Drillers and Dealers September 2011

Global Leaders in Energy
Executive Search
For enquires please contact:
www.maxwelldrummond.com - info@maxwelldrummond.com -+1 713 316 4480
Maxwell Drummond International is a global executive search hrm
founded in 1987 to provide international retained search services across
all spectrums of the energy industry from oil and gas through to
commodities trading and renewable energy.
Our fully integrated international team has a demonstrable track record
of success and a deep breadth of networks to service major energy
markets worldwide.

Aberdeen-Calgary-Houston-Johannesburg-London
Perth-Rio-Singapore

Guest Foreword

Drillers and Dealers ::: ::: September 2011 Edition

New Rules or a New Game?

Guest Foreword by Iain Pitt, COO, The Oil Council

As I sat down last week and watched the opening of the Rugby World Cup and National Football League (NFL) it
got me thinking about the similarities and common histories of the two games. American Football as we know it
today first developed on college campuses in the 1870s and for a steady period had only minor adjustments to
the rules of Rugby which famously began in 1843, when a young student named William Webb Ellis at Rugby
School in Warwickshire, England, seemingly tired of the restrictions placed on him during a traditional game of
association football, picked up the ball and ran with it down the field.

Indeed this early innovation of football even in recent years left some folks confused by the sport, including
famously Sir Tasker Watkins who with tongue in cheek was quoted in 1979 saying:

In 1823, William Webb Ellis first picked up the ball in his arms and ran with it. And for the next 156 years
forwards have been trying to work out why."

Rugby and American Football largely mirrored one another until Walter Camp, head coach at Yale put a spanner
in the works (or ingenuity depending on which side of the Atlantic you reside) by adapting the rules by introducing
downs and eliminating the restriction on forward passing that you see in rugby to this day.

Like the rules of American Football, at least certainly for this commentator, the recent collapse of the WTI-Brent
spread is something that is bewildering. WTI crude has historically as we know largely mirrored Brent and while
we often see the prices go out of alignment, the sheer length and spread that we are currently enduring is
particularly atypical.

Will WTI go the way of the NFL and slowly develop fundamental principles that ultimately create new rules of
engagement? Or will the two begin to merge back into one happy sporting entity?

Like the opening spectacle to last weekends sport it will be interesting to see how this develops over the coming
months, particularly with the hopeful stabilising of Libya and the gradual and now somewhat more assured
coming back on-stream of its oil production.

No-one is better positioned to discuss the challenges and opportunities this spread offers than Pierre Andurand,
Chief Investment Officer at BlueGold Capital Management whose hedge fund of ~$2.5 Billion bets almost
exclusively on oil futures. Pierre is graciously joining us next month in NYC to share his thoughts at our NYC
Assembly. Well keep you posted on what he says.

As Ross shared with our Members online earlier this month weve had many exciting new developments at The
Oil Council, from new colleagues joining the team to the development and launch of our new event websites.

Were now in the midst of planning to redesign our main portal to make it clearer, more concise and easier to
access. As always were very interested in your comments and feedback and wanted to ask your opinions on
what youd like to see in the new Oil Council portal.

How you would like it to present content, what functions do you like from a site, what things annoy you about
other sites (you don't have to name them!) that you'd like us to avoid?

Please email me at iain.pitt@oilcouncil.com if youve anything to share. Many thanks and I leave you with a quote
from the inspirational and enigmatic Vince Lombardi in which one can draw reflections and references not only in
any sport but in any business and in life as a whole.

I firmly believe that any man's finest hour, the greatest fulfilment of all that he holds dear, is that moment when
he has worked his heart out in a good cause and lies exhausted on the field of battle - victorious.

Yours,

Iain Pitt, COO, The Oil Council

Welcome to Drillers and Dealers September 2011


Contents

Guest Foreword
Iain Pitt, COO, The Oil Council

Executive Q&A
John McGoldrick, Executive Chairman, Caza Oil & Gas

Cross Border M&A in the Canadian O&G Sector
John Kousinioris and Alan Rautenberg, Bennett Jones LLP

South Sudan: The New Ministers In-Tray
David Tennant, Partner, SNR Denton

Special Focus on Corporate Governance and
Human Capital

Getting it Right in the Boardroom
Dominic Schofield, Senior Client Partner, Korn/Ferry
International

Leadership and Talent Management A Scarce
Resource?
4

8

10

13

17

20
William Clarey, Founding Partner, Clarey/Napier
International

Good Governance Matters
Dr Keith Myers, Partner, Richmond Energy Partners

23
ON THE SPOT PART ONE
What qualities/experiences must an O&G co look to
include when constructing/enhancing their Board to
ensure they can meet all the challenges tomorrows
markets pose?
28
Perspectives from Partners and Members Across the Globe

ON THE SPOT PART TWO
What practices and initiatives must we as an
industry adopt to tackle the increasing talent crunch
now stemming across not just G&G and engineering
but also O&G finance?
31

Perspectives from Partners and Members Across the Globe

Meet The Member

35
Copyright, Commentary and IP Disclaimer: *** Any content within this publication cannot
be reproduced without the express permission of The Oil Council and the respective
contributing authors. Permission can be sought by contacting the authors directly or by
contacting Iain Pitt at the above contact details. All comments within this magazine are the
views of the authors themselves unless otherwise attributed to their company /
organisation. They are not associated with, or reflective of, any official capacity, or any other
person in their company / organisation unless so attributed ***

Drillers & Dealers

Official Publication of The Oil Council
3rd Floor
86 Hatton Gardens
London
EC1V 8QQ, UK

Editor

Drake Lawhead
Vice President, Content and Member
Relations
drake.lawhead@oilcouncil.com
T: +44 (0) 20 7067 1873

Editor-at-Large and Media Enquires

Iain Pitt
COO
iain.pitt@oilcouncil.com
T: +27 (0) 21 700 3551

Publisher

Ross Stewart Campbell
CEO
ross.campbell@oilcouncil.com
T: +44 (0) 20 7067 1877

Partnership Enquires

Vikash Magdani
Executive Vice President, Corporate
Development
vikash.magdani@oilcouncil.com
T: +44 (0) 20 7067 1872

Advertising Enquires

Amir Shirkhan
Vice President, Sales
amir.shirkhan@oilcouncil.com
T: +44 (0) 20 7067 1876

Laurent Lafont
Vice President, Business Development
laurent.lafont@oilcouncil.com
T: +44 (0) 20 3287 3447

Ken Lovegrove
Vice President, Business Development
ken.lovegrove@oilcouncil.com
T: +1 604 566 4949

North American Media Enquiries

Jay Morakis
Partner
JMR Worldwide
jmorakis@jmrworldwide.com
T: +1 212 786 6037

To Be Added to Distribution List

Email: info@oilcouncil.com

More Information At

www.oilcouncil.com
HALLIBURTON
2011 Halliburton. All rights reserved.
Solving challenges.
TM
Wherever you need greater
efficiencies, Halliburton delivers
them in greater numbers.
www.oilcouncil.com/event/weca www.oilcouncil.com/awards info@oilcouncil.com
Welcoming A New World Order:
Defning the Roadmap for Future O&G
Finance and Investment
The defning event for the global oil and gas, fnance
and investment communities
CEOsandCFOstalkontheleadershipchallengestheynowfaceinensuring
newgrowthwithinover-regulated,increasinglycompetitiveandvolatilemarkets
Renownedmarketcommentatorsdiscussthedynamicsoftodays
macroeconomiclandscape
EnergybankinglegendsexploretheDoddFrankAct,thefutureofcommercial
lending,theavailabilityoffnanceandnewsourcesofenergycapital
Aplethoraoffnancialadvisors,institutionalinvestorsandPEinvestorsexplore
globalM&A/A&Dactivity,dealfowandtransactionmetrics,capitalraising
trends,capexdeploymentandnewinvestmentstrategies
Plusspecialfocusesonexplorationstrategies;thefutureoftheNorthSeaand
NCS;emergingbusinessopportunitiesinAfrica;corporategovernancebest
practiceforE&Pcompanies;thedynamicsoftodaysglobalgasmarkets;and
thegrowinginfuenceofAsianNOCinvestmentstrategies
Keith Roberts
CFO,
Petrofac
Bill Transier
Chairman,PresidentandCEO,
EndeavourInternational
Mike Watts
DeputyCEO,
CairnEnergy
Ian Springett
CFO,
TullowOil
Featuringsomeoftheindustrys
mostinfuentialminds,including:
Abdul Jaleel Al Khalifa
CEO,
DragonOil
Nick Cooper
CEO
Ophir Energy
(Lord) John Browne
PartnerandManagingDirector
RiverstoneHoldings
Oil & Gas Company Executives Register Today for only 1,895!
Special Industry Delegation Discounts Also Available!
Patrice de Vivis
SeniorVicePresident,Northern
Europe,
TotalExploration&Production
Sara Akbar
CEO,
KuwaitEnergyCompany
16 17 November 2011,
Chelsea Football Club,
London, United Kingdom
WORLD ENERGY CAPITAL ASSEMBLY
Oil Council
LeadPartners:
Partners:
Toronto Stock
Exchange
TSX Venture
Exchange
Bourse de
Toronto
Bourse de
Croissance TSX
Toronto Stock
Exchange
TSX Venture
Exchange
Bourse de
Toronto
Bourse de
Croissance TSX
Toronto Stock
Exchange
TSX Venture
Exchange
Bourse de
Toronto
Bourse de
Croissance TSX

Executive Q&A


Executive Q&A with John McGoldrick,
Executive Chairman, Caza Oil & Gas

Drake Lawhead (DL) interviews John McGoldrick (JM)

DL: Caza had a busy drilling schedule in 2011. Youve had a number of successes, but is it fair to say some
disappointments as well?

JM: The well on the Arran prospect was a disappointment, but it is important to remember that the data
gained from that well is extremely valuable, as it allows us to better correlate our models. Arran tested a
new play type and although the result was not what we were hoping for in the short term, it has provided
us with a wealth of geological data that is being applied to future efforts. Exploration is a process of
pulling together data from various sources, and even though Caza has the benefit of a very large 3D
seismic database, theres no substitute for the real data acquired from drilling wells in a given area.

DL: What are you looking forward to for the rest of the year and into 2012 for Caza?

JM: We are at an interesting point in the evaluation of our projects. Over the summer we have fracced
four wells and they are now flowing back. Small E&P companies have to be agile and able to adapt to
circumstance. The performance of these wells will help us to refine our efforts and set the direction of
the ongoing exploration and development campaign.

Our Louisiana 3D seismic database alone covers approximately 18,000 km2 in some of the most prolific
hydrocarbon producing basins in the US. Our current review of this data is progressing well, and Im
looking forward to drilling an exploration well there as early as Q4 2011, with more to follow in 2012.

