Bahamas Petroleum secures rig for 'significantly reduced' cost

Bahamas Petroleum Company announced on Tuesday that, having postponed its ‘Perseverance 1’ drilling operation from the first half of 2020 due to the Covid-19 coronavirus pandemic, had now entered into a definitive contract with Stena Drilling for a drilling rig as soon as the fourth quarter.

The AIM-traded firm said that as a result, it was now able to provide an updated and “significantly reduced” cost estimate for its first exploration well in the Bahamas, along with a general update on expected timing and progress toward drilling.

It said the unconditional agreement with Stena Drilling was for the provision of a “state-of-the-art” sixth generation drilling rig, including the integrated supply of a managed pressure drilling (MPD) unit.

There was now a firm window for the start of drilling between 15 December and 1 February, which was consistent with the licence obligations as extended by Covid-19.

Bahamas Petroleum said the estimated total cost of Perseverance 1 was down by around 15%, based on the contracted rig rate and rates for other contracted services and equipment, reflecting changes to the global operating environment..

The Perseverance 1 well was targeting recoverable P50 oil resources of 0.77 billion barrels, with an upside of 1.44 billion barrels.

It said the reduced cost estimate created scope for expanded formation evaluation work in the success case, without increasing the previous estimated total capital requirement.

The board said its optimal funding strategy and timing, including the farm-out process, was being reassessed accordingly.

“In March, we were within weeks of commencing the drilling of our Perseverance 1 well when we were compelled to defer our planned drilling programme due to the impacts of the Covid-19 pandemic,” said chief executive officer Simon Potter.

“Immediately we undertook a range of activities necessary to reschedule activity toward the end of 2020 and into the first quarter of 2021, consistent with our licence obligations as extended for the declared force majeure event, by which time we expect the worst of the broad suite of impacts of the pandemic to be behind us.

“To this end we are pleased to announce that we have today entered into a rig contract with Stena Drilling, which provides a firm series of parameters on rig rate, provision of MPD, mobilisation and demobilisation costs, and defines a revised drilling window of 15 December 2020 to 1 February 2021.”

Potter said the decision to lock in a rig now, at an already favourable rig rate, rather than try and “second guess” what markets and availability would look like later in the year, spoke to the firm’s intent to ensure Perseverance 1 was drilled at the soonest opportunity, and provided the necessary certainty needed for operational planning.

“Acting decisively in this way is consistent with our single-minded focus on technical delivery.

“Importantly, the commercial parameters in the rig contract have allowed us to not only revise down significantly the anticipated well cost, but also clears the way to revisit our funding strategy with adequate time to ensure we have the funds available as and when we need them, on the best possible terms.”

At 1258 BST, shares in Bahamas Petroleum Company were up 18.63% at 1.61p.