Bahamas Petroleum Company (BPC) is preparing to drill an exploratory well with or without a farm-in partner next year, having secured a framework agreement with deepwater drilling contractor Seadrill for the use of a drilling rig and the services of renowned oil field service company Halliburton to provide equipment tools and a drilling plan, the company’s notice of annual general meeting (AGM) outlined.
BPC notes that the cost of the well could be between $25 million and $50 million and although it will go ahead without a farm-in partner, one is preferred.
BPC is seeking to raise money to fund the drilling of the exploratory well if a farm-in partner cannot be secured in 2020. The company is obligated under its licensing agreement with the government to drill an exploratory well in its licensed area in the southern Bahamas before the end of 2020.
If the company is forced to extend its licensing agreement, it would be “required to relinquish 50 percent of the southern license area”.
According to BPC’s AGM notice, the company’s board of directors concluded that moving forward with drilling the exploratory well without securing a farm-in partner is the most prudent course of business in order to comply with its agreements with government.
“To enable the company to commence drilling activity in a timely manner during 2020, as required by the license obligations on the southern licenses, a number of critical tasks must be addressed in advance,” the AGM notice states.
“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, finalizing the logistical plan along with associated supply base location and set-up, finalizing 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.
“The company has entered into a framework agreement with Seadrill, one of the world’s largest offshore drill rig companies, which will see 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.
“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 to 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.”
BPC explained in its notice that the cost for rigs and drilling have decreased over the past few years, leading the company to consider commencing its exploratory well without a farm-in partner after securing financing “through a conditional convertible loan for £10.25 million”.
“Additionally, the company is presently considering a range of other financing options, as well as continuing the farm-in process,” the AGM notice states.
The notice explains that BPC is hoping to secure the convertible loan through Australian-based Bizzell Capital Partners Pty Ltd., “acting on behalf of entities associated with Mr. Stephen Bizzell and Mr. Mark Carnegie (BCI)”.
BPC is asking its shareholders to approve the convertible loan as well as approve the issuance of 25 million options to BCI to subscribe for ordinary shares at a price of £0.02 per share, the issuance of 12.5 million options to BCI to subscribe for ordinary shares at £0.025 per share and the issue of 12.5 million options to BCI to subscribe for ordinary shares for £0.03p per share, pursuant to the approval of the agreement for the conditional convertible loan.
The directors of BPC are also asking, as a special resolution, that the directors allow the company to “allot and issue up to a further 1,800,000,000 new ordinary shares in the capital of the company”.
“If fully available and drawn, the conditional convertible loan would provide BPC with access to approximately half the estimated costs associated with one well under the drilling plan,” the AGM notice states.
“Other financing arrangements currently being considered would, in aggregate and if concluded, provide BPC with additional funding which BPC considers would be sufficient to enable the company to meet its drilling obligations. The conditional convertible loan has been structured with a view to keeping the up-front costs to BPC as low as possible and preserving the company’s ability to ‘opt out’ of this financing at minimal cost if it is able to secure funding on better terms elsewhere. The conditional convertible loan is conditional on shareholder approval.
“I wish to stress that it remains the company’s strong preference to secure a farm-in partner. However, the ultimate objective is to drill a well, whether that be funded via a farm-in partner on acceptable terms, or by other means, whichever is in the best interests of the company. Thus we are now making progress on putting in place financial arrangements needed to fund that drilling, in the event that a farm-in partner is unable to be secured on a timely basis or on acceptable terms.”