DL: Were looking at leadership and corporate governance issues this month in Drillers & Dealers what, in your
opinion, are the most essential qualities an O&G CEO or Chairman ought to possess to manage a successful
company?

JM: Resilience. Anyone who has worked in the industry will tell you that exploration has more lows than
highs but the aim is to ensure that the cumulative size of the highs is bigger than the costs of the lows.
That takes time and perseverance. The other useful quality is being a good communicator, both internally
and externally: this includes with staff, with advisors, with host communities, with partners, with
counterparties amongst others. It is particularly important that the local communities where you operate
understand exactly what it is that you are doing and how your operations will benefit them in the short,
medium and long term. With the unfairly negative press surrounding fracture stimulation of wells at the
moment, it has become increasingly important that we communicate with the local communities to allay
any fears that they might have. In business, as in all walks of life, honesty and integrity are key.

DL: Something else were asking this month: Is talent getting any harder to find these days?

Executive Q&A

JM: Yes. The average age of subsurface geoscientists is getting older. Successful people tend to have
done quite well in their careers so the normal motivator, money, doesnt work as well as it might for
younger hungrier talent, so lifestyle aspects and corporate culture are the best ways to attract talent. At
Caza we have a small but incredibly talented team of engineers, landmen and geoscientists. We have a
very flat corporate structure, which encourages all of the team to think independently and
entrepreneurially. For anyone in the oil industry, there can be no greater thrill than identifying a lead and
progressing it through to a successful discovery. As a small company, we offer that opportunity in a way
that just isnt possible in a larger organization, and I think that is a major attraction.

DL: Which other oil companies do you admire, and why?

JM: Tullow and Rockhopper come to mind. Tullow because of its focus in exploring so successfully in a
core area. Rockhopper for sticking to its program when others around were failing.

DL: How would you describe Cazas business model for creating shareholder value to an investor?

JM: We are of the belief that significant value remains to be found in the onshore area of the US through
the use of advanced evaluation techniques. Using our seismic database and knowledge of the regional
geology, we believe we can sufficiently manage risk and identify value in undiscovered fields and plays
that are only now becoming commercially exploitable with the use of modern technology. The onshore
US also offers many advantages. It is relatively cheap, has a great deal of existing infrastructure and
offers quick hookup of production. It also has relatively low political risk.

DL: Looking at the wider market, where do you see value in todays oil and gas markets? Which plays do you
consider most intriguing/hottest right now?

JM: The Bone Springs play in the Permian, the Bakken and the Woodbine; all plays that have been known
about for years but where recent advances in frac technologies and horizontal drilling have raised
productivity.

DL: Concerns about the economy and market volatility have returned recently to levels last seen a few years
back. What do you think the main effect of that has been, or is, on independent E&P companies?

JM: Obviously its not good. The E&P business is very cash intensive and access to the funds in the
market is crucial for independents. The E&P sector has been hit particularly hard in the recent stock
market sell-offs, and unfairly so, in my opinion. For canny investors it should provide a great buying
opportunity as there are undoubtedly some fantastic little companies out there.

DL: How has the deal market been for you and your peers? Is there a shortage or surfeit of good partners for
farm-ins/outs?

JM: As yet we have not had any problems in finding partners for our projects. I would like to think that
this also reflects well on the quality of our asset base. If Companies continue to become more cash
strapped this may become an issue, however, whenever the market place becomes competitive then the
quality of the projects is what matters.

DL: What is the most exciting thing(s) about Caza from the point of view of a potential investor?

JM: We target material prospects. As a small company, one or two good finds can have a hugely positive
impact on the share price. That is why a shareholder would choose to put their money in our stock as
opposed to a supermajor where the discovery of an elephant (far rarer than most people appreciate)
might only move the stock by a couple of percent.

DL: Finally, when youre away from work, how do you enjoy spending your spare time?

JM: I learned to fly in 1983 and have been passionate about flying ever since, however more recently I
have started to sail. Much slower and cocktails are allowed!

About John McGoldrick:

John Russell McGoldrick is a director and Executive Chairman of Caza and a director and Executive Chairman of
Caza Petroleum. From February 2004 to August 2006, John served as Executive President of Falcon Bay. Prior
thereto, John was employed by Enterprise Oil from June 1984 to October 2002, serving in a number of positions,
including President of Enterprise Oil GoM. from August 2000 to October 2002 and Managing Director of
Enterprise Energy Ireland Ltd. from December 1997 to August 2000. John is a graduate of the University of
Bradford (Bachelor of Engineering Chemical Engineering with Management Economics).

Guest Article


Cross Border Mergers and Acquisitions in the Canadian Oil & Gas
Sector: Transaction Tips and Trends

Written by John Kousinioris (Partner) and Alan Rautenberg (Partner), Bennett Jones LLP

The Canadian oil and gas sector has traditionally had, and continues to have, significant M&A activity, with domestic and
foreign intermediate and larger players acquiring smaller players, and smaller companies acquiring non-core assets from larger
players rationalizing their asset portfolios.

Alberta has approximately 175 billion barrels of proven synthetic oil reserves in its oil sands and a further four billion barrels of
conventional crude oil reserves, making Canadian oil reserves second only to Saudi Arabia. Canada is also the third largest
producer of natural gas in the world with reserves in excess of 50 trillion cubic feet.

The abundance of Canadian natural resources has been of continuing interest to foreign investors, traditionally from the United
States, but more recently from Asia.

Transaction Structuring

Business acquisitions in Canada are typically completed by purchasing the voting securities of a business entity or by
purchasing the assets of the business.

Public business acquisitions must comply with a variety of corporate and securities regulatory requirements and
typically employ a take-over bid or plan of arrangement.

Private business acquisitions require less regulatory compliance and can usually be completed by way of a share or
asset purchase agreement.

Plans of Arrangement

A plan of arrangement is a court-sanctioned corporate reorganization procedure that allows a company to reorganize, combine
with another company or effect fundamental changes to its capital structure. This acquisition method is frequently used for
friendly M&A transactions because it is flexible, facilitates complex multi-step transactions, avoids the application of the more
prescriptive take-over bid rules and avoids the need for second stage transactions to eliminate residual shareholder interests.
In addition, a court-approved arrangement may provide a section 3(a)(10) exemption for the issuance of share consideration
under U.S. securities laws and avoid material SEC review of a registration statement.

Once negotiated by the bidder and the target, a plan of arrangement is submitted to the target's security holders for approval
and, upon receipt of that approval, submitted to the court for ultimate approval and subsequent implementation.

A plan of arrangement typically requires approval by two-thirds of the votes cast at a special meeting of security holders and
binds all security holders once approved.

Take-Over Bids

A take-over bid is the Canadian equivalent of the U.S. "tender offer" and is defined as an offer to acquire outstanding voting or
equity securities of a class that would bring the holdings of the bidder (and its joint actors) to 20% or more of the securit ies of
the class.

A take-over bid must remain open for at least 35 calendar days and no securities may be taken up by the bidder until the end of
that period. All shareholders must be offered identical consideration and collateral agreements are generally prohibited.

Unlike a plan of arrangement, adequate (i.e., clear and unequivocal) arrangements must be in place before a take-over bid is
commenced to ensure that the bidder has the necessary funds available to pay for all of the securities subject to the take-over
bid. Although financing conditions are permitted, the bidder must reasonably believe it to be unlikely that the conditions to its
financing cannot be met.

Exchangeable Shares

Exchangeable shares are often used in cross-border share exchange transactions to provide a tax deferral for Canadian
vendors. A foreign acquirer will establish a Canadian subsidiary that will, at the option of the target shareholders, either

(i) deliver shares of the foreign acquirer, or

(ii) issue shares that are exchangeable for the shares of the foreign acquirer.

Exchangeable shares mirror the voting, dividend and return of capital rights of the foreign acquirers shares and allow
shareholders of a Canadian target company to defer tax until they exercise the exchange right inherent in the exchangeable
shares.

Guest Article


Deal Terms Similarities and Differences

Although there are many similarities in deal terms between Canada and the USA, marked differences remain which should be
recognized in the context of cross-border M&A transactions, including the following which we believe should be highlighted:

"Go-shop" provisions appear far less frequently in Canadian transactions;
Canadian transactions involve far fewer earnouts;
The survival period for representations and warranties is typically longer in Canada;
Caps on indemnity claims are much higher in Canada, with almost half of Canadian transactions limiting indemnities
claims to the full purchase price of the transaction; and
Canadian transactions contain escrow or holdback components much less frequently.

Alternative Transaction Types

Over the past few years, we have noted a number of trends in the Canadian oil and gas sector that have impacted, and we
expect will continue to impact, M&A activity including:

Risk Sharing Rather than focusing on the control associated with owning high percentage working interests in oil
and gas properties, industry participants have begun to focus on risk sharing, particularly for large projects with multi-
year development horizons and high capital requirements. This has led to an increasing number of projects,
including exploration and development programs, being structured as partnerships and/or joint ventures, as well as
the sale of significant minority interests in projects and prospects to industry partners.

Technology The oil and gas business has never been as focused on proprietary technology. Access to the
specialized technology required to exploit a resource opportunity is critical, resulting in an increasing interest in
technology-driven joint ventures, increased spending on research and development and renewed interest in the
enhanced exploitation of oil fields using technologies such as horizontal drilling and multi-stage fracturing.

Foreign Ownership Restrictions

Notwithstanding the Government of Canadas recent decision on BHP Billitons proposed U.S.$39 billion unsolicited bid for
PotashCorp, Canada remains open for foreign investment and it will be business as usual for most foreign acquisitions of
Canadian businesses. Foreign investment review thresholds under the Investment Canada Act continue to rise with the review
and approval threshold for foreign acquisitions presently being C$312 million, based on the book value of the target's assets,
subject to certain exceptions.

