TIDMBLVN
RNS Number : 8227E
Bowleven plc
01 November 2022
1 November 2022
Bowleven plc ('Bowleven' or 'the Company')
Full Year Results
Bowleven, the Africa focused oil and gas exploration group
traded on AIM, today announces its audited full year results for
the year ended 30 June 2022. Terms not otherwise defined have the
meanings given to them in the Glossary at the end of this
announcement.
HIGHLIGHTS
Operational
Etinde, offshore Cameroon
-- In June 2022, New Age formally announced that it had signed a
conditional agreement to sell operatorship and their 37.5% gross
stake in Etinde to Perenco SA ('Perenco') Group for an undisclosed
sum, subject to the resolution of a number of conditions precedent,
including regulatory approval from SNH.
-- The JO partners continue to await the completion of the New
Age-Perenco transaction.
-- New Age has reduced its operational footprint placing Etinde
development activities on a 'care and maintenance' basis, pending
the transfer to Perenco.
-- Whilst New Age has completed several outstanding tasks from
the 2021 post-FEED analysis programme during the calendar year,
very little progress has been made otherwise.
Financial
-- The loss for the financial year was $2.5 million.
-- Bowleven closed the year with $1.3 million of cash and a
financial investment of $2.2 million giving a total value of
available funds of $3.5 million. Cash balance at 30 October 2022
was $0.5 million.
-- Currently, there is no draft work plan or budget for the 2023
calendar year as New Age has left this task open for Perenco to
agree with the Joint Operation ('JO') partners and S ociété
Nationale des Hydrocarbures ('SNH'), most likely in Spring
2023.
-- Bowleven anticipates a higher Etinde expenditure in 2023 on
the basis that Perenco is likely to put a full Etinde development
team in place in early 2023, following completion of its Etinde
interest acquisition, and may seek to take a fresh look at Etinde
development options which would incur an additional cost. When
combined with our current cash and liquid resources, the Directors'
cash flow forecasts and projections indicate a material risk that
Bowleven will fully utilise its existing cash resources by the end
of 2023. This gives rise to material uncertainty regarding the
going concern status of the Bowleven group.
-- The Board is currently discussing and investigating various
options, including debt and equity issues, as well as hybrid debt
instruments to raise additional funding during early 2023. No such
plans have been put in place at the current time and there can be
no certainty that any additional financing will be concluded, nor
as to the terms of any such additional financing. Bowleven will
make further announcements to update shareholders as soon as it has
more information.
Outlook
The Company's key objective is to continue to deliver its
outlined strategy in FY2023. The most important deliverables
include:
-- Working with JO partners on commercial and financial matters
in respect of the Etinde development options with the aim of
reaching an Etinde project financial investment decision (FID) in
2023.
-- To renew the Etinde Exclusive Exploitation Agreement ('EEEA')
licence as part of the regulatory process associated with FID.
Bowleven considers that the risk of the Etinde licence (which
expired in January 2021) potentially being removed will further
decline as Perenco joins the development team. The Board
understands that Perenco has an excellent relationship with SNH and
the Government of Cameroon given its position as the largest oil
and gas investor in Cameroon.
-- Maintaining disciplined management of capital and operational
expenditure to secure progress towards FID whilst maintaining
financial resources and raising additional financing.
Eli Chahin, Chief Executive Officer of Bowleven plc, said:
"It has been a year of progress and we continue to focus on
maximising the economic return to our shareholders. The most
significant event to update on is New Age's ongoing transaction to
sell its operatorship and share in Etinde development project to
Perenco.
Perenco has a formidable operating history in Cameroon with oil
and gas productions of 85,000 boepd (51,000 barrels per day and 24
million m3 of gas per day) mostly from the Rio del Rey basis (to
the north of Etinde) and at the Sanaga Sud field complex near
Kribi. Here Perenco, in conjunction with SNH and Golar operates the
very successful FLNG gas export business using the Hilli Episeyo
vessel.
At the January 2022 TCM held with SNH, the JO partners formally
told SNH that the partnership had reached the decision that the
Equatorial Guinea development had been selected as the development
basis for Etinde. After extensive study, the conclusion was that
this was the only economically and commercially viable development
option for that JO partnership group. With the accession of
Perenco, other additional options may now become feasible to
study.
As we move into 2023, we will work with our JO partners on both
commercial and financial matters in relation to the Etinde
development options and to further progress towards FID."
ENQUIRIES
For further information, please contact:
Bowleven plc
Eli Chahin, Chief Executive 00 44 20 3327 0150
Capital Markets Communications Ltd (Camarco)
Owen Roberts
Charlotte Hollinshead
Hugo Liddy 00 44 20 3757 4980
Shore Capital Ltd (NOMAD and Broker)
Robert Finlay 00 44 20 7601 6100
Daniel Bush
This announcement may include statements that are, or may be
deemed to be "forward-looking statements". These forward-looking
statements can be identified by the use of forward-looking
terminology, including the terms "believes", "estimates",
"anticipates", "projects", "expects", "intends", "may", "will",
"seeks" or "should" or, in each case, their negative or other
variations or comparable terminology, or by discussions of
strategy, plans, objectives, goals, future events or intentions.
