The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Government yesterday extended the deadline for an oil exploration company to drill its first Bahamas test well by 12 months to April 2018, giving it extra time to comply with its new regulatory regime.

Simon Potter, the Bahamas Petroleum Company’s (BPC) chief executive, told Tribune Business that the year-long extension was “fundamentally about compliance” and enabling the company to meet the Government’s requirements.

“Within the last year, detailed new regulations and specific procedures have been laid down by the Government, and they saw fit to extend time for the performance of our obligations under the license,” Mr Potter said.

“This is fundamentally about compliance, and ensuring that in the normal course of business we are able to comply with these detailed regulations. It’s primarily that. It’s business as usual.

“The Government very sensibly introduced a new slew of regulations to ensure the industry complied with international best practices and global standards, and it takes time and no little cost to comply with these things. All parties recognised this and acted sensibly.”

Parliament last year enacted the Petroleum Act 2016, and Sovereign Wealth Fund Act 2016, to regulate both the economic and environmental aspects of BPC’s activities, plus the wider oil industry and any exploration firms that come after it.

The 12-month extension, which impacts BPC’s four southern licenses, also gives the oil exploration firm more time to complete its search for, and tie down, a joint venture partner to share the financial and technical costs of drilling a first well.

Mr Potter agreed that the license extension would “obviously help” BPC’s search for joint venture, or ‘farm in’, partner, which has been negatively impacted by persistently low global oil prices.

“The energy market has stabilised and, indeed, strengthened, and capital seems to be coming back into the market,” he told Tribune Business.

“The benefit of the prospect we have here is the investment climate within the Bahamas is certainly very appealing to companies, and the related scale of the opportunity.

“Notwithstanding the hubris in the market, in terms of interest in this prospect, it is still extremely high.”

BPC said last September that while its likely well drilling costs had reduced by 50 per cent to around $50-$60 million, due to rig rates falling some 75 per cent, persistent low global oil prices were discouraging industry investment and exploration activities.

BPC’s ‘farm in’ partner search has been directly impacted by this negative trend, but the company says the scale of its Bahamas licenses, and likelihood of potential commercial discoveries, meant it is better placed than most.

BPC has been targeting a location south-west of Andros for its first exploratory well, within Bahamian territorial waters. Under the terms of its previous three-year license renewal, granted in June 2015, the company was supposed to ‘spud’ its first exploratory well by next month - April 2017.

Disclosing the extension to investors, BPC said yesterday: “The Government of the Bahamas has today extended the time for the performance of the obligations and requirements of BPC under its license renewals for a further period of 12 months, as applies to its four co-joined southern licences.

“The impact of the above is that the company will now not be obliged to commence activity on an initial exploration well until April 2018.”

As for its joint venture partner search, BPC added: “The company is singularly focused on commencing responsible and safe drilling operations as soon as possible, and to this end remains in advanced discussions with various potential funding and operating partners.

“The company considers that the license extension provided by the Government will be an important consideration in further advancing these discussions.”

Mr Potter told Tribune Business yesterday that BPC was “capitalised for us to do the work we need to do”.

The company’s statement yesterday said it closed 2016 with a freely available cash balance of $1 million, and a reserve cash position with an extra $0.5 million.

The latter had been retained by BPC’s bank as part of a performance bond issued in 2015, but this will now be released this year after the company satisfied the necessary obligations.

BPC added: “The company has previously announced various cost saving measures, including that the Board and senior management have agreed to certain fee and remuneration deferrals, so as to preserve cash resources through any extended farm-out process.

“These cost saving measures and deferrals will continue until such time as future funding is secured. As such, the company’s ongoing overheads are minimised, and the Board considers the company has sufficient financial resources to take it through the conclusion of the farm-out process.”