Bowleven Regulatory News (BLVN)

28 Mar 2008 07:02

BowLeven Plc28 March 2008 28 March 2008 Bowleven plc ('Bowleven' or 'the Company') Interim Results for six months ended 31 December 2007 Bowleven, the African focused oil & gas company listed on AIM, today announcesits Interim Results for the six months ended 31 December 2007. Company highlights are as follows: • Encouraging exploration progress - following completion of successful three well drilling campaign in Cameroon during 2007, preparation of an exploitation application for MLHP-7 is now underway. • Near term drilling programme - IF-1r well drilling expected to commence April/May 2008 with likely further appraisal wells to follow. • Further asset base evaluation - substantial high quality prospect inventory being developed across the Company's portfolio. • Portfolio expansion - doubled acreage in Cameroon with signing of new Bomono PSC. • Financial flexibility - proposed placing of up to approximately 12 million shares announced today strengthens the Group enabling the timely pursuit of the opportunities in its portfolio. Commenting, Kevin Hart, Chief Executive Officer, said: "I am delighted with the progress made by the Group to date. The Company is wellpositioned to capitalise on its existing asset base and I am hopeful that the forthcoming activity across the portfolio will help add to and enhance the valueof our existing resources." ENQUIRIES For further information please contact: Bowleven plcKevin Hart, Chief Executive Officer 00 44 131 524 5656Kerry Crawford, Deputy Finance Director/ 00 44 131 524 5673Head of Investor Relations Brunswick Group LLPPatrick Handley 00 44 207 404 5959Deborah Spencer Hoare Govett Limited 00 44 207 678 8000Andrew Foster Notes to the Editor: Bowleven is an African focused oil and gas group, based in Edinburgh and listedon AIM since December 2004. It holds, through its wholly-owned subsidiary EurOil Limited, a 100% equityinterest in the Etinde Permit area being three shallow water blocks in offshoreCameroon, West Africa; namely Blocks MLHP-5, MLHP-6 and MLHP-7. In total,Bowleven has approximately 2,300 km(2) of exploration acreage located across theRio del Rey and Douala basins in the Etinde Permit with current P50 resourcesindependently certified as 160 mmboe. EurOil Limited has also recently signed anew licence (the Bomono Permit) in onshore Cameroon covering approximately 2,328km(2). in the Douala/Kribi Campo Basin. Bowleven has operated in Cameroon since1999. During 2007 the Group completed a successful three well exploration andappraisal programme in Cameroon that resulted in: • the flow testing of the E field appraisal well (MLHP-7) at 30mmscfd of gas and 3,800 bpd of condensate. • the discovery of the D field (MLHP-5) that tested 26mmscfd of gas and 1,454 bpd of condensate. • the discovery of gas, condensate and oil 700 feet high to prognosis on the IF structure (MLHP-7) indicating possible connectivity of the IE and IF accumulations and a possible 1,300 foot hydrocarbon column. The Cameroon Government has announced a cooperation agreement with theGovernment of Equatorial Guinea to investigate a project to export gas fromCameroon to the gas liquefaction plant on Bioko Island on Equatorial Guinea. Itis proposed that Limbe would be the gathering hub for any such scheme. Bowleven also holds, through its wholly-owned subsidiary FirstAfrica OilLimited, a 100% equity interest in the EOV Block in offshore Gabon, whichcontains an existing oil discovery that it is seeking to develop, and a 50%equity interest in the Epaemeno Block which is approximately 1,340 km(2) ofexploration acreage in onshore Gabon which sits adjacent to a number of recentdiscoveries in surrounding blocks. The combined independently certified P50 resource base for the Group iscurrently 167mmboe. 28 March 2008 Chairman/Chief Executive Officer Statement Introduction We are delighted to report that over the last six months your Company hascontinued to evolve into a business which is capable of delivering materialorganic growth and value creation for its shareholders. The period has seen advances on a number of fronts as we seek to expand ourexploration portfolio and to add to and commercialise some of our existing P50resource base of 167 million barrels of oil equivalent. The main achievements over the last six months in this regard have included: • Successful three well drilling campaign completed on Cameroon acreage in 2007. • Obtaining an 18 month exploration extension to September 2009 for the Etinde Permit, Cameroon. • Following success of recent drilling, preparation of an exploitation application for Block MLHP-7 now underway. • Securing the Trident IV drilling rig for IF-1r well; drilling expected to commence April/May 