Business Case will test participating teams’ ability to solve a complex problem faced by O&G

company

Fueling Growth:
Acquisition of a leading European O&G company
You are a team of consultants for ArabEnergy tasked with assessing potential M&A
target - EuroOil, a leading European O&G company with a diverse range of upstream
and downstream assets (incl. exploration licenses, refineries, distribution network),
as well as digital portfolio

Areas of Investigation

Strategic fit Valuation Operations Org chart Risks

• Market analysis • Estimation of the • Operational • Organizational • Risk identification
• Alignment with the market value of improvement structure of the and analysis
corporate strategy the target Initiatives for the potential • Prioritization and
company target company merged company mitigation
(incl. digital, ESG)

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Case description

Prompt
Our client is ArabEnergy, Vertically Integrated O&G Company with a strong presence in the Middle East and North Africa region.
ArabEnergy has approached EY for helping to assess potential acquisition of EuroOil – European-based Vertically Integrated O&G Company.

Description
ArabEnergy is a publicly-traded oil and gas company that has seen significant growth recently due to a rise in oil and gas prices.

ArabEnergy's management team believes that the favorable market conditions present an opportunity to further expand the company's portfolio and
capture a bigger piece of the European market. To achieve this, ArabEnergy is considering acquiring EuroOil, a leading European oil and gas company with a
diverse range of upstream and downstream assets, including exploration licenses, refineries, and a distribution network, as well as digital portfolio.

As of now, EuroOil is a privately-owned company which has not been growing as much lately due to underinvestment. It would need to heavily increase its
exploration costs in the short-term in order to keep production rates steady.
At the same time EuroOil’s digital solutions are considered one of the best in the market and are utilized by many O&G companies across the world.
The company sees its digital revenue stream as one of the most promising for company’s future.

Question
Should ArabEnergy’s Committee make a decision to acquire EuroOil?

Committee overseeing the project consists of the following executives: President, EVP Production & Operations, EVP Strategy & Development, CFO and CHRO.
In order to make a final decision Committee would like you to cover 5 investigation areas: Strategic Fit, Valuation, Operations, Org chart, Risks.

Key investigation areas questions are listed on the following slide.

Additional information can be uncovered through submitting accurate website requests (no more than 2 questions per area)
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Business Case “areas of investigation” cover various business areas

Areas of Investigation

Strategic fit Valuation Operations Org chart Risks

Questions Questions Questions Questions Questions

1. Does acquisition fit with 1. What is the standalone 1. How can operational 1. What should be the 1. What are the key risks
the corporate strategy? value of the company? effectiveness of the organizational structure of the potential
2. Are the market 2. How much should we target company be of a merged company acquisition?
conditions positive for offer? improved? (upstream, up to CEO-2 level? 2. How would we
such an acquisition? downstream, logistics) 2. How target’s understand and identify
3. What would be the
2. How should digital subsidiaries should be risks facing this
3. What kind of synergies economic indicators?
solutions be integrated? integrated into the acquisition?
will companies have? (e.g. payback period)
structure?
3. How can we improve 3. How can we prioritize
targets’ ESG rating? and mitigate key risks?

Competencies Competencies Competencies Competencies Competencies

• Strategic thinking • Financial analysis • Sector and Industry • HR management • Risk management
• Valuation Acumen

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ArabEnergy Profile

ArabEnergy’s Key Financial Metrics

Overview
• Vertically Integrated Oil Company with a strong presence in the Middle East region Net
• Primarily focused on the production and distribution of crude oil, gas and products Revenue EBIT CAPEX ROACE
Income
• Public company
• Production – 6MM BOED $407 bln $149 bln $98 bln $32 bln 21.3%

Strategy
• Vision - To provide world with sustainable energy to fuel world’s economy
• Key Objectives: ArabEnergy’s Asset Map
o Increase production to 7MM BOED in 2 years
o Reduce commodity exposure
o Promote local business

Operations
• Upstream assets are located in 3 countries across MENA region
• Upstream lifting cost of $4.4 per boe produced
• Downstream assets are distributed across the world
• Customers are located in all parts of the world
• Digital portfolio consists of advanced proprietary solutions
• ESG rating - AA

Key Subsidiaries
ArabEnergy US, ArabEnergy Europe, ArabEnergy Asia, ArabEnergy Trading, ArabEnergy Marine, - upstream assets - downstream assets
ArabEnergy Pipelines, ArabEnergy Ventures, ArabEnergy Digital Factory