About the Authors:

John Kousinioris, co-chair of the firm's corporate commercial department, focuses his practice on securities law, mergers and
acquisitions and commercial transactions. His experience includes public and private offerings of equity, near equity and debt
securities, particularly in the energy sector, financing, acquisition and conversion transactions in the royalty trust and income
fund sector, domestic and international takeover bid transactions, asset and share purchase and sale transactions, corporate
reorganizations, debt restructuring, joint ventures and the negotiation and implementation of commercial transactions. You can
contact John directly at kousiniorisj@bennettjones.com

Alan Rautenberg has a tax planning practice where he advises on the tax issues relating to domestic and cross-border mergers
and acquisitions, public market debt and equity transactions and corporate reorganizations. Generally, Alan acts for public
corporations and large, closely-held companies. He has particular experience with mergers, acquisitions and dispositions and
securities and financing transactions in the energy and natural resources sector, acting for O&G, mining and alternative energy
companies. Alan has provided tax advice on the formation of several royalty trusts and has advised on acquisition, disposition,
merger and financing transactions involving royalty trusts. You can contact Alan directly at rautenberga@bennettjones.com

About Bennett Jones

Bennett Jones is Canada's leading energy firm, founded and focused on principles of professional excellence, integrity, respect
and independent thought. With offices in Calgary, Toronto, Edmonton, Ottawa, Dubai, Abu Dhabi and Beijing, our practice
encompasses virtually every sector of business, industry and government. Please visit: http://www.bennettjones.ca

SNR Denton is a client-focused international
legal practice delivering quality and value.
We serve clients in key business and fnancial centers from
60 locations and 43 countries, through offces, associate
frms and special alliances across the US, UK, Europe, the
Middle East, Russia and the CIS, South-East Asia, and Africa,
making us a top 25 legal services provider by lawyers and
professionals worldwide.
Our energy team comprises more than 100 lawyers covering
all types of energy related work, ranking it among the largest
dedicated energy legal practices in the world. The team has
extensive experience advising energy businesses on all types
of oil & gas projects and facilities.
Areas of Focus:
Upstreamanddownstream
Pipelinetransportationandstorage
LNG
Petrochemicals
Oilandgastrading
Derivatives
Regulation
Privatizationofoilandgasindustriesandenterprises
Contact
Danielle Beggs
Partner,London
T + 44 (0)20 7246 7442
danielle.beggs@snrdenton.com
Vince Murchison
Partner,Dallas
D +1 214 259 1866
vince.murchison@snrdenton.com
S
e
e

A
l
l

S
i
d
e
s

I
n
t
r
o
d
u
c
i
n
g

S
N
R

D
e
n
t
o
n

Guest Article


South Sudan: The New Minister of Petroleum's In-Tray

Written by David Tennant, Partner, Energy, Transport and Infrastructure Sector, SNR Denton

Much has been written about South Sudan's prospects since independence was achieved on 9 July 2011.

As others noted at that time, the question of oil was very much the elephant in the room. However, if South Sudan is to achieve
independence in a meaningful sense, this question of the sharing of oil revenues, in terms of what has happened in the past,
and what needs to happen in the future, must be answered. If South Sudan is to see its abundant oil resources delivering
economic benefit, in the form of new infrastructure and social reforms, then arrangements with existing oil contractors, and the
increasing number of new contractors visiting Juba, must be formalised at the earliest opportunity.

A key task for the new Minister of Petroleum and Mines is to look at the terms of the existing oil contracts covering produci ng
blocks situated in South Sudan. Approximately three quarters of Sudan's oil reserves are situated in the south with estimated
production levels varying between 350,000 and 400,000 barrels per day.

Although this level of production is delivering around US$40 million in revenues each day, the new government has shown a
willingness to review the existing arrangements. International consultants have been engaged for this purpose and the lawyers
are expected to report soon to Minister Stephen Dhieu Dau and Nilepet on the key terms previously agreed between
contractors and Sudapet, the former national oil company. Existing exploration and production agreements are in place with the
Greater Nile Petroleum Operating Company, China National Petroleum Corporation, Total and Petronas. It is expected
particular focus will be given to the fiscal terms dealing with cost recovery, sharing of profit oil and custom and tax exemptions.

Early indications are that the existing exploration and production contracts are not unfavourable from a South Sudan viewpoint.
The big question is: what if South Sudan decides it does not like the terms?

Short of contractors agreeing to a renegotiation the question becomes one of whether or not South Sudan remains bound by
the terms agreed on by Sudapet. This is not an easy problem to resolve and there no clear-cut answers. While lawyers
generally accept government succession (i.e. regime change) does not invalidate pre-existing contracts and international
treaties (as there is no change in the legal personality of the state), views are much more wide ranging on the issue of
successor states.

Two broad schools of thought exist.

The first concludes that the successor state remains bound by the obligations of the predecessor state. Here the
arguments rest on issues of natural law and justice, occasionally supplemented by arguments around the concept of
unjust enrichment.

The other school sees the question of state consent as crucial. Just as the predecessor state was only bound by
private contracts and international treaties where it had given its consent, so it must be for the successor state. So in
the absence of the successor state giving its express consent, the successor state is not to be bound.

Recent international experience does not favour one school of thought over the other (contrasts abound when considering the
approach taken to state succession on the dissolution of the Soviet Union, the breakup of former Yugoslavia and East Timor's
independence from Indonesia). Coupled with little international case law on state succession and the absence of international
agreements and treaties on the issue, the outcome in the South Sudan context may not be known for some considerable time.
That alone may be persuasive. If oil revenues are to continue to flow to Juba then government may decide lengthy disputes
with contractors are best avoided. After all, well over 90 percent of South Sudans revenues are oil dependent.

A second task for the Minister is to implement a new petroleum law. At present the body of law in South Sudan is something of
a mosaic. Some new South Sudan laws exist (though not in relation to key economic areas, such as petroleum resources, the
electricity supply industry or mining rights).

There are also various quasi laws that were enacted pre independence. Both of these are supplemented where necessary by
laws enacted by the predecessor Sudan. If new investment is to be encouraged, in terms of both new petroleum concessions
and new infrastructure, such as a refinery or new export pipeline, then a new legal and regulatory framework is needed fast.
Experience suggests this too may not be easy to achieve: a draft Electricity Act has been with the predecessor to the new
Ministry of Electricity and Dams for over two years, with no sign of implementation anytime soon. Oil revenue dependency
should accelerate enactment of a new Petroleum Act; however, until this happens, no new exploration is likely to take place.

The success of the new Petroleum Act (currently under development with the assistance of the Norwegian government) will in
some senses be dependent on who is being asked the question. From South Sudan's perspective the main requirement is to
establish a new framework that is attractive to contractors and encourages new exploration.

This does not mean the act has to be exhaustive in detailing all features of the regulatory framework, but it must be sufficient in
scope and intent to foster new investment. In short it must cover core concepts without too much detail and avoid setting in
concrete concepts that prove difficult to change in light of later experiences.

Good petroleum legislation (from both a government and a contractor standpoint) must identify a competent governmental
agency which will be mandated (ideally on an exclusive basis) to control and implement petroleum sector policy. This is likely to
be a particular challenge for Juba. Expertise is thin on the ground: government run Nilepet has minimal staff, a situation shared

Guest Article


with the petroleum unit with the Ministry. Getting the new legislation in place will be critical, but so will be creating the required
skills and capacity within government to administer it.

Others will view the success of the Petroleum Act as measurable by its approach on transparency and independent verification.
Concerns have longed been aired about the lack of transparency in Sudan, a concern much vindicated by the present delay in
the agreement between Khartoum and Juba on sharing revenues and access to export infrastructure.

Many view the management of the petroleum sector as the single most important task for government. With national income so
dependent on oil revenues (something unlikely to change in the foreseeable future), South Sudan's long-term viability is
dependent on the responsible and economic management of the sector. So commentators interested in ethical and governance
issues will judge success by the acts approach to data transparency, contract transparency, access to information,
independent auditing and fair contract allocation. In their eyes a robust and comprehensive act, effectively implemented, will go
a long way towards providing political stability and economic success in South Sudan.

Settlement of terms under existing exploration and production contracts and enacting new legislation will get South Sudan so
far, but a new export pipeline may get the government a lot further. Current export facilities are restricted to two pipelines,
refining capacity and the Port Sudan terminal, all controlled from Khartoum. Several new routes are under consideration.

Option one is to build a pipeline to Melut in Upper Nile continuing on to Ethiopia and Djibouti. Option two is to join Melut with the
Doba/Kribi pipeline between Chad and Cameroon. The third option, presently the front-runner, is a pipeline between Malakal in
Upper Nile and Lamu on the Kenyan coast.

The Lamu project has a head start. First conceived in the 1970s, the planned pipeline forms part of the larger Northern Corridor
project, in turn part of Kenya's 2030 economic blueprint. A commercial necessity for the Northern Corridor project is an
independent South Sudan. Lamu is attractive for a number of reasons.

Apart from being an alternative to Port Sudan, it would provide South Sudan with its shortest link to the sea and with access to
cheaper infrastructure. The proposed Lamu port, with its deep-water harbour and planned road and rail network, will give South
Sudan a land bridge, so facilitating exports of oil and minerals and the import of materials needed to develop local and regional
infrastructure projects.

While it is clear that the Kenyan authorities are pushing ahead with Lamu - the Ministry of Transport gave it the green light last
month - the position is less clear in Juba. The South Sudan end of the land corridor will only develop if the right legal and
contractual structures are in place.

At a minimum this will require new inward investment, taxation, public procurement and finance legislation, none of which is
likely to be implemented in the short term. Possible pipeline extensions and/or tie-ins with Ethiopia and Uganda and the cross-
border nature of the project will also add complexity. This will necessitate individual host government agreements with the
project developers, an inter-governmental agreement between South Sudan and Kenya (and possibly others) and also
complicated capacity sharing arrangements.

So the new Minister of Petroleum and Mines, appointed only earlier this month, has plenty to keep himself and his Ministry
colleagues busy.

About David:

David Tennant is a Partner in the Energy, Transport and Infrastructure Sectors at SNR Denton. He
specialises in the oil & gas sector and has wide experience of upstream, midstream and downstream
matters. He has worked in the UK, the Middle East, the CIS and throughout Africa, acting for a mixture of
host governments and NOCs, IOCs and independent oil & gas companies and industry regulators

Contact David directly on +44 (0)20 7246 7660, david.tennant@snrdenton.com

About SNR Denton

SNR Denton is a client-focused international legal practice delivering quality and value. We serve clients in key business and
financial centers from more than 60 locations in 43 countries, through offices, associate firms and special alliances across the
US, the UK, Europe, the Middle East, Russia and the CIS, Asia Pacific and Africa, making us a top 25 legal services provider
by lawyers and professionals worldwide.

