Oil explorer Bahamas Petroleum (BPC:AIM) slicked up 43.8% to 6.83p after The Bahamas government gave an effective green-light to exploration drilling. The shares still remain a long way off their 52-week high of 12.5p and investors will be hoping the breakthrough can help advance farm-out talks. The group needs a partner with deeper pockets to share the extensive costs of exploring off the coast of the Caribbean Islands.
An independent audit of the firm's assets, conducted by industry consultant Ryder Scott and released in July 2011, identified four 500 million barrel-plus prospects and as at 30 June 2012 the group had $26.6 million on its balance sheet to chase this opportunity.
Spudding a well remains a distant catalyst, as the group says it will be at least a year before it will be in a position to commence drilling. There are clear sensitivities - tourism accounts for more than 60% of the Bahamas' gross domestic product (GDP) and in September 2012 the newly-elected prime minister Perry Christie announced a general referendum on future oil drilling would be held at some point in 2013.
This rocked market confidence in the company, which had previously outlined plans to drill an exploration well in the first quarter of this year and by the end of 2012, the stock was in the doldrums, trading at just over 4p.
The authorities have now decided any poll can be deferred until after exploration drilling has taken place, in order to enable voters to make 'an informed decision'. Though political concerns have dogged the explorer, on the face of it the operating environment in The Bahamas has much to recommend it. Fiscal terms are structured around sliding scale production based royalties, ranging from 12.5% to 25%, there is no income or corporation tax and no capital gains tax on transactions.