OIL MARKET OUTLOOK AND WHAT NEXT FOR THE SOUTH EAST ASIAN OFFSHORE MARKET VIJAY KRISHNAN

OIL MARKET OUTLOOK AND WHAT NEXT FOR THE SOUTH EAST ASIAN OFFSHORE MARKET VIJAY KRISHNAN

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Slide 5 JW19 Work more on colour coding here and use company specific colours Julia Weiss, 30/11/2016

How we got here: the generic commodity cycle Higher reinvestment increases production Production outpaces demand Increased investment, capacity issues Prices drop, hurting cash flow and returns Higher prices improve cash flows Demand outpaces production Low reinvestment hurts production Cash flow declines, spending cuts, lay offs A commodity market with no price maker endlessly repeats this cycle

The cycle begins: in 2014, a large imbalance between supply and demand was looming Global liquids supply and demand 105 100 95 90 85 80 Production outpaces demand Demand Demand outlook (Jun 2014) Supply Supply outlook (Jun 2014) Prices drop, hurting cash flow and returns 75 Historical Forecast 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Source: Rystad Energy research and analysis, UCube, IEA

We have now witnessed the biggest drop in Global E&P investments ever 1 000 Global E&P investments USD billions 900 800 700 600 500 400 300 Other Onshore Shale/Tight oil Oil sands Offshore shelf Offshore midwater Offshore deepwater - 25% - 22% Cash flow declines, spending cuts, lay offs 200 100 0 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 Source: Rystad Energy DCube

Supply Impact affecting the medium term? Sanctioning of new fields has collapsed to Historic Lows 80 Global Resource by Approval Year Billion boe 70 60 50 40 30 20 10 History Forecast Other Onshore Shale/Tight oil Oil sands Offshore shelf Offshore midwater Low reinvestment hurts production 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Approval year for project Source: Rystad Energy UCube

Supply: Some Impact now, but 2020+ there are ~3 mmbbls/day missing due to recent underinvestment 4.0 Oil production (excl. shale) by approval year Mmbbl/d 3.5 3.0 2.5 2.0 1.5 1.0 2011 2012 2013 2014 0.5 2015 2016 0.0 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 Source: Rystad Energy UCube

Stocks draw in 2017 on cuts, in medium term still tight market due to lack of sanctioning 104 102 Global liquids supply and demand Million bbl/d 100 98 96 94 92 Total Demand Total Supply 90 88 86 84 Historical Forecast 82 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Source: Rystad Energy research and analysis 11

KSA prepared to force compliance and we expect production to be cut below target in 1H 17 10.8 10.6 10.4 KSA base case crude production, monthly Million bbl/d 10.2 10.0 9.8 KSA RE base case KSA Target cut 9.6 9.4 9.2 Historical Forecast 9.0 Jan-14 Mar-14 May-14 Jul-14 Sep-14 Nov-14 Jan-15 Mar-15 May-15 Jul-15 Sep-15 Nov-15 Jan-16 Mar-16 May-16 Jul-16 Sep-16 Nov-16 Jan-17 Mar-17 May-17 Jul-17 Sep-17 Nov-17 * This is the scenario called «Full 2017 Cuts + Natural Decline» in the OPEC scenarios on slide 4. Source: Rystad Energy research and analysis 12

Full compliance through maintenance, while Iran increases production through Aug-17 5.0 4.8 Selected OPEC countries crude production base case vs. OPEC agreement 30-Nov target production Million bbl/d 4.6 4.4 4.2 4.0 3.8 3.6 3.4 3.2 3.0 2.8 Iraq RE base case Iraq Target Iran RE base case Iran Target UAE RE base case UAE Target Kuwait RE base case Kuwait Target 2.6 2.4 2.2 Historical Forecast 2.0 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16 Oct-16 Jan-17 Apr-17 Jul-17 Oct-17 Source: Rystad Energy research and analysis 13

Six OPEC members struggle to maintain production regardless of the OPEC agreement Selected OPEC countries crude production base case vs. OPEC agreement 30-Nov target production 2.4 Million bbl/d 2.2 2.0 1.8 1.6 1.4 1.2 Venezuela Venezuela Target Angola Angola Target Rest OPEC* Rest OPEC* Target Algeria Algeria Target 1.0 Historical Forecast 0.8 Jan-14 May-14 Sep-14 Jan-15 May-15 Sep-15 Jan-16 May-16 Sep-16 Jan-17 May-17 Sep-17 *Rest OPEC = Qatar, Ecuador and Gabon. Source: Rystad Energy research and analysis 14

