ASSET management information

CONTENTS CONTENTS ................................................................................................. 2 TERMS USED IN THE EP INDUSTRY ........................................................... 3 BUSINESS ENVIRONMENT ......................................................................... 17 A. WORLD PROSPECTIVITY SUMMARY............................................................... 18 B. LICENSING ................................................................................................... 19 C. COUNTRY BRIEFS ......................................................................................... 21 D. PRODUCTION SHARING CONTRACTS............................................................. 37 E. COMPETITOR BRIEFS.................................................................................... 42 COMPANY REPORT.................................................................................... 43 HISTORICAL PERFORMANCE .............................................................................. 44 KEY METRICS .................................................................................................... 44 HSE PERFORMANCE ........................................................................................... 44

ASSET MANAGEMENT INFORMATION CONTENTS CONTENTS TERMS USED IN THE E&P INDUSTRY BUSINESS ENVIRONMENT 17 A B C D E WORLD PROSPECTIVITY SUMMARY 18 LICENSING 19 COUNTRY BRIEFS 21 PRODUCTION SHARING CONTRACTS 37 COMPETITOR BRIEFS 42 COMPANY REPORT 43 HISTORICAL PERFORMANCE 44 KEY METRICS 44 HSE PERFORMANCE 44 -2- TERMS USED IN THE EXPLORATION & PRODUCTION (E&P) INDUSTRY This guide was written to be used in conjunction with the ASSET training course, but may be of use as a general guide Items and explanations in italics refer specifically to ASSET and should not be assumed to be true in the ‘real world’ Words in CAPITALS used in explanations are defined elsewhere in the booklet Items are listed alphabetically More detailed explanations of financial terms can be found in the booklet ‘Financial Terms’ available from the Planning and Performance Measurement Team (PPM, Britannic House) -ASSOCIATED GAS Solution gas and/or gas cap gas found along with crude oil in an oil reservoir BACK IN In some PSCs the government has the right to participate in a discovery even though they did not participate in the exploration Entry into the partnership at such a late stage is called ‘backing in’ Whether or not compensation is paid varies with the PSC BALANCE SHEET This is a statement of the assets, liabilities and capital of a company on a particular date − the end of an accounting period It is a snapshot of the company at that time and is usually presented as two sides that balance − on one side the assets less the liabilities (NET ASSETS) and on the other the value belonging to the shareholders (EQUITY) BARREL (bbl) One barrel (bbl) is equal to 35 UK gallons or 42 US gallons BARREL OF OIL EQUIVALENT (boe) This is a term frequently used to compare gas with oil and to provide a common measure for different quality gases It is the number of barrels of stabilised crude oil that contains approximately the same amount of energy as the gas, e.g 5.8 TCF (of LEAN GAS) approximates to billion boe BRENT Brent crude is a MARKER CRUDE which is traded widely Other crudes are often priced relative to a marker crude, e.g Brent less $1.50/bbl, using a differential based on CRUDE QUALITY A BP oil price outlook of, say, $40/bbl refers to the Brent price Brent crude itself typically trades at $1-$2/bbl below the principal US marker crude WTI (West Texas Intermediate) BUY BACK When one party in a JVOA has SOLE-RISKed on an exploration well that has been successful, the other parties usually have the right under the JVOA to buy back into the discovery To cover the fact that the sole-risker has taken some risk, the buy back is usually a multiple of the actual exploration cost − typically five or ten times -3- CAPEX (CAPITAL EXPENDITURE) Capex is the sum of expenditure on FIXED ASSETS In BP this includes all expenditure on E&A, whether successful or not Capital items of value for more than one accounting period are ‘capitalised’ or recorded in the BALANCE SHEET and written off in the INCOME STATEMENT over time Revenue items are earned or incurred within an accounting period and are recorded in the income statement (For the subtle differences between capin and capex see the ‘Financial Terms’ booklet.) CONDENSATE This can refer to any mixture of relatively light hydrocarbons that remain liquid at normal temperature and pressure There will be some propane and butane dissolved in it Unlike crude oil there are few or none of the heavy hydrocarbons which constitute heavy fuel oil There are three main sources of condensate: (a) The liquid hydrocarbons which are separated out when raw