SHARES in Bowleven surged 8% after the oil and gas firm unveiled a potential $500 million (£312m) funding deal with a global giant that directors said could help it become a major producer off West Africa.

Edinburgh-based Bowleven has signed a strategic alliance with Petrofac under which the services giant will provide funding to help bring its discoveries off Cameroon onstream. This appears to provide a significant vote of confidence in Bowleven's acreage.

The AIM-listed company will also tap into expertise offered by Petrofac, in the hope of starting production from the Etinde permit in 2016.

Bowleven chief executive Kevin Hart said: "The proposed strategic alliance with Petrofac, which can provide extensive development experience along with access to significant investment capital, should ensure we have the best chance of success in our quest towards becoming a major producer in Cameroon."

Subject to shareholder agreement, the alliance will put Petrofac in line for a return of 20% on its investment, payable from the cashflows from the development. Petrofac, which has developed fields in the North Sea, will also get paid for providing engineering services.

By providing Bowleven with access to significant development funding which it might have struggled to raise from banks, the agreement may help cement a remarkable recovery in its fortunes.

In December 2008, an analyst said he suspected the potential difficulties Bowleven faced raising funding to develop its Cameroon finds meant it was dead in the water.

Yesterday, analysts at joint house broker Barclays Capital said: "In our view, today's alliance is a clear positive for Bowleven, as it removes the funding risk. We also believe Petrofac brings a much needed external validation."

Analysts at Deutsche Bank said the alliance looks positive for Bowleven at first glance.

However, they cautioned: "In our view, this represents a fairly onerous funding structure. It will be difficult for the market to come to a firm view on the value implications of the proposed alliance."

Investors appeared to like the look of the deal. Shares in the company surged 20% in early trading but lost ground later. They closed up 5.75p at 80.5p.

The value of Mr Hart's 2,562,364 shares increased by around £150,000 to £2m, although some shareholders may be sitting on hefty losses.

In November 2010, Bowleven raised £72m from investors in a placing completed at 327p per share. In October 2005 it raised £55m at 650p per share before suffering costly drilling setbacks under previous management.

In its annual results announcement, also published yesterday, Bowleven said it made good progress in the year to June.

The company signed a memorandum of understanding with prospective buyers of gas from Etinde, which could help underpin the commerciality of discoveries.

Bowleven made further discoveries on the permit, which need appraisal, and directors believe there is the potential to make more finds on its acreage in Cameroon.

Bowleven is preparing to apply to the Cameroon authorities for clearance to develop the area, or blocks, covered by the agreement.

The alliance partners expect Bowleven will decide whether to proceed with the development of the relevant fields next year.

Bowleven made a pre-tax loss of $13m in the year to June, compared with a $76.8m loss a year earlier.