Posting of Open Offer Circular to Shareholders

RNS Number : 3083Q

Bahamas Petroleum Company PLC

18 October 2019

 

NEITHER THIS ANNOUNCEMENT NOR ANY PART OF IT CONSTITUTES AN OFFER TO SELL OR ISSUE OR THE SOLICITATION OF AN OFFER TO BUY, SUBSCRIBE OR ACQUIRE ANY SECURITIES IN ANY JURISDICTION IN WHICH ANY SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL AND THE INFORMATION CONTAINED HEREIN IS NOT FOR PUBLICATION OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN OR INTO THE UNITED STATES, AUSTRALIA, CANADA, JAPAN, THE REPUBLIC OF IRELAND, SOUTH AFRICA OR ANY JURISDICTION IN WHICH SUCH PUBLICATION OR DISTRIBUTION WOULD BE UNLAWFUL.

 18 October 2019

Bahamas Petroleum Company plc

("Bahamas Petroleum" or the "Company")

Posting of Open Offer Circular to Shareholders

Bahamas Petroleum Company plc, the oil and gas exploration company with significant prospective resources in licences in The Commonwealth of The Bahamas announces that, further to its announcement of 10 October 2019, a circular (the "Circular") in relation to the Open Offer to shareholders will today be sent to all shareholders.

The Open Offer circular is also available to download from the Company website, www.bpcplc.com.

Pursuant to the Open Offer, all qualifying shareholders are being offered the ability to subscribe for 1 new share in the Company for each 5 shares held on the record date (being 16 October 2019), at a price of 2 pence per share. A total of 338,543,819 new shares in the Company will be offered for subscription under the Open Offer, and if fully taken up, will raise a total of approximately £6.8 million (approximately $8.5 million) with proceeds applied toward the cost of drilling an initial exploration well in The Bahamas in 2020. Shareholders who take up their entire entitlement will be eligible, via an excess application facility, to request to subscribe for additional shares in the Open Offer, if and only to the extent the Open Offer is not already fully subscribed.

In the event that not all of the shares offered in the Open Offer are subscribed for by shareholders, the Company's broker, Shore Capital, will seek to place any unsubscribed shares (at the same price) (the "Placing"). Shore Capital has agreed that to the extent any remaining shortfall is not fully placed, Shore Capital will participate in the Placing to the point that the Open Offer is fully subscribed or to a maximum of US$1 million. In addition, Management of the Company (collectively) has indicated an intention to subscribe £250,000 in the Placing.

Simon Potter, Chief Executive Officer of Bahamas Petroleum Company, said:

 "We are delighted to make the open offer to our existing shareholders and, reflecting the potential interest shown from institutional investors, will be making any shares not taken up available in the Placing, as part of a funding package for our planned drilling activities on our highly prospective licences. A significant operational phase is now getting underway, where we will be working towards receipt of a rig from Seadrill in late Q1 2020. This is an exciting time for the Company, and we look forward to updating shareholders on the results of the open offer process, as well as other operational updates in due course."

For the information of shareholders, key dates as set out in the Open Offer circular are as follows:

Record Date for entitlement under the Open Offer	Close of business on 16 October 2019
Announcement of the Open Offer	7.00 a.m. on 18 October 2019
Ex-entitlement date of the Open Offer	8.00 a.m. on 18 October 2019
Publication and Posting of the Circular, and in respect of Qualifying non-CREST Shareholders, the Application Form	18 October 2019
Open Offer Entitlements and Excess Open Offer Entitlements credited to stock accounts in CREST of Qualifying CREST Shareholders	8.00 a.m. on 21 October 2019
Latest recommended time and date for requested withdrawal of Open Offer Entitlements and Excess CREST Open Offer Entitlements from CREST	4.30 p.m. on 28 October 2019
Latest time and date for depositing Open Offer Entitlements and Excess CREST Open Offer Entitlements in CREST	3.00 p.m. on 29 October 2019
Latest time and date for splitting Application Forms (to satisfy bona fide market claims)	3.00 p.m. on 30 October 2019
Latest time and date for receipt of Application Forms and payment in full under the Open Offer and settlement of relevant CREST instructions (as appropriate)	11.00 a.m. on 1 November 2019
Company will seek to place any Open Offer Shares not applied for under the Open Offer with investors	4 November 2019
Announcement of the result of the Open Offer and the Placing	07:00 on 5 November 2019
Admission and dealings in the New Ordinary Shares (including the Open Offer Shares) expected to commence on AIM	8.00 a.m. on 6 November 2019
Where applicable, expected date for CREST accounts to be credited in respect of Open Offer Shares in uncertificated form	As soon as practicable after 8.00 a.m. on 6 November 2019
Where applicable, expected date for dispatch of definitive share certificates for Open Offer Shares in certificated form	No later than 13 November 2019

Key extracts from the Circular are set out as follows below and definitions used therewith have the meanings ascribed to them in the Circular.

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]
Shore Capital Stockbrokers Limited Jerry Keen / Toby Gibbs	Tel: [phone]
CAMARCO Billy Clegg / James Crothers	Tel: [phone]

www.bpcplc.com

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

Introduction and Background to and Reasons for the Open Offer

The Company is pleased to present the Open Offer to shareholders, providing all shareholders with an opportunity to participate in the Company's next fundraising.

The Company has a clear and unambiguous obligation under its licences to drill an initial exploration well in The Bahamas during 2020. Discharge of this obligation will then allow the Company to enter the next exploration period, running for a further three years, and, in the event of commerciality, seek a 30-year production lease that would allow for commercial development of any discovered reserves.

Over the last six months the Company has revised its drilling costs estimates to incorporate contracted pricing from service and equipment providers, and also to reflect a well design and drilling philosophy that will comply with the requirements of the Company's licences whilst at the same time enable a full evaluation of the target structures. The Company currently estimates a cost to meet its drilling objectives in the range of US$20 million - US$25 million (the ultimate amount of expenditure being dependent to a large extent on the pace of drilling - the rate of penetration or "ROP" - and the final drilled depth to which the Company's well reaches).

The Company maintains a lean and efficient overhead burn rate, and currently has sufficient cash available to meet general working capital needs through to H2 2020. Over and above these general working capital needs, it is necessary for the Company to form a degree of certainty as to the availability and timing of funding for drilling costs, primarily in order to enable the Company to nominate, confirm and proceed to a definitive contract for the rig, and to ensure other aspects required to commence drilling, such as procurement of long-lead items, provisioning and ancillary equipment. However, the bulk of the Company's expected cash outflows, and thus the Company's actual need for funding availability (outside of working capital), will generally only arise shortly before and during the course of actual drilling (thus well into Q1 2020).

 Accordingly, the Company is seeking to approach its funding needs in a measured fashion, with a view to ensuring the funding needed by the Company for the initial exploration well is available as and when it is needed, on the best possible terms, and in a way that strikes an appropriate balance of several competing factors, including:

ensuring the Company has a high degree of visibility in relation to potential funding, so as to lock-in access to a rig to enable drilling activities to proceed even if a farm-out is not secured;

matching the inflow of funding (and costs associated with that funding) to the timing of when that funding is actually needed, especially given that, whilst a degree of funding certainty is required at the present time, the majority of cash outflow will only occur when activities associated with drilling commence in late Q1 2020;

minimising the overall cost to the Company of its funding, and the potential dilutive impact of the overall funding package to existing Shareholders;

preserving the Company's ability to continue to pursue a farm-out, if the terms offered by a potential farm-out partner are attractive; and

providing a mechanism whereby all existing Shareholders of the Company can participate in the next phase of the Company's progress, on terms equal to any participating institutional investors.

It is in this context that the Board has determined to proceed, in first instance, with a £6,770,876 (approximately US$8.5 million) open offer (the "Open Offer") to existing Shareholders at a price of 2 pence per share, such that all Qualifying Shareholders will be able to participate in the next stage of the Company's progress, with any entitlements not taken up by qualifying shareholders sought to be placed with institutional investors.

Qualifying Shareholders may subscribe for Open Offer Shares on the basis of 1 Open Offer Share for every 5 Existing Ordinary Shares held on the Record Date. Shareholders subscribing for their full entitlement under the Open Offer may also request additional Open Offer Shares through the Excess Application Facility.

Under the Prospectus Rules, the maximum allowable amount that may be raised without the requirement for a prospectus is €8 million, which at current exchange rates equates to approximately £7 million. In order to accommodate an open offer of this amount, and based on the current number of shares in issue (being 1,692,719,096 Ordinary Shares) the lowest applicable ratio involving whole numbers is 1 new Ordinary Share for every 5 Ordinary Shares held.

Assuming full take-up under the Open Offer, the issue of the Open Offer Shares will raise gross proceeds of up to £6,770,876 for the Company. The New Ordinary Shares to be issued pursuant to the Open Offer are to be admitted to trading on AIM at the time of Admission, which is expected to take place on 6 November 2019.

The Company has appointed its broker, Shore Capital, to use reasonable endeavours to place any Ordinary Shares not taken up under the Open Offer with institutional investors at the same price as the Open Offer. Shore Capital has agreed that to the extent any remaining shortfall is not fully placed, Shore Capital will participate in the Placing to the point that the Open Offer is fully subscribed or to a maximum of US$1 million.

