(AIM: BPC)
THE BAHAMAS:A GIANT OIL PROVINCE IN
THE MAKING
Investor Presentation
January 2011
Isle of Man Head Office:
IOMA House
Hope Street
Douglas
Tel: +44 1624 647883
Email: [email protected]
Website: www.bpcplc.com
Borco oil storage facility Freeport Bahamas
Important Notice
This presentation has been prepared by Bahamas Petroleum Company Plc (the Company) solely for its use at informational meetings relating to it and is
for information purposes only. By attending the meeting where this presentation is made, or by reading the presentation slides, you agree to be bound by
the following limitations.
This presentation is being supplied to you solely for your information. This presentation and its contents may not be further copied, distributed or passed
on to any other person or published or reproduced directly or indirectly, in whole or in part, by any medium or in any form for any purpose.
Some statements contained in this presentation or in documents referred to in it are or may be forward-looking statements. Such statements reflect the
Company’s current views with respect to future events and are subject to risks, assumptions, uncertainties and other factors beyond the Company’s
control that could cause actual results to differ from those expressed in such statements. Although the Company believes that such forward-looking
statements, which speak only as of the date of this presentation, are reasonable, no assurance can be given that they will prove to be correct. Actual
results may differ from those expressed in such statements, depending on a variety of reasons. Therefore, you should not place undue reliance on these
statements. The development and production plans and estimates set out herein represent the current views of the Company's management. The
Company’s Board reviews the production estimates on an ongoing basis. All planning is subject to available funding and capital allocation decisions.
There can be no assurance that the results and events contemplated by the forward-looking statements contained in this presentation will, in fact, occur.
The Company will not undertake any obligation to release publicly any revisions to these forward-looking statements to reflect events, circumstances or
unanticipated events occurring after the date of this presentation, except as required by law or by any appropriate regulatory authority. Nothing in this
presentation or in documents referred to in it should be considered as a profit forecast.
Past performance of the Company or its shares cannot be relied on as a guide to future performance. This presentation does not constitute, or form part of
or contain any invitation or offer to any person to underwrite, subscribe for, otherwise acquire, or dispose of any securities in the Company or advise
persons to do so in any jurisdiction, nor shall it, or any part of it, form the basis of or be relied on in connection with or act as an inducement to enter into
any contract or commitment therefore. This presentation does not constitute a recommendation regarding the securities of the Company. No reliance may
be placed for any purpose whatsoever on the information or opinions contained in this presentation or on its completeness and no liability whatsoever is
accepted for any loss howsoever arising from any use of this presentation or its contents or otherwise in connection therewith.
This presentation and the information contained herein do not constitute an offer of securities for sale in the United States. The Company’s securities have
not been, nor will they be, registered under the US Securities Act of 1933, as amended (the Securities Act) and may not be offered or sold in the United
States except to qualified institutional buyers (as defined in Rule 144A) in reliance on Rule 144A or another exemption from, or in a transaction not subject
to, the registration requirements of the Securities Act.
This presentation has been prepared in compliance with English law and English courts will have exclusive jurisdiction over any disputes arising from or
connected with this presentation.
2
Bahamas Petroleum Company Awarded Licences and Licence
Applications
3
Google Image showing Bahamas Petroleum Company
Awarded Licences and Licence Applications
4
Five wells drilled in The Bahamas between 1947-1986
− Indicate active petroleum systems based on the presence of oil
shows of varying quality, abundant reservoirs and seals,
indications of source rocks and hydrocarbon saturations from log
interpretation
Due largely to the lack of deepwater drilling capability and
seismic expertise, all licences were abandoned prior to 1988
with the exception of Kerr McGee who undertook a nominal
program north of the Bahamas Islands, subsequently exiting
in 2006
All Bahamian Government geological technical data was
destroyed in 1980’s hurricanes
No compelling incentive for international exploration activity
post-1985 given crashes in oil and commodity prices from
1986 to 2003 which led companies to remain in more
conventional producing areas
Source: The Commonwealth of The Bahamas
Historical Bahamas Activity
WELL YEAR OPERATOR TOTAL
DEPTH
AGE AT TOTAL
DEPTH
Andros Island – 1 1947 Superior 4.446m Early Cretaceous
Cay Sal – 1 1959 Bahamas
California
5.763m Jurassic or Early
Cretaceous
Long Island – 1 1970 Bahamas
Gulf
5.351m Jurassic or Early
Cretaceous
Great Isaac – 1 1971 Bahamas
California
5.440m Jurassic
Doubloon Saxon – 1 1986 Tenneco 6.626m Early Cretaceous
5
Bahamas Petroleum Company Overview
Bahamas Petroleum Company was formed in 2005 and listed on AIM UK through a reverse takeover in Sept 2008
− Current market capitalisation is approx. US$252.8 million (GBP£158 million) (BPC: AIM)
− Bahamas Petroleum Company Plc is the first oil company to conduct new work in the highly prospective southern
Bahamas region since 1987
The Bahamas are a sparsely explored region with previous activity by major oil companies spanning 1947-1987
First mover advantage in assembling a material portfolio of oil and gas leads in The Bahamas
− World-class exploration with giant and super-giant leads exceeding 1bn boe
− Compelling fiscal terms: low royalty only, no corporation tax
Partial farm-out strategy to fund major costs retaining 100% ownership in some areas
− Maintain meaningful working interest positions while reducing exploration risk
Size and scale of the opportunity is significant
− Attractive to Majors and NOCs who are increasingly active in the region
Statoil farm-in signed mid-2009 validates the farm-out strategy
− Subject to Government approval of applications
− In discussion with others and more deals expected in near term
Recent results and near-term seismic and drilling program
− New 2D seismic (194 km) acquired June 2010
− More new seismic arrangements underway
− Plans to drill in Q4 2011
6
Bahamas Petroleum Company’s Technical Data Set – A
Competitive Advantage
Bahamas Petroleum Company undertook a successful global search for
data which could cost in excess of US$500M to acquire today
Search and acquisition of original seismic data, well logs and chance finds
of the original well cores took 4 years and cost over $4 million
In 2005 well cores were discovered by Bahamas Petroleum Company in
an industry-donated university storage warehouse in New Orleans (post
Hurricane Katrina)
Bahamas Petroleum Company undertook a thorough evaluation of the
exploration data set including digitising the original analog well logs
