The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A Bahamas-based oil explorer has revealed that some of the four additional financing offers it has received would cover the $20m-$25m costs of its first exploratory well by themselves.

Simon Potter, Bahamas Petroleum Company's (BPC) chief executive, told shareholders in unveiling the company's half-year results that he hoped "over the near term" to update them on "further progress" with its financing plans.

With the exploration outfit's recent annual general meeting (AGM) providing approvals that effectively unlocked access to 50 percent of the required exploratory well financing, Mr Potter's latest note suggests BPC now has multiple options for achieving its first goal regardless of whether it secures a joint venture partner.

"The company has also received four other funding proposals (some of which individually, but certainly all in aggregate, if contracted and fully drawn-down, would cover the anticipated cost of the well), as well as multiple other expressions of interest, all of which are currently being evaluated," Mr Potter disclosed.

"We hope over the near-term to be able to advise shareholders of further progress in this regard... Farm-in discussions continue, albeit with the benefit of a known financial objective (a well cost in the range of $20m to $25m) and we are now actively working in pursuit of a simple goal: To put in place a suitable set of financial arrangements sufficient to fund the intended initial exploration well, whether that is via a farm-in on acceptable terms, or by other means, whichever is in the best interests of the company and its shareholders."

Mr Potter's comments came after he recently told Tribune Business that BPC now had almost total certainty that 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."

Mr Potter's comments are likely to infuriate Bahamian environmental activists who have long opposed BPC's activities, with Hurricane Dorian's recent impact at Equinor's South Riding Point oil storage terminal and the affects of climate change merely escalating their concerns.

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.

"With the benefit of key parameters having been established - namely, an unambiguous obligation to drill a well in 2020 and an estimated well cost of between $20m to $25m - the company has been able to move forward with the all-important task of securing the funding necessary to support the intended drilling campaign," Mr Potter reiterated.

"To date, the company's focus has been predominantly on securing funding via a farm-in agreement, and farm-in discussions are continuing. Multiple parties are currently engaged in ongoing due diligence and commercial discussions, and it remains the company's preference to secure all or part of the required well funding through this structure.

"However, in the past six months the company has also sought to broaden its approach to seek other sources of potential finance such that if a farm-in is not secured, or if the terms of any potential farm-in are not satisfactory, the company can nonetheless proceed to drilling."

The AGM approvals, several of which related to financing, 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. Mr Potter told shareholders it had given BPC "the flexibility to enter into a range of possible funding arrangements, as and when required" and if they are in its best interests.

With BPC required to drill its first exploratory well before year-end 2020, Mr Potter told shareholders that the company had further reduced the technical risks associated with the project by undertaking four further studies that "have all produced positive results which, taken collectively, highlight the likely presence and quality of a world-class source rock and petroleum system located precisely in the BPC licence area".

BPC said its cash reserves stood at $3.2m at end-June 2019 following a first half loss of $1.49m. It had earlier raised $2.5m in working capital from a private placement.

Mr Potter added that if the impact of $1.2m worth of write-backs related to his remuneration were excluded, BPC's year-over-year operating loss for the six months to June 2019 would have been down by 19 percent. "Other expenses" were also off by 12 percent compared to the prior six months.