Our energy team comprises more than 100 lawyers covering all types of energy related work, ranking it among the largest
dedicated energy legal practices in the world. The team has extensive experience advising energy businesses on all types of
oil & gas projects and facilities. This experience has been built up over 60 years through oil and gas regulatory and project
related work in the United States, Europe, the Middle East, CIS, and Africa. Many of our lawyers have worked in-house for
energy companies, either before joining SNR Denton or while on secondment, giving our team a unique understanding of the
oil and gas industry the ability to deliver industry-based solutions in a timely and focused manner.

www.senergyworld.com
United Kingdom Norway Middle East Malaysia Australia New Zealand Americas
Oil & Gas Survey & GeoEngineering Alternative Energy Software Training
Were listening
Partnership based on a close working relationship
Senergy continues to grow its international energy
business, delivering integrated services to clients
in the oil and gas and alternative energy sectors.
Through the application of commercial and
technical innovation we add value and minimise
risk - and ultimately enhance performance and
productivity.
With over 500 people bringing an unrivalled
breadth and depth of expertise together to
challenge convention, Senergy gives you the
right assets, the right team, the right solution
and the right results.
www.senergyworld.com
T: + 44 1224 213440
E: info.uk@senergyworld.com
The continued globalization and demand for
energy has led to revolutionary changes in the
development, utilization, supply and transport of
key energy sources and commodities. Korn/Ferry
International, a proud sponsor of The Oil Council,
has been servicing this sector from more than 70
offices in the Americas, Europe and Asia Pacific
for over 40 years.
With a dedicated focus on the latest industry
trends from sustainability and the impact of
alternative energy on business planning to
emerging market supply/demand dynamics and
regulatory, political and financial factors we
develop the most effective talent solutions for this
ever-changing business.
Do you have
the right senior
leadership to drive
your strategy?
www.kornferry.com

Special Focus


Getting it Right in the Boardroom

Written by Dominic Schofield, Senior Client Partner, Korn/Ferry International

The legendary Peter Drucker once said, People use the word guru because they cant spell charlatan. This piece does not
seek to point to a corporate governance nirvana somewhere there yonder, but instead to describe the board landscape as we
see it today and point to some practical steps a company can take to get the best out of its board. This is based on our work
with a wide variety of boards over the years.

The past decade has seen a sharp increase in both focus on and pressure for stronger corporate governance. Each corporate
scandal has been followed by new enquiries and calls for greater scrutiny and tighter guidelines. In the US, Sarbanes-Oxley
followed the collapse of Enron, WorldCom and Tyco. In the UK, the corporate turbulence in the boardrooms at roughly the
same time led to the Higgs Review of Corporate Governance. The 2008-09 global financial crisis triggered another bout of
corporate governance angst and another round of guidelines and regulation tightening. The Walker Review into the Boards of
Banks and Financial Institutions (BOFIs) in the UK has led to a revision of the existing UK Code of Corporate Governance
(published in June 2010). The new Code strongly encourages boards to undergo an annual internally led and tri-annual
externally led performance review.

If, as the UK Code states, the purpose of corporate governance is to facilitate effective, entrepreneurial and prudent
management that can deliver the long-term success of the company, then the pressure and focus to develop and maintain a
strong and effective board is unlikely to abate any time soon. That pressure will come as much from investors and potential
investors as from regulatory and listing bodies. As reputational risk increases, we may see a war for talent emerge for
boardroom non-executive talent, with perceived strong boards being a greater factor in the market value of a company. By way
of illustration, a recent guidance note from Ernst & Young to companies considering a London listing illustrates this point: With
greater scrutiny and liability for public company directors, substantial time and effort is required to identify, appoint and groom a
qualified board of independent directors... investors are placing a premium on corporate governance (Exploring Options IPO
Readiness, Ernst & Young, 2010).

Recent episodes at FTSE100-listed miner Eurasian Natural Resources Corporation demonstrate the damage boardroom
conflict can have on a companys share price and value. Over the course of six months, despite stellar financial results, the
companys market capitalisation has fallen by nearly half primarily as a market reaction to governance concerns, not helped
by one of its ousted non-executives accusing the company of being more Soviet than City.

Good governance goes beyond just being compliant; it strays into the difficult to quantify realm of behaviour and human
interaction. As David Nadler of Mercer Delta wrote in the Harvard Business Review in 2004: The key to better corporate
governance lies in the working relationships between boards and managers, in the social dynamics of board interaction, and in
the competence, integrity and constructive involvement of individual directors (Building Better Boards, HBR, May 2004).

Four Types of Boards: Which One Is Yours?

6
At least as many Non-Execs as
execs, a Chairman, a SID and 3
sub-committees (Audit, Rem,
Noms)
At least 50% of the NEDs,
excluding the Chairman, are
independent
NEDs have 20-25 days available
a year for the role
Chairman and Chair of Audit
credible with Investor community
and well versed in corporate
governance best practice
Board aligns NEDs with the
companys 5yrs objectives
Sector speciality for either Chair
or SID
Chair able to devote a third to
half of his/her time to the role
NEDs could spend 30-35 days
on role post 2010
International / M&A experience to
help growth
Exposure to new business
models
High IQ and EQ NEDs, able to
be forensic on arguments and
engage positively with others
Talent focused, mentor execs
Global mindset & global
networks
Strong track record of growth
Combination of strategic and
operational
Board skill gaps and succession
regularly addressed
Works as team
World-class insights
In-depth knowledge on best
practice but relentless focus on
tomorrow
Candid on development needs
Diversity of views
Live the values
Basic Compliance Future Proofing
Basic Compliance
Basic Compliance
High Performance
Future Proofing
Basic Compliance
Future Proofing
High Performance
Strategic Asset
Foundation Board Developed Board Advanced Board Strategic Board
Process
driven
Behaviour
driven
Strategic Board Framework

Special Focus


No one board is the same. Our Strategic Board Framework puts boards into four broad categories, each with an increasingly
sophisticated mix of executive and non-executive directors (NEDs). The four stages seen previously represent a continuum.

Foundation Board: A Foundation Board adheres to the corporate governance codes and regulations of the
jurisdiction in which it is listed. A majority of its members will be independent, and its committees will be appropriately
staffed. The cosmetics are right. There will be interaction between executives and non-executives; however, there
is likely to be a strong CEO who set the strategic course of the company and very much calls the shots. Little
thought is given to succession and the future competencies of independent directors.

Developed Board: A Developed Board is aligned to the companys strategic needs, both in terms of its current
competency makeup and its future skill and competency requirements (future proofing). Careful attention is given to
ensuring the right competencies and skill mix. The chairman will ensure that all the right processes are followed.

Advanced Board: In an Advanced Board, directors are selected on the basis of experience/competencies as well as
their behaviours lets say, EQ as well as IQ. The chairman works hard to ensure that the board has lively and
productive conversations. Non-executives have good relations and interactions with the companys executives
often providing mentoring support and/or effective soundboards. The board regularly addresses gaps and has a firm
grip on succession and talent management challenges. It is a board which will annually review its performance and
processes.

The Strategic Board: The Strategic Board works as a team. It is a dynamic forum, which provides outstanding
leadership for the company. NEDs will provide robust challenges and mentoring to the executive management in
equal measure. The chemistry around the boardroom table is good, and worked on. Lively debate is the norm. The
chairman will conduct annual reviews of performance. Peers are open about each one anothers performance and
are candid about gaps and development needs. There is on-going learning, and the board has a penetrating
understanding of the issues, challenges and risks facing the company and executive management. In short, the
board lives the values of the company and is a source of respect and inspiration for the rest of the company.

Boards in the first two categories tend to be process driven, whilst the boards in the latter two categories are more behaviour
driven. Yales Jeffrey Sonnenfeld has argued in the past that the most involved, diligent, value-adding boards may or may not
follow every recommendation in the good-governance handbook. What distinguishes exemplary boards is that they are robust,
effective social systems (What Makes Great Boards Great, HBR, September 2002).

At the start of a board review/evaluation process, we always encourage our clients to take a cool and dispassionate
assessment as to how they operate and roughly where they think they may sit along this continuum. In some cases, boards will
exhibit features that cross the continuum. Nevertheless, knowing where you are right now is the best starting block for change
and getting you to where you want to be.

In the energy sector, the geopolitical, financial and operational complexities and pressure arguably suggest the need for
company boards to possess many of the qualities and features of an advanced or strategic board. The boardroom dynamics
will be critical.

How Boards Become More Effective

Board effectiveness and sound corporate governance cannot be legislated for. They are built over time, and directed and
maintained by strong boardroom leadership (most commonly in the guise of the chairman). The key features of building an
effective board should be:

Establishing a climate of trust and candour.
Encouraging a culture of debate and open dissent where board members feel comfortable challenging and quizzing
proposals. This is the antidote to group think.
Ensuring that board members develop a deep understanding of the business, from HQ to the coalface. Information
should be disseminated on a timely basis, and directors should commit to putting in the time.
Regularly evaluating the boards performance.
Ensuring that the boards makeup is aligned to the companys strategy in both its aggregate competencies and skills.

An additional feature of a strong energy sector board should be robust and effective scrutiny of risk as well as health, safety
and environmental issues.

Conclusion

Life in the boardroom of quoted companies has become more time consuming and demanding. Reputational risk has
increased. However, for companies and investors alike, the returns are huge from building strong, functional boards with
animated, engaged and highly competent directors focused on imparting their collective wisdom and adding value. For energy
companies possibly more than for companies in other, more domestic business sectors the strength and power of the
boardroom is of huge importance. Being able to draw on the wisdom and sound judgment, technical and financial skills, and
geopolitical nous of a strong group of directors (who work well as a group) is the surest way of navigating the ever-turbulent
seas of the global economy.

Dominic Schofield is a Senior Client Partner in Korn/Ferry Internationals EMEA Board & CEO Practice.
Dominic is based in London and can be reached at: +44 20 7024 9000 or dominic.schofield@kornferry.com

For more information on Korn/Ferry International please visit: http://www.kornferry.com
www.oilcouncil.com/event/latam drake.lawhead@oilcouncil.com
The Latin America
Assembly
A New Forum for Latin Americas Oil & Gas Business
Community
TheBusinessofE&PinLatinAmericaCapitalRaising,M&AandA&D,JVs
IOC/NOCpartnershipsandcapexstrategiesevolvingmodels
IndependentE&PopportunitiesinPer,Argentina,Brazil
Capitalmarkets:tappinglocalandinternationalfundingpoolsprivateand
public
NewFrontiersandUnconventionalplays:Argentineshale,heavyoil,offshore,
CentralAmerica
OilFieldServices
ManagingRisk,NavigatingRegulationsharingbestpractice.
25 26 January 2012
The Hilton Bogot,
Colombia
OilCouncilPartners:
LATIN AMERICA ASSEMBLY
Oil Council
Charle Gamba
CEO,
Canacol
John Wardle
CEO,
Amerisur Resources
Kjetil Solbraekke
CEO,
PanoroEnergy
Steve Crowell
CEO,
Pluspetrol
Dana Coffeld
President & CEO,
Gran Tierra
Aurelio Ochoa
President,Perupetro
Richard Walls
CEO,
C&C Energia
Marcio Mello
Chairman, Founder, and CEO,
HRT Oil & Gas
Abby Badwi
CEO,
Bankers Petroleum, and Chairman,
P1 Energy Corporation
Antonio Vincentelli
CEO,
PetroNova
Ali Moshiri
President, Africa and Latin America
Exploration and Production, Chevron
Toronto Stock
Exchange
TSX Venture
Exchange
Bourse de
Toronto
Bourse de
Croissance TSX
Toronto Stock
Exchange
TSX Venture
Exchange
Bourse de
Toronto
Bourse de
Croissance TSX
Toronto Stock
Exchange
TSX Venture
Exchange
Bourse de
Toronto
Bourse de
Croissance TSX
Register Today for Early Bird Discount of only $1 495
Special Discount for Delegations

Special Focus


Leadership and Talent Management A Scarce Resource?

