TIDMBPC
RNS Number : 6979A
Bahamas Petroleum Company PLC
01 October 2020
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1 October 2020
Bahamas Petroleum Company plc
("BPC" or the "Company")
GBP9.5 million Placing
Highlights:
-- Successful Placing to institutional investors to raise gross
proceeds of GBP9.5 million ($12 million) through the issue of
475,000,000 new ordinary shares at a price of 2p each
-- Placing proceeds enhance the Company's overall funding
capacity, including in particular for the anticipated costs of the
Company's 100% owned and operated Perseverance #1 well, expected to
spud prior to the end of 2020, targeting a recoverable P(50)
prospective resource of 0.77 billion barrels of oil
-- The rational for this Placing, in the lead up to drilling of
Perseverance #1, is the continuing drive to optimise BPC's funding
strategy, so, as previously announced, to achieve lower cost of
capital / less aggregate dilution / greater certainty
-- Based upon the proceeds from this Placing in combination with
the Company's existing cash balance and the amount available from
the existing Conditional Convertible Notes, and assuming no change
to the anticipated cost of Perseverance #1, the Company now does
not expect to have to draw further on the previously announced
GBP16 million zero-coupon, second ranking convertible bond
facility
Simon Potter, Chief Executive Officer, commented:
" Since mid-2019 we have been diligently implementing a funding
strategy designed to ensure we have access to the funds we need, as
and when we need them, such that we can efficiently discharge our
licence obligation and the technical objectives for the
Perseverance #1 well.
Today's placing is another milestone in the implementation of
that funding strategy. The placing proceeds, being certain,
immediately available and at a known dilution compared to other
existing funding options, give us the opportunity to simplify the
capital structure of the business whilst leaving us in a much
stronger overall financial position. With the success of the
placing we are also able to materially reduce the need to rely on
other previously announced financing instruments, without affecting
our overall ability to proceed with Perseverance #1 or other
aspects of our recently enlarged business.
At the same time, with a view to continually seeking to
strategically enhance the overall financial and operating capacity
of the Company, we continue to consider a wide range of other
funding options. Many of these are newly available to us consequent
on the broadening of our asset base in recent months.
I look forward to advising shareholders of our progress in this
regard - the next few months will continue to be both a busy and
exciting time for our Company. "
Overview:
BPC, the Caribbean and Atlantic margin focused oil and gas
company, with exploration, production, appraisal and development
assets across the region , is pleased to announce that it has
raised GBP9.5 million ($12 million) before expenses through a firm
placing of 475,000,000 new ordinary shares of 0.002p each
("Ordinary Shares") (the "Placing Shares") at a price of 2.0 pence
each (the "Placing"). The Placing was undertaken via an accelerated
book-build process. The Placing Shares were placed to a range of
institutional investors.
Related Party Transaction:
Simon Potter and certain non-board management have agreed to
subscribe for, in aggregate, 15,503,875 Placing Shares,
representing a $400,000 investment in the Company. The investment
accounts for approximately 3.3 per cent. of the gross proceeds of
the Placing. Simon Potter's participation in the Placing, amounting
to 7,751,938 Placing Shares, is deemed a related party transaction
pursuant to the AIM Rules for Companies, by virtue of his status as
a director of the Company. The independent directors (being those
directors other than Simon Potter) consider, having consulted with
the Company's nominated adviser, Strand Hanson Limited, the terms
of Simon's participation in the Placing to be fair and reasonable
insofar as shareholders are concerned.
Placing Rationale:
The Board considered that it would be prudent to undertake the
Placing at this time, given the desire to achieve greater immediate
certainty as to the Company's ability to meet the anticipated costs
of upcoming activities across BPC's portfolio of assets in The
Bahamas, Trinidad and Tobago, Suriname and Uruguay.
In particular, BPC is focused on the immediate funding needs for
the Perseverance #1 well, expected to spud prior to the end of 2020
in The Bahamas. The Company is continually seeking to simplify the
capital structure of the business whilst pursuing funding
alternatives that represent a lower cost of capital / less
aggregate dilution / greater certainty than facilities currently in
place .
Based on the current estimated cost of Perseverance #1, the
Placing proceeds will now allow BPC to reduce reliance on
previously announced convertible note financing instruments, and in
particular afford the ability to not draw further on the previously
announced GBP16 million (approximately $21 million) second ranking,
variable conversion price convertible bond facility with a
Bahamas-based family office (the "Zero-coupon Facility").