gas is treated This condensate typically consists of C5 to C8 (b) The liquid hydrocarbons which are recovered at the surface from non-associated gas (c) The liquid hydrocarbons which are produced from a gas condensate reservoir This may be only slightly distinguishable from a light stabilised crude oil COST OF SUPPLY Total cost of finding, developing and producing a barrel of oil (or boe of gas) Defined as Exploration Cost plus DD&A plus LIFTING COST Also referred to as Total Cost of Supply (TCOS) COST OIL, COST RECOVERY OIL This is a term used in PRODUCTION SHARING CONTRACTS (PSCs) Costs are recoverable from a proportion of production, e.g 40%, and this is termed COST OIL See also PROFIT OIL CRUDE QUALITY Crude oil varies not only in its ‘gravity’ or density but also in its sulphur content, its metals content, its nitrogen content, and the relative proportion of products produced by refining These and other factors determine the relative market price of different crudes Crude prices are mainly set by the traded price of MARKER CRUDES such as BRENT and WTI (West Texas Intermediate) DAFWCF A measure of accident rates for the workforce Days Away From Work Case Frequency (DAFWCF) refers to workforce incident rate per 200,000 hours worked Includes injuries and illnesses suffered by both employees and contractors DD&A − See DEPRECIATION DAILY CONTRACTED QUANTITY (DCQ) This is the average daily quantity of gas which is contracted to be supplied and taken DEBT (or FINANCE DEBT) Debt can be short or long term − the former is due for repayment within one year BP corporate financial strategy is to have an approx 80/20 split between long/short − this matches the FIXED ASSET/WORKING CAPITAL ratio in our balance sheet Average repayment time is 10−12 years, matching the lifetime of our fixed assets -4- Finance debt includes loans, bonds, debentures, leases, project finance DEBT:EQUITY RATIO The relationship between a company’s debt capital and its EQUITY or share capital is called its gearing Within BP this is usually expressed by the total FINANCE DEBT:finance debt plus equity ratio Finance debt is here taken net of any cash balances Some analysts use the simpler ratio of finance debt to equity In the US a third ratio termed leverage is used, which is the total liabilities:equity ratio − this includes non-interest paying debt in the numerator All these ratios are a measure of the company’s vulnerability to interest changes High ratios may indicate a risky company unless cash flows are very stable and guaranteed in order to cover interest payments The reason for having any debt capital at all is that generally it is cheaper than raising share capital (post-tax), and hence can be used to raise returns on share capital − if invested wisely DEPRECIATION This is an accounting device to spread the cost of FIXED ASSETS over their useful life by charging the cost to the P&L ACCOUNT gradually over the asset’s life When an asset is acquired, the cost is added to fixed assets in the BALANCE SHEET and there is no entry in the P&L account Once the asset is in use and earning revenue, each year the fixed assets are reduced by the depreciation relevant for that asset − and this same amount is charged to the P&L account At the end of the asset’s life, it is said to be fully WRITTEN OFF ‘Depletion’ is a similar process that refers to the accounting treatment of reserves or other ‘wasting assets’ Amortisation is the term used for writing off limited life or intangible assets such as leases and goodwill (Hence DD&A − Depreciation, Depletion & Amortisation.) In BP, production assets are depreciated using a unit of production method based on proven reserves This means that each year the proportion of the remaining asset value depreciated (or more strictly depleted) is given by the year’s production divided by the remaining reserves Other tangible assets are depreciated on the straight-line method, i.e the value is spread equally over the number of years of life Lease acquisition costs are amortised over the estimated period of exploration In ASSET, lease acquisition costs are written off immediately DILUTE EQUITY This refers to reducing one’s share in an asset Farming out an exploration licence would be an example In ASSET the term is used to cover the situation where the operator is sitting on a good discovery Partners then make a ‘dilute equity proposal’, where they offer to take the operatorship, develop the discovery and buy out half the operator’s share DRY GAS (a) The same as LEAN GAS i.e the gas contains no hydrocarbons that will liquefy at ambient temperature and pressure (b) Gas containing no water vapour, i.e the gas is ‘water dry’ DRY GAS FIELD The production from such a reservoir will yield DRY/LEAN GAS and very small quantities of CONDENSATE; typically less than 10 BBLS per MMSCF EMISSIONS TO AIR A measure of emissions during