These forward-looking statements include all matters that are not
historical facts. They include statements regarding the Company's
intentions, beliefs or current expectations concerning, amongst
other things, the results of operations, financial conditions,
liquidity, prospects, growth and strategies of the Company and its
direct and indirect subsidiaries (the "Group") and the industry in
which the Group operates. By their nature, forward-looking
statements involve risks and uncertainties because they relate to
events and depend on circumstances that may or may not occur in the
future. Forward-looking statements are not guarantees of future
performance. The Group's actual results of operations, financial
conditions and liquidity, and the development of the industry in
which the Group operates, may differ materially from those
suggested by the forward-looking statements contained in the
announcement. In addition, even if the Group's results of
operations, financial conditions and liquidity, and the development
of the industry in which the Group operates, are consistent with
the forward-looking statements contained in the announcement, those
results or developments may not be indicative of results or
developments in subsequent periods. In light of those risks,
uncertainties and assumptions, the events described in the
forward-looking statements in the announcement may not occur. Other
than in accordance with the Company's obligations under the AIM
Rules for Companies and the Market Abuse Regulations, the Company
undertakes no obligation to update or revise publicly any
forward-looking statement, whether as a result of new information,
future events or otherwise. All written and oral forward-looking
statements attributable to the Company or to persons acting on the
Company's behalf are expressly qualified in their entirety by the
cautionary statements referred to above and contained elsewhere in
the announcement.
Notes to Editors:
Bowleven plc is an African focused oil and gas group, based in
London and traded on AIM. It is dedicated to realising material
shareholder value from its asset in Cameroon, whilst maintaining
capital discipline and employing a rigorously selective approach to
other value-enhancing opportunities.
Bowleven holds a strategic equity interest in the offshore,
shallow water Etinde permit (currently operated by New Age) in
Cameroon.
CEO & CHAIRMAN STATEMENT
POSITIONED FOR VALUE CREATION
"Following a profoundly tumultuous period for the E&P
sector, the Etinde development has now to some extent been
fortified with sustained high commodity prices and an incoming
joint venture partner that bodes well for its progress through to
the $25 million FID payment for Bowleven".
Dear Shareholders,
The recent geopolitical events in Ukraine have had a significant
impact on the concept of energy sovereignty for all countries. The
human tragedy has been immense, and our sympathies are with all who
have been impacted by this crisis. There is a recognition today
that the world has changed, and we must adapt to a new reality.
In the energy sector, the new paradigm that has emerged has
affected the supply and flow of molecules, most likely for the
considerable future. The burden on domestic consumers arising from
recent historic highs in energy prices are currently being partly
offset by some western governments to help deal with the cost of
living crisis we are currently experiencing. This macroeconomic
backdrop is also challenging central banks as interest rates are
rising to help curtail the inflationary environment. The price of
energy has become a much more visible component in the cost of
living and the continued volatility in the short to medium term has
changed the calculus for all decision makers who must grapple with
the uncertainty.
It is the view of the Board that this uncertainty will continue
in the short term on a number of levels.
As capital providers and other stakeholders make sense of the
situation that surrounds us, it is clear that the path to continued
economic growth will only return by solving the energy conundrum.
This holds true for both developed and developing economies as they
cope with the fiscal environment that challenges all governments as
they balance the need for energy investments and the
decarbonisation agenda.
Emission targets and energy transition strategies are currently
being deliberated in light of the evolving situation in Europe,
which is feeling the immediate impact of restricted access to
hydrocarbon flows brought on by the Ukrainian crisis. Access to
additional supply by way of alternative sources, increased
liquefication and storage infrastructure, and new alliances have
now become part of the narrative for all government agencies.
Our investment in Etinde has not been spared the challenge of
deciding how we navigate our business such that our shareholders
reap the benefits of the asset entrusted under our stewardship. The
anticipated changes in the joint venture have been a catalyst for
positive momentum. The announced conditional acquisition by
French-based Perenco of the New Age stake in the licence and the
operatorship of Etinde is an important and positive milestone.
Etinde's resource and volume estimates are of vital importance to
the domestic economy in Cameroon and the surplus requirements are
potentially of strategic significance to prospective buyers
internationally. Our location offshore in West Africa leaves us
well placed to deliver to European and other markets for years to
come.
The most significant development during the year has undoubtedly
been New Age signing a definitive conditional agreement with a
subsidiary of Perenco to transfer all New Age's participating
interests in the Etinde permit, and operatorship of the Etinde JO,
to Perenco. Whilst the transaction remains subject to a number of
approvals, Bowleven and Lukoil as parties to the JO decided not to
exercise our pre-emption rights over New Age's interest. At the
time of writing, the customary regulatory approvals by the Cameroon
government are yet to be completed.
Perenco is a seasoned E&P company with a formidable
operating history in Cameroon and across West Africa. It has the
requisite balance sheet and human capital to support the JO
partners in ensuring the best development plan is tabled to the
host government. Perenco has earned the respect of the Government
of Cameroon as one of the leading independent oil and gas companies
in Europe today. In the Board's view, the transaction will move us
closer to the final investment decision (FID) payment of USD25m
from its Etinde JO partners which, following completion of the
transaction, would include Perenco as a counterparty to this
payment. The process of the New Age divestment is progressing
smoothly, and we continue to anticipate a closing of the
transaction in the fourth quarter of 2022.
Perenco is currently the largest operator in Cameroon in terms
of production, with an operating area in the Rio del Rey and Douala
basins, and with oil and gas productions of 85,000 boepd (51,000
barrels per day and 24 million m3 of gas per day). The enhanced
optionality this affords the Etinde development is deemed
considerable. We refrain from holding any strong views on the
likely development options without first gaining a better
understanding of the evolving circumstances we will find ourselves
in once the execution phases of the Perenco transaction have been
completed, and when we are privy to further analysis of the options
that we need to consider.
In our analysis during 2021, we expressed the view that we would
continue to work towards securing a consensual development plan
that met with the objectives of all strategic stakeholders. This
process has not yet been fully realised on the back of the Perenco
acquisition of the Etinde interest.
The Board believes, in light of Perenco's Cameroonian history
and operatorship credentials, that our continued patience is a
sensible proposition and indeed an inevitable consequence. We have
yet to engage formally with the incoming Operator on what we
believe is the most strategic commercial proposition for extracting
the hydrocarbons within Etinde but draw comfort in the change in
ownership and operatorship which is a testament to the Etinde
investment hypothesis.
