Bahamas Petroleum Company has been awarded the AREA OFF-1 petroleum licence offshore Uruguay.

Highlights

• BPC has been awarded the OFF-1 licence, offshore Uruguay
• OFF-1 contains a management estimated resource potential of up to 1 billion barrels of oil equivalent (BBOE), based on current mapping from multiple exploration plays and leads in relatively shallow waters with significant running room
• The OFF-1 licence play system is directly analogous to the prolific Cretaceous turbidite discoveries currently being evaluated/developed offshore Guyana and Suriname
• OFF-1 has an initial 4-year exploration period, with a work obligation limited to reprocessing and reinterpretation of selected historical 2D seismic data - there is no drilling obligation, and the licence includes staged no-cost exit points at BPC's sole election
• OFF-1 is thus comparable to the "low cost option" represented by BPC's licences in The Bahamas when they were first awarded - a modest work commitment over 4 years that secures a sizeable, technically high quality, frontier play, with regional seismic available and exciting exploration upside
• Uruguay is a stable, well-regulated operating environment with an attractive, internationally comparable fiscal regime
• BPC believes that OFF-1 has the capacity to generate similar value uplift to the Company's existing licences in The Bahamas, where the Company's primary focus remains commencement of exploration drilling on Perseverance #1, expected to spud in late 2020 / early 2021, and targeting recoverable P50 oil resources 0.77 billion barrels, with an upside of 1.44 billion barrels

Simon Potter, Chief Executive Officer of Bahamas Petroleum Company, said:
"The scale of the opportunity that our planned drilling campaign in The Bahamas may unlock for us, at the end of 2020, means that our personnel are and will remain entirely focussed on their efforts to deliver the Perseverance #1 exploration well successfully.  

However, the current period of introspection in our industry is presenting nimble, forward-thinking companies such as ourselves with compelling opportunities to expand our portfolio and achieve countercyclical growth. The recently-closed Open Licencing round in Uruguay presented exactly such an opportunity for us where, for very low cost, we have been able to secure an exploration licence of an extremely high-calibre that, even as recently as a few months ago, we most likely would have been outbid on by much larger players.  

We are especially pleased to have been awarded OFF-1 given that the licence represents a similarly underappreciated opportunity to that secured by the Company in 2007 in The Bahamas - a licence in a region with extensive existing seismic of various vintages, but largely underexplored, and requiring the application of more modern, state of the art seismic imaging technology and techniques to understand the full extent of the petroleum resource.  

We are confident that over the next four years we can bring to bear our expertise, gained in The Bahamas over the past decade, on OFF-1 so as to more fully evaluate the licence's potential, in the hope that in the longer-term we can create an opportunity of equal value and industry interest to what we have thus far accomplished in The Bahamas."

Overview

BPC has been chosen as the successful applicant for the award of an exploration licence offshore Uruguay by the Uruguayan national regulatory agency, ANCAP. This follows a period in which BPC's technical and operational credentials were first evaluated by ANCAP and BPC was approved as a qualified offshore operator, and thereafter BPC submitted an application for the AREA OFF-1 block.

The OFF-1 licence provides for an initial four-year exploration period, during which time BPC will reprocess approximately 2,000 kilometres of legacy 2D seismic and undertake a number of new geotechnical studies. The Company expects that the cost of the work program in the initial period will consist of approx. US$200,000 per annum in historic seismic data acquisition and reprocessing, G&G studies and other technical work to be largely supported by the Company's existing technical staff base currently supporting operations in The Bahamas. Apart from the costs of completion of the minimum work program there are no annual licence fee payments, and no drilling is required in the initial four-year period, with extension into a second exploration period entirely at BPC's election. 

OFF-1 has many operational and subsurface similarities to BPC's licences in The Bahamas - the Uruguay and Bahamas acreage is in similar water depths, both contain multiple, lower exploration risk structural plays in addition to the high impact fans, and both have material volume scope and extensive running room.

About AREA OFF-1

The AREA OFF-1 licence has a total area of approximately 15,000 km² (comparable to BPC's four southern licences in The Bahamas which comprise an aggregate area of 12,500 km²) and is situated in water depths from 20 to 1000 meters, approximately 100 kms off the Uruguayan coast.

There has been considerable prior legacy activity on and adjacent to the OFF-1 block, comprising some historical 2D seismic (approximately 12,000 line-kilometres acquired from the early 1970s to 2015). However only two historic wells have been drilled to-date in the area (in 1976 by Chevron), with no 3D coverage. Current mapping reveals a diversity of exploration plays and leads in relatively shallow water and indicates an estimated resource potential of up to 1 billion barrels of oil equivalent (BBOE). Given the successfully bid fiscal regime, BPC's preliminary analysis suggests that any of the individually mapped current prospects is likely to be economic, even at currently historically low oil prices.

Technically, the OFF-1 exploration play is similar in nature to the prolific Guyana - Suriname basin currently being successfully explored by multiple oil companies, as well as the Cretaceous turbidite plays that have been successfully explored offshore north-eastern South America.

There has been considerable licencing activity proximate to OFF-1 in recent years. During 2019, oil majors Shell, BP, Total and Equinor bid for and were awarded various licences offshore Argentina, adjacent to ours which is proximate to the Argentina-Uruguay maritime border, and where the primary targets in those licences are likely to be the same Cretaceous plays potentially present in OFF-1. More recently, In December 2019, Kosmos Energy bid for and was awarded the two adjacent Uruguayan offshore blocks to OFF-1.

Uruguay is located in south-eastern South America, bordering Brazil and Argentina, and with a broad Atlantic Ocean coastline. The country has a relatively high income per-capita in the region, and represents an advantaged operating regime, frequently ranking first in Latin America in measures such as democracy, anti-corruption, and ease of doing business.

Strategic Rationale

BPC is fully on-track for exploration drilling in The Bahamas, with its Perseverance #1 well expected to spud in late 2020 / early 2021, and targeting recoverable P50 oil resources 0.77 billion barrels, with an upside of 1.44 billion barrels.

The Company believes a successful exploration well in The Bahamas will unlock the broader multi-billion potential of the petroleum resources across the Company's extensive 100% held licences in that country and position the project in The Bahamas for the next stage of appraisal and development. At such time, it has long been the Company's stated policy that the transformative value of the project would be maximised by introducing a long-term partner via a farm-in, and it continues to be the Company's view that a partnership with a large multinational oil company will offer considerable benefits when it comes to taking the project forward once the initial exploration well is completed.

In this context, the Company has for some time been seeking to secure a new project (or series of projects) to provide scope for a future growth trajectory once the Company's project in The Bahamas moves beyond the exploration phase and the Company itself moves into the next phase of its life.

In considering such potential new project(s), the Company has been especially interested in project(s) that exhibit core characteristics of being (i) low-cost, (ii) early-stage, and (iii) complementary to the Company's assets in The Bahamas, such that the Company can efficiently leverage its internal expertise gained in The Bahamas to similar operating and subsurface settings, so as to create value. 

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