In addition to the Open Offer, the Company is at the same time progressing a broader funding strategy with a view to securing the funding required for the initial exploration well. To this end, the Company has also recently entered into the Convertible Notes Subscription Agreement for the previously announced and approved £10.25 million (approximately US$13.0 million) conditional convertible notes which, subject to all conditions precedent in the Convertible Notes Subscription Agreement being met or waived and the Convertible Notes being fully subscribed, would provide the Company with access to over half the estimated costs associated with drilling one well under the Drilling Plan.

In aggregate, therefore, the Open Offer (if fully subscribed or taken up under the Excess Application Facility or if the entitlements not taken up are placed with institutional investors) and the proceeds of the Conditional Convertible Notes (if all conditions of the Convertible Note Subscription Agreement are satisfied or waived and the Convertible Notes are fully subscribed ), would raise an aggregate amount of approximately US$21.5 million, which exceeds the lower-end estimates for the total well cost.

The Company also continues in its endeavours to secure a farm-out partner as a core part of its overall funding strategy. As previously announced, the Company's farm-out process is ongoing, with a number of parties engaged in ongoing discussions, due diligence and/or commercial interaction. It remains the Company's preference to secure funding through this structure, albeit the Company's attitude to potential farm-in terms in ongoing negotiations will necessarily reflect the funding status of the initial well at the time a farm-out is successfully concluded (if at all).

The Company notes that even if the full £6.77 million is raised via the Open Offer (and all conditions of the Convertible Note Subscription Agreement are satisfied or waived and the Convertible Notes are fully subscribed) the Company's farm-out process would nonetheless continue, albeit in that context concluding a farm-out would likely provide funds in excess of what would be required to complete the initial well, thereby potentially facilitating further exploration activity on the licences including that of an additional well.

In the event that the full £6.77 million is not raised via the Open Offer and subsequent Placing and/or the Conditional Convertible Note was not able to be drawn down in full then the funds raised via the Open Offer will be used to fund general working capital.

Business Background

The Company's business is focused and single purpose: we have five licences for hydrocarbon exploration covering approximately 16,000 km2 (4 million acres) in the territorial waters of The Bahamas. The Company has four exploration licences in the southern territorial waters of The Bahamas, referred to as Bain, Cooper, Donaldson, Eneas (these four licences together referred to as the "Southern Licences") and a fifth, the Miami licence, in the northern territorial waters of The Bahamas. The main licences of interest and focus are the Southern Licences.

All licences are held through wholly owned subsidiaries of the Company, and were awarded on 26 April 2007 for an initial exploration period of three years, with up to three further exploration periods possible, subject to renewal elections, nominally every three years. Subsequently, the Company received a number of extensions of the initial three-year exploration term of each of the Southern Licences, such that the second exploration term for the Southern Licences commenced on the 8 June 2015.

On entering this second term for the Southern Licences, the Company was obliged to commence activity by April 2018 on an initial exploration well, with equipment capable of drilling to a depth of at least 18,000 feet (the "Drilling Plan"). This date was extended by agreement with the Government on various occasions, most recently in February of 2019, where the second term licence period was extended such that currently the Company's work obligation is clear and unambiguous: to commence an initial exploration well on the Southern Licences by the end of 2020. The Company is currently in discussions with the Government regarding licence fee obligations payable for the period ended 31 December 2020.

The Southern Licences are commercially co-joined, meaning that the drilling of an initial exploration well on one of the Southern Licences will satisfy the work obligation in respect of all of the Southern Licences. Everything we are doing as a Company, is in the single-minded pursuit of drilling an initial exploration well in the Southern Licences, in a safe and responsible manner, within the timeframe that is consistent with our obligations under the licences.

At the conclusion of the second term for the Southern Licences, the licences may be extended for two further exploration periods of up to three years each on approval of the Government (which, if BPC has met its licence obligations, may not be unreasonably withheld). At the time of extension, BPC will be required to relinquish 50% of the Southern Licence area, which obligation BPC considers may be satisfied almost entirely by relinquishment of areas in shallower waters over the Grand Bahamas Bank, which are of lesser technical interest to BPC at this time.

On entry into a third exploration period, the minimum work obligation will be to commence the drilling of a new exploration well, essentially every two years, following the completion of the initial exploration well. At any time during this period the Company may apply for a production lease in respect of all or part of the area covered by the Southern Licences subject to submission and agreement of a development plan. As with the exploration period extensions, if BPC has met its licence obligations the grant of a production lease cannot be unreasonably withheld. Any such production lease would give the Company the right to produce petroleum from that production area for a term of 30 years (and with a renewal right on application thereafter).

In addition to the Southern Licences, in 2012 the Company made applications to the Government for a further five licences in the Cay Sal region of The Bahamas, on-trend from the existing Southern Licences, but in 2015 consolidated these applications from five to three. For these three revised applications, approval remains pending.

In respect of the Miami licence the Company remains in discussions with the Government concerning the nature and extent of any future obligations associated with entering into a second exploration term, should the Company so wish.

Technical Work To Date

The Company was awarded its licences in 2007. Once awarded, the Company sought to collect all available historical, geological and geophysical data from oil exploration projects in The Bahamas. This led to a three-year international search and purchase of historical materials from various oil companies, universities and research institutions. As a result, the Company developed an extensive database including well cores, logs, rock samples and thin sections (from three of the five deep oil exploration wells previously drilled in The Bahamas), approximately 8,000 line kilometres of regional 2D seismic data (of varying quality), and magnetic and gravity data. This data was evaluated using a combination of modern technologies and interpretative techniques, providing encouragement to invest in the acquisition of new data (seismic and further studies), so as to better define the petroleum system elements and the resource potential within the Company's licences.

In 2010, the Company recorded the first modern offshore seismic survey in the southern Bahamas since the 1980s. Interpretation of this 2D seismic acquisition programme confirmed the presence of several large structures, providing the basis for an independent Competent Person's Report ("CPR") completed by Ryder Scott in July 2011. The CPR included the Bain, Cooper and Donaldson licensed areas, highlighting the existence of multiple fold and fault structures and an estimated mean 2 - 3 billion barrels unrisked recoverable oil resources from several different stacked reservoir intervals (with a high case of 7 billion barrels unrisked recoverable oil resources).

Subsequently, in 2011, the Company completed a 3D seismic survey of 3,076 km² within the Southern Licence area using the latest CGG BroadSeis acquisition technology. This 3D seismic survey firmed up the previously identified structures mapped from the 2D seismic survey, confirming the petroleum resource potential in The Bahamas within multiple, large-scale structural prospects. The high quality of the 3D seismic and extensive other data allowed for several integrated studies by various consulting companies and university departments, so as to continue to reduce the prospect uncertainty. This work included seismic stratigraphy to determine facies classification and distribution, seismic attribute analysis, basin modelling and regional structural reconstruction to determine the timing of crucial petroleum system events such as trap formation and hydrocarbon generation and migration.

An optimal well location was chosen on the crest of the most prospective structure. In 2012 the Company completed a Front-End Engineering Design ("FEED") study for the well design, being consistent with discharging the licence obligation to drill an exploratory well targeting the shallowest prospective horizons and with drilling equipment capable of reaching depths of at least 18,000 feet. To all intents and purposes this meant that, having completed a significant amount of preparatory work, the Company regarded the prospect as 'drill-ready'. However various 'above ground' issues (as detailed further in Section 4 Regulatory Backdrop, below) resulted in a delay to the implementation of these plans.

During the period of this delay, the Company invested considerable additional efforts into a range of technical work focused on the Southern Licences. This work further established the presence and robustness of the petroleum systems, and assessed and sought to mitigate individually source rock interval and maturity, trap formation, oil migration, reservoir and seal risks. This work included analysis of fluid inclusion and oils collected from the region, determining multiple pulses of oil migration from differing source rock intervals, all determined to be in the oil window; an analysis of seal facies and distribution linked to vertical seismic anomalies to determine trap / seal integrity across the prospective structures; seismic inversion to aid determination of reservoir-seal pairs; and, a detailed seismic interpretation to test fault independent closure thus mitigating trap risk. Much of this work has been tested and validated through the farm-in process with a wide range of industry majors and large independents.

As a result of this and earlier work BPC determined that the Southern Licences contained considerable oil potential, and in 2017 the Company engaged Moyes & Co, an international petroleum industry consultancy, as external technical experts to conduct an independent audit of BPC's own assessment of the total petroleum system and prospect portfolio utilising the full range of the Company's exhaustive database. The key findings were as follows:

·     Stock Tank Oil Initially In Place ("STOIIP") assessed for the prospect structures as 8.4 billion barrels, with an upside of up to 28 billion barrels;

·     Applying a recovery factor in the range of 20% - 40% to the Moyes STOIIP volumetrics would result in an unrisked Estimated Ultimate Recoverable ("EUR") in the range of 1.6 billion to 3.3 billion barrels (mean), and up to 11 billion barrels (upside); and,

·     Moyes & Co. independently calculated the probability of success ("PoS") factors for each of the stacked reservoirs assessed, the majority of which were calculated in the 25 - 35% range.

Based on several field developmental studies BPC believes that the minimum field size for an economic development of this nature is less than 200 million barrels (versus the resource estimates measured in billions of barrels, as noted in the independent Moyes & Co review), and that the project therefore offers robust commerciality even in a series of credible downside scenarios.

