BowLeven Plc (BLVN) - Etinde Strategic Alliance
RNS Number : 3872Q
06 November 2012
6 November 2012
Bowleven plc ("Bowleven" or the "Company")
Proposed Strategic Alliance agreed in respect of the Future Development of the
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.
· 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
· Alliance also provides Bowleven with access to world class Petrofac
development engineering, design and project management personnel and training
· 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."
For further information please contact:
Kevin Hart, Chief
Executive00 44 131 524
Kerry Crawford, Head of Investor Relations
Brunswick Group LLP
00 44 207 404 5959
Bank of America Merrill Lynch (Nomad and broker)
00 44 207 628 1000
Barclays Bank plc (Broker)
44 207 623 2323
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.
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
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
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
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
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
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
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
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
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
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.
PRINCIPAL TERMS OF THE STRATEGIC ALLIANCE
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
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
· 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
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
· 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
· 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
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
· 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
In connection with the payments described above, Y% will be adjusted in the
· 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
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
· 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
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
"Ferrostaal" means Ferrostaal GmbH;
"FID"means the final investment decision to proceed with the Stage 1
"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 PetrofacLimited (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
"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
"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
"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;
"USD" means United States Dollars.
This information is provided by RNS
The company news service from the London Stock Exchange
SALMMMGMGVKGZZG -0- Nov/06/2012 07:00 GMT
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