Licence and Well Obligation extensions

RNS Number : 4061N

Bahamas Petroleum Company PLC

18 May 2015

 

18 May 2015

Bahamas Petroleum Company plc

("Bahamas Petroleum" or the "Company")

Licence and Well Obligation extensions

Bahamas Petroleum Company, the oil and gas exploration company with licences in The Commonwealth of The Bahamas is pleased to provide the following market update.

Highlights

·     Bahamas Petroleum has agreed upon the terms of a Licence Renewal Addendum in relation to its four southern licences

o  Current term of licences extended to 2Q 2018

o  Drilling commencement date extended to April 2017

o  Southern boundaries of these licences formalised up to The Bahamas - Cuba Maritime boundary

o  All work undertaken in individual licences offsets against adjacent licence obligations

o  Other licence terms and conditions remain intact and unaffected

o  Bahamas Petroleum acknowledged as having satisfied all obligations in respect of all licences, the Regulations and the Act

o  Licences grandfathered under the current Petroleum Act

·     The Minister of Environment and Housing has indicated publicly that the second reading of the revised Petroleum Act and attendant Regulations was scheduled to be presented to the Bahamian House of Assembly on 13 May 2015 but was postponed. The next sitting of the House is currently scheduled for 20 May 2015

·     Existing applications for new licences resubmitted consistent with strategic and technical focus

o  Focuses acreage holding consistent with technical access and major play trends

o  Reduces potential overlap with proposed Cay Sal National Marine Park

o  Renewal of Northern Licence (Miami)under review

Simon Potter, CEO of Bahamas Petroleum said:

"We are very pleased with the signing of the Licence Renewal Addendum extending the term of the four Southern Licences. This now gives BPC an unambiguous marker for future activity: to commence our first exploration well by April 2017, and a clear period of time in which to both secure a suitable farm-in partner and undertake the necessary preparatory work to ensure safe and responsible drilling operations.

"We are also pleased to note the Minister of Environment and Housing's statement that the new Petroleum Act and attendant Regulations will shortly be presented to the House of Assembly for debate, constituting the second of three readings. Passage of this Bill will further reinforce the commitment of The Bahamas to safe and responsible oil and gas exploration as a key component of its national energy strategy.

"Consistent with the extension of the Southern Licences, we have taken the opportunity to hi-grade our licence holdings and applications to focus on those areas where we are technically best and most effectively able to capture on-trend upside potential associated with those play-types already delineated in the Southern Licences, whilst at the same time minimising our impact on the environment. As a consequence we have sought amelioration of obligations associated with the northern Miami Licence and resubmitted our existing applications for new licences over revised areas thereby focusing our efforts and resources into the areas where we already have drill-ready prospects.

"We have worked hard with The Government to establish this clarity on licence timings and the schedule for associated obligations. It has been important to gain this level of understanding ahead of the modernisation and strengthening of the applicable laws and regulations that govern the exploration for hydrocarbons in The Bahamas, and to maximise the Company's ability to secure a farm-in partner. With this clarity, and the prospect of a new regulatory environment passing through Parliament, we look forward to evaluating the full potential of the licence holdings. Discussions with prospective partners, which remain active and ongoing, will be further supported by the clarity afforded the Company by these developments.

"The Company closed 2014 with a cash balance in excess of $10 million. Management continue to focus on cost reductions and efficiencies whilst maintaining an appropriate cost structure consistent with the needs of the Company."

Southern Licences

Bahamas Petroleum holds a 100 per cent working interest in four licences in the Southern territorial waters of The Commonwealth of The Bahamas - the Bain, Cooper, Donaldson and Eneas licences (the "Southern Licences").

The Southern Licences were initially awarded in April 2007, extended to 2012 in 2008and renewed into their second exploration period in July 2013.Bahamas Petroleum has now signed a Licence Renewal Addendum agreed with the Ministry of Environment and Housing in relation to a further extension of these Southern Licences. Having been executed by Bahamas Petroleum, this Addendum will now be passed by the Ministry to the Office of the Governor General to be formally counter-signed.

