Victoria and BowLeven are working together to unlock value for investors. Earlier this year, Victoria signed a farmout agreement with EurOil Limited, a Bowleven subsidiary, to acquire on completion an 80% working interest in the 2,237  sq km Bomono licence, adjacent to Gaz du Cameroun’s Logbaba field. Gaz du Cameroun is a subsidiary of Victora. 

Today, the two companies announced that they had extended this farmout agreement once again until the end of the year as they work with all parties to generate the best results. 

Falling revenue 

Even though Victoria is heading in the right direction, the company’s results for the six months ending June, which were published today, show a contraction in revenue and profitability. As production increased by 11%, revenue fell to $15.4m, from last year’s $23.6m and earnings before interest, tax, depreciation and amortisation fell to $4.4m from last year’s $14.2m. 

Nonetheless, despite these uninspiring results, management is highly optimistic about the company’s outlook. Commenting on today’s figures, chairman Kevin Foo said “the challenge we now face is building our business into one which is four to five times our current size. I believe that this growth is achievable within five years.” He continued that “GDC is very well positioned, as the only onshore gas supplier in Cameroon, to meet this demand.“

The potential gains on offer here for investors are clear. If management can hit its target of growing the business five times within the next five years, investors could be set to see a return of 500%. The risk here is that the company does not meet this target and instead (like many other small-cap oil & gas companies before it) runs out of cash. 

In this case, investors would likely see a 100% loss. Risking 100% for a potential 500% return is, in my view, an attractive bet. 

Unlocking value 

Investors could also see healthy returns from BowLeven as the company works with Victoria and continues to develop its portfolio. The company’s interim results showed that the business had $90m in cash at the end of March, which is worth around 19.5p per share based on current exchange rates.

On top of this, the deal with Victoria should unlock around $6m to $7m in direct revenues and royalties, corresponding to around $4m in post-tax cash flow, according to City analysts. The net asset value of the firm, including these prospective cash flows, is estimated at 53p per share, that’s around 71% above the current share price. 

Putting it all together 

I believe that a combination of both Victoria and BowLeven in your portfolio could produce some highly impressive results. As Victoria grows, BowLeven will also benefit, and it looks as if the two companies are trading at a deep discount to their future potential today. 

The post Could these 2 undervalued small-cap stocks make you brilliantly rich? appeared first on The Motley Fool UK.

However, there are some AIM businesses that look to have the hallmarks of potential successes. Two of these are BowLeven (LSE: BLVN) and Victoria Oil & Gas (LSE: VOG), which have both been working hard to unlock value for shareholders over the past five years.

Victoria in particular has really impressed. Year-to-date shares in the company are up 95% thanks to better than expected production and sales figures. And today the company announced that in order to further its growth, a subsidiary of the group has taken an 80% stake in Bowleven’s Bomono production sharing contract (PSC), with BowLeven keeping the remainder and continuing as operator.

Under the terms of the deal, gas from the field will be sold to Victoria minus a tolling fee for use of the pipeline. As well as the production, Victoria will also complete $6m of work required to connect Bomono to the local Cameroon gas network. BowLeven may have to step in to pick up part of the tab for this investment if Victoria’s sales of the gas do not cover initial capital investment costs. In exchange for the agreement Victoria is paying BowLeven £100,000 in shares plus a 3.5% royalty on gas sales capped at $20m.

An attractive deal

In several ways, this deal seems to benefit Victoria more than Bowleven, as while the company has been able to monetise its asset, the ultimate payoff depends on how successful Victoria’s management is at creating value for investors. What’s more, BowLeven could find itself on the hook for extra capital spending if Victoria’s pipeline connection comes in over budget. 

It seems the market has taken this view as well. As shares in Victoria have jumped by nearly 15% off the back of today’s news, shares in BowLeven have slumped by more than 5%.

Still, over the past two months, shares in the company have risen by nearly 40% thanks to the presence of an activist investor, which has taken aim at BowLeven’s management and is looking for changes. Specifically, the activist wants two seats on the board. As shares in BowLeven are up by 52% over the past 12 months, it looks as if the market is wholly behind the activist’s intentions to awake BowLeven’s management from its slumber. 

