TIDMBPC
RNS Number : 5790D
Bahamas Petroleum Company PLC
20 February 2020
20 February 2020
Bahamas Petroleum Company plc
("Bahamas Petroleum" or the "Company")
GBP8 million ($10.5 million) Convertible Loan Facility
and Funding Strategy Update
Bahamas Petroleum Company plc, the oil and gas exploration
company with significant prospective resource s in licences in The
Commonwealth of The Bahamas ("The Bahamas"), is pleased to announce
that it has entered into a binding, zero-coupon, second ranking,
unsecured convertible loan note facility (the "Facility") for up to
GBP8 million (approximately $10.5 million) ( before expenses and
fees) , of which 90% is available for cash draw down . The first
tranche of today's Facility, being GBP2.43 million is unconditional
and is immediately available. The Facility has been entered into
with a substantial Bahamian based institutional family-office
investor.
Highlights:
-- The Company has entered into an agreement for a zero-coupon,
second ranking, unsecured GBP8 million ($10.5 million) convertible
bond facility, of which 90% is available for cash draw down,
provided by an institutional family-office investor based in the
Bahamas
-- Facility will see immediate cash inflow of GBP2.43 million
(approximately $3.2 million), with access to the balance of the
facility available to be drawn at the Company's election, in four
committed instalments through the course of drilling of the 100%
owned and operated Perseverance #1 well, expected to spud in April
2020, targeting recoverable prospective resources of 0.7 - 1.4
billion barrels of oil
-- Company continues to evaluate farm-in options as part of its
overall risk mitigation strategy which could further expand its
available funding resources, if appropriate
Simon Potter, Chief Executive Officer, commented:
"We continue to make rapid progress toward the drilling of
Perseverance #1, our first exploration well in The Bahamas,
expected to commence in April 2020 .
Since mid-2019 we have progressively been implementing a
coordinated funding strategy, with a view to ensuring we have
access to the funds necessary for drilling, as and when we need
them. This measured approach means that we have now secured a
funding package with considerably less overall dilution to
shareholder equity than most commentators expected would be
required. Moreover, through this process we have consistently put
the interests of our shareholders first - for example, in October
2019 we provided our existing shareholders with the first option to
subscribe for additional shares at a substantial discount to the
then prevailing (and the current) share price.
Today's facility affords us greater overall funding
availability, and a high degree of financial flexibility so that we
can respond as may be needed to real-time drilling results. We will
see some immediate cash inflow to help manage the timing of
cash-flow needs in advance of drilling (for example for
long-lead/critical path items and advance credit payments required
by service providers). Thereafter, the remaining funds are
committed, and available if the Company elects to draw on the
facility as we progress through drilling.
At the same time, we continue to consider several farm-in
options, with a view to further strategically enhancing the overall
financial and operating capacity of the Company."
Critically, with this Facility and the Conditional Convertible
Loan Note, shareholders can take greater comfort that the well can
be delivered if we were to 'go it alone', or if we were to choose
to drill with a partner. The next few months will thus continue to
be both a busy and exciting time for our Company. "
Funding Strategy Update:
The Facility comprises a further part of a coordinated strategy
by the Company toward securing the funding required for the
drilling of an initial exploration well - Perseverance #1 - in The
Bahamas, with drilling expected to commence in April 2020, and
targeting recoverable prospective resources of 0.7 - 1.4 billion
barrels of oil.
Other elements of this funding strategy, as enacted to-date,
are:
1. Approval by the shareholders of the Company, in September
2019, of an enlarged share placement capacity of up to 1.8 billion
new ordinary shares, so as to provide the Company with maximum
flexibility in the process of securing funding for the planned
exploration well;
2. An open offer to the then existing shareholders, in October
2019, which raised gross proceeds of approximately US$4.3 million
through the issue of 166.4m new ordinary shares at a price of 2p
each;
3. A successful institutional placing, in November 2019, to
raise additional gross proceeds of approximately US$7.1 million
through the issue of 275.6 million new ordinary shares at a price
of 2p each;
4. A Conditional Convertible Note Subscription Agreement,
entered into by the Company on 10 October 2019 (and as more
particularly described in the Company's announcement of that date
and subsequently in the Company's Open Offer Circular as sent to
all shareholders in October 2019 - the "Conditional Convertible
Note"), whereby, subject to satisfaction of various conditions
precedent prior to 9 March 2020, the Company expects to raise
additional gross proceeds of GBP10.25 million ( c.US$13.3 million).
If fully drawn, and if all interest were accrued and the principal
and interest fully converted into shares, a total of approximately
590 million new ordinary shares would be issued; and
5. The Facility now entered into, which if fully draw and fully
converted, based on the Company's current share price, would
require the Company to issue a total of approximately 200 million
new ordinary shares.
