Bahamas Petroleum Company awarded licences
The OFF-1 licence provides for an initial four-year exploration period, during which time BPC will reprocess approximately 2,000 kilometres of legacy 2D seismic and undertake a number of new geotechnical studies. The Company expects that the total cost of the work programme in the initial period will cost approximately US$200,000 per annum in historic seismic data acquisition and reprocessing, G&G studies and other technical work to be largely supported by the Company’s existing technical staff base currently supporting operations in The Bahamas. Apart from the costs of completion of the minimum work programme there are no annual licence fee payments, and no drilling is required in the initial four-year period, with extension into a second exploration period entirely at BPC’s election. Key terms of the licence agreement are summarised further in the table below.
OFF-1 has many operational and subsurface similarities to BPC’s licences in The Bahamas – the Uruguay and Bahamas acreage is in similar water depths, both contain multiple, lower exploration risk structural plays in addition to the high impact fans, and both have material volume scope and extensive running room.
About AREA OFF-1
The AREA OFF-1 licence has a total area of approximately 15,000 km2 (comparable to BPC’s four southern licences in The Bahamas which comprise an aggregate area of 12,500 km2) and is situated in water depths from 20 to 1000 meters, approximately 100 kms off the Uruguayan coast (see map below).
There has been considerable prior legacy activity on and adjacent to the OFF-1 block, comprising some historic 2D seismic (approximately 12,000 line-kilometres acquired from the early 1970s to 2015). However, only 2 historic wells have been drilled to-date in the area (in 1976 by Chevron), with no 3D coverage. Current mapping reveals a diversity of exploration plays and leads in relatively shallow water, and indicates an estimated resource potential of up to 1 billion barrels of oil equivalent (BBOE). Given the successfully bid fiscal regime, BPC’s preliminary analysis suggests that any of the individually mapped current prospects is likely to be economic, even at currently historically low oil prices.
Technically, The OFF-1 exploration play is similar in nature to the prolific Guyana – Suriname basin currently being successfully explored by multiple oil companies, as well as the Cretaceous turbidite plays that have been successfully explored offshore north-eastern South America.
There has been considerable licencing activity proximate to OFF-1 in recent years. During 2019, oil majors Shell, BP, Total and Equinor bid for and were awarded various licences offshore Argentina, adjacent to ours which is proximate to the Argentina-Uruguay maritime border, and where the primary targets in those licences are likely to be the same Cretaceous plays potentially present in OFF-1. More recently, In December 2019, Kosmos Energy bid for and was awarded the two adjacent Uruguayan offshore blocks to OFF-1. Refer to the map below.
Uruguay is located in south-eastern South America, bordering Brazil and Argentina, and with a broad Atlantic Ocean coastline. The country has a relatively high income per-capita in the region, and represents an advantaged operating regime, frequently ranking first in Latin America in measures such as democracy, anti-corruption, and ease of doing business.
Area OFF-1 Licence Terms
The following table presents a summary of the key AREA OFF-1 licence terms, as successfully bid by Bahamas Petroleum Company:
|Participating Interest:||BPC 100%|
ANCAP has the right to back-in for up to a 20% Participating Interest.
|ANCAP has the right to participate (up to 20%) in each commercial field that is developed. To exercise that right ANCAP must fund its relevant percentage share of costs (including back costs).|
No limitation on BPC being able to farm-down its working interest.
|Exploration Periods and Minimum Work Obligations ("MWO"):||Three exploration phases, either:|
* Option 1: 4+3+3 or
* Option 2: 4+2+3
Both Option 1 and 2 have an initial 4-year exploration period. Minimum work obligation in this period is G&G studies and reprocessing of 2000 kms of legacy 2D seismic.
In Option 1 if the operator elects to move into the 2nd exploration period for 3 years, a single exploration well is required, but there is no relinquishment obligation. Option 2 allows for a shorter 2nd exploration period of 2 years with no well obligation, but with a 50% relinquishment obligation.
Both Option 1 and Option 2 thereafter require drilling of two wells if the operator elects to move into the final 3-year exploration period, with a 30% relinquishment obligation.
|No drilling obligation in initial 4-year exploration period.|
BPC can elect, but it is not required, to move from the first 4-year exploration period into Phase 2 or Phase 3.
|Minimum cost of MWO:||None specified.||BPC estimates the MWO in Phase 1 will be approximately US$200,000 per annum.|
|Contract Term:||30 years, with right to extend to 40 years.||Development period can be declared at such time as operator wishes - thus allowing for development period of +25 years.|
|Fiscal Terms:||No royalties, signature bonus, or annual rentals. Licence regime is based on BPC as operator undertaking work and recovering costs based on a Cost Oil model, and thereafter a sharing of income between BPC and ANCAP based on a standard industry "R factor" model (a revenue/cost radio model). BPC net profit is then taxed at normal Uruguay corporate income tax rate (25%).||An attractive, internationally comparable fiscal regime in a stable, well-regulated environment.|
|Other Costs:||The licence mandates annual contributions to various education and social funds and initiatives, of approximately US$25,000 per annum.||No annual licence fees.|