Guinea

3rd Feb '10 by Cuthbert C

16 comments 5538 reads

The earlier thread on Guinea is looking rather threadbare - it's more like a monologue than a discussion - (I wonder if that is because the thread title indulges in a little word play?)

So I thought I'd try starting a new thread with a simpler title in hope of attracting passing trade. (I did think of calling it "New Guinea" but thought that might blight the discussion before it starts.)

Political background on Guinea is set out in post #1 below.

Hyperdynamics latest AGM is discussed in post #10 below.

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Cuthbert C

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Cuthbert C

3rd Feb '10

Political Background

I must admit that I had not previously taken the time to get up-to-speed on Guinea - it was just one more West African country I wouldn't go to for a holiday*, but I hadn't got into detail.

I've spent an hour or so googling this morning and am now rather better informed. Thought I'd share the highlights.

The always useful CIA fact-book says:-

Guinea has had a history of authoritarian rule since gaining its independence from France in 1958. Lansana CONTE came to power in 1984 when the military seized the government after the death of the first president, Sekou TOURE. Guinea did not hold democratic elections until 1993 when Gen. CONTE (head of the military government) was elected president of the civilian government. He was reelected in 1998 and again in 2003, though all the polls were marred by irregularities. History repeated itself in December 2008 when following President CONTE's death, Capt. Moussa Dadis CAMARA led a military coup, seizing power and suspending the constitution. He appears unwilling to yield to domestic and international pressure calling for him to step down, increasing political and economic tensions.

source: CIA fact-book

If you ever want to count your blessings and appreciate just how lucky you are take time to read through the rest of the CIA fact book entries for Guinea. Mortality, health, literacy, poverty, disease, corruption....

...conflicts among rebel groups, warlords, and youth gangs in neighboring states have spilled over into Guinea, resulting in domestic instability......

...Guinea is a source, transit, and destination country for men, women, and children trafficked for the purposes of forced labor and sexual exploitation; the majority of victims are children.....

There is potential good news in the fact that the country has significant mineral resources - they have half of the world's bauxite reserves amongst other things. But most resources have not been developed because of the precarious situation in the country.

So, as noted above, General Conte seized power through a military coup in 1984 then staged "elections" in 1993 and to nobody's surprise won the vote. And won again in 1998 and again in 2003. I like the CIA's dry comment that "all the polls were marred by irregularities". Conte died in his bed in 12/2008. Captain CAMARA immediately staged a military coup and suspended the constitution. The CIA fact-book has not been updated since then.

According to many other sources, unrest about the coup grew. In September 2009 protests were staged in Konakry against the military government. A unit of the armed forces went on the rampage, shooting dead more than 150 of the protestors, savagely beating many others and raping dozens of women - the latter group of victims included both protestors and anyone unfortunate enough to be in the vicinity. Amongst those beaten was the leader of the nascent opposition Mr Dore.

An international outcry ensued. The UN conducted an inquiry and blamed Camara and his personal bodyguard. Camara denied responsibility and held his own internal inquiry. This exonerated Camara and his government and fixed the blame on the members of the bodyguard and in particular their commanding officer Lieutenant Diakite. Arrest warrants were issued. On 4th December 2009 Diakite managed to get close to Camara and shot him in the head before escaping. Camara survived but was seriously injured and was medi-vaced to Morocco for surgery.

And then something quite unusual and unexpected happened.

Camara's second-in-command was General Konate, who had been exonerated by the UN inquiry of involvement in the September massacre. With Camara out of the way, Konate found himself running the show. In poor health and without any ambition to rule the country, he decided that he wanted to do the decent thing.

He asked the opposition movement to nominate an interim head of state, announced that proper elections would be held as soon as feasible, sent Camara into exile in Burkina Faso and stepped aside. He is taking steps to normalise the position of the armed forces in relation to the government. The new interim president is Mr Dore who has only just recovered from his beating in September. He took office just a week ago. Other ministers have been appointed on an interim basis pending elections. (HDY CC says the timetable is for mid-year elections)

The interim government has 30 ministers - 10 from opposition parties, 10 from the military, 10 from provincial government. In total there are about 40 different political parties,

-------------------------------------------------------------

It is clear from the above that the interim government is simply a number of individuals chosen to represent different factional interests without any underlying common strategy, policy or programme. These individuals have never worked together before, are rivals and in many cases will disagree with each other about policy decisions.

This is the situation in which Hyperdynamics is trying to sign a PSC.

