By NATARIO McKENZIE
Tribune Business Reporter
nmckenzie@tribunemedia.net
A BAHAMAS-based oil explorer yesterday said it was looking to bring its Bahamian Depository Receipt (BDR) offering to local investors to market “as soon as possible”, noting that the Government’s decision to allow it to begin exploratory drilling prior to a referendum had given further impetus to this process.
Kenred Dorsett, minister of the environment and housing, yesterday said the Government was not going to hold a referendum on whether to permit oil drilling in Bahamian waters prior to determining whether commercial quantities existed.
Given the time required to determine this, Mr Dorsett suggested a referendum was unlikely to be held before 2014 – and possibly not until 2015. While his announcement will be ‘music to the ears’ of Bahamas Petroleum Company (BPC) and advocates of permitting ‘regulated’ oil exploration in the Bahamas, it will not go down well with environmentalists and other opponents of such activities.
Still, BPC’s chief executive, Simon Potter, said the decision to allow test well drilling prior to a referendum was ‘exciting news”. He told Tribune Business: “This will give impetus to that BDR process. There is no calculated volume; it’s basically us giving the opportunity to Bahamian investors to invest in stock.
“ There is no specific amount we need to raise: We are a well-funded company already, so it’s just the ability of Bahamians to purchase the BDR. From our point of view there should be no limit, we are not looking to raise any specific amount of money. That’s subject, of course, to Central Bank and Securities Commission approval. We are looking to do it as soon as possible. This clarity on the exploration issue will help the situation.”
Tribune Business understands that clarifying the whole ‘referendum issue’ was one of three issues key to paving the way for BPC’s BDR issue. The offering would not have been possible without the Government confirming exploratory well drilling could take place before a referendum, so yesterday’s announcement removes a key obstacle on both those fronts – exploration and share issue.
This newspaper has been told that the BDR issue is likely to be worth $5 million, and the two other issues are clarifying BPC’s licence areas and related leases, and obtaining Central Bank (Cabinet) approval on the exchange control situation. The relevant applications to the Government, Central Bank and Securities Commission are already in.
BPC’s BDR issue, if and when it happens, is likely to be something of a first for the Bahamian capital markets. It is, in effect, a venture capital/speculator’s play, as investors will effectively be ‘betting’ on an unknown – whether the company can strike commercial quantities of oil in Bahamian waters and, if it does, whether the Government/Bahamian people will approve of its extraction. To all intents and purposes, it will be an equity investment in a company that is almost in the ‘start up’ stage.
As to the company’s exploration readiness Mr Potter said: “All of the planning in terms of the location and the initial studies have been completed. We have always said it would take us one year to execute the well plan, so it would take us one year before we would be ready to drill a well. It’s not like we’re ready to go tomorrow or anything like that, but what this allows us to do is complete the planning process.”
Mr Potter said that with BPC having already invested some $50 million into the venture, the company was excited that at least one hurdle had been removed. “We have been working at this a long time. We have been excited by the prospects in the rocks we have seen, and having spent $50 million on seismic data we continue to be excited by the prospects,” he added.
“Given all of the drilling that has taken place in the Cuban sector, and the drilling that’s going on, we’re not the only company that’s excited by the prospects in the region. Other companies’ activities back up our view of the significant potential in the region.”
Late last year, the Russian company Zarubezhneft announced it had begun exploratory drilling just five miles from the Bahamas’ maritime borders.
Mr Potter added of yesterday’s government statement: “We welcome the statement. We are excited about the potential in the area, and we will get on with it as fast as prudent. It’s a long planning process to do this, and that’s the important thing: To do this responsibly, and we will. The Minister highlighted the Government’s intention to introduce new regulations, so we obviously need to see what they are and ensure that we comply with those.”
Comments
banker 11 years, 1 month ago
Doesn't anyone understand that this company is a "junior" resource company who is in for the stock play only, and the exploration is just a way for them to dump stock at inflated prices because they are the marketmaker. To see specific examples of of this, one should check our junior resources companies in Canada. The Canadian north is full of test holes specifically for making a profit on penny stocks. Buyer beware.
Gramacho 11 years, 1 month ago
Sounds like someone who has invested in Junior Canadian oil stocks that had disappointing results. Oil exploration is an activity with the potential for high rewards but also the potential for significant losses due to the risk that either no oil will be found or it will not be present in commercial quantities.
This company has done a tremendous amount of preparatory work over several years to understand the prospectivity of the Bahamas. This ranges from finding long lost data from wells drilled decades ago to conducting advanced seismic processing over its main prospects. That doesn’t mean it will be successful but it does demonstrate that it has done everything possible to understand the risks and select the drilling target using best available technology. Nevertheless those investing should only do so in amounts they can afford to lose.
As for “dumping stock at inflated prices”, the market has already done that during the course of the last 18 months due to the oil sector falling out of favour at a time of risk aversion and the uncertainty created by the Government when it withdrew permission for Bahamas Petroleum to drill. The Government has created the opportunity, intentionally or unintentionally, to invest in BPC at a time when the share price is relatively low compared with previous highs. The current share price on the London AIM market is one quarter of its previous peak and only one third of the price at which the previous major fund raising took place in March 2011.
banker 11 years, 1 month ago
Here is the dope on penny stocks (taken from Traderji.com)
THE DEADLY ART OF STOCK MANIPULATION....
In order to successfully speculate, one should presume the following: THE SMALL CAP STOCK MARKETS PRIMARILY EXIST TO FLEECE YOU! The average investor or speculator is not very likely to have much success in the small cap crapshoots.
By the way, the premise of these books is uniformly: "While these speculative companies do not actually make any money, one can profit by speculating in these companies." THAT is the premise on how these markets are run, by both the stock promoters, insiders, brokers, analysts and others in this industry. That logic is flawed in that it presumes "someone else" is going to end up holding the dirty bag. Follow this premise all the way through and you will realize the insane conclusion: For these markets to continue along that route, new suckers have to continue coming into the marketplace.
What the professionals and the securities regulators know and understand, which the rest of us do not, is this.
"RULE NUMBER ONE: ALL SHARP PRICE MOVEMENTS -- WHETHER UP OR DOWN -- ARE THE RESULT OF ONE OR MORE (USUALLY A GROUP OF) PROFESSIONALS MANIPULATING THE SHARE PRICE."
This should explain why a mining company finds something good and "nothing happens" or the stock goes down. At the same time, for NO apparent reason, a stock suddenly takes off for the sky! On little volume! Someone is manipulating that stock, often with an unfounded rumor.
In order to make these market manipulations work, the professionals assume: (a) The Public is STUPID and (b) The Public will mainly buy at the HIGH and (c) The Public will sell at the LOW. Therefore, as long as the market manipulator can run crowd control, he can be successful.
"RULE NUMBER TWO: IF THE MARKET MANIPULATOR WANTS TO DISTRIBUTE (DUMP) HIS SHARES, HE WILL START A GOOD NEWS PROMOTIONAL CAMPAIGN."
Ever wonder why a particular company is made to look like the greatest thing since sliced bread? That sentiment is manufactured. Newsletter writers are hired -- either secretly or not -- to cheerlead a stock. PR firms are hired and let loose upon an unsuspecting public. Contracts to appear on radio talk shows are signed and implemented. Stockbrokers get "cheap" stock to recommend the company to their "book" (that means YOU, the client in his book). An advertising campaign is rolled out (television ads, newspaper ads, card deck mailings).
The above comment is an example of the company doing its thing.
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