Last checked at 2 Sep 2008 07:00
2 September 2008
Bowleven plc ('Bowleven' or 'the Company')
Group Operational Update
Bowleven is scheduled to announce its preliminary results for the year to 30 June 2008 on 4 November 2008. In advance of these results Bowleven is providing information on recent operations since the last update on the 28 March 2008.
HIGHLIGHTS
First oil discovery on Etinde Permit; IF-1r well tested an average of 3,371 bopd from upper Isongo section.
Oil in place for IF discovery initially estimated to be between 76 mmbbls and 249 mmbbls mean.
Likely future upwards resource revision over other existing Isongo discoveries due to recognition of additional thin bed pay in IF.
Potential to upgrade IE field resource base due to high LPG content of gas; project sanction anticipated end 2009.
Enhanced and expanded prospect inventory across Etinde Permit.
P50 resources for EOV increased from 7.4 mmbbls to 12.4 mmbbls of oil.
FPSO contract incorporating option and commercial terms for EOV development signed with Fred Olsen; first oil anticipated Q1 2010.
Kevin Hart, Chief Executive said:
"We are delighted with the excellent progress being made across Bowleven's entire asset base. The recent oil discovery on MLHP-7 re-enforces the quality of our exploration acreage whilst the resource upgrades on EOV and Etinde augur well for future development activities and the resulting production and cashflow generation."
ENQUIRIES
For further information please contact:
Bowleven plc
Kevin Hart, Chief Executive 00 44 131 524 5678
Ed Willett, Exploration Director 00 44 131 524 5678
Kerry Crawford, Head of Investor Relations 00 44 131 524 5678
Brunswick Group LLP
Patrick Handley 00 44 207 404 5959
Deborah Spencer
RBS Hoare Govett 00 44 207 678 8000
Andrew Foster
Notes to the Editor:
Bowleven is an African focussed oil and gas group, based in Edinburgh and listed on AIM since December 2004.
Bowleven holds, through its wholly-owned subsidiary EurOil Limited, a 100% equity interest in the Etinde Permit area comprising three shallow water blocks in offshore Cameroon, West Africa; namely Blocks MLHP-5, MLHP-6 and MLHP-7. In total Bowleven has approximately 2,300 km2 of exploration acreage located across the Rio del Rey and Douala basins in the Etinde Permit. EurOil Limited also has a 100% equity interest in the Bomono Permit, onshore Cameroon, extending to approximately 2,328 km2 in the Douala/Kribi Campo Basin. Bowleven has operated in Cameroon since 1999.
The Cameroon Government has announced a co-operation agreement with the Government of Equatorial Guinea to investigate a project to export gas from Cameroon to the gas liquefaction plant on Bioko Island on Equatorial Guinea. It is proposed that Limbe would be the gathering hub for any such scheme.
Bowleven also holds, through its wholly-owned subsidiary FirstAfrica Oil Limited, a 100% equity interest in the EOV offshore block in Gabon, which contains an existing oil discovery that it is seeking to develop, and a 50% equity interest in the Epaemeno Block, which is approximately 1,340 km2 of exploration acreage in onshore Gabon and sits adjacent to a number of recent discoveries in surrounding blocks.
