Bowleven: Streamlining The Business
Edison | Aug 11, 2017 07:31AM ET
Bowleven's (LON:BLVN) management and board have changed significantly recently, with only the COO (David Clarkson) surviving from the shakeup since the general meeting in March 2017. The new management has slimmed down the company, reducing the headcount from 18 to five (resulting in monthly G&A costs falling from $0.6m to $0.35m), albeit at an immediate cost of $3-4m. The management continues to engage with the JV and the Cameroon government to seek a development concept at Etinde acceptable to all parties. Following the efficiency programme, we have reviewed our modelling and valuation, with core NAV now at 52p/share.
Changes at company do not alter Etinde’s value
Etinde’s latent value is unchanged by changes at Bowleven. With NewAge as operator and the potential upside of appraisal wells (probably in 2018), the asset is valuable. It is very likely that the company retains the financial firepower required to develop the asset (though the development concept and therefore costs are still unclear). Given that the development timelines could continue to be dogged by delays, the recent cost-cutting means that Bowleven is well placed to play a patient game to realise this value. The government has (reportedly) accepted that an FLNG scheme is a viable monetisation route for Etinde gas provided that a domestic gas stream is included. A key factor in determining the FLNG development will be the appraisal drilling, which is expected to commence in 2018. For now we continue to assume a fertiliser solution as the reference case in our economics, but will amend modelling when the development solution is clearer.
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