All data are collected in the Fiscal Year of 2008-2009.

Guinea / Energy, Mining, Resources

Hyperdynamics is an emerging independent oil and gas exploration and production company based in the United States. Hyperdynamics Corp. became a publicly traded company in 1996 and initially listed and traded on the Over-The-Counter Bulletin Board (OTCBB). The company’s focus from 1996 to 2000 was on information and data management technology. In May of 2001 they Purchased SCS Corp. and shifted the company’s focus to seismic data management. In 2005, they purchased HDY Resources to conduct domestic oil and gas production activities. They proceeded in this same year to list Hyperdynamics on the American Stock Exchange.

In 2006 it entered into a Hydrocarbon Production Sharing Contract (the “2006 PSC”) with Guinea for the sole exploration and exploitation of oil and gas in an approximately 80,000 square kilometre concession off the coast of Guinea. The first contract signed in 2002 gave it rights on all of the country’s offshore. A second, signed in September, 2006, also covered the entire offshore but called for Hyperdynamics to relinquish 64 percent of the acreage covered in the original contract once it was confirmed.

The points reflected on the map are defined with WGS 84 (World Geodetic System 1984) datum.

Hyperdynamics is engaged in oil and gas exploration off the coast of Guinea

As of September 29, 2009, 9 full time employees based in the United States and approximately 15 independent contractors in Guinea

The following comments in the company’s 2009 annual report are relevant::
“We do not have any reserve reports or geology or petroleum engineering reports for the Concession. We have experienced substantial operating losses. We expect to incur significant operating losses until we commence sales from the Concession. We will also need to raise sufficient funds to finance our exploration and exploitation activities. We may be unable to achieve or sustain profitability.”

It holds the largest exploration and production license in West Africa in Guinea covering 31,000 square miles.

“Hyperdynamics is committed to providing energy for the future by exploring internationally for new sources of oil and gas”

“Hyperdynamics' strategy is to build value for the company by exploring high-potential oil and gas opportunities offshore the Republic of Guinea. The company expects to mitigate risk and increase operational bandwidth by partnering with other operators in its West Africa program. Additionally, to accelerate the time frame necessary to drill exploration wells, strategic relationships have been formed with key offshore drilling contractors and equipment providers, laying the foundation for timely support of offshore drilling programs for the company or its farm-in partners.

Our business plan incorporates a multi-channel approach to exploring and developing our extensive Contract Area. We will continue independently to perfect drilling targets and ultimately to implement a drilling program on one or more of our targets. Simultaneously, we intend to seek exploration partners to work with us on all or parts of our Concession. In the short-term we are seeking an industry partner to complete the 2-D and 3-D seismic work in the Contract Area. In the future, we intend to enter into a joint venture or other relationship with a strategic industry partner to fully execute our business plan including conducting exploratory drilling and production in the Contract Area We expect that entering into these partnering relationships would entail transferring a portion of our interest in the Concession to such partner.

Our operating plan within the next 12 months includes the following:
a 1,000 kilometre 2-D seismic data shoot, the processing of the seismic data acquired, and the evaluation of that data and data that had been acquired in the past; a 4,000 kilometre 2D seismic data shoot, the processing of the seismic data acquired, and the evaluation of that data and data that had been acquired in the past; acquisition and geochemical analysis of core samples from the Contract Area and a satellite seeps study; third party interpretation and analysis of our seismic data, performed by Petroleum GeoServices (PGS); reconnaissance within Guinea to evaluate drilling infrastructure, support services, and the operating environment; and a 2,800 kilometre 2-D seismic data shoot, the processing of the seismic data acquired, and the evaluation of that data and data that had been acquired in the past.”

As of September 29, 2009, its direct and indirect wholly-owned operating subsidiaries consisted of:
(i) SCS Corporation (“SCS”), which is engaged in oil and gas exploration activities offshore Guinea;

(ii) SCS Corporation Guinee SARL (“SCSG”), which was formed to manage the business associated with the 2006 PSC including public relations programs in Guinea. Hyperdynamics owns 100 percent of SCS. SCSG is owned 100 percent by SCS.