The Board notes that as compared to previously announced
convertible note financing instruments, the Placing proceeds are
certain and represent a known level of dilution (with reference to
the Zero-coupon Facility) , and will be immediately available. The
Board considers that in the current market environment, this
represents a better outcome for shareholders as compared to
reliance on the Zero-coupon Facility , which remains to be drawn,
and given the variable conversion price mechanism introduces a
degree of uncertainty as to the ultimate extent of dilution should
the facility be drawn.
The net proceeds raised from the Placing will be directed by the
Company to meeting the Company's ongoing funding needs, and in
particular the drilling of the Perseverance #1 well.
Funding Strategy Update:
In the Board's view, the Placing should be considered in the
broader context of the coordinated strategy adopted by the Company
since September 2019 toward securing the funding required for the
drilling of an initial exploration well - Perseverance #1 - in The
Bahamas, with drilling now expected to commence before the end of
2020. More recently, this funding strategy has been expanded to
include the program of work being planned through 2021 across BPC's
expanded portfolio of assets in Trinidad and Tobago, Suriname, and
Uruguay.
The elements of this funding strategy, as enacted to-date,
are:
1. Approval by the shareholders of the Company, in September
2019 (and reapproved in August 2020), 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 planned activities;
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 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 certain conditions
precedent, the Company expects to be able to draw down on this
funding prior to drilling of Perseverance #1 and raise an
additional GBP10.25 million ( c.US$13.3 million). This convertible
note funding instrument has a fixed conversion price of 2.5p per
share, such that 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;
5. The Zero-coupon Facility, entered into on 19 February 2020,
under which the Company initially drew GBP4.7 million, and under
which approximately GBP11.3 million remains available for draw-down
in instalments in November and December 2020 and January and
February 2021. This convertible note funding instrument has a
floating conversion price linked to the market value of the
Company's shares, such that it is not possible to know in advance
the level of dilution that would occur if the remainder of this
facility was drawn in full. It is for this reason that the Company
wishes to remove its need to rely on this facility.
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. Whilst not a core element of the Company's
funding strategy, initial subscriptions to this fund successfully
raised 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.
Based on the anticipated cost of Perseverance #1, of between $21
million and $25 million, with an allowance for up to a further $5
million in contingencies, the combined amount of the Company's
existing cash balance, the net Placing proceeds, and the
Conditional Convertible Notes would result in the Company not
having a need to further draw on the Zero-coupon Facility.
As previously advised, a core element of the Company's overall
funding strategy is to seek to optimize existing funding sources in
the run-up to drilling, with a view to securing funding that is
cheaper, more certain, and/or less dilutive. The Placing should be
viewed as a successful step in executing on this strategy. In this
context the Company also notes that it is continuing to work on
developing a range of other financing alternatives as part of its
overall funding and risk mitigation strategy. A number of these
alternatives are new, arising out of the Company's recently
expanded operating asset base.
This includes:
(i) Surplus cash-flows from operations: The Company has
indicated publicly that it's goal is to increase production across
its asset base from current levels (approximately 400 - 450 bopd)
to 2,500 bopd by the end of 2021. As production increases through
2021, and depending on the prevailing oil price, the Company would
expect to see cashflows increasing accordingly, with the Company
seeking to be in a position, by end of 2021, to be generating
sufficient cash flows to cover all overhead and operating expenses,
and with surplus free cash flow potentially making a considerable
contribution to ongoing capital and exploration expenditures.
(ii) Farm-out options or similar transactions: For several
years, the Company has been engaged in a process to secure all or
part of the financing required to undertake drilling in The Bahamas
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 project, 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 the project in the past. This is a
fairly typical structure for financing in the oil and gas industry.
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.
(iii) Reserve-based lending facilities: The Company has
indicated publicly that it is seeking to undertake a portfolio wide
Competent Persons' Review (CPR), with a goal of 1 mmbbl of
certified 2P reserves (net) by the end of 2020, and 10 mmbbl of
certified 2P reserves (net) by the end of 2021. Certified 2P
reserves are a readily monetisable asset, and the Company has
commenced discussion with several providers of financing facilities
that advance funding against the assessed value of 2P reserves
("reserve-based lending facilities", or "RBLs". Based on the level
of targeted 2P reserves and typical RBL lending arrangements
(including those currently under evaluation), access to in the
order of $20m of capital is considered by the Company to be a
realistic goal.
