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Buy Bowleven at 59.75p

By Doc Holiday | Friday 5 July 2013


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.


In an exciting 2012, punters saw Bowleven (BLVN) shares reach a dizzy 102p. At a fundamental level the oil mid cap seems to have made strong progress yet the shares trade back at just 59.75p, valuing the company at £173 million. That seems largely a result of sectoral unpopularity and I reckon the shares are cheap.

 

The latest news comes from the IM-5 well in Cameroon. CEO Kevin Hart states:


"We are delighted with the overall results from IM-5 appraisal/development well which have surpassed our expectations. The flow rates that have been achieved on test, demonstrate substantial well deliverability from both the Middle and Intra Isongo intervals, and further strengthen the foundation for the planned development phase of Etinde. Due to the high deliverability of the Intra and Middle Isongo reservoirs, we are confident that we will be able to reduce the number of wells required to supply the planned fertilizer plant.


The IM-5 well has not only delivered a substantial increase in estimated hydrocarbon volumes, but it has also confirmed the presence of liquids rich hydrocarbons at the Isongo Marine field, a significant value driver for development plans on Etinde.

In addition to proving that there are more than sufficient gas volumes present on a P90 basis to meet 70 mmscfd dry gas requirements of the fertilizer plant, the IM-5 well has also derisked considerable further prospectively with significant volumetric upside on the block.

Sub Saharan Africa has become a popular place to further strategic partnerships as Bowleven announced its joint venture with First Oil on 4th July 2013.

This sector is clearly unloved and I would not bet my pension fund on one stock.  But Bowleven has a strong cash position (I estimate it still has c$100 million in the kitty), mammoth asset backing and real exploration upside. It has to be in play as a potential takeover target.

I’d be a buyer with a 55p stop loss and an initial target of 100p (Review at 70p)



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