operations Emissions to air comprise methane, non-methane HCs, sulphur oxides, nitrogen oxides, carbon monoxide and particulates Reported in tonnes -5- EXPECTED MONETARY VALUE (EMV) A concept used to evaluate exploration prospects It is calculated as:EMV = (value of success) x (risk) − (post-tax well cost) x (1 − risk) e.g if drilling a prospect has two possible outcomes − success (discovery) valued at $100m (including the exploration well cost) or a dry hole costing $10m post-tax, and the probability of success is estimated at in 5, the EMV is calculated as: (0.2 x 100) − (0.8 x 10) = 12 If the risk had been in 20, the EMV would have been (0.05 x 100) − (0.95 x 10) = −4.5 In general, if the EMV is negative, the well should not be drilled Another way of looking at this is to see the outcome of drilling, say, 20 wells on identical prospects In the first case, on average, there will be discoveries and 16 dry holes, so the total value will be 240 In the second case it will be minus 90 So, any company pursuing a policy of drilling prospects with negative EMVs, statistically will make a loss − assuming its geologists are estimating risk and outcomes, on average, correctly Before drilling a prospect, there are usually not just two single point outcomes to consider Where there are more than two outcomes, e.g the discovery might be either oil or gas, a decision tree is drawn and the same principles applied In order to take account of the fact that there is a range of possible reserve outcomes, not a single point, the value of success should be calculated using the EPV rather than the NPV of, say, the EXPECTED SIZE (Strictly speaking, the risk of failure is defined as the chance of the reserves found, if any, being outside the expected range In practice, this is rarely different to the risk of a dry hole.) EXPECTED PRESENT VALUE (EPV) For a prospect, and even a discovery, there is a range of possible reserves represented by a cumulative probability distribution In valuing this, the NPV is often calculated for a single estimate of reserves − usually the mean This effectively ignores the data contained in the distribution curve A better representation is to use the EPV, which is, in effect, the riskweighted NPV across the range To calculate this, three NPVs are measured, e.g the P5, P50 and P95 values The NPVs are then plotted against probability: -6- NPV Well cost Probability The EPV is calculated by estimating the area under the curve Note that, where the NPV is negative, that part of the graph is replaced with the well cost, since in practice the development would not proceed The point where the graph crosses the x-axis gives the probability of a commercial discovery, assuming/the hydrocarbons are present Note that this is different to the probability of failure EQUITY An accounting term for shareholders’ funds A company can choose to finance its operations from equity or from DEBT An existing public company such as BP can raise funds by a ‘rights issue’ - giving existing shareholders the right to buy new shares, usually at a discount to the current market value It could also purchase other companies in exchange for newly issued shares instead of cash, provided it has shareholder approval In the BALANCE SHEET, equity or shareholders’ funds are made up of nominal value of issued shares (not the market value) and retained profits Note that equity is also used to denote a company’s share of a licence or asset − see DILUTE EQUITY ESCALATION Escalation formulae are used to agree how the price of a service, e.g transporting oil or a commodity, e.g gas sales that is agreed today will change in the future Any agreement needs to specify the base price (or starting price), the base year to which the base price refers, and the formula for calculating future prices A simple example would be a gas sales contract where the two parties agreed a current price and agreed that the price would move in line with published fuel oil prices (in some industries fuel oil would be seen as a substitute or competing fuel for gas) This would be expressed as: gas price in year n = base gas price x (fuel oil price in year n) base fuel oil price Given the lead times in developing gas fields, no gas will be sold at the base gas price (often called the boilerplate price or P0 price) Also note that the gas price for year n will need to be known at the beginning of year n, so that invoices can be made out correctly and retroactive changes be avoided To overcome this, the gas price is based on the fuel oil price for a historic period − say 1.7.(n-2) to 1.7.