Combining all of the technical work and interpretation, the Company was able to build on earlier well design efforts to develop a range of potential well locations and well plan options, based upon in-depth reviews of wells previously drilled in The Bahamas. A particular issue affecting historical exploration well drilling performance was the slow rate of penetration ("ROP") of the drill bit. Studies were initiated taking account of recent technology and drilling philosophy developments, whilst also adopting and implementing global standards and best practices. The results of these studies suggested that significant improvements could be made to ROP, thus substantially reducing the predicted time it would take to drill any chosen well. Based on these studies, BPC estimated that an exploration well to a depth of up to 6,500 meters (21,500 feet) would take between 40 and 60 days to drill and assess. Further, well cost updates have incorporated the substantial reduction in global rig rates and availability, to arrive at the current well cost estimates (refer to Section 5, Well Location, Historical Cost Estimates and Funding Strategy, below).

The Company has, to date, expended in excess of US$100 million, much of it in relation to the above summarised technical work (including data acquisition, interpretation and studies). In aggregate, the Company believes this technical work has established a project with:

·     stacked play systems from Late Jurassic syn-rift clastics, to Cretaceous shallow water carbonates with reefal geometries and shallower slope talus debris fields, in structures and stratigraphies mapped from 3D - totaling over 20,000 feet of stratigraphic column;

·     three and four-way dip closed structures mapped at over 70 kilometres along strike length, with gross column heights up to 1,000m and areal extent ~400km²;

·     the prospect of a world-scale, multi-billion barrel petroleum resource, similar in scale and size to resources encountered in more well-known petroleum producing regions, and highly analogous to the Iranian Zagros mountains and the Mexican Salinas basins both producing from fold and thrust exploration plays, with the likely source rock charging the Company structures being the same age and type as the Bossier-Smackover petroleum system that charges the deep-water fields in the Eastern US Gulf of Mexico and nearby Cuba; and

·     a significant reduction in estimated well cost when compared to prior estimates, attributable to current rig rates, an anticipated improvement in ROP (principally associated with technical advances in drill bit technology) and lower estimated logistical and support costs.

Regulatory Backdrop

In 2012, the Government initiated a process to replace The Bahamas' existing laws and regulation for the petroleum industry (which then dated to the 1970s) with a new set of laws and regulations, in particular to include modern safety and environmental regulations consistent with global standards and best practices around the world. Such modernised regulations were, following a three-and-a-half-year process, finally promulgated in July 2016, following enactment of the updated Petroleum Act in March of the same year. These regulations for the first time include the concept of Environmental Authorisation ("EA") as a part of the commencement of well activities, which require the submission of both an Environmental Impact Assessment ("EIA") and an Environmental Management Plan ("EMP") together.

In 2012 the Company had already submitted an EIA to the Government via the Bahamas Environment, Science and Technology Commission (the "BEST Commission"). That EIA determined the most likely impacts any exploration activities may have on the environment within the country and sought to illustrate mitigating actions the Company could take to address any potential environmental risks. The EIA was reviewed and accepted by the Government at that time.

In April 2018, in accordance with these new regulatory requirements, the Company also submitted to the Government its EMP, which includes amongst other things an H₂S plan, an Oil Spill Contingency Plan and an Emergency Response Plan, incorporating desktop simulations of a worst-case discharge scenario, which has become mandatory in other jurisdictions in the region, to underpin effective response plans.

BPC's EA, including its EMP, was reviewed by energy consultants Black & Veatch ("B&V") as external consultant advisers to BEST, who have submitted an initial report on their assessment to the Government. B&V's methodology and mode of analysis consisted primarily of a "gap analysis", in which B&V sought to identify any gaps in the EA / EMP documentation provided by BPC against any applicable laws, regulations and applied international standards.

Encouragingly, in the context of the volume of materials submitted by BPC, B&V identified only a relatively small number of gaps, with the majority of the gaps identified relating to rig specific information or site specific information which was either unavailable or insufficiently detailed at the time of the initial submission of BPC's EIA, EMP and thus overall EA.

The Company's signing of a Framework Agreement for the provision of a sixth generation drilling rig (and subsequent "Go-Firm" election), along with the issue of Notices of Award for provision of key well services and equipment to Halliburton and BakerHughes GE means that, with the cooperation of these service and equipment providers, BPC is now in a position to provide all additional outstanding documentation and data, and BPC considers that gaps identified by B&V can be readily closed in the coming months.

The final substantive piece of data remaining to be collected as part of the EA process is an Environmental Baseline Survey ("EBS"). This survey seeks to determine the environmental baseline conditions (biological, chemical, physical) at the proposed drilling location by providing measures of the environment against which any effects from future operations may be compared. This includes collection of samples (at a range of water depths and distances from the proposed drill site) to characterise macroinfauna, document physicochemical conditions and characterise the water column. A photographic survey would be used to characterise the seafloor substrates and associated biological communities. By its very nature EBS data is typically collected closer to the time of field activities commencing so as to provide a relevant data point for later comparison. Terms of reference defining the scope of the EBS have been prepared and submitted to BEST for their review, prior to this work commencing.

As noted, the Government agency tasked with working with BPC on the EA process is the BEST Commission. BEST has appointed B&V as expert consultant to BEST / Government for this purpose.

Likewise, BPC has made, and will continue to make, a number of important appointments of international environmental consultants, to ensure that the environmental planning and associated permitting process is conducted in accordance with global best practice. To-date, these include:

·     the appointment of Acorn International ("Acorn"), a leading international environmental advisor, to work with the Company and liaise with B&V / BEST in finalising the relevant EMP documentation,

·     the appointment of marine environmental consulting firm, CSA Ocean Sciences to establish the terms of reference for and thereafter (once agreed) undertake the EBS, which as noted is a required component of the EMP documentation, and

·     in anticipation of future operations, BPC has applied for and been accepted for membership of Oil Spill Response Limited, the largest international industry-funded cooperative which exists to respond to oil spills wherever in the world they may occur, by providing preparedness, response and intervention services and equipment.

BPC is also in the process of engaging a number of other third-party consultants to conduct both field-based environmental work necessary for completion of the EMP, and desktop studies to identify and provide the necessary data to cover additional potential well locations, which would provide the Company with a degree of optionality should ongoing technical work identify more optimal well locations or the availability of funding permit a multi-well drilling strategy (and consistent with the capacity under the rig framework agreement to consider a two well exploration campaign).

A timeline has been developed jointly by BPC, BEST and Government representatives that would see work necessary for the EMP process completed by end 2019 / early 2020, so as to enable initial drilling activities to commence as planned in late Q1 2020.

Well Location, Historical Cost Estimates and Funding Strategy

The current proposed location of the first exploration well on the Southern Licences is in the Cooper - Donaldson licence area, within the 3D seismic acquisition area and approximately 100 miles from Andros Island and 15 miles from the Cuban border.

The ultimate well cost will be related to the amount of time drilling actually takes and a function of the spread rate, which includes both a rig rate (a day-rate for the use of a rig) and all associated support costs plus consumables. In 2012, at the peak of the rig market, and based on then-prevailing conditions in the global oil market, the Company had originally estimated an exploratory well cost of the type required to discharge the licence obligation to be approximately US$120 million. More recently (in 2016) the cost was re-estimated by the Company to be in the range of US$60 million to US$80 million, such reduction being largely as a result of reduced rig rates.

BPC now estimates the total cost of an initial exploration well (including mobilisation and demobilisation) to be in the range of US$20 million to US$25 million, and up to approximately US$40 million to US$45 million in aggregate (depending on depth drilled) should the Company elect to pursue a concurrent two well exploration campaign. This is a significant reduction from prior estimates, principally attributable to the rate at which the rig will be provided (as per the Framework Agreement between BPC and Seadrill), as well as the expected improvement in ROP based upon the technical advances in drill bit technology, and the ability to source a rig out of the Gulf of Mexico resulting in lower estimated logistical and support costs.

For several years, the Company has been engaged in a process to secure the financing required to undertake this drilling. It has been, and remains, the Company's primary strategy to secure such financing via a "farm-in", whereby another entity (ideally, but not necessarily, a major or large independent international oil and gas company) will acquire an interest in the Southern Licences, and in exchange will pay for all or a substantial part of the cost of drilling, and also potentially reimburse the Company a proportion of the past costs incurred by the Company on those Southern Licences. This is a fairly typical structure for financing in the oil and gas industry, and would directly dilute the Company's interest in the asset (i.e.: the percentage of the Southern Licences owned by the Company) and thus effectively dilute the shareholders interest by the equivalent amount. A common feature of a farm-in transaction is that operatorship of the drilling programme and the asset (and hence control) is passed to the incoming partner, depending on the operating capabilities of the incoming farminee.

A considerable number of suitable partners have engaged with the Company on the farm-in process, including undertaking technical and commercial due diligence and entering into negotiations, and some of these discussions remain ongoing. On this basis, the Company had hoped to have secured a farm-in on acceptable terms with a suitable partner by this stage. However, the process of securing a farm-in partner has taken much longer than anticipated, and has not as yet produced a successful outcome.

The Company is now embarking on a course to undertake drilling of the initial exploration well during the first half of 2020, with or without a farm-in. Whilst there has been no success to date in securing a farm-in partner, BPC's licence obligation to drill a well in 2020 is immutable. Moreover, the Board's view is that drilling as soon as practicable remains the most efficient route to generating shareholder value, and the current state of the global rig market and the resulting substantially reduced well cost estimate (both highlighted above) means it is now more feasible for the Company to consider undertaking the well on its own. The package of critical supply and service contracts (as described in Section 6 below) and the finance arrangements being put in place comprise a coordinated approach to how we propose to do this.

