BPC.L Regulatory News (BPC)

14 June 2017

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

Placing to raise US$3.25 million (£2.6 million)

Bahamas Petroleum Company plc, the oil and gas exploration company with a significant prospective resource in licences in The Commonwealth of The Bahamas, is pleased to announce that it has raised US$3.25 million (£2.6 million) before expenses through a firm and conditional placing of 260,000,000 new ordinary shares of 0.002p each (the "Placing Shares") at a price of 1 pence each ("Placing Price") (the "Placing").

Highlights:

· Placing to raise gross proceeds of US$3.25 million (£2.6 million) through the issue of 260,000,000 Placing Shares at a price of 1p each.

· Placing comprises firm placing of £1.1 million comprising 110,000,000 new ordinary shares (the "FirmPlacing") ("Firm Placing Shares") and conditional placing of £1.5 million comprising of 150,000,000 new ordinary shares (the "Conditional Placing") ("Conditional Placing Shares").

· Directors and certain Company executives have indicated an interest in participating in the Placing on the same terms, such participation to be advised once the Company has released its Financial Statements to 31 December 2016 (expected to be released on 15 June 2017) and is therefore out of the closed period for trading. This participation, once confirmed, will increase the size of the Conditional Placing.

· Proceeds of the placing will be used to fund the Company as it seeks to complete a farm-in or other financing sufficient to enable drilling of an exploration well on the Company's southern licences.

· BPC is confident of being able to conclude a farm-in:

· Oil market sentiment is improving, rig rates remain low and there is renewed interest in frontier exploration plays by oil industry majors - BPC believes the bottom of the cycle is passed;

· Bahamas regulatory framework now fully enacted, and BPC's licences renewed and extended such that licence tenure, work obligation and the overarching regulatory regime are clear;

· Project fundamentals remain unchanged: potentially multi-billion-barrel prospects, attractive fiscal terms, and proximity to world's largest oil market with infrastructure and services;

· Commercial negotiations ongoing with several parties; given improved industry sentiment others have re-entered the process.

· Approximately 70% of funds raised with be expended to ensure the Company's licences are maintained in good order pending and through the farm-in process, for example, on licence fees and direct in-country costs.

· Director and executive fee deferral arrangements, as previously announced, will continue to apply pending conclusion of a farm-in or other financing sufficient for the drilling of an initial exploration well on the Southern Licences, such that only a relatively small percentage of the funds raised (less than 8%) will be applied to Director / executive compensation.

· Extraordinary General Meeting to be held on or about 14 July 2017 to approve Conditional Placing ("EGM"). Notice for the EGM will be sent to shareholders in the near future.

Bill Schrader, Chairman of Bahamas Petroleum Company plc commented:

"BPC has assets that are potentially world class in scale. Over the past eight years the Company has substantially delineated and de-risked its assets, both technically and commercially. The next step is drilling.

In order to do this, BPC needs to source funding, and our strategy remains to do so from an industry partner, via a farm-in. BPC has made pleasing progress on this task, is in active commercial negotiations with a number of parties, and the Board and I remain confident that a farm-in will ultimately be concluded as evidenced by our expressed interest in participating in the placing once we are permitted to do so by the closed period trading rules.

I would like to thank all our existing and new shareholders for their continued support."

EXPECTED TIMETABLE OF PRINCIPAL EVENTS

An updated company presentation is also available on the Company's website which can be downloaded using the link below:

http://www.bpcplc.com/media-centre/presentations-webcasts.aspx

Ends

For further information, please contact:

Notes to editors:

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

www.bpcplc.com

This announcement contains inside information for the purposes of Article 7 of EU Regulation 596/2014.

1. Introduction

The Company is proposing to raise £2.6 million (before expenses) through a firm and conditional placing of 260,000,000 Placing Shares at the Placing Price of 1pence. Further details of the terms of the Placing are set out below under the heading "Details of Placing" and "Use of proceeds".