OPERATIONS
The Board's view was that the JO partners needed to maximise
hydrocarbon production rates to extract the full economics of the
licence which invariably entailed a combined IM and IE development
basis. This approach was also consistent with the generation of
higher tax revenue for the Government of Cameroon. Having regard to
the best risk-return proposition for Etinde, it was our belief that
processing Etinde wet gas directly at the existing
Marathon-operated facility on Bioko Island, Equatorial Guinea is
the best development option. This remains our position
currently.
Given that the incoming Operator is likely to reassess the
various development options considering today's economic
environment, it is worth reserving further judgement on what could
now be the most optimum development scenario. The incoming Operator
has neighbouring licences which in and of itself may broaden the
optionality for the Etinde development.
We have an obligation to our stakeholders to ensure both
conceptually and economically that we are securing the best
development option for what is regarded an important asset for
future generations. Earlier in the year we stated that it was
incumbent on the JO partners to present to the Government of
Cameroon and Société Nationale des Hydrocarbures a work plan and
budget to discuss this proposal with Marathon Oil in the 4 (th)
quarter of 2022.
As we go into Q4 2022, and subject to the views of an incoming
new licence partner and Operator, we are currently in a holding
pattern on a preferred development plan which needs to be formally
agreed and then presented to SNH. The Board is of the view, having
regard to this development and the broader economic backdrop for
the energy complex, that we are keen to build an alignment with all
stakeholders to ensure we have a framework and commitment to
bringing Etinde into production. Whilst we have failed to
anticipate the timing historically, we think that securing a
mutually acceptable development solution is now an increasingly
likely scenario.
Cost reduction without compromising our obligations to
shareholders is one of the key objectives for the Board. We remain
conscious of the need to preserve liquidity and any scope for
G&A reduction is being considered having regard to this
responsibility. We continue to operate with low overheads and
retain basic staffing requirements in our London and Cameroon
offices.
FINANCIAL AND OTHER MATTERS
At 30 June, 2022, the Company's balance sheet had cash of $1.3
million and liquid financial investments of $2.2 million, giving
available funds of $3.5 million.
At the time of writing, we have approved a budget to the end of
2022 with the outgoing Operator. No work plan or budget has been
set for 2023, but it is probable that actual expenditure in 2023
will exceed our current liquid funds towards the end of the year.
This will of course be determined by the actual work plan that will
be proposed by the incoming Operator, Perenco SA.
In our view, there is a significant risk that our current cash
and liquid financial resources may be fully utilised during 2023,
as shown by various cash flow models produced by the executive team
for the Board. How quickly this risk crystallises will depend on
the actual date Perenco becomes the Etinde Operator, the speed at
which they put their Etinde Operator management team in place, and
the 2023 work plan and budget they propose. We consider that as a
'new broom' Perenco may wish to review the previously agreed
Equatorial Development scheme, propose alternative(s), and probably
update the front end engineering design ('FEED') to reflect any
change in the approved development scheme and to reflect current
cost inflation for FID purposes. These actions will all need to be
approved by the JO partners as a group as well as SNH, as
regulator, before implementation. Our current cash flow projections
suggest that this risk will probably crystallise during the latter
half of 2023.
As was alluded to during our 2021 review, the Board will
continue to consider its options and engage with various
prospective providers of capital, on terms that it deems to be
beneficial for existing shareholders, to ensure our continued
ability to finance the Company until receipt of the FID payment of
$25 million. Whilst there are scenarios done on the basis that the
JO works seamlessly towards early FID during 2023, showing that we
hold sufficient funding at that time, it is most likely that
additional equity or debt financing will need to be raised in 2023.
This will especially be the case if a new material investment (eg.
FEED) is required to bolster the extensive works that have been
underwritten to date by the JO partners. That may of course change
but we are not at this stage privy to any details to this effect.
The leverage afforded to the company on the payment of the $25
million FID payment is recognized, but it would be imprudent not to
highlight the continued uncertainty regarding any additional FEED
works to support what will ultimately be the optimum development
concept. This represents a material uncertainty regarding the going
concern status of the group as a whole, which is reflected in
detail in this year's financial statements and the auditor's report
thereon.
ESG FOCUS
Environmental, Social and Governance ('ESG') factors and
Corporate Responsibility remain important factors for our Etinde
development. The production of hydrocarbons within Cameroon in a
responsible manner is something that we believe all stakeholders
will take pride in as and when it materialises. We are determined
to spearhead a positive legacy for Cameroon that has the impact to
change lives and set precedents for other developers to follow. On
securing Etinde FID, Bowleven will commit to a set of practices and
protocols that are consistent with international best practices,
responsibly having regard to our own emissions footprint.
It remains the Board's view that the Company's constitution and
size continue to serve the best interests of shareholders from a
cost and corporate governance perspective up until the time we
secure FID.
OUTLOOK
Whilst we cautioned shareholders last year on the continued
uncertainty that surrounds the hydrocarbons market, we certainly
did not anticipate the geopolitical events that will likely shift
the structural basis of energy markets for a considerable time.
Current spot prices and physical availability have forced Europe to
reconsider its dependency on the Russian flow of hydrocarbons.
The increase in hydrocarbon prices has refocused our attention
on the development options for Etinde and the viability of
development options previously thought to be marginal.
Historically, we have deemed some of these options to be less
resilient and high-cost relative to their breakeven economics. At
the current high prices and with potentially further hydrocarbon
acreage there may be greater optionality and flexibility for a
floating liquefied natural gas (FLNG) export solution that was not
available previously.
