Company Announcements

1 November 2022

Bowleven plc ('Bowleven' or 'the Company')

Full Year Results

Bowleven, the Africa focused oil and gas exploration group traded on AIM, today announces its audited full year results for the year ended 30 June 2022. Terms not otherwise defined have the meanings given to them in the Glossary at the end of this announcement.

HIGHLIGHTS

Operational

Etinde, offshore Cameroon

§ In June 2022, New Age formally announced that it had signed a conditional agreement to sell operatorship and their 37.5% gross stake in Etinde to Perenco SA ('Perenco') Group for an undisclosed sum, subject to the resolution of a number of conditions precedent, including regulatory approval from SNH.

§ The JO partners continue to await the completion of the New Age-Perenco transaction.

§ New Age has reduced its operational footprint placing Etinde development activities on a 'care and maintenance' basis, pending the transfer to Perenco.

§ Whilst New Age has completed several outstanding tasks from the 2021 post-FEED analysis programme during the calendar year, very little progress has been made otherwise.

Financial

§ The loss for the financial year was $2.5 million.

§ Bowleven closed the year with $1.3 million of cash and a financial investment of $2.2 million giving a total value of available funds of $3.5 million. Cash balance at 30 October 2022 was $0.5 million.

§ Currently, there is no draft work plan or budget for the 2023 calendar year as New Age has left this task open for Perenco to agree with the Joint Operation ('JO') partners and Société Nationale des Hydrocarbures ('SNH'), most likely in Spring 2023.

§ Bowleven anticipates a higher Etinde expenditure in 2023 on the basis that Perenco is likely to put a full Etinde development team in place in early 2023, following completion of its Etinde interest acquisition, and may seek to take a fresh look at Etinde development options which would incur an additional cost. When combined with our current cash and liquid resources, the Directors' cash flow forecasts and projections indicate a material risk that Bowleven will fully utilise its existing cash resources by the end of 2023. This gives rise to material uncertainty regarding the going concern status of the Bowleven group.

§ The Board is currently discussing and investigating various options, including debt and equity issues, as well as hybrid debt instruments to raise additional funding during early 2023. No such plans have been put in place at the current time and there can be no certainty that any additional financing will be concluded, nor as to the terms of any such additional financing. Bowleven will make further announcements to update shareholders as soon as it has more information.

Outlook

The Company's key objective is to continue to deliver its outlined strategy in FY2023. The most important deliverables include:

§ Working with JO partners on commercial and financial matters in respect of the Etinde development options with the aim of reaching an Etinde project financial investment decision (FID) in 2023.

§ To renew the Etinde Exclusive Exploitation Agreement ('EEEA') licence as part of the regulatory process associated with FID.  Bowleven considers that the risk of the Etinde licence (which expired in January 2021) potentially being removed will further decline as Perenco joins the development team. The Board understands that Perenco has an excellent relationship with SNH and the Government of Cameroon given its position as the largest oil and gas investor in Cameroon.

§ Maintaining disciplined management of capital and operational expenditure to secure progress towards FID whilst maintaining financial resources and raising additional financing.

Eli Chahin, Chief Executive Officer of Bowleven plc, said:

"It has been a year of progress and we continue to focus on maximising the economic return to our shareholders.  The most significant event to update on is New Age's ongoing transaction to sell its operatorship and share in Etinde development project to Perenco.

Perenco has a formidable operating history in Cameroon with oil and gas productions of 85,000 boepd (51,000 barrels per day and 24 million m3 of gas per day) mostly from the Rio del Rey basis (to the north of Etinde) and at the Sanaga Sud field complex near Kribi. Here Perenco, in conjunction with SNH and Golar operates the very successful FLNG gas export business using the Hilli Episeyo vessel.

At the January 2022 TCM held with SNH, the JO partners formally told SNH that the partnership had reached the decision that the Equatorial Guinea development had been selected as the development basis for Etinde. After extensive study, the conclusion was that this was the only economically and commercially viable development option for that JO partnership group. With the accession of Perenco, other additional options may now become feasible to study.

As we move into 2023, we will work with our JO partners on both commercial and financial matters in relation to the Etinde development options and to further progress towards FID."

