TIDMBLVN
RNS Number : 1165V
Bowleven plc
29 November 2019
29 November 2019
Bowleven plc ('Bowleven' or 'the Company')
Preliminary Results Announcement
Bowleven, the Africa focused oil and gas exploration group
traded on AIM, today announces its preliminary results for the year
ended 30 June 2019.
HIGHLIGHTS
Operational
Etinde, offshore Cameroon
- Ongoing operator evaluation of development options, with
particular focus on the facilities necessary to undertake all
aspects of the development.
- Extensive pre-Front End Engineering and Design (FEED) studies
performed by several external engineering consultancies and
equipment providers.
- Investment in completing the analysis of the data and samples
collected for the two 2018 appraisal wells, which was followed up
by a large scale exercise to remap and reassess each of the fields
currently discovered in the Etinde licence area. Particular focus
has been placed on re-evaluating the IE field, which has resulted
in a much clearer understanding of the importance of existing
discoveries and the prospectivity of the nearby undrilled
prospects.
- The JV partners have undertaken an independent Competent
Persons report on the contingent resources of the Etinde licence
area. The final report shows that the overall 'in place' contingent
resources of the Etinde licence area are largely unchanged from
Bowleven's 2015 assessment. Recovery rates have been reassessed in
light of current development options reducing the overall 2C
contingent resources available for production to 244 million boe
from 290 million boe on a 100 % basis.
Bomono, onshore Cameroon
- The licence terminated in December 2018. However, the Company
currently await the Government's formal notification of the licence
removal.
Financial
- The financial valuation of the Etinde asset has been assessed
during the latter part of the year based on development plans
proposed by the Operator and the revised assessment of the
project's contingent resources.
- We have paid close attention to the risks and uncertainties
associated with the pre-financial investment decision (FID) status
of the project.
- The valuation has been determined to be within a range, with a
mid-point of $150 million, resulting in an impairment provision of
$62 million against the Group's carrying value of Etinde.
Corporate
- Decision to make payment to shareholders equivalent of 15 pence per ordinary share.
- Group cash balance at 30 June 2019 of $11 million with no
debt. No outstanding work programme commitments.
- Investment of $4 million in publicly traded limited partnership interests and debt.
- Under the Etinde transaction, access to $25 million at FID.
- Ongoing control over general and administration (G&A) cost.
Outlook
Key objectives are to deliver on our revised strategy in FY2020
which includes:
- Working with our partners on Etinde development options with
the aim of Etinde project FID in FY2020, having due consideration
of the risk of the Etinde licence potentially expiring in January
2021.
- Disciplined capital management to secure progress towards FID
and thereafter explore funding options regarding development
capex.
Eli Chahin, Chief Executive Officer of Bowleven plc, said:
"Our focus in 2020 will be to work with all of our stakeholders
to ensure FID is underpinned by a compelling development plan,
which is suitably robust to secure future capex funding during the
financial year. This combined with a disciplined approach to
capital, management will ensure that we are able to deliver maximum
value for our shareholders."
ENQUIRIES
For further information, please contact:
Bowleven plc
Eli Chahin, Chief Executive 00 44 203 327 0150
Celicourt Communications Ltd
Mark Antelme 00 44 208 434 2643
Shore Capital & Corporate Ltd (NOMAD)
Shore Capital Stockbrokers Ltd (Broker)
Robert Finlay 00 44 207 408 4090
Antonio Bossi
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 (operated by NewAge) in Cameroon.
Notes to Announcement:
1. The technical information in this release has been reviewed
by Dr Michael Clancy, who is a qualified person for the purposes of
the AIM Guidance Note for Mining, Oil and Gas Companies. Dr Michael
Clancy, Reserves Engineering consultant for Bowleven plc, is a
Petroleum Engineer with more than 30 years oil and gas industry
experience and is a member of the Society of Petroleum
Engineers.
2. The information in this release reflects the views and
opinions of Bowleven and has not been reviewed in advance by its
joint venture partners.
3. Certain capitalised terms used in this announcement are
defined in the Glossary at the end of the announcement.
