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Bowleven PLC to Discuss Etinde Farm-Out Agreement Signed with LUKOIL and Newage Call

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Bowleven PLC to Discuss Etinde Farm-Out Agreement Signed with LUKOIL and Newage Call THOMSON REUTERS STREETEVENTS EDITED TRANSCRIPT BLVN.L - Bowleven PLC to Discuss Etinde Farm-out Agreement Signed with LUKOIL and NewAge Call EVENT DATE/TIME: JUNE 24, 2014 / 9:45AM GMT THOMSON REUTERS STREETEVENTS | www.streetevents.com | Contact Us ©2014 Thomson Reuters. All rights reserved. Republication or redistribution of Thomson Reuters content, including by framing or similar means, is prohibited without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. JUNE 24, 2014 / 9:45AM, BLVN.L - Bowleven PLC to Discuss Etinde Farm-out Agreement Signed with LUKOIL and NewAge Call CORPORATE PARTICIPANTS Kevin Hart Bowleven plc - CEO CONFERENCE CALL PARTICIPANTS Rafal Gutaj BofA Merrill Lynch - Analyst Alessandro Pozzi Barclays - Analyst David Farrell Macquarie Research - Analyst Will Forbes Edison - Analyst Charles Vaughan Dundee Securities - Analyst Divaji Hosseini Tudor Pickering Holt - Analyst David Round BMO - Analyst Mark Henderson Westhouse Securities Ltd. - Analyst PRESENTATION Operator Good morning ladies and gentlemen, and welcome to the Bowleven call on the Etinde farm-out transaction. For your information, this conference is being recorded. This morning's call will be led by Kevin Hart, Chief Executive of Bowleven. (Operator Instructions). At the time, I would like to turn the call over to Mr. Kevin Hart, please go ahead sir. Kevin Hart - Bowleven plc - CEO Morning, everybody. First of all, apologies, if I start yawning, I'm not bored. It's the fact I've just flown in Cameroon and on the bounciest flight ever, so I'm running on no sleep at the moment and no caffeine, which is never good. The purpose of the call today is really update everybody in respect of the transaction we announced this morning. You'll have seen we've entered into a conditional agreement with NewAge/LUKOIL to dispose of two-thirds of our existing position in Etinde in return for a gross consideration of $250 million, as split $210 million in cash and $40 million in respect of two appraisal well carry in respect of the Etinde acreage. I'd highlight probably the following [key] areas as why we see this as an excellent deal for Bowleven. Firstly, it gives us the opportunity to accelerate the appraisal of the interest at Isongo. The IM-5 well really opened a Pandora's box in respect of Intra Isongo, where we have at least three large stratigraphic channels that we've identified that need further appraisal in order to ascertain just how big the prize is there. So whilst we're giving a bit of the cake away, we're pretty hopeful that we can make the cake a damn sight bigger as a consequence of that appraisal drilling. And I know that certainly in the LUKOIL announcement today that it's the intention that those appraisal wells will be drilled in 2015, which I think is consistent with all parties. It also provides the cash to fully cover us for our residual share, in terms of development costs. And not only that, it lets us to get on with what is really the life blood of Bowleven historically, which is (inaudible) exploration. So as a consequence of today's transaction, in addition to accelerating the appraisal of Intra Isongo, covering the development costs, it will also provide us with the balance sheet strength to progress pretty aggressively on Bomono, drilling two wells there. 2 THOMSON REUTERS STREETEVENTS | www.streetevents.com | Contact Us ©2014 Thomson Reuters. All rights reserved. Republication or redistribution of Thomson Reuters content, including by framing or similar means, is prohibited without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. JUNE 24, 2014 / 9:45AM, BLVN.L - Bowleven PLC to Discuss Etinde Farm-out Agreement Signed with LUKOIL and NewAge Call We're in pretty advanced discussions in respect of a rig contract and [linked] farm-in on that acreage, which would enable to draw those wells and commence a two-well program prior to the end of the year. And then finally, of course, and not least, we have Kenya in the hopper, where we're just about to award to the 2D seismic contract. And we've got the twinkle in the eye, which is Zambia and we're looking past that. So overall, it really lets us take all our assets forward, fully funded from where we are. Some of the detail, the deal itself is conditional on government approval in Cameroon. We've been through that process twice