Bahamas Petroleum Co (BPC.L) Operational Update – Perseverance #1

In the lead-up to the drilling of Perseverance #1, BPC’s obligation exploration well in The Bahamas, the Company is pleased to provide the following update on preparations for well operations.

BPC is a Caribbean and Atlantic margin focused oil and gas company, with exploration, production, appraisal and development assets across the region.

Highlights

· Perseverance #1 is on track to spud before the end of 2020:

o 100% equity to BPC, drilling of this potential basin-opening well anticipated to take between 45 and 60 days, with ‘tight-hole’ procedures in place

o targeting recoverable prospective resources of 0.7 billion barrels of oil , with an upside of 1.44 billion barrels, solely for the northern portion of the B structure

o in the event of success, Perseverance #1 would substantially de-risk the total B structure, which extends for between 70 and 80 kms, has a mapped areal closure of over 400 km2, and has a ‘best estimate’ aggregate recoverable resource potential in excess of 2.0 billion barrels

· The Stena IceMAX, one of the most technically capable drill ships in the world, has completed all necessary vessel and equipment inspections, and is scheduled to leave dock in The Canary Islands before the end of November 2020, heading to location in preparation to drill the well

· Specific transportation procedures, isolation mandates and quarantine protocols are in place to minimise any risk of Covid-19 disruption to the operation, supplementing comprehensive, approved environmental safety standards and procedures; the Bahamas Defence Force and US Coastguard have been briefed on operating and safety preparations

· All material contracts and supply arrangements completed, logistics and mobilisation plans finalised

· Formal confirmation from the Government of The Bahamas of a further extension of the 2nd exploration period of BPC’s licences, from mid-April 2021 to the end of June 2021, reflective of the ongoing impacts of the Covid-19 force majeure

· Within BPC, the outcome of the Perseverance #1 well is now set within the strategic context of a portfolio business, with production and cashflow generating assets and a growing opportunity set of complementary assets across multiple jurisdictions

Commenting, Simon Potter, CEO of BPC, said:

“Many shareholders have been extremely patient and have stayed the distance, as has the majority of the management team, and we are now in the position to deliver the Perseverance #1 exploration well in compliance with our long-held exploration licences in The Bahamas. Perseverance #1 is a potentially basin-opening well, with the kind of scale and associated value uplift exposure rarely offered outside of oil majors.

At the same time, our activities, in the event of success, have the capacity to be economically transformative for the nation of The Bahamas, and could ultimately contribute billions of dollars in royalty revenues to the national treasury, at a time when the dual impact of recent hurricanes and the Covid-19 pandemic has been especially hard-felt by most Bahamians. Many other nations in the region such as USA, Mexico, Trinidad and Tobago, Suriname and Guyana, have over the past decade safely and responsibly drilled offshore wells, developed or continue to develop offshore hydrocarbon resources, and reaped the economic benefits of an established or a whole new industry. Moreover, these other nations have been able to do so at the same time as seeing growth and development of existing industry sectors, such as tourism.

BPC is fully committed to ensuring safe and responsible operations, and has assembled an experienced team of drilling personnel, supported by many of the world’s largest and most respected oil services contractors, with a collective track record of drilling many thousands of wells safely, all around the globe. We are especially pleased that one of the most modern, technically capable drilling vessels in the world will soon leave port ahead of drilling. In support of this, logistics plans to mobilise both equipment and personnel safely to site have been finalised, funding is in place, and we have completed a huge body of work to ensure that best practices have been applied as our health and environmental safety plans and protocols have been developed, contracted, and approved.

