23rd Mar 2006 07:02
BowLeven Plc23 March 2006 BowLeven Plc23 March 2006 BowLeven Plc ('BowLeven' or 'the Company') Interim results for the six months to 31 December 2005 BowLeven, the Cameroon-focused oil & gas company listed on AIM, today announcesits interim results for the six months ended 31 December 2005. Highlights include: • Cash of £62 million• 3D seismic survey underway on blocks MLHP 5 and MLHP 6 of Etinde permit• Reserves of 60.3 mmboe remain in place• Four well drilling programme being prepared for early 2007• Loss for the period £0.7 million• Concentration on original strategic plan including implementation of Gas To Electricity ("GTE") Plant in Cameroon Commenting, Terry Heneaghan, Executive Chairman, said: 'Although it has been a highly disappointing six months, with the drilling oftwo unsuccessful exploration wells and the dismissal of Philip Rhind, the ChiefExecutive, I am still confident that BowLeven is in a good position to generateconsiderable value for shareholders.' 'We are funded through the next 18 months, during which time we will concentrateon implementing the GTE business plan with the support of the government ofCameroon and monetising our existing and future recoverable hydrocarbonresources. We will continue the exploration of blocks MLHP-5 and MLHP- 6 andintend to drill four wells in the Etinde Permit in early 2007, at least one ofwhich will be an appraisal/development well in the Isongo Marine field. We arealso looking to secure one or more industry joint venture partners for thepermit area.' For further information contact: Terry Heneaghan, Executive Chairman, BowLeven Plc 0131 260 5100Adam Westcott, Noble & Company Limited 0131 225 9677Neil Bennett, Maitland 020 7379 5151 CHAIRMAN'S STATEMENT Since reporting our 2005 annual results in October of last year, the Company hassuffered a number of setbacks. We have drilled two disappointing explorationwells, our share price has fallen by around 75% from its historic high andPhilip Rhind, the Chief Executive, has been dismissed. However, following somenew director appointments and management changes, your company is returning tothe path that was set out in our AIM Admission Document in December 2004, withthe clear objective of generating considerable value for shareholders. The Two Exploration Wells Two exploration wells, Manyikebi-1 and Bachuo-1, were drilled during the lastquarter of 2005. Manyikebi-1 was a Biafra sands oil exploration prospect with an estimated 1 in 3chance of success. It was a potentially high impact well, which had beenassessed to contain in place hydrocarbons (P50) of around 280 million barrels ofoil and 100 Bcf of gas. As was expected from the seismic data, the welldiscovered gas but, despite encountering around 950 feet of high qualityreservoir sands, no oil was found. The well, which was drilled to a total depthof 5,050 ft, was plugged and abandoned, as a small gas discovery, at a totalcost of approximately US$7 million for our 100% interest. The Bachuo-1 exploration well was an Isongo sands gas/condensate target with anestimated chance of success of 1 in 5. It was another potentially high impactwell, which had been assessed to contain in place hydrocarbons (P50) of around2.6 Tcf of gas and over 430 million barrels of condensate. Although hydrocarbonswere encountered they would not flow when tested. The reservoir consisted ofvolcanoclastic debris of low permeability. This well was drilled to a totaldepth of 10,353 ft and cost approximately US$21 million in total for our 100%interest. It has been suspended and will probably be abandoned in due course atno additional cost. It is worth emphasising however, that the results of these two wells have had noadverse impact on the Company's (P50) recoverable hydrocarbon Reserves andContingent Resources (as stated in our AIM admission document), which wereindependently appraised by Scott Pickford at 118.5 million barrels of oilequivalent (60.3 mmboe of Reserves and 58.2 mmboe of Contingent Resources). Thisdocument, including the full report by Scott Pickford, is available on ourwebsite: www.bowleven.com. We intend to include a reserves update as part of theannouncement of the Company's results for the full year. The Business Plan The Company's business plan has been re-examined and we are focussing on theoriginal objectives, which were stated in our AIM Admission document. Over thenext 18 months, management will concentrate on the following activities: - implementing its Gas to Electricity ("GTE") business plan with the support of the government of Cameroon,- monetising our existing and future recoverable hydrocarbon resources,- acquiring and interpreting 3D seismic over blocks MLHP-5 and MLHP- 6,- securing one or more industry joint venture partners,- assessing the additional exploration potential of the Etinde Permit, and- drilling four wells in early 2007. The Company is being actively encouraged, by the Cameroon authorities, to bringgas to shore from the Isongo Marine Field, which is located in block MLHP-7, forthe initial purpose of fuelling an existing heavy fuel oil-fired electricitygenerating plant near Limbe. It is expected that this plant will be converted toburn gas and its capacity will then be expanded, in staged phases, oversubsequent years. We are currently engaged in securing the commercial agreementsnecessary for this project and we have already started