BNP Resources Inc. V.BNX.A

BNP - Letter to Shareholders - Jan 2017

[BNPResources]

RE: January 2017 - Monthly Letter to Shareholders

 
Dear Shareholders:
 
The purpose of this monthly letter is to bring BNP shareholders up to date, on issues and news, since the last letter.

1. Funding – We had originally scheduled a meeting with our agent and the financier on January 19, 2017. Our financing contact came down with a case of pneumonia at the last minute. We put the time to good use and met with our new partners on the pipeline and power generation project instead. The meeting with the financier will be rescheduled for the month of February or March. We are seeking a $100 million debt financing package, which would allow BNP to control 100% of the holding company. 

2. While in Calgary, I had the chance to meet with our partners in the pipeline and power generation venture, for Yellowknife, NT. This team is a very experienced construction management group, with mega project experience, in the range of $1 -15 Billion. They were also involved in laying out the plant for an early stage oilsands producer in Fort McMurray, and have worked on many of the large oilsands and power generation projects. The benefit of having this team involved is for cost and schedule certainty, which helps provide us access to the debt markets. One of the members of this blue chip team is also a BNP shareholder. The following is a proposal for the ownership of the new projects: 

1. Pipeline project to Yellowknife – 60% BNP / Northern Dancer Energy Inc (based on success of a $100 million debt financing deal), 30% for construction management partner, 10% for confidential partner (TBA later).

2. Power generation plant in Yellowknife and 240 kV overhead line network to mines – 60% Construction management team, 30% BNP / Northern Dancer Energy and 10% for confidential partner (TBA later).

3. We plan on meetings with the 10% confidential partner, after receipt of the initial stage of financing.

3. Crude oil finished the week, at $53.20 US per WTI barrel.

4. The Trump administration has indicated support for the Keystone Pipeline project. TransCanada has submitted their application and the administration has advised that a decision will be provided within 60 days. It has been reported that the approval of the Keystone Pipeline could create 28,000 construction related jobs, for the duration of the project. This is positive for the Canadian oil producers, as it will reduce the discount on each barrel of oil sold. The recent executive order to limit access to the USA is not unusual. I have witnessed a number of Canadian passport holders, that have been denied access and turned away at the border. I was also denied access at one time, regarding a visa issue.

5. The next step for BNP, is to obtain $100 million in debt financing, through our 100% owned holding company, Northern Dancer Energy Inc. The holding company will control our 60% interest in the pipeline, the 30% power generation interest, a 100% interest in the oil well abandonment company, and a 100% interest in the oil production company. I remain very optimistic and will keep moving our projects forward each month.

6. The following is a summary of the project back log for BNP Resources:

1. Phase I funding (part of $100 million debt financing) - Natural gas pipeline to Yellowknife – NT – 60% equity interest.
2. Phase I funding (part of $100 million debt financing) - Power Generation, Transmission and Distribution – Yellowknife (30% equity interest) – provide power to mines.
3. Phase I funding (part of $100 million debt financing) - Purchase of 1,000 – 1,800 barrel per day oil facility - $75 million.
4. Phase I funding (part of $100 million debt financing) - Oil well abandonment company – Capitalize at $1.5 million. Growth business within Alberta.
5. Natural gas play – Purchase existing natural gas assets along Yellowknife pipeline project, right of way, to feed into pipeline (with partners). Costs – TBA.
6. Develop South Ferguson farm in. Invest $5 million to develop 2 x DUC’s (drilled uncompleted wells).
7. Develop Jensen leases (farm in from Privco) - $5 million, subject to farm in.
8. Montana oil development project - Nisku and Lodgepole (with partners).
9. Montana Helium project (brought to us by a long term BNP shareholder). Requires a $10 million budget.
10. Del Bonita Midstream and Oil Trucking Company – Disposal, separation and storage at oil leases, plus oil and emulsion trucking - $1.5 million
11. Del Bonita Power – Power generation and distribution, at oil leases - $1.5 million
12. Lead zinc mine reactivation opportunity (with partners) – If the Yellowknife Pipeline proceeds, an opportunity exists to reactivate an existing orebody. Compressed natural gas would be used as fuel for the heavy haul trucks, instead of diesel, reducing operating costs. Costs and share acquisition – TBA.
13.  Willisden Basin, Saskatchewan – Made contact with a Vancouver group that have a new nuclear logging technology (approved in Canada), combined with better methods for sealing water zones in horizontal and vertical oil wells. We would need to hire a Saskatchewan geologist to search for suitable wells. We would purchase the target well and pay a portion of the completion costs, with our partner paying a portion and taking a royalty if successful. Very good success with this technology in other parts of the world. Not used in North America yet. Budget: $2 million. 

The following is a quote from St. Thomas Acquinas, that applies to my work on behalf of our BNP shareholders and creditors: “The test of the artist does not lie in the will with which he goes to work, but in the excellence of the work he produces.” With this quote in mind, my next step is to complete my “art on canvass”, which involves raising the money, and creating the four, Phase I operating companies. My motivation is to recapitalize BNP for the benefit of all shareholders, creditors and stakeholders, while creating a profitable Canadian owned growth company and conglomerate. After the raising of the $100 million debt financing package, I am planning a share for debt deal (up to 15 million shares at ten cents), to clean up the BNP balance sheet (oil well surface rents, audit fees, creditor invoices, amounts owed to auditors & accountants, legal fees, amounts owed as detailed in the working capital deficiency, amounts owed to previous officers of the company, CRA, etc), complete all well abandonments (we have $360,000 on deposit with the AER for this work), clearing our abandonment liabilities with the AER, completing the accounting from 2013 - 2016, and completing annual reports and quarterly reports, which will bring us up to date with the exchange. Once these steps are completed, the shares can resume trading again. I estimate that the BNP shares could be trading within 6-9 months of receiving the $100 million debt financing package. My preliminary model would have the shares trading at ten cents, based on an intrinsic value of $8 million and 80 million shares outstanding (conditional on raising the $100 million and closing all deals disclosed above). I plan on having our next annual general meeting at the Calgary Petroleum Club, where we will combine the 2013 – 2016 annual meetings. Our current cash operating costs are now $150 per month, for the storage locker, which is a manageable expense. In other words, I can now see the “light at the end of the tunnel”.