Should You Buy LGO Energy PLC And BowLeven PLC After Significant Updates?

Is now the right time to add LGO Energy PLC (LON: LGO) and BowLeven PLC (LON: BLVN) to your portfolio?

Peter Stephens

Having held various senior management positions in the manufacturing sector, Peter founded his own manufacturing company in 1996. This was subsequently sold in 2007. Meanwhile, his passion for investing (which began during the privatisations of the 1980s) remains strong and he couples this with writing for The Motley Fool as a Contractor. His investment style is value-oriented; focusing on company fundamentals, as well as assessing the strength and presence of a competitive advantage. While above-average growth prospects remain very attractive, a greater focus on dividends has crept in since Peter became a part-time retiree in 2007.

Published 24 February, 2015 9:17 am GMT

| More on: BLVN

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.

LGO Energy

Shares in LGO Energy (LSE: LGO) have fallen by as much as 12% today after the company made two separate announcements regarding its finances. The first is news that two placings of the company’s shares have been conducted, with £6.72m being successfully raised in the last two days. This will be used for, among other things, to further develop LGO’s assets in Trinidad and Spain, to repay existing short-term debt of £3m, and also to satisfy the liquidity tests so that LGO can proceed with its long-term financing deal.

In addition, LGO has announced a £16m long-term oil swap agreement with BNP Paribas. This will be used to fund the ongoing development drilling programme in the Goudron field in Trinidad and has been structured to allow repayment via future sales of oil.

Clearly, the placing and debt issue will allow LGO to continue to make progress at its Goudron field in Trinidad and, as such, are positive news for the company. Certainly, the outcome of the planned drilling programme is uncertain but, with the finances to execute its strategy, LGO could see investor sentiment improve moving forward and allow it to continue the run that has seen its share price soar by 210% in the last year.

BowLeven

Shares in BowLeven (LSE: BLVN) are 10% higher today after investors reacted positively to news that the sale of part of its stake in the Etinde project to LUKOIL and Newage has been formally approved by the President of Cameroon. This means that BowLeven will receive around $250m in total from the two companies in return for a 30% stake (LUKOIL) and further 10% stake (NewAge) in the project, with BowLeven set to receive $170m of the funds within the next three weeks.

As a result of today’s deal, BowLeven will still hold a stake of around 20% in the Etinde project and the addition of a new partner will strengthen the joint venture even further. In addition, the cash flow from the sale should allow BowLeven to participate in the near-term appraisal of the Intra Isongo formation.

As such, it seems to put BowLeven in a much stronger position, both financially and in regard to its future prospects. Therefore, its shares could continue to benefit from upward momentum in the short run and, while its longer-term future remains relatively risky, it could prove to be a strong performer.