PricewaterhouseCoopers 1

GlobalenergystatementofcapabilitiesDeliveringvaluewithindustry-focusedservices

GlobalIndustriesEnergy

2 GlobalEnergystatementofcapabilities

PricewaterhouseCoopers 3

ItappearstheworldiscomingoutoftheGreatRecession.Basedontheincreaseintransactionsintheoilandgasspace,companiesseemreadytoputtheeconomicdownturnbehindthem.

Oilpriceshavesomewhatstabilized,butnaturalgaspricescontinuetobelow.Energyanalystsandprofessionalsalikewouldcertainlybenefitfromacrystalballthatcouldpredictwhatcommoditypriceswilldo,notonlyintheshort-term,butoverthedecadestocome.Mostindustryprofessionalsandobserversrealizethatasthesupplyofoilandgasbecomesevenhardertofindandaccess,priceshavetogoup.Butthequestionremains,whenwillthatbe?

Strategyandlongrangeplanningareevenmoreimportantintoday’suncertainenvironment.Oilandgascompaniesmustcontrolcosts.Theywillcontinuetoweightherisksversusbenefitsofnewprojects,newproductsandhowmuchcapitaltoinvest.Behindsuchdecisions,thereareregulatory,safetyandenvironmentalconsiderations.Balancingtheneedtosupplytheworldwithhydrocarbons,companiesareconsideringinvestmentsinalternativeenergysources.Technologyisdrivingbreakthroughsinbothhydrocarbonsandnewenergysources.Unconventionalhydrocarbons,suchasshaleoilandgas,bitumenandcoalbedmethaneareexpandingthesupplyofoilandgas.

Thecostofcarbonisbecomingareality.Newregulationsarebeingdiscussedaroundtheworldasgovernmentsgrapplewiththebestwaytoreducecarbonexposure.Energycompaniesmustbepreparedtodealwithcarbontaxesorcapandtradesystemsnomatterwheretheyoperate.Untilaglobalcarbonpolicycanbeagreedupon,thecomplexityofmeasuring,controllingandreportingcarbonwillhavetobemanaged.

AtPricewaterhouseCoopers,wearenotonlywatchingthesedevelopmentsintheindustry,butweareanalyzingthesechangesfromtheperspectiveofhowtheywillimpactourclients,andhowwecanbesthelpcompaniesprepareandmanagethechanges.Ourprofessionalsunderstandtheissuesthatourclientsface,andhavetheknowledgeandexperiencetoproactivelyaddressthesechallengesandrecommendthebestsolutions.Weexaminetheissues,andbuildteamsofsubjectmatterspecialistswhodevelopappropriatesolutionsthroughourassurance,taxandadvisoryservices.Forglobalclients,ourexperiencedteamsareonthegroundin151countriesaroundtheworldcontributinglocalinsightandunderstanding.

PwCistheworld’sleadingadvisortotheenergyindustry,workingwitheverysegmentofthebusiness—fromupstreamtomidstreamtodownstream—toprovidebusinesssolutionstailoredtomeetyourneeds.Weexcelinservingoilandgascompaniesbecauseofourskills,experienceandteamsofindustryspecialists.Formorethan100years,wehavehelpedenergycompaniessucceed.Welookforwardtotheopportunitytoworkwithyourcompany.

AlanW.Page

GlobalEnergy,Utilities&MiningLeader

Introduction

4 GlobalEnergystatementofcapabilities

Atthecoreoftheindustry.Attheforefrontofdevelopments.Deliveringvalue.

PricewaterhouseCoopers 5

Introduction 2

Specializedservicesforenergycompanies 4

IndustrychallengesandPwCsolutions 11

Whatmakesusdistinct 18

Globalenergyteamcontacts 20

Contents

6 GlobalEnergystatementofcapabilities

PricewaterhouseCoopers (PwC) has been adding value by providing professional services to energy companies for more than 100 years. We help companies confront the industry’s most challenging issues and changes by developing effective solutions and strategies.

Energycompaniesarefacinganincreasinglycomplexenvironment,withchanginggeopolitics,tighteningregulatoryrequirements,greatercompetitionandhigherstakeholderexpectations.Findingnewreservesrequiresgreaterinvestmentandimprovedtechnology.Internationaloilcompaniesalsofacegreatercompetitionfromnationaloilcompanies,astheglobaldemandforenergycontinuestogrow.Thegrowthofrenewableenergysourcesandunconventionalhydrocarbonsishelpingdeliveradditionalenergysources,butcompaniesmustweighthecostsassociatedwiththesesources.Whileneedingtoinvestmore,energycompaniesarealsolookingforwaystoimproveefficiencyandlowercosts,whilemanagingthemanyrisksofthebusiness.

PwC32%

KPMG20%

EY19%

DT16%

Not disclosed5%

Other8%

Auditor market share of global energy companies $10B+

Source:Hoover’sOnline3Feb2010

PwCcanhelpenergycompaniesevaluatepriorities,assessrisks,andbuildstakeholderconfidence.Ourglobalenergypracticefocusesondeliveringprofessionalservicestocompaniesofallsizes,acrossallsegmentsoftheindustry.Weprovideindustryspecificsolutionsinthefieldsofauditandassurance,tax,dealsandconsultingservicestohelpcompaniesaddresstheirbusinessandstakeholderissues.

AuditandassurancePwCauditsenergycompaniesinallsectors—includingnational,international,upstream,midstream,downstreamandoilfieldservicescompanies.Ourauditmarketshareoftheenergysectoris32%.

Energycompanieswantauditteamstounderstandtheirissuesandbusinesschallengeswhenanalyzingtheirfinancialperformance.Ourdedicatedenergyprofessionalsreceivespecializedtraining,includingregularupdatesonregulatoryandtechnicalissues.Thistrainingisaugmentedbybothinternalandexternalindustryevents,whichbringsourpeoplethein-depthknowledgethatallowsPwC’senergyprofessionalstowalkandtalktheindustrywiththeirclients.

Financial statement auditsForpubliccompanies,theannualreportisthekeycommunicationtoolforshareholdersandthepublicat-large.Transparency,evidenceofstrongmanagementcontrolsandadherencetoregulationsareallcomponentsofthefinancialstatementaudit.PwCauditorsaroundtheworlduseasingle,globalauditmethodology,fullycompliantwithInternationalAuditingStandardsandapplicablenationalstandards.Ourgloballyconsistentapproachtotheauditmeansthatregardlessoflocation,PwCpeopleunderstandandevaluateyourbusinessusingasinglelanguageandcommonmethods.Inturn,thatgivesyouauniformlevelofqualityinallouraudits.Thismethodologyalsoenablesustoquicklyorganizeanddeploythekindsofmultinationalauditteamsoftenrequiredbyourlargerenergyclients.

Specializedservicesforenergycompanies

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PwCauditteamsholdannualAuditPlanningWorkshops,inwhichmembersoftheteamfromaroundtheworldgatherforaface-to-facemeeting,toplananddiscusstheaudit.Theclient’sChiefFinancialOfficerorControlleroftenattendsthesemeetingstoshareanyconcernsandlearnaboutparticularchallengesinvolvingstaffing,regulatorychanges,timing,etc.

Representative Audit and Assurance ClientsAllianceOilCoLtd.BGGroupplcBP-TNKCanadianNaturalResourcesCentricaplcChemoilEnergyLimitedChesapeakeEnergyChevronCorporationChinaNationalPetroleum

CorporationCHSInc.CompañiadePetroleos

deChileDCCPlcDongEnergyE.ONAGEcopetrolS.A.EmpresasCopecS.A.EnbridgeInc.EnCanaCorporationExxonMobilCorporationFederationofMigros

CooperativesGasNaturalSDG,S.A.GazpromNeftTradingGmbhHellenicPetroleumS.A.HutchisonWhampoaLimited

KenyaOilCompanyLimitedKinderMorganEnergyPartners,

L.P.KoçHoldingA.S.MarathonOilCorporationNaborsIndustriesLtd.NesteOilOyjNewfieldExplorationNipponMiningHoldings,Inc.NovatekOAOOAOGazpromOando(Nigeria)PlcONEOK,Inc.PlainsAllAmericanPipelinePlainsExploration&ProductionRoyalDutchShellplcRWEAktiengesellschaftSaudiArabianOilCompanySchlumbergerLtd.SHVHoldingsN.V.SimeDarbyBerhadS-OilCorporationSuncorEnergyInc.Transneft’AKOAOTechnipWoodGroupWorldFuelServicesCorporation

