High-Impact Exploration Update

RNS Number : 2483T

Bahamas Petroleum Company PLC

24 March 2021

 

24 March 2021

Bahamas Petroleum Company plc

("BPC" or the "Company")

High-Impact Exploration Update

BPC, the Caribbean and Atlantic margin focused oil and gas company, with production, appraisal, development and onshore and offshore exploration assets across the region, provides the following update on its high-impact exploration assets in The Bahamas and Uruguay.

Highlights

· Since the completion of the drilling of Perseverance #1 , the Company has had discussions with industry counterparties in relation to a potential farm-out of its licences in The Bahamas, and is working to formalise an entirely new farm-out process. Consequently, the Company intends to renew the four southern licences in The Bahamas into a third, three year "drill or drop" exploration period

· Final Perseverance #1 drilling cost expected to be approx. $45 million compared to pre-drill estimate of approx. $35 million; additional costs of approx. $10 million incurred as a result of heightened Covid-19 procedures (approx. $3 million) and side-tracking operations related to mechanical debris in the well (approx. $7 million)

· Formal contract execution for Off -1 block in Uruguay expected 2Q 2021; independent technical work undertaken by Uruguayan national oil company ANCAP indicates a P₅₀ estimated ultimate recovery volume (EUR) of 1.34 billion barrels at the Lenteja prospect

· Cash on hand of approx. $13 million (as at 1 March 2021, including unconditionally committed convertible notes); anticipated additional capital requirement in 2021/22 across the business of $25 - $40 million, the Company expects to more than cover the difference from various potential funding sources

The Bahamas

Until mid-2020, the Company's licences in The Bahamas were its sole asset and therefore the drilling of an initial exploration well was the Company's dominant strategic focus. Consistent with this focus,  the Company secured approximately $50 million of funding since early 2019 (as detailed in the Company's announcements over the period) which enabled the Company to retain operatorship and 100% equity in its licences, as well as deliver the Perseverance #1 well in the face of considerable challenges - including a year's delay and significant disruption caused by the Covid-19 pandemic, a collapse in oil prices, and an ultimately unsuccessful last-minute legal action by environmental activists to halt drilling. The Perseverance well was drilled safely and without environmental incident, in the period 20 December 2020 to 6 February 2021.

The Perseverance #1 well did not result in a commercial discovery. The Company is, however, encouraged that the results from the Perseverance #1 well indicated the presence of hydrocarbons. Technical results from the drilling campaign support the view that other closures, structures and both shallower stratigraphic and deeper structural plays in the Company's licence areas continue to provide significant prospectivity with multiple viable drillable prospects of scale which merit additional study and exploration activity.

The newly acquired technical data from Perseverance #1 will facilitate valuable updates and refinements to basin modelling, biostratigraphy and geochemistry. In particular, the significance of the new geothermal gradient data placing the oil maturation window deeper stratigraphically has critical implications for the deeper Jurassic play that produces oil in the Eastern Gulf of Mexico from an analogous play type (and which is the current focus for several companies actively exploring in the region).

Additionally, data derived from Perseverance #1 provides a modern-day well tie to recalibrate existing 3D mapping of the Aptian intervals untested in closures and structures elsewhere in the licence areas. The primary focus of the ongoing post-well evaluation work is on the deeper Jurassic pre-salt clastic, structural play and the extent to which potential multiple-target drilling locations can be optimised to access and evaluate untested shallower closures whilst testing this primary, deeper play.

Given these technical results, since announcing the results of the well the Company has had a number of discussions with industry counterparties in relation to a potential farm-out of the licences, and the Company is now working to formalise and launch an entirely new farm-out process via Gneiss Energy. The farm-out will seek to introduce a funding and operating partner for the next stage of exploration activity in The Bahamas. The Company is in the final stages of integrating the well information with its historical dataset and expects to commence the farmout process upon completing this work in the coming days.

Concurrent with the farm-out process, the Company intends to exercise its right to renew the four southern licences into a third exploration period at the end of the current second exploration period (at the end of June 2021). The third exploration period will 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 (i.e., "drill or drop").

Financially, the Company's most recent estimate, prior to commencement of drilling, had estimated a total cost for Perseverance #1 of up to $35 million. The Company is still awaiting various final invoices relating to the drilling of Perseverance #1, but  the total cost of Perseverance #1 is presently estimated to be approx. $45 million.

Over and above the pre-drill estimated well cost, the Company firstly incurred an estimated $3 million of additional expenditure on enhanced Covid-19 related processes beyond those which had been planned for prior to commencement of drilling.  These processes were put in place to prevent virus infection at the installation, which could have resulted in premature termination of drilling.  Strict adherence to these Company processes, including pre-deployment screening and protocols resulted in the detection of 14 Covid-positive personnel who were denied access to the facility. Enhanced protocols involved chartering planes and additional helicopter transit flights to the budget projections, along with significantly increased accommodation and staffing costs as staff remained quarantined or retained on the drilling vessel for considerably longer than planned.

