The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The soon-to-be-former Bahamas Petroleum Company (BPC) has revealed that it will “relinquish” 50 percent of the area where it was previously allowed to explore for oil as part of its licence renewal bid.

The oil exploration outfit, in revealing plans to rename itself Challenger Energy Group and recapitalise by raising a further $9.67m from existing “qualifying shareholders” via a rights issue, confirmed it had submitted formal notice of its licence renewal application to the Ministry of the Environment and Housing.

Indicating that the area given up was largely “shallower water depths” where the prospects of striking commercial oil quantities are less, BPC said: “The company will seek to renew its 100 percent interest in the southern licences by extending the licences in to the third exploration period.

“The third exploration period for the southern licences would last for three years and will require a further exploration well to be drilled before the period expires, failing which the licences would be forfeited. An extension of the licences will attract an annual licence fee (the amount to be determined during the renewal process) and requires a relinquishment of 50 per cent of the licence area.

“Notification of renewal of the licences has been submitted to the appropriate ministry, and the area to be relinquished has been identified as being the area equivalent to that over the shallower water depths covered by the southern licences (less than around 200 feet).”

BPC had until end-March 2021 to signal whether it will seek to renew its oil exploration licences, with the existing ones set to expire at end-June this year following the drilling of its first Perseverance One exploratory well, which failed to detect the commercial oil quantities it was seeking.

The name switch to Challenger, which reflects the fact the company is no longer Bahamas-centric given its obtaining of offshore exploration licences in Uruguay, and the acquisition that has given it assets in Trinidad & Tobago and Suriname, comes as Simon Potter steps down as chief executive although he will remain on the Board as a non-executive director.

He will be replaced as chief executive by Eytan Uliel, the company’s commercial director, while Ross McDonald, the former Bahamas chief for Royal Bank of Canada (RBC), is also leaving the Board. James Smith, the former Central Bank governor and minister of state for finance, remains as a non-executive deputy chairman.

Documents relating to the rights offering indicate that BPC has yet to settle licence fees the Government believes are outstanding from its second exploration period that includes the spudding of Perseverance One. They also further indicate that the company is unlikely to drill another exploratory well in The Bahamas unless it secures a joint venture partner to share the financial and technical load.

“The exploration licences held by the company in The Bahamas are subject to renewal in to the third exploration period as of end of June 2021. In relation to the grant of that renewal a number of matters pertain,” BPC said. 

“In relation to licence fees, BPC remains to finalise any outstanding balance of fees payable for the second exploration period with the Bahamian government, and licence fees for the third exploration period established. Depending on a variety of factors, these costs could be lower or higher.”

It added: “Forward exploration efforts in The Bahamas will be determined in part on the company securing a farm-in partner to fund the exploration programme. The company previously sought a farm-out of its licences in The Bahamas prior to drilling the Perseverance One well.

“Whilst there were interested parties who were in discussion with the company on a potential farm-out, the company was unable to secure a partner with which to drill the Perseverance One well. The company has restarted a farm-out process for its licences in The Bahamas, but there can be no assurance that it will find a suitable partner to progress exploration efforts.”

BPC was also somewhat dismissive of the ongoing Judicial Review challenge to its first well’s permits and approvals, even though the environmental activists behind it say they have raised the necessary $200,000 bond to cover the company’s legal costs as ordered by the Supreme Court.

“As at the date of this document, applicants representing various environmental groups have been granted leave to apply (amongst other matters) for a Judicial Review of the Government of The Bahamas’ decision to issue an Environmental Authorisation to the company for the drilling of the already completed Perseverance One well,” it said.

“The company has been joined as a party to that action. In order for the applicants to continue to pursue this action, the Supreme Court of The Bahamas had ordered that by March 31, 2021, the applicants were required to post the sum of $200,000 as security for costs.

“Thus far, the applicants have failed to do so, albeit the applicants have asserted that they have secured access to the funds to enable them to do so, and a process is ongoing to establish an appropriate joint account between the company’s and the applicants’ legal advisers for deposit of those security funds, consistent with common practice in The Bahamas,” BPC added.

“On establishment of the joint account, if security for costs is posted by the applicants, the Judicial Review process will continue, but no date has been set for the substantive hearing of that review, which it is presently estimated would not occur before June-July 2021. Alternatively, if the joint account is established and the applicants nonetheless fail to post the required security, the Judicial Review action will be stayed.”