Friday 23 March 2018

Tullow Oil sued by joint venture partner for alleged contract breach

Irish oil and gas explorer Tullow Oil is being pursued by Texas-based Hyperdynamics
Irish oil and gas explorer Tullow Oil is being pursued by Texas-based Hyperdynamics
Gavin McLoughlin

Gavin McLoughlin

Tullow Oil is being sued by one of its joint venture partners over an alleged breach of contract.

The Irish oil and gas explorer is being pursued by Texas-based Hyperdynamics, which has accused it of breaching an agreement to drill a well at a project in Guinea.

Hyperdynamics is seeking an order requiring Tullow - and the other partner in the project, Dana Petroleum (a subsidiary of the South Korean National Oil Company) - to move ahead with the drilling, as well as compensation for the delay.

"We bring these lawsuits with reluctance, and only after concluding that all other avenues available to us have been exhausted," Hyperdynamics president and chief executive Ray Leonard said in a statement issued earlier this week. Tullow Oil declined to comment.

Last week Hyperdynamics announced that the project in Guinea had stalled. Problems began to emerge in 2014 when both the US Department of Justice (DoJ) and the US Securities and Exchange Commission (SEC) began investigating Hyperdynamics for possible violations of a piece of legislation known as the Foreign Corrupt Practices Act.

Later the DoJ closed its investigation without bringing charges, and Hyperdynamics agreed to pay a $75,000 penalty to the SEC without admitting or denying findings that "Hyperdynamics failed to accurately record certain payments made by its subsidiary based in the Republic of Guinea."

The incident took place in 2007-08. Afterwards, Hyperdynamics replaced its board and senior management team.

"Both Dana and Tullow had raised concerns in 2014 that the Foreign Corrupt Practices Act investigations into Hyperdynamics could cause the Guinea government to question titles," Hyperdynamics said.

"Notwithstanding the conclusion of those investigations, Dana maintained its position that it would not agree to fund well costs absent further assurances from the Guinea government that the Guinea government would not challenge ownership rights."

Hyperdynamics alleges that the government of Guinea later agreed to provide the assurances that Tullow and Dana had sought.

Tullow shares fell again last week despite a sharp jump after the company issued a trading update on Monday. On Friday, Tullow shares closed at 130.2p in London, having closed at 138.9p the previous Friday.

The update said Tullow's capital expenditure on operating activities would be $1.1bn in 2016 - with the potential for further cuts - compared to $1.7bn in 2015.

It said its TEN project off the coast of Ghana was 80pc complete and heading for first oil between July and August of this year.

Sunday Indo Business

Business Newsletter

Read the leading stories from the world of Business.

Also in Business