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Executives

Anne Pearson – DRG&L, Investor Relations

Ray Leonard – President and CEO

Analysts

Jeff Hayden – KLR Group

Mike Breard – Hodges Capital Management

George Gaspar – Robert W. Baird & Co.

Joe Hudak – Wells Fargo Securities

Hyperdynamics Corporation (HDY) Business Update Conference Call September 18, 2012 11:00 AM ET

Operator

Good day ladies and gentlemen. Thank you for standing by and welcome to the Hyperdynamics Investor Update conference call. During today's presentation, all parties will be in a listen-only mode. Following the presentation, the conference will be opened for questions and instructions will be given at that time. This conference is being recorded today Tuesday, September 18, 2012.

I would now like to turn the conference over to Ms. Anne Pearson, DRG&L Investor Relations. Go ahead ma’am.

Anne Pearson

Thank you, Jo, and good morning everyone. Before I pass the call over to Ray Leonard, Hyperdynamic’s President and CEO, I have a few items to cover. In a few hours the replay of today’s conference will be available by webcast on Hyperdynamics via our website. Also if you would like to receive alerts of future news releases please go to the investor relations page of their website where you can sign up to receive those automatically.

A reminder that except for historical information presented, matters disclosed in this conference call may include forward-looking statements. These statements represents the company’s current judgment on the future, and are subject to risk factors and uncertainties that could cause actual results to differ materially to the extent that there are statements that can be construed as forward-looking, they should be considered in the context of all of our previous releases and Federal filings.

Again, information related on this call speaks only of today September 18, 2012. So any time sensitive information may no longer be accurate at the time of a replay.

Now, I’d like to turn the call over to Ray Leonard. Ray?

Ray Leonard

Thanks, Anne, and good morning everyone. Since our last webcast we’ve been very focused on three areas. I will begin this morning with an update on the progress of the farm-out, 40% of our concession area to an experienced oil and gas company, who would also serve as operator going forward. Next, I’ll update you on our technical programs that is evaluating initial results from the new deep water 3D seismic data, as well as the results of the Sabu-1 well we finished earlier this year to better understand the geology of our Guinea concession. And third, I’ll discuss our strategy to strengthen our financial position to be able to sustain us for the long term. Following that as we usually do on these calls, I will answer questions that investors have pre-submitted through the website. And then finally we’ll take any questions live by telephone that were not answered in my opening remarks or in the pre-submitted questions.

Looking first at the farm-out process, that process is going as planned and we continue to expect to complete the process by the end of this year. We seek to sell our farm-out of 40% interest of the gross 100% in the concession in operatorship of the project going forward. Our 23% partner, Dana Petroleum, has waived its right of first offer under the joint operating agreement to go forward in this farm-out process, which would leave Hyperdynamics with a 37% working interest in the concession.

We have completed the first three of five steps in the process. Step one was to prepare the data room including preliminary time and depth stretch sections of the 3D data that’s currently available to us. Studies from the Sabu-1 well and our map prospects. Step two involved evaluating potential participants on a number of criteria including significant deep water operating experience preferably along the Atlantic margin, access to deep water rigs and the operation on financial capability to fully evaluate the concession over the remaining exploration period of our production sharing contract. And then reviewing with the Ghanaian government plans for the farm-out process and the proposed potential participants. The companies we targeted wanted to participate in this process and actually many more than that had asked to participate. Step three was completing confidentiality agreements with those companies and having them visit our data room for presentations and their internal studies. We held meetings with the eight prospective participants in July and August who met the criteria that we were seeking. The fourth step will be receiving and reviewing bids and choosing the leading candidate. Our plan is to communicate with the government of Guinea to discuss the proposed new operator while we negotiate the final documents. The fifth and final step will be concluding the deal and obtaining the requisite government and partner approvals necessary to bring the new operator into the concession.

