REG - Bowleven plc - Full Year Results
01/11/2022 07:30
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RNS Number : 8227E Bowleven plc 01 November 2022
1 November 2022
Bowleven plc ('Bowleven' or 'the Company')
Full Year Results
Bowleven, the Africa focused oil and gas exploration group traded on AIM,
today announces its audited full year results for the year ended 30 June 2022.
Terms not otherwise defined have the meanings given to them in the Glossary at
the end of this announcement.
HIGHLIGHTS
Operational
Etinde, offshore Cameroon
§ In June 2022, New Age formally announced that it had signed a conditional
agreement to sell operatorship and their 37.5% gross stake in Etinde to
Perenco SA ('Perenco') Group for an undisclosed sum, subject to the resolution
of a number of conditions precedent, including regulatory approval from SNH.
§ The JO partners continue to await the completion of the New Age-Perenco
transaction.
§ New Age has reduced its operational footprint placing Etinde development
activities on a 'care and maintenance' basis, pending the transfer to Perenco.
§ Whilst New Age has completed several outstanding tasks from the 2021
post-FEED analysis programme during the calendar year, very little progress
has been made otherwise.
Financial
§ The loss for the financial year was $2.5 million.
§ Bowleven closed the year with $1.3 million of cash and a financial
investment of $2.2 million giving a total value of available funds of $3.5
million. Cash balance at 30 October 2022 was $0.5 million.
§ Currently, there is no draft work plan or budget for the 2023 calendar year
as New Age has left this task open for Perenco to agree with the Joint
Operation ('JO') partners and Société Nationale des Hydrocarbures ('SNH'),
most likely in Spring 2023.
§ Bowleven anticipates a higher Etinde expenditure in 2023 on the basis that
Perenco is likely to put a full Etinde development team in place in early
2023, following completion of its Etinde interest acquisition, and may seek to
take a fresh look at Etinde development options which would incur an
additional cost. When combined with our 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 material uncertainty regarding the going concern status of
the Bowleven group.
§ The Board is currently discussing and investigating various options,
including debt and equity issues, as well as hybrid debt instruments to raise
additional funding during early 2023. No such plans have been put in place at
the current time and there can be no certainty that any additional financing
will be concluded, nor as to the terms of any such additional financing.
Bowleven will make further announcements to update shareholders as soon as it
has more information.
Outlook
The Company's key objective is to continue to deliver its outlined strategy in
FY2023. The most important deliverables include:
§ Working with JO partners on commercial and financial matters in respect of
the Etinde development options with the aim of reaching an Etinde project
financial investment decision (FID) in 2023.
§ To renew the Etinde Exclusive Exploitation Agreement ('EEEA') licence as
part of the regulatory process associated with FID. Bowleven considers that
the risk of the Etinde licence (which expired in January 2021) potentially
being removed will further decline as Perenco joins the development team. The
Board understands that Perenco has an excellent relationship with SNH and the
Government of Cameroon given its position as the largest oil and gas investor
in Cameroon.
§ Maintaining disciplined management of capital and operational expenditure
to secure progress towards FID whilst maintaining financial resources and
raising additional financing.
Eli Chahin, Chief Executive Officer of Bowleven plc, said:
"It has been a year of progress and we continue to focus on maximising the
economic return to our shareholders. The most significant event to update on
is New Age's ongoing transaction to sell its operatorship and share in Etinde
development project to Perenco.
Perenco has a formidable operating history in Cameroon with oil and gas
productions of 85,000 boepd (51,000 barrels per day and 24 million m3 of gas
per day) mostly from the Rio del Rey basis (to the north of Etinde) and at the
Sanaga Sud field complex near Kribi. Here Perenco, in conjunction with SNH and
Golar operates the very successful FLNG gas export business using the Hilli
Episeyo vessel.
At the January 2022 TCM held with SNH, the JO partners formally told SNH that
the partnership had reached the decision that the Equatorial Guinea
development had been selected as the development basis for Etinde. After
extensive study, the conclusion was that this was the only economically and
commercially viable development option for that JO partnership group. With the
accession of Perenco, other additional options may now become feasible to
study.
As we move into 2023, we will work with our JO partners on both commercial and
financial matters in relation to the Etinde development options and to further
progress towards FID."
