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E&P Weekly

January 5th
Thomas Aarrestad
+47 22 87 87 21
thomas.aarrestad@pareto.no

Questerre. The disclaimer shall apply even if an Investment Recommendation is shown to be erroneous or incomplete or based upon incorrect or incomplete facts. Interoil. Norse Energy.no 2 . potential conflicts of interest etc. Any person receiving a Recommendation from Pareto is deemed to have accepted this disclaimer. Altinex. methods. interpretations or assessments or assumptions by Pareto. risks. and disclaimers please see www. and irrespective of whether Pareto or any person related to Pareto can be blamed for the incident. For further disclosures on relevant definitions.pareto. The investments are considered Medium to High Risk The analyst has assisted the corporate department relating financial services to PA Resources. Heritage and Pertra the previous 12 months Pareto and the analyst accept no responsibility and expressively disclaim any and all liabilities for any and all losses related to investments caused by or motivated by Recommendations from Pareto.These recommendations were not presented to the issuers before dissemination.

2 • Strong drilling result for Interoil in Colombia with exploration 1.6 • Current best recommendations – Pertra (Target NOK 100) 0. exploration portfolio .0 – Trefoil (Target NOK 90) on Revus Pertra PA DNO Heritage InterOil Altinex Norse Trefoil Questerre attractive risk/reward and Resources Energy underperformance 3 *) Valuation excl. Summary • Oil price down 8% – WTI 2012 contract $60/bbl EV/Risked Valuation(II)/(III)*) – WTI Spot $56/bbl 2.2 January 0.0 well producing at 450 bbl/day vs 100-200 bbl/day expected 0.6 field Iraq. Valuation in sum little changed 1.0 – S&P500 E&P Index -6% 1.8 0. EV/RV II EV/RV III but very strong well at Tawke 1./incl.4 on expectation of a good license awarwd in mid- 0.8 • DNO with dry well at Goliath.4 1.

6% Norsk Hydro – WTI Spot -8.01.6% Interoil Norse Energy • Current best recommendations Altinex – Pertra*) & Revus – license round S&P Majors E&P % las t cale ndar m onth due mid-January expected to have % las t w e e k substantial effect particulalry for WTI. 2012 Delivery these two companies Statoil – Trefoil*) – attractive risk/reward and WTI Spot underperformance S&P Independent E&P Natural Gas.2007) Change in % (All shareprices in USD) Main movements last week -25% -20% -15% -10% -5% 0% 5% 10% 15% 20% • US E&P’s down on oil price fall – US E&P Index -5.5% Pareto Norway E&P Index – Questerre -7.9% Heritage BP • Hydro discount to Statoil spreaded out Repsol – NHY -6.2% PA Resources – WTI 2012 -6.8% Questerre – US Spot Natural Gas -1.4% Lundin ENI • Norwegian Independents followed down Pertra except Pertra Trefoil – Pertra +1.9% DNO – STL -5.7% Revus Energy – PA Resources -11. Henry Hub 4 *) Pareto was advisor in 2005/2006 transactions in these companies . Share price performance (as of 04.

Henry Hub 5 . 2012 Delivery Lundin % 2006 BP S&P Independent E&P WTI Spot DNO Natural Gas. 2006 performance Change in % (All shareprices in USD) -100% -50% 0% 50% 100% 150% 200% Questerre Altinex PA Resources Heritage Interoil Pertra Norsk Hydro S&P Majors E&P Norse Energy ENI Pareto Norway E&P Index Repsol Revus Energy Trefoil Statoil WTI.

