Guyana - How To Invest In The Next Wealthiest Country In The World (2024)

For relevant additional information, I recommend reading my 2020 oil price outlook available here along with my article analyzing ExxonMobil’s Guyana assets.

Guyana is a small country on South America’s North Atlantic coast. The country is defined by its dense rainforest, or for avid Discovery Channel viewers, the season of Goldrush where the Hoffman’s decided to try their hand mining there. However, the purpose of this article is to talk about this country’s future as it becomes one of the wealthiest countries in the world from the discovery of not gold, but black gold.

As we'll see, this country has a strong business environment and huge potential wealth that despite the risks make it a strong place to invest.

Guyana - Wild Junket

Guyana Overview

Guyana is small and sparsely populated. The country is just 83,000 square miles or a bit over half the size of California. The country is notable as the only country in South America where the official language is English. However, the country's populace is incredibly small - it has just over 750,000 people making it one of the least populated countries in the world.

Guyana Overview - ExxonMobil Investor Presentation

On a geopolitical stage, the country is overshadowed by its much more significant neighbors of Venezuela and Brazil. The country’s business climate isn’t anything to write home about - it ranks at 93/180 on the country corruption perceptions index and 134 among 190 countries on the ease of doing business in the country rankings.

However, landing in the middle of the pack isn’t anything bad. For reference, other countries with similar rankings on the country corruption perceptions index are China (rank 87), India, Kuwait and Turkey (rank 78), and the Philippines and Thailand (rank 99). Notable countries nearby on the ease of doing business rankings are Belize (rank 135), Maldives (rank 147), and Brazil (rank 124).

Again nothing to write home about, but nothing so difficult as to prevent economic growth.

Now looking at the political situation, the country fares slightly better. On the democracy index, it ranks 54 out of 190 countries (next to neighbors such as Poland at 54, Croatia at 60, Mexico at 71 and India at 41). However, the country’s small size means that an influx of wealth can always change things and upturn society, which is worth paying attention to.

Lastly, looking at the country’s wealth, its GDP per capita is roughly $6900 and has gone up significantly since it was at $1100 in 2005. Life expectancy at just under 67 years is respectable and also trending upwards rapidly. The country’s small population hasn’t changed significantly since the 1980s, meaning that it has no upcoming demographic issues (i.e. a rapidly aging elderly population).

It’s worth noting that this environment overview doesn’t provide any guarantees, but is a useful way to provide some perspective on where things could be headed.

Guyana Potential Growth

Now that we have identified the Guyana demographics, political situation, and business environment, let’s talk about the massive potential growth.

ExxonMobil Guyana Growth - ExxonMobil Investor Presentation

The above image provides ExxonMobil’s alone planned production startups in Guyana. For reference, if you think about the classic wealthy oil countries (Saudi Arabia, Kuwait, Qatar, and the UAE), Saudi Arabia currently produces 0.33 barrels of oil per person / day, Kuwait produces roughly 0.80 barrels of oil per person / day, Qatar produces 0.70 barrels of oil per person / day, and the UAE produces roughly 0.20 barrels of oil per person / day.

In 2020, ExxonMobil alone will produce 0.16 barrels of oil per person / day and by 2025 that will rise to more than 1 barrel of oil per person / day. The IMF, as a result of ExxonMobil alone, is forecasting 86% GDP growth for the country in 2020 alone. The number of additional prospects for ExxonMobil in the country is also staggering.

It’s also important to note that ExxonMobil’s discovery came on the back of many dry wells in the region. However, it’s success is bringing new attention to the country that could potentially result in the discovery of other major plays that haven’t even been realized yet.

Guyana Future Developments - ExxonMobil Investor Presentation

The above map shows ExxonMobil’s drilled and undrilled prospects. It’s important to note that despite drilling large amounts of new prospects (roughly as many in 2018 alone as in 2015-2017 combined) the company still has significantly more undrilled prospects than drilled ones. As the company learns to understand the geology and oil fields this could push production in the country to >1-2 million barrels / day.

ExxonMobil is also the best known but not the only operator in Guyana. Tullow Oil originally made some respectable discoveries, however, said it was slowing down to re-evaluate whether it was an economic discovery in light of the heavy crude and high sulfur content of the discovered oil. However, just a few days ago the company found 4 meters of net oil pay, but much higher quality oil.

Four meters of net oil pay isn’t a ton (ExxonMobil and Tullow Oil’s heavy wells had roughly 10-20 times this), but it points to the potential for some balance between the heavy and light crude with more net oil pay. As exploration continues, I would expect this number to rise significantly and some production to come from this block that could be very rewarding to Guyana. With a small population, it doesn’t take much.

