The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamas Petroleum Company (BPC) has admitted that its joint venture partner search is “taking longer than we would have hoped”, amid growing shareholder frustration over the Government’s apparent “foot dragging” on enabling legislation.

Tribune Business has obtained tangible evidence that some BPC investors are growing increasingly anxious over the seeming delay in passing the new Petroleum Act and accompanying regulations, believing the associated regulatory uncertainty is deterring potential partners for the company’s first exploratory well.

David Lawson, a UK-based BPC shareholder, expressed concerns to this newspaper that the delay was also exacerbating BPC’s ‘cash burn’ rate and depressing its share price.

He added that he had yet to receive a reply from Kenred Dorsett, minister of the environment and who has responsibility for the revised petroleum industry regulation, to similar concerns contained in an e-mail he sent more than three weeks’ ago.

Mr Lawson, in his missive to Tribune Business, asked: “Why it is taking so long to bring the new regulations to the House to be passed into law, enabling BPC company to search for a suitable farm-in partner and to explore by drilling one, maybe two exploration wells which, if successful, could transform the finances of the Bahamas, eradicating national debt and raising the living standards of the people of the Bahamas?”

Detailing the consequences of the legislative wait, Mr Lawson added: “Many private investors like myself are seriously underwater due to the share price of BPC falling to almost nothing; not from the lack of oil found after exploration, but as a result of the failure of the Government of the Bahamas to take any steps to see this issue as a game changer for the Bahamas’ economy.

“The finances of BPC are steadily dwindling as a result of this lethargy, and it would be a bitter pill to swallow to see the company fail due to political nonchalance rather than the lack of recoverable resources. Investors like myself would have to accept the loss if recoverable resources were not found; difficult but inevitable.”

Should BPC and its oil exploration plans collapse as a result of the ‘wait for Government’, Mr Lawson warned that it would raise questions about “the wisdom of investing good money in the Bahamas”.

He added that the continued delays also brought into question the Government’s pledged commitment to permitting oil exploration in Bahamian waters.

“We understand that the Macando [BP] incident caused a re-think on the recovery of oil, and the Government of the Bahamas did the right thing to review the legislation standing at that time, but that was more than four years ago,” Mr Lawson said.

“Also, as an oil worker of almost 40 years standing, I am aware that most accidents in the oil field happen as a result of bad practice and human disregard for safety, which is something very difficult to legislate against.”

Despite bringing the required legislative package to the House of Assembly for its first reading, the Government cut the debate on the Bills short because Opposition MPs complained they had not been presented with a revised Petroleum Bill draft containing 12 changes to the original.

The Petroleum Bill is the key piece of legislation, as it establishes the legal basis for oil exploration in Bahamian waters, plus a regulatory framework that will govern the wider oil/energy industry. However, the Government has yet to bring the revised Bills back to the House of Assembly and restart the debate on them.

BPC, in its latest presentation to shareholder on October 2, 2015, said it still possessed some $7.8 million cash at mid-year, having invested $100 million on its Bahamian ventures to-date.

The company emphasised to investors that it was likely to have between $5-$6 million liquid cash left come December 2015, having reduced its annual ‘burn’ rate to $3-$4 million - with the promise of more savings to come. Yet its share price stood yesterday at just 1.42 UK pence.

Simon Potter, BPC’s chief executive, told Tribune Business in a recent interview that the points made by Mr Lawson were “very valid”.

However, he reiterated that the return, and passage, of the enabling legislation in Parliament was an issue for the Christie administration, not BPC.

Acknowledging that passage of the legislation would give potential investors and joint venture partners greater certainty over the potential regulatory landscape, Mr Potter told Tribune Business: “Investors like certainty, and we can see that very clearly at the moment.

“When you’re going to put hundreds of millions, if not billions of dollars at risk, it becomes even more important to have that clarity and certainty.”

Apart from the Petroleum Bill and accompanying regulations, the legislative package prepared by the Government also includes health and safety and environmental regulations, plus the Sovereign Wealth Fund Bill.

Mr Potter added that BPC’s Environmental Impact Assessment (EIA) already reflected international best practices and standards, incorporating much of what was likely to be contained in the Government’s regulations.

Amid the ongoing wait, Mr Potter and BPC have continued their search for a joint venture partner to help them ‘spud’ their first Bahamian exploratory well by April 2017, as required by their licence obligations.

That venture is likely to require a total $60-$100 million investment alone, and Mr Potter said the joint venture partner search had been impacted by the decline in global oil prices.

This had promoted oil industry players to reduce their operational expenses and capital outlays, but the BPC chief said his firm’s “prospects and oil structures” had elevated above a shrinking competitive field.

“We’ve been very busy speaking to these guys,” Mr Potter told Tribune Business of the joint venture (farm in) partner search.

“The discussions will take quite a long time, and it’s taking longer than we would have hoped. As the oil price falls, companies focus on projects that could move the dial, and in the Bahamas the advantage we have is the prospects and structures are very large.”

“We’re quite advantaged in the low oil price scenario,” Mr Potter added, “as the structures are very large, and due to geographical proximity the break even point is very good news.

“On the face of it there’ no movement, but we’re very encouraged by the interest international operators continue to display with regard to our project.”

BPC has predicted that its exploration activities could ‘break even’ with the global oil price as low as $30-$40 per barrel, and an oil field of just 200 million barrels - small by global standards.

Mr Potter described the company as facing a “good news, bad news” scenario as a result of the low oil price. While other potential exploration projects were “falling away faster”, the low oil price was curbing industry interest and investment.