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Bahamas Petroleum Company’s investor makes first conversion of loan notes

It is part of the explorer's efforts to ensure the Perserverance-1 well, to spud in April, is funded with or without a farm-out partner

Bahamas Petroleum Company PLC - Bahamas Petroleum Company’s Bahamian investor makes first conversion of loan notes

Bahamas Petroleum Company PLC (LON:BPC), after Wednesday’s close, announced a partial conversion of recently issued loan notes.

The exploration company last week inked a £8mln arrangement to issue zero-coupon convertible loan notes to a Bahamian based institutional family-office investor.

Shortly thereafter it made an initial draw-down of £2.7mln (after fees it received £2.43mln) and it has subsequently received the first conversion notice, for £1.44mln from the first draw-down.

READ: Bahamas Petroleum Company could be worth double - broker

As a result, the company will now issue some 48mln new BPC shares.

The company noted that the other £1.26mln of notes remain in issue and it will have the option to issue more loan notes to the investor in April, May, June and July.

The loan note facility is among a number of funding efforts implemented by the company which enable it to advance to the drilling of the Perseverance-1 exploration well without dependence upon a farm-out partnership – although securing such a deal remains a goal of the company.

As it set up the facility last week, BPC noted that farm-out options are still being evaluated as part of the company’s overall risk mitigation strategy ahead of hotly anticipated exploration drilling in Bahamian waters.

Funding independently

Chief executive Simon Potter told investors that the facility would allow the company to “go it alone” if that was necessary.

He highlighted that the facility provides funding availability and a high degree of financial flexibility.

"We continue to make rapid progress toward the drilling of Perseverance #1, our first exploration well in The Bahamas, expected to commence in April 2020,” Potter said.

“Since mid-2019 we have progressively been implementing a coordinated funding strategy, with a view to ensuring we have access to the funds necessary for drilling, as and when we need them.

“This measured approach means that we have now secured a funding package with considerably less overall dilution to shareholder equity than most commentators expected would be required.

“Moreover, through this process we have consistently put the interests of our shareholders first.”

Countdown to Perseverance

A month ago, BPC said that its hotly anticipated first exploration well is expected to get underway in April.

Perseverance-1 will be drilled in the northern segment of the ‘B Structure’ to target some 770mln barrels of recoverable prospective resources, with the ‘upside case’ estimates potentially pitched twice as high.

The B Structure is seen across some 70-80 kilometres and could host up to multi-billion barrels of crude resources.

Assuming an April start, results would follow later in the second quarter.

In a note yesterday, house broker Shore Capital identified a number of catalysts and milestones into and through the Perseverance-1 programme.

“We expect BPC to make further announcements in the lead up to spudding,” said analyst Craig Howie.

“We sense that announcement of a rig contract will be a particularly noteworthy milestone for investors to look forward to, as BPC targets significant prospectivity across acreage which has already been substantially derisked and delineated over several years.”

Shore Cap has today updated its valuation to reflect the progress towards Perseverance and, pitched at 8p per share, the broker’s ‘risked NAV’ for the company compares against a current share price of 4.25p.

Quick facts: Bahamas Petroleum Company PLC

Price: 3 GBX

Market: LSE
Market Cap: £69.83 m

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