The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamas Petroleum Company (BPC) yesterday said it remained committed to offering shares to Bahamian investors, with a major obstacle being the continued wait on a new regulatory regime.

Simon Potter told Tribune Business that BPC, and potential investors, needed the clarity that would come from the Government finalising the regime to govern the company’s oil exploration activities before securities were issued.

“That’s [a share offering to Bahamians] still the intent,” Mr Potter told Tribune Business.

“With regards to the Bahamian Depository Receipt (BDR), it’s really upon clarification with regards to the regulations that will allow us to be a lot clearer with the offering prospectus.

“Once that’s [the regulations] clear, we will be able to proceed with a form of offering that suits the regulatory authorities, suits the external shareholders, and suits the future Bahamian shareholders.”

BPC has long-planned to give Bahamians an opportunity to invest in the company at the ground level, with a Bahamian Depository Receipt (BDR) offering the most likely route.

This security, which is a derivative whose value is linked to the share price on a company’s ‘main board’ exchange, has already been issued twice in the Bahamas - by Kerzner International and Consolidated Water, although only the latter remains listed on the Bahamas International Securities Exchange (BISX).

But this and other initiatives, particularly BPC’s search for a joint venture partner for its first exploratory well south-west of Andros, are now all dependent on how fast the Government proceeds with the regulatory regime to govern these activities.

Apart from a Sovereign Wealth Fund Bill, which would hold the Government’s royalties proceeds from any discovery of commercial oil quantities in Bahamian waters, the regime governing BPC will touch on environmental and health and safety issues, too.

With the regime’s content just as important as speed in its release and passage, Mr Potter said in relation to the proposed BDR issue: ““The more uncertainty we can resolve, the more we can be clear in the prospectus, and that will be better for everyone at the end of the day.”

Mr Potter and BPC’s chairman, Bill Schrader, last week acknowledged in a presentation to the company’s investors that its share price had “underperformed” on London’s Alternative Investment Market (AIM).

Suggesting that the market had yet to properly value BPC’s “strong fundamentals” and market position, they said: “The extent of progress may not be obvious to shareholders/the market, and is undeniably slower than expectation.

“But, while BPC’s share price has underperformed, your company achieved a number of significant milestones during 2013-2014, thus ensuring it is well positioned into 2015.”

Mr Potter told Tribune Business that oil explorers typically saw an increase in their share price once they began actual drilling - a development that, again, hinges on the Government enacting the new regulatory regime to govern BPC’s activities.

Once this happens, BPC’s ability to finalise a joint venture partner for its first exploratory well will be considerably enhanced - the second key step to a drilling start.

Mr Potter said BPC’s share price depended on “what the future reaction will be to the farm out, and that hinges on the issuing of the new regulations.

“There’s a link to all these activities. To the extent that the regulations proceed smoothly, that will allow us to proceed and go faster with the farm-out, and that will lead to a reaction in the share price.

“The key thing about an exploration company is heading towards drilling, and the closer we get to drilling, the better the market will react.”

Mr Potter reiterated that the global over-supply of oil rigs, combined with changes to the well design and location, which will leave it drilling through “different geology”, should reduce costs associated with BPC’s first well “very significantly”.

This, in turn, would make BPC and its Bahamian drilling prospects more attractive to potential joint venture partners.

“As and when they can issue these strengthened and modern regulations, that will provide more clarity for all of us,” Mr Potter added.