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BowLeven Plc BLVN Etinde Strategic Alliance



  BowLeven Plc (BLVN) - Etinde Strategic Alliance

RNS Number : 3872Q
BowLeven Plc
06 November 2012
 



 

 

6 November 2012

 

Bowleven plc ("Bowleven" or the "Company")

 

                                       

Proposed Strategic Alliance agreed in respect of the Future Development of the
                                Etinde Permit

 

Bowleven is delighted  to announce it  has today signed  a Strategic  Alliance 
Agreement with Petrofac bringing investment capital and development  expertise 
to the proposed development of the Etinde Permit, Cameroon.

 

HIGHLIGHTS

 

·     Strategic Alliance Agreement signed between Bowleven and Petrofac,
following extensive technical and commercial due diligence, to deliver first
production from Etinde Permit, currently targeted for 2016

·     Petrofac will provide Bowleven with potential access to up to USD500
million towards the first stage of development of the Etinde Permit.

o  Initial capital  investment available at FID, anticipated H2 2013

o  Up to USD60 million towards IM-5 well costs, available at FID from this
investment

·     Alliance also provides Bowleven with access to world class Petrofac
development engineering, design and project management personnel and training
capabilities

·     Petrofac's investment incentivised and remunerated through a share of
Etinde cash flows

·     Transaction subject to Bowleven shareholder approval. Circular convening
general meeting expected to be issued by no later than 23 November 2012;
Bowleven Board intend to recommend the Transaction to shareholders.

 

 

Kevin Hart, Chief Executive of Bowleven plc, commented:

"I am very happy that Bowleven, through our subsidiary Euroil, is entering
into a proposed strategic alliance with Petrofac in respect of our planned
Etinde phased development. This complementary union provides Bowleven with
potential access to both investment capital and, just as importantly,
Petrofac's extensive development experience. Petrofac's excellent track record
of service provision, including training, will augment significantly Euroil's
strong local presence and capability. Our alliance with Petrofac will help
deliver first production from our Etinde project, and represents a major step
towards our goal of converting resources to reserves in Cameroon."

 

 

Andy Inglis, Chief Executive, Petrofac Integrated Energy Services, commented:

 

"We are delighted to be working with Bowleven to help them unlock the value of
their Etinde Permit.  Creating  this strategic alliance at  an early stage  of 
the project offers  Petrofac the  opportunity to  provide integrated  services 
covering, onshore and offshore  facilities development, drilling services  and 
training and operations, alongside the deployment of capital.  This is in line
with our strategy of providing  our exploration-led customers with  integrated 
project delivery services."

 

ENQUIRIES

For further information please contact:

 

Bowleven plc

Kevin Hart, Chief
Executive                                                        00 44 131 524
5678

Kerry Crawford, Head of Investor Relations                       

 

Brunswick Group LLP

Patrick
Handley                                                                               
00 44 207 404 5959

Catriona
McDermott                                                                     

 

Bank of America Merrill Lynch (Nomad and broker)          
                                            

Derek
Ross                                                                                        
00 44 207 628 1000

Tony White

 

Barclays Bank plc (Broker)

Bertie
Whitehead                                                                           00
44 207 623 2323          

Tom Macdonald                                              

 

 

 

NOTES TO EDITORS:

Bowleven is an African focused oil and gas exploration group, based in
Edinburgh and traded on AIM. Bowleven's strategy is focused on creating and
realising material value through exploration led organic growth.  Bowleven
holds equity interests in five blocks in Cameroon, with three blocks located
offshore in shallow water and two onshore. All of these blocks are operated by
Bowleven.  Bowleven also holds an equity interest in an onshore block in Kenya
operated by Adamantine Energy Limited.

 

 

IMPORTANT NOTICES

 

The Appendices  to  this  announcement  and  the  subsequent  Definitions  and 
Glossary of Technical Terms form part of this announcement.

 

This announcement is for information purposes only and shall not constitute an
offer to buy, sell, issue, or subscribe  for, or the solicitation of an  offer 
to buy, sell, issue, or subscribe for  any securities, nor shall there be  any 
sale of securities in  any jurisdiction in which  such offer, solicitation  or 
sale would  be  unlawful prior  to  registration or  qualification  under  the 
securities laws of any such jurisdiction. This announcement has been issued by
and is the sole responsibility of Bowleven. 

