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

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.

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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.