CMS Energy - Your Business in Africa

Africa: the Investment Case for Oil & Gas

Presenter: James Spinney, Director of Corporate Finance

Introduction to Strand Hanson

Independent, entirely management owned corporate finance advisory firm

Traditional merchant banking model allows investment to be made from our own balance sheet

Award winning M&A adviser, having been involved in transactions with an aggregate value of £6.0 billion in recent years

Leading nominated adviser on the AIM Market in the fields of oil & gas and metals & mining and also the market leader in advising African businesses

Regulated to act as:

Sponsor to the Official List;

Nominated adviser to the AIM Market;

Takeover panel approved adviser; and

Corporate adviser to the ISDX Growth Market

Cross-border specialists with an office in South Africa and a global network of advisers and consultants

Overview of Strand Hanson Africa Ø Regional office established, in November 2008, in Cape Town, South Africa

§ Under the leadership of a senior Strand Hanson Director

§ Team now comprises both South African and UK nationals

Ø Enables Strand Hanson to:

§ Service clients with assets across Africa through direct communication with, and ready access to, key

executives

§ Expedite due diligence processes on African assets

§ Source both transaction opportunities for listed clients (particularly in the Oil & Gas, Mining and Natural

Resource sectors) and alternate pools of capital for both listed and private clients

§ Develop key relationships with local market participants

§ Advise on cross-border transactions both intra-Africa and between Africa and other regions, particularly Asia

§ Identify early stage investing opportunities for direct investment by Strand Hanson’s merchant banking

operations

§ Gain exposure to fast-growing African economies

Ø South Africa office is now a key hub for Strand Hanson’s full range of services

Advantages of doing business in Africa

Common languages

Similar timezones

Shared legal principles

Vast natural resources

Changing governmental attitudes to external investment

The need for sophisticated financial and technical expertise

Making indigenisation work

Challenges to doing business in Africa

Disputes over title

Lack of formalised agreements

Retrospective application of new laws

Lack of political accountability

Less developed regulatory frameworks

Indigenisation

Poor infrastructure

Oil and Gas in Africa – AIM Listed Companies

Source: London Stock Exchange

BOWLEVEN £167m

ELAND OIL & GAS £150m

FALCON OIL & GAS £102m

TRINITY EXPLORATION &

PRODUCTION £96m

LEKOIL £92m

STERLING ENERGY £75m

MADAGASCAR OIL £54m

CHARIOT OIL & GAS £39m

WENTWORTH RESOURCES £37m

TOWER RESOURCES £34m

SIRIUS PETROLEUM £28m

OTHER £97m

AIM oil and gas companies by market capitalisation, total: c. £1bn

Oil and Gas in Africa - Production & Reserves

Production

Source: BP World Energy Review 2013

0%

2%

4%

6%

8%

10%

12%

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

1980 1985 1990 1995 2000 2005 2010 2015

% o

f g

lob

al

pro

du

cti

on

Pro

du

cti

on

Production - mboe/d % of global production

0%

2%

4%

6%

8%

10%

0

50

100

150

200

250

1980 1985 1990 1995 2000 2005 2010 2015

% o

f g

lob

al

reserv

es

Reserv

es

Reserves - bnboe % of global reserves

Reserves

Case studies Case studies: Lekoil Limited

Deal type: AIM IPO of Lekoil Limited (“Lekoil” or the “Company”), co-terminous with the completion of a significant acquisition Deal size: Total fundraise of US$50 million resulting in a market capitalisation of approximately US$110 million on admission to AIM

In early 2013, Strand Hanson was engaged by Lekoil, the oil & gas company established to acquire assets in sub-

Saharan Africa and in particular Nigeria, to advise on the acquisition of an ultimate 30 per cent. economic interest in OPL310, offshore Nigeria from Afren PLC and simultaneous admission to trading on AIM. OPL310 is an early

stage Nigerian oil & gas asset, located in the Dahomey-Benin Basin, with significant potential. Admission to trading

on AIM occurred in mid-May 2013.

Strand Hanson acted as nominated and financial adviser to Lekoil and worked alongside Mirabaud Securities LLP and

Revere Securities Corp., the company’s Broker and US placing Agent, to co-ordinate the largest H1 2013 AIM IPO, overcoming the challenges faced by a multi-jurisdictional transaction and significantly raising the profile of AIM in

one of Africa’s rapidly growing and resource rich economies.

Following the announcement of positive drilling results on OPL310, and the intention to acquire a 6.502 per cent.

participating interest in the adjacent block OML113, Lekoil successfully raised a further US$20 million in July 2013 to progress its drilling programme.

Despite the complex jurisdictional issues, the listing was completed on an accelerated basis in order to secure the

acquisition prior to the commencement of drilling on OPL310.

Case studies: Sirius Petroleum PLC Case studies

Deal type: Introduction to Sirius Petroleum PLC (“Sirius” or the “Company”) of a prepayment facility and exclusivity off-take agreement with Glencore Energy (UK) Limited (“Glencore”) Deal size: $65 million

Sirius has an interest in a previously producing OPL, shallow off-shore Nigeria, in addition to options to acquire

interests in two further OMLs.

The Company planned to undertake work to recommence production of its existing asset and exercise the options

that it has. In May 2013, Sirius entered into an agreement to funding from Glencore, such that it could achieve its

short term objectives and further, to guarantee a market for the oil it produces in the future.

Nigeria

Madagascar

Botswana

Namibia

South Africa

Ethiopia

Mozambique

Cameroon

Zambia

Tanzania

Ghana

Mauritania

Strand Hanson: African experience

Strand Hanson has extensive experience in Africa, with clients and Investments across the continent, as set out below:

Ethiopia

Mali

Algeria

Liberia

Madagascar

Botswana

Namibia

South Africa

Mozambique

Cameroon

Zimbabwe

Zambia

Tanzania

Mauritania

Nigeria

Tunisia Egypt

Chad

Gabon

Ghana

Benin

Investments Experience

Strand Hanson Limited is authorised and regulated by the Financial Conduct Authority.

