TIDMBPC
RNS Number : 8632N
Bahamas Petroleum Company PLC
27 September 2019
27 September 2019
Bahamas Petroleum Company plc
("BPC" or the "Company")
Interim Results for the Six Months Ended 30 June 2019
Bahamas Petroleum Company plc, the oil and gas exploration
company with significant prospective resources in licences in The
Commonwealth of The Bahamas is pleased to announce its interim
results for the six months ended 30 June 2019 (the "Period").
Period Highlights:
-- Extension of the second exploration period in respect of the
Company's licences to 31 December 2020.
-- Technical, environmental and operational activities
progressed with a view to commencing drilling of a first
exploration well in first half 2020.
Post Period End:
-- Entered into framework agreement with Seadrill for the
provision of a rig in 1H 2020; appointed Halliburton for integrated
well services and BakerHughes GE for provision of various
well-related equipment
-- GBP10.25m ($12.5m) conditional convertible loan note to
underpin finance necessary for the drilling of the well if
required, additional finance sources being evaluated, farm-in
process continues
-- AGM approval for the temporary authority for issue of new
shares to further contribute to the financing of drilling, if
required
Financial
-- Decrease of 12% of "other expenses" compared to the prior six
month period due to Company's cost control programme, despite
significant activity in the Period
-- 19% reduction in operating loss on comparative six month
period, when adjusted for write-offs agreed by CEO to remuneration
package in the prior period
-- Successfully raised $2.5m in working capital to continue the
technical, environmental and operational work in support of well
planning
Simon Potter, Chief Executive Officer of Bahamas Petroleum
Company, said:
"2019 has proved to be a year of positive progress and
developments for BPC, with a number of key milestones having been
achieved. The extension of our licences to December 2020 and the
requirement to commence the drilling of our obligation well in this
timeframe has given us a renewed clarity of focus. Accordingly, we
have begun taking all necessary steps to secure in principle the
rig, oilfield services and equipment we need, from leading global
suppliers, that will enable us to responsibly deliver our first
well. At the same time we are also pursuing a number of potential
financing options.
"On behalf of the Board and staff of BPC, I would like to thank
The Government of The Bahamas and all of our shareholders for their
continued support of the Company. I believe that the next 6-9
months will be a company making time for BPC, and I look forward to
providing further updates as we progress toward the drilling of an
initial exploration well in 1H 2020."
A copy of the Interim Accounts is available for download from
the Company's website: www.bpcplc.com
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 / Jack Botros 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 / Thayson 3781 8331
Pinedo
www.bpcplc.com
Chief Executive Officer's Review
Dear Shareholder,
2019 has been an exciting year for the Company thus far, and I
am pleased to report to shareholders on a number of significant
developments taking place both during and following the reporting
period to 30 June 2019.
Operational Overview
The first key development, in February 2019, was the Government
of The Bahamas extending the second exploration period in respect
of the Company's licences to 31 December 2020, thereby clearly
mandating that an initial exploration well must be executed within
this timeframe. This extension provided the clarity and certainty
needed to press ahead with a single-minded purpose: to do
everything necessary to move forward toward drilling a first
exploration well in 2020.
In terms of technical work, the Company undertook four separate
subsurface studies relevant to exploration well planning, in each
case making use of expert third-party consultants. These studies
have all produced positive results which, taken collectively,
highlight the likely presence and quality of a world-class source
rock and petroleum system located precisely in the BPC licence
area, with charge and migration pathways evident to deliver
hydrocarbons into the identified structures. The Company also
believes that hydrocarbon indicators have now been established from
the 3D data with the reservoir rock demonstrating a well-developed
fault and fracture system that will significantly influence the
final selection of an exploration well drill site, so as to provide
the highest confidence of encountering hydrocarbons.
In terms of environmental work, in early 2019 the Company was
notified of the engagement of Black & Veach to act for the
Government in reviewing our Environmental Authorisation ("EA")
application (which was lodged in April 2018, and the issuance of
which remains a prerequisite to commencing drilling under the new
environmental regulations in The Bahamas). Since then the Company
has been working collaboratively with the Government and its
advisers, with a view to finalizing the EA process ahead of the
Company's intended drilling activity.
