In the oil and gas industry a farm-out of an asset to a larger peer can offer a ringing endorsement of its potential – on the flip-side the exit of a major partner can have the opposite effect. Accordingly, Caribbean oil explorer Bahamas Petroleum Company (BPC:AIM) drops 9.3% to 3.9p as Norwegian oil major Statoil (STL:OL) abandons plans to jointly develop licences off the coast of the Bahamas.
As a result of this decision, the three licence applications − Zapata, Falcones and Islamorada − will revert to BPC. Putting a positive spin on events, the £42 million cap says it can now offer a 'wider suite of options' to prospective partners as it progresses a farm-out of the five licences it has already been awarded.
An independent audit of these licences, conducted by industry consultant Ryder Scott and released in July 2011, identified four 500 million barrel-plus prospects.
The group is under considerable time pressure to secure a deal as it is required under licence commitments to drill an exploration well by April 2015. Planning a well is likely to take up to 12 months and with reported cash of $17.3 million, going it alone is not an option. Securing an agreement in the next couple of months therefore looks to be a must.
Lessening political risk may help. In September 2012, Bahamas prime minister Perry Christie had announced a general referendum on future oil drilling would be held at some point in 2013 but in March last year this process was deferred until after commercial reserves of oil and gas have been established.