£71m cash call funds Bowleven's test wells off Cameroon coast

Published on Tuesday 9 June 2009 21:35

BOWLEVEN, the Edinburgh-based oil explorer, raised £71 million yesterday, issuing so many new shares that it will more than double its market capitalisation.

The Aim-listed company, which focuses on exploration in west Africa, has been seeking partners to share the cost of drilling wells to assess the size of a potentially valuable oil discovery off the Cameroon coast.

But a lack of cash meant Bowleven was seen as a distress seller, and it has been unable to strike a deal with a prospective partner firm on acceptable terms. That forced it into a major cash call.

After weeks of speculation, the company announced it had appointed Royal Bank of Scotland and Merrill Lynch to place millions of shares in the market yesterday morning.

By midday the bankers had found buyers for 106 million new shares, which increases its issued capital by 122 per cent. Despite the size of the placement the new shares were sold at 67p each, a discount of 9 per cent to Bowleven's opening price yesterday, but above the level shares have traded at in recent weeks.

Chief executive Kevin Hart praised his shareholders yesterday for being "strong and loyal". Even at its relatively small discount the placement had been "considerably" oversubscribed, he said.

Hart added that the placement meant Bowleven did not need a partner to drill appraisal wells to establish the size of the Cameroon field, which a recent independent report estimated was likely to contain 53 million barrels of recoverable oil.

Despite being seen as cash-strapped prior to the placement, Hart maintained that he had always been comfortable with the firm's position.

He commented: "If you're in a position where clearly your balance sheet hasn't got the cash to develop your assets, the natural perception is to assume that you are a distress seller, even though I think we were pretty comfortable all along."

Bowleven will now continue to seek a "farm in" partner for the project. Hart said he would prefer to go into the drilling programme with a partner, but Bowleven was now looking for one from a position of strength.

Hart explained: "Our preference would be to bring in a new partner, but it would have to be on the right terms.

"As a result of the placement we can plan and progress on the basis that we don't need one."

After its cash levels fell to a point where it had to cancel rig contracts last year, a fall in global oil exploration has loosened the market, so Bowleven could quickly begin drilling.

Hart admitted that Bowleven had been "slightly cheeky" in calling for tenders to drill the appraisal well before the placement. It has received tenders which suggested it could drill in the fourth quarter of 2009.

Shares in Bowleven fell 6.25p to 67.5p yesterday.