BPC to use Seadrill rig for Bahamas drilling. Might do it without farm-in partner

Bahamas Petroleum Company has entered into a framework agreement with drilling contractor Seadrill, setting the terms for the potential use of Seadrill’s drilling rig for its first exploration well in the Bahamas in 2020.

As previously reported, the government of the Bahamas awarded Bahamas Petroleum an extension until December 31, 2020, for the second exploration period on its offshore licenses back in late February.

During the extension period, BPC has an obligation to drill an exploration well in the acreage which the company says has “a multi-billion-barrel potential.”

The agreement with Seadrill, the oil company said, sets out key commercial parameters, fixes a day rate, and specifies a time slot for delivery of the rig in the first half of 2020, from the rig’s current working location in the nearby Gulf of Mexico. The drilling plan might be extended to a two-well program should funding permit.

Under the agreement, the firm contract for the offshore drilling rig, subject to various conditions, is to be signed by October 11, 2019, at the latest, the date by which BPC needs to prove to Seadrill it has the funds needed to pay for the contract.

“Having rigs already identified as per this Framework Agreement allows BPC, with Seadrill’s input and support, to begin necessary time-sensitive preparatory work, and to complete permitting processes ahead of drilling,” Bahamas Petroleum said.

Apart from the agreement with the drilling contractor, Bahamas Petroleum has appointed Halliburton, as an integrated well services provider, and BakerHughes GE  for the provision of a range of well-related equipment, including wellheads and tubulars. The company has issued Notices of Award to each of the service providers, as a precursor to contract as is customary in the industry.

Worth reminding, the company has been for some time trying to attract a farm-in partner to finance an exploratory well on the company’s 100 percent-owned Bain, Cooper, Donaldson, and Eneas licenses.

Might drill without partner

As Offshore Energy Today previously informed, Bahamas Petroleum had in March said it was confident it would be able to find a partner for its acreage, however, the company on Monday said it was still looking for one in a process that is taking longer than anticipated.

“BPC continues to proactively pursue a farm-in as its primary financing strategy, and farm-in discussions are continuing with multiple parties, the license extension to the end of 2020 granted by the Government of The Bahamas earlier this year offering clarity to potential partners. However, the process is taking longer than anticipated, and has not yet produced a successful outcome,” Bahamas Petroleum said.

BPC has also hinted it might go it alone: “BPC has an obligation to drill an initial exploration well in 2020 and, in the view of the BPC Board, drilling as soon as practicable remains the best route to generating shareholder value. Accordingly, the company is now embarking on a course to the drilling of an initial exploration well during the first half of 2020, in the event that a farm-in is not concluded by then.”

According to the company, BPC has since the acquisition of its Bahamas blocks in 2007, spent over $100 million on technical work such as seismic acquisition, interpretation, and studies.

Drilling cost estimate down. Financing arrangements sought

The oil company has said it has sought to put in place a package of critical supply and service contracts, along with finance and certain other arrangements (which will be tabled with shareholders for approval at the Annual General Meeting), representing a coordinated approach to undertaking this activity.”

BPC now estimates the total cost of an initial exploration well to be in the range of US$25 million to US$30 million (and less than US$50 million in aggregate should the company pursue a concurrent two-well exploration campaign). This is a material reduction from prior estimates (previously in the range of US$60 million to US$ 80 million for a single well).

The company has entered into a conditional agreement with Bizzell Capital Partners Pty Ltd (“BCI”) for a convertible loan investment of £10.25 million (approximately US$12.5 million), or approximately half the now estimated cost of the initial exploration well.

BPC said: “The Board is cognizant of the company’s firm obligation to drill an initial well in 2020, and given the protracted state of the farm-in process considers it imperative that viable alternative financing solutions be put in place.”

“In addition to allowing drilling to commence even if a farm-in is not concluded in an acceptable time frame or on acceptable terms, this will also allow long-lead items to be ordered and critical-path processes to commence, enable BPC to demonstrate financial capacity to potential farm-in partners [ … ]and assure the Government of the Company’s ability to deliver upon its obligations,” Bahamas Petroleum added.

Offshore Energy Today Staff

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