ENQUIRIES
For further information, please contact:
Bowleven plc
Eli Chahin, Chief Executive 00 44 20 3327 0150
Capital Markets Communications Ltd (Camarco)
Owen Roberts 00 44 20 3757 4980
Charlotte Hollinshead
Hugo Liddy
Shore Capital Ltd (NOMAD and Broker)
Robert Finlay 00 44 20 7601 6100
Daniel Bush
This announcement may include statements that are, or may be deemed to be
"forward-looking statements". These forward-looking statements can be
identified by the use of forward-looking terminology, including the terms
"believes", "estimates", "anticipates", "projects", "expects", "intends",
"may", "will", "seeks" or "should" or, in each case, their negative or other
variations or comparable terminology, or by discussions of strategy, plans,
objectives, goals, future events or intentions. These forward-looking
statements include all matters that are not historical facts. They include
statements regarding the Company's intentions, beliefs or current expectations
concerning, amongst other things, the results of operations, financial
conditions, liquidity, prospects, growth and strategies of the Company and its
direct and indirect subsidiaries (the "Group") and the industry in which the
Group operates. By their nature, forward-looking statements involve risks
and uncertainties because they relate to events and depend on circumstances
that may or may not occur in the future. Forward-looking statements are not
guarantees of future performance. The Group's actual results of operations,
financial conditions and liquidity, and the development of the industry in
which the Group operates, may differ materially from those suggested by the
forward-looking statements contained in the announcement. In addition, even
if the Group's results of operations, financial conditions and liquidity, and
the development of the industry in which the Group operates, are consistent
with the forward-looking statements contained in the announcement, those
results or developments may not be indicative of results or developments in
subsequent periods. In light of those risks, uncertainties and assumptions,
the events described in the forward-looking statements in the announcement may
not occur. Other than in accordance with the Company's obligations under the
AIM Rules for Companies and the Market Abuse Regulations, the Company
undertakes no obligation to update or revise publicly any forward-looking
statement, whether as a result of new information, future events or
otherwise. All written and oral forward-looking statements attributable to
the Company or to persons acting on the Company's behalf are expressly
qualified in their entirety by the cautionary statements referred to above and
contained elsewhere in the announcement.
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 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 (currently operated by New Age) in Cameroon.
CEO & CHAIRMAN STATEMENT
POSITIONED FOR VALUE CREATION
"Following a profoundly tumultuous period for the E&P sector, the Etinde
development has now to some extent been fortified with sustained high
commodity prices and an incoming joint venture partner that bodes well for its
progress through to the $25 million FID payment for Bowleven".
Dear Shareholders,
The recent geopolitical events in Ukraine have had a significant impact on the
concept of energy sovereignty for all countries. The human tragedy has been
immense, and our sympathies are with all who have been impacted by this
crisis. There is a recognition today that the world has changed, and we must
adapt to a new reality.
In the energy sector, the new paradigm that has emerged has affected the
supply and flow of molecules, most likely for the considerable future. The
burden on domestic consumers arising from recent historic highs in energy
prices are currently being partly offset by some western governments to help
deal with the cost of living crisis we are currently experiencing. This
macroeconomic backdrop is also challenging central banks as interest rates are
rising to help curtail the inflationary environment. The price of energy has
become a much more visible component in the cost of living and the continued
volatility in the short to medium term has changed the calculus for all
decision makers who must grapple with the uncertainty.
It is the view of the Board that this uncertainty will continue in the short
term on a number of levels.
As capital providers and other stakeholders make sense of the situation that
surrounds us, it is clear that the path to continued economic growth will only
return by solving the energy conundrum. This holds true for both developed and
developing economies as they cope with the fiscal environment that challenges
all governments as they balance the need for energy investments and the
decarbonisation agenda.
Emission targets and energy transition strategies are currently being
deliberated in light of the evolving situation in Europe, which is feeling the
immediate impact of restricted access to hydrocarbon flows brought on by the
Ukrainian crisis. Access to additional supply by way of alternative sources,
increased liquefication and storage infrastructure, and new alliances have now
become part of the narrative for all government agencies.
Our investment in Etinde has not been spared the challenge of deciding how we
navigate our business such that our shareholders reap the benefits of the
asset entrusted under our stewardship. The anticipated changes in the joint
venture have been a catalyst for positive momentum. The announced conditional
acquisition by French-based Perenco of the New Age stake in the licence and
the operatorship of Etinde is an important and positive milestone. Etinde's
resource and volume estimates are of vital importance to the domestic economy
in Cameroon and the surplus requirements are potentially of strategic
significance to prospective buyers internationally. Our location offshore in
West Africa leaves us well placed to deliver to European and other markets for
years to come.
The most significant development during the year has undoubtedly been New Age
signing a definitive conditional agreement with a subsidiary of Perenco to
transfer all New Age's participating interests in the Etinde permit, and
operatorship of the Etinde JO, to Perenco. Whilst the transaction remains
subject to a number of approvals, Bowleven and Lukoil as parties to the JO
decided not to exercise our pre-emption rights over New Age's interest. At the
time of writing, the customary regulatory approvals by the Cameroon government
are yet to be completed.
