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JTH, regards Seadrill contract I think Seadrill are having company stability problems at the moment so maybe this is why.
Don't worry about the licence length. It will be extended well past the current end date to allow sufficient time for the drill and and complications. The licence isn't genuinely a problem.
I'm satisfied that funding for p1 is sorted. Drill ship is in the bag.
The only real concern is one thst I share with Jim... Namely this merger (actually a takeover). I'm in favour of it but like Jim I'd prefer more info and I'm only in favour because I want to believe that it's part of something much bigger that we are yet to learn about. Very frustrating.
Am I correct or incorrect in assimilating that the force majeure only comes to pass on midnight of the 31st December 2020? If it does, is it not irrelevant until we know the drill is going to overshoot this deadline?
Potter is on record as saying that the Co were 3 weeks away from spud. From official RNS releases this was never the case. In my opinion he would only say this if he thought that it was so. Were we 3 weeks from spud? Was there a major? At the time it looked like Exxon gazumped us on the West Saturn. Were they twisting our arm, or in light of Covid, did they do us a huge favour? I cannot imagine BPC would have fared as well until now if we were paying a rig contract whilst the rig was idle.
Going forward P1 must be drilled, by hook or by crook. The Co know this, the GOCB know this and so does the major / supermajor. Who's paying? I believe there may be a different answer to that question, dependant on the positive / negative outcome of the merger.
The force majeure doesn't work in the way Jim has suggested re the BG. The relevance of the clause is to ensure that BPC are given an extension. The delay in announcing an extension period now is entirely understandable because no one knows just yet how covid will continue to play out and they are still well within the licence period. The length of the extension will be dictated by the overall impact of the virus. There may be things that genuinely worry people but getting the extension under the force majeure clause shouldn't be one.
How sure are you PoC that the force majeure doesn’t apply both ways? Are you 100% sure, are you privy to the details of the contract?
Linton, the question was for LTH Novice who seems to make out he’s been around a while and is quite knowledgeable in all things BPC.
P.S. the company have made a statement some time back on which acreage within the license areas it would give up.
Just to add, this is standard industry practice.
Linton - Some baffling arguments from people not in the know.
Thank goodness you answered jimintheknow, or there will be umpteen posts about how bad it is for BPC having to give 50% of the licence, as if that means giving up 50% of the oil. As you say BPC will give up areas of the licence that geologically do not have the structures that contain oil.
In this case, force majeure does not mean that the Bahamas Government can decalre a force majeure themselves, as it's not affecting them. The party that is directly affected in carry out it's operations and fulfilling it's obligations, is BPC, hence under the terms of the licences, can declare a force majeure. Therefore it does not give the right to the Bahamas Government to not grant an extension. As I've said, if they did not grant an extension the Bahamas Government would be liable to pay BPC compensation, c$100m. There is nothing to debate about it. Dyor.
I believe it’s 50 % Jim.
You would perhaps, give up the 50% away from the Cuban fold and thrust belt that contains multi billion barrel potential.
So it’s not really an issue....
Novice, How much of BPC’s licenses do they have to give up at the end of this term should there be no problems and the license extension be granted?
Wow so the derampers are trying to now already rumours that bpc will lose their license lol lol lol. It’s laughable but predictable. Some people must be really desperate to see the price fall.
The license extension will be given end of. Any suggestions to the contrary are just a load of rubbish. We have just signed a contract with stena, do you really think that would happen without extensions being granted.
PoC, I don’t think you’re getting what I’m saying, I don’t disagree it’s force majeure, it is. I’ll paste the Wikipedia definition for clarification...
Force majeure is a common clause in contracts that essentially frees both parties from liability or obligation when an extraordinary event or circumstance beyond the control of the parties, such as a war, strike, riot, crime, epidemic or an event described by the legal term act of God, prevents one or both parties from fulfilling their obligations under the contract.
Epidemic is a legal basis for a force majeure as per the contract. Therefore the Bahamas Government is legally obliged to grant an extension for the time the epidemic forced the cessation of safe operations. The only matter to be decided is how long. If the Bahamas Government did not live up to it's legal obligations, then they would be sued for damages and asked to repay circa $100m for breach.
In continuation of the force majeure discussion.
I think it puzzles everyone to this day why the Seadrill contract was never formalised and the same could be said for some the important CLN conditions. Surely this can only be because they were going to be given free access to the suspected drillship by a farm in partner?