8) 28th December DNO Dry exploration w ell 2nd prospect in Kurdistan.2) 2nd January DNO Taw ke #4 production w ell tested 8.2)..5) Inf o first w ell expected 1Q/2Q 1Q A LX Results new production w ell Brage Conf irmation of Risked Valuation expected Source: company information and Pareto assessment 6 *) All valuations NOK per share.9) 22nd December PERTRA Sold 15% of PL 321 exploration license to AKER exploration Payment in f orm of 2 w ells paid by Aker. All numbers represent value potential in excess of current risked valuation . Increased valuation by NOK 0.1) February DNO Reserve Dow ngrade Nabrajah Already accounted f or in V aluation February/March QEC Results f rom A-7 Development w ell Beaver River Partially prove up f ield potential (NOK 11) February/March QEC Results f rom Gentilly #1 (Quebec) 25 mill boe potential (NOK 5) 1Q NEC Start-up of 3-4 w ell exploration program off shore Brazil Potential 20 mill bbl per w ell (NOK 0. or NOK 35 per share if discovery January Aw ards of licenses in mature areas Potentially big impact f or several comp.000 bbl/day January/February HOC Results deep zone at Kingf isher #1 Potential 100 mmbbl net (USD 20) January/February NEC Expect IBA MA license f or Manati start-up Conf irmation of reserve valuation (NOK 0.5) 13th December DNO Spudded Zita exploration w ell Norw egian Sea (Hydro-operated) Unrisked potential 60 mill bbl (NOK 1. test rate February 11th December IOX Colombia exploration w ell at 600 bbl/day vs ~100 bbl/day expected Potential f or some 1 mill bbl reserve upgrade (NOK 2. News Flow Date Com pany Activity Valuation Cons e que nce *) 11th December QEC Beaver River w ell (A -7) w ith gas kicks & show s during drilling Results expected late December.500 bbl/day Strong rate. Little valuation ef fect 28th December DNO Increased PSA ow nership Kurdistan f rom 40% to 55% Increased value potential (NOK 0. Results due January/February 15th December QEC Conf irmation Gentilly #1 gas discovery in tw o zones Conf irmation of reserve valuation 19th December PERTRA PL 349 (5%) relinquished to government due to lack of prospects No valuation eff ect 22nd December DNO Goliat w est exploration w ell dry Reduced upside potential of field (NOK (0.5 3rd January IOX Colombia exploration w ell 450 bbl/day vs ~100 bbl/day Increased valuation (NOK 3) 4th January PERTRA Decision to drill Midgard West prospect in Q407 50 mill boe potential. Khanke #1 Limited valuation ef f ect 28th December DNO Tasour #23ST exploration w ell dry Limited valuation ef f ect 28th December DNO Hekma #1 exploration w ell (sharyoof Area) tested 800 bbl/day Potential f or 1-2 mill bbl (NOK 0. particularly PERTRA and REV US January TREF 4Q production update + company 2007 production target Expect 4Q production of close to 5.

WTI future curve down $5-6/bbl WT I future curve (Source: Bloomberg) 70 68 66 64 USD/bbl 62 60 58 56 W TI 14/12/06 W TI 05/01/06 54 Feb-07 Aug-07 Feb-08 Aug-08 Feb-09 Aug-09 Feb-10 Aug-10 Feb-11 Aug-11 Feb-12 Aug-12 7 .

