Bahamas Petroleum Company (BPC) has pushed back its scheduled date for the drilling of its first exploratory oil well, from sometime next month to the middle of May, due to the coronavirus (COVID-19) outbreak.
“At the time of the company’s AGM in September 2019, the company indicated it was on course to commence drilling in H1 2020. The board and management remain committed to delivering commencement of drilling within this time frame along with thereafter uninterrupted drilling operations for 45 to 60 days,” BPC noted in a statement.
“On this basis, spudding the well in the second half of May 2020 (and certainly no later than early June 2020), as opposed to previous estimates of April 2020 is now the company’s objective. This revised target has the advantage of avoiding any expected peak in the COVID-19 response, whilst at the same time enabling operations to be completed before the peak risk period for hurricanes in The Bahamas.”
If BPC is unable to commence drilling at that time due to adverse circumstances in the global operating environment, the company stated it will defer operations to the next practical window beyond the peak risk period of the hurricane season to mid-October or onward.
“The company stresses that this is not the company’s planning objective, but the company is seeking to develop a prudent ‘back-up’ plan on this basis, so that in any credible scenario the company can realistically meet its primary license obligation – i.e., an initial exploration well in 2020,” the statement continued.
“As shareholders will appreciate, the current circumstances occasioned by the COVID-19 response are unprecedented, highly fluid, unpredictable and of a global nature. The company is actively monitoring the situation and its potential impact on an ongoing basis, in an effort to assimilate all relevant information and formulate a prudent, effective response as efficiently as possible. The company will advise shareholders of any material developments as pertain to the company and its planned operations, as and when appropriate.”
This delay in drilling could also impact BPC’s funding strategy and farm-in process, with the company noting potential contingencies adding up to an extra $5 million of cost.
“The company does not presently anticipate this cost estimate will change as a result of the rescheduled commencement of operations, given that, to date, considerable effort has been made to minimize up-front commitment of capital to anything other than essential long-lead items, with expenditure focused on bits, casing and wellheads – all items that are essential to the company’s operation whenever it occurs and which may be temporarily stored and kept ready for immediate deployment as and when required, thus considerably reducing the project critical path once operations get underway,” BPC stated.
“As announced on March 9, 2020, the company has been able to reach agreement with the subscribers to the conditional convertible notes agreement to defer the date for satisfaction of conditions precedent to April 15, 2020, albeit access to these funds remain conditional on satisfaction of the noted conditions precedent.
“At the same time, the company has also continued its efforts to seek a farm-in or similar transaction as part of its overall risk mitigation and funding strategy and has maintained an active dialogue with a number of interested parties, including a number of oil and gas majors and supermajors. No assurance can be provided that a farm-in or other funding transaction will be concluded, but to the extent that a farm-in or other funding transaction is successfully concluded on terms acceptable to the company, the amount of capital available to the company when drilling operations commence could materially increase and would be additive to existing funding sources.”
Despite these new challenges and the volatility of the global oil market, BPC Chief Executive Officer Simon Potter maintained that the company has made consistent progress.
“As a prudent operator our primary objective is a safe well, best delivered by the ability to drill uninterrupted by external events for the period of the drill plan. Such a continuous operation is also the most cost effective. It is in this context that we have had to reassess the timing for commencement of drilling given the widespread disruption being caused by the global response to the COVID-19 virus,” he said.
“Whilst incredibly frustrating given all the hard work undertaken to get to the current state of drill-readiness, the responsible thing to do is to slightly reschedule commencement of operations, to later in Q2 2020, to a time when continuous delivery of operations can be better assured whilst also still enabling operations to be completed before the peak risk period of the Bahamian hurricane season. Pleasingly, farm-out discussions in the context of our overall funding strategy continue to advance. We will update shareholders as appropriate over the coming weeks.”