| Guinea - A Golden Asset Or A Small Pig?

19th Oct '09 by AnonymousUser858

16 comments 4227 reads

I'm creating this thread as a home for info and discussion of the Guinea assets that Dana is farming in to.

As details emerge and/or work progresses, I'll expand/develop this header as required

Highlights of today's announcement

Dana Petroleum ... has signed a letter of intent ("LOI") with ...Texas based ...Hyperdynamics Corporation (NYSE : HDY).

...Dana to acquire ...23% working interest in the Hyperdynamics concession offshore ...Republic of Guinea, West Africa...encompasses all of offshore Guinea, a total area of 80,000 square kilometres equivalent to 330 UK blocks.

The LOI contemplates ...signing definitive binding documents no later than 31 December 2009...intends to bring in ...a further significant partner with strong financial and technical capability...requires relinquishment of 64% of ...current acreage by end 2009

...Hyperdynamics has already acquired significant ...2D seismic data ...and will embark on a new 2D survey before the end of this month with an estimated cost of $10 million. The seismic dataset will be used to evaluate which parts of the concession to relinquish ...Following ...relinquishment, ...will still cover the equivalent of 119 UK blocks.

...Dana will pay ...$5 million (with)...further $15 million, in ...cash or shares (at Dana's election), on signature of the revised PSC.

Dana's Chief Executive...

"...this LOI is an important growth step ...to expand ...exploration portfolio in West Africa. Following the discoveries at Jubilee in Ghana and, ... at Venus in Sierra Leone, this is ...one of the most exciting exploration regions globally. ...Dana will have a significant stake in one of the largest unexplored areas in this province. ...very pleased to be working with Hyperdynamics which has acquired significant seismic data over the last few years and which, like Dana, has strong subsurface geotechnical skills."

Link to full text of RNS announcement

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AnonymousUser858

19th Oct '09

Just 2 weeks ago Hyperdynamics commissioned a study of oil seeps across the Guinea acreage

Oct 06, 2009 /...-- Hyperdynamics Corporation ...has contracted TDI-Brooks International of Houston to conduct a comprehensive oil seeps study of the company's 31,000-square-mile oil and gas concession offshore Guinea. The sample collection is expected to begin in mid-October.
"We are conducting this study to survey known sites of oil seepage in three areas of our concession ...We also will be testing cores taken from previous years to differentiate source rock ages ranging from possible Silurian, Devonian, Jurassic, Early Cretaceous, to Barremian/Turonian rocks."

Hyperdynamics has contracted GeoMark Research, Ltd. to perform the analytical work on the samples collected from both offshore and onshore studies.

full text of announcement here

Struck by the fact that the deadline for relinquishment is end 2009 but they are only just commissioning oil seep studies, core analyses and additional 2D seismic.

Either they are poor time managers and have left these activities very late, or they already have a very good idea which areas to relinquish and which to keep and are just dotting the i's and crossing the t's.

Three weeks ago HYPD contracted a 2D seismic survey

detailed announcement here

summary

Hyperdynamics Signs Agreement to Begin 2-D Seismic Survey Offshore Guinea ...Sept 30, 2009

..announced today that it has signed a contract with Bergen Oilfield Services AS of Norway to conduct a 9,000 kilometer 2-D marine seismic survey on portions of its oil and gas concession offshore Republic of Guinea. The survey is expected to get under way by the end of October.

"This survey will help us make a final determination of which portions of our 31,000-square mile concession area we want to maintain for future exploration...we are required to relinquish 64% of the acreage by December 31, 2009. This new data will enable us to choose the best acreage to retain from this vast area, and it will also help us high-grade our better prospects so we can choose the areas where we want to shoot a more limited 3-D survey next year."

"The raw field records ... from the ...survey will be delivered by BOS in almost real time as it is acquired," ... "The processing of this data will be done onboard one of BOS's modern seismic vessels...The cost of the project is estimated to be $10 million.