Turning now to our ongoing technical program. We are continuing to evaluate the results of the Sabu-1 well. As we’ve discussed previously we believe that Sabu-1 well was not a commercial of success because of the lack of reservoir still needed for commercial accumulation. And as the evidence that hydro carbon generation has taken place in the basin enhances the prospectivity of our concession. An important part of this evaluation is understanding the indications of oil on the well. As I have discussed before these indications can take several forms. The first indication is direct evidence in the rock. Fluid inclusion studies, rock samples collected from the Sabu-1 well demonstrates the presence of oil. The greatest concentration of oil bearing fluid inclusion are found in the upper Cretaceous portion of the well, the section we feel is lacking in seal capacity and is responsible for leaking of the oil. The second form is oil and gas shows recorded during the drilling of the well. There is some uncertainty here because the oil based mud that we used to drill the well makes it more difficult to identify oil in the rock fragments brought to the surface during drilling. Fluorescence readings some rock samples taken during drilling due indicate traces of oil different from the diesel based drilling fluid, but studies recovered fluids have not confirmed movable oil. The third form is log measurements. The hydro carbon saturations calculated from the wireline electric logging data were at levels consistent with the presence of residual oil. Further studies of water resistivity, which is a key input to capturing hydro carbon saturations due raise uncertainties regarding the levels of saturations. So we are continuing to analyze these data. Our fourth indication or line of evidence that supports models of oil generation down deep in our basin are regional studies of maturation measurements to sediments, which indicate the source rocks deeper in the basin, down deep from the well are mature. So overall, we believe the four indicators taken together show the presence of a hydro carbon system and we are confident that this first prospect we drilled in the shallow water portion of our concession does demonstrate the presence of oil in the upper Cretaceous section.

Looking at our deep water projects, the fast track processing of the 4,000 square kilometer deep water 3D survey has yielded high quality results. We’ve received the first preliminary time cube and depth stretched cube in March. From our review of these initial results we see thick wedges of sediments that contain deep water sandstone reservoirs with marine shale fields which can trap significant oil accumulations similar to recent discoveries on trend in neighboring countries in West Africa. Four distinct deep water fan systems have been mapped with multibillion barrels potential on an un risk basis. The water depth of surface locations that we’ve tested these upper Cretaceous submarine structures along with transflow margin ranges from about 2,500 to 3,000 meters water depth. We believe each represent the highest potential prospects on the block. We also believe that the Sabu-1 results demonstrating good reservoir and a working petroleum system enhance our deep water prospects and support the possibility of a continuation into Guinea of the oil prone play along the Equatorial Atlantic margin. Our further analysis of the shallow water area and factoring in Sabu-1 results leads us to believe that the deeper horizon prospects or the thin-risk section remain prospective for the potential discovery of commercial hydro carbons.

The deep water 3D processing by CGG Veritas is slightly ahead of schedule. CGG Veritas is using a process for the velocity modeling called simultaneous multilayer tomography, which is the best approach for the geology of our block particularly with our shallow high velocity carbonate rocks overlying the prospective sections. Their broadband technology is state of the art and has now been commissioned by both Anadarko and Total for similar deep waters 3D surveys along the transform margin fairway play. Our specialists are working with CGG Veritas on the processing and they are making good progress. We expect the final post act time migration results in mid-December and the post act depth migration results around February 1. The total amount of 3D processing time is slightly longer than our first 3D study due to the largest size of the survey, 4,000 square kilometer versus the 2,600 and 700 square kilometer surveys done previously.

The third item I’d like to discuss is our ongoing effort to position the company for the longer term. For the remainder of 2012 the primary focus of the company will be the Guinea project. This includes the ongoing analysis of the deep water 3D data and the farm-out process that I have just described. As you are aware, we have previously been looking for diversification opportunities to balance our portfolio of exploration with proof of producing reserves that also have some upside.

As we transition to a new operator we have and will be making appropriate overhead cost adjustments. To date we have made staff reductions and we’ve closed our U.K. based new ventures office. Also, these have reduced our payroll and benefit obligations. We will continue to evaluate our cost structure as the transition continues. We expect to resume our diversification efforts once we are further down the road with the Guinea project and we have greater financial resources to pursue potential opportunities. But for the time being we do not plan to do anything to jeopardize our ability to complete the farm-out or our staying power to be a significant equity holder in the guinea concession as we test what we believe to be billion barrel prospects. Our net liquidity after giving effect for the remaining liabilities and excess supplies associated with the Sabu-1 well and for the remaining cost associated with the 3D seismic survey processing is in the neighborhood of $35 million to $40 million.