This announcement may include statements that are, or may be deemed to be "forward-looking statements".  These forward-looking statements can be identified by the use of forward-looking terminology, including the terms "believes", "estimates", "anticipates", "projects", "expects", "intends", "may", "will", "seeks" or "should" or, in each case, their negative or other variations or comparable terminology, or by discussions of strategy, plans, objectives, goals, future events or intentions.  These forward-looking statements include all matters that are not historical facts.  They include statements regarding the Company's intentions, beliefs or current expectations concerning, amongst other things, the results of operations, financial conditions, liquidity, prospects, growth and strategies of the Company and its direct and indirect subsidiaries (the "Group") and the industry in which the Group operates.  By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future.  Forward-looking statements are not guarantees of future performance.  The Group's actual results of operations, financial conditions and liquidity, and the development of the industry in which the Group operates, may differ materially from those suggested by the forward-looking statements contained in the announcement.  In addition, even if the Group's results of operations, financial conditions and liquidity, and the development of the industry in which the Group operates, are consistent with the forward-looking statements contained in the announcement, those results or developments may not be indicative of results or developments in subsequent periods.  In light of those risks, uncertainties and assumptions, the events described in the forward-looking statements in the announcement may not occur.  Other than in accordance with the Company's obligations under the AIM Rules for Companies and the Market Abuse Regulations, the Company undertakes no obligation to update or revise publicly any forward-looking statement, whether as a result of new information, future events or otherwise.  All written and oral forward-looking statements attributable to the Company or to persons acting on the Company's behalf are expressly qualified in their entirety by the cautionary statements referred to above and contained elsewhere in the announcement.

Notes to Editors:

Bowleven plc is an African focused oil and gas group, based in London and traded on AIM. It is dedicated to realising material shareholder value from its asset in Cameroon, whilst maintaining capital discipline and employing a rigorously selective approach to other value-enhancing opportunities.

Bowleven holds a strategic equity interest in the offshore, shallow water Etinde permit (currently operated by New Age) in Cameroon.

CEO & CHAIRMAN STATEMENT

POSITIONED FOR VALUE CREATION

"Following a profoundly tumultuous period for the E&P sector, the Etinde development has now to some extent been fortified with sustained high commodity prices and an incoming joint venture partner that bodes well for its progress through to the $25 million FID payment for Bowleven".

Dear Shareholders,

The recent geopolitical events in Ukraine have had a significant impact on the concept of energy sovereignty for all countries. The human tragedy has been immense, and our sympathies are with all who have been impacted by this crisis.  There is a recognition today that the world has changed, and we must adapt to a new reality.

In the energy sector, the new paradigm that has emerged has affected the supply and flow of molecules, most likely for the considerable future.  The burden on domestic consumers arising from recent historic highs in energy prices are currently being partly offset by some western governments to help deal with the cost of living crisis we are currently experiencing.  This macroeconomic backdrop is also challenging central banks as interest rates are rising to help curtail the inflationary environment. The price of energy has become a much more visible component in the cost of living and the continued volatility in the short to medium term has changed the calculus for all decision makers who must grapple with the uncertainty.

It is the view of the Board that this uncertainty will continue in the short term on a number of levels.

As capital providers and other stakeholders make sense of the situation that surrounds us, it is clear that the path to continued economic growth will only return by solving the energy conundrum. This holds true for both developed and developing economies as they cope with the fiscal environment that challenges all governments as they balance the need for energy investments and the decarbonisation agenda.

Emission targets and energy transition strategies are currently being deliberated in light of the evolving situation in Europe, which is feeling the immediate impact of restricted access to hydrocarbon flows brought on by the Ukrainian crisis. Access to additional supply by way of alternative sources, increased liquefication and storage infrastructure, and new alliances have now become part of the narrative for all government agencies. 

Our investment in Etinde has not been spared the challenge of deciding how we navigate our business such that our shareholders reap the benefits of the asset entrusted under our stewardship. The anticipated changes in the joint venture have been a catalyst for positive momentum. The announced conditional acquisition by French-based Perenco of the New Age stake in the licence and the operatorship of Etinde is an important and positive milestone. Etinde's resource and volume estimates are of vital importance to the domestic economy in Cameroon and the surplus requirements are potentially of strategic significance to prospective buyers internationally. Our location offshore in West Africa leaves us well placed to deliver to European and other markets for years to come.

The most significant development during the year has undoubtedly been New Age signing a definitive conditional agreement with a subsidiary of Perenco to transfer all New Age's participating interests in the Etinde permit, and operatorship of the Etinde JO, to Perenco. Whilst the transaction remains subject to a number of approvals, Bowleven and Lukoil as parties to the JO decided not to exercise our pre-emption rights over New Age's interest. At the time of writing, the customary regulatory approvals by the Cameroon government are yet to be completed.

