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Brian Reinsborough

PresidentNexen Petroleum U.S.A., Inc.

Friday, December 5, 2008

Challenges in the Deepwater Gulf of Mexico

Challenges in the Deepwater Gulf of Mexico

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AgendaAgenda

Why Deepwater Gulf of Mexico?

Challenges Our Industry Faces

The Path Forward

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Why Deepwater GoM?Why Deepwater GoM?

Long-Term Demand for Oil Remains Strong

Deepwater has Large Yet-to-Find Resources

Fiscal Regime is Stable and Attractive

Proximity to a Consuming Market

Deepwater Drilling will Account for 25% of Offshore Production

Technology Breakthroughs will Drive Activity

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Challenges Our Industry Faces: External EnvironmentChallenges Our Industry Faces: External Environment

ExternalEnvironment

CompetitiveLandscape

Access

TechnologyInfrastructure

Development

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Players / New Entrants

Access

Costs CompetitiveLandscape

Competitive LandscapeCompetitive Landscape Infrastructure Development

CompetitiveLandscape Access Technology

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AccessAccess

Access

Infrastructure DevelopmentCompetitiveLandscape Access Technology

Lease Sales

M&A

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Technology

TechnologyTechnologyInfrastructure Development

CompetitiveLandscape Access Technology

Seismic

New Plays

Complex Geology

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InfrastructureInfrastructure

Infrastructure

Infrastructure DevelopmentCompetitiveLandscape Access Technology

InfrastructureDevelopment

Tie-backs

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Development

DevelopmentDevelopmentInfrastructure Development

CompetitiveLandscape Access Technology

Resource Constraints

Execution

Knowledge

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Response

Credit Tightness

Lower Oil Price

Majors

Exploit “opportunistic” M&A

Maintain low debt levels (reduce buy-backs?)

Seek to reduce costs

Exploration review

Type of Company

Large Caps

Delay /phase major projects

Asset rationalisation for some

Conserve cash

Reduce discretionary expenditure

E&P

Sell assets to fund developments

Struggle to raise finance

Cut exploration activity

Seek financially strong partners

Lack of project finance

Domestic budget pressures

NOC – Resource Holder

Service Companies

Become more competitive seeking service contracts with NOCs

Slow investment in new equipment

Margins at risk as activity falls

Impact of Lower Prices & RecessionImpact of Lower Prices & Recession

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The Path ForwardThe Path Forward

Longer-Term Oil Price Forecast Remains Strong recession believed to be short term worldwide supply/demand equation will balance

Projects may Slow Short Term industry consolidation expected to occur some companies will conserve capital

Deepwater Projects are Long-Term Focused

Deepwater Rigs will keep Drilling assumes capital is available for contract owners deepwater rigs still in short supply

Technology Advancements will Improve Economics of New Plays