Introduction

The end-product for this data is to be combined into a coherent picture to define individual drilling prospects which, in the success case, would be capable of supporting commercial hydrocarbon production.

This dataset now comprises three essential parts (i) the physical core material (rock matter) and cuttings (rock particles), (ii) the accumulated electronic data (mainly comprising seismic surveys), and (iii) the paper data, comprising reports, analysis, maps, interpretations and conclusions. The physical core material (rock matter) and cuttings (rock particles) are appropriately stored in secure Company premises.  The electronic data which includes seismic lines, original field tapes, original well logs and reports from a variety of sources within the United States and overseas is stored securely in the Company office in Nassau, The Bahamas, but is also stored separately at other Company locations for disaster recovery purposes. In addition, through its Industrial Associations with EGI (University of Utah), CLS (University of Miami), BEG (University of Texas at Austin) and independent scientific specialists, Bahamas Petroleum Company also has access to state-of-the-art technology and some of the most highly regarded technical personnel in the industry.

The broad area under review is bound by The Bahamas archipelago, the Florida Peninsula and Keys, and Cuba, where, since 1945, various operators have acquired data from several seismic surveys in the southern parts of the region.  Highlighted in Figure 1 are the granted licence locations of Bahamas Offshore Petroleum Licences (Bain, Cooper, Donaldson and Eneas) – the Southern Licences as confirmed by the southern licences renewal in June 2015. Also shown is the Island Offshore Petroleum Licence (Miami) – the Northern Licence – where BPC participation is under review.

In spite of proximity to the prolific Gulf of Mexico, only five (5) deep wells have been drilled to date, three (3) key wells; Cay Sal #1 (1959), Great Isaac #1 (1971), and Doubloon Saxon #1 (1986) provide a critical subsurface database and are considered and referred to throughout this report.  Parts of Bahamas Petroleum’s Licence areas were previously (shown in Figure 2) held by Amoco, Arco, Exxon, Chevron, Tenneco [taken over by BG] and Getty.  In 1987, all acreage in these areas was relinquished and remained fallow until awarded to the Company in 2007.

Highlights to Date

During the year 2016 Bahamas Petroleum Company had seen a continued lull in advancing its exploration programmes due to a range of uncertainties. These uncertainties included the final contents and timing of the revised legislative package – which did not receive the final ascent of and come into force until 16th July 2016, over four years after the issue was first noted as being required – as well as the sustained low price of oil adversely affecting the investment climate. However, the Company was able to execute much useful work during this period, continuing a number of main themes seen in previous years tailored to reflect the changed commercial environment and the continuing uncertainties around the legislative package:

Environmental: programmes to discharge all obligations under the newly revised regulations and the licences and undertaken as precursors to the drilling of any obligation wells compliant with international standards and best practices.

Seismic interpretation/prospect definition: following the accumulation of the huge seismic data base, processing and interpretation of the 3D seismic survey, more detailed and focused studies towards specific prospect definition given the requirement to identify detailed drilling targets with associated volumes and technical risks have been assessed.

Geological risk reduction: Having identified potential drilling targets a series of studies directed at modifying and reducing geological risk (increasing the probability of success – PoS).

Analogue matching: Establishing the links between the geological plays encountered in The Bahamas and other successful local oil producing provinces; most notably in Cuba, Florida and Mexico (where, in 2016, there was an active licensing programme underway which for the very first time included international oil companies).

Well planning and preparation work studies: studies required to ensure safe and compliant carrying out of well obligations consistent with the new Act and Regulations and the Licence consistent with international standards and best practices whilst delivering the most safe, cost efficient and responsible well to identify potentially commercial volumes of oil and/or gas.

Commercial analysis: Analysis to confirm commercial attractiveness and feasible minimum economic field sizes of any potential future success outcome.

