Why Bother Looking at Bowleven (code: BLVN.L)?

  1. Value: A very cheap stock on certain deep value measures: Price/Book Value ratio of 0.4x;
  2. Value (2): Estimated Net Asset Value per share (BMO, Barclays): 99-135p. Current share price: 40.8p: Price/estimated NAV: 0.3-0.4x;
  3. Catalyst: Agreement to sell down a 50% interest in its Etinde permit offshore Cameroon for Lukoil and NewAge for a total $250m, giving Bowleven enough cash to finance its share of development capex through to finding first oil (25% share left);
  4. Revaluation: Offshore Cameroon oil & gas resources worth potentially 70p/share for Bowleven, 71% higher than current share price.
  5. Technical: BLVN.L share price has bottomed out, now rising steadily, gap to close at 52p. 

A Small-Cap in one of my favourite sectors: Oil & Gas

I remain unashamedly keen on the global Oil & Gas sector, with recent Middle Eastern geopolitical worries in Iraq, Syria and Libya keeping the Brent crude oil price at relatively elevated levels, despite the onrush of shale oil production Stateside. 

Bowleven (BLVN.L) is a junior oil exploration company (market capitalisation £130m) with development interests offshore Cameroon in Africa. 

The Etinde permit, the subject of this latest stake sale to Lukoil and NewAge, comprise 3 blocks MLPH-5, 6 and 7 (Figure 1). 

1. Etinde permit, offshore Cameroon

etinde+BLVN.JPG

Source: company

While I admit that I am no oil & gas specialist, Bowleven piques my interest as an investor for a number of reasons, despite the rather large stumbling block of being loss-making at present (consensus EPS estimates are pegged at a loss of $0.036 for this year and $0.035 in 2015), which normally rules a company out of consideration for me. 

Value: Lots of unexploited value in Cameroonian assets

The stated balance sheet gives a trailing book value per share of $1.82 (Figure 2), which translates to 107p at the current $1.70 exchange rate. 

2. Balance sheet shows lots of potential value hidden

years.JPG

BLVN+BalS.JPG

This gives a price/book value ratio of just 0.4x, including the $38m of cash already on the balance sheet, before the cash infusions from the stake sale to Lukoil and NewAge. 

3. Price Book Valuation Attractive

BLVN+PBV.JPG

The stake sale to Lukoil and NewAge is to bring in some $170m…

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