TIDMBLVN
RNS Number : 0146T
Bowleven plc
10 November 2023
10 November 2023
Bowleven plc ('Bowleven' or 'the Company')
Full Year Results
Bowleven, the Africa focused oil and gas exploration group with
key interest in Cameroon, today announces its audited full year
results for the year ended 30 June 2023. Terms not otherwise
defined have the meanings given to them in the glossary at the end
of this announcement.
HIGHLIGHTS
Operational
Etinde, offshore Cameroon
-- In June 2022, New Age announced that it had signed a
conditional agreement to sell operatorship and their 37.5% gross
stake in Etinde to Perenco SA ('Perenco') for an undisclosed sum,
subject to the resolution of a number of conditions precedent,
including regulatory approval from SNH. This transaction has not
yet completed.
-- The contractual 'long stop' date of 12 months from signature
passed in July 2023; New Age and Perenco informally agreed to
extend this date until completion is possible. We understand that
the conditions precedent have yet to be met with formal approval of
the transaction by the Government of Cameroon being the most
significant issue. We continue to believe that governmental
approval will be forthcoming and the transaction will complete
either in late 2023 or more likely early 2024. However, this has
remained outstanding for a significant period and Bowleven reminds
stakeholders that there can be no guarantee that it will complete,
nor as to the timing of completion.
-- Whilst the New Age/Perenco transaction is awaiting
completion, a limited 'care and maintenance' Etinde Permit work
plan and budget for 2023 has been approved by the JV partners on a
quarter-by-quarter basis. New Age have proposed that the JV
partners submit a similar proposal for FY2024 at the next OCM
meeting with SNH.
Financial
-- The loss for the financial year was $2.0 million.
-- Bowleven closed the year with $0.9 million of cash and a
financial investment of $0.6 million giving a total value of
available funds of $1.5 million. The cash balance at 31 October
2023 was $1.0 million with the remaining financial investment
having been sold and its value realised subsequent to the year
end.
-- In the current situation, where the Perenco transaction has
yet to be completed and our working capital funds are depleting,
Bowleven has previously communicated a pressing need to raise
additional equity to fund our operations. The Group's cash flow
forecasts and projections indicate a material risk that Bowleven
will fully utilise its existing cash resources in spring/summer
2024 without new investment. This gives rise to a material
uncertainty regarding the going concern status of the Group.
-- The Board has spent considerable time discussing and
evaluating future debt and/or equity fundraising options during
2023, having implemented actions to reduce our cash burn and
preserve the business' cash resources during the year.
-- The Board has been in discussions with the Company's major
shareholder in relation to the provision of new equity capital and
has been considering an indicative proposal which contemplates it
providing equity capital at a very substantial discount to the
current market price of Bowleven's ordinary shares. The Board
considers it appropriate to ensure it has explored all available
options before pursuing this proposal. The availability of any new
equity capital, and the final terms of such an equity raise, is
highly uncertain, as is the timing.
-- Following further discussion with our major shareholder, the
Board has agreed that the Directors will defer the receipt of their
emoluments to the extent there is insufficient liquidity within the
business over the course of the following 12 months. This will
prioritise the funding of costs necessary to retain going concern
status whereby the Directors' emoluments will be accrued until such
time the liquidity situation improves or there is a capital raise.
In addition, the major shareholder of the Group has provided a
comfort letter confirming their intention to provide financial
support to the extent that cash resources are not otherwise
available for a period of not less than twelve months from the date
the FY2023 financial statements are authorised or the date the
audit report is signed, whichever is later. This will allow the
Group to discharge its liabilities primarily relating to general
and administrative expense and Etinde monthly cash calls. In the
Board's opinion, this should provide sufficient time for it to seek
and formalise new equity investment.
Eli Chahin, Chief Executive Officer of Bowleven plc, said:
"While clearly, we find ourselves in a challenging financial
situation, Bowleven remains on the verge of a significant turning
point with a new Etinde operatorship offering a renewed focus and
clearer vision to the monetisation of the asset. The timing of the
completion of Perenco's acquisition of New Age's interest at Etinde
is still not clear and while we stay in somewhat of a holding
pattern, our focus is on the careful management of our balance
sheet so that we remain funded for the foreseeable future. I am
still confident that within a manageable timeframe we will see
progress within the Etinde JV and be in a position to accelerate
our timetable towards hydrocarbon production at Etinde for the
benefit of all the JV Partners."
ENQUIRIES
For further information, please contact:
Bowleven plc
Eli Chahin, Chief Executive 00 44 20 3327 0150
Capital Markets Communications Ltd (Camarco)
Owen Roberts
Hugo Liddy 00 44 20 3757 4980
Shore Capital Ltd (NOMAD and Broker)
Robert Finlay 00 44 20 7601 6100
Daniel Bush
Angus Murphy
This announcement may include statements that are, or may be
deemed to be "forward-looking statements". These forward-looking
statements can be identified by the use of forward-looking
terminology, including the terms "believes", "estimates",
"anticipates", "projects", "expects", "intends", "may", "will",
"seeks" or "should" or, in each case, their negative or other
variations or comparable terminology, or by discussions of
strategy, plans, objectives, goals, future events or intentions.
These forward-looking statements include all matters that are not
historical facts. They include statements regarding the Company's
intentions, beliefs or current expectations concerning, amongst
other things, the results of operations, financial conditions,
liquidity, prospects, growth and strategies of the Company and its
direct and indirect subsidiaries (the "Group") and the industry in
which the Group operates. By their nature, forward-looking
statements involve risks and uncertainties because they relate to
events and depend on circumstances that may or may not occur in the
future. Forward-looking statements are not guarantees of future
performance. The Group's actual results of operations, financial
conditions and liquidity, and the development of the industry in
which the Group operates, may differ materially from those
suggested by the forward-looking statements contained in the
announcement. In addition, even if the Group's results of
operations, financial conditions and liquidity, and the development
of the industry in which the Group operates, are consistent with
the forward-looking statements contained in the announcement, those
results or developments may not be indicative of results or
developments in subsequent periods. In light of those risks,
uncertainties and assumptions, the events described in the
forward-looking statements in the announcement may not occur. Other
than in accordance with the Company's obligations under the AIM
Rules for Companies and the Market Abuse Regulations, the Company
undertakes no obligation to update or revise publicly any
forward-looking statement, whether as a result of new information,
future events or otherwise. All written and oral forward-looking
statements attributable to the Company or to persons acting on the
Company's behalf are expressly qualified in their entirety by the
cautionary statements referred to above and contained elsewhere in
the announcement.