Inadditiontoauditingfinancialstatements,weofferafullrangeofassuranceservicestoenergycompanies,coveringareassuchasstatutoryaudit,regulatoryrisk,Sarbanes-OxleyandInternationalFinancialReportingStandards(IFRS)compliance,independentreviewofsystems,controls,andprocesses,andadviceonacquisitions,alliancesanddisposals.Weareleadersindevelopingnon-financialperformancereporting,helpingourclientsrespondtotheneedforgreatertransparency,andimprovedcorporategovernance.Wehelpcompanieswithsustainabilityissues,includinghealth,safetyandenvironmentalprograms.Regulatory compliance and reportingForallorganizationsengagedinactivitiesthatcomeunderthecontrolofaregulator,PwCprovidessupport,advice,andassurancetohelpyoumanageregulatoryrisks.Inanever-changingregulatoryenvironment,we

helpensurethatyouidentify,manage,andcontrolanyexistingandfutureregulatoryrisks.Ourteamsconsistofexperiencedregulatoryriskspecialists,includingformerregulatorswhoknowtherules,andhaveimplementedandassessedmultiplecompanycomplianceefforts.Ourpeoplecanhelpyouatthestrategiclevel,identifyingwaystominimizethecostsandpotentialdisruptionstoyourbusinessthatcanstemfromregulations,whileensuringfullcompliance.

Sarbanes-Oxley complianceForallSecurities&ExchangeCommission(SEC)registeredorganizationswhomustcomplywiththerequirementsofsection404oftheSarbanes-OxleyAct,PwCprovidesarangeofservicestohelpyouachievecompliance.Ourservicesincludeprojectmanagementassistance,technicalsupport,riskassessmentsandscopingactivities,assistingindocumentationandevaluationefforts,training,qualityassurance,andreview.Fornon-auditclients,wecanalsoprovidedirectassistanceintheevaluationandremediationofcontrols.

IFRS reportingPwChasaproventrackrecordinhelpingcompaniessuccessfullycompletethetransitiontonewaccountingstandards.Understandingthecomplexityofsuchchanges,webuildteamswitharangeofspecialiststoassistyourcompany’sconversiontoIFRS,including:technicalaccounting,treasury,tax,humanresource,mergerandacquisitions(M&A)valuationsandprojectmanagementspecialists.OurprovenIFRStransitionmethodologyhashelpedmorethan200companiesthroughoperationalproblems,focusingoneffectiveknowledgetransfertoensurelastingbenefits.

UnderIFRS,thereislittleguidanceontheaccountingforexploration,developmentandproductionofminerals,oilandgas.Recognizingtheneedforfurtherclarification,theIASBundertookaspecialstudyofextractiveindustries,andinAugust2009,issuedadraftof“The Extractive Activities Discussion Paper”asafirststeptowardsanIFRSfortheseactivities.AteamofourglobalenergyspecialistswhofocusonextractiveindustriesworkedwiththeIASBinitseffortstodraftthesestandards.Weprovidedinputregardingissuessuchasdefinitionsofreservesandresourcesforfinancialreportingpurposes,thebasisforrecognizingmineral,oilandgasassets,initialandsubsequentmeasurementofmineral,oilandgasassets,andrelateddisclosures.

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The U.S. Securities and Exchange Commission revises how companies disclose reserves

OnDecember29,2008,theSECreviseditsdecadesolddisclosurerulesforreportingoilandgasreserves.Underthenewrules,oilandgascompaniesareabletodisclosepossibleandprobablereserves,whereastheywerepreviouslylimitedtoonlyreportingreservesthatwereproven.Companiesalsocantreatnon-traditionalresources,suchasoilsandsandshaleoil,asoilandgasreservesinsteadofminingreserves.Inaddition,companiesreportingreservescannowuseanaveragecommoditypricebasedupontheprior12-monthperiodratherthanhavingtouseyear-endprices.ThesechangescameintoeffectonJanuary1,2010.

Capital market transactions and initial public offeringsForcompaniesseekingtoraisedebtorequitycapitalinthecapitalmarkets,PwCcanprovideanindependentviewofthecriticalissuesinvolvedinaccessingaparticularcapitalmarket.Ouradviceistailoredfortheoilandgasindustry,thesizeandcomplexityofthebusiness,andthescopeofthetransaction.Forcompaniesconsideringgoingpublic,orspinningoffpartoftheirbusiness,wehavetheexperienceandexpertisetopositiontheentitytogopublicandthentakeanactivepartinmakingtheeventsuccessfulwhenithappens.

Internal audit servicesMaximizingthevalueandeffectivenessoftheinternalauditfunctionrequiresanunderstandingofanorganization’sobjectives,risks,riskmanagementpriorities,regulatoryenvironment,andthediverseneedsofcriticalstakeholdersincludingexecutivemanagement,theboard,employees,andshareholders.Byadvisingandassistinginthedevelopmentofinternalauditandriskmanagementmethodologies,wecanhelpimprovethequalityandeffectivenessoftheinternalauditprocesses.

AdvisoryServices/ConsultingOurconsultingservicesutilizeourdeepfinancial,analytical,industryandbusinessprocessskillstoprovideenergycompanieswiththeadviceandassistancetoimprovestakeholdervalue,buildtrustandboostperformance.Aroundtheworld,organizationsengageustohelpthemcaptureopportunities,navigateriskand

deliverlastingchangeacrossbusinessnetworks.

Ourconsultantsbringtogetherafullrangeoffunctionalandindustryskillstohelpyouinthisenvironment.Wetakethetimetolistenandhavethecouragetodebatedifferentpointsofview—basedonindependentandchallenginginsights,supportedbyfactsandindustrybenchmarks.Inparticular,wehelpclientsto:

•Buildeffectiveorganisations

•Innovateandgrowingprofitably

•Reducecosts•Leveragetalent

•Managerisksandregulation

•Executebetterdeals•Restructuretroubled

businesses

Achieve GrowthGlobalization,commoditypricefluctuations,supplychallengesandahostofotherfactorscanhindergrowthobjectives.Companiesneedtocreateefficiencies,andfindwaystomaximizetheentirevaluechaintomakethemostoftheirorganicgrowthpotential.Non-organicgrowthisakeyrouteforcompaniesseekingtogainaccesstonewreservesandmarkets,butgeopoliticalandeconomicfactorscanplaceaddeddemandsondeal-making.PwChasabroadspectrumofcapabilitiestosupportcompanies’effortstomanagethegrowththatwillbenecessarytomeettheever-increasingenergydemand.Whetheracompanyisconsideringatransaction,jointventureagreement,productionsharingagreement,ororganicexpansion,ourenergyprofessionalshavetheexperienceanddeepindustryunderstandingtodelivervalueandcontributetoyoursuccess.

People and changeEnergycompaniesfacehugegapsintheirworkforce,dueahighnumberofagingemployees,fewergraduateswithtechnical,petroleumandsciencedegrees,andacompetitivemarketplace.Withmorethan6,000humanresource(HR)professionalsinover151countries,PwC’snetworkhasoneoftheworld’slargestHRadvisoryorganizations.Ourmulti-disciplinaryapproachallowsustoadviseonallaspectsofpeoplemanagement,helpingourclientstocreatevalueanddelivercompetitiveadvantagefortheirbusinessesthroughpeople.Whetheritisassistingwithinternationalexpansion,changeprograms,tacklingskillsshortages,improvingandmeasuringhumancapitalperformanceordevelopingeffectiveremunerationsystems,PwC’sHRprofessionalscanhelp.

PricewaterhouseCoopers 9

Manage business performanceTheregulatory,shareholderandmarket’spressureonenergycompaniestodeliveryear-on-yearperformanceimprovementisbecomingevenmoreintenseinafluctuatingenvironment.Whatworkedsixmonthsagomaynolongerapplytotoday’scostcontainmentorriskmanagementissues.Fromgettingthemostfromyourownoperationstoimprovinginternalsystemsperformanceormanagingyoursupplychainandoutsourcedrelationshipseffectively,wereallylistentoyourbusinessissuesandworkwithyoutodeliversustainableperformanceimprovement.

Shared services and outsourcingManycompanieshavealreadyoutsourcedtheirITandback-officefunctionsorestablishedsharedservicescentersformajorbusinessprocesses.Companiesarenowoutsourcingcoreactivitiessuchashumanresources,taxandlegalservices,asglobalizationandconnectivityenablenewwaysofdoingbusiness.Therationaleforoutsourcingisthuschangingdramatically;agrowingnumberoforganizationsseeitasameansofobtainingstrategicadvantages,andnotjustasacost-cuttingmeasure.PwC’sspecialistsassistcompaniesbyhelpingidentifywhichactivitiestooutsource,definingyourrequirementsandassessingsuppliers,negotiatingterms,makingthenecessaryinternalchangesandcommunicatingthesetoemployees,managingtherelatedrisks,andmanagingthecontracts.

