Bahamas Petroleum Company has further cut the estimated cost of its upcoming exploration well in the Bahamas, as it is working to secure the cash needed for drilling.
The company on Friday said it had received funding offers for the first well to be drilled in 2020 offshore the Bahamas, in BPC’s acreage with “a multi-billion-barrel potential.”
At the same time, the company says it is in talks with multiple parties regarding a potential farm-in, which would be the company’s preferred option to secure the required well funding.
Bahamas Petroleum Company acquired its Bahamas blocks in 2007. So far, the company has spent over $100 million on technical work such as seismic acquisition, interpretation, and studies over its blocks located near the maritime border with Cuba.
Earlier this year, BPC received an extension for its offshore blocks in the Caribbean country until the end of 2020. With the extension came an obligation to drill an exploration well at its 4 commercially co-joined offshore licenses Bain, Cooper, Donaldson, and Eneas sitting at water depths of around 500 meters (1500 feet). BPC has said its acreage has a low minimum economic field size at c. 150 million barrels, with an estimated break-even price of $30 – 40 a barrel.
BPC has been for some time now unsuccessfully trying to secure a farm-in partner for its offshore acreage, to help fund the obligatory exploration well. This has driven the company to seek alternative options, and BPC last month said it might drill it alone, subject to securing the necessary funds.
In its update last month, BPC said it had entered into a conditional agreement with Bizzell Capital Partners Pty Ltd (“BCI”) for a convertible loan investment of £10.25 million (approximately US$12.5 million).
BPC at the time also said it had reached agreements with Seadrill for an offshore drilling rig for the well, and with BHGE and Halliburton for well services and equipment.
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Looking at loans, hoping for a partner
According to BPC’s August 21 report, the well cost estimate had been in the range of US$25 million to US$30 million, “a material reduction from prior estimates (previously in the range of US$60 million to US$ 80 million for a single well).”
In an update on Friday, BPC provided an even lower estimate for the well cost – $20 million to $25 million. This still means that BPC, subject to getting the $12,5 million from BCI, will have enough cash to fund only a half of the exploration well costs.
As for the remaining funds needed – in case no farmout partner is found – Simon Potter, Chief Executive Officer of BPC on Friday said: “The Company has also received four other funding proposals (some of which individually but certainly all in aggregate, if contracted and fully drawn-down, would cover the anticipated cost of the well), as well as multiple other expressions of interest, all of which are currently being evaluated. We hope over the near-term to be able to advise shareholders of further progress in this regard.”
While evaluating funding proposals, the company is still hoping to find a farm-out partner and says it is in talks with multiple parties
The CEO said: “To date, the company’s focus has been predominantly on securing funding via a farm-in agreement, and farm-in discussions are continuing. Multiple parties are currently engaged in ongoing due diligence and commercial discussions, and it remains the company’s preference to secure all or part of the required well funding through this structure.
Sevan Louisiana for the job?
According to the August 21 report, a Seadrill rig would be deployed in the Bahamas in the first half of 2020 and would arrive from its current working location in the nearby Gulf of Mexico. The drilling plan might be extended to a two-well program should funding permit.
Under the agreement, the firm contract for the offshore drilling rig, subject to various conditions, is to be signed by October 11, 2019, at the latest, the date by which BPC needs to prove to Seadrill it has the funds needed to pay for the contract.
Worth noting, while BPC has yet to officially say which rig exactly is being considered for the job, the company earlier this month published a presentation in which it said it would use a 6th generation Seadrill drilling unit. In the presentation, BPC showed a photo of Seadrill’s Sevan Louisiana rig. BPC also said the dayrate would be US$215,000 (this was still at the time when the full well cost estimate was $25 million to $30 million).
It is worth stressing that BPC used the Sevan Louisiana image for illustration only, as nowhere in the presentation was the rig explicitly named. However, there are reasons to believe this rig specifically might be used for BPC’s first offshore well.
Namely, according to data on Bassoe Analytics, there are currently six Seadrill/Seadrill Partners rigs in the U.S. GOM region, three of them being 6th gen units. The three are the Sevan Louisiana, the West Capricorn, and the West Sirius.
Bassoe Data shows the 2008-built West Sirius to be cold-stacked – meaning pretty much out of the Bahamas drilling equation.
The West Capricorn is soon to complete its contract with LLOG, and move on a new deal with Kosmos, also in the Gulf of Mexico. The Sevan Louisiana contract with Walter Oil & Gas was suspended from operations in February while repairs were being performed and resumed the Gulf of Mexico work in August.
Both the Sevan Lousiana and the West Capricorn contracts are expected to end in December 2019.
Offshore Energy Today Staff
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