DEVEX UKCS Discoveries: Present and Future Potential Developments. Dave Moseley, Hannon Westwood

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1 DEVEX 2015 UKCS Discoveries: Present and Future Potential Developments Dave Moseley, Hannon Westwood

2 Agenda Context - Exploration and Developments, Past and Present The Current UK Discovery Pool Key Economic Hurdles Opportunities Potential Future Developments Break Even Analysis Conclusions

3 Context: UK Exploration and Developments Exploration Discoveries NTDs Under Dev. Production

4 Undeveloped Discoveries 2.3 bnboe 3.4 bnboe NTDs Discoveries + 2 bnboe Total undeveloped resource base of c. 8 bnboe in NTDs and discoveries 51 NTDs totalling 2.3 bnboe, with nine over 50 mmboe 426 discoveries totalling 5.6 bnboe, with 18 over 50 mmboe, 61 with mmboe and 300+ with < 20 mmboe

5 Economic Hurdle 1: Size NTDs Discoveries Pool cut off at 45 mmboe as indicative of standalone both Western Isles (under development) and Darwin (NTD) are standalone with reserves of 38 and 30 mmboe respectively 11 NTDs (1.7 bnboe) and 19 discoveries (1.6 bnboe) are potential standalone developments Note, of the 11 NTDs, the majority have development issues

6 Economic Hurdle 2: Infrastructure CNS Stranded Discovery Resources (mmboe) All CNS discoveries with resources of 0 45 mmboe assigned to the closest hub Once the hub s prime field closes, discoveries that attach to this are considered stranded Remains Unstranded Other development options may be available for some discoveries This is designed to illustrate the time criticality of current infrastructure Analysis based on hydrocarbon type and proximity of hub 70% Stranded by 2035 As more hubs close, discoveries have greater tie-back distances and therefore other hurdles need to be crossed size

7 Economic Hurdle 3: Ownership (Funding) Currently, 133 companies in the UK increased by 14 in 2014, with 12 coming from the 28 th Round HW Tier Diagram ranks these companies based on their net remaining reserves under development or producing Majority of companies in Tiers 4, 5 and 6 struggle with funding even for E&A wells Therefore, many potential developments are slow, or even fail, to progress Compounded by a stagnant A&D market much available but very little is moving (currently) Companies can t monetise / divest assets

8 Economic Hurdle 3: Ownership (Funding) Cont. Majority of NTDs (40) operated by Tiers 1 3. Just 11 in Tiers 4 and 5 and none in T6 an inability to fund developments despite holding 50% of all UK licence holders (75) Three NTDs in T5 Hurricane (Lancaster, 207 mmboe) and Xcite (Bentley, 257 mmboe) are 100% and require funding to progress 72 discoveries operated by Tiers 4 6. Some likely uneconomical, others not (nine >20 mmboe) but lack funding to progress

9 Opportunities NTDs Heavy Oil Discoveries Normal HPHT Tight Gas Future Licence Rounds (Unlicenced) 140 Discoveries 140 discoveries on currently unlicensed acreage total discovered resource of c.1.4 bnboe Four discoveries with 45 mmboe or more (287 mmboe) 50 discoveries with over 10 mmboe, amounting to over 1 bnboe resources. 30 (500 mmboe) with normal reservoir Asset Acquisitions (Licenced) 225 Discovery Interests 225 individual company NTD and discovery interests considered non-core (require to divest or dilute equity) Therefore 2.8 bnboe potentially available for acquisition Cut off at 25% equity and 10 mmboe (to ensure a material pool) leaves 2.2 bnboe available for acquisition

10 Potential Cluster Developments Quad 15 contains 38 discoveries - combined reserves of c. 500 mmboe Average size is 13 mmboe, largest, Perth (NTD), is 45 mmboe Heavy Oil Normal HPHT 23 discoveries over 10 mmboe with 430 mmboe reserves 33 discoveries (415 mmboe) have normal reservoir conventional Tertiary and Jurassic plays Appraisal required which will reduce but not eliminate the pool Plus Maersk s Drumtochty Discovery, drilled in 2015 commerciality is being assessed Key is collaboration to progress logistically stranded resources

11 Break Even Analysis

12 The Hurdle Hub Appraisal Results Size Infrastructure Time Oil Price Discovery Govt. Incentives A&D Activity Ownership Funding Ownership Collaboration Licence Rounds

13 Questions..? Hannon Westwood Brian Nottage 7 Queens Gardens Aberdeen AB15 4YD Tel: +44 (0) briannottage@hannonwestwood.com Hannon Westwood Karen Alford 100 Brand Street Glasgow G51 1DG Tel: +44 (0) karenalford@hannonwestwood.com