90 0.86 1.17 1.48 1.10 (0.23 0.63 0.46 – Revus from NOK 99 to NOK DNO (DNO) 95 Unrisked (1.3 5.7 6.2 11.4 10.03 Altine x (ALX) Unrisked (0.1 1.49 0.1 1.0 26.2006E De ve lope d (I) Re cove ry (II) I II III Re vus Ene rgy (REV US) • Risked Valuations down on lower oil Unrisked 18 9 19 231 price Probability 100% 100% 53% 25% Ris k e d 53 18 9 10 58 95 3.26 0.3 PA Re s ource s (PAR) – PA Resources from NOK 61 to Unrisked (7) 30 34 103 Probability 100% 91% 63% 13% NOK 55 Ris k e d 58 (7) 27 22 13 55 2.4 to Nors e Ene rgy (NEC) NOK 6.46 – Pertra from NOK 122 to NOK Pe rtra (PERTRA) 117 Unrisked 25 2 39 253 Probability 100% 100% 70% 25% Ris k e d 66 25 2 27 63 118 19.3) 5.5 NOK 15.72 16.4 7.0) 4.66) 1.6 36.65 49 He ritage (HOC) • Increased expectation Unrisked 4 15 8 141 Uganda exploration well Probability 100% 80% 62% 20% Ris k e d 25 4 12 5 28 49 1.3 2.37 1. risked to reflect company dif ferences in terms of asset maturity and location 8 (II) Discoveries and incrased recovery valued in line w ith producing assets minus development costs (III) Exploration potential in line w ith company guidance. value per barrel varies betw een prospects .39 0.09 0.5 20.44 (I) Calulated at WACC 10% at current f uture curve of oil.8 1.52 • + NOK 3 from increased Inte roil (IOX) Colombia valuation Unrisked (16) 52 14 360 Probability 100% 96% 54% 19% – Altinex from NOK 2.76 1.1 2.29 0.0 Probability 100% 78% 62% 21% – DNO from NOK 17.06 0.2 Probability 100% 90% 51% 10% Ris k e d 6.84 0.74 – Heritage from USD 46 to USD Probability 100% 96% 51% 13% Ris k e d 1.68 90 Tre foil (TREF) – InterOil from NOK 112 to NOK Unrisked (2) 42 64 106 Probability 100% 96% 54% 15% 110 Ris k e d 46 (2) 40 35 16 90 1.5 5.40 – Norse Energy from NOK 7.0 to Que s te rre (QEC) Unrisked 1.1 2.57 5.02 0.82 0.23 0.03 1. Risked Valuation Summary Changes to Valuation / 05-Jan-07 Share price Ne t Cas h Producing & Dis cove rie s & Exploration Total Ente rpris e value / Relative Pricing Value pe r s hare (NOK) (De bt) De cide d Incre as e d (III) Ris k e d V aluation at 31.3) 5.2 4.66) 1.12.8 Unrisked (2.9 (2.6 15.5 – Trefoil from NOK 94 to NOK Probability 100% 97% 45% 15% Ris k e d 3.7 1.17 0.04 – Questerre from NOK 16.35 to NOK Ris k e d 43 (16) 50 8 68 110 1.3 1.0) 5.5 16.2 to NOK Ris k e d 11 (1.8 8.73 0.66 0.47 2.72 1.74 2.32 1.

(f urther de-risking) as Didon is completed Que s te rre (QEC) 6. Com m e nts V alue pe r s hare (NOK) in 12 m onths Price Targe t *) to Targe t e ndation I II III Re vus Ene rgy (REV US) 53 10 21 85 67 26% BUY Signif icant value increases ahead as reserves mature Target price equals EV /RV (II) 2.4x on expectation of license aw ards January *) Share price target on ”Best Judgement” basis.1x) on production increase Inte roil (IOX) 43 55 64 139 65 52% BUY Low valuation (EV /RV (II) 1.1x) as Brazil f ields mature Tre foil (TREF) 46 44 82 100 90 98% STRONG BUY Low current valuation (EV /RV (II) 0.7 1.5 5 11 19 14.8x) and sign. Upside Expect valuation to incr. and 9 2) estimate of future relative pricing.96 1.0x) Target ref lecting the huge upside in A ngola (EV /RV (II) 1.1 6.9 5.4x) Target price equals EV /RV (II) 2. large expl.10 1. Current risked valuation + 10%).5x).6x) Risked valuation and pricing to improve (1.4x PA Re s ource s (PAR) 58 30 54 68 60 4% HOLD Current valuation (EV /RV (II) 1. In principle it can be interpreted as combination of: 1) Risked valuation in 12 months time (i.0 79% STRONG BUY Current valuation (EV /RV (II) 0.9x) Expects valuation to improve to (EV /RV (II) 1.75 59% BUY Moderate valuation (EV /RV (II) 0.0 22% BUY Large potential f or reserve increases Iraq and Norw ay Expect more good new s f rom Iraq.1x) He ritage (HOC) 25 13 18 49 30 22% BUY Low current valuation (EV /RV (II) 1. Target price equals EV /RV (II) 1.6 8. expl. Oil price assumptions assumed unchanged .4x on near term Uganda expl.e.6 15.5 12.3x) Altine x (ALX) 1. Recommendations and Price Targets 05-Jan-07 Share price Ris k e d V aluation 12 m onth Ups ide Re com m .2 10.3x) Substantial room f or valuation incr. new s Pe rtra (PERTRA) 66 2 32 102 100 52% BUY Low current valuation (EV /RV (II) 1. to (0.5 12. upside Expect improved valuation (1.4x) and (EV /RV (III) 0.3x on expectation of license aw ards January DNO (DNO) 11.5x) Target price equals EV /RV (II) 1.3 60% BUY Low current valuation (EV /RV (II) 0.2x) and (EV /RV (III) 0.83 2.9x) on approaching new s on BR and Quebec Nors e Ene rgy (NEC) 3.15 2.

