Thursday, April 1, 2021
By NEIL HARTNELL
Tribune Business Editor
The Bahamas Petroleum Company (BPC) was forced to seek additional funding for its Perseverance One well after “funds fled away from us” due to the legal challenge launched by environmentalists.
Simon Potter, the company’s chief executive, in a March 30, 2021, interview with Proactive London revealed that the Judicial Review initiated by Save the Bays and Waterkeepers Bahamas had “created the perfect storm” that forced the oil explorer to seek an additional $19m in financing from an institutional investment fund managed by Lombard Odier Asset Management.
That move angered a number of existing BPC shareholders, who argued that it would serve to dilute the value of their holdings when they had been led to believe the company’s first exploratory well in The Bahamas was already fully financed.
Explaining the Lombard Odier move, Mr Potter said BPC had kept its Perseverance One financing options open via “a range of facilities” that had been put in place ahead of exploratory drilling that began in late December around Christmas.
These, he added, were structured to ensure that financing was only drawn down when it was needed so that BPC was not paying for debt facilities it did not need. The greatest cash consumption, he added, was designed to occur when the Stena IceMAXX drilling rig arrived in The Bahamas and headed to the drill site in waters 90 miles west of Andros.
“As is often the case, the rig was arriving just at the time a perfect storm was created for us,” Mr Potter said. “We had the rig on the way to the site, we were in the middle of the Christmas holidays, and a group of environmentalists took out an injunction to try and stop the well.
“What this meant was essentially a number of the facilities were essentially not available to us. The uncertainty associated with that injunction meant those funds fled away from us. We did what we could do. We arranged a facility with Lombard Odier.
“These facilities are not cheap, and there are a lot of catches associated with them. We did what we had to do, which meant that we got the Perseverance well drilled. Like I said, we did what we had to do and drilled the well.”
It is more accurate to say that the Supreme Court rejected the activists’ bid for an injunction that would have halted BPC’s plans, and the well was allowed to proceed, although Mr Potter’s point about the uncertainty the ongoing Judicial Review created is that it impacted the confidence of potential financing sources.
The BPC chief, meanwhile, said the company’s total spend in The Bahamas had hit $150m as he affirmed the oil explorer’s continuing interest in this nation and plan to apply for a renewal of its licences into a third exploration period. This will give it a chance to earn a return on its investment by “monetising” the value of these licences through securing a joint venture or farm-in partner.
Both the Prime Minister and Romauld Ferreira, minister of the environment and housing, have both said they remain personally opposed to oil drilling in Bahamian waters, so it is unclear what the fate of any renewal application will be. The Opposition, though, has indicated it remains in favour of allowing oil exploration.
Despite its Perseverance One well failing to strike commercial quantities, BPC has signalled that the drilling data obtained - as well as interest from other companies in partnering with it - had given it sufficient confidence to move forward.
“Since the completion of the drilling of Perseverance One, the company has had discussions with industry counterparties in relation to a potential farm-out of its licences in The Bahamas, and is working to formalise an entirely new farm-out process. Consequently, the company intends to renew the four southern licences in The Bahamas into a third, three-year ‘drill or drop’ exploration period,” BPC said.
“The Perseverance No.1 well did not result in a commercial discovery. The company is, however, encouraged that the results from the Perseverance One well indicated the presence of hydrocarbons.” This, together with renewed interest from potential joint venture partners, means BPC is not giving up on or abandoning The Bahamas just yet.
BPC added that its first exploratory well was drilled on a seabed structure that is more than double New Providence’s size, with its licences covering some 3m acres. In effect, Perseverance One represented just one pinprick in a vast area, and the drilling results and data derived from that first well suggest there is the possibility of finding commercial oil quantities nearby.
Suggesting that deeper drilling may be required, BPC’s statement said it was now focused on integrating Perseverance One’s findings with existing data on its licence areas as well as resuming the search for a joint venture (farm-in) partner to share the financial, technical and operational risks associated with drilling another exploratory well in Bahamian waters.
“Given these technical results, since announcing the results of the well the company has had a number of discussions with industry counterparties in relation to a potential farm-out of the licences, and the company is now working to formalise and launch an entirely new farm-out process via Gneiss Energy,” BPC said.
The statement indicates that the oil explorer will likely only drill another exploratory well in The Bahamas if it can secure a joint venture partner to help “monetise” its licence assets and provide some return on the $120m it invested in the run-up to Perseverance One.