Recent activities have ensured that Bahamas Petroleum is financially robust, has acquired the necessary data to more fully delineate prospectivity and ensures the Company is TECHNICALLY READY to execute the first exploratory well in Bahamian petroleum exploration licences in 25 years.

As the Company has matured and expanded, accordingly we have upgraded our processes and systems to ensure we are able to build SUSTAINABLE PRACTICES that allow us to comply with international standards and ensure we are able to maintain and extend our licence-to-operate in all the wider communities in which we participate.  The Company has assembled a quality team of experienced individuals to ensure we are FORGING RELATIONSHIPS across all aspects of our business in dealings with contractors, industry partners, local authorities and Government to establish ourselves as a partner of choice.

In total, in establishing the Company, the people and its systems, in accumulating a unique and comprehensive database of geology and geophysics, over US$50 million has been committed to ensure the future success of this endeavour.

Bahamas Context

There are many reasons why exploring for energy  in the territorial waters of The Bahamas is attractive to The Bahamas Petroleum Company, some of which are generic to the industry, but others are very specific to The Bahamas.

Oil Prices

They are approaching their all-time highs again and this always acts as an incentive that drives activity.

Costs

The proximity to the industrial base of the US Gulf of Mexico offers unique access to contractors and suppliers with significant cost advantages.

Technology

Historically, the acquisition of seismic data has been difficult and therefore constrained in Bahamian waters.  Because of the near surface carbonate geology, once 'noise' is filtered out there is little data left to interpret.  Whilst 3D seismic data acquisition is not a new technology, the opportunity and the choice by Bahamas Petroleum Company to invest in an extensive survey utilising modern technology provides a database that offers a significant competitive edge in the pursuit of success.

Prospectivity

The potential of the local geology to contain commercial quantities of oil, often expressed in aggregate as the 'chance of success' - beauty is in the eye of the beholder, but with a global quality source rock, extended reservoir sequences over thousands of feet, huge traps defined using 3D seismic data, these key components that define a working petroleum system are all present locally in The Bahamas.

Technical risk, however, always has to be balanced with reward to promote interest and given there has been no significant activity in Bahamian water for more than 25 years, it is only The Bahamas Petroleum Company that has seen fit to value this prospectivity sufficiently to commit significant investment in-country.

Fiscal and legislative regime

The Bahamas offers political stability having been a Parliamentary democracy for over 275 years with a reputation for financial integrity, an established regime for the conduct of commerce, beneficial fiscal terms to incentivise successful exploration and a legal framework based upon the English rule of law.  This consistency of law is extremely important to all sectors of the economy, not just the petroleum industry, and any compromise of this principle could have severe knock-on consequences for many major investors with multiple options for their capital.

Risk Perception

Whilst many might believe that the risks associated with oil are new to this region and will manifest in a similar way to other areas, a number of points should be taken into consideration.

First of all, in addition to the volumes of oil discovered in Cuba to date, there is a multiple well exploration programme in offshore Cuban waters currently ongoing.  So, in many ways, The Bahamas has much of the 'risk' associated with oil exploration but with none of the benefits.

Secondly, The Bahamas has for a long time been engaged in the transportation and transhipment of oil involving the major storage terminals of Grand Bahama.  Historically, these kinds of activities have been the major source of pollution risk associated with the oil industry and could manifest locally.

Thirdly, varied bottom-hole conditions (geology and pressures etc.) represent very different technical situations to be managed and therefore very different risk profiles.  The 'normal' pressures anticipated in the carbonate rocks of The Bahamas would represent half that of the 'over pressured' reservoirs experienced in the drilling of the Macondo in the US Gulf of Mexico. However, it is fundamental to the ultimate success of any exploration programme that a legislative environment with clear enabling regulations must be professionally implemented by the Company and then monitored as such to ensure no harm.

Given the expertise and experience of the employees of Bahamas Petroleum Company, the Company is anxious, ready and willing to contribute to the resolution of many of these issues, whereby a modern exploration programme can be commenced.

All the lessons learned from the Gulf of Mexico can be applied, with international standards adhered to and actively monitored to ensure that a full evaluation of the exploration potential of Bahamian waters can be carried out safely and, in the event of success, contribute significantly to future economic development, growth and prosperity.

Diversification of the economy will be fundamental to future and sustained growth.  A vibrant and successful energy exploration sector could contribute much to the economy and Bahamas Petroleum Company is anxious to play its role in contributing to that growth agenda.

 

Business Fundamentals

Business fundamentals are sound; the Company is well funded; a CPR has highlighted a substantial resource base; data from a new 3D seismic survey has further reinforced the potential for giant oil fields; the company has sufficient confidence to seek a listing on BISX; and, the risk profile of future activities of the business has been highlighted to the Government through the submission of an EIA along with actions for mitigation.

Following a raising of US$73.9 million in an oversubscribed equity placing in 2011, the Company executed a 1,120 line kilometre 2D seismic survey. The 2D seismic survey underpinned a Competent Persons Report (CPR) conducted by Ryder Scott out of Houston, which concluded:

Multiple structures over the southern licences with unrisked recoverable prospective resources (EUR) in excess of 500 million barrels at a number of different reservoir horizons; several individual structures with an EUR in excess of 1 billion barrels of oil; assessment was restricted to the Cretaceous interval only which leaves the shallower Tertiary strata and the deeper Jurassic strata still to be evaluated; The average Chance of Success (CoS) was assessed at 25%

Based upon the excellent data quality of the 2D survey, the desire to minimise identified risks pertaining to source maturity, migration pathways and seal and the need to design the safest and best placed well possible, the Company decided to shoot the Pearl 3D seismic survey using the most up-to-date CGG BroadSeis™ technology.  Significantly, results to date seem to mitigate some of those key remaining risks.

Structurally, the previously identified features are shown to retain integrity at depth and appear continuous over several tens of kilometres.  This offers huge encouragement for there being multiple targets at individual potential well locations and reinforcing the belief that there should be substantial commercial oil deposits in the territorial waters of The Bahamas.

In support of future exploration activity the Company has submitted to the Government, in the form of The Bahamas Environment, Science and Technology Commission ('BEST'), an Environmental Impact Assessment ('EIA').  This report determines the most likely impacts any exploration activities may  have on the environment and seeks to illustrate mitigating actions the Company could undertake.

Significantly, this report includes a very sophisticated, long-term simulation study designed to assess the transport of oil away from any potential spill site, undertaken as part of the Company's oil spill contingency planning.  The key conclusion from this study is that regardless of the spill size, ocean current, wind direction or sea state pertaining over the last seven years, Mother Nature is looking out for The Bahamas as an insignificant fraction of the likely spilled oil, even in the worst possible event, will ever make it to shore in Bahamian territorial waters, although cooperation with neighbouring territories would be a clear priority.  This work will be progressed through the coming year up to and during the course of the drilling of our first exploration well.

As the Company has matured, the focus of its operations has moved significantly towards The Bahamas.  To that end, the Board has decided to appoint two new directors based permanently in The Bahamas.  This further demonstrates our clear commitment to a future embedded within the communities surounding our resource base.  Furthermore, the Company has resolved to seek a listing on the Bahamas International Stock Exchange in the form of Bahamian Depositary Receipts (BDR).  These instruments represent tradable, listed securities which will provide Bahamians, effectively precluded from purchasing shares via the existing London Stock Exchange AIM listing, due to excessive costs, with access to any capital growth in the stock of the Company that would result from exploration success.