GLOBAL CHINESE FINANCIAL FORUM SHANGHAI CONFERENCE 2009 Canadian Natural Resources M&A Environment Trends and Outlook Brian Imrie Partner, KPMG Corporate Finance, Canada

1 © 2009 KPMG, a Canadian limited liability partnership, is part of the KPMG International network. KPMG International is a Swiss cooperative. All rights reserved. The KPMG logo and name are trademarks of KPMG International. Canadian Natural Resources M&A Environment M&A Activity Overview Global M&A has fallen dramatically from the 2007 peak and activity has continued to decline in 2009 M&A activity has rebounded modestly in Canada in 2009 Canadian portion of global total is significant and has risen in recent years Source: Bloomberg

2 © 2009 KPMG, a Canadian limited liability partnership, is part of the KPMG International network. KPMG International is a Swiss cooperative. All rights reserved. The KPMG logo and name are trademarks of KPMG International. Canadian Natural Resources M&A Environment Importance of Natural Resources in Canada Natural Resources are the leading components of Canadian equity markets and M&A Source: Standard and Poor’s (as at November 23, 2009)

3 © 2009 KPMG, a Canadian limited liability partnership, is part of the KPMG International network. KPMG International is a Swiss cooperative. All rights reserved. The KPMG logo and name are trademarks of KPMG International. Canadian Natural Resources M&A Environment Natural Resources M&A Mining M&A activity has declined since 2007 with fewer mega deals Energy M&A activity has declined less Source: MergerMarket

4 © 2009 KPMG, a Canadian limited liability partnership, is part of the KPMG International network. KPMG International is a Swiss cooperative. All rights reserved. The KPMG logo and name are trademarks of KPMG International. Canadian Natural Resources M&A Environment Premiums Paid Analysis The average premium paid in public natural resources takeovers in this period has been 24.7% The premium paid in the energy industry has been lower because of the greater number of “mergers of equals” with little or no premium, i.e. “at the market” transactions Source: MergerMarket

5 © 2009 KPMG, a Canadian limited liability partnership, is part of the KPMG International network. KPMG International is a Swiss cooperative. All rights reserved. The KPMG logo and name are trademarks of KPMG International. Canadian Natural Resources M&A Environment Cross-Border Transactions Cross-border transactions continue to represent a majority of Canadian M&A by Value Significantly higher than US Market Source: MergerMarket

6 © 2009 KPMG, a Canadian limited liability partnership, is part of the KPMG International network. KPMG International is a Swiss cooperative. All rights reserved. The KPMG logo and name are trademarks of KPMG International. Canadian Natural Resources M&A Environment Importance of Foreign Acquirors of Natural Resources Companies Source: MergerMarket Non-Canadian acquirors play an important role in takeovers of Canadian natural resources companies Proportion is higher for mining companies, given the more global nature of the assets and the high degree of consolidation activity in Western Canadian conventional oil and gas

7 © 2009 KPMG, a Canadian limited liability partnership, is part of the KPMG International network. KPMG International is a Swiss cooperative. All rights reserved. The KPMG logo and name are trademarks of KPMG International. Canadian Natural Resources M&A Environment Consideration Used in Acquisitions Cash is used to acquire natural resource companies in the majority of transactions However, acquirors regularly offer equity to target shareholders, or a combination of cash and equity Source: MergerMarket

8 © 2009 KPMG, a Canadian limited liability partnership, is part of the KPMG International network. KPMG International is a Swiss cooperative. All rights reserved. The KPMG logo and name are trademarks of KPMG International. Canadian Natural Resources M&A Environment Notable Deals - Mining Decline in Canadian mining M&A values in 2009 has been driven by a reduced number of mega deals  Decline of commodity prices  Lower equity market values for acquirors  Reduced access to capital Source: MergerMarket 2006 Barrick Gold/Placer Dome Xstrata/Falconbridge Vale/Inco $10 B $24 B $18 B 2007 Rio Tinto/Alcan$44 B 2008 Teck Resources/Fording Canadian Coal Trust$14 B 2009 CIC/Teck (17% stake)$1.7B

9 © 2009 KPMG, a Canadian limited liability partnership, is part of the KPMG International network. KPMG International is a Swiss cooperative. All rights reserved. The KPMG logo and name are trademarks of KPMG International. Canadian Natural Resources M&A Environment Chinese Mining Acquisitions In the last several years, Chinese acquirors have been very active in Canada Targets have been multiple minerals: nickel, coal, gold, zinc, copper  Exploration, development and production  100% ownership/minority control/portfolio investment 2009 Jilin Jien Nickel Industry/Canadian Royalties CIC/Teck Resources (17% stake) $137 MM $1.7 B 2008 Jinduicheng Molybdenum/Yukon Zinc China National Gold Corp/Jinshan Gold Mines (42% stake) Jinchuan Group/Tyler Resources China Minmetals & Jiangxi Copper/Northern Peru Copper $120 MM $200 mm $175 MM $410 mm Source: MergerMarket