I look forward to updating shareholders of our continued progress – this is an exciting time for BPC . ”

About Perseverance #1 Well

Perseverance #1 is an offshore oil exploration well , 100% owned and operated by BPC, to be drilled starting in late 2020 at a location in the far southern territorial waters of The Bahamas, adjacent to the Cuba-Bahamas maritime border. The well site is located within the Santaren Channel, a deep-water seaway that is already a major oil transhipment thoroughfare, through which oil super-tankers pass daily carrying millions of barrels of crude oil to oil facilities in The Bahamas and beyond (The Bahamas is already a significant player in the international oil industry, home to some of the world’s largest oil storage facilities). The Perseverance #1 well site is located more than 90 miles from the nearest inhabited Bahamian islands and over 40 miles away from the nearest uninhabited Bahamian islands, yet less than 200 miles from the infrastructure, services and customers of the world’s largest energy market (the US Gulf of Mexico).

The Perseverance #1 well is targeting the northern segment of the B megastructure as previously identified by 3D seismic analysis. This location has been chosen, based upon high resolution 3D seismic data, as the best balance of lowest technical risk, geological conditions and recoverable volumes at the crestal point on the northern segment of the very large B structure. The well will be located in water approximately 520 metres deep, and will be drilled to a target depth of 4,822 metres, but with a capability to be able to reach 5,600 metres, affording the ability to evaluate multiple reservoir horizons throughout the entire stratigraphic column below the Tertiary cover. The ultimate decision on well depth will depend on real-time drilling results and geological information.

The best estimate prospective recoverable oil resource at the Perseverance #1 location is 767 million barrels, with an upside of 1.444 billion barrels (assuming the same recovery factor). It is anticipated that any discovery at this location has the potential to extend into a larger portion of the overall B structure extending to the south-east. In aggregate, the entire B structure extends for approximately 75 kilometres along strike and accommodates over 400 km2 of mapped closure with the entire structure having a combined ‘best estimate’ prospective resource of in excess of 2.0 billion barrels, and gross column height of up to 1,000 meters.

In accordance with Bahamian law and the terms of BPC’s licences, as a precursor to drilling operations BPC was required to prepare and submit a comprehensive Environmental Authorisation to the Government of The Bahamas, inclusive of a detailed Environmental Impact Assessment and Environmental Management Plan. This was reviewed for the Government of The Bahamas by independent third-party industry experts, and certified to be in compliance with not only all applicable Bahamian laws and regulations, but consistent with all applicable international standards, guidelines, regulations and global best practice. Following that review, BPC’s proposed drilling program for Perseverance #1 was approved by the Government of The Bahamas, and Environmental Authorisation was granted. The approvals obtained relate specifically to the drilling of Perseverance #1, such that in the event of success, drilling of any subsequent wells in The Bahamas will be subject to a separate and equally exhaustive approvals process.

Perseverance #1 will be drilled making use of the Stena IceMAX, one of the most technically capable, advanced drill ships available in the world. The rig is dynamically positioned, dual-derrick, has an integrated Managed Pressure Drilling system on board and an advanced well management and safety system, which will be deployed for the duration of drilling. Befitting of the transformational, flagship nature of this well, a number of leading international oilfield companies will be providing equipment and specialist technical services for various aspects of the drilling program, including Halliburton, Schlumberger, BakerHughesGE and Weatherford.

The drilling program for Perseverance #1 is expected to take between 45-60 days, and will be undertaken on a ‘tight-hole’ basis – an industry protocol (and one required by the Government of The Bahamas) whereby real-time well information and drilling results will generally be kept confidential until the conclusion of drilling and testing procedures, and until any appropriate notifications to Government representatives have been made. The well has been designed specifically as an exploration well, with the sole objective of establishing the presence of hydrocarbons through a range of tests that will be conducted as the well is drilled. Perseverance #1 has not been designed to ever operate as a production well, such that at the conclusion of the drilling program the well will be permanently sealed and then abandoned.

Operational Update

The Perseverance #1 well in is on track to spud before the end of 2020 – that is, within approximately 6 weeks of the date of this announcement. A separate and distinct operational management and execution group within BPC is entirely focussed on the successful delivery of this core company objective. Key operational developments include:

1. Schedule

· Stena Drilling, the provider of the IceMAX drill ship, has issued formal notification to BPC of the intended operational start date, being 15 December 2020. BPC anticipates that it will take 4-5 days from this start date for the rig to be provisioned, loaded, and then transitioned to the drilling location for spud of the well.