The value assigned to the proposed sale of operatorship and New
Age's 37.5% (gross) stake in the Etinde development project to
Perenco acts as a 'triggering event' under international financial
reporting standards and has required the Board to undertake a new
valuation of our share in the Etinde licence. We have calculated
the net present value of Etinde based on projected cash flows using
a risk weighted discount rate of 15% and oil and gas export prices
of (Brent) $65 per bbl and $6 per mmscf respectively, using capital
and operating cost estimates based on FEED and other pre-FEED
studies undertaken by the JO partners between 2018 and 2021. We
have also considered the potential value of alternate development
scenarios that Perenco may present to the JO partners during 2023,
after their transaction with New Age completes. These options tend
to have higher initial capital investment and higher operating cost
than the existing JO partner approved EG scenario.
On the basis of the detailed examination undertaken, the Board
felt justified in maintaining the investment case for the Etinde
valuation in excess of $150 million and hence concluded that no
impairment was deemed necessary at the current time. The Board
feels that with the evolving macro and geopolitical environment,
the revenue and cost assumptions of our recent financial modelling,
and the high calibre JO partner, the Etinde valuation now has a
stronger underlying hypothesis. We acknowledge that the current
capitalisation falls well short of these levels and that the
Board's challenge into 2023 is to close this gap.
The Board believes that the acquisition of the New Age stake by
Perenco bodes well vis-a-vis operational credibility and project
backing to assist with our own capital raising efforts. Provided we
can financially support our operational overheads into 2023 and
beyond, we feel Bowleven is exceptionally well placed to build a
business that exposes our stakeholders to material value creation
in the short to medium term.
Eli Chahin Jack Arnoff
Chief Executive Officer Chairman
31 October 2022 31 October 2022
GROUP INCOME STATEMENT
FOR THE YEARED 30 JUNE 2022
Audited Audited
2022 2021
$000 $000
------------------------------------- -------- -------
Revenue - -
Administrative expenses (2,376) (2,803)
Impairment charges - -
------------------------------------- -------- -------
Operating loss (2,376) (2,803)
Finance and other income (108) 820
----------------------------------------- -------- -------
Loss before taxation (2,484) (1,983)
----------------------------------------- -------- -------
Taxation - -
------------------------------------- -------- -------
Loss for the year (2,484) (1,983)
----------------------------------------- -------- -------
Basic and diluted loss per share
($/share) from continuing operations (0.01) (0.01)
----------------------------------------- -------- -------
GROUP STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEARED 30 JUNE 2022
Audited Audited
2022 2021
$000 $000
-------------------------------- -------- -------
Comprehensive Loss for the year (2,484) (1,983)
------------------------------------ -------- -------
GROUP BALANCE SHEET
30 JUNE 2022
Audited Audited
2022 2021
$000 $000
------------------------------ -------- --------
Non-current assets
Intangible exploration assets 155,433 154,885
Property, plant and equipment 13 31
---------------------------------- -------- --------
155,446 154,916
--------------------------------- -------- --------
Current assets
Financial investments 2,251 2,499
Inventory 1,180 1,180
Trade and other receivables 1,858 1,838
Cash and cash equivalents 1,273 4,094
---------------------------------- -------- --------
6,562 9,611
--------------------------------- -------- --------
Total assets 162,008 164,527
---------------------------------- -------- --------
Current liabilities
Trade and other payables (668) (781)
Lease liability - (2)
Total liabilities (668) (783)
---------------------------------- -------- --------
Net assets 161,340 163,744
---------------------------------- -------- --------
Equity
Share capital 56,517 56,517
Share premium 1,599 1,599
Foreign exchange reserve (69,857) (69,857)
Other reserves 2,767 2,687
Retained earnings 170,314 172,798
---------------------------------- -------- --------
Total equity 161,340 163,744
---------------------------------- -------- --------
COMPANY BALANCE SHEET
30 JUNE 2022
Audited Audited
2022 2021
$000 $000
---------------------------------- --------- ---------
Non-current assets
Property, plant and equipment 12 30
Investments in Group undertakings 145,099 145,099
-------------------------------------- --------- ---------
145,111 145,129
------------------------------------- --------- ---------
Current assets
Financial investments 2,251 2,499
Trade and other receivables 13,142 11,730
Cash and cash equivalents 1,264 4,086
-------------------------------------- --------- ---------
16,657 18,315
------------------------------------- --------- ---------
Total assets 161,768 163,444
-------------------------------------- --------- ---------
Current liabilities
Trade and other payables (311) (244)
Lease liability - (2)
-------------------------------------- --------- ---------
Total liabilities (311) (246)
-------------------------------------- --------- ---------
Net assets 161,457 163,198
-------------------------------------- --------- ---------
Equity
Share capital 56,517 56,517
Share premium 1,599 1,599
Foreign exchange reserve (147,715) (147,715)
Other reserves (2,470) (2,550)
Retained earnings 253,526 255,347
-------------------------------------- --------- ---------
Total equity 161,457 163,198
-------------------------------------- --------- ---------
The Company has elected to take the exemption under section 408
of the Companies Act 2006 to not present the individual parent
undertaking income statement. The result for the Company for the
year was a loss of $1,821,000 (2021: loss of $999,000).