Logs were re-evaluated by Schlumberger and other parties using
industry’s latest technologies
New seismic conducted and processed mid 2010. It is expected that
more detailed seismic will be underway and processed in the next 3
months; allowing Bahamas Petroleum Company to estimate the size of
possible reserves and select the first drilling location, to be called
Perseverance
No other party has such a comprehensive data set and no other Company
has acreage in the southern region of The Bahamas
Bahamas Petroleum Company has the only
Comprehensive Data Set of Bahamas Geology and
Geophysics
7
Corporate History – First Mover Advantage
* Awards pending 8
Bahamas Petroleum Company is founded
by Alan BurnsBahamas Petroleum Company submits licence applications
Board expands toinclude Michael Proffitt as Financial Director
Licence awarded and reassigned
November 2006
Paul Crevello joins Bahamas Petroleum Company as Chief OperatingOfficer
Ministry of Energygrants the licence
application
Five licences approved byGovernor General of The Bahamas
Bahamas Petroleum Company
applies for additional licences
Announces intention to re-domicile Bahamas Petroleum Company in IOM
Bahamas Petroleum Company completes RTO onto AIM market through acquisition of Falkland Gold & Minerals
Announces commencement of seismic and environmental survey
20 July 2010 –Bahamas Petroleum Company applies for 2 additional licences & tenders for additional seismic
30 August 2010 - Bahamian
Government announces temporary freeze on licence applications
May-05 Aug-05 Mar-06 Aug-06 Oct-06 Jan-07 Apr-07 Jul-07 Oct-07 2008 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10
Bahamas Petroleum Company signs Statoiljoint explorationagreement on three licenses
19 April 2010 –Ministry gazettes Bahamas Petroleum Company-Statoil Cay Sal applications
US$12 Million Spent on Geological, Geophysical and Well Core Acquisition Evaluation and Processing
New seismic planned to mature a prospect for Q4 2011
2011
Bahamas Petroleum Company Board & Senior Management
Alan Burns: Non Executive Chairman – Isle of Man
− Alan Burns is founder of the Bahamas Petroleum Company Group and has a successful 37 year career in the oil businessincluding founding Hardman Resources, which was sold to Tullow Oil in 2006 for AUD$1.6bn
− Involved in 28 new oil and gas field discoveries and developments including original Uganda discovery
Dr Paul Crevello: Director & Chief Executive Officer – USA
− Dr Paul Crevello is a carbonate reservoir oilfield expert and has wide international experience in the discovery of majoroilfields
− Considerable experience in Bahamas geological investigation
Michael Proffitt: Non-Executive director – Isle of Man
− Michael Proffitt is formerly an international banker with Barclays as worldwide chairman of Barclays International. He is aformer resident of the Bahamas and is well known in the Bahamian business world
Dursley Stott O.B.E: Non-Executive director – Isle of Man
− Dursley Stott has played an important part in the Isle of Man’s financial growth during the last 50 years and is a founder of asuccessful stockbroking firm on the Island
− Experienced international businessman
9
Bahamas Petroleum Company Technical Team, Consultants & Capabilities
Dr Paul Crevello has over thirty years’ experience in US domestic and international exploration in more
than 40 countries
− University of Miami (Master of Science in Marine Geology and Geophysics) and Colorado School of Mines (Doctor of
Philosophy in Geology and Geologic Engineering)
− Marathon Oil (1978-1994) directed worldwide carbonate geologic exploration research
− Founded SE Asia’s first university petroleum studies in 1994 and founded Petrex Asia in 1997; developing it into a
leading technical consulting firm
− Numerous awards and distinctions from international societies for authorship and invited papers on carbonate and
sandstone reservoirs, AAPG International Distinguished Speaker, Chairman of Joides Ocean Drilling Program and
served on numerous committees and ancillary societies
− Conducted research exploration in The Bahamas since 1975
Standing U.S. Consultants
− Dr. Richard Inden, carbonate sedimentology/reservoir expert with over 40 years of experience
− Dr. Chuck Kluth, structural geologist, formerly head (retired) of Chevron structural group
− Dr. Jon Kirtpatrick, geophysicist and seismic specialist in carbonate exploration and exploitation
− Dr. Bill Pearson, gravity and magnetics specialist with over 35 years experience
− Dr. Mark Rowan, structural geologist, expert in Gulf of Mexico and fold and thrust belts
− Mr. Jock Drummond, seismic processing expert
− Prof. Dr. Paul Olsen, Triassic-Jurassic Atlantic rift basin expert
Unparalleled global expertise in similar-age Jurassic-Cretaceous tectonic reservoir settings as The
Bahamas: Golden Lane and Poza Rico fields, Mexico; the northern Gulf Smackover to Stuart City - Glen
Rose fields, Middle East fields stretching from Oman, Abu Dhabi, UAE, Saudi Arabia, Iran and Iraq
Field expertise include Cantarell and Golden Lane-Poza Rico of the southern Gulf of Mexico, Gwahar of
Saudi Arabia, Arzannah UAE, Yates Field in Texas
10
Why Bahamas?
A politically stable country, with an uninterrupted
parliamentary democracy of over 275 years
Excellent fiscal terms and English based Rule of Law
Benefits from proximity to extensive oil field service and
infrastructure providers in US Gulf of Mexico (GoM)
Close proximity to energy-hungry US market, both in the
GoM and along the US Atlantic coast
Freeport is the major industrial centre of The Bahamas, with
container facilities, oil off-loading terminals, dry dockage and
an oil storage terminal. Borco is the largest storage terminal
in the Caribbean, and Statoil recently acquired South Riding
Point Terminal for $263 million and have committed to
several hundred million dollars in upgrades to the facility and
job growth.
Ship registration under The Bahamas flag is the world's fifth
largest fleet and the world’s largest registry for oil tankers
with several thousand vessels. Many of the most respected
international ship-owning companies fly the Bahamian flag,
including Exxon International, Maersk Line, Teekay Shipping
and Chevron. Registered luxury vessels include the ships of
Norwegian Cruise Lines and Holland-America Cruises along
with cargo steamers, frigates, freighters, tankers and
tugboats.
World shipping traffic including oil tankers near and through The
Bahamas
South Riding Point Terminal, Grand Bahamas
recently leased to Statoil
Industry in the Bahamas
Overview
Commonwealth of The BahamasPopulation: 310,426GDP (US$ Bn): 7.38GDP per capita (US$): 28,600Unemployment Rate (%) 7.6%Median Age (years): 29.9Literacy 96%Education expenditures (% GDP) 3.6%Key industries: Tourism, banking, cement, oil transhipment,
salt, rum, aragonite, pharmaceuticals
Source: CIA World Fact Book, Bahamas Department of Statistics - 29/12/2010
11
Why Bahamas? Compelling Fiscal Terms
Royalty Rates and Leases terms:
Production Level Royalty Rate
Oil Production, up to 75,000 bopd 12.5%
Oil Production, from 75,000 to 150,000 bopd 15.0%
Oil Production, from 150,000 to 250,000 bopd 17.5%
Oil Production, from 250,000 to 350,000 bopd 20.0%
Oil Production, in excess of 350,000 bopd 25.0%
Gas Production 12.5%
Rentals: $0.92 per acre per annum charged for the area of a
lease, but these are deductible from royalty payments.
Income taxes: Nil in The Bahamas.
