Etinde G&A costs (H1 2021: $0.3 million) charged by the
Operator.
Finance income comprises interest and dividend income of $0.1 million (H1
2021: $0.1 million), foreign exchange loss of $0 million (H1 2021: loss $0.03
million) and a mark to market loss of $0.06 million (H1 2021: gain $0.02
million) arising from the revaluation of the Group's financial investment.
Capital expenditure cash flows during the 6 month period were $0.2 million (H1
2021: $0.3 million) all of which relates to Bowleven's share of the Etinde
pe-development phase project expenditure recharged by the Operator.
At 31 December 2022, Bowleven had $0.2 million of cash and cash equivalents
and no debt (H1 2021: $2.5 million and no debt). Bowleven owned $2.2 million
of financial investments in preference shares (H1 2021: $2.5 million), which
generates a reasonable financial return at relatively low investment risk.
This investment is being liquidated in an orderly manner during 2023 and
converted to cash to fund the Group's on-going operations. There will be a
corresponding reduction in dividend income during 2023.
Under the terms of the Etinde farm-out transaction in March 2015, the Group is
entitled to a $25 million payment from the JV partners, which is contingent on
achieving Etinde FID. This is held as a contingent asset pending further
clarity around Etinde FID project sanction.
At the completion of the 2021/22 financial reporting cycle, Bowleven's
auditors (BDO LLP) raised the question of the likely audit fees for the FY
2022/23 cycle and the subsequent period. BDO proposed to charge a substantial
increase in the base fee plus a significant additional sum to cover the
expected cost of a change in audit process driven by changes to UK audit
regulation. Whilst we fully understand the current dynamics in the regulated
UK audit marketplace, we considered the overall proposed fee increase to be
unwarranted. On this basis, Bowleven and BDO have agreed to part company and
BDO has tendered its resignation. We are currently in discussions with a
number of other major UK audit firms to replace BDO for the audit of the Group
financial statements for the year ending 30 June 2023.
OUTLOOK
There are two significant short term events that will significantly influence
the future of Bowleven and its participation in the Etinde development. These
are as follows:-
1. The completion of the transaction between New Age and Perenco; and
2. A fundraising to provide additional capital to allow the Group to
continue its operations.
During the remainder of 2023, if the EG option is pursued, the Group expects
to continue to work alongside the other Etinde JV partners to undertake
commercial discussions with Marathon Oil as operator of the Bioko Island
facilities JV. Subject to obtaining approval for the EG development option
from SNH, we expect to support bilateral discussions between the Governments
of Cameroon and Equatorial Guinea alongside SNH, Marathon Oil and other
interested parties of those countries. Once the legal and commercial
development framework is agreed, we expect the project to proceed to FID and
to raise investment finance from commercial debt finance providers, our
shareholders and other potential equity investors to support the investment
required in project development.
As current cash and liquid investment resources continue to decline through
the combination of normal operating costs and continued low level development
planning-related capital investment at Etinde, our safety margin is continuing
to decrease. Having reviewed a number of possible FID, opex and capex
scenarios (which are described further in note 2 to these interim financial
statements), the Directors' cash flow forecasts and projections indicate a
material risk that Bowleven will fully utilise its existing cash resources by
the end of 2023. The Directors are therefore of the opinion that it is highly
likely the Group will need to complete a fundraising in order to meet its
ongoing working capital and committed capital expenditure requirements as the
Etinde project progresses towards FID.
There remains a considerable number of regulatory and commercial uncertainties
regarding aspects of the Etinde development together with reaching
multi-stakeholder approval of the JV partners' preferred development option.
Whilst we currently expect FID to occur by late 2024, this is reliant on many
of the above considerations being resolved during 2023, including the
transaction between New Age and Perenco completing. Even with a successful
Bowleven fundraising taking place in 2023, there will continue to be a high
financial risk for Bowleven if FID slips to 2025 or if there is a requirement
for the Group to contribute to higher investment spending on Etinde than
currently expected.
In addition, it remains possible that Bowleven will need to seek additional
short-term financing to allow the Group's cash expenditure to bridge any gap
to attaining FID and the receipt of the $25 million FID payment (in addition
to the proposed fundraising plans discussed above). Additional funding
requirements will depend on the circumstances at the time and the time taken
to attain FID. Further details are provided in note 2 to these interim
accounts.