As you are aware in June our wholly owned subsidiary SCS filed suit against AGR following unsuccessful negotiations to address the cost overruns associated with the Sabu-1 well drilled off the coast of the Republic of Guinea. The suit was filed in London, England in the High Court of Justice- Queen’s Bench Division. SCS is seeking to recover damages and other relief from AGR for claims of mismanagement of the drilling of the Sabu-1 well and various breaches of contract that resulted in cost overruns. Among other things the lawsuit alleges that AGR mismanaged the selection reconditioning and crew staffing for the Jasper explorer drilling rig used to drill the Sabu-1. Mismanaged other subcontractor relationships, failed to see cost relief from its subcontractors and failed to return to SCS inventory purchased by SCS but not used in the drilling of the Sabu-1 well. AGR has not filed its defense from this matter but has indicated it does expect to file a counterclaim.

On May 14, 2012 we were notified by the New York stock exchange that we did not satisfy one of the New York stock exchange standards for continued listing applicable to its common stock. The New York stock exchange noted specifically that the company was below criteria for New York stock exchange price criteria for common stock because the average closing price of our common stock was less that $1 per share over a consecutive 30-day period. Under the New York stock exchange rules, in order to cure the deficiency for this continued standing listing, both our share price and the average share price over a consecutive 30-day trading period must exceed $1 per share by six months following receipt of the non-compliance notice. The New York stock exchange will also provide that if we choose to take an action to cure the price condition that requires shareholder approval, we must inform the New York stock exchange obtaining such shareholder approval by no later than our next annual meeting and implement the action promptly thereafter.

That concludes my prepared remarks. And next I’d like to respond to the many questions that were submitted to the website. I’ll answer them by category consistent with my prepared remarks, starting with the farm-out process.

First question on the farm-out process is please comment on the excitement or interest level of those companies still looking at the data and pursuing the process? Now, this is a very subjective question. From the continuous use of the virtual data room, which we can track and questions we are receiving from the companies the interest level remains very high and we’ll soon see how that translates into bids.

Next question. Are we in a position to take the best of many good offers? Are we in a position which we hope to get one that’s acceptable? Is it likely that multiple JV deals will be negotiated or rather concentration on one?

No. Our prime intention here is to do one deal to cover the entire concession. There are many advantages to doing it this way. Having said that, it will be foolish to rule out alternatives before we receive the bids, but we are moving forward on the process.

Have you set a due date for proposal from interested parties and have you determined when you will make a final decision regarding the selection and if we don’t have a finalized deal until the end of 2012, won’t that make it difficult to actually drill a well in the second and third quarter of 2013?

We have set a date for proposals from interested parties and we believe we are continuing on the timeline to complete this process by year end. The timing of the next well obviously is got to be decided together with the new participants and with our partner and with the approval of Ghanaian government.

In your opinion, is our concession less valuable today due to the Sabu failure, and as a result will major oil companies show less interest than we anticipated?

We’ll, first of all let me put the Sabu in perspective here. It satisfied the concession requirements securing our rights through 2016 and proves the hydro carbon system. And as I have mentioned before it was a commercial of success, and I believe due to lack of hydro carbon seals. Now, to answer your question you really need to consider three things. The Sabu results, the 3D seismic and the drilling results in the region. The Sabu results are obviously mixed; we proved the hydro carbon system and the presence of sand but identified the seal problem in the shallower water portion of the block in the post-risk section. We believe the 3D seismic has been a positive for the prospectivity, multiple deep water fan systems have been identified far more clearly than on the 2D seismic. Regionally, the results have been generally but not completely positive. On the South American side, two conjugate basins have been shown to be hydro carbon bearing, which of course is very positive. Further South in Liberia and Sierra Leone, evidence of the deeper source rock, the Albian is very good news for our concession because it expands the area of mature source rock. In Sierra Leone wells have shown good reservoirs but less hydro carbons than hoped and it felt that the feel definition may be a key component to success. It may also be worth noting that Sierra Leone held a license round and the two blocks on the Northern border, directly adjacent to our concession Chevron and Noble, have win the rights to those blocks. And in the end the fact that all the companies that we targeted wanted to be in the farm-out process I think is a good indicator of the interest level.

Please discuss the plan with respect to the one remaining area of the concession, which we have not completed in any 3D survey, the northwestern Neocomian carbonate section?