Notes to Editors:
Bowleven plc is an African focused oil and gas group, based in
London and traded on AIM. It is dedicated to realising material
shareholder value from its asset in Cameroon, whilst maintaining
capital discipline and employing a rigorously selective approach to
other value-enhancing opportunities.
Bowleven holds a strategic equity interest in the offshore,
shallow water Etinde permit (currently operated by New Age) in
Cameroon.
CEO & CHAIRMAN STATEMENT
Dear shareholders,
FY2023 has been a year of anticipation for both our Etinde joint
venture and indeed for all upstream E&P companies. At Bowleven,
our focus has been to align ourselves with the changing Etinde
partnership given the proposed incoming Operator for Etinde. After
many years of false starts we had hoped the last 12 months would
see Etinde emerge energised and well-positioned to deliver
sustainable returns to shareholders going forward.
Since 2017, we have restructured the business to reduce
operational and financial volatility. We have reduced capital
spend, aligned our cost base with our strategic singular
exploitation of Etinde, and improved our stewardship over our
assets. Our strategic intention remains, to:
-- monetise contingent resource;
-- reduce any expenditure, both capital and operational, not
consistent with Etinde's exploitation; and
-- focus exclusively on shareholder returns.
As detailed in our Annual Report for 2022 the conditional Sale
and Purchase Agreement for New Age's divestment of its interest to
a subsidiary of Perenco was a turning point for the Etinde Joint
Venture. This transaction, whilst subject to various approvals, was
and is expected to close in the coming months. Notwithstanding the
expiration of the long stop date, we have reason to believe that
the intention of all counterparties is to proceed with closing this
transaction. At the time of writing, the customary regulatory
approvals by the Government of Cameroon are yet to be
completed.
ETINDE OUTLOOK
The narrative in the mainstream media remains of a sector that
is poised for permanent decline, albeit with natural gas being the
key green energy transition enabler in the medium term. It is said
that current high oil and gas prices are likely to eventually
dissipate in the coming years. Indeed, the most recent projections
from the International Energy Agency is that the age of unbridled
growth will come to an end this decade. The turning point is the
subject of much debate as increasingly government policy is geared
towards energy transition and climate change. Together with the
slowing growth outlook for China, the increasing accessibility of
electric vehicles and the structural shifts due to the recent
pandemic all suggest that any growth outlook for oil is waning and
that the 'Golden Age of Gas' is being undermined by the cost and
supply of renewable energy alongside the geopolitical risk of
dependency on Russia that Europe is seeking to mitigate.
Nonetheless, the demand for such fuel is not linear. The African
region's appetite for both oil and gas has not subsided despite the
structural shift in energy supply that is underway in more
developed economies. The need for significant investment in oil and
gas supply is more pressing than ever given the years of
underinvestment, the role of electricity in Africa's
industrialisation and the predictably fast decline in existing
fields.
The associated economic and financial risks with new development
are amplified for many E&P companies. The difference for
Bowleven is that we have historically invested heavily to mitigate
much of the exploration risk. We were extremely disappointed that
we were unable to deliver FID for Etinde during FY2023, but we
ended the year having positioned ourselves for the incoming change
of operator. Our Etinde field is moving into a new phase, where
changing stakeholders, given the passage of time, must recalibrate
the assumptions and the consensus process. This has already taken
longer than expected and the Board is of the view it may still take
some time given the pace of progress thus far. Nonetheless, it
remains clear that if we are to monetise Etinde, we must ensure
that the share price reflects the Etinde proposition.
CAPITAL RAISE
Given the current situation, where the Perenco transaction has
yet to complete, and where there is uncertainty as to the likely
timing of completion, if it completes at all, and whilst its
working capital funds are depleting, Bowleven has an urgent need to
raise additional equity funding. The Board's preference would be to
recapitalise the business in such a way that all shareholders are
provided with an opportunity to participate whilst ensuring that
Bowleven retains its stake in Etinde whilst our investment
hypothesis is realised. This would allow Bowleven to continue to
fund its ongoing operations and general corporate overheads, as
well contribute its share of the potential expenditure at Etinde in
the period between Perenco becoming Etinde Operator and a FID date
(which the Board now expects to be in late 2024 at the earliest,
subject to the New Age/Perenco transaction completing in late 2023
or early 2024).
The Board has spent considerable time discussing and evaluating
future debt and/or equity fundraising options. It has also taken
actions to reduce our cash burn and preserve the business' cash
resources. As part of this process, the Directors have temporarily
reduced UK staff costs and eliminated office and associated costs.
The Company's current expenditure run rate is approximately
$125,000 to $175,000 per month. The Board expects some of these
cost-reduction measures to be temporary until the New Age/Perenco
transaction completes and/or until new finance is raised.
Continuing as a going concern depends on a series of actions,
including seeking fresh capital, controlling costs and catalysing
stakeholders towards the development of Etinde. The Directors had
discussions with the Group's largest shareholder in relation to a
potential issue of new shares to increase the business' cash
position to allow it to continue to finance its working capital
needs, as well as to provide for further project expenditure at the
Etinde Permit on the basis of an underwritten open offer to all
shareholders at a small discount to the share price. However, our
major shareholder has since been concerned at the potential high
level of risk relating to the closure of the Perenco acquisition as
well as other geopolitical issues and has subsequently communicated
an indicative proposal to provide new equity capital at a very
significant discount to current market price of Bowleven's shares.
