The Tribune

A Bahamas-based oil explorer last night said it had obtained “hugely significant clarity” from the Government renewing its key licences for a further three years, removing a potential obstacle to finding a joint venture partner and drilling its first exploratory well.

Simon Potter, the Bahamas Petroleum Company’s (BPC) chief executive, told Tribune Business that the Christie administration had extended its four licences in the southern Bahamas until April 2018.

And the company’s obligation to drill (spud) its first exploratory well, which will be located in those licence fields to the south-west of Andros, has been extended from this April until the same month in 2017.

Mr Potter told Tribune Business that the move represented a key step in “unlocking value” for both BPC and its shareholders, and the Government and Bahamian people, as it gave the company further certainty in planning for its upcoming operational phase.

He added that the licence renewals, and extended time given to BPC to drill its first $60-$100 million exploratory well, would help it attract, and finalise a deal with, potential joint venture partners.

“The Government has taken the opportunity to set all the clocks running for us,” Mr Potter told Tribune Business. “The licence clock runs until April 2018, and the drilling obligation is April 2017.”

Mr Potter described the latter deadline as “a back stop”, implying that BOC intends to drill its first exploratory well sooner than April 2017.

“The only route to shareholder value for me is to drill a well,” he said. “That [the licence renewal/extension] clears the way for a potential partner.”

Mr Potter said potential joint venture partners who had already approached BPC, and accessed its data room, had expressed concerns regarding the licences’ renewal and length of extension; the drilling obligations timeline; and the details of the Government’s proposed regulatory regime for the oil exploration industry.

The licences and drilling obligations have now been made clear, and BPC almost had the final ‘piece to the puzzle’ last week. The House of Assembly had been due to debate the Petroleum Bill and Sovereign Wealth Fund Bill, which will give effect to the new regulatory regime, but this was postponed after the Ministry of Tourism’s website was hacked.

Still, Mr Potter told Tribune Business: “All of the things that pertain to ‘above ground issues’ have been cleared up.

“We’re ready and willing to take this forward with the drilling obligation, but clarity around the dates is very good for us.

“The thing that unlocks value for us, my shareholders and the Government of the Bahamas is being able to drill a well,” the BPC chief executive added.

“The regulations unlock the standards we have to address in completing the well. The timeline gives us the security of tenure to do that. It’s hugely significant.”

Mr Potter added that the licence renewals and drilling obligation clarity “removes the barriers” to further discussions with potential joint venture partners, and made BPC and the Bahamas more attractive to such investors.

He reiterated his confidence that BPC would discover commercial quantities of oil, which can be extracted, in BPC’s Bahamas licence fields.

The two Bills will be accompanied by three sets of regulations dealing with Petroleum Operations; health and safety; and the environment.

“We obviously know the standards, the obligations to which we are required to perform,” Mr Potter added. “In many ways, we would operate at international standards and global best practices anyway, so it’s a matter of clarifying the standards the Government of the Bahamas wants to hold us to, which are clear in the regulations and will pass into law once the Bills are passed.”

BPC said in a statement that the boundaries of its four southern licences had been “formalised up to the Bahamas-Cuba Maritime boundary”. They will also be ‘grandfathered’ into the new regulatory regime established by the Petroleum Act.

The company said the Government “acknowledged” it had satisfied all obligations in respect of its existing licences.

Mr Potter said BPC was focusing “on those areas where we are technically best, and most effectively able, to capture on-trend upside potential associated with those play-types already delineated in the southern licences, whilst at the same time minimising our impact on the environment.

“As a consequence we have sought amelioration of obligations associated with the northern Miami Licence and resubmitted our existing applications for new licences over revised areas, thereby focusing our efforts and resources into the areas where we already have drill-ready prospects.”

BPC, which ended 2014 with $10 million in cash on its balance sheet, is thus concentrating on its four southern licences - the Bain, Cooper, Donaldson and Eneas licences.

These were initially awarded in April 2007, extended to 2012 in 2008, and renewed into their second exploration period in July 2013.

When it came to BPC’s five new licence applications, the company said that following talks with the Government it had reduced these to just three - the Andros, Islamorada and Zapata applications).

“The new licence applications pertain to an adjusted area, such that they seek to exclude the area of the proposed Cay Sal National Marine Reserve. principally contained within the original Falcones licence application,” BPC said.

It added that it had decided not to enter into a second exploration period for its northern Miami period, as this could not be justified without a “deferral of obligations”.

“This decision is taken in the context of a proposed three-fold increase to licence fees, and a requirement for the company to commence a well within the Miami licence by 2017 if the licence is retained,” BPC said.