Just as Theresa May hopes to strike it third time lucky with her Brexit deal, so oil explorer Bahamas Petroleum (BPC:AIM) will be looking for its latest effort to find a partner to stick after two previously unsuccessful farm-out attempts.

For those unfamiliar with the term, in the oil industry a farm-out is when a company offers up an interest in an oil and gas asset, typically to a larger firm with deeper pockets, in return for funding its development.

READ MORE ON BAHAMAS PETROLEUM HERE

The shares fall by a third to 1.7p as it announces a placing to raise $2.5m at 1.6p. These funds will be used to keep the business ticking over while it pursues a farm-out agreement.

The company is at least slightly better placed to do so, having recently (22 Feb) secured an extension on its exploration licence off the Bahamas out to the end of 2020.

WHAT IS THE BACKGROUND

It has been a long and winding road for shareholders since the company joined AIM through a reverse takeover in September 2008. The plan at that point was to drill in 2012.

The intervening decade has seen these hopes frustrated with its original partner Statoil pulling out in 2014 and an unnamed oil major exiting an exclusivity agreement ahead of a potential farm-out back in August 2018.

The process has also been complicated by the shifting position of the Bahamian government towards oil and gas, unsurprising given its reliance on tourism. The extension of the company’s licence implies a more supportive political environment with a regulatory framework for the industry now in place.

WHAT DO THE ANALYSTS THINK?

House broker Shore Capital unsurprisingly strikes an optimistic tone. ‘BPC reiterates today that discussions are ongoing with a number of potential partners and, with licence terms having been successfully extended, we remain very optimistic that an appropriate transaction will ultimately be concluded, facilitating drilling of potentially world class prospects that have already been substantially de-risked and delineated over several years,’ says analyst Craig Howie.

Cantor Fitzgerald takes a more sober view: ‘Licenses were extended recently to the end of 2020, which gives the company some time, but probably not enough to get a partner and drill a well before expiry. As such, we think it remains unlikely that the company will succeed – particularly when the industry is far more excited by the potential in Guyana.’ You can the latest on AIM-quoted Eco Atlantic (ECO:AIM), which is active in Guyana, here.


Issue Date: 15 Mar 2019