Bahamas Petroleum Company (BPC) and Columbus Energy Resources have reached agreement on the terms of a recommended all-share merger by way of a share for share exchange offer to be made by BPC for the entire issued and to be issued ordinary share capital of Columbus. The Merger is to be implemented by means of a Court-sanctioned scheme of arrangement between Columbus and the Scheme Shareholders under Part 26 of the Companies Act 2006.

Under the terms of the Merger, Columbus Shareholders will be entitled to receive: 

• For each Scheme Share, 0.803 New BPC Shares
• The Offer represents a value of approximately 2.67 pence per Columbus Share based upon the BPC Closing Price of 3.33 pence per BPC Share on 10 June 2020, being the latest practicable date prior to the date of this Announcement.
• The Merger values the entire issued and to be issued share capital of Columbus at approximately £25.1 million, and the Offer represents a premium of 11 per cent. to the Columbus Closing Price of 2.40 pence per share on 10 June 2020, being the latest practicable date prior to this Announcement.
• Assuming that a maximum number of 803,635,279 New BPC Shares are issued pursuant to the Merger to the Scheme Shareholders and outgoing Columbus executives (collectively, the "Columbus Parties"), including additional New BPC Shares to be issued on or shortly after the Effective Date (i) in respect of termination payments to Columbus executives, as agreed, and (ii) in respect of the exchange of certain Columbus executives' nil-cost options for New BPC Shares, the Columbus Parties will in aggregate hold approximately 23.9 per cent. of the enlarged issued share capital of BPC immediately following the Effective Date. Assuming 80,000,000 New BPC Shares are issued pursuant to the Replacement Funding Agreement to settle the Lind Convertible Loan Agreement, BPC Shareholders and the investor under the Replacement Funding Agreement (collectively the "BPC Parties") will in aggregate hold approximately 76.1 per cent. of the enlarged issued share capital of BPC immediately following the Effective Date.
• Following implementation of the Merger, the existing Board and management team of BPC will remain unchanged. The management team consists of Simon Potter - Chief Executive Officer, Eytan Uliel - Chief Commercial Officer, Nathan Rayner - Chief Operating Officer, Benjamin Proffitt - Finance Director and Company Secretary, and David Bond - Drilling Director. Leo Koot (Executive Chairman of Columbus) will join the BPC Board as a Non-Executive Director (subject to the completion of customary due diligence) and Geoffrey Leid (Managing Director, Trinidad of Columbus) will join the BPC executive leadership team. Employment arrangements with Anthony Hawkins (current Chief Executive Officer of Columbus) and Gordon Stein (current Chief Financial Officer of Columbus) will terminate, albeit both will remain available on short-term consultancy arrangements to assist with transitional matters. Michael Douglas (Non-Executive Director of Columbus) will step down from the Columbus Board.
• The Merger requires approval by Columbus Shareholders in connection with the Scheme and approval by BPC Shareholders in connection with the allotment of New BPC Shares. 

Merger rationale

• Columbus is an AIM-quoted oil and gas producer and explorer focused on onshore Trinidad and Suriname. In Trinidad, the Columbus Group has five producing fields, two appraisal / development projects and a prospective exploration portfolio in the South West Peninsula, which lies in the extreme southwest of Trinidad and consists of stacked shallow and deep prospects. A discovery was announced by Columbus in two zones in one of these prospects in late April 2020, including high-quality light oil (circa 40-degree API) recovered to surface. In Suriname, Columbus has an onshore appraisal / development project.
• BPC is an AIM-quoted oil and gas exploration company focused on offshore exploration in licences located in the southern territorial waters of The Bahamas. BPC is currently on-track for drilling an initial exploration well, Perseverance #1, in late 2020 / early 2021, with the well targeting recoverable P50 prospective oil resources of 0.77 billion barrels, with an upside of 1.44 billion barrels. Across the BPC portfolio, BPC's assets in The Bahamas have an independently assessed resource potential of between 8 billion and 28 billion barrels STOIIP. BPC has also recently been awarded an exploration licence in Uruguay, which BPC considers to be highly prospective, with a potential resource of 1 billion barrels of oil equivalent.
• The Boards believe that a combination of Columbus and BPC will create a Caribbean and Atlantic margin focused oil and gas 'champion', with assets that range across the full spectrum of oil and gas activities, from exploration, appraisal and development to production. The Boards consider that the Merger offers a strong fit in terms of asset overlap and technical, operational and financial / risk diversification synergies.
• In particular, the Combined Group will have access to high-impact offshore exploration in The Bahamas with drilling expected to take place within the next nine months, material onshore exploration, appraisal and development projects in Trinidad, a material onshore appraisal and development project in Suriname, and longer-term exploration prospects of scale in Uruguay. All of this will be underpinned by existing production onshore Trinidad, which BPC believes can be materially increased at low cost by application of BPC's technical expertise.
• Moreover, the Boards believe the Combined Group will have the footprint, technical capabilities and scale to further grow and consolidate and deploy its combined expertise in the Caribbean and more broadly in oil and gas projects around the Atlantic margin, and in so doing, attract increased interest from investors / shareholders attracted to the broader, diversified portfolio of assets and risks that the Combined Group would represent.

