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BowLeven – “Corporate Update and Award of Options”. Hmmm…

By Steve Moore | Friday 12 May 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.


Following boardroom change, BowLeven (BLVN) “is pleased to announce an update on progress with the company's strategic efficiency programme and on the current status of its existing assets. The company also announces the adoption of a Transformation Incentive Plan designed to align employees' interests with the company's longer term strategic objectives”. Hmmm.

The announcement includes “a reduction in head office staff to a level commensurate with the future strategy of the organisation as a holding company that does not expect to pursue any new exploration activity” (a process to reduce overall UK headcount from 18 to 5 full time employees is underway) and that “streamlining Cameroon headcount and costs has also commenced”. The company resultantly expects that in the second half of this year, monthly general & administrative costs will be reduced by approximately $0.25 million compared to the corresponding 2016 period, to circa $0.35 million.

It also updates on ‘continuing enagagement’ in Cameroon to agree plans for development of the Etinde resources, with a request having been submitted to convene an ‘Operating Committee Meeting’, and to gain the outstanding approval of the Bomono farm-in, “which will allow Bomono hydrocarbons to be produced into the VOG, Gas du Cameroon, pipeline”. Here, “meeting dates are being offered to work-out an all-party solution”.

It is then onto options and the ‘Transformation Incentive Plan’. On the latter, it is stated that any awards are decided by the remuneration committee of the company, though with the number of shares subject of the plan not to exceed 5% of the issued ordinary share capital. However, “this limit shall not affect the ability of the company to grant awards under any other employee share plans” and the remuneration committee has “resolved… to grant Mr Chahin a right to acquire up to 10,000,000 ordinary shares in the company at a nil cost under the Plan”.

Mr (Eli) Chahin is the new CEO – with his share plan award exercisable including to “the extent to which certain performance conditions are satisfied over the performance period commencing on the date of grant and ending on 31 March 2022… relate to the company's share price performance and the maintenance of annual cash costs below a certain level”.

Hmmm. With the shares at 30p, that’s a potentially very valuable award – and the lack of transparency on the detail of the performance conditions is unacceptable. It is perhaps, sadly, unsurprising though as “the board has taken external advice from independent remuneration consultants”. Or ‘Ratchet, Ratchet & Bingo’ as Warren Buffett has called them, recently saying “If the board hires a compensation consultant after I'm gone, I will come back”.

The old board here have though set a low bar and the new emphasises it “will continue to consider all options as to identify the most value accretive proposition for shareholders. Once the development options as to gas monetisation of both the Etinde and Bomono assets have been determined and costed, the board anticipates being in a position to determine the cash requirements of the business and whether there are surplus assets that can be returned to shareholders”. That sounds more promising, but for now I remain on the sidelines.


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