With around $100m of cash on the balance sheet, as well as value tied up in two large oil assets against a market cap of £103m, BowLeven’s upside could be significant if the activist succeeds in unlocking value.

Growing rapidly 

Meanwhile, Victoria is quickly becoming one of London’s most attractive growth stocks thanks to the size of the potential market available to the company within Africa. Victoria has already proven that the company has what it takes to build gas distribution and production business. Sales hit a record in January and the deal with BowLeven should only accelerate growth.

Overall, these two companies look have all the hallmarks of successful AIM businesses.

The post 2 AIM stocks that could make you rich appeared first on The Motley Fool UK.

The question for investors is whether these stocks are value buys with the potential to deliver multi-bagging gains, or slow-motion disasters.

Down but not out?

The market’s reaction to today’s trading update from South African platinum miner Lonmin (LSE: LMI) was decisive. The shares are down by 13% to 154p at the time of writing and are now trading 39% below last year’s 52-week high of 252p.

In my view, today’s news makes it clear why 14 City brokers currently rate this stock as a sell.

Production fell by 7.8% at the Marikana mine during the three months to 31 December. Lonmin says that planned changes to improve productivity are taking longer than expected. A particular problem area is the mine’s biggest shaft, K3, where output fell by 13.8%, to 590,000 tonnes.

Today, the company admitted that “the relationship between operational management and unions at this shaft is not working as effectively as we expected”. Additional crews have now been assigned to work at K3, which is expected to increase the cost per tonne.

Still losing cash

Lonmin shares currently trade at a 63% discount to their net asset value of 422p per share. But today’s update warned that, as things stand, the company is still operating at a cash loss. The group’s remaining net cash balance of $49m could soon disappear.

Last year’s restructuring plan has not yet managed to bring the group back into profit. There may still be an opportunity here for bold investors. But for me, there are too many risks and uncertainties. I’m going to stay away.

A rapid profit opportunity?

Cameroon-focused oil and gas explorer Bowleven (LSE: BLVN) has a couple of decent assets and net cash of $95m. Life should be good for shareholders.

The problem is that while the group’s well-paid board continues to evaluate “new venture opportunities”, shareholders have become unhappy at the firm’s refusal to return some of its cash to them. Many long-term investors are also frustrated that Bowleven has not made more rapid progress with its Bomono and Etinde assets.

This situation has now come to a head. Hedge fund Crown Ocean Capital P1 Ltd — which controls around 13% of Bowleven stock — has called an EGM to try and sack Bowleven’s board of directors. A number of other significant investors are said to have indicated they will vote with Crown Ocean, including a shareholder action group made up of private investors.

Shares could rally

Bowleven’s directors seem unlikely to back down gracefully. But if Crown Ocean does manage to remove them from the board, I’d expect the firm’s shares to rally sharply.

The hedge fund’s nominated directors would be likely to use some of the group’s cash to fund a special dividend for long-suffering shareholders. I’d also expect them to sell or farm out a stake of the Etinde field, in order to speed up the appraisal of this asset.

Both of these measures could deliver significant gains for investors from current levels, which is why I rate Bowleven as a speculative buy.

The post Could bargain stocks Lonmin plc and Bowleven plc double despite trouble? appeared first on The Motley Fool UK.

However, many of these companies are still short of cash and heavily in debt. I’d steer clear of such firms for a little longer yet. The companies catching my eye at the moment have proven assets, net cash, and — ideally — profitable production.

I’ve found three stocks that seem to fit the bill and still look cheap. In this article, I’ll take a closer look at each one. Are further gains likely?

Cash + free gas

Cameroon-focused Bowleven (LSE: BLVN) had net cash of $99m (£79m) at the end of October. This means that the group’s £78m market cap is completely covered by surplus cash.

The market seems to be assigning no value to Bowleven’s 20% stake in the Etinde gas field, which is thought to contain up to two trillion cubic feet of gas in place. Yet Bowleven’s stake in Etinde should soon benefit from $40m of paid-for appraisal work by the field operator NewAge. Bowleven also stands to receive a $25m cash payment, if the field is developed.