Secondly, a considerable amount of non-productive time (and hence additional cost of approx. $7 million) was added to the overall drilling program as a result of mechanical debris in the hole lost from the Managed Pressure Drilling (MPD) system requiring side-tracking.

In aggregate, these additional unbudgeted items have added up to an estimated further approx. $10 million of cost to the overall program cost. Whilst the majority of Perseverance #1 costs were incurred and paid prior to and during the course of drilling, work is ongoing to agree the final amounts remaining to be paid with contractors and suppliers arising from the additional unbudgeted costs (including some disputed amounts and some refunds owing), and to finalise a schedule for those payments over the coming months.

Those Perseverance #1 costs remaining to be paid (noting that some items are being disputed or negotiated by the Company), along with the Company's anticipated but discretionary 2021 work programs in Trinidad and Tobago and Suriname (as announced by the Company on 18 March 2021), renewal of the Company's Bahamas licences, and the Company's 2021 overheads, will require a total estimated spend over the balance of 2021 and into 2022 of between $25 million and $40 million. However, the eventual actual spend will ultimately be dependent on a number of factors, many of which are at the Company's discretion - for example, the extent and timing of future development drilling at the Saffron project, which in turn is dependent on the outcome of the drilling of Saffron #2, expected to commence in mid-May 2021.

As at the beginning of March 2021, the Company had current cash and unconditionally committed cash resources of approximately $13 million, and a potential additional $14 million available under the Company's conditional convertible note facility (the drawn down of which remains subject to satisfaction of various conditions). The Company also expects, dependent on oil price and production volumes, to generate a level of surplus cash from increasing production through the course of 2021. The potential prepay facility (as announced by the Company on 18 March 2021), and any proceeds from a successful farm-out process would be in addition to these amounts.

Uruguay

The Company has been advised by ANCAP, the Uruguayan state-owned oil and gas company, that the signing of the OFF-1 contract presently awaits presidential approval, which has been delayed due to the Covid-19 pandemic situation. The Company expects the formal contract execution within Q2 2021, and will thereafter commence initial desk-top and technical work.

In the interim, technical work undertaken independent of the Company by ANCAP has sought to highlight exploration prospectivity across the 15,000 km² licence area. This involves detailed mapping of several play types and prospects, notably the syn-rift play potential within the BPC OFF-1 block. The prospect and lead screening includes the specific identification of the Lenteja prospect with a P₅₀ estimated ultimate recovery volume (EUR) of 1.359 billion barrels and an upside case of several billion barrels recoverable (source: ANCAP 2021), located in just 80 meters of water. This volume estimate aligns well with the earlier guidance provided by BPC of the potential within its OFF-1 licence area in excess of a billion barrels.

As previously advised, the Company expects near-term activities in Uruguay to be low-cost, and whilst there is no drilling obligation during the initial four-year exploration term, the Company will be working to confirm these attractive volumetrics and mature a range of drillable prospects from reprocessed and improved 2D seismic imaging that has revealed new exploration upside previously unable to be identified due to poor data quality.

Regulatory Statements

In accordance with the AIM Note for Mining and Oil & Gas Companies, the Company discloses that Randolph Hiscock, BPC Technical Lead, is the qualified person who has reviewed the technical information contained in this document. He has a Masters in geology and is a member of the AAPG. He has over 35 years' experience in the oil and gas industry. Randolph Hiscock consents to the inclusion of the information in the form and context in which it appears.

The information communicated in this announcement contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) No. 596/2014.

For further information, please contact:

Bahamas Petroleum Company plc Simon Potter, Chief Executive Officer	Tel: [phone]
Strand Hanson Limited - Nomad Rory Murphy / James Spinney / Jack Botros	Tel: [phone]
Shore Capital Stockbrokers Limited - J oint Broker Jerry Keen / Toby Gibbs	Tel: [phone]
Investec Bank Plc - J oint Broker Chris Sim / Rahul Sharma	Tel: [phone]
Gneiss Energy - Financial Adviser Jon Fitzpatrick / Paul Weidman / Doug Rycroft	Tel: [phone]
CAMARCO Billy Clegg / James Crothers / Hugo Liddy	Tel: [phone]

Notes to Editors

BPC is a Caribbean and Atlantic margin focused oil and gas company, with a range of exploration, appraisal, development and production assets and licences, located onshore in Trinidad and Tobago, and Suriname, and offshore in the waters of The Bahamas and Uruguay. In Trinidad and Tobago, BPC has five (5) producing fields, two (2) appraisal / development projects and a prospective exploration portfolio in the South West Peninsula. In Suriname, BPC has on onshore appraisal / development project. BPC's exploration licence in each of Uruguay and The Bahamas are highly prospective, and offer high-impact value exposure within the overall portfolio value.

BPC is listed on the AIM market of the London Stock Exchange.   www.bpcplc.com

ENDS

 

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