---------------------------------------------------------------

references:-

Guinea leaders not guilty

New Hope in Guinea

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* note re my comment about holiday destinations

I have worked and holidayed in Nigeria, Ghana, Ivory Coast, Benin - as well as a number of countries in other parts of Africa. But Guinea does not attract me in the slightest. Not even a little bit.

Cuthbert C

3rd Feb '10

The previous posting provides a very clear explanation as to why HDY is now in difficulty in its attempts to finalise the PSC.

The exploration licences granted previously were issued by ex-President Camara. I'd guess that no reputable E&P or major would deal with him. I'd also imagine that any licence fee paid found itself into his pockets rather than the national exchequer.

The original licence gave HDY the entire offshore area of Guinea and was very relaxed about exploration timetables. AIUI around September things changed and HDY was told they would have to rush through a decision on relinquishment with only a couple of months leadtime. I'd guess that was Camara's people realising the balloon was going up and looking to make some money in a hurry. A MOU was issued in September setting out new terms.

With help from Dana and Repsol, HDY managed to rush through a relinquishment proposal within the deadline. The MOU had stipulated that the elinquished acreage would be put out to tender and that the HDY JV would be entitled to bid.

In fact some portions of the relinquished acreage were immediately re-licensed to a Chinese company without HDY (or anyone else) being given any chance to bid for them.

As mentioned previously, within a week of being appointed the Interim Minister for Minerals has gone to visit Hong-Kong.

HDY's CEO mentions in his recent conference call that Chinese companies have expressed an interest in the HDY assets.

The people in the interim government are unlikely to feel any sense of committment to contracts/licences signed by Camara and may well be prepared to repudiate them.

It isn;t difficult to join up the dots here. And the picture that emerges is not very pretty.

To put things at their most optimistic, it must now be far from certain that HDY and partners will end up with a PSC anything like that envisaged by the MoU.

Cuthbert C

3rd Feb '10

Listened to the pod cast by the CEO of HDY

You can listen for yourself at www.videonewswire.com/event.asp?id=65129

Not inclined to write it up in detail - situation in Guinea is very uncertain and there seems to me to be a significant risk that HDY will lose its acreage so not worth spending too much time on until that is resolved.

Just a few points:

Recent work identifies 2 distinct source rocks - jurassic and cretaceous - and multiple prospects.

Plan submitted to Guinea interim government involves:
- completion of 2D survey data collection by end Feb 2010
- 3D survey to start Q3 2010

Current priority #1 prospect is in 8-900 metres of water
Others are in shallower water

"We don't need a back-up plan" .......(who said "whom the Gods wish to destroy, they first make mad"?)

The HDY man who negotiated the current licences resigned last year when Leonard was appointed.

Leonard says the deadline for signing the PSC is March 11.

Just to be clear, I'm agnostic about the chances that HDY will get a PSC - maybe the new government will decide that they need to honour previous undertakings - maybe China is more interested in the Bauxite than the oil - maybe China will farm-in to HDY rather than pushing them aside. The point is that everything is uncertain.

This really makes little difference to Dana - the worst case outcome is that they lose a million dollars and walk away. But I would not want to be holding shares in HDY right now....

Cuthbert C

4th Feb '10

Report in the Economist today

original text of Economist article

...Jean-Marie Doré will supposedly hold power until a proper election within six months. But Guinea has never had a genuine poll before, nor any tradition of civilian rule. Moreover, the transitional government that the 70-year-old Mr Doré has been asked to form is to include a big batch of soldiers. No one is betting on a smooth path to true multi-party democracy....

Pretty much ties in with my own summary posted above yesterday.

e_2motion

4th Feb '10

Hi Again,

I appreciate the info on Guinea. I think it is correct in calling it a 4th world country, economically. They rely on their mineral wealth to provide their foreign exchange currency, and a lot of the national GDP.

I am coming at this investment from the HDY side, so I appreciate the views from the Dana side, and hope the sum of understanding is greater than that derived individually.

Regarding your thoughts on the danger of HDY not getting a new PSA, yes this is a possibility, and certainly is hanging over the head of HDY. I think it is useful to know a bit of history with HDY as it's quite a soap opera, but useful to know.

They got the PSA through the work of a pair of geologists, Neil Moore, and Bob Bearnth. They were doing work on the other side of the pond and looked east for a continuation of the trend. Through old data they found it offshore Guinea. Using the old Trident exploration philosophy (look for oil where the rivers used to flow before the last cretaceous uplift, including that of the Guinea Highlands) they mapped out a very significant number of large rivers that flowed into this area up until the last upliftment. Of course the Trident boys sold their company and went on to form Kosmos, and later to have a bit of luck with their block offshore Ghana which contains the Jubilee field.

