NASSAU, BAHAMAS — Bahamas Petroleum Company (BPC) has told investors that its enhanced COVID-19 mitigation measures and operational impact have resulted in the cost of its exploratory well being revised upward to between $24-$28 million.
The company said in a recent update to investors that all of its COVID-19 measures collectively add $3 million in additional costs.
The company previously told investors that Perseverance #1 is on track to spud before the end of 2020.
Noting the “highly fluid nature of the global COVID-19 situation”, BPC said it has decided to move to implement an “even more rigorous” COVID-19 mitigation plan along with Stena Drilling.
This plan, it said, would ensure the creation of “a series of effective COVID-19-free ‘bubbles’ that completely isolate and test all crew, staff and vendor personnel on an enhanced basis, and thus ‘shields’ the vessel to the maximum extent possible from the risk of COVID-19 importation/disruption”.
These measures include enhanced quarantine and testing measures, and multiple and different COVID-19 tests before, during and after isolation and during transit. Further, all transits will now be via private charter flights for all crew to and from the UK/USA and The Bahamas and then ultimately to the drilling vessel.
“Collectively, all of these measures are expected to add approximately $3 million of additional cost to the overall program,” BPC continued in an update on November 27.
“The company has previously advised a cost estimate of between $21 million to $25 million, with a possible contingency of up to $5 million. The cost estimate of Perseverance #1 is now revised upward, to between $24 million to $28 million. The company also considers that it would be appropriate to expand the contingency allowance to $7 million, such that if all contingencies were to materialize, the total cost of Perseverance #1 could be up to $35 million, or approximately 15 percent more than previously contemplated,” BPC said.
The company added that within this revised total cost estimate, it has already prepaid a number of items, including the rig mobilization fee, purchase of wellheads and equipment and advanced payments to a number of suppliers.
Based on this, remaining cash outflows required to complete Perseverance #1 are estimated to be in the range of $19 million to $23 million (and the aforementioned $7 million contingency, which may be required all, in part or not at all).
BPC CEO Simon Potter said: “Given the ever-evolving and escalating COVID-19 situation around the world, the sobering reality is that preventing the COVID-19 virus spreading onto the Perseverance #1 drilling installation in the first place is dramatically more cost-effective than having to deal with it once it has arrived offshore.
“Hence the considerable efforts put in by BPC, Stena and participating contractors and service companies to develop even more stringent measures to detect and diminish the risk of infection, which are now being implemented, but which will come at a cost.
“Fortunately, given the flexible range of funding options the company has developed over the course of the last two years, we have successfully agreed an increase to the size of our Conditional Convertible Note facility by £4.75 million to offset this increased cost.”
Potter added: “Moreover, we are pleased that the providers of this facility have demonstrated their commitment to the project by agreeing to provide a portion of this facility unconditionally once the well is spud, and the balance expected to be available as required. In aggregate, these arrangements provide enhanced financial capacity, notwithstanding a worsening COVID-19 environment.”