· Bridging documentation necessary to the proposed drilling campaign has been agreed between Stena Drilling and BPC. Accordingly, the well plan is complete, and a mobilisation plan has been agreed between all parties and is currently being enacted.

· A ‘Drill the Well on Paper’ exercise is scheduled to take place on 23 November 2020. This is an industry standard pre-operations readiness exercise, and involves active participation from representation of BPC, Stena Drilling, all major contractors, and nominated advisers / observers from the Government of The Bahamas.

2. Operational Readiness

· The BPC drilling team is assembled with the capability of operating from a single operational location in Houston, Texas, USA, consistent with BPC’s Covid-19 protocols. The core professional team, remobilised from being stood down in March 2020 as a result of the Covid-19 pandemic, consists of 12 highly experienced drilling professionals, with a collective experience of having drilled over 100 comparable wells around the world safely and responsibly, and with over 400 years of collective oil and gas experience.

· As noted, t he Stena IceMAX is equipped with a Managed Pressure Drilling (“MPD”) system, an advanced well management and drilling safety system that represents the ‘cutting-edge’ of drilling technology currently available. The MPD is operated by Schlumberger, one of the world’s pre-eminent oil services companies, who will have specialist technicians and representatives on board the IceMAX for the duration of drilling operations. All relevant MPD preparatory work is complete, including requisite inspections completed and service agreements put in place with Schlumberger.

· The logistics plan for Perseverance #1 has been completed, with complex arrangements finalised for inspection services, supply boats, helicopters and charter airplane services knitting, together operating/shore bases in the Canary Islands, the UK, The Bahamas and the USA. In parallel, a number of major supply contracts have been finalised for fuel, wireline testing equipment, the remote ocean survey vehicle, and purchase of all remaining tubulars required for the drilling campaign.

· Consistent with industry standards and as required pursuant to Bahamian and internationally applicable laws, a range of safety drills and inspections have been successfully conducted by BPC staff, independent third-party inspectors and relevant Government/Ministry representatives (both in person and remotely). This includes completion of the rig inspection, helideck inspection, third-party equipment inspection, and inspection of the blow-out preventor (“BOP”), equipment and materials storage etc.

· As previously announced, BPC has placed an extensive suite of insurance policies to cover drilling operations for Perseverance #1, including an appropriate well control policy. This is as required under the terms of BPC’s licences in The Bahamas, and is in accordance with global best practice standards. The insurance placement, arranged by leading global insurance agent Aon UK Ltd, followed an extensive independent third-party review of BPC’s well plan, design and risk mitigation policies. The insurance placement is with a panel of insurers comprising of Lloyd’s of London and International Company markets (with all meeting local Bahamian insurance regulations), all of which have a financial rating of “A” or higher from Standard & Poor’s. The policy utilises internationally recognised wordings and complies with BPC’s contractual obligations, including cover levels considerably in excess of those stipulated as being required by the Government of The Bahamas.

3. HSE&S

· In recent months, BPC has undertaken an extensive body of work, in conjunction with Stena Drilling and a number of BPC’s key contractors, to develop a Covid-19 mitigation plan. This plan is now complete, defining the Covid-19 protocols (testing, isolation and quarantine) that will be applied to the drilling campaign. The agreed plan is in accordance with all international requirements, and indeed is more stringent than current domestic requirements in each of The Bahamas, USA and UK in relation to Covid-19.

· Safety and environmental management systems have been finalised and documented along with bridging documents into Stena Drilling’s systems and Safety Case. BPC’s incident response systems and procedure will be tested/verified prior to commencement of drilling by OSRL, the Company’s contracted response specialists, through the organisation of an extensive desktop exercise simulating an incident requiring an emergency response. This exercise will include participation of BPC management and operating staff, the rig operations team, domestic Bahamian authorities, and multiple invited governmental agencies from across the region.