CHAIRMAN'S REVIEW
Progressing Etinde to FID
Dear Shareholders,
The past 12 months have seen Bowleven continue to work towards
maturing our Etinde asset, derisking the business and returning
surplus cash to shareholders.
Capital discipline and cost management remain key principles of
stewardship for our shareholders. We appreciate your continued
support as we strive to reach consensus on a development plan that
rewards shareholder patience on what has been corroborated now as
an asset of significant potential.
We continue to work towards developing our asset and maximising
its revenue generating potential in the coming two to three years.
The Company has a good cash position and no debt. This should
enable us to get through to FID, which would then provide the
Company with a $25 million payment from our JV partners. In the
meantime, the Company continues to prudently manage its cost
base.
Although a non-operator of Etinde, Bowleven enlists individuals
and institutions to ensure we properly understand the commercial
and technical risks associated with the Etinde development plans.
As Etinde reaches technical maturity, we continue to measure its
development against the key principles of capital discipline and
delivering results.
An example of this key philosophy was the return of cash to
shareholders undertaken in February 2019. We formed the view that
given the increasingly low interest rate environment, the volatile
capital markets and the time required to FID, we should return cash
to shareholders. When the economics of the Etinde financing are
clearly defined, any request for funding - be it from shareholders
or lenders - will have to be demonstrated by a suitable business
plan at that juncture.
The executive management team have also arrived at what appears
to be a reasonable valuation methodology for Etinde given the
circumstances surrounding the FID decision and the subsequent
development.
Following the evaluation of a low-cost exploitation application
for Bomono, management opted not to renew the expired licence.
The current Board constitution is likely to continue into 2020.
Our management team provides effective decision-making, controls
costs and is appropriate for the work programme of a non-operating
partner in Etinde.
We enter 2020 determined to obtain FID and its attendant
financial payment of $25 million. This would bring Etinde and our
Company into its long-awaited next stage whilst also delivering
considerable value to all of our stakeholders.
Matt McDonald
Chairman
28 November 2019
CHIEF EXECUTIVE'S REVIEW
Unlocking Material Value
Bowleven has continued to deliver on its clearly articulated
strategy by maturing its Etinde asset towards FID, immediate
alignment to shareholders interests and rigorous capital/cost
discipline to ensure the successful exploitation of a long-term
asset.
Dear Shareholders,
During 2019 we have moved closer to our goal of monetising the
Etinde asset, despite an economic environment that has presented
considerable challenges to many industries, and in particular the
energy sector. Hydrocarbon prices continue to be volatile as
concerns over slower global economic growth heighten, impacted by
lack of progress in the US-China trade discussions and an
increasingly unpredictable geopolitical backdrop. Whilst the
world's two largest economies continue to make conciliatory
gestures at the time of writing, the subdued demand outlook prompts
suggestions that the oil markets could end up in surplus in the
near term despite the efforts of OPEC to limit supply.
Global equity markets have responded accordingly with central
banks adopting a continued effort to ease interest rates. Oil and
gas demand growth remains fragile and the risks associated with low
real wage growth and weak inflation has had an impact on sector
investment. Whilst the industry context has remained challenging,
we take comfort from the fact that Bowleven's monetisation of
Etinde is anticipated at a time when the cyclical rebound appears
likely.
In the meantime, our response is to continue to focus on the
prudent management of our balance sheet and acceleration of the
path towards securing FID, alongside obtaining the necessary
funding to ensure this project is successfully executed.
Roadmap to FID
During 2019 we have undertaken the reassessment of the
development concept for Etinde post the appraisal drilling
programme. Extensive work has been undertaken, and indeed remains
ongoing, as the JV partners continue to hold collaborative
workshops around the key commercialisation issues.
The 2018 Etinde drilling campaign has reconfirmed the
significant accumulations of hydrocarbons. The operator, NewAge, is
currently calibrating the results in the model, enabling the JV
partners to fine tune our common understanding of the field in
order to achieve consensus on the best-fit development plan. We
have gone into significant detail to give shareholders a sense of
the ongoing deliberations to date as well as to rebalance the lack
of information flow during the year. The Operating Review in this
Annual Report gives a sense of the current roadmap as we approach
FID in 2020.
