The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

AN OIL explorer is not expecting to pay an extra $500,000 insurance premium “top-up” over its Bahamian exploratory well because this was drilled “without incident” last year.

Challenger Energy Group, the former Bahamas Petroleum Company (BPC), revealed in its financial results for the six months to end-June 2022 that it believes the potential extra liability associated with the Perseverance One well drilled in waters 90 miles west of Andros is unlikely to “crystallise” despite the project’s costs exceeding projections.

“$0.5m is in respect of potential insurance ‘top-up’ exposure due to the ultimate cost of the Perseverance One well in The Bahamas exceeding the initial estimated cost,” Challenger said in its report to investors and the market. “However, as at the date of this report no demand for this additional payment has been made, and the group expects that this exposure will not crystallise given that the well was completed safely and without incident over 18 months ago.”

Bahamian environmental activists have long questioned whether this additional insurance was paid. Casuarina McKinney- Lambert, executive director of the Bahamas Reef Environmental Educational Foundation (BREEF), told Tribune Business: “They still haven’t shared the insurance certificate or any details on the insurance coverage that was supposedly in place..... It’s still unclear whether this project had adequate insurance. How much did they actually pay?”

Challenger, meanwhile, also confirmed that it is still in negotiations with the Government over the full amount of fees still outstanding over the exploration licences that expired in June 2021 and which facilitated the drilling of Perseverance One.

“On February 27, 2020, the company advised that, consequent on the granting of Environmental Authorisation for the Perseverance One well, the company and the Government of The Bahamas had agreed a process seeking a final agreement on the amount of licence fees payable for the balance of the second exploration period - including the additional period of time to which the licence period was extended as a result of force majeure,” Challenger said.

“At the time, the parties entered into discussions with a view to finalising this outstanding matter. This discussion has been delayed owing to the state of emergency declared and ongoing business disruption caused by the national response to the COVID-19 outbreak in The Bahamas. However, subject to said confirmation, the company expects that an appropriate side letter agreement will be finalised in due course.

“In March 2021, the company notified the Government of The Bahamas that it was renewing the four southern offshore exploration licences for a further three-year period, having discharged its obligations under the previous licence term. The group remains in discussions with the Government over the terms of the renewal of these licences, which will include agreement on the level of annual rental fees payable over the renewed term.

Challenger suffered a $2.07m loss on its Bahamas assets in the 12 months to year-end 2021, which was preceded by a $2.188m loss the prior year. Still, Eytan Uliel, its chief executive, said Perseverance One’s outcome had encouraged the company to stick with The Bahamas even though no commercial quantities of recoverable oil deposits were found.

“In terms of outcomes, Perseverance One did not result in the commercial discovery we hoped for, but a substantial amount of data and learning was obtained from the drilling of the well, which was the first in the region linked to 3D seismic and using modern techniques,” he told shareholders.

“During the balance of 2021 we analysed this data, and concluded that The Bahamas might yet offer long-term potential. In simple terms, Perseverance One only tested one part of one structure, but there are at least four other locations and multiple structures that were upgraded following the Perseverance One outcome, and which therefore in the future could merit further analysis and testing. Data from Perseverance One also provides encouraging support for the possibility of a deeper, sizeable Jurassic oil play.”

Referring to another well drilled in Trinidad& Tobago, he added: “We are proud of the fact that, despite many challenges, we did what we said we would do: We drilled both wells safely and without incident, and met the objective of testing the relevant structures at the chosen drilling locations. This was no small feat, especially for a group of our size.

“We had to secure the financing needed, we had to recruit an experienced operations team, and in two different geographies we had to operate complex drilling programmes more typically undertaken by much larger companies. We did all of this at the peak of the global pandemic, and in the case of The Bahamas, whilst successfully overcoming a legal challenge from environmental activists that was frivolously launched at the very last minute.”