Embed sustainabilityEnergycompaniesknowthattheymustprovidereliableandaffordableenergy.Manyenergycompaniesaresuccessfullyintegratingsustainabilityintotheiroverallstrategiesbyengagingallstakeholders,developingrobustperformanceindicators,voluntarilypreparingforsustainability,corporatesocialresponsibility,andsafetyandenvironmentalreports,and,insomecases,providingindependentverificationofthesereportstoincreasethetransparencyoftheirdisclosures.PwC’sSustainableBusinessSolutionsteamworkswithenergycompaniestoaligncorporategovernanceandpolicies,operatingsystemsandprocesses,performancereportsandmechanismstomeettheneedsandexpectationsofstakeholders.

Make smarter risk decisionsEnergycompaniesfaceavarietyofrisks,fromgeopoliticsandregulatoryconcerns,toinvestmentandfinancialdecisions.PwCcanhelpclientswithallaspectsofthe

riskcontinuumsuchasregulatoryremediation,integratedgovernance,riskandcompliance,taxeffectiveness,managingcosts,andevaluatingnewopportunities.Wedoallofthisinthecontextofthebroaderriskequationthatenablescompaniestomeetperformanceandriskobjectives,resolveuncertaintyandachievetheirgoals.

Deal with unplanned eventsIntoday’senvironment,businessesneedtoanticipate,preventandeffectivelymanagecriticalrisksthathavethepotentialtocausesignificantinterruptionandgeneratenegativemediaattention.Sometimes,theunplannedoccurs—ahurricanestrikesanoffshoreplatform,aterroristgroupthreatensassetsorpeople,animportantcontractissuddenlycancelled—andbeingabletorespondimmediatelycanmakeallofthedifferenceintheoutcome.PwCcanhelpyourespondtoandcontrolthesituation.Weofferabroadspectrumofservices,withtheabilitytodeployacross-borderteamonamoment’snotice.Frombusinessrecoveryservices,todisputeanalysis,investigationsanddisasterrecovery,PwC’sspecialistscanprovideyouwithdirection,anunderstandingofyouroptions,andanexpedientplanforward.

ForensicsWhateverthecomplexityorurgencyofthesituationyourorganizationfaces,PwC’sforensicspracticecanprovideseasonedsupportandsolutions.Wecombineforensicaccountingandinvestigativeskillstoorganizations(andtheirlawyers)thatarefacingissueswithfinancialandlegalimplications,tohelptomakeintelligent,informeddecisionswhetherintheboardroomorthecourtroom.

Dispute support servicesWeprovidefinancial,economicandbusinessservicestobothlawyersandcorporateclientsgloballywhoareinvolvedinlitigation,arbitration,andotheralternativedisputeresolutionforums.Ourexperiencedprofessionalscanofferassistancewithearlycaseassessment,classcertification,discoveryassistance,quantificationofexposure,claimpreparation,andrebuttalandexpertwitnesstestimony.Whateverthesituation,frombreachofcontractorwarrantytoincomelossesfromtorts,weareheretohelp.

Forensic accounting and analysisCompaniesoftenfaceavarietyofchallengesinimplementingtheirstrategicvisions,executingor

10 GlobalEnergystatementofcapabilities

defendingtheirbusinessmodelsorunlockingthelatentvalueandpotentialofinformation.Supportedbyourstate-of-the-artforensictechnologytools,wecanprovideaclearevaluationoftheproblemoropportunity,optionsfortacklingtheissueandactionplanstoachievetheoptimaloutcome.Weassistclientsinprotectingandmaximizingthevalueoftheirintellectualpropertybyexaminingcompliancewithlicensingagreements.

InvestigationsDealingwithsuspicionsofunethicalorillegalactionsrequiresmuchmorethansimpleknow-how.Itrequiresspeed,sensitivityanddiscretion.Italsorequiresanin-depthknowledgeofthelegalandregulatoryframeworksineachjurisdiction.Weunderstandtheimportanceofreactingquicklyandconfidentiallytoacrisissituation.Weappreciatetheneedtostopillegalactivity,safeguardyourcompany’sassetsandreputation,preventrecurrences,andarriveataresolutionwithaslittledisruptionaspossibletotheregularflowofbusiness.

DealsDealsarecrucialtomanyenergycompanies’strategy,drivenbytheneedtosecuresupply,extendmarketfootprint,orfreeupcashandcapital.Whetheritisafull-scalemerger,orsaleorpurchaseofproducingproperties,orevaluatingoptions,PwCiswellknowninthemarketplaceforourknowledgeandexperienceinalltypesoffinancialtransactionsincludingmergersandacquisitions,valuation,growthordivestments,andexitstrategies.Wefocusonthedealcontinuumfromstrategythroughexecutionandpost-dealintegration,includingfinancialandoperationalduediligence,accessingthecapitalmarketsandvaluing,negotiatingandstructuringdeals.Weprovideadviceontheimplicationsoffinancingprojects,corporatedebt,restructuring,investments,mergersandjointventures.Weadviseonwaystobettermanageassetsandlargecapitalinvestmentsamidstincreasedcompetition,orintimesofuncertainty.Ouradvisorscanevaluatetechnical,operational,marketandfinancialrisks.

TaxservicesGlobal tax servicesTaxregulatoryissuesaretopofmindforoilandgascompaniesoperatingaroundtheworld.PwChasthestrongestinternationalnetworkofanyprofessionalservicesfirm,withdedicatedtaxspecialistsin151countries.Thismeansthatwecansupportyoubothlocallyandglobally,whereveryourequiretaxadvice.Our

globalenergytaxservicesfocusonhelpingourclientsunderstandlocaltaxregimes,anddeveloptaxstrategiesforallofthevarioustaxesthatcomeintoplay,includingroyalties,excisetaxes,value-addedtaxes,etc.Ourenergyprofessionalscanhelpcompaniesdealwiththetaxconsequencesofoilandgascontracts(suchasJointOperatingAgreements,ProductionSharingContracts,manufacturingandmarketingagreementsandfarm-out/farm-inagreements)beingnegotiatedorconcludedwiththegovernmentorco-operators.

International tax structuringOurtaxprofessionalssolvechallengingissues,anticipatechangesthatcanimpactyourtaxsituationandfinancialstatements,andkeepyouapprisedoflocal,state,foreignandinternationaltaxregulationsastheypertaintoyourcompany’soperations.Ournetworkofinternationaltaxstructuringprofessionalscanhelpyoutostructureyourinternationalbusinessinataxefficientmanner,bothlocallyandglobally.Wecanhelpyouconstructeffectivecross-borderstrategiesandmanageyourglobalstructuraltaxrate.Wewillalsokeepyouabreastofnewdevelopmentsintheinternationalarenathataffectyourbusiness.

Global compliance servicesForbothcorporateincometaxesandindirecttaxes,ourGlobalComplianceServicesgroupoffersunparalleledexcellence.Ourapproachtocorporateincometaxcompliancehelpscompaniesseekingbettertaxmanagementacrossanumberofterritoriesorwithmultipleentitiesinoneterritory.Thisisparticularlyrelevantwhenacompanyisenteringnewcountriesorwhereaccountingandfinanceresourcesarebeingmovedintosharedservicecenters.Wehavespecializedtaxcompliancecentersandskilledlocalterritorytaxteamsprovidingqualitytechnicalsupportaroundtheworld.

Corporate secretarial servicesThepotentialrisksofineffectiveglobalgovernanceandcompliancesystemsformultinationalcompaniesareoftennotrecognizeduntilfailureoccurs.PwChasanextensiveglobalnetworkprovidingaccesstocorporatesecretarialspecialistsinover80territorieswhoareinauniquepositiontoadviseandassistclientswiththeirglobalgovernanceandcomplianceneeds,whethertheyareoperatingonasingleormultinationalbasis.PostSarbanes-Oxley,oneofthemajorchallengesfacingmultinationalcompaniesistheneedfortheimplementationofinternalcontrolstoensureeffectivemanagementoflegalentitiesonaglobalbasis.

