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PROSPEX 2009
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  1. PROSPEX 2009 The Potential of the UKCS 26th Round - Unlicensed Prospects and Discoveries Chris Bulley Hannon Westwood LLP

  2. Hannon Westwood Oil majors to new entrants: expert advisers to the oil and gas industry for over 15 years Board level insight leading to investments totalling $3.5 billion in last 5 years High quality UKCS intelligence and business development 20 strong team of oil industry experts with global E&P commercial and geo-technical experience Unique comprehensive proprietary data systems; proprietary analytical software; investment opportunity flow

  3. History, the last five Licence Rounds • Remaining Potential of the UKCS • Undeveloped Discoveries and Undrilled Prospects on Open Acreage • Conclusions

  4. Blocks/part-Blocks Traditional Licences Promote Licences Companies Frontier Licences New Entrants oil price oil price PREVIOUS ROUNDS – the effect of oil price Block count Company count $ per bbl $ per bbl 300 140 120 140 120 250 120 100 100 200 100 80 80 80 150 60 60 60 100 40 40 40 50 20 20 20 0 21 22 23 24 25 licence round 0 0 21 22 23 24 25 licence round Well count $ per bbl 40 140 120 30 100 80 20 60 40 Firm wells 10 Contingent wells 20 oil price 0 0 21 22 23 24 25 licence round

  5. THE SUCCESS OF THE PROMOTE LICENCE Wells: sidetracks in brackets ACTIVITY 477 Promote Blocks awarded (292 Licences) 26 exploration wells plus 5 sidetracks 20 appraisal wells plus 12 sidetracks RESULTS 7 exploration successes (27% rate) 17 appraisal successes (65% rate) Exploration: estimated 35 mmbbls + 510 bcf 120 mmboe; 17 mmboe per well Appraisal: estimated 286 mmbbls + 2.1 TCF progressed 636 mmboe; 37 mmboe per well

  6. GMATRIX DATABASE & SOFTWARE: intelligence, resource, value Main tables & software derived data 3300+ equities: Acreage Ownership 430+ Prospects 1550+ Discoveries 384 x Oil & gas production 250+ E&A well activity & forecast 4000+ Historic E&A well data 150+ Company portfolios: reserves & NPV Field production cashflow & NPV Discoveries: notional cashflow & NPV, DPI Prospects: notional cashflow & NPV, DPI Capex & Opex model tables Oil & gas model production profiles E&A wellstats: success rates, mmboe Company portfolios & drill out NPV Software applications ATLAS Wellstats Fieldstats Corporate Fiscal Asset Discovery ABG cultural and resource HW proprietary software applications

  7. THE UKCS OIL & GAS RESOURCE 65350 mmboe Estimated Total Potential Resource 25,600 mmboe 14000 12000 c. 13000 • DPI is a measure of profitability, with 0.3 set as the commmercial threshold • oil price = $70 and gas price = 37 p per therm • A DPI > 0.3 indicates a candidate for E&A drilling • A DPI < 0.3 indicates sub commercial – unlikely E&A candidate 10000 8000 c. 2000 6000 5150 4000 5400 2580 3100 2000 1330 775 0 384 fields & satellites & Enhancements Risk 100% 46 Near Term Developments Risk 100% 227 Discoveries dpi > 0.3 Risked @ 60% From 5150 to 3100 163 Discoveries dpi < 0.3 Risked at 30% From 2580 to 775 1564 Prospects Risked @ 20% From 65350 to 13000

  8. Areas relinquished recently UNLICENSED ACREAGE, as of 1st November 2009 Further relinquishments occurring on a rolling basis 23rd Round 50% or full relinquishments due 22 December 2009 Early relinquishment of 1st & 2nd Round exploration acreage Fallow assets re-energised in January each year Acreage available for application both within and peripheral to main play fairways in all areas 46 Blocks & part-Blocks still held in limbo from 25th Round, awaiting further environmental assessment SW Approaches, formerly SEA 8, included in latest SEA for all offshore areas

  9. 100 80 60 40 20 0 1 11 21 31 41 51 Carboniferous Eocene UNDEVELOPED DISCOVERIES DISCOVERED RESOURCE REMAINS – needs to be drafted 58 DISCOVERIES potential unrisked resource of 514 mmboe Average size 10 mmboe DISTRIBUTION BY SIZE 5 10 20 50 100 250 500 1000 DISTRIBUTION BY PLAY OIL MMB GAS BCF