PRINCIPAL RISKS AND UNCERTAINTIES
The ultimate development of the Etinde wet gas and light oil discoveries is
likely to be technically and commercially dependent on the extent to which the
JV will be able to fully utilise the volume of gas potentially produced by the
onshore processing of the production of gas and liquids. This is the most
significant controlling factor, which governs the project's NPV. The
substantial associated risks include:
· Oil price volatility,
· Joint venture partner alignment,
· Governmental approval of a revised field development plan,
· The timing between SNH and the Government of Cameroon approving the
field development plan, commercial and technical discussions in relation to
the field development plan, the JV partners giving FID approval and the
exhaustion of our current working capital funds,
· Timing of the completion of the transaction between New Age and
Perenco,
· Raising finance for Bowleven to continue its operations and to
finance its share of project expenditure,
· Raising sufficient debt and equity finance by both Bowleven and our
JV partners, following FID, to finance the initial cost of the development,
· Receipt of the FID success payment from both of the JV partners,
Lukoil and New Age, when it falls due,
· Domestic market demand for natural gas and the ability to monetise
this demand,
· Access to project capital,
· Commercial terms and government permission to export gas.
RESPONSIBILITY STATEMENT
The Directors confirm that to the best of their knowledge, the interim
management report includes a fair review of the important events during the
first six months and description of principal risks and uncertainties for the
remaining six months of the year.
Eli
Chahin
Jack Arnoff
Chief Executive Officer Chairman
29 March
2023 29
March 2023
GROUP INCOME STATEMENTS
6 months ending 6 months ending
31 December 2022 31 December 2021 Year ending
(unaudited) (unaudited) 30 June
$000 $000 2022
(audited)
$000
Revenue - -
Administrative expenses (1,055) (1,278) (2,376)
Impairment - - -
Operating loss before financing (1,055) (1,278) (2,803)
Finance and other income 45 58 (108)
Loss from operations before taxation (1,010) (1,220) (2,484)
Taxation - - -
Loss for the period/year from continuing operations (1,010) (1,220) (2,484)
Basic and diluted loss per share
($/share) from continuing operations (0.00) (0.00) (0.01)
GROUP STATEMENTS OF COMPREHENSIVE INCOME
6 months ended 6 months ended Year ended
31 December 31 December 30 June
2022 2021 2022
(unaudited) (unaudited) (audited)
$000 $000 $000
Total comprehensive loss for the period/year (1,010) (1,220) (2,484)
GROUP BALANCE SHEETS
31 December 31 December 30 June
2022 2021 2022
(unaudited) (unaudited) (audited)
$000 $000 $000
Non-current assets
Intangible exploration assets 155,540 155,195 155,433
Property, plant and equipment 7 28 13
155,547 155,223 155,446
Current assets
Financial investments 2,193 2,481 2,251
Inventory 1,180 1,180 1,180
Trade and other receivables 1,665 1,789 1,858
Cash and cash equivalents 247 2,485 1,273
5,285 7,935 6,562
Total assets 160,832 163,158 162,008
Current liabilities
Trade and other payables (502) (571) (668)
Lease liabilities - (9) -
Total current liabilities (502) (580) (668)
Net assets 160,330 162,578 161,340
Equity
Called-up share capital 56,517 56,517 56,517
Share premium 1,599 1,599 1,599
Foreign exchange reserve (69,857) (69,857) (69,857)
Other reserves 2,767 2,741 2,767
Retained earnings 169,304 171,578 170,314
Total equity 160,330 162,578 161,340
GROUP CASH FLOW STATEMENT
6 months ended 6 months ended Year ended
31 December 31 December 30 June
2022 2021 2022
(unaudited) (unaudited) (audited)
$000 $000 $000
Cash Flows from Operating Activities
Loss before tax (1,010) (1,220) (2,484)
Adjustments to reconcile Company loss before tax to net cash used in operating
activities:
Depreciation of property, plant and equipment 5 12 18
Non-cash operating costs - - -
Finance costs/(income) (45) (58) 108
Equity-settled share-based payment transactions - 54 80
Adjusted loss before tax prior to changes in working capital (1,050) (1,212) (2,278)
Decrease/(increase) in trade and other receivables 307 54 (18)
Decrease/(increase) in trade and other payables (177) (242) (170)
Net (Cash used) in operating activities (920) (1,400) (2,466)
Cash flows used in investing activities
Purchase of intangible exploration assets (216) (318) (572)
Dividends received from financial investments 110 110 220
Net Cash (used in) investing activities (106) (208) (352)
Cash flows used in/from financing activities
Lease payments - (1) (3)
Net cash flows from financing activities - (1) (3)
