Diagnosed with clinical depression after losing his U.S. PGA TOUR card at the end of 2006, Bowditch found his game Friday on the rugged Hills course to top the leaderboard at 10-under 134.
Sheehan shot a 67. New Zealand's Michael Long was 8 under after a 67.
England's Richard Finch (65), Scotland's Peter Whiteford (68) and Australians Ewan Porter (66) and Gary Simpson (69) were 6 under.
Australian veteran Craig Parry, who had a share of the lead after the first round, shot a 74 to drop eight strokes back.
One of the rounds of the day came from 71-year-old New Zealander Bob Charles, the first left-hander to win a major when he captured the 1963 British Open. Charles shot a 68, bettering his age by three strokes.
'I almost felt 30 years younger out there today,' Charles said. 'The adrenaline starts pumping with all the competition.'
Charles, who won the 1954 title as an amatuer and also won the event in 1966, 1970 and 1973, eagled the first hole and had five birdies, a bogey and a double bogey in a round that left him 1 under for the tournament, nine strokes behind Bowditch and well inside the cut line.
Bowditch had six birdies on the back nine, including four in a row.
'I've been practicing good and doing everything I need to do to compete at a high level but haven't been able to put it on the golf course,' Bowditch said.
'The last couple of days I just went out there and had fun, still put in all the work but played like I didn't care to a certain degree.'
Bowditch finished in the top 15 on the Nationwide Tour money list in 2005, graduating to the PGA TOUR. But he had a terrible year in 2006 and lost his card.
This year, he played five PGA TOUR events on sponsor exemptions, missed the cut in four and withdrew from the fifth. He played mostly on the Nationwide Tour, where his best finish was a tie for 19th in 23 tournaments. Of those 23 events, he missed the cut in 12, was disqualified once and withdrew from another.