Hyperdynamics plans to fund the survey using proceeds from a farm-in arrangement it expects to complete with another oil and gas producer during the fourth quarter and/or with proceeds from a potential capital raise. The company will make an upfront payment of $500,000. In addition, as a guarantee to Bergen Oilfield Services (BOS), Hyperdynamics will allow seismic work to begin ahead of the farm-out and/or financing period. Hyperdynamics will issue the seismic contractor 2.5 million restricted common shares, or approximately 4.4% of outstanding shares. The deposit shares would serve as collateral for a mobilization payment of $1,100,000, and for three subsequent payments due as the data is processed and delivered to our office in southwest Houston (Sugar Land, Texas).

reading the last paragraph it sounds as if HDY is really struggling financially as surmised by EE on a different thread.

references to the terms of the licence being revised in September raise the possibility that the relinquishment date has been brought forward unexpectedly and that has caught HDY on the hop.

emptyend

The surmise referred to in post 3 was Marben's not mine.

If you listen to the webcast of 30th Sept here:

http://investors.hyperdynamics.com/events.cfm

....much will become clear. They get to keep 36% of the acreage and have a pre-emptive right to match terms on any deals on the relinquished acreage - so keeping the right 36% shouldn't be a major issue.

I'd be more concerned about the politics than about the acreage - the presentation (thanks to tgg for the link) shows various potential prospects, including a potential multi-billion bbl deep water oil prospect.

Early days though.....

ee

marben100

I'd be more concerned about the politics than about the acreage

An astute observation, as ever: http://www.minesite.com/nc/minews/singlenews/article/whats-really-up-for-grabs-guineas-counter-attack-against-resources-companies-explained/1092.html

October 15, 2009

What’s Really Up For Grabs: Guinea’s Counter Attack Against Resources Companies Explained

...Fofana added the following warning: "if Rio does not move fast, they may have to relinquish their remaining 50 per cent of the Simando deposit, if the conditions are not met by the time the next licence renewal comes up. There will be many takers for any portion of Simandou".

The western media, he said, fall for "all the old clichés on Africa. Everything done by African governments is presented as an attempt to defraud 'innocent and well meaning' investors, and to scare off the companies allegedly best suited to develop the resources. The companies can do no wrong. As a former Minister of Mines from Guinea and as a leader of several resource projects across Africa, I beg to differ."

According to the former minister, the prospects for international mining companies are much brighter in practice than western media reports have intimated. "No other licenses are affected or under threat in Guinea. Quite to the contrary: some of the world’s best-known metals and mining players, like AngloGoldAshanti, BHPBilliton, BSGR, Crew Gold, Mitsubishi, Newmont, Vale, and a group of Chinese players, are busy producing or exploring for new resources. Only the non-performing licences, regardless of the licence holder, are at risk." Of course, the political risk relating to the recent unrest in the country remains.

ISTM that, quite reasonably, the Guineans will want to see some investment going into the Hyperdynamics licences. I also observe that Lord Owen is on Hyperdynamics' Board. I guess he should know a thing or two about international politics - I hope he's not simply there as a "decoration".

This looks like a classic high risk/high reward situation, balancing the solid NS assets, in TC style.

Cheers,

Mark

PS... concerning the other partner that is sought, this would seem like a decent fit with Tullow's acreage - or have they got too much on their plate already?

I'd think Anadarko more likely, given the US-centric stakeholders in Hyperdynamics. There is, however, something to be said for having a partner active in the acreage in each direction round the coast.

Re the politics etc I'd recommend listening to that Hyperdynamics conference call. It would seem that they think the new regime in Guinea is trying to clean things up.

5th Jan '10

Further to my comment of 19/10..... That rather snappy comment now stands exposed as ill informed

I apologise to the victims of my sharp tongue.

AIUI it is not Hyperdynamics fault that they had to scurry around to meet the deadline for relinquishment at very short notice What occurred was regime change. The old regime had a less than sparkling reputation. The new regime wants to acquire a good reputation. The ensuing shake up resulted in licence terms being reviewed and tightened up very sharply. Hyperdynamics' licence was not revoked but the deadline for relinquishment decisions was brought forward very substantially. Which is why they needed help to optimise the relinquishment decision. Which is why they had to bring in farm in partners at very short notice. Which is how Dana came to farm in for 23% and Repsol for 37%. I'd guess the tight deadlines helped the farminees wrt negotiating terms. And which is why seismic analysis was being done so shortly before the relinquishment deadline.