Perenco is a seasoned E&P company with a formidable operating history in
Cameroon and across West Africa. It has the requisite balance sheet and human
capital to support the JO partners in ensuring the best development plan is
tabled to the host government. Perenco has earned the respect of the
Government of Cameroon as one of the leading independent oil and gas companies
in Europe today. In the Board's view, the transaction will move us closer to
the final investment decision (FID) payment of USD25m from its Etinde JO
partners which, following completion of the transaction, would include Perenco
as a counterparty to this payment. The process of the New Age divestment is
progressing smoothly, and we continue to anticipate a closing of the
transaction in the fourth quarter of 2022.
Perenco is currently the largest operator in Cameroon in terms of production,
with an operating area in the Rio del Rey and Douala basins, and with oil and
gas productions of 85,000 boepd (51,000 barrels per day and 24 million m3 of
gas per day). The enhanced optionality this affords the Etinde development is
deemed considerable. We refrain from holding any strong views on the likely
development options without first gaining a better understanding of the
evolving circumstances we will find ourselves in once the execution phases of
the Perenco transaction have been completed, and when we are privy to further
analysis of the options that we need to consider.
In our analysis during 2021, we expressed the view that we would continue to
work towards securing a consensual development plan that met with the
objectives of all strategic stakeholders. This process has not yet been fully
realised on the back of the Perenco acquisition of the Etinde interest.
The Board believes, in light of Perenco's Cameroonian history and operatorship
credentials, that our continued patience is a sensible proposition and indeed
an inevitable consequence. We have yet to engage formally with the incoming
Operator on what we believe is the most strategic commercial proposition for
extracting the hydrocarbons within Etinde but draw comfort in the change in
ownership and operatorship which is a testament to the Etinde investment
hypothesis.
OPERATIONS
The Board's view was that the JO partners needed to maximise hydrocarbon
production rates to extract the full economics of the licence which invariably
entailed a combined IM and IE development basis. This approach was also
consistent with the generation of higher tax revenue for the Government of
Cameroon. Having regard to the best risk-return proposition for Etinde, it was
our belief that processing Etinde wet gas directly at the existing
Marathon-operated facility on Bioko Island, Equatorial Guinea is the best
development option. This remains our position currently.
Given that the incoming Operator is likely to reassess the various development
options considering today's economic environment, it is worth reserving
further judgement on what could now be the most optimum development
scenario. The incoming Operator has neighbouring licences which in and of
itself may broaden the optionality for the Etinde development.
We have an obligation to our stakeholders to ensure both conceptually and
economically that we are securing the best development option for what is
regarded an important asset for future generations. Earlier in the year we
stated that it was incumbent on the JO partners to present to the Government
of Cameroon and Société Nationale des Hydrocarbures a work plan and budget
to discuss this proposal with Marathon Oil in the 4(th) quarter of 2022.
As we go into Q4 2022, and subject to the views of an incoming new licence
partner and Operator, we are currently in a holding pattern on a preferred
development plan which needs to be formally agreed and then presented to SNH.
The Board is of the view, having regard to this development and the broader
economic backdrop for the energy complex, that we are keen to build an
alignment with all stakeholders to ensure we have a framework and commitment
to bringing Etinde into production. Whilst we have failed to anticipate the
timing historically, we think that securing a mutually acceptable development
solution is now an increasingly likely scenario.
Cost reduction without compromising our obligations to shareholders is one of
the key objectives for the Board. We remain conscious of the need to preserve
liquidity and any scope for G&A reduction is being considered having
regard to this responsibility. We continue to operate with low overheads and
retain basic staffing requirements in our London and Cameroon offices.
FINANCIAL AND OTHER MATTERS
At 30 June, 2022, the Company's balance sheet had cash of $1.3 million and
liquid financial investments of $2.2 million, giving available funds of $3.5
million.
At the time of writing, we have approved a budget to the end of 2022 with the
outgoing Operator. No work plan or budget has been set for 2023, but it is
probable that actual expenditure in 2023 will exceed our current liquid funds
towards the end of the year. This will of course be determined by the actual
work plan that will be proposed by the incoming Operator, Perenco SA.
In our view, there is a significant risk that our current cash and liquid
financial resources may be fully utilised during 2023, as shown by various
cash flow models produced by the executive team for the Board. How quickly
this risk crystallises will depend on the actual date Perenco becomes the
Etinde Operator, the speed at which they put their Etinde Operator management
team in place, and the 2023 work plan and budget they propose. We consider
that as a 'new broom' Perenco may wish to review the previously agreed
Equatorial Development scheme, propose alternative(s), and probably update the
front end engineering design ('FEED') to reflect any change in the approved
development scheme and to reflect current cost inflation for FID purposes.
These actions will all need to be approved by the JO partners as a group as
well as SNH, as regulator, before implementation. Our current cash flow
projections suggest that this risk will probably crystallise during the latter
half of 2023.
