Bowleven's (OTC:BWLVF) year-end results brought few surprises. The company remains in a very strong cash position, with $99m on the books in October (and a $40m net drilling carry still outstanding). Reductions in G&A mean it should be able to retain this advantaged position for some time until a resolution is reached on the way in which its key Etinde asset will be developed. In the nearer term, Bomono should provide cash flows once bureaucratic delays are resolved. Discussions between the government and the operator (NewAge) are continuing on the best way to exploit the large gas/liquids resources and we believe this continued uncertainty is a key reason for the shares trading below our new core NAV of 50p/share (from 46p/share).
Development concept still to be locked down
The government is seeking a ‘domestic-first’ solution, with gas being processed in country before exportation, while NewAge prefers an ‘export-led’ solution, with an objective of floating LNG development. The asset should provide substantial value in either scenario, so we are hopeful that a compromise can be reached to benefit all parties, especially given that successful appraisal drilling of the potentially large Intra Isongo could more than provide for both options. For the moment, we retain our base case of a domestic fertiliser plant with LNG option later.
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