By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamas Petroleum Company (BPC) is in talks with “major” oil industry players over a $100 million joint venture partnership for its first $100 million exploratory well, and renewed its pledge to eventually offer shares to local investors via dual listing on BISX.

The oil exploration company, in an update to investors and the industry this week, said its key goal for 2016 is to secure a joint venture (farm in) partner to share the burden of drilling its first exploratory well in Bahamian waters.

BPC’s licence requires it to spud its first well by April 2017 in waters to the south-west of Andros, near this nation’s maritime boundary with Cuba. To hit this deadline, it said well design and permitting activities would run alongside its joint venture discussions throughout 2016.

“The Company’s primary focus for 2016 is to secure a partner for the initial exploration well, and to undertake activity in support of a drilling campaign during 2017,” Simon Potter, BPC’s chief executive, confirmed.

“There has been a considerable level of farm out interest to date, notwithstanding global oil market conditions, and discussions are ongoing with a number of companies, including majors and large independents.

“With our southern licences extended into their second exploration term, and the lengthy process of passing the new regulatory regime now behind us, BPC starts 2016 in a strong position to advance what we believe is potentially a multi-billion barrel petroleum resource that is world-class in terms of its scale, economic potential, location and operating environment.”

Mr Potter previously told Tribune Business that BPC faces something of a ‘chicken and egg’ situation on its farm in negotiations.

While the current collapse in global oil prices has made all industry players much more cautious on the capital, and exploratory, projects they commit investment to, Mr Potter said BPC would also benefit from having one of the stronger prospects and the reduction in competition from rival exploration activities.

“Notwithstanding near-term reductions to crude product prices, the world-class scale and robust economics of BPC’s defined geological structures continue to attract the interest of industry participants, and the company hopes to conclude a successful partnership arrangement during 2016,” BPC added.

BPC believes that the exploratory well itself will cost between $50-$60 million, adding that the lower cost is due to a re-design and new location, coupled with reductions to rig, contractor and service rates.

The company added that the $5.5 million in cash left on its balance sheet at end-2015 was adequate to finance its activities through 2016, including the joint venture negotiations and well planning phase. BPC’s annual overheads have also been reduced by 54 per cent since 2012.

Technical and environmental work related to the first well will also be undertaken in 2016, and BPC said it last year did “considerable work” in producing Environment Sensitivity Maps that pinpointed coastal and marine usage in different areas of the Bahamas.

This was designed to reinforce its Environmental Impact Assessment (EIA) that was submitted to the Government in 2012, and BPC added: “The company believes this is the first time that such information has been gathered and produced in the Bahamas, and the company has made all of this work available to all Government Ministries and agencies.”

BPC said it has invested more than $100 million since 2007 on its exploration activities, with the total outlay over the next two years to end-2017 adding another $100 million, “a meaningful proportion of which will be spent directly in the Bahamas”.

“In the event of a successful discovery, full evaluation and commercialisation of the company’s licence area could see incremental investment by the Company (and any partners) of many billions of dollars in the period 2018-2025,” BPC said.

“All of the costs of this activity considerably exceeds licence requirements and, in accordance with licence terms, would be borne entirely by BPC shareholders and partners (at no cost to the Government), with the benefits of any exploration success realised not only by shareholders but also by the Government and thus the people of the Bahamas alike.”

Pledging that it was committed to the Bahamas “for the long-term”, BPC said it had already established an office in this nation, plus trained local and international staff.

BPC’s long-planned share offering to Bahamian investors still remains on its agenda, having been postponed to allow for the Government to implement the new regulatory regime for oil drilling.

“BPC intends to continue its pursuit of a dual listing on the Bahamas International Securities Exchange (BISX) to allow Bahamian citizens to more easily participate directly in the value creation that exploration success may bring,” the company added.

“This process, which was first announced by the company in 2012, has been hitherto constrained pending the recently advanced regulatory legislation process.”

Mr Potter said: “Having undertaken substantial efforts to increase our footprint in the Bahamas, a local listing represents a further step in demonstrating our commitment to the Bahamas, with strong Bahamian participation in the entire project remaining a core tenet of our strategy.”

Referring to the recent passage of the Petroleum Bill and accompanying legislation/regulations through Parliament, he added: “We believe this recognises the nation-building potential of our nascent industry, in terms of skills development, job creation, direct investment, production royalties and long-term wealth creation.”