 

This announcement contains (or may contain) certain forward-looking statements
with respect  to  certain  of  Bowleven's plans  and  its  current  goals  and 
expectations relating to  its future financial  condition and performance  and 
which involve a number of  risks and uncertainties. Bowleven cautions  readers 
that no forward-looking  statement is  a guarantee of  future performance  and 
that actual  results  could differ  materially  from those  contained  in  the 
forward-looking  statements.    These   forward-looking  statements   can   be 
identified by the fact that they do  not relate only to historical or  current 
facts.  Forward-looking  statements  sometimes   use  words  such  as   "aim", 
"anticipate",  "target",  "expect",  "estimate",  "intend",  "plan",   "goal", 
"believe", or  other words  of similar  meaning. Examples  of  forward-looking 
statements  include,  amongst  others,  statements  regarding  or  which  make 
assumptions in  respect  of  the  proposed  Strategic  Alliance,  the  Group's 
liquidity  position,  the  future  performance  of  the  Company's   principal 
subsidiary undertakings, the on-going exploration and appraisal of the Group's
portfolio of assets, the timing of the commencement of any development of  and 
future production (if  any) from  those assets, the  ability of  the Group  to 
discover new reserves, the  prices achievable by the  Group in respect of  any 
future production, the costs of exploration, development or production, future
foreign exchange  rates,  interest rates  and  currency controls,  the  future 
political and  fiscal regimes  in  the overseas  markets  in which  the  Group 
operates, the  Group's future  financial position,  plans and  objectives  for 
future operations and any  other statements that are  not historical fact.  By 
their nature, forward-looking statements involve risk and uncertainty  because 
they relate to future events and circumstances, including, but not limited to,
economic and  business  conditions, the  effects  of continued  volatility  in 
credit markets, market-related risks  such as changes in  the price of oil  or 
changes in interest rates and foreign exchange rates, the policies and actions
of governmental  and  regulatory  authorities,  changes  in  legislation,  the 
further development of standards and interpretations under IFRS applicable  to 
past, current  and  future periods,  evolving  practices with  regard  to  the 
interpretation and application of standards under IFRS, the outcome of pending
and future  litigation or  regulatory investigations,  the success  of  future 
explorations, acquisitions and other strategic transactions and the impact  of 
competition. A number  of these factors  are beyond Bowleven's  control. As  a 
result, Bowleven's actual future results may differ materially from the plans,
goals, and expectations  set forth in  Bowleven's forward-looking  statements. 
Any forward-looking  statements made  in  this document  by  or on  behalf  of 
Bowleven speak only as of  the date they are made.  Except as required by  the 
FSA, the London  Stock Exchange,  the AIM  Rules or  applicable law,  Bowleven 
expressly disclaims  any obligation  or undertaking  to release  publicly  any 
updates or  revisions  to any  forward-looking  statements contained  in  this 
document to reflect any changes in Bowleven's expectations with regard thereto
or any  changes in  events,  conditions or  circumstances  on which  any  such 
statement is based. 

 

BofA Merrill Lynch, which is authorised and regulated in the United Kingdom by
the FSA, is acting  for Bowleven and  for no-one else  in connection with  the 
Strategic Alliance, and will not be responsible to anyone other than  Bowleven 
for  providing  the  protections  afforded  to  customers  of  Merrill   Lynch 
International or for providing advice to  any other person in relation to  the 
Strategic Alliance or any

APPENDIX I

 

Introduction to the proposed Strategic Alliance

 

Bowleven today announces its entry into a Strategic Alliance with Petrofac  in 
connection with  the  proposed development  of  the Etinde  Permit,  Cameroon. 
Pursuant to the Strategic Alliance, Petrofac will (i) provide investment of up
to USD500 million towards the  Group's share of costs  for the first stage  of 
the proposed development of  the Etinde Permit,  Cameroon, subject to  various 
conditions being  satisfied and  (ii)  work with  the  Group to  finalise  and 
execute the   field development  plan in  respect of  the first  stage of  the 
proposed development of the Etinde Permit to deliver first production from the
acreage, targeted to occur in 2016. 

 

The Group will pay to Petrofac a share of the operating cashflows arising from
the  Etinde development  in return for  the provision of  its investment.  The 
rate of these payments will be set at FID to provide Petrofac with an internal
rate of return ("IRR") of 20% and a money multiple of 2.125 of the  investment 
amount to be provided by them.  Petrofac's return is also ultimately capped at
a maximum of 50% of the projected net present value ("NPV") of Euroil's  share 
of stage 1 development.  In addition, it is anticipated that Petrofac will  be 
remunerated, at arm's length terms, for the provision of services to  Bowleven 
in relation to the Etinde project. These services are anticipated to comprise,
subject to  any  necessary co-venturer  or  Cameroon State  approval,  project 
management, engineering,  design, procurement  and construction  services  and 
training expertise.

 

Principal reasons for the Strategic Alliance

 

The Group is proposing the Strategic Alliance for two principal reasons:

 

1.    access  to  all, or  at  least  a substantial,  proportion  of  Euroil's 
anticipated funding requirement for the Stage 1 Development; and

2.    access to Petrofac's world-class development expertise.

 

The Group considers there is potential for significant value realisation  from 
the Etinde  Project.  The  potential provision  of an  integrated delivery  of 
significant investment capital and the capability to execute this development,
in alliance with Petrofac, helps in unlocking that value for shareholders. 