GLOSSARY:
Addax - Addax Petroleum Corporation
API - American Petroleum Institute units as a measure of oil specific gravity
bcf - billion cubic feet
bopd - barrel(s) of oil per day
DST - drill stem test
Equipoise - Equipoise Solutions Limited
ERC - Energy Resource Consultants Limited
FPSO - floating production, storage and offloading vessel
LNG - liquefied natural gas
LPG - liquefied petroleum gas, including secondary condensate recovery, propane and butane
mmscfd - million standard cubic feet of gas per day
mmbbls - million barrels
P50 - 50 per cent probability that volumes will be equal to or greater than stated volumes
Perenco - Perenco PLC
PSC - production sharing contract
psia - pounds per square inch absolute
STOIIP - stock tank oil initially in place
tcf - trillion cubic feet
thin bed pay - interbedded hydrocarbon bearing reservoir and shale where the thickness of individual beds are below the resolution (typically 6-12") of conventional electric logging tools
wet gas - gas prior to extraction of associated liquids
OPERATIONAL UPDATE
OPERATIONS
CAMEROON
Etinde Permit - MLHP-5, MLHP-6 and MLHP-7 (Bowleven group 100% - operator)
Exploration - MLHP-7
The IF-1r exploration well was spudded on 28 May 2008 and was drilled to a target depth of 7,750 feet. On completion of logging activities Bowleven planned to test two zones in the upper Isongo section, covering a potential oil column of approximately 400 feet.
The initial drill stem test (DST 1) successfully tested 56 feet within the oil column confirmed by the pressure gradient. The successful test represented the first oil discovery on the Etinde Permit. The well flowed an average rate of 3,371 bopd 36 degrees API oil and 2.65 mmscfd of associated gas on a 32/64 inch choke at a well head pressure of 2,291 psia.
The further drill stem test (DST 2) planned on the well has been terminated prematurely due to a well mechanical failure. DST 2 was intended to test a log-evaluated hydrocarbon-bearing high resistivity interval, above the previously tested DST 1. The well will now be suspended as a potential future producer.
A comprehensive programme of wireline logging, pressure measurement, fluid sampling and coring activities was undertaken during IF-1r operations to maximise the information obtained from the well. This will aid further evaluation of the IF and other MLHP-7 discoveries as well as the assessment of other potential prospects on the acreage.
Initial volumetrics on the IF accumulation have been compiled as part of this exercise and further work is ongoing to assess the potential impact that this previously unidentified pay has on the Group's overall portfolio. The initial mean oil in place for the IF discovery is estimated to be between 76 mmbbls and 249 mmbbls depending on trap configuration. Evaluation of further appraisal and development options for MLHP-7 has already commenced.
The Bowleven technical team are currently undertaking a block-wide evaluation of MLHP-7. This programme has been accelerated following the discovery of thin bed pay on IF. The discovery has particular significance for the whole block as rock properties in thin bed pay (net/gross, porosity and resistivity) are not accurately measured by conventional logging tools. Net reservoir and hydrocarbon saturation are often either grossly underestimated or missed completely.
Initial indications from the detailed work being undertaken to further evaluate the existing Isongo discoveries have highlighted the likelihood of further increases in resource estimates as the interpretation matures.
Exploration - MLHP-5 and MLHP-6
The prospect inventory for MLHP-5 and MLHP-6 has been significantly expanded and enhanced following the conclusion of detailed subsurface analysis and integration of well data. This updated interpretation highlights unrisked mean in-place volumes of approximately 4.5 tcf of wet gas, 250 mmbbls of condensate and 700 mmbbls of oil. The ranking of prospects for future drilling is ongoing.
Exploitation/commercialisation - Etinde Permit
The Group is continuing to progress the development of its gas/condensate discoveries in MLHP-7. The commercialisation of its growing resource base remains a priority, with the existing Isongo E and D (IE/D) gas/condensate discoveries establishing the likely core for an initial stand-alone development in Cameroon.
An initial study indicates that gas recycling could be a feasible option for developing the MLHP-7 gas/condensate discoveries and further work is continuing to assess this and other potential development options (including floating LNG).
Whilst further appraisal is required to delineate the extent of the accumulation, initial work undertaken indicates that the recent oil discovery on IF could be tied back to the IE/D infrastructure along with other existing or future discoveries on the acreage.
Further studies by external consultants have indicated the potential to produce LPGs from the existing IE/D discoveries. This has the potential to increase the Group's existing resource base significantly and is an integral consideration in the Group's development planning. Mean in place condensate and LPG volumes for IE/D are presently estimated to be 50.0 mmbbls and 25.9 mmbls respectively.
