Bahamas Petroleum Co (BPC.L) Portfolio Operations and Funding Update

BPC, the Caribbean and Atlantic margin focused oil and gas company, with production, appraisal, development and exploration assets across the region, is pleased to provide an update on its operations across its portfolio, as at the start of 2021.

Highlights

· Achieved production target of 500 bopd by end of 2020; end 2021 target remains at 2,500 bopd

· On track to deliver extensive 2021 drilling campaigns; commencing with Saffron #2 in Trinidad and Tobago, and Weg Naar Zee extended well test in Suriname

· Delivered certified 2P reserves and 3C resources targets; seismic reprocessing and drilling to drive further restatement in Q2 2021

· 100% owned Perseverance #1 exploration well, targeting recoverable P50 prospective oil resources of 0.77 billion barrels and with an upside of 1.44 billion barrels, commenced on 20 December 2020 in The Bahamas, with drilling ongoing

· Election to draw on first tranche of funding (£3m) under the Company’s convertible note funding facility now made; variation to the Funding Option Agreement entered into with the Investor in respect of the potential exercise of both the Put and Call

Simon Potter, CEO of BPC, said:

“BPC’s stated strategy has been to complement high-impact exploration activities with producing, and thus cash generative, assets. In this context, during 2020 we brought together an exciting portfolio of assets in multiple locations and laid out a strategy with clear operational objectives in support of delivering a significant financial goal by the end of 2021. I am pleased to report to shareholders that on leaving 2020, the initial key operational objectives were met and consequently we remain on track across the portfolio to deliver our goals.

Pleasingly, notwithstanding the obvious constraints of operating across all of our asset base during a global pandemic, we managed to increase production in Trinidad and Tobago to our targeted 500 bopd level by the end of 2020. The next challenge will be to sustain that production and grow it further so as to achieve our 2,500 bopd production target by the end of 2021.

As well as maintaining progress across the base production assets, delivering our goals will require timely execution of our 2021 drilling program in both Trinidad and Tobago and Suriname, and we are making great strides to be ready to kick-off those activities in the coming months.

Equally, in leading such a turnaround of activities in Trinidad and Tobago, we were not deflected from our primary goal of delivering on the long-awaited exploration well in The Bahamas. Perseverance #1 commenced drilling in late December 2020, and we look forward to being able to advise shareholders of the outcome at completion of the 45-60 day anticipated drilling and evaluation period.”

Operations Background

In August 2020, BPC completed a merger with Columbus Energy Resources Plc, pursuant to which BPC added a portfolio of production, development, appraisal and exploration assets in Trinidad and Tobago and Suriname to its existing assets in The Bahamas and Uruguay.

In respect of this broadened portfolio business, during 2020 BPC developed and outlined a strategy designed to achieve material, profitable growth in production, as well as rapidly progress appraisal and exploration activities across the portfolio, in support of clear financial targets.

Those financial targets are to deliver, by the end of 2021:

(i) a revenue run-rate of >$35 million per annum, and

(ii) an operating cashflow run-rate of >$15 million per annum,

all based upon achieving, or exceeding, a production target of 2,500 bopd by the end of 2021, with an extraction cost of <$20 per barrel (and assuming current oil prices). During the course of 2020, BPC set out a number of clear operational objectives, the achievement of which will underpin delivery of this strategy and our financial goals, and on which the Company is now pleased to provide an “end of year 2020” report, as set out further below. Progress Report Against Goals 1. Goal: Apply focussed technical work and expertise to build to a baseline of 500 bopd production by year end 2020, as an initial stepping stone toward ramping up to the production target of 2,500 bopd or more by year end 2021 Delivered : Peak daily production of 500 bopd was achieved during the month of December 2020, based upon a dedicated work program that saw a 15% uplift in daily offtake rates across November and December and production rates consistently >10% higher than pre-merger production rates earlier in 2020. The increased production over the last 6-8 weeks of 2020 has been the result of:

· Stabilised offtake rates from base production assets

o Specific workovers to remove wellbore damage undertaken on eight wells

· Delivery of the planned increased workover frequency rate (0.57 workovers per day post-merger, up from 0.39 pre-merger)

o A total of 35 workovers were completed in the period bringing the annual total to 152 completed workovers (a level not achieved since before 2018)

· Perforation of new oil producing zones in two existing wells

2. Goal: Achieve certified net 2P reserves of > 1MMbbls by the end of 2020, as an initial stepping stone toward achieving certified net 2P reserves of > 10MMbbls by the end of 2021

Delivered : As announced on 1 December 2020, BPC exceeded its reserves target by ~30%, with a certified net 2P reserve of 1.29MMbbls (as well as a certified net 2C resource of 7.46MMbbls and net 3C resource of 24.70MMbbls). Ongoing activities in Trinidad and Tobago and Suriname (as detailed further below), once completed, are expected to result in a material contribution to growth of 2P reserves and 2C resources, with a CPR update targeted for Q2 2021. As future capital is deployed it would typically be expected that the existing 2C resource base would migrate into the 2P reserves category, upon demonstration of commercial viability.