(iv) "Drill for equity" type arrangements: Another common
financing structure in the oil and gas industry is a "drill for
equity" type arrangement, whereby major service providers commute
part of their fees into an ownership interest in the underlying
project. Several such options may be available to the Company. For
example, as previously announced, in the contract for the provision
of a drilling rig with Stena Drilling, BPC granted several
investment options to Stena Drilling such that, prior to 1 December
2020, Stena Drilling has the right (but not the obligation, and
there can be no assurance that Stena Drilling will exercise the
right, all or in part) to (i) subscribe for up to $10 million of
new equity in BPC on the same terms and conditions as would apply
in any BPC capital raising, or (ii) farm-in to the BPC southern
licences on the basis of $10 million for a 10% non-operated working
interest. If Stena Drilling were to seek to take up either of these
investment options, the consideration could be satisfied either in
cash or by way of offset against amounts payable by BPC under the
Rig Contact. Similar "drill for equity" type arrangements may be
possible in respect of drilling operations elsewhere in the BPC
portfolio.
To the extent that any one or a combination of the above funding
alternatives are 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 could be applied towards eliminating
reliance on convertible note funding instruments entirely, and/or
expanding/extending the current work programme, or alternatively
proceeds could be applied to a much broader work programme across
the Company's asset base.
Placing Summary:
The Placing has raised, in aggregate, GBP9.5 million ( $12
million ) before expenses through the placing of, in aggregate
475,000,000 new Ordinary Shares at a price of 2.0p per share (the
"Placing"). The Placing Shares to be issued will rank pari passu in
all respects with the Company's existing Ordinary Shares and will
represent approximately 12 per cent. of the Company's enlarged
issued ordinary share capital, following Admission of the Placing
Shares. Approximately 18.7 million unlisted warrants to subscribe
for new Ordinary Shares at the Placing Price per share for a period
of 24 months are to be issued to the Company's advisers as part
compensation for services provided under the Placing.
Application will be made for the 475,000,000 Placing Shares to
be admitted to trading on the AIM market of the London Stock
Exchange ("AIM") and it is expected that admission will take place
and trading in the Placing Shares will commence from 8:00am on 8
October 2020 ("Admission").
Total Voting Rights:
Following Admission, the Company's issued share capital will
consist of 3,894,807,846 Ordinary Shares, with each Ordinary Share
carrying the right to one vote. The Company does not hold any
Ordinary Shares in treasury. This figure of 3,894,807,846 Ordinary
Shares may therefore be used by shareholders in the Company, as the
denominator for the calculations by which they will determine if
they are required to notify their interest in, or a change in their
interest in, the share capital of the Company under the FCA's
Disclosure Guidance and Transparency Rules.
Working Capital:
The directors consider that the net proceeds of the Placing
together with the Company's existing financial resources will
provide sufficient working capital for its currently anticipated
requirements for at least the next 12 months.
In circumstances where the convertible loan note financing
instruments are not available (for example, where the conditions
precedent set out in the subscription agreement for the Conditional
Convertible Notes are not satisfied (or waived by the
subscribers)), the Company may not have sufficient cash to complete
the drilling of the Perseverance #1 well, which, in turn, puts the
Company at risk of not meeting its licence obligations. In such
circumstances the Company would look to secure funding by way of
alternative sources. There can be no assurance, however, that the
Company would be successful in securing any such alternative
funding. Excluding any costs relating to the Perseverance #1 well,
the Company currently has sufficient cash available to meet general
working capital needs 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 - Bookrunner Tel: +44 (0) 207
& Joint Broker 408 4090
Jerry Keen / Toby Gibbs
Investec Bank Plc - Joint Broker Tel: +44 (0) 207
Chris Sim / Rahul Sharma 597 5970
Gneiss Energy - Financial Advisor & Placing Tel: +44 (0) 20
Agent 3983 9263
Jon Fitzpatrick / Paul Weidman
CAMARCO Tel: +44 (0) 20
Billy Clegg / James Crothers / Hugo Liddy 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.
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