BPC.L Regulatory News (BPC)

 4 April 2016

Bahamas Petroleum Company plc

("Bahamas Petroleum" or the "Company")

Compensation and Option Plan revisions

Bahamas Petroleum, the oil and gas exploration company with a significant prospective resource in licences in The Commonwealth of The Bahamas advises that a number of measures relating to Board / Executive compensation and the Company's option plan are to be implemented, as initially announced in the 2015 Final Results released on 21 March 2016.

These measures, are designed to better align the interests of board and senior management with shareholders, and to enable adequate time, through the preservation of cash reserves, for the executive team to deliver the investment required to commence an exploration well in the Company's southern licences.

The Company is singularly focussed on commencing responsible and safe drilling operations as soon as possible. Positive farm-out discussions continue with qualified potential strategic and funding partners. Total cash resources as at 31 December 2015 were US$5.6 million, which the Company considers is sufficient to maintain current operations through the second half of 2017. However, cost management has been, and continues to be, at the heart of the current business strategy, and the Company will continue to actively manage and preserve cash resources during the farm-out transaction process.

Summary of Remuneration Deferrals

From 1 April 2016, the following payment deferrals will take effect:

· 90 per cent. of the Chief Executive Officer (CEO), Simon Potter's compensation will be deferred until a farmout is successfully concluded, to be repaid at that time in a 50 per cent equal mix of cash and shares (calculated on the basis set out below); and

· 50 per cent. of Board fees will be deferred until a farmout is successfully concluded, to be repaid in shares at that time.

The number of shares to be calculated remains on the same basis as the existing 20 per cent. fee deferral agreement for Directors, which has been effective since 1 October 2014, namely that the number of ordinary shares accruing shall be calculated as the value of fees/salary forgone divided by the volume weighted average closing price of the Company shares over each month.

These deferrals are designed to preserve cash, thus supporting the Company's short term balance sheet while the Company pursues a farm-out transaction. In addition to representing a material and immediate fee sacrifice on the part of the Board and senior management, the deferrals will also provide a significant incentive to key members of the executive team to deliver a farm-out transaction in the shortest possible time-frame.

Cancellation and Issue of Share Options

On 4 April 2016 and in the subsequent weeks all existing options or share entitlements will be cancelled, surrendered or are expected to otherwise expire unexercised in accordance with their terms. In aggregate this will mean there are no residual options, thus providing an appropriate opportunity to reset the incentive structure in the Company in line with the Company's current objectives. These will thus be replaced by the issue of, in aggregate, 68.85 million new options to the Board, and existing staff, and explicitly linked to achievement of a farm-out transaction and commencement of an exploration well.

The details are as follows:

· Cancellation of options, all effective immediately:

o Cancellation of all options held by the CEO, Mr Potter (39 million);

o Cancellation of all options held by current Board members (6.5 million); and

o Cancellation of options held by existing staff (750,000).

· Expiry of options on 12 April 2016 in accordance with their terms (assuming they remain unexercised at time of expiry):

o All options held by previous Board members and staff (12.75 million).

· Surrender of share entitlement, effective immediately:

o Surrender of the CEO's currently accrued share entitlement under the existing 20 per cent. fee deferral arrangement 10.185 million.

· Issue of new options:

o Issue of replacement new options to Directors (39 million options to Simon Potter, 2 million options to the Chairman and 4 million options to be shared equally between the remaining Non Executive Directors).

o Issue of new options to staff (23.85 million in aggregate).

· Conditions of all new options:

o Strike price is the higher of 110 per cent. of 30 day VWAP on the date of grant and 110 per cent. of the closing share price on the date of grant.

o The new options are valid for five years, 50 per cent. will vest on conclusion of a successful farmout and 50 per cent. will vest on commencement of the initial exploration well.

Following the above option cancellations, expiries and grants of new options, the total number of share options in issue (as at 12 April 2016) shall be 68,850,000 representing 5.60 per cent. of the current shares in issue. This represents a slight overall net reduction to the total number of options and share entitlements currently in existence.

The described foregoing of 90 per cent. of Mr Potter's salary, as well as a reduction in benefits, pending conclusion of a farmout, and the surrender of share entitlements to date has been undertaken through a series of contractual revisions. During this period of reduced remuneration and benefits, and only prior to a farmout, Mr Potter has a reduced notice period of one month (in the event that Mr Potter serves notice of resignation), however, should this notice be tendered by Mr Potter then all accrued salary, benefits and all share options would be forfeited. Following a successful farmout, all material terms of the previous contractual arrangements, including the notice period, become reinstated.

The entering into of the above revised contractual terms with Mr Potter and the other directors of Bahamas Petroleum are, together, classified as a related party transaction in accordance with Rule 13 of the AIM Rules for Companies. As the contractual terms for all directors are being revised there are no independent directors for the purposes of Rule 13. Strand Hanson Limited, the Company's nominated adviser, considers the terms of the revised contract and the issue to be fair and reasonable in so far as shareholders, as a whole, are concerned.

Bill Schrader, Non-Executive Chairman of Bahamas Petroleum, said:

"We consider that the measures being implemented are important to ensure the Company remains in a position of strength during its next stage. Our objective is to ensure that staff and the executive team are aligned and appropriately incentivised, and provided with the time needed to deliver a farm-in partner that will take the Company into the drilling stage at our highly attractive and technically de-risked project. Whilst necessary and prudent, these measures also shift the focus on remuneration towards an entitlement to company stock, rather than cash, and align management with shareholders. We believe this demonstrates the confidence that your Board and the executive feels in the Company and its world class prospects, and creates an even further alignment with the interests of shareholders."

- Ends -

For further information, please contact:

Notes to editors:

Bahamas Petroleum Company is an oil and gas exploration company with 100 per cent. owned offshore licences exclusively focused on the Commonwealth of The Bahamas. The Company has significant prospective resources, which have been de-risked through both extensive 2D and 3D seismic. The four Southern Licences, with a newly agreed well obligation date of April 2017, run until 2Q 2018 when the licences may be renewed a further two times. The Company is intent on delivering safe and environmentally responsible exploration.

www.bpcplc.com