 

In view of the size and nature  of the transaction, the implementation of  the 
Strategic Alliance is  conditional, inter  alia, on the  approval of  Bowleven 
shareholders in general meeting.   A circular convening  a general meeting  of 
Bowleven shareholders is expected  to be issued by  no later than 23  November 
2012.

 

Appendix II to this announcement sets  out in more detail the principal  terms 
and conditions of the proposed Strategic Alliance Agreement.

 

 

Background to and reasons for the proposed Strategic Alliance

 

Development concept for Etinde Permit

A key near term objective of the Group is to convert a substantial  proportion 
of its existing resource base to  reserves, through the further appraisal  and 
subsequent final investment decision ("FID") to proceed with a development  of 
the discoveries on blocks MLHP-5 and MLHP-7 within the Etinde Permit and bring
these assets through to production.

 

As noted in the announcement of the  preliminary results of the Group for  the 
financial year ended 30 June  2012, also released today, significant  progress 
has been  made towards  accomplishing this  objective in  2012.  Bowleven  has 
identified a selected development concept, based  on a "hub and spoke"  scheme 
enabling a staged and flexible approach to the development and access to early
liquids production.  Under this concept,  discoveries in block MLHP-7 will  be 
the focus for the first stage ("Stage 1") of the development in which all  the 
required infrastructure  for this  phase will  be constructed  and  installed, 
including an onshore processing facility.  The second stage of the development
concept envisages the integration of the Group's discoveries on block  MLHP-5, 
utilising the onshore  infrastructure installed  during the  initial stage  of 
development.   With  a  high  level  concept  selected,  detailed  development 
planning has commenced and a project definition, scope and execution  schedule 
for the Stage 1 Development are all in place. 

 

In addition  to  the selection  and  maturation of  the  proposed  development 
concept, subsurface appraisal and development activities are continuing.   The 
evaluation of the 3D 4C OBC seismic data  acquired on the IE and IF fields  on 
block MLHP-7  is  progressing.    An independent  subsurface  and  engineering 
consultancy was engaged  to help  develop the  detailed reservoir  engineering 
work required  for field  development planning,  including the  generation  of 
reserves  and   production  profiles.   Drilling   operations  on   the   IM-5 
appraisal/development well commenced in September 2012, and an update from the
well is  now  expected in  mid  January  2013.  The  requirement  for  further 
appraisal drilling, if any, will be assessed following the results of IM-5.

 

The Group's planning  and scheduling to  secure an Exploitation  Authorisation 
("EA") over a substantial part of  the Etinde Permit is also well-advanced.  A 
draft Etinde Exploitation Authorisation Application ("EEAA") has been prepared
and submitted to  the Cameroon authorities,  supplemented by three  in-country 
workshops to support the submission. The final EEAA submission is expected  to 
be submitted  by  Euroil before  21  December 2012,  the  expiry date  of  the 
exploration period  under the  Etinde  Permit -  the  application for  the  EA 
overrides the expiry date of the exploration period under the Etinde  Permit.  
On grant of the EA on the  terms sought, the Etinde Permit joint venture  will 
secure development and exploitation rights over the relevant exploitation area
for an initial period of 20 years. The  grant of the EA will also trigger  the 
exercisability  of  an  option  of  the  State  of  Cameroon  to  take  a  20% 
participating interest in the joint venture, which (if exercised) will  reduce 
the Group's interest in the Etinde Permit to 60%.

 

The Group is  targeting FID  in the  second half  of 2013,  with the  proposed 
Strategic Alliance providing a  longstop date for FID  of 31 December 2014  or 
such later date as  the parties may agree.  Current anticipated timetables  in 
respect of the proposed  fertiliser plant / gas  offtake solution and Stage  1 
Development  work indicate first production from the Etinde project in 2016.

 

The immediate priorities for the Etinde  development team are the securing  of 
the EA, completion of drilling and  testing activities on the IM-5 well,  site 
selection for the onshore processing facilities and completing the  associated 
environmental and social impact assessment (ESIA) for the development.

 

Key outstanding conditions to any Stage 1 Development

Bowleven has identified three key outstanding conditions to FID on the Stage 1
Development:

 

1.    Award of EA

 

Details of the current status of the EEAA are set out above.  It is  currently 
anticipated that the formal  EEAA will be submitted  before 21 December  2012, 
the expiry date of the Etinde Permit exploration period. 

 

2.    Signature of a Gas Sales Agreement

As outlined in more detail in the Group's preliminary results announcement,  a 
detailed gas sales term sheet amongst Euroil, SNH and Ferrostaal, in  relation 
to the  potential  supply  of  Etinde Permit  gas  production  to  a  proposed 
fertiliser plant  to  be  constructed  near  Limbe  in  Cameroon,  is  nearing 
finalisation, following the signature of the initial feedgas MOU in April this
year. This term sheet will form the basis for a full gas sales agreement,  the 
drafting and negotiation  of which  is expected  to follow  shortly after  the 
finalisation of  the  gas  sales  term  sheet.   All  interested  parties  are 
targeting the end of 2012 for the agreement of that term sheet.

