TIDMBPC
RNS Number : 7000J
Bahamas Petroleum Company PLC
21 August 2019
21 August 2019
Bahamas Petroleum Company plc
("Bahamas Petroleum" or the "Company")
Progress towards Commencement of Exploration Drilling
and Notice of Annual General Meeting
Bahamas Petroleum Company, the oil and gas exploration company
with significant prospective resources in licences in The
Commonwealth of The Bahamas, is pleased to announce that it has
entered into a series of agreements as part of a coordinated
approach toward drilling its first exploration well in The Bahamas
in 2020.
Highlights
-- On course to see drilling of an initial exploration well in 1H 2020
-- Agreement with Seadrill for the provision of a sixth
generation drilling rig, key commercial parameters agreed including
day rate
-- Appointed leading international contractor, Halliburton, as
integrated well services provider, BakerHughes GE appointed to
provide a range of well-related equipment
-- Revised estimate of initial exploration well cost down to
between US$25 - US$30 million (or <US$50 million for a
concurrent two-well campaign if funding permits)
-- Conditional agreement for a convertible loan investment of
GBP10.25 million, approximately half the anticipated cost of a
single well
-- Proposals received for other financing alternatives, farm-out discussions continue
-- AGM called for 17 September 2019, to approve, inter alia, the
convertible note investment, a proposed expanded share issuance
authority, a proposed cancellation of existing options to be
replaced with issue of revised new options, and approval of payment
of deferred remuneration via the issue of new ordinary shares once
the initial well is fully funded
Simon Potter, Chief Executive Officer of Bahamas Petroleum
Company, said:
"Following our licences being extended to the end of 2020 by the
Government of The Bahamas earlier this year, rapid progress has
been made across our business. Today we are pleased to update
shareholders on a series of coordinated steps that the Company has
taken toward drilling of an initial exploration well during 2020,
consistent with our licence obligations. This includes a framework
agreement for a rig, appointments for essential well services with
leading global oil services companies, as well as considerable
progress on financial arrangements to fund the drilling, whether
that be via a farm-in on acceptable terms, or by other means,
whichever is in the best interests of the Company. I look forward
to updating all stakeholders as we make further progress."
Shareholders should note that this announcement comprises a
necessarily brief summary of the various matters to which it
relates, certain components of which are subject to shareholder
approval. A notice convening the Annual General Meeting of
Shareholders on 17 September 2019 has been prepared for despatch on
23 August 2019, at which shareholder approval for these matters
will be sought. The Notice of Annual General Meeting contains
details setting out the rationale for, and the terms and conditions
of, various agreements and other matters. Shareholders are
encouraged to read this information in full in conjunction with
this announcement. A copy is included in an appendix to this
announcement, and is also available on the Company's website
(www.bpcplc.com). All capitalised terms in this announcement are as
defined in the Notice of Annual General Meeting.
Overview
BPC has an obligation to drill an initial exploration well in
2020 and, in the view of the BPC Board, drilling as soon as
practicable remains the best route to generating shareholder value.
Accordingly, the Company is now embarking on a course to drilling
of an initial exploration well during the first half of 2020, in
the event that a farm-in is not concluded by then. The Company has
sought to put in place a package of critical supply and service
contracts, along with finance and certain other arrangements (which
will be tabled with shareholders for approval at the Annual General
Meeting), representing a coordinated approach to undertaking this
activity.
Operational Developments
BPC has entered into a framework agreement with Seadrill, one of
the world's largest offshore drill rig companies, for the provision
of a sixth-generation drilling rig (the "Framework Agreement"). The
Framework Agreement sets out key commercial parameters, fixes a day
rate, and specifies a time slot for delivery of the rig in the
first half of 2020 (with the ability to extend the drilling
campaign to a concurrent two-well program, should funding permit).
The provision of the rig remains subject to contract customary in
the industry (to include specific terms for an individual drilling
rig and encapsulating the key commercial parameters already
established in the Framework Agreement), a number of conditions
precedent being satisfied, and final Seadrill board approval. The
Framework Agreement stipulates that the parties must seek to enter
into such definitive contract by 11 October 2019 (or such later
date as the parties may agree). Having rigs already identified as
per this Framework Agreement allows BPC, with Seadrill's input and
support, to begin necessary time-sensitive preparatory work, and to
complete permitting processes ahead of drilling.
Following extensive technical discussions and mutual due
diligence, BPC has received proposals (including pricing) for
essential well services for the intended drilling campaign and well
design and has appointed leading international contractor,
Halliburton, as integrated well services provider. BakerHughes GE
has also been appointed to provide a range of well-related
equipment, including wellheads and tubulars. The Company has issued
Notices of Award to each of these service providers, as a precursor
to contract as is customary in the industry.
Farm-in Update
BPC continues to proactively pursue a farm-in as its primary
financing strategy, and farm-in discussions are continuing with
multiple parties, the license extension to the end of 2020 granted
by the Government of The Bahamas earlier this year offering clarity
to potential partners. However, the process is taking longer than
anticipated, and has not yet produced a successful outcome.
Financial Developments
The pricing parameters encapsulated in the rig Framework
Agreement with Seadrill and the Notices of Award for services from
Halliburton and BakerHughes GE have allowed the Company to obtain
greater certainty in estimating a total drilling cost. BPC now
estimates the total cost of an initial exploration well to be in
the range of US$25 million to US$30 million (and less than US$50
million in aggregate should the Company pursue a concurrent
two-well exploration campaign). This is a material reduction from
prior estimates (previously in the range of US$60 million to US$ 80
million for a single well).
The Board is cognisant of the Company's firm obligation to drill
an initial well in 2020, and given the protracted state of the
farm-in process considers it imperative that viable alternative
financing solutions be put in place. In addition to allowing
drilling to commence even if a farm-in is not concluded in an
acceptable time frame or on acceptable terms, this will also allow
long-lead items to be ordered and critical-path processes to
commence, enable BPC to demonstrate financial capacity to potential
farm-in partners (which the Company considers may strengthen the
Company's position in farm-in negotiations), and assure the
Government of the Company's ability to deliver upon its
obligations.
The Company has thus entered into a conditional agreement with
Bizzell Capital Partners Pty Ltd ("BCI") for a convertible loan
investment of GBP10.25 million (approximately US$12.5 million) (the
"Conditional Convertible Loan"), or approximately half the now
estimated cost of the initial exploration well. BCI is an
Australian domiciled investment firm, with a strong track record of
successful investment in a number of early-stage oil and gas
exploration businesses around the world. As consideration for
entering into the Conditional Convertible Loan agreement, the
Company has agreed to issue BCI with 25,000,000 options over new
ordinary shares with an exercise price of 2p per share, exercisable
for a four year period (the "First Tranche Options").
The Conditional Convertible Loan is subject to completion of due
diligence and contract and approval by Shareholders at the Annual
General Meeting. Thereafter the GBP10.25 million of funding is
subject to the Company also having secured funding for the balance
of the initial exploration well program, and satisfaction of a
number of other conditions.
Once advanced, the Conditional Convertible Loan would be for a
term of 3 years, with a coupon of 12% per annum, convertible at a
price of either 6p per share or a 25% premium to any hypothetical
future equity issuance, whichever is lower.
It remains the Company's preference to secure a farm-in, and
thus BPC has sought to keep upfront fees and costs relating to the
Conditional Convertible Loan as low as possible, whilst preserving
the right to opt-out of the Conditional Convertible Loan at minimal
cost to the Company prior to contract, should the Directors
consider it be in the Company's interest to do so. However, in the
view of the Board the Conditional Convertible Loan creates a
benchmark against which any farm-in or other financing proposals
can be considered, as well as underpinning the financing of the
initial exploration well. Additional details are set out in the
Notice of Annual General Meeting (reproduced in an appendix to this
announcement, below).
The Company has also received proposals for, and is presently
considering, several other financing alternatives. At the Annual
General Meeting shareholders will be asked to approve a temporary
expansion of the Company's general share issuance authority, such
that the Company will immediately be in a position to take
advantage of financing alternatives that may become available,
should that be appropriate and in the Company's best interests.
Human Resources Developments
As the Company moves forward toward drilling, it is essential
that a suitably qualified, experienced and capable team is in
place. BPC has thus commenced bolstering its professional team to
ensure detailed well planning, project management, logistics and
drilling engineering can be carried out in a timeframe consistent
with delivery of the rig. Several key new professionals have been
appointed and have commenced work preparing for an active drilling
campaign.
The Company is seeking to ensure that the enlarged professional
team is retained and appropriately incentivised to achieve creation
of shareholder value through progressing to the successful, timely
and safe delivery of an initial exploration well. A proposed new
option-based incentivisation arrangement will thus be tabled for
approval at the Annual General Meeting, along with approval of the
issuance of shares in satisfaction of the Company's deferred pay
obligations to-date (the issue of which, once approved, will remain
subject to performance criteria).
Comprehensive details in relation to these matters are set out
in the Notice of Annual General Meeting and explanatory notes
attached thereto (and reproduced in full in an appendix to this
announcement, below). In summary, however, it is proposed that the
existing 68.85 million options over ordinary shares (on issue to
various board members, executives, employees and consultants to the
Company) will be cancelled. In their place, 200,000,000 new options
("New Options") will be made available for allocation, although
initially the intention is that only 150,000,000 of the New options
will be allocated, with the balance remaining unallocated and
retained for future recruitments or incentive awards.
The New Options will be issued in three tranches, summarised as
follows: (i) Series A: 50,000,000 New Options, fully vested,
immediately exercisable, exercise price of 2.22p per New Option
(consistent with the exercise price of options being cancelled);
Series A New Options will be fully allocated; (ii) Series B: Up to
75,000,000 New Options, that will vest and become exercisable at
such point in time as the Board, having consulted with the relevant
advisers to the Company, determines that the cost of an initial
exploration well is fully funded, exercise price of 2.4p per New
Option; 50,000,000 of the Series B New Options will initially be
allocated, with the balance reserved for future grants, and (iii)
Series C: Up to 75,000,000 New Options, that will vest and become
exercisable at such point in time as the initial exploration well
commences, exercise price of 2.8p per New Option; 50,000,000 of the
Series C New Options will initially be allocated, with the balance
reserved for future grants. All New Options, if not exercised, will
expire five years after the date of issue. The New Options will not
be quoted or traded on AIM; on exercise, the Company will make
application for the new ordinary shares arising to be admitted for
trading on AIM.
The New Options will initially be allocated, in seeking to
ensure that the enlarged professional team is retained and
appropriately incentivised to achieve creation of shareholder value
through progressing to the successful, timely and safe delivery of
an initial exploration well, as follows:
OPTIONHOLDER SERIES A SERIES B SERIES C
William Schrader 1,500,000 750,000 750,000
---------------------- ---------------------- ----------------------
James Smith 750,000 375,000 375,000
---------------------- ---------------------- ----------------------
Eddie Shallcross 750,000 375,000 375,000
---------------------- ---------------------- ----------------------
Ross McDonald 750,000 375,000 375,000
---------------------- ---------------------- ----------------------
Adrian Collins 750,000 375,000 375,000
---------------------- ---------------------- ----------------------
Simon Potter 20,000,000 15,000,000 25,000,000
---------------------- ---------------------- ----------------------
Other executives, employees
and consultants, in
aggregate 25,500,000 32,750,000 22,750,000
---------------------- ---------------------- ----------------------
Total: 50,000,000 50,000,000 50,000,000
---------------------- ---------------------- ----------------------
In addition, for a number of years certain key executives and
consultants, and all members of the Board, have foregone part of
their contracted cash remuneration on the basis that this would be
repaid, in a combination of cash and shares, at a later date when
the Company has secured funding and is able to progress with
operations.
As part of preparing for operations, securing funding, and
solidifying the team, the Board considers that it is now an
appropriate time for the Company to discharge its obligations in
this regard. Shareholder approval will thus be sought for the
issuance of 116,698,188 deferred pay shares (the "Deferred Pay
Shares"), to discharge the Company's outstanding deferred pay
obligations up to 31 July 2019. However, these Deferred Pay Shares
will only be issued at such time as the Board, having consulted
with the relevant advisers to the Company, determines that the
initial exploration well is fully funded on an unconditional
basis.
The following new ordinary shares are thus proposed to be
approved for issue in satisfaction of the Company's deferred pay
obligations incurred up to 31 July 2019, once the initial
exploration well is fully funded on an unconditional basis:
Recipient Deferred Pay
Shares
William Schrader 7,601,289
------------------------
James Smith 4,970,074
------------------------
Eddie Shallcross 5,847,147
------------------------
Ross McDonald 4,970,074
------------------------
Adrian Collins 5,847,147
------------------------
Simon Potter 63,567,276
------------------------
Other Executives and
Staff 23,895,183
------------------------
Total Deferred Pay
Shares 116,698,188
------------------------
Related Party Transactions
The issue of certain of the New Options and Deferred Pay Shares
to Directors will constitute related party transactions under Rule
13 of the AIM Rules for Companies. Accordingly, given there are no
independent Directors, Strand Hanson Limited, the Company's
Nominated Adviser, considers that the terms of the proposed issue
of the options are fair and reasonable insofar as the Company's
shareholders are concerned.
Annual General Meeting
Certain components of the matters referred to above are subject
to shareholder approval. The Annual General Meeting of the Company
has been convened for 17 September 2019 at which shareholders will
consider and, if thought fit, approve these matters, as well as
attend to the ordinary business of the Annual General Meeting.
A notice convening the Annual General Meeting along with
explanatory materials for shareholders has been prepared for
immediate despatch - a copy is included in an appendix to this
announcement and it is also available on the Company website
(www.bpcplc.com). This contains a more detailed explanation of the
rationale for, and the terms and conditions of, the various
agreements and other matters for which Shareholder Approval is
being sought. Shareholders are encouraged to read the Notice of
Annual General Meeting and accompanying materials in full, in
conjunction with this announcement.
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 7409 3494
Shore Capital Stockbrokers Limited Tel: +44 (0) 207
Jerry Keen / Toby Gibbs 408 4090
CAMARCO Tel: +44 (0) 20
Billy Clegg / James Crothers 3757 4983
www.bpcplc.com
APPIX: NOTICE OF ANNUAL GENERAL MEETING AND EXPLANATORY
MATERIALS
BAHAMAS PETROLEUM COMPANY PLC
(Incorporated in the Isle of Man under the Companies Acts
1931-2004 and with Company Number 123863C)
NOTICE OF ANNUAL GENERAL MEETING
---------------------------------
Notice is hereby given that the tenth Annual General Meeting
(Meeting) of Bahamas Petroleum Company plc (Company) will be held
at the Company's registered office at IOMA House, Hope Street,
Douglas, Isle of Man, IM1 1AP on 17 September 2019 at 11 a.m., for
the purpose of considering and, if thought fit, passing the
following resolutions ("Resolutions"):
ORDINARY RESOLUTIONS
Resolution One: As an ordinary resolution, THAT the Directors'
Report and the Financial Statements for the year ended 31 December
2018 together with the Independent Auditor's Report, as dispatched
to shareholders on 11 June 2019 in compliance with Article 158 of
the Company's Articles of Association, be received.
