(Business in Cameroon) - The fledgling mining company, Bowleven, which received its mining permit for the Etinde oil wells off the coast of Cameroon in July 2014, has suffered more of a fright than actual folly. In its results published on November 12, 2014, the company announced that its fiscal year, which closed in June 2014, was promising for investors, especially in light of developments after that date.

One new development was the official approval granted by the Cameroonian government at the end of October 2014 for the sale of two thirds of Bowleven’s assets to the Russian company Lukoil and the NewAge consortium, which is the parent company of Camop. This sale guarantees Bowleven that it will soon bank the initial 170 million dollars (around 85 billion FCFA) stipulated in the sale contract. Eighty million dollars (40 billion FCFA) will be paid later, half of which will be in cash and the other half in hydrocarbon production.

“Receiving the Etinde permit was a decisive step […] We have made a lot of progress in our resources to reserves conversion process. With the drilling to be done in Bomono (Cameroonian coastal area), we will be active in four mining and exploration wells,” stated Kevin Hart, Managing Director of the new oil company listed on the London stock exchange’s alternative market.

Lacklustre results on the London stock exchange

Mr. Hart also indicated that the new projects are in the works and will be financed, not only with the sale of a third of Bowleven’s assets to Lukoil and NewAge, but also thanks to the company’s comfortable cash-flow which still has 14 million dollars (7 billion FCFA) and 30 million dollar bridge financing facility (15 billion FCFA) which has not yet been used.

The operator will have to work harder to reassure its investors, among whom the minority partners are becoming impatient. There is a level of caution that is apparent in the company’s performance on the stock market, remaining fixed at 30 pennies per share, far behind the 115 penny target set by some investment firms operating on the London Stock Exchange.

Furthermore, Barclays, which has constantly adjusted its forecasts for the value of Bowleven securities, stated on November 13, 2014, that it was overvalued, leading the company to adjust its forecasts for Bowleven securities to 50 pennies. It remains to be seen if others will follow as, on November 12, 2014, Westhouse Securities was recommending the security for sale with the same target price of 115 pennies.

A possible opportunity for local banks

Bowleven’s close-out for the year reveals two things: the company could no longer face its investment needs to make the oil wells more profitable alone, which is why there are new actors. Secondly, if it waits too long to announce better news, it runs the risk of losing some of its investors’ support.

In Cameroon, these shareholder debates seem far away. However, based on the company’s several statements and using the production sharing contract, the government, through Société nationale des hydrocarbures (SNH), should claim 20% of production, even though one cannot say if it will be total production or the tax-exempt portion of production.

In any event, if investors prove to be disinterested in the financing issue, this would be challenging not only for Bowleven, but also the Cameroonian government which is counting on a medium term production increase to support public finance. This challenge would be an opportunity for some investment banks and firms operating in Cameroon which are increasingly interested in the energy sector, particularly the final stages. An example of the banks’ interest in this sector is the facility granted by BGFI Cameroun to Gaz du Cameroun.