2008. • Progress on development plan for EOV field in Gabon (including further subsurface evaluation) with sanction possible Q2/Q3 2008. • Signed the new Bomono PSC area in Cameroon covering approximately 2,328 km(2). • Developing a substantial high quality prospect inventory across the Company's portfolio. Operations Cameroon MLHP-7 exploration Block MLHP-7 is situated in the Rio del Rey petroleum province in south westCameroon. This prolific hydrocarbon province is responsible for all ofCameroon's current hydrocarbon production. Thirteen wells were drilled on the block between the 1960s and 1980s whichresulted in numerous discoveries. These include the Isongo Marine fielddiscovered by Mobil and the IE discovery made by Total. In 2005 the Group acquired the first 3D seismic over the block. Interpretationof the resulting data has refined and improved our understanding of theprospectivity of the block. In 2007 the Group drilled an up-dip appraisal wellto the IE discovery which yielded extremely high condensate rates on test. TheIF-1 well was then drilled structurally up-dip to the south of the IE field inAugust 2007. Encouraging data was gained from this well prior to its earlyabandonment due to a high pressure influx of hydrocarbons. The IF-1r well isscheduled to be re-drilled by Transocean's Trident IV jack-up rig commencingApril/May 2008. If successful, the intention would be to drill up to two furtherappraisal wells on Block MLHP-7 in the following 12 months. In parallel to preparations for the re-drilling of IF-1r, Bowleven hasundertaken to reprocess the 3D data over Block MLHP-7. This is intended toenhance imaging over the Miocene age section, the principal objective on theblock. Development of a full prospect inventory based upon the re-processed 3Dvolume is scheduled for mid 2008 and the Company believes this work has thepotential to highlight further significant prospects on the block. Exploitation/commercialisation We are continuing with our activities to progress the development of our gas/condensate discoveries in Block MLHP-7. The commercialisation of these resourceshas the potential to substantially increase the core value of the Group andremains the top priority going forward. An initial study indicates that gas recycling (which allows the initialstripping out and sale of the condensate with the later production of commercialgas volumes) could be a feasible option for developing the Block MLHP-7 fieldsand further work is continuing on this as an initial route towards commercialityof our resources. There also remain a number of options for the sale of gas into Cameroon forpower and industrial use. In addition, the high global demand for LNG (liquifiednatural gas) combined with the development of smaller scale liquefaction units,gives further options for development. The recent announcement of the ownershipstructure for the second train at EGLNG (the gas liquefaction plant on nearbyBioko Island in Equatorial Guinea) has provided momentum to plans for the plantsexpansion. This is also encouraging for the subsequent development of gas inMLHP-7 and any other potential discoveries on our acreage. We continue to workwith the Cameroon government and other industry partners to progress all optionsfor commercial gas sales in the region. Against this positive technical and commercial background, we are in the processof applying for an exploitation authorisation from the Cameroonian authoritiesin order to allow us to develop the MLHP-7 fields. The application document iswell advanced and it is expected that it will be submitted towards the end ofApril 2008. MLHP-5 & MLHP-6 exploration Blocks MLHP-5 and MLHP-6 are located in the Douala basin petroleum province ofsouthern Cameroon which is characterised by numerous onshore oil seeps.Exploration in the basin commenced in the early 1950s, culminating in the mid1980s when activity effectively ceased with only sub-commercial volumes ofhydrocarbons having been found. With the application of modern technologyincluding 3D seismic, interest in the area is being regenerated. In 2007, TheGroup found hydrocarbons with its D-1 well (the first to be drilled on eitherblock). Numerous other wells drilled on adjoining acreage over the last 18months have further proved the existence of substantial volumes of gas,condensate and oil. Detailed seismic interpretation continues to integrate the drilling results andto further develop what is already quite a meaningful prospect and leadinventory, with prospects identified at several stratigraphic intervals on theacreage. The majority of new wells in the basin have targeted gas-condensate proneprospects with a high degree of success. Whilst pursuing these targets, oil hasalso been encountered and the