We’ll be proposing the JV, the 3D began as soon as possible for some results prior next September and we’ll be in exploration program plan without the benefit of 3D results. As shown in the Netherland Sewell reports that are on our website, the Northern area has high potential but is higher risk than the turbidite plays to the South. We presented the entire concession area to potential farm-in partners and are waiting see how the Northern area is covered in the bid. We also do want to capture the value of it. So we’ll look at our plans accordingly.

Next question. Most discussions of likely farm-in terms seems to indicate a farm-out of a percentage of the entire remaining concession. Under what circumstances if any might you consider the farm-out of a portion of the concession? Say that the border fans plays of the 3D survey, not the rest of the concession area.

The highest priority right now is testing of the deep water fan play and I do think that answers the rest of question in the previous answer.

The next questions are on the seismic survey. Has the 3D data been received from the contractor survey and please briefly comment if possible on the preliminary results?

As expected disappointing are better than expected. We find the best track 3D and depth stretch of high quality and they are the basis for our prospect mapping of the deep water fan play and they are also the basis for the potential partners evaluation and mapping.

Is there an intention to get an update Netherland Sewell report on the shallow of 3D and ultimate deep water 3D?

This will be determined in light of all the other ongoing events such as a new partner coming into the block.

Have there been any new recent exploration wells in either West Africa or South America that has improved the prospectivity in the Republic of Guinea concession?

I’d like to highlight here the discovery of Albian pay in Liberia that suggest – not normally suggest but demonstrates a deeper source rock and widens the area of mature source rock in the Guinea offshore and the discoveries by Telo Shell Total consortium and Petrobras along the Northern Coast of South America also shows that this play is moving forward and oil is being found in the basins as you continue to the North.

On the geology side, what information was learnt from the residual oil and gas shows, for the shows point to direction where producible oil is most likely located or down deep? Can interested parties combine their residual shows with 3D to produce reliable hypothesis where we produce oil is located and can you consider residual shows adding to the value of the entire concession?

For the most part I believe this question was answered in my talk. To add to the final point I believe the residual oil does add value to the Southern half of the concession south of the transform fault. To the North, it really is still untested, that’s a different basin and a different geological play.

For the deep water turbidite fan, does Hyperdynamics have an have up deep seal by faulting the structural closure or do the fans required simple pinch out?

The single line that Hyperdynamics provided in the previous news release to illustrate the turbidite fan shows the pinch-up geometry. The answer is the updip traps on the fans will be pinch out/ faults and our fast track 3D does show that the fans do have these trapping geometries updip. The line which showed also had some structural closure. However, we need to wait until the final post act depth migration to be sure of that.

The next question. Can the Sabu oil shows be described as the continuous phase oil event or occurence?

The answer to that is no.

Please provide detailed insight to what you refer to as the elephant prospect?

I think they are referring to the prospect that we call Syloi, which is S-Y-L-O-I, which is the falange for elephant. The prospect is a deep water fan in about 2,500 meters water depth. We view it right now as a strongest of the prospects at this time due to its size, its clear definition on the seismic, a possible structural closure and slightly shallow water depth compared to the other fans.

If the Sabu well results are now finalized, can you tell us if the Southern survey A still holds much promise for future exploration or if this area is a likely candidate for relinquishment next September?

As I’ve mentioned before, the deeper Cretaceous section and survey A is still untested and we believe it’s prospective.

I’d like to move now to one question on legal matters. The question is I know you can’t discuss legal matters but can you give us any ideas to the likely timing of the three lawsuits against Hyperdynamics and that lawsuit against AGR in terms of if they were to move forward in a normal course of matters within the courts of the U.S. and Great Britain?

And realistically the timing of the lawsuit is out of our hands. You will see as a matter of public disclosure. However, the filing that we do make public.

Questions on overhead, liquidity and stock price. Question here is please breakdown why we burn $1 million a month by salary, travel, rent, entertainment etcetera and why do we have 50 plus staff members?

As we transition from operator to non-operator status we will adjust overhead accordingly. Until the new operator takes over, we must continue to take the lead role in evaluation, operations and government relations. The biggest portion of our costs right now is salaries and benefits.

Once the JV is completed will operatorship be in the hands of the JV partner, hence will it be staff reductions or increases?

Once the farm-out is completed according to the production sharing agreement, we will remain operator over a four month transition period. By that time we should have a clear understanding of our role and the technical evaluation needs in the non-operator role. So it’s premature to be more specific for that right now.

