BowLeven shares drop after fund raising

Oil and gas company BowLeven took a tumble after announcing plans to raise $120m through a placing of 77.5m new shares at 103p each.The share price fell to the placing price of 103p at one point, down from 115p overnight, before recovering most of the losses.Funds from the issue will be used, together with existing cash resources and any funds from farm-downs, to pursue its proposed 2012 work programme.An agreement has been reached in principle with a third party to sell one of its subsidiaries, GGPC, which operates the EOV permit in Gabon. The assets relating to GGPC have been re-classified as assets held-for-sale, representing disposal proceeds of $35m. The group estimates that at the end of October, after taking into account all budgeted and approved drilling costs on the Sapele-3 well, but excluding any provision for testing, the company will have approximately $15m in cash.Westhouse Securities, a broker focused on the resource sector, reckons BowLeven should have more than enough cash to see it through its exploration and appraisal (E&A) programme, particularly if the sale of the EOV permit in the Gabon closes in the near future."The additional funding also means that Bowleven will be able to retain a larger share in Etinde during the E&A phase, before potentially farming out an additional interest at a higher value, later in the project," Westhouse added.BowLeven said that it expects to incur $42m in unsuccessful exploration costs after the Epaemeno permit, onshore Gabon, has been relinquished, after a joint technical review of its prospectivity was conducted. The company has stumped up around $23m in finance costs, which are mainly due to the recognition of foreign exchange movements on intra-group funding as the US dollar weakened against sterling over the comparative period. Westhouse said: "The write-down in Gabon, and the updated cash position, mean that we have revised our target price from 331p to 304p." Despite this, the broker has retained its "buy" recommendation on the shares. The share price fell 2.83% to 11.75p by 15:11.NR