Neil and Bob found a single guy, Denish Shukla (sp?) who had befriended the ruler of Gunea, Mr. Conte. Mr. Shukla had talked himself into the offshore rights, years before, but could do nothing with them. Bob and Neil bought into the rights, and then Hyper got them when they bought Bob and Neil's company. A bit of a long story shorter, Hyper did a bit of 2D, founds lots of indications of large amounts of oil. In 2005 Mr. Shukula pulled a fast one and befriended a fellow in the ministry of mines, and had this guy sign a letter he had written which totally canceled Hypers rights to any offshore acreage. As the past management of Hyper had relied exclusively on Mr. Shukula to act as it agent in Guinea, they were left empty handed, without having a single contact in Guinea. Neil Moore had been to Guinea, but his contacts were gone. It took a year, but they eventually negotiated a completely new contract (the 2006 PSA) with the government.

Fast forwarding a bit, the shareholders of Hyperdynamics grew tired of the previous management, basically for doing very little after the 2006 PSA. The previous management (the Watts brothers, Kent and Mike) had no experience in oil, and in fact no experience in running a successful company at all. The shareholders lobbied the board to change management. It worked and the board brought in Ray Leonard in July, 2009. Mr. Leonard has replaced management and the board of directors and is moving very fast on a good track currently. In Sept he renegotiated with the Guinea gov for a new PSA. He describes it all in his conference calls, but basically it is the 2006 PSA terms on an accelerated time basis. Of course it is not done yet, and may not be done, but compared with where Hyper was in 2005, this thing is really all but done and we have a line in the sand, March 11, to look forward to it being done. Having lived through having no contract, no contacts, and no money, the current situation is a walk in the park on a sunny day, in my opinion.

The 2D shoot in 2008 was processed by SIP (Seismic Image Processing). I am told that there are some sharp folks there. The rumor at the time was that Dana was in on the viewing of the full data and results at that time, and very interested in a JV with Hyper. They were said to have wanted another partner to sign first to (I think) ensure that the cash was there to complete to the drilling stage. So I think it is safe to assume that Dana has had over a year to look over the data and make up their mind about a JV deal. On this side of the pond I feel it is very encouraging that Dana decided to complete the JV, even to the point of being willing to issue additional stock to get it done. Rumors here are that they are very interested, backed up by their stated interest in getting a 50% JV position. With Repsol now signing with Hyper as well, I for one, am considering that Dana's investment is much more than the 1.7 million. If I was an investor in Dana (currently I am not) , I might consider that they are on the hook for $21.5 million this quarter, and an additional 24 million (23%, est of their share through drilling), by the end of next year.

Anyway a bit of history from the HDY side and one man's perhaps questionable opinion.

Jim

Cuthbert C

5th Feb '10

Hi Jim

I guess my concern is that all previous deals were done with non-democratic, non-accountable military regimes/individuals who could do whatever they wanted, whether it was in their country's interests or not.

You have to ask yourself why any country would:-
a) parcel up lts entire offshore acreage into a single gigantic exploration block (which could only be licensed to one third party) rather than dividing it up into normal sized blocks so that multiple licencees could be brought in. (one thinks of N Korea doing something similar(ish) perhaps)
b) award the mega-licence to a tiny start up company with no resources, no track record and no realistic prospect of moving forward at a rapid speed.

It looks like Guinea is coming out of the shadow of authoritarian miliitary rule and is moving towards more "normal" government - democratic and accountable. My question is will/should the new regime honour agreements made by their pre-decessors which do not look prima facie to be reasonable?

I hope that the re-negotiation of the PSC will conclude and will leave HDY et al with a validated licence over a large area. The quid pro quo should be transparent payment of tax/licence fees/royalties/profit share etc all benefiting the govt and people of Guinea. I hope this happens.

I don;t know Repsol but Dana needs a significant exploration project - and Guinea sounds like it could fit the bill, so that is what I want to happen.

But right now I have to think there is very real uncertainty and it could all evaporate. It would be very easy for Guinea to make a case that the licences were awarded improperly and very difficult to refute. I hope that does not happen but I wouldn't bet the farm on it.

T

emptyend

5th Feb '10

In reply to tournesol (post #6)

You have to ask yourself why any country would:-
a) parcel up lts entire offshore acreage into a single gigantic exploration block (which could only be licensed to one third party) rather than dividing it up into normal sized blocks so that multiple licencees could be brought in. (one thinks of N Korea doing something similar(ish) perhaps)

In the other example given, the answer is that the government completely lacked any technical expertise. It is almost always the case that frontier situations start off with relatively large blocks, which later shrink in size as discoveries are made, relinquishments occur and other partners are brought in.....but until people have done some basic seismic work they simply aren't going to be interested in small blocks that may contain bugger all.