As was alluded to during our 2021 review, the Board will continue to consider
its options and engage with various prospective providers of capital, on terms
that it deems to be beneficial for existing shareholders, to ensure our
continued ability to finance the Company until receipt of the FID payment of
$25 million. Whilst there are scenarios done on the basis that the JO works
seamlessly towards early FID during 2023, showing that we hold sufficient
funding at that time, it is most likely that additional equity or debt
financing will need to be raised in 2023. This will especially be the case if
a new material investment (eg. FEED) is required to bolster the extensive
works that have been underwritten to date by the JO partners. That may of
course change but we are not at this stage privy to any details to this
effect. The leverage afforded to the company on the payment of the $25 million
FID payment is recognized, but it would be imprudent not to highlight the
continued uncertainty regarding any additional FEED works to support what will
ultimately be the optimum development concept. This represents a material
uncertainty regarding the going concern status of the group as a whole, which
is reflected in detail in this year's financial statements and the auditor's
report thereon.
ESG FOCUS
Environmental, Social and Governance ('ESG') factors and Corporate
Responsibility remain important factors for our Etinde development. The
production of hydrocarbons within Cameroon in a responsible manner is
something that we believe all stakeholders will take pride in as and when it
materialises. We are determined to spearhead a positive legacy for Cameroon
that has the impact to change lives and set precedents for other developers to
follow. On securing Etinde FID, Bowleven will commit to a set of practices and
protocols that are consistent with international best practices, responsibly
having regard to our own emissions footprint.
It remains the Board's view that the Company's constitution and size continue
to serve the best interests of shareholders from a cost and corporate
governance perspective up until the time we secure FID.
OUTLOOK
Whilst we cautioned shareholders last year on the continued uncertainty that
surrounds the hydrocarbons market, we certainly did not anticipate the
geopolitical events that will likely shift the structural basis of energy
markets for a considerable time. Current spot prices and physical availability
have forced Europe to reconsider its dependency on the Russian flow of
hydrocarbons.
The increase in hydrocarbon prices has refocused our attention on the
development options for Etinde and the viability of development options
previously thought to be marginal. Historically, we have deemed some of these
options to be less resilient and high-cost relative to their breakeven
economics. At the current high prices and with potentially further hydrocarbon
acreage there may be greater optionality and flexibility for a floating
liquefied natural gas (FLNG) export solution that was not available
previously.
The value assigned to the proposed sale of operatorship and New Age's 37.5%
(gross) stake in the Etinde development project to Perenco acts as a
'triggering event' under international financial reporting standards and has
required the Board to undertake a new valuation of our share in the Etinde
licence. We have calculated the net present value of Etinde based on projected
cash flows using a risk weighted discount rate of 15% and oil and gas export
prices of (Brent) $65 per bbl and $6 per mmscf respectively, using capital and
operating cost estimates based on FEED and other pre-FEED studies undertaken
by the JO partners between 2018 and 2021. We have also considered the
potential value of alternate development scenarios that Perenco may present to
the JO partners during 2023, after their transaction with New Age completes.
These options tend to have higher initial capital investment and higher
operating cost than the existing JO partner approved EG scenario.
On the basis of the detailed examination undertaken, the Board felt justified
in maintaining the investment case for the Etinde valuation in excess of $150
million and hence concluded that no impairment was deemed necessary at the
current time. The Board feels that with the evolving macro and geopolitical
environment, the revenue and cost assumptions of our recent financial
modelling, and the high calibre JO partner, the Etinde valuation now has a
stronger underlying hypothesis. We acknowledge that the current capitalisation
falls well short of these levels and that the Board's challenge into 2023 is
to close this gap.
The Board believes that the acquisition of the New Age stake by Perenco bodes
well vis-a-vis operational credibility and project backing to assist with our
own capital raising efforts. Provided we can financially support our
operational overheads into 2023 and beyond, we feel Bowleven is exceptionally
well placed to build a business that exposes our stakeholders to material
value creation in the short to medium term.
