THE chief executive of Bowleven, Kevin Hart, has said the company is in good shape to deal with low oil prices after it finally completed the $250m (£168m) Cameroon stake sale it agreed in June.
Edinburgh-based Bowleven confirmed it has received the first $165m of the payment due regarding the sale of interests in the offshore Etinde permit to Russia's Lukoil and Cameroon's New Age
The company is due to get the remaining $85m in cash and cost contributions as work on the permit progresses.
The funding injection will transform Bowleven's finances. At current exchange rates the initial payment is worth £111m , bigger than the £108m valuation placed on Bowleven by the company's share price.
It will leave the Aim-listed company sitting on a significant cash pile at a time when oil and gas firms are grappling with the effect of the plunge in oil prices since June.
"Against a challenging market backdrop our strengthened balance sheet following the transaction puts us in a strong position," said Mr Hart.
The sale looks to have been well timed. Brent crude traded at around $114per barrel when Bowleven announced the farm-out deal with Lukoil and New Age in June. It fetched around $53 yesterday.
Bowleven could use the proceeds to increase exploration activity in Africa. It also has acreage onshore Cameroon, Kenya and Zambia.
The company has retained a 20 per cent interest in Etinde, which contains finds the partners on the licence hope to bring into production.
The completion ends a long wait for Bowleven, which has been fraught with uncertainty at times.
The deal was originally due to complete on 31 August. The partners extended the deadline for completion three times amid delays in receiving the required approvals from Cameroon's President Biya and authorities in the country.
In December Bowleven's chairman Ronnie Hanna said he was in almost hourly telephone contact with Chief Tabetando, a Cameroon lawyer and longstanding director of the company, about the approval process.
Bowleven has faced big problems in its attempts to make the most of its acreage in Cameroon.
In December 2008 an analyst said Bowleven was effectively dead in the water because of the challenges it faced raising funding amid volatility at the time in oil and gas and financial markets. Bowleven subsequently raised money from investors through a series of share placings.
Following the completion of the farm out, yesterday, analysts at Westhouse Securities said Bowleven has a significantly strengthened balance sheet that puts it in an interesting position in the current weak oil price environment.
New Age has increased its holding in Etinde to 30 per cent from 20 per cent. Lukoil has acquired 30 per cent. Cameroon's state oil and gas company has exercised its right to acquire 20 per cent.
Shares in Bowleven closed up 2.25p at 33.5p. Bowleven raised £72m from investors at 327p per share in November 2010.
Separately, Chinese-owned Nexen UK announced plans to cut 60 jobs in response to the downturn in the industry. The company runs its North Sea exploration and production operations from Aberdeen. It employs 719 people in the UK.
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