BPC.L Regulatory News (BPC)

15 April 2013

Bahamas Petroleum Company plc

("Bahamas Petroleum", "BPC" or the "Company")

Final Results for the year ended 31 December 2012

Bahamas Petroleum Company (LSE: BPC), the oil and gas exploration company with licences in The Commonwealth of The Bahamas, is pleased to announce its final results for the year ended 31 December 2012. 

Highlights:

·; Post period end, mandate to undertake exploration drilling has been granted to establish commercial viability ahead of referendum process on the future of oil development

·; Significant interest expressed by numerous potential farm-in partners with discussions given further impetus by political clarity on referendum; process is live, active and on-going

·; Letter received from Minister of the Environment in September 2012 confirming the good standing of the Company's licences

·; Significant progress on 3D seismic PSDM data interpretation enhancing subsurface understanding, increasing confidence on range of prospectivity and overall de-risking of assets; allowed specific mapping of detailed prospects over multiple horizons and reinforced primary target identification

·; Initial FastTrack 3D results sufficiently encouraging for BPC to proceed with an initial front end engineering design ("FEED") to construct a well plan for the drilling of a 22,500 feet deep exploration well estimated to take up to 120 days to drill and log at an anticipated cost of $100-120 million

·; Continuing to progress listing of Bahamian Depository Receipts on Bahamas International Stock Exchange ("BISX") with requisite approvals being sought

·; Cash position remains robust at over $21 million at 31 December 2012, enhanced by cost-reductions and conservative cash management

·; Appointment of Bahamian resident Ross McDonald as non-Executive Director

·; Environmental Impact Assessment released to the public by Bahamas Environmental, Science and Technology (BEST) Commission. Significant advancement made towards an Environmental Management Plan, Oil Spill Contingency Plan and Emergency Response Plan as prerequisites to drilling with Government to produce strengthened and modernised regulations

·; Joined the Oil Spill Response Group (previously Clean Caribbean Americas Association) which places a significant amount of equipment at the disposal of the Company

Simon Potter, Chief Executive of Bahamas Petroleum Company, said:

"2012 was a busy year for Bahamas Petroleum which recently culminated in significant progress for the Company. We have worked relentlessly to progress towards our ultimate goal of drilling an exploration well to evaluate the scale of hydrocarbon resources.

"Last year saw the election of a new Government in The Bahamas which subsequently provided clarity on the good standing of the Company's licences and our compliance with all legislation, regulations and licence requirements. 2013 has already got off to an exciting start with the Government confirming that, following adoption of revised environmental regulations by parliament, Bahamas Petroleum can undertake exploratory drilling prior to a referendum process, which will only be held once commercial hydrocarbon reserves have been established. This clarification on the referendum will assist the Company with its various discussions that are taking place with potential farm-in partners.

"Over the past year, we have been actively de-risking potential well locations and commenced initial planning for the start of drilling, notably by tying the extensive in-house core, chippings and log dataset to interpretation of the newly available, fully processed 3D data volumes. This work not only improved our understanding of the geology and thus detailed prospectivity but also provided us with a sufficient level of confidence to proceed with a FEED plan which provided an initial well design and identified long lead items and schedule for the drilling of an exploration well.

"Our focus is now firmly on developing this fresh political mandate into progress with potential farm-in partners and thus drilling preparations over the next 12-18 months. That drilling will proceed under strengthened and modernised regulations is to be welcomed as this will provide the Government, as well as the people of the Bahamas, sound assurance of a solid environmental and safety framework consistent with international best practices. We are closer than ever to realising our goal of exploring the hydrocarbon potential of the Bahamas and look forward to the near-term future with excitement and confidence."

The full audited financial statements are available to view on the Company's website www.bpcplc.com.

For any further enquiries:

Chairman's report

The past year has seen Bahamas Petroleum Company move closer to its goal of fully evaluating the resource potential of its assets in The Bahamas. The Company has continued to shift its operating focus more heavily towards The Bahamas - stream-lining the company structure, moving to a new office, engaging new employees and contractors, appointing new Directors from The Bahamas, doggedly pursuing a local listing on The Bahamas International Stock Exchange ("BISX") while increasing the integrity of local governance, embedding new internal processes and seeking to fulfil the mandate, indeed the obligation it has, to explore through drilling. The year has not been without difficult and frustrating delays. However I commend the determination and persistence of our staff.

2012 saw the Company having to navigate its way through the ever-changing political landscape of The Bahamas while the country held a General Election. This process reached a conclusion with the opposition PLP being returned to power in this 'Westminster" style parliament, after a five-year absence and with a landslide majority. Often during the process the subject of oil & gas exploration, its potential impact on the environment and the position of Bahamas Petroleum Company became heavily politicised notwithstanding the fact that none of these topics featured in either of the leading parties' election manifestos. Historical events, current industry practices and the future mandate for drilling became topics for hot debate in the weeks preceding the election.

In the months following the election a lack of clarity over the Government's intentions to hold a referendum on oil & gas exploration led to uncertainty over the Group's operational timeframes. The recent announcement by the Government that a referendum would only be held once commercial reserves had been established, coupled with confirmation in the year by the Government of the Group's compliance with the licence terms, legislation and regulations, has acted to restore our mandate to drill which is now contingent only on the adoption of imminent environmental regulations by the Bahamian parliament. The Company is currently working with the Government to quantify a revised deadline for drilling obligations under the licence terms, and we will update shareholders as and when appropriate.

Over the last six years the Company has worked hard to form an appropriately professional working relationship with the Government and people of The Bahamas regardless of which political party has been in power. As a result the Board is confident that the Company's strengthened "licence to operate" and its significant investment in the country, which currently stands at more than $50 million, put it in a strong position to progress its future work program at a pace more in keeping with shareholder expectations.

During the last year the Company completed the processing of 3D seismic data acquired during the second half of 2011 and commenced the process of interpreting this data to learn more about the geological characteristics of the southern licence areas. This process, now much further advanced in-house than envisaged, has been critical in continually de-risking our prospects, leveraging interest from potential partners and informing parameters critical to the design of the safest well plan possible whilst ensuring the greatest chance of a successful hydrocarbon find.

The Company has put in place additional policies and procedures to further strengthen its already sound corporate governance position. Furthermore, the Company has deepened its compliance and assurance experience in the year through the appointment of Ross McDonald to the Board and looks forward to enhancing its governance structure through further Board expansion and more advanced systems implementation as we gain clearer sight of our planned drilling schedule and attendant corporate development. The Company will continue to strive for best in class performance in this regard.

