Boston, MA 03/13/2014 (wallstreetpr) – Hyperdynamics Corporation (NYSE:HDY) is facing an uncertain future after one of its partners has invoked the “force majeure” clause in their contract.
The Guinea Problem
The present problem of Hyperdynamics relates to its production sharing contract signed with the Government of Guinea in 2006. Now, the Department of Justice is investigating if Hyperdynamics violated any provisions of the U.S. Foreign Corrupt Practices Act or any statutes related to money laundering.
Hyperdynamics stock lost $57.03 of its value after Tullow Guinea Limited invoked “force majeure” under its Production Sharing Contract with Hyperdynamics. Hyperdynamics and Tullow have a huge exploration block of 18,750 square kilometers off the west African coast.
The Government of Guinea also wishes to review the deal that rewarded Hyperdynamics with this huge exploration block.
Outlook For The Hydrocarbon Sector
The price of a barrel of oil is around $100 and it will likely remain in that range for some time. On the production side, exploration is becoming ever more expensive as companies have to go ever deeper into the ocean for offshore exploration or because oil is mixed up with tar sands and is difficult to extract.
Simultaneously, global demand for oil, which was expected to keep on rising, may not quite do so as vehicles become more efficient. Also, natural gas via shale gas production and fracking are rising in the U.S. reducing demand for oil. Natural gas production is expected to rise worldwide.
Rise in nuclear power production will similarly soften demand for natural gas as a source of power. Japan is considering restarting its closed nuclear power plants. This will also tend to dampen demand for oil.
Considering all this, small players such as Hyperdynamics may be in a tight spot when it comes to making big, multi-billion dollar investments in risky offshore exploration. It’s only the major players who have the deep pockets to absorb potential losses or fluctuating global economic cycles.