Production to drop by 260 kbbl/d in 1H 17 against the reference level, mostly through declines. Liquids production profile for non-opec countries 2.2 Historical Forecast Million bbl/d 2.0 1.8 Mexico Kazakhstan 1.6 1.4 1.2 1.0 Oman 0.8 0.6 0.4 Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Azerbaijan Malaysia Other non-opec 1 Source: Rystad Energy research and analysis

Recent rally in rig counts positions start-up activity for a steep recovery in 2017 2000 1800 US shale start-up activity scenarios Number of new wells per month 1600 1400 1200 1000 800 600 400 200 0 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jul-17 Jan-18 Jul-18 Jan-19 History Base Case Low Case (50 USD/bbl) Max Case (25 USD/bbl ahead of base) 1 Source: Rystad Energy research and analysis, Rystad Energy NASWellCube Premium

Significant growth is inevitable, base production is too mature given current activity levels 9000 US shale oil production scenarios Thousand bbl/d 8000 7000 Incremental New Production (Max Case) Incremental New Production (Base Case) New Production (Low Case) 6000 Base Production 5000 4000 3000 2000 1000 0 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jul-17 Jan-18 Jul-18 Jan-19 1 Source: Rystad Energy research and analysis, Rystad Energy NASWellCube Premium

Weaker 1Q and stronger remainder of the year demand result in overall higher 2017 growth World liquids demand growth y/y Million bbl/d 3.5 3.0 2.5 2.0 1.5 1.6 2.2 2.8 1.7 1.8 1.6 1.5 1.6 History Forecast 1.8 1.6 RoW Saudi Arabia Russia India Brazil China US Japan South Korea Iran World World (previous) 1.2 1.0 1.0 0.5 0.0-0.5 1Q-15 2Q-15 3Q-15 4Q-15 1Q-16 2Q-16 3Q-16 4Q-16 1Q-17 2Q-17 3Q-17 4Q-17 1 Source: Rystad Energy research and analysis

ICE Brent crude historical front month price, latest five year futures curve and UCube base case 140 120 100 80 60 45 60 67 59 62 40 20 0 Nov-10 Nov-11 Nov-12 UCube base case Nov-13 Nov-14 Nov-15 Futures curve Brent front month Nov-16 Nov-17 Source: Bloomberg, Rystad Energy research and analysis

E&P companies to keep investment flat in 2017 with some positive upside risk E&P Investments USD Billion 1,000 800-24% 600-22% 10% 400 200 0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Source: Rystad Energy DCube

Average 62 USD/bbl oil price in 2017 suggests broadly flat growth for the OFS market In the November 2016 release of DCube we see some downward revision of the short and long term service market. This is the effect of more clarity around oil supply and E&P companies being cautious before the OPEC meeting. The short term service segment purchases from 2015-2017 is now at -9.5%, down from -8.8%. Long term we still see an average growth of 10%. Purchases of oilfield services USD Billion Short term Long term 2015 2017 2021 CAGR -9.5% CAGR 10.0% Brent Oil Price with Rystad Forward Curve USD/bbl 120 100 80 60 40 20 0 100 54 47 62 75 88 2014 2016 2018 2020 97 105 Source: Rystad Energy DCube

Floater fixture volumes and rig rates have been trending downwards Rig rates (kusd/day) # fixed rig years 200 600 Rig Supply Years (rhs) Rig Rate USD (lhs) 180 500 160 140 400 120 300 100 80 200 123 60 101 100 0 78 54 58 57 45 50 38 29 33 37 39 29 39 28 28 27 14 12 16 17 14 7 7 11 10 13 13 11 1Q09 1Q10 1Q11 1Q12 1Q13 1Q14 1Q15 1Q16 6 40 20 0

The same situation for jackups but lower activity Jackups Jackup construction and retirement Number of units 100 90 80 Construction Retired 70 60 50 40 30 20 10 0-10 - 20-30 20 units retired in 2016* 19 units retired in 2015 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 *As of 22.09.2016 Source: RigCube September 2016

2015 & 2016 with largest number of retired rigs in more than 40 years Floaters Floater construction and retirement Number of units 35 30 25 20 Semisubmersible Drillships Retired Semisubmersible Retired Drillship 15 10 5 0-5 - 10-15 22 units retired in 2016* - 20-25 - 30 28 units retired in 2015 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 *As of 22.09.2016 Source: RigCube September 2016

Utilization will start to recover during 2018 assuming no further retirements Floaters Global supply* and demand for floating drilling rigs Number of rigs 400 350 Demand Total supply 300 250 200 150 100 50 0 Utilization Total fleet 2005 2010 2015 2020 Historical average 83% Implied 77% 81% 84% 86% 84% 81% 79% 82% 85% 82% 73% 57% 51% 53% 60% 65% * Total supply is gross supply for the fleet and includes all rigs, including ready stacked and cold stacked. Source: RigCube September 2016 25

