Roundtable Discussion; The Future of Mineral Sands. Watch the video here.
Here are some other bits and bobs gleaned from the AGM:
Limited communication
The joint venture between Bowleven, Lukoil and New Age, is technically an “unincorporated JV”. This gives the parties commercial rights, such as pre-emption rights that were not exercised when Perenco bid for New Age’s stake, but does not guarantee communication. Therefore, the discussions between New Age and Perenco have been bilateral, and the directors admit they are confused, baffled and surprised by the delays.
Nonetheless, they are aware that Perenco and New Age agreed to an addendum to the long stop date. Bowleven has had sight of it but cannot share it as it is private.
Recoverable costs
Regarding the difference of opinion over USD 10 million of recoverable costs, there are a few angles. Bowleven’s share of this is only 25% or USD 2.5 million. The money can only be recovered from future cashflows from Etinde In the greater scheme of things, USD 10 million is not that much for a project that could generate over USD 1 billion of cashflows. There has been a 10 year audit trail on costs, which is naturally a big exercise. Bowleven anyway expect this dispute will be resolved.
Other Perenco licenses
One possible source of complication and delays, is that Perenco could be negotiating /renegotiating multiple licenses with some inter-related and overlapping issues. We already know they renewed the Rio del Rey license earlier this year.
Possible sale of Bowleven Etinde stake
If this ever happened, the SNH approval process should be less complicated, because Bowleven is a financial investor and not an operator.
Geopolitics and costs of capital
The Chad pipeline dispute, and change of regime in Gabon, could raise fears of contagion risk, increasing the country risk profile. Equatorial Guinea however looks relatively stable.
Geopolitics might increase costs of capital but the auditors agreed to a 15% figure in line with previous years.
Perenco in West Africa
Perenco is the largest player in Cameroon, and is also active in Ghana, as well as Gabon.
Capital raise
Bowleven would prefer to see the share price rebound to minimise dilution. The aim is to offer it to existing shareholders, but they could also be open to new shareholders. Some form of hybrid structure could be considered, though a pure loan would be unlikely. Any offer probably needs to be fully underwritten to take out the execution risk.
They cannot disclose details of the Crown Ocean proposal, such as the share price, because it is private, and is anyway an ongoing discussion.
Domestic Gas
This could be important as part of the ESG agenda, in terms of obligations to the host government.
Development Finance Institutions
If the project gets to development plan and FDI stage, it is possible that development banks and other multilateral agencies might provide some financing. Bowleven has had discussion with banks in African and France
22 Questions & Answers Annual Report page 14 query :- From the H1 Results of 30th March - "Perenco has not, to date, sought to directly discuss its plans for the future of Etinde development with Bowleven or LUKOIL, although we have been made aware of some of their potential ideas indirectly. We consider the financial and strategic acquisition merits of Perenco’s purchase to be compelling and there are options we think are currently being assessed that would lead to commencement of production at Etinde in a cost effective and profitable way for the benefit of all Etinde JV Partners." However, on P14 of the AR concern is expressed on the possible negative implication for Etinde development of an absence of "public comment" and "private communication" from Perenco. Would management care to comment on the apparent change of "vibe"
When New Age informed the JV partners of the proposed transaction, we were informed that they expected the transaction to complete in Autumn 2022, although they subsequently extended this at the end of the year. Since then, a further 11 months have passed, including the 12 month long stop date of the original transaction, essentially with little to no development.
This is a concern.
After 18 months, can management offer any possible suggestion for such SNH delays given the centrality of O&G revenues to the state set against the RDR fields being in significant decline and Sanaga gas output being projected to "fall off a cliff" in 2026?
No. We cannot speculate on the intentions of the Government of Cameroon.
21 Questions & Answers Annual Report page 10 query :- "We anticipate the current uncertainty will be resolved by early 2024 at the latest by either the transaction completing or by some other means" - what other means do management envision?
There is a possibility that SNH and the Government may not approve Perenco’s proposed acquisition, which will require a change of strategy by New Age or different steps by Perenco. In, addition, we also consider that there is a possibility that New Age may seek or be approached by an alternative buyer to Perenco.