The culmination of this effort will be the tabling of a revised
development plan with our host government, which may also form the
basis of a new Participation Agreement that could enable Société
Nationale des Hydrocarbures (SNH) to share in the benefits of this
critical investment for the country. This will of course also be
the catalyst to the commissioning of the FEED studies which
underpin the infrastructure investment, capex spend requirements
and the development timetable to first production.
Currently all parties are focused on securing and structuring
the commercial agreements with various counterparties which are a
critical element to the financing solution. Substantive progress
has already been made in this regard. This task can only be
progressed upon reaching closure on the sub-surface development
plan, the infrastructure and facilities requirements, as well as
the relevant regulatory approvals. From Q4 2018, we have been
working with our partners to align the geological diagnostic
assessment of the field which has taken longer than initially
planned, in part due to the complexity of the field. Prudent
spending during this effort is something Bowleven is also keen to
preserve and this invariably leads to a more measured process. It
is therefore expected that the earlier Q1 2020 FID date will move
to Q3 2020.
Valuation of the Etinde asset
Following the completion of the 2018 appraisal drilling
programme, the JV partners have spent considerable time and effort
reassessing both the amount of hydrocarbon available for
development and the nature of the development itself. Whilst
discussions around the field development plan remain ongoing, the
development parameters have been significantly narrowed.
Given the change in both the hydrocarbon resource make-up and
development plan, we have undertaken a fresh valuation of the
Etinde asset based on what we consider to be the most likely
economically viable development scenario(s) in view of the revised
development scenarios currently being assessed by the Operator in
consultation with the JV partners.
Until the JV partners and the Government of Cameroon issue FID
and gain the necessary approvals, any valuation of Etinde will
include many uncertainties and risks, as will any financial model
that is prepared at this stage of the process. We have used two
separate valuation methodologies to address the valuation risk
arising as a result of these uncertainties. The first was to
prepare a discounted cash flow model based on conservative
assumptions. The second approach was to use a benchmarking analysis
for Bowleven's share or 2C contingent resources using a $ per boe
derived from market data for comparable assets.
The DCF model used conservative initial assumptions, especially
in respect to the level of contingent resources available for the
development and hydrocarbon pricing, and applied a risk weighted
discount rate to determine the financial impact of the risks we
have identified.
The technical and commercial solution for the high volume of gas
produced to access the high value condensate and LPG liquids
remains the most significant commercial uncertainty. This is also
impacted by the extent and timing of the availability of any actual
domestic Cameroon gas demand, combined with the extent that the
Government may enforce a domestic commitment. These factors are
likely to directly impact the nature of the facilities and
infrastructure needed to develop the field. However, they also have
a large indirect impact on maximum production levels and hence the
economic value of the recoverable resources.
The two other structural uncertainties relate to:
-- Any impact which could arise should the time taken for the JV
partners to agree to FID and the subsequent time taken for the
Government to formally approve the revised field development plan
results in the current licence end date of January 2021 being
exceeded. Although we consider that the risk of the JV partners and
Governmental authorities not being able to reach a negotiated
agreement to be low, it remains a source of significant
uncertainty; and
-- The ability of Bowleven and the other JV partners to raise
the necessary amounts of finance from shareholders and other
sources to enable the development to proceed. We view this to be a
low risk given the high quality of the asset, but until the matter
is actually addressed it remains a source of uncertainty.
Based on our assessment of the revised valuation, we have
concluded that Bowleven's share of the Etinde project has a value
of $150 million. This gives rise to the need for an impairment
provision of $62 million against the carrying value of the
Intangible Exploration asset, which has been reflected in these
preliminary financial statements (see Note 1 to the financial
statements).
Special Dividend Payment
On 8 February 2019, the Company made a special dividend payment
to shareholders of approximately GBP49 million, the equivalent of
15 pence per ordinary share. The payment was made in the context of
the increasing challenges of securing adequate returns in the
capital markets, alongside the lowering of interest rates. The
Board believed that the capital was better placed with our
shareholders until such time when the need for further capital
investment decisions are required.
As Bowleven continues to fund its obligation to get to FID, the
resulting payment to the Company of $25 million by our JV partners
will provide a suitable cash buffer until additional funding for
our portion of the project development cost is secured.