Net decrease in cash and cash equivalents (1,026) (1,609) (2,821)
Cash and cash equivalents at the beginning of the period/year 1,273 4,094 4,094
Net decrease in cash and cash equivalents (1,026) (1,609) (2,821)
Cash and cash equivalents at the period/year end 247 2,485 1,273
GROUP STATEMENT OF CHANGES IN EQUITY
Called-up Foreign exchange reserve Other Retained earnings
share capital $000 reserves $000 Total
$000 $000 equity
Share Premium $000
$000
At 1 July 2021 56,517 1,599 (69,857) 2,687 172,798 163,744
Loss for the period - - - - (1,220) (1,220)
Other comprehensive income for the period - - - - - -
Total comprehensive income for the period - - - - (1,220) (1,220)
Share based payments - - - 54 - 54
At 31 December 2021 56,517 1,599 (69,857) 2,741 171,578 162,578
Loss for the period - - - - (1,264) (1,264)
Other comprehensive income for the period - - - - - -
Total comprehensive income for the period - - - - (1,264) (1,264)
Share based payments - - - 26 - 26
At 30 June 2022 56,517 1,599 (69,857) 2,767 170,314 161,340
Loss for the period - - - - (1,010) (1,010)
Other comprehensive income for the period - - - - - -
Total comprehensive income for the period - - - - (1,010) (1,010)
Share based payments - - - - - -
At 31 December 2022 56,517 1,599 (69,857) 2,767 169,304 160,330
NOTES TO THE INTERIM STATEMENTS
For the 6 months ended 31 December 22022
1. Accounting Policies
Basis of Preparation
This Interim Report has been prepared on a basis consistent with the
accounting policies applied to all the periods presented in these consolidated
financial statements.
The disclosed figures are not statutory accounts in terms of section 435 of
the Companies Act 2006. Statutory accounts for the year ended 30 June 2022
have been filed with the Registrar of Companies. The auditor's report on the
annual report and accounts for the year ended 30 June 2022, which was
un-modified, included a Key Audit Matter disclosure identifying events or
conditions that create a material uncertainty which may cast significant doubt
on the Group's and Company's ability to continue as a going concern, noting
that the Group and Company may require additional funding during the 12 months
after approval of the financial statements in order to continue as a going
concern, depending on the timing of the final investment decision for the
Etinde project.
2. Going Concern
The current global market conditions remain highly uncertain, with continuing
high inflation, ongoing interest rate and taxation rises to fund current and
past Government expenditure, the ongoing war in Ukraine, and increasing
geopolitical tensions. Long term demand and pricing for hydrocarbons remains
the most significant factor that will permit the monetisation of Etinde
resources, as well as governmental approval for Etinde's development.
The major sources of significant economic and financial uncertainty for
Bowleven Group, at the current time, relate to:
1) the timing of FID and the receipt of the $25 million FID payment from
LUKOIL and New Age (or Perenco in due course) and
2) the level of spending required under the 2023 Etinde work plan and
budget ('WPB'), which has been drafted but has yet to be approved.
In the absence of the completion of the transaction between New Age and
Perenco, New Age have prepared an Etinde WPB for FY 2023, which has currently
not been formally approved by either the JV partners nor SNH. This WPB was
prepared on common understanding that it would be supplemented/replaced once
Perenco became operator, reflecting the proposed change in project operator
and potential for changes to the operational plan. In the meantime, the Etinde
partners are approving Etinde expenditure on a quarter by quarter basis.
Notwithstanding the period of time it is taking for New Age's transaction with
Perenco to complete, progress towards FID has remained slower than we expected
for several years. It remains to be seen what Perenco may propose as an
alternative to the current JV partner agreed development scenario. The current
proposal continues to have considerable commercial and regulatory issues which
require resolution before FID can be attained. The timing of resolution of
these formalities cannot be accurately predicted as many of them are not
within the Etinde JV partners' direct control.
The Directors have considered a number of different operational scenarios for
2023 onwards in order for us to prepare short and medium cash flow forecasts
and projections for the Etinde development project and hence the Bowleven
Group. The Directors took the above issues into consideration when determining
the potential scenarios to use in their assessment of the going concern status
of the Group.