As a result, the Board considers it appropriate to ensure it has
explored all available options before pursuing this proposal.
Therefore, currently the Board is also pursuing other options to
raise equity capital. The final form of such an equity raise is
unclear, as is the timing, but the Board would seek to provide an
opportunity for existing shareholders to contribute to an equity
raise should they so choose. The Board is also actively considering
measures with the potential to reduce current Bowleven expenditure
levels in order to create more time to find new equity
investors.
Following further discussion with our major shareholder, the
Board has agreed that the Directors will defer the receipt of their
emoluments to the extent there is insufficient liquidity within the
business over the course of the following 12 months. This will
prioritise the funding of costs necessary to retain going concern
status whereby the Directors emoluments will be accrued until such
time the liquidity situation improves or there is a capital raise.
In addition, the major shareholder of the Group has confirmed in a
comfort letter their intention to provide financial support to the
extent that money is not otherwise available for a period of not
less than twelve months from the date the FY2023 financial
statements are authorised or the date the audit report is signed,
whichever is later in order for the Group to discharge its
liabilities, which primarily relate to general and administrative
expenses and Etinde monthly cash calls.
The Board is mindful of our continued fiduciary obligation to
all shareholders to ensure every effort is expended to finance
Bowleven towards the receipt of the FID payment of $25 million.
Funding ourselves means ensuring we have sufficient working capital
and the resources to contribute to possible future development
activity.
OPERATIONS
Whilst the New Age/Perenco transaction has been awaiting
completion, a limited 'care and maintenance' Etinde Permit work
plan and budget for 2023 have been approved by the JV partners on a
quarter-by-quarter basis. New Age intends to formally submit this
to Société Nationale des Hydrocarbures (SNH) for approval. Monthly
expenditure at Etinde remains low as New Age continues to operate
the business on a largely suspended operational basis. New Age's
actual cash calls for the ongoing period (prior to the completion
of its sale of interest to Perenco) have been approximately $50,000
to $100,000 per month.
However, the Board needs to anticipate and assume that,
following completion of the New Age/Perenco transaction, Perenco
will quickly commence development-planning activity. The Company's
Etinde project expenditure going forward will be determined by this
work plan that will be presented by the incoming Operator,
Perenco.
Bowleven considers that Perenco may wish to review the previous
JO partner-agreed Equatorial Guinea based development scheme,
propose alternative(s), and update the front-end engineering design
to reflect any change in the approved development scheme and to
reflect current cost inflation for FID purposes. Any changes will
need to be approved by the joint venture partners as a group as
well as SNH, as regulator, before implementation. Whilst the timing
and impact of this remains uncertain, its impact on current
expenditure levels is expected by the Company is likely to be
substantial.
FINANCIAL AND OTHER MATTERS
At 30 June 2023, the Company's balance sheet had cash of $0.9
million and liquid financial investments of $0.6 million, giving
available funds of $1.5 million.
At the time of writing, we have an SNH approved budget to the
end of 2022 with JV partner expenditure levels agreed to the end of
2023 with the outgoing Operator. New Age have prepared a draft work
plan and budget for 2024, on the current 'care and maintenance'
basis adopted for 2023 expenditure. After that, we expect a
substantial increase in monthly expenditure at Etinde based on an
expected update to the current draft work plan to be proposed by
the incoming Operator, Perenco Cameroon S.A.
ENVIRONMENTAL, SOCIAL AND GOVERNANCE (ESG) FOCUS
Building a robust social licence is a fundamental principle of
the Company's objectives. T hrough our Operator, we engage the
support of our host government and communities. The development of
Etinde will enable us to undertake the technical, infrastructural
and logistical work associated with the exploitation, development
and production at Etinde, both onshore and offshore. Focal areas of
engagement with the Limbe region will include stakeholder
engagement, management of community problems, and land/sea access.
We intend to support the new Operator which has a history of
Cameroonian stakeholder engagement in this regard.
MOVING INTO 2024
Earlier this year we had to reset our operating model and
restructure working relationships with team members that were
critical to the stewardship of our business over the recent years.
This involved redundancies and we would like to take the
opportunity to thank these people for the support that they have
provided in circumstances that have been challenging for all. Our
hope is that we can secure funding and that FID materialises during
2024, opening up opportunities for future possible
re-engagement.
The Board continues to anticipate that the acquisition of the
New Age stake by Perenco will complete by early 2024 and this
represents a catalyst for the fund-raising effort and the
monetisation of Etinde. The pace of development to date has been
unfortunate of course, but we remain of the belief that the
operational credibility and project backing of Perenco for Etinde
should be a positive outcome for all stakeholders that will reset
the business into the coming years.
