Success Story: Prominence of Independent Oil & Gas Companies

as global players

PWC Conference, AccraOctober 17, 2013

A.B.C. OrjiakoChairman, SEPLAT Petroleum Development Company

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Disclaimer

This presentation contains forward-looking statements, particularly those regardingglobal and regional energy growth and sources of energy supply. Forward-lookingstatements involve risks and uncertainties because they relate to events, anddepend on circumstances, that will or may occur in the future. Actual results maydiffer depending on a variety of factors, including product supply, demand andpricing; political stability; general economic conditions; legal and regulatorydevelopments; availability of new technologies; natural disasters and adverseweather conditions; wars and acts of terrorism or sabotage; and other factorsdiscussed elsewhere in this presentation.

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Content

Introduction 4 - 8

The Emergence of Independents (The Nigerian Case) 9 - 12

Capacity Building 13 - 16

Success Story – The SEPLAT example 17 - 20

Conclusion 21 - 22

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The Independent Oil & Gas Companies have undoubtedly been part of the Global

Successes in the Energy Sector

There are several hundreds of Independents around the World today, but only a small

percentage of these are responsible for most of the contribution in the Global oil / gas

Supply and Demand Fundamentals

By Independents we mean those companies that are not counted among the Majors

(IOCs) or the NOC's - the so called medium to small size Producers.

For the purpose of this presentation, Global roles of these companies will be

acknowledged but with greater focus on Africa, with a good mention of our host

country Ghana. But emphasis will be on Nigeria and the corporate example will be

SEPLAT Petroleum Development Company – for obvious reason.

Introduction

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Introduction cont’d

Successes by the Independents are supported by the plethora of opportunities:

Rising Energy Demand

Other demanding investments for the Majors and NOC

Africa increasingly becoming more prominent source of oil and gas supply

o Increase in reserves and frequency of large discoveries.

o 132.4 billion barrels of oil & 513.2 TCF proved gas reserves in 2012

Rising numbers of Independent indigenous oil and gas players in the region.

Indigenous oil companies increasingly making significant contribution to national oil and

gas production / Reserves.

Indigenous companies impacting their local economies.

Asset Divestments by the IOCs

Government Policy Thrust

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6

Snap Shot: Key Oil Countries in Africa

Africa’s largest oil producer and a key member ofOPEC….

… With over 42.1 years worth of reserves (Europe& Eurasia average – 22.4 years)

BillionBarrels

Kbpd

Years

Key Oil Countries in Africa (Proved Reserves in Billion barrels)

Source: BP Statistical Review of World Energy, June 2013

12.2

47.1 4.3

1.5

12.7

37.2

1.7

2.0

1.6

Angola

Egypt

Libya

Algeria

NigeriaChad

Gabon

EquatorialGuinea

Rep. ofCongo

47.1

37.2

12.7 12.2

4.3 3.5 2.0

Libya Nigeria Angola Algeria Egypt South Sudan Gabon

2,417

1,784 1,667 1,509

295 283 245

Nigeria Angola Algeria Libya Republicof Congo

EquatorialGuinea

Gabon

86.9

50.042.1

40.7

22.3 20.0 19.4

Libya SouthSudan

Nigeria Chad Gabon Algeria Angola

3.5

1.5

Sudan

South Sudan

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Snap Shot: Key Gas Countries in Africa

… and a leading exporter of gas to Far East Asiaand the West African sub-region

Tcf

Bcf/d

Key Gas Countries in Africa (Proved Reserves in Tcf)

Source: BP Statistical Review of World Energy, June 2013

159.1

54.6 72.0

182.0

Egypt

Libya

Algeria

Nigeria

100.0

Tanzania

Mozambique

* Rovuma Basin is located offshore East Africa and straddles the territorial watersof Tanzania and Mozambique. Reserve estimates are based on majordiscoveries announced by companies operating in the region

182.0

159.1

100.0

72.054.6 44.3

Nigeria Algeria RovumaBasin*

Egypt Libya Other Africa

7.9

5.9

4.2 1.81.2

Algeria Egypt Nigeria Other Africa Libya

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Capital Spend of Independents in Africa (2010 – 2012)

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The graph above shows the capital expenditure by region for 34 small and mid-cap oil and gas companies in Africaover the last 3 years .