Our objective is simple: to drill an initial exploration well during 2020 consistent with our existing licence obligations, and to retain the greatest possible interest in the Southern Licences (whether at the asset or the equity level). To do this we are seeking to put in place the full range of technical delivery services and equipment required, and to enhance our financial capacity such that we can proceed to drilling.

Critical Supply and Service Contracts

To enable the Company to commence drilling activity in a timely manner during 2020, as required by the licence obligations on the Southern Licences, a number of critical tasks must be addressed in advance. These include completion of detailed well planning and design work, securing access to a rig and provision of required integrated well services, procurement of long-lead time items, finalising the logistical plan along with associated supply base location and set-up, finalising pricing for other critical equipment and services, and completion of all necessary permitting processes. Many of these tasks cannot be adequately completed without first knowing the specifications of the specific rig and equipment that will be used to undertake the work, and having full access to rig specific and site-specific information.

To this end, the Company has reached agreement (subject to contract) with a number of leading global equipment and service providers, fundamental to the delivery of a successful exploration well on time and within a prescribed budget. Central to that delivery is access to a suitable rig within the necessary timeframe, along with associated drilling equipment and supplies (including, for example, a bottom-hole assembly and drilling and logging services). In summary, these agreements are:

·     Rig Provider: In August 2019 the Company entered into a Framework Agreement with Seadrill, one of the world's largest offshore drill rig companies, for the provision of a sixth-generation drilling rig during the first half of 2020, with delivery from the rig's current working location in the nearby Gulf of Mexico. The Framework Agreement provides clarity and certainty around potential access to a suitable rig, in the timeframe required, and fixes the price for the rig (in accordance with industry practice, quoted as a day-rate in US dollars per day). Critically, with the benefit of the Framework Agreement in place, BPC (along with Seadrill's input and support) has been able to move towards finalising detailed logistical and design work, ensure compatible equipment and supplies are available and scheduled, and to complete the associated permitting processes in good time for an orderly commencement of drilling.

Further, the Framework Agreement required BPC, on or before 11 October 2019 (or such later date as the parties may mutually agree) to notify Seadrill that it wishes to "Go-Firm". Given the Board's assessment of the greater certainty and progress made in relation to funding, the Company on 10 October 2019 advised Seadrill that it wishes to go-firm on the drilling rig. Accordingly, the Company notified Seadrill of its desire to secure a rig for delivery by late Q1 2020. The Company and Seadrill are presently working to finalise the long-form Rig Contract, confirm the rig selection, and agree the critical drilling plan dates. It should be noted that the governing document in relation to provision of the drill rig will be the Rig Contract, which remains to be entered into and is subject to Seadrill's Board approval process for contract commitment. For the avoidance of doubt, the election for the drilling rig and the "Go-Firm" notice does not obligate BPC to incur any costs - in general terms, drilling costs will be incurred pursuant to the Rig Contract, and the vast majority of those costs will not start to be incurred until such time as the mobilisation of the drilling rig (that is, until Q1 2020).

·     Integrated Well Service Provider: At the same time, and following a process of extensive discussion and mutual due diligence, the Company has been able to secure the services (and agree prices for those services) of an integrated well services provider, Halliburton, a leading provider of integrated well services to the global oil and gas industry. Under this appointment, Halliburton will provide a range of essential well equipment, tools and services for the Drilling Plan. The Company has also appointed BakerHughes GE, another leading international service provider to the oil industry, as provider for wellheads and tubulars. The involvement of Halliburton and BakerHughes GE at a sufficiently early stage also allows for their participation in final well design, so as to further assure successful achievement of the objectives for the drilling of the well. The Company issued a Notice of Award to each of Halliburton and BakerHughes GE as part of this process, which notices were accepted, as a precursor to the parties concluding the necessary long-form documentation. Given the Board's assessment of the greater certainty and progress made in relation to funding, the Company has commenced the process of finalisation and entry into such long form documentation ("Call Off Contracts"), containing terms and conditions customary in the industry, whilst including the technical specifications and pricing already established in the Notices of Award.

Conditional Convertible Notes

On 21 August 2019 the Company announced that it had entered into a conditional agreement for £10.25 million (approximately US$13.0 million) convertible loan notes. Subsequently, the entry into this conditional agreement was approved by shareholders of the Company at the General Meeting held on 17 September 2019.

Further to that approval, the Company has now entered into a subscription agreement (the "Convertible Note Subscription Agreement") in relation to this convertible loan note investment, with the key terms and conditions of this Convertible Note Subscription Agreement summarised below.

Counterparty

The Convertible Note Subscription Agreement is entered into with the Subscribers, being Australian-domiciled investment firms acting on behalf of interests associated with Mr. Stephen Bizzell and Mr. Mark Carnegie.

Mr. Bizzell and Mr. Carnegie each have a track record of successful investment in a number of early-stage oil and gas exploration businesses around the world. Investment funds associated with Mr. Carnegie and Mr. Bizzell were also variously early-stage investors in Arrow Energy Limited and Dart Energy Limited, Australian-listed companies at which both the Company's Chief Executive Mr. Simon Potter and the Company's Commercial Director previously worked. Arrow Energy Limited was successfully acquired by a consortium of Shell and PetroChina in 2011, and Dart Energy Limited was acquired by AIM-listed iGas Energy Plc in 2014.

Convertible Note Subscription Agreement Key terms

Key terms of the Convertible Note Subscription Agreement are as follows:

·     Amount: £10.25 million (approximately US$13.0 million, being approximately half the upper end of the estimated range for the cost of the initial exploration well)

·     Use of funds: Well finance and general strategic purposes

·     Form of investment: Convertible loan notes ("Conditional Convertible Notes")

·     Note Subscribers: Initially Bizzell Capital Partners Pty Ltd (as to 50% of the Conditional Convertible Notes) and MH Carnegie & Co Pty Ltd (as to 50% of the Conditional Convertible Notes) (the "Subscribers"). However, The Convertible Note Subscription Agreement contemplates that the Subscribers may assign their Conditional Convertible Notes such that there may ultimately be multiple note holders, who will be represented by a noteholder trustee under the terms of a noteholder trust deed yet to be entered into between the Company and the noteholder trustee

·     Term: 3 years

·     Coupon: 12% per annum, payable annually in arrears; the Company can elect to capitalise interest accrued on the Conditional Convertible Notes

·     Priority: On a return of capital (by way of liquidation or otherwise) the Conditional Convertible Notes will rank senior to all ordinary shares on issue to the extent of the principal plus unpaid interest

·     Security: the Conditional Convertible Notes will be secured by an appropriate first ranking security to be granted over all the assets and undertakings of BPC, and will rank senior to all other debt of BPC, and which security will be cross-guaranteed on a secured basis by all members of the Company's group

·     Conversion: A holder of Conditional Convertible Notes may at any time prior to maturity elect to convert the Conditional Convertible Notes (principal plus any accrued interest) into fully paid ordinary shares in BPC

·     Conversion Price: Given the pricing established for the Open Offer, the conversion price of the Conditional Convertible Notes is now set at 2.5 pence per share

·     Early Redemption: A holder of Conditional Convertible Notes will be entitled to redeem the Conditional Convertible Notes at a 110% premium to face value if, as at 31 December 2020, employment and executive retention arrangements between nominated key executives and the Company are on terms that are not satisfactory to the Subscribers. The Company may not redeem the Convertible Notes early, unless agreed with the Subscribers

·     Dividends: No dividends may be declared or paid whilst the Conditional Convertible Notes are on issue

·     Subscription Deadline: Subject to satisfaction of all conditions precedent as described below, the Subscribers must subscribe for the Conditional Convertible Notes by no later than 15 February 2020; a Subscriber may also elect to subscribe for the Conditional Convertible Notes all or in part earlier than this date but no sooner than 30 November 2019

·     Conditions to Completion: Completion of the subscription for the Conditional Convertible Notes by the Subscribers will be subject to a number of conditions first being met or satisfied or otherwise waived. These conditions are:

o  Any approvals, consents, waivers, exemptions or declarations that are required by law, or by any Government Agency, to implement the transactions contemplated by the Convertible Note Subscription Agreement are granted, given, made or obtained on an unconditional basis

o  The Company entering into binding contracts with reputable international companies so as to enable the Company (to the satisfaction of each Subscriber, acting reasonably) to conduct the intended drilling of the initial exploration well at the estimated cost of that drilling, being:

§ A contract for provision of a drilling rig with a reputable international rig company, on terms satisfactory to each Subscriber, providing access to the appropriate drilling rig at an acceptable cost, as needed for the task of conducting the drilling; and