Resolution Two: As an ordinary resolution, THAT Mr. William
Schrader, who retires by rotation and, being eligible, offers
himself for reappointment, be reappointed as a director of the
Company.
Resolution Three: As an ordinary resolution, THAT Mr. James
Smith, who retires by rotation and, being eligible, offers himself
for reappointment, be reappointed as a director of the Company.
Resolution Four: As an ordinary resolution, THAT
PricewaterhouseCoopers LLC of 60 Circular Road, IM1 1SA, United
Kingdom, the retiring auditors, as auditors of the Company, be
reappointed to hold office until the conclusion of the next general
meeting at which accounts are laid and to authorise the directors
to determine their remuneration.
SPECIAL RESOLUTIONS
Resolution One: As a special resolution, THAT
(i) the entry by the Company into a conditional agreement for a
GBP10.25 million convertible loan facility (the "Conditional
Convertible Loan") with Bizzell Capital Partners Pty Ltd, an
Australian-domiciled investment firm acting on behalf of entities
associated with Mr. Stephen Bizzell and Mr. Mark Carnegie ("BCI")
is approved and ratified,
(ii) the issue of 25 million options to BCI to subscribe for
ordinary shares in the capital of the Company, for a term of four
years and with an exercise price of 2p per share (the "Convertible
Tranche One Options") pursuant to the terms of the Conditional
Convertible Loan, is approved, and
(iii) subject to agreement being reached between the Company and
BCI on the terms of the definitive long-form legal documentation
governing the Conditional Convertible Loan by no later than 30
November 2019, and subject to satisfaction of all conditions
precedent under that documentation and completion of the
convertible loan note investment under that documentation by 31
March 2020, the issue of 12.5 million options to BCI to subscribe
for ordinary shares in the capital of the Company, for a term of
four years and with an exercise price of 2.5p per share and the
issue of 12.5 million options to BCI to subscribe for ordinary
shares in the capital of the Company, for a term of four years and
with an exercise price of 3p per share (together the "Convertible
Second and Third Tranche Options") pursuant to the agreement for
the Conditional Convertible Loan, is approved.
Resolution Two: As a special resolution, THAT the Directors be
and hereby are granted the authority, pursuant to Article 6.7 of
the Company's Articles of Association, to allot and issue up to a
further 1,800,000,000 new ordinary shares in the capital of the
Company, as if the pre-emption provisions contained within Article
6.3 of the Company's Articles of Association did not apply to such
allotment and issue, provided that such authority, unless renewed,
shall expire on 31 December 2020, but shall extend to the making,
before such expiry, of an offer or agreement which would or might
require ordinary shares to be allotted after such expiry and the
Directors may allot ordinary shares in pursuance of such offer or
agreement as if the authority conferred hereby had not expired.
Resolution Three: As a special resolution, THAT
(i) the cancellation of 68.85 million options over ordinary
shares in the Company be approved,
(ii) the creation of a pool of up to 200 million new options
over ordinary shares in the Company be approved, expiring on the
date that is five years after the date of grant, for allocation by
the Board, in three tranches as follows:
a. Series A: A total pool of 50,000,000 options, vested and
immediately exercisable, at an exercise price of 2.22p,
b. Series B: A total pool of up to 75,000,000 options, that will
vest and become exercisable at such point in time as the Board,
having consulted with the relevant advisers to the Company,
determines that the cost of an initial exploration well is fully
funded on an unconditional basis (defined as the Company either
securing a farm-in or securing capital via debt or equity or a
combination of both in excess of $25 million, or any combination
thereof), at an exercise price of 2.4p, and
c. Series C: A total pool of up to 75,000,000 options, that will
vest and become exercisable at such point in time as the initial
exploration well commences (defined as once a rig is mobilised,
that being when the contracted drilling rig, following inspection
by BPC and any necessary customs authorisations, leaves the port of
origination by a distance of 1 nautical mile), at an exercise price
of 2.8p,
(iii) an initial allocation be approved of 50,000,000 of Series
A, 50,000,000 of Series B and 50,000,000 of Series C of these new
options be approved, with the balance of the available pool, being
25,000,000 of Series B and 25,000,000 of Series C, reserved for
future allocations at the discretion of the Board, and
(iv) the issue of 116,698,188 fully paid ordinary shares in
satisfaction of deferred pay obligations up to 31 July 2019 be
approved, such shares only to be issued at such time as the Board,
having consulted with the relevant advisers to the Company,
determines that the drilling of an exploration well is fully funded
on an unconditional basis.
Resolution Four: As a special resolution, THAT the Directors be
and hereby are granted the authority, pursuant to Article 6.7 of
the Company's Articles of Association, to immediately allot and
issue 7,200,000 warrants over new ordinary shares in the capital of
the Company to Shore Capital, with an exercise period of 2 years
from the date of grant and exercise price of 1.6 pence per ordinary
share, as if the pre-emption provisions contained within Article
6.3 of the Company's Articles of Association did not apply to such
issue.
Attached to this Notice of Annual General Meeting is a letter
from the Chairman which contains the Directors' unanimous
recommendation that you vote in favour of all of the Resolutions
(whether Ordinary Resolutions or Special Resolutions) to be
proposed at the Annual General Meeting. Attached to the Notice of
Annual General Meeting are explanatory notes setting out the
rationale for the various Special Resolutions being proposed.
Shareholders are encouraged to read these explanatory notes
carefully and in full.
This Notice of Annual General Meeting will be despatched to
Shareholders by no later than 23 August 2019, and has on 21 August
2019 been posted on the Company's website (www.bpcplc.com). Copies
can also be obtained in person at the Registered Office.
Dated 21 August 2019 BY ORDER OF THE BOARD
Benjamin Proffitt
Company Secretary
Registered office:
IOMA House, Hope Street
Douglas, Isle of Man, IM1 1AP,
United Kingdom
Notes:
1) A member entitled to attend and vote at the Annual General
Meeting may appoint one or more proxies to attend and (on a poll)
vote instead of him. A proxy need not be a member of the
Company.
2) A Form of Proxy is provided with this Notice of Annual
General Meeting. Completion and return the Form of Proxy will not
prevent a member from attending the Annual General Meeting and
voting in person.
3) To be effective, the Form of Proxy and any power of attorney
or other authority under which it is signed (or a notarially
certified copy of such authority) must be deposited with Capita
Registrars, PXS, 34 Beckenham Road, Beckenham, Kent BR3 4TU, not
less than 48 hours before the time of the holding of the Annual
General Meeting or any adjournment thereof.
4) In the case of joint holders, the vote of the senior who
attends to vote, whether in person or by proxy, will be accepted to
the exclusion of votes of the joint holders. For this purpose
seniority is determined by the order in which the names stand in
the register of members.
5) If you have any questions relating to return of the Form of
Proxy, please telephone the Company's registrars on 0871 664 0300.
Calls cost 12p per minute plus your phone company's access charge.
If you are outside the United Kingdom, please call +44 371 664
0300. Calls outside the United Kingdom will be charged at the
applicable international rate. We are open between 9.00 am - 5.30
pm, Monday to Friday excluding public holidays in England and
Wales. Calls may be recorded and randomly monitored for security
and training purposes. The helpline cannot provide advice on the
merits of the proposals described in this circular nor give any
financial, legal or tax advice.
6) Every member who (being an individual) is present in person
or (being a corporation) is present by a duly authorised
representative (not being himself a member entitled to vote), shall
on a show of hands have one vote and on a poll every member present
in person or by proxy or (being a corporation) by a duly authorised
representative shall have one vote for each share of which he is
the holder. A special resolution is passed either (i) on a show of
hands by a majority of not less than 75 per cent. of the votes cast
by such members as are present and eligible to vote at the relevant
meeting; or (ii) on a poll of members of the Company by a majority
of not less than 75 per cent. of the votes cast by members present
and eligible to vote at the meeting.
7) Pursuant to Regulation 22(1) of the Uncertificated Securities
Regulations 2005 of the Isle of Man (SD No. 754/05), the Company
has specified that only those members registered on the register of
members of the Company at close of business on 13 September 2019
shall be entitled to attend and vote at the meeting in respect of
the number of shares registered in their name at that time. Changes
to the register of members after that time shall be disregarded in
determining the rights of any person to attend and vote at the
meeting. Holders of the Firm Placing Shares will be entitled to
vote at the Annual General Meeting.
8) Where a corporation is to be represented at the Annual
General Meeting by a personal representative, such personal
representative must, if requested, provide a certified copy of the
resolution of its directors or other governing body authorising the
appointment of the representative before being permitted to
exercise any power on behalf of the corporation, and the Company
has determined that for these purposes such copy of the resolution
must be deposited at the Company's registered office address not
later than 48 hours before the time appointed for the Annual
General Meeting.
9) If the Chairman of the Annual General Meeting, as a result of
any proxy appointments, is given discretion as to how the votes the
subject of those proxies are cast and the voting rights in respect
of those discretionary proxies, when added to the interests in the
Company's securities already held by the Chairman, result in the
Chairman holding such number of voting rights that he has a
notifiable obligation under the Disclosure Guidance and
Transparency Rules, the Chairman will make the necessary
notifications to the Company and the UK Financial Conduct Authority
("FCA"). As a result any member holding 3 per cent. or more of the
voting rights in the Company who grants the Chairman a
discretionary proxy in respect of some or all of those voting
rights and so would otherwise have a notification obligation under
the Disclosure and Transparency Rules, need not make a separate
notification to the Company and the Financial Services
Authority.
10) As at 21 August 2019, being the last practicable date prior
to the printing of this Notice of Annual General Meeting, the
Company's issued share capital consisted of 1,692,719,096 Ordinary
Shares carrying one vote each. Therefore, the total number of
voting rights in the Company as at 21 August 2019 is
1,692,719,096.
BAHAMAS PETROLEUM COMPANY PLC
(Incorporated in the Isle of Man under the Companies Acts
1931-2004 and with Company Number 123863C)
EXPLANATORY INFORMATION FOR SHAREHOLDERS
IN RELATION TO SPECIAL RESOLUTIONS TO BE PROPOSED
AT THE ANNUAL GENERAL MEETING OF THE COMPANY
ON 17 SEPTEMBER 2019
---------------------------------------------------
IMPORTANT NOTICES
THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE
ATTENTION. It contains information on the Special Resolutions to be
voted on at the Annual General Meeting of the Company to be held at
11:00am on 17 September 2019. If you are in any doubt about the
contents of this document or as to the action you should take, you
are recommended to seek your own personal financial advice
immediately from your stockbroker, bank manager, solicitor,
accountant or other independent financial adviser authorised under
the United Kingdom' Financial Services and Markets Act 2000
("FSMA").
If you have sold or otherwise transferred all of your Ordinary
Shares, please immediately forward this document, together with the
accompanying Form of Proxy, to the purchaser or transferee, or to
the stockbroker, bank or other agent through whom the sale or
transfer was effected, for delivery to the purchaser or transferee.
If you have sold or transferred only part of your holding of
Ordinary Shares, please contact your stockbroker, bank or other
agent through whom the sale or transfer was effected
immediately.
AIM is a market designed primarily for emerging or smaller
companies to which a higher investment risk tends to be attached
than to larger or more established companies. AIM securities are
not admitted to the Official List of the United Kingdom Listing
Authority. A prospective investor should be aware of the risks of
investing in such companies and should make the decision to invest
only after careful consideration and, if appropriate, consultation
with an independent financial adviser. The London Stock Exchange
has not itself examined or approved the contents of this
document.
This document contains no offer of transferable securities to
the public within the meaning of section 102B of the FSMA, the Act
or otherwise. Accordingly, this document does not constitute a
prospectus within the meaning of section 85 of the FSMA and has not
been drawn up in accordance with the Prospectus Rules or approved
by the FCA or any other competent authority.
Strand Hanson Limited ("Strand Hanson"), which is regulated in
the United Kingdom by the FCA, is acting as nominated adviser to
the Company for the purposes of the AIM Rules. Persons receiving
this document should note that, in connection with the matters
described in this circular, Strand Hanson is acting exclusively for
the Company and no one else and will not be responsible to anyone,
other than the Company, for providing the protections afforded to
customers of Strand Hanson for advising any other person on the
transactions and arrangements described in this document. No
representation or warranty, express or implied, is made by Strand
Hanson as to any of the contents of this document in connection
with this circular, or otherwise. Unless otherwise excluded by the
FSMA or by law, Strand Hanson does not accept any liability
whatsoever for the contents of this document, including its
accuracy, completeness or verification or for any other statement
made or purported to be made by them, or on their behalf. Strand
Hanson accordingly disclaims all and any liability which they might
otherwise have in respect of this document.
This document does not constitute or form part of any offer or
instruction to purchase, subscribe for or sell any shares or other
securities in the Company nor shall it or any part of it or the
fact of its distribution form the basis of, or be relied on in
connection with any contract therefor. The distribution of this
document in jurisdictions other than the United Kingdom may be
restricted by law and therefore persons into whose possession this
document and/or the accompanying Form of Proxy comes should inform
themselves about and observe such restrictions. Any failure to
comply with such restrictions may constitute a violation of the
securities laws of any such jurisdiction.
Cautionary note regarding forward-looking statements
This document includes statements that are, or may be deemed to
be, "forward-looking statements". These forward-looking statements
can be identified by the use of forward-looking terminology,
including the terms "believes", "estimates", "plans", "projects",
"anticipates", "expects", "intends", "may", "will", or "should" or,
in each case, their negative or other variations or comparable
terminology. These forward-looking statements include matters that
are not historical facts. They appear in a number of places
throughout this document and include statements regarding the
Directors' current intentions, beliefs or expectations concerning,
among other things, the Group's results of operations, financial
condition, liquidity, prospects, growth, strategies and the Group's
markets. By their nature, forward-looking statements involve risk
and uncertainty because they relate to future events and
circumstances. Actual results and developments could differ
materially from those expressed or implied by the forward-looking
statements.
