BPC.L Regulatory News (BPC)

9 March 2020

Bahamas Petroleum Company plc

("Bahamas Petroleum" or the "Company")

Funding Strategy Update

Bahamas Petroleum Company, the oil and gas exploration company with significant prospective resources in licences in The Commonwealth of The Bahamas, is pleased to provide the following update in relation to its financing strategy for the drilling of Perseverance #1, its first exploration well to be drilled in The Bahamas.

Highlight

· Company and the parties to the Conditional Convertible Note Agreement agree extension of date for satisfaction or waiver of all conditions precedent and election to subscribe to 15 April 2020, which in defined circumstances may be further extended to 15 May 2020

· Circumstances agreed in which  the Company (at its sole option) can scale back the amount of the Convertible Notes by up to 50%, at no cost or penalty, should more advantageous financing become available

· Subscribers for the Convertible Notes have elected to exercise some of their options and have made payment to the Company in respect of that exercise

Details

On 10 October 2019, the Company entered into a subscription agreement (the "Conditional Convertible Note Agreement") in relation to a conditional convertible loan note investment of £10.25 million (as more particularly described in the Company's announcement of that date and subsequently in the Company's Open Offer Circular as sent to all shareholders in October 2019 - the "Convertible Notes"). On 30 January 2020, the date for the satisfaction or waiver of the conditions precedent to draw-down of the Conditional Notes was varied from 15 February 2020 to 9 March 2020, with all other terms and conditions remaining unchanged.

As at today, two substantive conditions precedent remain unfulfilled:

1. Formal placement of an insurance policy for drilling operations - the Company has to date received a number of proposals from globally recognised lead insurers, which are presently being evaluated (placement of an insurance policy in any event being a pre-requisite for mobilisation of a rig to site); and

2. Entry into a definitive contract for provision of a drilling rig.

A number of other more procedural conditions also remain to be satisfied, including:

1. The Company entering into a long-form master services agreement for integrated well services - the final form of which has already been agreed with the relevant service provider; and

2. The Company reaching final agreement with the Government of The Bahamas on remaining licence fees (if any) that may be payable until the end of the current licence period (31 December 2020) - it being noted that within the Environmental Authorisation (as announced by the Company on 27 February 2020) a process has been established for this to occur within 60 days of the date of that Environmental Authorisation.

The Company is progressing each of these and will advise shareholders as appropriate.

However, given that there remain conditions to be fulfilled, the Company and the parties to the Conditional Convertible Note Agreement (the "Subscribers") have today agreed further variations of the terms of that agreement, as follows:

1. The date for satisfaction or waiver of all conditions precedent and election to subscribe to the Convertible Notes is further extended to no later than 15 April 2020. Further, to the extent that the Subscribers elect to subscribe on an unconditional basis for at least £1.5 million of Convertible Notes prior to 15 April 2020, the date for the satisfaction or waiver of the conditions precedent to draw-down of the balance of the Convertible Notes will be extended to 15 May 2020 (with accrual of interest not commencing until actual remittance of funds by the Subscribers to the Company, and therefore with no cost to the Company until that time).

2. Prior to 31 March 2020, the Company (at its sole option) can notify the Subscribers that the Company wishes to scale back the amount of the Convertible Notes by up to 50%, at no cost or penalty to the Company (the Company has previously noted that, should alternative financing become available on terms more advantageous than the Convertible Notes, it would consider substituting part of the Convertible Notes, thereby achieving a better outcome for shareholders - this agreed amendment clarifies the Company's ability to do so).

Throughout this time, the Company has also continued to assess options for a farm-out or similar transaction as part of its overall risk mitigation and funding strategy, and has maintained an active dialogue with a number of interested parties, including a number of oil and gas majors and supermajors. The Company will advise shareholders on this matter as appropriate.

As detailed above, draw down of funds from the Conditional Convertible Note Agreement remains dependent on conditions first having been satisfied. To the extent the conditions are not satisfied there is a risk that the Company will not be able to receive the funding contemplated in the Conditional Convertible Note Agreement, unless those conditions are waived by the Subscribers. However, the Directors are confident that the conditions precedent can be satisfied such that funding will be available as and when required. In addition, on 20 February 2020 the Company entered into a second ranking zero coupon unsecured convertible note facility (as more fully described in the market announcement made by the Company on that date), so as to provide a further level of funding certainty, such that if for whatever reason all or part of the funds under the Conditional Convertible Note Agreement are not available, funds from that facility could be drawn in lieu.

Under the terms of the Conditional Convertible Note Agreement, the Subscribers were issued with 25,000,000 options exercisable at 2p per share. In conjunction with the agreed variations to the Conditional Convertible Note Agreement, the Subscribers have elected to exercise 3,250,000 of these options, and have made payment to the Company of £65,000 in respect of that exercise. The Company will proceed to issue 3,250,000 new ordinary shares (the "Exercise Shares") to the Subscribers, and application will be made for the Exercise Shares to be admitted to trading on the AIM market of the London Stock Exchange. It is expected that admission will take place on or around 13 March 2020 ("Admission").

Following Admission, the Company's issued share capital will consist of 2,221,350,114 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 2,221,350,114 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.

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

"We continue to make steady progress toward drilling of the Company's 100% owned and operated Perseverance #1 well, targeting recoverable prospective resources of 0.7 - 1.4 billion barrels of oil. As we prepare for drilling we are taking every opportunity to optimise a large number of moving parts - both financial and operational - and as part of this process we have successfully "reset" the timeline for our Convertible Notes while we work on finalising remaining conditions, at the same time seeking to only draw funds when they are actually required, with a view to reducing the overall cost of our comprehensive funding package. We have also been able to introduce a degree of optionality into those arrangements as we continue to pursue potentially more attractive options - for example, a farm-in - which would mean we could correspondingly scale back the Convertible Notes, consistent with our funding strategy to minimise costs and dilutionary impact. I look forward to updating shareholders on our continued progress over the coming weeks."

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:

www.bpcplc.com