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Bowleven pays £5.25m to break agreement

BOWLEVEN has agreed to pay $9 million (£5.25 million) to break its strategic alliance agreement (SAA) with Petrofac to allow the sale of a prized Cameroon asset for $250m to proceed.

big DEAL: Edinburgh-based Bowleven has broken its strategic alliance agreement with Petrofac to allow the $250m sale of a Cameroon asset to go ahead.
big DEAL: Edinburgh-based Bowleven has broken its strategic alliance agreement with Petrofac to allow the $250m sale of a Cameroon asset to go ahead.

The deal had to be terminated to pave the way for Edinburgh-based Bowleven to complete the farm-out of stakes totalling 50 per cent in the Etinde permit to Russia's LUKOIL and African's New Age, announced last month.

Under the SAA, signed in November 2012, Petrofac agreed to fund up to $500m to develop the first phase of the permit for a return of 20 per cent on its investment.

Bowleven said yesterday that it had reached a mutually acceptable agreement with Petrofac to terminate the SAA with the FTSE-100 company.

It said the agreement was one of the conditions of the LUKOIL and NewAge farm-out announced on June 24, and noted that it was subject to completion of the farm-out. Chief executive Kevin Hart said: "We have worked closely with Petrofac over the last two years and we appreciate their co-operation in reaching a mutually acceptable termination agreement."

Bowleven's exit from the SAA comes after it faced accusations of eroding shareholder value over the Etinde farm-out.

One major shareholder claimed the company had reduced its interest in the permit to 25 per cent for a knock-down price after years of heavy investment.

Waseem Shakoor said at the time that he was "shocked by the value destruction that has been cystallised by the deal".

And he warned he might vote against the farm-out as well as move to have Mr Hart voted off the board.

The farm-out means Bowleven will cede operational control of the Etinde permit, which contains undeveloped oil and gas that the company hopes to bring onstream.

The deal appears to put a value of $500m on the acreage, though it is understood Bowleven may have spent a higher sum on the prospect over the years.

LUKOIL will acquire a 37.5 per cent stake in the permit, with New Age hiking its stake to 37.5 per cent from 25 per cent under the terms of the farm-out.

In spite of the criticism, Mr Hart defended the farm-out, hailing it an endorsement of the value of the Etinde permit which it has spent 10 years developing.

Shares in AIM-listed Bowleven closed the day up 0.25p or 0.66 per cent at 38p.

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