Member Info for Bohemia

The £2m at 0.8p has been unconditional since the 16th Feb and was unconditionally meant to be settled on 28th Feb. The agreements can be RNS’d but unless the board is going to hold Bizzell to account (rather than renegotiating and giving them a board seat), the commitments are meaningless.

Now apparently they are going to put £2m in even if S2 fails. Fool me once....

(And the original terms for the £3m were 2.5p, not 0.8p. 0.35p is the second capitulation.)

Let me get the disclosure out of the way: I am short and will gain from the share price falling further. But only beer money.

The company have again overcomplicated their presentation of the finances, which I can only conclude is a deliberate attempt to gloss up the picture. It is totally shameless to again quote the cash position - c$10m - as a figure including the £2m CCN money which has not turned up and which is now conditional on the Open Offer reaching £5m. Moreover it's now not coming until June, the end of S2 drilling, and if you believe it will arrive if the well fails (like the £7m meant to come after P1) you need your head tested.

So the cash position is actually $7m. They owe $4m to LO and $14m for P1. Apparently the latter could be reduced - please don't actually find yourself depending on that being the case. So the company is $11m short of funding, perhaps let's say $7-11m. The Open Offer of $9.6m looks inadequate to me.

The Open Offer is not underwritten. Without question the company will have tried and failed to raise the money from IIs (as this is cheaper and quicker: hence that's what's always happens with perhaps a Primary Bid element), or to have IIs underwrite the OO. Therefore it is fanciful to think IIs will take a subsequent placing at 0.35p, particular with the SP now lower.

The OO is therefore a potential black hole. Is anyone going to tell me that a very high percentage of PIs will take up their entitlement shares, or that many will apply for excess shares (increase their investment by more than 40%) when the offer is barely any discount? The problem is that if you subscribe for shares and the total raised is only say £4.8m of the £6.9m (70%), what happens? Well the company tells you the total raised, takes your money, and is still insolvent - short of the funds it needs to pay its bills. The conditional £2m CCN money doesn't arrive either. Without underwriting, you have no guarantee your money forms part of a complete/successful raise and rather than recapitalising the company to move forward, your £ goes to LO/Stena.

If you are a shareholder planning to sit this out (pass on the OO but stay in) you should in fact sell 40% of your holding for any price over 0.35p and then take up your entitlement. This gives you a small gain and increases the chance the company fills the Open Offer.

Personally I am staying short. I don't believe the raise will be successful, a subsequent placing won't be at 0.35p and the company is at best, still in a parlous state. Quite easy to see a complete failure here.

CCN’s £2m commitment hasn’t shown up, the conversion reset to 0.35p (why?), $14m further costs on P1 and $4m to LO. Seriously, don’t give this “management” any more of your money.

I will accept there might be more to the well results. However I don’t believe a farm-out is around the corner, imminent enough to be a solution for their short term finances. These processes take time - I would think six months minimum. A partner would also want to see the court case resolved and understand the politics, especially if you think the partner would upfront pay substantial cash to BPC. I think just a carry, therefore limited commitment from the partner until a new well is permitted, is much more likely to be the form of any farm-in.

But even this option can’t progress beyond the finances. If BPC want a renewal they need to pay the licence rent ($0.4m I think in the past) and maybe a signature fee. If they can’t convince new investors of the Bahamas’ value (likely before any farm out occurs) they won’t be getting refinanced in my opinion and therefore they won’t be getting the renewal in June.

I also think there is a chance that, if the government want to wash their hands of BPC and deny the renewal, they could make an argument BPC didn’t correctly budget and finance the required drill with adequate contingency.

I keep seeing the attitude that, even if the financing position needs to be fixed and the news is difficult, the downside to the share price is limited and it will then move higher to 1p and beyond. On the other hand, I’ve said that I am short BPC at 0.45 so clearly I don’t agree with that view. I’ve sort of held off posting my reasons - I’m not really wanting to be a “deramper” or be responsible for anyone’s positioning, but I think the true position of the company will be clearer on Monday so it makes no difference now. Either I’ll be right or hold up my hands I was incorrect.

