IFRS Conference Amsterdam 2008

1

global energy sector specialists

IFRS Extractive Industry - Investors’ Perspectives Oil & GasJune 25, 2008

IFRS Conference Amsterdam 2008

connected, responsive, insightful

LONDON5 Investment Banking Professionals5 Acquisitions & Divestitures Professionals13 Global Equity Capital Markets Professionals

BUENOS AIRES1 Investment Banking Professional1 Acquisitions & Divestitures ProfessionalCALGARY

12 Investment Banking Professionals22 Acquisitions & Divestitures Professionals22 Global Equity Capital Markets Professionals

HOUSTON4 Investment Banking Professionals27 Acquisitions & Divestitures Professionals

DENVER14 Global Equity Capital Markets Professionals

INVESTMENT BANKINGMergers & AcquisitionsStrategic AdvisoryEquity UnderwritingFairness Opinions

ACQUISITIONS & DIVESTITURESNegotiated Sale

GLOBAL EQUITY CAPITAL MARKETSInstitutional ResearchInstitutional Sales Institutional Trading

A Global Energy Advisory Firm

Core Services

IFRS Conference Amsterdam 2008

ENERGY EQUITY FINANCINGS WITH PROCEEDS OVER36

7$17 billion8

8CORPORATE ENERGY M&A TRANSACTIONS VALUED OVER

$22 billion356

ENERGY ASSET PACKAGES VALUED OVER

$15.9 billion

$15.9 billion in asset transactions356 Asset Packages

Over $22 billion in M&A transactions

88 Corporate M&A assignments53 Fairness Opinions

Research Coverage of 160 companies24 sales & trading professionals in North America and Europe

[ Follow on Private Equity ]

[ Follow-on Public Equity Financings ]

[ Asset A&D ]

[ Corporate M&A / Reorganization ]

[ Global Sales, Trading and Research ]

[ Grey Market Trading “Private Liquidity” ]

Over $675 million raised through blind pool financings

Over $1.4 billion raised in follow on private financings

Over $14.8 BillionOver 269 Financings

Market maker for numerous private companies

Over $650 million through IPOsOver $448 million through going public RTOs

[ Start-up Equity Financing ]

[ IPO/ RTO ]

Corporate Life Cycle: Complete Services

Global Experience

Over $40bn of transactions and financings in the

Western Canada Sedimentary Basin

Offshore transactional experience in the Gulf of Mexico

Recent A&D and financing experience. Over 80% of advised South American transactions in the last four years A&D expertise in North

and West Africa. E&P experience throughout

the continent

Advised on regional divestitures, global acquisitions and equity financings for numerous SE Asian players

Experience evaluating prospects

A&D execution of approx. $2bn in transactions in the

North Sea

Asset and corporate advisory experience in Oman, Syria and

Qatar. E&P Experience throughout the Middle East

Transactional and operational experience in Continental Europe (France, Germany, Ireland, Norway, Italy, Portugal)

Privatizations and financing in FSU and Eastern Europe. E&P experience in Russia and the Baltic states.

Completed more North American asset transactions

than any other dealer in 2004, 2005 & 2006

12 retained AIM E&P clientsAnd $430mm in North Sea

Financings in last two years

IFRS Conference Amsterdam 2008

What do investors want?

• Information• Shareholders are the business owners• Performance measurement

• Relative and absolute

• Debt and equity investors have different priorities• Return of capital v return on capital• Different risk profiles• Debt providers want capital repayment with return• Equity investors seek growth and have higher but differing

risk profiles• Different preferences for reserves distributions

• P90 v P50• P50 v P10

IFRS Conference Amsterdam 2008

BP Share Price Performance

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BP Share (GBp)

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IFRS Conference Amsterdam 2008Royal Dutch Shell Share Price Performance

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RDSA vs. S&P 500

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RDSA vs. FTSEurofirst 300

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IFRS Conference Amsterdam 2008

Top 5 Oil Companies vs. S&P 500

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CVX

XOM

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S&P 500

IFRS Conference Amsterdam 2008Equity Valuation Drivers and Users

• Oil Prices• Costs • Fiscal systems

• Exchange Rates

• Interest Rates

• Company Growth Rates

• Profitability/Cost of Capital • Barriers to entry• Fade rates

• Asset Allocation• Debt/equity/alternative asset

classes/commodities

• Equity sectors relative performance

• Energy v financials?

• Hedge funds• Absolute return strategies• Long/short• Sector neutral

IFRS Conference Amsterdam 2008

Why Reserves?

• Balance Sheet• A balance sheet provides an overview of a company’s

financial position at the given time• financial report showing the status of a companies assets,

liabilities and equity on a given date.• Shows costs not value• Fair Value – complex calculations

• Oil price volatility• Obsfucate the operating results?