As noted above, during the year the Government has advanced plans to revise and upgrade environmental regulations designed to set the framework for exploration drilling within Bahamian waters, a prerequisite before any such drilling activity may take place. The Company welcomes all these developments as a clear sign of the Government's commitment to proceed recognising the highest international industry standards, a principal that we wholeheartedly share. In the event that our exploration program yields a discovery of commercial reserves of hydrocarbons, the Company will welcome the opportunity for public consultation and debate on the creation of an industry as potentially significant to the people of The Bahamas as oil & gas extraction. Central to this process of public consultation will be the clear definition of who bears the costs and risk versus the level of potential benefits to the people of The Bahamas, of this and future generations.

For over 25 years no other company has shown the interest, insight nor the commitment of BPC in bringing to the attention of the Government, at no financial risk or cost to it or its people, the potential that may reside in Bahamian waters. The Company will continue to emphasise the direct benefits of Government royalty income from the very first day, indeed the first barrel of production. This government income is modelled at the level in excess of $20 billion from a 1 billion barrel discovery, whilst it is the oil company that bears the entire cost and financing of development and operations, as well as the risk that production is sustained over time as projected. It is also clear that the creation of such an industry will have multiple additional benefits, through employment, infrastructure investment, direct foreign investment and the development of associated industries.

In addition, we intend to provide Bahamians with the opportunity to benefit on an individual level through participation in the equity ownership of the Company. To this end we have engaged Royal Fidelity Merchant Bank and Trust to deliver a Bahamian Depository Receipt program, which has been progressed through the year and on which we hope to provide greater detail in the near future. In this way we hope to further our goal of closer integration of the Company into Bahamian society by welcoming any citizens with an appetite for investment onto our shareholder register.

As mentioned above, the past year has seen further change to the composition of the Board of Directors as we welcomed Ross McDonald as a director of the Company. Ross brings with him a wealth of business experience in The Bahamas with a long career in the country's banking sector. Ross's appointment both augments the breadth and depth of the Company's experience and skills, particularly in the area of corporate governance, and allows us to further our commitment to becoming a more indigenous Bahamian company.

During the year the Company also saw the departure of Dursley Stott from the Board, who had served for over two years and had contributed a great deal to the Company during this formative period, and for whose efforts the Board and I are grateful. Post balance sheet, Paul Gucwa elected not to renew his contract to pursue faster paced opportunities where his skills can add the most value given the Company's shift from early stage exploration activities to drilling. I would like to thank Paul for his help and expertise in significantly supervising work aimed at de-risking the drilling prospects.

I would like to express my gratitude to my fellow Directors as well as the Company's staff for their considerable efforts over the last year in preparing the Company for the next stage in its development.

Finally, I would like to thank our shareholders for continuing their patient support of the Company through what has been a challenging year. The Board and I are as confident as ever about the future of our Company and we look forward to advancing our opportunities for shareholder value creation.

Yours sincerely,

Adrian Collins

Non-Executive Chairman

12 April 2013Chief Executive Officer's report

2012 was a year of hard work for the Company which resulted in significant progress on the technical aspects of the business with considerable further de-risking of prospectivity within its southern licences. This is based upon interpretation of the pre stack depth migrated ('PSDM') processed data volume that superseded the previously announced FastTrack data interpretation. Matching this enhanced dataset with existing historical well data only available through the Company data room has given us increased confidence of prospectivity and further reduced risk.

The corporate cash position remains strong whilst the process to seek a funding partner continues. Proactive cost management has ensured that the cash at hand is sufficient to manage the needs of the business for several years.

This last year has seen further delays to our exploration drilling program plans with the continued vagueness concerning a moratorium on offshore drilling, which was enacted by the previous Government, being exacerbated by the new Government's statements that the future of oil & gas exploration would be the subject of a referendum held prior to drilling being permitted. This time, however, has not been wasted as we have been able to further de-risk the prospectivity through even more detailed seismic analysis and interpretation in-house. Following a period of uncertainty regarding the intended scope and timing of such a referendum, an update was provided by the Minister of Environment in his announcement on 10 March 2013 that a referendum would only be held once commercial hydrocarbon reserves had been established, thereby providing the Company with a mandate to commence exploration drilling once modernised and strengthened environmental regulations, which we understand to be in an advanced state, are adopted by Parliament. In a letter to the Company of 7 September 2012, the Minister noted the continued compliance of the Company with the Petroleum Act, regulations, and terms and conditions of the licence which, when coupled with acceptance by the Government of licence rental payments in the year, demonstrates the good standing of the Company and the recognition by the Government of our "licence to operate".

This recent clarification of the exploration process and timetable has already re-energised farm-in negotiations which hitherto have suffered from these commercial uncertainties notwithstanding the significant interest expressed by numerous parties over the Company's technical prospects. The farm-in process is live, active and on-going.

The Company's BISX listing, which has also experienced delays arising from these uncertainties, continues to be progressed with the requisite approvals from the Securities Commission and Central Bank being sought. This process will also be significantly assisted by the recent Government clarification on the proposed referendum conditions precedent.

Technical work to date continues to confirm the primary target for drilling to be the lower Aptian and older, deeper section (16 - 18,000 feet and below) where interbedded anhydrites (seal), high porosity/permeability dolomites (reservoir) and source rock are interpreted to exist with a high degree of probability.

Since the PSDM data volume was delivered in August of 2012, delays resolving regulatory/Governmental issues have provided the time to allow a much fuller in-house interpretation of this data volume. These data are of high quality and represent our best image of the subsurface. Using these data the regional control on the stratigraphic framework has been established; a comprehensive seismic facies analysis has been completed; key horizons from the intra Jurassic to the intra Tertiary have been remapped; and the Doubloon Saxon well petrophysics and lithology has been carefully tied into the overall interpretation. This work has advanced understanding of the geologic history and hydrocarbon potential. Specifically the assessed seal risk has been considerably reduced and the hydrocarbon potential increased in the lower stratigraphic horizons of both folds B and C.

With regard to seal risk, the seismic facies mapping has identified an Upper Albian starved basin mudstone that covers fold C and most of fold B. This mudstone would likely be an effective seal and would not have been penetrated in the previously drilled wells. In addition, petrophysical work involving the Doubloon Saxon #1 well logs and a synthetic seismic tie to the 3D gives us a high degree of confidence in identifying anhydrite intervals in the Lower Cretaceous evidenced in this well. These regionally extensive anhydrite beds are now mapped from as shallow as approximately 13,000 feet.