conceptual developmentdesign. Associated condensate production will be sold separately at prices thatare close to world market prices. A 3D seismic acquisition and interpretation programme is currently underway overblocks MLHP- 5 and 6. Processing and initial interpretation of the seismic dataare expected to be completed during the 4th quarter of 2006. The Company still owns a 100% working interest, subject to governmentparticipation, in the Etinde Permit and the Board is committed to reduce thefinancial risks for shareholders on exploratory drilling and to secure a "secondpair of eyes" to review technical risks and select drilling locations. As a result, we are actively seeking joint venture partners on an asset farm-outbasis over blocks MLHP-5 and 6. This farm-out process is currently being plannedin two stages. Stage 1 will be a selective process, which will take place whilethe 3D seismic acquisition over MLHP-5 and MLHP-6 is being processed andinterpreted: it is likely to begin in April of this year. It is possible that afurther selective farm-out exercise, Stage 2, will be conducted after theinitial 3D seismic interpretation has been completed but before drilling onthese blocks has started. Drilling in MLHP-5 and 6 is expected to begin duringthe second quarter of 2007. We are also considering a farm-out of block MLHP-7 and this exercise is likelyto start after a gas sales contract for the GTE business plan has been signedand at least one Isongo Marine appraisal well has been drilled and tested. Itshould be noted that considerable exploration potential still remains in thisblock. As stated in our AIM Admission Document, we may also consider other forms ofcorporate partnerships, alliances or joint ventures. Drilling locations for first quarter 2007 have not yet been selected, but atleast one well (possibly two) of the four-well drilling programme will be anappraisal/development well in the Isongo Marine Field to support the GTEbusiness plan. The remaining wells will depend upon the interpretation of ourexisting and new 3D seismic databases and the success of our farm-out strategy.New geological and geophysical consultants have been appointed to assist in thetechnical evaluation of our three offshore blocks and in selecting our nextdrilling locations. Sanaga Sud For approximately three years, the Company has been trying to secure this drygas field. However, we were informed recently that a Production Sharing Contractfor Sanaga Sud has been signed between the Cameroon government authorities andanother oil and gas company. This fact has not impacted the Company's plans andobjectives for the Etinde Permit. Dismissal of Chief Executive and Management Changes As was announced on 15th February 2006, the Company's Chief Executive, PhilipRhind was dismissed. As a consequence, the directors have asked me to put my previously stated planto retire on hold. I will continue as Executive Chairman until a new CEO isappointed. John Morrow, previously Technical Director, has been appointed ChiefOperating Officer and the Technical, Exploration, Drilling and Commercialfunctions report directly to him. John Morrow reports to me as do the Financialand Corporate functions. No management void has occurred as a consequence of Philip Rhind's dismissal. The Board At the beginning of January, Jerry Anthony joined the Company as ExplorationDirector. Jerry, a geologist and formerly an employee of Sasol and Chevron, iswell experienced in West Africa and he is already making an impact onexploration and farm-out strategy. I am delighted that he has joined our team. The resignation of Robert Walvis (Non-Executive Chairman Designate) on 13thJanuary, shortly before Philip Rhind was suspended from office and subsequentlydismissed, was a blow to succession planning on the board. In early January,Robert came to the conclusion that the role of Chairman would require moreexecutive involvement than he was able or prepared to commit to the Company and,as a consequence, he resigned. I am very sorry that he did not continue with us;his corporate input, during the short period that he was a director, was veryuseful. It is still my aim to retire sometime during 2006. I will do so when the rolesthat I am currently fulfilling have been filled to the satisfaction of the boardand the Company's advisers, Noble & Company. Easton Wren will continue as aNon-Executive Director until a suitable replacement for him has been found. Your directors are well experienced and qualified to take the Company forwardand the board will be strengthened as necessary during the coming months. Executive Share Option Scheme Employees and directors who have joined the Company since the beginning of 2006,including Jerry Anthony, are entitled to receive share options based upon recentaverage market prices which are well below the exercise prices of the optionspackages granted in the past to their colleagues. This clearly creates ananomalous position within the management team. Therefore the RemunerationCommittee will be considering changes to the options packages of all employeesto ensure that they are properly incentivised in the future. AIM Guidelines for Resources Companies The London Stock Exchange has recently published guidelines for resourcescompanies. We endorse these guidelines and will implement them fully. Financial Results As expected, the Group reported a loss of £0.7 million