§ A contract for integrated well services for the drilling with a reputable international service company, on terms satisfactory to each Subscriber, providing access to the appropriate services needed for the task of conducting the drilling

o  The Subscribers being satisfied that the Company has sufficient funds in cash (but not including committed cash or cash subject to refund obligations) which, when aggregated with the subscription amount of the Conditional Convertible Notes, would be sufficient to fund the cost of the intended drilling operation in full and the operating costs of the Company until the end of June 2021

o  A convertible note trust deed being entered into between the Company and the convertible note trustee, on terms acceptable to the Subscribers

o  Appropriate security documents being entered into between the Company and the Subscribers and any other relevant parties, on terms acceptable to the Subscribers;

o  The Company securing all necessary permits and approvals for the intended drilling operations from the Government of The Bahamas, including all necessary environmental permits, and the Company reaching agreement with the Government of The Bahamas and making payment in relation to licence fees payable for the remaining licence period to 31 December 2020, on terms satisfactory to the Subscribers

o  Each Subscriber obtaining all approvals (including of its investment committee) and satisfying all procedures it considers necessary in relation to the transactions contemplated by this agreement

o  Employment and executive retention arrangements between key executives nominated by the Subscribers and the Company being entered into or amended on terms satisfactory to each Subscriber (acting reasonably); and

o  No breaches of warranty or material adverse events have occurred

·     Under the terms of the conditional agreement entered into on 21 August 2019, and repeated now in the Convertible Note Subscription Agreement, the Subscribers will be paid fees as follows:

o  An establishment fee of 3% of the subscribed amount, which the Subscribers may elect to deduct from the relevant subscribed amount

o  Options to subscribe for 25,000,000 ordinary shares in BPC with an exercise price of 2 pence per share, exercisable at any time within the four-year period from their date of issue (the "Convertible First Tranche Options")

o  On subscription of the Conditional Convertible Notes, two further tranches of options to subscribe for ordinary shares in BPC, of 12,500,000 options per tranche, the first with an exercise price of 2.5 pence per Ordinary Share and the second with an exercise price of 3 pence per Ordinary Share, exercisable at any time within the four year period from the date of their issue (the "Convertible Second & Third Tranche Options"). The number of these options to be ultimately granted will depend on the amounts subscribed for. In the event that the full amount of the Conditional Convertible Notes is not subscribed for then the number of such options will be pro-rated down accordingly

·     Board Rights: Effective from subscription of the Conditional Convertible Notes (i.e. only once Convertible Note funds are advanced to BPC) and until such time as the Conditional Convertible Notes are redeemed, the Subscribers will have the right to appoint a maximum of two (2) directors to the Board of BPC (but, for so long as both Simon Potter and Eytan Uliel are members of the Board, the right of appointment shall be reduced to only one (1)).

Attention is drawn to the fact that, as detailed above, availability of funds from the Convertible Note Subscription Agreement remains conditional on a number of conditions first having been satisfied. To the extent the conditions are not satisfied there is a risk that the Company will not be able to receive the funding contemplated in the Convertible Note Subscription Agreement, unless those conditions are waived by the Subscribers. However, given that a number of the conditions are necessary prerequisites to drilling commencing, and given that funds are not actually required until closer to the time that drilling commences, the Directors are confident that the conditions precedent can be satisfied in a timely manner such that funding under the Convertible Note Subscription Agreement will be available when required.  Please see "Part II Risk Factors" below for further information.

Use of Proceeds

The Company will use the net proceeds of the Open Offer, together with the proceeds of the Conditional Convertible Note to commence the drilling and all associated activities, operations and actions of the initial exploration well in 2020.

The Company continues to pursue a farm-out as part of its funding strategy, and has received proposals for, and continues to develop and assess a number of other financing options. A decision to enact any of these other financing proposals will be taken, if required, based on the outcome of the farm-out process, and once the Open Offer process has been concluded.

To the extent that a farm-out is successfully concluded on terms acceptable to the Company, the amount of capital available to the Company would likely materially increase, and would be additive to the funds raised through the Open Offer and Convertible Note Subscription Agreement, as detailed in the Circular. Such funding could be applied towards all or a considerable portion of the costs in respect of the intended drilling, or alternatively proceeds from any farm-out could be applied to a broader work programme than the current single well the Company intends to drill in 2020.

In circumstances where suitable funds are not raised via the Open Offer (if the Open Offer raises less than the equivalent of approximately US$7 million and the placing of the Open Offer Shortfall as described above is unsuccessful in raising the balance), or where the conditions precedent set out in the Convertible Note Subscription Agreement are not satisfied (or waived), or if a farm-out is not secured, the Company would likely not have sufficient cash to complete the drilling of the planned initial exploration well in H1 2020. In such circumstances the Company would look to secure funding by way of alternative sources. There can be no assurance, however, that the Company would be successful in securing any such alternative funding. Excluding any costs relating to the planned initial exploration well in H1 2020, the Company currently has sufficient cash available to meet general working capital needs through to H2 2020. In such a scenario, any amounts raised under the Open Offer and Placing will be applied to general working capital.  Please see "Part II Risk Factors" below for further information.

Funding and Dilutive Impact

The dilutive and funding impact of the Open Offer and the Convertible Note Subscription Agreement needs to be understood in conjunction with each other, and seen in the context of a broad and balanced approach to the Company's funding needs and objectives. Specifically:

·    At the Company's AGM on 17 September 2019 shareholders passed a number of special resolutions designed to provide the Board with the flexibility to enter into a range of possible funding arrangements to secure the capital required for the initial exploration well. This included the temporary authority to issue up to 1.8 billion new Ordinary Shares without consideration of the pre-emption rights of the existing shareholders of the Company.

·    Under the Open Offer, the Company will be offering to all shareholders the equal ability to subscribe for up to £6,770,876 in the capital of the Company at a price of 2 pence per share. The amount of the Open Offer has been set to avoid any requirement to issue a Prospectus under the Prospectus Rules.

o  To the extent that the Open Offer is taken up in full, the Company will receive £6,770,876 in additional funding, and will issue a further 338,543,819 Ordinary Shares;

o  To the extent that the Open Offer is taken up only 50% (and the shortfall remains unsubscribed and/or unplaced), the Company will receive approximately £3.4 million in additional funding, and will issue a further 169,271,909 Ordinary Shares; and

o  To the extent that the Open Offer is not taken up at all (and the shortfall remains unsubscribed and/or unplaced), the Company will receive nil in additional funding, and will issue no further Ordinary Shares.

·    Given the issue price established for the Open Offer (being 2 pence per share), the terms of the Conditional Convertible Notes (as previously announced and approved by shareholders) determine that the conversion price will be set at a 25% premium to the Open Offer Price, being 2.5 pence per share.

o  Thus, assuming (i) all conditions precedent in the Convertible Note Subscription Agreement are either satisfied or otherwise waived by the Subscriber and the Conditional Convertible Notes are fully subscribed, (ii) 3 full years of interest is capitalised into the debt principal and not paid in cash, and (iii) all principal and capitalised interest is fully converted, the Conditional Convertible Notes would result in the issue of approximately 560 million Ordinary Shares in the capital of the Company to the noteholders, and the Company will receive £10.25 million in funding.

·    When considered in aggregate, the Open Offer (if fully taken up) and the proceeds of the Convertible Note Subscription Agreement (assuming all conditions precedent in the Convertible Note Subscription Agreement are either satisfied or otherwise waived by the Subscribers and the Conditional Convertible Notes are fully subscribed, and assuming further that interest is capitalised and all principal and capitalised interest is ultimately converted) would result in approximately 896 million new Ordinary Shares being issued, and total funding inflows over the next 6 months of approximately £17 million (approximately US$21.5 million), which would be an amount which exceeds the lower-end estimates for the total well cost for the drilling of the initial exploration well.

Shareholders should note however that there remains a high degree of uncertainty in relation to both the Open Offer and Conditional Convertible Notes, given that ultimate quantum of funding to be received from both is dependent on the occurrence of future events outside of the control of the Company. Specifically:

·    Funding from the Convertible Note Subscription Agreement remains subject to certain conditions precedent as set out in that agreement first being satisfied on or prior to 15 February 2020 (unless said conditions are waived by the Subscribers) - these have been detailed above,

·    the amount raised under the Open Offer will depend on the extent to which Shareholders take up the offer and/or the extent to which any shortfall thereunder is taken up under the Excess Application Facility or, if not taken up, subsequently placed, and

·    the Company continues to work on securing a farm-out, which if successful could likely materially increase the amount of capital available to the Company, which could offset all or a considerable portion of the costs in respect of the intended drilling or alternatively provide funds in excess of that required to complete the initial well, thereby potentially facilitating further exploration activity on the licences including that of an additional well.

In circumstances where suitable funds are not raised via the Open Offer (that is, if the Open Offer and Excess Application Facility raises less than approximately US$7 million and the placing of the Open Offer Shortfall as described above is unsuccessful in raising the balance), or where the conditions precedent set out in the Convertible Note Subscription Agreement are not satisfied (or waived by the Subscribers), or if a farm-out is not secured, the Company would likely not have sufficient cash to complete the drilling of the planned initial exploration well in H1 2020. In such circumstances the Company would look to secure funding by way of alternative sources. There can be no assurance, however, that the Company would be successful in securing any such alternative funding. Excluding any costs relating to the planned initial exploration well in H1 2020, the Company currently has sufficient cash available to meet general working capital needs through to H2 2020.

Details of the Open Offer

Open Offer Structure

The Open Offer provides an opportunity for all Qualifying Shareholders to participate in the fundraising by acquiring Open Offer Shares pro rata to their current holdings of Existing Ordinary Shares with the option for subscribing for more pursuant to the Excess Application Facility subject to scaling back (see 10.3 below).