Annual Report page 11 query :- Is it correct to interpret what appears under "Short Term Outlook" as a JVP ambition to avoid having to hypothecate c 70mmcfd for domestic gas generation to maximize gas available to render a Bioko or a Perenco Plan B development more viable?
No, not in the way implied by the question. When we study the technical requirements for producing wet gas (condensate) at a fixed rate, for a finite period of time (for example to meet the commercial requirements under a Gas Sales Agreement) there are corresponding IM-act on the way the field is operated, and this has practical ramifications on liquids production levels and therefore on other commercial and economic considerations which impact the valuation and future cash flow of the Etinde project. In our view, the supply of natural gas to the Cameroon domestic market needs to be assessed as part of the overall development project.
Annual Report page 14 query :- Clarification please on timing of possible money raise given mention of present funds lasting through to Spring/Summer and possibly "a small number of additional months in practice" set against on p14 "a raise will be required by early 2024"
There are two slightly different considerations:
• How long will the existing Bowleven Group working capital last and how can we maximise this period of time using specific expenditure control mechanism, whilst, as a minimum, maintaining our obligations under the PSC agreement, based on the existing draft 2024 work plan and budget (or any amendment following a change in Operator), whilst maintaining a necessary safety margin; and
• The second reflects the time it will need to find new potential investor(s), agree commercial terms with them and then seek the necessary shareholder approval at a subsequent EGM. This needs to be completed prior to Bowleven fully exhausting its current working capital.
Firstly, is it known whether the absence of consent to the NA to Perenco transfer is down to no decision apparently being reached or is it because SNH are seeking to attach conditions to the transaction that are unacceptable to the parties?
There has been no formal correspondence from SNH to Bowleven or the JV partners as a whole on this subject. New Age has not provided any specific details of their negotiations on this point.
Annual Report page 5 query :- references to "a major shareholder" and "our major shareholder" - can we assume both references are to Crown Ocean only?
Crown Ocean Capital in this context.
Annual Report page 9 query :- "core initial IM Only field development" not even plus IE-2? What are the projected flow rates of gas and liquids for IM?
There is no simple answer as it depends on multiple factors, including (but not limited to) development concept, the acquirer of natural gas produced and the contractual terms of any gas sale agreement, the number of wells drilled, which reservoirs are being produced from and the capacity and design of the gas processing facility. Technically, the maximum rate of initial wet gas production is likely to be up to about 150 mmscf/d.
Annual Report page 10 query :- "However, progress delays with the outstanding completion issues and obtaining governmental approvals has been much slower than anticipated. The June 2023 long stop date was not met and Perenco and New Age have informally agreed to continue to work together to resolve all outstanding issues and complete the transaction in due course" - "All outstanding issues", are these all entirely with SNH or are they also between the two parties and has even this Lukoil issue referred to in the H1 Results been settled - "Under the terms of the deal, a number of conditions precedent remain outstanding. Completion of this transaction is notably dependent on Perenco reaching both governmental agreement with SNH as well as commercial agreement with LUKOIL relating to some logistical matters. We understand from New Age that regulatory approval is expected to be issued by SNH and the Government of Cameroon in mid-2023, and that discussions are ongoing between LUKOIL and Perenco."
We are not party to the Transaction between New Age and Perenco or any discussions these parties have with LUKOIL regarding specific aspects of their deal that impinge on LUKOIL. So far as we are aware, given a level of communication with New Age and LUKOIL, none of the potential issues relating to the SPA between Perenco and New Age have been resolved. We understand that SNH has raised some issues with Perenco that impinge on Perenco obtaining Governmental approval to acquire New Age’s stake, but we are not aware of all the details and cannot comment more than we already have done.
[ Now run into word or character limit, see next posting for more ]
I attended. At the end of the AGM presentation, there is a Q&A section addressing some questions posed that reference the annual report.
https://www.bowleven.com/system/files/uploads/financialdocs/agm-presentation-2023_1.pdf
In my next posting, I will try and copy and paste it, but there may be some kind of word limit (some other pastes seem to have been cut short ).
Then next week I will also send some notes from the chat at the AGM.
Shareholders should have had an email or message via brokers, but just in case anyone did not, the 84 page annual report is now on the site. The AGM is in London on Wednesday December 6, and I plan to attend it.