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ArabEnergy CEO remarks (Annual Report 2022)

Dear Shareholders and Stakeholders,

I am honored to present to you the annual report of ArabEnergy, a steadfast beacon in the global energy landscape. As we navigate the complexities of our industry, I am pleased to
reflect on the remarkable journey we have embarked upon as a vertically integrated oil company with a resolute focus on sustainable energy solutions.
The past year has been a testament to our unwavering commitment to excellence. ArabEnergy's presence in the Middle East region has not only solidified our standing but has also
positioned us as a pivotal contributor to the world's energy demands. With a primary emphasis on the responsible production and distribution of crude oil, gas, and products, we
have propelled ourselves as a public company distinguished by our dedication to progress.
Our production achievement of 6 million barrels of oil equivalent per day (BOED) underscores our operational prowess and the dedication of our exceptional team. We recognize
that a reliable supply of energy is the bedrock of economic growth and prosperity, which is why our vision remains resolute – to provide the world with sustainable energy, thus
fueling the engine of the global economy.
In alignment with our vision, we have charted a strategic course for the years ahead. Key among our objectives is the ambitious goal of increasing our production to 7 million BOED
within the next two years. This pursuit is not just a numerical target; it symbolizes our deep-seated commitment to meeting the evolving energy needs of the world. We are
prepared to meet this challenge head-on, leveraging our expertise and state-of-the-art technologies.
Furthermore, our dedication to risk management and value creation is evident in our commitment to reduce commodity exposure. This step serves as a safeguard against market
fluctuations while fortifying our financial resilience. By ensuring a stable foundation, we can confidently steer our ship through the unpredictable waters of the energy sector.
One of ArabEnergy's core values lies in empowering local businesses and communities. As we continue to thrive, we recognize the symbiotic relationship we share with the regions
we operate in. By promoting local businesses, nurturing talent, and fostering sustainable partnerships, we enhance the economic fabric of the communities we touch.
In closing, I extend my sincere gratitude to our shareholders for their unwavering support, our dedicated employees for their tireless efforts, and our valued stakeholders for their
trust. Together, we have propelled ArabEnergy to new heights, and I am confident that our collective endeavors will continue to illuminate the path toward a more sustainable
energy future.
As we venture forth, let us remember that every milestone achieved is a step closer to our shared vision of powering the world's economy through sustainable energy. ArabEnergy is
not merely a company; it is a force of positive change and an embodiment of our unwavering commitment to a brighter future.
Thank you!

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ArabEnergy Factsheet

Governance
• Strategy and vision statement defined and circulated
• A set of comprehensive policies and procedures are in place governing ArabEnergy’s functions
• Clear reporting lines have been defined

Operational Strengths
• Expertise in onshore drilling and production mainly
• Efficient and advanced refining capabilities
• Established market presence in the Middle East and beyond

Operational Weaknesses
• Limited experience in offshore exploration and production
• Low level of expertise in enhanced recovery due to low lifting costs

Supply Chain and Logistics

• Flexible supply chain management allows quick adaptation to market changes and optimization of product allocation
• Extensive pipeline network for crude oil and natural gas transportation in Middle East
• Well-established marine distribution networks to supply petroleum products across international markets

Technology
• Advanced seismic imaging and reservoir characterization techniques
• State-of-the-art refining technologies for high-quality product output

Digital
• Digital integration on par with other VIOC
• Business lines develop digital solutions and own value creation accountability
• Prioritizes robust cybersecurity protocols, safeguarding digital assets against evolving cyber threats
• Subpar data management capabilities and data silos acting as a barrier to value creation
• Untapped digital commercialization opportunities due to security and confidentiality barriers

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ArabEnergy Factsheet

Risk Management
• An ERM function has been established that reports directly to the CEO and BoD.
• Risk appetite has been defined as “We are committed to conducting our operations in a responsible and sustainable manner that prioritizes ESG
factors, safety, and the well-being of our employees and stakeholders.”
• A risk management framework has been established in 2021 approved by the CEO

Health & Safety

• A comprehensive HSE policy in place with a strong safety culture
• Few minor incidents reported annually with a robust response system

ESG
• Supports local communities development through employment, education, and healthcare initiatives
• Invests in sustainable water management
• Upholds high standards of corporate governance, transparency, and risk management