These scenarios ranged from no FID being achieved in 2023 through to modelling
the impact of a number of different development options on budgeted,
forecasted and projected cash flows until December 2025. As a 2023 WPB for
Etinde project spending hasn't to date been approved, with Perenco expected to
become operator in the future, we have prepared our own forecast and
projections based on various assumptions regarding the steps and actions that
Perenco may take and the speed at which they will progress the development
plan towards FID. We have assumed FID will occur in late 2024 in our base case
scenario. Our assumption is that Perenco will most probably choose to conduct
a new assessment of Etinde development options and these steps will most
likely include a new FEED process. By their nature, our expenditure
projections for 2023 and later are highly uncertain at this point in time. We
believe that we have prudently adopted a more conservative approach to costs
and potentially a more rapid implementation timetable than Perenco may adopt
in practice.
In the scenarios modelled, the Directors' cash flow forecasts and projections
indicate a material risk that Bowleven will fully utilise its existing cash
resources by the end of 2023. This gives rise to a material uncertainty
regarding the going concern status of the Group. The Directors have therefore
concluded that it is highly likely that the Group will need to raise
additional finance in 2023 in order to continue to fund the Group as the
Etinde project progresses towards FID.
The amount of additional finance required will depend on the status of the
Etinde development, the expenditure required of Bowleven to fund its share of
the Etinde development and the likely time period to FID, as well as any
anticipated risk to this being further delayed beyond our expectation. At FID,
the Bowleven Group is due to receive $25 million from our JO partners under
the terms of the 2015 farm-in agreement. The Directors do not anticipate any
timing issue relating to receipt of these funds when they fall due, but note
that any failure to receive these funds promptly may also cause further
funding issues for the Bowleven Group.
The Directors consider the risk of the Government of Cameroon removing the
Etinde PSC contract from the Etinde JO partners is low at the current time,
for the following reasons:
· The issue of the January 2021 licence expiry date has not been raised
as a formal concern by SNH, and SNH has approved all annual WPB up to and
including the year ending 31 December 2021;
• The JO will request the Government eliminate this uncertainty as
part of the FID regulatory approval process; and
• The expected addition of Perenco to the JO as operator, in place of
New Age, is likely to significantly reduce the practical risk of the
Government of Cameroon entering default proceedings.
After taking the preceding funding risks into account, the Directors believe
that the Group should be able to secure additional funding. Planning for an
injection of new finance is underway. However, it remains at an early stage
and no formal arrangements have been put in place and no agreements have been
reached at the current time. Therefore there is no certainty that additional
financing will be secured, nor as to the terms of any such financing if it is
secured.
Even with a successful Bowleven fundraising taking place in 2023, there will
continue to be a high financial risk for Bowleven if FID slips to 2025 or if
there is a requirement for the Group to contribute to higher investment
spending on Etinde than currently expected. In addition, it remains possible
that Bowleven will need to seek additional short-term financing to allow the
Group's cash expenditure to bridge any gap to attaining FID and the receipt of
the $25 million FID payment (in addition to the proposed fundraising plans
discussed above). Additional funding requirements will depend on the
circumstances at the time and the time taken to attain FID.
The Directors are conscious that the Company's financial position and the
issues discussed above create a material uncertainty that may cast significant
doubt over the Group's ability to continue as a going concern and therefore,
that the Group may be unable to realise its assets and discharge its
liabilities in the normal course of business. Whilst acknowledging this
material uncertainty, the Directors remain confident of raising finance in
2023. Accordingly, the interim financial statements have been prepared on a
going concern basis as the Directors are of the opinion that the Group has
sufficient funds to meet ongoing working capital and committed capital
expenditure requirements.
The financial statements do not include any adjustments that might result if
the Group were unable to continue as a going concern.
3. Subsequent events
There have been no significant post balance sheet events.
4. Other Notes
a) The basic earnings per ordinary share is calculated on a loss of
$1,010,000 (H1 2021: loss $1,220,000) on a weighted average of 327,465,652 (H1
2022: 327,465,652) ordinary shares.
b) In respect of the 6 months to 31 December 2022 the diluted earnings per
share is calculated on a loss of $1,010,000 on 327,465,652 ordinary shares.