• 70% of the market value is determined by the reserves• Source Dr. Bala Dharan Rice University submission to US House Committee on

Financial Services July 2004

IFRS Conference Amsterdam 2008

Which Reserves?

• Proved Reserves - (SEC Disclosure)• Major oil companies – comparability & benchmarking• US capital market listing

• US companies• North American• Europeans• Chinese

• Smaller E&Ps• Toronto• London AIM Market• Oslo

• NI 51-101• Competent Person Reports (CPRs)

• 1P, 2P reserves• 3P • Contingent resources• Prospective resources

IFRS Conference Amsterdam 2008Reserves replacement and growth

• Importance of replacing production and growing reserves• Growth = (reserve replacement less 100%)/reserve life

-4.00%

-2.00%

0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

80% 90% 100% 110% 120% 130% 140% 150% 160% 170% 180% 190% 200% 210%

IFRS Conference Amsterdam 2008

Reserve disclosure – Norsk Hydro

IFRS Conference Amsterdam 2008

Pemex Reserves Disclosure 20F

IFRS Conference Amsterdam 2008Pemex Reserves Disclosure Webcast

IFRS Conference Amsterdam 2008Pemex Reserves Disclosure Webcast

IFRS Conference Amsterdam 2008

Revus Prospective Resources Disclosure

IFRS Conference Amsterdam 2008

Revus Prospective Resources Disclosure

IFRS Conference Amsterdam 2008

Revus Prospective Resources DisclosureRevus Prospective Resources Disclosure

IFRS Conference Amsterdam 2008

Revus Share Price Performance, 3 July 2006 – 29 September 2006

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Revus Energy (NOK)

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Daily V

olum

e (00

0's)

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1985-89 1990-94 1995-1999

Source : Tristone Capital

Reserve replacement 1985-1999

IFRS Conference Amsterdam 20085 Sisters Reserve Replacement – Organic vs. All Sources

5 Sisters Reserve Replacement – Organic vs. All Sources

0%

20%

40%

60%

80%

100%

120%

140%

160%

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

Organic All Sources

IFRS Conference Amsterdam 2008

5 Sisters Reserve Replacement – Oil vs. Gas

5 Sisters Reserves Replacement Oil vs. Gas

0%

20%

40%

60%

80%

100%

120%

140%

160%

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200%

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

Oil Gas Total

IFRS Conference Amsterdam 20085 Sisters Exploration & Development Spend

5 Sisters Exploration & Development Spend

$0

$10,000

$20,000

$30,000

$40,000

$50,000

$60,000

$70,000

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

Development Exploration

IFRS Conference Amsterdam 20085 Sisters Finding and Development Costs

5 Sisters Finding and Development Costs

$0.00

$5.00

$10.00

$15.00

$20.00

$25.00

$30.00

1999 2000 2001 2002 2003 2004 2005 2006 2007

Finding Costs F&D Costs

IFRS Conference Amsterdam 2008

5 Sisters SEC NPV 10

5 Sisters NPV 10

$0

$100,000

$200,000

$300,000

$400,000

$500,000

$600,000

$700,000

$800,000

1999 2000 2001 2002 2003 2004 2005 2006 2007

IFRS Conference Amsterdam 2008

5 Sisters SEC NPV 10, Future Cash Inflows & Costs

5 Sisters NPV 10, Future Cash Inflows & Future Costs

$0

$500,000

$1,000,000

$1,500,000

$2,000,000

$2,500,000

$3,000,000

$3,500,000

1999 2000 2001 2002 2003 2004 2005 2006 2007

Future Cash Inflows NPV 10 Future Costs

IFRS Conference Amsterdam 2008

5 Sisters Capex per boe/d

5 Sisters Capex per boe/d

$0

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

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Selected Capex per boe/d

Selected Capex per boe/d

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Which Reserves?

• Ormen Lange

• A red herring• No one conservative in SEC reserve booking• Overstates costs• Reality an $11bn investment (400 cu metres 2.4bn boe)

IFRS Conference Amsterdam 2008

Conclusions

• More information on reserve and value• What is conventional/non conventional

• Oil Sands• GTL/LNG• Shale gas/shale oil

• Reserves• PRMS provides framework – reserves/resources• Economic reality

• onshore US and P50 or PD• Offshore P50

• Significant or all reserve disclosure• Top 5 reserves – top x%?• Independent reserve reports up to X size

• Increase DCF/Future cost disclosure• Aggregates or major project disclosure• Reserve booking should reflect costs to production• Costs – important in a high inflation environment