Shoot!, he doesn`t know anything!

Report
2012 AAPL ANNUAL MEETING SPONSORS
PLATINUM
GOLD
SILVER
BRONZE
SAN FRANCISCO SEMINAR
A wholly owned subsidiary of ExxonMobil
GOLF
International Negotiations
“In the beginning and
Beyond”
58th Annual Meeting - San Francisco
June 13-16, 2012
W.B. Phillips
US Exploration Land Manager
Hunt Oil Company
John Blair
Assistant General Counsel
Hunt Oil Company
AAPL - Copyright © 2012. All Rights Reserved.
Hey Bob,
I got a great deal on some
acreage that Petrobras is
going to let expire.
What do you know about
international farmouts?
Going To Rio
Shoot!, he
doesn’t know
anything!
He doesn’t
know anything
either!
How to Start
•
First, take a deep breath
•
Do as much homework as possible and find out as much as you can
about:
– The deal
– Your partners
– The host country
– Is your passport current and will you need a VISA
•
Find an expert(s) you and one your company can trust
– Get one here in the US and one in the country where the deal is
•
Use your domestic experiences, but be careful about comparisons
Do’s and Don'ts
•
Do:
– Do your homework first
– Recognize others national pride
– Think outside the box
– Join the AIPN
•
Don’t:
– Think you are smarter (than they are)
– Think you know it all (you don’t)
– Try to buy goodwill (there may be laws against it)
General Comparison’s
Domestic
International
Laws:
Common law
Civil law
Case law
Legislative
Tax law
Common law
Civil law
Case law
Legislative
Tax law
Mineral ownership:
Fee
State
Federal
Federal
Note:
the vast majority of foreign mineral ownership is held by the
national governments
General Comparison’s
Type ownership:
Fee
State
Federal
Domestic
International
yes
yes (DNR,GLO, etc.)
yes (BLM, BOEM)
yes (varies)
yes
yes
(old MMS)
Type of Mineral Lease granted:
Fee
State
Federal
Government participation:
oil & gas lease
oil & gas lease
oil & gas lease
no
Production
sharing Agmt.
License or
concession,
(you pay all
tax and royalty)
risk service
contract and
hybrid of all
the above
often and thru
state owned company
General Comparison’s
Domestic
Signing authority:
company officer, AIF
Types of contracts (between WI owners):
AAPL JOA,
farmouts
JV’s
Handshakes
Hybrid
ORRI and Net Profits recognized:
Yes
International
Head of
State, Oil Minister
AIPN JOA
farmouts
JV’s
MOU’s, MOA’s
Hybrid
see next page
Yes, no, maybe,
don’t understand
Types of Contracts Specified by Legislation
•
License
– Similar to oil and gas lease.
– Licensee receives all sales , LESS royalty and taxes
•
Production Sharing Agreement
– Contractor received negotiated % of production (less costs) and negotiated %
of balance of profits
•
Risk Service Contract
– Contractor negotiates % of production less costs compensated for risks
•
Service Contract
– Contractor receives negotiated payment regardless of success
Primer on Host Government Contracts (HGC)
How do you become competitive?
Three basic forms of HGC
• Service contract - Example Iraq
• Concession or License– Tax and Royalty
• Production Sharing Agreement (PSA) – cost oil/share oil
HGC is the law
• National interests
• Subsequent amendments; political risks
Title to oil and gas under a Concession/PSA
• Understand what is covered
• Title passes at point of delivery
• Money flow
Compare Featrures of Concession/PSA to Domestic Oil and Gas Leases
Term
• Fixed periods – no habendum clauses
• Exploration phases – off ramps
• Development period fixed term for commercial production (2025 years)
Work Commitments
• Competitive just like domestic bonus and royalty
• Each phase includes a commitment to do the minimum required
(work v. $$); carry forward rights; may require acreage
relinquishments
• Competing interests of HG and Oil Company
• Data collection
• Commercial production
• Limited capital
• Relinquishment issues
Compare Featrures of Concession/PSA to Domestic Oil and Gas Leases
• HG as Partner
• Carried interests to commercial production – may be option
to elect; 5% to 20 %
• Operating committee
• Chaired by representative of HG as JOA partner; sovereign
issues
• Training
• Significant issue to train and employ local labor
• Key control positions required
• Arbitration
• How to resolve disagreements
Comparative Fiscal Terms by Country
Odd’s and In’s
• Fracing bans
• Things you normally don’t think of
• Political risks
• Summary
Fracing Ban’s (it’s not only a US problem)
• France
• New South Wales
• West Virginia
New York
Things you normally don’t think of
•
Will my credit card work?
– Will I need cash and if so in what currency?
•
Will my cellphone or iPad work? (Do you want to take it?)
•
Does my company have the right insurance?
•
Will I need a VISA?
•
Should I drive?
– Answer – NO, NO , NO!
•
Can I take pictures?
Things you normally don’t think of
•
Labors Laws
•
Physical access
•
Boundary disputes
•
Nationalization (Venezuela)
•
Local Counsel availability
•
Foreign Corrupt Practices Act implications
•
Signatures often require “board” resolutions and what’s an “apostele”?
Things you normally don’t think of
•
What is the weather like?
•
Do I know where I am going?
•
Where am I staying?
•
Will my plug in’s work?
•
What can I take with me? (and what can I bring back?)
Political Risk
Political Risk
• Political Risk
• Where is the closest US Embassy?
– Do I have their contact information?
Summary
•
Find out as much as possible about the deal and where it is
•
Review all the facts with your expert, and then with your management
•
Don’t let the romance of the deal get in the way of good business judgment
•
If you go forward maintain an acute situational awareness of all aspects of the
opportunity and where you physically are
•
Have fun and learn as much as you can!
Join AIPN
Political Risk Run Amuck
• Do I need personal security?
Man, I am glad I
attended the AAPL
Education seminar
on International
Trades!

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