10 © 2009 KPMG, a Canadian limited liability partnership, is part of the KPMG International network. KPMG International is a Swiss cooperative. All rights reserved. The KPMG logo and name are trademarks of KPMG International. Canadian Natural Resources M&A Environment Notable Deals – Energy 2009 Energy has been the most active sector in Canadian M&A in 2009  Top 2 transactions and 5 of the top 10  Foreign companies have been active buyers  Ongoing domestic consolidation also Top Energy Deals  Suncor Energy/Petro-Canada - $20 B  Sinopec/Addax Petroleum - $10 B  Korean National Oil/Harvest Energy Trust - $5 B  Petrobakken Energy/Tristar Oil & Gas - $3 B  Abu Dhabi Investment Authority/Nova Chemicals - $2 B Source: MergerMarket

11 © 2009 KPMG, a Canadian limited liability partnership, is part of the KPMG International network. KPMG International is a Swiss cooperative. All rights reserved. The KPMG logo and name are trademarks of KPMG International. Canadian Natural Resources M&A Environment Chinese Energy Acquisitions Chinese acquirors have also been active in the mining sector Greater focus historically on companies with large international reserves 2009 PetroChina/AOSC Oil Sands Project (60%) Sinopec/Addax Petroleum CNPC/Verenex Energy $1.9 B $10 B $325 MM (pending) 2008 China Petroleum & Chemical/Tanganyika Oil $1.8 B 2005 CNPC International/PetroKazakhstan $3.9 B Source: MergerMarket

12 © 2009 KPMG, a Canadian limited liability partnership, is part of the KPMG International network. KPMG International is a Swiss cooperative. All rights reserved. The KPMG logo and name are trademarks of KPMG International. Canadian Natural Resources M&A Environment Unsolicited or “Hostile” Bids in Canada Most public company takeovers in Canada are friendly, negotiated transactions  Exclusive negotiations with single buyer or a controlled auction of company However, Canadian takeover regulations and practices make Canada one of the easiest jurisdictions globally to successfully launch an unsolicited or hostile takeover bid  Regulators in Canada want shareholders to decide on merits of a takeover bid  Majority of Canadian hostile transactions result in a change of control  Different from US “Just Say No” defence Average ultimate takeover premium for hostile bids is 54%, well above average premium for negotiated deals First Chinese hostile bid for Canadian company was successful in 2009  Jilin Jien Nickel Industry’s acquisition of Canadian Royalties

13 © 2009 KPMG, a Canadian limited liability partnership, is part of the KPMG International network. KPMG International is a Swiss cooperative. All rights reserved. The KPMG logo and name are trademarks of KPMG International. Canadian Natural Resources M&A Environment Canadian Hostile Transactions since 2005

14 © 2009 KPMG, a Canadian limited liability partnership, is part of the KPMG International network. KPMG International is a Swiss cooperative. All rights reserved. The KPMG logo and name are trademarks of KPMG International. Canadian Natural Resources M&A Environment Foreign Acquisitions in Canada – Investment Canada Act Investment Canada Act applies to every acquisition of control of a Canadian business by a non- Canadian Only 1 transaction has been blocked in 25 years, excluding cultural industries  Proposed $1.3 B acquisition of MDA’s space division by US-based Alliant Techsystems Changes to the ICA in 2009 significantly increased the threshold size under which reviews are not required  Deals will not be reviewed under $600 MM enterprise value Increasing to $800 MM in 2011 and $1 B in 2013  No longer any special review for uranium However, new power to review transactions based on national security interests creates some uncertainty  Not expected to be used often

15 © 2009 KPMG, a Canadian limited liability partnership, is part of the KPMG International network. KPMG International is a Swiss cooperative. All rights reserved. The KPMG logo and name are trademarks of KPMG International. Canadian Natural Resources M&A Environment Source: Bloomberg

16 © 2009 KPMG, a Canadian limited liability partnership, is part of the KPMG International network. KPMG International is a Swiss cooperative. All rights reserved. The KPMG logo and name are trademarks of KPMG International. Canadian Natural Resources M&A Environment M&A Outlook – 2010 and Beyond Most markets have improved significantly in 2009  Prospect for global economy has improved  Commodity prices have strengthened  Equity markets have improved and reduction of volatility  Improved CEO and Board confidence Improved Liquidity  Access to equity capital, particularly for senior and intermediate producers  Improved investment grade credit Canadian Natural Resources M&A  Mining M&A activity will increase substantially in 2010; energy M&A will remain high  Increased competition for mega deals as seniors return to the game Junior and intermediates, especially miners with development projects, will actively seek strategic partners and creative solutions  M&A  Minority investments  JV’s/project level investments  Offtakes

17 © 2009 KPMG, a Canadian limited liability partnership, is part of the KPMG International network. KPMG International is a Swiss cooperative. All rights reserved. The KPMG logo and name are trademarks of KPMG International. Questions/Discussion