An example of a Strategy-driven Wishlist

WISHLIST ASSETS
VALUE DRIVERS (I.e. Opportunities to add value)
STRATEGIC DRIVERS STRATEGIC LINK
Leverage Existing Portfolio
Improved
Performance
Defensive
No.
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COUNTRY ASSET NAME Partner 1/
Operator (%
interest)
Other partners
(%interest)
VALUE CHAIN Core Oil Gas and Power
Value Chain
LowCost
MRH Oil
Deep Water
Oil & Gas
Monetise
Technology
"Fit to Strategic Play"
(i.e. why Coveted/ Desired? )
O
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Doability
constraints/Show
Stoppers
Acquisition
Sponsor
See comments above for Legend Input brief note on the value uplift opportunity in cells below
1 AP C Country X Country X Gas
market
NOC Gas NOC (58.5%) P MMMP Not Applicable AP Not
Applicable
Not
Applcable
Secure new market entry
Foreign company not allowed to
own substantial
shareholding,15%current max.
2 AP C Country Y Country Y -
Power Gen &
Markets
Government -
55%
Private - 45% Gas to Power Not Applicable AP Not
Applicable
Not
Applcable
Use yyyy
expertise to
influence /
improve
efficiency
Entry to Country Power Gen & Markets Will State Government sell
shares?
3 AP D Country X ZZZZ Shipping NOC (62%) Pension fund
(5%)
LNG AP Key future part of LNGvalue chain Motivation of Key Local
shareholder
4 ME D Country Z Aaa-Bbb Field SOC-A AP SA
Use Limit-based competencies to demonstrate
capabilities that can be expended to other fields
Politics of Country Z entry
Growth by
May seem far too simplifying for what the sponsors have to say but a
framework like this :
1. Is a great aid to clarify the Sponsors thinking
2. Allows others (particularly the Decision Makers) to capture the
essence of this thinking too.
WISHLIST ASSETS
STRATEGIC DRIVERS STRATEGIC LINK
No.
R
e
g
i
o
n
"
C
o
v
e
t
e
d
"

o
r

"
D
e
s
i
r
e
d
"
COUNTRY ASSET NAME Partner 1/
Operator (%
interest)
Other partners
(%interest)
VALUE CHAIN Core Oil Gas and
Power Value
Chain
Low Cost
MRH Oil
Deep
Water Oil
& Gas
Monetise
Technology
"Fit to Strategic Play"
(i.e. why Coveted/ Desired? )
See comments above for Legend
1 AP
C
Country X Country X Gas
market
NOC Gas NOC (58.5%) P MM MP Not
Applicable
AP Not
Applicable
Not
Applcable
Secure new market entry
2 AP
C
Country Y Country Y -
Power Gen &
Markets
Government -
55%
Private - 45% Gas to Power Not
Applicable
AP Not
Applicable
Not
Applcable
Use yyyy
expertise to
influence /
improve
efficiency
Entry to Country Power Gen & Markets
3 AP
D
Country X ZZZZ Shipping NOC (62%) Pension fund
(5%)
LNG AP Significant future part of LNG value chain
4 ME
D
Country Z Aaa-Bbb Field SOC-A AP SA
Use Limit-based competencies to demonstrate
capabilities that can be expended to other
fields
An example of a Strategy-driven Wishlist
Detail 1
GENERAL
A
c
t
i
v
e

R
B
D

O
p
p
o
r
t
u
n
i
t
i
e
s
No. Opportunity/ Deal structure Link to
Coveted
Assets
Net Present
Value of
Assets (Base
case
evaluation
NPV7 PSV_M)
Net Present
Value of
Assets (Base
case
evaluation
NPV7 PSV_H)
Latest
Estimate
Market Price
Estimate of
Premium
over
Market
Price
LE
Purchase
Price
Estimated
annual
Capex
requireme
nts from
20xx
VIR7
Investment
(PSV_M)
VIR7
Forward
(PSV_M)
Mid case
Reserves
added (boe)
Peak
production
Added (boe/d)
UTC7
($/boe)
1
Country X Gas market 2 360 406 220 Not
Applicable
220 10 0.5 0.6
##
Country Y - Power Gen &
Markets
1 1250 1250 810 180 990 100 0.3 0.4
##
ZZZZ Shipping 3 1460 1460 955 195 1150 75 0.3 0.3
ECONOMIC / PRODUCTION IMPACT
Example Asset Assessment Criteria
Region A
FINANCIAL IMPACT VALUE ANALYSIS & BREAKDOWN
YEAR 20xx YEAR 20xy ESTIMATED VALUE UPLIFT OVER NET ASSET VALUE (NPV7 PSV_M) TOTAL Explanatory Notes
20xx NIAT
(ie. delta
NIAT to EP
Business
Plan)
20xx
Capital
Employed
(i.e. delta
CE to EP
Business
Plan)
20xy NIAT
(i.e. delta
NIAT to EP
Business
Plan)
20xy
Capital
Employed
(I.e. delta
CE to EP
Business
Plan)
Deal
Structure
(e.g. uplift
from onsale
of assets)
Tax or
Financing
position
Synergies (e.g.