Eli Chahin Jack Arnoff
Chief Executive Officer Chairman
9 November 2022 9 November 2022
GROUP INCOME STATEMENT
FOR THE YEARED 30 JUNE 2023
Audited Audited
2023 2022
$000 $000
------------------------------------- -------- -------
Revenue -
Administrative expenses (2,156) (2,376)
Operating loss (2,156) (2,376)
Finance and other income 136 (108)
----------------------------------------- -------- -------
Loss before taxation (2,020) (2,484)
----------------------------------------- -------- -------
Taxation - -
------------------------------------- -------- -------
Loss for the year (2,020) (2,484)
----------------------------------------- -------- -------
Basic and diluted loss per share
($/share) from continuing operations (0.01) (0.01)
----------------------------------------- -------- -------
GROUP STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEARED 30 JUNE 2023
Audited Audited
2023 2022
$000 $000
-------------------------------- -------- -------
Comprehensive Loss for the year (2,020) (2,484)
------------------------------------ -------- -------
GROUP BALANCE SHEET
30 JUNE 2023
Audited Audited
2023 2022
$000 $000
------------------------------ -------- --------
Non-current assets
Intangible exploration assets 155,543 155,433
Property, plant and equipment 3 13
---------------------------------- -------- --------
155,546 155,446
--------------------------------- -------- --------
Current assets
Financial investments 644 2,251
Inventory 1,180 1,180
Trade and other receivables 1,739 1,858
Cash and cash equivalents 906 1,273
---------------------------------- -------- --------
4,469 6,562
--------------------------------- -------- --------
Total assets 160,015 162,008
---------------------------------- -------- --------
Current liabilities
Trade and other payables (695) (668)
Total liabilities (695) (668)
---------------------------------- -------- --------
Net assets 159,320 161,340
---------------------------------- -------- --------
Equity
Share capital 56,517 56,517
Share premium 1,599 1,599
Foreign exchange reserve (69,857) (69,857)
Other reserves 2,767 2,767
Retained earnings 168,294 170,314
---------------------------------- -------- --------
Total equity 159,320 161,340
---------------------------------- -------- --------
COMPANY BALANCE SHEET
30 JUNE 2023
Audited Audited
2023 2022
$000 $000
---------------------------------- --------- ---------
Non-current assets
Property, plant and equipment 3 12
Investments in Group undertakings 145,099 145,099
-------------------------------------- --------- ---------
145,102 145,111
------------------------------------- --------- ---------
Current assets
Financial investments 644 2,251
Trade and other receivables 13,765 13,142
Cash and cash equivalents 891 1,264
-------------------------------------- --------- ---------
15,300 16,657
------------------------------------- --------- ---------
Total assets 160,402 161,768
-------------------------------------- --------- ---------
Current liabilities
Trade and other payables (389) (311)
Total liabilities (389) (311)
-------------------------------------- --------- ---------
Net assets 160,013 161,457
-------------------------------------- --------- ---------
Equity
Share capital 56,517 56,517
Share premium 1,599 1,599
Foreign exchange reserve (147,715) (147,715)
Other reserves (2,470) (2,470)
Retained earnings 252,082 253,526
-------------------------------------- --------- ---------
Total equity 160,013 161,457
-------------------------------------- --------- ---------
The Company has elected to take the exemption under section 408
of the Companies Act 2006 to not present the individual parent
undertaking income statement. The result for the Company for the
year was a loss of $1,444,000 (2022: loss of $1,821,000).
GROUP CASH FLOW STATEMENT FOR THE YEARED 30 JUNE 2023
Audited Audited
2023 2022
$000 $000
--------------------------------------------------- -------- -------
Cash flows from operating activities
--------------------------------------------------- -------- -------
Loss before tax (2,020) (2,484)
------------------------------------------------------- -------- -------
Adjustments to reconcile Group loss before tax to net cash used in
operating activities:
Depreciation of property, plant and equipment 10 18
Finance (income)/costs (136) 108
Equity-settled share based payment transactions - 80
Loss on sale of property, plant and equipment -
--------------------------------------------------- -------- -------
Adjusted loss before tax prior to changes in
working capital (2,146) (2,278)
------------------------------------------------------- -------- -------
Decrease/(Increase) in trade and other receivables 80 (18)
Increase/(Decrease) in trade and other payables 34 (170)
Net cash used in operating activities (2,032) (2,466)
------------------------------------------------------- -------- -------
Cash flows used in investing activities
Acquisition of intangible exploration assets (102) (572)
Sale of financial investments 1,584 -
Interest received 9 -
Dividends received 174 220
Net cash from/(used in) investing activities 1,665 (352)
------------------------------------------------------- -------- -------
Cash flows used in financing activities
Lease repayments - (3)
Net cash flows used in financing activities - (3)
------------------------------------------------------- -------- -------
Net decrease in cash and cash equivalents (367) (2,821)
------------------------------------------------------- -------- -------
Cash and cash equivalents at the beginning of
the year 1,273 4,094
Net decrease in cash and cash equivalents (367) (2,821)
Cash and cash equivalents at the year end 906 1,273
------------------------------------------------------- -------- -------
COMPANY CASH FLOW STATEMENT FOR THE YEARED 30 JUNE 2023
Audited Audited
2023 2022
$000 $000
----------------------------------------------------- -------- -------
Cash flows from operating activities
----------------------------------------------------- -------- -------
Loss before tax (1,444) (1,821)
--------------------------------------------------------- -------- -------
Adjustments to reconcile Company loss before tax
to net cash used in operating activities:
Depreciation of property, plant and equipment 10 18
Finance (income)/costs (130) 87
Equity-settled share based payment transactions - 80
Adjusted loss before tax prior to changes in working
capital (1,564) (1,636)
--------------------------------------------------------- -------- -------
Decrease/(Increase) in trade and other receivables 13 (14)
Increase in trade and other payables 89 9
Net cash used in operating activities (1,462) (1,641)
--------------------------------------------------------- -------- -------
Cash flows used in investing activities
Increase in inter-company funding (678) (1,398)
Sale of financial investments 1,584 -
Interest received 9 -
Dividends received from financial investments 174 220
Net cash used in investing activities 1,089 (2,819)
--------------------------------------------------------- -------- -------
Cash flows used in financing activities
Lease payments - (3)
Net cash flows used in financing activities - (3)
--------------------------------------------------------- -------- -------
Net decrease in cash and cash equivalents (373) (2,822)
--------------------------------------------------------- -------- -------
Cash and cash equivalents at the beginning of the
year 1,264 4,086
Net decrease in cash and cash equivalents (373) (2,822)
--------------------------------------------------------- -------- -------