(n-1) The base fuel oil price will be set historically, so, if the above contract had been signed in January 1995, the base fuel oil price would have been the historic average between 1.7.1993 and 1.7.1994 So the formula becomes: -7- gas price for 1999 = base gas price x (fuel oil price 1.7.97 - 1.7.98) (fuel oil price 1.7.93 - 1.7.94) Transportation tariffs are usually escalated with inflation, with crude oil price or with a mixture of the two Thus a 50/50 escalation formula for oil transportation tariffs would be: tariff n = base tariff x (0.5 x oil price n ) + (0.5 x inflation n ) base oil price base inflation EXCESS COST RECOVERY In PSCs costs are allowed to be recovered from COST OIL, which is a percentage of total production Excess cost recovery refers to any cost oil remaining after recovering all allowable costs in any one year This may be shared between contractor and government, as for PROFIT OIL, or it may revert to the government, depending on the country in question EXPECTED SIZE Prospects and discoveries will have a range of possible reserves These usually follow a log normal distribution The expected size is the mean, which is usually larger than the MEDIAN (or P50) case Both the mean and median are larger than the mode or ‘most likely’ (the highest point on the curve corresponding to the reserve size with the highest probability of occurring) For a normal distribution, all three values are the same Reserve estimates tend to be log normal, since they are calculated from multiplying a number of factors together The downside is fixed at zero, but often there is a long upside-down tail, at low probability, leading to a skewed or log normal distribution and to the mean being higher than the mode (In ASSET the expected size is shown as the arithmetic average of the estimated range Note that there is a probability that the ‘actual’ reserves will lie outside the initial range.) F&D COST Finding and development costs, usually expressed as $/bbl, are favourite company performance criteria used by investment analysts to compare E&P companies They are only really meaningful if calculated as an average over or 10 years, but some analysts use shorter periods Finding costs are defined as exploration costs incurred/(discoveries and extensions), while F&D costs are divided by discoveries, extensions, improved recovery and revisions When comparing companies, it is important to check on consistent definitions, e.g are associate companies included, are acquisitions and disposals included, how are service type contracts, e.g Abu Dhabi and Saudi treated? FARMIN Where one company owns acreage in which another company wishes to take a share, it is traditional to this by means of a farmin The owner (the farmor) agrees to transfer a percentage of the licence to the farminee in return for the farminee funding some agreed work programme Typically, if BP owns a block 100% and Shell farms in on a ‘2 for 1’ basis, Shell will pay the cost (100%) of one well and thus earn 50% of the licence A ‘4 for 1’ deal would only earn 25% for the same obligation One advantage of farmins is that there are no tax implications − they are not treated as acquisitions or disposals FINDING COST − See F&D COSTS FIXED ASSETS This is an accounting term used in the balance sheet and comprising: (a) tangible assets − physically verifiable assets used to earn revenue (b) intangible assets − assets which will earn revenue over a period >1 year but which are not physically verifiable, e.g patents, E&A expenditure -8- (c) long-term loans (not relevant in ASSET) Assets are valued at cost less DEPRECIATION (or DD&A) taken to date Exploration expenditure, which has not been WRITTEN OFF, is held in intangible assets until sanction is given for development, when it passes to tangible assets, and is then depreciated over time FUNDS FLOW This is the net cash flow for a period comprising all revenues received in the period less all costs paid out in the period (Within BP now, the terms cash flow and funds flow appear interchangeable Originally, cash flow was before deducting CAPEX: funds flow = cash flow − capex.) GAS CAP GAS This is NATURAL GAS which lies above the crude oil in a hydrocarbon reservoir GAS CONDENSATE RATIO (a) (b) For a GAS CONDENSATE RESERVOIR, this is the ratio of the CONDENSATE to the gas As for oil, it can be measured in SCF per BBL Alternatively, the inverse is used and the typical units are BBLS and MMSCF For a DRY GAS FIELD, only the inverse is normally used Typically, units are again BBLS and MMSCF, but grammes per cubic metre may well be used GAS CONDENSATE RESERVOIR Neither NATURAL GAS nor crude oil is the predominant production stream To increase the recovery of the CONDENSATE, the gas may be RECYCLED for the early years and produced at a later date GAS CYCLING or RECYCLING Produced gas is reinjected into the reservoir after removal of the Condensate This is to maintain the reservoir pressure and prevent CONDENSATE from ‘condensing’ in the reservoir and then becoming difficult to recover GAS OIL RATIO (GOR) For an oilfield this is the ratio of gas to stabilised crude oil to the gas It is usually measured in SCF per BBL The gas