Perseverance #1 Operational Update and Exercise of Options

Source: www.gulfoilandgas.com 9/30/2020, Location: South America

In the lead-up to drilling of its first exploration well in The Bahamas - Perseverance #1 - BPC, the Caribbean and Atlantic margin focused oil and gas company, with exploration, production, appraisal and development assets across the region, is pleased to provide the following update in relation to preparation for well operations. Perseverance #1, at 100% equity to BPC, is expected to spud before Christmas 2020, and is targeting recoverable prospective resources of 0.7 - 1.4 billion barrels of oil.

Highlights
· Well control and associated insurance policies placed for Perseverance #1
· Expansion of dedicated drilling team and facilities in Houston, Texas
· Logistics planning and contracts progressed for a range of necessary services and supplies, including entry into a Master Service Agreement with Halliburton for provision of integrated well services for the drilling of Perseverance #1
· Updated conceptual development study and associated update of potential full-field economics reaffirms economic robustness of the project. In a successful development scenario of the estimated Perseverance #1 P50 resource, at US$40/bbl oil price, the project would deliver an NPV10 exceeding $2.5bn, and revenues of over US$5 billion to the Government of The Bahamas

Simon Potter, Chief Executive Officer of BPC, said:
"Last week, we advised of an important milestone - the nomination of the Stena IceMAX as our drillship facility for Perseverance #1, and the anticipated spud date of that well, being prior to Christmas 2020.

With the certainty around our forward schedule, we are now able to push on with a wide range of important planning and logistics tasks, such as completing our insurance placement and progressing a range of necessary contracts for services and supplies. This includes entering into a Master Service Agreement with Halliburton, another important step as we progress towards drilling. The MSA with Halliburton provides access to services on an integrated basis from one of the world's pre-eminent oilfield services companies, befitting of the flagship nature of this project.

Alongside this our drilling team has recommenced activity, and whilst presently working remotely, office accommodation in Texas is back up and running for when actual drilling operations are underway, at which time the team can be physically co-located. I look forward to updating shareholders on additional milestones in the coming months."

Insurance Policy Placement
Under the terms of BPC's licences in The Bahamas, and in accordance with global best practice standards, BPC is required to secure an extensive suite of insurance policies to cover drilling operations for Perseverance #1, including an appropriate well control policy.

BPC is pleased to advise that it has now secured all required insurances for the Perseverance #1 well drilling operations. The insurance placement, arranged by Aon UK Ltd, follows an extensive independent third-party review of BPC's well plan, design and risk mitigation policies. The insurance placement has been 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.

Drilling Team and Facilities Expansion
Prior to the Covid-19 shut-down, BPC had established a drilling field office in Houston Texas, and had assembled a core Perseverance #1 drilling team with collectively nearly 300 years of drilling and project support experience. All members of this team were furloughed in March / April 2020, pending resumption of drilling activities.

With the spud of Perseverance #1 now anticipated prior to Christmas 2020, members of this team have returned to work, to resume final operational planning in the run up to commencing drilling. Activities are focused on ensuring continuous and safe operations during this time of Covid-19 interruptions, logistics planning to ensure the drilling vessel is fully and efficiently supplied at the time of spudding and thereafter, and ensuring all documentation, procedures, management systems and response plans are accurate and up to date in light of the confirmed use of the Stena IceMAX. Most of the drilling team is presently working remotely, but a physical field office in Houston has reopened, such that when drilling operations are underway the team can be physically co-located.

Halliburton MSA
In August 2019, following extensive technical discussions and mutual due diligence, BPC received proposals (including pricing) for a range of integrated well-related services, for the Perseverance #1 drilling campaign. At that time, and as previously announced, BPC issued a notice of award to Haliburton for provision of those integrated well services, as a precursor step to finalizing a detailed contract as is customary in the industry.

As a result of the Covid-19 pandemic, in March 2020 drilling operations were rescheduled, with the well now expected to spud prior to Christmas 2020, as previously announced. Consistent with that revised schedule BPC has now agreed terms for a Master Services Agreement ("MSA") with Halliburton Overseas Limited (a subsidiary of Halliburton Inc).

