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© 2015 Gaffney, Cline & Associates. All rights reserved. Terms and conditions of use: by accepting this document, the recipient agrees that the document together with all information included therein is the confidential and proprietary property of Gaffney, Cline & Associates and includes valuable trade secrets and/or proprietary information of Gaffney, Cline & Associates (collectively "information"). Gaffney, Cline & Associates retains all rights under copyright laws and trade secret laws of the United States of America and other countries. The recipient further agrees that the document may not be distributed, transmitted, copied or reproduced in whole or in part by any means, electronic, mechanical, or otherwise, without the express prior written consent of Gaffney, Cline & Associates, and may not be used directly or indirectly in any way detrimental to Gaffney, Cline & Associates’ interest.

Exploration/Development Opportunities in Central and Southern Africa in a $60/Bbl Oil, $3/Mcf World

MMEA Scout Group The RAF Club 15 July 2015

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Disclaimer

This set of presentations has been prepared exclusively for discussion purposes during this event. The materials presented should not be understood as GCA forecasts or predictions of oil and gas prices or future industry conditions and they should not be understood as a specific recommendation in respect of any particular decision or course of action.

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Today’s Agenda

▪ What does $60 oil and $3 gas mean to an African E&P

team? ▪ A word on Nigeria

▪ West Africa Pre-Salt, a mixture of fortunes

▪ Onshore Rifts, timing, timing and seals

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Bullish Africa Exploration View from 2013

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Some Plausible Price Scenarios

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Impact of Cost Savings not Linear Across Business Segments

Source: GCA analysis Nom. 20% R, 25% Tax

$50 World

$60 World

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South Sudan

Uganda Kenya

Tanzania

Angola

Algeria

Morocco

Libya Egypt

Tunisia

Ethiopia

Somalia

Botswana

DR Congo

Congo

Cameroon

Benin

Cote d’Ivoire

Gabon

EG

Ghana

Guinea-Bissau

Guinea Nigeria

Liberia

Namibia

Mauritania

South Africa

Sierra Leone

Senegal

Sudan

Zambia

Mali

Togo

Burkina Faso

Niger

Chad

Central African Republic

Eritrea

Zimbabwe

Pre-Salt West Africa The Big Upside? But where is it working?

Rest of Africa

Focus countries

Aptian Salt Basin

Aptian Salt Basin marked in Blue, spans offshore Gabon, Republic of Congo, DRC and Angola.

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Rio Muni Basin Pre-Salt largely untested

Adapted from: Brownfield & Charpentier (2006)

Rio Muni basin

W E

Pre-salt clastic reservoir targets

Basin borders (Fracture zones, structural arches and highs) West African Coastal basins

Gulf of Guinea basins

Niger Delta

West African Aptian salt basins

Orange River coastal basins

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Gabon Basin – Pre-Salt Mature oil play on shelf but Diaman-1B (Total), Leopard-1 (Shell) tested thick gas pays in Water depths 5,500’-6,500’

Adapted from: Brownfield & Charpentier (2006)

Gabon basin

W E

Pre-salt clastic reservoir targets

Basin borders (Fracture zones, structural arches and highs) West African Coastal basins

Gulf of Guinea basins

Niger Delta

West African Aptian salt basins

Orange River coastal basins

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SW NE

Congo Basin Pre-salt Deep Water under evaluated Shelf plays very successful, Improved 3D imaging key

Adapted from: Brownfield & Charpentier (2006)

Congo basin

Pre-salt clastic reservoir targets

Patchy? carbonate reservoir targets

Basin borders (Fracture zones, structural arches and highs) West African Coastal basins

Gulf of Guinea basins

Niger Delta

West African Aptian salt basins

Orange River coastal basins

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Angola

DRC

Republic of the Congo

Gabon Zam

bia

Namibia 0 250 500

Kilometres

Deloitte Petroview October 2014 Sub Saharan Africa Dataset

▪ The first pre-salt clastic field discovered was Pointe Indienne in the Republic of the Congo in 1957.

▪ Multiple discoveries in the pre-salt clastic play through to the present.

▪ Hydrocarbons encountered are a combination of oil and gas.

▪ All in <200m water depth.

Pre-salt clastics Republic of Congo

Vandji Marine

Nene Marine

Tilapia Minsala Marine

Litchendjili

Lidongo X Marine Viodo

M’Boundi

Kouakouala

Loufika Mengo

Move

Loussima

Pre-salt clastic fields discovered before 2006

Pointe Indienne

Manzi

Tchiniambi

Bindi

Kundji

Pre-salt clastic fields discovered after 2006

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Kwanza Basin Multi-Billion$ Exploration Play

Adapted from: Brownfield & Charpentier (2006)

Kwanza basin

W E

Neocomian-lower Aptian clastic reservoir targets Neocomian- Barremian carbonate reservoir targets

Pre-salt clastic reservoir targets

Pre-salt carbonate reservoir targets

Potential basement reservoir targets Basin borders (Fracture zones,

structural arches and highs) West African Coastal basins

Gulf of Guinea basins

Niger Delta

West African Aptian salt basins

Orange River coastal basins

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How Similar is W. Africa to Santos/Campos Basin?

