Bowleven seals $500m development deal in Africa with Petrofac

Kevin Hart, CEO, Bowleven
Kevin Hart, CEO, Bowleven
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SHARES in Bowleven jumped by up to a fifth yesterday after the Edinburgh-based oil driller signed a $500 million (£313m) deal with FTSE 100 energy services firm Petrofac to develop a gas field in Cameroon.

Petrofac will provide Bowleven with the funding for the initial stage of the development work on the Etinde permit, with the first gas expected to flow in 2016.

Engineering, design and project management personnel will also be supplied to Bowleven as part of the deal.

The blue-chip stock will then receive a share of the cash flow from the production well.

Chief executive Kevin Hart, who took over at Bowleven in 2006 after eight years as finance director at Edinburgh-based Cairn Energy, said: “Our alliance with Petrofac will help deliver first production from our Etinde project and represents a major step towards our goal of converting resources to reserves.”

Oil giants Elf, Mobil and Total drilled wells off Cameroon between the 1960s and 1980s, with Bowleven sinking its first exploration wells off Africa in 2004.

Alessandro Pozzi, an analyst at Barclays, said: “Today’s alliance is a clear positive for Bowleven as its removes the funding risk, which represented one of the reasons for the large disconnect between share price and net asset value. Petrofac brings a much-needed external validation, which confirms the size and economic viability of Bowleven’s discoveries.”

But Deutsche Bank analyst Phil Corbett warned: “This represents a fairly onerous funding structure. We would expect Bowleven to continue its search for other sources of development financing with the Petrofac funding as a backstop.”