Strand Hanson Limited Registered in England. Company no. 2780169

Registered office 26 Mount Row, London, W1K 3SQ

Strand Hanson Limited

26 Mount Row London W1K 3SQ

Tel: 020 7409 3494 Fax: 020 7409 1761

Mail: [email protected]

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Angola & Mozambique | Energy Market

October 2013

Angola

• Country Area: 1,246 thousand km2

• Estimated Population (2012) : 20 M

• Country Risk: B

Angola

8,4% of ECONOMIC GROWTH IN 2012

ENERGY +23,9%

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Angola at a glance

Main Clients and Suppliers

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Angola at a glance

Export % Import %

Fuels and mineral oils 97,4 Machines and

mechanical equipment

13,6

Ships and Boats 1,4 Ships and Boats 8,3

Precious stones and precious metals

0,8 Machines and electric equipment

7,8

Machines and

mechanical instruments

0,1 Cars and Parts 6,3

Iron and Steel 0,1 Iron and Steel Products 6,3

Main Products

Highlights on Angola

� Ambitious reforms - improving governance and modern legal system

� Difficult business environment - lack and poor functioning of institutions,

including the judiciary

� Still an important investment option for companies looking for new

challenges and open to participating in the country development plan

Key Sectors

Agriculture Building InfrastructureIndustrial

Activity

Mining Tourism

Angola – Energy Market - Background

− Onshore drilling for oil began in 1915;

− First commercial discovery in the Cuanza Basin in 1955;

− Angola is now the second biggest oil producer in Sub-Saharan Africa;

− The Angolan government, through the public concessionaire (Sonangol),

has granted rights to conduct petroleum operations in relation to 33/34

blocks to companies including BP, Chevron, Eni, Exxon, Statoil and Total;

− The country’s first LNG plant is already being developed near Soyo;

− The downstream sector – refinery and distribution of the products derived

from crude oil – remains underdeveloped;

− Recent deals entered into in relation to the pre-salt blocks in the Kwanza

Basin - hopes that the Angola pre-salt will bring exploration success to

match that in Brazil;

Angola – The latest in the Energy Market

OIL & GAS

− Sonangol recently announced that is expected later this year and during the

year of 2014, the completion of an onshore licensing round for oil

exploration blocks in Kwanza and Lower Congo Basins;

− 10 new blocks will be tendered;

− Specific legislation for such types of operations has been enacted;

− Preferable treatment and great incentives for Angolan companies may be

adopted – good opportunity for partnerships with local companies;

− 2 million barrels of oil a day by 2015 are expected;

Angola – The latest in the Energy Market

RENEWABLE ENERGY

− 190 MW of small hydro capacity addition announced by the Angolan

Government;

− The hydrographic potential of Angola, together with the two Congos,

represents more than half of the water resources of the African continent;

− 30 million litres of ethanol per year capacity addition announced;

− Eaglestone NV (financial services platform and an international private

equity business) intends to invest as much as 40% of a planned 100-million

Euro renewable energy fund in projects in Angola and Mozambique;

− Angola may also develop wind and solar power within the next 5 years;

Mozambique

• Country Area: 744,9 thoushand km2

• Estimated Population (2013) : 22,9 M

• Country Risk: BB

Mozambique

7,3% of ECONOMIC GROWTH IN 2012

EXTRACTIVE

INDUSTRY

35,2%

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Mozambique at a glance

Main Clients and Suppliers

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Mozambique in a glance

Export % Import %

Aluminium 45,1 Fuels and mineral oils 23,6

Fuels and mineral oils 16,3 Machinery and

mechanical appliances

14,0

Fruit 7,1 Aluminium and

aluminium products

11,0

Tobacco 5,0 Cars and Parts 10,2

Other ore 4,9 Cereals 4,9

Main Products

Highlights on Mozambique

� Ambitious reforms – tax, tourism, foreign trades seeking modernisation

� Difficult business environment - lack of qualified work force

� Still an important investment option for companies looking for new

challenges and open to participate in the country development plan

Key Sectors

Energy and

MiningTransports Comunications Tourism

Industry Financial

Mozambique – Energy Market - Background

− The first gas discoveries were made in the 1960s

− Production began in 2004

− In last 10 years there has been an enormous growth of gas production

− Often described as the next epicentre for global natural gas

− Anadarko’s major gas development with a LNG liquefaction plant

Mozambique – Energy Market Update

OIL & GAS

− Recent discoveries natural gas show that Mozambique could become one

of the largest global exporters

− Specific LNG legislation is being prepared

− First natural gas production contracts executed in 2014. Production in 2018

− One of world’s largest unexploited inland coal fields – projected to be within

the world’s top 10 producers by 2015

− Government recently announced the construction of two petroleum

terminals in Palma and Tete to guarantee supply to coal and gas projects

Mozambique – The latest in the Energy Market

RENEWABLE ENERGY

− The first solar panel factory in the country (Beluluane Industrial Park -

Maputo) will start operating next month, annual production target of 5MW

− Mozambique launched first wind power tender in 2012

− Government has been introducing incentives for investments in this sector

− Potential for biofuels is still being explored

Angola & Mozambique – Energy Market - Top Tips

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Contacts

CMS RPA

Patrick Dewerbe

[email protected]

Rua Sousa Martins, 10

1050-218 Lisbon, Portugal

Telephone: + 351 21 095 81 00

Fax: + 351 21 095 81 55

www.cms-rpa.com

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