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Bowleven clears hurdle in its quest for Etinde production

OIL and gas firm Bowleven has cleared a major hurdle in its quest to bring the Etinde permit off Cameroon into production.

The Edinburgh-based company said the president of Cameroon has signed a formal decree allowing it to bring resources in block MLHP-7 into production.

It brings to a close an Exploitation Authorisation (EA) process, which formally began when Bowleven lodged its application for exploitation rights to the offshore permit in January.

Kerry Crawford, finance director at Africa-focused Bowleven, said: "This is one of the key steps on our path to development in Cameroon, so it is significant milestone for us.

"In essence, it gives us the title to the asset to progress our development plans on block seven.

"The title is for an initial 20-year period with a further option for 10 years, so it's a big event for us."

The award of the EA sees Bowleven satisfy a major condition of its $250 million (£150 million) deal to farm-out a 50 per cent stake in the Etinde permit.

That deal, which will see Russian oil giant LUKOIL acquire a 37.5 per cent interest in the licence, and African firm NewAge up its stake from 25 per cent to 37.5 per cent, was formally approved by Bowleven shareholders on July 21.

It would leave Bowleven with a 25 per cent stake in the licence.

The Cameroon government has still to approve the transfer of equity interest and operatorship - the final condition attached to the farm-out.

Ms Crawford said the deal "brings a large amount of cash to Bowleven", supporting its appraisal drilling plan and shared development costs for Etinde, and boosting its exploration activity elsewhere in its portfolio.

This includes acreage onshore in Cameroon, where exploration drilling is planned for later this year, Kenya, and Zambia.

Ms Crawford said: "It puts our balance sheet in a stronger position."

Asked when Bowleven expects the Cameron government will reach a decision on the farm-out, Ms Crawford said: "We would hope the government would be as supportive as they have demonstrated here with the EA.

"With the president now signing off on that, this is clearly something the government will be keen to be getting after.

"We are hopeful of their support and it will happen speedily."

Should the deal be approved the operatorship of the Etinde permit will transfer to Cameroon Offshore Petroleum (CAMOP).

The EA means Bowleven and joint venture partners, including Cameroon state oil company SNH, development and exploration rights to the MLHP-7 block for an initial 20 years, with the option to renew for a further 10 years.

Bowleven said its initial development plans will focus on the IM field, and envisages initial dry gas sales to be to a proposed fertiliser plant onshore in Cameroon, enabling liquids production.

It also noted "significant upside potential", with additional gas offtake solutions being considered, notably for liquid natural gas.

Ms Crawford said: "We drilled a number of wells on it (Etinde) over time.

"One of the big events for us was drilling the IM-5 well, which was completed in 2013, because that not only underpinned the resources required for the fertiliser plant, but the significant upside potential on the acreage."

Ms Crawford added that success with IM-5 was "one of the reasons why we have done the transaction with LUKOIL, because that gives us the flexibility to accelerate the appraisal drilling.

"We recognise there is potential for more than simply the fertiliser plant - there are potentially other gas offtake solutions like CLNG (Cameroon Liquid Natural Gas). This enables us to go after the appraisal drilling, and sooner."

Bowleven has targeted the first half of 2017 for the first production from the permit.

Chief executive Kevin Hart said hailed the EA as a "significant milestone" in an important project for Cameroon.

Bowleven raised £55 million at 650p per share in October 2005 under past management, and £13 million at 45p in November.

Shares closed up 0.5p, or 1.31 per cent, at 38.75p.

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