TIDMBPC
RNS Number : 3718W
Bahamas Petroleum Company PLC
23 April 2021
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23 April 2021
Bahamas Petroleum Company plc
("BPC" or the "Company")
Notice of Extraordinary General Meeting and Circular relating to
Proposed Open Offer and Placing, Change of Name, Share
Consolidation, General Share Issuance Authority and Amendments to
Conditional Convertible Note Facility; changes to Board and
Management
BPC, the Caribbean and Atlantic margin focused oil and gas
company, with production, appraisal, development and onshore and
offshore exploration assets across the region, is pleased to advise
of a comprehensive program of activities, following the drilling of
Perseverance #1, which will lay the foundations for building future
shareholder value elsewhere across its expanded portfolio,
predominantly by increasing production, and hence cashflow, from
operations in Trinidad and Tobago and Suriname.
Highlights
-- Near-term activity schedule focussed on significantly
increasing production and cashflow, including in particular:
o Saffron # 2 appraisal / production well to be drilled in May /
June 2021, budgeted cost $3m million, e xpected production in the
range of 200 - 300 bopd generating cashflows of US$1.8 - US$2.6
million per annum, and paving the way for a full-field development
projected to achieve in an initial phase average daily production
of 1,000 - 1,500 bopd / generate annualised cashflows of US$8 -
US$12 million; and longer-term an overall field development could
ultimately comprise up to 30 wells in total, with a peak projected
production of approximately 4,000 bopd ;
o Appraisal well and extended well test at Weg Naar Zee in
Suriname planned to be drilled in July 2021, budgeted cost US$0.7
million capital expenditure, and paving the way for an initial
field development projected to produce c.100 bopd / generate
annualised cashflows of US$1m per annum; and longer-term with a
full WNZ field development scenario projected to generate annual
cash flows for the Company in excess of US$2.5 million
o Ongoing production maintenance and enhancement work in
Trinidad and Tobago, from five producing fields with current
production averaging in the range of 450 - 500 bopd, currently
generating annual cashflows to BPC of approximately US$3 million
per annum, and with the potential for cashflow growth from enhanced
production levels and/or increased oil prices
o Low-cost continuation of exploration activities, including
maturation of exploration targets in Trinidad, a process for
farming out the Company's principal licences in The Bahamas
(alongside renewal of those licences), and initial technical work
in relation to the Company's licence in Uruguay (and consideration
of potential farm-out options in relation to that licence)
-- Cost cutting initiative commenced across the Company, with a
view to reducing the Company's ongoing cost of operations by at
least 20% - 30%
-- Recapitalisation of the Company through a proposed GBP6.9
million (c. US$9.6 million) o pen offer to Qualifying Shareholders
("Open Offer") of approximately 1.967 billion shares at a price of
0.35 pence per share on a 1 new share for every 2.46 shares held
basis, to enable all qualifying existing shareholders the first
opportunity to participate in the Company's future, with the
Company intending for any shares not taken up in the Open Offer to
be placed with institutional investors at the same price
("Placing")
-- Circular to launch the Open Offer and convene an
Extraordinary General Meeting ("EGM") to be held on 17 May 2021 (to
be posted by no later than Saturday, 24 April 2021 and posted on
the Company's website on the same date) for the purposes of seeking
shareholder approval to:
o Change the name of the Company to Challenger Energy Group
Plc
o Consolidate the shares of the Company on a 1:10 basis ("Share
Consolidation"), and expansion of the Company's post-share
consolidation authorised share capital
o Refresh the Company's general share issuance authority
o Ratify and approve agreed changes to the Company's Conditional
Convertible Note facility, including a partial early conversion of
notes
-- Eytan Uliel, the Company's Commercial Director, to become
Chief Executive Officer (subject to completion of required due
diligence and onboarding processes for new Company directors) ,
Simon Potter is to transition to a Non-Executive director role
effective 20 May 2021; Non-Executive directors Mr Adrian Collins
and Mr Ross McDonald to step down from the Board; Mr Stephen
Bizzell to join the Board as a Non-Executive director (subject to
completion of required due diligence and onboarding processes for
new Company directors)
Bill Schrader, Chairman of BPC, said:
"T he Company is focussed on restoration, renewal and
refreshment. In this context, the Company's forward business
strategy for the coming 12-18 months has been firmly set, on
significantly increasing oil production and thus cashflow from our
assets in Trinidad and Tobago and Suriname, which the Board
considers to be the most effective manner in which to restore value
and create a foundation for future value growth. In support of this
strategy, the Company is calling an Extraordinary General Meeting,
to put before shareholders a series of actions with a view to
'resetting' the Company and its capital structure, along with a
recapitalisation of the Company and a cost reduction
initiative.
At the same time, as a part of a natural renewal process and in
adherence with best practices for corporate governance, changes are
being implemented to the Company's board and management. I would
like to welcome both Eytan Uliel and Stephen Bizzell on their
prospective appointments to the Board, as respectively CEO and
non-executive director. Shareholders will already be familiar with
the contribution of Eytan to the organisation over the last seven
years, and Stephen is highly credentialled in the industry, having
successfully assisted many similar companies with significant
capital raisings and transformational corporate transactions, as
well as having actively supported the funding of this Company for
the past two years. Simon Potter stays with us as a non-executive
director, where his skills and experience remain available to the
organisation. I would like to thank both Ross McDonald and Adrian
Collins, who will be leaving the Board, for their valued
contributions, over respectively the last nine and ten years.
Finally, a huge expression of appreciation for the work undertaken
by Ben Proffitt over the last twelve years in support of both the
Board as Company Secretary and to the Company as Finance Director -
we wish him luck as he embarks on the next stage of his career.
Taken together, the steps being announced today represent what
the Board considers to be a coordinated approach to charting a
viable and value-restorative future course for the Company. We
thank shareholders for their ongoing support, and we look forward
to providing updates as to our progress over the coming
months."
Eytan Uliel, CEO designate, said:
"Our Company has a diverse full-cycle portfolio of production,
development and exploration assets. The work program for 2021 and
beyond is busy, and contains many value triggers. The re-set
proposed today will enable us to get after that value, through
building production and cashflow. I am excited by the prospect of
leading Challenger Energy Group, and I look forward to engaging
with all our stakeholders over the coming months."
Background and Strategic Context
From 2008 until May 2020, BPC had a singular focus on
high-impact hydrocarbon exploration assets in The Bahamas, and in
particular on four exploration licences located in the southern
territorial waters of The Bahamas (collectively referred to as the
"Southern Licences"). This culminated in the recent drilling of the
Perseverance #1 well in late 2020 / early 2021.
During 2020, seeking to take advantage of the period of
inactivity and industry change occasioned by the Covid-19 pandemic,
the Company undertook a review of prevailing conditions in the oil
and gas exploration sector. Based on this review, and while
preparing for the drilling of Perseverance #1, the Company
initiated a revised business strategy with a view to creating a
broader, more diverse asset base. The objective was to create a
portfolio business with a range of assets across multiple
jurisdictions, a spread of operations across the industry spectrum
from production to exploration, and to deliver investors a
full-cycle exploration and production company centred on the
Caribbean and the Atlantic margin capable of complementing
high-impact exploration with growth in oil production and thus
cashflow.
In terms of execution of this revised strategy, the Company
completed two transactions in 2020: firstly, the successful
application for a high-impact exploration licence offshore Uruguay,
and secondly, a merger with Columbus Energy Resources PLC
("Columbus"), a company that owned and operated a range of
complementary assets in Trinidad and Suriname. A core rationale for
the Columbus transaction was the fact that the assets were already
in production and generating income, with the Company having
identified the potential to be able to grow that production, and
hence income, materially in the near-term. However, in taking the
first steps in creating the desired portfolio business through
2020, the Company's management structure, capital structure, and
market perception almost inevitably remained dominated by the
imminent drilling of Perseverance #1 in The Bahamas.
Drilling of the Perseverance #1 well was subsequently completed
in February 2021. However, the well did not result in a commercial
discovery, albeit the well did encounter hydrocarbons, and was
drilled safely and without environmental or safety incident.