Comparison of Licensee Revenues – GoM vs. Bahamas
Government Take of Project Pre-Tax NPV (%)
Source: Wood Mackenzie, Bahamas Petroleum Company,
FirstEnergy Capital
The increased potential
return to the licence
holder in the Bahamas
is largely due to zero
corporate income tax
Bahamas
Bah
am
as
Average: 67%
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30%
40%
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nd
Exploration licence - 12 years in total based on 3-year renewal periods1) Initial 3 year award
2) 1st Renewal (years 4-6) @ 100% of acreage – renewal requires commitment to spud well before end of year 4
3) 2nd Renewal (years 7-9) @ 50% - requires well drilled at 2 year intervals
4) 3rd Renewal (years 10-12) @ 50% - requires well drilled every 2 years
Production licence – 30 years plus additional 10 years (subject to approval of extension) 12
Bahamas Petroleum Company (Red/Yellow) & Bahamas Petroleum
Company / Statoil JV (Blue) Exploration Licences
Asset (1) Holder Licence Area The Bahamas – Bain
Licence (offshore)
Bahamas Petroleum
Company
775,468 acres
3,138 km2
The Bahamas – Cooper
Licence (offshore)
Bahamas Petroleum
Company
777,934 acres
3,148 km2
The Bahamas –
Donaldson Licence
(offshore)
Bahamas Petroleum
Company
778,855 acres
3,152 km2
The Bahamas – Eneas
Licence (offshore)
Bahamas Petroleum
Company
780,316 acres
3,158 km2
The Bahamas – Miami
Licence (offshore)
Bahamas Petroleum
Company
760,973 acres
3,080 km2
Application (2) Holder Licence Area The Bahamas –
Islamorada Licence
(offshore)
Bahamas Petroleum
Company / Statoil
777,900 acres
3,148 km2
The Bahamas – Zapata
Licence (offshore)
Bahamas Petroleum
Company / Statoil
776,200 acres
3,141 km2
The Bahamas – Falcones
Licence (offshore)
Bahamas Petroleum
Company / Statoil
774,600 acres
3,135 km2
Application (3) Holder Licence Area The Bahamas – Santaren
Licence (offshore)
Bahamas Petroleum
Company
760,100 acres
3,076 km2
The Bahamas – Andros
Licence (offshore)
Bahamas Petroleum
Company
774,500 acres
3,134 km2
(1) Interest for all licences: 100%
(2) Statoil – Bahamas Petroleum Company Limited Joint Venture Applications - there is no certainty
that they will be granted
(3) July 2010 applications with 100%- WI - there is no certainty that they will be granted 13
* Cay Sal and 3rd Round Licence Applications contingent on lifting of
Government imposed application freeze – see page 25.
Bahamas Petroleum Company Technical Achievements (2006-2010)
Retrieved and described original
core and cutting samples
Completed modern computer
workstation analysis: seismic, well
logs, gravity and magnetics
Petrophysics well log analysis on
original digital and scanned logs
Seismic and borehole structural
geologic analysis
Risk analysis, cost comparison and
reservoir simulations
Geochemistry and petroleum
systems evaluation
Shot new advanced 2D seismic,
gravity and magnetics on its 100%
owned areas in June 2010
Conducted environmental survey on
Cay Sal
36 leads confirmed 14
*
*
* Cay Sal and 3rd Round Licence Applications contingent on lifting of
Government imposed application freeze (see page 25)
*
*
15
Previous Wells Drilled – Core Interpretation
Numerous hydrocarbon shows throughout all wells
16
1 sec
2 sec
3 sec
2 kmC4N S
Bahamas Petroleum Company’s BH 2010 - 2D Seismic Survey (June 2010)
17
Seismic Data Analysis September 2010
Flat reflectors
Dim spotsWater bottom evulsion features
Figure 1: showing stratigraphic variations, amplitude and frequency variations possibly associated
with porosity and/or fluid, C4 structure with potential gas chimney indicators and water bottom
features.
5 Kms.
Figure 2: showing hydrocarbon signatures, with polarity reversal, frequency absorption,
amplitude dimming and due to gas cloud diffusion.
18
1 Km.
Figure 3: showing amplitude dimming and chimney features due to insitu gas.
1 Km.
Figure 4: showing flat reflectors possibly due to fluid interface
Seismic Data Analysis September 2010 cont.
19
DG Consultant Services
607A Kipling St., Houston, Texas 77006, 713 927 2251
September 15, 2010
Introduction:
Bahamas Petroleum Corporation (Bahamas Petroleum Company) acquired 194 kilometers of 2D seismic data in July 2010 in order to evaluate the capabilities of improving seismic data
quality through modern acquisition techniques, and processing algorithms utilizing massive computer power.
Analysis:
Data results of this survey show better data quality than previous vintages acquired most recently in the 1980’s. Vintage geologic and seismic data (1986) previously documented the
potential presence of multiple >500MMboe fields. These historical studies and recent independent consultant reports (2007-2010) indicate that the area has a high probability for oil, which is
supported by oil shows in exploratory and ODP (Ocean Drilling Program) wells drilled in The Bahamas, well tests from offshore Florida Keys and offshore Cuba. Bahamas Petroleum
Company's June 2010 seismic confirms the previous work and reduces risk placed on hydrocarbon presence.
Bahamas Petroleum Company's 2010 data is more suitable for both structural and stratigraphic interpretation, as well as advanced analyses for hydrocarbon and porosity detection, through
amplitude and velocity variation, and frequency absorption due to hydrocarbons.
The new data present clear evidence of large structures (figure 1) with continuous layering of probable reservoirs and seals across the breadth of the folds and hydrocarbon fluid flow
features including chimneys or vents, and direct hydrocarbon indicators as can be seen in figures 2 and 3. There is further evidence from the sections of likely fluid controlled amplitude
variations and flat-spots (figure 4) which may indicate fluid interfaces of various phases of hydrocarbon contacts. Vertical chimneys into the sea bottom as well as amplitude dimming and
frequency absorption in figures 2 and 3 are direct evidence of in situ escaping hydrocarbons from well charged structures. Typically the light ends of the hydrocarbons escape through micro-
faults and fractures and provide indicators of hydrocarbons preserved within the structure.
The types of features observed over the structures and along rock layers are indicative of an oil-prone system with minor amounts of lighter ends escaping to the surface. The abundance of
hydrocarbon indicators supports recent consulting studies that proposed the petroleum system is operative (see APT summary of report posted on Bahamas Petroleum Company website).
Summary:
Bahamas Petroleum Company’s 2010 seismic acquisition and processing program successfully demonstrates the advantages of modern acquisition and processing systems and computer
power. As well as imaging large structures with over 700 hundreds of milliseconds (2-way time; i.e., ~4000 feet) of closure, there are numerous geophysical indications of porosity variations
and hydrocarbons in the system. It is anticipated that a closely spaced 2D grid or 3D will prove up drillable prospects by the end of the year.
J. (Jock) Drummond
Dr. Norman S. Neidell
Seismic Data Analysis September 2010 cont.