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ArabEnergy Organizational Structure

CEO

EVP CTO
EVP CIO
EVP EVP CFO CHRO EVP EVP EVP
Production & Strategy & Human Corporate
Technology Innovation Finance Legal Audit
Operations Development Resources Affairs

SVP VP Corporate &

SVP SVP Innovation SVP Training & VP Functional
SVP Upstream SVP Strategy SVP Controllers Government Commercial
Engineering Strategy Development Audits
Affairs Law

SVP SVP
SVP Project SVP Corporate SVP Corporate VP Transactions VP Operational
Downstream & SVP R&D SVP Treasury Compensation
Management Development Comms & Finance Law Audits
Midstream & Benefits

SVP SVP SVP Internal SVP Investor VP Corporate VP Affiliates

SVP HSSE SVP Digital SVP Tax
Renewables Sustainability Consulting Relations Compliance Audits

SVP Supply SVP Shared VP Special

SVP IT SVP Staffing
Chain Services Audits

SVP
SVP Office
Information
Services
Security

SVP HR Policy
and Systems

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EuroOil Profile

Overview
• EuroOil is a Vertically Integrated Oil Company with a strong presence in Europe EuroOil’s Key Financial Metrics
• Primarily focused on the production and distribution of crude oil and products
• Private company Net
Revenue EBIT CAPEX ROACE
• Production – 0.7MM BOED Income

$54 bln $18 bln $13 bln $3 bln 16.3%

Strategy
• Vision - To create a bright future by combining O&G expertise with cutting-edge digital capabilities
• Key Objectives:
o Keep production at least at current level EuroOil’s Asset Map
o Expand supply chain capabilities
o Increase digital revenue by 10x in 3 years

Operations
• Upstream and Downstream assets are located in Eastern Europe and Western Africa
• Upstream lifting cost of $13.1 per boe produced
• Customers are mainly located in Europe
• Digital solutions are best-in-class and highly popular on the market having advanced AI capabilities
• ESG rating – BBB (company lacks transparency on the Governance side)

Additional
• EuroOil requires significant upstream investments to maintain current production figures
• Country’s government requires EuroOil to lower its emissions by 10% in next 5 years
• Country’s regulations requires local management for favorable tax treatment - upstream assets - downstream assets
• Strong brand recognition in Europe

Key Subsidiaries
EuroOil US, EuroOil Digital, EuroOil Consulting Services, EuroOil Trading, EuroOil Pipelines Company

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EuroOil CEO remarks (Annual Report 2022)

Dear Stakeholders and Friends!

I am honored to present to you the annual report of EuroOil, a beacon of innovation and progress in the European energy landscape. As we reflect on the past year's achievements,
I am filled with pride for the exceptional strides we have made as a vertically integrated oil company, seamlessly marrying our energy expertise with cutting-edge digital
capabilities.
In a landscape of dynamic challenges and opportunities, EuroOil's presence in Europe has solidified our standing as a pivotal contributor to the region's energy security. Our
unwavering commitment to the responsible production and distribution of crude oil and products underscores our dedication to powering the continent's progress. As a private
company, we are fueled not only by our operations but also by our shared vision of a brighter and more sustainable future.
Our production milestone of 0.7 million barrels of oil equivalent per day (BOED) signifies not just our operational strength, but our adaptability in the face of change. We are
acutely aware that energy forms the bedrock of societal advancement, which is why our vision is clear – to create a bright future by harmonizing our oil and gas expertise with
state-of-the-art digital capabilities.
In alignment with our vision, we have meticulously outlined our strategic objectives for the years ahead. Our first goal is to sustain our production at the current level, ensuring a
reliable energy supply to fuel the region's needs. While doing so, we are committed to expanding our supply chain capabilities, fostering efficiency and resilience in every facet of
our operations. This expansion ensures that we remain agile and prepared for the challenges that lie ahead.
Our pioneering spirit is epitomized by our objective to increase digital revenue by 10 times within the next three years. This goal underscores our commitment to innovation and
technology, as we leverage digital solutions to enhance our operational efficiency, optimize decision-making, and create new avenues of growth. By embracing digitalization, we
stand at the forefront of progress, poised to redefine the energy landscape.
EuroOil's journey is characterized not only by its operational achievements but also by its dedication to creating value. Our commitment to environmental sustainability,
responsible governance, and societal progress remains unwavering. We are cognizant of the profound impact we have on the communities we operate in, and we endeavor to be
responsible stewards of the environment and catalysts for positive change.
In conclusion, I extend my heartfelt gratitude to our shareholders for their continued trust, our dedicated employees for their hard work, and our esteemed stakeholders for their
unwavering support. Together, we have propelled EuroOil to new horizons, and together, we shall continue to illuminate the path toward a brighter and more sustainable energy
future.
As we navigate the exciting road ahead, let us remember that EuroOil's journey is a testament to our collective commitment to progress. It is not just a company; it is a testament
to our vision, resilience, and ability to transform challenges into opportunities.
Thank you.

