Hyperdynamics Unit Says Partners Bailed After FCPA ProbeBy Beth Winegarner
Law360, San Francisco (January 12, 2016, 8:41 PM ET) -- A unit of Houston-based oil and gas driller Hyperdynamics Corp. has sued two of its partner drillers in Texas federal court, claiming they breached a petroleum exploration agreement by using a Foreign Corrupt Practices Act investigation as an excuse not to complete the job.
Hyperdynamics subsidiary SCS Corporation Ltd. claims in its lawsuit filed Jan. 8 that Tullow Guinea Ltd. and Dana Petroleum Ltd. are hiding the real reasons they won’t finish the exploration project off the coast of Guinea. If they don’t finish the contract by September, SCS will lose the right to drill in that area, according to the complaint.
In 2013, the U.S. Securities and Exchange Commission launched an FCPA investigation into Hyperdynamics, which the company settled two years later. Tullow stopped all work on the Guinea project in March 2014, declaring force majeure, which allows parties in a contract to escape liability when extraordinary circumstances arise, and giving the SEC investigation as the reason for the halt, the lawsuit said.
“Tullow used the FCPA investigation as a trumped up reason for declaring force majeure. This declaration was without basis as Tullow quickly conceded when it withdrew the force majeure claim at the first challenge to its utter lack of validity. On information and belief, the real reason Tullow did not want to move forward was that it lacked the funds to do so,” SCS’ lawsuit said.
SCS entered a production sharing contract with the Republic of Guinea in 2006 in which SCS agreed to explore for and develop offshore oil and gas in exchange for a concession to the area of exploration. Tullow and Dana also joined the agreement and one well was drilled in 2011 or 2012, but a second required well hasn’t been drilled, according to the suit.
Even after Tullow withdrew its force majeure declaration, it didn’t resume the well planning necessary. Instead, it said that it needed title assurances from the Guinea government, leading to more than a year of discussions with the government, which ultimately wouldn’t agree to Tullow’s allegedly “expansive demands,” the lawsuit said.
SCS claims that Tullow eventually resolved its budgeting issues and said it was interested in drilling, but then Dana pursued similar title assurances concerns, asking the Guinea government to agree that it would never strip the concession holders of their title.
“Like Tullow, and based on information and belief, Dana appears to have a hidden motive for its position: its inability to pay for its portion of the well commitment,” the complaint said.
In December, the Guinea government agreed to certain title assurances Dana proposed and Tullow agreed to. While Tullow initialed the amendment to the production sharing contract, neither company has signed it in full, each is refusing to sign unless the other signs first, and both are refusing to sign first, according to the suit.
“Under the PSC, if the second well is not spud by September 2016, then the Concession will be lost in its entirety. Further, arranging for the variety of services required to drill a well — particularly in a location such as Guinea that lacks oil and gas exploration infrastructure — takes many months. If such planning does not commence shortly, then it will be impossible to spud a well before the PSC expires,” the suit said.
Hyperdynamics is seeking court rulings that Tullow and Dana are in violation of the contract and an order forcing them to complete their obligations.
Representatives for Tullow and Dana couldn’t be reached for comment on the suit Tuesday.
SCS is represented by Samuel Cooper and Edward Han of Paul Hastings LLP.
Representation information for Tullow and Dana wasn’t immediately available.
The case is SCS Corporation Ltd. v. Tullow Guinea Ltd. et al, case number 4:16-cv-00076, in the U.S. District Court for the Southern District of Texas.
--Additional reporting by Keith Goldberg. Editing by Emily Kokoll.
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