I’ve stated what I think is the company’s funding position: they’ve raised $55m since 2019 and their spending is $45m on P1, $7m on G&A and $12m on other corporate/merger/legal costs. So in order to settle all their bills they need another $9m. Then they need $4m for 2021 G&A . I don’t believe production covers this, and in fact I can see the $3m cashflow being used up on infill/workovers to sustain production and other costs I keep finding (they owe Touchstone $200k and they have decomm to do in Spain probably in the 1oos of $k). And they need $3m for S2, and they may need $3m to settle up with LO.

All In I think they need a fundraise of $15-20m, and this will be exceptionally challenging. I don’t think it can be less that that: no-one is going to give them money that only pays off the debts but doesn’t give them funding to move forward. $20m would be difficult for a £26m company. In one sense, IIs will buy in a discounted placing if they think it’s enough of a discount to sell the shares on to others (PIs) for a quick gain - but $20m would be a lot to shift to the current LTHs. Otherwise taking the placing is a fundamental investment, so the question is - is 0.3p or even 0.1p attractive?

At 0.3p, with $20m new money and the £5m of debt, the entry point for new money would be enterprise value of $47m. At 0.1p it would $34m. Are these valuations attractive enough for IIs to get onboard with a management who’ve been too willing to issue shares like confetti (as went AAOG, UKOG), have little experience themselves with Saffron and their T&T assets, and just went $10m over budget on P1?

I believe in a harsh but bottom-line valuation, the existing business is nigh on worthless. Low output wells that just about keep the lights on. What would you pay for any business that has a view cash-positive assets but burns all that cash keeping the head office lights on. I also don’t think IIs will put any value on the Bahamas - rather just want that sitting there as upside: I’m afraid I think P1 was essentially a worthless exercise - historic spend is no guide to the value of an asset and we know how management have talked up a farm-out in the past.

Basically the value of the business is Saffron: is that worth $47m or $34m. To me it’s debatable with S2 needing to come good. So there it is. If I’m right about the cash I’m unconvinced they can solve the shortfall at any s

"So average for the calculated source at 100% and migration at 30% = 65%"

When you calculate the probablity of two things both happening, you multiply their %s, not average them. If West Ham have a 50% chance of finishing 4th and thereafer a 1% chance of winning the Champions League, actually finishing fourth (raising qualification to 100%) wouldn't make there probability of winning next year's CL 50.5%.

If you want to use 100% for source and 30% for migration, the maximum compounded CoS is 30%.

Moreover the other 100%s you use are not reasonable. We have (presumably) seen that there are reservoir and seal in the Aptian. You could say that the "play probablities" for this are therefore 1.0 and 1.0 instead of 0.9 and 0.8. But, just like P1's risks were slightly higher than the play overall, no individual prospect will have 1.0 like the play: there is always the risk that at a different structure the same reservoir sands are not adequately developed or the trap is breached. But even that analysis is completely overshadowed if they next target Jurassic horizons: they haven't done anything to raise the probablities of seal and reservoir in the Jurassic.

Well, I feel entitled to respond to this:

"Its interesting that the negative crew here put themselves in the same category as you in evaluation ability and date review skills, intelligence, understanding of BPC and its position.

They do not provide logical source based and objective counter points, just one liner negatives or long winded justifications for a negative stance with no evidence, just supposition and opinion. "

I have made two main points in the last few days and I am astonished that no-one positive on the company, with supposedly tens of thousands at risk, has looked at the argument made and offered a reasoned arguement. If you'd be willing, I'm all ears.

i) The company cannot possibly has any money left. They have detailed every $ raised, and it totals about $55m (RNSs 12Jan and 16Feb). There spend has been $45m drilling, $12m merger/legal/financial costs and about $7m G&A (RNSs 12Jan and 24Mar); totalling $64m for a $9m shortfall.

ii) The company is not profitable on current production. Even at the current oil price, Auctus's note has then netting back about $19/bbl after discounts for their crude, lifting costs and royalties. At 450b/d that's $3m a year from production, which doesn't cover their G&A of $4m.

My belief is that they therefore need something like $15m fresh money to cover the shortfall, drill S2 and fund this year's G&A with modest contigency. And potentially nearer $20m if they need to make a sizeable payment to LO.

I don’t know where you get your $40 netback but Auctus have, that at $57 Brent, they sell their crude for $49. Lifting costs $18, royalties $11, netback $19.

That would $3m from 450b/d before G&A.

My interpretation is closer to SvS’s. I believe that the existing fields net back $3m at 450-500b/d, but this is before the central/G&A costs of $4m (office, employees and corporate). In other words BPC is currently burning $1m pa before capex.