Group's priority focus on blocks MLHP-5 and MLHP-6will be to develop this oil play with a view to drilling a number of high impactexploration wells. Farm-out activity The Group is currently evaluating whether to farm-out part of its position inthe Etinde permit prior to further exploration and appraisal drilling. Adecision will be made based on a thorough analysis of the risk rewardproposition of maintaining 100 percent exposure versus any offer received. Inany event, it is considered unlikely a farm-out will take place until after theIF-1r well is drilled. Bomono A production sharing contract (PSC) was signed for the Bomono permit area,Cameroon on 12 December 2007. The Bomono permit area comprises onshore blocksOLHP-1 and 2 and covers approximately 2,328 km(2) in the Douala/Kribi Campobasin petroleum province. The permit area is characterized by numerous oil seepsand has not been actively explored since the 1980s. The first phase of the PSCrequires 500km of 2D seismic and one well to be completed within a five yearterm. Preparations are underway to commence geological fieldwork later in 2008and to conduct an airborne geophysics survey in the 2008/2009 dry season. Aseismic programme is expected to commence in 2009. Gabon EOV field Pre-sanction work is continuing for the 7mmbo EOV oil development with areservoir development study due for completion in April 2008. This study hasbeen undertaken to provide additional confidence over the current reservesestimates for the field, and also to identify further development welllocations. Negotiations are also continuing on evacuation options for oil fromthe field. Depending on the results of the reservoir study, the Company will bein a position to make a decision on project sanction by Q2/Q3 2008. Assumingsanction at that stage, commercial production from the field could then beexpected in Q2/Q3 2009. Epaemeno The PSC for the 1,340 km2 Epaemeno permit area located onshore Gabon entered itssecond three year term in August 2007 with an obligation to drill one well priorto August 2010. The farm-out of 50 percent of the Group's interest in theEpaemeno PSC to Addax was approved by the Gabonese government in December 2007.Addax are now preparing to acquire up to 700 km of 2D seismic with activityexpected to commence later in 2008. Financial Results This is the first period that the financial statements for the Group have beenprepared under International Financial Reporting Standards (IFRS) as adopted bythe European Union (EU). It is also reporting in US Dollars for the first time,the revised presentational currency for the Group. A detailed conversion andrestatement document was issued on 20 November 2007, and a copy of this isavailable on the Company's website. The Group reported a loss of $6.6 million for the 6 months ended 31 December2007 (H1 2006: loss $11.6 million). The main contributor to this loss wasadministrative expenses of $9.5 million (H1 2006: $4.4 million). The scale ofthis expense reflects the ongoing efforts across the group to properly assessand exploit the asset base. The overall loss for the period also includes a$0.9m foreign exchange gain. This is included within finance income and resultsprimarily from the treatment under IFRS of exchange movements on intra-groupfunding arising from the weakening of the US dollar against sterling (H1 2006:foreign exchange losses of $9m are included within finance costs) The principal cash outflow during the period under review was the expenditureof approximately $49 million, primarily on exploration drilling activity. At the period end, the Company has approximately $55million of net cash and wasfully funded for its committed work programme. However, in order to improvefinancial and operational flexibility, the Company announced today the proposedplacing of up to approximately 12 million shares to new and existinginstitutional investors. The separate announcement by the Company sets out theterms of the placing. These additional funds will enable the group to bestpursue the significant exploration opportunities in its existing portfolio. Board Appointment and strengthening of management team I am pleased to announce that Ed Willett, who currently serves as ExplorationDirector on the Group Management Board, has been appointed as a director on theBoard of Bowleven plc with effect from 28 March 2008. Kerry Crawford joined us in January 2008 as Deputy Finance Director and Head ofInvestor Relations. Kerry will sit on the Group Management Board and is awelcome addition to the team. Outlook It is our vision to build an Africa focused, exploration and production companywhich becomes renowned for its ability to consistently create and realisematerial shareholder value through exploration led organic