Hyperdynamics became caught up in the conflict between the political elite surrounding the late president Lansana Conte. For instance in 2007, former prime minister Lansana Kouyate called for a sweeping change in the offshore licensing rules following a refusal by Guinea’s parliament to endorse a contract that essentially handed the country’s offshore to Hyperdynamics; former US Assistant Secretary of State, Herman J. Cohen accompanied Hyperdynamics’ executives on almost every trip to Guinea to personally intervene with Conte; it employed Keita Thierno, a former director of Societe Guineenne des Hydrocarbures (SGH) as a consultant; another former Prime Minister Ahmed Tidiane Souare signed the exploration authorization for Hyperdynamics for a “commission” of US$ 25 million; and eventually defence minister, Sekouba Konaté, a key figure in the current (2009) power structure secured Hyperdynamics’ contract. Konaté has built up substantial connections within the military and business community over the years and has gained considerable control over the award of government contracts.

Certain terms of the 2006 PSC have been modified in part by the Memorandum of Understanding that it entered into with the government of Guinea in 2009 (the “2009 MOU”). The 2009 MOU provides, among other things, that the 2006 PSC in its entirety will be negotiated with a view to bringing the PSC into conformance with international standards. There is no assurance that these negotiations will result in a mutually acceptable agreement. If these negotiations do not come to a satisfactory conclusion by March 10, 2010, the MOU will be cancelled.

The 2006 PSC requires 64 percent of its Contract Area to be surrendered to Guinea upon the passage of a “Project of Law” in the National Assembly of Guinea, a Presidential Decree, and a Supreme Court ruling.

On September 11, 2009, the company entered into the 2009 MOU with Guinea in which it agreed with the government to resolve certain issues related to the 2006 PSC. Pursuant to the terms of the 2009 MOU and in addition to other obligations under the 2006 PSC, Hyperdynamics agreed to commence drilling of at least one exploratory well within the Contract Area no later than December 31, 2011. The 2009 MOU requires the company to surrender 64 percent of the Contract Area (approximately 51,200 square kilometres) no later than December 31, 2009. If it does not submit a relinquishment offer pursuant to the 2009 MOU by December 31, 2009, Guinea may select the 64 percent of the Contract Area that is to be surrendered.

The 2009 MOU clarifies the company’s right to participate in any new concessions within this surrendered area on a right of first refusal basis, on equal terms and conditions with bidding parties. The 2009 MOU requires negotiation between the parties concerning the terms and conditions of the provisions in the 2006 PSC to make such terms more consistent with usually applicable international standards and practices by March 11, 2010, subject to force majeure and arbitration, without any modification of existing rights to the non-surrendered portion of the Contract Area of approximately 28,800 square kilometres.

The company is required by the 2006 PSC to meet certain milestones on the following timeline: pay Guinea a ten percent royalty on oil and gas produced and sold within the Contract Area; take up to seventy-five percent of production from the Contract Area, depending upon an incremental scale of daily production, for purposes of recovering the royalty and costs of operations; and after recovery of royalty and costs of operations, production will be split as set forth in the table below:

In October 2009 Hyperdynamics signed a letter of intent with Aberdeen-based Dana Petroleum under which the two companies will negotiate the assignment of a 23 percent participating interest in Hyperdynamics' oil and gas concession offshore Guinea.

The letter of intent, which is non-binding and gives Dana exclusive negotiating rights for the 23 percent share, calls for Dana to take a participating interest in Hyperdynamics' concession in exchange for total consideration of US $20 million. This includes US$5 million in cash payable upon execution of the definitive agreements and, where applicable, their entry into full legal effect pursuant to the laws of Guinea. The remaining US$15 million is payable at Dana's option in either cash or newly issued ordinary shares of Dana. It would be paid upon the conclusion by March 2010 of a review by the government of Guinea and Hyperdynamics of its 2006 Production Sharing Contract pursuant to the terms of a Memorandum of Understanding signed in September and the effectiveness of any resulting revisions or amendments.

The letter of intent with Dana contemplates that the two companies will work to sign definitive documents no later than December 31, 2009; the letter of intent otherwise terminates unless extended by further agreement.

Also in October 2009 Hyperdynamics signed a contract with Bergen Oilfield Services AS of Norway to conduct a 9,000 kilometre 2-D marine seismic survey on portions of the oil and gas concession offshore Guinea. The cost of the project is estimated to be US$10 million. Hyperdynamics plans to fund the survey using proceeds from the farm-in arrangement it expects to complete with Dana. 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.