Identified Giant & Super-Giant Leads
Tenneco
Resource est
Max Case
100% Structural Fill
bn bbl
Most Likely Case
50% Structural Fill
bn bbl
Minimum Case
33% Structural Fill
bn bbl
Manta Ray 1.447 0.543 0.049
Sand Shark 1.386 0.244 0.071
Blue Fin 3.469 0.406 0.069
Lion Fish 1.322 0.268 0.16
Blue Marlin 1.94 0.439 0.238
Grouper 6.492 1.665 0.837
Hammer Head 1.007 0.299 0.121
TOTAL for play in billion barrels
17.063 3.864 1.545
• GREEN – 4-way isolated closure (COMBINED 33,581 ACRES)
• YELLOW - 4-way combined closure (COMBINED 122,441 ACRES)• BLUE - 4-way & fault closure to spill (201,144 ACRES)• Structure map on Lower Cretaceous
Bahamas
Petroleum
Company*
Resource est
Max Case
100% Structural Fill
bn bbl
Most Likely Case
50% Structural Fill
bn bbl
Minimum Case
33% Structural Fill
bn bbl
C1 11.947 4.420 1.770
C2 5.865 2.170 .870
C3 3.693 1.366 .550
C4 2.791 1.030 .410
TOTAL for play in
billion barrels
24.296 8.986 3.600
Tenneco Map
Tenneco & Bahamas Petroleum Company lead maps and resources of same structures. Bahamas Petroleum Company was unable to
identify Tenneco’s named leads relative to Bahamas Petroleum Company’s.
1986
20*Based on volumetrics work by consultant petrophysicist. Numbers represent a highly
speculative assessment of potential resource.
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Corporate Overview
Bahamas
Petroleum
Company PLC
Isle Of Man
BPC Ltd.
Bahamas
Bahamas Offshore
Petroleum Ltd.
Privateer
Petroleum Ltd.
Island Offshore
Petroleum Ltd.
100%
100% 100% 100%
AIM RTOSept 08
AIM RTO
Sept 2008
* Cash balance as of June 2010
GBP USDPrice 0.16 0.25652 Week High 0.19 0.30452 Week Low 0.027 0.043
Shares Outstanding 987.4 -Market Cap (mm) 158.0 252.8
Cash and Cash Equivalents (mm) 2.1* 3.4*Debt (mm) -Enterprise Value (mm) 155.9 249.4
Shareholder Shares Held %Morgan Stanley Inv Mgmt (UK) 50,727,021 5.14%
TD Waterhouse 50,677,843 5.13%
Hargreaves Lansdown Asset Management 49,645,369 5.03%
Halifax Share Dealing 44,350,504 4.49%
Barclays Wealth 43,937,406 4.45%
Majedie Asset Management 36,949,086 3.74%
JM Finn & Co 36,787,997 3.73%
Fidelity 36,252,500 3.67%
Burns Family Investments* 34,820,000 3.53%
Squaregain 30,686,283 3.11%
Petroleum Geoscience * 17,730,000 1.80%
Petrexasia Consulting* 15,300,000 1.55%
Gumbo Investments* 12,360,000 1.25%
Total Management & Founders 80,575,000 8.16%
Total - Top 25 Shareholders 681,020,414 68.97%
Total Shares in Issue 987,379,096
* Director Shareholdings
21Note: Past performance of the Company or its shares is not a guide to future performance
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Bahamas Petroleum Company Share Price Chart
22Note: Past performance of the Company or its shares is not a guide to future performance
Bahamas Petroleum Company
and StatoilHydro
sign JV agreement
for oil exploration in
Bahamas waters
Blackrock buys 4.05%
of Bahamas Petroleum Company Shares
Bahamas Petroleum Company
begins to attract a number of
other well known institutional
investors and further broadens
shareholder baseBahamas Petroleum Company
raises £2.4 million from
institutional shareholders
at a price of 3.5 pence
Bahamas Petroleum
Company announces
2D seismic program
and environmental
baseline study in
Bahamas
Bahamas Petroleum
Company announces
2D seismic program
results
Bahamas Petroleum
Company applies for 2
new licences in the
Bahamas
Bahamas Gov’t
announces
suspension of new
license applications
Bahamas Gov’t
clarifies position:
Bahamas Petroleum
Company licences
unaffected by
suspension
Bahamas
Petroleum
Company
announce placing
of £5.1million
23
Bahamas Gov’t
announces
suspension of
new license
applications
Reverse Takeover
Of FGML by BPC
Pre RTO – FGML History
Bahamas Petroleum Company
and StatoilHydro
sign JV agreement
for oil exploration in
Bahamas waters
Bahamas Petroleum Company begins to attract a
number other of well known institutional investors and
further broadens shareholder base
Bahamas Petroleum Company
raises £2.4 million from
institutional shareholders
at a price of 3.5 pence Bahamas Petroleum
Company announces
2D seismic program
results
Bahamas Gov’t
clarifies position
Bahamas Petroleum
Company licences
unaffected by
suspension
Bahamas
Petroleum
Company
announce placing
of £5.1million
Five Year Share Price
24
Licence Application Update - August 31, 2010
Bahamas Petroleum Company News Release – 31 August 2010:
Bahamas Petroleum Company, the AIM quoted oil and gas exploration company with licences in The Commonwealth of The Bahamas, notes the announcement from the
Ministry of the Environment (Government of The Bahamas), issued late yesterday, concerning oil exploration in the country.
Included below is the full text of the announcement: ―MINISTRY OF THE ENVIRONMENT - OIL EXPLORATION IN THE BAHAMAS
Nassau: The Public is advised that The Ministry of The Environment has suspended consideration of all applications for oil exploration and drillings in the
waters of The Bahamas. The Ministry seeks, by this decision, to maintain and safeguard an unpolluted marine environment for The Bahamas, notwithstanding the potential financial benefits of
oil explorations. Additionally all existing licences will be reviewed to ascertain any legal entitlement for renewal.
Given recent events involving oil exploration and the efforts to prevent pollution, this prudent safeguard is essential to preserving the most vital natural resource of The Bahamas, its
environment.
The Ministry will work diligently to complete and have in place, very stringent and environmental protocols for oil exploration prior to any further consideration of applications, given that oil is
likely to be located in the marine environment of The Bahamas.
The Ministry of The Environment believes that this prudent policy requirement is in the best interest of The Bahamas and the social, economic and environmental wellbeing of future
generations of Bahamian citizens and visitors.
The Hon. Earl D. Deveaux, MP
Minister of The Environment
30th August 2010‖
Bahamas Petroleum Company understands and appreciates the position of the Government of The Bahamas in delaying the granting of new applications and its reviews
given the drilling bans in place in US waters until the cause of the Macondo well blowout are fully determined and appropriate new controls are put in place.
In the meantime the Company will continue to process and seismically explore its existing granted licences, which contain the majority of Bahamas Petroleum Company's
targets. The Directors believe that by the time Bahamas Petroleum Company's drilling program is more definitive, the situation brought about by the Macondo incident will
become clear and that appropriate and stringent controls will be in place. Bahamas Petroleum Company is committed to working with the Government of the Bahamas to
ensure that the highest
exploration and environmental standards are in place.
