Columbus Energy Executive Chairman Leo Koot is convinced Columbus Energy's merger with Bahamas Petroleum #BPC is in the best interests of #CERP shareholders. "I understand its come as surprise, we've kept it well under wraps, but it allows us to weather the Covid storm and also to create shareholder value. I do believe its a clever, intelligent deal."
So, were Columbus short of financial firepower I asked Leo? "We have an exciting portfolio which needs cash. We can go it alone and go slow, and in this oil price environment your free flow of cash is obviously reduced. We looked at many options and opportunities, thought this through very carefully, and we think this is the best one, and that's why we did it."
Leo explains that the board opted for a paper deal in order to allow shareholders to make their own decision and give them the freedom to sell if this isn't for them. Secondly, he believes it is best to preserve cash for the business and to grow the business with that cash rather than effectively say "we are giving up" because "that's the last thing we are going to do".
In essence, Leo thinks the BPC Perseverance well is a great opportunity. "They have great seismic which shows multiple massive structures and is 90 kilometres long - its massive. What I see in offset wells is that there are hydrocarbons in the system, there have been shows of gas and oil, there are reservoirs and there are traps all over the place." "When we did the pre-drills for Saffron there was 11 million, with Perseverance there is 700 million. So this gives Columbus shareholders an opportunity to be part of something much bigger.
The scale of the project is so tantalising that it justifies the risk profile." "I'm honourered and flattered by shareholders loyalty to me and the company, and that's mutual. I will never do a runner and look after my own interests. However we are aligned as I probably will end with 1% of the merged entity, which is lot of my personal capital." Will Perseverence require a farm-in given it is such a large project? "Possibly. I'm convinced that drilling that well is the turning point for our shareholders. Eventually I think that Big Oil is going to develop this given the size and scale." Next week we interview Tony Hawkins the Columbus energy CEO and get his take on the merger.