New data has allowed the mapping of intervals below base Aptian with confidence. The Lower Cretaceous/Upper Jurassic section should be considered highly prospective but was never considered in the Ryder Scott Competent Persons Report ("CPR"). Indeed it is this horizon that is now considered the primary target- hence planned drilling depths past 20,000 feet. These units consist of interbedded reservoir (dolomite), seal (anhydrite) and source rock repeating units. The top of this interval ties to the anhydrite interval already seen and mapped in the base of the Doubloon Saxon #1 well from logs, chippings and core where evaporites are interbedded with reservoir quality dolomite - a conclusion also supported by seismic inversion analysis. The detachment surface that accommodates the major thrust faulting is readily mappable and occurs below the base Lower Cretaceous in what we interpret to be the organic rich shales of the Upper Jurassic - this would act as the link between this active source below in the Jurassic and the reservoir rocks above.

In summary this deeper section has the source, faulted migration pathways, reservoir and seal in juxtaposition - all of which point towards potentially successful commercial oil exploration. Most of this deeper section is below the intervals assessed in the CPR released in 2011 and is the section indicated therein as having 'significant unevaluated potential'. As regards the potential resource volumes that are indicated in the CPR additional seal encouragement exists with the identification of the Albian mudstones. As currently mapped, the closure of the overall fold B structure extends some 78 kilometres along strike with a vertical closure of over 850 metres.

The Company derived sufficient confidence from the FastTrack results of the initial seismic interpretation to proceed with an initial front end engineering design ("FEED") to construct a well plan, including a review of the previously drilled wells and specific new plans for the drilling of a 22,500 feet deep exploration well estimated to take up to 120 days to drill and log (P50 case). This target depth and interpretation has been reinforced by the interpretation of the PSDM dataset. Ultimate well cost is highly dependent on spread rate but is still anticipated to be in the $100-$120 million range.

The Company opened a data room for the period of May 2012 and received a number of offers to farm-in to its licences, none of which were accepted, as they were deemed to be heavily discounted due to commercial uncertainties. Discussions remain ongoing with a number of interested parties, but the basis for these discussions has benefited significantly from the renewed clarity provided by the government.

In support of drilling preparedness, the Environmental Impact Assessment ("EIA") submitted in October 2011 has been made a public document open to review, scrutiny and comment by all agencies, though there continues to be no schedule for any public consultation. The Company has continued work on the subsequent and related Environmental Management Plan ("EMP") elements of which are 60% complete. This plan includes the Oil Spill Contingency Plan ("OSCP"), and the Emergency Response Plan (both based upon a simulated worst-case discharge calculation). Another major component of the EMP are a series of environmental sensitivity index maps identifying areas of high impact put together by the Company based upon extensive public consultation. In this context the Company has also taken the proactive step of joining the Oil Spill Response Group - previously Clean Caribbean Americas ("CCA") - which places a significant amount of equipment at the disposal of the Company in order to mitigate the impact of any potential incident.

A prerequisite for any drilling campaign will be the establishment of new environmental regulations by the Government. The new administration continues to work on this task and the Company has offered its encouragement and assistance, having already incorporated international best practices and standards within its EIA document submission.

With respect to the new licenses currently under joint application with Statoil, the operator has submitted its Environmental Feasibility Study and a final response from the Government is still awaited.

During the year, Repsol, Petronas and PDVSA have each completed exploratory wells in adjacent Cuban acreage. Whilst all wells were plugged and abandoned, each of the latter two wells were said to have demonstrated a working hydrocarbon system, albeit not commercial at the drilled location. Both wells would have barely tested the uppermost Cretaceous section and neither well would have been capable of interrogating the intended Bahamas Petroleum target intervals. Finally, Zarubezhneft commenced drilling in December 2012 approximately 12 miles from The Bahamas - Cuba border. There has been little news of progress to date, though recently it has been reported that repairs to critical equipment have constrained drilling progress.

On the financial results, the operating loss for the year of $6.3m represents a 39% decrease on 2011, largely due to cost reductions made during late 2011 and early 2012. This is underpinned by a 50% reduction in employee related expenses year-on-year. Cash expenditure in the year of $8.6m on intangible exploration assets comprises predominantly 3D seismic processing costs and brings the total capitalised exploration expenditure to $45.7m at the year end. With no further non-drilling exploration expenditure commitments, the closing cash balance of $21.3m places the Company in a strong financial position going forward.

The outlook for Bahamas Petroleum Company is encouraging as we gear up for drilling, expected to start between mid-year 2014 at the earliest but potentially closer to the end of 2014. A key priority this year will be to close the farm-out discussions as soon as possible and review options over drilling rig selection. Ongoing work will continue with a greater focus on drilling as we progress with designing and planning the exploration well in the context of the new environmental regulations which we wholly support. We will be progressing with the BISX listing and continuing to build our technical team to best manage the exciting transition from wholly subsurface to drilling activities.

With the initial pre-drill data gathering and analysis phase transiting to an engineering focus and potentially a more partner-driven operational phase as we gear up for exploration drilling, we look forward to the next year with excitement and confidence.

Yours sincerely,

Simon Potter

Chief Executive Officer

12 April 2013

Consolidated statement of comprehensive income for the year ended 31 December 2012

Consolidated balance sheet as at 31 December 2012

Consolidated statement of changes in equity for the year ended 31 December 2012

The Reverse acquisition reserve balance arose from the issue of shares in BPC (Falklands) Limited (Formerly Falkland Gold and Minerals Limited) as part of the reverse takeover of BPC Falklands by the shareholders of BPC Jersey in September 2008.

Consolidated cash flow statement for the year ended 31 December 2012

1 General information

Bahamas Petroleum Company plc ("the Company") and its subsidiaries (together "the Group") is the holder of several oil & gas exploration licences issued by the Government of the Commonwealth of The Bahamas.

The Company is a limited liability company incorporated in the Isle of Man. The address of its registered office is IOMA House, Hope Street, Douglas, Isle of Man. The Company's review of operations and principal activities is set out in the Directors' Report.

The Company has six directly and seven indirectly 100% owned subsidiaries as follows:

2 Summary of significant accounting policies

The principal accounting policies applied in the preparation of these consolidated Financial Statements are set out below. These policies have been consistently applied to all the periods presented, unless otherwise stated.

2.1 Basis of preparation

The consolidated Financial Statements of Bahamas Petroleum Company plc (the "Financial Statements") reflect the results and financial position of the Group for the year ended 31 December 2012, have been prepared in accordance with International Financial Reporting standards ("IFRS") as adopted by the European Union ("EU") and IFRIC (International Financial Reporting Interpretations Committee) interpretations. These Financial Statements have been prepared under the historical cost convention and the requirements of the Isle of Man Companies Acts 1931 to 2004.

The preparation of Financial Statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the Group's accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the Financial Statements are disclosed in note 4.

