BPC.L Regulatory News (BPC)

14 December 2020

Bahamas Petroleum Company plc

("BPC" or the "Company")

Funding Agreements for up to US$20 million

Highlights:

· BPC has entered into agreements with a leading European alternative asset manager, under which BPC has the potential to access gross funding of £15 million (US$20 million)

· Under the terms of a funding agreement entered into, BPC will immediately receive gross proceeds of £7.5 million (US$10 million) through the issue of 375,000,000 new ordinary shares at a price of 2.0p each ("Funding Agreement")

· Alongside the Funding Agreement, BPC has also entered into an option agreement, whereby BPC has an option, at its sole discretion, to raise up to a further £3.75 million (US$5 million) from the Investor within 10 business days after the spud of the Perseverance #1 well on substantially the same terms; if BPC so elects, the Investor has the option to double that amount, thereby providing BPC discretionary access to the full £15 million (US$20 million) ("Funding Option Agreement")

· The transaction is consistent with BPC's funding strategy, and will enhance the Company's overall funding capacity, including for the anticipated costs of work in Trinidad and Tobago and Suriname planned for 2021, and ongoing costs and expenses associated with the Company's 100% owned and operated Perseverance #1 well in The Bahamas

Simon Potter, Chief Executive Officer, commented:

"2021 will be a busy year for BPC in pursuing operations that have the potential to create considerable value for the Company. We have a full slate of activity planned in Trinidad and Tobago and Suriname, where we are proposing an active drilling campaign of appraisal and production aimed at rapidly bringing wells directly into production and thus cashflow, building to 2,500 bopd production by the end of 2021. We will also be maturing prospects that will drive an active onshore exploration programme that is designed to deliver the next step-change in production beyond 2021. In The Bahamas, we have the transformational Perseverance #1 well, for which operations are expected to commence imminently. And in Uruguay, we expect to commence early-stage evaluation of already identified leads, with a view to maturing drillable prospects from our high potential offshore licence.

We are thus extremely pleased to have secured a further US$10 million of immediate equity funding, along with the option to expand that to US$15 million and potentially to receive a total US$20 million, from a leading European institutional investor. Not only will this additional liquidity, consistent with our overall funding strategy, give us the flexibility to continue to pursue an aggressive growth agenda at a pace determined by the Company, but we consider this funding at this time to be a strong vote of confidence in BPC and the value embedded in the totality of our portfolio. I look forward to providing updates of our continued progress to shareholders."

Overview and Key Terms:

BPC, the Caribbean and Atlantic margin focused oil and gas company, with exploration, production, appraisal and development assets across the region, is pleased to announce that it has entered into equity funding agreements with a leading European alternative asset manager (the "Investor").

Under the terms of the Funding Agreement, BPC will issue to the Investor a total of 375,000,000 new ordinary shares of 0.002p each, at a price of 2.0 pence each, for immediate gross proceeds of approximately £7.5 million (US$10 million).

Alongside this Funding Agreement, BPC and the Investor have also entered into the Funding Option Agreement, whereby within 10 business days of spud of the Perseverance #1 well BPC has the option, but not the obligation, to raise up to a further £3.75 million (US$5 million) from the Investor on substantially the same terms as under the Funding Agreement. If BPC elects to exercise this option, then the Investor has a reciprocal option to subscribe for up to double the amount put to the Investor by BPC. Thus, to the extent BPC elected to raise the full £3.75 million from the Investor, and the Investor elected to exercise its right to double that, the net effect would be a further raising of approximately £7.5 million (US$10 million).

As part of the initial Funding Agreement, the Investor will also be issued with warrants, valid for one year, to subscribe for a further 93,750,000 shares at a price of 3.0p per share and a further 93,750,000 shares at a price of 4.0p per share. If all of these warrants were to be exercised, the Company would raise a further £6.6 million (US$8.7 million). If funds are subsequently made available to BPC under the Funding Option Agreement, further warrants on the same terms will be issued to the Investor, pro-rata to the quantum on funds made available under the Funding Option Agreement.