before, once with [DiTOIL] and then the (inaudible). It's a well tried and tested process. And finally, we also need shareholder approval. So we'll be providing a circular to the shareholders in due course, which should be posted within seven days of the announcement. Other loose ends, clearly this deal isn't compatible with the arrangements we currently have in place with Petrofac. And the strategic alliance agreement doesn't actually envisage this kind of termination event. We're already in discussions with them, as to how to move it forward. There's a $50 million break fee in the event of a corporate takeover, which doesn't really apply in this instance. So we'll be having a conversation as to how best to remedy things, such that the strategic alliance would be terminated. Maybe just a few words on LUKOIL, I'm sure you all know who they are, they're $53 billion company. It begs the question, I suppose, why would then enter into Cameroon? And why would they come into the Etinde acreage? I hope the answer to that's pretty self-evident. Firstly, they see the upside in Intra Isongo, which we all believe is a world-class opportunity but requires further appraisal. And secondly, they clearly think there's a commercial project there, over and above just fertilizer. I think everybody's got an eye on an LNG scheme as an augmentation to the fertilizer plant. So where we are. We think we sold two-thirds of our interest in Etinde for something in excess of where [it] (inaudible) last night. We've retained [Etinde upside], which is a down sight more realizable, now we've got funding to do in terms of appraisal drilling. And we've got the opportunity to move all the assets, not just Etinde, forward for the foreseeable future. So hopefully, you'll all agree with us that we think it's a pretty good transaction. But I'll pass across for questions. Operator? QUESTIONS AND ANSWERS Operator (Operator Instructions). Rafal Gutaj, Bank of America. Rafal Gutaj - BofA Merrill Lynch - Analyst Three questions, please. Firstly, could you just discuss how soon you think you could get a rig to drill the appraisal wells on IM-5? And could you just remind us of the anticipated costs to drill these wells? Secondly, on Bomono, if there's any delays to the farm down here, would you still risk these wells by the end of the year, to avoid the $60 million penalty? 3 THOMSON REUTERS STREETEVENTS | www.streetevents.com | Contact Us ©2014 Thomson Reuters. All rights reserved. Republication or redistribution of Thomson Reuters content, including by framing or similar means, is prohibited without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. JUNE 24, 2014 / 9:45AM, BLVN.L - Bowleven PLC to Discuss Etinde Farm-out Agreement Signed with LUKOIL and NewAge Call And then finally, the severance payment you referred to as being $50 million with Petrofac on the strategic alliance, you mentioned it doesn't apply here. But could there be any compromise by virtue of using Petrofac for the FID studies for the development to mitigate any severance payment? Thanks very much. Kevin Hart - Bowleven plc - CEO I've taken them in order. Wells. Typically when we've gone out to contracts for drilling wells in Etinde, the lead time typically from going out -- the twinkle in the eye to spud is probably somewhere in the region of six to 12 months. It really does just depend on that rig availability. Clearly, that's one of the first things we'll be looking at as a joint venture as soon as this deal completes. So part of it will be linked into the timing of the completion as well. It's certainly all our expectations, I believe, that we'll be drilling in 2015 and clearly the earlier in 2015 we can manage, subject to the usual caveats of safety, the better. So that's the first part of that question. The second part in relation to the cost of the wells. I think what we're looking at in terms of appraisal locations is very much focused on the Intra Isongo level. So above the middle Isongo, which is where the higher pressure resides. So I would have thought $40 million would fully cover the cost of two wells -- our net share would fully cover the cost of two wells on testing, which is the basis on which that number was derived. And in respect of Bomono, we are actually in the -- a very, very long way down the track in terms of securing a rig for that. And, as part of that rig contract, it's likely that the rig supplier would get part of the acreage or take an equity position in the block alongside us. I don't want to say too much yet until it's finalized.
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