6 12.6 Ave rage 19.3 . .6 99. 2007: USD 65/boe.8 7.2006: USD 65/boe.108 .2 6.291 11.9 13. .8 Questerre NOK 6. 56.550 9.3 InterOil NOK 42.3 10.6 11.income tax 10 .2 15.1 17. of M ark -to- Re p.5 2.6 17.6 A ltinex NOK 1.0 21.0 3.7 35.603 53 1.9 3.7 25 1.5 6.4 .5 8. 6.2 5.6 PA Resources NOK 57. .026 9.93 353 1. 47. 26.3 33 1.6 .573 5. 5.116 (135) 982 .7 7.6 18. . .8 12. Ne t de bt Ent. .6 8.5 2.3 11. .2 11.4 14. .203 19.9 5.5 2.9 14.602 30. Key Figures E&P Independents 05-Jan-07 No.5 145 8.161 1.0 31.9 15. .7 3.412 3. .7 7.70 167 1.757 (472) 1.3 42.386 817 2.964 2.3 Pertra NOK 66. 24.5 .0 Brent oil price assumption as basis for earnings estimates .311 1.750 (642) 1. .8 9.6 7.9 .9 11. .5 52. 2008: USD 55/boe EBIDA def ined as operating prof it + associated companies + depreciation .8 16.5 35 1.655 16.058 492 1.6 133.6 22 539 45 584 .10 1.1 DNO NOK 11.2 19. EV /EBIDA P/E m ark e t EV / Com pany Curr Price m ill Cap YE 06E value 2006E 2007E 2008E 2006E 2007E 2008E 2008E P/E Re s e rve s USD/boe USD/boe 62 Revus Energy NOK 53.1 Heritage USD 24. 31.364 21.46 900 10.0 Norse Energy NOK 3.4 6. 13.3 8.0 Trefoil NOK 45.286 36.6 8.6 6.4 4.3 7.5 7. Share s hare s M k t.0 27 1.9 9.338 1.3 21.0 7.2 9.

100 4.8 6.800 9.000 PA Resources 154 75% 42 75 9.000 DNO 138 100% 70 126 13.100 6.200 2.400 InterOil 16 100% 18 8 15.05 2) Resources used in Pareto's V aluation may in some cases dif f er f rom certif ied reserves based on Pareto assessment Questerre reserves by company estimate 11 .3 2.600 12.860 Heritage 70 99% 56 26 8.0 1) Certif ied Reserves as of 31.0 2.000 23.1 2.12.3 230 2.600 Questerre 2 19% 5 10 99.600 6.000 Pertra 32 100% 1 39 5.6 720 810 810 Ave rage 78% 21.560 12.300 17.400 29.400 21.000 2.040 10.6 15.1 7. Operational Figures E&P Independents 05-Jan-07 Re s e rve s / Re s ource s us e d in Ris k e d V aluation 2) EV / Pe trole um Production 1) Com pany Re s e rve s P1+P2 (I) (II) Re s e rve s 2006E 2007E 2008E m m boe oil s hare m m boe USD/boe boe /day boe /day boe /day Revus Energy 34 80% 11 17 6.0 790 2.6 3.000 29.000 Tref oil 24 100% 25 34 11.800 Norse Energy 45 42% 24 24 7.900 A ltinex 31 86% 36 14 18.200 5.600 5.

251 17.044 35.852 4.256 228.3 10.332 24.2 12.4 9. Ne t de bt Ent. Share s hare s M k t.1 6.3 5. EV/EBIDA P/E m ark e t Com pany Curr Price m ill Cap YE 06E value 2006E 2007E 2008E 2006E 2007E 2008E 2008E P/E USD/boe 62 Statoil NOK 157.000 232.6 7.470 6.1 6.606 6.6 6.0 Talisman CAD 18.5 9.9 9.2 3.3 2.2 8.0 1.3 10.059 8.165 340.8 9.9 6.2 10.1 1.0 Brent oil price assumption as basis f or earnings estimates .3 5.6 10.535 358.138 4.1 3.2 8.734 6.6 ENI EUR 25.617 7.income tax 12 .519 17.221 31.4 Repsol EUR 26.0 12.9 5. Key Figures Larger E&P Companies 05-Jan-07 No.5 4.850 97.0 8.0 11.5 10.0 1.6 10.2 5. of M ark -to- Re p.8 10.8 11.9 7.8 Ave rage 6.7 10.0 9.0 8.3 6.521 229.9 11.676 105.2 7. 2007: USD 65/bbl.2006: USD 65/bbl.055 5.606 4. 2008: USD 55/bbl EBIDA def ined as operating prof it + associated companies + depreciation .2 5.2 7.6 8.366 246.9 6.2 9.896 5.7 BP USD 65.8 9.6 10.3 Norsk Hydro NOK 182.120 20.