growth and nicheacquisitions. Against a backdrop of high oil prices and substantial costinflation Bowleven has now amassed what it considers to be a highly prospectiveportfolio of exploration acreage. Your Company is well positioned to evaluateand exploit this position with the overall goal of creating significant valuefor shareholders. In addition to pursuing opportunities in our existing assetportfolio we continue to evaluate new venture opportunities across the WestAfrican province. Bowleven plc GROUP INCOME STATEMENT for the six months ended 31 December 2007 6 months 6 months Year ended ended ended 30 June 2007 31 Dec 2007 31 Dec 2006 (Audited) (Unaudited) (Unaudited) (As re-stated) (As re-stated) $'000 $'000 $'000 Administrationexpenses (9,509) (4,408) (11,649) Operating lossContinuing operations (9,509) (4,408) (9,908)Acquisitions - - (1,741) (9,509) (4,408) (11,649) Finance income 2,909 1,845 5,108Finance costs (27) (9,043) (13,606)Loss before tax (6,627) (11,606) (20,147) Tax - - - Loss for theperiod (6,627) (11,606) (20,147) Basic anddilutedearnings pershare $(0.09) $(0.33) $(0.37) Bowleven plc GROUP STATEMENT OF CHANGES IN EQUITY for the six months ended 31 December 2007 6 months 6 months Year ended ended ended 30 June 2007 31 Dec 2007 31 Dec 2006 (Audited) (Unaudited) (Unaudited) (As re-stated) (As re-stated) $'000 $'000 $'000 Opening equityattributableto equityholders 309,359 121,387 121,387 Currencytranslationdifferences (872) 12,063 13,728 Total incomerecogniseddirectly inequity (872) 12,063 13,728 Loss for theperiod (6,627) (11,606) (20,147) Total recognisedincome and expensesattributable to equityholders for the period (7,499) 457 (6,419) New shares issued inrespect of employee shareoptions 1,336 - -Share based payments 1,048 610 1,539New shares issued - 131,533 192,852 Closing equityattributableto the equityholders 304,244 253,987 309,359 Bowleven plc GROUP BALANCE SHEET As at 31 December 2007 6 months 6 months Year ended ended ended 30 June 2007 31 Dec 2007 31 Dec 2006 (Audited) (Unaudited) (Unaudited) (As re-stated) (As re-stated) $'000 $'000 $'000 Non-current assets Intangibleexplorationassets 179,964 58,697 149,709Property plantand equipment 68,940 724 63,932 248,904 59,421 213,641 Current assetsInventory 7,080 8,238 7,802Trade & otherreceivables 1,874 21,660 2,080Otherfinancialassets - 18,007 -Cash and cashequivalents 54,614 155,153 105,307 63,568 203,058 115,189 TOTAL ASSETS 312,472 262,479 328,830 Current liabilitiesTrade andother payables 8,228 8,492 19,471Total currentliabilities 8,228 8,492 19,471 Net assets 304,244 253,987 309,359 Equity attributable to equityholders of the parentCalled-up share capital 14,451 11,420 14,378Share premium 341,321 281,696 340,058Foreign currencytranslation 12,856 12,063 13,728Other reserves 8,431 6,454 7,383Retained earnings (72,815) (57,646) (66,188)Total equityattributable to the equityshareholders 304,244 253,987 309,359 Bowleven plc GROUP CASH FLOW STATEMENT For the six months ended 31 December 2007 6 months 6 months Year ended ended ended 30 June 2007 31 Dec 2007 31 Dec 2006 (Audited) (Unaudited) (Unaudited) (As re-stated) (As re-stated) $'000 $'000 $'000Cash flows used in operatingactivitiesCash used inoperations (5,075) (37,349) (22,176)Interest paid (27) - (19) Net cash usedin operatingactivities (5,102) (37,349) (22,195) Cash flows used in investingactivitiesExpenditure onintangibleexplorationassets (42,261) (11,439) (70,755)Expenditure onproperty,plant andequipment (6,531) (184) (5,149)Interestreceived 2,010 1,845 5,108Acquisitions - - (962) Net cash usedin investingactivities (46,782) (9,778) (71,758) Cash flows from financingactivitiesProceeds fromissue ofshares 1,336 131,417 140,818Pre-acquisition loanadvanced toFirst AfricaOil (26,071) Net cash flowsfrom financingactivities 1,336 131,417 114,747 Net(decrease)/increase in cashand cashequivalents (50,548) 84,290 20,794Opening cashand cashequivalents atbeginning ofperiod 105,307 77,108 77,108Exchange(losses)/gainson cash andcashequivalents (145) 11,762 7,405 Closing cashand cashequivalents 54,614 173,160 105,307 Bowleven plc RECONCILIATION OF OPERATING PROFIT TO NET CASH INFLOW FROM OPERATING ACTIVITIES For the six months ended 31 December 2007 6 months 6 months Year ended ended ended 30 June 2007 31 Dec 2007 31 Dec 2006 (Audited) (Unaudited) (Unaudited) (As re-stated) (As re-stated) $'000 $'000 $'000 Operating loss (9,509) (4,408) (11,649)Depreciation 231 172 353Loss ondisposal ofproperty,plant andequipment - - 73Decrease/(increase) instocks 722 (7,492) (5,769)Decrease/(increase) indebtors 125 (23,577) 679Increase/(decrease) increditors 2,111 767 (1,814)Exchangedifferences 197 (3,421) (5,704)Shareoptions/LTIPcharge 1,048 610 1,539Non-cashpayment ofdirector'sshare