I haven’t commented on AIM-listed Cameroonian gas play Bowleven (BLVN) for some time – the last being back on 27 March last year when I asked are you brave enough to buy? in the face of a big sell-off in oil and gas prices as the severity of the Covid crisis started to become apparent. The share price then was 2.17p in the middle and latest news sees the shares more than double that. I wasn’t brave enough to buy more….but my then existing holding is still there...
The latest news is that the joint venture partners for the offshore Etinde project at Cameroon have received formal approval to apply for a new exploitation agreement following discussions with the Cameroonian authorities, replacing the original deal reached in January 2015 which expires at the end of this month. Of course, the doesn’t guarantee the approval will come but given that this is the result of negotiations with the Cameroon Government representative, the Societe Nationale des Hydrocarbons - the national oil and gas company of the Republic of Cameroon - one would imagine that things will progress in due course, and we are told the news essentially eliminates the possibility of the loss of Etinde. It was a bit of a worry that the previous deal was due to expire at the end of this month and seemingly little progress had been made in its renewal. Now it looks rather more positive and we are told that the joint venture partners led by New Age Ltd continue to make good progress towards achieving a Final Investment Decision in 2021 which will (if achieved) lead to a $25 million cash payment to Bowleven.
If I were New Age I certainly wouldn’t be in any hurry to fork out $25 without a replacement exploitation deal so this news certainly looks as though a major stumbling block is almost behind the partners. The other good news is that oil and gas prices have put in a pretty good recovery from last year’s covid-crash and with new production on the world stage looking limited the stage could be set for a big rise in oil/gas prices once the inventory glut has gone. So it seems there is much to play for here.
As things stand, Bowleven’s market capitalisation is around £17 million – a small discount to that possible $25 million (call that around £18.4 million) heading its way, we hope this year. At the last results - the FY to last June - Bowleven had around $7.5 million in net current assets, but had lost $2.6 million in admin and other costs. Costs have been whittled away, but if we assume that by June the company will have around $5 million of cash that would mean around $30 million – call that £22 million – for £17 million now. But that $25 million isn’t in the bank yet, hence the discount. But what the share price perhaps does not reflect at all is the upside to Bowleven if Etinde gets the go-ahead. Tom Winnifrith wondered whether a price-tag of $50 million to Bowleven might be a suitable valuation for Etinde back in 2017. By then, Bowleven had sold much of its Etinde stake to its joint venture partners in a deal which valued its remaining holding at around $90 million. So in theory, Bowleven shareholders are sitting on massive potential upside. Even if we take Tom Winnifrith’s $50 million figure (around £37 million) if Etinde gets a final investment decision and go-ahead, Bowleven’s market cap simply reflects almost zero upside – and that upside could be very material. You can do the maths….....There is the small matter that progress has been painfully slow, and there are plenty of risks, but it seems to me that a bit of patience could really pay off. Once we get a final investment decision – and $25 million in the bank – there will need to be a decision made by the board. Does it simply sell out with the project on full go-ahead? Might that bring in $90 million (or more)? That would surely see Bowleven transformed into a cash shell with maybe $120 million, call that £88 million, of net cash – or about 26p per share. But consider the position of New Age: at Bowleven’s current share price it surely becomes a takeover target as and when Etinde gets the go-ahead, unless the shares move sharply northwards. So despite the extended and long history of disaster and delay, this does have its attractions and I’m still hanging in there. Indeed, I suggest that this could prove to be a stonking buy for the very brave - and patient!
Filed under: Bowleven, Manolete, Vast Resources, Asiamet Resources, Mosman Oil & Gas, Catenae
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