Petroleum Africa
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Tuesday, March 7, 2017
Bowleven and Victoria Oil & Gas (VOG) have signed a farm-out agreement that has VOG joining Bowleven on the Bomono PSC in Cameroon. The deal between the two has been under negotiation for several months.
Under the farm-out agreement, EurOil Ltd., Bowleven’s subsidiary, will have a 20% working interest in the Bomono. VOG’s wholly owned subsidiary in Cameroon, GDC Bomono, will hold an 80% stake. Bowleven will remain as operator.
Gas from the Bomono PSC will be sold to GDC less a tolling fee. The gas price paid will be a weighted average received by GDC for its total domestic sales less a tolling fee for use of the pipeline network. The pipeline connection from the Bomono PSC to the main network will be managed and funded by GDC. GDC Bomono will complete the civil engineering works necessary for the gas processing plant installation at the Bomono site. The estimated capital cost for these works is $6 million.
Bowleven has agreed to pay GDC Bomono 50% of any deficit, limited to a maximum payment of $2 million, if the first three years of net income received by GDC Bomono is less than the development expenditure incurred.
EurOil will receive a 3.5% royalty from GDC Bomono’s production share of hydrocarbons, with an aggregate cap limiting the total royalty payments to $20 million. Bowleven will, on completion, also receive £100,000 worth of new ordinary shares in VOG based on the volume weighted average share price 10 days preceding the date of the agreement, being 69.23 pence per share. It is the intention of Bowleven to retain these shares initially, but keep that decision under regular review as there are no restrictions on their disposal.
Bowleven says that the transaction provides the ability to minimize the timescale to first production and optimizes the proven advantages of its upstream expertise and VOG’s established gas supply business that feeds a diverse range of industries and the local power grid.
The initial plan is that gas currently suspended at Moambe be brought onstream and that further drilling be considered to supply the growing domestic market in and around the Douala area.
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