Amid its ongoing legal woes with environmentalists, Bahamas Petroleum Company (BPC) announced yesterday it is exercising a put option to raise a further £3.75 million ($5 million), which the company said represents adequate funding to meet not just the costs of drilling the Perseverance #1 well, but also fund its 2021 work programs in other jurisdictions.
A put option, or a financial market derivative instrument, allows a holder to sell assets at an agreed price on or before a particular date.
BPC is seeking to issue 187.5 million new ordinary shares at 2p per share, which it said would bring total funding since August 2019 to $52 million, with current undrawn potential funding sources in place for up to a further $20 million.
“As noted above, under the terms of agreements entered into on December 14, 2020 with an institutional investment fund managed by Lombard Odier Asset Management (the investor), BPC was granted an option to place a further fixed number of shares to the investor, to raise up to a further £3.75 million (US$5 million). If the put is exercised, the investor has the option to double the amount of the call on the same terms and conditions. As advised on January 7, 2021, the parties had agreed that the last date for exercise of the put by BPC is January 13, 2021,” BPC noted in a statement today.
“BPC has today exercised the put, such that BPC will issue 187,500,000 new ordinary shares of 0.002p each, at a price of 2.0 pence each, for immediate gross proceeds of approximately £3.75 million (US$5 million). This additional issuance represents approx. 3.5 percent of BPC’s fully diluted share capital. The investor now has until the earlier of (a) the date of BPC’s RNS announcement of the result of the Perseverance #1 well results, and (b) February 12, 2021, to exercise the call, failing which the call lapses.
“Consequent on the exercise of the put by BPC, the investor will also be issued with warrants, valid for one year, to subscribe for a further 46,875,000 shares at a price of 3.0p per share and a further 46,875,000 shares at a price of 4.0p per share. As previously advised, in respect of shares issued pursuant to the call or put, the reconciliation date for any potential future payment to the investor by BPC is April 16, 2021.”
If remaining potential funding sources are available and drawn in full, this would represent successful completion of BPC’s current funding strategy, initiated in August 2019, securing a total of $72 million,” the company noted.
“This represents adequate funding to meet not just the costs of drilling the Perseverance #1 well (at 100 percent ownership, operatorship and control), but also the costs of an extensive 2021 work program on a suite of production, appraisal and development assets in three other complementary jurisdictions, as well as all geological and geophysical (G&G) costs across the business through to mid-2022,” BPC stated.
“Perseverance#1 targeting resources of between 0.77 billion and 1.44 billion barrels of oil and the 2021 work program is targeting exit production of c.2,500 barrels of oil per day (2020 exit rate of 500 barrels of oil per day).”
BPC is targeting an exit production rate of 2,500 barrels of oil per day in its 2021 work program in Trinidad and Suriname.
BPC stated its total capital need, from 2019 through to the drilling of Perseverance #1 and the extensive work program planned in Trinidad and Tobago and Suriname to the end of 2021 is approximately $78 million. It is expected to have been funded and completed at the end of the put option.
BPC Chief Executive Offer Simon Potter said since August 2019, when the oil company embarked on its strategy to self-fund the drilling of Perseverance #1, executives knew it would require capital to facilitate its growth strategy, which would be secured incrementally over time.
“Now, with drilling in The Bahamas well underway and with a broad program of value-adding work about to kick off in Trinidad and Tobago and Suriname, we continue to draw on the various elements of the funding package we worked hard to put in place over the past 18 months. Today’s option exercise, to raise a further £3.75 million, is consistent with that strategy,” he said.
“Given the range of components to our funding, we are today providing shareholders with a clear reconciliation of our delivery against the funding strategy we articulated in August 2019. This represents, in our view, a transparent and accurate measure by which the board and management should be held accountable.
“We believe that the delivery of our funding package and thus the portfolio-wide work program it supports, represents a considerable achievement when considered in the context of depressed equity markets (particularly in the energy sector), oil price weakness and the material cost, timing and operational challenges caused by both COVID-19 and the last-minute – but ultimately unsuccessful – legal challenge to BPC’s drilling operations in The Bahamas.”
BPC commenced exploratory oil drilling in Bahamian waters last month despite the efforts of local environmentalists and attorneys to stay oil drilling pending a judicial review.
While Judge Petra Hanna-Adderley refused the stay application, she earlier this month granted leave for a judicial review, which is currently set for February 17 and 18.