Recently Bahamas Petroleum Company completed a baseline sampling in the southern Bahamas to establish the presence of oil and tar balls prior to any possibility of
contamination arriving from the BP spill. The sampling showed the presence of pre-existing tar balls and oil seeps washed ashore that were not from the BP source. This
oil appears to be sourced from natural seeps and possibly oil tanker spillage. Bahamas waters have through traffic of a large percentage of the world's oil tankers.
Alan Burns commented, "Whilst we note this short term situation, there are exploration activities including drilling, proceeding in adjacent Cuban waters
and significant previous drilling within the Company's current licence areas that we believe do not face the same geological risks as those encountered in the US Gulf of
Mexico.
"We enjoy a good relationship with Bahamian authorities and are confident that this situation will be resolved quickly."
25
Licence Application Update - August 31, 2010
News Article in The Bahamas Tribune:
Govt suspends consideration process for oil exploration
August 31, 2010
By TANEKA THOMPSON Tribune Staff Reporter
GOVERNMENT has suspended the consideration process for all oil exploration and drilling applications until the country has stringent environmental protocols in place to mitigate against a
catastrophic oil well leak.
According to Environment Minister Earl Deveaux, the new stipulation comes in response to British Petroleum's (BP) devastating oil leak in the Gulf of Mexico - which threatened fragile marine
ecosystems and fishing industries - and the large volume of oil exploration applications inundating the government.
"The Ministry of the Environment has suspended consideration of all applications for oil exploration and drillings in the waters of the Bahamas. The ministry seeks, by this decision, to maintain
and safeguard an unpolluted marine environment for the Bahamas notwithstanding the potential financial benefits of oil explorations," said a statement released by Dr Deveaux yesterday. The
release added that all existing licenses will be reviewed to ascertain any legal entitlement for renewal.
"We are not seeking to interfere with any existing licenses and the people who have licenses know of the policy. The recent events showed us that (a) oil if it is to be found, will likely be in the
marine environment and (b) we want to maintain an unpolluted environment.
"And so before we explore for oil we want to have the most stringent environmental protocols in place," said Mr Deveaux when asked to clarify this point yesterday.
Bahamas Petroleum Company Plc recently partnered with Norwegian oil heavyweight Statoil to search for oil in some 2.5 million acres in Cay Sal Bank and hold five licenses for oil
exploration. The government has not issued any licenses for oil drilling in Bahamian waters.
Environment Permanent Secretary Ronald Thompson said that while the ministry has yet to draft the necessary safety protocols, government will frame its future policies around existing ones
from other countries. "We haven't drafted any but there are ones that are in existence in other places where oil is current being harvested or explored. We will in short order review all of those
and come up with what we think will be the best (policies) for the Bahamas," said Mr Thompson.
Deepwater Horizon's oil rig exploded on April 20, killing 11 workers, and leaking an estimated 4.9 million barrels of oil from BP's underwater well. Yesterday's statement said that calamity
underscored the need for precautions. "Given recent events involving oil exploration and the efforts to prevent pollution, this prudent safeguard is essential to preserving the most vital natural
resource of the Bahamas - its environment," said the statement.
Speaking to The Tribune, Mr Deveaux said more stringent protocols could have prevented BP's disaster. "Everything we learned about BP suggests that there were a few mishaps that could
have been avoided," he said.
In May, Dr Deveaux said it would be "impractical and unreasonable" for the Bahamas to shy away from oil exploration or drilling as a consequence of the environmentally devastating oil leak
off the coast of the US state of Louisiana.
"The world is not going to shy away from oil because of this accident. This is not the first or the last," he said at the time. He also said earlier that proper management of resources would be
vital to any oil discovery in Bahamian waters.
26
Bahamas Petroleum Company Plc – Proposed Seismic Grid
Seismic grid plan to be undertaken by Norwegian seismic company SeaBird Exploration (www.sbexp.com). Following
various negotiations with other oil companies, it is expected that an additional partner will join our project post the
structural definition and potential volumetrics determined by this more detailed survey.
*
*
Cuba Ramps up Exploration Activity
World class operators have been attracted to Cuba and The Bahamas
In 2005 Repsol, with partners Statoil and
India ONGC, drilled a well 60 miles west of
Cay Sal bank. The group plans to drill
another one of two wells this year in the
same area. In 2009, based on knowledge of
the Cuban petroleum province, Statoil joint
ventured with Bahamas Petroleum Company
to explore the Cay Sal bank.
Other recent Cuban exploration news:
• November 17, 2010 – Gazprom, the Russian oil
company farms into four Petronas Offshore
Cuba Blocks earning a 30% stake. First Well
2011.
• ―Russia`s Zarubezhneft to drill Cuba oil shelf in
2011 – CEO‖
– Source: RIA Novosti, Moscow +
Cubastandard.com 14 July 2010
• ―Russian Oil Company JSC Zarubezhneft
Opens Office in Cuba‖
– Source: Latin America Herald Tribune +
Cubastandard.com 25 June 2010
• ―Cuban offshore oil exploration preparations‖
– Source: Reuters 01 Aug 2010
27
* Cay Sal and 3rd Round Licence Applications contingent on lifting of
Government imposed application freeze (see page 25)
**
Zarubezhneft Website – www.nestro.ru/www/nestroweb.nsf/main_eng
28
Gazprom Website – www.gazprom.com
29
Industrial Port, Grand Bahamas
Borco Oil storage terminal at Freeport Industrial Port
is the largest oil storage facility in the CaribbeanTanker off-loading at Freeport Industrial Port
Tanker off-loading at Freeport Industrial Harbour, Grand
Bahama30
31
G reat Isaac 10,313’
1 m m 10343’
cm
OOID GRAINSTONE - PRESERVED INTERGRANULAR (IG)
& LEACHED OOID GRAIN MOLDS (OM) POROSITY
EXCELLENT RESERVOIR POROSITY (BLUE DYE) &
PERMEABILITY CHARACTERISTICS
ANHYDRITE – SEAL ROCK
NOTE: ANHYDRITE IS THE
TYPE SEAL ROCK FOR THE
WORLD’S LARGEST
OILFIELD IN SAUDI ARABIA
Great Isaac Oolite – Anhydrite Reservoir – Seal Pairs
IG
OM
32
A study by: Applied Petroleum Technology (UK) Ltd. (www.aptec.no) Oct 2010 conducted independently for Bahamas Petroleum Company
Limited
Disclaimer – General
This report contains a number of assessments and opinions presented by Applied Petroleum Technology (UK) Limited (APT UK) based on the information provided and on the company
experience. However, as the oil and gas business is an inherently risk business, no one can accurately predict the outcome of any drilling or completion operation. APT UK neither warrants
nor guarantees the results of any work programme carried out as a result of any predictions or comments made in this Independent Report.
Disclaimer – Specific
It should be noted that given the actual well density in the Bahamas (there are only 5 wells over some 100,000 square miles) there is a high level of uncertainty about the true nature of the
sub surface. The reader should be aware that this report has been based on the data available but given the uncertainty the ranges of actual maturity and some quality in the area may vary
widely from those presently understood. The estimates and conclusions in this report being scientific judgments, may vary considerably from the currently available results and the authors
make no claims as to the accuracy of any information herein or assume any liability or responsibility for actions or decisions taken as a result of reading this report.
