Bowleven - Interim Results
Edison | Apr 06, 2016 07:19AM ET
Bowleven’s (LON:BLVN) interim announcement gave little new news, although the confirmation that the appraisal wells may not be drilled until 2017 has affected the shares. Although disappointing, this delay has a very minor effect on valuation and will still enable the new operator (NewAge) to take advantage of low rig rates. At Bomono, the company is working with the government to progress the BEAA to enable a small gas-to-power scheme, producing useful cash flows. We have adjusted modelling slightly after Bowleven’s interim results (30 March), but this leaves the valuation unchanged. The share price is broadly supported by the current cash position of $100m (21p/share), leaving value at Etinde and Bomono upside available to long-term investors.
Four options still being examined at Etinde
The consortium is still considering a number of options at Etinde, with the operator leading evaluation of LNG, power and fertiliser options. We note, however, the government has previously favoured the fertiliser solution, so we continue to use this as our base case for now. If and when appraisal success at the Intra Isongo unlocks greater resources, there may be enough gas for both a fertiliser and LNG solution, providing sound financial returns. We would not expect a decision until after the appraisal wells are drilled in 2017, but NewAge is looking at advancing an initial development utilising the existing wells via an offshore processing facility.
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