The financial information has been extracted from the consolidated financial statements for the year ended 31 December 2012 approved by the Board of Directors on 12 April 2013 upon which the auditors' opinion is not modified and includes an emphasis of matter paragraph in respect of the uncertainty related to the future recoverability of the Group's intangible exploration and evaluation assets.

Going concern

The Directors have, at the time of approving these Financial Statements, determined that the Group has more than adequate financial reserves and therefore these Financial Statements have been prepared on a going concern basis, which assumes that the Group will be able to meet its liabilities as and when they fall due. See note 4 for further information.

Adoption of new and revised Standards

a) New and amended standards adopted by the Group

There are no new or amended standards or interpretations that were effective for the first time for financial

periods beginning on 1 January 2012 that have had a material impact on the Group's consolidated results.

b) Standards, amendments and interpretations to existing standards that are in issue and relevant to the Group but not yet effective or adopted by the EU and have not been early adopted

At the date of authorisation of these Financial Statements the following standards and interpretations, which have not been applied in these Financial Statements, were in issue but not yet effective, or in some cases not yet adopted by the EU.

IAS 1 (Amended), 'Financial statement presentation' regarding other comprehensive income. The main change resulting from these amendments is a requirement for entities to group items presented in 'other comprehensive income' ('OCI') on the basis of whether they are potentially reclassifiable to profit or loss subsequently (reclassification adjustments). The amendments do not address which items are presented in OCI. The Group is yet to fully assess IAS 1's impact.

IFRS 9, 'Financial instruments', addresses the classification, measurement and recognition of financial assets and financial liabilities. IFRS 9 was issued in November 2009 and October 2010. It replaces the parts of IAS 39 that relate to the classification and measurement of financial instruments. IFRS 9 requires financial assets to be classified into two measurement categories: those measured as at fair value and those measured at amortised cost. The determination is made at initial recognition. The classification depends on the entity's business model for managing its financial instruments and the contractual cash flow characteristics of the instrument. For financial liabilities, the standard retains most of the IAS 39 requirements. The main change is that, in cases where the fair value option is taken for financial liabilities, the part of a fair value change due to an entity's own credit risk is recorded in other comprehensive income rather than the income statement, unless this creates an accounting mismatch. The Group is yet to assess IFRS 9's full impact and intends to adopt IFRS 9 no later than the accounting period beginning on or after 1 January 2015, subject to endorsement by the EU. The Group will also consider the impact of the remaining phases of IFRS 9 when completed by the International Accounting Standards Board.

IFRS 10, Consolidated Financial Statements', builds on existing principles by identifying the concept of control as the determining factor in whether an entity should be included within the consolidated Financial Statements of the parent company. The standard provides additional guidance to assist in the determination of control where this is difficult to assess. The Group does not expect IFRS 10 to impact the Group and the Group will adopt IFRS 10 no later than the accounting period beginning on or after 1 January 2014, the date it has been endorsed for by the EU.

IFRS 11, 'Joint arrangements', is a more realistic reflection of joint arrangements by focusing on the rights and obligations of the parties to the arrangement rather than its legal form. There are two types of joint arrangement: joint operations and joint ventures. Joint operations arise where a joint operator has rights to the assets and obligations relating to the arrangement and therefore accounts for its share of assets, liabilities, revenue and expenses. Joint ventures arise where the joint venturer has rights to the net assets of the arrangement and therefore equity accounts for its interest. Proportional consolidation of joint ventures is no longer allowed. IFRS 11 is not expected to impact the Group and the Group intends to adopt IFRS 11 no later than the accounting period beginning on or after 1 January 2014, the date it has been endorsed for by the EU.

IFRS 12, 'Disclosures of interests in other entities', includes the disclosure requirements for all forms of interests in other entities, including joint arrangements, associates, special purpose vehicles and other off balance sheet vehicles. The Group does not expect IFRS 12 to impact the Group and the Group will adopt

IFRS 12 no later than the accounting period beginning on or after 1 January 2014, the date it has been endorsed for by the EU.

Amendments to IFRSs 10, 11 and 12 on transition guidance provides additional transition relief to IFRS's 10,11 and 12, limiting the requirement to provide adjusted comparative information to only the preceding comparative period. The Group is yet to fully assess the full impact of these amendments and intends to adopt the amendments to IFRS's 10,11 and 12 no later than the accounting period beginning on or after 1 January 2013, the date it has been endorsed for by the EU.

IFRS 13, 'Fair value measurement', aims to improve consistency and reduce complexity by providing a precise definition of fair value and a single source of fair value measurement and disclosure requirements for use across IFRS. The requirements, which are largely aligned between IFRS and US GAAP, do not extend the use of fair value accounting but provide guidance on how it should be applied where its use is already required or permitted by other standards within IFRS or US GAAP. The adoption of IFRS 13 on 1 January 2013 has not had a significant impact on the Group.

Annual improvements 2011 (issued May 2012), effective 1 January 2013, were issued by the IASB as part of the 'annual improvements process' resulting in amendments to 5 standards. The improvements have not had a significant impact on the Group.

IAS 27, 'Separate Financial Statements' (revised 2011), effective 1 January 2013, includes the requirements relating to separate Financial Statements, following the issue of IFRS 10. The Group is yet to fully assess IAS 27's impact and intends to adopt IAS 27 no later than the accounting period beginning on or after 1 January 2014, the date it has been endorsed for by the EU.

IAS 28 (revised 2011), 'Associates and joint ventures' effective 1 January 2013, includes the requirements for associates and joint ventures that have to be equity accounted following the issue of IFRS 11. The Group is yet to fully assess IAS 28's impact and intends to adopt IAS 28 no later than the accounting period beginning on or after 1 January 2014, the date it has been endorsed for by the EU.

2.2 Basis of consolidation

The consolidated Financial Statements incorporate the Financial Statements of the Company and entities controlled by the Company (its subsidiaries) made up to 31 December each year. Control is achieved where the Company has the power to govern the financial and operating policies of an investee entity so as to obtain benefits from its activities.

The results of subsidiaries acquired or disposed of during the year are included in the consolidated statement of comprehensive income from the effective date of acquisition or up to the effective date of disposal, as appropriate.

Where necessary, adjustments are made to the Financial Statements of subsidiaries to bring the accounting policies used in line with those used by the Group.

All intra-group transactions, balances, income and expenses (including unrealised gains and losses on transactions between group companies) are eliminated on consolidation.

Changes in the Group's interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions. Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recognised directly in equity and attributed to the Group.

The Financial Statements consolidate the results, cash flows and assets and liabilities of the Company and its wholly owned subsidiary undertakings.

