Why BowLeven PLC & Falkland Oil and Gas Limited Are Better Bets Than Afren Plc

BowLeven PLC (LON: BLVN) and Falkland Oil and Gas Limited (LON: FOGL) look far less risky than Afren Plc (LON: AFR).

| 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.

A year or so ago you wouldn’t have caught me liking a Falklands-based oil explorer better than an onshore explorer in Africa!

But that’s the way things have changed, and after the calamities that have hit Afren (LSE: AFR) I see at least two better prospects, one there and one on the same continent.

Afren, focused mainly in Nigeria, is effectively bust and living on borrowed time after defaulting on interest payments this month. That was with the tacit agreement of creditors who are not going to pull the plug while Afren seeks a refinancing package, but I really can’t see there being much left for existing shareholders once it’s in place.

An oily with cash!

But on the same continent, BowLeven (LSE: BLVN) is looking like a much better prospect. BowLeven has interests in Cameroon and in Kenya, and although it is not in profit at the moment, it had $14m in cash in its books at the end of October with a further $30m facility unused.

But the big plus is BowLeven’s planned farmout of two thirds of its Etinde assets, which should yield a total of $250m. The deal is expected to be finalised any day now, with BowLeven receiving the first $170m in cash. With that kind of money, the company will be in a very strong position to develop the rest of its assets along with the Etinde joint venture.

Over in the South Atlantic, Falkland Oil and Gas (LSE: FOGL) had $109m on its books at interim time in June last year, with easily enough cash to fund its 2015 drilling programme. At the time, the firm was working on the seismic data it captured in early 2014, and was targeting more than 1.3 billion barrels of gross resource with a 5-well drilling plan.

Programme underway

Since then, in February this year, we’ve heard that exploration has commenced with a slightly more efficient programme. And last week we got the news that the first well had been spudded. Chief Executive Tim Bushell said that “FOGL has the largest acreage position of any explorer in the Falklands Islands and the biggest exposure to the upcoming drilling campaign, the results of which have the potential to be transformational for us“.

So we have two explorers with exciting prospects and all the cash they need to fund their developments, against another that’s massively indebted and struggling to stay alive.

The bottom line

It seems pretty obvious to me which one to keep your bargepole away from and where to risk your oil-exploration money, and the city’s tipsters agree with me. Four are tipping Falkland as a Buy with four staying Neutral, and for BowLeven we have four Buy recommendations and just one Neutral — no Sell tips for either.

Afren? One lonely soul apparently thinking we should Buy, with five firmly opposed in the Sell camp and 10 on a Neutral stance.

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.

Alan Oscroft has no position in any shares mentioned. The Motley Fool UK has recommended Afren. 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

Investing Articles

Should I buy more Rolls-Royce shares near 500p?

This investor is wondering whether to buy more Rolls-Royce shares this summer or to just stick with those he already…

Read more »

Investing Articles

After its big fall, is the National Grid share price dirt cheap now?

The National Grid share price fell sharply in reponse to new rights issue plans. But is it an even better…

Read more »

Aerial shot showing an aircraft shadow flying over an idyllic beach
Investing Articles

Starting in June, I’d invest £1,000 a month to aim for a £102,000 second income in retirement

This author highlights a less well-known FTSE 100 stock that could help his portfolio generate a very big second income…

Read more »

Investing Articles

Down 47% in 5 years, is the IAG share price due a bounce?

Many companies in the travel sector have seen fierce rallies since 2020. But with the IAG share price still down…

Read more »

Young black colleagues high-fiving each other at work
Investing Articles

Despite its drop, I reckon this is one of the best FTSE 100 stocks to buy and hold!

The FTSE 100 has been climbing in 2024 but this favourite of our writer's has been falling. Despite this, she’s…

Read more »

Investing Articles

AI stocks vs EV shares; which is the best sector for me to invest in?

Jon Smith considers the recent rally in AI stocks and weighs up whether to allocate more money there versus EV…

Read more »

A graph made of neon tubes in a room
Investing Articles

Do Greggs shares have even more growth ahead?

Greggs shares have seen some solid growth in the last few months, as the economy shows positive signs. But is…

Read more »

Investing For Beginners

How I’d aim to grow my Stocks & Shares ISA from £20k to £1m

Jon Smith explains how diversification and focusing on sectors for the future can help grow his Stocks and Shares ISA.

Read more »