The Firm Placing is conditional, inter alia, on First Admission (which is expected to become effective with dealings in the Firm Placing Shares to commence on or about 21 June 2017); and the Conditional Placing is conditional, inter alia, on Second Admission (which is expected to become effective with dealings in the Conditional Placing Shares to commence on or about 17 July 2017). The Placing has not been underwritten.

Shore Capital Stockbrokers Limited, ("Shore Capital"), has acted as a broker for the Company for the purposes of the AIM Rules for the Placing, and has been appointed as broker to the Company on an ongoing basis.

2. Details of the Placing

The Placing will raise, in aggregate, £2.6 million (before commissions and expenses) through the conditional placing of the Placing Shares at a price of 1 pence per share with institutional and other investors. Having considered the price at which the Ordinary Shares are currently traded, feedback from investor marketing and other factors, the Directors have resolved that the Placing Price is appropriate.

The Firm Placing Shares (110,000,000 shares) are being placed pursuant to existing authorities granted to the Directors by clause 6.4.4 of the Company's Articles of Association while the Conditional Placing Shares (150,000,000 shares) are being placed conditional, inter alia, on the passing of the relevant resolutions at the EGM.

The Placing Shares in aggregate, when issued, will represent approximately 17.5% per cent. of the Company's Enlarged Share Capital immediately following Second Admission. The Placing Shares will rank in full for all dividends with a record date on or after the date of Admission and otherwise equally with the Ordinary Shares in issue from the date of Admission.

Directors and certain Company executives have indicated an interest in participating in the Placing on the same terms, such participation to be advised once the Company has released its Financial Statements to 31 December 2016 (expected to be released on 15 June 2017) and is therefore out of the closed period for trading. This participation, once confirmed, will increase the size of the Conditional Placing accordingly.

The Firm Placing (which is not being underwritten) is conditional, amongst other things, upon:

(a) the Placing Agreement becoming unconditional in all respects (save for First Admission and Second Admission) and not having been terminated in accordance with its terms prior to First Admission; and

(b) Admission of the Firm Placing Shares becoming effective on or before 8.00 am on 21 June 2017 or such later date as the Company and Shore Capital may agree, being no later than 8.00 am on 31 July 2017.

The Conditional Placing (which is not being underwritten) is conditional, amongst other things, upon:

(a) the Placing Agreement becoming unconditional in all respects (save for Second Admission) and not having been terminated in accordance with its terms prior to Admission;

(b) Shareholders passing the resolutions to be set out in a circular granting the directors authority to allot and issue relevant securities (including the Conditional Placing Shares); and

(c) Admission of the Conditional Placing Shares becoming effective on or before 8.00 am on 17 July 2017 or such later date as the Company and Shore Capital may agree, being no later than 8.00 am on 31 July 2017.

2.1. The Placing Agreement

Pursuant to the terms of a Placing Agreement entered into between the Company and Shore Capital, Shore Capital has conditionally agreed to use its reasonable endeavours, as agent for the Company, to procure subscribers for the Placing Shares at the Placing Price with certain institutional and other investors.

The Placing Agreement contains warranties from the Company in favour of Shore Capital in relation to, inter alia, the accuracy of the information in this announcement and other matters relating to the Group and its business. In addition, the Company has agreed to indemnify Shore Capital in relation to certain liabilities it may incur in respect of the Placing. Shore Capital has the right to terminate the Placing Agreement in certain circumstances prior to Admission, in particular, in the event of a material breach of the warranties given in the Placing Agreement, the failure of the Company to comply in any material respect with its obligations under the Placing Agreement, the occurrence of a force majeure event which in Shore Capital's opinion may be material and adverse to the Company or the Placing, or a material adverse change affecting the financial position or business or prospects of the Company. 15.6 million unlisted warrants to subscribe for new Ordinary Shares at the Placing Price per share for a period of 24 months from Second Admission, are to be issued to Shore Capital as part compensation for services provided under the Placing Agreement.