Cash and cash equivalents at the year end 891 1,264
--------------------------------------------------------- -------- -------
GROUP STATEMENT OF CHANGES IN EQUITY
FOR THE YEARED 30 JUNE 2023
Foreign
Share Share exchange Other Retained
capital premium reserve reserves earnings Total equity
$000 $000 $000 $000 $000 $000
----------------------------- -------- -------- --------- --------- --------- --------------
At 1 July 2021 (audited) 56,517 1,599 (69,857) 2,687 172,798 163,744
----------------------------- -------- -------- --------- --------- --------- --------------
Loss for the year - - - - (2,484) (2,484)
Total comprehensive loss for
the year - - - - (2,484) (2,484)
----------------------------- -------- -------- --------- --------- --------- ------------
Share based payments - - - 80 - 80
At 30 June 2022 (audited) 56,517 1,599 (69,857) 2,767 170,314 161,340
----------------------------- -------- -------- --------- --------- --------- ------------
Loss for the year - - - - (2,020) (2,020)
Total comprehensive loss for
the year - - - - (2,020) (2,020)
----------------------------- -------- -------- --------- --------- --------- ------------
Share based payments - - - - - -
At 30 June 2023 (audited) 56,517 1,599 (69,857) 2,767 168,294 159,320
----------------------------- -------- -------- --------- --------- --------- ------------
COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE YEARED 30 JUNE 2023
Foreign
Share Share exchange Other Retained Total
Attributable to owners of Parent capital premium reserve reserves earnings equity
Company $000 $000 $000 $000 $000 $000
--------------------------------- -------- -------- --------- --------- --------- -------
At 1 July 2021 (audited) 56,517 1,599 (147,715) (2,550) 255,347 163,198
--------------------------------- -------- -------- --------- --------- --------- -------
Loss for the year - - - - (1,821) (1,821)
Total comprehensive loss for
the year - - - - (1,821) (1,821)
--------------------------------- -------- -------- --------- --------- --------- -------
Share based payments - - - 80 - 80
At 30 June 2022 (audited) 56,517 1,599 (147,715) (2,470) 253,526 161,457
--------------------------------- -------- -------- --------- --------- --------- -------
Loss for the year - - - - (1,444) (1,444)
Total comprehensive loss for
the year - - - - (1,444) (1,444)
--------------------------------- -------- -------- --------- --------- --------- -------
Share based payments - - - - - -
At 30 June 2023 (audited) 56,517 1,599 (147,715) (2,470) 252,082 160,013
--------------------------------- -------- -------- --------- --------- --------- -------
NOTES TO THE FULL YEAR FINANCIAL STATEMENTS
For the year ended 30 June 2023
(1) Accounting Policies
Basis of preparation
The financial information in the financial statements has been
extracted from the statutory accounts which have been prepared in
accordance with UK Adopted International Accounting Standard (UK
IAS) and in conformity with the requirements of the Companies Act
2006. The Company financial statements have been prepared in
accordance with UK Adopted International Accounting Standard (UK
IAS) as applied in accordance with the provisions of the Companies
Act 2006. The financial statements have been prepared under the
historical cost convention. The financial statements comply with
those parts of the Companies Act 2006 applicable to companies
reporting under UK Adopted International Accounting Standard (UK
IAS).
The announcement has been prepared on a basis consistent with
the accounting policies applied to the statutory accounts for the
year ended 30 June 2023.
The disclosed figures are not statutory accounts in terms of
section 434 of the Companies Act 2006. The statutory accounts give
full disclosure of the Group accounting policies and will be
published as soon as they are available.
On the statutory accounts for the year ended 30 June 2023, the
auditor gave an unqualified opinion and did not contain a statement
under section 498 (2) or (3) of the Companies Act 2006. The
statutory accounts for the year ended 30 June 2022 have been filed
with the Registrar of Companies.
(1) Going concern
Global market conditions have largely recovered from the direct
impact of the COVID-19 (coronavirus) pandemic. However, there
remains a range of after effects, including shortages of raw
materials and production delays, which have combined with cost
inflation, the ongoing green energy transition and the various
impacts deriving from the ongoing Russian-Ukraine war and the
international political response to create significant market
uncertainty. These factors have helped create a period of
relatively high price inflation. The resulting political and
economic climate is one of considerable volatility and ongoing
uncertainty.
The most significant sources of material uncertainty facing the
Bowleven Group today relate to:
(i) the timing of completion of the transaction between Perenco
Group and New Age relating to the transfer of operatorship of the
Etinde joint operation;
(ii) whether the transaction between Perenco and New Age will complete at all;
(iii) the level of spending required under the 2024 Etinde WPB,
which is currently an unapproved draft which has yet to be
submitted to SNH for approval;
(iv) the timing of FID and the receipt of the $25 million FID
payment from LUKOIL and New Age (or Perenco in due course); and
(v) the raising of additional finance to fund Bowleven's ongoing operations.
The draft 2024 work plan and budget has been prepared on a
minimal 'care & maintenance' expenditure basis by New Age,
acting as Operator. Preparing a revised 2024 WPB and agreeing that
plan with ourselves, LUKOIL and SNH, should be the first
significant task facing Perenco when they become Operator at
completion of their transaction with New Age. Whilst the timing of
completion of the New Age transaction with Perenco is unknown, our
working assumption is that this will occur by Spring 2024 at the
latest and consider that the existing JO members will not be able
to continue with the current impasse for much longer.
Whatever happens in the immediate future, progress towards FID
has remained much slower than we ever anticipated. Whilst the
existing JO members determined that the Equatorial Guinea (EG)
option, was the most likely economically viable development
scenario, there remains uncertainty as to the development plan
which will be adopted. We expect Perenco may reconsider all options
and may well have their own proposal, which will need to be
presented and approved by the JO partners as a whole. In addition,
there remain considerable commercial and regulatory issues which
will require resolution before FID can be attained. The timing of
resolution of these formalities cannot be accurately predicted as
many of them are not within the Etinde JO partners' direct control.
Our current expectation is that these will be resolved no earlier
than 31 December 2024, but we recognise that it may happen at an
even later date.
In this uncertain environment, Bowleven's existing working
capital resources will be extinguished, most likely before Summer
2024, although this will critically depend on the level of activity
at Etinde and the point in time at which the proposed transaction
between New Age and Perenco completes.
The Directors have considered a number of different operational
scenarios for the remainder of 2023, 2024 and thereafter in order
for us to prepare short and medium-term cash flow forecasts and
projections for the Etinde development project and hence the
Bowleven Group.
