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The Pay Zone: Bowleven, President Energy & Petroceltic...

The Pay Zone: Bowleven, President Energy & Petroceltic...
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Oil price
Another up week for oil with nearly 10% added to both WTI and Brent and this morning has seen another strong start to the week with both putting on around 50 cents. On a purely technical basis this is most encouraging, for WTI breaking above $35 was important and with Brent now above $39 that too is giving scope for further upward movement. Generally economic news and industry data helped on Friday, the NFP was 242/-, higher than expected and people’s thoughts turned again to growth in the USA, whilst news from China albeit hardly positive, showed a dose of realism from the Government. Bourses were up pretty much around the world, with oil rising is it becoming a risk-on indicator? Friday also saw the rig count fall as forecast, overall went below 500, down 13 at 489 and oil was below 400, down 8 at 392, as from now we are in new territory, pretty much nobody under 60 can remember so many units stacked.
The bulls picked up on the physical position in the market being tight, albeit on a short term basis, this is true but by no means takes up any slack at all in the call on Opec. Whilst clutching at straws, Azerbaijan has joined the caravan of love and will freeze production at 830/- b/d this year. I fear that the inventory stats will rain on the parade but in this mood the bulls will brush away any bad news.

Bowleven
I recently met up with Kevin Hart, CEO of Bowleven which I have  been happy to have in the new bucket list. Whilst I will mention Bomono and Tanzania I concentrated most of my questions on Etinde which is their key asset and in my view almost certainly going to provide significant upside to the current share price. With the highly successful farm-out to New Age and Lukoil, BLVN now has a 20% non-operated interest here but did a deal worth an overall $250m of which $170m is already in and another $80 is due for cash and carry.
The key to this discovery is drilling the next two wells which are effectively appraisal by nature and could easily prove up 3-4 TCF of gas and, say, 500m barrels of liquids. With the farm-in done and well locations agreed and budgets approved, you would have thought that the drill bit would not be long in spinning. Indeed there appear to be buyers aplenty for the gas in fertiliser plants and LNG facilities and the liquids clearly add immediate value. With BLVN raring to go it seems that both the other parties, while obviously keen to get on may have slight flies in their particular ointments. Originally the first well was planned for spud in June of this year, since then I have heard Q3 and even 2H which seems odd. Market rumours at one stage suggested that Lukoil and BLVN were prepared to take on extra risk in order to get on with the drilling but at the moment Q3 looks most likely if possibly optimistic. I have a possible further theory as to why New Age maybe holding up the process but is only at present a theory. Some time ago Savannah Petroleum announced that it was reversing into another company and that this would take until April to be closed, what if this party was Steve Lowden and New Age? It might explain why the foot has been off the accelerator as negotiations with Mr Knott would no doubt be how you say, intense.
So where does all that leave us in terms of valuing Bowleven and more importantly when longstanding and faithful holders might make something out of the company? There is no doubt that what is only a modest delay at the moment on Etinde is irritating but little more. If my numbers as quoted above, are anything like accurate then you should at least add at least 30-50p a share to the current 22p, maybe more in the long run. The risk is clearly that with NA possibly in deal mode, and Lukoil’s latest announcements being somewhat vague drilling on Etinde is further delayed.
Elsewhere as I mentioned, Bomono looks like a good project with 5-6 mmscfd of gas for power generation but doesnt move the needle much albeit a positive for cash flow in due course. The company recently announced, then walked away from a deal with Aminex in Tanzania, I dont think much should be read into this as during negotiations risk profiles and timescales proved different, it may yet happen. Bowleven has $120m of cash and no debt plus that $80m of cash and carry so is in a very strong position indeed. I have said for some time that some of that cash and maybe a few shares could be used to buy Victoria Oil & Gas which would bring an immediate addition of a cradle to grave business with cash flow and scale in Cameroon but I’m not sure whether anyone’s listening, or if they are if it works.
The market, particularly long standing shareholders, are understandably getting impatient and would like to know when such a valuable prospect as Etinde is likely to be drilled. I suspect that at the moment all the partners are keen to get going but that local difficulties such as I have mentioned may be causing slight delays, at this time I would suggest that it is not Kevin Hart holding anything back. Etinde is a company maker and if it takes just a little longer i’m sure that it will be worth waiting for, if not a little inconvenient.

President Energy
A corporate and operational update from President today, both Argentina and Louisiana are performing in-line with management expectations and both trading profitably at current oil prices. On that subject the oil price in Argentina is currently $58 and with 16 Peso’s/$ (from 10 last December) margins are ‘robust’ and with the new ability to take dollars out of the country it all helps. The workovers in Argentina start at the end of this month funded fully from domestic cash. The development drilling programme is the key to this announcement and will ‘materially increase production’ and more importantly will not need new equity. Costs are being ‘attacked’ at President, the latest victim being the CFO role, I wish Ben Wilkinson well, he has been a stalwart through the development of the company. I remain very positive on President and whilst the project has taken way longer than expected and had a few twists and turns on the road should eventually reward patient, very patient investors, the biggest of which is Peter Levine.

Petroceltic- You couldnt make it up…
Just when you didnt think it couldnt get worse it did, as Worldview have put PCI into Examinership which is a bit like Chapter 11 I understand. It’s about the only thing I do understand about all this as is looks very odd behaviour to me. With the next waiver of the debt expected and a strategic review looking at all options, a hostile bidder has just tried to allegedly bankrupt the company it ‘wants’ to buy. The ramifications of this are at best unclear and I’m sure that the company and its advisors are not sure either. Under this process I get the impression that without a valid waiver in place the company may be technically in default although I suspect that lending banks may have sympathy with PCI.
What is for sure is that all involved are in uncharted territory, under the Court the examiner has 100 days to reorganise the company’s affairs but again I suggest that this legislation was never designed for such action and I think that technically Worldview may have to prove that they can run the company. PCI are suspended but not until 4th April as some suggest, if the company can sort out the waiver situation I think that the quote may return.
I am by no means au fait with these procedures and I suspect neither are the company, all I can see is that Worldview, having failed in the 3p bid (which is still technically on the table), are considering yet more outrageous options which may end in tears all round.

And finally…
Muzza looked out on his feet after nearly five hours on court and having played Friday and Saturday but team GB went on the beat Japan and earn a tie against Serbia with Djoko!
In the Prem the Foxes remain at the top as Spurs and the Gooners could only draw. The Noisy Neighbours thrashed Villa and the best game un less you are a Toffee was the Hammers coming back from 2-0 to win 2-3. Elsewhere the Baggies beat 10 man Man Who, the Eagles appeared very unlucky to lose to the HubCap Stealers, the Maccams nearly won but conceded against the Saints with 30 seconds to go. With the Magpies abjectly losing 1-3 to the Cherries the prospect of the Wally with the Brolly going down is still quite likely although the Canaries losing to the Swans hasn’t helped their cause exactly.
In the Prem rugby there were more tight games, Sarries lost at home to the Saints, Leicester beat the Chiefs and Gloucester beat Wasps…



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