Technical issues while drilling the well also meant that the
ultimate cost of the well will be considerably more than planned.
The Company is currently in the process of both completing the post
well technical analysis, and in parallel finalising payment terms
and schedule for remaining amounts invoiced, as well as resolving
various items in dispute, which process it expects to complete in
due course, thereby fully "closing out" the drilling program for
Perseverance #1.
With the Perseverance #1 well completed and with better
visibility of costs still to be paid (as set out in the Funding
Requirements section below), the Company is now in a better
position to consider the most advantageous plans for the various
other components of its asset portfolio, as well as the demand for
capital across the business. In particular, whilst the Company
believes that maturation of its offshore assets in The Bahamas and
Uruguay continue to be of significant longer-term value potential,
the Company's nearer-term focus, and immediate value creation
potential, will be driven largely by the ability to achieve a step
change in production and cashflow growth from its assets in
Trinidad and Suriname, realising low-cost exploration success in
Trinidad, continuing to expand a portfolio of complementary assets
along with sourcing the capital needed to collectively progress
these objectives.
It is in this context that the board of the Company ("Board")
considers it to be an appropriate time to enact certain fundamental
changes to the way that the Company operates going forward,
reflective of the fact that the assets in The Bahamas no longer
represent the sole or even dominant focus of the business.
To this end, a transition of the Company's Board and management
is occurring, alongside a change of name of the Company, a 'reset'
of the Company and its capital base, a recapitalisation, and
implementation of a cost reduction exercise. In aggregate, the
Board considers this overall Forward Strategy to be the approach
that will provide the Company with the best capacity and capability
to restore and create future shareholder value.
Key Business Value Drivers
As a consequence of activities undertaken during 2020, BPC is
now a Caribbean and Atlantic margin focused oil and gas company,
with a range of exploration, appraisal, development and production
assets and licences, located onshore in Trinidad and Suriname, and
offshore in the waters of The Bahamas and Uruguay.
In 2020, BPC commissioned a Competent Persons Report, which
certified net 2P reserves across BPC's portfolio of production
assets in Trinidad of 1.29 MMbbls, and net 2C contingent reserves
of 7.46 MMbbls across BPC's portfolio of assets in Trinidad and
Suriname (each at the Company working interest).
Approximately 80 staff are employed globally in the Company's
operations (the majority of whom are located in Trinidad and are
employed in active operations in that location). The Company owns
and operates two workover rigs that are employed in support of
production maintenance and enhancement activities in Trinidad.
Production Transformation and Cashflow Growth
The Company's forward business strategy for the coming 12-18
months is firmly focussed on restoring and creating future value
through significantly increasing oil production and thus cashflow
in its assets in Trinidad and Tobago and Suriname. To achieve this,
the Company is focussed on three principal activity sets:
a) Drilling of the Saffron #2 appraisal / production well in
Trinidad and, in the event of success with that well, rapidly
moving to develop the Saffron field, thereby significantly
increasing Company production and cashflow,
b) Drilling of the Weg Naar Zee (WNZ) appraisal well and
conducting an Extended Well Test (EWT) on that well in Suriname,
and, in the event of success, rapidly moving to drill additional
production wells across the WNZ field, thereby adding both further
production and cashflow, and
c) Maintaining, enhancing and developing production (and
resultant cashflow) at or from existing fields in Trinidad.
The Saffron Development in Trinidad
During 2020, an initial exploration well ("Saffron #1") was
drilled within the Bonasse licence in the South West Peninsula
("SWP") of Trinidad. This well discovered oil in both the Lower
Cruse and Middle Cruse reservoirs. High-quality light oil (circa
40-degree API) was also recovered to surface from the Lower Cruse
reservoir. The well encountered 2,363 ft of gross sands with six
reservoir intervals of interest with a 47 per cent. net / gross
ratio. On the basis of these results Columbus confirmed an
estimated a field resource (as established pre-drill by seismic) of
up to 11 MMbbls. Production was established from the Middle Cruse
interval but due to mechanical failures in the execution of the
Saffron #1 well, no production completion was established over the
discovered oil in the Lower Cruse.
The Company is now planning to drill an appraisal / production
well at the Saffron field. This well - Saffron #2 - is scheduled to
commence drilling in May 2021 and has been designed to establish
production from both the Middle and Lower Cruse reservoir horizons
(though initially only from the Lower horizons). As such, a number
of workstreams have already been completed to enable this to occur,
including a detailed well plan (benefitting significantly from the
drilling results and learnings from the drilling of Saffron #1),
civil works to establish the well pad, purchase of all long-lead /
major equipment items and contracts for required well services. The
well conductor was installed in March and mobilisation of rig and
associated equipment will commence this month and the well is
expected to spud on or around 23 May 2021, subject to the
successful completion of the Open Offer and Placing
("Fundraising"). The well design for Saffron #2 is for a total
drilled depth of approximately 4,500 ft, with drilling expected to
take up to 25-30 days to complete. The budget for the Saffron #2
appraisal well, inclusive of the production completion, is
approximately US$3 million.
The Saffron #2 appraisal well will be placed onto immediate
production given the ready proximity to oil sales infrastructure.
Expected production is in the range of 200 - 300 bopd. Based on a
US$60 / bbl oil price, this would generate, from this well alone,
cashflows to BPC of US$1.8 - US$2.6 million per annum, with a full
well payback of 12-18 months and a ROI of in excess of 200 per
cent..
Contingent on Saffron #2 well success, an initial program of
field development has been planned which could see a further five
to nine production wells drilled during H2 2021 (subject to
permitting, rig availability and capital availability), with field
development drilling continuing thereafter, through 2022 and 2023.
The current estimated overall field development would comprise up
to 30 wells in total, with a peak production projection of
approximately 4,000 bopd. The initial program of activity is
projected to achieve an average daily production of 1,000 - 1,500
bopd by the end of 2021 which, based on a US$60/bbl oil price,
which alone would generate annualised cashflows to BPC of US$8 -
US$12 million. For context, the projected full Saffron field
development scenario would generate annual cash flows for the
Company in excess of US$25 million per annum.
The Weg Naar Zee Project in Suriname
In October 2019, a Production Sharing Contract ("PSC") was
entered into with Staatsolie Maatschappij Suriname N.V, the
Suriname state-owned petroleum company ("Staatsolie"), to secure an
onshore appraisal / development project contained in the Weg Naar
Zee Block ("WNZ"). BPC holds a 100 per cent. working interest in
WNZ, however, Staatsolie has the right to participate in the
development phase with up to a 50 per cent. working interest,
subject to Staatsolie reimbursing BPC for pro-rata share of costs
incurred up to that point and funding its own share of costs
thereafter.
WNZ is a large block (900 km(2)) in a proven hydrocarbon
province with 70 historic wells and 2D seismic coverage. Up to 24
MMbbls STOIIP (15 degrees API) has been identified in eight pools
(of which around half is in a single pool) with the recently
completed CPR assessing 2C resources of 1.1 MMbbls and 3C resources
of 3.5 MMbbls.
An extended well test ("EWT") has been designed to appraise the
producibility of the discovered resource in the WNZ block, and to
assess whether the asset is suitable for application of enhanced
oil recovery techniques used by BPC in Trinidad. To date, approval
from Staatsolie to proceed with the planned drilling program has
been received as has approval from NIMOS (the Surinamese
environmental regulator). The proposed well site has been scouted,
various in-country contractors and well equipment has been sourced,
and rig tenders have been received from a number of suppliers.
The Company is thus ready to proceed with drilling of a first
WNZ well, albeit operational challenges arising from the Covid-19
situation in Suriname have resulted in the decision to move the
projected well spud date to July 2021.
This first well will target the largest of the undrained pools
(twinning with an existing successful production well), will be
drilled to a total depth of less than 1,000 ft., is expected to
take around 10 days to complete, and has an estimated cost of
US$0.6 million. The EWT to follow is expected to run through to the
end of 2021, and cost approximately an additional $150,000.