Pursuant to the MSA, Halliburton will provide a number of services on an integrated basis for the drilling of Perseverance #1. This includes provision of drilling fluids, directional drilling (including measurement while drilling ("MWD") and logging while drilling ("LWD") tools), cement and cementing services, mudlogging, electric logging, liner hangers and casing accessories, and review of the well control plans.

Other Significant Contracts & Activities
Prior to the Covid-19 shutdown, BPC had established a logistics plan for personnel transit and crew change to and from the drillship via S-92 Sikorsky helicopter with ERA Helicopters, and had contracted for transport of consumables, equipment and necessary supplies to the drillship via a range of supply boats with Harvey Gulf International Marine. The Master Flight Services and Master Time Charter agreements in respect of both of these crucial logistics services have been reactivated, in accordance with the revised drilling schedule, for implementation as previously envisaged.

Physical inspection of the Stena IceMAX and all associated equipment is scheduled to occur shortly, with the vessel location currently in port in Las Palmas, in the Canary Islands, Spain. A series of contracts for service providers in the region will be awarded soon, to facilitate this process.

Conceptual Development Study and Update Potential Economics
In anticipation of drilling of Perseverance #1, BPC has undertaken a study to update its view on potential full-field development options, their potential costs in the current environment, and the ultimate possible economic parameters of a full-field development in the event of successful exploration and thereafter appraisal drilling campaigns. The study was undertaken with the assistance of an internationally recognized third-party consultancy firm, and focused on (i) development options screening, (ii) development option selection, definition and initial design, and (iii) development capital and operating cost estimates.

Over the last 8 years of detailed geological and geophysical study, BPC has refined both its view of the resource potential of the B Structure, and in particular the BNorth segment targeted with the drilling of Perseverance #1 (P50 0.77 billion barrels; upside 1.44 billion barrels), along with the possible range of production rates in the event of a successful development. These pre-drill estimates, along with expected fluid characteristics, water depth and distance from infrastructure have been combined to confirm the preferred development concept, being the use of a subsea wells system tied to a Floating Production Storage Offloading (FPSO) vessel. This is a known technology operating safely up and down the entire Atlantic margin on both sides of the ocean.

A preferred development concept for a field size of approximately 0.7 billion barrels would involve an initial 16 wells, with Electric Submersible Pumps (ESPs), connected to subsea wellheads, grouped in pods of 4 wells, then flowing through a closed-circuit subsea flowline up individual risers to the FPSO. Thereafter additional wells would be drilled over the field life in similar configuration to maintain a production plateau and optimise FPSO throughput.

In a successful development scenario of approximately 0.7 billion barrels (i.e., of the P50 resource level at Perseverance #1 only), and assuming a real US$40 oil price, the project remains robustly economic with an NPV10 exceeding US$2.5 billion. In such a scenario, even at these relatively modest oil prices, an aggregate revenue stream of over US$5 billion would flow to the Government of The Bahamas in royalty income and other payments over the life of the project.

In the event of a successful development being established at the BNorth Perseverance #1 location, it is expected that the most likely resource volumes identified for the remainder of the 70 - 80km long B Structure would be largely derisked. In such a scenario it could thus be anticipated that one or more additional FPSO developments would be required to effectively drain the expanded resource base - for example one located at the northern end of the structure, and the other at the southern end. With a similar wells and subsea architecture configuration, a commensurate increase in incremental economic worth to the project (and revenues to the Government of The Bahamas) could be anticipated.

Exercise of Share Options
BPC has received notification for the exercise of share options in respect of 5,429,206 ordinary shares of 0.002p each in the capital of the Company by a former employee of Columbus Energy Resources PLC. As previously announced, the exercise price in connection with these share options is 0.002p per share. Application has been made for the shares to be admitted to trading on AIM ("Admission"), and Admission is expected to occur on or about 2 October 2020. These shares will rank pari passu with the ordinary shares of the Company in issue.

The Company's total issued share capital, following the issue of the shares, will comprise of 3,419,807,846 ordinary shares. As the Company does not hold any shares in Treasury, this figure may be used by shareholders in the Company as the denominator for the calculations by which they will determine if they are required to notify their interest in, or a change to their interest in, the share capital of the Company following Admission.


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