EFTA Document EFTA01367341

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),„ have remained key themes in the UKCS... C20 C16 f CO% I CH t12 ?CS (10 [6 C2 1 1 1 I I 45% • 55% to CO% CO 40% 2004 2005 3:06 3:07 ]001 2009 330 20112012 333 —Av Ostro Col pet Obi Sas DELL, LK 0 f and DM Ds** Ban 2014 ProSon Orkisocy Figure 38: However, in Norway Opex (SUSD/boe) inflation has been modest and declined in 2014 on exchange rate tailwinds. Jr: •aart• sir• ea, atba /pia •wrree• at r (ea, Sots basS ant Stogie Psis Soros Deutsche Bank Securities Inc. • ww runts,. • “%scsel Figure 37. ...Leading to reductions ill near. term production estimates amidst the tall in crude prices SO - 600 1 700 24:0 ICO 11 2015 2016 2017 2018 2019 2020 colt:CS0c (UK 01 sod 11..) • Month 2014 0LIKCEIC. (WC 01 010 GM • 1Alon 2015 Scutt DEC, UK Ward clet CMISIOW SW* Figure 39! And non-development spending on currently producing fields represents -50% of current field capex CcloceecieN -440 Sam Ostler St Swolo Sacra Dayeare Page 23 CONFIDENTIAL - PURSUANT TO FED. R. CRIM. P. 6(e) DB-SDNY-0058874 CONFIDENTIAL SDNY_GM_00205058 EFTA01367341