In more detail:

• Following acceptance of The Environmental Impact Assessment (EIA) by the BEST Commission and publication on the commission’s website (http://www.best.gov.bs/documents.html), the Company has continued its environmental studies in preparation to commence an initial well.  These studies are extensive and have formed the basis for considerable community engagement meetings throughout the Bahamas including the ‘Family Islands’.
• Continued preparation work to be included in an Environmental Management Plan (EMP) and, having completed preliminary “worst case discharge” calculations by Gemini in the prior years, continued work on completing an Oil Spill Response Plan – in co-operation with The Response Group has been furthered.
• Both of the aforementioned main documents (the EIA and EMP) as well as these other associated documents have been put forward to the BEST Commission and the Ministry of The Environment and Housing as documentation compliant with the Petroleum (Offshore Environmental Protection and Pollution Control) Regulations, 2016, for commencement of an exploration well. Thus having initiated all processes consistent with the commencement of an exploration well, the Company has now sought further information on how to ensure compliant fulfilment of the application process mandated by Regulation 3 of the Petroleum (Offshore Environmental Protection and Pollution Control) Regulations, 2016 for an Environmental Authorisation ahead of commencing drilling operations consistent with licence requirements
• University of Miami Carbonate Sedimentology Lab (CSL) previously completed interpretation of the multibeam survey collected over a portion of the Southern Licences. This has been further utilised to identify potential sinkholes, gas and oil seeps to the surface and into the seabed. This in areas extending on-trend outside of the licensed areas as further evidence of a working hydrocarbon system but also, as importantly, noting the areas of their absence as indicative of effective sealing.
• The Company, as part of its environmental management plan, has continued to collect detailed data over a gradually wider area. This has taken place through consultation with local islanders, scientific experts, local fishermen, government agencies, local environmental non-governmental organizations and local research organizations highlighting critical and natural wildlife communities. The summarised findings of activities and habitats are combined in maps showing such things as the turtle nesting beaches, blue holes, important birding areas, coral reefs, sea grass beds and wetlands etc. These have been compiled into a series of Environmental Sensitivity Maps and Environmental Sensitivity Index Maps showing derived detailed indices which allow for prioritized response plans and procedures.
• The existing study entitled the ‘Transport and Fate of Water and Oil Particles Released in the Straits of Florida’ is specific to an individual well location. Additional, alternate well locations are being investigated to provide different geological and drilling options and the requirement for additional spill analysis and sea bottom studies is being investigated.
• Considerable ongoing planning has sourced a level of emergency and remedial equipment that would be available in support of an exploration well and in the unlikely event of an associated incident or threat.
• In 2011, the Company undertook and completed the acquisition of the first modern 3D seismic survey in the southern Bahamas, and acquired 3,074 km2 of data.  These data contain over 4 trillion bits of information and provide a very high resolution picture of a portion of the Southern Licence area.  Initial processing of the data (“Fast Track”) was completed January 2012.  The Final processed volume, a Pre-Stack Depth Migration (PSDM), was completed in August 2012. Interpretation of this PSDM database continues to be ongoing and will be so for a number of years as it is utilised to define and improve understanding of the hydrocarbon potential, define specific prospects, select appropriate drill sites and guide well planning – which will remain ongoing up to and beyond commencement of the first obligation well.
• Both the Fast Track and Final data were utilized by consultants at the University of Texas Bureau of Economic Geology (BEG) Reservoir Characterization and Research Lab (RCRL) to construct a detailed seismic facies analysis for the Southern Licence area. This work has been refined and continued since. In conjunction with this University of Texas study, iReservoir completed a detailed evaluation of the available log data (particularly from the Doubloon Saxon #1 well) and used these data to complete a seismic inversion of the Fast Track data which has been continually reviewed and further integrated into prospect definition work and alternative well location studies. This work has again been revisited to more closely define sequence stratigraphy in the proximity of defined prospects.
• The Company also completed a project to re-evaluate the sequence stratigraphic framework throughout the 3D survey over the licence areas, most specifically through the B and C structural features targeted for drilling. All 2D, 3D and biostratigraphy data was integrated to come up with a best fit solution of sequence boundaries across the data extents.