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Ourcorporatesecretarialserviceofferingisbasedaroundtwokeyprinciples:globalgovernanceandglobalcompliance(legalentityriskassessment,legalentitymanagementandcorporatechanges).Fromtheincorporationofanewcompanyorbranch,theongoingcompliancewithlocallegislationrequirements,totherestructuringofyourglobalbusinesses,ourlegalservicesnetworkisinauniquepositiontoassistyouinensuringthegoodstandingofallofyourlegalentitiesinaccordancewithlocallegislation.

Indirect taxesIndirecttaxes,includinggoodsandservicestaxes(GST),value-addedtaxes(VAT),severance,property,employment,excise,motorfuels,salesandusetaxes,andcustomsdutiesareuniquelyimposedbyavarietyofjurisdictionsandcanbeasignificantburdenforanyenergycompany.Energycompaniesinparticular,duetotheirlargevolumeofcommoditybasedtransactions,canbeexposedtosignificanttaxesontransactions.Ourindirecttaxprofessionalscanassistinfirstdeterminingwhattaxesareimposedbyajurisdiction,whethertheactivitiesofacompanyareenoughtosubjectittothetax,andhowtoeitherstructurethecompany’sactivitiessoastoavoidthetaxorassistincomplyingwiththefilingrequirements.Duetothesignificantdifferencesintaxesandrelatedrulesamongthejurisdictions,itmaybepossibletominimizetheoveralltaxpaidthroughproperplanning.

Tax merger and acquisition servicesEarlytaxplanningformergersandacquisitionsisessentialtoreduceboththeactualtransactiontaxcostsandthelong-termsustainabletaxratefollowingthetransaction.PwChasthelargestnetworkofM&Ataxspecialistsintheworldandwecanofferyouexpertdealstructuringandfinancingadviceatallpointsthroughoutthedealcycle.Wedelivervaluethroughquantitativeanalysis,rigorousimplementationandleadingedgestructuringtechniques,carryingoutpre-acquisitionduediligence,ensuringtaxefficientdealstructuring,andensuringpost-dealintegration.Transfer pricingInter-companytransactionsacrossbordersaregrowingrapidlyandarebecomingmuchmorecomplex.AtPwC,wehaveastronginternationalnetworkofdedicatedtransferpricingspecialistswithadvancedtrainingineconomics,accounting,lawandprojectmanagement,whoarereadytoworkwithyou.Ourindustryandtaxauthorityexperienceanduniquecapabilitiesenableustodevelopinnovativeapproachesforenergyindustry

participants.Thelastfewyearshaveseenasurgeoftransferpricingaudits,atrendthatisnotexpectedtoslowdownanytimesoon.Adecadeago,onlyafewcountrieshadformaltransferpricingdocumentationrequirements.In2009,morethan60countriesdid.Thisnewenvironmentrequiresmultinationalcorporationstotakeproactive,coordinatedstepstounderstandtheirtransferpricingarrangementsanddocumentationrequirements.Risksmustbeidentifiedandaddressed.Disputesandauditsmustbeavoided,managed,andresolved.Allissuesmustbecoordinatedandalignedacrossjurisdictionsbeforetheydevelopintolargerbusinessconcerns.Ourglobaltaxcontroversyanddisputeresolutionprofessionalswillassistyourcompanytoproactivelyevolveinthisrapidlychangingenvironment.

International assignment servicesMostoilandgascompaniestodayoperateinmorethanonecountryorregion.Forthesecompanies,deploymentoftalentisakeytosuccess.Whateverthemission—sharingknowledge,implementingmanagementprocesses,expandingbusinessintonewterritories—assigneesprovidethefuelforglobalgrowth.OurInternationalAssignmentstaxgroupcanhelpcompanieswithensuringthatyourinternationalassignmentpoliciesarealignedwithandmeettheneedsofyourbusinesswhilebeingcost-efficient.Wehelpclientspreparetax-efficientinternationalassignmentstructuresandpoliciesandmanagerisksbycomplyingwiththeregulationswheretheirworkforceisdeployed.

Sustainability and climate change tax servicesWiththegrowingconcernoversustainabilityandclimatechange,andtheregulatoryregimestoaddresstheseissues,PwC’ssustainabilityandclimatechangetaxnetworkhelpsclientswithissuessuchascarbontaxes,environmentaltaxesandregulation.Ourservicesincludecomplianceandincentives,footprintandmonitoring,fundstructuring,transferpricing,humanresources,andpolicyconsulting.OurTax and the environment—a world of possibilitiestextisavaluabletoolforcost-effectiveplanning.Thisstudyprovidesanoverviewofbothenvironmentaltaxesandtaxincentivesrelatedtoenvironmentallyfriendlyinvestmentsandactivitiesandanalysesenvironmentaltaxmeasuresin13majorterritories.

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TheGlobalTaxMonitorrecognizesPwCastheleadingtaxadvisergloballybyreputation,withaverystrongleadoverthecompetition.

Ourreputationasglobalmarketleaderextendstothevarioustaxserviceareas,wherewehaveaverystrongleadoverthecompetitionindomesticandcross-bordertaxcompliance,domesticandinternationalcorporatetaxplanning,indirecttax/VAT,M&A,transferpricing,compensationandbenefits,taxriskminimization,taxaccounting,taxfunctioneffectivenessandexpatriatetaxplanningandcompliance.

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Accesstocapital,risingcosts,pressuretoreducethecarbonfootprint,whethertoinvestandhowmuchtoinvestinalternativefuelsandenergysources,changingdemandpatterns,skilledworkforceshortages,safetyandenvironmentalconcernsandchanginggeopoliticalscenariosarejustsomeoftheissuesandchallengesfacingenergycompaniestoday.Energycompaniesknowthattheirbusinessiscyclical,andthatnewprojectsrequirelongleadtimes.Managingtheupsanddownsofcommodityprices,whiletryingtoremaincompetitiveandsatisfystakeholdersisdifficult.AtPwCwedelivervaluetoourclientsbydeliveringservicesthathelpenergycompaniesaddressthemanychallengestheyfacetoday.

Challenge:Changingmarketdynamics,includingcommodityprices,supplyanddemand,coststructuresEnergyisamatureindustry,butcontinuestoevolveandexperiencechangingmarketdynamics.Characterizedbylongprojectleadtimes,andaboom-to-bustcycle,theoilandgasbusinessrequirescarefulstrategicplanningandlong-termthinkingtoachievesuccess.Oncedominatedbyinternationaloilcompanies,nationaloilcompanieshavebroughtincreasedcompetitivefactorsintoplay.Accesstoeasyreserveshasallbutdisappeared.Nonconventionalplays—searchingforreservesindeepwater,andminingbitumenandshale—aremorecommonintoday’sindustry.Amidstthesemarketdynamics,priceshavecontinuedtofluctuateupanddownindrasticswingsoverrecentyears.

Thereisaclearcompetitiveadvantagetothoseenergycompanieswhocanoperateanefficientbusiness,controllingcostsandfindingwaystoimproveperformance.ThisiswherePwCcanhelp.

PwC ServicesWhencompanieswanttomakesustainablechangestoimproveperformance,theycallonPwCtohelpdesign,

manageandexecuteaprogramtoreducecosts,increaseefficienciesandenhanceoperationaleffectiveness.Usingourdeepunderstandingoffinance,riskmanagement/compliance,ITsystems,operationsandhumanresources,wehelpourclientsidentifyandimplementcostsavinginitiatives,improveprocessesandinternalcontrols,identifyandmanageriskandimprovequality.Wealsouseourprovenexperienceandknowledgetoprovidehands-onassistancetoimprovefinancialunder-performanceandcash-flowmanagement.Ourindustryskillsandunderstandingensuretailoredsolutionstosupportyourresponsetoincreasingregulation,competition,riskandcosts.Someoftheareaswherewecanhelpcompaniesimproveperformanceinclude:

Finance • Maintaining compliance and control:Being

accountabletothebusinessandtothefinancialcommunity,CFOshaveputcomplianceandcontrolonthetopoftheagenda.Formany,responseshavebeentacticalratherthanstrategic.Moredeeplyembeddedandsustainablesolutionsarenowrequired.Flexibilitytorespondtofutureregulatorychangeisalsoincreasinglyimportant.

• Driving efficiency:Thepressuretoreleaseresourcesandcapacityhasneverbeengreater.Gainsmaycomefromtheeliminationofredundantactivities,consolidationsofactivities(forexample,throughsharedservices),standardizationandautomationofprocesses.Thesestepshaveinsomeinstancesresultedincostsavingsinexcessof50percent.