Bomono
Following a failed effort to secure the request for an EA for a
small scale gas to power generation project with the discovered
resources, the Bomono licence expired on 18 December 2018.
Discussions with the regulator SNH, continue towards a Bomono PSC
closeout meeting and a formal revocation of the licence.
Etinde
The Etinde Block is an established asset with a development plan
being formulated that has various monetisation options that are
currently being rigorously screened to ensure the optimum return
for all our stakeholders. Whilst essentially a liquids play, we are
excited by the hydrocarbon potential to make a difference to both
West Africa and towards a decarbonised environment. The gas
production potential can be meaningful in terms of facilitating
energy transition for local Cameroonians in a way that existing
sources haven't been able to.
Its geographic proximity between the port of Limbe (20 km) and
the proposed gas mega hub in Bioko Island is ideally suited to
ensure multiple options exist for securing a demand for the
production. Its shallow water setting and the accommodating
government response to innovative gas production solutions
vis-a-vis the recent Golar Hili floating liquefied natural gas
(FLNG) success bode well for continuing conversations to ensure the
benefit of this asset are widely deployed.
In summary, in the same way we have navigated the transformation
of the business into one which is better aligned with shareholder
interest, I believe we have the right approach and methodology to
oversee the development of a major shallow water project that
delivers attractive financial return. The success will be
underpinned by a shared prosperity with local and international
stakeholders with whom we have a strong relationship. I am
confident we have an exceptional team in place to meet the upcoming
challenge in 2020 that will finally see us restoring shareholder
value through our Etinde investment, while we continue to follow
embedded performance and cost management culture.
Eli Chahin
Chief Executive Officer
28 November 2019
Group Income Statement
for the year ended 30 June 2019
2019 2018
$000 $000
======================================== ==== ========= ==========
Revenue - -
Administrative expenses (5,018) (6,294)
Impairment charge (62,007) -
---------------------------------------- ---- --------- ----------
Operating loss before financing costs (67,025) (6,294)
Finance and other (expense)/income 458 (748)
---------------------------------------------- --------- ----------
Loss from continuing operations before
taxation (66,567) (7,042)
Taxation - -
---------------------------------------- ---- --------- ----------
Loss for the year (66,567) (7,042)
---------------------------------------------- --------- ----------
Basic and diluted loss per share
($/share) (0.20) (0.02)
----------------------------------------- --- --------- --------
Statements of Comprehensive Income
for the year ended 30 June 2019
Group
2019 2018
$000 $000
======================================== =========== ========= =========
Loss for the year (66,567) (7,042)
---------------------------------------------------- --------- ---------
Other Comprehensive Income:
Items that will be reclassified to
profit and loss:
Currency translation differences - 1,986
---------------------------------------------------- --------- ---------
Total comprehensive loss for the year (66,567) (5,056)
-------------------------------------------- ------ ---------- ---------
Company
=========================================== ======= ========= ========
2019 2018
$000 $000
--------------------------------------- ----------- --------- --------
Loss for the year (77,930) (3,821)
--------------------------------------------------- --------- --------
Other Comprehensive Income:
Items that will be reclassified to
profit and loss:
Currency translation differences - 6,937
--------------------------------------------------- --------- --------
Total comprehensive (loss)/gain for
the year (77,930) 3,116
------------------------------------------- ------ ---------- --------
Group Balance Sheet
30 June 2019
2019 2018
$000 $000
=============================== === ========= =========
Non-current assets
Intangible exploration assets 150,000 199,712
Property, plant and equipment 23 39
------------------------------------ --------- ---------
150,023 199,751
Current assets
Financial investments 4,134 19,073
Inventory 1,545 746
Trade and other receivables 1,890 2,903
Deferred consideration - 12,984
Bank deposits 500 500
Cash and cash equivalents 10,482 62,734
------------------------------------ --------- ---------
18,551 98,940
----------------------------------- --------- ---------
Total assets 168,574 298,691
------------------------------------ --------- ---------
Current liabilities