overheads, R&D,
procurement,
contracting, rig
contracts,
exploration,
capital
investments,
infrastructure,
relationships)
New and Sxxx-
only
Technology
(e.g.
Deepwater,
PtL, DtL, VtV,
GTL etc.)
Commercial
Drivers (e.g.
crude trading
uplift from
condensate
premiums, US
gas trading
margins)
Obvious
spin-backs
(I.e. applying
target best
practice in
Shell)
Benefits
from
defending
existing
business or
strategies
Additional
Strategic/
Future option
value (Risked
NPV7 PSV_M)
Estimated
Value
Created
(NPV7
PSV_M)
220 10 220 Supply gas to
power plant (Gas
to Power Value
Chain)
Not Applicable Enhance
relationship
with State
Gov't
50 190 xxxx
20 990 20 990 Extension of Gas
value chain to
pipeline tariff
income
150 410 yyyy
130 1130 170 1150 - - Negligible - 250 560 zzzz
Example Asset Assessment Criteria
Region A Financial and Value Impact
Option Valuation Table
From Until Decision Oil price
Unrisked
Reserves PVCapex
Unrisked
NPV7 VIR Decision Oil price
2P
Reserves PVCapex NPV7 VIR Comments Further Optionality?
MMstb/ boeUSD, mln RUSD, mln RT MMstb/boe USD, mln RUSD, mln RT
Delay Infill
Project 2015 2018
Commence
in 2015
$100/ bbl
RT 9 105 123 1.17
Cancel in
2015
$45/ bbl
RT -9 -90 -8 0.09
Project Profitable but
below VIR Threshold Can Reconsider upto 2018
Delay Gas
Injection 2016 2018
Commence
in 2016
$100/ bbl
RT 12 155 108 0.70
Cancel in
2015
$45/ bbl
RT -12 -130 23 N/A Can Reconsider upto 2018
Cancel Export
Pipeline Upgrade 2015 2017
Commence
in 2015
$100/ bbl
RT 11 190 80 0.42
Cancel in
2015
$45/ bbl
RT -11 -145 55 N/A NONE
Accelerate Infill
Project 2012 2014
Commence
in 2013
$100/ bbl
RT 9 105 123 1.17
Start
drilling
$130/ bbl
RT 1 5 20 4.00
High VIR from
accelerated production Further Infill
Accelerate Gas
Injection 2013 2015
Commence
in 2016
$100/ bbl
RT 12 155 108 0.70
Commence
Project
$130/ bbl
RT 12 4 4 1.00 NONE
Early Production
from well A1-X 2012 2013
Commence
in 2015
$100/ bbl
RT 4 90 115 1.28 Start 2012
$130/ bbl
RT 0 15 6 0.40 Pure Accelearation NONE
Accelerate by
Early Production 2013 2018
Commence
in 2013
$100/ bbl
RT 25 250 350 1.40
Start in
2013
$100/ bbl
RT 2 90 70 0.78 Infill in Block B
Accelerate
Export Pipeline 2013 2015
Commence
in 2013
$100/ bbl
RT 11 190 80 0.42
Start in
2013
$100/ bbl
RT 9 -2 25 N/A NONE
Accelerate Gas
Injection 2012 2015
Commence
in 2014
$100/ bbl
RT 12 155 108 0.70
Start in
2012
$100/ bbl
RT 9 -5 57 N/A NONE
Gas Injection Into
Block A 2014 2015 Not in Plan
$100/ bbl
RT 0 0 0 N/A
Start
drilling
$100/ bbl
RT 15 15 20 1.33
In concert with delayed
Gas Injection Upgrade Further Infill
Sufficient Gas for
Export via
Company B
DomGas Scheme
2016 2017 Not in Plan
$100/ bbl
RT
0 0 0 N/A
Commence
