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Bahamas Petroleum’s bold and transformational week impresses investors

In a matter of days BPC has shed its single-country focus and lined up a 'full cycle' portfolio of assets.

Bahamas Petroleum Company PLC - Bahamas Petroleum’s bold and transformational week impresses investors

Bahamas Petroleum Plc (LON:BPC) continues to surprise and impress with its bold growth strategy which has sees the company transformed over just a few days.

A deal announced on Thursday marks the biggest change by adding production, appraisal/development, and exploration assets across Trinidad and Suriname.

Earlier in the week, BPC expanded its exploration footprint as Uruguay awarded the OFF-1 licence covering a high-potential but early-stage area off the Atlantic coast.

These are the latest but not only significant steps that BPC has taken towards ‘company making’ growth.

It has previously taken frontier Bahamian acreage to the cusp of high-impact drilling with the Perseverance.  This has only temporarily been held up by pandemic, and, is slated to get underway as soon as the fourth quarter.

Perseverance, targeting close to 800mln barrels of crude, has been said to be one of the “premier prospects” to be drilled anywhere in the world this year.

Not only is it a big prospect, it is also - presently - the sole participant in the venture with 100% of both the risk and reward. It is a bold move and ambitious project. The kind of move that’s a lot less common than it used to be in the small-cap oil sector.

This week though BPC has doubled up with another ambitious and quite rare move, picking up high potential but untested acreage from the Uruguayan government.

READ: Bahamas Petroleum strikes £25mln deal for Columbus Energy

The new acreage, the OFF-1 licence, is much earlier stage than BPC’s project in the Bahamas though could in time prove to be as rich in potential. Estimates presently envisage 1bn barrels of resource potential, based presently on seismic data and desktop work.

OFF-1 spans some 15,000 square kilometres and hosts exploration play systems that are believed to be directly analogous to the prolific Cretaceous turbidite discoveries that are currently being evaluated and developed further north, offshore Guyana and Suriname.

BPC secured the project via a low-cost option, with arrangements similar to those previously used to secure the Bahamas opportunity.

Also like the Bahamas opportunity, BPC reckons it can achieve a significant value uplift by completing the initial stages of exploration to advance towards making ‘drill ready’ prospects.

Chief executive Simon Potter in a statement on Tuesday highlighted that the Uruguay opportunity opened up partly because of the turmoil in the broader industry, which has seen larger players slash investment and capital spending for new projects.

“The current period of introspection in our industry is presenting nimble, forward-thinking companies such as ourselves with compelling opportunities to expand our portfolio and achieve countercyclical growth,” Potter said.

“The recently-closed open licencing round in Uruguay presented exactly such an opportunity for us where, for very low cost, we have been able to secure an exploration licence of an extremely high-calibre that, even as recently as a few months ago, we most likely would have been outbid on by much larger players.”

READ: BPC is a small-cap throwback, high-impact projects are increasingly rare

Potter noted that the acreage is an underappreciated opportunity and that there is extensive existing seismic, of various vintages, and it requires the application of modern seismic imaging technology and techniques to understand the full extent of the petroleum resource.

BPC has a four-year initial exploration period in which it is obligated to reprocess and reinterpret existing 2D seismic data. There are no drilling commitments during this time.

Uruguay is an exciting early-stage opportunity but Bahamas remains the flagship venture.

The company in the near term continues to look forward to drilling the Perseverance-1 exploration well in the Bahamas in late Q4 2020/early 2021. Perseverance-1 is targeting some 770mln barrels of potential resources, plus possible upside of around 1.44bn barrels.

"The scale of the opportunity that our planned drilling campaign in The Bahamas may unlock for us, at the end of 2020, means that our personnel are and will remain entirely focussed on their efforts to deliver the Perseverance #1 exploration well successfully,” Potter added.

Champion deal for Columbus

Thursday’s deal to buy Columbus for £25mln aims to create a full-cycle Caribbean and Atlantic margin focused oil and gas "champion".

This ‘champion’ will own stakes in five producing fields, two appraisal and development projects  in Trinidad, including a brand new discovery, a high impact (800mln to +1bn barrel) exploration well in the Bahamas, and expansive frontier exploration acreage offshore Uruguay and Suriname.

BPC will retain its existing management team, with Simon Potter at the helm as chief executive, while Columbus executive chair will become a non-executive director.

Potter highlighted that the enlarged company’s forward work programme is “largely discretionary” so management will be able to optimise ‘operational sequencing’ to make best use of its available resources.

In a statement, he added that the acquired assets are entirely complementary to its project in the Bahamas, where the Perseverance-1 well is slated later this year.  According to Potter, the new company will have multiple opportunities to create shareholder value over the next 12 - 24 months.

“In one bold step we have given ourselves a production base in Trinidad from which to generate cash, and the opportunity to leverage a range of low-cost developments via workovers, reactivations and new wells targeting shallow reservoirs, along with a range of further options for organic growth and exploration prospects.”

“We also have low-cost appraisal of existing discoveries in the South West Peninsula of Trinidad to look forward to, and further infrastructure-led exploration at Weg Naar Zee in Suriname.”

Quick facts: Bahamas Petroleum Company PLC

Price: 2.85 GBX

LSE:BPC
Market: LSE
Market Cap: £115.56 m
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