Principal terms of the Open Offer

Subject to the fulfilment of the conditions set out below and in Part IV of the Circular, Qualifying Shareholders are being given the opportunity to subscribe for the Open Offer Shares at a price of 2 pence per Open Offer Share, pro rata to their holdings of Existing Ordinary Shares on the Record Date on the basis of:

1 Open Offer Share for every 5 Existing Ordinary Shares

Qualifying Shareholders are also being given the opportunity, provided that they take up their Open Offer Entitlement in full, to apply for Excess Shares through the Excess Application Facility.

Assuming full take-up under the Open Offer, the issue of the Open Offer Shares will raise gross proceeds of £6,770,876 for the Company.

The Open Offer Shares will, upon issue, rank pari passu with the Existing Ordinary Shares.

Fractions of Open Offer Shares will not be allotted.  Each Qualifying Shareholder's entitlement under the Open Offer will be rounded down to the nearest whole number.

Qualifying Shareholders with holdings of Existing Ordinary Shares in both certificated and uncertificated form will be treated as having separate holdings for the purpose of calculating the Open Offer Entitlements.

If the Open Offer is not fully taken up by Qualifying Shareholders, the Company has appointed Shore Capital to use reasonable endeavours to place any Open Offer Shares that have not been subscribed with institutional investors at the Issue Price. Shore Capital has agreed that to the extent any remaining shortfall is not fully placed, Shore Capital will participate in the Placing to the point that the Open Offer is fully subscribed or to a maximum of US$1 million.

Excess Application Facility

The Excess Application Facility will enable Qualifying Shareholders, provided that they take up their Open Offer Entitlement in full, to apply for Excess Open Offer Entitlements. Qualifying non-CREST Shareholders who wish to apply to acquire more than their Open Offer Entitlement should complete the relevant sections on the Application Form. Qualifying CREST Shareholders will have Excess CREST Open Offer Entitlements credited to their stock account in CREST. Applications for Excess Open Offer Entitlements will be satisfied only and to the extent that corresponding applications by other Qualifying Shareholders are not made or are made for less than their Open Offer Entitlements. If applications under the Excess Application Facility are received for more than the total number of Open Offer Shares available following take-up of Open Offer Entitlements, such applications will be scaled back pro rata to the number of Excess Shares applied for by Qualifying Shareholders under the Excess Application Facility.

Application will be made for the Open Offer Entitlements and Excess Open Offer Entitlements in respect of Qualifying CREST Shareholders to be admitted to CREST. It is expected that such Open Offer Entitlements and Excess Open Offer Entitlements will be admitted to CREST at 8.00 a.m. on 21 October 2019. Such Open Offer Entitlements and Excess Open Offer Entitlements will also be enabled for settlement in CREST at 8.00 a.m. on 21 October 2019. Applications through the means of the CREST system may only be made by the Qualifying Shareholder originally entitled or by a person entitled by virtue of a bona fide market claim.

Qualifying non-CREST Shareholders will have received an Application Form with the Circular which sets out their entitlement to Open Offer Shares as shown by the number of Open Offer Entitlements allocated to them. Qualifying CREST Shareholders will receive a credit to their appropriate stock accounts in CREST in respect of their Open Offer Entitlements on 21 October 2019.

Shareholders should note that the Open Offer is not a rights issue. Qualifying CREST Shareholders should note that although the Open Offer Entitlements and Excess Open Offer Entitlements will be admitted to CREST and be enabled for settlement, applications in respect of entitlements under the Open Offer may only be made by the Qualifying Shareholder originally entitled or by a person entitled by virtue of a bona fide market claim. Qualifying non-CREST Shareholders should note that the Application Form is not a negotiable document and cannot be traded. Qualifying Shareholders should be aware that in the Open Offer, unlike in a rights issue, any Open Offer Shares not applied for will not be sold in the market or placed for the benefit of Qualifying Shareholders who do not apply under the Open Offer. If applications are made for less than all of the Open Offer Shares available, then the lower number of Open Offer Shares will be issued.

Further information on the Open Offer and the terms and conditions on which it is made, including the procedure for application and payment, are set out in Part IV of the Circular.

For Qualifying non-CREST Shareholders, completed Application Forms, accompanied by full payment, should be returned by post or by hand (during normal business hours only) to Link Asset Services, Corporate Actions, The Registry, 34 Beckenham Road, Beckenham, Kent, BR3 4TU so as to arrive as soon as possible and in any event so as to be received no later than 11.00 a.m. on 1 November 2019. For Qualifying CREST Shareholders, the relevant CREST instructions must have been settled as explained in the Circular by no later than 11.00 a.m. on 1 November 2019.

Other information relating to the Open Offer

The Open Offer is conditional upon, inter alia, Admission of the Open Offer Shares becoming effective by no later than 8.00 a.m. on 6 November 2019 (or such later date as the Company may determine, being not later than 8.00 a.m. on 20 November 2019). Accordingly, if the conditions to the Open Offer are not satisfied or waived (where capable of waiver), the Open Offer will not proceed and the Open Offer Shares will not be issued and all monies received by the Receiving Agent will be returned to the Applicants (at the Applicant's risk and without interest) as soon as possible, but within 14 days thereafter. Any Open Offer Entitlements admitted to CREST will thereafter be disabled.

The Open Offer Shares will be issued free of all liens, charges and encumbrances and will, when issued and fully paid, rank pari passu in all respects with the Open Offer Shares, including the right to receive all dividends and other distributions declared, made or paid after the date of their issue.

Application will be made to the London Stock Exchange for the Open Offer Shares to be admitted to trading on AIM. It is expected that Admission will become effective on 6 November 2019 and that dealings for normal settlement in the Open Offer Shares will commence at 8.00 a.m. on 6 November 2019.

Action to be taken

Qualifying non-CREST Shareholders

If you are a Qualifying non-CREST Shareholder, you will have received an Application Form which gives details of your maximum entitlement under the Open Offer (as shown by the number of Open Offer Entitlements allocated to you). If you wish to apply for Open Offer Shares under the Open Offer (whether in respect of your Open Offer Entitlement or both your Open Offer Entitlement and any Excess Open Offer Entitlements), you should complete the accompanying Application Form in accordance with the procedure for application set out in paragraph 4.1 of Part IV of the Circular and on the Application Form itself.

Qualifying CREST Shareholders

If you are a Qualifying CREST Shareholder and do not hold any Ordinary Shares in certificated form, no Application Form accompanies the Circular and you will receive a credit to your appropriate stock account in CREST in respect of the Open Offer Entitlements representing your maximum entitlement under the Open Offer except (subject to certain exceptions) if you are an Overseas Shareholder who has a registered address in, or is a resident in or a citizen of an Excluded Territory. Applications by Qualifying CREST Shareholders for Excess Open Offer Entitlements in excess of their Open Offer Entitlements should be made in accordance with the procedures set out in paragraph 4.2 of Part IV of the Circular, unless you are an Overseas Shareholder in which event, applications should be made in accordance with the procedures set out in paragraph 6 of Part IV of the Circular.

The latest time for applications under the Open Offer to be received is 11.00 a.m. on 1 November 2019. The procedure for application and payment depends on whether, at the time at which application and payment is made, you have an Application Form in respect of your entitlement under the Open Offer or have Open Offer Entitlements credited to your stock account in CREST in respect of such entitlement. The procedures for application and payment are set out in Part IV of the Circular.

Qualifying CREST Shareholders who are CREST sponsored members should refer to their CREST sponsors regarding the action to be taken in connection with the Circular and the Open Offer.

Overseas Shareholders

Information for Overseas Shareholders who have registered addresses outside the United Kingdom or who are citizens or residents of countries other than the United Kingdom appears in paragraph 6 of Part IV of the Circular, which sets out the restrictions applicable to such persons. If you are an Overseas Shareholder, it is important that you read that part of the Circular.

Additional Information

Your attention is drawn to the additional information set out in Parts II to V (inclusive) of the Circular.

Director and Management Participation

Directors and members of the Company's senior management have confirmed their intention to participate for their pro rata entitlement in the Open Offer. Additionally, management (collectively) has indicated an intention to subscribe £250,000 in the Open Offer Shortfall (if available).

RISK FACTORS

An investment in the Open Offer Shares is highly speculative and involves a high degree of risk due to the nature of the Company position and the sector in which it operates, namely, exploration for hydrocarbons. Before making any investment decision, prospective investors should carefully consider all the information contained in the Circular including, in particular, the risk factors described below and should form their own views. In addition to the usual risks associated with an investment in a hydrocarbon exploration business, the Directors believe that, in particular and in no order of priority, the following risk factors should be considered. Other factors relate principally to an investment in the Open Offer Shares. It should be noted that this list is not exhaustive and that other risk factors may apply. Additional risks and uncertainties not currently known to the Directors, or that the Directors currently deem immaterial, may also have an adverse effect on the Group's business, financial condition and results of operations.

An investment in the Company may not be suitable for all recipients of the Circular. Investors are advised to consult an independent financial adviser authorised under the FSMA who specialises in advising on the acquisition of shares and other securities before making a decision to invest.

Risks related to the oil and gas industry

Exploration, development and production and general operational risks

There can be no guarantee that any hydrocarbons will be discovered in commercial quantities or developed to profitable production. If discovered, developing a hydrocarbon production field may require significant investment to build the requisite operating facilities, drilling of production wells along with implementation of advanced technologies for the extraction and exploitation of hydrocarbons with complex properties. These may result in uncertainties about the amount of future investment necessary, operating costs and additional expenses which might be incurred as compared with the initial budget. In addition, hydrocarbon deposits may not ultimately contain economically recoverable volumes of resources and even if they do, delays in the construction and commissioning of production projects or other technical difficulties may result in any projected target dates for production being delayed or further capital expenditure being required.