Eli Chahin Jack
Arnoff
Chief Executive Officer Chairman
31 October
2022 31
October 2022
GROUP INCOME STATEMENT
FOR THE YEAR ENDED 30 JUNE 2022
Audited Audited
2022 2021
$000 $000
Revenue - -
Administrative expenses (2,376) (2,803)
Impairment charges - -
Operating loss (2,376) (2,803)
Finance and other income (108) 820
Loss before taxation (2,484) (1,983)
Taxation - -
Loss for the year (2,484) (1,983)
Basic and diluted loss per share
($/share) from continuing operations (0.01) (0.01)
GROUP STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 JUNE 2022
Audited Audited
2022 2021
$000 $000
Comprehensive Loss for the year (2,484) (1,983)
GROUP BALANCE SHEET
30 JUNE 2022
Audited Audited
2022 2021
$000 $000
Non-current assets
Intangible exploration assets 155,433 154,885
Property, plant and equipment 13 31
155,446 154,916
Current assets
Financial investments 2,251 2,499
Inventory 1,180 1,180
Trade and other receivables 1,858 1,838
Cash and cash equivalents 1,273 4,094
6,562 9,611
Total assets 162,008 164,527
Current liabilities
Trade and other payables (668) (781)
Lease liability - (2)
Total liabilities (668) (783)
Net assets 161,340 163,744
Equity
Share capital 56,517 56,517
Share premium 1,599 1,599
Foreign exchange reserve (69,857) (69,857)
Other reserves 2,767 2,687
Retained earnings 170,314 172,798
Total equity 161,340 163,744
COMPANY BALANCE SHEET
30 JUNE 2022
Audited Audited
2022 2021
$000 $000
Non-current assets
Property, plant and equipment 12 30
Investments in Group undertakings 145,099 145,099
145,111 145,129
Current assets
Financial investments 2,251 2,499
Trade and other receivables 13,142 11,730
Cash and cash equivalents 1,264 4,086
16,657 18,315
Total assets 161,768 163,444
Current liabilities
Trade and other payables (311) (244)
Lease liability - (2)
Total liabilities (311) (246)
Net assets 161,457 163,198
Equity
Share capital 56,517 56,517
Share premium 1,599 1,599
Foreign exchange reserve (147,715) (147,715)
Other reserves (2,470) (2,550)
Retained earnings 253,526 255,347
Total equity 161,457 163,198
The Company has elected to take the exemption under section 408 of the
Companies Act 2006 to not present the individual parent undertaking income
statement. The result for the Company for the year was a loss of $1,821,000
(2021: loss of $999,000).
GROUP CASH FLOW STATEMENT FOR THE YEAR ENDED 30 JUNE 2022
Audited Audited
2022 2021
$000 $000
Cash flows from operating activities
Loss before tax (2,484) (1,983)
Adjustments to reconcile Group loss before tax to net cash used in operating
activities:
Depreciation of property, plant and equipment 18 57
Finance costs/(income) 108 (820)
Equity-settled share based payment transactions 80 109
Loss on sale of property, plant and equipment - 31
Adjusted loss before tax prior to changes in working capital (2,278) (2,606)
(Increase) in trade and other receivables (18) (491)
Decrease in trade and other payables (170) (624)
Net cash (used in) operating activities (2,466) (3,721)
Cash flows used in investing activities
Purchase of property, plant and equipment - (21)
Purchase of intangible exploration assets (572) (1,446)
Dividends received 220 220
Net cash used in investing activities (352) (1,247)
Cash flows used in financing activities
Lease repayments (3) (40)
Net cash flows used in financing activities (3) (40)
Net decrease in cash and cash equivalents (2,821) (5,008)
4,094 9,102
Cash and cash equivalents at the beginning of the year
Net decrease in cash and cash equivalents (2,821) (5,008)
Cash and cash equivalents at the year end 1,273 4,094
COMPANY CASH FLOW STATEMENT FOR THE YEAR ENDED 30 JUNE 2022
Audited Audited
2022 2021
$000 $000
Cash flows from operating activities
Loss before tax (1,821) (999)
Adjustments to reconcile Company loss before tax to net cash used in operating
activities:
Depreciation of property, plant and equipment 18 57
Finance costs/(income) 87 (813)
Equity-settled share based payment transactions 80 109
Loss on disposal of fixed assets - 31
Adjusted loss before tax prior to changes in working capital (1,636) (1,615)
(Increase) in trade and other receivables (14) (25)
Increase in trade and other payables 9 15
Net cash (used in) operating activities (1,641) (1,625)
Cash flows used in investing activities
Purchase of property, plant and equipment - (20)
Increase in inter-company funding (1,398) (3,537)
Dividends received from financial investments 220 220
Net cash (used in) investing activities (2,819) (3,337)
Cash flows used in financing activities
Lease payments (3) (40)
Net cash flows used in financing activities (3) (40)
Net decrease in cash and cash equivalents (2,822) (5,002)
4,086 9,088
Cash and cash equivalents at the beginning of the year
Net decrease in cash and cash equivalents (2,822) (5,002)
Cash and cash equivalents at the year end 1,264 4,086
GROUP STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2022
Share Share Foreign exchange reserve Other Retained earnings Total equity
capital
premium
reserves
$000
$000 $000
$000 $000 $000
At 1 July 2020 (audited) 56,517 1,599 (69,857) 2,927 174,432 165,618
- - - - (1,983) (1,983)
Loss for the year
Total comprehensive loss for the year - - - - (1,983) (1,983)
Share based payments - - - 109 - 109
Revaluation of EBT shares - - - (315) 315 -
Transfer between reserves - - - (34) 34 -
At 30 June 2021 (audited) 56,517 1,599 (69,857) 2,687 172,798 163,744
- - - - (2,484) (2,484)
Loss for the year
Other comprehensive income for the year - - - - - -