What is there to present potential drillers or partners who just weigh it out, let us run of cash and then they acquire the concession much more cheaply?

Well, the short answer to this question is competition. We are running a disciplined process with the specific objective of creating a competitive environment. If we are successful in this and the signs are good, waiting this out would be a losing proposition.

Please explain to shareholders how you’re working toward increasing shareholder value. I’ve seen no updates on any new developments between lawsuits and dwindling cash position and lack of any clear information. I’m extremely worried about my ownership stake in the company. Well, the first major step is bringing on a partner. We run a disciplined process that we hope to show results by yearend. The second step is the future evaluation of the acreage and finally we’re working to cut costs to preserve our cash position.

A question on the New York Stock Exchange listing. What is your current status with the New York Stock Exchange delisting? And if a farm-out is not completed or announced prior to the deadline date and the stock price has not rebounded over $1, what is your plan for dealing with the problem and have you considered a reverse split? I have talked about that, but let me clarify our answer. Our near term objective is to complete the farm-out and see if that has a positive impact on the stock price. If the farm-out is not successful in this regard, the board will consider other options. And to reiterate, the New York Stock Exchange rules provide that if we choose to take an action to cure the price condition that requires stockholder approval, we must inform the New York Stock Exchange and obtain such approval no later than the next annual meeting and implement the option right thereafter. Now but I don’t want to speculate on these options at this time. We are in discussions with the New York Stock Exchange and we are very aware of the situation.

Political situation in Guinea and regards the production sharing agreement. There was a question on this. Well, the current political unrest in Guinea affect contract negotiations. Can you shed any light on the parliamentary election stag? We do not anticipate political differences in Guinea affecting the farm-out or contract negotiations. Now President Condé has in the past week agreed to remove the current head of the elections commission which was requested by the opposition and we will see how positively that will affect the dialog. Hyperdynamic’s relationship with the government remained strong. We’ve honored every commitment in the concession and they in turn have strictly abided by the production sharing agreement.

Has the concession officially been divided into blocks and is Hyperdynamics considering block by block as well as entire concession deals? The concession has been divided into blocks, although there’s only one production sharing agreement. We intend to farm-out 40% as an entirety in the block and keep the contract areas one that’s by far the preferable course.

Further questions on the AGR dispute. Is there any ongoing discussion with AGR to settlement of the suit or in your opinion will it go to court? Well, our corporate policy as we have reiterated is not to comment on ongoing litigation, but we have made public statements and it is our – but it’s our policy to seek resolution in that matter and it’s best to – and it fits in the best interest in all parties. So we have committed on a course, but if there’s a possibility of seeking resolution then we will take it.

Is AGR withholding the final law report? Does this in any way undermine your ability to accurately define the full results of Sabu-1. We do not believe anything withheld by AGR has any effect on this farm-out or to define the full results of Sabu-1. I can state that definitely.

Has the dispute with AGR had any effect on soliciting or closing on a farm-in on the concession or had any negative repercussions with the result with republic of Guinea? We’ve discussed the cost overruns with the government of Guinea and they are aware and supportive of our efforts to reduce the cost and it has had no effect on the soliciting or closing of a farm-in.

Last question, will you definitely have a partner by the end of the year? You stated the deep water is high risk and high reward. Are there other targets or drilling plants to lessen the risk? As I said before we’ve set in motion a progress to set up to be completed by the end of the year and we are on track on that process. Really that’s the clearest statement we can make on it. And to lessen the risk for the deep water play, we’re utilizing state of the art 3D seismic. We’re integrating the well data and we want to bring on a partner that has additional experience in terms of exploring in the Atlantic margin.

So that concludes both the prepared remarks and the answers to the questions that have been pre-submitted. I’d now like to open the floor to any questions that have not been covered to this point.

Question-and-Answer Session

Operator

Thank you, sir. (Operator instructions). And our first question comes from the line of Jeff Hayden with KLR Group. Go ahead please.

Jeff Hayden – KLR Group

Just a couple of quick questions for you. One, you talked about trying to manage the headcounts. Kind of looking at that now with that roughly $1 million a month burn rate that we were at most of this past fiscal year. Where do you think that could go once you adjust the headcount for more of a non-operator role?