All parties reading this report should also be aware that exploration and drilling for hydrocarbons involves a degree of inherent risk and is considered speculative. There is the possibility that
wells drilled as a result of the current work carried out, may not recover oil and gas in commercial quantities. Discussion of potential traps, structures, facies changes, generation of oil,
maturation and timing and migration of hydrocarbons and hydrocarbon volumes, should not be taken to imply that any commercial accumulations exist.
The following conclusions are excerpted from an independent technical report that has bearing on the hydrocarbon analysis of Bahamas
Petroleum Company's acreage.
SUMMARY
A regional geochemical review study has been carried out on behalf of Bahamas Petroleum Company Limited on the Bahamas area with the specific objective of
assessing:
1) The likelihood of the presence of source rocks within or adjacent to the area of interest (AOI);
2) The likely thermal maturity of the potential source rocks to generate oil or gas;
3) The evidence for the presence of mature generative source rocks in the area of interest.
The conclusions are as follows:
Source rocks:
• It is believed that there are source rocks of sufficient quality and maturity to generate significant volumes of hydrocarbons in the Bahamas although they are poorly
quantified in the very few wells drilled in this very large area.
Maturity:
• Geothermal gradients are believed to be genuinely low in the area of interest but given the thicknesses of sediment accumulated at the depths where the potential
source rocks are likely to exist, these source rocks should have been oil generative. Current low temperatures will be conducive to the preservation of hydrocarbon
accumulations.
Conclusions of the Report "The Bahamas: Petroleum system evaluation and
hydrocarbon charge potential"
33
Manifestation:
• Live hydrocarbon shows have been encountered during drilling of at least four of the five deep wells drilled in the Bahamas and even in a number of the relatively
shallow stratigraphic boreholes (ODP/DSDP) in or close to the AOI;
• Sea bottom sediment sampling has recorded the possible presence of migrated hydrocarbons of thermogenic origin in several drop cores close to the location of the
Doubloon Saxon-1 well; isotopes suggest oil prone source;
• There is evidence of hydrocarbon seepage in the form of an area of seismic opacity in the near surface close to one of the recently mapped seismic leads likely caused
by vertically migrating gas.
Preservation:
• Hydrocarbon accumulations derived from the Bahamian source rocks are thought most likely to occur in deep prospects in the fore deep close to the known Cuban
effective source rock system.
• Hydrocarbon quality is likely to be influenced by the source rock system and provide aromatic oils and (depending on the source) possible traces of sulfur.
• Gravities are likely to be in the 35 to 40° API range. Degradation processes are unlikely to have negatively affected oils generated.
Dr Steve Thompson
Patrick Barnard
Applied Petroleum Technology (UK)
Conclusions of the Report "The Bahamas: Petroleum system evaluation and
hydrocarbon charge potential” – cont’d...
Key Conclusions
First mover advantage in assembling acreage in The Bahamas
Oil province with world-class exploration potential
Strategy to use farm-outs and also retain 100% owned acreage
Size and scale of the opportunity attractive to Majors and NOCs
Statoil Hydro farm-in signed mid 2009 validates the strategy
Modern seismic acquired June 2010 confirms the Company’s petroleum assessment
Planning further 2D seismic in next 3 months to prepare for drilling in late 2011
In discussion with other potential partners and more deals expected in time
Bahamas Petroleum Company believes there are supergiant oilfields
to be found in Bahamas waters and is working on its own and with
partners to find them
34
35
Article: StatoilHydro enters into an agreement to acquire South Riding Point crude
oil terminal
Published 8 July 2009
StatoilHydro has signed an agreement with World Point Terminals Inc to buy the South Riding Point crude oil storage and transhipment terminal located
on Grand Bahama Island in the Bahamas.
StatoilHydro has signed a stock purchase agreement to buy the terminal from the Canadian public company World Point Terminals Inc. The acquisition of South
Riding Point terminal includes the crude oil storage and transhipment facility and World Point’s 50% interest in the Freepoint Tug and Towing Service tug boat
business, both located on Grand Bahama Island. The terminal is located on property leased from a corporation controlled by the government of the Bahamas.
The stock purchase agreement between StatoilHydro and World Point Terminals is conditional upon:
•A long term extension of the ground lease with the Bahamian government on terms solely acceptable to StatoilHydro
•A satisfactory due diligence
•Approvals and necessary clearances from relevant government authorities in the Bahamas
The purchase price is USD $263 million, equivalent to about NOK 1.7 billion.
―The acquisition is a strategic move which supports Statoil Hydro’s global growth ambition. It will strengthen StatoilHydro’s marketing and trading position in
North America by securing the full terminal capacity,‖ says Jon A Jacobsen, executive vice president for Manufacturing & Marketing.
―StatoilHydro’s objective is to upgrade the terminal to allow for blending of all types of crude oils, including heavy oils,‖ he continues.
StatoilHydro has leased storage capacity at the terminal since 1993. All 55 of the current employees at the terminal will be asked to remain in their current jobs
and will be offered permanent positions with StatoilHydro.
South Riding Point is a full member of the Clean Caribbean America (CCA) cooperative. CCA is a clean seas organisation covering the Caribbean and provides
equipment and expertise to its member companies to assist in managing waterborne pollution incidents, should they occur. In addition, South Riding Point has its
own oil spill response equipment and expertise located on site and at the terminal.
StatoilHydro anticipates receiving all required governmental approvals during the 3rd quarter of 2009 and closing the transaction prior at year-end 2009.
36
HOUSTON, December 20, 2010 — Buckeye Partners, L.P. (―Buckeye‖) (NYSE: BPL) announced today that it has signed a definitive agreement to acquire an 80 percent interest in Bahamas Oil
Refining Company International (―BORCO‖) from affiliates of First Reserve Corporation (―First Reserve‖) for $1.36 billion. BORCO is the fourth largest oil and petroleum products storage terminal
in the world and the largest petroleum products facility in the Caribbean with current storage capacity of 21.6 million barrels. Buckeye expects to finance the purchase through a combination of
equity and debt.