On successful production, the forward EWT program for the
balance of 2021 at WNZ could include the potential for drilling a
further four production wells (subject to permitting, rig
availability and capital availability), with field development
drilling continuing thereafter, through 2022 to 2024. The current
estimated overall field development could ultimately comprise up to
approximately 50 wells in total over time, at a cost of
approximately $300,000 per well (albeit with most wells paid for
from cashflow generated by the project itself), with peak
production projected to be approximately 900 to 1,000 bopd. A
successful WNZ initial field development of four additional
production wells is projected to produce around 100 bopd which,
based on a US$60/bbl oil price, would result in cash flows to BPC
of US$1m per annum. For context, the projected full WNZ field
development scenario would generate anticipated annual cash flows
for the Company in excess of US$2.5 million (based on the same oil
price assumption).
Growth of Existing Production in Trinidad and Tobago
In Trinidad and Tobago, the Company has five producing fields -
comprising of some 250 wells (of which over 80 are producing) -
with current production averaging in the range of 450 - 500 bopd.
This represents a stabilisation of natural production decline and,
at currently prevailing oil prices, results in positive operating
cashflows in Trinidad (at a US$60/bbl oil price, 500 bopd of stable
production from these fields results in annual cashflows to BPC of
approximately US$3 million per annum, which approximately equates
to the Company's operating costs and overhead in Trinidad).
The Company uses its two owned and operated workover rigs to
complete incremental workover projects across its fields of
operation and in the last two months has added an additional 50
bopd to the baseline production, which serves to offset natural
production decline from these aged reservoirs. Projects undertaken
include both wellbore damage clean outs and addition of new oil
zones. An additional 10 workover projects are planned for Q2 2021
on the Goudron and Inniss-Trinity fields that will primarily access
zones that have previously not been adequately produced through
recompletions and additional perforations. Further similar projects
will be shortlisted and scheduled for execution throughout the
remainder of 2021.
The Company has recently undertaken full-field asset reference
plans for each of the operating fields, that has revealed potential
unswept or compartmentalised oil that may be recovered through
either further workovers or infield drilling, and accordingly plans
are being put in place to capture that oil in order to enhance and
grow production.
High-Impact Exploration
Whilst the Company's forward business strategy for the coming
12-18 months is firmly focussed on restoring and creating future
value through significantly increasing oil production and thus
cashflow from its assets in Trinidad and Tobago and Suriname,
pursuing high-impact exploration activities in an effective
low-cost manner, as a means of complementing production growth and
cashflow generation with longer term value growth, remains a
component of the Company's overall strategy and business.
In this regard, the Company is focussed on three principal
exploration activity sets:
(a) Maturing the exploration prospect represented by the
Company's extensive licence position in the South West Peninsula of
Trinidad,
(b) Seeking a farm-out of the Company's licences in The Bahamas, and
(c) Progressing the initial low-cost technical work required to
mature the exploration prospectivity represented within the
recently acquired OFF-1 licence in Uruguay.
The South West Peninsula of Trinidad
The South West Peninsula (SWP) of Trinidad, in which the Company
has a large licence position, represents the Company's main
exploration acreage in Trinidad with numerous prospects consisting
of both stacked shallow and deeper reservoirs. The area is assessed
internally by BPC as having a resource level amounting to
approximately 230 MMbbls, containing up to nine Saffron-sized
prospects.
BPC is undertaking reprocessing of the entire 3D seismic grid
over the area in 2021. Re-processing commenced in April 2021 and is
anticipated to be complete within six months. Results from this
reprocessing work, along with existing data, will support the
selection of future low-cost exploration drill targets.
The Bahamas
The newly acquired technical data from Perseverance #1 will
facilitate valuable updates and refinements to basin modelling,
biostratigraphy and geochemistry. In particular, the significance
of the new geothermal gradient data placing the oil maturation
window deeper stratigraphically has critical implications for the
deeper Jurassic play that produces oil in the Eastern Gulf of
Mexico from an analogous play type (and which is the current focus
for several companies actively exploring in the region or in deep
water Mexico). Additionally, data derived from Perseverance #1
provides a modern-day well tie to recalibrate existing 3D mapping
of the Aptian intervals untested in closures and structures
elsewhere in the licence areas.
As a result of this information the primary focus of the ongoing
post-well evaluation work is on the deeper Jurassic pre-salt
clastic, structural play and the extent to which potential
multiple-target drilling locations can be optimised to access and
evaluate untested shallower closures whilst testing this primary,
deeper play.
Given these technical results, since announcing the outcome 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 has now formally launched an entirely new farm-out
process via Gneiss Energy. The farm-out is seeking to introduce a
funding and operating partner for the next stage of exploration
activity in The Bahamas.
Concurrent with the farm-out process, the Company will seek to
renew its 100 per cent interest in the Southern Licences by
extending the licences in to the third exploration period. The
third exploration period for the Southern Licences would last for
three years and will require a further exploration well to be
drilled before the period expires, failing which the licences would
be forfeited (i.e., "drill or drop"). An extension of the licences
will attract an annual licence fee (the amount to be determined
during the renewal process) and requires a relinquishment of 50 per
cent. of the licence area. Notification of renewal of the licences
has been submitted to the appropriate Ministry, and the area to be
relinquished has been identified as being the area equivalent to
that over the shallower water depths covered by the Southern
Licences (less than circa 200 feet).
As at the date of this document, applicants representing various
environmental groups have been granted leave to apply (amongst
other matters) for a judicial review of the Government of The
Bahamas' decision to issue an Environmental Authorisation to the
Company for the drilling of the already completed Perseverance #1
well. The Company has been joined as a party to that action. In
order for the applicants to continue to pursue this action, the
Supreme Court of The Bahamas had ordered that by 31 March 2021 the
applicants were required to post the sum of $200,000 as security
for costs. Thus far, the applicants have failed to do so, albeit
the applicants have asserted that they have secured access to the
funds to enable them to do so, and a process is ongoing to
establish an appropriate joint account between the Company's and
the applicants' legal advisers for deposit of those security funds,
consistent with common practice in The Bahamas. On establishment of
the joint account, if security for costs is posted by the
applicants, the judicial review process will continue, but no date
has been set for the substantive hearing of that review, which it
is presently estimated would not occur before June / July 2021.
Alternatively, if the joint account is established and the
applicants nonetheless fail to post the required security, the
judicial review action will be stayed.
Uruguay
In June 2020, following a competitive bid process, the Company
was notified that it was the successful applicant for the OFF-1
offshore block in Uruguay. Subsequently, the Company has been
advised by ANCAP, the Uruguayan state-owned oil and gas company,
that the signing of the licence for the OFF-1 offshore block
presently awaits presidential approval, which has been delayed due
to the Covid-19 pandemic situation. The Company expects the formal
licence execution within Q2 2021 and will thereafter commence
initial desk-top and enhanced technical work. In the interim,
technical work undertaken independent of the Company by ANCAP has
sought to highlight exploration prospectivity across the circa
15,000 km(2) licence area. This involves detailed mapping of
several play types and prospects, notably the syn-rift play
potential within the Company's OFF-1 block. The prospect and lead
screening includes the specific identification of the syn-rift
Lenteja prospect with a P(50) estimated ultimate recovery volume
(EUR) of 1.359 billion barrels and an upside case of several
billion barrels recoverable (Source: ANCAP 2021), located in just
80 metres of water. This volume estimate aligns well with the
earlier guidance provided by BPC of the potential within its
OFF-1 licence area in excess of a billion barrels.
The Company expects near-term activities in Uruguay to be
low-cost (previously indicated by the Company to be in the range of
US$200,000 per annum), and whilst there is no drilling obligation
during the initial four-year exploration term, the Company will be
working to reconfirm attractive volumetrics and mature a range of
drillable prospects encompassing syn-rift and Guyana analogue plays
from reprocessed and improved 2D seismic imaging that has revealed
new exploration upside previously unable to be mapped due to poor
data quality.
