An interesting note from Canadian Overseas Petroleum’s Q3 Report—they failed to repay $7.2 million to ExxonMobil related to closing payments paid to Liberia and lost 3% of the 20% stake they held in LB-13, the Liberian offshore block.
It begs the question: what value does a company bring to a something tricky like offshore oil exploration in a post-conflict state when they don’t contribute significant amounts of cash and little operational capability?
I’ve tried reaching COPL and will update as I hear.
An ExxonMobil spokesman responded: “ExxonMobil Exploration and Production Liberia Limited (ExxonMobil) and Canadian Overseas Petroleum (Bermuda) Limited (COPBL) have restructured their equity holdings in their recently acquired PSC covering Liberia Block 13. The holding are now COPBL 17% and ExxonMobil 83%. This restructuring is subject to the approval of the National Oil Company of Liberia.”
This confuses an already confusing transaction—the involves several parties: ExxonMobil, COPL, the National Oil Company of Liberia (NOCAL) and Peppercoast, the original “owner” of the exploration block, LB-13. LB-13 was linked to bribes paid to Liberian legislators and legislative employees to secure ratification of the original production contract.
To look back, this is a long, winding story :
2007 - Peppercoast Petroleum, an Isle of Man-based, entity with little experience, acquires 100% rights to explore offshore block LB-13
2011 - April - Liberia’s General Auditing Commission recommends the Peppercoast contract be nullified out of concern that its legislative passage was secured through illicit payments.
2011 - May - COPL announces that it will buy LB-13 from Peppercoast
2011 - November - COPL & ExxonMobil announce that they will partner on LB-13 for a 30/70% split on LB-13
2013 - March - Deal structure is announced. And it’s hard to follow.
- COPL will buy LB-13 from Peppercoast in a transaction funded by the Liberian national oil company, NOCAL.
- Where is NOCAL getting this money? Well, once ratifying a new contract with ExxonMobil and COPL they’ll get $50 million dollars.
- Once in possession of LB-13, COPL will partner with ExxonMobil at a 20/80% split. ExxonMobil pays approximately $120 million for its 80%. (Not stated publicly at the time, COPL borrows at least $7.2 million of it’s portion of the $50 million payment due to NOCAL.)
2013 - April - COPL & ExxonMobil acquire LB-13 ; Peppercoast identifies the buyer as COPL only—the price: $83.5 million.
2013 - June - Canadian strengthens its signature anti-corruption law, the Corruption of Foreign Public Officials Act.
2013 - June (approx.) - COPL doesn’t pay the $7.2 million to ExxonMobil.
2013 - October - COPL reports that it intends to seek listing on the London Stock Exchange.
2013 - December - Having just sold their sole holding, Peppercoast calls it day—as a member of the management described enters into “Members Voluntary Liquidation as request by the acquirer.” The members walk away with $18.8 million in cash. What happened to the remaining $65 million? The former managing director, Edward Dawson, responded, “For me Peppercoast is firmly in the past. I have no desire nor need to enter into a dialogue on the matter.”
If you’re confused after reading this, you’re not the only one. While the attenuated nature of this transaction may serve specific business purposes, it creates a very clear perception: that ExxonMobil has used COPL to construct a legal firewall between itself and the corruption charges marring Peppercoast’s original ratification deal.
Liberia has a framework to account for this transaction—the Extractive Industries Transparency Initiative. Both Canada and the United States have laws and, presumably, the resources to determine whether either COPL or ExxonMobil has or will benefit from the corruption identified by Liberian investigators at the root of this transaction.
The important thing to remember is that for all of this money changing hands—and keep in mind a majority of those hands are not Liberian—not a single drop of commercial oil has been produced in Liberia.