(Alliance News) - Bahamas Petroleum Co PLC said Thursday it intends to raise GBP7 million in equity and has agreed a subscription for GBP10.3 million in convertible notes.
The open offer is priced at 2.0 pence per share. Shares in the Caribbean-focused oil company were 14% lower in London in morning trade at 1.91p each.
Bahamas Petroleum said the open offer will allow the company to meet its financing needs. If the open offer is not taken up by shareholders, Bahamas has appointed Shore Capital to place the unsubscribed shares with institutional investors, at the same price.
Bahamas Petroleum also has entered into a subscription agreement for the previously agreed and approved GBP10.3 million conditional convertible loan note facility. The subscription is be Australian-domiciled investment firms acting on behalf of interests associated with Stephen Bizzell and Mark Carnegie.
Bahamas said Bizzell and Carnegie "each have a track record of successful investment in a number of early-stage oil and gas exploration businesses around the world".
The convertible notes have a 3-year term, with a 12% coupon per annum, and can be converted into Bahamas Petroleum shares at 2.5p per share.
Bahamas Petroleum noted the subscription agreement remains conditional on a number of targets being met, but the company said a number of these conditions are "necessary prerequisites" to drilling commencing, so is "confident" all the conditions will be met.
Bahamas Petroleum said the open offer and conditional convertible notes will raise a combined USD21 million - which exceeds the lower-end estimates for the cost of the company's exploration well.
It expects the cost to meet its drilling needs to be between USD20 million and USD25 million, with the final cost dependent on the pace of drilling and the final drilled depth.
The initial exploration well - set to be drilled offshore in the Bahamas - is set to cost between USD25 million and USD30 million, and less than USD50 million in total if the company embarks on a concurrent two-well campaign. This is far below previous estimate of between USD60 million and USD80 million for just one well.
"The company has a clear and unambiguous obligation under its licences to drill an initial exploration well in the Bahamas during 2020. Discharge of this obligation will then allow the company to enter the next exploration period, running for a further three years, and in the event of commerciality seek a 30-year production lease that would allow for a commercial development of any discovered reserves," Bahamas Petroleum explained.
Chief Executive Officer Simon Potter added: "I am pleased to advise shareholders of continued progress toward drilling an initial exploration well in the Bahamas during 2020. A farm-out remains our preferred funding option, and constructive discussions continue."
Potter continued: "At the same time, we are moving forward with additional components of a balanced funding strategy, so that we can deliver on drilling regardless of the outcome of these discussions."
Bahamas Petroleum set out a drilling schedule for the exploration well, which would see initial drilling activities begin late in the first quarter of 2020. The company currently has a framework agreement with Seadrill for the provision of a rig during the first half of 2020.
"Given the progress made in relation to our funding strategy, we have notified Seadrill of our desire to receive a rig in late first quarter 2020, and we are now working collaboratively with Seadrill on both finalising the long-form rig contract and preparing for drilling," Potter added.
By Paul McGowan; paulmcgowan@alliancenews.com
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