Oil & Gas Corporate News
Bowleven (LON:BLVN) (BUY, £3.00) (BLVN, 179.5p, ? (0.84%)) has entered into a revised option agreement with Vitol E&P Limited in respect of the Etinde Permit, offshore Cameroon. Under the agreement, which replaces the previous option arrangement, Vitol have an option to acquire a 10% participating interest in block MLHP-7, Etinde, in return for funding an agreed $50m gross appraisal work programme. The option expires on the earlier of (i) the spud date of the next appraisal well on block MLHP-7 or (ii) 31 March 2011. The option arrangement excludes blocks MLHP-5 and MLHP-6, Etinde, where the Sapele-1 exploration well is currently being drilled. Bowleven will retain operatorship of all three blocks. The nature of the option and its applicability to only block MLHP-7 reflects Vitol's primary focus on appraisal and development activities and the understandable requirement for further technical work to be completed prior to a firm future development and appraisal plan being agreed on the IE and IF field areas. In this regard, work is ongoing integrating the results of the recent IE-3 appraisal well and on the processing and interpretation of the newly acquired 3D seismic over the IF field area. Bowleven and Vitol currently have participating interests of 75% and 25% respectively in the Etinde Permit. In the event of option exercise, Bowleven's participating interest in block MLHP-7 would be 65 percent with effect from the date of exercise, with its participating interest in blocks MLHP-5 and MLHP-6 remaining at 75%. All participating interests are expressed prior to the exercise of any state back-in rights. The Etinde PSC effectively restricts the equity that can be transferred to a new participant to a minimum of 25% (pre state back-in). Consequently by retaining a greater equity position Bowleven retains the flexibility to bring in a further partner, if deemed appropriate, whilst still retaining a material ongoing position. Bowleven estimates that it will have approximately $80m of cash and no debt on completing the Sapele-1 exploration well (excluding testing). This excludes approximately $35m proceeds anticipated from the disposal of EOV, offshore Gabon. Once the remainder of the existing Vitol $100m carry is exhausted, Vitol will continue to fund activities across the Etinde Permit in accordance with their existing 25% equity interest. Comment: We believe the new agreement highlights Vitol?s focus on appraisal and development rather than…