is known as ‘associated gas’ and in some environmentally sensitive areas is no longer allowed to be flared Some of the gas is used to run turbines for power Generally, ASSOCIATED GAS is a nuisance especially since the production rate is driven by the oil production rate and this does not give a good profile for gas buyers (In ASSET there is no nuisance value ascribed to associated gas.) GEARING − See DEBT/EQUITY RATIO GOR − See GAS OIL RATIO GROSS RESERVES These are the total reserves under a company’s control before deducting any royalties (whether in kind or not) BP’s account reports NET RESERVES See also RESERVES (HYDROCARBONS) HSE Health, Safety and Environment SHE is also sometimes seen The principal items reported by oil and gas companies are: Fatalities, Days Away From Work Case Frequency (DAFWCF), OIL SPILLS and EMISSIONS TO AIR Safety reports generally follow US Occupational Safety and -9- Health Administration (OSHA) guidelines for classifying occupational injuries and illnesses throughout company operations Reported safety data for the workforce include injuries and illnesses suffered by both employees and contractors INCOME STATEMENT This is a summary of the revenues and expenses of a business for an accounting period (usually a year) It is also known as a Profit & Loss Account, P&L or an operating statement See PROFIT ISO 14001 Part of the ISO 14000 series of international standards on environmental management Achievement of ISO 14001 status demonstrates compliance with International Standards Organisation Environmental Management Standards JVOA OR JOA Joint Venture Operating Agreement or Joint Operating Agreement is an agreement signed by companies jointly acquiring licences It sets out how the JV will operate, from licence bidding through to production It will cover appointment of operator, voting rights, default provision, etc LEAN GAS or DRY GAS This is gas with relatively few hydrocarbons other than METHANE The calorific value is typically around 1000 BTUs per SCF, unless there is a significant proportion of non-hydrocarbon gases present LIFTING COSTS These are defined as OPERATING COSTS less transportation costs The latter includes the cost of owned pipelines, tariffs paid to third parties, and payment for the use of owned or chartered tankers LIQUEFIED NATURAL GAS (LNG) This is NATURAL GAS (mainly METHANE), which has been liquefied by reducing its temperature to around −162ºC at atmospheric pressure This is an efficient way of transporting gas over large distances, especially across oceans However, substantial investment is needed in terminals at each end of the journey and in special vessels Hence such schemes are only used for large reserves sold on a long-term contract − typically 20 years, minimum size 5TCF LIQUEFIED PETROLEUM GAS (LPG) This is propane, butane or a mixture of both which has been liquefied by reducing the temperature, increasing the pressure or a combination of both LPG is commonly called ‘bottled gas’ and one trademark is Calorgas Typical uses are for camping, caravaning and in isolated homes MARKER CRUDE These are crudes used to set world prices Such crudes need to be available in reasonable quantities over a period of time Currently, they include BRENT and WTI (West Texas Intermediate) Although each crude does have its own market, trends are set by the movement in the marker crudes MEDIAN A statistical term equal to the P50 case, i.e there is an equal chance of the reserves lying above or below this value See EXPECTED SIZE for more detail - 10 - E COMPETITOR BRIEFS Some of the main players in the world of ASSET are listed below with brief descriptions You may find any of them operating licences that you choose not to operate You will, however, not be directly aware of competition from these players One main point of interaction occurs in the country of Exteria which is ‘new geology’ and ‘new geography’ Licence rounds may be offered in the not too distant future and you have to consider whether to position your company for entry One option is to form an alliance with one of your competitors solely for entry to Exteria This will be a 50/50 alliance with all costs shared 50/50 Shell A major diversified international with a good track record on being at the forefront of new technology ExxonMobil Another major international player, less well diversified than Shell, but with proven arctic technology Strong focus on cost efficiency and profitability Total A French integrated company with ambitious international plans for exploration Strong political ties to French Government and French national interest Chevron A Bravuran major with a strong home base and a few overseas profit centres Has moderate level of arctic technology, and keen interest in Enhanced Oil Recovery Statoil Norwegian State Oil Company, previously advisor to a number of emerging developing world producers