The Guinea situation, though, may be a different matter?

e_2motion

22nd Feb '10

I recently attended the Annual Shareholder meeting for Hyperdynamics, and I thought others here might be interested as it relates directly to Guinea and Dana's interest there.

First here is the link to the Power Point slides given during the meeting: http://investors.hyperdynamics.com/secfiling.cfm?filingID=1144204-10-8969

We asked why CEO Ray Leonard was so positive about signing the PSC soon. His reply was interesting. He said that once the new Prime minister, Dore, came in one of the first things he did was to prevent all current ministers from signing anything. His reasoning was to not have any soon to be dismissed ministers signing agreements that they would personally benefit from after leaving office. Mr. Leonard had traveled to Guinea in Jan. and had discussions relating to the PSC. Apparently all the issues had been worked out then, and there were no more issues left unresolved. Mr. Leonard even accepted the Guinea offshore block map, as they had presented it. This is why he is so positive. This block area is shown in the link above. What remains is for Mr. Leonard to return to Guinea for the actual signing, as the new new government has been now formed, and ministers can sign agreements. A side note, the minister of mines did not change. My understanding is that Mr. Leonard should travel to Guinea this week, or next to do this.

At the meeting a Mr Herman Cohen also spoke. He is the former US Under Secretary of State for African Affairs. He has quite a history in the region, and from all accounts is quite respected there. He is a HDY board member, and spoke from that position. He impressed everyone I talked to there, as well as myself. He gave a history of Guinea, a bit of his involvement there, and his outlook as to why he thinks this is the best position the country has been in for a very long time, meaning it is his opinion that the chance for a real democratic government is better now than it has ever been for Guinea.

From this side of the pond (as a HDY shareholder) it seems only a matter of time before the PSC is signed and the 3D is put out for tender, as shown in the timeline.

At the meeting I got the chance to speak with: CEO Ray Leonard; Chairman Bob Solberg; Executive Vice President for Commercial Affairs Bill Young, recently of BG Group; CFO Jason Davis; Vice President of Exploration Steve Barrett, as well as all board members except Lord David Owen and Herman Cohen. There was only so much time I had, and I personally like the oil side of the business more than the political side. Some of my friends spoke to these other men.

The presentation was a bit understated, but they showed enough for us to get the idea why they are so excited. Steve Barrett spoke a bit about the submarine fans which have been found. He was a bit noncommittal when pressed for numbers, but indicated that there were at least 3 of these. They feel they have numerous fields at 500 M barrels and above potential, but feel 200 M would be commercial. They were able to take samples of the oil slicks on the surface of the water and in one case in a core sample taken at the seep location so as to verify a working system from both Jurassic as well as Cretaceous source rocks.

On this side of things the feeling is that there could be a very large amount of oil located here. Only time and the drill bit will tell, but so far things are looking very good.

Jim

Cuthbert C

22nd Feb '10

Sounds quite analogous to Ghana - which explains Dana's interest - perhaps this time Dana will get the chance to see it through.

Cuthbert C

23rd Feb '10

Hyperdynamics AGM presentation has now been put onto their website - ths version easier on the eye and much easier to scroll through and/or download than the form-8K version referenced in post #8.

You can find it at Hyperdynamics AGM presentation

For me the stand-out features include

slide 7 - seismic lines

slide 9 - retention vs relinquishment

slide 11 - timeline -- 3D survey throughout 2010 -- drilling planned Q4/2011

slide 25 - Q&A - "...Some of the features we have seen to date suggests that there exists the possibility of giant or supergiant fields (500 million barrels to 1 billion barrels of oil equivalent)...."

Cuthbert C

2nd Mar '10

Africa Energy Intelligence is carrying a new report on Hyperdynamics situation in Guinea.

Full text is here - requires subscription but is free

Last Chance for Hyperdynamics

...Guinea’s ...oil minister...retained ...French law firm...to help ...in talks with ...Hyperdynamics. ...Bonnefoy, was in Conakry between Feb. 24-26 to rewrite a clause in Hyperdynamics’ original ...PSC. ...a report this week ...will set a time limit to the contract and fix the concession’s boundaries. ...also benchmark contracts of the same type signed in the region so that Guinea can compare the deal with others. ...chief executive ...Ray Leonard ...due in Conakry on March 1 to finalize talks before the MOU runs out. Given the lack of time before it expires, the trip could be seen as a last chance for Hyperdynamics to retain a position in Guinea.

