Bowleven’s major shareholder is worried about the risks to a deal with Perenco, in Cameroon, closing.
As such, Crown Ocean Capital P1 has suggested it acquire new equity in Bowleven “at a very significant discount”.
The Bowleven statement noted the “potential high level of risk relating to the closure of the Perenco acquisition, together with various global geopolitical risks”.
Closing of the sale has been repeatedly delayed. The sale must close, and then the partners at Etinde reach final investment decision (FID), to trigger a $25 million payout to Bowleven.
The junior said it must explore all opportunities to raise cash before accepting the Crown Ocean proposal.
The problem is that the rate at which Bowleven is using cash will see it run out “most likely before summer 2024”.
The company said it expected Cameroon to approve the deal, and it then to complete, either late in 2023 or early 2024. It has been waiting for a significant amount of time, though.
“Bowleven reminds stakeholders that there can be no guarantee that it will complete, nor as to the timing of completion”, it said.
Assuming the deal completes, Perenco may reach FID by the end of 2024. Bowleven then expects the project to begin generating revenue in January 2027.
Perenco struck the deal to buy out a stake held by New Age (African Global Energy) in June 2022.
Once Perenco has taken control, it may well want to rethink the Etinde project. The partners had agreed that exports via LNG facilities in neighbouring Equatorial Guinea would be the best way forwards.
However, Bowleven warned that Perenco may want to update the front-end engineering and design (FEED). It will also have to reckon with the impact of cost inflation. The Etinde partners, and state-owned Société Nationale des Hydrocarbures (SNH), would need to approve the changes before FID.
At the end of June, Bowleven had cash of $0.9 million and financial investments of $0.6mn. As of the end of October, this had fallen to $1mn. Current expenditure for the company is $125,000-175,000 per month.
Bowleven has said it has taken steps to reduce spending while it seeks an equity raise. While Crown Ocean remains an option, an alternative would look to secure support from other shareholders, while Bowleven works to bridge the gap until partners take FID.
Zeus analyst Daniel Slater said Etinde was a “potentially very valuable asset” but that progression to FID was crucial.
“Funding for the development will also be required, with senior debt, offtake prepay and vendor funding from oil services contractors likely to be considered”, Slater said in a note. There has been “substantial progress”, he said, but Zeus has a “cautious stance while we wait for further progress”.