With net cash and a book value of 88.9p per share, Bowleven shares should be worth more than 24p. But chief executive Kevin Hart says that he’s assessing “new venture opportunities.” There’s a real risk that Bowleven’s cash will be wasted on risky exploration projects, rather than returned to shareholders.

From Russia, with love

The Russian oil industry has survived the oil crash in much better shape many investors expected, thanks to low costs and the devaluation of the rouble.

Long-time producer Exillon Energy (LSE: EXI) has survived unscathed. The firm’s latest accounts showed net cash of $103.6m at the end of June, equivalent to 45% of Exillon’s £187m market cap.

Exillon trades on just 3.2 times trailing earnings. While broker coverage is thin, the latest forecast I’ve found suggests Exillon could report a net profit of $37.7m this year. That’s equivalent to a forecast P/E of 6.2. The same forecasts also suggest that a dividend of up to 11 cents (8.9p) per share could be paid this year. If so, then Exillon has the potential to offer a yield of more than 7%.

Russia may remain a risky place to invest, but there’s no doubt in my mind that Exillon could deliver further gains.

Small, but perfectly formed

At £38m, North Sea-focused Serica Energy (LSE: SQZ) is pretty small. But it had a $13.1m net cash balance at the end of September, even before receiving payment for September sales.

The group’s profits were hit during the first half of this year by a maintenance shutdown on its main asset, the Erskine field in the North Sea. However, with Erskine back in production since late August, management expects net cash to start rising again.

My calculations show that Serica trades on a trailing P/E of 10. Broker forecasts available through a private subscription service I use indicate that net profit in 2016 could rise to $8.8m. That’s equivalent to a P/E of about 5.2 at current exchange rates.

There’s no dividend, but I believe Serica shares are probably worth more than 14p.

The post These cash-rich oil stocks could be a life-changing buy appeared first on The Motley Fool UK.

But that does include a $133.5m impairment due to the downgrading of the firm’s intangible exploration assets, compared to an impairment of $76m in the same period last year, all due to the ongoing cheap-oil environment. And the company remains upbeat, pointing out that it had $108m of cash on the books at 31 December, and no debt.

By 29 March, there was approximately $100m of that left, and BowLeven should have around $40m coming in from its farmout agreement for its Etinde project in Cameroon, so it shouldn’t be facing any funding squeeze any time soon. Is BowLeven a good investment today? I’m not one for oilies in their loss-making phases myself, but I see it as one of the less risky ones.

Transformational

Shares in Learning Technologies (LSE: LTG) have shot up by 81% since a recent low on 1 December, to 37.25p. Acquisitions, including a couple announced in January, have helped, but the rise has surely been mainly in anticipation of the e-learning firm’s maiden full-year pre-tax profit.

With revenue up 33% to £19.9m in a year that has been dubbed as “transformational” by chairman Andrew Brode, that pre-tax figure came in at £1.55m compared to a loss of £127,000 a year previously. Adjusted EPS doubled to 0.756p, and the dividend was lifted by 50% to 0.15p per share, albeit for a yield of only 0.4%.

Looking forward, a “landmark” contract, in alliance with KPMG UK, to provide the UK Civil Service with learning facilities for 400,000 staff over three years could well mark a real turning point for the company.

Volatility

Shares in Circle Holdings (LSE: CIRC) have had a very erratic 12 months, reaching 57p in May 2015 before crashing as low as just 9p in January this year. As I write today they’re back up at 21.25p, though that is after a 4.5% fall on the day of the company’s 2015 full-year results.

The healthcare services group saw revenue rise by 15% to £127.8m, with EBITDA losses reduced by more than half to £4.9m — and we heard that all segments of the business, excluding Head Office, are now EBITDA positive. Chairman Michael Kirkwood CMG opines that the company is “well poised to realise its potential through a sustainable business model while generating consistent returns for our shareholders“.

He may be right, but with no profit yet and no forecasts, I’d hold off a little while longer myself before making any commitment.

The post Should You Buy BowLeven PLC, Learning Technologies Group PLC And Circle Holdings PLC After Today’s Results? appeared first on The Motley Fool UK.

The news has been eagerly awaited by the company’s investors following recent delays, but it represents the first time that all three tiers of the KORE fuel cell system have operated in parallel with each other to successfully dispatch power into the German power grid. And with significant operational data having been recorded, AFC can now enhance the system yet further. In addition, the fact that the fuel cells have exceeded the name plate capacity of the individual 10kW cartridges is positive news for the long term.