Perenco is a seasoned E&P company with a formidable operating history in Cameroon and across West Africa. It has the requisite balance sheet and human capital to support the JO partners in ensuring the best development plan is tabled to the host government. Perenco has earned the respect of the Government of Cameroon as one of the leading independent oil and gas companies in Europe today. In the Board's view, the transaction will move us closer to the final investment decision (FID) payment of USD25m from its Etinde JO partners which, following completion of the transaction, would include Perenco as a counterparty to this payment.  The process of the New Age divestment is progressing smoothly, and we continue to anticipate a closing of the transaction in the fourth quarter of 2022.

Perenco is currently the largest operator in Cameroon in terms of production, with an operating area in the Rio del Rey and Douala basins, and with oil and gas productions of 85,000 boepd (51,000 barrels per day and 24 million m3 of gas per day). The enhanced optionality this affords the Etinde development is deemed considerable. We refrain from holding any strong views on the likely development options without first gaining a better understanding of the evolving circumstances we will find ourselves in once the execution phases of the Perenco transaction have been completed, and when we are privy to further analysis of the options that we need to consider.

In our analysis during 2021, we expressed the view that we would continue to work towards securing a consensual development plan that met with the objectives of all strategic stakeholders. This process has not yet been fully realised on the back of the Perenco acquisition of the Etinde interest.

The Board believes, in light of Perenco's Cameroonian history and operatorship credentials, that our continued patience is a sensible proposition and indeed an inevitable consequence. We have yet to engage formally with the incoming Operator on what we believe is the most strategic commercial proposition for extracting the hydrocarbons within Etinde but draw comfort in the change in ownership and operatorship which is a testament to the Etinde investment hypothesis.

OPERATIONS

The Board's view was that the JO partners needed to maximise hydrocarbon production rates to extract the full economics of the licence which invariably entailed a combined IM and IE development basis. This approach was also consistent with the generation of higher tax revenue for the Government of Cameroon. Having regard to the best risk-return proposition for Etinde, it was our belief that processing Etinde wet gas directly at the existing Marathon-operated facility on Bioko Island, Equatorial Guinea is the best development option. This remains our position currently.

Given that the incoming Operator is likely to reassess the various development options considering today's economic environment, it is worth reserving further judgement on what could now be the most optimum development scenario.  The incoming Operator has neighbouring licences which in and of itself may broaden the optionality for the Etinde development.

We have an obligation to our stakeholders to ensure both conceptually and economically that we are securing the best development option for what is regarded an important asset for future generations. Earlier in the year we stated that it was incumbent on the JO partners to present to the Government of Cameroon and Société Nationale des Hydrocarbures a work plan and budget to discuss this proposal with Marathon Oil in the 4^th quarter of 2022.

As we go into Q4 2022, and subject to the views of an incoming new licence partner and Operator, we are currently in a holding pattern on a preferred development plan which needs to be formally agreed and then presented to SNH. The Board is of the view, having regard to this development and the broader economic backdrop for the energy complex, that we are keen to build an alignment with all stakeholders to ensure we have a framework and commitment to bringing Etinde into production. Whilst we have failed to anticipate the timing historically, we think that securing a mutually acceptable development solution is now an increasingly likely scenario.

Cost reduction without compromising our obligations to shareholders is one of the key objectives for the Board. We remain conscious of the need to preserve liquidity and any scope for G&A reduction is being considered having regard to this responsibility. We continue to operate with low overheads and retain basic staffing requirements in our London and Cameroon offices.

FINANCIAL AND OTHER MATTERS

At 30 June, 2022, the Company's balance sheet had cash of $1.3 million and liquid financial investments of $2.2 million, giving available funds of $3.5 million.

At the time of writing, we have approved a budget to the end of 2022 with the outgoing Operator. No work plan or budget has been set for 2023, but it is probable that actual expenditure in 2023 will exceed our current liquid funds towards the end of the year.  This will of course be determined by the actual work plan that will be proposed by the incoming Operator, Perenco SA.

In our view, there is a significant risk that our current cash and liquid financial resources may be fully utilised during 2023, as shown by various cash flow models produced by the executive team for the Board. How quickly this risk crystallises will depend on the actual date Perenco becomes the Etinde Operator, the speed at which they put their Etinde Operator management team in place, and the 2023 work plan and budget they propose. We consider that as a 'new broom' Perenco may wish to review the previously agreed Equatorial Development scheme, propose alternative(s), and probably update the front end engineering design ('FEED') to reflect any change in the approved development scheme and to reflect current cost inflation for FID purposes. These actions will all need to be approved by the JO partners as a group as well as SNH, as regulator, before implementation. Our current cash flow projections suggest that this risk will probably crystallise during the latter half of 2023.