Discussions are also ongoing with the Cameroon government and potential industry partners regarding the possible future sale of gas for LNG.
Alongside the increased focus and pace of development planning for the MLHP-7 discoveries, the Group has submitted an application for a PSC for the entire Etinde Permit area to the Cameroonian authorities. Negotiations on the terms of the PSC are expected to commence shortly. It is anticipated that these will be substantially agreed by the end of 2008, and will expedite the realisation of value from the Etinde discoveries for all stakeholders.
Bomono (Bowleven group 100% - operator)
Since the signing of the Bomono PSC on 12 December 2007, the Group has commenced preparation for geological fieldwork later in 2008 and plans to conduct an airborne geophysics survey in the 2008/2009 dry season. A 2D seismic acquisition programme is expected to commence in H2 2009.
GABON
EOV field development (Bowleven group 100% - operator)
Pre sanction work is continuing on the EOV oil development. Following the results of a detailed subsurface review undertaken by ERC and Equipoise, P50 contingent resources for the field have increased from 7.4 mmbbls to 12.4 mmbbls of oil. Further modelling work is ongoing to confirm production profiles and identify potential producing locations.
The Group has recently signed a contract with a subsidiary of Fred Olsen Production ASA ("Fred Olsen") for the provision of the 600,000 bbls storage capacity FPSO Knock Taggart. The contract secures an option, exercisable at the Group's discretion, to proceed with the FPSO development at any time up to and including 15 December 2008. The contract also fixes the commercial terms for the provision and operation of the vessel by Fred Olsen. In consideration for the grant of the option, the Group has agreed to pay Fred Olsen an option fee of US$2.5 million. The option fee can be recovered against subsequent mobilisation costs under the contract, assuming the Group elects to proceed with the FPSO development.
The jacket for the EOV platform is complete and the topside facilities being finalised. Both are being stored in the United States of America pending project sanction and mobilisation to Gabon. Financing and partnership options are under review, with debt financing discussions ongoing with various banks. Project sanction is planned for Q4 2008 with first oil scheduled for Q1 2010.
EOV - exploration (Bowleven group 100% - operator)
Interpretation of the North West Kowe exploration prospect is now complete following a data trade with Perenco. The prospect is volumetrically assessed to contain a mean unrisked oil in place volume of 234 mmbbls. Future plans to drill the prospect are being considered in conjunction with EOV development drilling.
Epaemeno (Bowleven group 50%, Addax 50% - operator)
The farm-out of 50% of the Group's interest in the Epaemeno PSC to Addax was approved by the Gabonese government in December 2007. 2D seismic acquisition has commenced in the northern area of the block. The acquisition of seismic in the south is being considered for late 2008. Interpretation and selection of suitable drilling targets over the entire block would then follow, with drilling anticipated 2009/2010.
NEW VENTURES
The Group continues to review the potential for new venture acreage to further enhance its portfolio.
The Group's strategy is to collaborate with indigenous companies in its geographical areas of focus and it currently has the potential for such an opportunity in connection with onshore blocks to be offered in the forthcoming Angolan licensing round.
CORPORATE
Bowleven is scheduled to issue its first full year set of financial statements prepared under International Financial Reporting Standards (IFRS) and reporting in US Dollars on 4 November 2008.
The Group has net funds of approximately $55million at the end of August 2008 (after completing payment of IF-1r well costs) and is currently reviewing various additional financing options in relation to its prospective acreage.
OUTLOOK
Bowleven continues to be well placed to create and realise value from its existing portfolio of assets. Over the forthcoming months the Group will focus on moving EOV towards project sanction, refining the development options for MLHP-7 and identifying additional exploration potential on its acreage. Future development, appraisal and exploration activities to increase shareholder value will undoubtedly require additional capital. The Group continues to review all available funding options including debt finance on EOV and the potential farm out of part of the Group's existing positions in Cameroon and Gabon.