Although AFC remains a relatively high risk play owing to its size, it now has the world’s largest operating alkaline fuel cell system. With the world moving towards cleaner energy production, it has significant long-term capital gain prospects.

Risks and rewards

Also releasing news today is oil and gas play BowLeven (LSE: BLVN). It has decided to terminate talks to acquire a 25% stake in the Kiliwani North licence and a 50% interest in the Ruvuma contract following due diligence. While this is disappointing, with a low oil price apparently set to remain in place there may be other opportunities for BowLeven to strengthen its long-term profit outlook.

Of course, the company’s shares have been hurt by a lower price for black gold, with them being down 32% in the last year. And with the company’s losses widening in its most recent results mainly due to major asset impairments, its near-term future appears to be somewhat challenging. However, with BowLeven having a strong balance sheet with no debt, it continues to have appeal as a smaller exploration play. This, plus the potential for positive news flow from its drilling programme, mean that it could be of interest to less risk-averse investors.

Appealing potential

However, for most investors the risk/reward ratio of BP (LSE: BP) still holds greater appeal. That’s because it offers the potential for significant capital gains as well as an above-average level of income.  

For example, BP trades on a price-to-book value (P/B) ratio of 0.9 and while there’s the prospect of asset writedowns due to the low oil price, BP continues to have a very high quality asset base that’s well-diversified and cheap to buy for new investors. Furthermore, the company’s shares currently yield 7%. Even though dividends could be cut substantially in the coming years, it seems likely that BP will remain a solid income stock due to it stating that shareholder payouts will remain a priority in the medium term.

Furthermore, with BP set to move on from the huge payouts for the Deepwater Horizon oil spill, there appears to be less reason for negative investor sentiment. This could have a positive impact on its share price over the course of the next few years.

The post BP plc, AFC Energy plc And BowLeven PLC: Buy, Sell Or Hold? appeared first on The Motley Fool UK.

In fact, the mining major has stated that, by the end of 2015, its aluminium product group will have delivered around $300m of cash cost improvements, as well as a reduction of $45m in sustaining capital expenditure and a reduction in working capital of $400m versus 2014. Furthermore, Rio Tinto remains focused on improving its cash flow, with a broad range of initiatives set to remove around $300m in additional cash costs from the aluminium product group in 2016.

In addition, Rio Tinto expects to make improvements in productivity during 2016, with output from bauxite, alumina and aluminium set to increase. And, with Rio Tinto investing $1.9bn in the recently announced Amrun project in Australia, it is well-positioned to become the industry leading supplier of bauxite.

Clearly, Rio Tinto is enduring a challenging period, but today’s announcement shows that it is responding in a logical manner to the tough trading conditions which it faces. Certainly, more pain could lie ahead, but with the company trading on a price to earnings (P/E) ratio of 13.6 using next year’s forecast earnings figure, it appears to be a sound, albeit volatile, buy for the long term.

Also announcing changes to its business plan is Anglo American (LSE: AAL). It has decided to suspend dividend payments for the second half of 2015 and 2016 as it seeks to shore up its financial position. Although disappointing, this appears to make sense since the company is enduring an exceptionally difficult period.

In addition, Anglo American will seek to reduce its asset base by as much as 60% as it focuses on higher quality assets and will consolidate its operating units from six to three. This should lead to additional efficiencies and, alongside an additional cut in capex of $1bn and additional financing of $1.5bn before the end of 2016, the company’s cash position should improve. And, with Anglo American seeking to make cost savings of $3.7bn by the end of 2017, it could prove to be in a stronger position following the planned radical changes.

Clearly, Anglo American is enduring a very difficult period, but with an asset base which still has long term growth potential, it could prove to be a sound long term purchase.

Meanwhile, oil and gas company BowLeven (LSE: BLVN) continues to struggle amidst a lower oil price environment. In fact, in its recent results it reported a widening of its loss as well as major impairments, with it reducing the size of its asset base by $76m which contributed to a $90m pretax loss.

