1. 2012 AAPL ANNUAL MEETING SPONSORS PLATINUM GOLD SILVER SAN FRANCISCO SEMINAR GOLF A wholly owned subsidiary of ExxonMobil BRONZE

2. 58 th Annual Meeting - San Francisco June 13-16, 2012 AAPL - Copyright © 2012. All Rights Reserved. International Negotiations “In the beginning and Beyond” W.B. Phillips US Exploration Land Manager Hunt Oil Company John Blair Assistant General Counsel Hunt Oil Company

3. Hey Bob, I got a great deal on some acreage that Petrobras is going to let expire. What do you know about international farmouts?

4. Going To Rio He doesn’t know anything either ! Shoot!, he doesn’t know anything!

5. How to Start First, take a deep breath Do as much homework as possible and find out as much as you can about: –The deal –Your partners –The host country –Is your passport current and will you need a VISA Find an expert(s) you and one your company can trust –Get one here in the US and one in the country where the deal is Use your domestic experiences, but be careful about comparisons

6. Do’s and Don'ts Do: –Do your homework first –Recognize others national pride –Think outside the box –Join the AIPN Don’t: –Think you are smarter (than they are) –Think you know it all (you don’t) –Try to buy goodwill (there may be laws against it)

7. General Comparison’s DomesticInternational Laws:Common lawCommon lawCivil lawCase lawLegislativeTax law Mineral ownership:Fee State FederalFederal Note: the vast majority of foreign mineral ownership is held by the national governments

8. General Comparison’s DomesticInternational Type ownership:Feeyesyes (varies) Stateyes (DNR,GLO, etc.)yes Federalyes (BLM, BOEM)yes (old MMS) Type of Mineral Lease granted: Feeoil & gas leaseProduction sharing Agmt. Stateoil & gas leaseLicense or Federaloil & gas leaseconcession, (you pay all tax and royalty) risk service contract and hybrid of all the above Government participation:nooften and thru state owned company

9. General Comparison’s DomesticInternational Signing authority:company officer, AIF Head of State, Oil Minister Types of contracts ( between WI owners ): AAPL JOA, AIPN JOA farmoutsfarmoutsJV’s HandshakesMOU’s, MOA’s HybridHybrid see next page ORRI and Net Profits recognized: YesYes, no, maybe, don’t understand

10. Types of Contracts Specified by Legislation License –Similar to oil and gas lease. –Licensee receives all sales, LESS royalty and taxes Production Sharing Agreement –Contractor received negotiated % of production (less costs) and negotiated % of balance of profits Risk Service Contract –Contractor negotiates % of production less costs compensated for risks Service Contract –Contractor receives negotiated payment regardless of success

11. Primer on Host Government Contracts (HGC) How do you become competitive? Three basic forms of HGC Service contract - Example Iraq Concession or License– Tax and Royalty Production Sharing Agreement (PSA) – cost oil/share oil HGC is the law National interests Subsequent amendments; political risks Title to oil and gas under a Concession/PSA Understand what is covered Title passes at point of delivery Money flow

12. Compare Featrures of Concession/PSA to Domestic Oil and Gas Leases Term Fixed periods – no habendum clauses Exploration phases – off ramps Development period fixed term for commercial production (20- 25 years) Work Commitments Competitive just like domestic bonus and royalty Each phase includes a commitment to do the minimum required (work v. $$); carry forward rights; may require acreage relinquishments Competing interests of HG and Oil Company Data collection Commercial production Limited capital Relinquishment issues

13. Compare Featrures of Concession/PSA to Domestic Oil and Gas Leases HG as Partner Carried interests to commercial production – may be option to elect; 5% to 20 % Operating committee Chaired by representative of HG as JOA partner; sovereign issues Training Significant issue to train and employ local labor Key control positions required Arbitration How to resolve disagreements

14. Comparative Fiscal Terms by Country

15. Fracing bans Things you normally don’t think of Political risks Summary Odd’s and In’s

16. Fracing Ban’s (it’s not only a US problem) FranceNew York New South Wales West Virginia

17. Will my credit card work? –Will I need cash and if so in what currency? Will my cellphone or iPad work? (Do you want to take it?) Does my company have the right insurance? Will I need a VISA? Should I drive? –Answer – NO, NO, NO! Can I take pictures? Things you normally don’t think of

18. Labors Laws Physical access Boundary disputes Nationalization (Venezuela) Local Counsel availability Foreign Corrupt Practices Act implications Signatures often require “board” resolutions and what’s an “apostele”? Things you normally don’t think of

19. What is the weather like? Do I know where I am going? Where am I staying? Will my plug in’s work? What can I take with me? (and what can I bring back?)

20. Political Risk

21. Where is the closest US Embassy? –Do I have their contact information?

22. Summary Find out as much as possible about the deal and where it is Review all the facts with your expert, and then with your management Don’t let the romance of the deal get in the way of good business judgment If you go forward maintain an acute situational awareness of all aspects of the opportunity and where you physically are Have fun and learn as much as you can!

23. Join AIPN

24. Political Risk Run Amuck Do I need personal security?

25. Man, I am glad I attended the AAPL Education seminar on International Trades!