Forward-looking statements may and often do differ materially
from actual results. Any forward-looking statements in this
document are based on certain factors and assumptions, including
the Directors' current view with respect to future events and are
subject to risks relating to future events and other risks,
uncertainties and assumptions relating to the Group's operations,
results of operations, growth strategy and liquidity. Whilst the
Directors consider these assumptions to be reasonable based upon
information currently available, they may prove to be incorrect.
Save as required by law or by the AIM Rules, the Company undertakes
no obligation to publicly release the results of any revisions to
any forward-looking statements in this document that may occur due
to any change in the Directors' expectations or to reflect events
or circumstances after the date of this document.
Notice to overseas persons
The distribution of this document and/or the Form of Proxy in
certain jurisdictions may be restricted by law and therefore
persons into whose possession these documents come should inform
themselves about and observe any such restrictions. Any failure to
comply with these restrictions may constitute a violation of the
securities laws of any such jurisdiction.
Basis on which information is presented
In the document, references to "pounds sterling", "GBP", "GBP",
"pence" and "p" are to the lawful currency of the United
Kingdom.
In the document, references to "dollars", "$" and USD" are to
the lawful currency of the United States of America.
References to defined terms
Certain terms used in this document are defined and explained at
the section of this document under the heading "Definitions".
All times referred to in this document are, unless otherwise
stated, references to London time.
DEFINITIONS
The following definitions apply throughout this document unless
the context otherwise requires:
"Act" the Companies Acts 1931 - 2004 (as amended);
"AIM" the AIM Market operated by the London Stock Exchange;
"AIM Rules" the AIM Rules for Companies published by the
London Stock Exchange from time to time;
"Allocated New Options" A subset of the New Options comprising 150,000,000
options over Ordinary Shares to be issued initially
on approval by Shareholders, in the manner detailed
in in the section of this document setting out
explanatory materials relating to Special Resolution
Three;
"Annual General The general meeting of the Company to be held
Meeting" or "AGM" at 11 a.m. on 17 September 2019 for the purposes
of considering the Resolutions, and conducting
other business typical for an annual general
meeting of Shareholders;
"Bahamas" or "The The Commonwealth of The Bahamas;
Bahamas"
"BakerHughes GE" Vetco Gray LLC, an operating subsidiary of BakerHughes
GE, a Houston based provider of well services
to the international oil and gas industry;
"BCI" Bizzell Capital Partners Pty Ltd, an Australian-domiciled
investment firm acting on behalf of interests
associated with Mr. Stephen Bizzell and Mr. Mark
Carnegie for the purposes of investing in BPC;
"Company" or "BPC" Bahamas Petroleum Company plc, a company incorporated
and registered in the Isle of Man with registered
number 123863C;
"Competent Person's the technical report produced by Ryder Scott
Report" or "CPR" on the Company's assets in the southern Bahamas
dated 30 June 2011;
"Conditional Convertible The agreement between BCI and BPC in relation
Loan Agreement" to a conditional convertible loan investment
of GBP10.25 million by BCI in BPC, as described
in the section of this document setting out explanatory
materials relating to Special Resolution One;
"Convertible First Options to subscribe for 25,000,000 Ordinary
Tranche Options" Shares at an exercise price of 2p per Ordinary
Share, to be granted to BCI as initial consideration
for entry into the Conditional Convertible Loan
Agreement;
"Convertible Second Options to subscribe for two further tranches
& Third Tranche of Ordinary Shares, the first 12,500,000 Ordinary
Options" Shares at an exercise price of 2.5p per Ordinary
Share, the second 12,500,000 million Ordinary
Shares at an exercise price of 3p per Ordinary
Share, both to be granted to BCI, as additional
consideration for entry into the Conditional
Convertible Loan Agreement, subject to completion
of that agreement and draw-down of funds by BPC;
"CREST" the computerised settlement system (as defined
in the CREST Regulations) in respect of which
Euroclear is the operator (as defined in those
regulations) which facilitates the transfer of
title to shares in uncertificated form;
"CREST Regulations" the Uncertificated Securities Regulations 2001
(S.I. 2001 No. 3755) as amended;
"Deferred Pay Shares" the entitlement of Company Directors, and certain
executives and staff to receive fully paid Ordinary
Shares pursuant to the agreement to defer certain
fees and salaries until such a time as the Company's
first exploration well is financed;
"Directors" or "Board" the directors of the Company whose names are
set out on page 9 of the Notice of AGM document,
or any duly authorised committee thereof;
"Drilling Plan" The BPC defined well design for an exploratory
well to a depth of at least eighteen thousand
feet (18,000 feet) and indicatively targeting
a maximum depth of up to twenty one thousand
and five hundred feet (21,500 feet) equivalent
to approximately six thousand and five hundred
metres (6,500 metres), consistent with the discharge
of the Company's licence obligations in respect
of the Southern Licences;
"Euroclear" Euroclear UK & Ireland Limited, the operator
of CREST;
"Existing Options" the 68,850,000 existing options over unissued
Ordinary Shares in the Company as announced by
the Company on 4 April 2016;
"Existing Ordinary the 1,692,719,096 Ordinary Shares in issue at
Shares" the date of this document;
"FCA" the UK Financial Conduct Authority;
"FEED" Front End Engineering Design;
"Form of Proxy" the form of proxy accompanying this document
for use by Shareholders in connection with the
Annual General Meeting;
"Framework Agreement" The agreement between the Company and Seadrill
for the provision of and associated pricing of
a sixth-generation drilling rig during the first
half of 2020 for the purpose of the implementation
of the Drilling Plan, as described in Section
2 of the Additional Information for Shareholders;
"Fully Diluted Share the issued share capital of the Company as reduced
Capital" by the cancellation of the Existing Options,
and then enlarged by the Deferred Pay Shares,
plus the New Options, Convertible First Tranche
Options and Shore Warrants, assuming they were
all to be issued and, in the case of options
and warrants, to be exercised;
"Fully Diluted Potential the Fully Diluted Share Capital, as enlarged
Share Capital" by the Reserved New Options, The Convertible
Second & Third Tranche Options, and the General
Share Issuance Capacity, assuming they were all
to be issued and, in the case of options, all
exercised;
"FSMA" Financial Services and Markets Act 2000;
"General Share Issuance the authority of the Company, but not the obligation,
Capacity" to allot and issue up to 1,800,000,000 new Ordinary
Shares as if the pre-emption provisions contained
within Article 6.3 of the Company's Articles
of Association did not apply to such allotment
and issue, for which approval is being sought
pursuant to Special Resolution Two;
"Group" the Company and its subsidiaries as at the date
of this document;
"Government" the duly elected Government of The Bahamas from
time to time, including its relevant ministries,
departments and agencies;
"Halliburton" Halliburton Energy Services Inc, a Houston based
provider of well services to the international
oil and gas industry;
"Integrated Well An agreement to be entered into between the Company
Services Agreement" and Halliburton for the provision by Halliburton
of a range of essential well equipment, tools
and services to the Company for the duration
of the implementation of and consistent with
delivery of the Drilling Plan, such agreement
to be on the basis of technical specifications
and associated pricing already defined in the
Notice of Award;
"London Stock Exchange" London Stock Exchange plc;
"New Options Pool" the 200,000,000 New Options which will be available
to be issued over unissued Ordinary Shares in
the Company, in three series and on the terms
and conditions as detailed in the section of
this document setting out explanatory materials
relating to Special Resolution Three;
"New Options" the new options over Ordinary Shares to be issued
from the New Option Pool;
"Notice of Award" A separate notice issued by BPC to each of Halliburton
and BakerHughes GE, appointing Halliburton as
provider of a number and range of specified well
services with defined associated technical specifications
and pricing and appointing BakerHughes GE as
provider of specified wellhead equipment and
tubulars with defined associated technical specifications
and pricing;
"Notice of Annual the notice convening the Annual General Meeting
General Meeting" to which this document is attached;
"Ordinary Resolutions" Any Shareholder Resolutions defined as Ordinary
by the Company Articles of Association, requiring
a notice period of 14 clear days and a simple
majority of votes cast in order to be passed;
"Ordinary Shares" the Company's ordinary shares of GBP0.00002 (0.002
pence) each;
"Prospectus Rules" the prospectus rules made by the FCA pursuant
to section 73A of the FSMA;
"Reserved New Options" A subset of the New Options comprising 50,000,000
options over Ordinary Shares to be approved for
issue by Shareholders but not initially allocated,
and reserved for grant to future employees and/or
for future incentive awards;
"Resolutions" the resolutions set out in the Notice of General
Meeting, including both the Ordinary Resolutions
and the Special Resolutions;
"Seadrill" Seadrill Limited, a company engaged in the business
of the provision of drill rigs;
"Special Resolutions" Any Shareholder Resolutions defined as Special
by the Company Articles of Association, requiring
a notice period of 21 clear days and a majority
of 75% of votes cast in order to be passed;
"Strand Hanson" Strand Hanson Limited, the Company's nominated
adviser for the purposes of the AIM Rules;
"Shareholders" holders of Ordinary Shares from time to time;
"Shore Capital" Shore Capital Stockbrokers Limited, a broker
for the Company for the purposes of the AIM Rules;
"Shore Warrants" the 7,200,000 unlisted warrants to subscribe
for new Ordinary Shares at 1.6 pence per Ordinary
Share to be issued to Shore Capital as compensation
for services provided to the Company in its placing
of Ordinary Shares in March of 2019;
"Southern Licences" collectively the four exploration licences held
by the Company in The Bahamas, individually referred
to as Bain, Cooper, Donaldson and Eneas; and
"UK" the United Kingdom of Great Britain and Northern
Ireland.
LETTER FROM THE CHAIRMAN
Bahamas Petroleum Company plc
(Incorporated in the Isle of Man under the Companies Acts
1931-2004 and with Company Number 123863C)
Directors: Registered Office:
William (Bill) Schrader (Non-Executive Chairman) IOMA House
James Smith (Non-Executive Deputy Chairman) Hope Street
Adrian Collins (Non-Executive Director) Douglas
Edward Shallcross (Non-Executive Director) Isle of Man
Ross McDonald (Non-Executive Director) IM1 1AP
Simon Potter (Chief Executive Officer)
21 August 2019
Dear Shareholders
Notice of Annual General Meeting and explanatory information for
Shareholders
1. Introduction
The Company has today announced a series of agreements and
developments that, when taken together, represent a coordinated
approach towards commencement of drilling activities in The Bahamas
during 2020, in accordance with its licence commitments.
The Annual General Meeting of Shareholders has been convened for
17 September 2019, at which a number of Resolutions will be put to
Shareholders for approval. Several of these Resolutions are
Ordinary Resolutions, and deal with ordinary business of the type
typically transacted at the Annual General Meeting of the Company
and which require a simple majority to approve. However, certain of
the Resolutions to be tabled for consideration by Shareholders are
Special Resolutions, that relate directly to the Company's plans to
progress towards drilling activities, and therefore require
approval by a 75% super-majority of Shareholders voting at the
Annual General Meeting.
The main purpose of this letter and attached explanatory notes
is to set out the details of, and reasons for, the Special
Resolutions, describe how passage of the Special Resolutions relate
to successful delivery of the core objectives of the Company, and
thus explain why the Directors unanimously consider that the
Special Resolutions to be proposed at the Annual General Meeting
are in the best interests of the Company and its Shareholders as a
whole, and to recommend that you vote in favour of all of the
Resolutions to be proposed at the Annual General Meeting.
It is important that Shareholders understand the rationale for
this range of linked activities and associated Special Resolutions,
which is directly related to the Company now embarking on a course
toward drilling of an initial exploration well during the first
half of 2020, activity which the Directors consider to be the
bedrock of future Shareholder value in our Company.
2. Business Background
The Company's business currently is focussed and single-purpose:
we have five licences for oil exploration covering approximately
16,000 km(2) (4 million acres) in the territorial waters of The
Bahamas. The Company has four exploration licences in the southern
territorial waters of The Bahamas, referred to as Bain, Cooper,
Donaldson, Eneas (these four licences together referred to as the
"Southern Licences") and a fifth, the Miami licence, in the
northern territorial waters of The Bahamas. The main licences of
interest and focus are the Southern Licences.
All licences are held through wholly-owned subsidiaries of the
Company, and were awarded on 26 April 2007 for an initial
exploration period of three years, with up to three further
exploration periods possible, subject to renewal elections,
nominally every three years. Subsequently, the Company received a
number of extensions of the initial three-year exploration term of
each of the Southern Licences, such that the second exploration
term for the Southern Licences commenced on the 8 June 2015.
On entering this second term for the Southern Licences, the
Company was obliged to commence activity by April 2018 on an
initial exploration well, with equipment capable of drilling to a
depth of at least 18,000 feet (the "Drilling Plan"). This date was
extended by agreement with the Government on various occasions,
most recently in February of 2019, where the second term licence
period was extended such that currently the Company's work
obligation is clear and unambiguous: to commence an initial
exploration well on the Southern Licences by the end of 2020.
The Southern Licences are commercially co-joined, meaning that
the drilling of an initial exploration well on one of the Southern
Licences will satisfy the work obligation in respect of all of the
Southern Licences. Everything we are doing as a Company, including
the proposal of the various Special Resolutions to Shareholders for
approval, is in the single-minded pursuit of this goal: drilling an
initial exploration well in the Southern Licences, in a safe and
responsible manner, within the timeframe that is consistent with
our obligations under the licences.
At the conclusion of the second term for the Southern Licences,
the licences may be extended for two further exploration periods of
up to three years each on approval of the Government (which, if BPC
has met its licence obligations, may not be unreasonably withheld).
At the time of extension, BPC will be required to relinquish 50% of
the Southern Licence area, which obligation BPC considers may be
satisfied almost entirely by relinquishment of areas in shallower
waters over the Grand Bahamas Bank, which are of lesser technical
interest to BPC.
On entry into a third exploration period, the minimum work
obligation will be to commence the drilling of a new exploration
well, essentially every two years, following the completion of the
initial exploration well. At any time during this period the
Company may apply for a production lease in respect of all or part
of the area covered by the Southern Licences subject to submission
and agreement of a development plan. As with the exploration period
extensions, if BPC has met its licence obligations the grant of a
production lease cannot be unreasonably withheld. Any such
production lease would give the Company the right to produce
petroleum from that production area for a term of 30 years (and
with a renewal right on application thereafter).
In addition to the Southern Licences, in 2012 the Company made
applications to the Government for a further five licences in the
Cay Sal region of The Bahamas, on-trend from the existing Southern
Licences, but in 2015 consolidated these applications from five to
three. For these three revised applications, approval remains
pending.
In respect of the Miami licence the Company remains in
discussions with the Government concerning the nature and extent of
any future obligations associated with entering into a second
exploration term, should the Company so wish.