For example 150,000 barrels / day of peak production in Tullow Oil’s region would be a mid-size operation but would be, on a per capita basis, as much oil for Guyana as the UAE produces in its entirety. Anadarko Petroleum (now Occidental Petroleum) also has licenses for Guyana offshore blocks that will likely be solid off (read about Occidental Petroleum here).

The company hasn’t been clear yet about the results of exploration or its plan for this region.

Guyana Risks

However, in the interest of discussing both sides of the opportunity, investing in Guyana is not a risk free opportunity. In fact, there are 3 major risks that I view as possible and recommend that investors pay attention too.

The first is that due to previous lack of success in exploration in Guyana, ExxonMobil was given extremely good exploration terms. The ExxonMobil discovery was so unexpected that the country’s department of energy has a budget of just $2 million and hasn’t finished drafting laws to deal with exploration and production. It has set up a $5 billion sovereign wealth fund to handle the money but still doesn’t have a good framework.

The country’s president lost a vote of no confidence upon people’s anger over the terms of the deal given to Guyana. There are corruption investigations going on over the deal terms given to ExxonMobil which was signed at a time when the country was desperate to get producers - anyone at all - to drill. However, I’m still expecting a multi-billion dollar settlement.

Another potential issue in Guyana is wealth inequality, which historically is more likely to lead to protests or other forms of complaints. The country’s Gini coefficient (a measure of inequality) is respectable (0.45 for Guyana vs. 0.49 for the US and 0.27 for Norway), however, the country does have some social issues with citizens of Portuguese colonizer descent tend to be much wealthier.

Again, this doesn’t mean anything but it’s a risk factor worth paying attention too.

The last risk factor I want to discuss is one of Guyana’s neighbors, Venezuela. Venezuela claims much of the waters in offshore Guyana, especially major parts of the exploration block. In fact, ExxonMobil’s discoveries to date in Guyana have been away from the Venezuela coast due to potential decisions. In the past, Venezuela’s navy has seized ships to enforce these claims.

Venezuela is essentially a failed state. As such, it is unpredictable. While the US and other nations will back Guyana, where the discoveries fall within its exclusive economic zone, especially in terms of attacks against a US company, it’s a risk worth paying attention too.

Guyana Investment Recommendation

Putting all of this together, let’s discuss how to invest in Guyana. There are two primary ways to invest in Guyana. The first is to invest in companies in Guyana that will benefit from overall growth. The second is to invest in the oil companies that will provide this growth.

The Guyana stock market is incredibly small as visible by looking at the above chart of every company in the stock market along with their trading information as of yesterday. Several of these companies haven’t had shares traded in years. Investors with large sums of capital can benefit by looking up how to invest in these companies, which due to their position in a small country (especially the banking & construction companies) will likely do quite well.

Guyana Goldfields and ATNI are two Guyana companies you can trade in the U.S. (ATNI controls indirectly most of the country’s cellular and telecom networks). Unfortunately, ETFs with exposure are difficult to find due to the country’s small size.

Alternatively, you can invest in countries that will benefit. ExxonMobil (NYSE: XOM) and Hess Corporation (NYSE: HES) are major owners of the Straoboek block that will begin producing soon.

For reference, Hess Corporation produces 265 thousand barrels per day currently, so its share of Guyana production by the mid-2020s could be almost as big as the rest of the company combined. ExxonMobil will see its share of the production by the mid-2020s be 10% of the company's production. Current breakeven costs are estimated to be ~$35 / barrel, with Liza oil selling for ~$5-7 / barrel more than Brent ($70 / barrel as of today).

That means for Hess Corporation, a $21 billion company, Guyana alone will provide almost $3 billion in profits / year by the mid-2020s. For ExxonMobil, a $300 billion company, Guyana will be $4.5 billion profits / year. That assumes no new discoveries (as we saw above there's plenty of un-drilled prospects). This cash flow will go straight to shareholders - generating strong rewards.

Another option, Tullow Oil (OTCMKTS: OTCPK:TUWOY) is a high risk high reward option that has a stake in other oil producing assets. Either of these companies would see their stock price and shareholder returns go up as they begin to produce oil.

Conclusion

Guyana is on the cusp of major growth. Thanks to ExxonMobil and other companies, the country is on the verge of becoming the largest oil producing country in the world on a per capita basis which should generate a massive amount of wealth. The country is already preparing for this by building a sovereign wealth fund and attempting to rewrite laws to handle the influx of money.

Of course the country has risks, namely around potential inequality and the original contract terms along with threats poised by its neighbor Venezuela. However, it will experience significant growth. I recommend, for wealthy investors, looking at investing in the stock market directly. Alternatively, I recommend looking at investing in the oil companies that will benefit.

Editor's Note: This article covers one or more microcap stocks. Please be aware of the risks associated with these stocks.

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