HYPERDYNAMICS, A FIRM AT ODDS WITH ITSELF

C O N F I D E N T I A L CONAKRY 000112 SIPDIS NOFORN SIPDIS DEPT FOR AF/W, AF/EPS, EB, L/AF E.O. 12958: DECL: 02/10/2018 TAGS: ECON EPET PGOV KCRM PREL GV SUBJECT: HYPERDYNAMICS, A FIRM AT ODDS WITH ITSELF REF: A. CONAKRY 81 ¶B. CONAKRY 87 Classified By: ECON OFF KIM JORDAN FOR REASON 1.4 B AND D ¶1. (C) SUMMARY. Divisions are becoming apparent at Hyperdynamics, while concerns about possible FCPA violations continue to surface. The top management of the company know little about what is going on in Guinea and have virtually ignored political insights provided by the Embassy. With virtually no experience in the oil sector, it appears that Hyperdynamics may have been looking to sign a big contract for a quick and tidy profit, and that they now find themselves in over their heads. Given FCPA considerations, Post has ceased advocacy support for this firm with the GoG. END SUMMARY. ¶2. (C) On February 8, Ambassador and Econoff met with Harry Briers, the Executive Vice President of Hyperdynamics (HYPD). Mr. Briers explained that he has been an employee of the SCS/Hyperdynamics Corp. business entity for 10 years. He went on to confide that he personally has two million shares of HYPD and would like to see the stock go to $5 before he cashes out. However, he admitted neither he nor the CEO Ken Watts have any previous experience in the oil industry. He said his goal in coming to Conakry this visit is to meet with Prime Minister Kouyate and the Minister of Mines to clarify and solve the current impasse over their contract. ¶3. (C) Briers explained that the HYPD/SCS entity had become a service company by purchasing around 10 different companies. They then merged and shed companies until today all that is left is parent company HYPD and its subsidiary SCS Corp. (NOTE: Recent public reports by HYPD indicate that there are at least two other subsidiaries operating in the US which Mr. Briers failed to mention. END NOTE.) Mr. Briers said their original goal was to sell Hyperdynamics after signing the oil exploration contract with Guinea as quickly as possible, or in other words, to 'flip' it. However, he said that over the last year the stock price has gone down due to the difficulties encountered in Guinea. (NOTE: Current price is $1.23. END NOTE.) ¶4. (C) Briers complained of divisions within the company, both within the US office as well as between the US main office and the Conakry operation. He said he did not trust the local team, especially Mr. Kourouma. He was uncertain that the documents he has sent to be given to the government were passed on by the local management team. Briers provided copies of these documents, saying that was prepared to hand over a similar package to the Prime Minister and Minister of Mines as soon as he could. He said that he and the CEO are at odds over the course to take in Guinea, especially with regards to the local management team in Conakry. He noted that two American Ambassadors (the previous and current COMs) had expressed reservations about the character and quality of the firm's local management team but that his CEO steadfastly supports Kourouma and his team. ¶5. (C) Briers raised the issue of FCPA violations without prompting. He said he has been concerned over possible violations, but denied that the company had paid anti-Kouyate youth groups to protest against the government earlier this year as had been rumored in the press. When asked directly by Econoff, he denied that HYPD had paid the Secretary General of the Presidency, Sam Soumah, to push through their contract. ¶6. (C) Briers was clearly concerned about OPIC's decision not to provide political risk insurance to his firm and asked for the Ambassador to intervene with OPIC on HYPD's behalf. The Ambassador responded that he and the embassy fully supported OPIC's decision and that OPIC had made its decision in part on information provided by the embassy. In the regard, the Ambassador highlighted recent public statements by GoG officials about HYPD's contract. In particular, the Ambassador noted the December/January edition of the magazine, Jeune Afrique, that had an extensive spread on Guinea's economy and mining sector specifically. In these articles, the Minister of Finance was quoted as naming HYPD as one contract that had to be renegotiated. The Ambassador also mention the December Council of Ministers meetingwhere the PM stated that the HYPD contract was not binding and needed to be renegotiated. Briers informed the Ambassador that he was completely unaware of these public statements by GoG officials about his firm. In fact, Briers was unaware of the magazine Jeune Afrique or that the Gog issued communique's after each weekly Council of Ministers meetings. Nor was he aware that HYPD's putative champion, the Secretary General of the Presidency, was a member of the SIPDIS Coouncil of Ministers. ¶7. (C) When Briers stated that he did not understand why the PM had focused his attention on HYPD's contract, the Econoff described the mandate of the GoG following the January 2007 Accords. Mr. Briers was completely unaware that the renegotiation of mining and oil contracts is one of the terms of the tripartite agreement which ended the strikes in January and February 2007, and which came into force before Kouyate was named PM. ¶8. (C) The Ambassador stated clearly that there was nothing further the Embassy could do for HYPD with respect to its relations and engagement with the Guinean government. By all accounts, GoG was ready and willing to meet with the firm and resolve this dispute. It was now a business matter, and the Embassy had given all of the political insight it could provide. Briers said that he fully understood the Ambassador's position and that he would do his best to meet with the PM and Minister of Mines as soon as possible. He noted that he was pursuing these appointments through the firm's local attorney, Alpha Omar Diallo, rather than through his local management team. The Ambassador applauded Briers' course of action, noting Mr, Diallo's reputation as one of Guinea's best private attorneys. ¶9. (C) COMMENT. It is apparent that HYPD has ignored post's advice. It is also apparent that HYPD is not listening to their Special Advisor, Amb Hank Cohen. When Briers sought the Amb Cohen's advice just prior to this trip, he was informed for the first time of President Conte's unfamiliarity with HYPD and its contract. He was shocked. The lack of knowledge about current events in Guinea, coupled with the complete lack of oil experience for the CEO and ExecVP, suggests that they were (and still are) looking for a quick flip of the contract, not a long term investment in Guinea. Brier's suspicions of FCPA violations coupled with similar suspicions (REFTEL) by the Financial Director of the company, add further weight to concerns that HYPD is possibly in violation of the FCPA. Considering the lack of funds (REFTEL) the company reportedly has currently and the widening divisions within the company, HYPD's tenure in Guinea appears more tenuous than ever before. Given possible FCPA concerns and considerations, post has ceased any and all advocacy work for this firm with the GoG and will only monitor developments as they occur. END COMMENT. CARTER