IFRS Conference Amsterdam 2008 1

IFRS Conference Amsterdam 2008

1

global energy sector specialists

IFRS Extractive Industry - Investors’ Perspectives Oil & GasJune 25, 2008


connected, responsive, insightful

LONDON5 Investment Banking Professionals5 Acquisitions & Divestitures Professionals13 Global Equity Capital Markets Professionals

BUENOS AIRES1 Investment Banking Professional1 Acquisitions & Divestitures ProfessionalCALGARY

12 Investment Banking Professionals22 Acquisitions & Divestitures Professionals22 Global Equity Capital Markets Professionals

HOUSTON4 Investment Banking Professionals27 Acquisitions & Divestitures Professionals

DENVER14 Global Equity Capital Markets Professionals

INVESTMENT BANKINGMergers & AcquisitionsStrategic AdvisoryEquity UnderwritingFairness Opinions

ACQUISITIONS & DIVESTITURESNegotiated Sale

GLOBAL EQUITY CAPITAL MARKETSInstitutional ResearchInstitutional Sales Institutional Trading

A Global Energy Advisory Firm

Core Services


ENERGY EQUITY FINANCINGS WITH PROCEEDS OVER36

7$17 billion8

8CORPORATE ENERGY M&A TRANSACTIONS VALUED OVER

$22 billion356

ENERGY ASSET PACKAGES VALUED OVER

$15.9 billion

$15.9 billion in asset transactions356 Asset Packages

Over $22 billion in M&A transactions

88 Corporate M&A assignments53 Fairness Opinions

Research Coverage of 160 companies24 sales & trading professionals in North America and Europe

[ Follow on Private Equity ]

[ Follow-on Public Equity Financings ]

[ Asset A&D ]

[ Corporate M&A / Reorganization ]

[ Global Sales, Trading and Research ]

[ Grey Market Trading “Private Liquidity” ]

Over $675 million raised through blind pool financings

Over $1.4 billion raised in follow on private financings

Over $14.8 BillionOver 269 Financings

Market maker for numerous private companies

Over $650 million through IPOsOver $448 million through going public RTOs

[ Start-up Equity Financing ]

[ IPO/ RTO ]

Corporate Life Cycle: Complete Services

Global Experience

Over $40bn of transactions and financings in the

Western Canada Sedimentary Basin

Offshore transactional experience in the Gulf of Mexico

Recent A&D and financing experience. Over 80% of advised South American transactions in the last four years A&D expertise in North

and West Africa. E&P experience throughout

the continent

Advised on regional divestitures, global acquisitions and equity financings for numerous SE Asian players

Experience evaluating prospects

A&D execution of approx. $2bn in transactions in the

North Sea

Asset and corporate advisory experience in Oman, Syria and

Qatar. E&P Experience throughout the Middle East

Transactional and operational experience in Continental Europe (France, Germany, Ireland, Norway, Italy, Portugal)

Privatizations and financing in FSU and Eastern Europe. E&P experience in Russia and the Baltic states.

Completed more North American asset transactions

than any other dealer in 2004, 2005 & 2006

12 retained AIM E&P clientsAnd $430mm in North Sea

Financings in last two years


What do investors want?

• Information• Shareholders are the business owners• Performance measurement

• Relative and absolute

• Debt and equity investors have different priorities• Return of capital v return on capital• Different risk profiles• Debt providers want capital repayment with return• Equity investors seek growth and have higher but differing

risk profiles• Different preferences for reserves distributions

• P90 v P50• P50 v P10


BP Share Price Performance

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BP Share (GBp)

300.00

400.00

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800.00Ja

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BP Sha re (USD)

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BP vs. S& P 5 0 0

4 0 .0

6 0 .0

8 0 .0

1 0 0 .0

1 2 0 .0

1 4 0 .0

1 6 0 .0

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BP vs. FTSE

40.0

60.0

80.0

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120.0

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IFRS Conference Amsterdam 2008Royal Dutch Shell Share Price Performance

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RDSA Share (EUR)

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RDSA vs. S&P 500

30.0

40.0

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RDSA Share (USD)

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RDSA vs. FTSEurofirst 300

20.0

40.0

60.0

80.0

100.0

120.0

140.0

160.0

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Top 5 Oil Companies vs. S&P 500

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0

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300

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8

FP

CVX

XOM

RDSA

BP

S&P 500

IFRS Conference Amsterdam 2008Equity Valuation Drivers and Users

• Oil Prices• Costs • Fiscal systems

• Exchange Rates

• Interest Rates

• Company Growth Rates

• Profitability/Cost of Capital • Barriers to entry• Fade rates

• Asset Allocation• Debt/equity/alternative asset

classes/commodities

• Equity sectors relative performance

• Energy v financials?