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EuroOil Factsheet

Governance
• Policies and procedures have been established for most functions at EuroOil but have not been approved yet
• Delegation of authority matrix is not available

Operational Strengths
• Top-notch experience in tertiary oil and gas recovery
• Expertise in offshore operations in various conditions
• Strong track record in meeting environmental regulations

Operational Weaknesses
• Limited reserve base compared to larger industry players
• Offshore facilities require expansion and modernization
• High lifting costs due to complex reservoir structure and stringent regulations

Supply Chain and Logistics

• Pipelines for crude oil and natural gas transportation connecting its fields to local processing facilities
• Distribution agreements with regional partners to supply refined products to nearby European markets

Technology
• Cutting-edge directional drilling and well stimulation techniques
• Best in class Real-Time-Operations-Center for drilling
• Advanced environmental monitoring and eco-friendly drilling practices

Digital
• Market leading digital capabilities
• Solution development and budget accountability lies within Digital Transformation office
• Digital solutions commercialization engine is setup and ready for the major launch
• Several highly innovative solutions piloted and ready to be commercialized

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EuroOil Factsheet

Risk Management
• EuroOil does not have an established ERM function

Health & Safety

• Exemplary safety and environmental records with no significant incidents in the past five years

ESG
• Prioritizes safety and provides employee welfare and development opportunities. Promotes diversity and gender representation
• Adheres to strict environmental regulations, invests in renewable energy research, and adopts eco-friendly drilling practices
• Emphasizes shareholder interests in its governance practices

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EuroOil Organizational Structure

CEO

SVP
EVP SVP
EVP SVP
EVP SVP
EVP SVP
EVP SVP SVP VP VP SVP SVP
Transport & Engineering Strategy & Human Corporate Government
Upstream Downstream Digital Legal Audit
Trading & Tech Finance Resources Affairs Affairs

VP Corporate &
VP Upstream VP Digital VP Training & Dir Corporate Dir Domestic VP Functional
VP Refining VP Logistics VP Engineering VP Strategy Commercial
Operations Transformation Development Comms Affairs Audits
Law

VP
VP Domestic VP Project VP Corporate Dir Health & Dir Intl VP Transactions VP Operational
VP Exploration VP Chemicals VP IT Compensation
Trading Management Development Safety Affairs & Finance Law Audits
& Benefits

VP Petroleum VP Intl VP VP Information Dir Shared VP Corporate VP Affiliates

VP Retail VP Finance VP Staffing
Engineering Trading Procurement Security Services Compliance Audits

VP HR Policy VP Special
VP Drilling VP R&D
and Systems Audits

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Valuation Assumptions

Operational Assumptions
Upstream Operations
Downstream Operations
• The upstream segment engages in the exploration and extraction of crude oil.
• It exclusively supplies its products to the downstream sector.
• The selling price encompasses logistical and transportation expenses, resulting in netback prices.
• It is assumed that resources will undergo renewal beyond the projected period.
• The downstream segment is involved in the refining of crude oil products.
• It sources all of its volumes exclusively from the upstream segment; no additional volumes are obtained from third parties.
• The selling price does not incorporate logistics or transportation costs, as these expenses are covered by EuroOil.

Digital Company • There are no intercompany turnovers within the upstream and downstream segment. All revenue generated originates from third-party sources.