It does not make sense to think current production is covering the G&A with $3m to spare. That would imply production is netting back $7m in total. How could 80 old wells totalling 500b/d netback $7m when 1 fresh S2 at 300b/d only nets back $3m.

My key point would be that if you think the loan is a useful facility for the company and a positive signal for the share price, i think you've missed the lesson of how it failed to deliver for investors during the drilling of P1. At worst, it was a false flag waived for two years to make it look like the well was better funded than it really was, and was then rewritten to give the Aussies mates an unreasonably good call option on the drilling, at the expense of shareholders.

As to your other opinions:

- No, I don't think BC can "borrow" from the Stena money if they need to pay LO. I have already argued I think they raised $56m maximum in total, and have spent (but not yet paid) $64m: $45m drilling, $7m G&G/admin, $12m corporate/legal/financing costs. As such, the disputed $7m is neither here nor there. Stena has no reason to agree to to slow payment. BPC need to resolve its full financing now, in April, before it can drill S2. No-one is going to drill a $3m well for them without clear funding in place: not money Stena might take them to court for.
- I think it improbable they owe LO so little - a number you base on a supposed floor price in the LO arrangement. I doubt would have written an investment with a 15% return but potential for a 100% loss. BPC would have had to disclose such a key detail, and they would have wanted to as well. There is a slight chance LO want to forget the whole thing and let the reconciliation quietly go away, but that's unlikely (that would be their investors taking a loss for the sake of the investment managers' reputation.
- Your comment that BPC can exercise "its option on the £3.5m Australian deal" is simply inaccurate: it's not BPC's option They can signal to the lenders they'd like the money, and then it's the lenders choice if another £3.5m with 0.8p conversion makes sense to them (or if they'd like to renegotiate again, or pass).

It won't surprise you I have no shares. I took a small short out at 0.45 after the $45m well cost RNS as this cemented my view they can't have enough money left. It's small: I'll make or lose a few hundred quid in the next 2-4 weeks, but after following the saga with interest I might as well have a horse in the race.

Here are some less wonderful features of the Australian loan:

- It is not in BPC’s discretion to “borrow”. The Lenders may “subscribe”.

- This is the same money that was “available” in January, but never came good. £20m was in place but only £3m every appeared on the original terms.

- In exchange for the £3m (which was never, remember, gambled on the P1 result: they are still owed the money back with full security on all the co’s assets), the lenders got the option to invest at least £3.5m in BPC at 2.5p conversion AFTER the well result. That’s right: for extending a £3m first ranked loan, they got the option to put in £3.5m if and only if the SP had jumped to 10p+, for an instant £10m profit (which would have come at the dilution to the rest of you).

- Because the £20m never arrived, the company had to go with the LO deal. Thanks for that!

- Of course, we saw there was evidently no obligation on them to put in the £3.5m or any other rest of the £20m in the event of the P1 failure. They put in £2m, which in fact surprised me, but of course the price of that was the conversion price being moved down to 0.8p, on the £2m AND on the previous £3m: their call option was repriced/bailed-out.

- Bear that in mind if you take confidence from the 0.8p conversion price, as some sort of show of confidence. If they lend more, or if there is another dilution event, don’t be surprised if the 0.8p is reset downwards again.

- In the event SP or EU leave, they have the right to demand immediate repayment. Nice poison pill there. They can convert anytime, not just in 2023, but don’t be impressed they aren’t doing so with the price below 0.8p: that just shows they aren’t crazy.

Why Stena? There would multiple contractors working on the rig, as evidenced by the rig contract only giving Stena $8-11m of the total expenditure. I doubt any contractor is liable to BPC for an unfortunate event: they’d have to be shown to have been negligent. Potter described it as “part of the industry we’re in”.

I struggle to believe this is a decent excuse for the cost overrun. The drilling was completed well within the 45-60 estimate - i.e. the sidetracking was done working the budget drilling time - so where did the $7m go?

They don’t need all the T&T funding now, but you would want them to be able to fund $3m for S2.

The costs I listed are all before S2: all their funding IMO would be eaten up by $7m G&G, $12m corporate costs and $38m P1 costs. That would leave them with $0 for S2.

If that was it, I’d imagine they can find/ borrow or partner $3m for S2. But trying to do that when they have a dispute for $7m more P2 costs, £5m debt and a potential payment to LO?