GROUP CASH FLOW STATEMENT FOR THE YEARED 30 JUNE 2022
Audited Audited
2022 2021
$000 $000
-------------------------------------------------- -------- --------
Cash flows from operating activities
-------------------------------------------------- -------- --------
Loss before tax (2,484) (1,983)
------------------------------------------------------ -------- --------
Adjustments to reconcile Group loss before tax to net cash used in
operating activities:
Depreciation of property, plant and equipment 18 57
Finance costs/(income) 108 (820)
Equity-settled share based payment transactions 80 109
Loss on sale of property, plant and equipment - 31
------------------------------------------------------ -------- --------
Adjusted loss before tax prior to changes in
working capital (2,278) (2,606)
------------------------------------------------------ -------- --------
(Increase) in trade and other receivables (18) (491)
Decrease in trade and other payables (170) (624)
Net cash (used in) operating activities (2,466) (3,721)
------------------------------------------------------ -------- --------
Cash flows used in investing activities
Purchase of property, plant and equipment - (21)
Purchase of intangible exploration assets (572) (1,446)
Dividends received 220 220
Net cash used in investing activities (352) ( 1,247)
------------------------------------------------------ -------- --------
Cash flows used in financing activities
Lease repayments (3) (40)
Net cash flows used in financing activities (3) (40)
------------------------------------------------------ -------- --------
Net decrease in cash and cash equivalents (2,821) (5,008)
------------------------------------------------------ -------- --------
Cash and cash equivalents at the beginning of
the year 4,094 9,102
Net decrease in cash and cash equivalents (2,821) (5,008)
Cash and cash equivalents at the year end 1,273 4,094
------------------------------------------------------ -------- --------
COMPANY CASH FLOW STATEMENT FOR THE YEARED 30 JUNE 2022
Audited Audited
2022 2021
$000 $000
----------------------------------------------------- -------- -------
Cash flows from operating activities
----------------------------------------------------- -------- -------
Loss before tax (1,821) (999)
--------------------------------------------------------- -------- -------
Adjustments to reconcile Company loss before tax
to net cash used in operating activities:
Depreciation of property, plant and equipment 18 57
Finance costs/(income) 87 (813)
Equity-settled share based payment transactions 80 109
Loss on disposal of fixed assets - 31
--------------------------------------------------------- -------- -------
Adjusted loss before tax prior to changes in working
capital (1,636) (1,615)
--------------------------------------------------------- -------- -------
(Increase) in trade and other receivables (14) (25)
Increase in trade and other payables 9 15
Net cash (used in) operating activities (1,641) (1,625)
--------------------------------------------------------- -------- -------
Cash flows used in investing activities
Purchase of property, plant and equipment - (20)
Increase in inter-company funding (1,398) (3,537)
Dividends received from financial investments 220 220
Net cash (used in) investing activities (2,819) (3,337)
--------------------------------------------------------- -------- -------
Cash flows used in financing activities
Lease payments (3) (40)
Net cash flows used in financing activities (3) (40)
--------------------------------------------------------- -------- -------
Net decrease in cash and cash equivalents (2,822) (5,002)
--------------------------------------------------------- -------- -------
Cash and cash equivalents at the beginning of the
year 4,086 9,088
Net decrease in cash and cash equivalents (2,822) (5,002)
--------------------------------------------------------- -------- -------
Cash and cash equivalents at the year end 1,264 4,086
--------------------------------------------------------- -------- -------
GROUP STATEMENT OF CHANGES IN EQUITY
FOR THE YEARED 30 JUNE 2022
Foreign
Share Share exchange Other Retained
capital premium reserve reserves earnings Total equity
$000 $000 $000 $000 $000 $000
----------------------------- -------- -------- --------- --------- --------- --------------
At 1 July 2020 (audited) 56,517 1,599 (69,857) 2,927 174,432 165,618
----------------------------- -------- -------- --------- --------- --------- --------------
Loss for the year - - - - (1,983) (1,983)
Total comprehensive loss for
the year - - - - (1,983) (1,983)
----------------------------- -------- -------- --------- --------- --------- ------------
Share based payments - - - 109 - 109
Revaluation of EBT shares - - - (315) 315 -
Transfer between reserves - - - (34) 34 -
----------------------------- -------- -------- --------- --------- --------- ------------
At 30 June 2021 (audited) 56,517 1,599 (69,857) 2,687 172,798 163,744
----------------------------- -------- -------- --------- --------- --------- ------------
Loss for the year - - - - (2,484) (2,484)
Other comprehensive income
for the year - - - - - -
Total comprehensive loss for
the year - - - - (2,484) (2,484)
----------------------------- -------- -------- --------- --------- --------- ------------
Share based payments - - - 80 - 80
At 30 June 2022 (audited) 56,517 1,599 (69,857) 2,767 170,314 161,340
----------------------------- -------- -------- --------- --------- --------- ------------
COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE YEARED 30 JUNE 2022
Foreign
Share Share exchange Other Retained Total
Attributable to owners of Parent capital premium reserve reserves earnings equity
Company $000 $000 $000 $000 $000 $000
--------------------------------- -------- -------- --------- --------- --------- -------
At 30 June 2020 (audited) 56,517 1,599 (147,715) (2,310) 255,997 164,088
--------------------------------- -------- -------- --------- --------- --------- -------
Loss for the year - - - - (999) (999)
Total comprehensive loss for
the year - - - - (999) (999)
--------------------------------- -------- -------- --------- --------- --------- -------
Share based payments - - - 109 - 109
Revaluation of EBT shares - - - (315) 315 -
Transfer between reserves - - - (34) 34 -
At 30 June 2021 (audited) 56,517 1,599 (147,715) (2,550) 255,347 163,198
--------------------------------- -------- -------- --------- --------- --------- -------
Loss for the year - - - - (1,821) (1,821)
Total comprehensive loss for
the year - - - - (1,821) (1,821)
--------------------------------- -------- -------- --------- --------- --------- -------
Share based payments - - - 80 - 80
At 30 June 2022 (audited) 56,517 1,599 (147,715) (2,470) 253,526 161,457
--------------------------------- -------- -------- --------- --------- --------- -------
NOTES TO THE FULL YEAR FINANCIAL STATEMENTS
For the year ended 30 June 2022
(1) Accounting Policies
Basis of preparation
The financial information in the financial statements has been
extracted from the statutory accounts which have been prepared in
accordance with UK Adopted International Accounting Standard (UK
IAS) and in conformity with the requirements of the Companies Act
2006. The Company financial statements have been prepared in
accordance with UK Adopted International Accounting Standard (UK
IAS) as applied in accordance with the provisions of the Companies
Act 2006. The financial statements have been prepared under the
historical cost convention. The financial statements comply with
those parts of the Companies Act 2006 applicable to companies
reporting under UK Adopted International Accounting Standard (UK
IAS).