2.3 Operating segments

All of the Group's business activities relate to oil & gas exploration activities in the Commonwealth of The Bahamas. The business is managed as one business segment by the chief operating decision maker ("the CODM"), who has been identified as the Chief Executive Officer ("the CEO"). The CODM receives reports at a consolidated level and uses those reports to assess business performance. It is not possible to assess performance properly using the financial information collected at the subsidiary level.

2.4 Foreign currency translation

(i) Functional and presentation currency

Items included in the Financial Statements of each of the Group's entities are measured using the currency of the primary economic environment in which the entity operates ("the functional currency"). The consolidated Financial Statements are presented in United States Dollars, which is the functional currency of the Company and all of the Group's entities, and the Group's presentation currency.

(ii) Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Monetary assets and liabilities denoted in foreign currency are translated into the functional currency at exchange rates ruling at the year end. Foreign exchange gains and losses resulting from the settlement of transactions and from the translation at year end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the consolidated statement of comprehensive income.

2.5 Property, plant and equipment

Property, plant and equipment is stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items.

Subsequent costs are included in the asset's carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All other repairs and maintenance are charged to the consolidated statement of comprehensive income during the reporting period in which they are incurred.

Depreciation on assets is calculated using the straight‑line method to allocate their cost, net of their residual values, over their estimated useful economic lives, as follows:

The assets' residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date.

An asset's carrying amount is written down immediately to its recoverable amount if the asset's carrying amount is greater than its estimated recoverable amount with any impairment charge being taken to the consolidated statement of comprehensive income.

Gains and losses on disposals are determined by comparing proceeds with carrying amount and are recognised in the consolidated statement of comprehensive income.

2.6 Intangible assets - exploration and evaluation assets

Exploration and evaluation expenditure incurred which relates to more than one area of interest is allocated across the various areas of interest to which it relates on a proportionate basis. Exploration and evaluation expenditure incurred by or on behalf of the Group is accumulated separately for each area of interest. The area of interest adopted by the Group is defined as a petroleum title.

Expenditure in the area of interest comprises direct costs and an appropriate portion of related overhead expenditure, but does not include general overheads or administrative expenditure not linked to a particular area of interest.

As permitted under IFRS 6, exploration and evaluation expenditure for each area of interest, other than that acquired from the purchase of another entity, is carried forward as an asset at cost provided that one of the following conditions is met:

·; the costs are expected to be recouped through successful development and exploitation of the area of interest, or alternatively by its sale; or

·; exploration and/or evaluation activities in the area of interest have not, at the reporting date, reached a stage which permits a reasonable assessment of the existence or otherwise of economically recoverable reserves, and active and significant operations in, or in relation to, the area of interest are continuing.

Exploration and evaluation expenditure which fails to meet at least one of the conditions outlined above is taken to the consolidated statement of comprehensive income.

Expenditure is not capitalised in respect of any area of interest unless the Group's right of tenure to that area of interest is current.

Intangible exploration and evaluation assets in relation to each area of interest are not amortised until the existence (or otherwise) of commercial reserves in the area of interest has been determined.

2.7 Impairment

In accordance with IFRS 6, exploration and evaluation assets are regularly reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset's carrying value exceeds its recoverable amount. The recoverable amount is the higher of an asset's fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are largely independent of the cash inflows from other assets or groups of assets (cash-generating units).

2.8 Financial instruments

The Group classifies its financial assets in the following categories: at fair value through profit or loss, loans and receivables and available for sale. The classification depends on the purpose for which the financial assets were acquired. The classification of financial assets is determined at initial recognition.

At 31 December 2012 and 2011 the Group did not have any financial assets held at fair value through profit or loss or classified as available for sale. Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in any active market. They are included in current assets, except for those with maturities greater than 12 months after the balance sheet date which are classified as non‑current assets. Loans and receivables are stated initially at their fair value and subsequently at amortised cost using the effective interest rate method. The Group's loans and receivables consist of 'cash and cash equivalents' at variable interest rates, 'restricted cash' and 'other receivables' excluding 'prepayments'.

The Group assesses at the end of each reporting period whether there is objective evidence that a financial asset or group of financial assets is impaired. A financial asset or a group of financial assets is impaired and impairment losses are incurred only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a 'loss event') and that loss event or events has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated.

The Group classifies its financial liabilities in the following categories: at fair value through profit or loss and other liabilities. As at 31 December 2012 and 2011 the Group did not have any financial liabilities at fair value through the profit or loss. Other liabilities are recognised initially at fair value and are subsequently measured at amortised cost using the effective interest method. Other liabilities consist of 'trade and other payables'. These amounts represent liabilities for goods and services provided to the Group prior to the end of financial period which are unpaid. The amounts are unsecured and are usually paid within 30 days of recognition.

2.9 Cash and cash equivalents

Cash and cash equivalents includes cash on hand and deposits held at call with financial institutions with original maturities of three months or less. For the purposes of the cash flow statement restricted cash is not included within cash and cash equivalents.

2.10 Share capital

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are deducted, net of tax, from the proceeds. Net proceeds are disclosed in the statement of changes in equity.

2.11 Employee benefits

(i) Wages and salaries, annual leave and sick leave

Liabilities for wages and salaries, including non‑monetary benefits, expected to be settled within 12 months of the

reporting date are recognised in other payables in respect of employees' services up to the reporting date and are measured at the amounts expected to be paid when the liabilities are settled.

(ii) Share based payments

Where equity settled share options are awarded to employees or Directors, the fair value of the options at the date of grant is charged to the consolidated statement of comprehensive income over the vesting period. Non-market vesting conditions are taken into account by adjusting the number of equity instruments expected to vest at each balance sheet date so that, ultimately, the cumulative amount recognised over the vesting period is based on the number of options that eventually vest. Market vesting conditions are factored into the fair value of the options granted. As long as all other vesting conditions are satisfied, a charge is made irrespective of whether the market vesting conditions are satisfied. The cumulative expense is not adjusted for failure to achieve a market vesting condition.

Where equity instruments are granted to persons other than employees or Directors, the consolidated statement of comprehensive income is charged with the fair value of goods and services received.

(iii) Bonuses

The Group recognises a liability and an expense for bonuses. Bonuses are approved by the Board and a number of factors are taken into consideration when determining the amount of any bonus payable, including the recipient's existing salary, length of service and merit. The Group recognises a provision where contractually obliged or where there is a past practice that has created a constructive obligation.

(iv) Pension obligations

For defined contribution plans, the Group pays contributions to publicly or privately administered pension insurance plans on a mandatory, contractual or voluntary basis. The Group has no further payment obligations once the contributions have been paid. The contributions are recognised as an employee benefit expense when they are due.

