According to an independent audit of Bahamas Petroleum’s (BPC:AIM) assets off the coast of the Caribbean islands the company could be sitting on billions of barrels of oil. This seems at odds with a market value which, even after today’s rise of 61.5% to 1.05p, stands at just £20m.

The report, carried out by consultant Moyes & Co, suggests between 1.6bn and 3.3bn barrels could be recovered from its southern licences. It also suggests less that a discovery of 200m barrels or more would be sufficient for a development to be economic.

There are three key reasons the market is giving the company little credit for this potential:

POLITICS: It has been beset by political issues as, over time, the government of The Bahamas has shifted its position on oil exploration. There is understandable sensitivity around environmental risks given tourism accounts for around 50% of GDP.

PARTNER (OR LACK THEREOF): Since Norwegian oil firm Statoil exited in 2014, BPC has been on the hunt for a partner which can meet the significant costs of drilling a well offshore The Bahamas.

PRESSURE (OF TIME): The company has around $3m in the bank after a modest placing earlier this year and says it has enough money to cover normal operations in 2018. Under the current terms of its licence it needs to commence activity on an exploration well in April 2018.

All these issues need to be addressed for the valuation to more fully reflect the barrels in the ground.

What are the hopes of progress in 2018? A new government was elected in The Bahamas in May and the company says it has been ‘proactively’ meeting with the administration to press its case.

The company is making progress on a farm-out process but arguably has a weak negotiating hand given its relatively tight finances and the looming commitments on the licence.

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Issue Date: 20 Dec 2017