Petrofac will provide BowLeven with up to $500m (£311m) of capital towards first-stage development of the Etinde permit. A final investment decision for the permit is expected during the second half of next year, with initial production targeted for 2016. In return for its investment, Petrofac will receive a share of operating cash flow from Etinde - equivalent to an internal rate of return of 20 per cent, with a cap set at a maximum of 50 per cent of the projected value of the first stage of development. Moreover, chief executive Kevin Hart pointed out that, in addition to capital, the deal provides access to "extensive development expertise to assist project delivery, mitigate execution risk and help deliver first production".
Operationally, meanwhile, BowLeven cut its full-year operating loss by 70 per cent to $16.2m, reflecting a marked reduction in costs linked to unsuccessful drilling. Bank of America Merrill Lynch estimates net asset value (NAV) at 248p a share - assuming a long-term oil price of $95 a barrel.
| BOWLEVEN (BLVN) | ||||
|---|---|---|---|---|
| ORD PRICE: | 82p | MARKET VALUE: | £242m | |
| TOUCH: | 82-82.25p | 12-MONTH HIGH: | 153p | LOW: 53p |
| DIVIDEND YIELD: | nil | PE RATIO: | na | |
| NET ASSET VALUE | 197¢* | NET CASH: | $142m | |
| Year to 30 Jun | Turnover ($m) | Pre-tax profit ($m) | Earnings per share (¢) | Dividend per share (¢) |
|---|---|---|---|---|
| 2008 | nil | -10.9 | -14.0 | nil |
| 2009 | nil | -10.2 | -12.0 | nil |
| 2010 | nil | 19.5 | 10.0 | nil |
| 2011 | nil | -76.8 | -37.0 | nil |
| 2012 | nil | -13.1 | -5.00 | nil |
| % change | - | - | - | - |
|
*Includes intangible assets of $425m, or 144¢ a share £1 = $1.61 |
||||
IC VIEW:
The Petrofac deal helps to de-risk the Etinde development, while freeing-up capital for BowLeven's other projects in Africa. With strong cash resources and trading at a substantial discount to forecast NAV, expect more upside ahead. Buy.
Last IC view: Buy, 101p, 26 March 2012
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