Operationally, during the reporting period a considerable body
of work was undertaken, which is necessary to assure the timely,
safe and cost-effective delivery of a well in 2020. As a result of
this work in August 2019 the Company announced (i) a framework
agreement with Seadrill, a leading global offshore rig provider,
for the provision of a 6(th) generation rig in 1H 2020, subject to
detailed contract, (ii) the appointment of Halliburton for the
provision of integrated well services, subject to detailed
contract, and (iii) the appointment of BakerHughes GE for the
provision of various well-related equipment, subject to detailed
contract. Seadrill, Halliburton and BakerHughes GE are global
leaders in oilfield services provision. We are extremely pleased to
have been able to secure, by 'Notice of Award', the involvement of
these firms in our project, and over the coming months, we will be
working hard to finalize long-form contracts with each of these
parties, as well as working actively with these parties as we
prepare for drilling operations. We have also begun to build out
the Company's professional team, so as to ensure that as we move
toward drilling, we have available to us the services of staff who
are suitably experienced, and thus capable of delivering the
well.
Commercially, the engagement of Seadrill, Halliburton and
BakerHughes GE and the agreed rates established for the rig,
equipment and ancillary well services in those engagements has
allowed the Company to finalise its well costing estimates, such
that we are currently estimating the cost of the initial
exploration well will be in the range of $20m - $25m. This
represents a substantial decrease on previous costs estimates,
largely due to the competitive rate at which the rig will be
provided, expected improvements in drilling Rate of Penetration
("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.
With the benefit of key parameters having been established -
namely, an unambiguous obligation to drill a well in 2020 and an
estimated well cost of between $20m - $25m - the Company has been
able to move forward with the all-important task of securing the
funding necessary to support the intended drilling campaign. To
date, the Company's focus has been predominantly on securing
funding via a farm-in agreement, and farm-in discussions are
continuing. Multiple parties are currently engaged in ongoing due
diligence and commercial discussions, and it remains the Company's
preference to secure all or part of the required well funding
through this structure.
However, in the past six months the Company has also sought to
broaden its approach to seek other sources of potential finance,
such that if a farm-in is not secured, or if the terms of any
potential farm-in are not satisfactory, the Company can nonetheless
proceed to drilling. At its AGM on 17 September 2019, the Company
thus presented its shareholders with a number of special
resolutions (all of which were overwhelmingly passed) designed to
provide the Board with the flexibility to enter into a range of
possible funding arrangements, as and when required and if
considered to be in the best interests of the Company.
Of the various options available, the Company has thus far
entered into a GBP10.25m ($12.5m) conditional convertible loan note
agreement, which, subject to contract and various conditions
precedent, as set out in the circular to shareholders of 21 August
2019, to enable funds to be available for draw-down, would provide
access to approximately half the funding required for the initial
exploration well. The Company has also received four other funding
proposals (some of which individually but certainly all in
aggregate, if contracted and fully drawn-down, would cover the
anticipated cost of the well), as well as multiple other
expressions of interest, all of which are currently being
evaluated. We hope over the near-term to be able to advise
shareholders of further progress in this regard.
Financial Review
The Company reported an operating loss for the 6 months to June
2019 of $1.49m, finishing the reporting period with cash reserves
of $3.2m. The operating loss for the comparative period to June
2018 includes the substantial write-back of provisions totalling
approx. $1.2m associated with the changes to my remuneration as
agreed last summer whereby I agreed to a reduction in my headline
salary and cessation of ongoing accrued share entitlements from 1
July 2018. If the effect of these write-backs is excluded, then the
operating loss for the 6 months to June 2019 represents a decrease
of approximately 19% on the comparative 6 month period in 2018, and
a decrease of 16% on the year to 31 December 2018 on an annualised
basis.