New Business Opportunities
The Company continues to screen and evaluate potential new
business opportunities in line with its objectives to expand and
differentiate its existing asset portfolio, with a view to creating
a broader, diverse asset base and to grow production and cashflow.
The Company will continue to seek opportunities that further
leverage a portfolio business with a range of assets across
multiple jurisdictions, a spread of operations across the industry
spectrum from production to exploration, and to deliver investors a
full-cycle exploration and production company centred on the
Caribbean and the Atlantic margin.
Forward Strategy and Corporate Changes
As indicated above, following the completion of the Perseverance
#1 well in The Bahamas, the Company considers that its key value
drivers, and hence forward business strategy for the coming 12-18
months, will relate primarily to significantly increasing oil
production and thus cashflow in its assets in Trinidad and Tobago
and Suriname.
In support of this forward business strategy the Company is
proposing various changes and actions which can be summarised as
follows:
-- A transition of the Board and the senior management of the
Company coupled with a comprehensive cost savings exercise across
the Group (with a view to reducing overhead by 20 per cent. - 30
per cent. in the coming months), along with introduction of
revised, aligned incentivisation arrangements for ongoing / new
management and Board;
-- A 'reset' of the Company and its capital base, to be implemented by way of:
o a change of name of the Company to Challenger Energy Group PLC
(the change of name of the Company being the subject of a
Resolution at the EGM);
o A share consolidation whereby it is proposed that the existing
Ordinary Shares of 0.002 pence each in the capital of the Company
("Existing Ordinary Shares") will be subject to a 1 for 10
consolidation resulting in new Ordinary Shares of 0.02 pence each
in the capital of the Company (the "New Ordinary Shares") (the
"Share Consolidation") (the Share Consolidation being the subject
of a resolution at the EGM);
o An increase to the post-Share Consolidation authorised share
capital of the Company;
o The approval of a new general share issuance authority;
and
o An agreed early conversion of part of the Conditional
Convertible Notes currently on issue, along with a reapproval of
the ability to issue shares in satisfaction of future conversions
under the Conditional Convertible Note Facility, as required
(each the subject of resolutions to be proposed at the EGM
("Resolutions")); and
-- A recapitalisation of the Company, seeking to raise up to, in
aggregate, approximately GBP6.9 million of new equity by way of an
Open Offer to holders of Existing Ordinary Shares (other than
treasury shares) on the Company's register of members at the Record
Date (other than certain Overseas Shareholders) ("Qualifying
Shareholders") (and a Placing of any Open Offer Shares not taken
up).
When taken together, this set of actions represent what the
Board considers to be a coordinated approach to charting a viable
and value-restoring future course for the Company.
A circular in relation to the Open Offer and a Notice of
Extraordinary General Meeting, including explanatory notes in
relation to the resolutions to be put to holders of Existing
Ordinary Shares ("Shareholders") at the EGM, will be posted to
shareholders on 24 April 2021] and will be posted to the Company's
website at the same time. The EGM will be held at IOMA House Hope
Street Douglas, Isle of Man IM11AP at 11:00 a.m. on 17 May
2021.
Detailed below is a brief explanation for each of the elements
above.
Changes to the Board and Management
With the drilling of Perseverance #1 in The Bahamas completed,
and with the near-term focus on the Company shifting toward
significant growth in profitable production and thus cashflow from
operations in Trinidad and Suriname (and in parallel pursuing a
renewal of licences and farm-out for those licences in The Bahamas)
the Board considers that it is an appropriate time for changes to
be made to the Company's Board and executive management team, as
follows:
(a) Mr Simon Potter, the Company's Chief Executive Officer since
2011, will step down from this role effective 20 May 2021 (or
immediately following completion of the Open Offer and the Placing
if later). Thereafter, Mr Potter will remain on the Board of the
Company in the capacity of non-executive director, with a remit to
provide ongoing support to the Company's executive team given Mr
Potter's long history with the Company, and his deep industry
knowledge and experience.
(b) Mr Eytan Uliel, the Company's Commercial Director since
2014, will replace Mr Potter as Chief Executive Officer of the
Company effective 20 May 2021(or immediately following completion
of the Open Offer and the Placing if later, and will join the Board
on, and subject to, completion of required due diligence and
onboarding processes for new Company directors).
(c) Mr Adrian Collins, initially Chairman and then a
non-executive director of the Company since 2011, has advised of
his resignation from the Board, to take effect from 20 May 2021 (or
immediately following completion of the Open Offer and the Placing
if later).
(d) Mr Ross MacDonald, a non-executive director of the Company
since 2012, has advised of his resignation from the Board, to take
effect from such time as Mr Stephen Bizzell joins the Board of the
Company (as detailed in point (e) below).
(e) Consistent with the broadened operating remit of the Company
and the geographies in which it does business, the Chairman intends
to seek to supplement the revised Board's capabilities over the
coming months, as necessary with the addition of suitably qualified
directors. As part of this process, Mr Stephen Bizzell, principal
of Australian investment and financial advisory firm Bizzell
Capital Partners, the provider and arranger of the Company's
Conditional Convertible Notes facility, has indicated his intention
to join the Board of the Company (which will occur on, and subject
to, completion of required due diligence and onboarding processes
for new Company directors).
(f) Therefore, assuming the above changes are completed, the
Board of the Company will comprise William Schrader (Non-Executive
Chairman), James Smith (Deputy Non-Executive Chairman), Simon
Potter (Non-Executive Director), Stephen Bizzell (Non-Executive
Director) and Eytan Uliel (CEO), with the potential for the
additional of further independent Directors in the future, as may
be deemed appropriate.
(g) The various committees of the Board will be appropriately
restructured to reflect the revised composition of the Board, and a
further announcement will be made in this regard in due course.
(h) Mr Benjamin Proffitt, the Company's Finance Director and
Company Secretary since 2010, will step down from this role once a
suitable replacement has been recruited, allowing ample time for an
orderly transition of key financial and secretarial functions
within the Company.
(i) As appropriate with the ongoing level of HSE/ESG delivery,
operations management, commercial impact and requirement for
Government and stakeholder relations in each of the jurisdictions
of operation - Trinidad and Tobago, Suriname, The Bahamas and
Uruguay - the CEO will make recommendations to the Board as to the
appropriate management structure, skills maintenance and staffing
levels appropriate, with a view to implementing any further
management and organisational changes in the coming 3-4 months.
The revised Board membership and all relevant personnel will be
working in the coming months to deliver a comprehensive cost
savings exercise across the Company, with a view to reducing
overhead by 20 per cent. - 30 per cent., whilst at the same time
ensuring a smooth and seamless transition of both the Board and
executive team. As part of the cost savings exercise, it is the
intention that part of the existing compensation of the Board and
members of the senior management group will, for at least the next
6 months, be satisfied in shares.
Change of Name
From 2008 to mid-2020, the Company's only business was the
various licences held by the Company in The Bahamas. In this
context, the Company's name, "Bahamas Petroleum Company plc", was
entirely appropriate.
Since mid-2020, however, the Company's operations and business
strategy have expanded considerably, such that it now includes
assets and operations in Trinidad and Tobago, Suriname and Uruguay,
in addition to those in The Bahamas. As detailed in this document,
the near-term focus of the Company has shifted toward a rapid
build-up of profitable production from operations in Trinidad and
Tobago and Suriname, initial technical work in Uruguay, and in
parallel pursuing a farm-out (and renewal) for those licences in
The Bahamas. The Company in the future may also become involved in
assets and operations in other jurisdictions.
As such, the Board considers that the name of the Company,
referring solely to The Bahamas, is no longer an accurate
representation of the Company's overall business or strategic
direction.
Accordingly, the Board is proposing to change the name of the
Company to Challenger Energy Group PLC.
A 'reset' of the Company's capital base
The Company's current capital base is, in large part, a
reflection of the last several years' focus on fundraising
necessary to secure the funding needed for Perseverance #1. At
present, the Company has approximately 4.85 billion shares on
issue. At the same time, the Company has used up almost all of its
current share issuance capacity, such that the Company has no
ability to respond flexibly to opportunities to secure new assets
or secure new capital. Finally, for the reasons detailed in in the
Financial Information section below, in order to execute on its
planned 2021 work programs, the Company requires the infusion of
fresh capital.