• Providing insight and challenge:Insighttakesdifferentformsindifferentorganizations.Itinvolvesdeliveryofaneffectiveperformancemanagementframework,understandingthekeybusinessdriversandchallengingandsupportingbusinessdecisionsaroundthesedrivers.Equippingfinancetodelivereffectivesupportontheseaspectsrequirestoolsandcapabilitieswhichareoftennewtothefunction.

Findingsolutionstoindustrychallenges

14 GlobalEnergystatementofcapabilities

Technology Toassistyouingettingvaluefromtechnologyinvestments,webringtogethertheskillstodeliverimprovementsinprocesses,aswellastheknowledgeinITstrategy,ITarchitectureanddesign,enterpriseapplications,sourcing,projectmanagementandIToperationsmanagement.Wecanhelpyouwith:

•AligningITtothebusiness•ManagingITcostsandvalue•Sourcingandservicemanagement•ITtransactionservicesduediligence

Governance, risk and compliance Wesupportclientsinidentifying,understandingandmanagingriskandhelpensureanappropriatebalancebetweenrisksandopportunities.Ourspecialistsassistbusinessesindesigningandimplementinggovernanceandcomplianceprogramstoensurethatthecompanycontinuestooperatewithintheboundariesofrelevantlegislationandregulations.Thisincludesbuildingacultureofdoingtherightthing.Areasoffocusinclude:

•Governancesuchasboardandmanagementperformanceandaccountability,orimprovingstakeholderandregulatoryrelationshipsandcommunications

•Enterpriserisk/portfolioriskmanagement•Managingbusinessprocessforcomplianceoutcomes•Compliancemonitoringandreporting•Compliancecostmanagement•Incidentidentificationandremediation

Capital projects and infrastructure Whetherrelatedtoinfrastructure,constructionofanewplant,buildingorsystem,capitalprojectsrequireseparatefinancing,management,governanceandassurance.Thescaleofprojectsintheenergysectorpresentsimmensechallengesatthebestoftimes.Thechallengeofdevelopinganddeliveringcapitalprojectsisfurtherintensifiedasthenatureofprojectsthemselvesbecomesmorecomplexanddemanding.Forexample,manyprojectsneedtobesitedinverydemandinglocationsinordertosourcemoremarginalreservesorgainpermitting.Projectsarealsobecomingmoretechnologicallydemandingascompaniesfactorintheimpactofevolvingtechnologies,suchascarboncaptureandsequestration.Companiesalsohavetocontendwiththeupsanddownsoflaborandskillsavailability.

Theimportanceofoptimizingcapitalprojectplanning,managementanddeliveryiscritical.PwCiswell-equipped

toassistwiththechallengesfacingcompaniesandguidethemthroughthestepstheyneedtotakethroughoutthecapitalprojectcycletoachievethebestoutcomes.Ourhighlyexperiencedspecialistteamsofindustryexperts,engineers,surveyorsandprojectaccountantsworkcloselywithcompaniestoreviewcapitalprojectpracticesthroughouttheprojectlifecycle,includingportfoliomanagement,governance,projectmanagement,riskandqualitymanagement,procurementstrategies,supplychainmanagementandmanagementreporting.

Issue:Sustainability,climatechangeandsecurityofsupplyAcrosstheglobegovernmentsandconsumersalikearecallingforasecureenergysupply.Indevelopingeconomies,energyissynonymouswitheconomicgrowth.Indevelopedeconomies,energycompaniesarecalledupontosupplyacleanfuelsource,readilyavailableatareasonableprice.Inbothdevelopedanddevelopingcountries,energycompaniesfaceanincreasinglycomplexenvironment.Newreservesarebecomingmoredifficulttofindanddevelop,withsomeregionsoff-limitsduetonationalism,environmentalissues,warorterrorism.Alternativeenergysourcescantakeyearstobringonline,andareoftenmorecostlythantraditionalhydrocarbonresources.

PwC servicesOurglobalenergypracticeincludesover3,100professionalsin151countriesaroundtheworld,providingourclientswithon-the-groundresourcesineverymajorenergycenter.Suchglobalreachallowsustokeepourclientsbetterinformedofnewdevelopments,suchaschangingpoliticalandregulatoryenvironments,economicconditions,environmentaldevelopmentsandothersituationswhichcanhaveanimpactonyourbusiness.Weprovideinsightandadviceinareasincluding:

•Internationalexpansionthroughdirectinvestments,transactions,jointventuresorproduction-sharingagreements

•Carbonmanagement•Managingcommoditypriceandcurrencyrisks•Assessingandmanaginggeopoliticalrisks•Non-financialreportingsuchassustainabilityreporting•Managingcashrepatriation•Globalworkforcestrategiesandexpatriateplanning•Internationaltaxstructuring,taxplanningandfavorable

taxregimes•Enterprise-wideriskmanagement

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Formanycompanies,themostchallengingaspectofthesustainabilityagendaisincorporatingtheconceptintotheirlong-termstrategy.Theforcesdrivingcompaniestointegratesustainabilityintotheirstrategicplanningarenowfamiliar—regulation,climatechange,safetyandenvironment,resourceconstraints,globalizationandeaseofaccesstoinformation.Makingtheappropriatechangesintheorganizationcanbemoredifficult.Byassessingthespecificsustainabilityissuesthataffectthebusinessmostcriticallyandidentifyingwhereopportunitiesliegivennotonlyitssectorandlocale,butalsoitsparticularcompetitiveadvantages,acompanycandeveloptheappropriateresponse,andavisionforwhereitwantstobeinfiveyears.Then,tobringthatstrategytofruition,acompanycanplanitsresourceallocationarounditssustainabilityagenda,itsstrategicgoalsandmetrics,andthecommunicationsplanforstakeholders—includingemployees.PwChelpsclientsateverystageofthisprocessandembedssustainabilityconsiderationsintoallaspectsoftheorganization.

Fromataxperspective,oursustainabilityandclimatechangetaxnetworkprovidesadviceandsupportwithtaxissuesarisingfromboththegovernmentalresponse,suchastheintroductionofcarbon,environmentaltaxesandotherregulation,andfromthebusinessresponse,suchasreorganizationoracquisition,tothesustainabilityandclimatechangeagenda.

Challenge:ManaginggeopoliticalrisksEnergycompaniesunderstandthebusinessconsequencesofpoliticalchangeperhapsbetterthaninanyotherindustry.Apoliticalchange—theoutcomeofanelectionorshiftinregulatoryenvironment—canchangeeverythinginaflash.Regulatorychanges,includingtaxregimechanges,environmentalstandardsandlaborlawscanhaveasignificantimpactonthecostofdoingbusiness.

Manyofthesechangescanbeanticipated,andthereforemanaged.Theprocessofmanagingpoliticalriskcanhelppositioncompaniestobetterpreparefortherisksmostlikelytoaffectbusinessoperations,marketperformanceandshareholdervalue,aswellastakeadvantageofnewopportunitiesbeforecompetitorsdo.

PwC ServicesPwChasteamedwithEurasiaGrouptobringtogetherateamofspecialistswhodevelopedaPolitical

Financing renewable energy projects in the US

PoliticalleadersfromaroundtheworldgatheredattheCopenhagenClimateConferenceinDecember2009.Althoughnoconsensusoragreementonglobaltargetsforreductionofemissionswasreached,participantsrecognisedthatclimatechangeisoneofthegreatestchallengesofthepresentdayandthatactionsshouldbetakentokeepanytemperatureincreasestobelow2°C.

NotwithstandingtheimpasseatCopenhagenonactualemissionreductiontargetsandmechanisms,anumberofcountrieshavecreatedvariousincentiveorsubsidyprogramstoencouragethedevelopmentandbuildingofwind,solarandotherformsofrenewablegeneration.Inseveralcountries,notablyGermanyandSpain,theseprogramshaveincluded‘buy-in’tariffsforrenewableenergyprojects.Suchtariffsprovidethedevelopersofrenewableprojectslong-termoff-takecontractsforthesaleoftheelectricitygeneratedatabovemarketprices.

AdifferentapproachhasbeentakenintheUSwherefederalpolicieshavebeenadoptedtoprovideincentivesthroughtaxcreditsandacceleratedtaxdepreciationofequipment.Tobenefitfromthetaxadvantages,thedeveloperand/orotherinvestorsintherenewableenergyprojectmusthavesufficientfuturecashtaxliabilitiestoefficientlyrealizetheeconomicvalueofthetaxincentives.