―This acquisition is a natural fit for Buckeye’s core business and significantly expands our market reach by adding a global logistics hub to our portfolio of assets,‖ said Forrest E. Wylie,
Chairman and CEO of Buckeye. ―BORCO is a premier marine storage facility with a world-class customer base that complements our fast-growing terminalling and storage business. On a 100
percent ownership basis, BORCO is projected to generate Adjusted EBITDA (as defined below) of $138 million in 2011. The acquisition of First Reserve’s 80 percent interest in BORCO is
expected to provide immediate accretion to Buckeye’s distributable cash flow per limited partner (―LP‖) unit of approximately 10 percent, assuming no cash distributions are paid on the Class B
―pay-in-kind‖ partnership units we will issue to fund a portion of the purchase price. Additionally, BORCO has a significant backlog of customer interest supporting a planned expansion of the
facility that, if completed, would substantially increase cash flow and further improve accretion, even after giving effect to the conversion of the Class B units into LP units. The pay-in-kind
feature of the Class B units facilitates the expansion by providing substantial support to distributable cash flow per LP unit accretion until the expected in-service date of a portion of the
expansion.‖
Wylie added, ―We are pleased that First Reserve has agreed to take a portion of its purchase price in equity and that we have obtained commitments for the remainder of our anticipated equity
financing needs from other institutional investors. These commitments eliminated the need for us to further access the equity capital markets and enabled us to lock in our cost of equity capital
for the transaction. Moreover, First Reserve’s decision to make a substantial investment in Buckeye demonstrates their positive view of our base business, as well as their continued support for
BORCO’s planned expansion.‖
Royal Vopak (―Vopak‖), which is based in The Netherlands, owns the remaining 20 percent in BORCO. ―We look forward to continuing the positive working relationship with Vopak enjoyed by
First Reserve,‖ said Clark C. Smith, President and Chief Operating Officer of Buckeye. ―We recognize Vopak’s extensive expertise in marine terminals globally, and we are excited to have them
as a partner and to participate in the regional and international growth opportunities offered by this strategic facility.‖
The transaction will be financed as follows:
First Reserve will acquire approximately 4.38 million units of a new class (Class B, described below) of Buckeye limited partner interests at a value of $57.04 per unit, resulting in proceeds of
$250 million. The Class B units will be substantially similar in all respects to Buckeye’s existing LP units, except that Buckeye may elect to pay distributions in respect of the Class B units
through the issuance of additional Class B units rather than cash. The Class B units will convert into LP units on a one-for-one basis on the earlier of (i) the date on which at least four million
barrels of incremental storage capacity are placed in-service at BORCO and (ii) the third anniversary of the closing date of the BORCO acquisition. First Reserve also will acquire approximately
2.48 million Buckeye LP units at a value of $60.40 per unit, resulting in proceeds of $150 million. Institutional investors have committed to acquire 5.79 million Buckeye LP units at a price of
$60.40 per unit and 1.31 million Class B units at a price of $57.04 per unit, resulting in gross proceeds (before fees and expenses) of $425 million.
Buckeye has obtained a commitment from Barclays Bank PLC, SunTrust Robinson Humphrey, Inc., and SunTrust Bank for a senior unsecured bridge facility of up to $775 million to provide the
remainder of the proceeds necessary to finance the BORCO acquisition. Buckeye plans to raise cash through the issuance of term debt prior to closing the acquisition rather than use the bridge
facility.
The transaction is subject to approval by certain Bahamian governmental authorities and is otherwise subject to customary closing conditions. Buckeye expects to complete the transaction
during the first quarter of 2011. Vopak has the right to sell its 20 percent ownership interest in BORCO to Buckeye at the same proportionate price and on the same terms and conditions as
those in the agreement with First Reserve. If Vopak elects to sell, Buckeye would expect to finance the Vopak purchase price with a combination of debt and equity, including equity placed with
Vopak in the same types and proportionate amounts of equity that will be placed with First Reserve. The commitment for the bridge facility provides for this flexibility.
Located only 80 miles from the Florida coast, no other regional commercial storage terminal enjoys BORCO’s proximity to the U.S. demand and supply centers, as well as its scale and
comprehensive service offerings. The BORCO terminal is comprised of a fully integrated terminalling business and offers customers storage, berthing, heating, transshipment, blending, treating,
bunkering, and other ancillary services. The facility is located along the Northwest Providence Channel of The Grand Bahama Island.
Buckeye Partners, L.P. to acquire 80% interest in marine storage facility for liquid petroleum
products in Freeport, Bahamas
37
BORCO has total installed storage capacity of 21.6 million barrels and is prepared to undertake a significant expansion project, which Buckeye expects will be phased in over the next
two to three years and would add approximately 7.5 million barrels of flexible petroleum product storage, increasing total storage capacity to more than 29 million barrels. This
expansion is expected to be completed at a cost of approximately $400 million and to generate incremental Adjusted EBITDA of $70-80 million per year. The facility site also has a
significant amount of unused land available for other future expansions, with room to install approximately 13 million barrels of incremental storage capacity.
The existing marine infrastructure of BORCO consists of three deep-water jetties. The jetties are situated in water depths ranging from approximately 42 feet to 100 feet and are
approximately 3,000 feet to 4,000 feet from the shoreline. After completion of an ongoing refurbishment project on one of the jetties, which is expected to occur in the second half of
2011, the three jetties will provide six deep-water berths that serve as the access points to the storage facilities and are capable of handling vessels over a range of deadweight tonnage
(―DWT‖), from a minimum of 20,000 DWT to a maximum of 500,000 DWT, including both VLCCs and ULCCs. The BORCO facility also includes an inland dock with an approximately
650-foot berth located in Freeport Harbor. The inland dock is in the process of being upgraded, which will include the build-out of a new berth. Upon completion, the inland dock will
include two berths capable of handling Panamax vessels of up to 80,000 DWT. Completion of the upgrade of the inland dock is expected to occur in 2011. Upon completion of the jetty
refurbishment and inland dock renovation projects, BORCO will have a total of eight berths. Ancillary services provided by BORCO facilitate customer activities within the tank farm and
at the jetties. Onshore activities include heating, blending, and treating of petroleum products. Transshipment services allow customers to transfer cargo directly from one vessel to
another across the jetties, expediting product movements. Bunkering, the supplying of vessels with fuel, is done primarily by barge while the vessel is anchored offshore or via pipeline
when the vessel is berthed at one of the jetties or the inland dock. BORCO offers complete berthing services to vessels loading and unloading at the facility, including piloting, vessel
mooring (line handling), tug services, and tendering services.
A presentation concerning the transaction has been posted on the ―Investor Center‖ section of our website, www.buckeye.com. The presentation includes an explanation of the
calculation of estimated distributable cash flow per LP unit accretion resulting from the transaction.
Buckeye will host a conference call with members of executive management today, December 20, 2010, at 11:00 a.m. Eastern Time. To access the live Webcast of the call, go to
http://www.visualwebcaster.com/event.asp?id=75215 10 minutes prior to its start. Interested parties may participate in the call by dialing 1-888-575-8232. A replay will be archived and
available at this link until January 20, 2011, and the replay may also be accessed by dialing 1-800-408-3053 and entering passcode 4085066.
Barclays Capital acted as sole financial advisor and sole placement agent to Buckeye in connection with the acquisition and the private placement of equity. Buckeye is a publicly
traded partnership that owns and operates one of the largest independent refined petroleum products pipeline systems in the United States in terms of volumes delivered, with
approximately 5,400 miles of pipeline. Buckeye also owns 69 refined petroleum products terminals, operates and maintains approximately 2,400 miles of pipeline under agreements
with major oil and chemical companies, owns a major natural gas storage facility in northern California, and markets refined petroleum products in certain of the geographic areas
served by its pipeline and terminal operations. More information concerning Buckeye is available at www.buckeye.com.