7% BP 18.046 42% 10.328 35% 8.000 42% 1.400 47% 1.8 1.0% Norsk Hydro 2.9 470.737.000 43% 1.000 61% 1.000 54% 4.000 67% 4.150.000 61% 1.837 55% 10.000 60% 1.000 60% 1.110.0 563.014.750.000 64% 3.000 71% 570.000 54% 485.000 64% 1.700 43% 9.05 13 .1% Reserves as of 31.167.000 62% 1.2 60% 58% 57% 3. Prove n Re s e ve Pe trole um Production grow th Com pany Re s e rve s Life 2005 2006E 2007E 2005-2008 m illion boe oil s hare ye ars boe /day oil s hare boe /day oil s hare boe /day oil s h Statoil 4.000 63% 4.4 4.163 53% 12.100.140.000 53% 493.1% Ave rage 45% 10.000 68% 605. Prod.8% Talisman 1.300.950.139.000 56% 5.12.785.295 41% 10.6% Repsol 3.1 1.4% ENI 6. Operational Figures Larger E&P Companies 05-Jan-07 Annl.0 1.

w ith reserves of 31 mill bbl.signif icant exploration portf olio located on the NCS.600 boe / day in May 2006 Altine x (ALX) Focused on exploration and production w ith key activities on the NCS.500 in 2010. of w hich 5 is P1+P2 Production currently ~900 bbl/day. A f rica and the Middle East w ith P1+P2 reserves of 72 mmboe (mainly in Russia) Current producing in Oman. UK.expected start-up of West Chumpass f ield in Russia late 2006 Pe rtra (PERTRA) Exploration f ocused E&P company w ith f ocus on Norw ay. Guinea w ith P1+P2 reserves of 118 mmboe (mainly Tunisia) Production dominated by the large Didon f ield of f shore Tunisia. to increase to 4. Iraq. expect to f ind 100 mill bbl 14 .3 bn boe at end of 2005 and production of 1.2 mmboe / day in 2005 (15% outside of Norw ay) Nors k Hydro (NHY) Integrated oil & gas company operating 13 oil & gas installations.000 boe / day in 2005 World's third largest integrated aluminium supplier w ith a presence on every continent and a production of 1.8 mmboe solely f rom Chanares Herrados f ield .000 boe / day prod / behind pipe by end 2006 Nors e Ene rgy (NEC) Diversif ied independent w ith exploration and production activities in US (onshore) and Brasil (of f shore) w ith P1+P2 reserves of 38 mmboe (mainly Brasil) Production f rom 1 f ield in Brasil and 1 region in the US . 3 discoveries to be developed and 18 exploration licenses close to existing f ields and inf rastructure DNO (DNO) Exploration f ocused E&P company w ith production in Norw ay and Y emen w ith P1+P2 reserves of 100 mmboe. of w hich 55% in Yemen and 45% in Norw ay Signif icant exploration activities in Norw ay. Recently sold assets in Congo f or ~$30m .000 boe / day P1+P2 Reserves of 14. 12 exploration w ells to be drilled (rigs secured). Denmark.aim to increase production to 13.500 boe / day post acquisition of Denerco Oil .0 bn boe at end of 2005 and production of 563. Y emen.500 boe / day in 2005 to 3. Company Business Descriptions Com pany Bus ine s s De s cription Statoil (STL) Integrated oil & gas company engaged in exploration and production in 15 countries and accounting f or 60% of all Norw egian petroleum production Proven reserves of 4. A ssets in both North Sea and Norw egian Sea. proven reserves of 2. Equatorial Guinea and Mozambique PA Re s ource s (PAR) Production-f ocused E&P company w ith main activities in Tunisia as w ell as on the NCS and in Eq.000 boe / day by 2008 Inte roil (INOX) Independent f ocused on activities in Latin A merica (onshore) and West A f rica (of f shore) w ith P1+P2 reserves of 16 mmboe (mainly Peru) Production in Peru and Colombia. currently grow ing strongly f rom 2. UK and Oman He ritage (HOC) Exploration f ocused E&P company w ith operations in Russia.aim to increase sharply f rom new f ields Brasil and more drilling in the US Tre foil (TREF) Exploration and production company f ocused on acquisition and development of neglected f ields onshore A rgentina w ith current production of 3.8m tonnes of primary aluminium in 2005 Re vus Ene rgy (REV US) Pure play Norw egian E&P company f ocusing on the North Sea w ith P1+P2 reserves of 33 mmboe (11 mmboe in producing f ields and 45 mmobe in discoveries) Production f rom 3 f ields (non-operated).700 in 2009 and 8. UK and Oman w ith P1+P2 reserves of 30 mmboe (mainly North Sea) Expected production of 12. To be balanced by V olve (Norw ay) and Elyssa (Tunisia) f rom 2007 Que s te rre (QEC) Calgary-based independent exploration and production company actively developing an onshore portf olio of oil & gas assets in Canada Currently producing around 500 boe / day f rom several f ields in A lberta. To reach 2.