Written by William Clarey, Founding Partner, Clarey/Napier International

Management is doing things right, Leadership is doing the right things
Peter F. Drucker

Many people may have surmised that with all the challenges of the last decade Great Recession, current global malaise, 9-
11, "Tech wreck (of 2000 2001)" several natural disasters, plus many other events that the War for Talent in the energy
industry was over or had been postponed.

The truth is with the industry planning to invest several hundred billion dollars in capital in the coming decade, the demand for
talent/leadership skills may be higher than ever. Companies like to promote the idea that their staffs are a big source of
competitive advantage. The reality is that most of them are as unprepared for the challenge of sourcing, developing, motivating
and retaining quality employees as they were a decade ago.

Pace of Change Accelerating

The issue of demographics, globalization, and the impact of knowledge workers has been widely documented. When you
combine these factors with the following, the industry is facing unprecedented levels of change to include:

Growing demand
Shift of supply to even more remote locations
Heightened environmental sensitivities
Even larger capital requirements
Evolving centers of activity (BRIC countries)
Shortage of petrotechs (estimated to lose 5,000 experienced petrotechs by 2014)

We have all heard for many years about the looming demographics (median age of industry technical talent in the US
estimated at almost 50), Workforce 2000 issues, the great "shift or crew change" that is occurring and many would suggest far
too little management time and attention has been devoted to the issue.

With the thousands of unfilled professional level positions across the industry, one might suggest the battlefield for talent should
be viewed in the much same way a company would develop their supply chain strategy, their capital structure, government and
partner relations, etc. Talent sourcing, development, and leadership and succession planning must be viewed as an on-going
process - not a one-time event.

Emerging Markets Only a Partial Solution

While a number of companies may look to the emerging markets as a source of talent (they are currently graduating more than
twice as many university educated professionals as the developed world) a number of issues will need to be addressed before
this can be a viable part of a resourcing strategy, to include: inadequate English skills, questionable academic curriculums,
cultural deficiencies lack of experience working in teams and an unwillingness to assume leadership roles.

Additional Management Focus Required

A survey conducted by McKinsey and Company of CEOs, Business Unit leaders and Human Resource professionals
acknowledge that they fail to give the issue of talent and leadership management adequate time and attention. Over half of the
interviewees believed executive leadership doesnt align talent management with business strategies.

If one accepts the point of view that one of the basic goals of Leadership and Talent Development is to produce more leaders
and not more followers, than why hasn't the industry been more successful? A recent survey of over 10,000 employees in the
energy sector found the following competencies to be top priorities:

Improved ability to lead employees and teams
Employee relations problem-solving skills
Career development and learning opportunities that are cross-organizational

However, when asked to evaluate the effectiveness of their companies in meeting these priorities there was a significant
shortfall in performance. Notable gaps were: building and leading a team, confronting problem employees, building a broad
functional orientation and career management. When combined with the belief that the industry has invested heavily to
implement HRIS programs, outside consultants, etc. why the "dis-connect"?

Too many companies still view talent/leadership management as a short-term problem rather than an integral element of a
long-term strategy. Great talent and great leaders are hard to find...when we see the shelf-life of CEO's at a record low (and the
turnover that creates on their direct reports) companies need to focus on finding a match between leadership strengths and
competencies that matter most for their sustained growth.

Data suggests that candidate sourcing and recruiting, training and development, succession planning and individual and
organizational development activities might be best focused on these competencies.

Special Focus


Impact of the HR Team and Organization

One could argue that HRs role and impact continues to decline. Questions to be asked include: what level in the company
does HR report to? Do HR professionals occupy the senior positions within the function? How is the HR professional staff
compensated in comparison to their peers in finance, IT etc?

Many times HR and Talent Acquisition staff may be criticized for lacking business knowledge and establishing credibility is a
continuing challenge. Organizations that deliver the highest return on their leadership development activities view HR as a
strategic function and not as administrators who do things on request.

In our experience, companies that perform and execute best practices in the Leadership and Talent Acquisition area do the
following:

Conduct detailed assessments of their talent requirements
Create development targets and competencies that support growth strategies
Include these into all aspects of the HR value chain recruiting, succession planning, performance management and
reward/incentive plans.
Hold line management and the HR organization jointly accountable for the implementation and execution of programs
and systems
Review objectives and results at the Board and Compensation Committee level regularly

Investing in leadership excellence must be strategically focused and the returns measured and should be a joint effort between
business operations, senior company management and the Human Resource organization.

Conclusion

If the industry is going to be able to avoid delaying projects due to talent shortages while simultaneously trying to staff a major
push into Unconventional resource plays, (not to mention the amount of talent that has been siphoned recently to join private
equity sponsored start-ups), they should be involved in the following:

acknowledge that the status quo talent strategy will be inadequate to meet future growth targets
develop a value proposition/brand that distinguishes your organization from all others
avoid curtailing hiring when prices soften
don't allow staffing and leadership issues to be delegated too low in the organization - has to be a C-level issue
ensure compensation plan remain competitive
maintain an active university relationship strategy to include Executive Development Programs

Investing in leadership excellence can payoff - for those who get it right they can develop an advantage that will be difficult to
replicate.

About Clarey/Napier International:

Clarey/Napier International is a Houston-based retained executive search firm established in 1998 to provide companies with a
distinctive competence in the area of strategic staffing. Bill Clarey and Ginger Napier have a proven track record of excellence
in identifying and attracting talent in a variety of industries and functional areas. Together, they offer over 30 years of executive
search and management consulting experience. Clarey/Napier International is based in the center of the international energy
industry and over 50 percent of our executive search assignments are within this sector. The other business sectors in which
we have experience include manufacturing, professional services, engineering and construction, power, and emerging growth
businesses.

About William Clarey, II

Prior to joining the executive search industry, he spent seven years as a consultant with McKinsey & Company and Hay
Associates. In that capacity, he helped large energy, manufacturing and diversified service companies among others address
major corporate strategy, organization, human resources and executive compensation issues. In 1987, Bill joined the executive
search profession and over the next ten years served as a principal and partner with two major international executive search
firms. During this period, he served clients in a variety of industries to include: energy, professional services, environmental,
information services, private equity, manufacturing, and health care. He has conducted executive search assignments in
various functional disciplines to include: general management, risk management, business development, finance, operations,
engineering, manufacturing, management consulting, systems, quality, and human resources. In 1998, Bill joined with his
current partner to form Clarey/Napier International with the objective of delivering high level, client focused executive search
services targeted at the global energy market place. Phone William on +1 713-238-6705

Footnotes: SBC, 2010 Oil & Gas HR Benchmark Study, Center for Creative Leadership, 2009
Integrated services from Petrofac
Petrofac is a leading international provider of facilities solutions to the oil & gas industry.
We design and build oil & gas facilities; operate, maintain and manage facilities and train personnel;
enhance production; and, where appropriate invest to offer an integrated solution for upstream and
infrastructure developments.
Our Integrated Energy Services division enables Petrofacs existing capability, from engineering
& construction through to sub-surface management, to be harnessed and packaged to create value
for customers through the delivery of our services.
To learn more visit www.petrofac.com
call +44 207 811 4748 or email investment@petrofac.com
www.petrofac.com
PETROFAC IS DELIGHTED TO BE A PARTNER OF THE OIL COUNCIL

Special Focus


Good Governance Matters Analysis of Mid-Cap E&P Companies

Written by Dr Keith Myers, Partner, Richmond Energy Partners

Summary

Richmond Energy assessed the quality of corporate governance for 30 mid-cap exploration and production companies against
a set of 13 measures covering board, management, transparency and reliability of reporting and compared the results to share
price and operational performance over a 3-year period.

This assessment is primarily based on indicators of Good Governance, not actual good governance. An assessment for the
latter requires being privy to day to day decision making within the organisation. We focus on indicators for clarity of direction
and operational plans, and disclosure of operational performance.

The scoring of corporate governance appears to correlate with average share price performance - The shares in 15 companies
that ranked above the median score for evidence of good governance grew an average 54% in USD terms over a three year
period whilst the 15 that scored below the median grew an average 8%.

So, corporate governance of a mid-cap exploration and production company seems to make a difference to equity values and
should be a key consideration for investors.

The correlation between evidence of good governance and share price is not one to one companies with top scores for
governance can fall in value and companies at the bottom end can increase but the difference on average is significant.

So why is this? Do better governed companies perform better in operational measures of growth such as production or oil and
gas reserves. Possibly, but what is probably more important is that investors perceive less risk in companies that have
competent management accountable to a knowledgeable board, who report regularly with a high degree of transparency.

The regulatory regime and geography of operations also makes a difference, as evidenced by the high scores of companies
listed in Toronto where regulation, particularly on reserve reporting is comprehensive. Companies with assets in Europe seem
to score higher than companies with assets in the Middle East and Former Soviet Union. However, good governance practice is
as much a matter of company choice as it is a choice of regulatory regime.

So the lesson for investors is to pay close attention to the board structure and the competence and accountability of
management. Beware of companies that tell their stories infrequently or are sketchy on detail. If a company seems reluctant to
communicate, it is maybe because it doesnt have a good story to tell.

Introduction

Corporate governance should be a key factor in determining investment decisions but it is one of the hardest elements to
assess. Pre-IPO investors spend a great deal of effort in doing due diligence on the management team, but once a company is
listed access to information is more limited.

The outsider is not privy to day to day decision-making inside a company and the investor must put its trust in the board to
ensure that its interests are being looked after, and rely on reporting from the company for its primary source of information on
performance.

After years of following smaller oil and gas companies we have encountered, from time to time, disturbing lapses in standards
of corporate governance, which have resulted in huge value destruction for shareholders.

We have used the lessons learned from these examples (1) and adapted principles of oil sector governance best practice from
Keith Myers work with Chatham House, the World Bank and the IMF to develop a set of 13 criteria to assess companies
against. The criteria are grouped under two headings - 1) Clarity of direction, board structure and management, 2)
Transparency and reliability of reporting.

It should be emphasised that this assessment is based on indicators of Good Governance, not actual good governance. We
are not accountants and have not assessed companies compliance with financial accounting codes. Instead we focus more on
clarity of direction, operational plans and disclosure of operational performance. Good governance requires:

1) Clarity of goals, roles and responsibilities
2) Accountability for performance and decision-making
3) Transparency and accuracy of reporting
4) A management capability relevant to the objectives of the company
5) Sustainable decisions and risk management

The assessment criteria listed below were developed for this study based on the principles above. Assessments were then
made based on evaluation of the companies publicly available information. Sustainability and risk management factors were

1
Oilexco Lessons learned March 2009. REP briefing note

Special Focus


not assessed in this study. Assessment of management capability is subjective and based on published management profiles.
Potential conflicts of interests noted are those in the public domain and there maybe others we are unaware of.