TheUStaxincentiveprogramsmakeitmorechallengingforsmallerorstart-upcompaniesandnon-UScompanieswithlittleornocashtaxappetiteintheUStodeveloprenewableenergyprojects.Thecurrenteconomicclimatehasalsosignificantlyreducedthenumberoftraditionalinvestorsthathavethetaxappetitetoutilizethebenefitsoftheseincentiveprograms.Toovercomethesebarriers,variouscomplexpartnershipstructuresarebeingcreatedtoenabletheprojectdeveloperstomonetizethetaxincentives.Suchstructuresrequiretheidentificationof‘taxpartners’thathavetheabilitytoefficientlyutilizethetaxbenefits.Nonetheless,inperiodswhenthetaxincentivesexceedtheavailable‘taxequity’partners,thedevelopmentandfinancingofrenewableprojectscanbenegativelyimpactedresultingintheeitherdelayorcancellationoftheproject.AclearunderstandingoftheimportanceofthesestructuresandtherolesplayedbyvariouspartiesiscriticalforsuccessintheUSrenewablemarket.

16 GlobalEnergystatementofcapabilities

RiskAssessment(PRA)diagnosticandmonitoringmethodologywhichenablescompaniestoisolateandassessthecontributionofpoliticalrisktotheiroverallriskprofile.ThisPRAallowsenergycompaniestounderstandandbettermanagetheserisks,andidentifyandcapitalizeonunexploitedopportunities.

LeveragingPwC’sglobalnetworkisasignificantcompetitiveadvantageforourclientsastheymanagegeopoliticalrisks.Ourindustryspecialistsonthegroundunderstandboththeclient’sbusinessandthedynamicsofdoingbusinessinaterritorytargetedforexpansion.Forexample,ourtaxspecialistshelpcompaniesbalancethetaxopportunitiesandrisksinanewreportinglocationtomanagetheclient’soveralleffectivetaxratechangesproactively.

Managing political risk to improve business performance

PwCwasaskedbyamajorinternationaloilcompanytohelpthemdevelopamorequantifiableapproachtomeasuringpoliticalrisk.Thecompanyrecentlydecidedtolimititscoreoilandgasexplorationtoaselectgroupofcountrieswithhigherriskstothecompanyratherthansearchforreservesinmorepoliticallystablejurisdictions.Theorganizationbelievedthatthisapproachtoexplorationcreatedhigherrisk,butwithahigherrisk-adjustedrateofreturn.Asapartoftheiranalysis,thecompanywantedtoquantifytherisksassociatedwiththeirstrategy,especiallypoliticalrisk.Bydoingso,theycouldincorporatemeasuresofpoliticalriskintotheirbusinessdevelopmentandcapitalallocationmodels.PwCdemonstratedhowpoliticalriskcanbemeasuredbyfirstidentifyingthekeyelementsofpoliticalriskthatinfluencethecompany’sperformanceintheoilandgassector.Theseelementscanbeevaluatedusingqualitativeandquantitativemeasures.Themeasuresarethenassignedriskprobabilitiesandvaluesthatcanbeincorporatedintotheclients’riskmodel.Thisbeneficialapproachallowsriskprobabilitiesandvaluestobemonitoredandadjustedovertime;theapproachalsoprovidesthecompanywithameasureofrisk-adjustedreturnoncapital.

Issue:IndustrytransactionsandconsolidationAlargenumberofsignificanttransactionssinceAugust2009seemtobeastrongindicatorthatenergyindustryisonceagainfocusedongrowingandexpanding.Thesizeandscaleofenergycompaniescontinuestogrow;theoilfieldservicessectorisfurtherconsolidating,andupstreamcompaniesarebuyingaccesstoimportantoilandgasreserves.Today’sworldwideenergyconsumptionisprojectedtoincreaseby50percentfrom2005to2030.Tofeedtheworld’sincreasingdemandforaffordableandreliableaccessenergyrequiresgreatercapital,largerworkforces,bettertechnology,andeffectiveriskmanagement.

PwC ServicesPwChasabroadspectrumofcapabilitiestosupportcompanies’effortstomanagethegrowththatwillbenecessarytomeettheever-increasingenergydemand.Whetheracompanyisconsideringatransaction,jointventureagreement,productionsharingagreement,divestitureororganicexpansion,ourenergyprofessionalshavetheexperienceanddeepindustryunderstandingtodelivervalueandcontributetoyoursuccess.

•Mergers and acquisitions:Wefocusonthedealcontinuumfromstrategythroughexecutiontopost-dealintegration,includingfinancialandoperationalduediligence,accessingthecapitalmarketsandvaluing,negotiatingandstructuringdeals.

•Strategic and valuation advice:Weprovideindependentexpertvaluationadviceforyourbusiness.Forexample,weevaluatethefinancialimplicationsofcorporatedebt,restructuring,investments,mergersandjoint-ventures.Weadviseonbettermanagingassetsandlargecapitalinvestmentsamidstincreasedcompetition,orintimesofuncertainty,andweevaluatetechnical,operational,marketandfinancialrisks.

•Growth or divestments and developing exit strategies:Ourspecialistshelpyoucompleteandextractthemaximumvaluefromyourtransactions.

•Tax merger and acquisition services:Fullrealizationofmergersynergiesrequiresexploringtax-relatedopportunitiesandprotectingagainsttax-relatedrisks.SomeoftheareasthatourM&Ataxprofessionals

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delivermorevaluetoourclientsinclude:

•Addressingkeyissuesandidentifyingopportunitiesduringduediligence

•Creatingaflexibleglobalstructure•Identifyingstatutorydeadlinesandcurrentperiod

filingrequirements•Re-evaluatingtheglobaltaxstrategyvis-à-visthe

mergeroracquisition•Achievinganoptimallong-termsglobaleffectivetaxrate•Reducingcostsandcontributingtooverallsynergygoals•Evaluatingandoptimizingtaxdepartmentstructure,

resources,processesandsystems

•Post transaction services:Wehavepost-transactionspecialistswhocanassistyouinareasofsystemsandprocessintegration,humanresources,andwaystoachieveadditionalsynergiesfromacompletedtransaction.

Deal value in a down market

PwCwasaskedbyabunkerfuelcompanyinEuropetohelpsellthecompany.Thetransactioninvolvedalimitedglobalauctionacrosssevencountries,andthroughourinternationalenergynetwork,wewereabletohelpthemineachlocation.AFortune500companywasselectedasthepreferredbidder,andsubsequentlyundertookextensivefinancial,commercialandenvironmentalduediligencethroughoutaperiodofexclusivitylastingformonths.Despitedifficulttradingconditionsandaturbulentglobaloilmarket,thevendorachievedwhatheconsideredtobeastrategicvalueforthebusiness.

Challenge:ComplyingwithregulatoryandreportingrequirementsTheregulatoryandreportinglandscapeisparticularlycomplexforoilandgascompanies.Energycompaniesconductoperationsinavarietyofregulatoryandtaxregimes,manywithmoretransitionalratherthanstaticregulatoryenvironments.Thegeopolitical,environmental,safetyandregulatoryrequirements,combinedwithoftencomplexstakeholderandbusinessrelationships,addstothecomplexconditionoilandgascompaniesface.Inaddition,theadventofIFRSandSection404oftheSarbanes-OxleyActforU.S.registrantshasaddedtothechallenges.Allofthesecircumstancesdemandcarefuljudgmentaroundcorporategovernance,internalcontrolsandexternalreporting.

PwC Services•Audit services:All60,000auditorsinPwCfirms

aroundtheworlduseasingleglobalauditmethodologythatisfullycompliantwithInternationalAuditingStandardsandapplicablenationalstandards,suchasU.S.GAAPandIFRS.

Forourenergyclients,webringtogetheraglobalteamwithappropriateindustryexperienceandskills,includingfunctionalandtechnicalspecialists.Wereviewexternalreportingfortransparencyconsistentwiththeinternalinformationthatmanagementusestorunthebusiness.Togainauditcomfort,weexamineandvalidatethecontrolsputinplacebymanagementtomitigatefinancialreportingrisks.

•Reporting and compliance consulting:PwChelpsclientsidentifygovernance,riskmanagementandcomplianceinformationneedsforbothstakeholderreportingandoperationalmonitoringineveryareaofthecompany.Weevaluatethesourceandqualityofthedatatosupporttheinformationneedsand,afterconsideringcostandotherfactors,recommendprocesses,organizationanduseoftechnologyforobtainingandpreparingdataanddeliveringtimelyinformation.