Total comprehensive loss for the year - - - - (2,484) (2,484)
Share based payments - - - 80 - 80
At 30 June 2022 (audited) 56,517 1,599 (69,857) 2,767 170,314 161,340
COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2022
Attributable to owners of Parent Company Share Share Foreign exchange reserve Other reserves Retained earnings Total
capital
premium
$000 $000 $000 equity
$000 $000
$000
At 30 June 2020 (audited) 56,517 1,599 (147,715) (2,310) 255,997 164,088
- - - - (999) (999)
Loss for the year
Total comprehensive loss for the year - - - - (999) (999)
Share based payments - - - 109 - 109
Revaluation of EBT shares - - - (315) 315 -
Transfer between reserves - - - (34) 34 -
At 30 June 2021 (audited) 56,517 1,599 (147,715) (2,550) 255,347 163,198
- - - - (1,821) (1,821)
Loss for the year
Total comprehensive loss for the year - - - - (1,821) (1,821)
Share based payments - - - 80 - 80
At 30 June 2022 (audited) 56,517 1,599 (147,715) (2,470) 253,526 161,457
NOTES TO THE FULL YEAR FINANCIAL STATEMENTS
For the year ended 30 June 2022
(1) Accounting Policies
Basis of preparation
The financial information in the financial statements has been extracted from
the statutory accounts which have been prepared in accordance with UK Adopted
International Accounting Standard (UK IAS) and in conformity with the
requirements of the Companies Act 2006. The Company financial statements have
been prepared in accordance with UK Adopted International Accounting Standard
(UK IAS) as applied in accordance with the provisions of the Companies Act
2006. The financial statements have been prepared under the historical cost
convention. The financial statements comply with those parts of the Companies
Act 2006 applicable to companies reporting under UK Adopted International
Accounting Standard (UK IAS).
The announcement has been prepared on a basis consistent with the accounting
policies applied to the statutory accounts for the year ended 30 June 2022.
The disclosed figures are not statutory accounts in terms of section 434 of
the Companies Act 2006. The statutory accounts give full disclosure of the
Group accounting policies and will be published as soon as they are available.
On the statutory accounts for the year ended 30 June 2022, the auditor gave an
unqualified opinion and did not contain a statement under section 498 (2) or
(3) of the Companies Act 2006. The statutory accounts for the year ended 30
June 2021 have been filed with the Registrar of Companies.
Going concern
Global market conditions have recovered or are recovering from the economic
slowdown caused by the COVID-19 (coronavirus) pandemic. However, the
aftereffects of the Covid pandemic and the ongoing uncertainty related to the
Russian invasion of Ukraine are creating significant economic and financial
uncertainty at the current time.
The two most significant sources of material uncertainty facing the Bowleven
Group today relate to:
(i) the timing of FID and the receipt of the $25 million FID payment from
Lukoil and New Age (Perenco in due course) and
(ii) the level of spending required under the 2023 Etinde WPB, which has yet
to be prepared and submitted to SNH for approval.
Preparing the 2023 WPB and agreeing that plan with ourselves, LUKOIL and SNH,
will be the first significant task facing Perenco when they become operator at
completion of their transaction with New Age.
Progress towards FID has remained slower than we expected. There are
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 JO partners'
direct control.
The Directors have considered a number of different operational scenarios for
2023 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 2024.
As New Age has not prepared a 2023 work plan and budget for the Etinde project
pending Perenco becoming Operator, we have made our own assessment based on
various assumptions regarding the steps and actions that Perenco will take and
the speed at which they will progress the development plan towards FID. We
have assumed FID will occur in late 2023 or later for cash flow modelling
purposes in our base 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 adopted a more conservative approach to costs and potentially a more
rapid implementation timetable than Perenco may adopt in practice.
In each scenario modelled for the period July 2022 to December 2023, the Group
continues to retain positive cash balances until at least June 2023.
Thereafter, current liquid resources are forecasted to be fully depleted by
the end of 2023 under all of the scenarios modelled. However, we note that it
remains plausible that the rate of progress towards FID will remain slow in
2023 while the JO partners and SNH seek to agree any new Etinde development
scenario.
As the timing of progress towards FID is not within the control of the Group,
we have concluded that it is highly likely that Bowleven will need to raise
additional short term funding to bridge expenditure to FID. The amount of
additional finance that will be required will depend on the status 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, Bowleven 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 date has not been raised as a formal
concern by SNH and SNH has approved all annual work programmes and budgets up
to and including the year ending 31 December 2021;
· we 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 reduce practical risk of the Government of Cameroon
entering default proceedings.