3. Technical Work To Date
The Company was awarded its licences in 2007. Once awarded, the
Company sought to collect all available historical, geological and
geophysical data from oil exploration projects in The Bahamas. This
led to a three-year international search and purchase of historical
materials from various oil companies, universities and research
institutions. As a result, the Company developed an extensive
database including well cores, logs, rock samples and thin sections
(from three of the five deep oil exploration wells previously
drilled in The Bahamas), approximately 8,000 line kilometres of
regional 2D seismic data (of varying quality), and magnetic and
gravity data. This data was evaluated using a combination of modern
technologies and interpretative techniques, providing encouragement
to invest in the acquisition of new data (seismic and further
studies), so as to better define the petroleum system elements and
the resource potential within the Company's licences.
In 2010, the Company recorded the first modern offshore seismic
survey in the southern Bahamas since the 1980s. Interpretation of
this 2D seismic acquisition programme confirmed the presence of
several large structures, providing the basis for an independent
Competent Person's Report ("CPR") completed by Ryder Scott in July
2011. The CPR included the Bain, Cooper and Donaldson licensed
areas, highlighting the existence of multiple fold and fault
structures and an estimated mean 2 - 3 billion barrels unrisked
recoverable oil resources from several different stacked reservoir
intervals (with a high case of 7 billion barrels unrisked
recoverable oil resources).
Subsequently, in 2011, the Company completed a 3D seismic survey
of 3,076 km(2) within the Southern Licence area using the latest
CGG BroadSeis acquisition technology. This 3D seismic survey firmed
up the previously identified structures mapped from the 2D seismic
survey, confirming the petroleum resource potential in The Bahamas
within multiple, large-scale structural prospects. The high quality
of the 3D seismic and extensive other data allowed for several
integrated studies by various consulting companies and university
departments, so as to continue to reduce the prospect uncertainty.
This work included seismic stratigraphy to determine facies
classification and distribution, seismic attribute analysis, basin
modelling and regional structural reconstruction to determine the
timing of crucial petroleum system events such as trap formation
and oil generation and migration.
An optimal well location was chosen on the crest of the most
prospective structure. In 2012 the Company completed a Front End
Engineering Design ("FEED") study for the well design, being
consistent with discharging the licence obligation to drill an
exploratory well to at least 18,000 feet. To all intents and
purposes this meant that, having completed a significant amount of
preparatory work, the Company regarded the prospect as
'drill-ready'. However various 'above-ground' issues (as detailed
further in Section 4 Regulatory Backdrop, below) resulted in a
delay to the implementation of these plans.
During the period of this delay, the Company invested
considerable additional efforts into a range of technical work
focused on the Southern Licences. This work further established the
presence and robustness of the petroleum systems, and assessed and
sought to mitigate individually source rock interval and maturity,
trap formation, oil migration, reservoir and seal risks. This work
included analysis of fluid inclusion and oils collected from the
region, determining multiple pulses of oil migration from differing
source rock intervals, all determined to be in the oil window; an
analysis of seal facies and distribution linked to vertical seismic
anomalies to determine trap / seal integrity across the prospective
structures; seismic inversion to aid determination of
reservoir-seal pairs; and, a detailed seismic interpretation to
test fault independent closure thus mitigating trap risk. Much of
this work has been tested and validated through the farm-in process
with a wide range of industry majors and large independents.
As a result of this and earlier work BPC determined that the
Southern Licences contained considerable oil potential, and in 2017
the Company engaged Moyes & Co, an international petroleum
industry consultancy, as external technical experts to conduct an
independent audit of BPC's own assessment of the total petroleum
system and prospect portfolio utilising the full range of the
Company's exhaustive database. The key findings were as
follows:
-- Stock Tank Oil Initially In Place ("STOIIP") assessed for the
prospect structures as 8.4 billion barrels, with an upside of up to
28 billion barrels;
-- Applying a recovery factor in the range of 20% - 40% to the
Moyes STOIIP volumetrics would result in an unrisked Estimated
Ultimate Recoverable ("EUR") in the range of 1.6 billion to 2.9
billion barrels (mean), and up to 9 billion barrels (upside);
and,
-- Moyes independently calculated the probability of success
("PoS") factors for each of the stacked reservoirs assessed, the
majority of which were calculated in the 25 - 35% range.
Based on several field developmental studies BPC believes that
the minimum field size for an economic development of this nature
is less than 200 million barrels (versus the resource estimates
measured in billions of barrels, as noted in the independent Moyes
& Co review), and that the project therefore offers robust
commerciality even in a series of credible downside scenarios.
Combining all of the technical work and interpretation, the
Company was able to build on earlier well design efforts to develop
a range of potential well locations and well plan options, based
upon in-depth reviews of wells previously drilled in The Bahamas. A
particular issue affecting historical exploration well drilling
performance was the slow rate of penetration ("ROP") of the drill
bit. Studies were initiated taking account of recent technology and
drilling philosophy developments, whilst also adopting and
implementing global standards and best practices. The results of
these studies suggested that significant improvements could be made
to ROP, thus substantially reducing the predicted time it would
take to drill any chosen well. Based on these studies, BPC
estimated that an exploration well to a depth of up to 6,500 meters
(21,500 feet) would take between 40 and 70 days to drill and
assess. Further, well cost updates have incorporated the
substantial reduction in global rig rates and availability, to
arrive at the current well cost estimates (refer to Section 5, Well
Location, Historical Cost Estimates and Funding Strategy,
below).
The Company has, to date, expended in excess of US$100 million,
much of it in relation to the above summarised technical work
(including data acquisition, interpretation and studies). In
aggregate, the Company believes this technical work has established
a project with:
-- stacked play systems from Late Jurassic syn-rift clastics, to
Cretaceous shallow water carbonates with reefal geometries and
shallower slope talus debris fields, in structures and
stratigraphies mapped from 3D - totalling over 20,000 feet of
stratigraphic column;
-- three and four-way dip closed structures mapped at over 70
kilometres along strike length, with gross column heights up to
1,000m and areal extent 400km(2) ;
-- the prospect of a world-scale, multi-billion barrel petroleum
resource, similar in scale and size to resources encountered in
more well-known petroleum producing regions, and highly analogous
to the Iranian Zagros mountains and the Mexican Salinas basins both
producing from fold and thrust exploration plays, with the likely
source rock charging the Company structures being the same age and
type as the Bossier-Smackover petroleum system that charges the
deepwater fields in the Eastern US Gulf of Mexico and nearby Cuba;
and
-- a significant reduction in estimated well cost when compared
to prior estimates, attributable to current rig rates, an
anticipated improvement in ROP (principally associated with
technical advances in drill bit technology) and lower estimated
logistical and support costs.
4. Regulatory Backdrop
In 2012, the Government initiated a process to replace The
Bahamas' existing laws and regulation for the petroleum industry
(which dated to the 1970s) with a new set of laws and regulations,
in particular to include modern safety and environmental
regulations consistent with global standards and best practices
around the world. Such modernised regulations were, following a
three and a half year process, finally promulgated in July 2016,
following enactment of the updated Petroleum Act in March of the
same year. These regulations for the first time include the concept
of Environmental Authorisation ("EA") as a part of the commencement
of well activities, which require the submission of both an
Environmental Impact Assessment ("EIA") and an Environmental
Management Plan ("EMP") together.
In 2012 the Company had already submitted an EIA to the
Government via the Bahamas Environment, Science and Technology
Commission (the "BEST Commission"). That EIA determined the most
likely impacts any exploration activities may have on the
environment within the country and sought to illustrate mitigating
actions the Company could take to address any potential
environmental risks. The EIA was reviewed and accepted by the
Government at that time.
In April 2018, in accordance with these new regulatory
requirements, the Company also submitted to the Government its EMP,
which includes amongst other things an H(2) S plan, an Oil Spill
Contingency Plan and an Emergency Response Plan, incorporating
desktop simulations of a worst-case discharge scenario, which has
become mandatory in other jurisdictions in the region, to underpin
effective response plans. The Government, via the BEST Commission,
has appointed international petroleum consultants Black and Veatch
("B&V") to advise them on the review of this document. The
Company is presently engaged in dialogue with the BEST Commission
(and through them, with B&V) and the Government in relation to
the finalisation of the EMP and thus the EA, which relies heavily
on site-specific and rig-specific data. Given the criticality of
the rig and its operations equipment, capacities and emergency
response programmes to completing the EA, the Framework Agreement
(as described in Section 6 below) affords BPC access to the
technical and other rig specific data necessary to complete this
aspect of the approval process. The intention the Government has
articulated to the Company is to complete this process during 2019,
ahead of when drilling is scheduled to occur during 2020 in
satisfaction of the Company's Southern Licences' obligation.
5. Well Location, Historical Cost Estimates and Funding Strategy
The current proposed location of the first exploration well on
the Southern Licences is in the Cooper - Donaldson licence area,
within the 3D seismic acquisition area and approximately 100 miles
from Andros Island and 15 miles from the Cuban border.
The ultimate well cost will be related to the amount of time
drilling actually takes and a function of the spread rate, which
includes both a rig rate (a day-rate for the use of a rig) and all
associated support costs plus consumables. In 2012, at the peak of
the rig market, and based on then-prevailing conditions in the
global oil market, the Company had originally estimated an
exploratory well cost of the type required to discharge the licence
obligation to be approximately US$120 million. More recently (in
2016) the cost was re-estimated by the Company to be in the range
of US$60 million to US$80 million, such reduction being largely as
a result of reduced rig rates.
BPC now estimates the total cost of an initial exploration well
(including mobilisation and demobilisation) to be in the range of
US$25 million to US$30 million, and up to approximately US$50
million in aggregate should the Company elect to pursue a
concurrent two well exploration campaign. This is a significant
reduction from prior estimates, principally attributable to the
rate at which the rig will be provided (as per the Framework
Agreement between BPC and Seadrill), as well as the expected
improvement in ROP based upon the technical advances in drill bit
technology, and the ability to source a rig out of the Gulf of
Mexico resulting in lower estimated logistical and support
costs.
For several years, the Company has been engaged in a process to
secure the financing required to undertake this drilling. It has
been, and remains, the Company's primary strategy to secure such
financing via a "farm-in", whereby another entity (ideally, but not
necessarily, a major or large independent international oil and gas
company) will acquire an interest in the Southern Licences, and in
exchange will pay for all or a substantial part of the cost of
drilling, and also potentially reimburse the Company a proportion
of the past costs incurred by the Company on those Southern
Licences. This is a fairly typical structure for financing in the
oil and gas industry, and would directly dilute the Company's
interest in the asset (i.e.: the percentage of the Southern
Licences owned by the Company) and thus effectively dilute the
shareholders interest by the equivalent amount. A common feature of
a farm-in transaction is that operatorship of the drilling
programme and the asset (and hence control) is passed to the
incoming partner, depending on the operating capabilities of the
incoming farminee.
A considerable number of suitable partners have engaged with the
Company on the farm-in process, including undertaking technical and
commercial due diligence and entering into negotiations, and some
of these discussions remain ongoing. On this basis, the Company had
hoped to have secured a farm-in on acceptable terms with a suitable
partner by this stage. However, the process of securing a farm-in
partner has taken much longer than anticipated, and has not as yet
produced a successful outcome.
The Company is now embarking on a course to undertake drilling
of the initial exploration well during the first half of 2020, with
or without a farm-in. Whilst there has been protracted delay in
securing a farm-in partner, BPC's licence obligation to drill a
well in 2020 is immutable. Moreover, the Board's view is that
drilling as soon as practicable remains the most efficient route to
generating shareholder value, and the current state of the global
rig market and the resulting substantially reduced well cost
estimate (both highlighted above) means it is now more feasible for
the Company to consider undertaking the well on its own. The
package of critical supply and service contracts (as described in
Section 6 below) and finance and other arrangements (as described
in Sections 7, 8, 9 below), and the associated Special Resolutions
being put to Shareholders for approval, comprise a coordinated
approach to how we propose to do this.
Our objective is simple: to drill an initial exploration well
during 2020 consistent with our existing licence obligations, and
to retain the greatest possible interest in the Southern Licences
(whether at the asset or the equity level). To do this we are
seeking to put in place the full range of technical delivery
services and equipment required, and to enhance our financial
capacity such that we can proceed to drilling.
6. Critical Supply and Service Contracts
To enable the Company to commence drilling activity in a timely
manner during 2020, as required by the licence obligations on the
Southern Licences, a number of critical tasks must be addressed in
advance. 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,
finalising the logistical plan along with associated supply base
location and set-up, finalising 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.
To this end, the Company has reached agreement (subject to
contract) with a number of leading global equipment and service
providers, fundamental to the delivery of a successful exploration
well on time and within a prescribed budget. Central to that
delivery is access to a suitable rig within the necessary
timeframe, along with associated drilling equipment and supplies
(including, for example, a bottom-hole assembly and drilling and
logging services). In summary, these agreements are:
-- Rig Provider: 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. The
Framework Agreement provides clarity and certainty around potential
access to a suitable rig, in the timeframe required, and fixes the
price for the rig (in accordance with industry practice, quoted as
a day-rate in US dollars per day). Critically, with the benefit of
the Framework Agreement in place, BPC (along with Seadrill's input
and support) is now able to move towards finalising detailed
logistical and design work, ensure compatible equipment and
supplies are available and scheduled, and to complete the
associated permitting processes in good time for an orderly
commencement of drilling.
-- Integrated Well Service Provider: 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 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. The involvement of Halliburton and BakerHughes GE at a
sufficiently early stage will also allow for their participation in
final design, so as to further assure successful achievement of the
objectives for the drilling of the well. The Company has issued a
Notice of Award to each of Halliburton and BakerHughes GE as part
of this process, which notices have been accepted, as a precursor
to the parties seeking to conclude necessary long-form
documentation.
Shareholders' attention is drawn to the fact that whilst the
Framework Agreement provides certainty in relation to the setting
of a rig price and certain key commercial parameters and timings,
the final provision of a rig remains subject to entry into a
definitive long-form contract which will be subject to Seadrill
board approval (the "Rig Contract"). Moreover, given that BPC will
require the financial capacity to fulfil the Rig Contract, the
Framework Agreement stipulates that BPC has until 11 October 2019
(or such longer date as the parties may mutually agree) to
demonstrate such financial capacity to Seadrill. Similarly, the
Notices of Award with each of Halliburton and BakerHughes GE now
need to be followed up with the finalisation and entry into long
form documentation ("Call Off Contracts"), containing terms and
conditions customary in the industry, whilst including the
technical specifications and pricing already established in the
Notices of Award.