EBITDA, a measure not defined under U.S. generally accepted accounting principles (―GAAP‖), is defined by Buckeye as net income before interest and debt expense, income taxes,
and depreciation and amortization. The EBITDA measure eliminates the significant level of non-cash depreciation and amortization expense that results from the capital-intensive
nature of Buckeye’s businesses and from intangible assets recognized in business combinations. In addition, EBITDA is unaffected by Buckeye’s capital structure due to the elimination
of interest and debt expense and income taxes. Adjusted EBITDA, which also is a non-GAAP measure, is defined by Buckeye as EBITDA plus non-cash unit-based compensation
expense. EBITDA and Adjusted EBITDA should not be considered alternatives to net income, operating income, cash flow from operations, or any other measure of financial
performance presented in accordance with GAAP.
The EBITDA and Adjusted EBITDA data presented may not be directly comparable to similarly titled measures at other companies because EBITDA and Adjusted EBITDA exclude
some items that affect net income, and these measures may be defined differently by other companies. Management of Buckeye uses Adjusted EBITDA to evaluate the consolidated
operating performance and the operating performance of the business segments and to allocate resources and capital to the business. In addition, Buckeye’s management uses
Adjusted EBITDA as a performance measure to evaluate the viability of proposed projects and to determine overall rates of return on alternative investment opportunities. Buckeye
believes that investors benefit from having access to the same financial measures used by Buckeye’s management. Further, Buckeye believes that these measures are useful to
investors because they are one of the bases for comparing Buckeye’s operating performance with that of other companies with s imilar operations, although Buckeye’s measures may
not be directly comparable to similar measures used by other companies.
Buckeye Partners, L.P. to acquire 80% interest in marine storage facility for liquid petroleum
products in Freeport, Bahamas – cont’d.
38
This press release contains forward-looking estimates of Adjusted EBITDA projected to be generated by BORCO. Reconciliations to GAAP net income are not provided because GAAP net
income for the applicable periods is not accessible. Buckeye has not yet completed the necessary valuation of the various assets to be acquired, a determination of the useful lives of these
assets for accounting purposes, or an allocation of the purchase price among the various types of assets. Accordingly, the amount of depreciation and amortization that will be included in
BORCO’s net income is not accessible or estimable at this time. Buckeye does not anticipate BORCO incurring any interest expense or income tax expense, but the amount of depreciation
and amortization could be significant, such that the amount of net income would vary substantially from the amount of projected Adjusted EBITDA.
This press release includes forward-looking statements that we believe to be reasonable as of today’s date. Such statements are identified by use of the words ―anticipates,‖ ―believes,‖
―estimates,‖ ―expects,‖ ―intends,‖ ―plans,‖ ―predicts,‖ ―projects,‖ ―should,‖ and similar expressions. Actual results may differ significantly because of risks and uncertainties that are difficult to
predict and that may be beyond our control. Among these risks and uncertainties are (1) changes in laws or regulations to which we are subject, including those that permit the treatment of
us as a partnership for federal income tax purposes, (2) terrorism, adverse weather conditions, environmental releases, and natural disasters, (3) changes in the marketplace for our
products or services, such as increased competition, better energy efficiency, or general reductions in demand, (4) adverse regional or national economic conditions or adverse capital
market conditions, (5) shutdowns or interruptions at the source points for the products we transport, store, or sell, (6) unanticipated capital expenditures in connection with the construction,
repair, or replacement of our assets, (7) volatility in the price of refined petroleum products and the value of natural gas storage services, (8) nonpayment or nonperformance by our
customers, (9) our ability to realize efficiencies expected to result from our previously announced reorganization, and (10) our ability to integrate acquired assets with our existing assets
and to realize anticipated cost savings and other efficiencies. You should read our filings with the U.S. Securities and Exchange Commission, including our Annual Report on Form 10-K for
the year ended December 31, 2009 and our subsequently filed Quarterly Reports on Form 10-Q, for a more extensive list of factors that could affect results. In addition, there are significant
risks and uncertainties relating to our pending acquisition of BORCO and, if we acquire BORCO, our ownership of BORCO, including (a) the acquisition may not be consummated, (b) the
representations, warranties, and indemnifications by First Reserve are limited in the acquisition agreement and our diligence into the business has been limited; as a result, the
assumptions on which our estimates of future results of the business have been based may prove to be incorrect in a number of material ways, resulting in our not realizing the expected
benefits of the acquisition and our having limited recourse against First Reserve, (c) financing the acquisition will substantially increase our leverage, (d) we may not be able to obtain debt
financing for the acquisition on expected or acceptable terms, which would require us to draw on the committed bridge and make the acquisition less accretive, (e) the closing of the
acquisition is not subject to a financing condition and our bridge does not backstop the equity portion of our purchase price or our equity commitments, which means we may be obligated to
close the acquisition even if we do not have sufficient funds available to pay the purchase price, (f) the acquisition could expose us to additional unknown and contingent liabilities, (g)
BORCO depends on a limited number of customers for substantially all of its revenue and the loss of any of them could adversely affect our results of operations and cash flow, (h) we may
not own 100 percent of BORCO following closing and Vopak may be able to prevent certain business decisions relative to BORCO, (i) BORCO may be adversely affected by economic,
political, and regulatory developments in The Bahamas and the region in general, (j) a substantial amount of the petroleum products handled by BORCO are exported from Venezuela,
which exposes us to political risks, (k) hurricanes could disrupt BORCO’s operations or the operations of its customers or could result in significant damage to its facilities, having a material
adverse effect on our business, financial results, and cash flow, (l) if BORCO’s tax status in The Bahamas changes such that BORCO has more tax liability than we anticipate, our cash
flow could be materially adversely affected, and (m) the acquisition could expose us to challenges as a result of operating in a new and foreign jurisdiction, including compliance with
additional domestic and foreign laws and regulations. We undertake no obligation to revise our forward-looking statements to reflect events or circumstances occurring after today’s date.
This press release does not constitute an offer of any securities for sale. The Class B units and LP units have not been registered under the Securities Act of 1933, as amended, and may
not be offered or sold in the United States absent registration or an applicable exemption from registration requirements.
For First Reserve media inquiries, please contact:
Caroline Harris CJP Communications Tel: +1 212-279-3115; ext. 222 Email: [email protected]
Caroline Merrell Cubitt Consulting Telephone: +44 020 7367 5103 E-mail: [email protected]
About First Reserve Corporation
First Reserve is the world’s leading private investment firm in the energy industry, making both private equity and infrastructure investments throughout the energy value chain. For 28
years, it has invested solely in the global energy industry, and has developed an unparalleled franchise, utilizing its broad base of specialized energy industry knowledge as a competitive
advantage. The firm is currently investing its most recent private equity fund, which closed in 2009 at approximately US $9 billion. First Reserve invests strategically across a wide range of
energy industry sectors, developing a portfolio that is diversified across the energy value chain, backing talented management teams and building value by building companies. Further
information is available at www.firstreserve.com.
Buckeye Partners, L.P. to acquire 80% interest in marine storage facility for liquid petroleum
products in Freeport, Bahamas – cont’d.