Capital expenditures by small and mid-cap Oil and Gas companies in Africa totaled US$39,512 billion during 2012;representing an increase of 20% from 2011 when the total reached US$32,897 billion

Source: Evaluate Energy

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The Emergence of Independents (The Nigerian Case)

ONSHORE ACQUISITION SUCCESSES BY INDIGENOUS COMPANIES - THE GAME CHANGER

SEIZING THE OPPORTUNITY IN NIGERIA E&P

Discretionary Awards & Emergence of the Indigenous Programme – Early 90s – 99

Preferential access in the bid for new acreage

- Since 2003, the Government has favoured the allocation of acreage to indigenous companies during the bid rounds

- The Nigerian Content Act (2010) specifies that Nigerian independent operators be given first consideration in the award of oilblocks

Marginal field development programme

- Fields left fallow by the IOCs are farmed out to indigenous E&P companies , who are then granted preferential fiscal incentives

- 24 “marginal” licences were awarded in 2002 and a number of them have begun production – Platform, MidWestern Niger Delta

- Upcoming round expected to feature fields with large reserves

Preferred buyers in onshore and shallow waters IOC asset divestments

- Local companies / local company led-consortiums are expected to continue being the beneficiaries of divestitures ofonshore/shallow offshore oil blocks by the IOCs who favour deep-water acreage because of their natural advantage in terms oftechnology, experience and financial capacity

- Divestments driven by portfolio rationalization rather than underlying economics

Production Spilt (MM bbl)

Source: company data, IHS Herold(*) $/bbl based on recoverable oil resource estimated by RPS (Mid Case) (source: company press release). Gas reserves: estimate(**) OMLs 60-63 are predominantly gas. Acquisition also include offshore exploration assets and a stake in Brass LNG project

EV/2P

542 463 531 522

198 272320 292

28 45

4653

2008 2009 2010 2011NNPC/IOC JV Indigenous (Incl. NPDC) Others

4.9 4.6 4.8

1.7 -2.5

- -

4.4

8.4

8.1

1.2

4.1

OM Ls 4,

38, 41

OM L 42 (*) OM L 26 OM L 40 OM L 30 OM Ls 60-

63 (**)$/bbl $/boe $/bbl average $/boe average

4.8

Indigenous companiesare viewed as beingpivotal to thedevelopment of Nigeria’soil sector and thegovernment has showncommitment to promotingindigenous participationin E&P, institutingpolicies favourable toindigenous companies

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10

11

12

Increasing ownership of onshore acreage by indigenouscompanies (Nigeria)

Since early 1990s the government ofNigeria has encouraged localparticipation in the oil & gas sectorinitially through discretionary Awards

Nigerian companies predominantlyfeatured in the oil licensing rounds in2000, 2005, 2006 and 2007, biddingfor onshore and offshore acreage,and current policies are expected tocontinue to provide support for thistrend

Additionally, recent divestments fromonshore assets by the IOCs to focuson offshore operations havebenefited the indigenous players

Indigenous companies (ex-NNPC/NPDC) now account forapproximately 6% of crude producedin Nigeria

(*) Oando Energy Resources’ economic interest in the assets is subject to completionSPDC: Shell Petroleum Development CompanyCNL: Chevron Nigeria Limited

OML 42Neconde

OML 26FHN

OML 34Niger Delta OML 30

Heritage/ Shoreline

OML 38SEPLAT

OPL2007Conoil

OML 41SEPLAT

OML 40Eland / Starcrest

OML 98Pan Ocean

OML 4SEPLAT

OPL 275CPC

Gulf of Guinea

OPL 283Centrica

OML 111NPDC

OPL 205Summit Oil

OPL 298NPDC

OPL 2006Sterling Global

BONNY

OML 59Conoil

OML 141Emerald

OML66NPDC

BRASS

FORCADOS

QUA IBO

ESCRAVOS

OPL233

OPL283ENI

OPL227EXPRESS

OPL287

OML109ATLAS

OML 62

OML 63

OML 61

OML 60

OML124SINOPEC

OPL290CONOIL

OML112 AMNI

OPL 234MONI PULO

OML 103Conoil

OPL 274Sahara

OML96Dubri

Warri

PortHarcourt

Other non-Indigenous Ownership

Other Indigenous Companies

Oil terminal

LNG terminal

Seplat (OPERATOR)