We are especially pleased that, notwithstanding the considerable
and increased level of activity in the Company over the past 6
months, ongoing cost control efforts that management has put in
place has resulted in a decrease of "other expenses" of 12% on the
prior 6 month period, and 24% lower than the full year to December
2018 on an annualised basis. It should also be noted that, whilst
the Board continue to defer 90% of their cash remuneration until
the well is financed, these deferrals are not reflected in the
"employee benefit expense" figure for the period, as IFRS requires
recognition of their full fees for the period regardless of their
deferred, non-cash nature.
In March 2019 the Company successfully raised $2.5m in working
capital through an institutional placing. This placing was designed
to ensure the Company had adequate financial resource to continue
the technical, environmental and operational work in support of
well planning, and the commercial work in seeking to secure
financing of the well.
Summary
2019 has proved to be a year of positive progress and
developments for BPC, with a number of key milestones having been
achieved. The extension of our licences in February 2019 has given
us a renewed clarity of focus: we have an obligation to drill a
well in 2020, and shareholder value will best be delivered by
getting on with that task. To this end we have taken steps to
secure the rig, oilfield services and equipment we need, with
leading global suppliers. We have continued our program of
technical work in support of well planning, we are working
collaboratively with Government to progress our EA in a timely
manner, and we have commenced building out our team so that we have
experienced people in place for the drilling campaign. Farm-in
discussions continue, albeit with the benefit of a known financial
objective (a well cost in the range of $20m - $25m) and we are now
actively working in pursuit of a simple goal: to put in place a
suitable set of financial arrangements sufficient to fund the
intended initial exploration well, whether that is via a farm-in on
acceptable terms, or by other means, whichever is in the best
interests of the Company and its shareholders.
On behalf of the Board and staff of BPC, I would like to thank
all our shareholders for their continued support of the Company. I
believe that the next 6-9 months will be a company making time for
BPC, and I look forward to providing further updates as we continue
toward the drilling of an initial exploration well in 1H 2020.
Yours sincerely,
Simon Potter
Chief Executive Officer
26 September 2019
Consolidated statement of comprehensive income
for the six months ended 30 June 2019
Note Six months Six months Year ended
ended 30 ended 30 31 December
June June
2019 2018 2018
(Unaudited) (Unaudited) (Audited)
$ $ $
Continuing operations:
Employee benefit expense (674,234) 209,974 (458,923)
Depreciation expense (119,203) (13,984) (30,798)
Other expenses (692,801) (790,818) (1,823,042)
Operating loss (1,486,238) (594,828) (2,312,763)
Other income 2 - 500,000 1,000,000
Finance income 13,701 5,308 5,308
Interest expense 1 (13,376) - -
Total comprehensive
loss for the period,
net of tax (1,485,913) (89,520) (1,307,455)
------------ --------- ------------
Basic and diluted loss
per share (cents per
share) (0.09) (0.0001) (0.08)
------- --------- -------
Consolidated statement of changes in equity
for the six months ended 30 June 2019
Share
Share Reverse based
Share premium Merger acquisition payment Retained Total
capital reserve reserve reserve reserve earnings equity
$ $ $ $ $ $ $
At 1 January
2019 46,138 83,068,307 77,130,684 (53,846,526) 3,819,843 (59,060,096) 51,158,350
Comprehensive
income
Loss for
the period - - - - - (1,485,913) (1,485,913)
--------- ----------- ----------- ------------- ---------- ------------- ------------
Total comprehensive
income for
the period - - - - - (1,485,913) (1,485,913)
--------- ----------- ----------- ------------- ---------- ------------- ------------
Transactions
with owners
Issue of
ordinary
shares 3,156 2,355,989 - - - - 2,359,145
Share options