Project
2016
$50/boe
RT
9 65 21 0.32
Backs out Fuel Oil /
Supports Sustainable
Development NONE
Perform
interwell pilot 2013 2015 Not in Plan
$100/ bbl
RT 0 0 0 N/A
Start in
2013
$100/ bbl
RT 1 70 -15 -0.21 Assuming Success
Perform Mini Flood,
MidScale or Full Scale
Perform Mini-
flood in Block A 2014 2016 Not in Plan
$100/ bbl
RT 0 0 0 N/A
Start in
2014
$100/ bbl
RT 3 145 -5 -0.03 Assuming Success
Perform MidScale or Full
Scale
Mid scale
Implementation 2014 2017 Not in Plan
$100/ bbl
RT 0 0 0 N/A
Start in
2014
$100/ bbl
RT 9 250 67 0.27 Assuming Success Perform Full Scale
Full scale
Implementation 2015 2019 Not in Plan
$100/ bbl
RT 0 0 0 N/A
Start in
2015
$100/ bbl
RT 29 400 280 0.70 Assuming Success NONE
EOR
ASP proves
economic
success in the
nearby X field
Base Case Assumptions
Impact
Above $120 /
bbl
Oil Price
Outlook
Planning Planning
Trigger
Below $50 /
bbl
Time Window to
Exercise Impact
Optionalities
Option Value Assumptions
Block B
Appraisal
Proves OIL
Appraisal
Proves GAS
Option Valuation Table Trigger and Base
Economic Assumptions
From Until Decision Oil price
Unrisked
Reserves PVCapex
Unrisked
NPV7 VIR
MMstb/ boeUSD, mln RUSD, mln RT
Delay Infill
Project 2015 2018
Commence
in 2015
$100/ bbl
RT 9 105 123 1.17
Delay Gas
Injection 2016 2018
Commence
in 2016
$100/ bbl
RT 12 155 108 0.70
Cancel Export
Pipeline Upgrade 2015 2017
Commence
in 2015
$100/ bbl
RT 11 190 80 0.42
Accelerate Infill
Project 2012 2014
Commence
in 2013
$100/ bbl
RT 9 105 123 1.17
Accelerate Gas
Injection 2013 2015
Commence
in 2016
$100/ bbl
RT 12 155 108 0.70
Early Production
from well A1-X 2012 2013
Commence
in 2015
$100/ bbl
RT 4 90 115 1.28
Accelerate by
Early Production 2013 2018
Commence
in 2013
$100/ bbl
RT 25 250 350 1.40
Accelerate
Export Pipeline 2013 2015
Commence
in 2013
$100/ bbl
RT 11 190 80 0.42
Accelerate Gas
Injection 2012 2015
Commence
in 2014
$100/ bbl
RT 12 155 108 0.70
Gas Injection Into
Block A 2014 2015 Not in Plan
$100/ bbl
RT 0 0 0 N/A
Sufficient Gas for
Export via
Company B
DomGas Scheme
2016 2017 Not in Plan
$100/ bbl
RT
0 0 0 N/A
Perform
interwell pilot 2013 2015 Not in Plan
$100/ bbl
RT 0 0 0 N/A
Perform Mini-
flood in Block A 2014 2016 Not in Plan
$100/ bbl
RT 0 0 0 N/A
Mid scale
Implementation 2014 2017 Not in Plan
$100/ bbl
RT 0 0 0 N/A
Full scale
Implementation 2015 2019 Not in Plan
$100/ bbl
RT 0 0 0 N/A
EOR
ASP proves
economic
success in the
nearby X field
Base Case Assumptions
Above $120 /
bbl
Oil Price
Outlook
Planning
Trigger
Below $50 /
bbl
Time Window to
Exercise Impact
Optionalities
Block B
Appraisal
Proves OIL
Appraisal
Proves GAS
Decision Oil price
2P
Reserves PVCapex NPV7 VIR Comments Further Optionality?