(v) Termination benefits

Termination benefits are payable when employment is terminated by the Group before the normal retirement date, or whenever an employee accepts voluntary redundancy in exchange for these benefits. The Group recognises termination benefits when it is demonstrably committed to a termination and when the entity has a detailed formal plan to terminate the employment of current employees without possibility of withdrawal. Benefits falling due more than 12 months after the end of the reporting period are discounted to their present value.

2.12 Interest Income

Interest income is recognised on a time proportion basis using the effective interest method.

2.13 Leases

Leases in which a significant portion of the risks and rewards of ownership are not transferred to the Group as lessee are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to the statement of comprehensive income on a straight‑line basis over the period of the lease.

3 Financial risk management in respect of financial instruments

3.1 Financial risk factors

The Group's activities expose it to a variety of financial risks: liquidity, market and credit risk. The Group's overall risk management program focuses on minimising potential adverse effects on the financial performance of the Group.

Risk management is carried out by the CEO under policies approved by the Board of Directors. The CEO identifies, evaluates and addresses financial risks in close co‑operation with the Group's management. The Board provides written principles for overall risk management, as well as written policies covering specific areas, such as mitigating foreign exchange risk, interest rate risk, credit risk and investing excess liquidity.

(i) Liquidity risk

The Group monitors its rolling cashflow forecasts and liquidity requirements to ensure it has sufficient cash to meet its operational needs. Surplus cash is invested in interest bearing current accounts and money market deposits.

No profit to date 

The Group has incurred losses since its inception and it is therefore not possible to evaluate its prospects based on past performance. Since the Group intends to continue investing in the exploration licences it currently holds an interest in, the Directors anticipate making further losses. There can be no certainty that the Group will achieve or sustain profitability or achieve or sustain positive cash flows from its activities.

Future funding requirements

The Group intends to raise funding through the placing of ordinary shares and farm-outs of its licences. There is no certainty that the Company will be able to raise funding on the equity markets or that the raising of sufficient funds through future farm-outs will be possible at all or achievable on acceptable terms. This could substantially dilute the Group's interest in the licences, however, given the size of the Group's existing holding it would be expected, although there is no guarantee, that the Group will retain a significant equity interest in the licences.

Financial liabilities

The Group's financial liabilities comprise entirely its trade and other payables which all fall due within 1 year. The Group's payment policy is to settle amounts in accordance with agreed terms which is typically 30 days.

(ii) Market risk

Foreign exchange risk

The Group operates internationally and therefore is exposed to foreign exchange risk arising from currency exposures, primarily with regard to UK Sterling. The exposure to foreign exchange risk is managed by ensuring that the majority of the Group's assets, liabilities and expenditures are held or incurred in US Dollars, the functional currency of all entities in the Group. At 31 December 2012 the Group held $4,178,400 of cash in UK Sterling (December 2011: $6,811,742) and had an immaterial amount of trade and other payables denominated in UK Sterling.

At 31 December 2012, if the US Dollar currency had weakened/strengthened by 10% against UK Sterling with all other variables held constant, post-tax losses for the year would have been reduced/increased by approximately $418,000 (31 December 2011: reduced/increased by $681,000), mainly as a result of foreign exchange gains/losses on translation of UK Sterling denominated bank balances.

The Group also has operations denominated in the Bahamian dollar. As the Bahamian dollar is pegged to the US dollar on a one for one basis these operations do not give rise to any currency exchange exposures.

Interest rate risk

The Group's exposure to interest rate risk relates to the Group's cash deposits which are linked to short term deposit rates and therefore affected by changes in bank base rates. At 31 December 2012 and 2011 short term deposit rates were in the range of 0% to 1% and therefore the interest rate risk is not considered significant to the Group. An increase in interest rate of 0.25% in the year would have had an immaterial effect of the Group's loss for the year.

 (iii) Credit risk

Credit risk is managed on a Group basis. Credit risk arises from cash and cash equivalents and deposits with banks and financial institutions. For banks and financial institutions, only independently rated parties with a minimum rating of 'A' are accepted. In order to mitigate credit risk arising from cash balances the Group holds cash reserves with more than one counterparty.

3.2 Capital risk management

Capital is defined by the Group as all equity reserves, including share capital and share premium. The Group's objectives when managing capital are to safeguard the Group's ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to support the Group's business operations and maximise shareholder value. The Group is not subject to any externally imposed capital requirements.

4 Critical accounting estimates and assumptions

The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.

(a) Going concern

These Financial Statements have been prepared on a going concern basis, which assumes that the Group will be able to meet its liabilities as and when they fall due.

The Directors are of the opinion that the Group has more than adequate financial resources to meet its working capital needs through to the end of 2014 based on cash flow forecasts and the Group's existing liquid cash resources.

Additional cash resources may become available to the Group following the granting of three new exploration licences in The Bahamas which would result in the completion of the farm-in agreement with Statoil and the receipt of consideration funds.

The Group's ability to meet its obligations beyond 2014 is dependent on the level of exploration and appraisal activities undertaken. The next step in the Group's asset development program requires the drilling of an exploration well on its prospects. The ability of the Group to discharge this obligation is contingent on the successful completion of a farm-in arrangement or equity raise.

(b) Carrying value of exploration expenditure

Expenditure of $45,716,502 relating to the cost of exploration licences, geological and geophysical consultancy and seismic data acquisition and interpretation has been capitalised as at 31 December 2012 (2011: $38,927,378).

Ultimate recoupment of exploration and evaluation assets capitalised is dependent on successful development and commercial exploitation, or alternatively, sale of the respective licence areas. The carrying value of the Group's exploration and evaluation expenditure is reviewed at each balance sheet date and, if there is any indication that it is impaired, its recoverable amount is estimated. Estimates of impairment are limited to an assessment by the Directors of any events or changes in circumstances that would indicate that the carrying value of the asset may not be fully recoverable. Any impairment loss arising is charged to the statement of comprehensive income.

On 7 September 2012 the Group was informed by the Government of the Bahamas that a national referendum on an oil & gas industry would be held prior to any exploration drilling being permitted in Bahamian waters.

On 10 March 2013, the Government of the Bahamas announced that any referendum on oil & gas would be deferred until commercial reserves had been established and that, consequently, all hydrocarbon explorers within the country would be permitted to engage in exploration drilling activities once draft regulations governing such were approved by parliament. Following this decision, the future recoverability of the Group's intangible assets has become contingent on both the discovery of commercial reserves and a positive referendum result for the extraction and exploitation of hydrocarbons.