- value of
services - - - - 76,441 - 76,441
--------- ----------- ----------- ------------- ---------- ------------- ------------
Total transactions
with owners 3,156 2,355,989 - - 76,441 - 2,435,586
Balance at
30 June 2019 49,294 85,424,296 77,130,684 (53,846,526) 3,896,284 (60,546,009) 52,108,023
--------- ----------- ----------- ------------- ---------- ------------- ------------
Consolidated statement of changes in equity
for the six months ended 30 June 2018
Share
Share Reverse based
Share premium Merger acquisition payment Retained Total
capital reserve reserve reserve reserve earnings equity
$ $ $ $ $ $ $
At 1 January
2018 44,481 81,398,084 77,130,684 (53,846,526) 3,381,645 (57,752,641) 50,355,727
Comprehensive
income
Loss for
the period - - - - - (89,520) (89,520)
--------- ----------- ----------- ------------- ---------- ------------- -----------
Total comprehensive
income for
the period - - - - - (89,520) (89,520)
--------- ----------- ----------- ------------- ---------- ------------- -----------
Transactions
with owners
Issue of
ordinary
shares 1,587 1,583,241 - - - - 1,584,828
Share options
- value of
services - - - - 366,270 - 366,270
--------- ----------- ----------- ------------- ---------- ------------- -----------
Total transactions
with owners 1,587 1,583,241 - - 366,270 - 1,951,098
Balance at
30 June 2018 46,068 82,981,325 77,130,684 (53,846,526) 3,747,915 (57,842,161) 52,217,305
--------- ----------- ----------- ------------- ---------- ------------- -----------
Consolidated statement of changes in equity
for the year ended 31 December 2018
Share
Share Reverse based
Share premium Merger acquisition payment Retained Total
capital reserve reserve reserve reserve earnings equity
$ $ $ $ $ $ $
At 1 January
2018 44,481 81,398,084 77,130,684 (53,846,526) 3,381,645 (57,752,641) 50,355,727
Comprehensive
income
Loss for the
year - - - - - (1,307,455) (1,307,455)
--------- ----------- ----------- ------------- ------------ --------------- -------------
Total
comprehensive
income for
the year - - - - - (1,307,455) (1,307,455)
Transactions
with owners
Issue of
ordinary
shares 1,657 1,670,223 - - - - 1,671,880
Share options
- value of
services - - - - 438,198 - 438,198
Total
transactions
with owners 1,657 1,670,223 - - 438,198 - 2,110,078
--------- ----------- ----------- ------------- ------------ --------------- -------------
Balance at
31 December
2018 46,138 83,068,307 77,130,684 (53,846,526) 3,819,843 (59,060,096) 51,158,350
--------- ----------- ----------- ------------- ------------ --------------- -------------
Consolidated balance sheet
at 30 June 2019
30 June 30 June 31 December
2019 2018 2018
(Unaudited) (Unaudited) (Audited)
Assets Note $ $ $
Non-current assets
Intangible exploration
and evaluation assets 1 48,603,562 48,454,371 48,515,200
Property, plant and
equipment 35,571 57,391 45,692
Right of use asset 1 276,210 - -
48,915,343 48,511,762 48,560,892
Current assets
Other receivables 723,029 800,378 705,635
Cash and cash equivalents 3,177,600 3,078,885 2,220,765
Restricted cash 25,533 26,382 25,480
3,926,162 3,905,645 2,951,880
------------- ------------- ------------
Total assets 52,841,505 52,417,407 51,512,772
============= ============= ============
Liabilities
Current liabilities
Trade and other payables 451,943 200,100 354,422
Lease liability 1 281,539 - -
------------- ------------- ------------
Total liabilities 733,482 200,100 354,422
Equity
Ordinary shares 49,294 46,068 46,138
Share premium reserve 85,424,296 82,981,325 83,068,307
Merger reserve 77,130,684 77,130,684 77,130,684
Reverse acquisition
reserve (53,846,526) (53,846,526) (53,846,526)
Share-based payments
reserve 3,896,283 3,747,915 3,819,843
Retained earnings (60,546,008) (57,842,159) (59,060,096)
------------- ------------- -----------------
Total equity 52,108,023 52,217,307 51,158,350
------------- ------------- -----------------
Total equity and liabilities 52,841,505 52,417,407 51,512,772
============= ============= =================
These unaudited interim financial statements were approved by
the Directors and authorised for issue on 26 September 2019.