To address these issues, the Company is proposing to 'reset' its
capital base by way of a 1:10 share consolidation and then increase
the post-share consolidation authorised share capital of the
Company, the approval of a new general share issuance authority,
and a reapproval of the ability to issue shares in satisfaction of
the agreed partial early conversion of Conditional Convertible
Notes currently on issue and in satisfaction of future potential
conversions of Conditional Convertible Notes that remain on issue
or may in the future be issued under the Company's Conditional
Convertible Note facility (all these matters are the subject of
resolutions at the EGM).
Share Consolidation
The Board is of the view that it would benefit the Company and
shareholders to reduce the number of ordinary shares on issue with
a resulting adjustment in the market price of such shares. This is
expected to assist in reducing the volatility in the Company's
share price and enable a more consistent valuation of the Company,
thus making the Company's shares more attractive to long-term
institutional shareholders whilst not impacting overall
liquidity.
It is thus proposed that all existing ordinary shares will be
subject to a 1 for 10 consolidation.
New Ordinary Shares issued pursuant to the Share Consolidation
will have exactly the same rights as those currently accruing to
existing ordinary shares under the Company's Articles, including
those relating to voting and entitlement to dividends.
General share issuance authority
At the EGM, Shareholders will be asked to increase the Company's
authorised share capital post share consolidation, and thereafter
to approve a temporary authority for the Company to issue up to
750,000,000 new ordinary shares (on a post-share consolidation
basis). If this authority was ultimately to be used in its entirety
(and assuming the consolidation of the Company's share base is
approved, the Open Offer is fully taken up or any Ordinary Shares
not taken up are successfully placed, and the various other actions
described in this document are completed) this would represent a
total potential dilution of approximately 50 per cent. on a fully
diluted basis, without the need for seeking further shareholder
approval, and with such capacity to be in place until the end of
2022.
The rationale for the proposed temporary general issuance
authority is directly related to the Company now embarking on a
course to restore value through a strategy aimed at significantly
increasing production and thus cashflow, and which will necessarily
involve the need to secure fresh capital over time, and which may
also include the issuance of additional ordinary shares to secure
access to new assets or portfolios of assets complementary to this
strategy. In the absence of a near term value uplift from The
Bahamas, it is this activity - and the ability to execute on this
activity quickly and flexibly - which the Board consider offers the
best opportunity for Shareholder value restoration and creation
over the coming 12-18 months.
Further, as discussed below, it is intended that the
implementation of revised incentivisation arrangements - considered
essential to the ability of the Company to continue to retain key
existing employees and attract, retain and incentivise future
employees - will be conducted under this general share issuance
authority .
Approval of early conversion of Conditional Convertible Notes
and ratification of the amended terms of the Conditional
Convertible Note facility
In September 2019, the shareholders of BPC approved the Company
entering into a GBP10.25 million convertible loan facility (the
"Conditional Convertible Note") with Bizzell Capital Partners Pty
Ltd (an Australian based investment and investment management
firm), and the terms contained within that facility. The facility
has been amended and extended on several occasions, including on 26
November 2020, when the Conditional Convertible Note facility was
expanded to a total of GBP15 million of available funding.
Subsequent to this date, GBP3 million of Convertible Notes were
drawn down.
On 15 February 2021, and as announced as that time, certain key
terms of the Conditional Convertible Note facility were further
amended by mutual agreement, including, amongst other matters, to
reduce the conversion price of all Convertible Notes issued and to
be issued under the facility from 2.5 pence to 0.8 pence per
Existing ordinary share (this price will change to 8 pence per New
Ordinary Share on completion of the Share Consolidation), and to
amend the manner and timeline in which interest payments will be
made. These variations were entered into with the facility provider
to reflect the changed business environment of the Company, most
notably the re-rating of the Company share price following the
results of the Perseverance #1 well.
At that time, a further GBP2 million of Convertible Notes were
committed on an unconditional basis, and were due for draw down and
funding at the end of February 2021. As yet, however, the Company
has not drawn down on these funds, pending ongoing negotiations
with the provider of the Conditional Convertible Note facility in
the context of the Company's overall financial requirements and in
anticipation of the Fundraising detailed in this document.
The Company and the provider of the Conditional Convertible Note
have now mutually agreed further amendments to the terms of the
Conditional Convertible Note facility, as follows:
(a) Of the GBP3 million of Convertible Notes that have already
been drawn down, GBP2.5 million (and all accrued interest in
respect of those Convertible Notes, amounting to approximately
GBP113,000) will be converted by the noteholders into approximately
74.7 million New Ordinary Shares (that is, at a conversion price
equal to the Open Offer issue price), with such conversion to occur
concurrent with (and subject to) closing of the Open Offer,
(b) The date for funding and issue of the GBP2 million of
Convertible Notes previously committed on an unconditional basis
and initially intended to be drawn / funded at the end of February
2021 has now been rescheduled to be no later than 14 June 2021
(that is, concurrent with the anticipated completion of the
drilling of the Saffron #2 well, but not dependent on the
completion or outcome of the Saffron #2 well), as well as now
expressed to be conditional on the Open Offer process having
successfully secured at least GBP5 million,
(c) Convertible Notes remaining on issue after the closing of
the Open Offer, and those to be issued by 14 June 2021 as described
above, will continue to be governed by the terms and conditions of
the Conditional Convertible Note facility as amended (and with the
conversion price of those Convertible Notes amended in accordance
with the share consolidation to 8 pence per share),
(d) The balance of the Conditional Convertible Note, under which
up to a further GBP10 million of funding is potentially available
to the Company on a conditional basis, will remain unchanged, and
will be available for draw down (subject to satisfaction of
conditions) until the end of July 2021 (that is, broadly speaking
in line with the potential need for funding for the start of
Saffron field development expenditure, in the event of success with
Saffron #2), and
(e) As indicated previously, Mr Stephen Bizzell will join the
Board of the Company being a right afforded under the terms of the
Conditional Convertible Note facility (with such to occur on, and
subject to, completion of required due diligence and onboarding
processes for new Company directors).
The Directors believe the Conditional Convertible Note facility,
as amended, continues to represent a useful and flexible component
of the overall package of funding sources available to meet the
ongoing capital needs of the Company in the current commercial
environment.
New Incentivisation Arrangements
As the Company embarks on the above-noted process of Board and
executive management transition, the Board considers it appropriate
that incentive arrangements for the ongoing / future Board and
management / employee team of the Company - especially those
charged with executing the Company's future business and strategy -
be appropriately refreshed.
This is because the existing incentive arrangements for the
Company's Board and team of executives and employees has, to-date,
been entirely conditional on, and singularly linked to, the
delivery of the Perseverance #1 well in The Bahamas
(notwithstanding a significant expansion of the Company asset
portfolio and business since mid-2020). The non-commercial result
of Perseverance #1 means that the options previously issued to the
Company's current Board and team of executives and employees are
substantially 'out of the money', and hence the holders of those
options will for all intents and purposes receive no future
benefit. This is entirely appropriate: the incentive arrangements
operated as intended, such that there has been an alignment of
interests between the value outcome for shareholders with that of
Board / management.
However, going forward, it is imperative that the Company
continues to have dedicated, competent people at work on delivering
the planned work programs and executing the Company's future
strategy focussed on production and cashflow growth. Equally, the
Company must continue to be able to recruit, retain and incentivise
high-quality personnel, whether that be existing employees, or new
ones. BPC operates in a competitive global job market for skilled
and talented personnel, and thus it is essential that the Company
has the ability to offer fair, market-based incentive arrangements
which serve to align management with the creation of shareholder
value.
To ensure this, the Company is thus proposing to issue new
options only to certain key continuing members of the Board /
executive / employee group. These new options will be granted in
three tranches, with new vesting and exercise conditions linked
directly to delivery of production growth and shareholder value
growth - that is, linked directly to and consistent with
strategy.