Trade and other payables (451) (1,066)
------------------------------------ --------- ---------
Total liabilities (451) (1,066)
------------------------------------ --------- ---------
Net assets 168,123 297,625
------------------------------------ --------- ---------
Equity
Called-up share capital 56,517 56,517
Share premium 1,599 1,599
Foreign exchange reserve (69,857) (69,857)
Other reserves 2,354 1,076
Retained earnings 177,510 308,290
------------------------------------ --------- ---------
Total equity 168,123 297,625
------------------------------------ --------- ---------
Company Balance Sheet
30 June 2019
2019 2018
$000 $000
=================================== === ========== ==========
Non-current assets
Property, plant and equipment 22 36
Investments in Group undertakings 145,099 221,758
---------------------------------------- ---------- ----------
145,121 221,794
Current assets
Financial investments 4,134 19,073
Trade and other receivables 5,109 3,216
Bank deposits 500 500
Cash and cash equivalents 10,476 62,700
---------------------------------------- ---------- ----------
20,219 85,489
--------------------------------------- ---------- ----------
Total assets 165,340 307,283
---------------------------------------- ---------- ----------
Current Liabilities
Trade and other payables (187) (539)
---------------------------------------- ---------- ----------
Total Liabilities (187) ( 539)
---------------------------------------- ---------- ----------
Net assets 165,153 306,744
---------------------------------------- ---------- ----------
Equity
Called-up share capital 56,517 56,517
Share premium 1,599 1,599
Foreign exchange reserve (147,715) (147,715)
Other reserves (2,883) (2,446)
Retained earnings 257,635 398,789
---------------------------------------- ---------- ----------
Total equity 165,153 306,744
---------------------------------------- ---------- ----------
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 $77,930,000 (2018: loss of $3,821,000).
Group Cash Flow Statement
for the year ended 30 June 2019
2019 2018
$000 $000
============================================= === ========= ==========
Cash flows from operating activities
Loss before tax (66,567) (7,042)
-------------------------------------------------- --------- ----------
Adjustments to reconcile Group loss before tax to net cash used
in operating activities:
Depreciation of property, plant and
equipment 38 88
Impairment charge 62,007 -
Non-cash operating costs 1,080 -
Inventory impairment 150 1,607
Finance (income)/expense (458) 748
Equity-settled share based payment
transactions 151 167
Loss on sale of property, plant and
equipment 24 17
-------------------------------------------------- --------- ----------
Adjusted loss before tax prior to
changes in working capital (3,575) (4,415)
Decrease/(Increase) in trade and other
receivables 207 (629)
(Decrease) in trade and other payables (380) (445)
Exchange differences - (418)
-------------------------------------------------- --------- ----------
Net cash used in operating activities (3,748) (5,907)
Cash flows (used in)/from investing
activities
Purchases of property, plant and equipment (22) (6)
Purchases of intangible exploration
assets (1,380) (319)
Purchases of financial investments - (19,075)
Receipts from sale of financial investments 14,043 -
Receipts from sale of property, plant
and equipment 12 91
Dividends received 388 194
Interest received 1,597 1,262
-------------------------------------------------- --------- ----------
Net cash (used in)/from investing
activities 14,638 (17,853)
Cash flows from/(used in) financing
activities
Proceeds from issue of share capital - 1,069
Special dividend paid (63,142) -
--------------------------------------------- --- --------- ----------
Net cash Flows from/(used in) financing
activities (63,142) 1,069
Net decrease in cash and cash equivalents (52,252) (22,691)
-------------------------------------------------- --------- ----------
Cash and cash equivalents at the beginning
of the year 62,734 85,307
Effect of exchange rates on cash and
cash equivalents - 118
Net decrease in cash and cash equivalents (52,252) (22,691)
================================================== ========= ==========
Cash and cash equivalents at the year
end 10,482 62,734
Company Cash Flow Statement
for the year ended 30 June 2019
2019 2018
$000 $000
============================================= === ========= =========
Cash Flows from Operating Activities
Loss before tax (77,930) (3,821)
-------------------------------------------------- --------- ---------
Adjustments to reconcile Company loss before tax to net cash
used in operating activities:
Depreciation of property, plant and
equipment 36 86
Impairment of investment 76,659 -
Finance (income)/expense (397) 417
Equity-settled share based payment
transactions 151 167