Remaining held by Norw egian and Intl' funds. more than 60% held by top 20 shareholders Trading volumes dow n since listing in June 2005 . as w ell as private persons Liquidity preliminary limited as the share is currently traded OTC. including ~14% held by chairman Brian Jepsen Strong liquidity w ith average monthly turnover last 12 months of approx 100% of shares outstanding He ritage (HOC) N. Pe rtra (PERTRA) 78% 22 held% by Management and Board members.A.average monthly turnover last 3 months of ~100% of shares outstanding Nors e Ene rgy (NEC) 77% Register dominated by private investors w ith insiders controlling almost 25%.average monthly turnover last 3 months of approx 15% of shares outstanding DNO (DNO) 96% Register dominanted by Norw egian institutional investors. including 18% held by the Eitzen Group Good liquidity w ith volumes slightly up over last 12 months . f ree f loat predominantly held by US.A . UK and domestic institutions Trading volumes f airly stable last 12 months . 4% held by Berge Gerdt Larsen and some 35% held by top 20 shareholders V ery strong liquidity w ith average monthly turnover last 12 months of some 150% of shares outstanding PA Re s ource s (PAR) 81% Insiders controlling almost 20% including some 8% held by Mr Haudemann-Andersen Trading volumes slightly dow n over last 12 months . Expect listing early November 15 . US and UK institutions Trading volumes f airly stable last 12 months . 22. N.average monthly turnover of 15-20% of shares outstanding (~50% of f ree f loat) Nors k Hydro (NHY) 55% 45% held by the Norw egian State through the Ministry of Trade & Industry free f loat predominantly held by domestic.6% held by Smedvig Capital Relatively low liquidity w ith average monthly turnover since listing in December 2005 of approx 10% of free f loat Inte roil (INOX) 47% Register dominated by insiders (Mr Rød and Mr Perucci controls more than 50%) and institutional investors Relatively poor liquidity since listing on the OTC in October 2005 w ith inf requent trading Altine x (ALX) 83% Register dominated by private investors w ith insiders controlling some 17%.average monthly turnover last 3 months of approx 50% of shares outstanding Tre foil (TREF) 75% Register dominated by institutional investors w ith almost 90% held by top 30 shareholders. Liquidity & Ownership Com pany Fre e Com m e ntary Float Statoil (STL) 29% 71% held by the Norw egian State through the Ministry of Petroleum & Energy.average monthly turnover last 3 months of approx 20% of shares outstanding Que s te rre (QEC) 78% Some 22% held by insiders and appox 53% of shares held by Norw egian investors (equivalent to almost 70% of f ree f loat) Strong liquidity w ith volumes up since OSE listing in June 2005 .average monthly turnover of approx 15% of shares outstanding (~30% of free f loat) Re vus Ene rgy (REVUS) 87% Some 13% of share held by insiders.