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Bahamas-based oil explorer sees 4bn barrel upside

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A Bahamas-based oil explorer was yesterday forced to deny it plans to raise further equity financing from institutional investors as interest in its 2020 drilling plans continues to ramp up.

Bahamas Petroleum Company (BPC), in a statement to the markets, said that given its belief its share price “materially undervalues” its prospects for striking oil in Bahamian waters it had no intention of seeking further equity financing via private placement.

“The company has multiple funding options available to it to fund the exploration well intended to be drilled in the 2020 first half, which will provide shareholders with exploration exposure to risked resources between 0.4 and 1.2bn barrels of oil, and with a potential upside in the targeted structure that has been independently assessed at close to 4bn barrels of oil,” BPC said.

“The company has consistently stated that it will work in a co-ordinated way towards selection of a financing package that the board considers to be in the best interests of the company and its shareholders.” BPC, in its recent half-year results announcement, said some of the four additional financing offers it has received would cover the $20m-$25m costs of its first exploratory well by themselves.

And BPC’s recent annual general meeting (AGM) gave the go-ahead to a conditional agreement with Bizzell Capital Partners, an Australian-based oil and gas exploration financier, to provide a £10.25m convertible loan that can be switched into equity shares.

That sum, which translates into $12.5m, is equivalent to half the cost of the $25m initial exploration well and will help underpin BPC’s drilling should a joint venture partner not be sealed in time.

“In this context, in recent days the company has met with a number of potential institutional investors as it considers its funding strategy,” BPC confirmed yesterday.

“However, the Board considers that the current share price of the company materially undervalues the project, and thus raising equity by way of a private placing to institutional investors at or below the current share price would not compare favourably with other options presently being considered, and would thus not represent the best value proposition for the company’s shareholders.

“The company continues to actively evaluate a range of funding options, and active farm-in discussions continue. The company remains confident it will implement a suitable financing package which will provide access to funding as and when required for drilling and drilling-related activities, and which linked to the provision of a rig and access to integrated well services from a collaboration of major international companies will enable drilling to commence as intended in the 2020 first half.”

Simon Potter, BPC’s chief executive, recently told Tribune Business that BPC now had almost total certainty it will be able to finance drilling of its first exploratory well in waters several hundred miles south-west of Andros, near The Bahamas’ maritime boundary with Cuba.

“We’ve got a range of options for funding that is certainly going to deliver the $25m needed to deliver the well,” he said in a recent interview with this newspaper. “We’ve identified, given that we’ve locked in the pricing through the technical agreements we have, a $20-$25m range for the well. This isn’t a number plucked out of the air; it has considerable engineering gone into it.

“The pricing of rigs has come down considerably, and we’ve locked in the rig price per day,” he explained.” We can be fairly certain about costs. The rig is coming from the Gulf of Mexico, which is very close to The Bahamas, so in terms of pricing, logistics and transit time, that’s relatively minimal.”

Many Bahamians will likely be sceptical as to whether any oil exploration activities will take place, given the lengthy 12-year process BPC has been involved with, but the financial impact of Hurricane Dorian’s devastation will likely strengthen the calls that this nation has nothing to lose in determining whether commercial, recoverable quantities of oil are located within its waters.

Comments

TheMadHatter 2 years, 10 months ago

This kind of statement - in the arena of politics - is called being "tone deaf". It suggests the writer/speaker has not heard about the oil spill on the eastern end of the island ... and that we do not know of any reputable international response team in place. The public is now worried about the future with respect to oil.

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BahamaPundit 2 years, 10 months ago

I don't care if we have 100 billion in oil, the answer to drilling must be no. What gives us the right to risk polluting this beautiful environment God gave us. The Bahamian people were promised a referendum before any drilling was done, and the FNM have corruptly broken that promise. The world does not need a drop more of fossil fuels. What we already have is destroying us with Global Warming. After the unmitigated devastation of hurricane Dorian, the last thing on Bahamian politicians' agenda should be drilling for oil.

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Porcupine 2 years, 10 months ago

I support your comment 100%. As should all thinking people in this country. If the Bahamian government does not stand up and state boldly that there will be no drilling for oil in The Bahamas, then they should not be allowed to receive a penny in international aid for climate change mitigation. Not having the money to do what is necessary is one thing. Not having the brains to do the right thing is another. Our Prime Minister doesn't seem to have either the brains or the fortitude to do the right thing.

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Well_mudda_take_sic 2 years, 10 months ago

As I've said before, the only thing anyone needs to know about Bahamas Petroleum Company PLC is that James Smith of Colina is one of its directors and shareholders.

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TheMadHatter 2 years, 10 months ago

I actually am not worried about the environmental issues of drilling. If we had a government that brought in independent international teams to check safety issues and deal with cleanups if needed - there would be no problem. But the current (apparent) policy of allowing the company who experiences a spill to go ahead and clean it up in whatever way they just feel like doing it - with no oversight (except the people they bring in and pay for "oversight") - is just silly.

In addition, how much does the Agreement for this new oil exploration company say the Bahamas Treasury will get from each barrel obtained? $1/barrel? That would be nice if over a billion barrels as they say - that's a billion dollars in taxes (about the same amount as VAT). Well, in that case maybe it is good that we are getting NOTHING per barrel - because we've already seen where the over 4 billion dollars from VAT has gone (gone into hiding). No disclosure of "where the vat money gone". So if we did get one dollar per barrel - then 2 years from now we will just be on here asking "where the oil money gone?"

WE as Bahamians - just can't win. Dog tried to eat our lunch (then even he realized there ain't no lunch to eat).

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Bahama7 2 years, 10 months ago

This resource needs to be drilled.

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Porcupine 2 years, 10 months ago

So does your head. A lot of unused resources there.

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Bahama7 2 years, 9 months ago

Jobs and money for the country Porky.... wake up !!! Cuba is drilling, Jamaica, The US, Guyana, now even Barbados... wakey, wakey...!!!

Its happening all around us and we do nothing for years and lose out.

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Sickened 2 years, 10 months ago

This drilling doesn't make sense unless the government can get about $10 per barrel. Anything less than that and it's a waste of time for us.

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