1. A Comparative Analysis of the Performance of Selected E&P Firms in the U.S. & Abroad Professor Wumi Iledare, Ph.D. Senior Fellow, U.S. Association for Energy Economics Distinguished Fellow, Nigeria Association for Energy Economics Associate Editor, SPE Journal of Economics & Management Professor, Petroleum Economics & Policy Research & Director, Energy Information Division SPE ATCE 20091

2. USAEE 2011 DC Introduction Research Objectives Overview of FRS Companies FRS E&P Firms’ Efforts & Outcomes Modeling Approach & Results Closing Remarks Presentation Outline 2

3. Objectives Paper analyses quantitatively, FRS E&P firms efforts and outcomes in the US and overseas The paper evaluates and compares the performance of these firms in an aggregate sense using Monte Carlo simulation process Determines the effect of tax regimes, prospectivity, and prices on empirical aggregate outcomes of EP efforts in the US and overseas 3USAEE 2011 DC

4. Companies Reporting to the FRS, 1974-2009 4USAEE 2011 DC

5. 5 Companies Reporting to the FRS, 1998-2009 USAEE 2011 DC

6. Firms Reporting to the FR System 6 Original criteria was at least 1% of oil and gas production or reserves in the U.S. or 1% of either refining capacity or petroleum product sales in the United States. In 1976 there were 27 FRS firms reporting domestic and foreign activities using Form EIA 28 A simplified EIA was introduced in 1998 to make the survey more pragmatic because of the changing structure of the industry USAEE 2011 DC

7. Role of FRS Firms in the U.S. 7USAEE 2011 DC

8. Role of FRS Firms in the U.S. 8USAEE 2011 DC

9. Liquid Production Dry Gas Production SPE ATCE 20099 Role of FRS Firms in the U.S.

10. Liquids Reserves Gas Reserves SPE ATCE 200910 Role of FRS Firms in the U.S.

11. FRS Firms’ Relative Reserves and Production in the US & Abroad SPE ATCE 200911

12. FRS Firms’ Relative Performance in the US & Abroad –BOE Reserves Replacement SPE ATCE 2009 12

13. BOE Reserves per Efforts in the US and Abroad 13USAEE 2011 DC

14. Model Specification 14USAEE 2011 DC  On annual cash flow for a typical E&P venture :  NCF = Gross Revenue - Royalty - State & Local Taxes - Operating Expenses - Overheads (business & investment) - Capital Investments - Bonus & Rentals - Net Taxes + Property Sales Price

15. Model Specification 15USAEE 2011 DC  Annual Taxable Income = Revenues – Royalties - Fiscal Costs  Fiscal allowable cost deductions include:  OPEX, Royalty, Depreciation, Depletion Allowance, Expensed Investments  Revenue (R) = Price (P) * Marketed Production (Q)  NCF ATAX =NCF BTAX -T C (NCF BTAX -DD&A-I)  PIR = 1+ [ NCF ATAX / (DD&A+I)]  NRE = ( NCF ATAX *SUCR)/CWELL

16. Model Specification 16USAEE 2011 DC  NCF BTAX = (1-β 1 -β 2 -β 3 )* R  SUCR = successful completion rate  I = interest payment on debt (loan) if allowed  T C = the corporate tax rate, fraction  Β i : (i=1,2,3) fraction of revenue for CAPEX, OPEX, other Cost  R = annual Operating Revenue  P= price of Output and Q=Output

17. Descriptive Statistics of Data 17USAEE 2011 DC

18. Descriptive Statistics of Data 18USAEE 2011 DC

19. Deterministic Model Results--US 19USAEE 2011 DC

20. Deterministic Model Results--FOR 20USAEE 2011 DC

21. Deterministic Model Results 21USAEE 2011 DC

22. Deterministic Model Results 22USAEE 2011 DC

23. 23 Stochastic Model Assumptions--US USAEE 2011 DC

24. 24 Stochastic Model Assumptions--FOR USAEE 2011 DC

25. Stochastic Model Results--US 25USAEE 2011 DC

26. Stochastic Model Results—Foreign 26USAEE 2011 DC

27. Comparative Stochastic Results US Foreign 27USAEE 2011 DC

28. Stochastic Sensitivity Results 28USAEE 2011 DC

29. Stochastic Sensitivity Results 29USAEE 2011 DC

30. Summary & Conclusions 30USAEE 2011 DC