Columbus Energy (CERP.L) Q&A on potential merger with Bahamas Petroleum (BPC.L)

Columbus, the oil and gas producer and explorer focused on onshore Trinidad and Suriname, is pleased to provide a set of Q&A’s on the potential merger with Bahamas Petroleum Company plc.

The Q&A’s are set out below and can also be accessed on the Company’s website at

Columbus Energy Resources plc – Bahamas Petroleum Company plc

Proposed Merger – Q&A

Q. Why do the merger now? Columbus announced the results of Saffron on 27 April 2020, why not wait until after Saffron 2 was drilled or after the Trinity Inniss CO2 results before negotiating a merger or contemplating other transactions?

A. In January and February 2020, the Company was focussed on safely completing the drilling of the Saffron well and commencing its testing regime (see the Corporate Update dated 13 February 2020). By mid-March 2020, the Company was aware of the potential impact of Covid-19 on its operations and the industry (see the RNS dated 17 March 2020). The subsequent fall in the oil price (most notably in April 2020) highlighted the need, in the Board’s view, for the Company to be part of a larger business that will be better placed to weather the storm than Columbus as a standalone entity – our assets will be more advanced and the balance sheet stronger. The overlap of assets, people and finance with Bahamas is, in the Board’s view, very good and there was no guarantee that the opportunity to undertake the merger would be available later in the year, especially given BPC’s intention to drill the Perseverance well in Q4 2020/Q1 2021. It is also worth noting that the Board met remotely almost every day during the deliberations with BPC (early April to early June 2020) to consider progress and examine alternative options for the Company, including remaining a separate entity. The Board was unanimous that the merger was in the best interests of all the Company’s stakeholders, taking account of all relevant information available to it.

Q. Why is it that the transaction was announced without Columbus management previously announcing that that some form of action (corporate merger, capital raise, asset sale) was contemplated?

A. As set out above, in early 2020, the Company did not prioritise merger or other corporate actions prior to the completion of the Saffron drilling and testing. The impact of Covid-19 and Opec+ decisions in February to April 2020 accelerated the Company’s planning for the next stage of the Company and led, ultimately, to the proposed merger with BPC. Discussions with BPC began in April 2020 and as with any merger or sale involving a publicly traded company (including Columbus), the obligation of secrecy, one of the fundamental requirements of the Takeover Code, needed to be maintained. Oil and gas companies around the world – from the majors, to medium to smaller-sized entities – were also taking actions in Q2 2020 to respond to the new business environment they were facing. This has resulted in well-publicised actions across the industry including significant cost reductions, deferral of work programmes, reduction or cancellation of dividends and other M&A activities. In seeking to take a new approach, the Boards of BPC and Columbus were responding to circumstances in a manner consistent with their oil & gas industry peers.

Q. Is Leo Koot still committed to the business post-merger?

A. Absolutely. Leo will become a Non-Executive Director of BPC post-merger and be responsible for driving the progress of the South West Peninsula and Suriname projects. He will also be entitled to attend and contribute to the BPC leadership team meetings.

Q. How did the parties agree the relative valuations and how does this relate the net present value (“NPV”) of each party’s assets? Does the transaction undervalue Columbus?

A. The merger valuation was agreed based on the relative share price and market capitalisations of each company using several reference points in time, as described on pages 33 and 36 of the Scheme Documents. The NPV of each party’s assets will depend upon a number of assumptions for that NPV to be realised. For example, the NPV for the Saffron appraisal and development project (as set out in Columbus’ Corporate and Operational Update dated 27 April 2020) depends on funding for the project of circa US$3m (as set out on page 12 of that update). As such, the share price and market capitalisation of each party is a more appropriate measure of value. The Columbus Board looked at the proposed transaction with a 6 – 12 month horizon. In the event of BPC’s drilling success with the Perseverance well, the Board believes the merits of the deal will be self-evident. In the event the Perseverance well result is ambiguous, the Board’s view is that by that time the combined business will be better placed than if Columbus didn’t undertake the merger.

Q. Why does the Scheme Document not contain more information on the current performance of the Columbus assets, including information on current production levels?

A. With regards to production levels of the Columbus assets, as previously announced, the Company has since Q1 2019 been focussing on maximizing the profitability of our production rather than the absolute level of production. As such, the Company has not regularly reported production numbers and does not expect to do so prior to the shareholder meetings to vote on the proposed merger. Of course, the total valuation of the Company is made up of, amongst other things, the value of current production, the South West Peninsula portfolio and the Weg Naar Zee asset in Suriname.

Q. Will the merger have any impact on the commercial license terms or will the license terms need to be renegotiated post-merger? Specifically, in relation to the lease with Singh Estates which has a provision that “no royalties are payable until 10m barrels of oil have been produced”.

A. The terms of the Singh Estate lease are not affected by the Merger. In general, the Merger will not trigger any changes the commercial terms of the SWP licences, including the timing of any future royalty payments upon a successful development. The Scheme Document sets out the conditions related to various approvals from Heritage and Staatsolie related to the Merger.

Q. Why has the signing of the Goudron IPSC/EPSC been postponed multiple times? Is the delay in signing the ESPC a cause for concern due to broader oil policy issues in Trinidad?

A. The delays in signing the new Goudron EPSC have been exacerbated to a large extent by Covid-19 restrictions in Trinidad affecting ongoing regulatory and administrative approval processes. The Company is not aware of any new oil policy issues which have affected the signature process. The same delays are being faced by other IPSC/EPSC licence holders.

Leo Koot, Executive Chairman of Columbus, commented:

“I would encourage all our shareholders to read the Q&A’s, which are some of the most common questions related to the potential merger that we have received from our shareholders. As set out in the Scheme Document, the Board is unanimous in their recommendation to accept the offer. I would encourage shareholders to consider the merits of the offer for the reasons set out in the Scheme Document and to vote at the relevant shareholder meeting via the proxy forms.”

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