Additional details of the Framework Agreement are provided in
Section 2 of the Additional Information for Shareholders, and
details of the Notices of Award are provided in Section 3 of the
Additional Information for Shareholders.
7. Financing Arrangements
As noted, the pricing and timeline parameters encapsulated in
the Framework Agreement with Seadrill for the provision of a
sixth-generation drilling rig, and the Notices of Award for
integrated well services from Halliburton and wellhead equipment
from BakerHughes GE, have allowed the Company to obtain a
significant degree of certainty as to the estimated total drilling
costs, based upon a specific Drilling Plan under the now defined
market conditions.
BPC now estimates the total cost of an initial exploration well
(including mobilisation and demobilisation) to be in the range of
US$25 million to US$30 million, and up to approximately US$50
million should the Company elect to pursue a concurrent two-well
exploration campaign.
BPC's principal strategy to secure the funding needed for its
intended Drilling Plan remains to secure a farm-in, which the
Company continues to pursue. Indeed, the Company considers that the
reduced drilling cost estimates might result in a farm-in proposal
becoming viable with an increased number of potential partners.
However, as noted previously, the process of seeking to secure a
farm-in partner is yet to produce a successful outcome. At the same
time, BPC's licence obligation to drill a well in 2020 is
immutable, and a considerable amount of necessary work is required
to commence ahead of that. Moreover, drilling as soon as
practicable remains, in the Board's view, the most efficient and
likely route to generate Shareholder value.
Given these circumstances the Board considers it imperative that
at the same time as continuing to pursue a farm-in the Company
should take steps to put viable alternative financing solutions in
place. Doing so at this time will provide BPC with an expanded
range of financing options, will allow the Company to demonstrate
financial capacity to the Government and various potential farm-in
partners and contractors, allow certain long-lead time work items
to commence, strengthen the Company's hands in farm-in and other
financing negotiations, and ultimately enable drilling even in the
event that a farm-in is not concluded in an acceptable time frame,
or on acceptable terms.
Therefore, the Company has now entered into a first financing
arrangement, a Conditional Convertible Loan for GBP10.25 million,
specifically so as to secure an alternative financial option
towards funding of the Drilling Plan, should this be required.
Additionally, the Company is presently considering a range of other
financing options, as well as continuing the farm-in process.
Details of the Conditional Convertible Loan are outlined in the
section of this document containing explanatory materials relating
to Special Resolution One. 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. 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, and therefore Special Resolution One sets out
the requisite approvals, including the details and explanation
thereof.
I wish to stress that it remains the Company's strong preference
to secure a farm-in. However, the ultimate objective is to drill a
well, whether that be funded via a farm-in 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-is unable to be secured on a timely basis or on acceptable
terms.
8. General Share Issuance Authority
At the Annual General Meeting, Shareholders will also be asked
to approve a temporary authority for the Company to issue up to
1,800,000,000 Ordinary Shares, which, if used in its entirety,
would represent a total dilution of approximately 45%, without the
need for seeking further shareholder approval, and with such
capacity to be in place until the end of 2020.
It is important that Shareholders understand that the rationale
for the proposed temporary general issuance authority is directly
related to the Company now embarking on a course to undertake
drilling of an initial exploration well during the first half of
2020, activity which we consider to be the bedrock of future
Shareholder value in our Company. Prior to then, the Company must
secure the funding needed to drill a well, and securing that
funding will, by necessity, require some level of dilution of
ownership interest (either at the equity level or at the asset
level).
As already noted, our preference is for that dilution of
ownership interest to occur directly at the asset level, which is
what will happen if a farm-in is successfully concluded. That is,
if the Company is able to secure a farm-in on acceptable terms, the
farm-in partner will take a direct ownership interest in the
underlying Southern Licences, and there will thus be no or little
need for the Company to issue additional equity (albeit the
Company's ownership interest in the underlying Southern Licences
will be diluted by some agreed percentage, and a transaction of
this sort may potentially require the Company to cede operatorship
- and therefore some level of control - to the farm-in
partner).
However, if the Company is unable to secure a farm-in on a
timely basis, or on acceptable terms, or if the Company is only
able to secure a partial farm-in, the Company will necessarily need
to secure the required funding from alternative sources, for
example the equity capital markets, or by drawing on the
Conditional Convertible Loan and/or implementing one or more of the
various other alternative financing proposals which the Company is
evaluating. All of these alternative avenues will likely involve
the issuance of material levels of new equity. Thus, having the
authority in place to enable the Company to undertake issuances of
Ordinary Shares over the next sixteen months as the Board deems
appropriate - i.e. throughout the period in which the Company
intends to be drilling in fulfilment of licence obligations - is
considered advantageous, in that it will afford the Company maximum
flexibility as it moves forward.
It should be noted that, given current financial resources and
absent the costs of the contemplated Drilling Plan, the Company
does not anticipate requiring any further working capital for the
next 12 months. The authorities being requested are thus in support
of securing the finance needed for the Company's Drilling Plan and
maximising Shareholder value. It should also be noted that the
authority being tabled for Shareholder approval is for a limited
period of sixteen months, specifically being until the end of the
current Southern Licence exploration period, and the authority will
expire if not exercised and / or renewed by the Shareholders prior
to that time.
The authority being sought requires approval of the Shareholders
as a Special Resolution, and Special Resolution Two sets out the
proposed resolution pertaining to this matter, including the
details and explanation thereof.
9. Employee Arrangements
To date, the Company has maintained a strict focus on cost
control, and on preserving cash. The Company's team of employees
has thus deliberately been kept small (albeit fit-for-purpose), and
a number of key executives, as well as all members of the Board,
have for some time foregone all or part of their contracted cash
compensation, with an agreement that deferred pay will be
reimbursed in cash and / or shares at a later date when the Company
has secured funding and is able to progress with operations.
Given the increased level of activity in the Company with the
detailed work now required and being undertaken to prepare for
drilling in 2020, it is imperative that the Company has available
to it the requisite team of competent executives and technical
staff. Quite simply, a well will be best conducted safely and
responsibly if the right people are on board, as early as is
practicable. Such qualified persons are not always instantly
available, so over the past several months we have commenced the
process of expanding our team, and have been able to secure the
services of a number of highly qualified individuals, attracted to
the robust technical merits of our project. Summary CV details of
the current key team members, including new recruitments, are set
out in the section of this document containing explanatory
materials relating to Special Resolution Three. Discussions with a
number of other candidates for other roles relevant to the Drilling
Plan are also underway.
It is critical at this stage in the Company's life that the
Board, executive, management and staff of the Company be retained
and appropriately incentivised, such that their interests are
aligned with the creation of Shareholder value through progressing
to an initial exploration well.
To ensure this, we are thus proposing to cancel all outstanding
existing Board / executive / employee options, and to replace them
with new options that will be granted in three tranches, with
vesting linked to delivery of value enhancement, and exercise
prices stepping up with each tranche, all at a material premium to
the Company's current share price.
The proposed new option scheme would create a pool of options
available for allocation over time, and which (once fully
allocated) would represent around 7.53% of the Fully Diluted Share
Capital. This level of incentive ownership is consistent with that
in place at several companies similar to BPC, and has been
benchmarked accordingly by the Board and advisors. Initially,
however, the intention is that only 75% of this pool will be
allocated, with the balance retained for allocation to future
recruits and to enable future incentive awards (if appropriate). I
would also note that of the intended allocation, only a small
percentage will be to non-executive Board members (including
myself), with the majority to be distributed widely amongst
executive management and other employees. That is, the people we
are seeking to retain and incentivise through the grant of options
are those people directly responsible for delivery of a well, and
their reward will be directly linked to value creation for all
Shareholders.
At the same time as introducing the new option scheme, we are
proposing to approve the issuance of the Deferred Pay Shares, to
discharge our outstanding deferred pay obligations. However, these
Deferred Pay Shares will only be issued at such time as the Board,
having consulted with the relevant advisers to the Company,
determines that the initial exploration well is fully funded on an
unconditional basis.
The issue of the performance-based New Options, and the issue of
the Deferred Pay Shares at such time as the Board having consulted
with the relevant advisers to the Company, determines that the
initial exploration well is fully funded on an unconditional basis,
is being put to Shareholders for approval. Special Resolution Three
sets out the proposed resolution pertaining to these matters,
including the details and explanation thereof.
10. Related Party Transactions
The issue of Allocated New Options to the Directors and the
issue of the Deferred Pay Shares will constitute related party
transactions under Rule 13 of the AIM Rules for Companies.
Accordingly, given there are no independent Directors, Strand
Hanson Limited, the Company's Nominated Adviser, considers that the
terms of the proposed issue of the options are fair and reasonable
insofar as the Company's Shareholders are concerned.
11. Notice of Annual General Meeting
A Notice convening the Annual General Meeting of the
Shareholders of the Company, to be held at the Company's registered
office at IOMA House, Hope Street, Douglas, Isle of Man, IM1 1AP on
17 September 2019 at 11 a.m. has been prepared, has been posted to
the Company's website as of 21 August 2019, and by no later than 23
August 2019 will be despatched to Shareholders. These explanatory
materials comprise an appendix to the Notice of Annual General
Meeting, and are intended to provide explanation to Shareholders of
the rationale for the various Special Resolutions to be proposed at
the Annual General Meeting.
The Annual General Meeting will address both the Company's
regular Ordinary Resolutions as required by the Articles of
Association, and table for consideration the Special Resolutions
(explanations for which are included in this document). The
Ordinary Resolutions will be proposed as such, and will require a
simple majority of the Shareholders voting in person or by proxy in
favour of the resolution at the Annual General Meeting. The Special
Resolutions will be proposed as such, and will require a
super-majority of seventy-five per cent. (75%) or more of the
Shareholders voting in person or by proxy in favour of the
resolution at the Annual General Meeting.
The Form of Proxy for use at the Annual General Meeting
accompanies the Notice of Annual General Meeting. Whether or not
you intend to be present at the Annual General Meeting, the Form of
Proxy should be completed and signed in accordance with the
instructions thereon and returned to the Company's registrars, Link
Asset Services, PXS, 34 Beckenham Road, Beckenham, Kent BR3 4TU, as
soon as possible, but in any event so as to be received by no later
than 48 hours before the time appointed for the Annual General
Meeting. Unless the Form of Proxy is received by this date and
time, it will be invalid. Alternatively, CREST members who wish to
appoint a proxy or proxies via CREST may do so in accordance with
the procedures set out in the Notice of Annual General Meeting and
the Form of Proxy. The completion and return of the Form of Proxy
or appointment of a proxy via CREST will not preclude Shareholders
from attending the Annual General Meeting and voting in person
should they so wish.
12. Recommendation
The Directors consider the approval of the Ordinary Resolutions
and the Special Resolutions to be proposed at the Annual General
Meeting to be in the best interests of the Company and its
Shareholders as a whole, and, accordingly, unanimously recommend
Shareholders to vote in favour of all of the Ordinary Resolutions
and Special Resolutions, as they and their associated parties
intend to do in respect of their beneficial holdings, which in
aggregate total 16,295,000 Ordinary Shares, representing
approximately 1 percent of the current issued share capital.
Yours faithfully
Bill Schrader
Non-Executive Chairman
EXPLANATORY INFORMATION RELATING TO SPECIAL RESOLUTIONS:
SPECIAL RESOLUTION ONE: APPROVAL OF CONDITIONAL CONVERTIBLE
LOAN
Rationale:
The Company has entered into a Framework Agreement with Seadrill
which, subject to a long-form contract and Seadrill board approval
processes, will see the provision of a sixth-generation drilling
rig during the first half of 2020. Seadrill is one of the world's
largest offshore drill rig companies.
At the same time, the Company has issued a Notice of Award to
Halliburton, a leading international oil industry contractor, for
the purposes of providing essential integrated well services to
facilitate the Company's intended drilling campaign, and a Notice
of Award to BakerHughes GE, another leading international oil
industry consultant, for the purposes of providing wellhead
equipment and large tubulars. The Framework Agreement and the
Notices of Award do not require Shareholder approval, but details
in relation to these key operational developments are set out in
Section Two and Section Three of the Additional Information for
Shareholders, respectively.
Based on the pricing parameters set out in the Framework
Agreement and the service proposals submitted by Halliburton and
BakerHughes GE, the Company has been able to estimate with a
significantly greater level of certainty the total costs of the
intended Drilling Plan and subsequent evaluation period, through
the course of 2020. BPC estimates that it will be possible to
implement the Company's Drilling Plan for an initial exploration
well in the range of US$25 million to US$30 million, or up to
approximately US$50 million should the Company elect to pursue a
concurrent two-well exploration campaign (inclusive of mobilisation
and demobilisation costs). This is a significant reduction on
previous cost estimates.
BPC has to-date been seeking to address its funding needs via a
"farm-in" - a common oil industry form of financing whereby a third
party (usually a company with existing industry operations and
expertise) agrees to pay for all or some of the cost of drilling,
in exchange for a direct ownership interest in the relevant
underlying assets (which in BPC's case would involve a farm-in
partner taking a direct ownership interest in the four Southern
Licences). The extent of the farm-in partner's ownership interest
is a matter for commercial negotiation. Other key commercial terms
to be agreed in any farm-in agreement would be the extent (if any)
to which a farm-in partner might make a further cash payment direct
to BPC in respect of "back costs", and whether the farm-in partner
would require BPC to cede operatorship of the project.
Securing a farm-in continues to be BPC's preferred funding
model, and the Company continues in discussions with various
potential farm-in partners. The Company's intention remains to
conclude a farm-in on acceptable terms, and in a time frame
consistent with the Company's current Drilling Plan and licence
obligations.
However, given that BPC's licence commitment is now fixed as
being to commence an initial exploration well during 2020, and
given the amount of preparatory work required ahead of commencing
operations (much of which must commence imminently) the Board
considers it imperative to put in place alternative viable
financial sources. Doing so at this time will provide BPC with an
expanded range of financing options to choose from, will allow BPC
to demonstrate financial capacity to the Government and potential
farm-in partners and contractors, allow long-lead time work items
to commence (for example, environmental baseline sampling),
strengthen the Company's position in ongoing farm-in negotiations,
and ultimately enable drilling to commence even if a farm-in is not
concluded.
With this in mind, the Company has been able to agree terms for
a GBP10.25 million (approximately US$12.5 million) Conditional
Convertible Loan, an alternative financial option for funding of
the Drilling Plan should this be required. Additionally, the
Company is presently considering a number of other alternative
financing options to a farm-in. If available and drawn, the
Conditional Convertible Loan would provide BPC with access to
approximately half the estimated well cost, and when combined with
other financing proposals currently being considered, in aggregate
(and if concluded) would provide BPC with sufficient funding to
enable it to meet its drilling obligations during 2020, even absent
a suitable farm-in.
