Dana Petroleum has signed an exclusive letter of intent (“LOI”) with the Texas-based company Hyperdynamics Corporation .
The LOI positions Dana to acquire a 23% working interest in the Hyperdynamics concession offshore the Republic of Guinea, West Africa. The concession encompasses all of offshore Guinea, a total area of 80,000 square kilometers equivalent to 330 UK blocks.
The LOI contemplates Dana and Hyperdynamics signing definitive binding documents no later than December 31, 2009. During this period, Hyperdynamics is bound to deal exclusively with Dana with respect to this 23% interest. Hyperdynamics intends to bring in to the concession a further significant partner with strong financial and technical capability. Dana has the option to negotiate for an additional interest of up to a further 27% (to give Dana a total of 50% interest) if Hyperdynamics does not sign a letter of intent with such a company by November 30, 2009.
Hyperdynamics has recently signed a Memorandum of Understanding with the government of Guinea which confirms Hyperdynamics’ title to the Production Sharing Contract (“PSC”). It requires relinquishment of 64% of the current acreage by end 2009 and review of the existing PSC by end March 2010.
Hyperdynamics has already acquired significant coverage of 2D seismic data in the acreage 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 as mutually agreed by Dana and Hyperdynamics. Following the relinquishment, the acreage will still cover the equivalent of 119 UK blocks. Subject to agreeing the definitive binding documents by December 31, 2009, Dana will pay Hyperdynamics $5 million (to be applied to the seismic acquisition cost). Dana will pay Hyperdynamics a further $15 million, in either cash or shares (at Dana’s election), on signature of the revised PSC.