Why Shares In BowLeven PLC Spiked Today

BowLeven PLC (LON: BLVN) strengthens balance sheet on deal to sell stake in offshore Etinde project.

Mark Stones

Mark Stones (TMFMumbojumbones) joined The Motley Fool in 2014 and initially worked as a writer for Fool.co.uk, before joining the Fool’s analyst programme. Mark earned a BA in English from Loughborough University. Although he spends more time reading annual reports than Russian literature these days, he still appreciates a novelist’s antipathy toward the accepted view, which is a useful attitude when trying to sniff out hidden gems on the stock market. His approach to investing has been largely influenced by the principles of Warren Buffett and Peter Lynch. He also takes a special interest in the work of healthcare companies. Outside of investing, Mark plays guitar, enjoys good writing and has a guilty passion for combat sports.

Published 24 June, 2014 10:35 am BST

| More on: BLVN

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Although we don’t believe in timing the market or panicking over every stock fluctuation, understanding how a business is performing, competing and changing is vital to sensible investment.

So what: Shares of Africa-focused oil and gas explorer Bowleven (LSE: BLVN) spiked by 12% to 45p during early trade this morning on the decision to sell-down its stake in a project off the coast of Cameroon. Russia’s second-largest oil producer, Lukoil, and NewAge (African Global Energy) will pay $250m (£147m) to acquire 50% of Bowleven’s offshore Etinde block.

Now what: LukOil and NewAge will pay Bowleven $170m at completion of the deal, a $40m deferred cash payment on completion of appraisal drilling, and cover $40m in costs for two appraisal wells.

The chief executive of Bowleven, Kevin Hart, commented:

“Bowleven’s strategy is to focus on our core strengths of exploration and appraisal and enable the conversion of resources to reserves, ensuring that we realise value for shareholders at the appropriate time. This transaction endorses the value of Etinde while allowing us ongoing participation in its significant remaining potential.”

Now what: The significant cash component of the deal will strengthen Bowleven’s balance sheet and increase financial flexibility. As such, Bowleven is in a position to progress multiple exploration opportunities across its wider African portfolio, including planned and potential exploration drilling in Borneo, onshore Cameroon and Kenya. As the Etinde project moves forward Bowleven retains exposed to future upside potential.