AGIP/Oando Energy Resources*

OML 95CNL JV OML 49

CNL JV

OML91

OML 89CNL JV

OML 79SPDC JV

OML 88CNL JV

OML 86CNL JV

OML 43SPDC JV

OML 46SPDC JV

OML 35SPDC JV

OML 32SPDC JV

OML 22SPDC JV

OML 58Elf

OML 17SPDC JV

OML 11SPDC JV

OML51

OML 13SPDC JV

OML 70Mobil

OML 99Elf

OML 72SPDC JV

OML 18SPDC JV

OML 33 & OML 29SPDC JV

OML 25SPDC JV

OML 24SPDC JV

OML 55CNL JV

OML 53CNL JV

OML 21SPDC JV

OML 20SPDC JV

OML 28SPDC JV

OML 31SPDC JV

OML 36SPDC JV OML 23

SPDC JV

OML 74SPDC JVOML 77

SPDC JVOML 71SPDC JV

OML 52CNL JV

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Divestment by IOCs (Nigeria)

Other countries: government rounds have also opened upopportunities

Raising own finances and growing indigenous technicalcompetence.

From Carried Interest to Operatorship- AMNI, SHEBAH

From Marginal Fields to Acquisitions

Platform / Seplat, NPDR & WSP/ND West.

Marginal Fields Program a huge success

8 Operator/producers, only 2 TP’s

2 more closely behind.

5-fold reserve growth in BOE.

A new group of serious players to build on.

20% domestic production capacity (Crude Oil & Gas) by endof 2016 now looks achievable

CAPACITY BUILDING

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Contribute to the nation’s production / reserve build-up aspirations.

Fill some critical value gap.

Participants benefit as they build their businesses through value

creation.

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Why Indigenous Participation?

Growing numbers of indigenous technical expertise and business entrepreneurs

25 Indigenous oil companies contribute about 10% of Nigeria total production of2.5 million bpd – STILL GROWING.

Breaking new grounds and integrating value:-.

Monetisation of gas.

Small scale refining.

Better able to handle local communities.

Projections:

Next 5 years Indigenous companies will contribute 20% of the nation’s oil and

40% of domestic gas supply (Nigeria).

They are likely to be responsible for 100% supply for domestic refining by 2020.

IMPACT OF THE INDEPENDENTS

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Unlock Small-Sized Reserves.

Feed the Domestic Market.

Long-term domestic energy security will come from indigenous companies

LPG (NDPR, Energia & Platform).

Natural Gas (Seplat, ND West & NPDC).

Refining (Dangote as frontier investor).

WHERE ARE THE WIN-WINS?

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Success Story (The SEPLAT Example)

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“To be a world class energycompany delivering premiumvalue to all stakeholders”

Four Key Factors of These Successes (TheSEPLAT Example)

Solid Corporate Governance & Best Practices Experience & Diverse Board

Strong Management Team and High Ethical Standards

Partnership & Stakeholder Value Creation The SEPLAT Community Engagement Model

Pro activity

Capacity Building & Empowerment

Inclusiveness / Participatory relationship

Clearly Defined Achievable Growth Strategy – The WinningStrategy Organic Growth

Accretive Acquisition

Gas Commercialisation

Verifiable Proven Track Record – Not by Chance18

SEPLAT in the COMMUNITY

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GMOU SIGNING CEREMONY

SEPLAT BASE OFFICE, SAPELE

SEPLAT in the COMMUNITY

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SKILL ACQUISITION SAFE MOTHERHOOD

EYE CAN SEE

SEPLAT PEARLS QUIZWATER PROJECTS

Security risks and political tensions.

Export pipelines and theft factor

Lack of enabling business infrastructure

Access to Finance & Cost Of Capital

National Governments

Policy Inconsistencies / uncertainties

Provision of enabling institutional, legislative and security conditions

Clear deliverables

Clear policy guidelines on processes and monitoring.

CHALLENGES

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Indigenous Independent companies will increasingly continue to playsignificant roles:-

Increasing oil production and reserves

building local capacities and expertise.

Improving economies

More access to Assets by the Independents

Bid rounds anticipated

IOCs divestments & Asset rationalization

Collaboration between independents and National oil companies

Shared values/objectives

Win/win partnerships as part of the process

Clear policy guidelines on processes and monitoring

Conclusion…

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References

Evaluate Energy

Africa Oil & Gas

Petroleum Intelligence Weekly

BP Statistical Review of World Energy, June 2013

Company data, IHS Herold

Crude Continent – Duncan Clarke, 2008

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Thank you for your attention

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