Hyperdynamics succeeded in submitting its relinquishment plan on time

News release can be read here

Hyperdynamics ...today announced that the government of the Republic of Guinea has received the Company's relinquishment plan of 64% of its original offshore oil and gas contract area and its 2010-2011 work plan for the 36% it has selected to retain and explore.

...The acreage selection was part of the September 2009 Memorandum of Understanding between Hyperdynamics and the government ...enables Hyperdynamics to retain approximately 11,160 square miles of its original contract area for oil and gas exploration.

The government now has the right to auction the remaining 64% to other companies, but Hyperdynamics has the right of first refusal on that acreage as well.

..."The choice of the acreage we will retain for further exploration was aided by our prospective partners, Repsol and Dana Petroleum, whose knowledge and expertise working offshore West Africa were invaluable in helping us select the best prospects," said Ray Leonard, Hyperdynamics President and Chief Executive Officer.

"The new 2-D seismic data we commissioned in the fourth quarter of 2009 - along with an additional oil seeps study - gave us clear indications of where the most prospective areas are located within our contract area.

"We expect to finalize our three-way agreement with Repsol and Dana and complete the review of our Production Sharing Contract with the government of Guinea in the first quarter of 2010. In the meantime, we will continue our technical work with a greater focus on specific initial targets," he added.

As part of the 2010-11 work plan, Hyperdynamics and its partners expect to conduct a 3-D seismic survey in mid-2010 covering approximately 3,000 square kilometers to identify specific drilling locations, and they expect to spud the first exploration well in late 2011.

A map of the licence block has been published showing what has been relinquished and what retained.

for reasons I don't understand my attempts to insert it here are not working, so here is a link instead

www.newscom.com/cgi-bin/pub/s?f=PRN/prnpub&page=1&xtag=PRN-prnphotos-88299&redir=detail&TAG_ID=prnphotos088299

29th Jan '10

Hyperdynamics announced that it has finalized the sale of a minority interest in its oil and gas concession offshore the Republic of Guinea (Northwest Africa) to Dana Petroleum

Hyperdynamics and Dana signed an Assignment and a Joint Operating Agreement under which the U.K.-based company acquired a 23 percent participating interest in Hyperdynamics' Production Sharing Contract with the government of the Republic of Guinea (PSC). The assignment and JOA were made under the December 2009 purchase agreement between Hyperdynamics and Dana. According to its terms, Dana is to pay Hyperdynamics approximately $1.7 million for its pro-rata portion of accrued expenses associated with the Hyperdynamics' ongoing 2-D seismic program and bear a similar share of future costs for the program.

The closing follows the approval of the Assignment by Guinea's Ministry of Mines, Energy and Hydraulics.

Hyperdynamics and the Republic of Guinea are currently undergoing a review of the PSC in accordance with the September 2009 Memorandum of Understanding.

Upon the conclusion of the review and the effectiveness of any resulting clarifications and amendments to the PSC, Dana is to pay Hyperdynamics an additional purchase price of $19.6 million and assume its proportionate share of costs for all operations. Of that figure, Dana will pay $5.0 million in cash and the remaining $14.6 million will be paid either in cash or in shares of Dana Petroleum plc, at Dana's option. Should Dana choose to pay in stock, there would be no restriction on the immediate resale of these shares by Hyperdynamics.

source: http://money.cnn.com/news/newsfeeds/articles/prnewswire/DA46035.htm

2nd Feb '10

French language journal Africa Intelligence is reporting a break-down in the PSC negotiations.

Original report in French is at www.africaintelligence.fr/LAE/petrole/2010/02/03/pas-d-accord-pour-hyperdynamics,79513818-GRA

My rough translation - highlights only follows:-

"Despite Hyperdynamics' promise to invest 100 million offshore, the government still refuses to make a definitive committment to the Texan group.

The CEO of Hyperdynamics, Ray Leonard, and the Developmnt Director for Dana Petroleum, John Downey, left Guinée 21st January muttering nearly a week after a new government came to power.

A Memorandum of Understanding (MoU) was signed in September defining the extent of the offshore licence blocks, but the government of Guinea has now redused to sign the new PSC putting a definitive end to the dispute/discussion/negotiation between the two sides. The Minister for Mining & Energy, Mahmoud Thiam, is en route for Hong Kong and delegated the Minister for Construction & Habitat, Boubacar Barry, to meet Leonard and Downey.

