The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The former Bahamas Petroleum Company (BPC) yesterday said it will undertake “no material work” in this nation during 2022 other than maintaining its rights to renew four exploration licences.

Challenger Energy Group confirmed that its focus is firmly elsewhere as it unveiled plans to raise £6m from a combination of new and existing shareholders that will allow it to complete its financial restructuring and ensure the company remains solvent.

Revealing that it will concentrate largely on existing production assets in Trinidad & Tobago, Challenger said: “Following unsuccessful commercial outcomes with two higher-risk exploration/appraisal wells during 2021, one each in The Bahamas and Trinidad and Tobago, the company has sought to redefine its business strategy, operations and goals for 2022 and beyond, with a view to focusing only on lower-risk production activities, so as to generate and maximise cash flows.

“No material work or capital expenditure is planned in respect of ‘legacy’ exploration assets in The Bahamas, Uruguay or the south-west peninsula of Trinidad and Tobago, beyond routine work required to maintain the relevant licences in good order and progress discussions relating to farm-in and/or other monetisation options.”

It added that “the costs associated with such activities during 2022 are expected to be minimal”. The statement provides further indication that Challenger is unlikely to drill a further exploratory well in Bahamian waters, after its Perseverance One well failed to strike oil, unless it secures a joint venture partner to share the burden of the financial and technical risks.

In the meantime, it is merely seeking to preserve and secure its rights to renew the four exploration licences that expired last year so that it can eventually realise monetary value from them - either from a joint venture partner or selling the rights to them.

Meanwhile, Challenger revealed that it still owes creditors who provided services to its Perseverance One well some $1.4m. It said: “All remaining creditors from the drilling of the Perseverance One well in The Bahamas in early 2021 (approximately $11.3m) agreed to be settled for total payment of approximately $2m in cash.

“Approximately $0.6m has been paid to-date, with the remaining balance of approximately $1.4m payable during the 2022 first quarter to reduce the total of remaining Perseverance One creditors to nil.”

And James Smith, former minister of state for finance and Central Bank governor, will step down from his role as Challenger’s non-executive deputy chairman and leave the Board once the latest financing is completed.

Tribune Business reported in December that Challenger’s Perseverance One creditors had agreed to accept a near-84 percent haircut on the outstanding debt owed to them. The oil explorer said contractors, vendors and others that provided services to facilitate the drilling in waters 90 miles west of Andros had agreed to accept a $2m settlement on what is collectively owed to them.

“All remaining creditors from the drilling of the Perseverance One well in The Bahamas in early 2021 (approximately $11.3m) have agreed to be settled for total payment of approximately $2m in cash, of which approximately $0.6m has been paid to-date,” Challenger said.

It added that “the remaining balance of approximately $1.4m [is] payable by January 31, 2022, to reduce the total of remaining Perseverance One creditors to nil. Payment of this remaining balance is to be funded from new capital to the business, which is in the process of being sourced by the company.”

The creditors involved were not identified, and there was no mention as to whether Bahamian or local companies and service providers were among them.

It is also unclear why creditors on Challenger/BPC’s Bahamian exploratory well have agreed to effectively write-off some $9.3m, or 83.7 percent, of the debts owed to them. However, this settlement on the surface represents a significant victory for the oil exploration outfit in its battle for financial survival, as the Bahamas-related debts had accounted for over half is $22m liabilities.

Eytan Uliel, Challenger Energy’s chief executive, said yesterday of the latest capital-raising: “In December 2021, the company advised that it had undertaken a comprehensive balance sheet restructuring process, whereby approximately $23m of balance sheet payables, debts and potential liabilities would be reduced to approximately $2.5 million, principally by way of discounted settlement agreements.

“As noted at that time, the final step required to place the company back on a firm financial footing was a recapitalisation, which we will now embark on via the proposed fundraising. The new funds raised will enable final agreed creditor settlement payments to be made, significantly reducing the company’s financial liabilities.

“Even more importantly, however, the new funds will allow the company to pursue an identified, production accretive work programme in 2022 and 2023 across the company’s asset portfolio. We also believe that a stabilised business with a restructured balance sheet and increasing cash flows from production will be well placed to consider further production growth opportunities, whether organically generated or via acquisitions.”