2.2. Settlement and dealings

Application will be made to the London Stock Exchange for the Firm Placing Shares to be admitted to trading on AIM. It is expected that First Admission will become effective and that dealings in the Firm Placing Shares will commence on or about 21 June 2017.

Application will be made to the London Stock Exchange for the Conditional Placing Shares to be admitted to trading on AIM. It is expected that Second Admission will become effective and that dealings in the Conditional Placing Shares will commence on or about 17 July 2017, subject to the passing of the relevant resolutions at the EGM.

The Placing Shares being issued pursuant to the Placing will, on Admission, rank in full for all dividends and other distributions declared, made or paid on the Ordinary Shares after Admission and will otherwise rank pari passu in all respects with the current issued Ordinary Shares.

3. Use of proceeds

The Company intends to use the net proceeds of the Placing for licence fees, project development, and general business expenses while the Company seeks to complete a farm-in with an industry partner or secure other financing sufficient to enable drilling of an initial well on the Company's Southern Licences. The net proceeds of the Placing will ensure that the Company has sufficient working capital for at least the next 12 months, by which time the Directors expect to have completed a farm-in or otherwise secured the funding to enable drilling to occur on its Southern Licences.

Approximately 70% of the funds raised will be expended on costs and expenses considered necessary to ensure the Company and the Southern Licences, which comprise the Company's primary asset, are maintained in good order pending and through the farm-in process. These costs and expenses include, inter alia, licence fees, direct in-country costs and expenses (for example, the cost of maintaining a physical office presence and data-room in The Bahamas), essential staff costs (and in particular, local Bahamian staff), and other necessary fees and expenses.

A further approximately 10% will be applied towards general expenses considered necessary to see the Company through the farm-in process, including the costs associated with maintaining the Company's AIM listing (for example, AIM fees).

It is noted that the Company had previously announced that the directors of the Company had agreed to defer 50% of their fees, with such deferred fees to be repaid in shares conditional on successful conclusion of a farm-in or other financing sufficient for the drilling of an initial exploration well on the Southern Licences. The Company had also previously announced that the CEO of the Company had agreed to defer 90% of all salary on the same basis. These arrangements will continue to apply such that only a relatively small percentage of the funds raised (less than 8%) will be applied to remuneration of the Chief Executive and Board (in the absence of a farm-in).

4. The Company's Business and Assets

Overview

The Company currently has five exploration licences for oil exploration covering approximately 16,000 km2 (4 million acres) in the territorial waters and maritime Exclusive Economic Zone of The Bahamas. The five exploration licences, referred to as Bain, Cooper, Donaldson, Eneas (these four licences together referred to as the Southern Licences) and Miami are held through wholly-owned subsidiaries of the Company, and were initially awarded on April 26, 2007 for a period of twelve years, with renewal nominally every three years. Subsequently, the Company received a number of extensions on the initial three-year term of each of the licences such that the second term for the Southern Licences commenced on the 8 June 2015.

On entering this second term for the Southern Licences the Company was obliged to commence activity on an initial exploration well with equipment capable of drilling to a depth of at least 18,000 feet by April 2017. In March 2017 this date was subsequently extended by agreement with the Government of The Bahamas to April 2018, with all attendant licence obligations correspondingly extended.

In respect of the Miami licence the Company remains in discussion with the Government concerning the nature and extent of any future obligations associated with entering a second term should it so wish.

In addition to the Southern Licences, the Company made applications with the Government initially for a further five licences in the Cay Sal region of The Bahamas on-trend from the existing acreage holdings but in 2015 consolidated these applications from five to three. For these three revised applications, approval is pending.

At the conclusion of the second term for the Southern Licences they may be extended for two further exploration periods of up to three years, on approval of The Bahamas Government, with an obligation to commence the drilling of a new exploration well essentially every two years following the initial exploration well. At any time the Company may apply for a production lease in respect of all or part of the area covered by the Southern Licences. Any such production lease would give the Company the right to produce petroleum from that production area for a term of 30 years.