• In support of further geological risk reduction the Company commissioned a series of fluid inclusion analyses on the core and cuttings from three historical wells drilled in The Bahamas that offset the Company’s acreage. This work provides further technical support for the presence of an active petroleum charge system across sizeable 3D defined structures in the region, and more specifically, in the locality of the Company’s intended drilling activity.
• Critical to exploration success is the relative timing of structural events associated with the generation of structures that form the drilling targets within the Company acreage. In order to constrain these structural risks balanced cross sections of four profiles from the 3D seismic survey area were created to constrain the fault-fold relationships, structural style, and kinematic evolution in parts of the Bain, Cooper and Donaldson license areas in the Bahamian foreland to the Cuban thrust belt. Re-interpretation of principal thrust surfaces within and between the four profiles have been analysed and the fault-fold geometry and timing relationships established in this study. This provides a framework for fault correlation through the entire 3D volume, as well as for burial history, maturation, and subsidence analyses for key wells and restored cross sections.
• Given the continued interest in exploration acreage in Cuba adjacent to those licences held by the Company, the Company has sought all regional seismic lines of interest to better correlate and tie-in the working hydrocarbon systems of adjacent areas into the Company acreage.
• New licensing rounds have been taking place in Mexico with the involvement for the first time of international oil companies. This has created a significant interest hydrocarbon exploration in the region and indeed in similar play-types to those encountered in the Bahamas. To this end the Company has sought to draw favourable comparison to the exploration offered in the Mexico licence round. Further, new oil finds in Senegal bear some examination as in the geological past, pre-Atlantic rifting the territory currently occupied by The Bahamas and Senegal were adjacent to each other and therefore consist largely of the same rock types.
• Bahamas Petroleum contracted with Petrobea in 2011 and Applied Drilling Technology Inc. (“ADTI”) in 2012 to complete initial well plans and Front End Engineering and Design (FEED) studies for a vertical well to test the southern end of the “B” structure compliant with licence obligations. As the world’s international rig market has become constrained more rigs have been coming on to the market capable of executing a well consistent with the prepared drill plans and compliance with the current licence obligations. This has significantly impacted the day rates rig companies are prepared to accept and therefore substantial discounting is now the norm. Bahamas Petroleum Company continues to work with a renowned rig broker to maintain up to date reports on the provision of and anticipated costs of available rigs by continual investigation of the rig market.
• In support of a continual assessment of a safe, responsible and cost effective well programme, Technical Limit Performance Pty Ltd (TLP) was contracted in 2015 to verify the well-cost assumptions made during both the Petrobea and ADTI FEED studiesmentioned above. The Technical Limit (TL) approach used in the report reviews what performance is technically possible and uses this benchmark to review offset (historical) well performance to determine the main issues that prevented these prior wells from delivering the Technical Limit performance.
• The Technical Limit (TL) approach was reapplied in 2016 against more up to date rig rates and availabilities.
• Bahamas Petroleum Company continues to engage with selected major international oil companies and proactive independent oil companies for the purpose of seeking an internationally renowned partner and potential operator of the exploration well.  These discussions remain ongoing.
• The aboved mentioned discussions with potential partners has meant the need to create, maintain and extend a database on detailed play types within the licence boundaries, individual reservoirs and their production potential, specific individual prospects and the volumetrics associated with each individual play. This work has been continually modified and upgraded since early 2014.
• The Company continues to modify and update its economic models, to reflect revised current global oil price trends, well costing estimates as noted above, all up-to-date technical data, and other relevant factors to an eventual field development, such as the project’s proximity to existing infrastructure, contractors and service suppliers etc. Based on this work, the Company believes that the minimum field size for an economic development is less than 200 million barrels (versus current resource estimates measured in billions of barrels), and that the project would thus offer robust profitability even in the current (comparatively lower) oil price environment. All credible oil pricing scenarios show a total recovery to previous levels and above in that timeframe.