After taking the preceding funding risks into account, the Directors are
satisfied that the Group would be able to secure additional debt and equity
funding in order to finance its share of the Etinde development. Whilst
discussions with certain parties are ongoing about an injection of new debt
financing, and we have also undertaken preliminary discussions with regard to
raising new equity funding. However, no formal binding financing arrangements
have been put in place at the current time.
The Directors are nevertheless conscious that 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 including making further
cost savings to reduce the level of cash expenditure. Accordingly, the
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.
The auditor's report on the 2022 Annual Report and Accounts, which is
un-modified, includes a Key Audit Matter disclosure identifying events or
conditions that create a material uncertainty which may cast significant doubt
on the Group's and Parent Company's ability to continue as a going concern,
noting that the Group and Parent 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) Etinde Valuation
The proposed acquisition of New Age's 37.5% gross share of the Etinde Joint
Operations, by Perenco by setting a potential external valuation of the Etinde
asset as a whole, represents a triggering event as defined under IFRS
accounting standards, requiring the Directors to formally value Bowleven
Group's share of the Etinde project.
Global events in 2021/22 have had a significant impact on global supply and
demand for both oil and gas, causing material increases in the expected price
of hydrocarbons in the short term as well as creating significant market
uncertainty.
Three major uncertainties related to:
· global hydrocarbon prices which are currently at or higher than 2021
price levels. However, the Directors consider that at the current time, there
is no definitive evidence that prices will remain at current levels in 2026
when first production is expected;
· timing of FID; and
· regulatory uncertainty. In our assessment, management remain
confident that the JO partners have undertaken all reasonable steps possible
to ensure that the JO is meeting all its obligations to ensure that FID is
given as soon as possible. Accordingly, although the possibility of a licence
revocation exists, management considers that the risk of this occurring is low
in the short term.
Etinde Impairment Review in 2022
The discounted cash flow model was used in 2022 to determine our best estimate
of the expected value of the development of the Etinde asset taking into
consideration the following factors and assumptions:
· the macroeconomic environment globally and in Cameroon;
· prevailing market conditions in the oil and gas industry;
· a conservative and phased inclusion of the hydrocarbon resource
available for development;
· the commercial and governmental situation in Cameroon;
· The JO partner approved Equatorial Guinea development scenario, plus
additional consideration of potential alternate approaches that Perenco, as
incoming Operator, might propose at a future date; that the development will
seek to maximise production from the outset giving due consideration to the
potential for supplying gas to both Cameroon domestic and export supply;
· that condensate can be supplied to either the global or domestic
markets for the same value;
· Differential gas and LNG process for the Cameroon domestic and LNG
based European gas export market;
· infrastructure capital and operating costs estimated are based on
FEED and pre-FEED engineering studies undertaken or assessed between 2019 and
2021, except where pricing data was not available; and
· the Etinde asset is considered to be a single cash-generating unit
and includes historic exploration costs incurred on the Etinde Permit in line
with the treatment of those costs for cost recovery purposes.
Until the JO partners and the Government of Cameroon issue FID and gain the
necessary approvals, any valuation of Etinde will include many uncertainties
and risks. Any financial model that is prepared at this stage of the process,
in the period immediately prior to the point in time that development consent
is given and approvals issued, is inherently uncertain. The most significant
uncertainties impacting the valuation model include:
· reaching commercial agreement with potential off-takers and receiving
governmental approval to export gas;
· agreeing the development solution with joint venture partners and
other stakeholders;
· raising finance to fund development post-FID; and
· any impact arising from FID date and the subsequent governmental
approval of the revised field development plan. The current PSC terminates
2045. However, failure to complete the initial work programme set out in the
Presidential decree and EEA documentation within the first six years after
approval in January 2015, may be used to provide grounds under which the
Government of Cameroon can proceed to terminate the Etinde development licence
early at their option, following the process set out in the Cameroon Petroleum
Code.
We have applied a risk weighted discount rate of 15% to the projected Etinde
cash flows, based on FID in late 2023, with first revenue projected to occur
after 2026, with the date depending on the development scenario considered.
All capex costs include a project contingency of 20% and allow for EPIC
contract costs of 15% and 5% withholding tax applied on imports under Cameroon
fiscal code. The largest single risk factor included in the discount rate
reflects the risk relating to Government approval of the EG development option
and a likely longer period to reach the approval.
We have used a reasonable range of condensate, Cameroon domestic and European
export gas (LNG) pricing taking due account of currently available long term
oil and gas price forecasts prepared by internationally reputable bodies such
as the IMF, World Bank and US EIA, as well as other oil and gas businesses and
market commentors. We have used a range of recovered oil and gas reserves from
various discovered oil and gas condensate fields based on the latest reservoir
modelling information prepared by New Age on a C2 (P50) resource basis. Our
base line financial modelling demonstrates that the 1 January 2023 value of
Bowleven group's 20% share of the Etinde development project ranges from $158
million to over $200 million at $65 Brent, $6 LNG export price and $3 domestic
gas price points.