The exploration for and development of oil and gas resources is speculative and involves a high degree of technical risk. In particular, the operations of the Company may be disrupted by a variety of risks and hazards which are beyond the control of the Company, including environmental hazards, industrial accidents, occupational and health hazards, technical failures, labour disputes, earthquakes, unusual or unexpected geological formations, flooding, earthquake and extended interruptions due to inclement or hazardous weather conditions (including hurricanes), explosions and other accidents. These risks and hazards could also result in damage to, or destruction of wells or production facilities, personal injury, environmental damage, business interruption, monetary losses and possible legal liability.

Delays in the construction and commissioning of projects or other technical difficulties may result in the Company's current or future projected target dates for production being delayed or further or additional capital expenditure being required. If the Company fails to meet its work and/or expenditure obligations, the rights granted therein may be forfeited, which could jeopardise its ability to continue operations.

Oil Price

Oil and gas companies' earnings, investment and development decisions and strategy are heavily affected by fluctuations in international oil prices. Both oil and gas are commodities, and as such, tend to see larger fluctuations in price than more stable investments such as stocks and bonds. There are several major influences on oil prices but most importantly the interplay of supply and demand. While oil demand tends to be slow moving, mainly driven by economic growth and to some extent climate policies, the prospects of future oil supply are highly uncertain - not least considering persistent political instability in exporting countries and the uncertainty regarding the discovery of new reserves. As a result of such uncertainties, oil prices could undergo further (increasingly) drastic fluctuations in the future which could impact the Group's projects and adversely affect the feasibility and profitability of any of its projects and therefore have an adverse effect on the Group's business, financial condition, results of operations and prospects or even decisions to invest.

Increase in drilling costs

The oil and gas industry historically has experienced periods of rapid cost increases. Increases in the cost of exploration and development would affect the Company's ability to invest in prospects and to purchase or hire equipment, supplies and services.

Availability of Drilling Equipment and Access

Oil and natural gas exploration and development activities are dependent on the availability of drilling rigs and other equipment and services is affected by the level and location of drilling activity around the world. An increase in drilling operations may reduce the availability of equipment and services to the Company. The reduced availability of equipment and services may delay its ability to exploit reserves and adversely affect the Company's operations and profitability.

Third party contractors and providers of capital equipment can be scarce

The Group may contract or lease services and capital equipment from third party providers. Such equipment and services can be scarce and may not be readily available at the times and places required. In addition, costs of third-party services, and equipment may increase significantly over time. Scarcity of equipment and services and increased prices may in particular result from any significant increase in exploration and development activities on a region by region basis which might be driven by high demand for oil and gas. The unavailability and high costs of such services and equipment could result in a delay or restriction in the Group's projects and adversely affect the feasibility and profitability of such projects and therefore have an adverse effect on the Group's business, financial condition, results of operations and prospects.

Estimation of reserves, resources and production profiles

The estimation of oil and gas reserves and resources and their anticipated production profiles involves subjective judgements and determinations based on available geological, technical, contractual and economic information. They are not exact determinations. In addition, these judgments may change based on new information from production or drilling activities or changes in economic factors, as well as from developments such as acquisitions and dispositions, new discoveries and extensions of existing fields and the application of improved recovery techniques.

Risks related to the Group

Dependence on key personnel

In common with other services and businesses in this industry sector, the Company's business is dependent on retaining the services of a number of key personnel of the appropriate calibre as the business develops. The success of the Company is, and will continue to be significantly dependent on the expertise and experience of the Directors and senior management. The loss of one or more of these key personnel could have a material adverse effect on the Company.

No profit to date

BPC has incurred losses since its inception and it is therefore not possible to evaluate the prospects of the Company based on past performance. Since the Company intends to continue investing in the exploration licence areas, it is anticipated that the Company will continue to make losses for the immediate future. There can be no certainty that the Company will achieve or sustain profitability or achieve or sustain positive cash flow from its activities in the future.

Significant competition

The Company's competitors include major and independent oil and gas companies. The oil and gas business is highly competitive in the search for and acquisition of reserves and in the gathering and marketing of oil and gas production and in the recruitment and employment of qualified personnel. Some of the Company's competitors have significantly greater financial, technical and other resources than it and are able to devote greater resources to the development of their businesses. If the Company is unable successfully to compete, its business will suffer.

Limited diversification

The Company's business currently is focused and single-purpose - all five of its licences for hydrocarbon exploration are situated in the territorial waters of The Bahamas.

Climate

The climate in The Bahamas is subtropical to tropical. There is a hurricane season from approximately July to November with parts of The Bahamas having suffered severe hurricane damage in recent years. Storms and storm damage could limit the Company's ability to conduct exploration, development and production activities.

Licence fees

In relation to licence fees, BPC remains to finalise fees for the balance of the 2nd exploration period with the Bahamian Government. A number of these licence compliance costs are variable, and depending on a number of factors, some of which are presently unknowable, such as work to be done, time taken to do that work, and negotiations. BPC expects the costs to 31 December 2020 to be US$1.03m. However, depending on a variety of factors, these costs could be as low as US$700,000, and as high as US$2 million. To the extent these costs are higher than presently expected, other costs areas can and will be reduced accordingly.

Health, Safety, Environment and Security ("HSES'')

The Group's operated ventures means that the HSES risks cover a wide spectrum. These risks include major activity safety incidents; failure to comply with approved policies; effects of natural disasters (including hurricanes) and pandemics; social unrest; civil war and terrorism; exposure to general operational hazards; personal health and safety; and crime. The consequences of such risks materialising can be injuries, loss of life, environmental harm and disruption to business activities. Depending on cause and severity, the materialisation of such risks may affect the Group's reputation, operational performance and financial position.

In addition, failure by the Group to comply with applicable legal requirements or recognised international standards may give rise to significant liabilities. HSES laws and regulations may over time become more complex and stringent or the subject of increasingly strict interpretation or enforcement. The terms of licences include requirements to comply with prevailing HSES regulatory requirements which may change over time. The obtaining of exploration, development or production licences and permits may become more difficult or be the subject of delay by reason of governmental, regional or local environmental consultation, approvals or other considerations or requirements. These factors may lead to delayed or reduced exploration, development or production activity as well as to increased costs.

Environmental risk and insurance coverage

There are significant exploration and operating risks associated with drilling oil and gas wells, including potential blowouts, cratering, sour gas releases, uncontrollable flows of oil, natural gas or well fluids, adverse weather conditions, and fire, all of which can result in accidental spills, leakages or discharges of harmful liquids and toxic gases. The occurrence of any of these incidents can result in substantial losses to the Group due to injury or loss of life, damage to or destruction of the Company's oil and gas wells, pollution or other environmental damage. Damages occurring as a result of such risks can give rise to claims against the Company or a member of its Group and can result in the Company's targets for drilling or production being delayed or halted.

Although the Company will exercise all due care and attention in the conduct of its business and will maintain what it believes to be customary insurance coverage for companies engaged in similar operations, the Company cannot guarantee it is not fully insured against all risk in its business. The occurrence of a significant event against which the Company is not fully insured could have a material adverse effect on its operations and financial performance. In addition, in the future some or all of the Company's insurance coverage may become unavailable or prohibitively expensive.

Funding Risk

The Company currently estimates the cost of meeting its drilling objectives to be in the range of US$20 million - US$25 million (the ultimate amount of expenditure dependent to a large extent on the pace of drilling - the rate of penetration or "ROP" - and the final drilled depth to which the Company's well reaches). There is a risk that the drilling costs may be more than anticipated and further funds may have to be raised in order to meet drilling objectives.  At present, the Company has insufficient cash resources to finance its planned drilling activity and so will be required to source the funding necessary to meet these estimated drilling costs. The Company is seeking to develop a funding plan that does so in a measured way. As part of this plan, the Open Offer (and Placing) and the Conditional Convertible Notes, if fully subscribed to and drawn down, would result in total funding of approximately £17 million (approximately US$21.5 million) which it is estimated would be sufficient to enable the Company to meet its drilling objectives at the lower end of the estimated range, this being the shallower target horizons.

However there remains a degree of conditionality to the proposed financing package which is dependent on the occurrence of future events outside of the control of the Company, which represents a material risk. Specifically:

·    Funding from the Convertible Note Subscription Agreement remains subject to certain conditions precedent as set out in that agreement first being satisfied on or prior to 15 February 2020 (unless said conditions are waived by the noteholders) - see below for further details,

·    the amount raised under the Open Offer will depend on the extent to which Shareholders take up their entitlements under the Open Offer and/or the extent to which any shortfall thereunder is taken up under the Excess Application Facility or, if not taken up, or subsequently placed, and

·    the Company continues to work on securing a farm-out, which if successful could materially increase the amount of capital available to the Company, which could offset all or a considerable portion of the costs in respect of the intended drilling or alternatively provide funds in excess of that required to complete the initial well, thereby potentially facilitating further exploration activity on the licences including that of an additional well.