3. Goal: Rapidly add production in both Trinidad and Tobago and Suriname , through:

(a) Saffron #2 appraisal well in Trinidad and Tobago (targeting a thicker downdip reservoir section) , which, subject to results, would rapidly see BPC seek approvals for a Saffron field development, and with up to seven production wells to follow through 2021

Progress update: Detailed technical and operational planning work is well underway, including:

· The Saffron #2 well plan, proposal and design has been completed. This includes estimates of costs for drilling, and completion of the well for the subsequent extended well test.

· The rig tendering process, along with major services, has been completed. BPC is assessing the response and expects to award the contract(s) in the coming weeks.

· Site inspections and surveys have been completed. Civil work contractors have been invited to quote, and construction work is scheduled to begin in January 2021.

(b) Appraisal well and Extended Well Test (EWT) in the Weg Naar Zee Block in Suriname, and subject to results, rapidly moving into a wider field development, with up to six production wells to follow through 2021

Progress update: Planning and design for the Weg Naar Zee well was completed prior to the end of 2020, and requisite details have been submitted to both the state and environmental regulators, as well as further clarifications submitted following external review. With the expectation of final approvals being provided in January 2021, planning work is continuing, including the issue and receipt of rig tender proposals from interested parties. Drilling remains on target for Q1 2021.

4. Goal : Identify and mature up to three additional exploration targets in Trinidad and Tobago, so as to add further resources and thus reserves for future production growth in 2022 and beyond

Progress update: BPC has identified nine other prospects of roughly equivalent size to Saffron in the South West Peninsula (SWP). A contract for initial 3D seismic reprocessing of the dataset that covers the SWP as a whole was awarded in November 2020 and, while the entire 3D seismic reprocessing project is expected to be completed by April 2021, the initial study area – covering the Saffron discovery – will be completed within January 2021 ahead of drilling.

5. Goal : Formal award of the OFF-1 exploration licence in Uruguay f rom the Ministry of Energy & ANCAP , and commence initial geotechnical work

Progress update: As previously announced on 9 June 2020, BPC was awarded the OFF-1 exploration licence in Uruguay. The licence application has been submitted and agreed between BPC and ANCAP (the Uruguayan state-owned petroleum company and regulatory body) and now only awaits ministerial approval and Presidential Decree prior to signing, expected during Q1 2021. BPC has already purchased a 2D seismic database and identified additional 2D data for purchase from ANCAP as part of the Exploration Period 1 work program requirements. The entire enlarged 2D seismic database will be reprocessed to enable early-stage geotechnical work to commence immediately upon formal signing of the OFF-1 licence. This initial technical work, expected to be completed through the course of 2021, will comprise the review and analysis of the purchased/reprocessed seismic and other legacy data to remap and update the portfolio utilising the latest imaging technology to reconfirm prospects and leads previously identified across the licence. In addition, integrated geological and geophysical studies will be undertaken to fully support a more complete play and petroleum system assessment of the block OFF-1 area.

6. Goal : Drill and evaluate the Perseverance #1 well in The Bahamas

Progress update: Drilling of the Perseverance #1 exploration well in The Bahamas has been underway since 20 December 2020 (consistent with previous announcements prior to Christmas 2020). The well is progressing according to plan and budget and remains on track to take 45 – 60 days to complete . The well has a t arget depth of 4,800 meters (with capacity to increase depth to 5,600 meters, depending on outcomes while drilling), and is targeting P50 prospective oil resources of 0.77 billion barrels, with an upside of 1.44 billion barrels.

Funding Update: With drilling of Perseverance #1 having now been underway for almost 3 weeks, and with clarity as to the ability to continue drilling without interruption received from the Court in The Bahamas (refer to BPC’s announcement of 6 January 2021), the Company is now refocussed on bringing to a close the final elements of its previously advised corporate funding strategy, with 2 principal aims: (i) ensuring the Company has on an ongoing basis adequate liquid cash resources to meet ongoing costs; and (ii) ensuring the Company has access to additional funding resources should they be needed to meet contingencies and other costs arising as drilling proceeds, but ideally without the Company being required to draw on those funding sources until and unless needed.

