The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A Bahamas-based investor was yesterday said to have added “another brick in the wall” to a local oil explorer’s financing strategy by taking the funding available for its first well to $36m.

Simon Potter, Bahamas Petroleum Company’s (BPC) chief executive, told Tribune Business that the investor - who he declined to name - had given the exploration outfit access to a further £8 million (approximately $10.5m) before expenses and fees.

Some 90 percent of these funds can be drawn down, and BPC has this week already accessed an initial $3.2m tranche as it moves to ensure it has the necessary financing in place when needed for the first exploratory well that will be dug in April 2020 in waters south-west of Andros.

Mr Potter indicated that the Bahamian investor’s financing provided BPC with further certainty that all costs will be fully covered, as service provider contracts are likely to combine with direct well expenses to take the total outlay to between $25m to $30m.

“Some $3.2m was made available straight away,” he explained. “There’s a further series of tranches available in April, May, June and July. The way we’re putting the funding together is for it to be available to us at the time we need it. As the rig arrives and the well progresses, we need to draw down on those funds.

“We have a lot of long-lead items, critical path items we have to pay for up front. Receiving $3.2m at this time helps to prepare the equipment for as and when it’s needed.”

BPC’s statement described the £8m facility as coming from a “substantial Bahamian-based institutional family office investor”, and Mr Potter described the local involvement as “encouraging to see”.

“I think us putting in place the financing from the Bahamian investor is us moving forward with a structured financing strategy,” he told Tribune Business. “The well cost is estimated at $20m to $25m, and as we firmed up the signing of many contracts, we’re looking at a cost closer to $25m to $30m. This capture makes it $36m, and more than covers that and any contingencies as well.”

BPC has already raised $7.1m and $4.3m, respectively, through a private placement and rights offering to existing shareholders, and also has access to another convertible note financing facility providing a gross $13.3m. Its recent Bahamian mutual fund placement raised a further $0.9m, and it has the ability to place more shares along with existing cash reserves.

The oil explorer’s announcement said the Bahamian mutual fund will raise a further $1.4m should the further 40 million BOC shares being made available to it, at a price of 3.35 UK pence per share, be fully taken up next month.

“Today’s [Bahamian investor] facility affords us greater overall funding availability, and a high degree of financial flexibility so that we can respond as may be needed to real-time drilling results,” Mr Potter added.

“We will see some immediate cash inflow to help manage the timing of cash flow needs in advance of drilling (for example, for long-lead/critical path items and advance credit payments required by service providers). Thereafter, the remaining funds are committed and available if the company elects to draw on the facility as we progress through drilling.

“We continue to make rapid progress toward the drilling of Perseverance No.1, our first exploration well in The Bahamas, expected to commence in April 2020,” he continued. “Since mid-2019 we have progressively been implementing a co-ordinated funding strategy, with a view to ensuring we have access to the funds necessary for drilling, as and when we need them.

“This measured approach means that we have now secured a funding package with considerably less overall dilution to shareholder equity than most commentators expected would be required. Moreover, through this process we have consistently put the interests of our shareholders first - for example, in October 2019 we provided our existing shareholders with the first option to subscribe for additional shares at a substantial discount to the then prevailing (and the current) share price.”

Explaining the rationale for BPC seeking additional funding, the oil explorer’s statement said it now has access to “total funding availability of approximately $36m”.

“In 2019, the company advised an estimated cost for the Perseverance No.1 well in the range of $20m to $25m,” BPC said. “Since then, the company has made considerable progress in terms of contracting for various equipment and services necessary for the drilling of the well, as well as finalising certain key cost inputs for the well including logistical support (helicopters and supply vessels), manpower planning, fuel supply and other consumables.

“Further, to maximise the capacity to drill the well safely at all times the company has decided to employ a managed pressure drilling system (MPD) integrated on to the drilling rig, which will add an additional cost to the day-rate for the rig.

“Finally, taking into account other operational requirements, the load-out, mobilisation and demobilisation of the rig will take approximately one week longer than originally contemplated. As a result, the estimate for the base cost of the Perseverance No.1 well has now been revised to be in a range of $25m to $30m.”

The oil explorer added: “Additionally, a number of potential contingency elements have been identified, including the provision for additional, optional casing strings, and the possibility for an expanded data gathering, logging and sampling programme if merited by positive real-time drilling results.

“These additional items could, if not offset by a reduction in drilling time or other costs, add up to another $5m to the total estimated cost of the well.... Accordingly, recognising the need to provide both greater funding assurance and flexibility to meet the full estimated potential cost of the well in all operating scenarios, and so as to better manage cash flow and thus avoiding the potential of any unnecessary delay to the project timeline, the Board has determined that securing further staged funding capacity would be prudent.”