for the six months ended31st December 2005. The main contributor to this loss was administrativeexpenses of £1.5 million reflecting the Group's efforts to exploit its assets. Following the successful share placing in October 2005, the balance sheet ishealthy with £62 million of cash resources and no debt at the period end. Ofthis amount, approximately £14 million is committed for the 3D seismicacquisition programme over blocks MLHP-5 and 6 and it is planned that anyadditional funds, which the Company may require in the foreseeable future, toexplore, appraise and develop its Cameroon asset base, will come from either asuccessful farm-out or a corporate alliance or both. Outlook Despite the disappointing wells that were drilled in 2005 and the board changesof earlier this year, your Company has the resources to implement its businessplan and deliver value for shareholders. The previously assessed Reserves and Contingent Resources were not adverselyaffected by the well results of last year and management is determined tomonetise these assets as rapidly as possible. Exploration potential remains exciting and our farm-out strategy should unlockvalue from our exploration acreage. The business plan, as previously stated in our AIM Admission Document, is backon track: the management team has the ability to capitalise on the potential ofthe Etinde Permit. The balance sheet is solid with £62 million of cash at 31st December 2005. Weanticipate that a successful farm-out of part of our acreage and/or a corporatealliance should cover any foreseeable financing requirements beyond 2007. GROUP PROFIT AND LOSS ACCOUNT Six months ended Six months ended Year ended 31 December 31 December 30 June 2005 2004 2005 (Unaudited) (Unaudited) (Audited) £'000 £'000 £'000 Turnover - - -Administrative expenses (1,470) (303) (1,373) Operating loss (1,470) (303) (1,373)Interest receivable and similar income 746 78 512Interest payable and similar charges - (1,277) (1,271)Loss on ordinary activities before taxation (724) (1,502) (2,132)Tax on loss on ordinary activities - - -Loss for financial period (724) (1,502) (2,132) There are no recognised gains or losses other than those included in the profitand loss account. GROUP BALANCE SHEET At 31 December At 31 December At 30 June 2005 2004 2005 (Unaudited) (Unaudited) (Audited) £'000 £'000 £'000Fixed assetsIntangible assets 27,496 8,784 11,289Tangible assets 356 - 336 27,852 8,784 11,625Current assetsStocks 841 238 853Debtors 956 1,071 527Cash at bank 62,355 25,763 20,518 64,152 27,072 21,898Creditors: amounts falling due within one year (6,955) (2,533) (844) Net current assets 57,197 24,539 21,054 Total assets less current liabilities 85,049 33,323 32,679 Capital and reservesCalled up equity share capital 2,961 2,111 2,111Share premium 86,002 33,771 33,758Other reserves 2,883 2,883 2,883Profit and loss account (6,797) (5,442) (6,073)Shareholders' funds 85,049 33,323 32,679 GROUP CASH FLOW STATEMENT Six months ended Six months ended Year ended 31 December 31 December 30 June 2005 2004 2005 (Unaudited) (Unaudited) (Audited) £'000 £'000 £'000 Net cash flow from operating activities (2,301) (1,227) (2,905)Returns on investments and servicing offinance 744 (1,192) (759)Capital expenditure and financial investment (9,700) (1,961) (5,686) Cash outflow before financing (11,257) (4,380) (9,350)FinancingIssue of equity share capital 53,094 34,926 34,651Advance of other loans - 2,100 2,100Repayment of loans - (7,045) (7,045)Net cash inflow from financing 53,094 29,981 29,706Increase in cash in the period 41,837 25,601 20,356 Reconciliation of net cash flow to movement in net funds Increase in cash in period 41,837 25,601 20,356Net cash inflow from loan instruments - 4,944 4,944Change in net funds 41,837 30,545 25,300Opening net funds 20,518 (4,782) (4,782)Closing net funds 62,355 25,763 20,518 NOTES FORMING PART OF THE INTERIM RESULTS 1. Basis of preparation The financial information contained herein does not constitute statutoryaccounts within the meaning of Section 240 of the Companies Act 1985. Theunaudited interim financial information has been prepared on the basis of theaccounting policies set out in the Group's accounts for the year ended 30 June2005. The figures for the year ended 30 June 2005 have been extracted from theaccounts. Those accounts have been filed with the Registrar of Companies andcontained an unqualified auditor's report. 2. Reconciliation of movement in shareholders' funds Six months ended 31 December 2005 £'000 Loss for the period (724)New shares issued 850Premium on new share capital subscribed 52,244Opening shareholders' equity funds 32,679Closing shareholders' equity funds 85,049 3. Cash Included within the Group cash balance of £62 million at 31 December 2005 is a$3m non-refundable deposit received from Addax Petroleum NV as part of anagreement under which a farm-in agreement was contemplated. Addax has soughtrepayment of this amount. The Directors, having taken legal advice, intend todefend the claim. 4. Interim report This document represents the Interim Report and half yearly results of BowLevenplc. Copies of the Interim Report will be sent to shareholders and can beobtained, free of charge, from the Company at 68-70 George Street, Edinburgh,EH2 2LT for a period of one month. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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