The formal terms of the Group's exploration licences require the spudding of one well in the southern licence area and one well in the Miami licence area by 26 April 2013. The Directors are of the opinion that, due to the articulation of a drilling moratorium in 2010 by the Bahamian Government, lifted pending adoption of revised environmental regulations, and government references to a potential referendum, this requirement will be extended to allow the safe and timely design and execution of the Group's exploration drilling program. This position is consistent with the Government mandate for future oil exploration activities and a number of public statements made by the Minister for Environment to this effect.

(c) Share based payments

Share based payments comprise equity settled share options granted during the year to Directors, employees and consultants of the Group. IFRS 2 requires an estimate of the fair value of all options to be undertaken at the date of grant with a charge being made to the consolidated statement of comprehensive income, spread over the expected vesting period of the options. Fair value is determined using an appropriate pricing model determined by the Directors who also determine that the assumptions applied in the calculation of the fair values of the options are appropriate. Details of the option model and assumptions used therein are set out in note 18.

The charge for share based payments is calculated in accordance with the analysis described in note 18. The option valuation models used require highly subjective assumptions to be made including the future volatility of the Company's share price, expected dividend yield, risk-free interest rates and expected staff turnover. The Directors draw upon a variety of external sources to aid in the determination of the appropriate data to use in such calculations.

5 Segment information

The Company is domiciled in the Isle of Man. The total of non-current assets other than financial instruments located in the Isle of Man as at 31 December 2012 is $14,080 (31 December 2011: $136,098), and the total of such non-current assets located in The Bahamas is $45,926,130 (31 December 2011: $39,282,622).

6 Finance income

7 Employee benefit expense

8 Other expenses

9 Taxation

During 2010, the Group underwent a Scheme of Arrangement which resulted in the Isle of Man subsidiary becoming the Group's parent company, with the parent company's tax residency correspondingly being migrated to the Isle of Man. Companies incorporated and resident in the Isle of Man are subject to Isle of Man income tax at a rate of zero per cent.

The Company's 100% directly held subsidiary, BPC Jersey Limited is treated as a zero rated company under the amended Income Tax (Jersey) Law 1961.

All other group companies are within the tax free jurisdiction of the Commonwealth of The Bahamas. Under current Bahamian law, the Bahamian group companies are not required to pay taxes in The Bahamas on income or capital gains.

10 Basic and diluted loss per share

(a) Basic

Basic loss per share is calculated by dividing the loss attributable to owners of the Group by the weighted average number of ordinary shares in issue during the year.

(b) Diluted

Diluted loss per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares. The Group had one category of dilutive potential ordinary shares: share options. For these share options, a calculation is performed to determine the number of shares that could have been acquired at fair value (determined as the average annual market share price of the Group's shares) based on the monetary value of the subscription rights attached to outstanding share options. The number of shares calculated as above is compared with the number of shares that would have been issued assuming the exercise of the share options. Share options outstanding at the reporting date were as follows:

The effect of the above share options at 31 December 2012 is anti-dilutive; as a result they have been omitted from the calculation of diluted loss per share.

11 Restricted cash

Bank deposits as at 31 December 2011 included $231,995 held by Barclays Bank Plc as security for a guarantee provided to Her Majesty's Revenue and Customs ("HMRC"). The guarantee was required to be in place prior to migrating the UK tax residency of BPC Limited (incorporated in the Falkland Islands) to Jersey in 2008 and was required to be increased by the Supreme Court of the Falkland Islands as a condition of the completion of the Scheme of Arrangement in 2010. These amounts were released to the Company following receipt of consent from HMRC during year ended 31 December 2012.

Included in non-current bank deposits as at 31 December 2012 is the amount of $161,738 held as security for Company credit card facilities (31 December 2011: $239,654).

12 Property, plant & equipment

Disposals in the prior year were for $nil proceeds and were of assets that had been fully depreciated.

13 Intangible exploration and evaluation assets

Ultimate recoupment of intangible exploration and evaluation assets capitalised is dependent on successful development and commercial exploitation, or alternatively, sale of the respective licence areas (note 4(b)).

These assets are reviewed for impairment annually or whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. At present the Directors do not believe any such impairment indicators are present (note 4(b)).

14 Cash and cash equivalents

The 2012 balance includes interest bearing accounts at rates between 0% and 1% (2011: 0% to 1%).

15 Other receivables

(a) Other receivables

As at 31 December 2012, these amounts predominantly consist of VAT recoverable. In the prior year these amounts included funds advanced to the resident management office in The Bahamas for forthcoming local expenditure.

(b) Prepayments

As at 31 December 2012 prepayments include $500,000 (2011: $500,000) in application fees paid to the Government of the Commonwealth of The Bahamas for additional exploration licences, pending award. In the event that the Group's applications are unsuccessful, 50% of this amount is refundable to the Group. No provision has been made in the consolidated Financial Statements to write down the carrying value of these prepayments in the event that the applications are unsuccessful, see also note 4(b).

16 Trade and other payables

17 Share capital, share premium and merger reserve

The total authorised number of ordinary shares at 31 December 2012 and 2011 was 5,000,000,000 shares with a par value of 0.002p per share.

All issued shares are fully paid.

On 16 March 2011 the Company announced the placement of 243,100,000 new ordinary shares at 18.75 pence per share, raising $70,155,401 in net proceeds (net of $3,848,817 in transaction costs). Of this placing, 110,000,000 ordinary shares were allotted on 17 March 2011 with the remaining 133,100,000 ordinary shares being allotted on 13 April 2011 following shareholder approval at the Extraordinary General Meeting of the Members of the Company on 11 April 2011.

18 Share based payments

Share options have been granted to Directors, selected employees and consultants to the Company.

The Group had no legal or constructive obligation to repurchase or settle any options in cash. Movements in the number of share options outstanding during the year are as follows:

On 12 April 2011 the Company granted 13,500,000 share options to Directors, management and consultants of the Company. The options have an exercise price of 21.25 pence and an expiry period of 5 years. Half of the options became exercisable immediately on grant with the remaining half becoming exercisable should the Company share price reach 50 pence per share. The options do not lapse in the event that the option holder ceases to hold office at any time during the exercise period.

On 27 October 2011 the Company granted 8,000,000 share options to Directors and management. The options have an exercise price of 7.4 pence, an expiry period of 5 years and become exercisable should the Company share price reach 18.75 pence per share. All 8,000,000 options require the option holder to remain in office. In the event that the option holder ceases to hold office during the exercise period, the survivability of the options is at the explicit discretion of the Board of Directors.