Ray Leonard

Okay. Well, first of all with regard to the headcount, we are still operating this block and this block has the size or 2500 Gulf of Mexico blocks and that takes a certain amount of time and effort. Most of our cost is on the technical side and is in salaries and benefits. And so as long as we’re the operator of this block, there is a limited amount of movement on that. In the companies we’re talking with in terms of our role, it’s also not clear. Several of the companies have said look, you’ve done a tremendous job on this. Expert manpower is tight. It’s possible that our technical expertise will be used in a more direct role. So it may not be the answer you’re looking for, but we’re not in a position yet to say where we’ll be because the other factor is what are we going to be looking at in terms of other additional projects.

Jeff Hayden – KLR Group

Okay, I appreciate that. And then just one other quick one. How should we think about this budding of the next well? Assuming we get the deal closed by yearend, is it likely that we could get another well drilling in Q2 or might it be a little later or even earlier than that?

Ray Leonard

Well, one of the factors you’re looking at in terms of the worldwide rig market for ultra deep wells, it is very tight. One of our criteria for looking at partners is that they will have a rig available. Recognizing that they’ll be starting at the beginning of the year from scratch in putting this rig together, it’s not realistic to expect a well in the early part of 2013. Deciding on a rig time is a combination of with us with our partners, with the government and the rig availability. We are as one of the factors in choosing a partner looking for somebody who can get started sooner rather than later. But in terms of setting a date really it would be very premature for me to say anything until we have a partner on board because they’re going to be a key part of the decision. But we are cognizant that it’s better sooner than later.

Jeff Hayden – KLR Group

All right, thanks a lot, Ray.

Operator

And our next question comes from the line of Mike Breard with Hodges Capital. Go ahead please.

Mike Breard – Hodges Capital Management

Ray, you were talking about completing the format by yearend. Now it’s obviously going to take the lawyers quite a bit of time to settle on the final wording. When do you expect to announce who you’re negotiating with? Might that be an October or even November event?

Ray Leonard

Well, we have – as I’ve said there is a timeline and we’re doing all we can in the preparatory process to speed up the final process and those things are for example going down to the government and going through the list of companies and making sure that they agree that these companies fulfill all the criteria necessary which should speed up the approval of the government on the other end. Another thing we’re doing as part of the process is the farm-out document and joint operating agreement. As part of their bid they’re submitting markups so that we can look at the proposals as well as the fiscal bid that they make. We can see how much they would try to change the joint operating agreement. So again we want to try to look at companies that are not going to try to reinvent the world to get this deal closed. In terms of what we’re going to announce, we’re not going to announce anything until we have ink on the paper signed. We really think that it would be premature and misleading to try to announce anything until we have something on paper with the other party.

Mike Breard – Hodges Capital Management

Okay. So there’s no way it’s possible you could start negotiating the final deal say in November and like close this one in early or late December? Or you don’t know the exact timetable?

Ray Leonard

Well, we have a process. We move as fast as we can and we will announce once we get something on paper. I cannot commit to any specific date.

Mike Breard – Hodges Capital Management

Okay. I’d rather have an announcement with the final decision than leave people wondering whether or not we’re going to get something soon. Thank you.

Ray Leonard

Yeah. We are on track on our plans and that’s really the clearest statement I can make.

Mike Breard – Hodges Capital Management

Okay. Thank you.

Operator

And our next question comes from the line of George Gaspar. Go ahead please.

George Gaspar – Robert W. Baird & Co.

Thanks. A couple of questions. I apologize if you’ve detailed this before. The timeline on the lawsuit looking forward, what are your markers that you’re looking for please?

Ray Leonard

Well, as I’ve said before, we really cannot comment on litigation. It’s a case of you’ll see by the disclosures as we go forward. We in the case of AGR we filed the lawsuit. We’re waiting for their defense to come out and on the other suits, the courts move very slowly and when an event happens the filing will be public and you will see that. But we do not control the speed of those events. All we can say is that you’ll see the filings as they go.

George Gaspar – Robert W. Baird & Co.

I get you. Okay. And then one of the things during the drilling process of the first well was turmoil in the harbor area and your logistics problem that you ran into. What are you doing – what’s been done about that to improve the situation for the service support necessary offshore and as you move forward into a second well project?