As part of the terms of the Funding Agreement, on the earlier of (i) 60 days after the date of spudding of BPC's Perseverance #1 well; (ii) 31 December 2021; or (iii) such other date where a reconciliation is permitted under the Funding Agreement, BPC may be required to make a cash payment to the Investor to the extent that the Investor's aggregate return from those new ordinary shares has been less than 115% of the subscription price. The Funding Agreement contains a number of other anti-dilution provisions and warranties customary to an agreement of this nature. The same terms will apply for any funds that may subsequently be made available to BPC under the Funding Option Agreement.

Rationale:

Given the range of upcoming activities across BPC's portfolio of assets in Trinidad and Tobago, Suriname, The Bahamas and Uruguay, the Board considers that it is prudent to enter into the Funding Agreement and Funding Option Agreement at this time, in order to give it greater and immediate certainty as to the Company's funding, as well as the flexibility on a range of future funding decisions and their timing. This is consistent with the Company's overall funding strategy, and in particular the continuing drive to optimise the Company's funding mix so as to achieve a lower cost of capital, less aggregate dilution, greater certainty of funding availability, and maximum funding flexibility.

In this regard, the Board considers that the Funding Agreement provides a superior source of immediate funding especially as compared to the Company's previously announced Zero-coupon Facility. Moreover, the Funding Agreement requires the issuance of direct equity (rather than convertible notes) at a fixed price (rather than at a future indeterminate price) and thus represents a known level of dilution (as compared to an unknown level of potential future dilution). BPC has stated on a number of occasions it would seek to optimise its funding strategy such that it would have no need to draw on the Zero-coupon Facility in the future, and with the proceeds from the Funding Agreement, the Company can now categorically commit to not drawing any further on the Zero-coupon Facility.

In regard to the potential cash payment arrangement included in the Funding Agreement, this is similar to the mechanism employed successfully by BPC in the agreement entered into with Trafalgar Capital Management (HK) Limited, a Hong Kong based financier, for the financing of certain aspects of the Columbus merger transaction earlier in 2020. The final reconciliation date under that agreement has recently passed, and the ultimate outcome was one advantageous to BPC, in that there was no additional cost to BPC for funding that was secured at the time of the merger on advantageous terms.

In relation to the Funding Option Agreement, a core component of BPC's funding strategy to-date has been to secure access to additional funding but where the drawdown of that funding is at BPC's election, such that BPC can control the extent of funding drawn and the dilution incurred as a result. This is so as to provide maximum funding "flex" at the lowest possible cost, given the fact that the costs of drilling operations can be variable, and include the potential of sizeable contingencies. The Company considers that no-obligation but on-call funding sources provide an attractive means of managing this variable and unknowable nature of the Company's future funding needs.

In aggregate, therefore, the Board considers that the Funding Agreement and the Funding Option Agreement together provide an attractive risk-reward profile, especially in the current market and operating environment.

Gneiss Energy acted as financial adviser and sole arranger to the Company in respect of the Funding Agreement and Funding Option Agreement.

Funding and Funding Strategy Update:

The net proceeds raised from the Funding Agreement will be immediately available to the Company and will be directed by the Company to meet the Company's ongoing funding needs across the Company's portfolio of assets.

As at 31 October 2020, BPC held existing cash balances of US$17.5 million. In addition, BPC expects to receive £15 million (approximately US$20 million) via the previously announced fixed-conversion price senior secured convertible loan notes financing instrument (the "Notes"), of which approximately £3 million has been committed, subject to spud of Perseverance #1 by 28 December 2020, and the drawdown of the balance remains subject to satisfaction of certain conditions precedent, as previously announced on 27 November 2020. The proceeds from the Funding Agreement will be additive to these existing sources of funding.

This then represents an aggregate overall current funding (definite and conditional) available to the Company (assuming availability of all funds under the Notes) of approximately US$47.5 million (and up to US$57.5 million, should the Company elect to raise the full US$5m under the Funding Option Agreement and the Investor elected to exercise its right to double that). Against this, the Company has, as previously announced, a planned 2021 work program in Trinidad and Tobago and Suriname of between US$15 million and US$25 million, and a remaining cost associated with the Perseverance #1 well, net of amounts already prepaid, in the order of US$19 million - US$23 million (plus an identified US$7 million contingency, which may be required all, in part, or not at all).