• Hedge funds• Absolute return strategies• Long/short• Sector neutral


Why Reserves?

• Balance Sheet• A balance sheet provides an overview of a company’s

financial position at the given time• financial report showing the status of a companies assets,

liabilities and equity on a given date.• Shows costs not value• Fair Value – complex calculations

• Oil price volatility• Obsfucate the operating results?

• 70% of the market value is determined by the reserves• Source Dr. Bala Dharan Rice University submission to US House Committee on

Financial Services July 2004


Which Reserves?

• Proved Reserves - (SEC Disclosure)• Major oil companies – comparability & benchmarking• US capital market listing

• US companies• North American• Europeans• Chinese

• Smaller E&Ps• Toronto• London AIM Market• Oslo

• NI 51-101• Competent Person Reports (CPRs)

• 1P, 2P reserves• 3P • Contingent resources• Prospective resources

IFRS Conference Amsterdam 2008Reserves replacement and growth

• Importance of replacing production and growing reserves• Growth = (reserve replacement less 100%)/reserve life

-4.00%

-2.00%

0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

80% 90% 100% 110% 120% 130% 140% 150% 160% 170% 180% 190% 200% 210%


Reserve disclosure – Norsk Hydro


Pemex Reserves Disclosure 20F

IFRS Conference Amsterdam 2008Pemex Reserves Disclosure Webcast


Revus Prospective Resources Disclosure


Revus Prospective Resources DisclosureRevus Prospective Resources Disclosure


Revus Share Price Performance, 3 July 2006 – 29 September 2006

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Revus Energy (NOK)

0

10

20

30

40

50

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80

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100

03

-Jul-0

6

17

-Jul-0

6

31

-Jul-0

6

14

-Aug

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28

-Aug

-06

11

-Sep

-06

25

-Sep

-06

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

Daily V

olum

e (00

0's)

78

104

122

0

20

40

60

80

100

120

140

1985-89 1990-94 1995-1999

Source : Tristone Capital

Reserve replacement 1985-1999

IFRS Conference Amsterdam 20085 Sisters Reserve Replacement – Organic vs. All Sources

5 Sisters Reserve Replacement – Organic vs. All Sources

0%

20%

40%

60%

80%

100%

120%

140%

160%

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

Organic All Sources


5 Sisters Reserve Replacement – Oil vs. Gas

5 Sisters Reserves Replacement Oil vs. Gas

0%

20%

40%

60%

80%

100%

120%

140%

160%

180%

200%

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

Oil Gas Total

IFRS Conference Amsterdam 20085 Sisters Exploration & Development Spend

5 Sisters Exploration & Development Spend

$0

$10,000

$20,000

$30,000

$40,000

$50,000

$60,000

$70,000

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

Development Exploration

IFRS Conference Amsterdam 20085 Sisters Finding and Development Costs

5 Sisters Finding and Development Costs

$0.00

$5.00

$10.00

$15.00

$20.00

$25.00

$30.00

1999 2000 2001 2002 2003 2004 2005 2006 2007

Finding Costs F&D Costs


5 Sisters SEC NPV 10

5 Sisters NPV 10

$0

$100,000

$200,000

$300,000

$400,000

$500,000

$600,000

$700,000

$800,000

1999 2000 2001 2002 2003 2004 2005 2006 2007


5 Sisters SEC NPV 10, Future Cash Inflows & Costs

5 Sisters NPV 10, Future Cash Inflows & Future Costs

$0

$500,000

$1,000,000

$1,500,000

$2,000,000

$2,500,000

$3,000,000

$3,500,000

1999 2000 2001 2002 2003 2004 2005 2006 2007

Future Cash Inflows NPV 10 Future Costs


5 Sisters Capex per boe/d

5 Sisters Capex per boe/d

$0

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007


Selected Capex per boe/d

Selected Capex per boe/d


Which Reserves?

• Ormen Lange

• A red herring• No one conservative in SEC reserve booking• Overstates costs• Reality an $11bn investment (400 cu metres 2.4bn boe)


Conclusions

• More information on reserve and value• What is conventional/non conventional

• Oil Sands• GTL/LNG• Shale gas/shale oil

• Reserves• PRMS provides framework – reserves/resources• Economic reality

• onshore US and P50 or PD• Offshore P50

• Significant or all reserve disclosure• Top 5 reserves – top x%?• Independent reserve reports up to X size

• Increase DCF/Future cost disclosure• Aggregates or major project disclosure• Reserve booking should reflect costs to production• Costs – important in a high inflation environment

IFRS Conference Amsterdam 2008 1

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