 

In addition  to the  Ferrostaal  fertiliser project,  there has  been  further 
progress on  the initiative  between GDF  Suez  S.A. and  SNH to  advance  the 
monetisation of  the  substantial  undeveloped gas  resource  within  Cameroon 
through an aggregation scheme to supply an indigenous LNG facility.  The Group
also  continues  to  review  additional  gas  offtake  solutions,  which   may 
ultimately be utilised, subject to available gas volumes, in the future.

 

3.    Access to Finance for the Stage 1 Development

The proposed  Strategic  Alliance is  a  significant step  towards  the  Group 
meeting this key condition  to a Stage 1  Development.  Further detail on  the 
financing options available to the Group is provided below.

 

Progress towards Stage 1 Development funding

Throughout 2012, Bowleven has  continued to review and  progress a variety  of 
potential financing options for its participation in the Stage 1 Development. 
The transition  of the  Etinde  Permit from  an  exploration asset  towards  a 
development asset provides  the opportunity to  access alternative sources  of 
funding. In addition to the more conventional debt funding solutions, the high
equity interest retained  in the  Etinde Permit  provides the  Group with  the 
opportunity to bring in additional farm-in partners, if appropriate.

 

Discussions have taken place, and continue, with a number of potential capital
providers (including Petrofac) with a view to securing the required  financing 
prior to  FID. The  Company remains  optimistic  that there  are a  number  of 
potential options available for  its development funding requirements;  whilst 
also recognising that  success on  securing certain of  these finance  sources 
will be influenced by the market environment at the time.

 

Access to potential development capital through the Strategic Alliance

Initial discussions between Bowleven and Petrofac  on the terms of a  proposed 
Strategic Alliance began shortly after  completion of the Group's recent  five 
well exploration/appraisal drilling  campaign on the  Etinde Permit. From  the 
outset, these  discussions  highlighted the  benefits  to each  party  of  the 
provision by Petrofac  to Bowleven of  access to both  capital and  integrated 
development services to  execute a  Stage 1  Development -  in particular  the 
complementary nature of an alliance between a successful exploration  operator 
with pre-development assets and an established international oilfield services
company with a wealth of upstream development experience and a track record of
global project delivery.

 

During the  course  of the  preceding  few  months Petrofac  has  carried  out 
extensive technical,  commercial and  legal due  diligence on  Euroil and  the 
Etinde project prior to entering into the Strategic Alliance.

 

The proposed  Strategic Alliance  with Petrofac  will provide  the Group  with 
potential access to up to USD500 million of investment capital following  FID. 
Although the Group cannot  give any definitive assurance  at this stage as  to 
the extent of the full funding requirement  for its share of the costs of  the 
Stage 1  Development,  the  provision  of  capital  from  Petrofac  under  the 
Strategic Alliance will represent  potentially all or  at least a  substantial 
proportion of this requirement.

 

In addition, the terms of Petrofac's  investment, which are described in  more 
detail in Appendix II to this announcement, provide Bowleven with  flexibility 
to seek additional funding for the balance of its share of Stage 1 Development
costs, in  the event  that these  are  not met  wholly through  the  Strategic 
Alliance.

 

As described in more detail in Appendix II, Petrofac will be incentivised  and 
receive the return  on  its investment through a  share of the Etinde  project 
cash flows.   The level  of  these payments  will be  set  at FID  to  provide 
Petrofac with a projected IRR of 20%  and a projected money multiple of  2.125 
of the investment  amount provided  by them. Petrofac's  remuneration is  also 
ultimately capped at  a maximum of  50% of the  NPV of Euroil's  share of  the 
proposed development. 

 

Information on Petrofac

In addition  to providing  potential  access to  a significant  proportion  of 
Euroil's anticipated  share  of  Stage  1  Development  costs,  the  Strategic 
Alliance also affords  the Group  access to Petrofac's  extensive world  class 
development capability.

 

Petrofac is  an oilfield  service company  listed on  the main  market of  the 
London Stock Exchange  and a  constituent of  the FTSE  100 index.  It has  an 
operating history  of  over  30  years and  employs  more  than  17,200  staff 
worldwide. Petrofac's key areas of expertise are:

 

·     the design and build of oil and gas infrastructure;

·     the operation, maintenance and management of assets; and

·     the training of personnel.

 

Petrofac provides services to operators across the entire spectrum of the  oil 
and gas  asset  life  cycle,  on either  a  standalone  or  integrated  basis. 
Consistent with the nature of the Strategic Alliance,  its stated strategy  is 
to offer  flexible  commercial  models  for the  integration  of  its  service 
offering, involving the deployment of its own capital to create alignment with
its partners. Its  existing global portfolio  of integrated service  provision 
demonstrates a  track record  of  enabling upstream  operators to  deliver  on 
development projects, including the following partnerships and alliances:

 

Berantai Development, Malaysia

In 2011, Petrofac signed a Risk Service Contract (RSC) to lead the  fast-track 
development of the Berantai gas field, on behalf of Petroliam Nasional  Berhad 
(PETRONAS), the Malaysian national oil company. 