The PSC ...was never confirmed by Guinea’s government. In addition, a (deal) ...with ...Dana and ...Repsol, must win a green light from Conakry before coming into effect, ...Hyperdynamics’ position is thus very shaky ...the firm can count on backing from the U.S. State Department ...former under secretary of state ....Cohen, sits on its board....

Gooseman

11th Mar '10

Five day extension to the MoU with the Government of Guinea:

http://investors.hyperdynamics.com/releasedetail.cfm?ReleaseID=451148

Cuthbert C

16th Mar '10

here is a news article which mentions Hyperdynamics in passing

Bergen Oilfield Services ...has recently completed a 10,000km 2D seismic data acquisition program offshore Guinea, northwest Africa on behalf of Hyperdynamics Corporation....

Gooseman

19th Mar '10

The wait goes on......

Hyperdynamics Announces Second Extension of Memorandum of Understanding With Government of Guinea

Hyperdynamics Corporation (NYSE Amex: HDY) today announced that it has agreed in writing with the government of the Republic of Guinea to extend for an additional five working days their Memorandum of Understanding (MOU). The MOU was entered into in September 2009 and called for a review of the commercial terms of the 2006 Production Sharing Contract (PSC) among Hyperdynamics, Dana Petroleum and the Republic to bring them in line with international standards. The MOU provided for a six-month negotiating period intended to culminate in an agreed PSC amendment.

Gooseman

25th Mar '10

Looks like a decent result considering getting nothing was looking like a fairly likely alternative:

SUGAR LAND, Texas, March 25, 2010 /PRNewswire via COMTEX News Network/ -- Hyperdynamics Corporation (NYSE Amex: HDY) today announced that it and the Government of the Republic of Guinea have executed an amendment to the 2006 Production Sharing Contract (PSC). The document was signed by the Guinean Minister of Mines and Geology, Mahmoud Thiam; the Minister of Finances and Economy, Kerfala Yansane; and Ray Leonard, Hyperdynamics' President and Chief Executive Officer. A decree giving the Government's formal agreement to the assignment of a 23% interest to Dana Petroleum in the PSC is being prepared and will be issued in the near future.

The amendment was entered into in accordance with the September 2009 Memorandum of Understanding (MOU) between Hyperdynamics and the Republic of Guinea that reaffirmed the Company's PSC but which also required a review of the commercial terms to ensure that they were in line with international standards.

In addition to addressing the points raised in the MOU and clarifying certain elements of the PSC, the amendment included the following terms:

* The company will retain a contract area of approximately 24,000 sq km, 30% of the original concession area and will relinquish 25% of the retained contract area by September 30, 2013.
* In September 2010, the company will enter into the second exploration period which runs until September 2013 and may be extended to September 2016. The work program to September 2013 is to acquire a minimum of 2000 sq km 3D seismic and drill an exploration well, to be spudded by end 2011, to a minimum depth of 2500m while that for the period from September 2013 to September 2016 is to drill one exploration well to a minimum depth of 2500m.
* The Republic of Guinea will be carried through to first production for its share of up to 15%, at which time the cost of that carry will be recovered out of 62.5% of the Republic of Guinea's share of cost and profit oil.

...We expect to begin work on a 3D seismic survey in the third quarter 2010 to identify potential well locations for initial drilling late next year," Leonard concluded.

e_2motion

10th May '10

It looks like Dana's part in the Hyperdynamics offshore Guinea concession is now finally official. Hopefully the 3D bids come in under expectations for the 3 areas. I guess we will know sometime in June.

"Hyperdynamics Receives Presidential Decree and Arrete From Guinea Government

HOUSTON, May 10, 2010 /PRNewswire via COMTEX News Network/ -- Hyperdynamics Corporation (NYSE Amex: HDY) today announced that it has received from the government of the Republic of Guinea a Presidential Decree approving both the Production Sharing Contract (PSC), covering its offshore Guinea concession, and the PSC amendment signed on March 25.

"We are delighted that the Decree has been issued," Ray Leonard, Hyperdynamics' President and CEO, remarked at the conclusion of a meeting with Prime Minister Jean-Marie Dore. "We can now concentrate our full energies on exploring for oil and gas in the contract area."

The Company also received a document, referred to as an arrete, from the Ministry of Mines and Geology confirming the Government's approval of the assignment of a 23 percent participating interest in the PSC to Dana Petroleum."

Guinea

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Cuthbert C

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