· A contract with International SOS has been finalised to provide a project specific Medical Evacuation Response Plan (“MERP”) including a credentialled network of medical providers, that complements and progresses the offshore MERP that is provided for on the Stena IceMAX. The MERP includes access to a project specific medical assistance via a 24/7 designated Assistance Centre, out-patient and in-patient case management, and medical assistance for workforce travelling to and from the various project sites.

4. Formation Evaluation Plan

· BPC’s geotechnical risk mitigation strategy for the drilling and evaluation of the Perseverance #1 well seeks to effectively de-risk each of the pre-drill risk elements – top seal, reservoir quality, oil quality and source rock presence/maturity. However, as previously noted, the primary objective of the well is to establish the presence and distribution of hydrocarbons throughout the targeted reservoirs.

· Accordingly, BPC has developed a comprehensive formation evaluation plan that prioritises the measurement, logging and acquisition programme to fit this core objective. Considerable attention has been placed on the reliability, robustness and configuration of the Measurement While Drilling (MWD) / Logging While Drilling (LWD) tool. This includes redundancy/duplication in the data gathering processes, and planning for tool assembly in all potential hole sizes. High bandwidth recording will be maintained downhole at all time to be retrieved at each trip/bit run to provide real-time drilling results.

· In the normal course of drilling, a full suite of logging and measurement while drilling logs (gamma-resistivity, sonic density and neutron) will be acquired, thereby providing formation data and a synthetic seismogram (sonic-density), both of which will be used to calibrate real time well data to identified seismic markers to correlate the reservoir targets and age each of the penetrated horizons. In all instances, formation evaluation while drilling (FEWD) tools will gather data on temperature, formation pressures, porosity (including fractures), oil and water saturations and total thickness of the potential hydrocarbon bearing reservoirs regardless of outcome – further augmented by a wide range of wireline logging and sampling should results while drilling be merited.

· The comprehensive formation evaluation data retrieved from Perseverance #1 can be utilised to update the pre-drill volumetric estimates in a successful outcome scenario.

Environmental Oversight

In accordance with the requirements of BPC’s licences, BPC has formally notified the Bahamian Department of Environmental Protection & Planning (“DEPP”) as to the precise well location, as well as the specific details and technical specifications in respect of the Stena IceMAX drillship, and has obtained the DEPP’s consent to same. BPC is currently working with the Government of The Bahamas’ appointed third-party expert adviser, international environmental consultants Black & Veatch, on a number of technical items relating to the Perseverance #1 drilling program.

As agreed with the Government of The Bahamas, one or more Black & Veatch experts will be stationed onboard the Stena IceMAX during drilling operations, and will oversee the entire drilling program, with a specific mandate from the Government of The Bahamas to observe and report on specific tasks, activities and operations, including observing the baseline seafloor survey and testing of drilling fluids to ensure compliance with mandated safety requirements, oversight of environmental compliance activities during drilling activities and thereafter during decommissioning and abandonment activities, and monitoring drilling practices, procedures, and activities, to assure compliance with the program Environmental Impact Assessment (EIA) and Environmental Management Plan (EMP).

Government

BPC has received formal confirmation from the Government of The Bahamas that the Second exploration period of BPC’s licences will now extend beyond mid-April 2021, to expire at the end of June 2021, given the ongoing impact of the coronavirus pandemic force majeure. That said, because the proposed drilling program is anticipated to be between 45-60 days, BPC expects to complete all well activities considerably prior to even the previous mid-April 2021 date.

Regulatory Statements

In accordance with the AIM Note for Mining and Oil & Gas Companies, BPC discloses Randolph Hiscock, BPC Business Development Director, is the qualified person who has reviewed the technical information contained in this document. He has a Masters in geology and is a member of the AAPG. He has over 35 years’ experience in the oil and gas industry. Randolph Hiscock consents to the inclusion of the information in the form and context in which it appears.

The information communicated in this announcement contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) No. 596/2014.


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