I first came across Bowleven (LON:BLVN) , as a potentially interesting investment, at the Oilbarrel Conference in Sep 2010. [1]  What made it interesting to me at that time was:

  • A strong management team, with key players being ex-Cairn [2] [3] and ex-BG [4]
  • A decent cash position & sound, tested assets [see "Assets"]
  • Partnership with a big player, in the shape of Vitol [see "Vitol Agreement" below]
  • Lots of potential upside from drilling, with the major Sapele-1 well due to spud shortly

Against that, I had to balance the political risk of operating in Cameroon and risks associated with commercialising existing discoveries, meaning that they can currently only be classed as "contingent resources", as opposed to 2P reserves. Anyhoo... I decided to take a punt in October 2010 when, despite Sapele-1 having already spudded and initial results being expected soon, the share price had remained remarkably subdued. That proved a good decision with my original punt having now double-bagged.

Long story short, I believe that the market has misunderstood the company's latest RNS concerning the Sapele-1 well and that there may be considerable excitement to come - hence I have topped up today (Wednesday 9th Feb), with the SP well off its recent peak. AIUI one rig is standing by, waiting for government approval to sidetrack Sapele-1, in order to appraise a Tertiary oil discovery made in the original well and another, more capable rig, is on its way. That rig will drill a step-out well into deeper, more "challenging" Cretaceous prospects.

Lots more drilling is expected over the course of 2011 with those rigs, and Bowleven has the cash to fund it.

I will start by discussing the Sapele-1 well and then come back to discuss already tested assets that (at least to some extent) underpin Bowleven's current market cap. of £716m, irrespective of Sapele-1 results.

Sapele-1

 

 

Well/News Timeline

Sapele-1 is the second well drilled by Bowlen in its shallow-water MLHP-5 Block offshore Cameroon (75% equity interest). The first, D-1r well in 2007 made a gas-condensate discovery, flowing 25mmscf/d + 1,400bopd condensate in the Tertiary horizon. Following 3D seismic acquired during 2010, Sapele-1 is designed to intersect multiple prospects in both Tertiary and Cretaceous strata. It was spudded…

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