The Company wishes to highlight that at this stage, certain
aspects of the Conditional Convertible Loan are conditional on
further developments and satisfaction of various condition
precedent, and thus access to the funding is not assured.
Furthermore, the Conditional Convertible Loan is subject to
Shareholder approval, and therefore Special Resolution One sets out
the requisite approvals.
It remains the Company's preference to secure a farm-in, and
thus potentially not have to make use of the Conditional
Convertible Loan. For this reason, the Conditional Convertible Loan
has been structured with a view to keeping the up-front cost to BPC
as low as possible, and to ensuring that the Company's ability to
"opt-out" of this financing at minimal cost if it is able to secure
funding on better terms elsewhere. However, if for whatever reason
BPC is unable to secure a farm-in, or if the farm-in process takes
longer than required, the Company considers that having this
finance arrangement in place will be advantageous for the reasons
detailed in this document.
Conditional Convertible Loan Facility - Summary Details:
The Company has entered into an agreement for a conditional
convertible loan investment (the "Conditional Convertible Loan") of
GBP10.25 million (approximately US$12.5 million, or approximately
half the estimated cost of the initial exploration well). Amongst
other conditions as detailed further below, the Conditional
Convertible Loan is subject to Shareholder approval.
The Conditional Convertible Loan agreement is with Bizzell
Capital Partners Pty Ltd, an Australian-domiciled investment firm
acting on behalf of interests associated with Mr. Stephen Bizzell
and Mr. Mark Carnegie for the purposes of investing in BPC ("BCI").
Mr. Bizzell and Mr. Carnegie each have a track record of successful
investment in a number of early-stage oil and gas exploration
businesses around the world. The Company's Commercial Director, Mr.
Eytan Uliel, worked for Mr. Carnegie from 1999 - 2006. Further,
investment funds associated with Mr. Carnegie and Mr. Bizzell were
also variously early-stage investors in Arrow Energy Limited and
Dart Energy Limited, Australian-listed companies at which both the
Company's Chief Executive Mr. Simon Potter and the Company's
Commercial Director previously worked. Arrow Energy Limited was
acquired by a consortium of Shell and Petrochina in 2011, and Dart
Energy Limited was acquired by AIM-listed iGas Energy Plc in
2014.
For the information of Shareholders, the key terms of the
Conditional Convertible Loan are summarised as follows:
-- Amount: GBP10.25 million (approximately US$12.5 million,
being approximately half the estimated cost of an initial
exploration well)
-- Use of funds: Well finance and general strategic purposes
-- Form of investment: Convertible loan notes ("Notes")
-- Note Subscribers: Bizzell Capital Partners Pty Ltd and / or
nominees of Bizzell Capital Partners Pty Ltd, Mr. Stephen Bizzell
and Mr. Mark Carnegie
-- Term: 3 years
-- Coupon: 12% per annum, payable annually in arrears; BPC can
elect to capitalise interest accrued on the Notes
-- Priority and Security: On a return of capital (by way of
liquidation or otherwise) the Notes will rank senior to all
Ordinary Shares on issue to the extent of the principal plus unpaid
interest, and shall be secured by a first ranking security over all
the assets and undertakings of BPC, and will rank senior to all
other debt of BPC
-- Conversion: BCI may at any time prior to maturity elect to
convert the Notes (principal plus any accrued interest) into fully
paid ordinary shares in BPC at a 25% premium to the price of BPC's
next capital raising (if any) or at 6p per share, whichever is the
lower
-- Early Redemption: BPC will have no right to redeem the Notes
prior to the end of the 3 year term; BCI will be entitled to redeem
the Notes at a 110% premium to face value if, as at 31 December
2020, employment and executive retention arrangements between
nominated key executives and the Company are on terms that are not
satisfactory to BCI
-- Dividends: No dividends must be declared or paid whilst the Notes are on issue
-- Documentation: The parties will work in good faith to agree
and enter into definitive long-form legal documentation as soon as
possible, but in any event by no later than 30 November 2019.
Subject to definitive documentation being entered into and subject
to satisfaction of all conditions precedent as described below, BCI
must subscribe for the Notes ("Completion") by 31 March 2020
-- Conditions to Completion: Completion of the subscription for
the Notes by BCI will be subject to a number of conditions first
being met or satisfied or otherwise waived by BCI. These
include:
o Completion of due diligence on BPC, to the satisfaction of
BCI;
o BPC having raised sufficient funds (to the reasonable
satisfaction of BCI) to meet the balance cost of the intended
Drilling Plan in full, plus the operating costs of the Company for
a period of at least 24 months from the date of Completion, such
funding to be secured through one or a combination of either a
farm-in and/or a capital raising via issue of Ordinary Shares at a
price of 2p per Ordinary Share or higher;
o the Company having entered into such binding agreements and
contracts with reputable international companies as is necessary
and sufficient to enable the Company to conduct the Drilling Plan
at the estimated cost of those operations, including a contract for
provision of a drilling rig with a reputable international rig
company, and a contract for integrated well services with a
reputable international service company;
o the Company securing all necessary permits and approvals for
drilling from the Government, including all necessary environmental
permits;
o the Company's Shareholders in general meeting having first
approved the investment by BCI; and
o employment and executive retention arrangements between
nominated key executives and the Company being on terms
satisfactory to BCI.
-- BCI will be paid fees as follows:
o Options to subscribe for 25,000,000 Ordinary Shares in BPC
with an exercise price of 2p per share (ie: an approximate 25%
premium to the Ordinary Share price on the last trading day
immediately prior to the date of entry into the Conditional
Convertible Loan agreement, being 20 August 2019), exercisable at
any time within the four year period from their date of issue (the
"Convertible First Tranche Options");
o on Completion, an establishment fee equal to 2% of the Notes
face value (i.e. GBP205,000), with such establishment fee to be
offset against the investment subscription for the Notes; and
o on Completion, two further tranches of options to subscribe
for Ordinary Shares in BPC, of 12,500,000 options per tranche, the
first with an exercise price of 2.5p per Ordinary Share (i.e. an
approximate 60% premium to the Ordinary Share price immediately
prior to entry into the Conditional Convertible Loan agreement) and
the second with an exercise price of 3p per Ordinary Share (i.e. an
approximate 90% premium to the Ordinary Share price immediately
prior to entry into the Conditional Convertible Loan agreement),
exercisable at any time within the four year period from the date
of their issue (the "Convertible Second & Third Tranche
Options").
o If Shareholder approval of the Conditional Convertible Loan is
not obtained, or if Shareholder approval is obtained and BPC
subsequently exercises its opt-out right as described further
below, BCI will be entitled to receive and retain the Convertible
First Tranche Options. On the other hand, the Convertible Second
& Third Tranche Options will only be issued and the
Establishment Fee will only become payable on Completion - i.e.
once all conditions precedent are satisfied and funds are advanced
to BPC. To the extent Completion does not occur for any reason, BPC
shall not be obliged to issue the Second & Third Tranche
Options or pay the Establishment Fee.
-- BPC Opt-Out Right: At any time prior to entry into definitive
long-form documentation, BPC may elect to opt-out of the proposed
investment (if, for example, BPC is able to raise funds on better
terms elsewhere), without penalty other than BCI will be entitled
to retain the Convertible First Tranche Options as consideration.
If BPC opts-out of the proposed investment because it has secured
funds on better terms at a corporate level, BCI will have the
ability to participate in that fund raising in an amount up to
GBP10.25 million on terms equal to all other investors in that fund
raising. If BPC opts-out of the proposed investment because BPC has
secured funds on better terms via an asset level transaction, such
as a farm-in, BCI will retain the right to make a smaller
Convertible Note investment of GBP3.4 million, and the
establishment fees and the amount of Convertible Second & Third
Tranche options will be pro-rated accordingly.
-- Board Rights: Effective from Completion (i.e. only once all
conditions precedent are satisfied and funds are advanced to BPC)
and until such time as the Notes are redeemed, BCI will have the
right to appoint two (2) directors to the Board of BPC (but, for so
long as both Simon Potter and Eytan Uliel are members of the Board,
the right of appointment shall be reduced to only one (1)).
Attention is drawn to the fact that, as detailed above, the
Conditional Convertible Loan remains subject to completion of due
diligence, and negotiation and entry into of definitive long-form
legal documentation, and thereafter access to the GBP10.25 million
of funding would require the Company first having secured funding
for the balance of the initial exploration well Drilling Plan plus
24 months operating costs, and for a number of other conditions to
have first been satisfied. Nonetheless, the Directors consider the
Conditional Convertible Loan agreement to be of considerable
valuable, in that it would provide roughly half of the capital
required to complete the Drilling Plan and therefore substantially
reduces the overall amount of finance required to be raised by the
Company from alternative sources, thus affording much greater
flexibility both in terms of farm-in discussions and consideration
of other financing options.
Attention is also drawn to the fact, and Shareholders should
note that, in the event the Conditional Convertible Loan is not
approved, or if the Conditional Convertible Note agreement is
cancelled by the Company exercising its opt-out right,) the Company
will remain obligated to issue to BCI the Convertible First Tranche
Options.
Special Resolution:
The Special Resolution to be put to Shareholders in relation to
the Conditional Convertible Loan is as follows:
Special Resolution One:
As a special resolution, THAT
(i) the entry by the Company into a conditional agreement for a
GBP10.25 million convertible loan facility (the "Conditional
Convertible Loan") with Bizzell Capital Partners Pty Ltd, an
Australian-domiciled investment firm acting on behalf of entities
associated with Mr. Stephen Bizzell and Mr. Mark Carnegie ("BCI")
is approved and ratified,
(ii) the issue of 25 million options to BCI to subscribe for
ordinary shares in the capital of the Company, for a term of four
years and with an exercise price of 2p per share (the "Convertible
Tranche One Options") pursuant to the terms of the Conditional
Convertible Loan, is approved, and
(iii) subject to agreement being reached between the Company and
BCI on the terms of the definitive long-form legal documentation
governing the Conditional Convertible Loan by no later than 30
November 2019, and subject to satisfaction of all conditions
precedent under that documentation and completion of the
convertible loan note investment under that documentation by 31
March 2020, the issue of 12.5 million options to BCI to subscribe
for ordinary shares in the capital of the Company, for a term of
four years and with an exercise price of 2.5p per share and the
issue of 12.5 million options to BCI to subscribe for ordinary
shares in the capital of the Company, for a term of four years and
with an exercise price of 3p per share (together the "Convertible
Second and Third Tranche Options") pursuant to the agreement for
the Conditional Convertible Loan, is approved.
EXPLANATORY INFORMATION RELATING TO SPECIAL RESOLUTIONS:
SPECIAL RESOLUTION TWO: APPROVAL OF GENERAL SHARE ISSUANCE
AUTHORITY
Rationale:
At the Annual General Meeting, Shareholders will be asked to
approve a temporary authority of the Company to issue up to
1,800,000,000 additional Ordinary Shares (including options and
warrants as may be required) without the need for seeking further
Shareholder approval, at any time in the period prior to the end of
2020. If all issued, this would represent a total dilution of
approximately 45% on a fully diluted shares in issue basis. The
authority being sought requires approval of the Shareholders as a
Special Resolution.
The rationale for this proposal is directly related to the
Company now embarking on a course to undertake drilling of an
initial exploration well during the first half of 2020, activity
which Directors consider to be the bedrock of future Shareholder
value creation. Prior to commencing drilling, the Company must
secure the funding needed for that activity, and securing that
funding will, of necessity, require some level of dilution of
ownership interest.
As noted repeatedly throughout this document, the Company's
primary strategy remains to fund the drilling of an initial
exploration well through a farm-in. Under a farm-in arrangement, a
third party will provide all or part of the funding necessary to
pay for the well costs (and potentially some payment to BPC in
relation to BPC's past costs), in exchange for a direct
participatory interest in the Company's underlying assets (i.e. the
four Southern Licences).
If the Company is able to meet this objective and secure a
farm-in on acceptable terms and in an acceptable timeframe, there
will be little or no need to issue additional Ordinary Shares to
fund well costs (albeit the Company's ownership interest in the
underlying Southern Licences will necessarily be diluted at the
asset level, and depending on farm-in negotiations and the
requirements of potential farm-in partners, this would likely
result in a material dilution in ownership interest in the Southern
Licences, as well as potentially ceding operatorship to a farm-in
partner with a corresponding reduction in operational control).
However, if the Company is unable to secure a farm-in on
acceptable terms, or if the Company is only able to secure a
partial farm-in, or if the farm-in process takes longer than
anticipated, then in order to meet its licence commitments the
Company will need to secure the required funding from alternative
sources, and doing so would likely include the need to issue a
material number of new Ordinary Shares. For example, if the Company
were to seek to rely for part of its funding needs on the
Conditional Convertible Loan, the Company would secure GBP10.25
million which would, at the election of BCI, be convertible into
Ordinary Shares of the Company. Similarly, other funding solutions
which the Company is currently considering, might require the issue
of Ordinary Shares. Other funding sources may also become available
that represent a better value proposition for Shareholders as
compared to a farm-in, for example, funding via the private
placement of Ordinary Shares on AIM, or via an entitlement offer to
all existing Shareholders, or a combination thereof.
Furthermore, even if the Company is successful in being able to
conclude a farm-in, depending on the ultimate farm-in partner and
the terms of the relevant farm-in agreement that may be entered
into, the Company may be required to issue some Ordinary Shares as
part of the overall farm-in transaction, and/or might be obligated
to pay certain success fees to various consultants and advisers,
which fees the Company may be required to pay in the form of
Ordinary Shares or options or warrants, or which the Company could
elect to pay in the form of Ordinary Shares or options or warrants
should the Company wish to preserve available cash resources.
In summary, therefore, if the Company is unable to secure a
farm-in on a timely basis, or on acceptable terms, or if the
Company is only able to secure a partial farm-in, or if alternative
funding sources become available that represent a better value
proposition for Shareholders as compared to a farm-in, in order to
meet licence obligations the Company may seek and rely on
alternative sources of finance, all which will likely involve the
issuance of material levels of new Ordinary Shares (albeit the
extent is presently unknowable).
The Board thus considers that, as the Company progresses towards
drilling activities and in view of the current funding sources
available to and being considered by the Company, having the timely
ability to undertake material issuances of Ordinary Shares would be
advantageous, affording the Company maximum flexibility as it moves
forward (including a stronger position in potential farm-in
negotiations).
