The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamas Petroleum Company (BPC) yesterday said the three-year extension granted to its five oil exploration licences would “unlock our ability” to launch a multi-million dollar Bahamian Depository Receipt (BDR) share offering to Bahamian investors.

Speaking after the Government agreed to extend its licences through until 2016, Simon Potter, BPC’s chief executive, told Tribune Business the Christie administration’s increased support would also boost its negotiations with potential joint venture partners.

Suggesting the extra “clarity” would make a “fundamental difference” to its bid to find a partner for BPC’s first $100-$120 million exploratory well, Mr Potter said: “We’re ready to put our money where our mouth is and go after oil.”

Explaining that BPC had done everything it could “remotely” to determine whether commercial quantities of oil are located in Bahamian waters, Mr Potter said the only step left was to drill an exploratory well.

The new licence terms oblige BPC to start drilling its first well by April 2015, a deadline MR Potter said the company was “well within”.

BPC is aiming to start its first exploratory well during the 2014 second half, focusing on its southern licence fields near the Bahamas/Cuba maritime boundary.

Mr Potter yesterday said the company’s seismic data surveys, coupled with the technology available to it, would enable it to seek and detect oil “in places people have never looked before”.

And, acknowledging that the Government was already working on regulations to govern the oil exploration industry, he said it was “the sooner, the better” in terms of their release.

Meanwhile, the BPC chief executive said the Government’s announcement had given both the company and Bahamian investors critical ‘security of tenure’ confirmation regarding its five licences.

Without such a confirmation, a material uncertainty regarding BPC’s Bahamian operations would have existed, making it virtually impossible to launch its share offering to Bahamians.

Mr Potter said a major obstacle to Bahamian equity investment in the oil explorer had been removed, suggesting that the Government confirmation had provided “a bit of clarity for the Securities Commission and Central Bank such that we can push ahead with the BDR as well”.

He told Tribune Business: “It’s the basis that would unlock our ability to come to the market with complete clarity about what the offering is.”

While BPC would be akin to a venture capital investment for Bahamian institutional and retail investors, given that uncertainty remains over whether commercial oil deposits are in this nation’s waters, it provides an opportunity for them to get in on ‘the ground floor’ with what could become a hugely profitable venture if ‘black gold’ is struck.

Tribune Business understands that BPC has already submitted a draft BDR offering prospectus to the Securities Commission for its review and approval.

Yet both the capital markets regulator and the Central Bank have yet to approve the offering, the uncertainty surrounding the licences having played a key role in this.

One source familiar with developments told Tribune Business: “Hopefully, what this will do is act as a catalyst for some of the areas that have been held up, and get them moving.

“The offering document is with the Securities Commission at the moment. One of the outstanding issues was the leases, and everybody knows nothing could happen until those were clarified.

BPC’s intention behind the BDR offering is to provide Bahamians with equity ownership in the company, rather than to raise capital.

It has consistently touted its solid financial position, having spent $50 million on its Bahamian oil exploration efforts to-date, while yesterday stating it had “considerably exceeded” the terms of its original licences that expired on April 26, 2012.

“It clarifies the company’s tenure over these licences, which is often the unanswered question,” Mr Potter told Tribune Business.

“It points to the intent and support of the Government for these activities, which is key for people entering into these activities in new areas. Is the Government for it or against it?

“The Government has been articulating its support, but this is a much clearer statement of it.”

The licence extension confirmation adds to the clarity created by the Government’s previous announcement that BPC will be permitted to drill exploratory wells prior to any oil referendum being put to the Bahamian people.

In effect, the uncertainty that previously clouded the company’s short to medium-term activities, at least for the next three-four years, has been largely removed.

And Mr Potter added: “It’s clear support for the intent to drill a well coming from the Government, and follows on from the announcement about exploratory drilling ahead of being put to a referendum, and establishing whether commercial reserves exist.

“It clarifies the licence tenure, obligation to drill a well, and provides clarification for licence partners and for us to get on with things with the Government.”

Mr Potter said the April 2015 target for the first well was “well within our plans”. The licence terms commit BPC to drill a second exploratory well by April 2017, and the southern boundaries of four licence fields have been adjusted to conform with the maritime borders between the Bahamas and Cuba.

“We’ve done all we can remotely. It’s now down to drilling a well to find out whether there’s commercial oil deposits there or not,” Mr Potter told Tribune Business.

“All the wells drilled historically were constrained by the equipment available to them at the time.

“We’re able to use technology in the Old Bahama Channel to identify structures never identified before, which we believe is key to identifying commercial oil reserves here.

“It’s having time to look in places people have never looked before with technology, and that obliges us to drill safely and responsibly, but also in the right place.

“We’re ready to put our money where our mouth is, and go after it. The sentiment issue is more around: Can we do what we say we can do?”

And Mr Potter added: “What this first well will be designed to establish is the presence of oil in these very large rock structures.

“We’ve reduced the risk related to the technical case with respect to geology and rocks. We can’t reduce the technical risk any further without drilling in those rocks.”

Mr Potter said BPC was now looking for the Government’s “upgraded, modernised and strengthened regulations” to govern its activities.

He added that the company’s Environmental Impact Assessment (EIA) was based on the enhanced international standards flowing from the Deepwater Horizon spill in the Gulf of Mexico.

“The next step is for the Government to embrace the higher standards in the regulations, which they’re already working on,” Mr Potter told Tribune Business.

“The sooner, the better. The more we know what the Government is intending, the sooner that can be articulated to the people.”