Loss on disposal of fixed assets - 61
-------------------------------------------------- --------- ---------
Adjusted loss before tax prior to
changes in working capital (1,481) (3,090)
(Increase) in trade and other receivables (3,255) (1,832)
Decrease in trade and other payables (352) (459)
Exchange differences - (418)
-------------------------------------------------- --------- ---------
Net (Cash used) in operating activities (5,088) (5,799)
Cash flows (used in)/from investing
activities
Purchases of financial investments - (19,075)
Proceeds from sale of financial investments 14,043 -
Purchases of property, plant and equipment (22) (5)
Dividends received from financial
investments 388 194
Interest received 1,597 1,262
-------------------------------------------------- --------- ---------
Net Cash from/(used in) investing
activities 16,006 (17,624)
-------------------------------------------------- --------- ---------
Cash flows (used in)/from financing
activities
Proceeds from issue of share capital - 1,069
Special dividend paid (63,142) -
--------------------------------------------- --- --------- ---------
Net cash flows (used in)/from financing
activities (63,142) 1,069
Net decrease in cash and cash equivalents (52,224) (22,354)
-------------------------------------------------- --------- ---------
Cash and cash equivalents at the beginning
of the year 62,700 84,936
Effect of exchange rates on cash and
cash equivalents - 118
Net decrease in cash and cash equivalents (52,224) (22,354)
-------------------------------------------------- --------- ---------
Cash and cash equivalents at the year
end 10,476 62,700
-------------------------------------------------- --------- ---------
Group Statement of Changes in Equity
for the year ended 30 June 2019
Foreign
Called-up exchange Other Retained Total
share capital Share Premium reserve reserves earnings equity
$000 $000 $000 $000 $000 $000
At 1 July 2017 56,186 861 (71,843) 4,730 311,511 301,445
------------------------------------ --------------- ---------------- ---------- ---------- ---------- ---------
Loss for the year - - - - (7,042) (7,042)
Other comprehensive income for
the year - - 1,986 - - 1,986
------------------------------------ --------------- ---------------- ---------- ---------- ---------- ---------
Total comprehensive income for
the year - - (3,183) - (53,692) (56,875)
Proceeds from issue of share
capital 331 738 - - - 1,069
Share based payments - - - 167 - 167
Transfer between reserves - - - (3,821) 3,821 -
At 30 June 2018 56,517 1,599 (69,857) 1,076 308,290 297,625
------------------------------------ --------------- ---------------- ---------- ---------- ---------- ---------
Loss for the year - - - - (66,567) (66,567)
Other comprehensive income for - - - - - -
the year
------------------------------------ --------------- ---------------- ---------- ---------- ---------- ---------
Total comprehensive income for
the year - - - - (66,567) (66,567)
Special dividend payment - - - - (63,142) (63,142)
Share based payments - - - 207 - 207
Transfer between reserves - - - 1,071 (1,071) -
------------------------------------ --------------- ---------------- ---------- ---------- ---------- ---------
At 30 June 2019 56,517 1,599 (69,857) 2,354 177,510 168,123
------------------------------------ --------------- ---------------- ---------- ---------- ---------- ---------
Company Statement of Changes in Equity
for the year ended 30 June 2019
Foreign
Called-up exchange Other Retained Total
Attributable to Owners of Parent share capital Share premium reserve reserves earnings equity
Company $000 $000 $000 $000 $000 $000
At 1 July 2017 56,186 861 (154,652) 1,246 398,751 302,392
-------------------------------------- --------------- -------------- ---------- ---------- ---------- ---------
Loss for the year - - - - (49,460) (49,460)
Other comprehensive income for the
year - - (7,905) - - (7,905)
-------------------------------------- --------------- -------------- ---------- ---------- ---------- ---------
Total comprehensive income for the
year - - (7,905) - (49,460) (57,365)
Proceeds from issue of share capital 331 738 - - - 1,069
Share based payments - - - 167 - 167
Transfer between reserves - - - (3,859) 3,859 -
At 30 June 2018 56,517 1,599 (147,715) (2,446) 398,789 306,744
-------------------------------------- --------------- -------------- ---------- ---------- ---------- ---------
Loss for the year - - - - (77,930) (77,930)
Other comprehensive income for the - - - - - -
year
-------------------------------------- --------------- -------------- ---------- ---------- ---------- ---------
Total comprehensive income for the
year - - - - (77,930) (77,930)
Special dividend payment - - - - (63,142) (63,142)
Share based payments: Transfer from
subsidiary
undertaking - - - (1,715) 989 (726)
Share based payments - - - 207 - 207
