BNP Resources Inc. V.BNX.A

BNP - Letter to Shareholders - February 2017

[BNPResources]

RE: February 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 met with our agent and source of financing on Friday, February 24, 2017. We have received verbal approval for a $100 million debt financing package, with a negotiable amortization period. This will allow BNP to become a holding company, in control of the following assets:

1. Approximately 60% interest in a natural gas pipeline between Alberta and Yellowknife, NT, subject to final agreement with partners.
2. Approximately 30% interest in a power generation plant and transmission lines, subject to final agreement with partners.
3. 100% interest in an oil & gas production company.
4. 100% interest in an environmental company, focused on oil well abandonment.

This is subject to successful completion of a detailed business plan, which I will start working on next week. Estimated time to close is 2-3 months.

2. I also met with our partners in the pipeline and power generation venture. This team will be in charge of the construction, engineering and procurement, for all pipeline, power generation and transmission line projects. They are a very experienced construction management group, with mega project experience, in the range of $1 -15 Billion. They will also assist us with other major construction and earthworks projects within the group of companies. The benefit of having this team involved is for cost and schedule certainty. Our corporate mission is “We all work for construction, to deliver projects on budget and within schedule. All engineering will finished in the office and not in the field. Utilize new and innovative methods for executing projects, not currently adopted by our competitors. Construct facilities at a lower cost than our global competitors”.

3. 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) – Purchase 69 barrel per day Chin Coulee and Claresholm properties.
5. Phase I funding (part of $100 million debt financing) – Farm in on 2 South Ferguson DUC’s (drilled uncompleted wells).
6. Phase I funding (part of $100 million debt financing) - Oil well abandonment (environmental) company
7. Natural gas play – Purchase existing natural gas assets along Yellowknife pipeline project, right of way, to feed into pipeline (with partners). Costs – TBA.
8. Develop Jensen leases (farm in from Privco) - $5 million, subject to farm in.
9. Montana oil development project - Nisku and Lodgepole (with partners).
10. Montana Helium project (brought to us by a long term BNP shareholder). Requires a $10 million budget.
11. Del Bonita Midstream and Oil Trucking Company – Disposal, separation and storage at oil leases, plus oil and emulsion trucking - $1.5 million
12. Del Bonita Power – Power generation and distribution, at oil leases - $1.5 million
13. 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.
14.  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

4. After the closing the financing and project acquisitions, the following is our plan to get BNP shares trading again:

1. 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 current and previous officers of the company, CRA, etc).
2. Complete all well abandonments (we have $360,000 on deposit with the AER for this work), clearing our abandonment liabilities with the AER,
3. Completing the accounting from 2013 - 2017, and completing annual reports and quarterly reports, which will bring us up to date with the exchange.
4. 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 am planning on having our next annual general meeting in Calgary, where we will combine the 2013 – 2017 annual general meetings. 

February 2017, is my 3 year anniversary, as president of BNP Resources. This has been a challenging time, for all shareholders and creditors, as BNP shares currently have a zero quotation value, in all of our accounts. Assuming that the financing closes, and we can get the shares trading again, I hope to see a quotation value, in the ten cent range fairly quickly (I bought my most recent 750,000 shares at one cent, prior to delisting). This valuation is based mainly on the interest in the pipeline, power generation and transmission line business units. As construction proceeds, this valuation will increase with construction progress, where I believe a twenty-five cent share price (with 80 million shares outstanding, this is a $20 million corporate valuation) is not unreasonable within 2-3 years. The pipeline, power generation and transmission assets represent $1 Billion+ in capital projects, of which we will own 60% of the pipeline and 30% of the power generation and transmission assets. We are aligned with a blue chip construction group which provides us with cost and schedule certainty. We also expect to see value creation from the other assets. Thanks again to all shareholders and creditors for your patience over the past 3 years. As we look ahead into the future, I see BNP Resources as a utility company, with a focus on serving the natural gas, power generation and transmission needs of Yellowknife and the northern Canadian communities. Our group of companies, may some day be involved in shipping gas from the Beaufort Sea, to destinations south.