As was alluded to during our 2021 review, the Board will continue to consider its options and engage with various prospective providers of capital, on terms that it deems to be beneficial for existing shareholders, to ensure our continued ability to finance the Company until receipt of the FID payment of $25 million. Whilst there are scenarios done on the basis that the JO works seamlessly towards early FID during 2023, showing that we hold sufficient funding at that time, it is most likely that additional equity or debt financing will need to be raised in 2023. This will especially be the case if a new material investment (eg. FEED) is required to bolster the extensive works that have been underwritten to date by the JO partners. That may of course change but we are not at this stage privy to any details to this effect. The leverage afforded to the company on the payment of the $25 million FID payment is recognized, but it would be imprudent not to highlight the continued uncertainty regarding any additional FEED works to support what will ultimately be the optimum development concept. This represents a material uncertainty regarding the going concern status of the group as a whole, which is reflected in detail in this year's financial statements and the auditor's report thereon.

ESG FOCUS

Environmental, Social and Governance ('ESG') factors and Corporate Responsibility remain important factors for our Etinde development. The production of hydrocarbons within Cameroon in a responsible manner is something that we believe all stakeholders will take pride in as and when it materialises. We are determined to spearhead a positive legacy for Cameroon that has the impact to change lives and set precedents for other developers to follow. On securing Etinde FID, Bowleven will commit to a set of practices and protocols that are consistent with international best practices, responsibly having regard to our own emissions footprint.

It remains the Board's view that the Company's constitution and size continue to serve the best interests of shareholders from a cost and corporate governance perspective up until the time we secure FID.

OUTLOOK

Whilst we cautioned shareholders last year on the continued uncertainty that surrounds the hydrocarbons market, we certainly did not anticipate the geopolitical events that will likely shift the structural basis of energy markets for a considerable time. Current spot prices and physical availability have forced Europe to reconsider its dependency on the Russian flow of hydrocarbons.

The increase in hydrocarbon prices has refocused our attention on the development options for Etinde and the viability of development options previously thought to be marginal. Historically, we have deemed some of these options to be less resilient and high-cost relative to their breakeven economics. At the current high prices and with potentially further hydrocarbon acreage there may be greater optionality and flexibility for a floating liquefied natural gas (FLNG) export solution that was not available previously. 

The value assigned to the proposed sale of operatorship and New Age's 37.5% (gross) stake in the Etinde development project to Perenco acts as a 'triggering event' under international financial reporting standards and has required the Board to undertake a new valuation of our share in the Etinde licence. We have calculated the net present value of Etinde based on projected cash flows using a risk weighted discount rate of 15% and oil and gas export prices of (Brent) $65 per bbl and $6 per mmscf respectively, using capital and operating cost estimates based on FEED and other pre-FEED studies undertaken by the JO partners between 2018 and 2021. We have also considered the potential value of alternate development scenarios that Perenco may present to the JO partners during 2023, after their transaction with New Age completes. These options tend to have higher initial capital investment and higher operating cost than the existing JO partner approved EG scenario.

On the basis of the detailed examination undertaken, the Board felt justified in maintaining the investment case for the Etinde valuation in excess of $150 million and hence concluded that no impairment was deemed necessary at the current time. The Board feels that with the evolving macro and geopolitical environment, the revenue and cost assumptions of our recent financial modelling, and the high calibre JO partner, the Etinde valuation now has a stronger underlying hypothesis. We acknowledge that the current capitalisation falls well short of these levels and that the Board's challenge into 2023 is to close this gap.

The Board believes that the acquisition of the New Age stake by Perenco bodes well vis-a-vis operational credibility and project backing to assist with our own capital raising efforts. Provided we can financially support our operational overheads into 2023 and beyond, we feel Bowleven is exceptionally well placed to build a business that exposes our stakeholders to material value creation in the short to medium term.

Eli Chahin                                          Jack Arnoff

Chief Executive Officer                     Chairman

31 October 2022                                 31 October 2022

GROUP INCOME STATEMENT

FOR THE YEAR ENDED 30 JUNE 2022

GROUP STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 30 JUNE 2022

GROUP BALANCE SHEET

30 JUNE 2022

COMPANY BALANCE SHEET

30 JUNE 2022

The Company has elected to take the exemption under section 408 of the Companies Act 2006 to not present the individual parent undertaking income statement. The result for the Company for the year was a loss of $1,821,000 (2021: loss of $999,000).

GROUP CASH FLOW STATEMENT FOR THE YEAR ENDED 30 JUNE 2022

COMPANY CASH FLOW STATEMENT FOR THE YEAR ENDED 30 JUNE 2022

GROUP STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 30 JUNE 2022

COMPANY STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 30 JUNE 2022