The Tribune

EDITOR, The Tribune

I have always been an enthusiast about Bahamas Petroleum Company (BPC), the Isle of Man firm that started its exploration for oil in Bahamian waters over a dozen years ago. Having carefully read all its disclosures and relevant literature, I have never been concerned that its drilling on licensed off-shore sites 100 mile southwest of Andros would lead to pollution of our pristine beaches or wetlands or endanger our tourist-based economy. Recent information about careful reviews by our Government, supported by BEST and international consultants Black & Veatch, satisfies me that this project is not environmentally threatening.

But that does not satisfy me that the venture is, yet, financially secure. While risk-oriented institutions in the UK have sunk roughly $100 million into development and exploration costs with zero return to date, accepting a very low share price on London’s Alternative Investment Market, ordinary retail investors have not been attracted based on extensive seismic testing and other modern analyses indicating major hydro-carbon reserves available in under-sea pockets, BPC has commitments for sufficient debt and equity capital to drill its first exploratory well early in 2000. But CEO Simon Potter has always emphasised that nothing is certain until a well is spudded and crude is a actually seen rising from the pipe. Even in Texas and Oklahoma, plenty of promising “dry holes” have disappointed investors. The contracted drillship is not scheduled to arrive on the site until sometime in next-year’s first quarter, and reliable results may not be known until mid-year.

Furthermore, a major oil company will need to be found by BPC as a farm-in partner to fund the substantial cost of development wells for producing petroleum in commercially viable quantities. Despite on-going negotiations, and a potential partner investigating for four months in 2018, no major company has yet been identified.

Viewing these unresolved risk factors, I was thus surprised to read that BPC, in cooperation with securities dealers Leno Corporate Services, will “certainly be ready in the New Year” to launch a Bahamian mutual fund holding exclusively BPC shares. This announcement strikes me as premature. I do not want to discourage Bahamians from making innovative investments, but the present uncertainties to do not justify plunging into BPC equity in the near future. Doing it via a so-called mutual fund does not mitigate the risks. Six months or a year hence, the picture may be clearer, with the entry price higher but the return safer.

I will be interested to see the reaction of our Securities Commission, which will certainly have jurisdiction over the proposed mutual fund offering, unless it is limited to a private placement targeted at proven sophisticated investors.

RICHARD COULSON

Nassau

December 1, 2019