MMstb/boe USD, mln RUSD, mln RT
Cancel in
2015
$45/ bbl
RT -9 -90 -8 0.09
Project Profitable but
below VIR Threshold Can Reconsider upto 2018
Cancel in
2015
$45/ bbl
RT -12 -130 23 N/A Can Reconsider upto 2018
Cancel in
2015
$45/ bbl
RT -11 -145 55 N/A NONE
Start
drilling
$130/ bbl
RT 1 5 20 4.00
High VIR from
accelerated production Further Infill
Commence
Project
$130/ bbl
RT 12 4 4 1.00 NONE
Start 2012
$130/ bbl
RT 0 15 6 0.40 Pure Accelearation NONE
Start in
2013
$100/ bbl
RT 2 90 70 0.78 Infill in Block B
Start in
2013
$100/ bbl
RT 9 -2 25 N/A NONE
Start in
2012
$100/ bbl
RT 9 -5 57 N/A NONE
Start
drilling
$100/ bbl
RT 15 15 20 1.33
In concert with delayed
Gas Injection Upgrade Further Infill
Commence
Project
2016
$50/boe
RT
9 65 21 0.32
Backs out Fuel Oil /
Supports Sustainable
Development NONE
Start in
2013
$100/ bbl
RT 1 70 -15 -0.21 Assuming Success
Perform Mini Flood,
MidScale or Full Scale
Start in
2014
$100/ bbl
RT 3 145 -5 -0.03 Assuming Success
Perform MidScale or Full
Scale
Start in
2014
$100/ bbl
RT 9 250 67 0.27 Assuming Success Perform Full Scale
Start in
2015
$100/ bbl
RT 29 400 280 0.70 Assuming Success NONE
Impact Planning
Option Value Assumptions
Option Valuation Table Option Value
Assumptions
Stakeholder Management: A Framework
Issue Risk
Response
/Mitigation
Impact on
Value Comments
Patrons
P1
P2
P3
Controllers
C2
C3
Influencers
I1
I2
I3
Deal Name Project Majesty
Issue Risk Response/ Mitigation Impact on Value Notes
Government May not approve of nationality
of acquirer
Deal cannot
Complete
Lobby government in favour
of the deal
1. If sale aborted, carry Deal team and
external consultancy costs
2. Essentially places on hold the Country
strategy/ Growth strategy in this region
Divesting party carries
much more risk.
They may need to re-
market, with likely loss
of value
JV Partner with Pre-
emption rights
May pre-empt Deal cannot
Complete
1. Understand motivation
and value perception of this
party
2. Sweetner elsewhere for
this party?
1. If sale aborted, carry Deal team and
external consultancy costs
2. Compromises Growth strategy
Divesting party gets
same deal, but without
any potential new
relationship.
Regional Director Unhappy with the risk profile of
the deal given comments from
Technical, Exploration and
Legal
Deal not
approved
Understand more deeply the
concerns and see if they can
be mitigated in price or
structure
1. If sale aborted, carry Deal team and
external consultancy costs
2. If negotiations continue, then a positive
impact on price
Negoition under
reduced 'delegated
authoirty'
Controllers
Finance Director Price has got above what is
now affordable after poor Q3
Deal not
approved
It there a way to restructure
the payment terms (eg
performance related earn
out)?
1. If sale aborted, carry Deal team and
external consultancy costs
2. If negotiations continue a likely a
reduction in absolute value
Probable
'showstopper'
HSES Director Uneasy with abandoned well
liabilities and emerging security
situation
Deal not
approved
1. Can liabilities be
realistically transferred?
2. Independent assessment
of country risk
May reduce contingencies for liabilities Possible 'showstopper'
Technical Team Leader Believes reserves and other
resource estimates
systematically overstated
Values not
supported in
this area
Understand more deeply the
concerns and see if they can
be mitigated in price or
structure
A reduction in absolute value Should be resolved in
Deal Team
Exploration Manager Sees considerable commitment
with little reward
Values not
supported in
this area
Understand more deeply the
concerns and see if they can
be mitigated in price or
structure
A reduction in absolute value Maybe requires
'independent' expert
opinion?
Legal Adviser Unhappy with 'contractual'
arrangements for 'special
consultant', close to
Government
"Business
Principles Risk"
Attempt to get Divesting
Party to terminate the
contractual arrangement, to
the satisfaction of
contracted party
May lead to deal being aborted Potential
'showstopper'
Patrons
Influencers
Seen as Acquirer or Divestor
ACQUIRER
Stakeholder Management Framework: Example
Issues Roll
Upwards
as the deal
Progresses