A FINANCIAL ANALYSIS OF RISKS IN POLAND FROM THE PERSPECTIVE OF EOG SEPTEMBER 11, 2013 Christopher Denny Elena Shrestha Vera Uboytseva Ayodele Sonupe

Background Info. $48 billion company spun off of Enron in 1999 (pre- bankruptcy) First mover in the Bakken Shale play in 2008 First mover in the Eagle Ford Shale play in 2010 Acquired large plots of land at very attractive rates at the time Divested dry gas assets to focus more on liquid assets before the collapse in natural gas prices Has grown production at a CAGR of 38% over the last seven years 2

EOG Shale Plays 3

Economic Outlook Potential causes for foreign exchange movement The Zloty has reacted to the Eurozone crisis The Polish Central Bank intends to intervene in the foreign exchange market to strengthen the Zloty Interest rates in Poland is high Poland intends to adopt the Euro 4 Foreign Exchange Source: Global Insight Economic Data

Economic Outlook Inflation Domestic demand in Poland may increase Close attention is paid to monetary policies Poland needs to ensure that interest rates remain at no more than 1.5 percentage points above the average of the three European Union countries with the lowest inflation. Interest Rates Euro crisis is eroding growth in Poland Inflation is expected to remain low The polish central bank intends to strengthen the Zloty 5 Interest & Inflation Rate Source: Global Insight Economic Data

Economic Outlook Fiscal Policy Poland has no tax regulations around upstream extractions Revenues are projected to fall below target but the polish government cannot continue to cut spending because of domestic demand stimulus Balance of Payments There is a decline in the amount of imported goods Exports in Poland is dependent on the demand from Euro buyers Domestic demand in Poland is struggling. 6 Fiscal Policy & Balance of Payments

Financial Market Factors involved in the development of financial market: One of the fastest growing economies in Europe In 2010, the Polish economic growth rate was 3.9% The growth of the Warsaw Stock Exchange (WSE) facilitated the development of Poland’s capital market Derivative instruments for currencies and interest rates started being traded in the mid-1990s Polish banks and foreign banks actively participated in the OTC derivatives market. Liquidity is primarily created by foreign banks. Foreign investors play a major role in the futures and options market of the WSE. 7

Financial Market – Derivative Instruments Investor structure on the futures market. 8 Investor structure on the options market.

Recommendation is to not invest at the moment until fiscal regulations are clarified Moderate Exchange rate risks (zloty and euro) Positive Inflation outlook Positive Interest rates outlook Some concerns Balance of payments outlook Well developed Financial markets High Fiscal risks High Business risks 9