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Appraisal well game changer at Etinde for Bowleven, but the market sleeps BLVN

Oil and gas exploration group Bowleven (LSE:BLVN) has announced that a rig has been secured for drilling appraisal wells at the Etinde site in Cameroon, where it owns a 25pc stake. The development provides further vindication for for the shareholder activists who voted to boot out almost all of Bowleven’s former board led by chief executive Kevin Hart last March. Hart and his gang had run the company into the ground, but the stage could now be set for Bowleven to regain some of its former glory.

With Bowleven’s shares edging up by just 0.7p to 32.5p over the last two days it seems the market has slept through the upside potential, which the Etinde news could be the catalyst for. This price, and Bowleven’s corresponding £103.2m market cap, could represent a great point given the company’s attractive fundamentals. Indeed, as of June 30 last year, Bowleven had a cash balance of $86m, absolutely no debt, and the benefit of the $40m carry for the two appraisal wells at Etinde

And this is the key point to remember , Appraisal wells will be drilled at Etinde, which are far more valuable than your garden-variety exploration well. If the firm is able to recapture even a modicum of the investor interest it had before Hart & Co selfishly burned through millions of pounds worth of cash, then the share price could soar. Drilling is due to commence in Q2

Drilling opportunity

The drill was acquired by New Age Cameroon Offshore Petroleum, operator at Etinde, which entered into a deal with drilling contractor Vantage Drilling International for the jack-up rig, known as the ‘Topaz Driller’.

The Topaz Driller has been contracted for 140 days to perform drilling services in Cameroon on the joint venture’s proposed appraisal wells.

Planning for the delivery of the wells is ongoing, but Bowleven expects drilling to begin in the second quarter of 2018 – the Topaz Driller is currently in South East Asian waters and will transit to Singapore before mobilising to Cameroon.

This will be music to the ears of the rebel investors in Bowleven who voted to shake up the then-ailing firm last March.

A requisitioned meeting, led by 29pc shareholder and private equity group Crown Ocean Capital, saw five of Bowleven’s directors, including CEO Kevin Hart and finance director Kerry Crawford, removed from the firm’s board.

Two nominees put forward by Crown Ocean – Christopher Ashworth and Eli Chahin – were subsequently appointed to the board and immediately implemented a new strategy.

Crown Ocean and a large number of shareholders had been long calling for a change in direction at Bowleven.

The firm’s old board was heavily criticised for failing to maximise shareholder value, taking excessive renumeration packages, and making ill-advised farm-out agreements..

Indeed, a string of disappointments saw the firm lose 90pc of its value over five years as management tore through the company’s cash balance.

All previous board members have now been replaced, and new management has cut costs, reduced staff number and turned Bowleven into a holding company pending the development of Etinde.

Today’s announcement is a significant step in the right direction for Bowleven and shows that Crown Ocean is doing right by the company so far, with the holding company strategy also defending fundamental value. If these appraisal wells come close to hitting the hype surrounding them a few years ago, then Bowleven could be worth getting in before the market wakes from its slumber.

 

DISCLOSURE

The author of this piece holds a position in the company covered in this article.

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