Whilst we have prepared financial forecasts for alternate development
scenarios that Perenco may propose to the JO partners, we note that any such
alternative will require the formal approval of at least LUKOIL as well as SNH
and the Government of Cameroon to become official JO policy. Due to the nature
of these alternate potential developments, our forecasts have a higher degree
of uncertainty as they have not been studied in detail as part of FEED or
pre-FEED activities. In general terms, these scenarios tend to have higher
initial capital development costs (which may be reduced by sale and lease back
arrangements) and higher operating costs, giving rise to a lower calculated
NPV range. Offsetting this, the risk weighting attached to the time/approval
of any Cameroon focused development is materially lower than for the EG
option. Using lower discount rates partially offsets the impact of higher
costs. In any case, the Board of Bowleven remain adamant that we will not
approve any alternate development scenario that provides a significantly lower
economic return to Bowleven's shareholders.
The key sensitivities in our valuation models include:
· Export price. Increasing Oil and gas export prices to $75 per bbl
and $8 per mmscf, has a positive impact of around $50 to $60 million increase
in NPV, depending on the development scenario;
· Discount rates. Increasing risk weighted discount rates from 15 to
17%, reduces NPV by around $20 million, depending on the development scenario;
The impact of FID and development commencement alongside first revenue have
allowed for using the different assumptions under the EG and alternate
development options. This is also the major risk weighting factor in arriving
at the 15% risk weighted discount rate. As such making a further sensitivity
adjustment would be double counting the risk weighting.
On this basis, the Board has concluded that the current net book value of the
Etinde intangible asset (at $156 million) is not impaired at the current date.
However, in reaching this conclusion we do note that there are potential
material uncertainties and that we cannot rule out further valuation
impairment triggering events arising in future periods and that a lower
valuation may be estimated at that point.
(3) Other Notes
a) The loss attributable to ordinary shares and the number of ordinary
shares for the purpose of calculating the diluted earnings per share are
identical to those used in the basic earnings per share. The exercise of share
options or warrants would have the effect of reducing the loss per share and
consequently are not taken into account. In the prior year, the loss
attributable to ordinary shares and the number of ordinary shares for the
purpose of calculating the diluted earnings per share were identical to those
used in the basic earnings per share.
b) Directors have not recommended a dividend (2021: nil).
c) As at 30 June 2022, a contingent asset of $25 million is disclosed for
the FID consideration relating to the Etinde farm-out and will be credited to
intangible exploration assets once further clarity around Etinde project
sanction/FID is obtained.
(4) 2022 Annual Report and Accounts
Full accounts together with a notice of AGM are scheduled to be posted on 4
November 2022 to shareholders who elected to continue to receive a hard copy
report and can be obtained free of charge, at the Company's registered office,
50 Lothian Street, Edinburgh, EH3 9WJ for a period of one month after
publication. For shareholders who opted to receive the annual report
electronically, notification will be provided when the annual report is
available to access 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
CAMOP New Age Cameroon Operating Company
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
EEEA Etinde Exclusive Exploitation Agreement
EG Equatorial Guinea
E& P exploration and production
Etinde Permit the Etinde Exploitation Authorisation (EA) 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 JO 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
FLNG Floating liquefied natural gas
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
IFRS 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
LTIP long-term incentive plan
LUKOIL LUKOIL Overseas West Project Limited, a subsidiary undertaking of OAO LUKOIL
Macquarie Macquarie Capital (Europe) Limited
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
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
TCM Technical Committee Meeting
US United States of America
$, US Dollars, USD United States of America Dollars
£, GB Pounds, GBP Great Britain Pounds Sterling
WPB Work plan and budget
Notes:
Prospective resources, contingent resources and reserves shall have the
meanings given to them by the guidance on petroleum resources classification
contained in the 2007.
SPE Petroleum Management System published jointly by the Society of Petroleum
Engineers, The American Association of Petroleum Geologists, the World
Petroleum Council and the Society of Petroleum Evaluation Engineers.
For the purposes of this announcement, 6mscf of gas has been converted to
1boe.
Notes:
Prospective resources, contingent resources and reserves shall have the
meanings given to them by the guidance on petroleum resources classification
contained in the 2007.
SPE Petroleum Management System published jointly by the Society of Petroleum
Engineers, The American Association of Petroleum Geologists, the World
Petroleum Council and the Society of Petroleum Evaluation Engineers.
For the purposes of this announcement, 6mscf of gas has been converted to
1boe.
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