After the Company was awarded its licences in 2007, the first task was to collect all available historic geological and geophysical data from previous oil exploration projects in the country. As a result of a three-year international search and the purchase of historical materials from oil companies, universities and research institutions, the Company acquired extensive material which included well cores, rock samples and thin sections, a large amount of regional 2D seismic data (of varying quality), magnetic and gravity data and well logs. Once acquired this data was re-examined using modern technologies and interpretative techniques the results of which provided the Company with the encouragement to invest further in the acquisition of new information, particularly seismic data, to better understand the detail of the petroleum systems and ultimate scale potential within the Company's licences.

In 2010 and 2011 the Company undertook the first modern seismic survey in the southern Bahamas since the 1980s. The results of this 2D seismic acquisition confirmed the presence of several large structures and provided the basis for an independent Competent Person's Report ("CPR") completed by Ryder Scott and released in July 2011. The CPR report provided an assessment of the hydrocarbon potential in the Bain, Cooper and Donaldson licensed areas. The key findings of the CPR report were the existence of multiple structures over these areas with considerable unrisked recoverable prospective resources of oil at a number of different reservoir horizons.

Subsequently the Company completed a 3D seismic survey in 2011 of 3,076 km2 within the Southern Licence area using the latest BroadSeis technology. The results of this 3D seismic survey not only better defined the prospective structures mapped on the 2D seismic survey, confirming that The Bahamas has petroleum potential within multiple, very large potential prospects, but also provided the data necessary to be able to design a well with the best chance of technical success at a reasonable cost estimate whilst being optimised from a safety perspective.

Since 2012, the Company has undertaken the FEED phase of the project to construct a number of well plan options, including various reviews of the previously drilled wells and subsequent updates taking into account changing global rig rates and conditions and providing a range of locations for the drilling of an exploration well to a depth of up to approximately 22,500 feet, which could take up to 120 days to drill and log.

Hitherto, a prerequisite for any drilling campaign has been the adoption of new safety and environmental regulations by The Bahamas Government. Such modernised and strengthened regulations were, following a three and a half year process, finally promulgated in July 2016, following enactment of updated Petroleum Legislation in March of the same year. These regulations for the first time include the concept of Environmental Authorisation as a part of the commencement of well activities which require the submission of both an Environmental Impact Assessment ("EIA") and an Environmental Management Plan ("EMP").

Accordingly, the Company has already submitted an EIA to the Bahamas Environment, Science and Technology Commission. The report determines the most likely impacts any exploration activities may have on the environment within the country and seeks to illustrate mitigating actions the Company could take. The Company has also sought to submit its EMP, which includes amongst other things an H2S plan, an Oil Spill Contingency Plan and an Emergency Response Plan, incorporating worst case discharge results, to The Bahamas Government and awaits its direction. The final preparation of the EMP document relies on site-specific and rig-specific data and will therefore be completed when The Bahamas Government mandate is received and a rig is identified.

The current proposed location of the first exploration well is in the Cooper - Donaldson licensed area, approximately 80 miles from Andros Island and 25 miles from the nearest Cuban islands. Ultimately the final well cost is highly dependent on spread rate, which includes rig rate and all support costs, but given recent developments in the global rig market is anticipated to be in the range of $60 million to $80 million. If commercial quantities are indicated from the exploratory well then the Company would proceed to the appraisal drilling phase thereafter.

Funding

The Company has been engaged in an active process to secure the financing required to undertake drilling on the Company's highly prospective Southern Licences. This process is ongoing.

It has been and remains the Company's strategy to secure such financing via a "farm-in", whereby another entity (ideally, but not necessarily, a major or large independent international oil and gas company) will acquire an interest in the Southern Licences, and in exchange will pay for all or a substantial part of the cost of drilling, and also reimburse the Company a proportion of the past costs incurred by the Company on those Southern Licences. This is a fairly typical structure for financing in the oil and gas industry.