Simon Potter, Chief Executive Officer Adrian Collins, Director
Consolidated cash flow statement
for the six months ended 30 June 2019
Note 30 June 30 June 31 December
2019 2018 2018
(Unaudited) (Unaudited) (Audited)
$ $ $
Cash flows from operating activities
Payments to suppliers and employees (1,232,688) (1,189,103) (2,542,110)
Net cash used in operating activities (1,232,688) (1,189,103) (2,542,110)
------------- ------------- ------------
Cash flows from investing activities
Purchase of property, plant and
equipment (2,975) (30,095) (35,212)
Proceeds from disposal of property,
plant and equipment 1,000 - -
Payments for exploration and
evaluation assets (88,362) (136,293) (197,121)
Decrease in restricted cash - 500,000 500,000
Other income 2 - 500,000 1,000,000
Interest received 13,701 5,308 5,308
Net cash generated by/(used in)
investing
activities (76,636) 838,920 1,272,975
------------- ------------- ------------
Cash flows from financing activities
Proceeds from issuance of ordinary
shares 2,359,144 1,584,828 1,671,880
Lease liability payments 1 (116,634) - -
------------- ------------- ------------
Net cash flows from financing
activities 2,242,510 1,584,828 1,671,880
------------- ------------- ------------
Net decrease in cash and cash
equivalents 933,186 1,234,645 402,745
------------- ------------- ------------
Cash and cash equivalents at
the beginning of the period 2,220,765 1,838,527 1,838,527
Effects of exchange rate changes
on cash and cash equivalents 23,649 5,713 (20,507)
------------- ------------- ------------
Cash and cash equivalents at
the end of the period 3,177,600 3,078,885 2,220,765
------------- ------------- ------------
1. Basis of preparation
The unaudited consolidated interim financial information has
been prepared using the recognition and measurement principles of
International Accounting Standards, International Financial
Reporting Standards and Interpretations adopted for use in the
European Union (collectively "EU IFRSs"). The principal accounting
policies used in preparing the interim results are unchanged from
those disclosed in the Company's financial statements for the year
ended 31 December 2018. It is not expected that there will be any
changes or additions to these in the annual financial statements
for the year ended 31 December 2019.
While the financial information included in this interim
consolidated financial information has been prepared in accordance
with the recognition and measurement criteria of EU IFRSs, this
consolidated interim financial information does not itself contain
sufficient information to comply fully with EU IFRSs.
The interim financial information for the six months ended 30
June 2019 and 30 June 2018 is unaudited and does not constitute the
Company's statutory financial statements for those periods. The
comparative financial information for the full year ended 31
December 2018 has, however, been derived from the Company's
statutory financial statements for that period. The auditor's
report on those statutory financial statements was unqualified.
In the opinion of the directors, the accompanying interim
financial information includes all adjustments considered necessary
for fair and consistent presentation of the interim financial
statements. The interim financial statements have been prepared on
the going concern basis, assuming that the Group will realise its
assets and extinguish its liabilities in the normal course of
business at the amounts recognised within the interim financial
statements.
Adoption of IFRS 16 "Leases"
IFRS 16 "Leases" came into effect on 1 January 2019. This new
standard sets out the principles for the recognition, measurement,
presentation and disclosure of leases and requires lessees to
account for most leases under a single on-balance sheet model.
The Group adopted IFRS 16 from 1 January 2019 using the modified
retrospective approach and accordingly the information presented
for 2018 has not been restated, remaining as previously reported
under IAS 17. On initial application, the Group recognised a
right-of-use asset based on the present value of the corresponding
lease liability on a lease by lease basis. Right-of-use assets and
lease obligations totalling $384,797 were recorded as at 1 January
2019, with no net impact on retained earnings.
The Group has also elected to use the recognition exemptions for
lease contracts that, at the implementation date of 1 January 2019,
have a lease term of 12 months or less and do not contain a
purchase option ('short term leases'), and lease contracts for
which the underlying asset is of low value ('low-value
assets').
