The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

An oil explorer’s financial woes should mean its bid to renew its four Bahamian licences is “not even a blip on the radar” for the Government, environmental activists argued yesterday.

Seizing on Tribune Business revelations that the former Bahamas Petroleum Company (BPC) is in a “stressed financial position”, with its bills exceeding available cash resources by some $19m, they asserted that the disclosures raise serious questions about its ability pay outstanding licence fees let alone new ones.

Sam Duncombe, reEarth’s president, said: “My position on BPC/Challenger Energy Group is we should never engaged with them when we had the opportunity to get out of the mess we’re in right now. Instead, we had some smoke blown about we could not get out of the deal.

“We missed an opportunity there, but have an another opportunity to go that route. If the investor has no money, why are they even a blip on our radar at all? The challenge we have going on, as far as keeping that oil in the ground, absolutely keep it right there. But I don’t understand why we continue to entertain an industry that is devastating to our economy and way of life moving forward.”

Eytan Uliel, Challenger’s chief executive, told shareholders in unveiling the company’s 2021 first half results that it must urgently “pursue a creditor restructuring and recapitalisation plan” otherwise there was a risk it may be unable to continue as “a going concern”. He added that $15m in fresh capital would likely be required.

The oil exploration outfit’s presently troubled financial position raise questions as to whether it has the financial wherewithal to pay for four new Bahamas exploration licences, and fulfill any terms and conditions that may be imposed, plus whether the Government should even be entertaining negotiations with it until the talked-about restructuring takes place.

However, Mr Uliel said it was already “engaging with the new administration” on its application to renew its four licences for another three-year term, together with the obligation to drill another exploratory well in Bahamian waters during that period.

The Davis administration while in Opposition indicated it would take a more sympathetic approach to oil exploration in Bahamian waters so long as it met the necessary health and environmental safeguards.

However, reports yesterday suggested this stance may have been modified. The Prime Minister indicated that while exploratory oil drilling would be permitted, production and extraction associated with any find in Bahamian waters would not. Instead, The Bahamas would seek to monetise this via carbon credits or some other mechanism to gain a reward for keeping its oil in the ground.

Meanwhile, Casuarina McKinney-Lambert, the Bahamas Reef Environment Educational Foundation (BREEF) executive director, told Tribune Business it was “shocking” that Challenger’s financial statements “don’t state how much in licence fees for the last exploration period are still owed to the Bahamian government” or whether these have been paid.

“How can they list the former licences as assets when they expired at the end of June?” she queried. “With its current balance sheet, can the company meet its financial obligations and pay its debts, including the past due fees owed to The Bahamas and continue as a going concern?”

Mrs McKinney added that Challenger’s financial statements raised multiple questions requiring answers. They show the oil explorer as making a $1.359m operating loss in The Bahamas during the 2021 first half, yet peg the value of its “tangible and intangible” assets at $93.88m.

She called on Challenger to detail the assets included in this $93.88m valuation, and whether they incorporate the expired licences. “A hope to negotiate a renewal is not an asset,” Mrs McKinney argued, while also questioning whether the reference to an $8.065m deferred tax liability included the licence fees owing in The Bahamas.

Rashema Ingraham, executive director of Waterkeepers Bahamas, told Tribune Business that Challenger’s financial results raise major questions over whether it can pay its past due licence fees as well as any future commitments.

“Where I’m at now, it’s almost certain they don’t have the financial resources in place to pay the outstanding fees,” she argued. “And they don’t have the financial resources in place to pay anything in the future. At this point they are hoping to be in a position. We cannot go on hope.

“We’re in a critical state where we need to build back to protect our people, and we cannot hope for an experiment. Please, please, Prime Minister, do not let Challenger Energy experiment with the Bahamian people. We are not lab rats. Their application for a renewal should automatically be denied.”

Mr Uliel, in his message to shareholders, had warned: “The group currently estimates that it has a need for, in aggregate, approximately $15m in funding in order to continue to meet its obligations as and when they fall due over the coming 12 months or, in the alternative, achieve creditor settlements that would reduce the amounts payable, and thus have the same economic effect.

Describing these bills and liabilities as “unacceptably high”, he added: “The company’s ability to meet all of its anticipated obligations over the 12 months from the date of the 2020 annual report is dependent on this outcome - that is, successful completion of a process to definitively address the outstanding payables/liabilities position and secure additional funding for ongoing operations and work programmes in 2022, and in so doing place the company on a stable, debt-free footing for the future.

“It should be noted that if the company is unsuccessful in achieving its restructuring and recapitalisation plan there is a risk to the company continuing as a going concern.”