  10. mmboe 600 400 200 0 1 101 201 301 401 501 Devonian Eocene UNDEVELOPED PROSPECTS DISCOVERED RESOURCE REMAINS – needs to be drafted 518 PROSPECTS potential unrisked resource of 22655 mmboe Average size 44 mmboe DISTRIBUTION BY SIZE DISTRIBUTION BY PLAY 5 10 20 50 100 250 500 1000 VINTAGE OF MAPPING OIL MMB 2005-2009 291 pre-2000 169 GAS BCF 2000-2004 58

  11. DISCOVERIES – total resource & discovery count Sum of mmboe Sum of mmboe Rotliegendes 800 DISCOVERYRESOURCE 120 100 Jurassic 600 Gas mmboe 80 Tertiary Oil mmbbls 400 60 40 200 20 0 0 CNS SNS NNS WOS WOB Eocene Triassic Zechstein Palaeocene Rotliegendes Upper Jurassic Middle Jurassic Carboniferous Lower Cretaceous Upper Cretaceous Count – by AREA Count – by PLAY 30 DISCOVERY COUNT Rotliegendes 20 25 15 20 UJ 15 10 10 5 5 0 0 Eocene Triassic Zechstein Palaeocene Rotliegendes CNS SNS NNS WOS WOB Carboniferous Upper Jurassic Middle Jurassic Upper Cretaceous Lower Cretaceous

  12. PROSPECTS – total resource & prospect count Sum of mmboe Sum of mmboe 12000 PROSPECT RESOURCE 8000 Jurassic 8000 6000 Gas mmboe Oil mmbbls Tertiary 4000 4000 2000 0 0 CNS WOS WOB SNS NNS Triassic Eocene Jurassic Permian Devonian Palaeocene Carboniferous Lower Cretaceous Upper Cretaceous Count - AREA PROSPECT COUNT Count - PLAY 250 200 Jurassic 200 150 150 Permian 100 100 50 50 0 0 CNS SNS WOS WOB NNS Eocene Permian Jurassic Triassic Devonian Palaeocene Carboniferous Lower Cretaceous Upper Cretaceous

  13. AVERAGE SIZES Average by AREA (mmboe) Average by PLAY (mmboe) 30 Triassic DISCOVERY SIZES 25 20 MJ Tertiary 20 15 Tertiary 15 10 10 5 5 0 0 NNS WOS WOB CNS SNS Eocene Triassic Zechstein Palaeocene Rotliegendes Carboniferous Upper Jurassic Middle Jurassic Upper Cretaceous Lower Cretaceous Average by AREA (mmboe) Average by PLAY (mmboe) PROSPECT SIZES 140 150 120 Tertiary 100 100 Tertiary 80 Cretaceous 60 50 40 20 0 0 WOS WOB CNS NNS SNS Eocene Permian Jurassic Triassic Devonian Palaeocene Carboniferous Lower Cretaceous Upper Cretaceous

  14. CONCLUSIONS In our opinion:- COMMITMENT WELLS From recent Rounds, $120 oil attracted 35 firm wells, $ 60 oil attracted 17 firm wells. Predict $70 will attract c. 20 firm wells NEW ENTRANTS The wave of new entrants peaked between 21st -23rd Round and has declined after that, despite the sharp rise in oil price – due to market saturation & lack of finance AWARDS About 250 blocks/part blocks awarded in last 3 rounds with oil price from $50 - $120. Anticipate similar “250 block” event for the 26th Round. PROMOTE 46 E&A wells have found or progressed 756 mmboe, with a 27% technical success rate (TSR) in exploration & 65% TSR in appraisal (rough estimate of $1.50 per boe to date assuming $25mm average well cost)

  15. CONCLUSIONS continued …. In our opinion:- UKCS RESOURCE Remaining UKCS potential remains resilient at c. 25 billion boe but more immediate investment appears targeted at c. 3330 mmboe with a further 22 billion boe “at risk” or short on funds (slide 7) 26th ROUND ACREAGE58 discoveries with a potential unrisked resource of 514 mmboe Average size 10 mmboe; dominated by NNS and Frontier WOS Largest discoveries lie in the Triassic, MJ and Tertiary (15 to 19 mmboe) At least 518 prospects (scouted) with a potential unrisked resource of 22,655 mmboe Average size of 44 mmboe; dominated by Frontier WOS and CNS Largest prospects lie in the Tertiary, the Cretaceous and the Jurassic (40 to 100+ mmboe) The 58 discoveries represent the remnant of E&A for the past 40 years (10 mmboe average) The 518 prospects mostly represent the results of 3D coverage and reworked acreage since 2000 (44 mmboe average)

  16. THANK YOU For an email copy of this presentation, call by our stand (#37) and leave your contact details website www.hannonwestwood.com