The announcement has been prepared on a basis consistent with
the accounting policies applied to the statutory accounts for the
year ended 30 June 2022.
The disclosed figures are not statutory accounts in terms of
section 434 of the Companies Act 2006. The statutory accounts give
full disclosure of the Group accounting policies and will be
published as soon as they are available.
On the statutory accounts for the year ended 30 June 2022, the
auditor gave an unqualified opinion and did not contain a statement
under section 498 (2) or (3) of the Companies Act 2006. The
statutory accounts for the year ended 30 June 2021 have been filed
with the Registrar of Companies.
Going concern
Global market conditions have recovered or are recovering from
the economic slowdown caused by the COVID-19 (coronavirus)
pandemic. However, the aftereffects of the Covid pandemic and the
ongoing uncertainty related to the Russian invasion of Ukraine are
creating significant economic and financial uncertainty at the
current time.
The two most significant sources of material uncertainty facing
the Bowleven Group today relate to:
(i) the timing of FID and the receipt of the $25 million FID
payment from Lukoil and New Age (Perenco in due course) and
(ii) the level of spending required under the 2023 Etinde WPB,
which has yet to be prepared and submitted to SNH for approval.
Preparing the 2023 WPB and agreeing that plan with ourselves,
LUKOIL and SNH, will be the first significant task facing Perenco
when they become operator at completion of their transaction with
New Age.
Progress towards FID has remained slower than we expected. There
are considerable commercial and regulatory issues which require
resolution before FID can be attained. The timing of resolution of
these formalities cannot be accurately predicted as many of them
are not within the Etinde JO partners' direct control.
The Directors have considered a number of different operational
scenarios for 2023 in order for us to prepare short and medium cash
flow forecasts and projections for the Etinde development project
and hence the Bowleven Group.
The Directors took the above issues into consideration when
determining the potential scenarios to use in their assessment of
the going concern status of the Group. These scenarios ranged from
no FID being achieved in 2023 through to modelling the impact of a
number of different development options on budgeted, forecasted and
projected cash flows until December 2024.
As New Age has not prepared a 2023 work plan and budget for the
Etinde project pending Perenco becoming Operator, we have made our
own assessment based on various assumptions regarding the steps and
actions that Perenco will take and the speed at which they will
progress the development plan towards FID. We have assumed FID will
occur in late 2023 or later for cash flow modelling purposes in our
base scenario.
Our assumption is that Perenco will most probably choose to
conduct a new assessment of Etinde development options and these
steps will most likely include a new FEED process. By their nature,
our expenditure projections for 2023 and later are highly uncertain
at this point in time. We believe that we have adopted a more
conservative approach to costs and potentially a more rapid
implementation timetable than Perenco may adopt in practice.
In each scenario modelled for the period July 2022 to December
2023, the Group continues to retain positive cash balances until at
least June 2023. Thereafter, current liquid resources are
forecasted to be fully depleted by the end of 2023 under all of the
scenarios modelled. However, we note that it remains plausible that
the rate of progress towards FID will remain slow in 2023 while the
JO partners and SNH seek to agree any new Etinde development
scenario.
As the timing of progress towards FID is not within the control
of the Group, we have concluded that it is highly likely that
Bowleven will need to raise additional short term funding to bridge
expenditure to FID. The amount of additional finance that will be
required will depend on the status of the Etinde development and
the likely time period to FID as well as any anticipated risk to
this being further delayed beyond our expectation.
At FID, Bowleven is due to receive $25 million from our JO
partners under the terms of the 2015 farm-in agreement. The
Directors do not anticipate any timing issue relating to receipt of
these funds when they fall due but note that any failure to receive
these funds promptly may also cause further funding issues for the
Bowleven Group.
The Directors consider the risk of the Government of Cameroon
removing the Etinde PSC contract from the Etinde JO partners is low
at the current time, for the following reasons:
-- the issue of the January 2021 date has not been raised as a
formal concern by SNH and SNH has approved all annual work
programmes and budgets up to and including the year ending 31
December 2021;
-- we will request the Government eliminate this uncertainty as
part of the FID regulatory approval process; and
-- The expected addition of Perenco to the JO as operator, in
place of New Age, is likely to reduce practical risk of the
Government of Cameroon entering default proceedings.
After taking the preceding funding risks into account, the
Directors are satisfied that the Group would be able to secure
additional debt and equity funding in order to finance its share of
the Etinde development. Whilst discussions with certain parties are
ongoing about an injection of new debt financing, and we have also
undertaken preliminary discussions with regard to raising new
equity funding. However, no formal binding financing arrangements
have been put in place at the current time.
The Directors are nevertheless conscious that the issues
discussed above, create a material uncertainty that may cast
significant doubt over the Group's ability to continue as a going
concern and therefore, that the Group may be unable to realise its
assets and discharge its liabilities in the normal course of
business. Whilst acknowledging this material uncertainty, the
Directors remain confident of raising finance in 2023 including
making further cost savings to reduce the level of cash
expenditure. Accordingly, the financial statements have been
prepared on a going concern basis as the Directors are of the
opinion that the Group has sufficient funds to meet ongoing working
capital and committed capital expenditure requirements.
The financial statements do not include any adjustments that
might result if the Group were unable to continue as a going
concern.
The auditor's report on the 2022 Annual Report and Accounts,
which is un-modified, includes a Key Audit Matter disclosure
identifying events or conditions that create a material uncertainty
which may cast significant doubt on the Group's and Parent
Company's ability to continue as a going concern, noting that the
Group and Parent Company may require additional funding during the
12 months after approval of the financial statements in order to
continue as a going concern, depending on the timing of the final
investment decision for the Etinde project.