 

Along with two  local partners, Petrofac  provides a range  of services,  from 
well analysis  and subsurface  modelling  to the  design and  construction  of 
facilities, to  well engineering,  drilling and  production optimisation,  and 
ultimately to operations and  maintenance of the  installed facilities. A  key 
area of focus for Petrofac will be to use its extensive training  organisation 
to develop local resource capability.

 

The Dons Development, UKCS

In 2006, Petrofac acquired interests in the West Don and Don Southwest  fields 
in the North Sea, and agreed to develop both fields in parallel, together with
partners.

 

Petrofac leveraged its oilfield services  capability to move rapidly from  the 
initial concept evaluation stage to offshore production operations. The use of
a floating production facility cut development  time, and a dual stage  export 
route enabled Petrofac to  achieve first oil  from West Don  less than a  year 
from receiving approval of the Field Development Plan (FDP).

 

Cendor Development, Malaysia

In 2004, Petrofac acquired a 30% interest in Block PM304, offshore Peninsular
Malaysia, and assumed Operatorship of the Cendor field development.  Using an
innovative, flexible and cost effective solution, Petrofac was able to bring
the field on stream only 15 months after receiving FDP approval. 

 

Petrofac Integrated Service Provision during Stage 1 Development

 

The Strategic Alliance  anticipates that  the Group  will have  access to  the 
operational experience and expertise of Petrofac in two distinct phases during
any Stage 1 Development:

 

1.    Before FID:  initially the Group  anticipates that it  will integrate  a 
number of Petrofac personnel within its own development team to complement and
supplement the existing  organisation. The  emphasis of  the expertise  sought 
from  the  relevant  Petrofac  personnel  will  be  in  areas  not   currently 
represented within the  Bowleven Group -  notably, facilities engineering  and 
development project  management services.  The engagement  of these  personnel 
will be on a standalone, transparent and arms' length basis and on  commercial 
terms customary in the international oil and gas industry.

 

Bowleven and Petrofac have also signed an initial service contract today under
which Petrofac  has agreed  to  provide to  Bowleven certain  engineering  and 
project  management  personnel  on  arm's  length  terms  to  assist  in   the 
engineering maturation phase of the  Stage 1 Development, a  period   expected 
to run from completion of IM-5 drilling and testing operations to FID. 

 

2.    From  FID to  First  Production: following  FID,  the Group  expects  to 
maintain the arrangement  with Petrofac  in place  before FID  and to  further 
integrate Petrofac  project management  and engineering  personnel within  the 
Euroil development team. In addition to this, it is anticipated that the Group
will have access  to Petrofac's detailed  engineering, design and  procurement 
services for the  execution phase of  the Stage 1  Development, such  services 
anticipated to incorporate some or all of the following:

 

a.    offshore facilities;

b.    pipelines and umbilicals; and

c.     onshore processing facilities.

 

                The terms of provision  of these detailed engineering,  design 
and procurement  services are  under  discussion but  are  expected to  be  on 
transparent, open book and  arms' length terms,  with an appropriate  industry 
benchmarking exercise. The award  of any such service  contracts will also  be 
subject to any necessary co-venturer or Cameroon state approvals.

 

In addition, it is envisaged that Euroil and Petrofac will agree and  document 
a detailed contracting strategy applicable to all procurement activities to be
undertaken by Petrofac in connection with the Stage 1 Development.   A guiding
principle of  this  detailed contracting  strategy  will be  the  ensuring  of 
compliance with applicable  Etinde Permit, joint  operating agreement  ("JOA") 
and legal requirements and consistency  with the Group's existing  contracting 
philosophy for the Stage  1 Development. It is  anticipated that the  improved 
purchasing power and expertise  provided by Petrofac in  this area will be  of 
added value to the Development.

 

Petrofac also have extensive expertise in providing training capabilities  and 
support for the projects they are  involved with. This service provision  will 
augment Euroil's strong local presence and capability in Cameroon.

 

The provision  by  Petrofac to  Bowleven  of these  development  services  and 
expertise will  be, in  the view  of Bowleven  given the  current strength  of 
demand for skilled personnel  in the industry, an  important advantage of  the 
Strategic Alliance.

 

 

Further details of the Strategic Alliance

 

As stated above, Appendix  II to this announcement  summarises in more  detail 
the principal terms and conditions of the proposed Strategic Alliance.

 

 

Current trading and prospects

 

The Company announced its preliminary results for the financial year ended  30 
June 2012 today.