Ray Leonard

Well, in the long term, in drilling a well, you do find out things that you just didn’t find out before you made the attempt. I do know for example that for Daniels has been hired to do a major infrastructure project in building a new port for Guinea. Now whether that would be available to another company working in time is another question. Another factor of course is that if you get a different rig with a lot more depth space, it may not be as necessary to have as many trips and supply. But this is a problem that’s going to be faced by the operator that takes over once we complete the farm-out. What will be valuable is the experience we had and we will make available for that new operator all those learning so that hopefully they don’t fulfill what is Einstein’s definition of insanity doing the same thing over and expecting a different result.

George Gaspar – Robert W. Baird & Co.

Great, okay. And one question on the 3D, your interpretation to date and analysis work relative to the structure and depth of the first well and I know that there’s a distance from between where you drill the first well and where you’ll be drilling the second well. But what does the 3D analysis show as far as the potential depth of the structures that you would be looking at to draw versus well 1?

Ray Leonard

Well, there are two aspects to that. One is the water depth and the other is the depth of the prospect below the mud line. And in terms of the water depth as I mentioned before, the turbidite sand plays, you’re looking at 2,500 to 3,000 meters water depth and in terms of the depths below mud line, they vary. As I mentioned earlier there are four different fan systems and they range anywhere from 2,000 to 4,000 below the mud line.

George Gaspar – Robert W. Baird & Co.

Okay. All right, thank you.

Operator

And our next question comes from the line of Joe Hudak. Go ahead please.

Joe Hudak – Wells Fargo Securities

Good morning and thanks for taking my call. Most of my questions have been answered. However, did have a question to going back Ray on the casts, how much has gone down the bottom line in the reduction? You haven’t stated a number there. You’re burning $1 million a month. Are we not burning $800,000 a month or?

Ray Leonard

Well, there are two aspects to this. Number is that we remain the operator of the concession. During the summer while we went through the farm-out exercise there were times in which we had two major oil companies in. Our staff was being used to the full in addition to interpreting the new seismic data. So for the Guinea operation, we were at full board. What we did do was we cut our London new ventures operation and some support staff for new ventures here in Houston. So that was a piece and that was about 15% of the staff. In terms of what we will be doing in the future, it depends on what happens. As I’ve said before, some of the companies that have talked to us that said we really like what your technical work has shown us and we really would value using – continuing to use that technical work in the forefront of the evaluation. Another factor here is that with the staff reductions have come severance costs. So you have not seen the reduction in that cost right now, but you will see it in the coming year’s budget.

Joe Hudak – Wells Fargo Securities

Got you. If you had to summarize everything since the last conference call, there’s been a lot of really good things that have come out since then, but if you had to summarize it as to what was really outstanding that was maybe overlooked and also what in your perspective remains the biggest challenge?

Ray Leonard

Okay. That’s an excellent question. I would say that there have been two very positive developments. The first positive development is with regard to the farm-out when we started the process. We identified the companies that ideally we’d want as a partner and they all wanted to look at this concession. They’ve all participated in a very extensive data room and whether that will translate into bids we’ll find out very soon. But it’s been a very good process. So that has been very positive, as good as we could have hoped. And you don’t know until you get the bids, but it’s worked right on target to this point. And the second high, very positive has been that with the 3D depth stretch, we have been able to map four very interesting deepwater 3D channel systems.

We saw some indications on the 2D seismic, but with the 3D to this point they’ve become much clearer and are very positive. On the tougher side, we did go through a staff reduction and that’s not fun and that’s tough. But it was done and it was necessary. So those were really the key events and in terms of what you will see in the next several months I think the main thing to look for is the farm-out process. Now I know a lot of people have questioned about the New York Stock Exchange listing question. With this farm-out process the market will take a look at us and re-price us based on the farm-out and we make no guarantees, but we’re confident of the process and we’ll just have to see how it plays out over the next few months.

But the last several months have been – we have done what was needed to be done both on the technical evaluation, the farm-out side and in terms of our cost structure. And so we believe we are very well positioned for what comes next. And for those who have stuck with us we are appreciative and for those who take a look at us and look at our value and look at our potential, we hope you find us of interest. So once again thank you for listening through the call and thank you for your interest in Hyperdynamics.

Operator

Ladies and gentlemen, that does conclude the Hyperdynamics investor update call. If you wish to listen to a replay of today’s call please dial 303-590-3030 with the access code 4559037. Thank you for your participation. You may now disconnect.

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