By NEIL HARTNELL
Tribune Business Editor
A Bahamas-based oil explorer yesterday said it was now locked in joint venture talks with “multiple parties” after a “major global oil company” ended their exclusive negotiations.
Simon Potter, Bahamas Petroleum Company’s (BPC) chief executive, told Tribune Business that the end-August finish to the exclusivity period was no reflection on the company or the likelihood of discovering oil in Bahamian waters.
Reiterating his confidence in BPC’s project, Mr Potter said the company remained well-positioned to capitalise on increased exploration demand due to surging oil prices that yesterday closed just below $80 on the Brent crude index.
He added that the exclusivity period’s end had allowed BPC to restart talks with potential partners it had left in “abeyance”, and suggested this could benefit the oil explorer by promising to create a “more competitive” bidding environment.
Mr Potter said the $1m paid for the exclusivity by the unidentified “oil major”, together with funding previously raised, had “put $6m in the bank” over the past year to leave BPC on a “sound footing” financially.
While some observers will likely interpret the exclusivity end as a sign that BPC’s project will ultimately prove unsuccessful, the oil industry veteran indicated he was hardly losing sleep over the failure to pin down a lasting deal.
“They paid us $1m and are not paying us any more. It’s just the normal cut and thrust of commercial negotiations,” Mr Potter said of the exclusivity period’s end. He added that BPC had hired Macquarie, a Canadian investment bank that specialises in the oil and gas industry, to advise it on talks with other prospective partners.
“The reason we brought them in is that we’re working on a whole range of companies rather than just one,” the BPC chief executive explained. “It’s much better for you. It’s a more competitive environment, and possibly a much more competitive deal for us.
“The rocks are still there, the data is still there. It [the exclusivity end] doesn’t change anything, and the commercial environment as the oil price strengthens gets better and better. With the advisers on board we have access to a much greater range of potential partners.
“I cannot name them, and don’t want to discuss specifics about commercial negotiations and things like that, but we’ve opened negotiations with a number of different parties, some of whom have been interested previously. It’s multiple parties.”
BPC, in announcing the exclusivity period’s end, did not name the “major international oil company” involved, citing confidentiality and non-disclosure agreements (NDAs). It has been seeking a joint venture, or farm-in, partner for several years to help finance its first exploratory well, which is targeted for waters south-west of Andros near the maritime border with Cuba.
Pointing out that its potential “partner” ended the exclusivity, BPC said in a statement: “Bahamas Petroleum, in conjunction with its adviser, Macquarie Bank, has therefore recommenced broader, asset-based discussions with third parties in addition to those non-asset based financing discussions already ongoing for the funding of its first exploration well.”
Mr Potter yesterday said there was “nothing all all” to be concerned about in relation to the exclusivity period’s end, and added: “I’ve been here a long while and am still committed. I wouldn’t be here if not convinced of the scale, and global scale, of this asset and the technical merits of the project.
“I’m very confident, as I always am, and have been over time. The rocks are still there and don’t change; they’ve been there for billions of years. With the oil price striking $80 per barrel that provides a much stronger commercial environment for exploration, and particularly this type of exploration.
“As the oil price strengthens companies need to expand, need to refresh their asset base, and this is exactly the kind of project they’ll be interested in. We’re working with a range of companies rather than just one, and create more options with a competitive market rather than a monopoly,” Mr Potter continued.
“We’ve banked $1m, created a whole set of renewed interest in the asset, brought on an adviser to help us deal with a range of companies, and we’re moving forward.”
BPC needs a joint venture partner to share the financial and technical burden of drilling its first exploratory well. “The exploration [on the first well] will last for 90 days and cost up to $100 million, a considerable proportion of which will be spent locally in-country. That’s an immediate benefit,” the BPC chief executive said in a previous interview.
The company also submitted its ‘Environmental Authorisation’ application for the necessary permits for the first well to the Government back in late April. Little has been heard of that since, but Mr Potter yesterday said both BPC and the Government were treating the matter with the care “it deserves” given the environmental and safety risks.
Attitudes towards BPC’s project among Bahamians have been mixed. Environmental activists have been vehemently opposed, while others are sceptical over the project’s merits and whether sufficient quantities of oil can be extracted from below the seabed to make it commercially viable.
The former Christie administration postponed a proposed referendum on whether to permit oil drilling in Bahamian waters until after exploratory wells were dug, and it was known whether commercial quantities had been discovered.
Mr Potter, in an official statement on the exclusivity end, said: “Appetite for ‘frontier’ exploration has improved as the industry cycle has turned, and the company continues to move forward with farm-out and financing options, working closely with our adviser Macquarie. The company with which we have been in exclusive negotiations has elected not to extend further the period of exclusivity, which means we will receive no further exclusivity payments.
“At the same time, having demonstrated interest from an international oil major, we are now able to freely re-engage in discussions with all other parties, which had previously been put in abeyance. Following receipt of $1 million in exclusivity payments under the agreement, and the raising of additional finance through the placing of shares in May 2018, the company remains adequately funded to continue developing well financing options through to completion. We will provide the market with further updates when appropriate.”