“5. $7m is in dispute and BPC could use most of the cash until the issue is resolved in a few months.”

Yesterday I calculated that BPC had pulled together total funding of $57m and spent G&G of $7m and corporate/legal costs of $12m, leaving $38m. Please do the calculation yourself and let me know if you disagree.

That means that even if they successfully hold back the $7m, the other well costs of $35m plus $3m leave them out of cash once the bills are paid. The $7m is not there to pay for T&T unless they fail to pay a whole load more of their bills. And who will lend them a few million for drilling, or do work for them based on the $250k/month, when it might get taken away by the $7m dispute. And then there’s the LO reconciliation.

Won't make me popular but to me the RNS has finally confirmed how back things are. A $10m overrun of the maximum budget+contingency is a nightmare for a cash-strapped explorer. We finally have the bulk of the cash numbers to see the picture:
Going back to the 1st Dec RNS thay had raised $52m, including $15m+$5m from LO amd the first $4m from the CCNs. Since then, the only new cash is the further £2m CCNS and perhaps a little CERL cashflow: call it $55m.
Their expediture has been $45m for P1, $7m G&G (from the $11m 3yr figure) and $12m other costs. That is $64m. The fact they have $13m left doesn't mean they have money for T&T: it just means the bills are outstanding.
Their minimum stated shortfall ($25m vs $13m cash) basically aligns to this. The $25m may or may not include $3m for S2, but either way, they don't have the actual cash for S2.
Lesser points:
i) they may still owe LO $3-4m for the Put tranche
ii) it seems rather dodgy the $13m includes "unconditionally commited cash". This must be the £2m CCN money I included above. This was meant to be paid on 28th Feb, but apparently wasn't. It's now 24th March: seems very strange they haven't said whether it's been paid. Note that the important date for the CCNs (a further $14m) is the 16th April, same day as the LO reconciliation.
BPC need to sort out their funding by 16th April. It's hard to see the CCNs putting in $14m without money from elsewhere. There money on it's own would pretty much only clear BPC's bills and not fund their onward G&G and S2: who'd invest in a company with no ability to invest. I don't see any other option but a sizable equity raise.

Nobody took shares at 0.8p. Only the CLN holders accepted their conversion price being moved to 0.8p, which is a gift compared to the 2.5p they originally signed-up for. If they convert their original £3m, they now get 375m shares instead of 120m (and at present a 25% loss instead of 76%). But of course unlike shareholders they also have the option to wait for £3m to be paid back in cash with first security over all the assets.

Icemax, first off this was an argument as to whether BPC could be short of cash if P1 doesn’t come in, which I’m sure you’ll agree is a scenario where the company would want to see the CCN cash received (2.5p dilution would seem a good way to fund T&T).

Yes if the result is positive you could argue they might not want to take this dilution. But last we were told the conditions were meant to be met by 15th Jan and the next £5m was expected mid January. If this has changed, I think they ought to announce it just like the deadline for the Call was amended. It also didn’t look to me that the company could just decide not to issue the CCNs: otherwise being able to scale them back by specifically 50% is redundant. I read it that by committing to the CCNs and putting in the first £3m, the Subscriber now has the right to put more money in - not at BPC’s discretion.

OK the average is about 2.20 since mid December, better than I thought. But they still have more to shift it they want to clear the $15m before the result and the price is now 2.06. I would still think the average will be nearer 2.1 than 2.3, and the reconciliation over $1m.

But the bigger concern is the lack of news on the CCNs.

https://www.investegate.co.uk/bahamas-petroleum-co--bpc-/rns/funding-strategy--reconciliation---put-option/202101120700073153L/

At the last count they’d received $52 million. And let’s say spent $12m other legal/merger costs and $7m G&G (of the 3 year $11m figure). So that leaves $33m which is not enough for the top end P1 estimate.

I also reckon they owe LO $1.5m if the shares are sold at 2.1p average. If LO hold a third through the results and it were a duster, if they dump those at 1p they’re owed more like $4m.

They have other potential sources but the $5m Call is at LO’s discretion not the company’s, and the remaining $15m from the convertible notes seems to be late and has gone very quiet????

“ If it’s a duster CERP Will bring the share price back up to 2p and just a few months I guess ...”

Unless they go bust - run substantially short of money - of course.