AIM-listed Bowleven (BLVN) was one of two ideas from me in the ShareProphets share tip-fest last Christmas. The hope had been to see some corporate action before the end of the year as the Etinde project saw appraisal drilling and the JV partners wanted to move things on. Well we had the drilling, the shares went up and I top-sliced. So far so good... But we didn’t get blow-out results from the two drills and the shares came back down again, settling lower than they were when I tipped them. Perhaps it would have been better to sell the whole lot as a bit of excitement was in the air, rather than just to cash in a slice. Results for the year to June were released on Thursday...
These showed that admin costs have been almost halved, and without the massive impairments of last year in relation to the Bomono project, which the previous regime had spent millions and millions on but which was impaired away last year the losses came in at two US cents per share – down from a loss of 17 US cents last time. Meanwhile on the balance sheet we see cash of $63 million, down from $85 million after $19 million of investments which were made in order to cover some of the company’s costs going forward. We are told that this is now focussed on US Treasuries. So not that much has changed, except that the drilling – for which Bowleven was fully carried - was a bit of a disappointment, though not a complete wash-out. Assuming the US treasuries don’t collapse, the company is sitting on $81 million of liquid assets – call that £62 million – and a fully diluted 20% share of Etinde with a bonus of $25 million to come in if the JV partners decide to go ahead and commercially develop the project.
So if Etinde gets the go-ahead, adding in that $25 million that would bring liquid assets more-or-less up to the current market capitalisation of £83 million, with any further gains on Etinde in for free. In the meantime we are told that the management is looking to deliver a break-even result for the current year. So what are the plans for Etinde? We are told: A key component of the Company's value proposition is the need to ensure the Etinde field development plan is commensurate with the appraisal drilling results, project deliverability and a risk-adjusted return. In light of the contingent resource shortfall to underpin a new build FLNG offtake, there are a few alternatives which are currently being assessed in consultations with various stakeholders, including our host government. And the key objectives included: Working with our partners on Etinde development options with the aim of Etinde project FID in FY2019.
So Bowleven wants to get on with it and one can hope the JV parters are taking the same view. Once the partners have a plan we are told that the company will return surplus cash to shareholders, but for now the company is holding on to the cash in order to preserve its pay to play options. Well I had hoped for bigger and better by now, but that was dependent on decent drilling results. However, it appears that it is still all to play for and rather than big developments this year the guidance is to look to 2019 now. Etinde still has proved up reserves and the recent drills will have added a little, as well as more knowledge of the resource.
The new (-ish) CEO, Eli Chahin, is on a decent bonus package that gets up to 10 million free shares if the share price various points between 45p and 80p per share, although there are other conditions too regarding annual costs etc. So he is well motivated to deliver a much higher share price than the 25p it is today. And the prime movers of change, which saw the old lot tipped out, Crown Ocean are still there with a holding of 28.94% at the last count (31 August 2018). If you followed this tip and bought in at around 31p last year, I hope you followed my suggestion to cash some in when the shares were heading to 40p. But now does look to be a potentially interesting time to get in for new investors: Etinde is a large project, is almost in the share price for free and the company is awash with cash and will return any not needed once the next steps at Etinde are decided. It looks to me to be a great asset play at the current share price and I am raising my stance back to BUY.
Filed under: Bowleven, Bearcast, Online Blockchain, CSF Group, Dignity, Ariana Resources, dividends
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