The new options to be allocated only to key continuing members
of the Board / executive / employee group will be in various
tranches, each tranche having an exercise price at a premium to the
Issue Price and that steps up further with each tranche, and
certain of the tranches will have vesting criteria based on
achieving production outcomes and shareholder value creation. The
detailed terms and allocation of the new options will be determined
by the Board following recommendation from the Remuneration
Committee, and will be advised by the Company at that time.
Of the intended allocation of new options, both initially and
over time, only a very small proportion will be to non-executive
Board members, with the vast majority of options to be allocated
to, or available for future allocation amongst, key executive
management and other critical employees. That is, to incentivise
those people directly responsible for delivery of the future of
this Company, and with their aggregate reward directly linked to
building production and generating future value creation for all
Shareholders.
The implementation of these revised option arrangements will be
conducted under the Company's general share issuance authority
(assuming this is approved at the Extraordinary General Meeting).
As such, these revised option arrangements, which as noted will be
fully disclosed once allocated, do not require specific approval of
shareholders outside of the approval of the general share issuance
authority. However, the allocation of the new options will likely
be deemed a related party transaction in accordance with the AIM
Rules for Companies, and for which a fairness opinion will be
obtained as required.
A recapitalisation via an Open Offer (and potential shortfall
Placing)
In order to pursue activities designed to increase production
and cashflow, the Company requires fresh capital, which it intends
to secure via an Open Offer (and a subsequent placing of any New
Ordinary Shares not taken up under the Open Offer (the
"Placing")).
The Company is progressing its recapitalisation via an Open
Offer because the Board considers it important to provide the
Company's loyal and supportive Shareholders with the first
opportunity to participate in the future of the Company.
Under the Open Offer, qualifying shareholders will have the
ability to subscribe for, in aggregate, up to approximately GBP6.9
million (before expenses) in Open Offer shares without the Company
having to produce a prospectus (in accordance with the Prospectus
Rules) which would have both cost and timing implications for the
Company.
The Open Offer provides an opportunity for all qualifying
shareholders to participate in the fundraising by acquiring Open
Offer Shares pro rata to their current holdings of existing
Ordinary Shares. Qualifying Shareholders are also being given the
opportunity to apply for excess shares through an Excess
Application Facility, provided that they take up their Open Offer
entitlement in full.
Qualifying Shareholders will be able to subscribe for shares
under the Open Offer Shares at a price of 0.35 pence per share (on
a pre-share consolidation basis, which equates to 3.5 pence per
share on a post share consolidation basis), pro rata to their
holdings of Existing Ordinary Shares on the basis of 1 Open Offer
share for every 2.46 Existing Ordinary Shares.
The issue price of shares under the Open Offer represents a
discount of approximately 35 per cent. to both the closing share
price on 20 April 2021 and the average VWAP of the Company's shares
in the 30 trading days to 20 April 2021.
To the extent all of the shares available for subscription under
the Open Offer are not fully taken up, the Company intends to
appoint its brokers and advisers, together or individually, to
place any Open Offer Shares not taken up to institutional investors
at the same price as the Open Offer and via the Placing.
Assuming full take-up under the Open Offer (or full placing of
any Open offer Shares not taken up under the Open Offer) the issue
of the Open Offer Shares will raise gross proceeds of GBP6.9
million for the Company.
Mr Eytan Uliel (the Company's incoming Chief Executive Officer)
has confirmed his intention to participate for his pro rata
entitlement in the Open Offer in respect of any Ordinary Shares
held. Certain other members of the Company's continuing Board and
senior management have also confirmed their intention to
participate in the Open Offer to varying extents.
Further details in relation to the Open Offer will be included
in the Open Offer circular, to be posted to shareholders no later
than 24 April 2021, and to be posted on the Company's website at
the same time.
Financial Information
Funding Requirements
Over the balance of 2021, the Company presently estimates that
it will have a requirement for total potential funding of between
US$22.5 - US$40 million depending on the range of activities
undertaken. The higher end of this funding range (that is,
approximately US$40 million over the balance of 2021) includes up
to $20 million of drilling and business costs that represent
discretionary or enhanced activity in a success case (that is, the
decision to incur these expenses is at the Company's discretion,
and will depend not only on capital availability but positive
technical outcomes from planned drilling activities).
The total range of activities to be considered during the
balance of 2021 (based upon the level of funding available and the
final estimate of costs, in respect of which certain elements are
unknown at this time and some of which would be incurred in 2022)
is summarised as follows:
(a) drilling and evaluation of the Saffron #2 well planned to be
drilled in May / June 2021: US$3 million capital expenditure - as
noted previously, the Company is projecting a successful Saffron #2
to produce in the range of 200 - 300 bopd and based on a US$60 /
bbl oil price, this well would generate cashflows to BPC of US$1.8
- US$ 2.6 million per annum, with a full well payback of 12-18
months and a ROI of in excess of 200 per cent;
(b) drilling an extra 5-9 production wells at the Saffron
project, the decision for which will depend on the technical
outcomes of the Saffron #2 well and the pace of which will depend
on permitting, rig availability and capital availability: US$12 -
US$20 million capital expenditure, of which an estimated US$7m -
US$12 million would require capital funding, with the balance
anticipated to be able to be funded from cashflow generated by the
project - as noted previously, this initial program of activity is
projected to achieve an average daily production of 1,000 - 1,500
bopd by the end of 2021 which, based on a US$60/bbl oil price,
alone would generate annualised cashflows to BPC of US$8 - US$12
million going forward; the current estimated overall field
development could ultimately comprise up to 30 wells in total, with
a peak projected production of approximately 4,000 bopd ;
(c) the EWT project (including drilling and evaluation) at Weg
Naar Zee in Suriname planned to be drilled in July 2021: US$0.7
million capital expenditure;
(d) drilling an extra 4 production wells at the WNZ project in
Suriname, a decision and pace for which will depend on the
technical outcomes of the initial well at WNZ and on permitting,
rig availability and capital availability: US$2 million capital
expenditure - as noted previously, such an initial field
development is projected to produce around 100 bopd which, based on
a US$60/bbl oil price, would result in cash flows to BPC of US$1m
per annum, and with a projected full WNZ field development scenario
anticipated to generate annual cash flows for the Company in excess
of US$2.5 million ;
(e) proceeding with in-fill drilling well opportunities at
existing producing fields in Trinidad, the decision for which will
be taken in H2 2021, and will largely be dependent on capital
availability at that time: up to $6 million capital
expenditure;
(f) completion of the seismic reinterpretation work in the SWP
of Trinidad, with a view to delineating additional drillable
prospects: US$0.3 million capital expenditure;
(g) drilling up to two exploration wells targeting discoveries
from Saffron lookalike prospects by the end of 2021 based upon the
results of high grading the 3D data set, and capital availability:
up to $6 million capital expenditure;
(h) following the completion and outcome of the drilling of
Perseverance #1, a final reconciliation payment to a fund managed
by Lombard Odier ($4 million) is due in June 2021, and the Company
is in the process of finalising residual costs, payment terms,
schedule and resolving various items in dispute relating to the
drilling of Perseverance #1, which process it expects to complete
in due course but is expected to amount to approximately $14
million payable through into H2 2021 (although the Company expects
to achieve a discount/reductions to this amount as a result of
commercial negotiations and agreed resolutions to items in dispute
and/or be able to satisfy part of this amount in the form of
shares, and has assumed an aggregate 20 per cent. - 30 per cent.
reduction in cash required for settlements on this basis);
(i) realising business development opportunities to expand the
portfolio based upon projected value generation (to be
determined);
(j) any incremental costs associated with renewal of the
Company's licences in The Bahamas, including community programs,
and ongoing legal costs as may be required to continue to
successfully defend the Company's licences in the event of ongoing
environmental challenges in The Bahamas (to be determined), and
(k) corporate overhead costs up to $4 million, although as noted
previously, the Company is initiating a cost reduction exercise
across its business with a view to reducing corporate overhead
costs by 20 per cent. - 30 per cent.