A considerable number of suitable partners have engaged with the Company on the farm-out process, including undertaking technical and commercial due diligence and entering into negotiations. On this basis, the Company had hoped to have secured an acceptable farm-in with a suitable partner by this stage. However, the process of securing a farm-in partner has been hampered by a number of factors, and has thus taken much longer than anticipated. These factors have included the substantial reduction in the oil price during 2016, which resulted in a freeze on or slow-down in consideration of new business opportunities in many large oil companies. This also included the longer than anticipated time that it took to secure renewal of the Company's licences, and the longer than anticipated period of time taken for the adoption and enactment of new petroleum laws and regulations in The Bahamas.

More recently, the Company's view is that there has been a noticeable improvement in general oil industry sentiment: the oil price has appeared to stabilize, and recent market activity suggests that major oil companies are more actively evaluating and investing in exploration projects than they have in the past several years. As such, the Company believes the industry has passed the bottom of the cycle. At the same time, there is now certainty in relation to a number of "above ground" issues specific to the Company and its assets: the Company's licences have been renewed and extended such that timing and work obligations are clear, and the overarching legislative framework in The Bahamas is now fully in place and enacted. And the fundamentals of the Company's project have not changed: potentially multi-billion-barrel prospects, attractive fiscal terms, and proximity to the world's largest oil market with infrastructure and services.

The Company thus remains committed to the strategy of seeking a farm-in, and remains confident of eventual success. Discussions are continuing with a number of potential farm-in partners or investors, and in view of the general improvement in market conditions others have recently been seeking to re-engage in the process.

The purpose of the Placing is therefore to enable the Company additional time and financial capacity to successfully complete the farm-in process. If the Placing does not occur, the Company's cash resources are such that there is a very real prospect of the Company exhausting its available funding prior to a farm-in being completed.

The Company also considers that its negotiating position in potential farm-in discussions will be strengthened by having additional capital and a deeper shareholder base.

It is noted that despite the Company's confidence in this regard, no assurance can be provided that a farm-in or other financing will be concluded, or on what terms, or in what timeframe.

5. Extraordinary General Meeting, Shareholder Circular & Notice of Meeting

The EGM will be held at 11am on 14 July 2017 the Company's registered office at IOMA House, Hope Street, Douglas, Isle of Man, IM1 1AP. The purpose of the EGM is to consider and, if thought fit, to pass the resolutions necessary to authorise and carry out the Conditional Placing.

A circular containing a notice of extraordinary general meeting will be sent to Shareholders shortly. Shareholders should read the full text of the resolutions contained in the Notice of Meeting in the Circular. Copies of the Circular & Notice of Meeting will be available for inspection at the Company's registered office.

6. Application for admission

Application will be made to the London Stock Exchange for the Firm Placing Shares to be admitted to trading on AIM. It is expected that this admission will become effective and that dealings in the Firm Placing Shares will commence on or about 21 June 2017 ("First Admission").

Application will be made to the London Stock Exchange for the Conditional Placing Shares to be admitted to trading on AIM. It is expected that this second admission will become effective and that dealings in the Conditional Placing Shares will commence on or about 17 July 2017 subject to the passing of the appropriate resolutions at the EGM ("Second Admission").

7. Total voting rights

Following the First Admission but before the Second Admission, the Company's issued share capital will consist of 1,340,479,096 ordinary shares of 0.002p each ("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 1,340,479,096 Ordinary Shares may therefore be used by shareholders in the Company, between the dates of First Admission and Second Admission, 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 ("DTRs").

Following the Second Admission, the Company's issued share capital will consist of 1,490,479,096 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 1,490,479,096 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 DTRs. As noted, the Conditional Placing may increase in size once Directors and Company executive participation is advised. Updated issued share capital numbers will be provided accordingly.

8. Recommendation

The Directors consider the Placing to be in the best interests of the Company and its Shareholders as a whole and accordingly unanimously recommend Shareholders to vote in favour of the resolutions to be proposed at the Extraordinary General Meeting as they intend to do in respect of their beneficial holdings.