EFTA01367341.pdf

31 May 2015 Integrated Oil US Integrated Oils Why the UK 7:3). 7 a good prow for Norwegian for global Non-OPEC) production While some have looked at the UK as a cautionary tale for both the North Sea and as an example for global Non-OPEC production, we see limited read through. Like its neighbor, the UK has seen steadily declining production despite a significant increase in capital spent. However, we see a few meaningful differences: 1) fiscal policy (including the most recent tax change) has done little to encourage exploration in the region (unlike Norway), resulting in far fewer meaningful growth projects in the development queue (check the data on this), 2) aging infrastructure has become increasingly problematic land in many cases borderline non-functioning), driving rapid increases in operating expenses and decreases in production efficiency, with increasing amounts of capital used for maintenance and asset retirement. In contrast, Norway has seen relatively limited operating cost inflation (declined in 2014), with nearly 50% of spend on producing fields free to support development drilling. Figure 315 Cost inflation and poor 1)1()ChiCtiC)11 isffiCit11),„ Figure 37. ...Leading to reductions ill near.term have remained key themes in the UKCS.. . production estimates amidst the tall in crude prices C20 SO - 600 1 C16 f CO% 700 I CH t12 ?CS (10 to CO% [6 • C2 CO 1 2004 —Av 2005 3:06 1 3:07 1 I ]001 2009 Ostro Col pet Obi I 330 20112012 333 ProSon Orkisocy 2014 55% 45% 40% 24:0 ICO 2015 2016 11 2017 1..) • Month 2014 colt:CS0c (UK 01sod1 2018 2019 2020 0LIKCEIC. (WC 01010 GM • 1Alon 2015 Sas DELL, LK 0 f andDM Ds** Ban Scutt DEC, UKWard clet CMISIOW SW* Figure 38: However, in Norway Opex (SUSD/boe) Figure 39! And non-development spending on currently inflation has been modest and declined in 2014 on producing fields represents -50% of current field capex exchange rate tailwinds. CcloceecieN -440 Jr: •aart• sir• ea, • ww runts,. atba /pia • “%scsel •wrree• at r (ea , Sots basS ant Stogie Psis Soros Sam Ostler St Swolo Sacra Dayeare Deutsche Bank Securities Inc. Page 23 CONFIDENTIAL - PURSUANT TO FED. R. CRIM. P. 6(e) DB-SDNY-0058874 CONFIDENTIAL SDNY_GM_00205058 EFTA01367341