Plate reconstruction by GeTech, published in GEO ExPro (2013).

The Santos and Campos basins of Brazil were formed adjacent to those in Angola during the rifting event analogous stratigraphy and structure?

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The Brazilian Analogue

▪ Comparable pre-salt clastic and carbonate lithologies encountered on both margins, but @ different scale

▪ Vital differences between them, notably thickness of salt in the Santos basin compared to thin or absent salt in parts of the Kwanza.

Is this an appropriate analogue?

Adapted from Brownfield & Charpentier (2006) & Feijo (2013).

Sandstone Shale and Siltstone Salt Carbonate Basement rocks

Fault

Break-up Unconformity

Santos

Tupi (Lula)

Kwanza

Cameia

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Block 36

Block 37

Block 39

Block 40

Block 25

Block 19

Block 20

Orca pre-salt oil discovery

Azul pre-salt oil discovery

BP

Block 24

Petrobras & Total found CO2

Statoil- volcanics Statoil dry hole Repsol suspended

Atlantic Ocean

OU

TER

TR

END

INN

ER T

REN

D

BP drilling

Kwanza Basin Pre-Salt Drilling Activity

Source: Modified from Petroview Sub Sahara Africa

Block 26

Block 9 Cobalt dry hole

Cobalt

BP dry hole

Block 35

Block 23

Block 38

Sumbe Volcanics Volcanic Ridge

COB-Continental Oceanic Boundary

Statoil

Total

Total

Petrobras

Dry hole

Statoil

ConocoPhilips

Eni

ConocoPhilips

Dry hole

Dry hole

Maersk

Block 22

Repsol drilling

Cobalt ANGOLA

Block 21

Lontra pre-salt gas discovery Mavinga oil discovery Cameia pre-salt oil discovery Bicuar oil discovery Omosi gas discovery

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Gas Developments – are they realistic at $3/Mcf?

▪ Many of the Deep Water West African pre-salt discoveries are gas rich, in contrast to the predominance of oil found in the pre-salt of Brazil – Angolan contract terms, operators not entitled to any gas – Gabon, both Congos more favourable gas terms, lack of

infrastructure or clustered resources – FLNG may be viable, especially for dry gas! New builds too costly,

conversion of 30+ year old LNG carriers underway ▪ African Gas Demand (+ 1 Billion people in next 30 years) ▪ Ghana, Cote d’Ivoire, Cameroon, Gabon, Mauritania & Nigeria

all have local gas markets not linked to oil prices – Developments need funding for gas utilization projects based on

Power Generation or Petrochemicals – Backed by International Agencies with gas payment guarantees – African gas for African transport fuels a mid-term option

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East African Rifts, so Many to Choose from

Digital Elevation Model SRTM data - NASA

Brown, D. Structural complexities of the East African rifts and the implications for exploration and production (Poster), PESGB-HGS Africa Conference, September 2013

Extensionally reactivated Precambrian orogenic belts, form the East African Rift System (EARS)

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Permian-TriassicKaroo Rift Basins

Cretaceous Rift Basins

Paleogene-Neogene Rift Basins

Karoo Rifts reactivated in Neogene

Neogene Rift Basins

Rukwa Rift

Turkana Rift

Muglad Basin

Albert Basin

Anza Graben

From Africa Oil & Macgregor, 2012

Permian-TriassicKaroo Rift Basins

Cretaceous Rift Basins

Paleogene-Neogene Rift Basins

Karoo Rifts reactivated in Neogene

Neogene Rift Basins

Rukwa Rift

Turkana Rift

Muglad Basin

Albert Basin

Anza Graben

From Africa Oil & Macgregor, 2012

SRTM data Source: NASA

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Lake Albert Potential Identified in 1890’s, First Well 1937/8

DRC

Uganda

Alluvial Fan

Low Sinuosity Channels

Rift Scarp

Semliki Delta

Incised Channel

Delta

Natural oil film on Nile

at Paraa

Kibiro Oil Seep Butiaba

Oil Seeps SAR slicks

Kibuku Oil Seep Semliki

Waki B1 1938

0 20 km

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0 100 km

Block boundaries

Prospects

Fields

Wells

A

B

C

D

E

C

B

A

D

E

?