"Business as Usual" for Perenco in Gabon, according to this Bloomberg article
https://www.bloomberg.com/news/articles/2023-10-23/family-owned-africa-oil-driller-perenco-takes-coup-in-its-stride
So Gabon should not be causing delays now.
Short term hope now is some eleventh hour approval of the Perenco New Age deal. Bowleven has said the two companies are trying to "progress" it, and the companies have also been reported saying the same thing. If Bowleven is not party to the discussions, as they say, they may not know all the details. In theory approval could come at any time.
Just reposting this link to an article published in July
Perenco "expects progress on approval of its acquisition of New Age’s interest in the Etinde gas field project"
https://www.africa-energy.com/news-centre/article/cameroon-perenco-signs-rio-del-rey-production-deal-eyes-new-age
but it is not clear who at Perenco was quoted, or exactly when.
Has Gabon delayed matters? This article gives an impression of "business as usual" in Gabon
https://energies-media.com/gabon-petrole-plus-de-la-moitie-de-la-production-assuree-par-perenco/
The Franco-British company Perenco produces 110,000 barrels of oil equivalent per day out of an average national production of 200,000 barrels of crude oil per day
The Franco-British company Perenco achieved production in Gabon of 110,000 barrels of oil equivalent per day in 2022, making it the largest producer of hydrocarbons in the Central African country.
The data was presented following an audience granted by the Minister of Oil and Gas, Marcel Abeke , on September 22, to the Africa director of the Perenco Group – Jean Noël Bouassi Bouassi – and to the general director of Perenco Gabon Adrien Brooch (photo, d).
Gabon currently produces around 200,000 barrels of crude oil per day.
Https://www.africa-energy.com/news-centre/article/cameroon-perenco-signs-rio-del-rey-production-deal-eyes-new-age
1st sentence : Paris-based independent Perenco has signed a production-sharing contract (PSC) for the offshore Rio del Rey Basin and says it expects progress on approval of its acquisition of New Age’s interest in the Etinde gas field project.
(I did not pay to read the rest of the article behind the paywall. Does anyone have a subscription to African Energy ?)
The FID payment would actually be USD 25 million, from either New Age and Lukoil, or Perenco and Lukoil if the Perenco deal goes through.
The annual report continues to indicate a valuation of around USD 150 million for Etinde, which can go up and down with inputs such as oil and gas prices and discoun rates. USD 150 million would work out at about 50p per share.
The staff have temporarily gone part time this year while waiting for the Perenco deal to go through and waiting to hear Perenco set out its plans for development.
Yes the FID (Final Investment Decision) on Etinde keeps getting delayed. The great hope now is that Perenco will be a "game changer" . If Perenco completes the New Age deal it would surely seem logical for Perenco to buy Bowleven as well? Why would that not make sense?
Perenco seem quite active on the PR front recently https://worldoil.com/news/2023/6/29/perenco-completes-south-kole-marine-development-offshore-cameroon/
This release quotes the Head of Perenco Cameroon as mentioning "satellite projects" in the context of Rio de Rey. Presumably that includes Etinde, though no specific projects were mentioned.
https://www.brandiconimage.com/2023/06/cameroon-perenco-to-unlock.html
I extracted the quote:
Armel Simondin, CEO of Perenco Rio del Rey, said, “This new contract creates a solid foundation on which we will be able to build an ambitious program of modernizing our facilities, reducing emissions, exploring the area, seizing new opportunities, developing satellite projects and supporting the country in meeting its future energy challenges
Perenco has extended its production sharing with SNH for Rio del Rey for 20 years
https://www.ogj.com/drilling-production/article/14295077/perenco-signs-new-20year-psc-for-rio-del-rey-basin-offshore-cameroon
This suggests that SNH is making some decisions, even if not on Etinde.
The article also mentions Perenco acquiring Etinde. What synergies might Etinde have with the rest of Rio del Rey?
This was disclosed in Bowleven's results. However, in Africa it is not unusual for these "long stop dates" to get extended several times, judging by eg Afrentra in Angola. If this has dragged on for 11 months, it is not clear to me that they are suddenly going to speed up in the June.