In addition, the Company has sponsored the creation of a
Bahamian domiciled mutual fund, with the primary objective of
creating a vehicle through which qualified Bahamian investors could
invest in the Company, and thereby share in the ownership of the
Company's nationally significant project. Whilst not a core element
of the Company's funding strategy, initial subscriptions to this
fund have now closed, raising gross proceeds in Bahamian dollars
equivalent to US$0.9 million through the issue of 35.3 million new
ordinary shares at a price of 2p each (please see below for further
information on the allotment of these shares). The Company has also
agreed to make available to the fund in March 2020 up to a further
40 million shares at a price of 3.35p each, which if taken up by
the fund would raise a further $1.4 million.
In aggregate, therefore, the above elements (including the
Conditional Convertible Notes, if fully drawn, and today's
Facility, if fully drawn) would see total funding availability of
approximately $36 million, and issuance of approximately 1.3
billion new shares. In both cases, this represents a considerably
smaller overall equity issuance, and therefore dilution
(approximately 30%), than the 1.8 billion shares approved by
shareholders of the Company in September 2019.
The Company also continues to evaluate farm-out options or
similar transactions as part of its overall risk mitigation and
funding strategy. To the extent that a farm-out or similar
transaction is successfully concluded on terms acceptable to the
Company, the amount of capital available to the Company would
likely materially increase, and would be additive to existing
funding sources. Such funding, if secured, could also be applied
towards reducing reliance on convertible note funding, meeting
contingencies (if they arise), expanding/extending the current work
programme, or alternatively proceeds could be applied to a much
broader work programme in the event of a successful exploration
well and thereafter a licence extension into a 2021 - 2023 work
period.
Attention is drawn to the fact that, as detailed above, draw
down of funds from the Conditional Convertible Note Subscription
Agreement remains dependent on a number of conditions first having
been satisfied. To the extent the conditions are not satisfied
there is a risk that the Company will not be able to receive the
funding contemplated in the Conditional Convertible Note
Subscription Agreement, unless those conditions are waived by the
subscribers. However, given that a number of the conditions are
necessary prerequisites to drilling commencing, the Directors are
confident that the conditions precedent can be satisfied in a
timely manner such that funding under the Conditional Convertible
Note Subscription Agreement will be available as and when required.
The Facility entered into today provides a further level of funding
certainty, in that if for whatever reason all or part of the funds
under the Conditional Convertible Notes Subscription Agreement are
not available, funds from the Facility could be drawn in lieu,
subject to the conditions set out below.
Facility Rationale:
The net proceeds raised from the Facility will be additive to
the Company's existing funds and the Conditional Convertible Loan
Notes, should these become available. These aggregate resources
will be directed by the Company to meeting the costs of drilling of
the Perseverance #1 well.
In 2019, the Company advised an estimated cost for the
Perseverance #1 well in the range of $20 million to $25 million.
Since then, the Company has made considerable progress in terms of
contracting for various equipment and services necessary to the
drilling of the well, as well as finalising certain key cost inputs
for the well including logistical support (helicopters and supply
vessels), manpower planning, fuel supply and other consumables.
Further, to maximise the capacity to drill the well safely at all
times (and as contained within the Safety Case included in the
Company's Environmental Authorisation) the Company has decided to
employ a managed pressure drilling system ("MPD") integrated onto
the drilling rig, which will add an additional cost to the day-rate
for the rig. Finally, taking into account other operational
requirements, the loadout, mobilisation and demobilisation of the
rig will take approximately one week longer than originally
contemplated. As a result, the estimate for the base cost of the
Perseverance #1 well has now been revised to be in a range of $25
million to $30 million.
Additionally, a number of potential contingency elements have
been identified, including the provision for additional, optional
casing strings (depending on actual conditions encountered whilst
drilling, and which may be required to provide greater assurance
the target depth can be reached) and the possibility for an
expanded data gathering, logging and sampling program (if merited
by positive real-time drilling results). These additional items
could, if not offset by a reduction in drilling time or other
costs, add up to another $5 million to the total estimated cost of
the well (although there is no surety that this will be the case -
the need for these items will, as noted, only be decided real-time
during the course of drilling operations).
In terms of cash-flow, in order to stay on track to deliver the
Perseverance #1 exploration well in Q2 2020, over recent months the
Company has commenced a number of long-lead work-streams. This has
included the procurement of various long-lead items for future
delivery (including wellheads, drill bits and casing) and the
custom manufacturing of certain items of essential equipment.
Moreover, a number of equipment suppliers and service providers are
requiring all or part payment in advance, given that Perseverance
#1 is a single well programme. As a result the nearer term cash
needs of the Company in the lead-up to drilling have increased
(albeit the cash needs towards the end of drilling have
correspondingly decreased). At the same time expected cash inflow
from the Conditional Convertible Note facility remains subject to
satisfaction of conditions precedent, the deadline for which has
been extended to 9 March 2020 (as previously announced on 30
January 2020).