3 dry wells

SRTM data Source: NASA, Blocks, Fields, Prospects and Wells from Petroview

A Stable African Craton?

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Albert Basin Stratigraphy

▪ Reservoir units – Thick well sorted sands – Porosities advertised 27-32% – Permeabilities advertised

200-8,000 mD ▪ Seals

– Laterally extensive lacustrine shales

From Karp et al., 2012

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Albert Basin Structure

From Karp et al., 2012

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Albert Basin Burial Depth

Seismic Interpretation:

0

-500

-1000

-1500

-2000

-2500

-3000

-4000

-5000

-3500

-4500

8 7 6 5 4 3 2 1 0

Dep

th S

ubsu

rfac

e (m

)

8 7 6 5 4 3 2 1 0Age (my)

Holocene

Late Pleistocene

Late Pliocene

Early Pleistocene

Middle Pliocene

Early Pliocene

Late Miocene

Fm

• VERY recent rapid burial! • Rapid/late maturation • Currently active source kitchen

Based on interpretation by Heritage Oil

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Rwenzori Mountains - “Mountains of the Moon”

Source: http://ecsforum1.wordpress.com/2013/04/02/africas-physical-features/

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Tectonic Elements

All Rights Reser ed

TONYAFAULT

NORTH TOROBUNYORO FAULT

PAKWACHBASIN

RHINO-CAMPBASIN

Petroleum Exploration and Production Department, 2012 Interpretation

Petroleum Exploration and Production Department, 2012 Interpretation

From Petroleum Exploration and Production Department, 2012

SEMLIKI BASIN

3 dry wells

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Kingfisher Discovery – 2006/2017, ~ 200 Million Barrel

Source: Tullow

Three way dip closure against bounding fault

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South Lokichar Basin (Courtesy Africa Oil, D.M. Jarrett)

Data Source: NASA

▪ The South Lokichar Basin forms part of the Eastern Branch of the EARS

▪ Lies to the southwest of Lake Turkana

Source: AOC

0 500 km

0 60 km

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South Lokichar Basin – Half Graben

Source: AOC

Shell 1992

Entering oil window, local geothermal gradient?

2 km

5 km

Source Kitchen

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South Lokichar Basin (schematic), Reservoirs and Seals

Source: AOC

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Comparison with Other Rifts Burial History

Qua

t Pl

ioce

ne

Mio

cene

Olig

ocen

e

Eocene

Pal

eoce

ne

Upper Lower

Upp

er

Mid

dle

Lower Upper M

iddl

e

Low

er

Lopi

ngia

n

Gua

dalu

pian

Cisuralian

Permian Triassic Jurassic Cretaceous Paleogene Neogene

Plei

stoc

ene

0

-500

-1000

-1500

-2000

-2500

-3000

-3500

-4000

-5000

-4500

100 50 0 200 150 300 250

Rukwa Wescott Model Rukwa Roberts Model Turkana Rift Muglad Albert Basin Anza Graben

Million Years

Dotted Lines = Estimated

SEE BURIAL DEPTH CHART 2

Dep

th (m

)

Based on interpretation by Heritage Oil and data in Le Gall et al., 2005, Morley et al., 1999b, Wescott et al., 1991, Roberts et al., 2004, Roberts et al., 2010, Schull, 1988 and Morley et al., 1999c.

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Polarity switching within each rift ▪ Tanganyika

Rift

From Delvaux et al., 1991

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Lake Tanganyika South – Play Types

Source: Beach Energy

Albertine Graben analogues, but water depth is a big issue

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Key Takeaways for African E&P ▪ Oil & Gas Prices

– Potentially have to live with $50-60 oil and $3 gas for several years ▪ adapt E&P portfolio to deliver value to our shareholders/investors

– Cost reductions will enhance onshore/shallow water economics faster than in deep water for similar tax regimes

– Tax breaks on existing PSC’s will be tough to negotiate with <1 year of low oil prices

▪ Timing – Cashflow is king, many of the 1970’s explorers in the Chad and Sudan

rift basins were not around when oil exports began 20+ years later – Lake Albert timeline is 1997-2017 for first “local” oil, timing of pipeline to

coast? – Kenyan oil appraisal for “fast track” development;

▪ Scope to move oil without waiting for a $3B pipeline, a trade-off between higher OPEX/Bbl and the time value of money + financing issues

▪ Pre-Salt & Onshore Rifts – Super rich source rocks allied to very complex play concepts

– Rapid vertical movements, lateral variations in seals and reservoirs – Improved rift imaging + imagination likely to yield many more “hidden gems”

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Thank you for your attention

Chris.Rachwal@gaffney-cline.com