In circumstances where suitable funds are not raised via the Open Offer (that is, if the Open Offer raises less than approximately US$7 million and the placement of the Open Offer Shortfall as described above is unsuccessful in raising the balance), or where the conditions precedent set out in the Convertible Note Subscription Agreement are not satisfied (or waived by the Subscribers), or if a farm-out is not secured, the Company would not have sufficient cash to complete the drilling of the planned initial exploration well in H1 2020. In such circumstances the Company would look to secure funding by way of alternative sources. There can be no assurance, however, that the Company would be successful in securing any such alternative funding, and in such circumstances any funds raised in the Open Offer and Placing would be applied to general working capital. Excluding any costs relating to the planned initial exploration well in H1 2020, the Company currently has sufficient cash available to meet general working capital needs through to H2 2020.

Convertible Note Subscription Agreement

The Convertible Loan Subscription Agreement entered into on 10 October 2019 for the provision of up to £10.25 million (approximately $13.0 million) in well finance contains a number of conditions precedent which must either be satisfied prior to 15 February 2020 or waived by the Subscribers in order for the advance of any funding being provided to the Company. The conditions precedent are:

·    Any approvals, consents, waivers, exemptions or declarations that are required by law, or by any Government Agency, to implement the transactions contemplated by the Convertible Note Subscription Agreement are granted, given, made or obtained on an unconditional basis

·    The Company entering into binding contracts with reputable international companies so as to enable the Company (to the satisfaction of each Subscriber, acting reasonably) to conduct the intended drilling of the initial exploration well at the estimated cost of that drilling, being:

o  A contract for provision of a drilling rig with a reputable international rig company, on terms satisfactory to each Subscriber, providing access to the appropriate drilling rig at an acceptable cost, as needed for the task of conducting the drilling; and

o  A contract for integrated well services for the drilling with a reputable international service company, on terms satisfactory to each Subscriber, providing access to the appropriate services needed for the task of conducting the drilling;

·    The Subscribers being satisfied that the Company has sufficient funds in cash (but not including committed cash or cash subject to refund obligations) which, when aggregated with the subscription amount of the Conditional Convertible Notes, would be sufficient to fund the cost of the intended drilling operation in full and the operating costs of the Company until the end of June 2021;

·    A convertible note trust deed being entered into between the Company and the convertible note trustee, on terms acceptable to the Subscribers;

·    Appropriate security documents being entered into between the Company and the Subscribers and any other relevant parties, on terms acceptable to the Subscribers;

·    The Company securing all necessary permits and approvals for the intended drilling operations from the Government of The Bahamas, including all necessary environmental permits, and the Company reaching agreement with the Government of The Bahamas and making payment in relation to licence fees payable for the remaining licence period to 31 December 2020, on terms satisfactory to the Subscribers;

·    Each Subscriber obtaining all approvals (including of its investment committee) and satisfying all procedures it considers necessary in relation to the transactions contemplated by this agreement;

·    Employment and executive retention arrangements between key executives nominated by the Subscribers and the Company being entered into or amended on terms satisfactory to each Subscriber (acting reasonably); and

·    No breaches of warranty or material adverse events have occurred.

If the above conditions are not satisfied in accordance with the Agreement prior to 15 February 2020, or if are not otherwise waived by the Subscribers, there is a risk that the Conditional Convertible Notes will not become available for drawdown by the Company.

Requirements for permits and licences

The operations of the Company require licences, permits and in some cases assignments or renewals of existing licences and permits from various governmental authorities. Governmental approvals, licences and permits are subject to the discretion of the applicable governments or governmental offices and are outside the control of the Company. The Company's ability to obtain, sustain, renew or assign such licences and permits on acceptable terms is therefore subject to the discretion of the applicable governments as well as changes in regulations and policies. A failure to obtain, sustain, renew or assign these where needed could result in the dilution or forfeiture of interests held by the Company which could have a material adverse effect on the Group's business, financial condition, results of operations and prospects.

In particular, on entering the second term for the Southern Licences, the Company was obliged to commence activity by April 2018 on an initial exploration well, with equipment capable of drilling to a depth of at least 18,000 feet (the "Drilling Plan"). This date was extended by agreement with the Government on various occasions, most recently in February of 2019, where the second term licence period was extended such that currently the Company's work obligation is clear and unambiguous: to commence an initial exploration well on the Southern Licences by the end of 2020. If the Company is not able to meet this obligation, and is unable to obtain a further extension of this obligation by the Government of The Bahamas, the Southern Licences will expire without an entitlement of the Company to renew.

Working Capital

The Company may need to raise additional funds in the future in order to develop further its development programmes and growth initiatives. Additional equity financing may be dilutive to Shareholders and could contain rights and preferences superior to those of the Open Offer Shares. Debt financing may involve restrictions on the Company's financing and operating activities. In either case, additional financing may not be available to the Company on acceptable terms. If the Company is unable to raise additional funds as needed, the scope of its operations may be reduced and or its interest in concessions diluted or expired and, as a result, the Company may be unable to fulfil its long-term expansion programme.

Foreign currency exchange rates

As an international operator, the Company's business transactions may not be denominated in the same currencies. To the extent that the Company's business transactions are not denominated in the same currency, the Company is exposed to foreign currency exchange rate risk. In addition, holders of the Ordinary Shares are subject to foreign currency exchange rate risk to the extent that its business transactions are denominated in currencies other than the US dollar. Fluctuations in foreign currency exchange rates may adversely affect the Company's profitability. At this time, the Company does not plan actively to hedge its foreign currency exchange rate risk.

Taxation

The Company is exposed to taxation in both the Isle of Man and The Bahamas. However, the taxation regime applicable in both the Isle of Man and The Bahamas may change in the future with a consequent potential adverse impact on the after‐tax profits available to the Company following any such changes.

Risks relating to the Open Offer Shares

There may be volatility in the price of the Open Offer Shares

The Issue Price may not be indicative of the market price for the Open Offer Shares following Admission. The market price of the Open Offer Shares could be volatile and subject to significant fluctuations due to a variety of factors, including changes in sentiment in the market regarding the Company, the sector or equities generally, any regulatory changes affecting the Group's operations, variations in the Group's operating results and/or business developments of the Group and/or its competitors, the operating and share price performance of other companies in the industries and markets in which the Group operates, news reports relating to trends in the Group's markets or the wider economy and the publication of research analysts' reports regarding the Company or the sector generally.

To the extent that Shareholders do not take up the Open Offer Shares under the Open Offer, their proportionate ownership and voting interest in the Company will be reduced and the percentage that their Existing Ordinary Shares represents of the Enlarged Share Capital will be reduced accordingly. Subject to certain exceptions, Shareholders in the United States and other Excluded Territories will not be able to participate in the Open Offer.

Pre-emptive rights may not be available for US and other non-UK holders of Ordinary Shares

In the case of an increase in the share capital of the Company for cash, the Shareholders are generally entitled to pre-emption rights pursuant to the Act unless such rights are waived by a special resolution of the Shareholders at a general meeting, or in certain circumstances stated in the Articles, and such an issue could dilute the interests of the Shareholders. To the extent that pre-emptive rights are applicable, US and certain other non-UK holders of Ordinary Shares may not be able to exercise pre-emptive rights for their shares unless the Company decides to comply with applicable local laws and regulations and, in the case of US holders, unless a registration statement under the US Securities Act is effective with respect to those rights or an exemption from the registration requirements thereunder is available. The Open Offer Shares to be issued will not be registered under the US Securities Act. Qualifying Shareholders who have a registered address, or who are resident in, or who are citizens of, countries other than the United Kingdom should consult their professional advisers about whether they require any governmental or other consents or need to observe any other formalities to enable them to take up their Open Offer Entitlements or acquire Open Offer Shares.

Other risk factors

The Existing Ordinary Shares are traded on AIM rather than the main market of the London Stock Exchange. An investment in shares traded on AIM may carry a higher risk than an investment in shares listed on the Official List of the UK Listing Authority and traded on the main market of the London Stock Exchange.

Investors should be aware that the value of the Open Offer Shares may be volatile and may go down as well as up and investors may therefore not recover their original investment, especially as the market in the Open Offer Shares on AIM may have limited liquidity.

The market price of the Open Offer Shares may not reflect the underlying value of the Company's net assets. The price at which investors may dispose of their shares in the Company may be influenced by a number of factors, some of which may pertain to the Company, and others of which are extraneous. Investors may realise less than the original amount invested.

The risks above do not necessarily comprise all those faced by the Company and are not intended to be presented in any assumed order of priority.

The investment offered in the Circular may not be suitable for all of its recipients. Investors are accordingly advised to consult an investment adviser, who is authorised under the FSMA and who or which specialises in investments of this kind before making a decision to invest.

OPEN OFFER STATISTICS

Issue Price	2 pence
Number of Existing Ordinary Shares in issue as at the Record Date	1,692,719,096
Basis of Open Offer	1 Open Offer Share for every 5 Existing Ordinary Shares
Number of Open Offer Shares*	up to 338,543,819
Open Offer Shares as a percentage of the Enlarged Share Capital*	16.67 per cent.
Gross proceeds of the Open Offer*	£6,770,876
Market capitalisation on Admission at the Issue Price*	£40.63 million
Open Offer Basic Entitlements ISIN	IM00BHR3YB95
Open Offer Excess Entitlements ISIN	IM00BHR3Y970

*Assuming full take-up under the Open Offer

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