General Meeting and Circular to Bowleven Shareholders

The Strategic Alliance is conditional upon, amongst other things,  Shareholder 
approval being  obtained at  the  General Meeting.  A circular  convening  the 
General Meeting is expected to be issued to Bowleven shareholders by no  later 
than 23 November 2012.  It is the intention of the Bowleven Board to recommend
the Transaction to shareholders.

 

 

 

 

APPENDIX II

PRINCIPAL TERMS OF THE STRATEGIC ALLIANCE

                                       

1.            Introduction

The Strategic Alliance Agreement was entered  into on 6 November 2012  between 
Euroil Limited ("Euroil") and Petrofac Energy Developments West Africa Limited
("PEDWA") and is the principal agreement in respect of the Strategic Alliance.
 Euroil is a wholly-owned subsidiary of  Bowleven and PEDWA is a  wholly-owned 
subsidiary of Petrofac. Bowleven will guarantee Euroil's performance under the
Strategic Alliance Agreement  and Petrofac  Energy Developments  International 
Limited will  guarantee  PEDWA's  performance  under  the  Strategic  Alliance 
Agreement.

2.            Bowleven shareholder approval

The Strategic Alliance Agreement is conditional on Bowleven shareholder
approval in general meeting.  If Bowleven's shareholders do not approve the
Strategic Alliance Agreement by 5 pm on 5 May 2013, the Strategic Alliance
Agreement will automatically terminate.

3.            Development of the Field Development Plan and Investment Case

The parties will work together  to seek to agree  a field development plan  in 
respect of the Stage  1 Development (an  "FDP").  If an  FDP cannot be  agreed 
between the parties, then  Euroil may agree an  FDP with its co-venturers  and 
the Strategic Alliance Agreement will automatically terminate.

The investment case  in respect of  the Stage 1  Development (the  "Investment 
Case") will be agreed between the parties at the same time as the FDP.

4.            Provision of capital for the Stage 1 Development

The amount of capital which PEDWA will potentially provide in relation to  the 
Stage 1 Development will be determined following the agreement of the FDP  and 
Investment Case as follows:

·             PEDWA  may  within  the  period  of  two  weeks  following  such 
agreement serve a put notice on Euroil.  If a put notice is served, the amount
of the investment to  be provided will  (subject as set  out below) be  USD300 
million.

·             Euroil may serve a call notice on PEDWA at any time between  the 
expiry of that two week period and FID.  If this notice is served and:

o    PEDWA has not  served a put  notice, the amount of  the investment to  be 
provided will be USD300 million; or

o    PEDWA  has served  a  put notice,  the amount  of  the investment  to  be 
provided will be USD500 million.

Unless agreed between the parties the investment provided by PEDWA can only be
used to meet Euroil's share of the costs incurred in connection with (a)  work 
done between FID and first production from the Stage 1 Development and (b) the
IM-5 well, but only  if that well is  used in the Stage  1 Development (up  to 
USD60 million).

Any such investment to be  provided by PEDWA will be  provided as the Stage  1 
Development progresses (and the continued availability of such investment will
be subject to  certain conditions  being satisfied at  the time  of each  cash 
call, including that Euroil has  funding for the balance  of its share of  the 
costs of the Stage 1 Development (together with a 10% contingency)).

5.            Conditions to investment

The investment from PEDWA is conditional upon, amongst other things:

·             all material governmental and regulatory consents being obtained
in respect of the Stage 1 Development;

·             approval of the agreed FDP by Euroil's co-venturers;

·             agreement of proposed service contracts with the Petrofac  Group 
in connection with  the Stage  1 Development (and  all material  governmental, 
regulatory and  co-venturer  consents  being  obtained  in  respect  of  those 
contracts);

·             the Investment Case demonstrating that PEDWA will receive a  15% 
IRR  and  each  of  the  downside  cases  included  in  the  Investment   Case 
demonstrating that PEDWA will receive an IRR of not less than 0%;

·             the  execution  of  a  gas sales  agreement  or  other  off-take 
agreement;

·             there being  no adverse change  from the date  of the  Strategic 
Alliance Agreement in the market, economic or political conditions in Cameroon
which would have a material adverse  effect on the Petrofac Group in  relation 
to the Strategic Alliance Agreement;

·             Euroil having sufficient funding for the balance of its share of
the costs of the Stage 1 Development (together with a 10% contingency); and

·              completion  of  a  restructuring  of  the  Bowleven  Group   in 
connection with the Strategic Alliance.

The Strategic Alliance  Agreement may  be terminated  by either  party if  the 
above conditions are not satisfied (or, in certain cases, waived) on or before
31 December 2014 or such later date as the parties may agree.

6.            PEDWA return

PEDWA shall  be entitled  to the  following return  in consideration  for  the 
provision of its investment:

·     Cost oil/cost gas from the Stage 1 Development: PEDWA is entitled to  be 
paid an amount equal to 80% of  Euroil's receipts from sales of cost  oil/cost 
gas produced from the Stage 1  Development, until such time as Petrofac  shall 
have received an amount equal to 1.3 times the investment provided by Petrofac
in respect of the Stage 1 Development.

