Wednesday, 13 November 2013

Today's Bowleven news - won't dress it up

So we got some of the news we were on balance probably expecting. The Final Investment Decision (FID) has been pushed out to mid 2014 and the Expanded Exploitation Application (EEAE) is still pending approval. The farm in on the Bomono permit has stalled as the preferred farminee can't follow through. The search is ongoing for a replacement. Up to this point I'm OK with this, normal delays and dealings in O&G and especially in Africa. Fundamentals still in place and massive value to the upside as we move towards 2016.....

.....Then we got a load of stuff we already know, such as the IM-5 well was really great and the deal with Petrofac is going to be fab, and we have enough gas to meet the fertilizer plant needs blah-de-blah. Yes all good but not really relevant today......

......And then we got some stuff that we didn't know (but others clearly did) and didn't want to know. Namely a fund raise at a whopping discounted price of 45p (25% below recent prices? why I have to ask?) I don't think many were expecting this today or the unfortunate but necessary reference to the "going concern" statements at the end. Which is of course a technicality on the one hand as technically the company don't have enough cash to get them through to production so fair enough that accountants would have to flag this, but reading it at 7am it felt like an extra portion of salt was being applied to some fresh cuts and therefore I'm not going to say I feel full of the joys of spring this morning.......

So where now? Well leaving aside the sickening emotional reaction to the fund raising everything else is still  pretty much as it was before. The gas hasn't evaporated and the delays aren't the end of the world for anyone investing over a reasonable timescale (ie not 2 weeks or months). Bringing these assets to production and fruition are complex and significant operations and the wheels keep turning.

But what sticks in the throat is the placing price and the blatant leak of the details before today. We've seen significant selling for days now and whilst PI's have been buying up and sitting in the dark others in the know have been offloading. The city really is bent as a nine bob note and nothing that we moan about or gnash our teeth about makes one ounce of difference.

"If you can't stand the heat don't sit in the kitchen" and so I reflect on my hobby of investing in oil and gas companies trading on the AIM. Should I sell the lot and buy some nice utility companies? For peace of mind probably yes but then I can't imagine waking at 6am full of anticipation for EON's latest management statement? Can you?

I posted here what I thought about the fundamentals and progress that Bowleven has made to date and my top 2 risks have both been confirmed - FID delays and Bomono farm in falling through. I've just re-read it to see if I was barking mad and I don't think I am. The fundamentals are fantastic. What is in effect a relatively small and short term fundraising to see the company through to FID and the petrofac deal could have been handled differently. But it's been dropped on us at a time when good news was expected, doubling the insult. It will set the BB's alight and form the basis for the bears "told you so" comments for weeks to come - groan - but I guess the score is currently Bears 1 : Bulls 0 so let them enjoy their victory.

The brave or true long term investors may look to add some more at prices now around 45p or less if we don't get news for a while. The old me would have bought more this morning on the bell convinced we're at a new bottom but I'm not so sure so will let the dust settle and reasses.

I still think Bowleven is a cracking investment and the fundamentals are of course still in place. The 30% upgraded P50 resources to 263mmboe are a great reminder of the huge potential still here and in surrounding licences. It makes good reading, especially as it also excludes the IF field volumes from the calculations due to complexities. Tracs have been commissioned to produce an updated CPR which will add to the increase in due time.

I hope anyone riding the rollercoaster that is BLVN isn't too sick this morning. Maybe the utilities would be a less volatile place to park your money? I only jest, I'm pretty pi##ed off this morning too, but let's focus on the positives. If you hadn't sold out before this morning I don't see any point doing so now (unless you're on that 2 week trading timescale - good luck). If you did sell out yesterday, then hats off to you, and good luck getting back in for 20% less than you sold for. I'm sure you will based on those fundamentals won't you?

Good luck and have a great day.

From today's news......VOLUMETRICS UPDATES
In-Place Volumes
The IM-5 well result substantially increases the Isongo Marine (IM) field in-place volumes. Preliminary volume estimates have been updated post the results of testing. The combined P90 WGIIP has increased by over 300% to 531 bscf post IM-5 drilling, confirming that there are more than sufficient gas volumes available on a P90 basis to meet fertiliser plant requirements.  The combined mean WGIIP and CIIP for IM field has increased by 162% and 611% to 1,222 bscf and 135 mmbbls respectively.
The Intra Isongo interval encountered at the successful IM-5 well has provided a material volume addition. Initial seismic and amplitude analysis also indicates significant upside potential outwith the areal extent currently considered in preparing the above-mentioned Isongo Marine field volumetrics. In addition, several lookalike prospects have been identified that could provide further material upside potential. This upside potential has enabled the consideration of additional gas offtake schemes.
Contingent Resource Volumes
The Group's net contingent resource volumes on a P50 basis have increased by 30% to 263 mmboe (2012: 203 mmboe). This substantial increase is following the results of the highly successful IM-5 well outlined above. The significant increase in volumes for the IM field has been partially offset by the removal of IF field volumes from Group resources pending external review, as noted below.
The mapping of the IF field from the original 3D seismic dataset was hindered by the presence of a gas chimney. Recent interpretation by our in-house technical team of reprocessed 3D 4C OBC development seismic data acquired over the field suggests that IF is more structurally complex than first anticipated. Bowleven has commissioned TRACS, the external consulting firm who prepared the current CPR on the IF field, to review our findings and produce an updated CPR. To maintain the technical integrity of the Group's resource reporting process IF field volumes have been excluded from the year end resources report pending the results of this work. 
Overall, and despite the exclusion of the contingent resource volumes for IF (net P50 57 mmbbls), the successful results of the IM-5 have resulted in a substantial increase in the Group's net contingent resource volumes to 263 mmboe.
Further information regarding the Group's updated net contingent resources and the Group's estimates of certain in-place volumes are set out in the preliminary results presentation available on the Company's website:

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