PROMOTE

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PROMOTE - A PASSION FOR EXPLORATION
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Strategy Matrix - End games For declining
industries
Competitive in parts of the industry
Non-competitive in parts of the industry
Growth Dominance
Favorable decline conditions
Leadership or Niche
Harvest or Divest quickly
Inward investment
Unfavorable decline conditions
Divest quickly
Niche or Harvest
Exit reemploy capital
Harrigan Porter END GAME STRATEGIES FOR
DECLINING INDUSTRIES 1983 Harvard Business
Review.
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And some.
600
500
400
Average Field Discovery Size million boe.
300
200
100
0
1965
1970
1980
1975
1985
1990
1995
2000
Source UKOOA 1999 Economic Report - after Arthur
Andersen Petroview and a little extra data
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End game or New game?

• Harvesting and selective divestment by
• the traditional North Sea players
• The emergence of new entrants
• The Promote licence round initiative
• All conspired to create a very new environment

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The New Game
The prolongers
Producing assets
The Producers
Going concerns
Near developments
The providers
The Majors
Limited exploration
The promoters
Starter packs
The Promoters
Exploration acreage
Farm-in opportunities
Data assistance
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The Fourth player
Pressure to release acreage data Fallow
blocks Use it or loose it!
The Majors
Encouragement to develop Increase
activity Access to infrastructure
The DTI
The Producers
Encouragement to explore and create new
activity Access to data and acreage
The Promoters
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The playing field
The Majors Production Infrastructure Acreage
The Explorers Cash rich Risk accepting
The Developers Re-developments New developments
Divestment association
The Producers Production Infrastructure
New Open Opportunities
INVESTMENT
The Explorers Little cash Expert
Engineering Based
Exploration Based
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Forget the highs - Theyve all been drilled
To the well adapted organism - all change is bad
Richard Dawkins
Everyone clings to the past - and tries to
replicate / relive past successes
We cant solve our problems with the
same thinking that created them Einstein
Historical data, poorly constructed statistics,
out dated processes - Your doomed!
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Trap types numbers of fields
6
12
Structural
82
Combination
Stratigraphic
World wide giant fields study Structural 66 Comb
ination 12 Stratigraphic 22 Moody
Sue Stoker, Joy Gray, Peter Haile, Ian Andrews
Don Cameron BGS DTI - PETEX 2004
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Still going strong
2178 exploration wells drilled to end
2003 Technical success rates 1964-2003 average
31.1 1999-2003 average 45.4

• Commercial success rate
• 312 fields
• 14 or 1 in 7
• In reality closer to 16 or 1 in 6
• AND - in basins proper, somewhere between 1 in 4
  or 5

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The little Promoters - Who are they?

• Ex Major / Traditional North Sea oil company -
• Geoscientists
• Engineers
• Commercial analysts
• Ex contractor personnel
• Independent consultants

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The little Promoters - characteristics

• Usually expert many years of local experience
• Long memories for prospects not drilled
• Passionate about exploration
• Frustrated by lack of activity in recent years

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The Explorers - what to look for
Or if I were an investor...

• Long term experience / expertise.
• Intimate local knowledge
• Proven technical acumen
• Potential to develop new opportunities
• Realistic expectations
• Business and cultural alignment
• Management experience

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Strategies.. (the spectrum)
1 Prospect Map, and sell 10s - 100s thousands
2 Prospects Map, accept cash and a royalty
or equity carry
Multiple Prospects Map, acquire JV
partners, farm-out
Multiple Prospects Map acquire JV partners, part
farm-out part fund
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WHAM model..
Generate prospects in-house and through our
network of contacts
1
2
Acquire acreage (with aligned partners)
Refine fully develop concept
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Objectives Organic growth Exploration
focus Strategic partners Informed investors
Part farm-out and part fund via WHAM
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EXPLORE
5
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WHAM success case reserves NPV Value
Prospect / Block
Total Potential Reserves 164 MMBOE
42/21,22 Prometheus West (1)
42/21,22 Prometheus East
42/21 Carboniferous
Morpheus 48/3
Hypnos 48/3
Total Success case NPV 10 411 MM
Quad 42 43
Quad 49 53
Blocks 29/1c
Block 23/16 23
17
? 750 BCF
PROMETHEUS
0o
1o E
42
43
41
21
22
Mid North Sea High
Zech
Zech
1
1
Approximate limit of the Rotliegende Sandstones
Dowsing Fault zone
24
21
6
Wollaston

Whittle
1
MORPHEUS HYPNOS 300 - 600 BCF
3
5
1
Flamborough Head Fault zone
4
2
2
1
Ravenspurn
1
Johnston
Cleeton
54o 0
26
46
47
48
Artemis
Neptune
Minerva
Outer silverpit fault
Solepit Basin
Apollo
1
1
Hyde
Rough (offshore storage)
Hoton
6
Mercury
West Sole
DIMLINGTON EASINGTON
6
Newsham
Amethyst W
Pickerill
Barque S
Amethyst E
Mallory
54o 30
11
11
Galahad
Mordred
Excalibur
Guinevere
Lancelot
17
16
Waveney
THEDDLETHORPE
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Future success criteria
Real understanding of investment opportunities
Consolidation in to promote portfolios
Significant fiscal incentives for exploration
Development of economies of scale and scope
Cost effective operations access to resources
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Some people think football is a matter of life
and death. I can assure them it is much more
important than that! Bill Shankley
Persistence
Patience
Passion
Some people think Exploration is a matter of life
and death. I can assure them it is much more
important than that - it is a matter of life!
Positivity
Playfulness