Transcript Shoot!, he doesn`t know anything!
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”
58 th 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 going to let expire.
is What do you know about international farmouts?
Shoot!, he doesn’t know anything!
Going To Rio
He doesn’t know anything either !
How to Start
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First, take a deep breath
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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
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Do:
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Do your homework first
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Recognize others national pride Think outside the box Join the AIPN
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Don’t:
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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
Laws: Mineral ownership: Domestic Common law Civil law Case law Legislative Tax law Fee State Federal International Common law Civil law Case law Legislative Tax law Federal Note: the vast majority of foreign mineral ownership is held by the national governments
General Comparison’s
Domestic Type ownership: Fee State Federal Type of Mineral Lease granted: Fee State Federal yes yes (DNR,GLO, etc.) yes (BLM, BOEM) (old MMS) oil & gas lease oil & gas lease oil & gas lease Government participation: no International yes (varies) yes yes 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
Signing authority: Domestic 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
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License
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Similar to oil and gas lease.
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Licensee receives all sales , LESS royalty and taxes
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Production Sharing Agreement
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Contractor received negotiated % of production (less costs) and negotiated % of balance of profits
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Risk Service Contract
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Contractor negotiates % of production less costs compensated for risks
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Service Contract
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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 (20 25 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
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Data collection
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Commercial production
• •
Limited capital Relinquishment issues
Compare Featrures of Concession/PSA to Domestic Oil and Gas Leases
• • • •
HG as Partner
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Carried interests to commercial production – may be option to elect; 5% to 20 % Operating committee
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Chaired by representative of HG as JOA partner; sovereign issues Training
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Significant issue to train and employ local labor
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Key control positions required Arbitration
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How to resolve disagreements
Comparative Fiscal Terms by Country
Odd’s and In’s
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Fracing bans
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Things you normally don’t think of
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Political risks
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Summary
Fracing Ban’s (it’s not only a US problem)
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France New York
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New South Wales
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West Virginia
Things you normally don’t think of
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Will my credit card work?
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Will I need cash and if so in what currency?
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Will my cellphone or iPad work? (Do you want to take it?)
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Does my company have the right insurance?
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Will I need a VISA?
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Should I drive?
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Answer – NO, NO , NO!
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Can I take pictures?
Things you normally don’t think of
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Labors Laws
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Physical access
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Boundary disputes
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Nationalization (Venezuela)
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Local Counsel availability
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Foreign Corrupt Practices Act implications
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Signatures often require “board” resolutions and what’s an “apostele”?
Things you normally don’t think of
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What is the weather like?
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Do I know where I am going?
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Where am I staying?
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Will my plug in’s work?
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What can I take with me? (and what can I bring back?)
Political Risk
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Political Risk
Political Risk
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Where is the closest US Embassy?
–
Do I have their contact information?
Summary
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Find out as much as possible about the deal and where it is
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Review all the facts with your expert, and then with your management
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Don’t let the romance of the deal get in the way of good business judgment
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If you go forward maintain an acute situational awareness of all aspects of the opportunity and where you physically are
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Have fun and learn as much as you can!
Join AIPN
Political Risk Run Amuck
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Do I need personal security?
Man, I am glad I attended the AAPL Education seminar on International Trades!