Recovery from 2018 for all segments 20% Purchases of oilfield services 15% Annual change 10% 9% 9% 10% 5% 6% 5% 0% -5% 2013 2014 2015 2016 0% 2017 2018 2019 2017-2021 CAGR -10% -15% -20% -20% -18% Maintenance and Operations EPCI Subsea Drilling Contractors -25% Well Services and Commodities Seismic -30% All OFS Purhases Source: DCube November 2016

But the rebound varies across regions and segments in 2017 Oilfield service growth North America Europe 30% 30% 20% 20% 10% 10% 0% -10% 2015 2016 2017 2018 0% -10% 2015 2016 2017 2018-20% -20% -30% -30% -40% -40% 30% 20% 10% 0% -10% -20% -30% -40% South America Africa and Middle East Asia and CIS 30% 30% 20% 20% 10% 10% 2015 2016 2017 2018 0% 0% 2015 2016 2017 2018 2015 2016 2017 2018-10% -10% -20% -20% -30% -30% -40% -40% Source: DCube

Project cost cutting has helped field development in the region New field developments Breakeven improvement of a best-in-class non-sanctioned offshore development USD/bbl 90 80 Seismic Well Services and Commodities Drilling Contractors 70 60 Subsea EPCI Maintenance and Operations 7.3 50 49.3 40 80 30 20 45 10-2014 Downsizing and simplification Improved design and reduced contigencies High grading and efficiency gains Unit prices Currency gains 2016 Source: Rystad Energy Research and Analysis

Shallow water investments drive the decline in Southeast Asia, but also the rebound Offshore purchases from investments by supply segment USD billions 35 Offshore deepwater 30 25 Offshore midwater Offshore shelf - 26% 20 15-33% CAGR: 16% 10 5 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Source: Rystad Energy DCube 29

Southeast Asian growth will come from new developments and Brownfield investment SE Asia purchases of offshore oilfield services USD Billion 50 45 Exploration Greenfield Brownfield 40 35 30 25 20 15 10 5 0 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Source: Rystad Energy DCube

Southeast Asian growth by service segment SE Asia purchases of offshore oilfield services USD Billion 50 45 40 35 30 Seismic Well Services and Commodities Drilling Contractors Subsea EPCI Maintenance and Operations 25 20 15 10 5 0 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Source: Rystad Energy DCube

Although lower volumes, there are still exciting opportunities around the world! Offshore capex 2017-2022 USD billion North Sea: Johan Castberg Wisting Alta/Gotha Culzean Mediterranean: Leviathan Zohr GoM: Appomattox Mad Dog Phase 2 Shenandoah Indonesia: Abadi FLNG/onshore Gendalo-Gehem Mozambique: Coral FLNG Area 1 LNG Area 4 LNG West Africa: Bonga SW Zabazaba/Etan Brazil: Libra Pilot Sepia Buzios Marlim revitalization Source: Rystad Energy research and analysis, DCube Legend Size of circle = 1 BUSD India: KG-DWN-98/2 Australia: Browse FLNG

Spending in Offshore Southeast Asia Greenfield Exploration Brownfield Greenfield Exploration Brownfield 3 33

Petronas, Shell, Chevron and Total are the biggest spenders during the recovery SE Asia purchases of offshore oilfield services USD Billion 50 45 40 35 30 Other Perenco VietSovPetro Pertamina BP PetroVietnam Total Shell ConocoPhillips Eni Repsol ExxonMobil Murphy Oil PTTEP (Thailand) Chevron Petronas 25 20 15 10 5 0 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Source: Rystad Energy DCube

Investment in greenfield projects favors large fields SE Asia greenfield purchases by field size USD Billion 16 14 12 Reserves 0-1 MMboe Reserves 1-3 MMboe Reserves 3-10 MMboe Reserves 10-30 MMboe Reserves 30-100 MMboe Reserves 100-300 MMboe 10 8 6 4 2 0 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Source: Rystad Energy DCube 3

Large growth in fixed facilities SE Asia greenfield purchases by facility USD Billion 16 14 Subsea tie back Floater Fixed 12 10 8 6 4 2 0 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Source: Rystad Energy DCube

Rystad Energy CONTACT INFORMATION Vijay Krishnan Managing Director Asia Pacific Vijay.krishnan@rystadenergy.com www.rystadenergy.com This document is the property of Rystad Energy. The document must not be reproduced or distributed in any forms, in parts or full without permission from Rystad Energy. The information contained in this document is based on Rystad Energy s global oil & gas database UCUBE, public information from company presentations, industry reports, and other, general research by Rystad Energy. The document is not intended to be used on a stand-alone basis but in combination with other material or in discussions. The document is subject to revisions. Rystad Energy is not responsible for actions taken based on information in this document.