Bowleven to complete key West African deal

Bowleven has cleared the final official hurdle in the way of completing the $250m (£163m) Cameroon stake sale it agreed to in June putting the oil and gas company in line for a big cash injection.

The Edinburgh-based company said a decree from Cameroon's President Biya approving the deal has been officially recorded bringing an end to months of uncertainty.

The completion process has been attended by a series of delays that have required considerable management effort to resolve.

The deal to sell a total of 50 per cent interest in the Etinde permit to Cameroon's New Age and Russia's Lukoil was originally due to complete on 31st August.

The parties to the farm-down extended the deadline three times pending approval of the deal by President Biya.

In December, Bowleven's chairman Ronnie Hanna said he was in almost hourly telephone contact with Chief Tabetando, a lawyer from Cameroon who has been on the company's board since 2001, about the approval process for the stake sale.

On 30th January, Bowleven said it had received a decree signed by president Biya but had to wait for it to be gazetted, or formally published.

The company announced yesterday the decree had finally been gazetted. All the sale conditions have now been met.

Led by chief executive Kevin Hart, Bowleven said the transaction is scheduled to complete within 15 business days. It expects to receive an initial $170m (£110m) cash from New Age and Lukoil on completion.

This is more than the total £107m valuation assigned to Bowleven by investors, based on the Aim-listed company's share price.

The remaining $80m will be payable as work progresses on the Etinde permit. Mr Hart said the deal puts the company in a strong position to develop the interests it has amassed at a challenging time for oil and gas firms.

The deal was agreed before the crude price tumbled last year which seemed to have been well-timed.

" Our strengthened balance sheet is a real advantage through this volatile period for the sector," said Mr Hart. Completion of the deal would cement a remarkable turnaround in Bowleven's fortunes.

In December 2008 an analyst said the funding challenge faced by the company then was so severe that BowLeven was effectively dead in the water.

Yesterday another analyst, Will Forbes, at Edison Investment Research, said: "Once complete, the farm-down transforms the company into a fully funded developer of Etinde with material cash reserves to pursue other opportunities, if sought."

In addition to the $170m cash, Lukoil and New Age will pay a further $15m to Bowleven following appraisal drilling on the Etinde permit, which Bowleven hopes will prove up additional resources. They will cover up to $40m drilling costs for Bowleven.

The remaining $25m will be payable if the parties decide to sanction the hefty investment required to bring finds on Etinde on stream.

No target date has been set for them making the relevant Final Investment Decision.

If the parties decide to proceed, Bowleven may be able to use some of the cash secured through the farm-down deal towards its share of the development costs.

The sale proceeds could also be used to fund work elsewhere in Cameroon or further afield. Bowleven has early stage interests in Kenya and Zambia.

Shares in Bowleven closed up 14 per cent, 4p at 33p. The shares closed at 42p the day the farm-out deal was announced. Cameroon's state-owned Societe Nationale des Hydrocarbure has exercised its right to take a 20 per cent stake in Etinde.

Bowleven will retain a 20 per cent holding after SNH acquires its interest and the farm-down deal completes.

Lukoil and New Age will have 30 per cent each. New Age will take over as the operator leading on developments from Bowleven.