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Bahamas Petroleum eyes deal with major oil firm
Shares in Bahamas Petroleum (BPC:AIM) have nearly trebled in value to 3p off the back of possible partnership agreement with an unnamed major oil company.
The oil exploration minnow announced on 3 May it had entered into a confidentiality and exclusivity agreement which could lead to a ‘commercial transaction’.
Formed in 2005, the firm has a colourful history, having acquired some of the data on its Bahamian assets from a New Orleans warehouse in the wake of Hurricane Katrina.
The latest independent audit of its acreage off the coast of The Bahamas, carried out by consultant Moyes & Co, suggests between 1.6bn and 3.3bn barrels could be recovered from its southern licences.
It also indicates that a discovery of as little as 200m barrels would be sufficient for a development to be economic.
Bahamas Petroleum joined AIM through a reverse takeover in September 2008. At that point it hoped to commence drilling in 2012 but nearly a decade down the line it has still not sunk a well having been stymied by several different issues.
Despite last week’s share price rally, its shares are still 88% below their peak in 2011. Shareholders have also been diluted several times by share placings.
Over time, the government of The Bahamas has shifted its position on oil exploration. There is understandable sensitivity around environmental risks given tourism accounts for around 50% of GDP.
Bahamas Petroleum recently applied for environmental authorisation for drilling under new regulations introduced in 2016.
A lack of funding has also been an obstacle for the company and, in that regard, this latest announcement could be significant. Since Norwegian oil firm Statoil exited in 2014, the company has been on the hunt for a partner which can meet the significant costs of drilling a well offshore The Bahamas.
The exclusivity agreement itself should help give the company some breathing room in terms of its financial position – at the last count it had around $3m after a placing in summer 2017.
Under the terms Bahamas Petroleum will get $250,000 per month for an initial three months with an additional $250,000 for any monthly extension beyond that point up to a maximum of a further three months.
Unless a definitive agreement is reached with the counterparty, its identity is set to remain confidential. (TS)