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BowLeven – CEO Hart claims ‘delight’ with “farm-out agreement”, who does he think he’s kidding?

By Steve Moore & Tom Winnifrith | Monday 6 March 2017

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.

Kick-the-board-out requisition-pressured BowLeven (BLVN) CEO Kevin Hart is “delighted to be working together with Victoria Oil & Gas to unlock the potential of Bomono… gaining access to Victoria Oil & Gas’s extensive infrastructure and gas marketing experience”. Hmmm, the market doesn’t seem to share ‘delight’ in the deal from your side though Kevin – shares in BowLeven currently more than 7% lower, whilst those in Victoria Oil & Gas (VOG) more than 12% higher…

Hart argues “attractive returns relative to a gas to power option, and requires minimal further investment by Bowleven to reach first production” - and the agreement also includes Victoria to pay BowLeven £100,000 in shares, a 3.5% royalty from its production share (capped at $20 million) and to “complete the civil engineering works necessary for the gas processing plant installation at the Bomono site” (estimated capital cost $6 million, though with if the first 3 years of net income Victoria receives is less than the development expenditure, BowLeven to pay 50% of the deficit up to a $2 million payment). BowLeven is also to remain as operator of the project, so what’s the catch?...

“On completion, EurOil Limited, a Bowleven subsidiary, will have a 20% working interest in the Bomono PSC and GDC Bomono S.A., a wholly owned VOG subsidiary, will have an 80% working interest.”

You what?!? 80% of an interest in which an estimated over $100 million has been spent is being given up for THIS agreement?!?

It is added that the deal “has been negotiated by the parties over several months” - as if that gives it some sort of complexity merit - and that “in the event that any of the resolutions requisitioned by Crown Ocean Capital P1 Limited at the forthcoming Bowleven General Meeting on 14 March 2017 are passed, VOG has the right to terminate the agreement” - as if that’s some type of meaningful threat.

Instead, this just looks the workings of a desperate – and continuously useless – board. Time for them to be voted out.

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