BowLeven PLC Moves Closer To $250m Deal

If the Etinde farm-out completes, BowLeven PLC (LON:BLVN) could look very cheap at today’s price.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

oil rigBowLeven (LSE: BLVN) announced this morning that the Cameroon government had granted approval for the firm to assign 50% of its interest in the Etinde Permit to partners Lukoil and NewAge, in a deal worth $250m to the AIM-listed firm.

On first reading this morning’s news, I assumed this meant that this deal — which was originally scheduled to be completed by 31 August 2014 — could now be completed. However, it turns out that following government approval, Cameroon’s president must now issue a signed decree to formalise the deal. As a result, the deal deadline is being extended again, from 31 October to 31 December 2014.

Patience worthwhile?

Although news of further delay is frustrating for Bowleven shareholders, the Etinde asset is thought to contain in excess of 1,500 billion cubic feet of gas, and I believe patience is worthwhile.

In my view, this deal is almost certain to complete successfully, and will be worth the wait: on completion of the deal, Bowleven will be entitled to a $40m carry on two fast-tracked Etinde appraisal wells, plus an immediate cash payment of $170m, with a further $40m cash payable if certain milestones are reached as the project develops.

Bowleven is working towards a 20-year gas sale agreement to a local fertiliser plant, and towards a joint venture LNG plant for the remainder of the Etinde gas, both of which could provide attractive long-term cash flow to fund future projects.

Other prospects

The $170m cash payment will enable Bowleven to fund its share of Etinde costs and also to focus its attention on some of its other promising exploration assets, most notably the Bomono permit, where Bowleven is currently planning to drill two exploration wells, starting in late 2014.

Bowleven also has early-stage exploration assets in Kenya and Zambia, with more in the pipeline.

Selling at a discount?

Bowleven’s current market capitalisation of £104m is roughly equal to $170m. At the time of its last financial report, Bowleven had $38m in the bank and no debt.

Assuming the Lukoil/NewAge farm-out completes by the end of the year, today’s 32p share price could be below Bowleven’s net cash per share — without attaching any value to its remaining 25% stake in Etinde and to the other assets in its portfolio.

That looks too cheap to me, and I believe that now could be a good time to buy into Bowleven.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Roland Head has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Passive income text with pin graph chart on business table
Investing Articles

Yields of up to 7%! I’d consider boosting my income with these FTSE dividend stocks

The London market has some decent-looking dividend stocks right now, and I’m tempted by these two for growing income streams.

Read more »

Young mixed-race couple sat on the beach looking out over the sea
Investing Articles

I’d put £20K in an ISA now to target a £1,900 monthly second income in future!

Christopher Ruane shares why he thinks a long-term approach to investing and careful selection of shares could help him build…

Read more »

Mature couple at the beach
Investing Articles

6 stocks that Fools have been buying!

Our Foolish freelancers are putting their money where their mouths are and buying these stocks in recent weeks.

Read more »

Black woman using loudspeaker to be heard
Investing Articles

I was right about the Barclays share price! Here’s what I think happens next

Jon Smith explains why he still feels the Barclays share price is undervalued and flags up why updates on its…

Read more »

Investing Articles

Where I’d start investing £8,000 in April 2024

Writer Ben McPoland highlights two areas of the stock market that he would target if he were to start investing…

Read more »

View of Tower Bridge in Autumn
Investing Articles

Ahead of the ISA deadline, here are 3 FTSE 100 stocks I’d consider

Jon Smith notes down some FTSE 100 stocks in sectors ranging from property to retail that he thinks could offer…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

Why I think Rolls-Royce shares will pay a dividend in 2024

Stephen Wright thinks Rolls-Royce shares are about to pay a dividend again. But he isn’t convinced this is something investors…

Read more »

Investing Articles

1 of the best UK shares to consider buying in April

Higher gold prices and a falling share price have put this FTSE 250 stock on Stephen Wright's list of UK…

Read more »