London-listed oil company Bahamas Petroleum Company (BPC) has further pushed back the drilling of its first exploration well in The Bahamas, the Perseverance #1.
BPC said on Wednesday that the delay was a result of the “massive, unprecedented, and adverse impact of the spread of the COVID-19 virus.”
According to the company, drilling operations planned for the May/June 2020 timeframe can no longer be assured and are rescheduled to October 2020 onwards.
Cost-effective drilling can best be delivered by ensuring continuous operations throughout the entire period of the 45 – 60 day drill plan uninterrupted.
National and regional shutdowns are impacting the ability of drilling rigs and other mission-critical equipment to get properly prepared and certified for drilling due to travel bans and border closures. Also, The Bahamas declared a state of emergency with a curfew in place on March 17.
This is further compounded given the need to take into account the timing of the traditional hurricane season in The Bahamas which happens between July and mid-October.
“The Board has thus concluded that if the company was to continue to seek to commence drilling in the first half of 2020, there would be an unacceptable level of risk to the company’s ability to operate continuously, responsibly, safely, and within currently established guidelines, timelines and, as a consequence, budgets.
“Accordingly, the company has determined to postpone drilling operations until mid-October 2020 onwards, being after the expected peak in the COVID-19 response, and also after the peak risk period for hurricanes in The Bahamas,” BPC stated.
BPC added that the impact of the response to the spread of the coronavirus, both globally and in The Bahamas, also constituted a force majeure event under the terms of the company’s licenses. Due to that fact, BPC expects to receive a corresponding extension to the current term of the licenses from the Government of The Bahamas.
Simon Potter, CEO of BPC, said: “Given the ever-evolving adverse impact of the response to the spread of the Covid-19 virus – which is changing daily and is affecting everyone and all enterprises, around the globe – it has become clear to us that if we continue to push forward with drilling in the first half of 2020, safe and responsible operations would be compromised.
“Shareholders should be encouraged, however, that we are in a strong position to resume drilling activities toward the end of 2020, compared to where we were just a year ago. The company has cash reserves, and financial backers intent on flexibly supporting the company.
“We also have an approved environmental authorization from the Government of The Bahamas, farm-in discussions remain on foot, and the current crisis is presenting a number of interesting alternative opportunities for us.
“The spread of the Covid-19 virus represents a global threat to our collective way of life, and we all have to face reality over the coming months – which in the case of our company means pausing our drilling plans for a time, as hard as that may be. We hope that all of our shareholders, stakeholders, employees, and contractors take care, and stay safe and well in this extremely difficult time for all.”
No change in cost estimate
BPC said that the cost estimate for the Perseverance #1 well was in the range of $25 – $30 million, with potential contingencies for up to an extra $5 million. The company does not anticipate the cost estimate to change due to the rescheduled start of operations.
All previously agreed financial elements would see total funding availability of around $45 million, and issuance of approximately 1.6 to 1.8 billion new shares of BPC.
As a result of the global COVID-19 crisis, a large number of international drilling programs were canceled or postponed, and a large number of rig contractors are revisiting their work programs.
This is expected to have knock-on effects on rig availability and potentially lower rig pricing in the revised drilling window. BPC is already revisiting discussions with a range of contractors for securing a suitable drilling rig for the revised drilling window.
Furthermore, the company will continue to assess options for a farm-out or similar transaction in the coming months, and stated that a number of interested parties, including oil and gas majors and supermajors, have indicated that they would wish for discussions to continue regardless of the coronavirus global crisis and the recent decline in global oil prices.
BPC is also evaluating some potentially value-creating alternative strategic options presented to the company in light of the global COVID-19 crisis.
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