Consistent with this strategy, the Company has progressed two elements of its funding package, as follows:

(i) The Company has drawn-down the first £3 million of its conditional fixed-conversion price senior secured convertible loan notes financing facility (“Notes”) , under which up to £15 million (approximately US$20 million) is available for draw-down, subject to satisfaction of conditions precedent. Drawdown of the first £3 million was subject to spud of Perseverance #1 by 28 December 2020, with the drawdown of the balance in accordance with a timing schedule matched to the Perseverance #1 drilling program, and subject to satisfaction of certain conditions precedent by the time of drawdown.

(ii) The Company has secured a variation to the agreements entered into on 14 December 2020 with an institutional investment fund managed by Lombard Odier Asset Management (the “Investor”), which were specifically designed to replace a variable-conversion price convertible note facility with a Bahamian family office investor. Under a Funding Agreement, BPC placed a fixed number of shares to the Investor to secure £7.5 million (US$10 million), and under a Funding Option Agreement, BPC was granted an option, exercisable within 10 business days after the spud of the Perseverance #1 well (being 6 January 2021), to place a further fixed number of shares to the Investor to raise up to an additional £3.75 million (US$5 million) (the “Put”). If BPC exercises the Put, the Investor has the option to double the amount the subject of the Put, on the same terms and conditions (the “Call”). BPC and the Investor have now agreed that: (i) the last date by which BPC may exercise the Put is extended to 13 January 2021, but if the Company chooses not to exercise the option the Put will simply lapse – this extension preserving funding optionality for BPC as drilling progresses, consistent with the overall funding strategy; (ii) subject to BPC exercising the Put, the Call must be exercised before the earlier of (a) the date of BPC’s RNS announcement of the Perseverance #1 well results and (b) 12 February 2021, failing which, the Call will lapse; and (iii) in respect of any shares issued pursuant to the exercise of the Put or Call, the date on which BPC may be required to make a reconciling payment to the Investor is extended from 60 days after the date of spudding of Perseverance #1 (which would be 20 February 2021), to 16 April 2021, this extension allowing a considerably longer window for the determination of the need for a reconciliation payment (if any), which BPC considers to be to its advantage.

Operational Outlook for 2021

BPC’s portfolio-wide work program for 2021, as defined in late 2020 (refer for more details to the Company’s announcement of 1 December 2020), remains on track, and can be summarised as follows:

Trinidad & Tobago

· Drilling of Saffron #2 appraisal well commencing in Q1 2021, which, subject to results, would rapidly see BPC seek approvals for a Saffron field development, and with up to seven production wells to follow through 2021.

· Completion of reprocessing of the entire 3D seismic grid over the highly prospective SWP, high-grading Saffron lookalike prospects for drilling, with up to two initial exploration wells by the end of 2021.

· Depending on technical outcomes, speed of permitting approvals, and rig and funding availability, an accelerated 2021 work program could include u p to a further eight Saffron production wells, and one further exploration well in the SWP.

Suriname

· Drilling of an appraisal well and conduct of Extended Well Test (EWT) in the Weg Naar Zee Block in Suriname in Q1 2021, and subject to results, rapidly moving into a wider field development, with up to six production wells to follow through 2021.

· Depending on technical outcomes, speed of permitting approvals, and rig and funding availability, an accelerated 2021 work program could include u p to a further three Weg Naar Zee production wells in Suriname.

Uruguay

· Finalisation of licence award in Q1 2021.

· Finalise technical work to better define, delineate and quantify the lead/prospect inventory.

The Bahamas

· Completion of the Perseverance #1 well in Q1 2021, and analysis of technical results.

· Depending on technical outcomes, renewal of licences in The Bahamas into a third exploration period (end of Q1 2021), followed by planning for future well activity, and farm-out considerations.

Regulatory Statements

In accordance with the AIM Note for Mining and Oil & Gas Companies, BPC discloses that Mr Nathan Rayner, the Company’s Operations Director, is the qualified person who has reviewed the technical information contained in this announcement. He is a qualified Petroleum Engineer, a member of the Society of Petroleum Engineers, and a member of the Institution of Engineers, Australia. He has over 20 years’ experience in the oil and gas industry. Nathan Rayner 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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