Bowleven Plc’s (LON:BLVN) new taskmasters will have a tough job on their hands, according to analysts at Barclays, who reckon the ‘simple strategy’ put forward by activist shareholder Crown Ocean Capital is easier said than done.
On Wednesday, it was confirmed that most of the Bowleven board had been sacked – after Crown Ocean‘s proposals garnered enough support at a general meeting of shareholders – leaving just chairman Billy Allan and chief operating officer David Clarkson in place.
Barclay’s today downgrades Bowleven to ‘underweight’ whilst noting that the shares now trade close to its new target price of 34p.
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“The shareholder vote to remove CEO Kevin Hart and four other directors comes following the proposal from an activist investor of a simple strategy: minimise the cash burn while maximising the realised value of the company's existing assets, returning excess cash to shareholders,” Barclays analyst James Hosie said in a note.
“However, if delivering such a strategy was straightforward (and value-accretive) the evidence would be a long list of small cap E&Ps that efficiently monetised success and returned the cash to investors.”
“The reality is that a clean exit at a full price is rare, while scarce equity capital will continue to favour larger, diversified and self-funding businesses.”
Hosie says the company’s flagship Etinde project may have considerable upside potential, nonetheless, he reckons it will be challenging for Bowleven (as a minority partner in the project) to realise significant value from the asset quickly.
The analyst also cautions against any plans to strip cash from the group.
“The intuitive appeal of returning a large portion of the company's $95m cash balance is understandable, but can only enhance the longer-term outlook for shareholders if it comes with the monetisation of Etinde requiring limited further investment by Bowleven.”