Current cash expenditure levels of the Group are around $1.5
million to $1.8 million per annum. On this basis, the minimum
amount of new capital required in the short term is between $0.5
million and $2 million based on the current level of activity.
However, on completion of the Perenco transaction, we expect a new
project team to be put in place and the current or an alternative
development scheme to be fully developed for presentation and then
submitted for approval to SNH and the Government of Cameroon. This
is likely to take at least 12 months to complete. Currently, we are
not able to estimate the likely expenditure levels that might be
proposed.
The Directors have taken these and other potential issues into
consideration when determining the scenarios to use in their
assessment of the going concern status of the Group. These
scenarios ranged from no FID being achieved in 2024 through to
modelling the impact of a number of different development options
on budgeted, forecasted and projected cash flows until December
2025.
We have made our own assessment and used data available based on
various assumptions regarding the steps and actions that Perenco
may take and the speed at which they may progress the development
plan towards FID. We have assumed FID will occur in late 2024 or
later for cash flow modelling purposes in our base scenario.
Our assumption is that Perenco will most probably choose to
conduct a new assessment of Etinde development options and these
steps will most likely include a new FEED process. By their nature,
our expenditure projections for 2024 onwards and later are highly
uncertain at this point in time. We believe that we have adopted a
more conservative approach to costs and potentially a more rapid
implementation timetable than Perenco may adopt in practice.
A new equity raise is essential to secure the future of Bowleven
at this time, as the current level of capitalisation will fall
short of the level needed in the immediate future. Over the last 12
months, the Board has been considering a range of financing
options. The Directors have had discussions with Bowleven's largest
shareholder in relation to a potential issue of new shares to
increase the business' cash position to allow it to continue to
finance our working capital needs, as well as provide for further
project expenditure at the Etinde Permit, whilst allowing all
current shareholders to participate at the same price. However, the
potential high level of risk relating to the closure of the Perenco
acquisition, together with various global geopolitical risks, has
meant that they are minded to make an indicative and non-binding
financing proposal which would be at a very significant discount to
the current market price of Bowleven shares. As a result, the Board
considers it appropriate to ensure it has explored all available
options before pursuing this proposal and accordingly, it has also
been seeking other sources of new equity capital.
The Board is mindful that the majority of shareholders are
long-term investors in Bowleven and the potential of the Etinde
asset. The availability of any new equity capital, and the final
terms of such an equity raise is highly uncertain, as is the
timing, but alongside any new equity financing available, the Board
will seek to provide an opportunity for existing shareholders to
contribute should they so choose.
The Board has also been actively evaluating measures to reduce
current Bowleven expenditure levels in order to create more time to
identify and complete an equity raise. Following further discussion
with our major shareholder, the Board has agreed that the Directors
will defer the receipt of their emoluments to the extent there is
insufficient liquidity within the business over the course of the
following 12 months. This will prioritise the funding of costs
necessary to retain going concern status, whereby the Directors'
emoluments will be accrued until such time the liquidity situation
improves or there is a capital raise. In addition, the major
shareholder of the Group has provided a comfort letter confirming
their intention to provide financial support to the extent that
cash resources are not otherwise available for a period of not less
than twelve months from the date the 30 June 2023 financial
statements are authorised or the date the audit report is signed,
whichever is later, in order for the Group to discharge its
liabilities which primarily relate to general and administrative
expenses and Etinde monthly cash calls.
As the timing of progress towards FID is not within the control
of the Group, we have concluded that it is highly likely that
Bowleven may need to raise additional short-term funding to bridge
expenditure to FID. The amount of additional finance that will be
required will depend on the status of the Etinde development and
the likely time period to FID as well as any anticipated risk to
this being further delayed beyond our expectation.
At FID, Bowleven is due to receive $25 million from our JO
partners under the terms of the 2015 farm-in agreement. The
Directors do not anticipate any timing issue relating to receipt of
these funds when they fall due but note that any failure to receive
these funds promptly may also cause further funding issues for the
Bowleven Group.
The Directors consider the risk of the Government of Cameroon
removing the Etinde PSC contract from the Etinde JO partners is low
at the current time, for the following reasons:
-- the issue of the January 2021 licence expiry date has not
been raised as a formal concern by SNH, and SNH has approved all
annual work programmes and budgets up to and including the year
ending 31 December 2022 (2023 is pending action by New Age);
-- we will request the Government of Cameroon eliminate this
contractual uncertainty as part of the FID regulatory approval
process; and
-- the expected addition of Perenco to the JO as Operator, in
place of New Age, is likely to reduce practical risk of the
Government of Cameroon entering default proceedings.
After taking the preceding funding risks into account, the
Directors are satisfied that the Group would be able to secure
additional debt and/or equity funding in order to finance its share
of the Etinde development.
The Directors are nevertheless conscious that the issues
discussed above create a material uncertainty that may cast
significant doubt over the Group's ability to continue as a going
concern and therefore, that the Group may be unable to realise its
assets and discharge its liabilities in the normal course of
business. Whilst acknowledging this material uncertainty, the
Directors remain confident of raising finance in 2023/24.
Accordingly, the financial statements have been prepared on a going
concern basis as the Directors are of the opinion that the Group
has sufficient funds to meet ongoing working capital and committed
capital expenditure requirements.
The financial statements do not include any adjustments that
might result if the Group were unable to continue as a going
concern.
(2) Etinde Valuation
In the previous financial year, we considered that the proposed
acquisition of New Age's 37.5% gross share of the Etinde joint
operations, by Perenco setting a potential external valuation of
the Etinde asset as a whole, represents a triggering event as
defined under IFRS accounting standards, requiring the Directors to
formally value Bowleven Group's share of the Etinde project. This
was completed in FY2022 and the results are disclosed in that set
of financial statements. No further valuation impairment provision
was considered necessary at that point in time.