optionscheme dues - - 116Net cashoutflow fromoperatingactivities (5,075) (37,349) (22,176) Bowleven plc NET FUNDS For the six months ended 31 December 2007 At 1 July 2007 Cash flow Exchange At 31 December movements 2007 $'000 $'000 $'000 $'000 Cash at bank 6,212 (3,994) - 2,218Short termdeposits 99,095 (46,553) (146) 52,396 Cash and cashequivalents/net funds 105,307 (50,547) (146) 54,614 6 months ended 6 months ended Year ended 31 Dec 2007 31 Dec 2006 30 June 2007 (Unaudited) (Unaudited) (Audited) (As re-stated) (As re-stated) $'000 $'000 $'000 Cash at bank 2,218 15,847 6,212Short termdeposits 52,396 139,306 99,095 Cash and cashequivalents 54,614 155,153 105,307 Otherfinancialassets - 18,007 - Net funds 54,614 173,160 105,307 1. ACCOUNTING POLICIES Basis of Preparation This Interim Report has been prepared on a basis consistent with the accountingpolicies expected to be applied for the year ended 30 June 2008. AIM(Alternative Investment Market) listed companies are required to report underInternational Financial Reporting Standards (IFRS) as adopted by the EuropeanUnion (EU) for financial years commencing on or after 1 January 2007. The firstresults to be prepared on this basis are the company's Interim Results for thesix months ending 31 December 2007. The company will present its first annualreport and accounts under IFRS for the year ended 30 June 2008. The company issued a 'Restatement of 2006-07 Results from UK GAAP (UnitedKingdom Generally Accepted Accounting Practices) to IFRS' document on 20November 2007 that highlighted the principal accounting differences between IFRSand UK GAAP. This restatement document contained revised accounting policiesunder IFRS and presented restated financial information under IFRS inconjunction with reconciliations between UKGAAP and IFRS. The disclosed figures are not statutory accounts in terms of section 240 of theCompanies Act 1985. Statutory accounts for the year ended 30 June 2007, on whichthe auditors gave an unqualified report, have been filed with the Registrar ofCompanies. Comparative information Comparative information for the six months to 31 December 2006 and for thetwelve months to 30 June 2007 have been restated to comply with the IFRSaccounting policies as contained within the above mentioned restatementdocument. As discussed below, this comparative information was also restated inUS$ in this document following a revision to the presentational currency of thegroup. Foreign currency exchange differences in the Income Statement have alsobeen reclassified. Those previously recorded within administrative expenses havebeen reclassified within finance costs in the Income Statement. a) Change in Oil and Gas Accounting policy In preparing the accounts for the twelve months to 30 June 2007, Bowlevenfollowed the full cost method of accounting for oil and gas assets. Under thismethod, all expenditure incurred in connection with the acquisition,exploration, appraisal and development of oil and gas assets was initiallycapitalised. Following the implementation of IFRS Bowleven has changed itsaccounting policies for both exploration/appraisal assets and development/production assets (including in property, plant and equipment) to successfulefforts based policies. The comparative information for the six months to 31December 2006 and the 12 months to 30 June 2007 have been restated accordingly.Further details can be found in the restatement document discussed above. b) Change in Presentational Currency The functional currency of Bowleven plc, the ultimate parent company of theGroup, is sterling. These financial statements have been presented in US$. Thisis a change from 30 June 2007 when the financial statements were presented underUK GAAP in the functional currency of the ultimate parent company (sterling). Asit is deemed to be more appropriate to present the financial statements in linewith the functional currency of the majority of the Group the comparativeinformation provided has been revised to reflect this change. 2. OTHER NOTES a) The basic earnings per ordinary share is calculated on a loss of $6,627,000 (H1 2006 restated: loss of $11,606,000) on a weighted average of 74,643,415 (H1 2006: 35,569,899) ordinary shares. b) In respect of the six months to 31 December 2007, 861,254 potential ordinary shares were anti-dilutive. c) No dividend has been declared (2006: nil). 3. INTERIM REPORT This document represents the Interim Report and half yearly results of Bowlevenplc. Copies of the Interim Report will be sent to shareholders and can beobtained, free of charge, from the Company at 1 North St Andrew Lane, Edinburgh,EH2 1HX for a period of one month This information is provided by RNS The company news service from the London Stock Exchange