BPC pre-spud price discussion (updated 18/8/20)18 Aug 2020 12:19
How much will the BPC share price be prior to the spud results announcement? We need to deal in market cap, and work backwards...
As a base line, firstly refer to various opinions and analysis at https://www.proactiveinvestors.co.uk/LON:BPC/Bahamas-Petroleum-Company-PLC/timeline/all presented until March 2020. At the time, 2.1b BPC shares were in play and of lesser importance PoO was around $50/b. In February, Shore Capital predicted the possibility of 8p (£170m market cap). Today there are c3.5b shares, however we need to add the additional market cap based on CERP assets. For simplicity I will use the conservative value of £20m. 170m+20m = £190m. This works out at c5.5p/share.
What will affect the based figure of 5.5p (and market cap of £190m) are the following factors:
1. Can BPC do a JV without substantially issuing more shares? Ie, could it be on asset farm-in terms, where the JV’s ROI could be huge based on a percentage of the oil found? Stena were offered 10% for $10m.
2. Will a major want to pay to play? They will need to pay a large chunk of the $100m exploration back costs. This can be used to acquire other assets or invest in current CERP ones and Uruguay.
3. Can BPC issue a bond/get a loan secured on its assets?
4. A mixture of 1 and 3?
5. Will there be any good news relating to CERP, which if still a standalone company would have increased its market cap higher than £20m? Remember in Sept 2019 it had a market cap of £50m
All said and done, everything above will be based on investors’ risk appetite at the time, which I believe will be substantial and be influenced by two additional MASSIVE upside opportunity factors:
(a) If Persv-1 is shown to potentially hold 770m -1.44bboe in just ONE structure a few weeks after Spud, experts have predicted a market cap of approx. $1/barrel. This is without potentially c1bboe more from the same structure next door.
(b) A few MONTHS after spud, the quality of the oil will have been independently analysed and confirmation of the type and volume with 90% accuracy. The market cap at that point will reflect these results, taking into account ZERO Bahamas/IOM corporation tax, 25% royalties to the BGov and xx% to the JV farm-in partner (if applicable). If positive, we are looking at SUBSTANTIALLY more than $1 market cap per 1/barrel and a possible farm-out to a major. However this will be dependent on PoO. Even if PoO is at $40-45/b at the time, the majors and our BoD know full well that mother nature will store this wealth for us safely and free of charge without having to pay punitive daily contango storage.
Bottom line: A key factor which will drive the price up pre-spud whether 5p, 6p or more is there are relatively few shares based on market cap with a massive jackpot as described above. I believe SP will be a ‘lot more’ than its current 2p price, however only you can decide.
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