Clearly, this is a disappointing result, but is not a major surprise given the low oil price. And, with BowLeven having a debt-free balance sheet and a cash balance of $145m at the end of the last financial year, it remains in a relatively strong position to complete its drilling programme and potentially take advantage of discounted valuations within the sector.

As such, and while larger oil companies which are profitable provide more security for investors, for less risk-averse investors seeking an oil exploration play, BowLeven appears to be a relatively appealing opportunity for long-term capital growth.

The post 3 Top Resources Stocks For 2016? Rio Tinto plc, Anglo American plc & BowLeven PLC appeared first on The Motley Fool UK.

But there was $145.3m in cash in the books, and there’s no debt. And chief executive Kevin Hart reckons that “Following completion of the Etinde farm-out we are well positioned with a strong financial foundation to deliver on our strategic objectives“.

Despite the positive outlook, BowLeven’s shares are down 20% in the past 12 months and down 52% over two years. BowLeven seems to have the resources to ride out this low-oil period, and looks to me like it could be a nice longer term bargain.

Atlantic disappointment

Falkland Oil & Gas (LSE: FOGL) shares took a battering after its Humpback exploration well failed to find any commercial quantities of the black stuff, but I think they’re looking a bit oversold now. The post-Humpback crash has knocked 50% off the share price, to just 10.3p today, implying that as much value had been placed on the firm’s previously untested South Falklands possibilities as on its proven North Falklands resources.

It seems wrong to me to place so little value in the firm’s Zebedee and Isobel Deep discoveries, and the likely extent of the North Falklands Sea Lion field, and to apparently completely write off any future South Falklands prospects.

It’s obviously a very risky business, but when overenthusiastic investors come to expect perfect results every time and run for the hills when they don’t get them, that can leave opportunities for the rest of us.

A profitable oily!

If it’s all gloom at BowLeven and Falkland, the mood among SOCO International (LSE: SIA) shareholders seems positively ebullient by comparison, with the shares up nearly 50% since late August — even though interim results on the fifth of that month lifted full-year guidance only a little.

The strange thing about SOCO is that analysts are expecting a dividend yield of around 5% for the full year, though that won’t be remotely met by earnings — and there’s a drop to a more realistic 1.8% on the cards for 2016.

But SOCO is profitable, even if a forward P/E of over 80 might seem a bit eye-watering — though that is set to drop to 40 on 2016 forecasts, and it’s based on current oil prices. When (not if) oil prices rise again, SOCO’s profits should be geared up accordingly and that P/E should drop further. But what’s a good P/E valuation for an oil stock right now? It’s impossible to say really.

The post Is It Time To Load Up On BowLeven PLC, Falkland Oil and Gas Limited & SOCO International plc? appeared first on The Motley Fool UK.

In the case of Quindell, an investigation by the financial regulator, the FCA, into the company’s communications in recent years prompted Quindell to seek a temporary suspension of its shares on 24 June. Clearly, this is bad news for the company and, while the FCA could find that the company followed all applicable rules, the possibility of a negative outcome is likely to hurt investor sentiment towards the company in the meantime. And, with Quindell also failing to reports its full-year results on-time, it appears as though the situation at the company remains rather less than perfectly smooth.

Of course, Quindell could prove to be a strong long term performer. It has new board members and is apparently seeking to become a specialised telematics and insurance technology business. However, the challenges it faces could hold back investor sentiment and, even if its shares do resume trading in the near future, prudent investors may wish to watch, rather than buy – at least until the outlook appears steadier for Quindell.

Meanwhile, Afren’s shares have been suspended since 15 July amid concern surrounding its financial standing. In fact, Afren admitted that it was unable to accurately assess its financial position and that its near-term production levels would be materially below previous guidance. This was despite a recent restructuring plan being agreed with the company’s creditors and, while Afren is said to be further engaging with them in the hope of raising additional capital, its future seems to be rather bleak.

Of course, the company has been hit by a falling oil price and, while its asset base has always been relatively impressive, it appears as though a balance sheet containing too much debt may lead to its downfall. And, with interest rates only likely to go one way over the medium to long term and the oil price slipping back below $50 per barrel in recent weeks, even if its shares resume trading there appear to be far better options within the oil sector.