Over and above this, BPC continues to work actively on a range of other financing alternatives as part of its overall funding and risk mitigation strategy, and will continue to seek access to incremental capital, most relevantly for activities across the Company's broader portfolio of assets in Trinidad and Tobago, Suriname and Uruguay. These alternatives include:

· Surplus cash-flows from operations: As a full-cycle exploration and production company, BPC expects to see cashflows available from production such that it can be in a position, by end of 2021, to be generating sufficient cash flows to cover all overhead and operating expenses, and with surplus free cash flow potentially making a considerable contribution to ongoing capital and exploration expenditures.

· Farm-out options or similar transactions: For several years, the Company has been engaged in a process to secure financing whereby another entity will acquire an interest in the project in The Bahamas, and in exchange will pay for all or a substantial part of the cost of drilling and cash payments in respect of back costs, thus freeing up capital for redeployment elsewhere in the Company's operations. Discussions remain ongoing.

· Reserve-based lending facilities: The Company has recently received a Competent Person's Report (CPR) on certain of its production and development assets in Trinidad and Tobago and Suriname, the details of which were set out in the Company's announcement of 1 December 2020. The Company considers that it has an asset that can be readily monetised in the form of certified 2P reserves, and the Company has commenced discussion with several providers of financing facilities that advance funding against the assessed value of these reserves.

· "Drill for equity" type arrangements: Another common financing structure in the oil and gas industry is a "drill for equity" type arrangement. Several such options may be available to the Company.

· Bahamian domiciled mutual fund: The Company has a sponsored fund with the primary objective of creating a vehicle through which qualified Bahamian investors could invest in the Company. Should this fund grow, additional capital may become available to the Company.

To the extent that in the future any one or a combination of the above funding alternatives are successfully concluded on terms acceptable to the Company, the amount of capital available to the Company would likely materially increase and would be additive to existing funding sources. Such funding could be applied towards expanding / extending the current work programme, or alternatively proceeds could be applied to a much broader work programme across the Company's asset base in Trinidad and Tobago, Suriname, The Bahamas and Uruguay.

Total Voting Rights

In satisfaction of certain existing outstanding professional fees, as well as commissions payable in respect of the Funding Agreement, the Company had agreed to make payment in the form of cash. Certain of the Company's advisers have agreed to receive ordinary shares in the Company in lieu of those cash fees. Consequently, the Company is issuing 37,500,000 ordinary shares in settlement of cash fees otherwise payable (the "Adviser Fee Shares").

Application will be made for the 412,500,000 ordinary shares issued under the Funding Agreement and the Adviser Fee Shares to be admitted to trading on the AIM market of the London Stock Exchange ("AIM") and it is expected that admission will take place, and trading in those ordinary shares will commence from 8:00am on 17 December 2020 ("Admission").

Following Admission, BPC's issued share capital will consist of 4,503,048,549 ordinary shares, with each ordinary share carrying the right to one vote. The Company does not hold any ordinary shares in treasury. This figure of 4,503,048,549 ordinary shares may therefore be used by shareholders in the Company, as the denominator for the calculations by which they will determine if they are required to notify their interest in, or a change in their interest in, the share capital of the Company under the FCA's Disclosure Guidance and Transparency Rules.

Regulatory Statements

The information communicated in this announcement contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) No. 596/2014.

For further information, please contact:

Notes to editors

BPC is a Caribbean and Atlantic margin focused oil and gas company, with a range of exploration, appraisal, development and production assets and licences, located offshore in the waters of The Bahamas and Uruguay, and onshore in Trinidad and Tobago, and Suriname. BPC is currently on-track for drilling an initial exploration well in The Bahamas, Perseverance #1, in late 2020 / early 2021, with the well targeting recoverable P50 prospective oil resources of 0.77 billion barrels, with an upside of 1.44 billion barrels. In Trinidad and Tobago, BPC has five producing fields, two appraisal / development projects and a prospective exploration portfolio in the South West Peninsula. BPC's exploration licence in Uruguay is highly prospective, with a potential resource of 1 billion barrels of oil equivalent. In Suriname, BPC has an onshore appraisal / development project.

BPC is listed on the AIM market of the London Stock Exchange.  www.bpcplc.com

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