on tax systems and licence awards Looking to expand internationally BHP Billiton An Australian Mining and E&P company with interests concentrated around Australasia and Exteria Gazprom Former Soviet giant and a comparatively recent player on the wider world stage Alliancing may be difficult, but their historic ‘colonial’ influence may be all too obvious in some regions Other large FSU players may also be on the prowl - 42 - ASSET COMPANY REPORT The following pages show your company’s starting position, including summary historical data and HSE performance statistics for the last three years, and last year’s detailed Financial Accounts - 43 - Your Company HISTORICAL PERFORMANCE Periods mmboe Production oil and gas 2004 2005 2006 271 348 346 Exploration & Appraisal Capex $m 30 120 105 Development & Production Capex $m 970 31 769 Opex (Lifting costs + Transportation) $m 983 410 992 Post Tax Cash Flow $m -1 138 852 646 Net Income $m 041 073 035 Reserves at end of period mmboe 096 159 296 Discoveries mmboe 67 411 483 New developments mmboe 196 216 803 2004 2005 2006 KEY METRICS Periods Reserves/Production Ratio (R/P) years 11.4 9.1 9.5 Opex/boe $/boe 7.32 6.93 5.75 F & D Cost/boe (3-year average) $/boe - - 7.22 Net Income/boe $/boe 14.92 11.71 8.76 % 16.2 15.9 13.6 2004 2005 2006 10 ROACE HSE PERFORMANCE Periods Fatalities No DAFWCF rate/200,000 hrs 0.56 0.62 0.65 Oil Spills >1 bbl No 168 278 226 Emissions to Air '000 tonnes 302 293 312 17 15 Sites achieving ISO 14001 % Updated February 2007 v3.1 Default 2007 - 44 - Industry : Starting Position Team : Your Company Period : 2006 Your Company PERFORMANCE REPORT 2006 2007 2008 2009 2010 2011 2012 mmboe 346 - - - - - - $m $m $m 105 - - - - - - Periods Production oil and gas Exploration & Appraisal Capex Development & Production Capex Opex (Lifting costs + Transportation) Number of wells drilled Number of successful wells Reserves at end of period Discoveries New developments 04/02/2007 10:40 mmboe mmboe mmboe 769 - - - - - - 992 - - - - - - 30 - - - - - - - - - - - - 296 - - - - - - 483 - - - - - - 803 - - - - - - Asset V3.1 - Admin Page of 12 Industry : Starting Position Team : Your Company Period : 2006 PROFIT AND LOSS STATEMENT Unless otherwise specified, all values are given in $m Albion Bravura Corum Tanu Dhangyen Exteria Total PRODUCTION Production - Liquids Production - Gas Production - Total Production - Total mbd mmscf/d mboe/d mmboe 486 486 177 463 463 169 0 0 0 0 0 0 949 949 346 FINANCIAL ACCOUNT Turnover Liquids, Gas and other Operating Costs Royalty Opex (Lifting costs + Transportation) Technical studies Operating costs - Cash DD&A - depreciation DD&A - write offs/ decom./ dry holes Exploration write-offs - licences Operating costs - Non cash Replacement Cost Operating Profit RCOP Pre-Tax Profit (Loss) on Sale of Assets Tax Charge Net Income (per GFO) Interest Dividend Retained Profit 04/02/2007 10:40 298 747 0 13 045 -945 -770 -1 715 -1 075 -59 -1 134 -1 222 -1 222 -2 715 -26 -2 740 0 0 11 -11 0 0 0 -3 0 0 0 0 0 -945 -1 992 -2 937 -3 776 -98 -3 874 449 -1 352 097 785 -1 848 938 0 0 0 0 0 0 235 -3 200 035 -643 -897 494 Asset V3.1 - Admin Page of 12 Industry : Starting Position Team : Your Company Period : 2006 CASH FLOW STATEMENT (Financial Account) Unless otherwise specified, all values are given in $m Albion RCOP Pre-Tax Operating costs - Non cash (add back) Working capital movement NCF (exc div/int) Tax paid NCF from Operations Post-Tax Exploration Licence Capex Exploration & Appraisal Capex Development & Production Capex Total capex Acquisitions Disposals Post Tax Cash Flow (PTCF) Interest Dividend PTCF after Interest and Dividend 449 134 -525 058 -654 404 -63 -315 -378 0 026 Bravura 785 740 -562 963 -1 848 116 -28 -405 -432 0 684 Corum Tanu 0 0 0 -12 -49 -61 0 -61 Dhangyen Exteria 0 0 0 -3 -3 0 -3 Total 0 0 0 0 0 0 235 874 -1 087 021 -2 502 520 -105 -769 -873 0 646 -643 -897 106 REGIONAL CASH FLOW (Commercial Analysis Format) Unless otherwise specified, all values are given in $m Albion Gross revenues Royalties / Govt share Net revenues Exploration Licence Capex Exploration & Appraisal Capex Development & Production Capex Total capex Acquisitions Disposals Opex (Lifting costs + Transportation) Technical studies Tax paid Working capital movement Post Tax Cash Flow (PTCF) 04/02/2007 10:40 298 -945 353 -63 -315 -378 0 -770 -654 -525 026 Bravura 747 747 -28 -405 -432 0 -1 222 -1 848 -562 684 Asset V3.1 - Admin Corum Tanu 0 0 -12 -49 -61 0 0 0 -61 Dhangyen 0 0 -3 -3 0 0 0 -3 Exteria Total 0 0 0 0 0 0 0 13 045 -945 12 101 -105 -769 -873 0 -1 992 -2 502 -1 087 646 Page of 12 Industry : Starting Position Team : Your Company Period : 2006 VALUE REPORT All values are given in $m Identified prospects Total EMV Discoveries Total NPV Developments & Production Total NPV Total country value Albion Bravura Corum Tanu Dhangyen Exteria 186 181 234 643 525 0 840 12 