The loss attributable to ordinary shareholders and the number of ordinary
shares for the purpose of calculating the diluted earnings per share are
identical to those used for the basic earnings per share.
c) No dividend has been declared.
5. Electronic Shareholder Communication
As per the prior year Interim Results, and recognising increased automation in
shareholder communications, the Group no longer produces hard copy Interim
Reports. The Annual Report is distributed electronically unless shareholders
specifically elect to receive a hard copy which can be obtained from the
Company on request.
6. Interim Report
This announcement represents the Interim Report and half yearly results of
Bowleven plc. The announcement will be available to download from the Company
website www.bowleven.com (http://www.bowleven.com) .
GLOSSARY
AGM annual general meeting
AIM the market of that name operated by the London Stock Exchange
Articles of Association the internal rules by which a company is governed
BBL or bbl barrel of oil
bcf or bscf billion standard cubic feet of gas
Board of Directors the Directors of the Company
boe barrels of oil equivalent
Bomono Permit/Licence the production sharing contract between the Republic of Cameroon and EurOil,
dated 12 December 2007, in respect of the area of approximately 2,328 km2
comprising former blocks OLHP-1 and OLHP-2 onshore Cameroon; or, as the
context may require, the contract area to which that production sharing
contract relates
Bowleven or Bowleven plc Bowleven plc (LSE: BLVN) and/or its subsidiaries as appropriate
CFA Central African Francs
Companies Act 2006 ('the Act') the United Kingdom Companies Act 2006 (as amended)
Contingent resources those quantities of hydrocarbons that are estimated to be potentially
recoverable from known accumulations, but which are not currently considered
to be commercially recoverable
EA Exploitation Authorisation
EBT employee benefit trust
EEA or EEEA Etinde Exclusive Exploitation Agreement
EG Equatorial Guinea
E & P exploration and production
Etinde Permit the Etinde Exclusive Exploitation Authorisation agreement or area. The Etinde
EA, granted on 29 July 2014, covers an area of approximately 461km2 (formerly
block MLHP-7) and is valid for an initial period of 20 years with an initial
six-year period ending January 2021, by which time development must commence.
SNH have informed the JV of their intention to exercise their right to back
into this licence, but have not signed the Participation Agreement and funded
their share of cash calls in accordance with the requirements set out in the
PSC
EurOil EurOil Limited, an indirectly wholly owned subsidiary of Bowleven plc,
incorporated in Cameroon
FEED Front End Engineering Design
FID final investment decision
G&A general and administration
GIIP gas initially in place
Host Government Government of Cameroon
Group the Company and its direct and indirect subsidiaries
HSSE health, safety, security and environment
IAS International Accounting Standards
IE, IM Specific locations or areas where Miocene aged Intra-Isongo reservoirs
horizons have been identified as actual or potential oil and gas condensate
IFRS fields
International Financial Reporting Standards
Intra Isongo nomenclature used to describe a sequence of sedimentary rocks in the Etinde
licence area
JO, JV or JV partners an unincorporated joint operation. Joint Venture partners are the financial
investors who jointly own and operate the unincorporated joint operations
km kilometres
km2 square kilometres
LNG liquefied natural gas
LPG liquefied petroleum gas
LUKOIL LUKOIL Overseas West Project Limited, a subsidiary undertaking of OAO LUKOIL
mmbbls million barrels
mmboe million barrels of oil equivalent
MMBtu Metric Million British Thermal Unit
mmscf million standard cubic feet of gas
mscf thousand standard cubic feet of gas
New Age New Age (African Global Energy) Limited, a privately held oil and gas company
New Age Group New Age and its subsidiaries
NOMAD nominated advisor
Operator New Age Group
ordinary shares ordinary shares of 10 pence each in the capital of the Company
P10 (3C) 10% probability that volumes will be equal to or greater than stated volumes
P50 (2C) 50% probability that volumes will be equal to or greater than stated volumes
P90 (1C) 90% probability that volumes will be equal to or greater than stated volumes
PSC production sharing contract
Q1, Q2 etc. first quarter, second quarter etc.
scf standard cubic feet.
shareholders means holders of ordinary shares and 'shareholder' means any one of them
SNH Société Nationale des Hydrocarbures, the national oil and gas company of
Cameroon
tcf trillion cubic feet
US United States of America
$, US Dollars, USD United States of America Dollars
£, GB Pounds, GBP Great Britain Pounds Sterling
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