WITH analysts at Macquarie investment bank describing the $250m (£150m) sale of a half share in Edinburgh-based Bowleven's Etinde oil and gas permit as the farm-out deal of the year, some in the City appeared to feel the company's directors deserved plaudits.

The decision of Russia's LUKOIL to invest in the permit through the deal suggests some hard-headed industry players share Bowleven's faith in the potential of the oil and gas fields it hopes to develop on the acreage. Only five years ago another analyst said the funding challenges Bowleven faced amid the downturn were so severe it was effectively dead in the water.

But some shareholders who are sitting on hefty losses on investments they made in Bowleven may be less happy about developments. Bowleven has raised funds at 650p, 327p and 220p per share, but the shares closed at 42p yesterday.

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The share price gyrations may reflect factors like exploration reverses under past management and recent delays in the planning of the Etinde development. Directors have noted a shift in City sentiment against small exploration and production companies.

But the performance of the shares provides a reminder of the risks that go with investing in such companies. Many private investors hope of backing a firm that could make finds as big as Cairn Energy did in India before suffering reverses off Greenland.

The lessons learned by those who suffered losses on oil and gas investments may have been especially painful given the level of some executives' salaries in the sector.