Commenting on the Merger, Simon Potter, Chief Executive Officer of BPC, said:
"Today's announcement sees the maturing of our company into an Atlantic margin focused, full-cycle exploration and production company with multiple opportunities over the next 12 - 24 months for generating shareholder value across an asset base covering The Bahamas, Trinidad, Suriname and Uruguay.

In one bold step we have given ourselves a production base in Trinidad from which to generate cash, and the opportunity to leverage a range of low-cost developments via workovers, reactivations and new wells targeting shallow reservoirs, along with a range of further options for organic growth and exploration prospects. We also have low-cost appraisal of existing discoveries in the South West Peninsula of Trinidad to look forward to, and further infrastructure-led exploration at Weg Naar Zee in Suriname.

It is important to note that the forward work programme is largely discretionary, and therefore operational sequencing can be varied to optimize the use of available resources.

This enhanced asset base in Trinidad, Suriname and Uruguay is entirely complementary to, and in no way detracts from, our determined focus on our existing exploration base asset in The Bahamas, where we will see the build-up to drilling of the Perseverance #1 well in late 2020 / early 2021 - targeting P50 prospective oil resources of 0.77 billion barrels (with an upside of 1.44 billion barrels). A rig contract has already been signed for the drilling of this well, long-lead and critical path items have already been purchased, and globally renowned service companies are ready to work with us to ensure the safe and responsible completion of the well.

The board and management of BPC are looking forward to leading the staff of the combined company into the next stage of corporate development, where together we can continue to confidently mature prospects, grow production, and expand the asset base of the company.

It is with great pleasure that the BPC Board will be supporting this transaction and wholeheartedly commend the combination of the two companies to shareholders when they have the opportunity to vote."

Commenting on the Merger, Leo Koot, Executive Chairman of Columbus, said:
"Today we start a new and exciting chapter for Columbus Energy Resources and its shareholders. Following a period of intense due diligence and negotiation, we are delighted and pleased to have received a firm intention to make an offer from Bahamas Petroleum Company plc ("BPC") to merge our two companies. The merger is ideal in terms of asset overlap and will create a combined company that is stronger than the sum of its two parts.

Columbus Shareholders will gain access to the high-impact Perseverance #1 exploration well in The Bahamas, which we expect will be drilled in Q4 2020 / Q1 2021. If successful, Perseverance #1 will transform the company as it has a P50 prospective oil resource of 0.77 billion barrels, with an upside of 1.44 billion barrels. It is rare for a relatively small oil & gas company to have access to a prospective resource of this size.

In return, BPC gain access to our existing production base in Trinidad and our strong appraisal / development portfolio (namely in the South West Peninsula in Trinidad and the Weg Naar Zee Block in Suriname). Importantly, BPC brings a strengthened balance sheet to the combined group, and I believe the combined entity will be able to progress faster in unlocking the value of our appraisal and development assets.

The combined group will create a larger, more diversified oil and gas champion for the Caribbean and South America, with assets that range across the full spectrum of oil and gas activities, from exploration through appraisal and development to production.

The Columbus Board is unanimous in its recommendation that this merger is in the best interests of Columbus Shareholders and we hope you share our enthusiasm for the future of the combined entity. The Columbus Board intends to recommend that Columbus Shareholders accept the proposed transaction. We look forward to your support in the weeks ahead as we progress with the approvals to complete the merger."

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