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So what: Shares of Africa-focused oil and gas explorer Bowleven (LSE: BLVN) spiked by 12% to 45p during early trade this morning on the decision to sell-down its stake in a project off the coast of Cameroon. Russia’s second-largest oil producer, Lukoil, and NewAge (African Global Energy) will pay $250m (£147m) to acquire 50% of Bowleven’s offshore Etinde block.
Now what: LukOil and NewAge will pay Bowleven $170m at completion of the deal, a $40m deferred cash payment on completion of appraisal drilling, and cover $40m in costs for two appraisal wells.
The chief executive of Bowleven, Kevin Hart, commented:
“Bowleven’s strategy is to focus on our core strengths of exploration and appraisal and enable the conversion of resources to reserves, ensuring that we realise value for shareholders at the appropriate time. This transaction endorses the value of Etinde while allowing us ongoing participation in its significant remaining potential.”
Now what: The significant cash component of the deal will strengthen Bowleven’s balance sheet and increase financial flexibility. As such, Bowleven is in a position to progress multiple exploration opportunities across its wider African portfolio, including planned and potential exploration drilling in Borneo, onshore Cameroon and Kenya. As the Etinde project moves forward Bowleven retains exposed to future upside potential.
BowLeven shares are up 15% so far this year, but will it outperform in the second half of 2014? And will it outperform "Motley Fool's Top Growth Stock", which could double profits within four years?
Mark does not own shares in BowLeven.