COST POOL

Unrecovered Exploration Costs

Unrecovered Development Costs

Operating Costs

OIL & GAS SALES REVENUE

COST RECOVERY – Revenue available for recovering past costs

PROFIT PETROLEUM – Revenue available for

sharing with government

Recovery of Operating

Costs

Recovery of Unrecovered

CAPEX

Contractor Profit Share

Government Profit Share

Split based on Cost Recovery %

Split based on Govt. Share as per R Factor

In initial years, when revenue available for Cost Recovery is not enough to recover all past costs, any unrecovered costs are carried forward to next year until they are fully recovered.

In later years, when revenue available for Cost Recovery is more than the unrecovered past

costs, the difference get added to Profit Petroleum and is shared as per R factor calculation.

Revenue Splits as per PSC

Example Say, Past Costs/Unrecovered CAPEX: 100 MM$ Current year OPEX: 10 MM$ Cost Recovery: 60% Profit Split as per R factor: 40% to govt., 60% to contractor Total Revenue for Current Year: 50 MM$ So, Cost Recovery Revenue = 50 MM$ X 60% = 30 MM$ OPEX Recovered = 10 MM$ CAPEX Recovered = 20 MM$ Unrecovered CAPEX Carried Forward = 80 MM$ And, Profit Petroleum = 50MM$ - 30 MM$ = 20 MM$ Govt. Share = 20 MM$ X 40% = 8 MM$ Contractor Share = 20MM$ X 60% = 12MM$ Therefore, out of total revenue of 50 MM$: Govt. gets = 8 MM$ Contractor gets = 42 MM$ (30 MM$ as cost recovery revenue + 12 MM$ as profit petroleum revenue)