One stock that is not suspended at the present time and which is available for purchase is BowLeven (LSE: BLVN). Unlike Quindell and Afren, its recent news flow has been positive, with the company announcing the completion of drilling in the Zingana exploration well in Cameroon and reporting that it has found hydrocarbons in the reservoirs that were targeted. This is highly encouraging and caused a short term boost in BowLeven’s share price, although it remains 15% down since the turn of the year – largely due to a weak oil price.

Looking ahead, further positive news flow could lie ahead, with BowLeven set to commence drilling on the second well in the programme. And, with its shares currently trading on a price to book ratio of just 0.22, it appears to offer a wide margin of safety and considerable capital gain potential. Certainly, it is likely to be volatile, but could be worth buying for the long term.

The post Is It Safe To Buy Quindell PLC, Afren Plc And BowLeven PLC? appeared first on The Motley Fool UK.

These stocks should cover all different investing styles, including value, growth, and, of course, income.

With that in mind, here are four picks for a beginner’s oil portfolio. 

Blue chip backbone

Every portfolio needs a large-cap dividend champion, to provide a steady income and backbone to build the rest of the portfolio around. For oil investors, BP (LSE: BP) could be the best pick for this position. 

While BP is still trying to sort out legacy issues from the Gulf of Mexico disaster, the company has prioritised shareholder returns. Indeed, over the past five years the company has returned a staggering $33.3bn to investors through both dividends and buybacks — that’s almost a third of BP’s current market value. 

BP’s dividend yield currently stands at 5.8% and City analysts expect the payout to grow at a rate of around 5% per annum for the next few years.

BP currently trades at a forward P/E of 17.5, which may seem expensive, but the company’s lofty dividend yield more than makes up for the rich valuation. 

High-risk, high reward

BowLeven (LSE: BLVN) is a great portfolio partner for BP. 

While BP is a slow-and-steady income play, BowLeven has the potential to be a multi-bagger from current levels. 

The company is currently sitting on around 30p a share in cash, along with oil reserves amounting to 58m barrels of oil equivalent. BowLeven’s total net asset value stands at around 75p per share, a full 150% above present levels. 

At the beginning of this month, the company confirmed that it had started drilling operations at its Zingana exploration well on the Bomono permit, onshore Cameroon.

Mid-cap play

Like all early stage oil and gas companies, Bowleven is a risky bet, although the risk-reward profile looks attractive. 

As a mid-cap international oil producer, Genel Energy (LSE: GENL) is a reduced risk play on the oil sector with the potential for tremendous growth. 

Just like BowLeven, Genel has a cash-rich balance sheet, with a cash balance of $489m at year-end 2014. The company’s production hit 69,400 barrels of oil per day during 2014, up from 44,000 bopd during 2013. Production is expected to grow further to between 90,000 and 100,000 bopd this year. 

However, Genel’s future depends on the price of oil. Analysts currently estimate that Genel’s pre-tax profit will hit $55m this year, before jumping 79% during 2016. This is based on the assumption that oil prices will push steadily higher to around $80 per barrel by 2016. 

If the price of oil exceeds this forecast, then clearly, Genel’s earnings growth will accelerate. 

Based on current figures the company is trading at a forward P/E of 24.4, falling to 14.9 for 2016’s estimated earnings. 

Services required 

Weir Group (LSE: WEIR) is currently suffering from a drop in orders at its oil and gas division. For the long-term holders, however, the company could be a great play on the oil services sector. 

Weir has been hit by a slowdown in North American oilfield activity as crude oil prices remain depressed. To counter falling orders the company has slashed costs, but according to forecasts, these cost cuts won’t do much to offset declining sales. Specifically, Weir’s earnings are set to fall 30% this year.

Still, growth is expected to return during 2016.

 Analysts have penciled in earnings per share growth of 12% for 2016. Double-digit growth is also expected for 2017. 

And based on current forecasts Weir is trading at a forward P/E of 19.4 and 2016 P/E of 17.3. Also, Weir supports a dividend yield of 2.3%, which is covered twice by earnings per share. 

The post The Perfect Beginner’s Oil Portfolio: BP plc, BowLeven PLC, Genel Energy PLC & Weir Group PLC appeared first on The Motley Fool UK.