•Energy regulations:Oneofthekeybenefitsouroilandgasclientsreceiveisateamofprofessionalswhoarethoroughlytrainedinindustry-specificissuesandaccountingtreatments.Wekeepabreastofchangesandtrendsinvolvingallofthepetroleumaccountingmatters—oilandgasreservesaccounting,impairments,transactions,revenuerecognition,intangibleassets,suspendedwells,andmanyothers–sothatwecanprovidethebestguidancetoourclients.

•Taxes:OilandgascompaniesareamongsomeofthelargesttaxpayersincountriessuchastheU.S.Aneffectivetaxrateof40percentorhigherisnotunusual.Incometaxes,excisetaxes,royalties,stateandlocaltaxes,alladduptoasignificantexpenseforenergyproducers.PwCcanhelpyoumanageyourglobaltaxcomplianceissues—includingcorporatetax,indirecttax,accounting,risksandopportunities.Wehaveastronginternationalnetworkoftaxcomplianceprofessionals,providingaconsistentlyhigh-qualityservice,coordinatedacrossasmanyterritoriesasyourequire.

•Public offering readiness:OurGlobalCapitalMarketsGroupworkswithcompaniesseekingtoraisedebtorequitycapitalinthecapitalmarkets.Wecanprovideanindependentviewofthecriticalissuesinvolved

18 GlobalEnergystatementofcapabilities

inaccessingaparticularcapitalmarket.Ouradviceistailoredaccordingtowhetheryouareasmaller,entrepreneurialcompanyunfamiliarwiththeIPOprocess,orasophisticatednationalormultinationalcompanythatregularlyusestheinternationalcapitalmarkets.PwCprovidesadviceatallstagesoftheprocess,frompreparingforoperationasapubliccompany,selectingtherightcapitalmarket,andestablishingtherightteamofPre-IPOworkshops.

IFRS implementation

PwCworkedwithoneofthelargestintegratedenergycompaniestoimplementIFRS,includingareviewofsignificantdifferencesbetweenexistingstatutoryGAAPandcriticalaccountingpolicydecisionsrelatedtoimplementation.Thiseffortrequiredin-depthenergyindustryexperienceaswellasdeepIFRSknowledge,bothofwhichwerebroughttobearoverthecourseofourengagement.Inaddition,weprovidedpre-andpost-implementationtrainingtothecompany’sstaffandmanagementtoenhancetheirIFRSknowledgebase.TheimplementationwasasuccessandthecompanyhasusedtheirexperiencetobuildasustainableIFRSreportingprocess.

Issue:RecruitingandretainingaskilledworkforceThegloballaborshortageforoilandgascompaniesremainsaperplexingproblem.Insomecountries,suchastheU.S.,theaverageageofemployeesiscloseto50,andoverhalfofthecurrentoilandgasworkforcewillreachretirementageinthenextdecade.Recruitingstrategiesandtheabilitytoretainemployeesinoilandgascompaniesismoreimportantnowthanever.

Withgrowingglobaldemandforenergy,companieswillneedtogrowtheirworkforcestomeettheirproductiongoalsandremaincompetitive.Developinghumanresourcestrategiesthathelpattractnewrecruits,transferknowledgefromretiringemployees,aswellasretaintheexperiencedworkforceandtheirknowledgeandskills,areimperativetothefutureoftheindustry.

PwC services

With more than 6,000 specialists in over 100 countries, the PwC network is one of the world’s largest HR advisory organizations.

PwC’smulti-disciplinaryapproachallowsustoadviseonallaspectsofpeoplemanagement,helpingourclientstoenhancevaluefortheirbusinessesthroughpeople.OurHRservicespracticebringstogetherprofessionalswhoworkacrossfourcoredisciplines:

•International assignments (expatriate services):Whencompaniesneedtoensurethattheirinternationalassignmentpoliciesarealignedwithandmeettheneedsofthebusinessandarecost-efficient,PwCcanhelp.Weknowthatoilandgascompaniesarelargelydependentoninternationalassignmentstogettherightskillsetsintherightlocations,andtohandlethefluctuatingdemandsofthebusiness.Theinternationalassignmentdeliverystructureneedstobeefficientandcosteffective.Tax-efficientinternationalassignmentstructuresandpoliciesneedtobeinplace.Youneedtomanagerisksbycomplyingwiththeregulationswhereyourworkforceisdeployed.PwC’sHRspecialistscanhelpwiththeseconcerns.

•HR management:RecentpressureonglobalorganizationstoimprovebusinesseffectivenessandminimizeriskisatrendthathashittheHRfunctionhard.ThedrivetoimprovebusinessperformancethroughhumancapitalhasmadeitcriticalfororganizationstorealizeanddemonstratethevalueofHRpoliciesandprocesses.PwC’shumanresourceservicesteamhelpsorganizationsachieveHRassuranceandoffersanobjectiveviewofyourHRfunction’sbusinesseffectiveness.AccesstoSaratogahumancapitalandHRfunctionbenchmarkingdataallowsustounderpinourknowledgewithharddata.OurservicesincludeHRmetricsandbenchmarking,HRfunctioneffectivenessandservicedelivery,andHRtransactionservices.

•Employee rewards (compensation, benefits, pensions):Creatingtherightglobalrewardplansforyouremployeesisessentialforattractingandretainingkeystaff,achievingbusinessandhumanresourceobjectives,aswellasoptimizingrelatedcosts.Butbalancingbusinessprioritieswithshareholderinterests

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canbeachallenge.Bydrawingonthecompensation,benefits,pensionandfinancialexperienceofourglobalnetwork,wehelporganizationslinkexecutiveandemployeerewardstobusinessgoalsandshareholdervalue.Ournetworkofrewardconsultantsisfullyintegratedandpeoplefocused.Webringintheskillsandresourcestodelivertechnical,tax,legal,accountingandfinancialservicesviaanevidence-basedapproach,givingourclientsacompetitiveadvantageintoday’smarket.Weadviseoncompensation,benefitsandpensions.

•Organizational change and program effectiveness:Gettingthebestfrompeopleateverylevelwhenthereisconstantchangeisthekeytosustainablecompetitiveadvantage.Solidstrategies,processesandtechnologyalonedonotdeliverresults.Ittakespeopletoaccept,adopt,drive,andsustainthechangetorealizetangibleimpact.Successinbusinesshingesonstrategicagilityandtheabilitytoexecute.PwCcanhelpcompaniesbuildmoreeffectiveorganizationalstructures,motivatepeopleandgettherightpeopleintotherightjobs.

Alargemultinationaloilandgascompanydecideditwantedtominimizesafetyrisks,andexplorehowitmightgoaboutmeasuringtheeffectivenessofgovernance,regulationandcomplianceactivityacrosstheorganization.PwCwasengagedatthegroupleveltolookathowothercompaniesembedgoodgovernancemechanismsandmeasureitseffectiveness,andattheassetleveltolookindetailatwhathadleadstosafetyfailures.Weexaminedwhatimprovementsanorganizationcouldmakeinlocalmanagementinformationandriskandcontrolpractices.PwCwasaskedtofurtherexplorehowexistingmeasurementmechanismscouldbeusedtoassesstheeffectivenessofgovernanceinthebusiness.Wewereabletoprovideavaluableinsighttoarangeofgovernance,regulationandcomplianceapproachesusedbyothercompanies.Byidentifyingthekeyconstituentsrequiredtomeasuretheeffectivenessofthebusiness,weusedthatinformationtosupportanumberofareaswithintheclient,specificallyincludingsafety.Themeasurementconceptdevelopedbroughtanumberofdatasourcestogethertoprovideacross-cuttingviewoftheeffectivenessofriskmanagementthroughanumberoflenses.

20 GlobalEnergystatementofcapabilities

PwCislocatedwherevertheindustryisexploringfor,producing,refiningandsellinghydrocarbons.Morethan3,100specialistsareassignedfulltimetotheGlobalEnergyGroup,givingourclientsaccesstooilandgasspecialistsaroundtheworld.Wehaveover300partnersservingglobalenergycompaniesworldwide.HeadquarteredinHouston,TexasourGlobalEnergyGrouphasmajorenergycentersaroundtheworldincludingBrazil,Canada,China,Norway,Russia,theUK,andthroughouttheMiddleEastandAfrica.

