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Bowleven’s interim results disappoint, but is the market undervaluing its assets? #BLVN

The Bowleven (LSE:BLVN) share price has had a decent run in recent weeks, but is the market still massively discounting its true valuation? The stock had dropped back a little since peaking at 38p last week with the share price hitting the top of its current price channel and the RSI getting very overheated. What’s really put the boot in today was the announcement of the company’s interim results, with the share price down 7% as I write. There’s a possibility this will dip back lower but price action does seem to suggest to me that the floor is in at around 30p.

In its interim results, the company reported a loss of $2.7m for the six months to December 2017, but much of its £111m Market Cap is supported by its net assets. The majority of that consists of cash – at the year-end, Bowleven’s coffers were well-filled to the tune of $83.7m. The company also boasts of having no debt, a rarity in the sector after the abysmal returns over the past couple of years.

The company also has access to a further $25m which is receivable on achieving the Final Investment Decision (FID) on the Etinde project. In addition, Bowleven is carried for its share of the budgeted cost of the two well Etinde 2018 appraisal drilling programme, up to a maximum of $40m. The value of the carry is recognized as an asset on the company’s balance sheet with a value of $39.6m.

Add the potential $25m to the carry value and cash balance, and you reach a total of £105m, approx. Therefore, the current Market Cap attributes pretty much zero additional value to the company’s 20% stake in Etinde. With the oil sector seemingly rising from the depths of its bear market, now might be a good time to take a closer look at Bowleven.

Author: Stuart Langelaan

Disclosure: The author of this piece does not own shares in the company mentioned

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