Bowleven: Farm-Down To VOG Monetizes Bomono Gas
Edison | Mar 10, 2017 04:10AM ET
Bowleven’s (LON:BLVN) farm-out with Victoria Oil and Gas (LON:VOG) is probably the quickest route to market for Bomono gas. While BLVN has had to sacrifice 80% of its interest in the block, the deal allows gas to be sold to Victoria’s existing network of customers at a gas price significantly above that expected from other solutions with very little further capex required in the near future. On our estimates, 7mmscfd of production should bring in around $6-7m in direct revenues and royalties, corresponding to around c $4m in post-tax cash flows, a useful addition to Bowleven’s income. On the assumption that the deal completes, we increase our core NAV from 49p/share to 53p/share to reflect Bomono’s inclusion.
Deal creates near-term revenue opportunity
While the deal sees Bowleven’s working interest fall from 100% to 20%, it gives Bomono gas access to VOG’s existing industrial and power customers, where realised prices achieved are between $9-16/mcf. This is several multiples of the levels we had assumed in our gas to power modelling. Additionally, the deal requires little further capital investment (in the near term) and minimal opex exposure. Upside (estimated at 146 and 263bcf GIIP across the block) may be accessed in the future, although we do not expect further drilling imminently. Subject to completion (which is conditional on government approval and the result of BLVN’s General Meeting on 14 March), we believe the deal should allow Bomono gas to start flowing to customers within nine to 12 months (mostly due to the time required for VOG to build the connecting pipeline infrastructure at its own cost).
To read the entire report Please click on the pdf File Below
Get The News You Want
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.