On 2 April 2012 the Company granted 48,000,000 share options to Directors and management. 1,000,000 options have an exercise price of 7.4 pence, an expiry period of 5 years and become exercisable should the Company share price reach 18.75 pence per share. The remaining 47,000,000 options carry the following terms:

·; 14,000,000 become exercisable on (a) the conclusion of a suitable farm-in agreement to allow the drilling of an exploration well or (b) the securing of independent finance to drill an exploration well;

·; 9,000,000 become exercisable following the spudding of the first exploration well;

·; 24,000,000 become exercisable in the event of a corporate sale of the Company at a price per share equal to or exceeding 37.5 pence;

·; All 47,000,000 options have an exercise price of 18.75 pence and an expiry period of 5 years.

All 48,000,000 options require the option holder to remain in office. In the event that the option holder ceases to hold office during the exercise period, the survivability of the options is at the explicit discretion of the Board of Directors.

The fair value of the options granted in the year is estimated using the Black Scholes model or, where there are market based vesting conditions, the Black Scholes Barrier model. The inputs and assumptions used in calculating the fair value of options granted in the year and the prior year are as follows:

*Hurdle rate for options granted on 12 April 2011 applies to 50% of total options granted only, forming tranche 2.

Expected volatility has been based on an assessment of the volatility of the share price of the Company and a selection of its peers over a period consistent with the expected life of the options. The weighted average remaining contractual life of the options in issue at 31 December 2012 is 4.0 years (31 December 2011: 4.2 years).

The tranche 4 options granted in the year only vest and become exercisable in the event of a corporate sale of the Company at a price per share equal to or exceeding 37.5 pence. As the likelihood of such a transaction cannot be deemed to be probable at the reporting date, the number of options expected to vest has been assessed as zero and therefore no charge for this tranche has been recognised in these Financial Statements. Consequently, no expected life or fair value for these options has been determined.

Expenses arising from share based payment transactions

Total expenses arising from equity-settled share based payment transactions during the year were as follows:

19 Cash used in operating activities

20 Contingencies and commitments

(i) Contingencies

As at 31 December 2012, the Group had entered into a contract with Royal Fidelity Merchant Bank and Trust Limited for services in connection with the creation of a Bahamian Depository Receipt facility. Fees payable under this contract totalling $285,000 are contingent on completion of the facility, which had not taken place as at 31 December 2012. Consequently, this contingent liability has not been recognised in these Financial Statements.

(ii) Expenditure commitments

As at 31 December 2012 the Group had discharged all of its work obligations under the terms of the existing exploration licence period.

The formal terms of the Group's exploration licences require the spudding of one well in the southern licence area and one well in the Miami licence area by 26 April 2013. The Directors are of the opinion that, due to the articulation of a drilling moratorium in 2010 by the Bahamian Government, lifted pending adoption of revised environmental regulations, and government references to a potential referendum, this requirement will be extended to allow the safe and timely design and execution of the Group's exploration drilling program. This position is consistent with the Government mandate for future oil exploration activities and a number of public statements made by the Minister for Environment to this effect.

(iii) Annual rental commitments

The Group is required under the exploration licences to remit annual rentals in advance to the Government of the Commonwealth of The Bahamas in respect of the licenced areas.

During the year the Group renewed its exploration licences for a further 3 years. Rentals for each of the five licences in the three year period of renewal are as follows; Year 1 is $57,500, Year 2 is $86,250 and Year 3 is $115,000. Rentals for the current year have been paid in the year and are consequently recognised in these Financial Statements.

The Group leases various premises under non-cancellable operating lease agreements. The leases have varying terms and renewal rights.

The future aggregate minimum lease payments under non-cancellable operating leases are as follows:

On 28 January 2013 the Group signed a two year lease to sublet a portion of the Nassau office building, which had been unutilised, for $48,000 per annum. The above minimum lease payment obligations are shown gross of this income source.

21 Related party transactions

Key Management Personnel

Details of key management personnel are as follows:

Key Management Compensation

During the year, amounts totalling $167,424 (31 December 2011: $84,341) were reimbursed to Simon Potter for relocation costs and expat benefits following his appointment as CEO of the Company. These amounts have been included above under short term employee benefits.

During the year, ownership of a Company vehicle, which had been purchased in the prior year for $104,767, was transferred to Simon Potter for $nil consideration as part of his remuneration package.

Simon Potter's key remunerative terms as Chief Executive Officer of the Company are as follows:

·; Annual salary of $1,000,000 with minimum CPI indexation.

·; Mr Potter is entitled to receive pension contributions from the Company equal to 10% of his annual salary.

·; The term of the contract is 4 years. Benefits arising from termination during the term range from nil to payment of salary over the full term, depending on the circumstances surrounding termination.

During the year, Simon Potter was provided with housing in Nassau, The Bahamas for his exclusive use at a cost to the Company of $172,000. These amounts have been recognised in the Financial Statements as premises expenses under the categorisation "other costs".

During the prior year $500,000 was paid to Simon Potter as a sign on bonus prior to commencement of duties.

During the prior year cessation of service payments totalling $237,428 were paid to Michael Proffitt.

During the prior year cessation of service payments totalling $1,100,000 were paid to Paul Crevello

During the prior year amounts totalling $3,000 were paid by the Company for the maintenance of residential property in the United States of America belonging to Paul Crevello.

During the prior year, amounts totalling $8,292 were reimbursed to Paul Crevello for travel and relocation costs following his resignation as CEO of the Company.

During the prior year, amounts totalling $17,539 were paid by the Company for the shipping of personal effects belonging to Paul Crevello from The Bahamas to the United States of America following his resignation as CEO of the Company.

During the prior year, Paul Crevello was provided with housing in Nassau, The Bahamas for his exclusive use at a cost to the Company of $187,000. These amounts have been recognised in the Financial Statements as premises expenses under the categorisation "other costs".

Directors' remuneration

Share options granted to Directors during the year are as follows:

Share options granted to Directors during the prior year are as follows:

Details of share options granted are disclosed in note 18 to these Financial Statements.

Other related party transactions

During the year, $50,000 was paid to Royal Fidelity Merchant Bank & Trust as an engagement fee for the provision of depository services relating to the Company's future Bahamian Depository Receipt program. Ross McDonald, a director of the Company, is also a director of Royal Fidelity Merchant Bank & Trust.

During the year the Company opened banking facilities with RBC Royal Bank (Bahamas) Limited in Nassau, The Bahamas. Ross McDonald, a director of the Company, is also a director of RBC Royal Bank (Bahamas) Limited. As at 31 December 2012, $329,316 was held on deposit with RBC Royal Bank (Bahamas) Limited (31 December 2011: $nil).