(2) Etinde Valuation
The proposed acquisition of New Age's 37.5% gross share of the
Etinde Joint Operations, by Perenco by setting a potential external
valuation of the Etinde asset as a whole, represents a triggering
event as defined under IFRS accounting standards, requiring the
Directors to formally value Bowleven Group's share of the Etinde
project.
Global events in 2021/22 have had a significant impact on global
supply and demand for both oil and gas, causing material increases
in the expected price of hydrocarbons in the short term as well as
creating significant market uncertainty.
Three major uncertainties related to:
-- global hydrocarbon prices which are currently at or higher
than 2021 price levels. However, the Directors consider that at the
current time, there is no definitive evidence that prices will
remain at current levels in 2026 when first production is
expected;
-- timing of FID; and
-- regulatory uncertainty. In our assessment, management remain
confident that the JO partners have undertaken all reasonable steps
possible to ensure that the JO is meeting all its obligations to
ensure that FID is given as soon as possible. Accordingly, although
the possibility of a licence revocation exists, management
considers that the risk of this occurring is low in the short
term.
Etinde Impairment Review in 2022
The discounted cash flow model was used in 2022 to determine our
best estimate of the expected value of the development of the
Etinde asset taking into consideration the following factors and
assumptions:
-- the macroeconomic environment globally and in Cameroon;
-- prevailing market conditions in the oil and gas industry;
-- a conservative and phased inclusion of the hydrocarbon resource available for development;
-- the commercial and governmental situation in Cameroon;
-- The JO partner approved Equatorial Guinea development
scenario, plus additional consideration of potential alternate
approaches that Perenco, as incoming Operator, might propose at a
future date; that the development will seek to maximise production
from the outset giving due consideration to the potential for
supplying gas to both Cameroon domestic and export supply;
-- that condensate can be supplied to either the global or domestic markets for the same value;
-- Differential gas and LNG process for the Cameroon domestic
and LNG based European gas export market;
-- infrastructure capital and operating costs estimated are
based on FEED and pre-FEED engineering studies undertaken or
assessed between 2019 and 2021, except where pricing data was not
available; and
-- the Etinde asset is considered to be a single cash-generating
unit and includes historic exploration costs incurred on the Etinde
Permit in line with the treatment of those costs for cost recovery
purposes.
Until the JO partners and the Government of Cameroon issue FID
and gain the necessary approvals, any valuation of Etinde will
include many uncertainties and risks. Any financial model that is
prepared at this stage of the process, in the period immediately
prior to the point in time that development consent is given and
approvals issued, is inherently uncertain. The most significant
uncertainties impacting the valuation model include:
-- reaching commercial agreement with potential off-takers and
receiving governmental approval to export gas;
-- agreeing the development solution with joint venture partners and other stakeholders;
-- raising finance to fund development post-FID; and
-- any impact arising from FID date and the subsequent
governmental approval of the revised field development plan. The
current PSC terminates 2045. However, failure to complete the
initial work programme set out in the Presidential decree and EEA
documentation within the first six years after approval in January
2015, may be used to provide grounds under which the Government of
Cameroon can proceed to terminate the Etinde development licence
early at their option, following the process set out in the
Cameroon Petroleum Code.
We have applied a risk weighted discount rate of 15% to the
projected Etinde cash flows, based on FID in late 2023, with first
revenue projected to occur after 2026, with the date depending on
the development scenario considered. All capex costs include a
project contingency of 20% and allow for EPIC contract costs of 15%
and 5% withholding tax applied on imports under Cameroon fiscal
code. The largest single risk factor included in the discount rate
reflects the risk relating to Government approval of the EG
development option and a likely longer period to reach the
approval.
We have used a reasonable range of condensate, Cameroon domestic
and European export gas (LNG) pricing taking due account of
currently available long term oil and gas price forecasts prepared
by internationally reputable bodies such as the IMF, World Bank and
US EIA, as well as other oil and gas businesses and market
commentors. We have used a range of recovered oil and gas reserves
from various discovered oil and gas condensate fields based on the
latest reservoir modelling information prepared by New Age on a C2
(P50) resource basis. Our base line financial modelling
demonstrates that the 1 January 2023 value of Bowleven group's 20%
share of the Etinde development project ranges from $158 million to
over $200 million at $65 Brent, $6 LNG export price and $3 domestic
gas price points.
Whilst we have prepared financial forecasts for alternate
development scenarios that Perenco may propose to the JO partners,
we note that any such alternative will require the formal approval
of at least LUKOIL as well as SNH and the Government of Cameroon to
become official JO policy. Due to the nature of these alternate
potential developments, our forecasts have a higher degree of
uncertainty as they have not been studied in detail as part of FEED
or pre-FEED activities. In general terms, these scenarios tend to
have higher initial capital development costs (which may be reduced
by sale and lease back arrangements) and higher operating costs,
giving rise to a lower calculated NPV range. Offsetting this, the
risk weighting attached to the time/approval of any Cameroon
focused development is materially lower than for the EG option.
Using lower discount rates partially offsets the impact of higher
costs. In any case, the Board of Bowleven remain adamant that we
will not approve any alternate development scenario that provides a
significantly lower economic return to Bowleven's shareholders.
The key sensitivities in our valuation models include:
-- Export price. Increasing Oil and gas export prices to $75 per
bbl and $8 per mmscf, has a positive impact of around $50 to $60
million increase in NPV, depending on the development scenario;
-- Discount rates. Increasing risk weighted discount rates from
15 to 17%, reduces NPV by around $20 million, depending on the
development scenario;
The impact of FID and development commencement alongside first
revenue have allowed for using the different assumptions under the
EG and alternate development options. This is also the major risk
weighting factor in arriving at the 15% risk weighted discount
rate. As such making a further sensitivity adjustment would be
double counting the risk weighting.
