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Strategic Entry into Indian Oil Industry: NELP VII Action Plan

This detailed plan outlines strategies to enter the Indian oil industry through NELP VII, including objectives, budgeting, JV partnerships, and risk mitigation. It covers acquisition, exploration, JV partnerships, risk assessment, and financial projections over 7-8 years. Initial focus on onshore and shallow offshore blocks, JV negotiations, data analysis, and decision-making for block selection. The action plan includes mobilizing teams and resources, data acquisition, interpretation, economic modeling, and bid strategy development. Key deliverables involve economic metrics, hydrocarbon potential assessments, bid package preparation, due diligence, and government submission. Immediate steps include database acquisition, geophysics software, and hardware upgrades for efficient operations.

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Strategic Entry into Indian Oil Industry: NELP VII Action Plan

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  1. DSC’s entry into the E&P sector NELP VII

  2. Agenda • DS Objectives and Strategy • NELP VII Objectives and Strategy • Action Plan

  3. DS Objective & Strategy for Oil • DSC Board’s Objectives for E&P • Cash multiple of X times by which year? • IRR of 25% by Year 8 • NPV of X $ million by which year? • Strategy • Entry into Indian Oil Industry through NELP VII • Acquisition of Acreage/blocks in order hopefully to discover reserves (!) • Commitment of $200 million (?) • Over 7-8 years • Form JVs with experienced E&P Companies • Manpower, Systems & Software • Outsource first and then build In-house

  4. DS Objective & Strategy for Oil • Initial Strategy • Active JV Partner vs Sleeping Partner? • Depends on partner • Working interest • 90% [Naftogaz]; 20%? [OIL or other offshore operator] • How do we realise value? • Farm out (i.e. sell part of working interest for cash, royalty or work done) • Win revenue from production • Do we enter Production [delay the decision]

  5. NELP Objective & Strategy • Objectives • Acquire x blocks that imply capital expenditure of $y million (approx. $200 million?) • Say 5 blocks for a balanced affordable portfolio • But need to bid for say 10 blocks to win 5… • Revised estimate of $225 million on exploration for 10 blocks (8 onshore) for typical winning minimum work programmes, expended over 7-8 years (taken from analysis of NELP VI winners) • Revised estimate of additional $57m for 10 Blocks if one discovery is found on each of them (the obligatory appraisal programme in the Contract)

  6. NELP Objective & Strategy • Overall Strategy • Take a working interest of at least 80% for onshore blocks • Willing to take minority interest in offshore blocks • Joint venture with experienced Operators • Sole risk on a few ‘S’ blocks? • Active (lead) JV Partner where high working interest • Leverage other partners’ technical teams to our advantage • After award, spread risk by: • Farm-in to additional 5 blocks by trading equity and/or paying cash and/or work • Farm-out to other companies if DSC win too many blocks

  7. NELP Objective & Strategy • Detailed Strategy Analyse about 20 blocks in detail, ideally 25+ • Latter achievable if help from JV partners • Bid on 10 blocks ideally (to win 5) • Budget must cover winning all blocks (or farm out)! • Achieve maximum marks on the biddable Minimum Work Programme (MWP) • Achieve DSC’s minimum corporate hurdle IRR in fiscal package

  8. NELP Action Plan • Mobilise • Teams, hardware, software, videocoms starting now • Public information to pre-prioritise blocks for detailed study (starting now until Jan 8th) • Supplemented by contact with DGH • View online data as soon as DGH makes it available • Focus on the 38 onshore and shallow offshore • Agreement with Naftogaz (onshore) • Negotiate with OIL for offshore, but identify competitor offshore operators • OIL unlikely to collaborate on many blocks, or permit DSC significant working interest

  9. NELP Action Plan • Mumbai road show- Jan 8th • Overview; potential JVs; networking • Physical data room- hopefully Jan 10th • Objectives: finalise blocks for detailed analysis; fine tune additional data for purchase • Purchase of data packages- from Jan 10th • Interpret seismic and well data- Jan 10th to Mar 10th • Identify possible hydrocarbon accumulations on each block analysed, their range of potential sizes, and the geological probability that they exist and are economic

  10. NELP Action Plan • Above information passed to Engineering (25th Jan until 10th Mar), who then deliver: • Recovery factor • Production profile • No. of wells • Cost of wells and surface facilities and pipelines • Schedule to first oil/gas • Capital and operating cost schedules, and pipeline/processing tariffs • Economic modeling (25th Jan to 25th Mar) • Input assumptions (e.g. oil and gas price series; escalation) • Basic cash flows • PSC terms (easily adjustable) • Any additional India- specific taxation

  11. NELP Action Plan • Outputs (1st Mar to 31st Mar) • Economic metrics for various bid strategies (e.g. IRR, NPVX, EMV, Payback, maximum exposure) • Range of potential hydrocarbons in place and probability of existence • Cost of Minimum work programme for each favoured block • Outputs according to bid rules and according to reality! • Bid package suitable for submission (25th Mar to 5th Apr) • Legal and taxations final due diligence • Board presentations • Internal decision making • Submission to government

  12. NELP Immediate Steps (in order of priority) • Purchase I.H.S database ($70k approx. for min. one year, and temporary export to Buenos Aires) NOW! • Purchase/lease geophysics software ($55k to $130k, temp exp to BA) NOW! • Purchase high end hardware for $60k for temp export to BA) NOW! • Review existing video conferencing hardware for compatibility and purchase two units for temp exp to BA and UK for $60k (or borrow chairman’s in London?) • Resolve data upload capability in Delhi for use of video conferencing (bonded ADSL?) • Purchase/lease other software ($265k to $500k) for temp exp to BA • Identify Indian academic to advise on petroleum geology of offered Blocks.

  13. NELP Cost Estimate of Exploration and Appraisal Work Programmes (based on NELP VI winning bids)

  14. Cost Estimate of Bidding Process

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