·     Profit oil/profit gas from the Stage 1 Development: PEDWA is entitled to
be paid a percentage (Y%) of Euroil's receipts from sales of profit oil/profit
gas produced from the Stage 1 Development.   Y% shall be determined at FID  on 
the basis of the projections in the agreed Investment Case as follows:

o    firstly, a provisional value for Y% shall be set such that the  aggregate 
receipts by PEDWA of cost oil/cost gas and profit oil/profit gas payments from
the Stage 1 Development shall be equal to 2.125 times the investment  provided 
by it;

o    secondly, if  required, that  provisional value shall  be increased  such 
that PEDWA is projected to receive an IRR of not less than 20%; and

o    finally, if the provisional value for Y% as determined in accordance with
the preceding two paragraphs would result in Euroil being projected to receive
less than 50% of the projected NPV in respect of Euroil's share of the Stage 1
Development, the value for Y% shall  be reduced such that Euroil is  projected 
to receive 50% of such value.

Y% may be  adjusted downwards in  certain circumstances, on  which please  see 
below.

·     Profit oil/profit gas from further or additional developments: PEDWA  is 
also entitled to  receive Y%  of Euroil's receipts  from sales  of its  profit 
oil/profit gas from:

o    fields within the Etinde Permit which were not included in the FDP agreed
with PEDWA ("Further Developments"); and

o    additional developments (which were not  included in the FDP agreed  with 
PEDWA) of fields that were included in the FDP ("Additional Developments").

PEDWA's entitlement to such payments in respect of any Further Development  or 
Additional Development does not begin until Euroil has received  consideration 
for the sale of its share of cost oil/cost gas and profit oil/profit gas  from 
that Further Development or Additional Development  equal to its share of  the 
costs of that Further Development or Additional Development.

·     Third  party profits:   PEDWA is  entitled  to receive  Y% of  the  fees 
received by Euroil for the use by any third party of any facilities  comprised 
within the Stage 1  Development (net of  costs and any  taxes payable on  such 
fees).

In connection with the  payments described above, Y%  will be adjusted in  the 
following cicumstances:

·     Where PEDWA has received  payments described above (other than  payments 
in respect of third party profits) equal to 2.125 times its investment and has
achieved an IRR of 20%:

o    if  the  investment provided  by  PEDWA is  USD500  million, Y%  will  be 
adjusted to 10%; and

o    if  the  investment provided  by  PEDWA is  USD300  million, Y%  will  be 
adjusted to 6%.

·     Where PEDWA has received  payments described above (other than  payments 
in respect of third party profits) equal  to 2.3 times its investment and  has 
achieved an IRR of 20%:

o    if  the  investment provided  by  PEDWA is  USD500  million, Y%  will  be 
adjusted to 5%; and

o    if  the  investment provided  by  PEDWA is  USD300  million, Y%  will  be 
adjusted to 3%.

Where PEDWA has received relevant payments  equal to 2.125 times or 2.3  times 
(as the case may be) but  has not achieved an IRR  of 20%, Euroil may make  an 
additional payment to  PEDWA such  that it  achieves an  IRR of  20%.  On  the 
making of that payment Y% will be adjusted as set out above.

7.           Transfers by Euroil of interests in the Etinde Permit

The Strategic Alliance  Agreement imposes certain  restrictions upon  Euroil's 
ability to transfer its interests in the Etinde Permit.

Save as summarised below, in the event  that Euroil transfers all or any  part 
of its interests in the Etinde Permit,  it must ensure that the transferee  is 
bound (on a  pro rata  basis by  reference to  the interest  acquired) by  the 
Strategic Alliance Agreement.

This requirement does not apply where, prior to FID, Euroil transfers up to  a 
25% interest in the Etinde Permit (or up  to a 20% interest in the event  that 
the Government of Cameroon elects to participate in the Stage 1  Development). 
In such event:

·     PEDWA may reduce,  in the same proportion  as the reduction of  Euroil's 
interest in  the Etinde  Permit, the  amount of  the investment  which it  has 
exercised its option  to put  on Bowleven  (and of  any additional  investment 
called by Bowleven) in connection with the Stage 1 Development; and

·     the amount of any reimbursement by PEDWA of costs in respect of the IM-5
well will  be  reduced, again  in  the same  proportion  as the  reduction  of 
Euroil's interest in the Etinde Permit.

8.           Termination of Strategic Alliance Agreement and break fee
arrangements

Any party is  entitled to terminate  the Strategic Alliance  Agreement on  the 
occurrence of certain events, including:

·     the other party failing  to make a payment due  to that party under  the 
Strategic Alliance Agreement;

·     the  other  party  defauling  in  its  material  obligations  under  the 
Strategic Alliance Agreement;

·     the  other  party  becoming  insolvent  or  subject  to  any  insolvency 
proceedings; or

·     FID not  occurring before 31  December 2014  or such later  date as  the 
parties may agree.

