Prelims from Bowleven (LON:BLVN) reveal it is in a healthy position for a junior oiler as it is sitting on US$145mln of cash.
The source of the company’s riches is a US$250mln deal struck with Russia’s LUKOIL and privately-owned NewAge, which now each own 30% of the Etinde Permit, offshore Cameroon.
Bowleven, which has been left with 20% (the remainder is owned by the state oil firm), is now carried on a two well programme next year.
That carry is estimated to worth US$40mln, while Bowleven will receive a further U$15mln on completion of appraisal drilling and US$25mln once the final investment decision is made on the project.
Etinde lies in shallow waters off the coast of Cameroon and is host to a number of discoveries including oil, condensate and gas.
The P50 contingent resources is 58mln barrels of oil equivalent.
However, there is huge potential upside and the appraisal work being carried out in 2016 is targeting an additional one to two trillion cubic feet of gas (tcf) in place at the P90 level.
It will depend on how much gas the partners find as to how the asset will be developed.
There is the opportunity to develop a liquefied natural (LNG) gas facility, a fertiliser plant or power project.
Bowleven is not a one asset company. It also owns Bomono, an onshore gas discovery right next to Douala, Cameroon’s second city and industrial hub.
An extended well test will determine the potential for commercialising this asset, but it is already talking to private equity fund Actis, owner of the local electricity company, about collaborating on a gas-to-power deal.
Bowleven in its results statement said one of its key objectives for the coming year is to manage its cash resources carefully, although the company is on record as saying it will consider value accretive, Africa focused acquisition opportunities.
“The sustained low oil price has created a challenging environment for E&P companies and we have taken the time to examine our current cost base to ensure that it is right-sized for current plan, and our strategic objectives,” said chief executive Kevin Hart.
“However, for those with balance sheet strength there are opportunities.
“We will evaluate this new business potential against a background of capital discipline and operational capability while continuing to drive forward progress on our existing assets."
In common with companies involved in exploration, Bowleven was loss-making in the 12 months to June 30. The deficit was US$90mln, compared with US$13.6mln a year earlier, although the former number included an impairment charge of US$76mln.
Analyst Craig Howie, at Shore Capital, said: "We look forward to completion of well testing at Bomono and the commencement of appraisal drilling at Etinde; in the meantime, we highlight Bowleven's $145mln net cash balance at the period end, which provides significant valuation support in our opinion."
Meanwhile, Mirabaud noted that operationally there was not "a great deal" to report in the statement..
Testing continues at the Moambe gas discovery at the Bomono permit in Cameroon with the rig expected to move to the Zingana discovery on completion, the broker said.
"In preparation for commercial flow rates, Bowleven has signed an MOU with Actis/Eneo, which will spell out the terms for a gas sales agreement. Meanwhile, appraisal drilling at Etinde is expected to commence next year (in line with previous guidance) with BLVN carried for the cost of the two wells up to a net cap of US$40m."
Bowleven shares eased 5.83% on the day to 24.25p.