We have updated various assumptions made as part of the FY2022
Etinde valuation assessment as part of our FY2023 accounting close
processes and reassessed the valuation of the Etinde intangible
asset.
Etinde Impairment Review in 2022 and 2023
Etinde Impairment Review in 2023
The proposed transaction between New Age and Perenco setting a
potential external valuation of the Etinde asset has not yet
completed and there is considerable uncertainty when this might
happen at the current time. This represents a triggering event as
defined under IFRS, requiring the Directors to update the
impairment assessment carried out in 2022. Accordingly, we have
reassessed and updated the 2022 impairment review assumptions in
light of the ongoing situation.
The principle changes in assumptions are:
-- Oil price, which has increased;
-- Timing of FID and first revenue is now assumed to be the end
of 2024 and January 2027 respectively; and
-- A cost inflation assumption to update FEED based expenditure
assumptions to current day base line (of 10%)
In addition, we have modelled and assessed scenarios for the
main development options with an additional one and two year delay
to FID and first revenue as sensitivity cases.
Otherwise, our key assumptions, as set out below (and in the
2022 annual report and accounts), remain unchanged.
Our base line financial modelling demonstrates that the 1
January 2024 value of Bowleven Group's 20% share of the Etinde
development project ranges from $177 million to over $200 million
at $75 Brent, $6 LNG export price and $3 domestic gas price
points.
The key sensitivities in our valuation models include:
-- Oil price. Increasing oil export price to $80 per bbl has a
positive impact of around $10 million to $15 million increase in
NPV, depending on the development scenario;
-- Discount rates. Increasing risk-weighted discount rates from
15% to 17%, reduces NPV by around $20 million to $25 million,
depending on the development scenario; and
-- Delaying FID and first revenue to 2028 decreased valuation by around $25 million.
On this basis, the Board has concluded that the current net book
value of the Etinde intangible asset (at $156 million) is not
impaired at the current date. However, in reaching this conclusion
we do note that there are potential material uncertainties and that
we cannot rule out further impairment triggering events arising in
future periods and that a lower valuation may be estimated at that
point.
Impairment charges were previously recognised in both 2015 and
2016 totalling $136.7 million (2016: $60.7 million; 2015: $76
million).
Etinde Impairment Review in 2022
The discounted cash flow model was used in 2022 to determine our
best estimate of the expected value of the development of the
Etinde asset taking into consideration the following factors and
assumptions:
-- the macroeconomic environment globally and in Cameroon;
-- prevailing market conditions in the oil and gas industry;
-- a conservative and phased inclusion of the hydrocarbon resource available for development;
-- the commercial and governmental situation in Cameroon;
-- the JO partner approved EG development scenario, plus
additional consideration of potential alternate approaches that
Perenco, as incoming Operator, might propose at a future date;
-- that the development will seek to maximise production from
the outset giving due consideration to the potential for supplying
gas to both Cameroon domestic and export supply;
-- that condensate can be supplied to either the global or domestic markets for the same value;
-- differential gas and LNG process for the Cameroon domestic
and LNG-based European gas export market;
-- infrastructure capital and operating costs estimates are
based on FEED and pre-FEED engineering studies undertaken or
assessed between 2019 and 2021, except where pricing data was not
available; and
-- the Etinde asset is considered to be a single cash-generating
unit and includes historic exploration costs incurred on the Etinde
Permit in line with the treatment of those costs for cost recovery
purposes.
Until the JO partners and the Government of Cameroon issue FID
and gain the necessary approvals, any valuation of Etinde will
include many uncertainties and risks. Any financial model that is
prepared at this stage of the process, in the period immediately
prior to the point in time that development consent is given and
approvals issued, is inherently uncertain. The most significant
uncertainties impacting the valuation model include:
-- reaching commercial agreement with potential off-takers and
receiving governmental approval to export gas;
-- agreeing the development solution with joint venture partners and other stakeholders;
-- raising finance to fund development post-FID; and
-- any impact arising from FID date and the subsequent
governmental approval of the revised field development plan. The
current PSC terminates in 2045, however, failure to complete the
initial work programme set out in the Presidential decree and EEA
documentation within the first six years after approval in January
2015 may be used to provide grounds under which the Government of
Cameroon can proceed to terminate the Etinde development licence
early at their discretion, following the process set out in the
Cameroon Petroleum Code.
We have applied a risk-weighted discount rate of 15% to the
projected Etinde cash flows, based on FID in late 2024, with first
revenue projected to occur after 2026, with the date depending on
the development scenario considered. All capex costs include a
project contingency of 20% and allow for EPIC contract costs of 15%
and 5% withholding tax applied on imports under Cameroon fiscal
code. The largest single risk factor included in the discount rate
reflects the risk relating to government approval of the EG
development option and a likely longer period to reach the
approval.
We have used a reasonable range of condensate, Cameroon domestic
and European export gas (LNG) pricing taking due account of
currently available long-term oil and gas price forecasts prepared
by internationally reputable bodies such as the IMF, World Bank and
US EIA, as well as other oil and gas businesses and market
commentators. We have used a range of recovered oil and gas
reserves from various discovered oil and gas condensate fields
based on the latest reservoir modelling information prepared by New
Age on a C2 (P50) resource basis. Our base line financial modelling
demonstrates that the 1 January 2023 value of Bowleven Group's 20%
share of the Etinde development project ranges from $158 million to
over $200 million at $65 Brent, $6 LNG export price and $3 domestic
gas price points.
Whilst we have prepared financial forecasts for alternate
development scenarios that Perenco may propose to the JO partners,
we note that any such alternative will require the formal approval
of at least LUKOIL as well as SNH and the Government of Cameroon to
become official JO policy. Due to the nature of these alternate
potential developments, our forecasts have a higher degree of
uncertainty as they have not been studied in detail as part of FEED
or pre-FEED activities. In general terms, these scenarios tend to
have higher initial capital development costs (which may be reduced
by sale and lease back arrangements) and higher operating costs,
giving rise to a lower calculated NPV range. Offsetting this, the
risk weighting attached to the time/approval of any Cameroon
focused development is materially lower than for the EG option.