With this ship now long since gone I think it was a surprise to everyone to see the Stena contract signed and maybe this was done to apply pressure to the Bahamian government in any force majeure decision making process? People close to the company will remember the words of Attorney General Bethal at the time of the last extension stating they had sought legal advice and a decision not to extend would have cost them a lot of money, maybe a force majeure situation could have presented them with an opportunity to walk away this time?
With the mutual fund, a rig contract now signed and a preliminary EA in place it seems unlikely BPC will not be given the extension to drill and evaluate results before opting to renew but we have had so many twists on this road nothing would surprise.
I think Plan A was always P#1 and Uruguayan license but BPC may have got nervous with a force majeure decision not going their way and enacted a Plan B with CERP which wasn’t ideal but it saves their bacon, and preserves the gravy.
To clarify for everyone, an epidemic is included as an unforseeable circumstance for a force majeure in the licences contract.
It is almost unquestionable that a global pandemic isn’t a force majeure event, I don’t think that is up for debate. What is up for debate is what that means to this company.
A force majeure clause normally works equally for both parties in a contract and allows them both to break from a contract without penalty. BPC must therefore confirm the government are happy to continue with BPC with a delay and that they are not inclined to tear up the contract. Which is possible.
BPC are being very choice about their words, as they always are. At the moment I care little about the length of any delay and only whether the Government will continue with BPC.
Good Afternoon and thank you Gents/Ladies for your respective responses.
I agree this would be classed as a FM event and I even agree/admit that I am probably making an issue about nothing (and apologies to all if this is the case) but, conversely it could also be argued (I suggest) that it is easy for it to be confirmed that the BG have acknowledged (as part of those discussions) this is an FM event.
Anyway I'm sure (well maybe 90% sure:-) ) all will be OK and wish everyone a great weekend/future successful investment.
Thank you for your good work therein - very valuable.
Have a nice weekend.
Red - You should give BPC a call. In the AGM voting papers they are offering to set up calls with shareholders to answer any questions... take advantage of it.
I was worried about the licenses expiring and gave them a call back in 2018 and spoke with Ben Proffitt. It was useful at the time.
In regards to Force Majeure.... I personally wouldn't worry. I have seen legal advice on various websites saying that COVID is definitely a trigger for Force Majeure in many contracts... the exact wording of the clause will need to be checked though.
Red: Thanks for keeping us updated. My opinion is the FM event cannot be disputed by the BGov. Furthermore it still exists and as such they can't give an end date. It will be somewhat irrelevant if Stena drill by year end. Now, if they do not drill until 2021 and for some reason which is unfathomable as the Bahamas are in dire need of revenue, the Gov sequestrates the license...
(a) I cannot see legally how the Gov can argue it is NOT an FM in court. The legal system is sound and not a corrupt banana republic. Furthermore, its courts are subject to the Privy Council of the Commonwealth, for appeals.
(b) BPC didn't get environmental approval until Feb 2020 to even be allowed to drill in Bahamanian waters.
(c) Our BPC shares will likely soar based on the damages claim of gazillions!
I'm not worried, however it will be better to get the confirmation sooner rather than later.
I posted the following in June and said I would share if I gained a response. After 4 attempts the reply received yesterday ……. “AIM rules restrict us from providing any detail outside of that which has been provided in our rns of 25 March 2020”.
I am disappointed in this response and while I like to think the BG will not dispute that this is a Force Majeure event it did not seem unreasonable to have that confirmation
14 Jun 2020 09:29 POST (below)
Good Morning Starchild,
Thank you for your posts.
I contacted BPC (early last week) regards licence extension following Force Majeure notification and received a response on Friday.
I was referred to the 25th March RNS but they added....
….."The Company remains in discussions with the Government of The Bahamas as regards the specific period for which the licence term should be extended per the legal provisions within the licence agreement However, as the state of force majeure remains to date, with approx. 3 months having passed since the declaration was made, the Company is confident that the extent of the licence extension shall be sufficient to allow for the execution of Perseverance 1 within the planned timeframe as outlined in our rns of 26 May 2020.
As regards your query on insurance, all corporate insurance coverage remains intact and the Company will activate (incept) the drilling specific insurance cover that it has arranged, referred to in the industry as Well Control Insurance, in advance of the commencement of drilling activities.”
I was not entirely satisfied with the response (perhaps this is just me) because I asked for confirmation that the B/Govt had accepted there was a case of Force Majeure (I believe there is such a case but like to have peace of mind) and e mailed them back. My 'logic' is that while they refer to discussions they did not actually say yes it is accepted and we continue to have dialogue until the time-lines are clearer (i.e. virus gone/controlled).
I just thought I would share and if I get a response I will post again.