Bowleven — Update 14 January 2016

Bowleven — Update 14 January 2016

Bowleven

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Bowleven

Bomono well test results

Positive well tests

Oil & gas

15 January 2016

Price

20.8p

Market cap

£68m

US$1.5/1£

Net cash ($m) at October 2015

120

Shares in issue

327.3

Free float

93%

Code

BLVN

Primary exchange

AIM

Secondary exchange

N/A

N/A

Share price performance

Business description

Bowleven is an AIM-listed, Africa-focused E&P with assets in Cameroon, Kenya and Zambia. It has a 20% net interest in the Etinde development, which will provide gas to a fertiliser plant for 20 years. Its partners are NewAge and Lukoil.

Analysts

Will Forbes

+44 (0)20 3077 5749

Ian McLelland

+44 (0)20 3077 5756

Bowleven is a research client of Edison Investment Research Limited

Bowleven’s exploration activities onshore Cameroon have produced positive results. On 8 January, BLVN announced that tests of the shallow gas reservoirs (started in Q415) have given the company enough confidence to “continue to support plans for an initial supply of around 5 to 6 mmscfd of gas for power generation” under a development scheme formulated with Actis and Eneo”. Should this project get the go-ahead after full analysis has been completed, it could mean a relatively low-cost project for Bowleven, which could see near-term initial production. The wells were completed as producers, so re-drilling will not be needed, while the site is very close to the grid with enough land for expansion in time.

Year
end

Revenue
($m)

PBT*
($m)

Operating cash
flow ($m)

Capex
($m)

Net (debt)/
cash ($m)

06/14

0.0

(13.6)

(8.6)

(18.0)

20.5

06/15

0.0

(14.1)

(10.4)

(30.4)

144.8

06/16e

0.0

(11.2)

(9.2)

(74.2)

112.0

Note: *PBT is normalised, excluding amortisation of acquired intangibles, share-based payments.

Potential for a quick development

As yet we have not heard much about the make-up of the other reservoirs, the existence/extent of associated liquids or other considerations – we expect detail in time. However, for this development from the shallow intervals, the dry gas would mean a cheap, quick process to first production – we expect a Gas Sales Agreement and development planning to be the key focuses in the coming months. Any success in deeper horizons (where liquids may be present) could build on this initial development and liquids should mean increased returns (although potentially taking longer to come on stream).

Uncertainties remain but a positive step

As the counterparties are western backed, we expect them to be as eager as Bowleven to swiftly arrive at a development to supply power to the electrical grid. Initial volumes of 5-6mmscfd can use rented generation units, so there is a possibility of a quick development – albeit that delays cannot be ruled out for a number of reasons (not least that Victoria Oil & Gas has found it difficult to increase its gas production/demand over a number of years from a site in Central Douala). Given its location, space is not limited enabling the company to scale a development as required.

On pricing, Victoria is able to charge between $9-16/mmbtu to industrial customers We would not be surprised to see Bowleven achieving lower prices given the wholesale nature of the gas sales, but prices should still be good. We are cautiously optimistic and await further news.

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Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 9258 1161

Level 25, Aurora Place

88 Phillip St, Sydney

NSW 2000, Australia

Wellington +64 (0)48 948 555

Level 15, 171 Featherston St

Wellington 6011

New Zealand

Paysafe Group — Update 13 January 2016

Paysafe Group

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