On this basis, the Board has concluded that the current net book
value of the Etinde intangible asset (at $156 million) is not
impaired at the current date. However, in reaching this conclusion
we do note that there are potential material uncertainties and that
we cannot rule out further valuation impairment triggering events
arising in future periods and that a lower valuation may be
estimated at that point.
(3) Other Notes
a) The loss attributable to ordinary shares and the number of
ordinary shares for the purpose of calculating the diluted earnings
per share are identical to those used in the basic earnings per
share. The exercise of share options or warrants would have the
effect of reducing the loss per share and consequently are not
taken into account. In the prior year, the loss attributable to
ordinary shares and the number of ordinary shares for the purpose
of calculating the diluted earnings per share were identical to
those used in the basic earnings per share.
b) Directors have not recommended a dividend (2021: nil).
c) As at 30 June 2022, a contingent asset of $25 million is
disclosed for the FID consideration relating to the Etinde farm-out
and will be credited to intangible exploration assets once further
clarity around Etinde project sanction/FID is obtained.
(4) 2022 Annual Report and Accounts
Full accounts together with a notice of AGM are scheduled to be
posted on 4 November 2022 to shareholders who elected to continue
to receive a hard copy report and can be obtained free of charge,
at the Company's registered office, 50 Lothian Street, Edinburgh,
EH3 9WJ for a period of one month after publication. For
shareholders who opted to receive the annual report electronically,
notification will be provided when the annual report is available
to access from the company website www.bowleven.com .
GLOSSARY
AGM annual general meeting
AIM the market of that name operated by the London
Stock Exchange
Articles of Association the internal rules by which a company is
governed
BBL or bbl barrel of oil
bcf or bscf billion standard cubic feet
of gas
Board of Directors the Directors of the Company
boe barrels of oil equivalent
Bomono Permit/Licence the production sharing contract between the
Republic of Cameroon and EurOil, dated 12
December 2007, in respect of the area of
approximately 2,328 km2 comprising former
blocks OLHP-1 and OLHP-2 onshore Cameroon;
or, as the context may require, the contract
area to which that production sharing contract
relates
Bowleven or Bowleven Bowleven plc (LSE: BLVN) and/or its subsidiaries
plc as appropriate
CAMOP New Age Cameroon Operating Company
CFA Central African Francs
Companies Act 2006 the United Kingdom Companies Act 2006 (as
(the Act) amended)
contingent resources those quantities of hydrocarbons
that are estimated to be potentially
recoverable from known accumulations,
but which are not currently considered
to be commercially recoverable
EA Exploitation Authorisation
EBT employee benefit trust
EEEA Etinde Exclusive Exploitation Agreement
EG Equatorial Guinea
E & P exploration and production
Etinde Permit the Etinde Exploitation Authorisation (EA)
area. The Etinde EA, granted on 29 July 2014,
covers an area of approximately 461km2 (formerly
block MLHP-7) and is valid for an initial
period of 20 years with an initial six-year
period ending January 2021, by which time
development must commence. SNH have informed
the JO of their intention to exercise their
right to back into this licence, but have
not signed the Participation Agreement and
funded their share of cash calls in accordance
with the requirements set out in the PSC
EurOil EurOil Limited, an indirectly wholly owned
subsidiary of Bowleven plc, incorporated
in Cameroon
FEED Front End Engineering Design
FID final investment decision
FLNG Floating liquefied natural
gas
G&A general and administration
GIIP gas initially in place
Host Government Government of Cameroon
Group the Company and its direct and indirect subsidiaries
HSSE health, safety, security and environment
IAS International Accounting Standards
IFRS International Financial Reporting
Standards
Intra Isongo nomenclature used to describe a sequence
of sedimentary rocks in the Etinde licence
area
JO, JV or JV partners an unincorporated joint
operation. Joint Venture
partners are the financial
investors who jointly
own and operate the unincorporated
joint operations
km kilometres
km2 square kilometres
LNG liquefied natural gas
LPG liquefied petroleum gas
LTIP long-term incentive plan
LUKOIL LUKOIL Overseas West Project Limited, a subsidiary
undertaking of OAO LUKOIL
Macquarie Macquarie Capital (Europe) Limited
mmbbls million barrels
mmboe million barrels of oil equivalent
MMBtu Metric Million British Thermal
Unit
mmscf million standard cubic feet
of gas
mscf thousand standard cubic feet of
gas
New Age New Age (African Global Energy) Limited,
a privately held oil and gas company
New Age Group New Age and its subsidiaries
NOMAD nominated advisor
ordinary shares ordinary shares of 10 pence each in the capital
of the Company
P10 (3C) 10% probability that volumes will be equal
to or greater than stated volumes
P50 (2C) 50% probability that volumes will be equal
to or greater than stated volumes
P90 (1C) 90% probability that volumes will be equal
to or greater than stated volumes
PSC production sharing contract
Q1, Q2 etc. first quarter, second quarter
etc.
scf standard cubic feet.
shareholders means holders of ordinary shares and 'shareholder'
means any one of them
SNH Société Nationale des Hydrocarbures,
the national oil and gas company of Cameroon
tcf trillion cubic feet
TCM Technical Committee Meeting
US United States of America
$, US Dollars, USD United States of America
Dollars
GBP, GB Pounds, GBP Great Britain Pounds Sterling
WPB Work plan and budget
Notes:
Prospective resources, contingent resources and reserves shall
have the meanings given to them by the guidance on petroleum
resources classification contained in the 2007.
SPE Petroleum Management System published jointly by the Society
of Petroleum Engineers, The American Association of Petroleum
Geologists, the World Petroleum Council and the Society of Petroleum
Evaluation Engineers.
For the purposes of this announcement, 6mscf of gas has been
converted to 1boe.
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END
FR EAAEFDFFAFAA
(END) Dow Jones Newswires
November 01, 2022 03:30 ET (07:30 GMT)
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