The key financial impact at the start and end of the period is
shown below:
USD As at 1 January As at 30 June
2019 2019
Balance sheet
---------------- --------------
Property, plant and equipment 384,797 276,210
---------------- --------------
Lease liabilities (384,797) (281,539)
---------------- --------------
-
---------------- --------------
Income statement
---------------- --------------
Depreciation expense - 108,586
---------------- --------------
Other expenses - (116,586)
---------------- --------------
Interest expense - 13,376
---------------- --------------
Cash flow statement
---------------- --------------
Net cash used in operating
activities - 116,634
---------------- --------------
Net cash flows from financing
activities - (116,634)
---------------- --------------
Carrying Value of Intangible Exploration and Evaluation
Assets
Expenditure of $48,603,562 relating to the cost of exploration
licences, geological and geophysical consultancy and seismic data
acquisition and interpretation has been capitalised as at 30 June
2019 (30 June 2018: $48,454,371) (31 December 2018:
$48,515,200).
Ultimate recoupment of exploration and evaluation assets
capitalised is dependent on successful development and commercial
exploitation, or alternatively, sale of the respective licence
areas. The carrying value of the Group's exploration and evaluation
expenditure is reviewed at each balance sheet date and, if there is
any indication that it is impaired, its recoverable amount is
estimated. Estimates of impairment are limited to an assessment by
the Directors of any events or changes in circumstances that would
indicate that the carrying value of the asset may not be fully
recoverable. Any impairment loss arising is charged to the
statement of comprehensive income.
On 26 April 2018 the Company filed its application for
Environmental Authorisation ("EA") as required by the Petroleum
(Offshore Environmental Protection and Pollution Control)
Regulations 2016 (the "Regulations"). Under these newly implemented
regulations, an application for EA represents the first step in
commencing field activities and therefore the submission of the
application by BPC represents an important milestone in the project
and its development. The Company is presently in ongoing
discussions with the Government and their advisors regarding the
progression of the EA application ahead of anticipated drilling
activity in 2020.
On 21 February 2019, the Group received notification from the
Bahamian Government of the extension of the term of its four
southern licences to 31 December 2020, with the requirement that
the Company commence an exploration well before the end of the
extended term.
In performing an assessment of the carrying value of the
exploration and evaluation assets at the reporting date, the
Directors concluded that it was not appropriate to book an
impairment given the remaining term of the licences, geological
probability of success of the structures and the continued plans to
explore and develop the block.
Renewal of the Miami licence remains under review as at the
balance sheet date.
2. Other Income
Other income during the prior period consists of payments
received in consideration for having entered into a period of
exclusive discussions with a major international oil company as
announced by the Company on 3 May 2018. Payments received during
the prior 6 month reporting period of $500,000 relate to the period
from 1 May 2018 to 30 June 2018, with further payments totalling
$500,000 having been received after the prior 6 month period
balance sheet date relating to the period from 1 July 2018 to 31
August 2018.
3. Events after the balance sheet date
On 21 August 2019, the Company announced:
- The execution of a framework agreement with Seadrill for the
provision of a sixth generation drilling rig, including the key
commercial parameters, during the first half of 2020, subject to
contract,
- The appointment of Halliburton as integrated well service provider, subject to contract,
- The appointment of BakerHughes GE to provide a range of well
related equipment, subject to contract,
- The entering into a conditional agreement for the provision of
a GBP10.25m ($12.5m) convertible loan investment by Bizzell Capital
Partners Pty Ltd
As a consequence of the above and the securing in principle of
the key commercial parameters for the execution of its first
exploration well, the Company has revised its estimated well cost
to $20m - $25m for a single well.
On 17 September 2019, the Company's shareholders granted the
Company the authority to issue up to 1.8 billion new ordinary
shares in the Company for the purposes of providing an alternative
option to finance the implementation of the agreements with
Seadrill, Halliburton and BakerHughes GE should the ongoing
discussions with potential funding partners not result in a
definitive agreement to fund the well within the timeframes
necessary to discharge the Group's licence obligation to execute a
well by 31 December 2020.
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
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