It is the intention of the Board and management to undertake as
much activity as possible but at all times remaining within the
overall funding capacity of the Company. In other words, given the
discretionary / success-based nature of much of the Company's
intended activity, capital availability will be a core determinant
in the decision to proceed with particular items of work, and the
timing of those decisions.
Funding Sources
The Company presently considers that it has sufficient financial
resources available to it to meet the lower end of the above-noted
required funding range (that is, approximately US$22.5 million)
through the balance of 2021. The Company's expectation in this
regard includes and assumes:
(a) cash at hand, proceeds of fee rebates described below, and
expected amounts of not as yet received funds under the Conditional
Convertible Note facility (approximately $10 million);
(b) assumed surplus income from production based on an assumed
US$60/bbl oil price and current projected production through the
balance of 2021 (including from Saffron #2) (approximately $3
million);
(c) the proceeds of the Open Offer (assuming full take of the
Open Offer and/or a successful Placing of any Open Offer Shares not
taken up) ($9.7 million);
(d) successful implementation of the cost cutting program being
initiated across the Company, resulting in overall cost reduction
in the range of 20 per cent. - 30 per cent. (approximately $2
million); and
(e) completion of negotiations in relation to licence renewals
in The Bahamas and completion of invoicing, payment scheduling and
resolution of disputes and final settlement of estimated costs
associated with the completed drilling of Perseverance #1, such
that the aggregate amount of cash payments required in respect of
licence fees and 'close-out' of Perseverance #1 are consistent with
the description in (h) above (approximately $4.5 million).
In circumstances where current funding assumptions (as
summarised above) do not materialize or do not materialize in the
timeframe expected (for example if the GBP2 million currently
expected under the Conditional Convertible Note facility is not
received, or if expected surplus income from production, and/or the
proceeds of the Open Offer (assuming full take of the Open Offer
and/or a successful Placing of any Open Offer Shares not taken up)
are not available, or the Company is unable to negotiate expected
reductions in cash required for settlements as described above,
absent securing capital from alternative sources, the Company would
not have sufficient financial resource available to undertake all
of the work and meet the obligations projected in the $22.5
million, and would be required to manage cash resources
accordingly.
In circumstances where the Saffron #2 well is not a success, the
Company will be required to secure capital from alternative sources
or the Company would be required to effect greater reductions to
overheads, negotiate greater reductions in cash required for
settlements as described above and/or not proceed with or defer
discretionary expenditure on all or some of the work as summarised
above.
Equally, in the event of success with the Saffron #2 well in
Trinidad, and/or success with the WNZ well and EWT in Suriname, the
Company will need additional funding to pursue development of those
projects and for general working capital purposes, presently
estimated to be $15 - $20 million in additional funding required
through the balance of 2021.
In any of the above-noted circumstances where the Company would
look to secure funding by way of alternative sources to meet any
funding shortfall / incremental funding needs, there can be no
assurance that the Company would be successful in securing any such
alternative funding.
However, the Board believes there are a wide range of potential
funding sources available to the Company, and as such the Company
is confident that it will be able to secure additional funding, if
and when required. In particular, those additional sources of
funding that may become available to the Company, and which would
increase the Company's overall financial capacity with a view to
placing the Company in a position where it would have sufficient
funds available to meet its requirements, including:
-- Assuming the GBP2 million is provided in June 2021, undrawn
availability under the remaining limit of the Company's Conditional
Convertible Note facility, which is up to GBP10 million.
Availability of this portion of funding under the Conditional
Convertible Note facility remains conditional, primarily on the
Company and the provider of the facility agreeing and documenting
suitable security arrangements. In this regard, the following
points are noted:
o As noted previously, GBP3 million has already been advanced to the Company under this facility (notwithstanding that security documentation has not been agreed), and of which GBP2.5 million will be converted into Ordinary Shares coincident with and on the same price basis as the Open Offer.
o A further GBP2 million has been committed under this facility.
These funds, initially scheduled to be advanced at the end of
February 2021, have been rescheduled to now be due coincident on
completion of, but not dependent on the results of, the drilling of
Saffron #2 (and provided that the Open Offer has been successfully
completed).
o The availability of the remainder of the facility (subject to
conditionality) has been extended to the end of July 2021, to
accommodate for the expected Saffron timeline, and
o Mr. Stephen Bizzell will be joining the board of the Company in due course.
Given the foregoing, the Company considers the Conditional
Convertible Note facility to be a viable and important part of its
overall funding sources, and considers that a material amount of
further funding could become available under the facility in the
future, particularly in the event of a successful outcome with the
Saffron #2 well so as to enable a rapid development of that project
in particular;
-- Increased income from production, whether as a result of
higher levels of production or a higher oil price than the
US$60/bbl assumed in the Company's forecasting;
-- Proceeds from a successful farm-out of the Company's assets
in The Bahamas - as noted elsewhere in this document, the Company
has engaged Gneiss Energy in relation to this process, which is
underway;
-- Proceeds and/or offset of costs in relation to other assets
in the Company's portfolio. Specifically, the Company considers
that in the event of a successful Saffron #2 well a viable
alternative to development of that project at 100 per cent. would
be a farm-out of that project to fund the overall development
costs, and given the recently enhanced view of the prospectivity of
the Company's asset in Uruguay (as detailed in Section 2.3.3 of
this letter) the Company considers that a farm-in to this asset may
be a viable near-term option;
-- Proceeds from any asset sales, the Company noting that assets
in Trinidad regularly transact, should the Company elect to
consider this as an option;
-- The offset of costs from any successful "drill for equity" type arrangements, and
-- Proceeds from any other financial facilities that may become
available to the Company in the period, such as a reserve-based
lending facility and/or a production prepay facility (the Company
being in active discussions with various providers of these types
of facilities).
If currently anticipated funding is not available and no
suitable funding from other sources is able to be secured to enable
the Company to undertake the work program and meet the obligations
detailed in this document, the Company would need to scale back the
intended work program (which is largely discretionary in nature at
the upper end of the funding requirement), and/or reschedule that
work program, and/or cut overhead and operating costs to match the
Company's actual capital availability, and/or further revise
payment terms, amounts and schedules in relation to residual
amounts to be paid to close-out Perseverance #1.
Finally, the Company notes that it has negotiated an agreed cash
rebate of advisory and fundraising fees paid by the Company
previously, amounting to approximately GBP500,000 (thus increasing
the amount of cash available to the Company) and has settled a
number of current corporate creditors through the issuance of, in
aggregate, 340.5 million new Existing Ordinary Shares on a
pre-Share Consolidation basis (which will become 34.05 million New
Ordinary Shares on a post Share Consolidation basis) (the "Fee
Shares"). Application has been made for 149,385,766 of the Fee
Shares (the "First Tranche Fee Shares") to be admitted to trading
on the AIM market of the London Stock Exchange and it is expected
that admission will take place, and trading in the First Tranche
Fee Shares will commence on or around 27 April 2021 at 08:00 a.m.
The remaining 191,114,234 Fee Shares (the "Second Tranche Fee
Shares") will be admitted to trading on 21 May 2021 upon, and
conditional on, the closing of the Open Offer and Placing.
Total Voting Rights
Following admission of the First Tranche Fee Shares, BPC's
issued share capital will consist of 4,987,934,115 ordinary shares,
with each ordinary share carrying the right to one vote. The
Company does not hold any ordinary shares in treasury. This figure
of 4,987,934,115 ordinary shares may therefore be used by
shareholders in the Company, as the denominator for the
calculations by which they will determine if they are required to
notify their interest in, or a change in their interest in, the
share capital of the Company under the FCA's Disclosure Guidance
and Transparency Rules.
Notice of Extraordinary General Meeting
A notice convening the Extraordinary General Meeting to be held
at the Company's registered office at IOMA House, Hope Street,
Douglas, Isle of Man, IM1 1AP at 11:00 a.m. on 17 May 2021 will be
set in the Circular.