Shareholders should note that the authority being tabled for
Shareholder approval is for a period of sixteen months only, to the
end of 2020. That is, the authority is temporary, and in respect of
a time period directly linked to the remainder of the current term
of the Southern Licences, in which the Company's intends to be
drilling in fulfilment of licence obligations.
Special Resolution:
The Special Resolution to be put to Shareholders in relation to
the Company's general share issuance authority is as follows:
Special Resolution Two:
As a special resolution, THAT the Directors be and hereby are
granted the authority, pursuant to Article 6.7 of the Company's
Articles of Association, to allot and issue up to a further
1,800,000,000 new ordinary shares in the capital of the Company, as
if the pre-emption provisions contained within Article 6.3 of the
Company's Articles of Association did not apply to such allotment
and issue, provided that such authority, unless renewed, shall
expire on 31 December 2020, but shall extend to the making, before
such expiry, of an offer or agreement which would or might require
ordinary shares to be allotted after such expiry and the Directors
may allot ordinary shares in pursuance of such offer or agreement
as if the authority conferred hereby had not expired.
EXPLANATORY INFORMATION RELATING TO SPECIAL RESOLUTIONS:
SPECIAL RESOLUTION THREE: APPROVAL OF ISSUE OF NEW OPTIONS AND
DEFERRED PAY SHARES
Rationale:
As the Company moves forward toward the Drilling Plan it is
essential that a suitably qualified, experienced and capable team
is in place. Qualified persons are not always instantly available,
so over the past several months the Company has commenced the
process of expanding its team, and has been able to secure the
services of a number of highly qualified individuals, attracted to
the robust technical merits of our project. In tandem, the Company
is seeking to ensure that the team is appropriately retained, and
incentivised to achieve creation of Shareholder value through
progressing to successful, timely and safe delivery of an initial
exploration well. Ability to retain and recruit key personnel at
this critical stage in the Company's operations is, in the Board's
view, essential.
Further, for many years, certain key executives, and all members
of the Board, have foregone contracted salary and remuneration on
the basis that this would be repaid, in a combination of cash and
shares when the Company has secured funding and is able to progress
with operations. The amount of this deferral has accumulated over
time. As part of preparing for operations, securing funding and
solidifying the team, the Board is proposing to approve the
issuance of the Deferred Pay Shares, to discharge the Company's
outstanding deferred pay obligations. However, these Deferred Pay
Shares will only be issued at such time as the Board having
consulted with the relevant advisers to the Company determines that
the initial exploration well is fully funded on an unconditional
basis.
Personnel Profiles:
For the information of Shareholders, brief profiles of key
personnel that now comprise the Company's leadership team,
including certain new executives, are set out below. Discussions
with a number of candidates for other roles relevant to the
Drilling Plan are currently taking place.
Simon Potter Industry Experience: 40 years oil & gas / mining sector
Chief Executive Qualifications: B.Sc. (Hons) Geology, M.Sc. Management
Officer Notable prior Science
roles: CEO - Hardman Resources, Dart Energy,
various roles (20 years) at BP and
Base: TNK-BP
Bahamas
Eytan Uliel Industry Experience: 25 years O&G / resources & commercial
Commercial Director Qualifications: BA / LLB
(non-Board) Notable prior CFO and CCO - Dart Energy, Arrow
roles: Energy
Base: Bahamas
-------------------------------- --------------------------------------------------
Ben Proffitt Industry Experience: 10 years O&G / resources
Finance Director Qualifications: CA, Bsc, Company Secretary
(non-Board) Notable prior Founder & CEO, BDP Orbita Ltd
roles: Isle of Man
Base:
-------------------------------- --------------------------------------------------
Randolph Hiscock Industry Experience: 30 years exploration new ventures
Technical Director Qualifications: M.Sc. and B.Sc. (Hons - Geology), MBA
(non-Board) Notable prior (Oil & Gas)Head of Caribbean / Latin
roles: America new ventures, Shell (10
years),
Base: Encana (20 years)
Florida / Canada
-------------------------------- --------------------------------------------------
David Bond Industry Experience: 35-year offshore drilling, including
Drilling Director Qualifications: ultra-deep-water in Africa
(non-Board) Notable prior B.Sc. (Hons) Mechanical Engineering
roles: International Drilling and Completions
Manager - Woodside, Drilling Director
Base: - Ophir Energy
Bahamas / Asia
-------------------------------- --------------------------------------------------
Richard Turner Industry Experience: 40 years managing complex drilling
Drilling Manager Qualifications: operations
Notable prior Degreed Petroleum Engineer
roles: Variety of international locations
with majors / independent oil
Base: companies;
engineering, operations and management
expertise
Houston
Jane Bond Industry Experience: 25 years geology, geophysics,
Chief Geoscientist Qualifications: petrophysics,
Notable prior res. eng. Mgt.
roles: B.Sc. Geology and Mathematics, M.Sc.
in Geophysics
Lead Reservoir Engineer/Senior
Base: Geoscientist
(Ophir Energy Ltd, Reliance), Senior
Geoscientist/Reservoir Engineer,
Petrophyicist
(Woodside/Shell)
Bahamas / Asia
-------------------------------- ---------------------------------------------------
Roberta Quant Industry Experience: 15 years Environmental management
Environmental Qualifications: BA (Hons) Law, B.Sc. Ocean Engineering,
Scientist Notable prior M.Sc. Environmental Engineering. Called
roles: to Bar (Bahamas)
Technical Officer at Bahamas
Environment
Base: Science and Technology Commission
Bahamas
-------------------------------- ---------------------------------------------------
Jobeth Coleby-Davis Industry Experience: 10 years, specialty in Bahamian oil
General Counsel Qualifications: and gas law
Notable prior B.Sc. Law and Business, M.Sc. Energy
roles: Law and Policy. Called to Bar (UK and
Bahamas)
Base: Current member of the Bahamian Senate
(Upper House)
Bahamas
-------------------------------- ---------------------------------------------------
Proposed Incentive Arrangements:
At present, a total of 68.85 million options over Ordinary
Shares are on issue to various board members, executives, employees
and consultants to the Company. These options were issued on 1
April 2016, and are subject to vesting and exercise conditions as
detailed in the announcement of 4 April 2016.
The Company considers that it would be beneficial to amend the
Company's incentive arrangements, to ensure uniform and clear
incentives for all key personnel going forward, including new
recruits. The Company also considers that incentives should be
clearly aligned to the creation of shareholder value through a
focus on achievement of the Company's core objective: progressing
to the Drilling Plan.
Therefore, by agreement with relevant existing option holders
the Company intends to cancel all existing Board / executive /
employee / consultant options on issue, and make available for
allocation an aggregate of up to 200,000,000 New Options. Of these,
a relatively small number (9,000,000, being less than 5% of the New
Options) will be allocated to non-executive Directors, with the
balance (191,000,000) available for allocation to executives,
management, staff and professional consultants. Initially, the
intention is that only 150,000,000 of the New Options will be
allocated (the "Allocated New Options"), with the balance of
50,000,000 New Options remaining unallocated and retained should
they be required for future recruitment of additional team members,
or should the grant of future incentive awards become
appropriate.
The New Options will be issued in three tranches on uniform
terms and conditions as described below. New Options will all have
strike prices in excess of the current share price, such that the
New Options will only be of value if the Company's share price
increases. All New Options, if not exercised, will expire 5 years
after the date of issue.
The New Options, if fully distributed (and after taking into
account the issue of all other proposed Ordinary Shares, options
and warrants), would represent approximately 7.53% of the Company's
Fully Diluted Share Capital (i.e. as enlarged by the other
proposals set out herein). The Directors consider this to be an
appropriate level of executive / employee incentive ownership, in
line with general market practice and that in place at several
similar companies to BPC, and has been benchmarked accordingly by
the Board and advisors, considering the nature of the Drilling
Plan.
The New Options will consist of three series, the key terms of
which are as follows:
-- Series A: A total pool of 50,000,000 New Options, fully
vested and immediately exercisable, with an exercise price of 2.22p
per New Option, representing an approximately 40% premium to the
share price prevailing on the date immediately prior to publication
of the Notice of Annual General Meeting (and consistent with the
exercise price of existing options being cancelled). If all
exercised, these Series A New Options would result in net cash
inflow for the Company of GBP1,110,000. The Series A tranche of New
Options will be fully distributed.
-- Series B: A total pool of up to 75,000,000 New Options, that
will vest and become exercisable at such point in time as the
Board, having consulted with the relevant advisers to the Company,
determines that the cost of an initial exploration well is fully
funded (defined as the Company either securing a farm-in or
securing capital via debt or equity or a combination of both in
excess of US$25 million, or any combination thereof), at an
exercise price of 2.4p per New Option, representing an approximate
50% premium to the share price prevailing on the date immediately
prior to publication of the Notice of Annual General Meeting. If
all exercised, these Series B New Options would result in
GBP1,800,000 net cash inflow for the Company. 50,000,000 of the
Series B New Options will initially be distributed, with the
balance (25,000,000) reserved for future grants.
-- Series C: A total pool of up to 75,000,000 New Options, that
will vest and become exercisable at such point in time as the
initial exploration well commences (defined as once a rig is
mobilised, that being when the contracted drilling rig, following
inspection by BPC and any necessary customs authorisations, leaves
the port of origination by a distance of 1 nautical mile), at an
exercise price of 2.8p per New Option, representing an approximate
75% premium to the share price prevailing on the date immediately
prior to publication of the Notice of Annual General Meeting. If
all exercised, these Series C New Options would result in
GBP2,100,000 net cash inflow for the Company. 50,000,000 of the
Series C New Options will initially be distributed, with the
balance (25,000,000) reserved for future grants.
New Options will initially be allocated as follows:
Non-Executive Board:
OPTIONHOLDER SERIES A SERIES B SERIES C
William Schrader 1,500,000 750,000 750,000
--------------------- -------------------- --------------------
James Smith 750,000 375,000 375,000
--------------------- -------------------- --------------------
Eddie Shallcross 750,000 375,000 375,000
--------------------- -------------------- --------------------
Ross McDonald 750,000 375,000 375,000
--------------------- -------------------- --------------------
Adrian Collins 750,000 375,000 375,000
--------------------- -------------------- --------------------
Management and Executives:
OPTIONHOLDER SERIES A SERIES B SERIES C
Simon Potter
Chief Executive Officer 20,000,000 15,000,000 25,000,000
---------------------- ---------------------- ----------------------
Other executives,
employees and consultants,
in aggregate 25,500,000 32,750,000 22,750,000
---------------------- ---------------------- ----------------------
TOTAL ALLOCATED OPTIONS
NEW OPTIONS 50,000,000 50,000,000 50,000,000
---------------------- ---------------------- ----------------------
Unallocated
(Reserved for future
recruitments / allocations) n/a 25,000,000 25,000,000
---------------------- ---------------------- ----------------------
TOTAL NEW OPTION POOL 50,000,000 75,000,000 75,000,000
---------------------- ---------------------- ----------------------
The New Options will not be quoted or traded on AIM. However, on
exercise, the Company will make application for the new Ordinary
Shares arising to be admitted for trading on AIM.
Deferred Pay Shares:
For a number of years certain key executives and consultants,
and all members of the Board, have foregone part of their
contracted cash remuneration, on the basis that this would be
repaid, in a combination of cash and shares, at a later date when
the Company has secured funding and is able to progress with
operations. As part of preparing for operations, securing funding,
and solidifying the team, the Board considers that it is now an
appropriate time to address this matter, and for the Company to
discharge its obligations in this regard. The Board is thus
proposing to approve the issuance of the Deferred Pay Shares, to
discharge the Company's outstanding deferred pay obligations.
However, these Deferred Pay Shares will only be issued at such time
as the Board, having consulted with the relevant advisers to the
Company, determines that the initial exploration well is fully
funded on an unconditional basis.
The following new Ordinary Shares are thus proposed to be issued
in satisfaction of the Company's deferred pay obligations incurred
up to 31 July 2019:
Recipient Deferred Pay Shares
Directors:
-------------------------------
William Schrader 7,601,289
-------------------------------
James Smith 4,970,074
-------------------------------
Eddie Shallcross 5,847,147
-------------------------------
Ross McDonald 4,970,074
-------------------------------
Adrian Collins 5,847,147
-------------------------------
Simon Potter 63,567,276
-------------------------------
Total Directors 92,534,795
-------------------------------
Other Executives
and Staff 23,895,183
-------------------------------
Total Deferred Pay
Shares 116,698,188
-------------------------------
Whilst approval for the issue of these Ordinary Shares in
satisfaction of the Company's deferred pay obligations is being
sought, Shareholders should note that such Ordinary Shares will
only be issued at such time as the initial exploration well is
fully funded on an unconditional basis.
The new Ordinary Shares proposed to be issued in satisfaction of
the Company's deferred pay obligations relate only to those
deferred pay obligations incurred up to 31 July 2019. Deferred pay
obligations that may be incurred in the period commencing 1 August
2019 will be settled by the Company in due course, in either cash
or shares (at the Company's discretion).
After taking into account the issue of all other proposed new
Ordinary Shares, options and warrants described elsewhere in the
balance of this document, the Deferred Pay Shares would represent
approximately 5.86% of the Company's Fully Diluted Share Capital,
and 3.02% of the Company's Fully Diluted Potential Share
Capital.
When issued (i.e. only once the Board, having consulted with the
relevant advisers to the Company, determines that the initial
exploration well is fully funded on an unconditional basis) the
Company will make application for the Deferred Pay Shares to be
admitted for trading on AIM.
Special Resolution:
The Special Resolution to be put to Shareholders in relation to
the New Options and the Deferred Pay Shares is as follows:
Special Resolution Three:
As a special resolution, THAT
(i) the cancellation of 68.85 million options over ordinary
shares in the Company be approved,
(ii) the creation of a pool of up to 200 million new options
over ordinary shares in the Company be approved, expiring on the
date that is five years after the date of grant, for allocation by
the Board, in three tranches as follows:
a. Series A: A total pool of 50,000,000 options, vested and
immediately exercisable, at an exercise price of 2.22p,
b. Series B: A total pool of up to 75,000,000 options, that will
vest and become exercisable at such point in time as the Board,
having consulted with the relevant advisers to the Company,
determines that the cost of an initial exploration well is fully
funded on an unconditional basis (defined as the Company either
securing a farm-in or securing capital via debt or equity or a
combination of both in excess of US$25 million, or any combination
thereof), at an exercise price of 2.4p, and
c. Series C: A total pool of up to 75,000,000 options, that will
vest and become exercisable at such point in time as the initial
exploration well commences (defined as once a rig is mobilised,
that being when the contracted drilling rig, following inspection
by BPC and any necessary customs authorisations, leaves the port of
origination by a distance of 1 nautical mile), at an exercise price
of 2.8p,
(iii) an initial allocation be approved of 50 million of Series
A, 50,000,000 of Series B and 50,000,000 of Series C of these new
options be approved, with the balance of the available pool, being
25,000,000 of Series B and 25,000,000 of Series C, reserved for
future allocations at the discretion of the Board, and
(iv) the issue of 116,698,188 fully paid Ordinary Shares in
satisfaction of the Company's deferred pay obligations up to 31
July 2019 be approved, such shares only to be issued at such time
as the Board, having consulted with the relevant advisers to the
Company, determines that the drilling of an exploration well is
fully funded on an unconditional basis.