Using lower discount rates partially offsets the impact of higher
costs. In any case, the Board of Bowleven remain adamant that we
will not approve any alternate development scenario that provides a
significantly lower economic return to Bowleven's shareholders.
(3) Other Notes
a) The loss attributable to ordinary shares and the number of
ordinary shares for the purpose of calculating the diluted earnings
per share are identical to those used in the basic earnings per
share. The exercise of share options or warrants would have the
effect of reducing the loss per share and consequently are not
taken into account. In the prior year, the loss attributable to
ordinary shares and the number of ordinary shares for the purpose
of calculating the diluted earnings per share were identical to
those used in the basic earnings per share.
b) Directors have not recommended a dividend (2022: nil).
c) As at 30 June 2023, a contingent asset of $25 million is
disclosed for the FID consideration relating to the Etinde farm-out
and will be credited to intangible exploration assets once further
clarity around Etinde project sanction/FID is obtained.
(4) 2023 Annual Report and Accounts
Full accounts together with a notice of AGM are scheduled to be
posted on [ ] November 2023 to shareholders who elected to continue
to receive a hard copy report and can be obtained free of charge,
at the Company's registered office, 50 Lothian Street, Edinburgh,
EH3 9WJ for a period of one month after publication. For
shareholders who opted to receive the annual report electronically,
notification will be provided when the annual report is available
to access from the company website www.bowleven.com .
GLOSSARY
AGM annual general meeting
AIM the market of that name operated by the London
Stock Exchange
Articles of Association the internal rules by which a company is
governed
BBL or bbl barrel of oil
bcf or bscf billion standard cubic feet
of gas
Board of Directors the Directors of the Company
boe barrels of oil equivalent
Bomono Permit/Licence the production sharing contract between the
Republic of Cameroon and EurOil, dated 12
December 2007, in respect of the area of
approximately 2,328 km2 comprising former
blocks OLHP-1 and OLHP-2 onshore Cameroon;
or, as the context may require, the contract
area to which that production sharing contract
relates
Bowleven or Bowleven Bowleven plc (LSE: BLVN) and/or its subsidiaries
plc as appropriate
CAMOP New Age Cameroon Operating Company
CFA Central African Francs
Companies Act 2006 the United Kingdom Companies Act 2006 (as
(the Act) amended)
contingent resources those quantities of hydrocarbons
that are estimated to be potentially
recoverable from known accumulations,
but which are not currently considered
to be commercially recoverable
EA Exploitation Authorisation
EBT employee benefit trust
EEEA Etinde Exclusive Exploitation Agreement
EG Equatorial Guinea
E & P exploration and production
Etinde Permit the Etinde Exploitation Authorisation (EA)
area. The Etinde EA, granted on 29 July 2014,
covers an area of approximately 461km2 (formerly
block MLHP-7) and is valid for an initial
period of 20 years with an initial six-year
period ending January 2021, by which time
development must commence. SNH have informed
the JO of their intention to exercise their
right to back into this licence, but have
not signed the Participation Agreement and
funded their share of cash calls in accordance
with the requirements set out in the PSC
EurOil EurOil Limited, an indirectly wholly owned
subsidiary of Bowleven plc, incorporated
in Cameroon
FEED Front End Engineering Design
FID final investment decision
FLNG Floating liquefied natural
gas
G&A general and administration
GIIP gas initially in place
Host Government Government of Cameroon
Group the Company and its direct and indirect subsidiaries
HSSE health, safety, security and environment
IAS International Accounting Standards
IFRS International Financial Reporting
Standards
Intra Isongo nomenclature used to describe a sequence
of sedimentary rocks in the Etinde licence
area
JO, JV or JV partners an unincorporated joint
operation. Joint Venture
partners are the financial
investors who jointly
own and operate the unincorporated
joint operations
km kilometres
km2 square kilometres
LNG liquefied natural gas
LPG liquefied petroleum gas
LTIP long-term incentive plan
LUKOIL LUKOIL Overseas West Project Limited, a subsidiary
undertaking of OAO LUKOIL
Macquarie Macquarie Capital (Europe) Limited
mmbbls million barrels
mmboe million barrels of oil equivalent
MMBtu Metric Million British Thermal
Unit
mmscf million standard cubic feet
of gas
mscf thousand standard cubic feet of
gas
New Age New Age (African Global Energy) Limited,
a privately held oil and gas company
New Age Group New Age and its subsidiaries
NOMAD nominated advisor
ordinary shares ordinary shares of 10 pence each in the capital
of the Company
P10 (3C) 10% probability that volumes will be equal
to or greater than stated volumes
P50 (2C) 50% probability that volumes will be equal
to or greater than stated volumes
P90 (1C) 90% probability that volumes will be equal
to or greater than stated volumes
PSC production sharing contract
Q1, Q2 etc. first quarter, second quarter
etc.
scf standard cubic feet.
shareholders means holders of ordinary shares and 'shareholder'
means any one of them
SNH Société Nationale des Hydrocarbures,
the national oil and gas company of Cameroon
tcf trillion cubic feet
TCM Technical Committee Meeting
US United States of America
$, US Dollars, USD United States of America
Dollars
GBP, GB Pounds, GBP Great Britain Pounds Sterling
WPB Work plan and budget
Notes:
Prospective resources, contingent resources and reserves shall
have the meanings given to them by the guidance on petroleum
resources classification contained in the 2007.
SPE Petroleum Management System published jointly by the Society
of Petroleum Engineers, The American Association of Petroleum
Geologists, the World Petroleum Council and the Society of Petroleum
Evaluation Engineers.
For the purposes of this announcement, 6mscf of gas has been
converted to 1boe.
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END
FR BLBTTMTJMTTJ
(END) Dow Jones Newswires
November 10, 2023 02:00 ET (07:00 GMT)
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