Transfer between reserves - - - 1,071 (1,071) -
At 30 June 2019 56,517 1,599 (147,715) (2,883) 257,635 165,153
-------------------------------------- --------------- -------------- ---------- ---------- ---------- ---------
NOTES TO THE PRELIMINARY FINANCIAL STATEMENTS
For the year ended 30 June 2019
(1) Accounting Policies
Basis of preparation
The financial information in the preliminary financial
statements has been extracted from the statutory accounts which
have been prepared in accordance with International Financial
Reporting Standards (IFRS) as adopted by the European Union (EU)
and with those parts of the Companies Act 2006 applicable to
companies reporting under IFRS. The financial statements have been
prepared under the historical cost convention as modified by the
revaluation of certain financial assets and liabilities (including
derivative instruments). The preliminary announcement has been
prepared on a basis consistent with the accounting policies applied
to the statutory accounts for the year ended 30 June 2019.
These financial statements are presented in US Dollars, the
Group's presentation and functional currency, rounded to the
nearest $000.
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. The 30 June 2019 annual
results presented here are audited and the auditor has issued an
un-modified opinion containing an emphasis of matter drawing
attention to significant uncertainties related to valuation of
intangible assets, and containing no statement under section 498
(2) and (3) of the Companies Act 2006. On the statutory accounts
for the year ended 30 June 2018, the auditor gave an unqualified
opinion that did not contain an emphasis of matter 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 2018
have been filed with the Registrar of Companies.
Going concern
After making enquiries, the Directors are satisfied that the
Group has adequate resources to continue in operational existence
for the foreseeable future. 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
Directors have considered the likelihood of reaching FID in 2020
and the consequent need to raise additional financing. In this
scenario, the Group is due to receive a $25m cash payment from its
JV partners at FID. 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. The Directors have
also considered the possibility of FID not occurring prior to the
licence expiry in January 2021. In this scenario, the Directors are
satisfied that the Group has sufficient existing financial
resources in place to meet its operating costs for at least 12
months from the date of approval of these accounts.
Impairment Considerations
The Group has undertaken a full impairment review of the Etinde
exploration assets during the current financial year. This review
was under taken as the JV consortium has recognised that the
previous Government sanctioned development proposal is no longer
realistic or achievable and the Contingent Resources of Etinde have
been reassessed during the current year, following the completion
of the 2018 appraisal drilling programme. Whilst the JV consortium
partners have yet to adopt a revised development concept, the
options currently under consideration are significantly different
from previous concepts considered at the time of the last full
impairment review undertaken in December 2015.
When a full impairment review is considered necessary, the
recoverable amount of the asset is based on the higher of a fair
value less costs of disposal approach (using Level 3 inputs based
on IFRS 13 fair value hierarchy) and a value-in-use assessment. As
Etinde is a pre-development asset, no consideration has been given
to the value-in-use approach. The fair value less costs of disposal
approach has been determined using two methods: (i) a risk adjusted
discounted cash flow model and (ii) benchmarking against market
data for comparable assets. The estimated recoverable amount is
then compared to the net book value of the intangible exploration
asset in the financial statements.
The discounted cash flow model is based on our best estimate of
the expected development of the Etinde asset taking consideration
of 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;
-- two alternate development options with either an onshore or
an off-shore focused infrastructure based development;
-- 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 and Liquefied Natural Gas ('LNG') can be
supplied to either the global or domestic markets for the same
value;
-- Infrastructure capital and operating costs estimated based on
the pre-FEED engineering studies undertaken in 2019, except where
pricing data was not available.
-- 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 JV 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
exceeding the current licence end date of January 2021.