The governance scores were then compared with share price changes from end 2007 to end 2010. Note that at the start and
end of the three year period oil prices were at about the same level, which means that oil price should not have a significant
effect on performance.

Governance Criteria

1) Clarity of Goals and Strategy

This criteria concerns the communication of the goals of the company and its business strategy. These are more than
motherhood statements and should set targets and measurable objectives and give the investor a good sense of what the
company is aiming to achieve and hold management to account for.

2) Conflicts of interest

This criteria identifies potential conflicts of interest where the executive team or major shareholders have other business or
personal interests that could potentially result in a conflict of interest at some future date. An investor needs to trust that the
company decision-making is in the interests of all shareholders. This is quite a common issue in the oil and gas sector with
company founders often being serial entrepreneurs with interests in several businesses. A notorious example of this was the
purchase by Sibir Energy of a Moscow property portfolio belonging to one of its Russian oligarch shareholders during the 2008
financial crisis.

3) Clarity of Board Roles and Responsibilities

In this criteria we are looking for the accountability of the executive function to the board of directors. Companies score full
marks if there is clear accountability of the CEO to an independent Chairman. This is difficult to judge without knowledge of the
personalities involved but a separation of the roles is a good start. We also look for clarity in who is fulfilling key roles like
finance director and head of exploration and looking out for any gaps in the organisation.

4) Majority non-executives

This is another measure of accountability of the executives. Good practice is to have a majority of genuinely independent non-
executives. Often independent non-executives carry this label but maybe close associates of executive management.

5) Non-execs with oil and gas experience

It is crucial for accountability that there are non-executives on the board that have oil and gas experience at both a
commercial/financial and technical level. Otherwise, the board is less able to monitor or challenge the decisions and
performance of the executive effectively on behalf of shareholders.

6) Management Reputation

Management reputation concerns whether key members of the management team have the capabilities to deliver the strategy
and goals of the company. This is a rather subjective judgement as to whether the management have a track record of delivery
in the focus area of the business, and is based upon what details the companies release.

7) Overheads

The overhead charge is effectively the fee the management team is charging shareholders for managing the capital assets for
which they are responsible. Here we benchmarked companies against the ratio of overhead to booked oil and gas assets, i.e.
capital actually deployed rather than sitting in the bank. A ratio >5% gets zero and a red flag and <2% full marks.

8) Financial Reporting Segmented by Country

This will become increasingly a requirement for oil companies as part of global transparency initiatives so companies that score
well on the measure are ahead of the game. Country segmented reporting allows greater insight into company performance.

9) Informative Presentations

The quality and detail in presentations is more important than frequency. Here we are looking for overviews of assets and
future projects. In particular we are looking for summaries of planned prospects to be drilled with a seismic cross section, map
and information on prospective volumes and risks. There needs to be enough information so that the informed reader can make
their own judgement as to risk and reward in the company portfolio.

10) Operational Plans

A minimum of once a year the company should lay out its operational plans for the year highlighting key events and
distinguishing between firm activity and contingent activity. The company should provide an estimate of capital spend and its
allocation.

Special Focus


11) Operational Reporting

For E&P companies the challenge is to report all significant drilling results in sufficient detail for the informed investor to be able
to understand the significance of the event being reported. The investor should expect the company to report regularly on
progress of wells and if a discovery is made provide information as to what has been found and its likely significance. The onus
is on providing the facts rather than optimistic interpretations. The results of any well tests should be reported with suffi cient
detail on duration and flow rates for any caveats to be understood.

12) Reserves Reporting Detail

This is a crucial area of disclosure for oil and gas companies and practice varies enormously. Each stock exchange has
different rules and each company interprets the rules differently. Reserve reporting is a dark art because of the uncertainti es
involved, so detail is important to be able to evaluate value. From an analysts perspective, the more detail provided the better.

Top scores go to companies that break down reserves on a field by field basis, distinguish reserves on production for
undeveloped and contingent resource, and provide uncertainty ranges (usually 1P and 2P). Reserve movements from year to
year are important. The Canadian listed companies also often provide a NPV10 valuation of the reserve categories which can
be useful provided the assumptions are also laid out.

13) Independent Reserve Audits

Independent reserve audits by a Competent Person (CPRs) give a valuable layer of assurance if they are carried out by a
reputable company. Top marks go to companies that name a reputable reserve auditor and who provide information on the
brief given to the audit company.

Results

The average company score overall in 2011 was 70% and unchanged in the 26 companies that featured in both the 2010 and
2011 studies. Seven companies scored more than 80% with no red flags and merit top grade for good governance indicators.
These companies are spread across all the major exchanges with assets in different continents, demonstrating the good
governance is a corporate choice rather than a regulatory outcome.

The average score was 72% for Board and Management and 70% for Transparency. The two most common red flag issues are
conflicts of interest (7 companies): and high overheads (6 companies).

Possible conflicts of interest are caused most commonly through a dominant individual or company shareholder with outside
business interests. Note this criterion is not assessing an actual conflict of interest but assessing the potential for one. In some
cases executives of the company may have shareholdings and directorships in companies potentially competing for
opportunities.

In terms of transparency of reporting, the two most common weaknesses were infrequent and/or uninformative presentations
and lack of financial information broken down at a country level. The industry has broadly accepted reserve reporting to SPE
standards which helps comparison of one company to another. However there are no common standards for the detail of
reserves reporting across exchanges and it remains difficult to compare reserves from one company to another.

Third-party validation is critical for the analyst/investor to be able to assess oil and gas reserves confidently. Many companies
do not acknowledge carrying out independent reserve audits. Some say they do without naming the engineer concerned or how
much of the portfolio they have audited. Reserve audits are presented as tables and rely heavily on the integrity of the auditor.
A Competent Persons Report can be more useful if it provides asset descriptions and technical backup.

We have observed a range of standards across in third-party reporting and also in the detail provided in CPRs. These reports
are only as good as the questions being asked, the depth of investigation and the competence and experience of the
Competent Person.

So does governance matter?

Based on our database, there is not an easily discernable correlation between the governance score and operational
performance measures such as production and reserves growth and capital efficiency.

However, there is strong evidence that companies showing evidence of good governance performed better in terms of share.
The top 15 companies for overall governance scores shares grew average +54% during 2008-10 whilst the bottom 15 grew
+8% over the same period. The 14 companies that scored over the average score of 70% grew +69% whilst the 16 companies
that scored less than 70% decreased by -3%.

Why do shareholders seemingly reward well governed companies even if they are not obviously performing better? It could be
a matter of trust. Well governed, transparent companies are easier for the shareholder to trust. Its worth remembering that to
fully trust a company you believe that its people are credible, reliable, open and not operating only out of self-interest (or that at
least their interests are aligned with yours).

Does the regulatory regime make a difference?

UK and Australian listed companies score lower for governance on average than Canadian or Scandinavian listed companies.

Special Focus


The Canadian listed companies score particularly well for transparency. Canadian companies score an average 80% for
reserves reporting detail compared to 55% for UK listed companies. Third party reserve audits are compulsory also and the
Annual Information Form system provides for consistency in reporting.

Regulatory rules are not the whole story though, as some of the highest scoring companies in the study are listed in London
and a number of TSX listed E&P companies failed during the 2008 financial crisis. Good governance is also a matter of
company choice. Of the 12 UK listed companies the study the top 6 for governance grew an average +11% over the 3 years
whilst the bottom 6 grew an average +3%.

The Toronto listed companies shares performed significantly better on average than companies listed on other exchanges. The
Scandinavian companies significantly underperformed despite high transparency scores. Perhaps weaknesses or inexperience
in board and management in the Scandinavian companies is the key factor.

So the regulatory regime does make a difference and the Toronto exchange is leading the way. The UK and Australian
exchanges need to raise their game and the Scandinavians need to look at why so many of their companies have
underperformed.

Does the country of operation make a difference?

When companies are divided into subsets based on their principal areas of operation, some differences in governance
indicators are apparent. The sample set is perhaps too small to generalise but it appears that companies with operations in
Europe tend to score significantly higher those in the Middle East and Former Soviet Union. So, it may be that the country of
operation is at least as important as the stock exchange listing in influencing governance indicators.

Conclusions and Recommendations

The study has developed a methodology that enables governance risks to be identified and criteria against which they can be
scored. It concludes that companies that score higher have delivered higher returns for shareholders on average over the past
three years.

Standards of reporting and communication are highly variable between companies. The regulatory regime and geography of
operations can make a difference as evidenced by the strong scores for companies listed in Toronto and for companies
operating in Europe.

Although the SPE reserve reporting rules have generally been adopted, there is still huge discretion in what companies actually
disclose. This lack of consistency makes it more difficult than it should be to evaluate and compare companies and assign
capital.

Investors should push for higher governance standards in the companies they own and should factor in corporate
governance when making investment decisions.

Directors and management of well-run companies should disclose more information and be as open as possible with
regard to future plans and operational performance.

There should be common reserve reporting standards across the main UK, Australian, Canadian and Scandinavian
exchanges. Ideally reporting should be on a field by field level with an external audit (whilst recognising that this may
not be practical for larger companies with 100s of fields).

There should be clearer rules on the use and abuse of Competent Persons Reports and independent reserve audits.

About Keith Myers:

After completing a Ph.D. at Imperial College, Keith joined BP in 1987 as a geologist. Following a variety of technical roles, he
became a Senior Commercial Advisor in 1996 when he led several major negotiations for new business access as well as
Business Strategies for BPs business in West Africa and BPs Strategic Alliance with Statoil. Since 2000 Keith has been an
advisor to numerous energy companies on strategy and partnership issues Keith founded Richmond Energy Partners in 2006
to provide independent advice to investors in smaller oil and gas companies. Richmond Energy advise some of the largest
funds and institutions investing in the sector. Keith takes a keen interest in oil sector governance and served on the organising
committee of the Good Governance of the National Petroleum Sector Project at the think tank Chatham House

About Richmond Energy Partners

Richmond Energy Partners Ltd is a UK consultancy company who provide independent evaluations of smaller oil and gas
companies for professional investors. We provide an independent, conflict free approach to valuing smaller oil and gas
companies for professional investors and oil company clients. Our research is founded on deep industry knowledge and our
global expert network which provides clients insights into companies, their assets and their potential. For more information visit:
http://www.richmondep.com

The Harvey Nash Executive Search Oil & Gas Practice is enjoying
considerable success worldwide.

Under Sherree Youngs leadership, the practice is now firmly estab-
lished in the UK, its success is based on her deep understanding of
the sector and her extensive network in the AIM and FTSE 100
organisations. It is her passion for the sector, for delivery, her open
and flexible approach to doing business within a sector typified by
entrepreneurialism and pace that sets her apart from the traditional
providers.