 

PEDWA may also  terminate the  Strategic Alliance Agreement  if certain  other 
events occur, including any failure  by Euroil to meet  its share of any  cash 
call under the  JOA or the  receipt by  Euroil of certain  notices of  default 
under the Etinde Permit or the JOA or Euroil's removal as operator.

If PEDWA terminates  the Strategic  Alliance Agreement following  FID, then  a 
compensation payment (calculated by  reference to the  then expected NPV10  of 
PEDWA's return from the Stage 1 Development) will become due to PEDWA.

Bowleven may  also  terminate  the  Strategic  Alliance  Agreement  if  Euroil 
transfers all of its interests in the Etinde Permit to a third party or  there 
is a change of control of Bowleven plc or certain other members of the  Group. 
In such event  a break  fee of  USD15 million may  become due  by Bowleven  to 
PEDWA. That  break fee  may also  become  payable to  PEDWA in  certain  other 
circumstances.

 

DEFINITIONS AND GLOSSARY OF TECHNICAL TERMS

 

In this announcement:

"3D" means three dimensional;

"4C OBC" means four component ocean bottom cable;

"AIM" means the AIM market operated by the London Stock Exchange;

"AIM Rules" means  the current rules  published by the  London Stock  Exchange 
applicable to companies with a class of securities admitted to trading on AIM;

"Board" or "Directors" means the directors of the Company;

"BofA Merrill Lynch" means Merrill Lynch International;

"Bowleven" or the "Company" means Bowleven plc;

"Cameroon" means The Republic of Cameroon;

"Circular" means the circular proposed to be sent by the Company in connection
with the Strategic Alliance, to include notice of the General Meeting;

"EEAA" means the exclusive Etinde exploitation authorisation application to be
submitted by the Etinde Permit joint venture in respect of part of the current
Etinde Permit area;

"Etinde Permit" means the production sharing contract between the Republic  of 
Cameroon and  Euroil,  dated 22  December  2008, in  respect  of the  area  of 
approximately 2,316  km^2, comprising  the former  blocks MLHP-5,  MLHP-6  and 
MLHP-7, offshore Cameroon or, as the context may require, the contract area to
which this production sharing contract relates;

"Euroil" means Euroil  Limited, an indirectly  wholly-owned subsidiary of  the 
Company incorporated in  Cameroon and  the designated operator  of the  Etinde 
Permit;

"Ferrostaal" means Ferrostaal GmbH;

 

"FID"means  the  final  investment  decision  to  proceed  with  the  Stage  1 
Development;

"FSA" means the Financial Services Authority;

"General Meeting" means the general meeting  of the Company to be convened  in 
connection with the Strategic Alliance;

"Group" means the Company and its subsidiary undertakings;

"IE" means the Isongo E field area, block MLHP-7, Etinde Permit;

"IF" means the Isongo F field area, block MLHP-7, Etinde Permit;

"IFRS" means the  International Financial Reporting  Standards adopted by  the 
International Accounting Standards Board;

"IM" means the Isongo Marine field area, block MLHP-7, Etinde Permit;

"LNG" means liquefied natural gas;

"London Stock Exchange" means London Stock Exchange plc;

"MOU" means memorandum of understanding;

"NGLs" means natural gas liquids;

"Ordinary Shares" means ordinary shares of 10 pence each in the capital of the
Company and "Ordinary Share" means any one of them;

"Petrofac" means Petrofac Energy Developments West Africa Limited, an indirect
subsidiary of Petrofac Limited (LSE: PFC)

"Shareholders" means holders  of Ordinary Shares  and "Shareholder" means  any 
one of them;

"SNH" means Société Nationale des  Hydrocarbures, the national oil company  of 
Cameroon

"Stage 1 Development" means the initial development of the Etinde Permit to be
contained in the corresponding field development plan agreed at FID, currently
envisaged to be the offshore development of  the IE/ID and IM fields in  block 
MLHP-7 and including export line  to shore, onshore processing facilities  and 
NGLs plant.

"Strategic Alliance" means the proposed strategic alliance between the Company
and Petrofac in respect of the Stage 1 Development on the terms set out in the
Strategic Alliance Agreement;

"Strategic Alliance  Agreement"means  the  agreement  of  that  name  dated  6 
November 2012 between Bowleven and Petrofac;

"United Kingdom"  or  "UK" means  the  United  Kingdom of  Great  Britain  and 
Northern Ireland;

"United States" or "US"  means the United States  of America, its  territories 
and possessions, any state of the United States and the District of  Columbia; 
and

"USD" means United States Dollars.

 

                     This information is provided by RNS
           The company news service from the London Stock Exchange
 
END
 
 
SALMMMGMGVKGZZG -0- Nov/06/2012 07:00 GMT
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