Accordingly, recognising the need to provide both greater
funding assurance and flexibility to meet the full estimated
potential cost of the well in all operating scenarios, and so as to
better manage cash-flow and thus avoiding the potential of any
unnecessary delay to the project timeline, the Board has determined
that securing further staged funding capacity would be prudent. T
he Company has accordingly sought to secure access to additional
staged funding capacity by entry into the Facility. Part of the
funds from the Facility will be drawn immediately, the amount drawn
reflective of ongoing procurement activities and the Company's
resultant cash needs ahead of anticipated funding from the
Conditional Convertible Notes. The balance of the Facility funds
will be available in staged instalments through April, May, June
and July 2020, matched both to the expected timing of the drilling
of Perseverance #1 and the payment schedules/conditions for
equipment and contractors employed during the course of
drilling.
The Facility is thus consistent with the Company's coordinated
funding strategy for the drilling of the Perseverance #1 well,
which is to ensure appropriate funding is available as and when
required, whilst at the same time seeking to minimize overall
dilution to shareholders.
Facility Summary:
The Company has entered into the Facility for up to GBP8 million
zero-coupon, second ranking, unsecured convertible loan notes (the
"Notes"). Key terms are as follows:
-- Amount: face value of up to GBP8 million (approximately US$10.5 million)
-- Use of funds: to provide staged capital (as required) toward
completion of the Perseverance #1 well and associated payments
-- Form of investment: zero-coupon, second ranking, unsecured convertible loan notes
-- Note Subscriber: A Bahamian registered institutional family-office investor
-- Structure: An initial draw-down of GBP2.43 million to be made
immediately, with four further instalments of GBP1.19 million each
available to be drawn at the Company's sole election at the start
of each of April, May, June and July 2020 (subject to customary
termination provisions) - ie: the Company can elect to draw
additional funds if required through the course of drilling of the
Perseverance #1 well
-- Term: 3 years from time of draw-down
-- Coupon: Zero. However, Notes when drawn will be issued at 90%
of face-value, equating to the equivalent of an embedded coupon of
3.33% per annum, effectively paid in advance. The Company will thus
receive net proceeds (before fees) of GBP2.43 million on the
initial draw-down, and should the Company elect to make additional
draw-downs, net proceeds of GBP1.19 million per draw-down will be
received.
-- Priority: On a return of capital (by way of liquidation or
otherwise) the Notes will rank second to the Conditional
Convertible Notes, but will rank senior to all ordinary shares on
issue to the extent of the face value of the Notes
-- Security: the Notes will be unsecured
-- Repayment: At end of the term, unless redeemed or converted prior
-- Conversion: The holder of Notes may at any time prior to
maturity elect to convert the face value of the Notes into fully
paid ordinary shares in the Company
-- Conversion Price: The lower of (i) a 25% premium to the price
of the Company's ordinary shares on the date of draw-down, or (ii)
the lowest closing bid price of the Company's shares on the five
days prior to the date of conversion
-- Early Redemption: The Company has the right to redeem the
Notes in cash at 105% of face value; if the Company serves an early
redemption notice, the holder has a 3 day period to elect to first
convert the notes;
-- Conditions to future draw- downs : if the Company's share
price falls below 2 pence for five consecutive trading days, there
can be no further draw downs; and no material adverse events
subsisting at time of draw-down
-- Fees: the Company has agreed to pay a 3% arranging fee to the
arranger of the Facility in respect of the entire face value of the
Facility (ie: GBP240,000), and an additional raising fee of 3% of
any amounts drawn, the latter payable to the arranger of the
Facility only if and when additional funds are drawn under the
Facility
-- Change of control: the Facility contains a change of control
provision (per the United Kingdom Corporations Act 2010 or the
sale/transfer of 50% or more of the assets of the Company) pursuant
to which the investor can require the Company to redeem the Notes
at a price of 105% of face value
Bahamas Fund Timing Update:
Pursuant to the Company's announcement, on 14 February 2020,
regarding the allotment of shares to the BPC Investment Fund Ltd
(the "Fund"), admission to trading of the subscription shares is
now expected to take place on or around 13 March 2020 to allow
additional time for the Fund's necessary administrative processes
to be completed.
Working Capital:
The directors consider that the proceeds of the Facility
together with the Company's existing access to financial resources
will provide sufficient working capital for its currently
anticipated requirements for at least the next 12 months.
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 / James Thomas 408 4090
CAMARCO Tel: +44 (0) 20
Billy Clegg / James Crothers 3757 4983
www.bpcplc.com
The information communicated in this announcement contains
inside information for the purposes of Article 7 of the Market
Abuse Regulation (EU) No. 596/2014.
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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