The result of the foregoing is that:

1.   The Company is acknowledged as having satisfied all obligations in respect of the first exploration period, via its extensive programme of technical work including acquisition and processing of modern 2D and 3D seismic data;

2.   The second exploration period of the Southern Licences has been extended, such that it shall now not require further renewal until2Q 2018;

3.   The Southern Licences remain commercially co-joined, such that satisfaction of exploration work obligations in any one licence area shall be considered as satisfaction of work obligations across the Southern Licences in aggregate;

4.   The Company's second exploration period work obligation is clarified as being to commence at least one exploration well in the Southern Licences area by April 2017;

5.   The boundaries of the Southern Licences have been adjusted, such that the Southern Licences now include all contiguous territorial waters in The Bahamas up to the Cuban maritime border. The other boundaries have been reconfigured to ensure the aggregate retained licence area remains broadly consistent with that pertaining at grant;

6.   All other commercial terms, relative timings and obligations remain unchanged; and

7.   The Southern Licences will be grandfathered under the existing Petroleum Legislation based upon the Savings Provisions in the new Bill.

New Licence Applications

Bahamas Petroleum had previously submitted applications for five new licences in The Commonwealth of the Bahamas (the "New Licences").

Following discussion with The Government, the Company has amended these New Licence applications such that the total number of New Licences now applied for has been hi-graded to three (the Andros, Islamorada and Zapata applications).

The New Licence applications pertain to an adjusted area, such that they seek to exclude the area of the proposed Cay Sal National Marine Reserve principally contained within the original Falcones licence application. At the same time the New Licence applications are strategically and practically focussed, being on trend from plays identified in the Southern Licences, thus seeking to fully capture technically accessible upside potential.

The Company expects to conclude discussions with The Government relating to the terms and conditions of the New Licences, including work obligations, licence fees, and timing as soon as possible. Following these discussions, Bahamas Petroleum expects the New Licences to be issued with The Government offsetting residual application fees against future licence fees, consistent with past practices.

Other Updates:

A.   Miami Licence

Bahamas Petroleum holds a 100 per cent working interest in a single licence in the Northern territorial waters of The Commonwealth of The Bahamas (the "Miami Licence").Given the Company focus on the huge potential associated with the play-types and the drill-ready prospects of the Southern Licences it has been resolved to direct all effort and resources into that area as a priority. As a consequence the Board has decided that entry into the Miami Licence second exploration period is not justified without a deferral of obligations. This decision is taken in the context of a proposed threefold increase to licence fees and a requirement for the Company to commence a well within the Miami licence by 2017if the licence is retained. The Company will keep the market updated of any relevant developments.

B.  Petroleum Legislation

As previously announced, in December 2014 a new Petroleum Act and a suite of associated regulations to guide and govern hydrocarbon exploration in The Bahamas was placed before the Bahamian Parliament's House of Assembly. On 13 May 2015, the Minister of Environment and Housing indicated publicly that he had intended to present the Petroleum Act and attendant Regulations to the House of Assembly for their second reading during that day's session. However, the House session was curtailed with the next sitting currently scheduled for 20May 2015.Following the second reading, a period of public consultation shall commence after which the legislation will be voted on before passage via the Senate into law. The Company considers that the legislative package, once promulgated, will reinforce responsible and safe hydrocarbon exploration as an integral part of the National Energy Policy of The Bahamas, whilst providing the assurance and framework required to attract the considerable investment necessary to develop the potentially significant economic resources present in Bahamian waters.

A copy of the proposed Acts and associated regulations can be viewed on the Company's website www.bpcplc.com and for further information visit The Government's website: www.government.bahamas.bs.

C.  Cash Reserves

As previously announced, the company finished 2014 with in excess of $10 million cash at hand underpinned by early initiatives to ensure an appropriate and reducing cost structure consistent with the needs of the Company and the prevailing commercial environment. Thus the board is confident that existing capital reserves combined with a continual focus on costs are sufficient to maintain the current level of activity for a number of years to come. This includes taking account of revised and extended licence fees and incremental work required in anticipation of securing a farm-in partner and moving to commencement of drilling.

Map

A map illustrating the Southern Licences, as renewed, the existing Miami Licence, and the New Licence applications, as re-submitted, can be found on the Company website at www.bpcplc.com

- Ends -

For further information, please contact:

Bahamas Petroleum Company plc Simon Potter, Chief Executive Officer	Tel: [phone]
Strand Hanson Limited - Nomad Rory Murphy / James Spinney	Tel: [phone]
CAMARCO Billy Clegg / Georgia Mann	Tel: [phone]

Notes to editors:

Bahamas Petroleum Company is an oil and gas exploration company with 100% owned offshore licences exclusively focused on the Commonwealth of The Bahamas. The Company is intent on delivering safe and environmentally responsible exploration.

www.bpcplc.com

 

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