Economic & Financial Assumptions

Period Year 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 2041 2042 2043
CPI US % 5.0% 8.0% 5.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0%
Brent Prices
(USD/bbl 75 70 86 88 82 80 75 76 78 80 81 83 84 86 88 90 91 93 95 97 99 101 103
(USD/bbl)
Conversion Ratio tn to bbl 7.4 7.4 7.4 7.4 7.4 7.4 7.4 7.4 7.4 7.4 7.4 7.4 7.4 7.4 7.4 7.4 7.4 7.4 7.4 7.4 7.4 7.4 7.4
Annual Volumes K tn 73,000 73,500 75,000
Tax Rate % 20% 20% 20% 20% 20% 20% 20% 20% 20% 20% 20% 20% 20% 20% 20% 20% 20% 20% 20% 20% 20% 20% 20%
Revenue Growth –
% 1,000% 500% 100% 20% 15% 10% 5% 3% 2% 2% 2% 2% 2% 2% 2% 2% 2% 2% 2% 2%
Digital Company

Discount Rate Assumptions

Description Unit Value
US Treasury Yield – 15 Years Maturity % 3.95%
Country Risk Premium (blended) % 2.51%
Peers’ Beta (Unlevered) # 0.97

Peers’ Debt to Equity % 80.45%

Equity Risk Premium % 6.00%
Pre-Tax Cost of Debt % 8.32%
Tax Rate % 20.00%
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EuroOil’s Historical Financial Data

Upstream Unit 2021 2022 2023 Downstream Unit 2021 2022 2023 Additional information Unit 31.12.2023
Income statement Income statement Cash USDb 5.000
Net revenue USDb 36.734 33.722 42.180 Revenue USDb 45.954 43.049 53.730 Debt USDb 40.000
Gross revenue USDb 40.515 38.073 47.730 Direct costs USDb (38.234) (35.222) (43.680) NWC USDb -
Logistics USDb (3.781) (4.351) (5.550) Feedstock USDb (36.734) (33.722) (42.180)
Direct costs: USDb (22.447) (21.493) (25.422) Other USDb (1.500) (1.500) (1.500)
Lifiting cost USDb (3.241) (3.263) (3.330) Gross profit USDb 7.720 7.827 10.050
MET USDb (16.206) (15.229) (19.092) G&A USDb (1.000) (1.000) (1.000)
Other USDb (3.000) (3.000) (3.000) Selling (transport) USDb (4.088) (4.704) (6.000)
Gross profit USDb 14.286 12.229 16.758 EBITDA USDb 2.632 2.123 3.050
G&A USDb (1.000) (1.000) (1.000) D&A USDb (1.379) (1.291) (1.612)
EBITDA USDb 13.286 11.229 15.758 EBIT USDb 1.253 0.832 1.438
D&A USDb (2.026) (1.904) (2.387) Financial expenses USDb - - -
EBIT USDb 11.261 9.326 13.372 Income tax USDb (0.251) (0.166) (0.288)
Financial expenses USDb (3.000) (3.000) (3.000) Net Income USDb 1.003 0.665 1.150
Income tax USDb (1.652) (1.265) (2.074) Additional information
Net Income USDb 6.609 5.060 8.297 CAPEX % of Revenue 2.0% 2.0% 2.0%
Additional information
CAPEX % of Revenue 3.0% 3.0% 3.0%

Digital Unit 2021 2022 2023 Consolidated Unit 2021 2022 2023
Income statement Income statement
Revenue USDb 0.030 0.050 0.100 Revenue USDb 45.984 43.099 53.830
Direct costs USDb (0.040) (0.070) (0.080) Direct costs USDb (23.987) (23.063) (27.002)
Gross profit USDb (0.010) (0.020) 0.020 Gross profit USDb 21.996 20.036 26.828
G&A USDb (0.100) (0.150) (0.200) G&A USDb (2.100) (2.150) (2.200)
Selling (marketing) USDb (0.500) (1.000) (1.500) Selling USDb (4.588) (5.704) (7.500)
EBITDA USDb (0.610) (1.170) (1.680) EBITDA USDb 15.308 12.182 17.128
D&A USDb (0.003) (0.005) (0.010) D&A USDb (3.407) (3.200) (4.008)
EBIT USDb (0.613) (1.175) (1.690) EBIT USDb 11.901 8.982 13.120
Financial expenses USDb - - - Financial expenses USDb (3.000) (3.000) (3.000)
Income tax USDb - - - Income tax USDb (1.903) (1.431) (2.362)
Net Income USDb (0.613) (1.175) (1.690) Net Income USDb 6.998 4.551 7.758
Additional information
CAPEX % of Revenue 9.0% 9.0% 9.0%
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