AfricaEliasPungong,TerritoryLeaderelias.pungong@ga.pwc.com

AustraliaMichaelHappell,CountryLeadermichael.happell@au.pwc.com

CanadaScottBolton,CountryLeaderscott.r.bolton@ca.pwc.com

ChinaGavinChui,CountryLeadergavin.chui@cn.pwc.com

IndiaKameswaraRao,CountryLeaderkameswara.rao@in.pwc.com

Central&SouthAmericaJorgeBacher,TerritoryLeaderjorge.c.bacher@ar.pwc.com

MiddleEastDonPainter,TerritoryLeaderdon.painter@ae.pwc.com

Russia&Central,EasternEuropeDaveGray,TerritoryLeaderdave.gray@ru.pwc.com

UnitedKingdomRossHunter,CountryLeaderross.hunter@uk.pwc.com

UnitedStatesRichPaterson,CountryLeaderrichard.paterson@us.pwc.com

Ourcommitmenttotheenergyindustrygoesbeyondourservices.Westayintouchwithourclientsthroughthoughtleadershipandsponsorshipactivities.PwCisaPatronoftheWorldEnergyCouncil,andalong-timesponsorandparticipantattheWorldEnergyCongresstobeheldin2010inMontréal,Canada,andtheWorldPetroleumCongress,tobeheldin2011inDoha,Qatar.

OurEnergypracticeistheonlyBigFourfirmtoserveasakeysponsoroftheGlobalOilSummitatCERAWEEKeachyear.IHSCERA(fkaCambridgeEnergyResearchAssociates)isthehighlyrespectedenergyadvisoryfirmandthisannualeventisoneofthemostwidelyattendedintheindustry.Ourenergypartnersparticipateinmanyoftheleadingindustryorganizationsonaterritorialbasis,tokeepabreastofdevelopingregulatorychanges,industryinformationandtohearfirst-handfromoilandgasprofessionals.

WhatmakesPwCdifferent?

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Fromourexperience,wedevelopindustryspecificinstructionalmaterialsandreportsonissuesofstrategicimportancetohelpkeepourclientsinformed.Someofourupcomingandrecentpublicationsinclude:

Renewable Deals*RenewableenergyisaccountingforanincreasingsliceofoverallM&Aactivityinthepowerutilitiessector.DealnumbersandtotalM&Avalueinthesectorasawholedeclinedsignificantlyin2009butthedeclineindealsforrenewableassetsortechnologywasmuchlessmarkedthaninthewidersector.ThesearesomeofthekeyfindingsinPwC’sannualreviewofmergersandacquisitionsactivitywithintheglobalrenewableenergymarket.Thenumberofrenewablesdealsfellbyoverathird(36%)year-on-yearfrom2008to2009butaveragedealsize(fordealswithdisclosedvalues)rosebyathird(34%)—upfromanaverageofUS$45.5milliontoUS$60.8million.

Appetite for changeBasedonalmost700interviews,conductedin15countries,Appetiteforchangeexaminesattitudesintheinternationalbusinesscommunitytowardsenvironmentalregulation,legislationandtaxes.Climatechangeistestingtheabilityoftheworld’sleaderstodevelopeffectiveenvironmentalpoliciesandmanyarefrustratedwiththepaceofnegotiations,asevidencedbytheCopenhagensummit.Whilealargemajorityofbusinessesarepotentialsupportersofincentives,emissionstradingschemesandcarbontaxes,manyexecutivesalsobelievethatcurrentgovernmentpoliciesarenotsufficientlycoherentoreffective.Still,theyremainreadytosupportpoliciesthatareconsistent,clearlylinkedtosavingtheenvironment,anddevelopedinconsultationwiththeprivatesector.

Energy SEC Reserves Reporting—Leading the change Formorethan25years,theSEC’srulesformeasuringandreportingoilandnaturalgasreservesremainedrelativelyunchanged,despiteincreasedgeologicalcomplexity,significantadvancesintechnologyandincreasedpricevolatilityinglobalmarkets.Astimeprogressed,theseruleseventuallymadeitmoredifficultforinvestorsandanalyststoassessandcomparetheoilandgasthatcompaniesheldunderground.Today,however,anewsetofreportingprinciples,adoptedinlate2008,willimpactthewayoilandgascompaniescommunicatereservesinformationtostakeholders.TheSEC’snewrulesgiveenergyexecutivesanddirectorstheopportunitytomorecloselyalignreservesreportingwiththeiroverallbusinessstrategyandtheircompetitivepositioninthemarketplace.

IFRS bulletin: Straight away—August 2009TheextractiveactivitiesprojectattheIASBTheExtractiveActivitiesprojectattheIASBopensthedoortopotentialradicalchangestofinancialreportingforminingandoil&gas.Thereislittleguidanceontheaccountingforexploration,developmentandproductionofmineralsandoil&gasincurrentIFRS.ThisDiscussionPaper(DP)isthefirststeptowardsanIFRSfortheseactivities.ThedraftDPwaswrittenbyfournationalstandardsettersattherequestoftheIASB.TheworkwasledbytheAustralianAccountingStandardsBoardwithparticipationfromCanada,NorwayandSouthAfrica.TheDPwillbepublishedformallybytheIASBinQuarter1,2010,withaninvitationtocomment.

22 GlobalEnergystatementofcapabilities

Financial reporting in the oil and gas industry*InternationalFinancialReportingStandards—NationalstandardsinothercountriesarebeingconvergedwithIFRS.TheglobaltrendtowardsIFRShasgainedsignificantfurthermomentumwiththeUSSecuritiesandExchangeCommission’s(SEC)commitmenttothestandards,beginningwithitsdecisiontodroptherequirementforforeignlistedcompaniesintheUStoreconciletoUSGAAP.Thiseditionof“Financialreportingintheoilandgasindustry”describesthefinancialreportingimplicationsofIFRSacrossanumberofareasselectedfortheirparticularrelevancetooilandgascompanies.Availableonlineatwww.pwc.com/energy

6th Edition Petroleum Accounting Principles, Procedures & IssuespublishedjointlywiththeUniversityofNorthTexas’ProfessionalDevelopmentInstitute.ThistextbookandleadingreferencetoolfocusesonU.S.financialaccountingandreportingforpetroleumexplorationandproductionactivities.Thebookalsocovershottopicsincludingriskmanagement,internationaloperations,accountingforbusinesscombinationsandothers.The7theditionisexpectedtobeavailableinearly2011.Availablethroughwww.pdi.orgorwww.amazon.com

Working together: Energy sector income tax benchmarking study Incometaxdisclosures,presentedinannualreports,areanimportantinsightintoacompany’staxaffairs,withtheeffectiveincometaxratebeingtheheadlineratecommonlyquotedbychieffinancialofficerswhendiscussingtheircompany’sincometaxaffairs.Inthisstudy,PwCpresentsinsightsintowhereenergycompaniesstandcomparedtotheirpeergroupfortheexploration&production,integratedoil&gasandenergyservicessegmentsoftheindustry.Thestudyencompasses37companieslocatedin17differentcountriesaroundtheworld.

PwCfoundthattheaverageEffectiveIncomeTaxRate(ETR)forthethree-yearperiod(2005-2007)was33.6%,higherthananyoftheninesectorsPwChasanalysedforthesameperiod.

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ThememberfirmsofthePwCnetworkprovideindustry-focusedassurance,taxandadvisoryservicestobuildpublictrustandenhancevalueforitsclientsandtheirstakeholders.Morethan155,000peoplein151countriesacrossournetworkworkcollaborativelytodevelopfreshperspectivesandpracticaladvice.

Global Contacts

AlanPageGlobalEnergy,Utilities&MiningLeaderalan.page@us.pwc.com

JamesKochGlobalEnergy,Utilities&MiningTaxLeaderjames.koch@us.pwc.com

MichaelHurleyGlobalEnergy,Utilities&MiningAdvisoryLeadermichael.hurley@uk.pwc.com

Formoreinformation,pleasevisit

www.pwc.com/energy

Globalenergyteamcontacts

©2010PricewaterhouseCoopers.Allrightsreserved.“PricewaterhouseCoopers”and“PwC”refertothenetworkofmemberfirmsofPricewaterhouseCoopersInternationalLimited(PwCIL).EachmemberfirmisaseparatelegalentityanddoesnotactasagentofPwCILoranyothermemberfirm.PwCILdoesnotprovideanyservicestoclients.PwCILisnotresponsibleorliablefortheactsoromissionsofanyofitsmemberfirmsnorcanitcontroltheexerciseoftheirprofessionaljudgmentorbindtheminanyway.Nomemberfirmisresponsibleorliablefortheactsoromissionsofanyothermemberfirmnorcanitcontroltheexerciseofanothermemberfirm’sprofessionaljudgmentorbindanothermemberfirmorPwCILinanyway.DH-10-0356