757 254 0 12 669 14 282 436 234 Dhangyen Exteria RESERVES REPORT - OIL All values are given in mmbbl Albion Bravura Corum Tanu Identified prospects Number Unrisked reserves Risk-weighted reserves 17 585 107 0 0 0 0 0 0 325 325 280 280 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 Discoveries Reserves one year ago - Developments + Discoveries + Revisions/Acq/Div/Adds = Reserves today 12 120 132 Developments & Production Reserves one year ago - Production + Developments + Revisions/Acq/Div/Adds = Reserves today 04/02/2007 10:40 491 177 0 313 853 169 325 009 Asset V3.1 - Admin Page of 12 Industry : Starting Position Team : Your Company Period : 2006 RESERVES REPORT - GAS ONLY All values are given in tcf Albion Bravura Corum Tanu Dhangyen Exteria Identified prospects Number Unrisked reserves Risk-weighted reserves 11 2.08 0.37 0 6.1 1.71 12.6 2.49 0 0 0 0 0.5 0.5 0 0 0 0 0 0 0 0.5 0.5 0 0 0 0 0 Discoveries Reserves one year ago - Developments + Discoveries + Revisions/Acq/Div/Adds = Reserves today 2.27 2.27 0.48 0.48 Developments & Production Reserves one year ago - Production + Developments + Revisions/Acq/Div/Adds = Reserves today 04/02/2007 10:40 0 2.27 2.27 Asset V3.1 - Admin 0 0 Page of 12 Industry : Starting Position Team : Your Company Period : 2006 IDENTIFIED PROSPECTS LIST Albion ENVIRONMENT AND OWNERSHIP Prospect name Ada-0 Ada-1 Ada-2 Ada-3 Ada-4 Ada-5 Amy-0 Amy-1 Amy-2 Amy-3 Amy-4 Amy-5 Anne-0 Anne-1 Anne-2 Anne-3 Anne-4 Technology Type Operator name Team's share % Shallow water Shallow water Shallow water Shallow water Shallow water Shallow water Shallow water Shallow water Shallow water Shallow water Shallow water Shallow water Shallow water Shallow water Shallow water Shallow water Shallow water Oil or Gas Oil or Gas Oil or Gas Oil or Gas Oil or Gas Oil or Gas Oil Oil Oil Oil Oil Oil Oil or Gas Oil or Gas Oil or Gas Oil or Gas Oil or Gas BHP Billiton BHP Billiton BHP Billiton BHP Billiton BHP Billiton BHP Billiton Team Team Team Team Team Team Team Team Team Team Team 50 50 50 50 50 50 60 60 60 60 60 60 40 40 40 40 40 TECHNICAL AND FINANCIAL INFORMATION Reserves 100%, all the rest are shown as Team's share Prospect name Ada-0 Ada-1 Ada-2 Ada-3 Ada-4 Ada-5 Amy-0 Amy-1 Amy-2 Amy-3 Amy-4 Amy-5 04/02/2007 10:40 Oil case Reserves mmbbl Risk 80 20 60 65 80 55 75 65 35 55 55 75 in in in in in in in in in in in in Gas case NPV $m Reserves tcf Risk 307 61 251 265 307 236 310 279 177 248 248 310 0.375 0.35 0.475 0.325 0.45 0.5 - in in in in in in - Asset V3.1 - Admin NPV $m 266 254 314 242 302 325 - Exploration Capex EMV $m $m 14.6 14.6 14.6 14.6 14.6 14.6 17.6 17.6 17.6 17.6 17.6 17.6 85 49.2 85 78 95 103 48 31.9 21.3 35.5 26.6 37.1 Page of 12 Industry : Starting Position Team : Your Company Period : 2006 IDENTIFIED PROSPECTS LIST Albion TECHNICAL AND FINANCIAL INFORMATION Reserves 100%, all the rest are shown as Team's share Prospect name Oil case Reserves mmbbl Risk 45 137 85 80 125 in in in in in Anne-0 Anne-1 Anne-2 Anne-3 Anne-4 Gas case NPV $m Reserves tcf Risk NPV $m 191 417 294 282 388 0.575 0.275 0.6 0.275 0.375 in in in in in Exploration Capex EMV $m $m 11.7 11.7 11.7 11.7 11.7 97 111 107 88 87 328 193 328 193 239 IDENTIFIED PROSPECTS LIST Corum Tanu ENVIRONMENT AND OWNERSHIP Prospect name Caro-0 Caro-1 Caro-2 Caro-3 Caro-4 Caro-5 Caro-6 Technology Type Operator name Team's share % Onshore Onshore Onshore Onshore Onshore Onshore Onshore Gas only Gas only Gas only Gas only Gas only Gas only Gas only Team Team Team Team Team Team Team 80 80 80 80 80 80 80 TECHNICAL AND FINANCIAL INFORMATION Reserves 100%, all the rest are shown as Team's share Prospect name Caro-0 Caro-1 Caro-2 Caro-3 Caro-4 04/02/2007 10:40 Oil case Reserves mmbbl Risk - - Gas case NPV $m Reserves tcf Risk - 1.05 0.7 0.85 1.3 1.37 in in in in in Asset V3.1 - Admin NPV $m 594 411 490 762 762 Exploration Capex EMV $m $m 7.83 7.83 7.83 7.83 7.83 113 202 117 185 249 Page of 12 Industry : Starting Position Team : Your Company Period : 2006 IDENTIFIED PROSPECTS LIST Corum Tanu TECHNICAL AND FINANCIAL INFORMATION Reserves 100%, all the rest are shown as Team's share Prospect name Oil case Reserves mmbbl Risk - - Caro-5 Caro-6 Gas case NPV $m Reserves tcf Risk NPV $m - 0.85 1.5 in in Exploration Capex EMV $m $m 7.83 7.83 117 200 490 825 IDENTIFIED PROSPECTS LIST Dhangyen ENVIRONMENT AND OWNERSHIP Prospect name Di-0 Di-1 Di-2 Di-3 Di-4 Di-5 Di-6 Di-7 Technology Type Operator name Team's share % Shallow water Shallow water Shallow water Shallow water Shallow water Shallow water Shallow water Shallow water Gas only Gas only Gas only Gas only Gas only Gas only Gas only Gas only Team Team Team Team Team Team Team Team 40 40 40 40 40 40 40 40 TECHNICAL AND FINANCIAL INFORMATION Reserves 100%, all the rest are shown as Team's share Prospect name Di-0 Di-1 Di-2 Di-3 Di-4 Di-5 Di-6 04/02/2007 10:40 Oil case Gas case Reserves mmbbl Risk NPV $m Reserves tcf Risk NPV $m - - - 3.75 4.5 3.25 4.25 4.5 in in in in in in in 382 137 620 463 220 542 620 Asset V3.1 - Admin Exploration Capex EMV $m $m 6.44 6.44 6.44 6.44 6.44 6.44 6.44 271 184 265 361 198 303 400 Page of 12 Industry : Starting Position Team : Your Company Period : 2006 IDENTIFIED PROSPECTS LIST Dhangyen TECHNICAL AND FINANCIAL INFORMATION Reserves 100%, all the rest are shown as Team's share Prospect name Oil case Reserves mmbbl Risk - - Di-7 Gas case NPV $m Reserves tcf Risk NPV $m - 4.25 in Exploration Capex EMV $m $m 6.44 252 542 DISCOVERIES LIST Albion ENVIRONMENT AND OWNERSHIP Discovery name Technology Type Operator name Team's share % Alva-0 Shallow water Gas only Team 80 Art-0 Shallow water Oil Team 50 Ash-0 Shallow water Oil Team 50 Azad-0 Shallow water Oil ExxonMobil 50 TECHNICAL AND FINANCIAL INFORMATION Reserves 100%, all the rest are shown as Team's share Discovery name Estimated Capex $m Expected NPV $m Rate of return % Profitability index mmboe Last period for development Alva-0 103 2013 832 561 28.3 0.909 Art-0 25 2010 209 -27 -0.174 Ash-0 65 2013 428 208 19.5 0.653 Azad-0 175 2012 833 875 41.1 1.42 04/02/2007 10:40 Reserves Asset V3.1 - Admin Page of 12 Industry : Starting Position Team : Your Company Period : 2006 DISCOVERIES LIST Bravura ENVIRONMENT AND OWNERSHIP Discovery name Bat-0 Technology Type Operator name Team's share % Deep water Oil Team 70 TECHNICAL AND FINANCIAL INFORMATION Reserves 100%, all the rest are shown as Team's share Discovery name Reserves Estimated Capex $m Expected NPV $m Rate of return % Profitability index mmboe Last period for development 400 2011 881 525 21 0.718 Bat-0 FIELDS AND DEVELOPMENTS LIST Albion ENVIRONMENT AND OWNERSHIP Field and development name Technology Type Operator name Team's share % Eagle Shallow water Oil Team 85 Hawk Shallow water Gas only Team 65 Vulture Shallow water Oil Chevron 50 TECHNICAL AND FINANCIAL INFORMATION Reserves 100%, all the rest are shown as Team's share Field and development name Remaining reserves mmboe Remaining capex in MOD $m Remaining opex in MOD $m Remaining NPV $m Eagle 366 518 021 Hawk 603 179 895 835 Vulture 304 628 984 04/02/2007 10:40 Asset V3.1 - Admin Page 10 of 12 Industry : Starting Position Team : Your Company Period : 2006 FIELDS AND DEVELOPMENTS LIST Bravura ENVIRONMENT AND OWNERSHIP Field and development name Pluto Saturn Technology Type Operator name Team's share % Onshore Oil Team 45 Deep water Oil Shell 50 TECHNICAL AND FINANCIAL INFORMATION Reserves 100%, all the rest are shown as Team's share Field and development name Pluto Saturn Remaining reserves mmboe Remaining capex in MOD $m Remaining opex in MOD $m Remaining NPV $m 521 980 10 725 650 569 132 032 FIELDS AND DEVELOPMENTS LIST Corum Tanu ENVIRONMENT AND OWNERSHIP Field and development name Cara Technology Type Operator name Team's share % Shallow water Gas only Total 50 TECHNICAL AND FINANCIAL INFORMATION Reserves 100%, all the rest are shown as Team's share Field and development name Cara 04/02/2007 10:40 Remaining reserves mmboe Remaining capex in MOD $m Remaining opex in MOD $m Remaining NPV $m 172 471 418 254 Asset V3.1 - Admin Page 11 of 12 Industry : Starting Position Team : Your Company Period : 2006 BULLETIN MESSAGES FROM THE SIMULATION The actual oil price last period was $ 57 The actual inflation rate was 2.6 % Gas price in the five countries next period is ($/MCF): 9.15, 0, 6.295, 8.173, The following licences are available for bidding: Abba, Acca, Adda, Affa, Agga, Ajja, Akka, Alex Your Company's share price at close of market trading on 31st December 2006 was $21.33 per ordinary share BALANCE SHEET (Financial Account) Unless otherwise specified, all values are given in $m Periods 2006 2007 2008 2009 2010 2011 2012 Net Assets Fixed assets Property, plant & equipment less accumulated depreciation 20 276 - - - - - - 087 - - - - - - -698 200 20 865 -10 396 10 469 - - - - - - - - - - Working capital Inventory, debtors, creditors and prepayments Tax Cash Total Capital Employed Debt Net Assets after Debt Shareholder's Value 975 494 10 469 Shareholder equity b/f Retained Profit (current year) Shareholder equity c/f - - Key Metrics Debt / (debt+equity) ROACE 04/02/2007 10:40 % % 49 13.6 - - Asset V3.1 - Admin - - - - Page 12 of 12 ... COSTS FIXED ASSETS This is an accounting term used in the balance sheet and comprising: (a) tangible assets − physically verifiable assets used to earn revenue (b) intangible assets − assets which... the cost of FIXED ASSETS over their useful life by charging the cost to the P&L ACCOUNT gradually over the asset s life When an asset is acquired, the cost is added to fixed assets in the BALANCE... exploration In ASSET, lease acquisition costs are written off immediately DILUTE EQUITY This refers to reducing one’s share in an asset Farming out an exploration licence would be an example In ASSET