Working across the NED and Executive Director appointments,
Sherree brings incisive market insight and an extensive knowledge
of the community, all supported by the strength of a successful plc.
To find out more about how we are helping Oil & Gas organisations
secure the very best talent please contact:

Sherree Young
+44(0) 20 7333 0033
sherree.young@harveynash.com
Harvey Nash Oil & Gas Practice
continues to grow rapidly

Special Focus


On the Spot Part One
What qualities/experiences must an O&G co look to include when constructing/enhancing
their Board to ensure they can meet all the challenges tomorrows markets pose?

Young E&P companies, during their initiation phase, tend to need entrepreneurial
yet generalist boards, with a strong business network, that ensure the ability to raise
finance and connect to opportunities. A tightly focused board would seem to be one
key success factor in establishing the groundwork for company longevity. Board
composition should transition as the company moves from the embryonic phase to
that of an established and sustainable business, such as from private to public or
from explorer to producer.

This life-cycle change can be rapid, perhaps due to instantaneous exploration
success, a game-changing acquisition, material production or the introduction of
large institutional investment.

Board composition must mature in step with these changes, preferably in
anticipation of each change: but not so far in advance that the additional specialist
skills required, be they in corporate governance, government affairs, environmental
management, engineering or such, are not warehoused and under-utilized.

The original entrepreneurs, at some point, will need to pass the baton on to the
completer-finishers who can add the right mix of skills to lead the company in its
next stage of development.

There undoubtedly will be board management issues regarding ego and
ownership. It is a wise Chairman or CEO who can judge the right moment to
gracefully reshape a board in line with the evolution of the companys business.

- Graham Lyon, CEO, MENA Hydrocarbons

Clearly the Board composition depends on the size of the company and stage of
maturity of its assets. For production-biased, larger companies, the Board should
include solid experience in operations, corporate finance (including M&A) and
company law.

A smaller, earlier stage company should favour directors with experience in
identifying, bidding and negotiating new production licences in frontier territories,
exploration drilling and reserve valuation.

The larger companies are likely to be conducting acquisitions of existing operations
while the smaller will look for new licences to expand their reserve base organically.

- Angelos Damaskos, CEO, Sector Investment Managers

A Board must bring an in depth knowledge of the industry and a diverse set of skills
including accounting, risk analysis and mitigation, finance, technical depth and
people management.

The issues of tomorrow are likely to be ones of more volatility and rapid unexpected
changes in the countries where we operate, challenging financial markets and
increasing expectations of financial returns but increasingly balanced with the need
to benefit the community and country where the operation is taking place.

Getting the balance right between short term financial performance and longer term
shared benefits is going to be essential.

- Greg Coleman, CEO, NewCo E&P

Special Focus


An E&P company assembling a board, or seeking to renew its board, should
endeavour to have expertise and competence in the below areas.

Clearly, not every independent director will possess strengths in all areas, but
should score well in one or two areas. What follows is to a degree a Board
experience checklist:

Oil & Gas Technical Competencies: Expertise in emerging oil & gas
technologies (e.g., deep water, harsh environments, oil sands) and
exploration best practices.

Strategic Planning: Expertise in business planning; ability to provide
advice in significant high-profile deals involving international public
companies.

Senior Corporate Leadership Experience: It is good to have a former
CEO on the board he/she understands the pressures of leading a
company and can provide valuable insight to the CEO and executive team.

Financial & Commercial Experience: A former, current or past finance
director of a listed company will be able to chair the audit committee and
apply financial rigour.

Industrial Sector Experience: Deep grasp of value drivers and
operational challenges facing industrials, particularly in major capex
projects.

Global Perspective: Good understanding of geopolitics and the region the
company is operating in. Knows how governments work; able to guide and
advise on governmental and reputational issues and challenges.

HSE/Environmental Issues: Insight into the HSE challenges; able to
scrutinise and guide existing practices.

M&A: Understanding of the intricacies of corporate finance; knows how
financial institutions think and work.

- Iain Manson, Senior Client Partner and Head, Energy
(EMEA), Korn/Ferry International

The E&P sector is operating within an increasingly complex environment.
Tomorrows market not only promises to retain the current technical challenges,
particularly associated with deep water drilling, but also an ever increasing exposure
to political risk with its associated regulatory burden. In addition, investor appetite for
new exploration ventures has recently decreased as a result of the broader
economic environment and a more multifarious culture of risk management.

Senior executive and Board appointments have changed to meet this new market
reality. At Harvey Nash we continue to support a range of E&P clients who are
seeking board level candidates in finance, technical and oversight functions in order
to ensure that their business is well placed to meet the challenges and opportunities
ahead.

A good example of this is a recent mid-sized E&P client who sought to appoint a
new CFO. While day-to-day financial management was obviously central to the role
it was the candidates ability to operate at Board level, to raise investor finance as
well as take responsibility for financial oversight and risk that made the chosen
individual stand out.

Small-mid cap companies face the challenge of trying to grow their business in an
environment where access to capital is often limited, where access to deal flow is
often restricted due to their size and where the rising cost of new regulation, and

Special Focus


new taxes (such as the UK tax hike on North Sea fields) requires identifying
candidates with broad skill sets.

For these organisations its not enough for candidates to be a good financial
manager or technical expert. Candidates for tomorrows market need impeccable
technical credentials but also the regulatory knowledge and entrepreneurial spirit to
operate in tough economic times.

This has a knock on effect for the next generation of leaders.

The Great Crew Change has been widely written about, and with the industry-wide
peak age creeping towards 60 todays analysts, geologists and energy equity
researchers are tomorrows senior executives and Board members. They need
experience of working with the risk, regulatory and financial oversight issues they
will be facing when its their turn at the helm.

So we will need to see younger Non-Executive Directors making an appearance on
Boards. The key to achieving this and reducing the long term threat presented by
tomorrows market conditions is the recruitment, retention and development of
exceptional talent today.

- Sherree Young, Head, Oil & Gas, Harvey Nash

The purpose of the board is to engage executive leadership in a robust, open and
constructive dialogue to ensure that shareholder value is protected and enhanced
through the discussion of financial matters, strategic direction, risk management and
talent development.

Historically many boards have not fully engaged in discussions about risk and talent
and herein lies an area for greater engagement with the executive team.

It is also imperative to have individuals on the board with the appropriate personality,
character and style to be compatible with the executive team and shareholders in
order to create a functional and constructive atmosphere on the board.

- Scott Eversman, Partner, Heidrick & Struggles

A board has certain basic requirements i.e. proper knowledge/backgrounds for
the 3 basic committees (audit, comp and governance) and they need to be sure they
have this it is often easy to just get audit right and say the other 2 will follow
because of board member past experience beyond that the board needs to be
sure it has the right business skills to properly strategize and assess business
opportunities this entails having individuals with geological and production
experiences if their strategy includes M&A then a person with a strong financial
background (different from accounting as needed on the audit committee) would be
a must this proper collection of talent will ensure the company can face
tomorrows challenges.

- David Preng, President and CEO, Preng & Associates

Financial and tax acumen are certainly important, as is an ability to attract capital,
but the point of view that is most frequently missing from the board room today is the
old school oil man who started at the bottom in this business -- as a roughneck --
and worked his way up to the top.

He literally knows the business from the ground up, and thus holds a perspective on
our industry and operations that no amount of business school can replace. This
perspective is particularly important for companies that intend to grow organically, by
the drillbit, instead of through acquisitions of existing production.

- John Graves, Founder, Graves & Co

Special Focus


On the Spot Part Two
What practices and initiatives must we as an industry adopt to tackle the increasing talent
crunch now stemming across not just G&G and engineering but also O&G finance?

The oil and gas industry needs to approach talent as a scarce and valuable resource
in the same way it looks at the natural resources themselves.

As with oil and gas, there is a finite global supply of talent. It exists in a range of
locations around the globe, with concentrations in key energy hubs (Calgary,
Houston, London, and Singapore), and on the ground where the hydrocarbons are
extracted.

The talent supply in certain locations is depleting, particularly as the Western
economies lose the baby-boomer generation from their workforces. Thus, the
industry we engage in a series of activities:

Greater proactive marketing of the industry is required to overcome any
negative images so that our brightest students see the industry as a great
place to work. It must be seen as better than banking and consultancy.

Talent availability must be viewed on a global basis. For example, we
should have a greater focus on being able to utilise and develop the
significant engineering talent that is produced in Asia, filling the gaps in
Western economies

Systems and processes must be developed to ensure critical knowledge
transfer across the generations and across cultures.

We need to be more open to recruiting from outside the sector. Great
technical and leadership skills do exist beyond oil and gas.

Indeed, those companies and countries that put the talent atop their agenda will
succeed in the wonderfully diverse, complex and ever-changing oil and gas sector
that we know today.

- Iain Manson, Senior Client Partner and Head, Energy
(EMEA), Korn/Ferry International

As an oil & gas specialist executive search firm we are noticing an increased tempo
and volume of chatter on this subject. In order to counter the talent crunch in the long
term we must reach young people as they make decisions about their careers and
communicate to them what the industry offers.

Unless you know something about it, it is easy to sweep the whole energy industry
aside with one broad moral brush stroke. In order to overcome this hurdle, the
industry must be more proactive in its attempt to reach the young as they are about
to enter university and again while they are contemplating career choices and hit
them with messaging that they can relate to.

This means educating them on the investment that the industry makes annually in
R&D, the diversity of geographical locations that they could work in, the many,
technically challenging projects that are executed each year, the advances in
environmental safety and lets not forget how lucrative a career in the oil & gas
industry can be compared to most others. Currently, unless residing in a location
which is heavily dominated by the oil & gas industry such as Houston, Calgary or
Aberdeen, they are probably not aware that the sector provides such an incredibly
broad spectrum of opportunities. Thus the industry must broaden its geographic net
when attempting to attract top talent. When presented with the information about our
industry it is hard to imagine a young person, leaving high school thinking about what
to do when they go to university not being excited by what a career in oil & gas could

Special Focus


offer. Maybe there is mileage in the idea that the career choices of the young should
be seen as the largest investment that the industry makes and that it should be
tackled with all the same effort, cunning and intelligence that a consumer company
harnesses when it looks to attract its customers; especially so, as energy and the
humans that play a part in producing it, are the life blood of our civilization.

- Jamie Ferguson, Vice President, Maxwell Drummond

Larger companies should strengthen their graduate/ junior employee recruitment and
set up clear programmes for career development and incentives for talent retention.

Smaller companies will unfortunately still rely on the experienced talent pool and
talent migration from larger peers, nevertheless, training, career development and
retention incentives should become much more important in any organization.