EXPLANATORY INFORMATION RELATING TO SPECIAL RESOLUTIONS:
SPECIAL RESOLUTION FOUR: APPROVAL OF SHORE WARRANTS
Rationale:
As announced on 15(th) March 2019, the Company undertook a
placement of Ordinary Shares to raise US$2.5 million. Shore Capital
acted as broker to the Company for that placement, and as part of
Shore Capital's agreed remuneration, the Company agreed to issue to
Shore Capital the Shore Warrants, being warrants to be issued
7,200,000 Ordinary Shares with an exercise period of 2 years from
the date of grant, and with an exercise price of 1.6 pence per
warrant. At the time, the Company was unable to issue Shore
Warrants, as to do so would have exceeded the Company's then
approved share issuance capacity. Consequently, Shore Capital
agreed to a deferred issuance of the Shore Warrants on the basis
that the Company table the issue of the Shore Warrants for approval
at the next Annual General Meeting of the Company's
Shareholders.
The Shore Warrants will not be quoted or trade on AIM. However,
on exercise, the Company will make application for the new Ordinary
Shares arising to be admitted for trading on AIM.
Shareholders should note that if the issue of the Shore Warrants
is not approved, the Company will remain obliged to issue the Shore
Warrants at such time as the Company's share issuance authority
allows (which would be if Special Resolution Three is approved, or
if that Special Resolution is not approved, in January of 2020 when
the Company's general share issuance authority under its Articles
of Association is automatically refreshed).
Special Resolution:
The Special Resolution to be put to Shareholders in relation to
the Shore Warrants is as follows:
Special Resolution Four:
As a special resolution, THAT the Directors be and hereby are
granted the authority, pursuant to Article 6.7 of the Company's
Articles of Association, to immediately allot and issue 7,200,000
warrants over new Ordinary Shares in the capital of the Company to
Shore Capital, with an exercise period of 2 years from the date of
grant and exercise price of 1.6 pence per Ordinary Share, as if the
pre-emption provisions contained within Article 6.3 of the
Company's Articles of Association did not apply to such issue.
ADDITIONAL INFORMATION FOR SHAREHOLDERS:
1. ANALYSIS OF CHANGES TO SHARE CAPITAL AS A RESULT OF PROPOSED
SPECIAL RESOLUTIONS
Special Resolutions for various matters are being put to
Shareholders that would, subject to approval, see the capital
structure of the Company change considerably. Therefore, the
following information is provided to assist Shareholders in more
fully understanding the impact of the proposed Special
Resolutions.
Stage 1: Immediately following receipt of Shareholder
Approval:
Subject to Shareholder approval, the following will occur:
-- BCI will be issued with the Convertible First Tranche Options as follows:
o 25,000,000 Convertible First Tranche Options - exercise price
2p
-- The existing 68.5m Board / executive / employee / consultant
options currently on issue will be cancelled, and replaced with the
issuance of the following New Options, as follows:
o 50,000,000 Series A New Options - exercise price 2.22p per
Ordinary Share
o 50,000,000 Series B New Options - exercise price 2.4p per
Ordinary Share
o 50,000,000 Series C Options - exercise price 2.8p per Ordinary
Share
-- An additional 116,698,188 Deferred Pay Shares will be issued
in respect of satisfying certain deferred pay obligations of the
Company (such Deferred Pay Shares only to be issued at such time as
the Board, having consulted with the relevant advisers to the
Company, determines that the initial exploration well is fully
funded on an unconditional basis)
-- Shore Capital will be issued the Shore Warrants in settlement
of outstanding fee obligations, as follows:
o 7,200,000 Shore Warrants - exercise price 1.6p per Ordinary
Share
Thus, following the Annual General Meeting (and assuming all
Special Resolutions are approved), the Ordinary Shares, warrants
and options that may be on issue in the capital of the Company can
be summarised as follows:
ITEM Number % of Total
Ordinary Shares on issue
-------------- -----------
Ordinary Shares 1,692,719,096 84.99%
-------------- -----------
Deferred Pay Shares 116,698,188 5.86%
-------------- -----------
Total Ordinary Shares on
issue 1,809,417,284 90.85%
-------------- -----------
New Options on issue
-------------- -----------
Series A New Options 50,000,000 2.51%
-------------- -----------
Non-executive Directors 4,500,000
-------------- -----------
Executives & employees 45,500,000
-------------- -----------
Series B New Options 50,000,000 2.51%
-------------- -----------
Non-executive Directors 2,250,000
-------------- -----------
Executives & employees 47,750,000
-------------- -----------
Series C New Options 50,000,000 2.51%
-------------- -----------
Non-executive Directors 2,250,000
-------------- -----------
Executives & employees 47,750,000
-------------- -----------
Total New Options on issue 150,000,000 7.53%
-------------- -----------
Convertible First Tranche
Options 25,000,000 1.26%
-------------- -----------
Shore Warrants 7,200,000 0.36%
-------------- -----------
FULLY DILUTED SHARE CAPITAL 1,991,617,284 100%
-------------- -----------
Stage 2: Potential future dilutions:
Assuming all of the various Special Resolutions are approved by
Shareholders, the Company will also have the authority to issue
additional Ordinary Shares in the period to 31 December 2020
without the need for further Shareholder approval (including
warrants and options) as may be required to secure the funding
needed for the Company's intended Drilling Plan (although these
will not be issued immediately and, depending on the outcome of
farm-in discussions and consideration of alternative funding
solutions, may ultimately not need to be issued at all).
In addition, assuming all of the various Special Resolutions are
approved by Shareholders, the Company will have approved the
potential issuance of certain additional tranches of options
(although these will not be issued immediately and depending on
presently unknown future circumstances their issue may not
ultimately be required). In aggregate, these potential issuances of
additional Ordinary Shares and warrants/options are summarised as
follows:
-- A general authority to issue up to 1,800,000,000 new Ordinary
Shares (inclusive of options and warrants), at any time prior to 31
December 2020, without the need for additional Shareholder
approval
-- An additional reserved pool of New Options, the issue of
which will be at the discretion of the Board in the future, as may
be required for ongoing recruitment and future employee / executive
incentive awards:
o 25,000,000 unallocated Series B New Options - exercise price
2.4p per Ordinary Share
o 25,000,000 unallocated Series C New Options - exercise price
2.8p per Ordinary Share
-- Subject to completion of the Conditional Convertible Loan and
advancement of funds to the Company, the issue to BCI of the
Convertible Second & Third Tranche Options as follows:
o 12,500,000 Convertible Second Tranche Options - exercise price
2.5p per Ordinary Share
o 12,500,000 Convertible Third Tranche Options - exercise price
3p per Ordinary Share
As highlighted previously, it is not presently known whether and
to what extent the Company would make use of this general share
issuance authority. However, for illustrative purposes, assuming
that all of the above noted additional Ordinary Shares, warrants
and options were to be issued in full, the Company would expect to
realise an amount in excess of US$25 million (i.e. the amount
required to fund the Company's intended drilling campaign and meet
licence commitments), and the overall capital structure of the
Company (Ordinary Shares, warrants and options on issue) would then
indicatively expand as follows:
ITEM Number % of Total
Ordinary Shares on issue
-------------- -----------
Ordinary Shares 1,692,719,096 43.78%
-------------- -----------
Deferred Pay Shares 116,698,188 3.02%
-------------- -----------
Additional Ordinary Shares
pursuant to special issuance
authority 1,800,000,000 46.55%
-------------- -----------
Total Ordinary Shares on
issue 3,609,417,284 93.35%
-------------- -----------
New Options on issue
-------------- -----------
Series A New Options 50,000,000 1.29%
-------------- -----------
Non-executive Directors 4,500,000
-------------- -----------
Executives & employees 45,500,000
-------------- -----------
Series B New Options 75,000,000 1.94%
-------------- -----------
Non-executive Directors 2,250,000
-------------- -----------
Executives & employees 72,750,000
-------------- -----------
Series C New Options 75,000,000 1.94%
-------------- -----------
Non-executive Directors 2,250,000
-------------- -----------
Executives & employees 72,750,000
-------------- -----------
Total New Options on issue 200,000,000 5.17%
-------------- -----------
Convertible First Tranche
Options 25,000,000 0.65%
-------------- -----------
Convertible Second Tranche
Options 12,500,000 0.32%
-------------- -----------
Convertible Third Tranche
Options 12,500,000 0.32%
-------------- -----------
Shore Warrants 7,200,000 0.19%
-------------- -----------
FULLY DILUTED POTENTIAL
SHARE CAPITAL 3,866,617,284 100%
-------------- -----------
ADDITIONAL INFORMATION FOR SHAREHOLDERS:
2. FRAMEWORK AGREEMENT FOR THE PROVISION OF A SIXTH GENERATION
DRILLING RIG: SUMMARY OF KEY TERMS
The company has entered into a Framework Agreement for the
provision of a sixth-generation drilling rig during the first half
of 2020 (the "Framework Agreement"). The Framework Agreement is
entered into with Seadrill, one of the world's largest drilling
companies.
Based on the rate agreed in the Framework Agreement and current
general market conditions, BPC has reassessed the total cost of its
intended Drilling Plan, which is now estimated to be in the range
of US$25 million to US$30 million for an initial exploration well,
and up to approximately US$50 million for a concurrent two-well
campaign. The Framework Agreement contemplates the capacity for BPC
to pursue a two-well campaign, should BPC elect.
The purpose of the Framework Agreement is to record the
commercial desire of the parties to work together for the purposes
of Seadrill offering a drilling rig to BPC in order that it can
undertake the Drilling Plan, to stipulate the process by which that
working relationship shall be developed over the coming months
leading up to entry into a definitive legal agreement for provision
of the drilling rig (the "Rig Contract") and thereafter conduct of
drilling operations, to set out certain key commercial terms,
schedule and operating parameters to be included in the Rig
Contract, and to define the pre-conditions to entry into the Rig
Contract. It should be noted therefore that the governing document
in relation to provision of the drill rig will be the Rig Contract,
which remains to be entered into and is subject to Seadrill's Board
approval process for contract commitment.
Further, the Framework Agreement requires BPC, on or before 11
October 2019 (or such later date as the parties may mutually agree)
to notify Seadrill that it wishes to "Go-Firm". Along with a
Go-Firm notice BPC must provide Seadrill evidence of BPC's finance
capacity in order to enter into the Rig Contract. At the same time,
the parties must confirm the rig selection and critical Drilling
Plan dates.
Seadrill, subject to said Rig Contract, will make available to
BPC a sixth generation semi-submersible, priced on a day rate basis
of US$215,000 per day (with a similar rate for mobilisation and
demobilisation). Seadrill has already identified two specific
suitable rigs to be made available currently operating in the Gulf
of Mexico (however Seadrill has the right to substitute these for a
rig of equal or better specification).
The parties have identified an estimated timeframe in which the
rig will be delivered to BPC, as being in the period 1 January 2020
to 30 June 2020 with execution of the Drilling Plan expected to
take between 40 - 90 days following delivery of the rig. BPC has
agreed to use the rig for a minimum number of 60 days (inclusive of
mobilisation and demobilisation) but BPC can (subject to mutual
agreement) request Seadrill to relocate the rig to an alternate
location for drilling of a 2(nd) exploration well.
Given the criticality of the rig operation to completing BPC's
Environmental Authorisation ("EA"), Seadrill has agreed to provide
assistance to BPC as may reasonably be required for the purpose of
completing the EA, including in particular provision of all
technical and other rig specific data.
If the Rig Contract is not entered into by the 11 October 2019
required date (or such date as may be extended by mutual agreement)
then the Framework Agreement may be cancelled by either party
without penalty.
ADDITIONAL INFORMATION FOR SHAREHOLDERS:
3. NOTICE OF AWARD: DETAILS OF APPOINTMENT OF HALLIBURTON AS
INTEGRATED WELL SERVICES PROVIDER
In addition to the drilling rig, rig support services are an
important part of successful drilling of a well. Following a
process of detailed technical discussions, analysis and mutual due
diligence, Halliburton has agreed to participate with BPC for the
provision of various essential integrated well services and
equipment provision. To this end a Notice of Award has been issued
to Halliburton, and has been accepted by Halliburton, for the
provision of services as follows:
-- Downhole drilling equipment (Rotary Steerable, MWD and other BHA components)
-- Wireline Services
-- Drilling Fluids
-- Mud Logging
-- Drill Bits
-- Cementing services (final rig choice dependent)
-- Cement equipment
It is expected that a detailed Integrated Well Services Contract
containing terms and conditions customary in the industry (often
referred to as a "Call-Off Contract"), including the technical
specifications and pricing already established in the Notice of
Award, will be finalised with Halliburton in the coming months (and
in any event the Notice of Award requires this to be completed by
no later than 30 November 2019), during which time detailed well
planning work with Halliburton will continue.
A Notice of Award has also been issued to BakerHughes GE for the
supply of wellhead equipment and running tool rental and large
tubulars (36" and 20"). As with Halliburton it is expected that a
detailed Call-Off Contract containing terms and conditions
customary in the industry, and including the technical
specifications and pricing already established in the Notice of
Award, will be finalised in the coming months (and in any event the
Notice of Award requires this to be completed by no later than 30
November 2019). Again, detailed well planning work with BakerHughes
GE will continue during this time.
The Company expects that contracts for other required services
not included in the package of integrated well services with
Halliburton and wellhead equipment with BakerHughes GE, such as
supply vessels, helicopter support, engineering and support
personnel and logistics, will be placed over the coming months.
In anticipation of future operations, BPC has also applied for
and been accepted for membership of Oil Spill Response Limited, the
largest international industry-funded cooperative which exists to
respond to oil spills wherever in the world they may occur, by
providing preparedness, response and intervention services. OSRL is
wholly owned by environmentally responsible oil and gas companies,
and the organisation's membership represents the majority of global
oil production.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
MSCPGUCGRUPBGRU
(END) Dow Jones Newswires
August 21, 2019 02:00 ET (06:00 GMT)
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