Barry told them he was refusing to sign the PSC "for reasons of national interest" despite the intervention of the Interim President Sékouba Konaté. Barry did undertake to relay Hyperdynamics plans to invest $100 million in the next 2 years to the government for further review/consideration.

In support of his proposition, Léonard cited a comparative study of PSC's across the region done by Robert P. Thibault and M. Shelby from the American Consultants Moyes & Co. ...."

Sounds to me like the political situation is extremely difficult and unstable. AIUI the original exploration licences were awarded to Hyperdynamics on generous terms by a previous government. A new government seized office in a non-democratic coup and immediately abrogated the previous licence terms. That resulted in Hyperdynamics being given just s couple of months to relinquish most of its acreage instead of the much longer period originally agreed.

Hyp had to bring in bigger partners to support the very hasty data gathering and technical analysis exercise required to make an intelligent decision around relinquishment. Enter Dana and Repsol stage left. The enlarged JV managed to meet the tough relinquishment deadline. The government accepted the relinquishment and extended the licence and went on to agree to Dana and Repsol farming in.

Next stage was to convert the exploration licence into a proper PSC. AIUI this was not seen as a major stumbling block.

However the article in Energy Africa says there was yet another change of government just a week before the meeting to finalise the PSC. The latest set of ministers have stopped the PSC process dead in its tracks.

Now the new Minister for Mining & Energy is hot footing it over to China within a week of taking office and has in his hot sticky hand the charts prepared by Hyp, Dnx and Repsol showing the most promising prospects and the results of their recent analyses.

Seems eminently likely to me that Guinea is looking for a big deal with China covering mining and oil and whatever else they can get. Deals done by previous administrations will simply be torn up and thrown away.

Shame

e_2motion

In reply to tournesol (post #12)

Good Morning all, HDY shareholder here.

As I listened to Ray Leonards cc I took away his message, stated a couple of times, that the contract with Guinea should be done by March 11. In addition I think it was the old minister, Mr. Mahmoud Thiam, who went to Hong Kong. He is an officer in the Sonogal-China play for mineral and oil rights in Guinea. It is not certain that he will be retained as Minister of mines going forward, certainly Rusal does not think so in their current row with him.

As another point of interest for me, Mr Leonard mentioned Jurassic source rock in the northern area and just Cretaceous in the south. With the depth of these Jurrasic layers I am wondering if this could explain the rumors of the larger fields.

In total my 4 take aways from the cc were:

1. There have been expressions of interest in HDY (offers)

2. Again, Jurrasic source rock.

3. The interium Prime Minister has been a good supporter of HDY.

4. HDY will not release any additional information on the results of either the core samples taken, or the 2D seismic for "competative reasons", ie drive up the price of additional blocks that the Dana-HDY-Repsol group wish to bid on. But he did say that once the contract with Guinea is completed, including the block assignments, China will have something else to focus on and will take the pressure off the HDY group.

Jim

According to Upstream online Hyperdynamics has announced that it has extended the period of validity for the letters of intent exchanged with Repsol re the latter's farm in to HDY's Guinea acreage. The letters were due to expire on 31st January, but have now been extended to 11th March.

source:- www.upstreamonline.com/live/article205079.ece

This is obviously a holding strategy in response to the government's recent abrogation of the PSC negotiations. As I understand it, both Dana and Repsol have already made initial payments of less than $2 million each as contributions towards the cost of recent seismic surveys. If the government awards HDY a PSC then both the farm-in partners will make further more significant payments to HDY. If the government kicks HDY out (as looks a distinct possibility) then Repsol and Dana will just walk away without further payment and chalk it up to experience.

e_2motion

which conference call are you talking about?

have you got a link please?

3rd Feb '10

In reply to tournesol (post #15)

I've answered my own question.

Webcast of conference call is at www.videonewswire.com/event.asp?id=65129

Well worth listening to

I think I'll start a new thread to take the Hyperdynamics/Guinea thing forward from here.

See you there.

Guinea - a golden asset or a small pig?

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AnonymousUser858

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What’s Really Up For Grabs: Guinea’s Counter Attack Against Resources Companies Explained

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