- Angelos Damaskos, CEO, Sector Investment Managers

For me the major area of focus must be on strengthening the connection between
the universities that are training our future talent and the enterprises that will
eventually employ them.

Academics need to reach out more to the future employers and the employers need
to increase their capacity for training and utilising undergrads.

For example a program using intern placements as training and selection
opportunities will benefit everyone.

- Greg Coleman, CEO, NewCo E&P

In order to realize their full potential companies will have to invest extensively in all
aspects of talent development. From acquisition and retention, to development and
training, companies will have to seek the best, train people well and fight to retain
those skills most important to the business. At the upper end of the career
continuum, those who want to work beyond traditional retirement age, perhaps in
some flexible arrangement, should be welcomed to continue in the industry. On the
other hand companies will have to offer young executives opportunities to lead and
make important decisions, possibly at an earlier point in their career than has
historically been the case. In this regard the key challenge across many functions will
be to accelerate training and development without sacrificing content or quality.

- Scott Eversman, Partner, Heidrick & Struggles

Corporate and Financial Public Relations
Independently
ranked No.1 in the
Oil and Gas sector
www.pelhambellpottinger.co.uk

www.ofs-portal.com William Le Sage, CEO wlesage@ofs-portal.com
Dave Wallis, E-A-M & FE Representative dwallis@ofs-portal.com
OFS Portal LLC Copyright 2011

Reduce the friction for your CFO !

The credit crunch reminded us all, of the basic reporting characteristics on which CFOs
must focus to ensure efficient financing, reduce perceived risk and ultimately maximize
value. Transparency, accuracy and speed are paramount in ensuring your numbers and
those of your partners have the credibility which enhances your companys value and
access to capital.
Those entities that have incorporated eCommerce into their normal business processes
find many benefits that significantly impact finance, procurement and operations. The CFO
finds eCommerce an important tool to enhance the companys credibility and reduces the
friction between the CFO and the requirements of his job.
Transparency and visibility are necessary in your relations with your
joint venture partners, lenders, regulatory agencies and
statutory financial reporting. With greater transparency
perceived risk is reduced, which influences the cost of
capital. Greater transparency makes a company more
attractive to joint venture partners and lenders.
With more visibility, there is greater control of
costs through spend analytics and feedback to key
control mechanisms.
Accuracy is enhanced through the use of system
validation of the transactions. Additionally, audits are
significantly simpler, as the supporting documentation
is electronically filed and tagged to all transactions.
Speed in reporting helps manage working capital, both in helping manage Days Payable
Outstanding (DPO) as a buyer, and Days Sales Outstanding (DSO) as a service company.
Payments under joint operating agreements are timely and accurate, thus maintaining your
credibility and optimizing your working capital.
eCommerce is a tool to help you make the most of your business processes and financial
relationships. It provides you with the capabilities to reduce risk, enhance the value of your
company and increase your access to capital.

Are you an Oil Council Member? If not apply now:
http://www.oilcouncil.com/index.php?page=becomeamember

Meet The Members
Committee Member Member
Terry
Newendorp
Chairman and
CEO,
Taylor-
DeJongh

Curtis Burton
CEO and
Managing
Director,
Buccaneer
Energy

How did you come to be in the oil industry? How did you come to be in the oil industry?
I approached it from the process engineering side
originally, working on financings of downstream
projects and originally acting for the EPC contractors
and services firms. Gradually I migrated up the value
chain to midstream (particularly LNG) and eventually
Upstream deals, too.

Some might say lack of originality, but when I
graduated as an engineer my intention was to work
for NASA. I received an offer to work on the newly-
formed shuttle program in Houston, as well as
several offers in the oil and gas industry. In the end,
I thought I could do more good by working in the
energy industry and decided on that path.
What is your proudest work-related achievement
to date?
What is your proudest work-related achievement
to date?
I have worked on Projects in more than 100
countries.

In 70 of those countries today, I can get off a plane
and go to a factory, or LNG or process plant, or
upstream drilling facility that is employing people,
contributing to the local economy and making money
for the investor/owner and I had some responsibility
for organizing its financing.

I have a deep feeling of satisfaction that I have
contributed to the financing of tangible assets all over
the globe which are making a positive impact on the
local and global economy.

In the Early 90s the energy industry was at a cross
road. Oil production was in a steep decline in the
USA and big oil fields were becoming very hard to
find. The choice was to go international or watch
your production decline and eventually dry up
completely. At that time, the only company taking
advantage of the deep water opportunity was Shell,
and even they were limited by current technology.
After looking at the situation I went to my employer
at the time and suggested we bring the operators,
service companies, and regulators together and
solve the issues surrounding the challenge. In 1990
I co-founded DeepSTAR and helped change the
future of the industry by unlocking the deep water
for everyone.

Where do you see the greatest challenge in
todays oil and gas markets?
Where do you see the greatest opportunity in
todays oil and gas markets?
The broader development of gas. In addition to the
huge potential of shale gas in US, China, Poland and
elsewhere, and coal seam gas in Australia and Africa,
there is a new wave of LNG opportunities for Asian
and emerging market economies.

Favourite holiday destination?

Colorado mountains, or Tuscany/Umbria.
Today we are challenged to provide the energy the
planet needs to grow and thrive. The United States
was built on low cost, hydrocarbon energy. Today
we are seeing a shift toward lighter hydrocarbons.

Natural gas has become a viable alternative for
fuelling our future and we need to be very focused
to make sure we have plentiful supplies. It is clean,
relatively low cost, abundant and a near term fix to
much of what ails us from an energy perspective.

Favourite holiday destination?

Disney World with the grandkids.

Are you an Oil Council Member? If not apply now:
http://www.oilcouncil.com/index.php?page=becomeamember

Meet The Members
Terry
Newendorp
Chairman and
CEO,
Taylor-
DeJongh

Curtis Burton
CEO and
Managing
Director,
Buccaneer
Energy

What was the wisest advice you ever received
from a mentor?
Everything you ever say, you say on behalf of the
team.
What was the wisest advice you ever received
from a mentor?
I never had a mentor. However, when seeking
advice, I have always believed that everyone is
obligated to try to leave the world a better place
than you found it. Weighing my decisions by that
simple concept has always served me well. Said
another way, Do your duty in all things, you cannot
do more, you should never aspire to do less.

What advice would you pass on to a graduate
wishing to work in your line of business?
What advice would you pass on to a graduate
wishing to work in your line of business?
This is a technical industry; learn the technology
issues, even if what you want to be is a banker.
It is very important to understand that this is not the
O&G business, but the energy business. I would
encourage a recent graduate entering the business
to learn as much as they can about the entire
business. Dont become so focused on the squiggly
lines, the pressures and pipes, or the accounting
that you miss the whole point.

By being well rounded you will be ready for
whatever the future of our business holds.

Whats the one interesting fact about you that no
one would suspect?

Whats the one interesting fact about you that
no one would suspect?
Im an avid fly fisherman and river conservationist. Most probably dont know that I am a collector of
performance automobiles. With that in mind, most
would probably not suspect that I generally drive the
speed limit, at least most of the time.

How do you prefer to spend your spare time? How do you prefer to spend your spare time?
Reading history, particularly voyageurs and
discoverers, and fly fishing in a mountain stream.

Home and Family.
All-time favourite book? All-time favourite book?
Civilization, by Niall Ferguson Bible, always challenges me to be better than I am.

All-time favourite film?

All-time favourite film?
Casablanca and Singin In the Rain.

Forbidden Planet.

What 3 things would you take to a desert island?

What 3 things would you take to a desert island?
The score for Beethovens 9
th
Symphony, with full
orchestra and chorus.
A Coke and a candy bar for food and a good book
for entertainment.

Societe Generale is authorised and regulated by the French Autorit de Contrle Prudentiel and Autorit des Marchs Financiers. This material has been prepared solely for information
purposes and does not constitute an offer to enter into a contract Societe Generale Corporate & Investment Banking (SG CIB) is a marketing name for the corporate and investment
banking businesses of Societe Generale and its subsidiaries worldwide. Societe Generale is a credit institution and an investment services provider (entitled to perform any banking activity
and/or to provide any investment service under the Markets in Financial Instruments Directive (MiFID) except the operation of multilateral trading facilities) authorised and regulated by
the French Autorit de Contrle Prudentiel (the French Prudential Control Authority) and the Autorit des Marchs Financiers (the French Financial Markets Authority). Societe Generale
is subject to limited regulation by the Financial Services Authority for the conduct of its business in the United Kingdom. Details of the extent of its regulation by the Financial Services
Authority are available from us on request. Societe Generale benets from the European Commission passport authorising the provision of investment services within the European
Economic Area. This material has been prepared solely for information purposes, and does not constitute an offer, a solicitation of an offer or invitation, or any advice or recommendation,
from Societe Generale to buy or sell any security or nancial instrument or product, or participate in any trading strategy, activity or arrangement. Not all securities or nancial instruments
or products offered by Societe Generale are available in all jurisdictions. This communication is not intended for or directed at retail clients/investors. It is for professional clients/investors
only. Please contact your local of ce for any further information. ArnoLam.com - FRED&FARID
WE DEVELOP YOUR BUSI NESS
OPPORTUNI TI ES BUI LDI NG ON OUR EXPERTI SE
I N RESERVE BASED FI NANCE
AS ONE
At SG CI B, our t eams of pr of essi onal s suppor t sponsor s and i nvest or s i n t hei r E&P f i nanci ng
pr ogr ams at any st age of devel opment wi t h wor l d- cl ass advi si ng, ar r angi ng and di st r i but i on
capabi l i t i es. Our act i vi t y i s gl obal , addr essi ng pr oj ect r equi r ement s i n bot h emer gi ng and devel oped
mar ket s. Our t echni cal exper t i se and i ndust r y knowl edge al l ow us t o ant i ci pat e your evol vi ng
needs i n t he dynami c O&G sect or .
www. sgci b. com
GLOBAL FI NANCE
CIB_SHOW GUIDE OIL COUNCIL_GLOBAL FINANCE_210X297_LUNETTES.indd 1 18/08/11 14:38
The continued globalization and demand for
energy has led to revolutionary changes in the
development, utilization, supply and transport of
key energy sources and commodities. Korn/Ferry
International, a proud sponsor of The Oil Council,
has been servicing this sector from more than 70
offices in the Americas, Europe and Asia Pacific
for over 40 years.
With a dedicated focus on the latest industry
trends from sustainability and the impact of
alternative energy on business planning to
emerging market supply/demand dynamics and
regulatory, political and financial factors we
develop the most effective talent solutions for this
ever-changing business.
Do you have
the right senior
leadership to drive
your strategy?
www.kornferry.com

Drillers and Dealers September 2011

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Drillers and Dealers September 2011

Uploaded by

Copyright:

Available Formats

Global Leaders in Energy

You might also like