In order to account for the significant uncertainties described
above, we have taken an approach of risk-adjusting the discount
rate in our valuation model. Using a risk adjustment discount rate
of 17 to 23% our model gave a valuation estimate of $130 million -
$190 million.
Our benchmarking of Etinde's contingent resources against market
data for other African assets on a $ per boe of 2C contingent
resources resulted in a valuation range of $120 million - $180
million based on a unit pricing range of $2 - $3 per boe.
We determined what we concluded to be a reasonable mid-point in
the range of valuations there were derived from both valuation
approaches. Our current year assessment of the recoverable amount
of the Etinde cash-generating unit calculated on the basis set out
is $150 million (2018: $208 million). This gives rise to an
impairment adjustment of $62 million in the current year.
Impairment charges were previously recognised in both 2015 and 2016
totaling $136.7 million (2016: $60.7 million; 2015: $76
million).
The key sensitivities in our valuation models are the level of
contingent resources available, the risk weighted discount rate and
the price per boe of 2C contingent resources on which the mid-point
in the range of market valuations was determined. The valuation is
directly impacted by a change in level of contingent resources
available. A change in per boe input by $0.5 per boe would result
in a $30 million change in the impairment result. Similarly, a
change in risk weighted discount rate of 2% would result in $15
million change in the impairment result.
(2) 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 (2018: nil).
c) As at 30 June 2019 there is a current financial asset of $nil
(2018: $12.9 million) arising from the Etinde farm-out. The amount
relates to the remaining deferred consideration relating to the
appraisal drilling carry.
d) As at 30 June 2019, 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.
(3) 2019 Annual Report and Accounts
Full accounts are scheduled to be posted 4 December 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
ABI Association of British Insurers
AGM annual general meeting
AIM the market of that name operated by the London
Articles of Association Stock Exchange
the internal rules by which a company is governed
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 the production sharing contract between the
Republic of Cameroon and EurOil Limited, dated
12 December 2007, in respect of the area of
approximately 2,328km(2) 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 Bowleven plc (LSE: BLVN) and/or its subsidiaries
as appropriate
CFA Central African CFA Francs
Companies Act 2006 the United Kingdom Companies Act 2006 (as amended)
('the Act')
Company Bowleven plc
CPR Competent Persons Report
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
CSOP Company share option plan
EBT employee benefit trust
Etinde Permit the Etinde Exploitation Authorisation (EA)
area. The Etinde EA, granted on 29 July 2014,
covers an area of approximately 461km(2) (formerly
block MLHP-7) and is valid for an initial period
of 20 years with an initial 6 year period ending
January 2021, by which time development must
commence. SNH have informed the JV 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
FID final investment decision
FLNG floating liquefied natural gas
G&A general and administration
GIIP gas initially in place
Government Cameroon Government
Group the Company and its direct and indirect subsidiaries
HSSE health, safety, security and environment
IAS International Accounting Standards
IFRS International Financial Reporting Standards
IM the Isongo Marine Field area, Etinde Permit
km(2) square kilometres
LNG liquefied natural gas
LUKOIL LUKOIL Overseas West Project Ltd, a subsidiary
undertaking of OAO LUKOIL
mmboe million barrels of oil equivalent
mmscfd million standard cubic feet of gas per day
mscfd thousand standard cubic feet of gas per day
NewAge New Age (African Global Energy) Limited, a
privately owned oil and gas company
ordinary shares ordinary shares of 10p each in the capital
of the Company
PSC production sharing contract
P50 50% probability that volumes will be equal
to or greater than stated volumes
P90 90% probability that volumes will be equal
to or greater than stated volumes
Q1, Q2 etc. first quarter, second quarter etc.
SNH Société Nationale des Hydrocarbures,
the national oil and gas company of the Republic
of Cameroon
tcf trillion cubic feet
US United States of America
VOG Victoria Oil & Gas Plc
2D two dimensional
$ or US Dollars, USD United States of America Dollars
GBP or GB Pounds, Great Britain Pounds Sterling
GBP
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR LKLBLKFFBFBQ
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November 29, 2019 02:07 ET (07:07 GMT)
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