At the Extraordinary General Meeting, the following resolutions
will be proposed:
1. As an ordinary resolution, to consolidate every ten (10)
Existing Ordinary Shares into one (1) New Ordinary Share, thereby
reducing the total issued share capital of the Company from
approximately 4.85 billion shares to approximately 485 million
shares.
2. As an ordinary resolution to increase the authorised share
capital of the Company to GBP400,000 divided into 2,000,000,000 New
Ordinary Shares of 0.02 pence each.
3. As a special resolution, to change the name of the Company to Challenger Energy Group PLC.
4. As a special resolution, to authorise a general share
authority such that the directors may, prior to 31 December 2022,
issue up to 750 million New Ordinary Shares (on a post-share
consolidation basis) without the need for further Shareholder
approval (and from within which general share authority the
proposed new incentive arrangements for continuing and future
executives and management will be implemented).
5. As a special resolution, to ratify the amendments previously
made to the Company's Conditional Convertible Note facility, to
authorise the agreed early conversion of part of the Convertible
Notes currently on issue, and to approve the current and future
issue of New Ordinary Shares pursuant to that facility.
All of these resolutions are to be proposed on an
inter-conditional basis: that is, the Company is seeking to
comprehensively reposition and recapitalise at the same time, and
the resolutions being proposed should thus be regarded as a
"package", each alongside with and integral to the other changes
being made.
EXPECTED TIMETABLE OF PRINCIPAL EVENTS
Record Date for entitlement under 6:00 p.m. on 21 April 2021
the Open Offer
Announcement of the Open Offer 7:00 a.m. on 23 April 2021
------------------------------------
Ex-entitlement date of the Open 8:00 a.m. on 23 April 2021
Offer
------------------------------------
Publication and posting of this 23 April 2021
Circular (inclusive of the Notice
of Extraordinary General Meeting)
and the Application Form and Proxy
Form
------------------------------------
Open Offer Entitlements and Excess as soon as practicable after
CREST Open Offer Entitlements credited 8:00 a.m. on 26 April 2021
to stock accounts in CREST of Qualifying
CREST Shareholders
------------------------------------
Latest recommended time and date 4:30 p.m. on 6 May 2021
for requested withdrawal of Open
Offer Entitlements and Excess CREST
Open Offer Entitlements from CREST
------------------------------------
Latest time and date for depositing 3:00 p.m. on 7 May 2021
Open Offer Entitlements and Excess
CREST Open Offer Entitlements in
CREST
------------------------------------
Latest time and date for splitting 3:00 p.m. on 10 May 2021
Application Forms (to satisfy bona
fide market claims)
------------------------------------
Latest time and date for receipt 11:00 a.m. on 12 May 2021
of Application Forms and payment
in full under the Open Offer and
settlement of relevant CREST instructions
(as appropriate)
------------------------------------
Announcement of the result of the 4:35 p.m. on 13 May 2021
Open Offer and the launch of the
Placing
------------------------------------
Announcement of the results of 7:00 a.m. on 14 May 2021
the Placing
------------------------------------
Latest time and date for filing 11:00 a.m. on 15 May 2021
of proxies for the Extraordinary
General Meeting
------------------------------------
Extraordinary General Meeting 11:00 a.m. on 17 May 2021
------------------------------------
Announcement of the result of the 17 May 2021
Extraordinary General Meeting
------------------------------------
Admission and dealings in the Open 8.00 a.m. on 21 May 2021
Offer and Placing Shares, Shares
issued pursuant to the Conversion
of GBP2.5m Convertible Notes and
S econd Tranche Fee Shares expected
to commence on AIM
------------------------------------
Where applicable, expected date As soon as practicable after
for CREST accounts to be credited 8:00 a.m. on 21 May 2021
in respect of Open Offer Shares
in uncertificated form
------------------------------------
Record date for the Share Consolidation 4:30 p.m. on 21 May 2021
------------------------------------
Dealings in the New Ordinary Shares 8:00 a.m. on Monday 24 May
expected to commence on AIM 2021
------------------------------------
Share certificates dispatched for By 31 May 2021
Open Offer Shares and the Placing
(as applicable)
------------------------------------
Notes:
(1) All of the above times refer to London time unless otherwise
stated. The dates set out in the Expected Timetable of Principal
Events above and mentioned throughout this document and the
Application Form and Proxy Form may be adjusted by the Company, in
which event details of the new dates will be notified by means of
an announcement through a Regulatory Information Service and, where
appropriate, to Shareholders.
(2) Completion of all events in the above timetable following
the holding of the Extraordinary General Meeting are conditional
upon, inter alia, the passing of the Resolutions at the
Extraordinary General Meeting.
(3) The ability to participate in the Open Offer is subject to
certain restrictions relating to Shareholders with registered
addresses outside the UK, details of which will be Set out in the
Circular: "Terms and Conditions of the Open Offer".
(4) Different deadlines and procedures for return of forms may apply in certain cases.
Recommendation
The Directors of the Board consider the 'package' of actions
proposed to be undertaken, including the resolutions to be proposed
at the Extraordinary General Meeting and the Open Offer and Placing
to be in the best interests of the Company and its shareholders as
a whole as these actions are designed to put the Company in a
position where it can best seek to significantly increase
production and cashflow, and thereby restore and create future
shareholder value.
If the various resolutions are not passed at the EGM, the Open
Offer and Placing will not proceed, nor will the other intended
corporate actions be able to proceed in the manner presently
contemplated. If the net proceeds of the Open Offer and Placing are
not available to the Company, the Company will need to seek
alternative sources of funding or seek alternative methods of
realising shareholder value. Neither of these alternatives is
expected to be favourable for shareholders given the current stage
of the Company's development. The Board considers that it is
therefore of the utmost importance that Shareholders vote in favour
of the package of resolutions to be proposed at the EGM, and to
support the Open Offer.
Regulatory Statements
In accordance with the AIM Note for Mining and Oil & Gas
Companies, BPC discloses that Mr Nathan Rayner, the Company's
Operations Director, is the qualified person who has reviewed the
technical information contained in this announcement. He is a
qualified Petroleum Engineer, a member of the Society of Petroleum
Engineers, and a member of the Institution of Engineers, Australia.
He has over 20 years' experience in the oil and gas industry.
Nathan Rayner consents to the inclusion of the information in the
form and context in which it appears.
The information contained within this announcement is deemed by
the Company to constitute inside information as stipulated under
the Market Abuse Regulation (EU) No. 596/2014 as it forms part of
United Kingdom domestic law by virtue of the European (Withdrawal)
Act 2018.
For further information, please contact:
Bahamas Petroleum Company plc Tel: +44 (0) 1624
Simon Potter, Chief Executive Officer 647 882
Strand Hanson Limited - Nomad Tel: +44 (0) 20
Rory Murphy / James Spinney / Rob Patrick 7409 3494
Shore Capital Stockbrokers Limited Tel: +44 (0) 207
- J oint Broker 408 4090
Jerry Keen / Toby Gibbs
Investec Bank Plc - J oint Broker Tel: +4 4 (0) 207
Chris Sim / Rahul Sharma 597 5970
Gneiss Energy - Financial Adviser Tel: +44 (0) 20
Jon Fitzpatrick / Paul Weidman / Doug 3983 9263
Rycroft
CAMARCO Tel: +44 (0) 020 3757
Billy Clegg / James Crothers / Hugo 4980
Liddy
Notes to Editors
BPC is a Caribbean and Atlantic margin focused oil and gas
company, with a range of exploration, appraisal, development and
production assets and licences, located onshore in Trinidad and
Tobago, and Suriname, and offshore in the waters of The Bahamas and
Uruguay. In Trinidad and Tobago, BPC has five (5) producing fields,
two (2) appraisal / development projects and a prospective
exploration portfolio in the South West Peninsula. In Suriname, BPC
has on onshore appraisal / development project. BPC's exploration
licence in each of Uruguay and The Bahamas are highly prospective,
and offer high-impact value exposure within the overall portfolio
value.
BPC is listed on the AIM market of the London Stock Exchange. www.bpcplc.com
ENDS
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END
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