5 Themes and 17 Companies to Generate Alpha in an Industry in Transformation

May 30, 2011

Europe: Energy: Oil & Gas - E&P

Equity Research 5 themes and 17 companies to generate alpha in an industry in transformation

E&P - seek exposure to five key themes Unconventional liquids

We highlight five themes that we believe will Technological progress being made in established ACTION drive share price performance in the E&P sector; unconventional liquid/oil shale plays in the US RATINGS & UPSIDE TO 12-MONTH PRICE TARGETS high-impact, frontier exploration; unconventional could be levered to new basins and countries; we Upside to TP Market Cap (USDmn) Conviction Buy gas; unconventional liquids; explorers with a highlight two stocks that should benefit from this Rockhopper 241% 901 Aurelian 181% 411 strong core value; and NOC-driven M&A. We trend, including Conviction Buy Panoro. Panoro 154% 261 highlight 17 companies that we believe provide Bowleven 107% 1074 Buy the most attractive exposure to these themes. Balanced exploration Global Energy Development 189% 37 BPC 168% 316 We identify five stocks with high-impact Northern Petroleum 164% 173 Frontier exploration increasingly attractive Max Petroleum 159% 164 exploration supported by core values that mitigate Falkland Oil & Gas 140% 192 We highlight five E&P stocks with high re-rating downside risk of exploration failure. Bowleven PA Resources 132% 418 Nighthawk Energy 125% 36 potential from exploration in new basins. We and Rockhopper (Conviction Buys) screen well. Dominion 117% 146 Igas 117% 187 expect the majors and NOCs to show increasing Nautical Petroleum 112% 470 appetite for these types of assets after a decade of NOC-driven M&A Cove Energy 108% 691 Aminex Plc 104% 100 poor exploration performance. We see NOCs as the most price-insensitive buyers Great Eastern Energy 97% 771 Borders and Southern 96% 392 and believe that high materiality and exposure to Noreco 96% 523 Unconventional gas in deficit markets new technologies drive such activity. Green Dragon 95% 1718 Source:Maurel Datastream, & Prom Goldman Sachs 89% Research 2604 estimates. Increasing gas prices and new technical advances Bankers Petroleum 89% 1950 CoverageSell View: Attractive benefit unconventional gas producers in countries Rating changes Premier Oil 22% 3578 fighting for less dependency on foreign gas Hardy Oil 22% 241 We upgrade Noreco and Maurel and Prom to Buy Lundin Petroleum 14% 4315 imports. Stocks we believe will benefit from this (from Neutral). We upgrade DNO and Encore Oil theme include Conviction Buy Aurelian. to Neutral (Sell). We downgrade Salamander, Det Norske and Coastal Energy to Neutral (Buy), and downgrade Premier to Sell (Neutral).

Christophor Jost The Goldman Sachs Group, Inc. does and seeks to do business with +44(20)7774-0014 [email protected] Goldman Sachs International companies covered in its research reports. As a result, investors should Ruth Brooker be aware that the firm may have a conflict of interest that could affect +44(20)7774-6842 [email protected] Goldman Sachs International the objectivity of this report. Investors should consider this report as Michele della Vigna, CFA only a single factor in making their investment decision. For Reg AC +44(20)7552-9383 [email protected] Goldman Sachs International certification, see the end of the text. Other important disclosures follow Henry Tarr the Reg AC certification, or go to www.gs.com/research/hedge.html. +44(20)7552-5981 [email protected] Goldman Sachs International Analysts employed by non-US affiliates are not registered/qualified as research analysts with FINRA in the U.S.

The Goldman Sachs Group, Inc. Global Investment Research May 30, 2011 Europe: Energy: Oil & Gas - E&P

Table of contents

Five themes to play in the E&P sector 3 Frontier exploration set to be a major theme in late 2011/early 2012. Industry appetite for frontier exploration provides additional benefits for explorers. 5 Rising gas prices, energy security and production ramp-ups to drive outperformance in unconventional gas 10 Unconventional liquids – de-risking of assets and potential M&A the key driver 15 Free exploration options remain a compelling investment case 18 M&A – Materiality and technical access a further potential driver of NOC activity 19 Thematic summary for E&P universe 21 Oil price sensitivity and the E&Ps; higher fiscal risk, but lower commercial thresholds; maintaining US$100/bl in our valuations 22 E&P screens; updating target prices and ratings 27 Medium-term exploration & balanced explorers still top performing exploration screens 34 Portfolio update for the E&Ps 38 North Sea performance weak on tax change; Falklands and Kurdistan remain weak 40 Maurel & Prom (MAUP.PA): Core value and ‘free’ exploration exposure; up to Buy 43 Noreco (NOR.OL): Core value combined with ‘free’ Norwegian exploration option; Buy 44 Premier Oil (PMO.L): Company’s strengths already in the price, down to Sell. 45 DNO international (DNO.OL): Underperformance & political de-risking of KRG, Neutral 46 Salamander Energy (SMDR.L): Downgrading to Neutral after recent outperformance 48 Det Norske (DETNOR.OL): Downgrading to Neutral following outperformance 50 Coastal Energy (CEO.L): Removing from Buy List, better upside elsewhere; Neutral 52 Encore Oil (EO.L): Underperformance and Cladhan reaction overdone; up to Neutral 54

Prices in this report are as of the close of May 25, 2011 unless stated otherwise.

Goldman Sachs Global Investment Research 2 May 30, 2011 Europe: Energy: Oil & Gas - E&P

Five themes to play in the E&P sector

Our E&P universe provides exposure to a diverse set of themes and geologies. We highlight key themes in the E&P space that we believe complement broader industry themes that we expect to drive share price outperformance.

High-impact, long-dated exploration: We identify stocks which we estimate have more than 50% of their value in exploration prospects with potentially greater than 300 mn bls of net resource. We see an increasing appetite among majors and NOCs to pursue high-impact frontier exploration, which we believe could encourage farm-ins, potentially improving terms. We believe that the attractive economics of these exploration plays could attract M&A in the event of discoveries.

Unconventional gas: With gas demand in Japan likely to increase in our view, and upwards cost pressure on LNG developments, we view companies with gas assets in markets with gas deficits positively. We particularly highlight unconventional gas assets, which we believe are risked too harshly by the market, given the progress that has been made in unconventional gas in the US and Australia.

Unconventional liquids: We believe that the technological progress being made in the established unconventional liquid/oil shale plays in the US could be levered to new basins and countries, improving drilling economics and flow rates. These assets are typically low enough on the cost curve to attract potential acquirers.

Balanced exploration: We take a sceptical view on the ability to select stocks on the basis of the existence of a geological “edge”. We therefore favour companies which combine a strong core value (including discoveries) that fully supports the share price and a high level of exploration potential (66% re-rating potential to our valuations in the next 12 months).

NOC-driven M&A: We believe that NOCs are the price insensitive buyers in the market and we therefore view NOC-driven M&A as particularly attractive. As we believe NOCs are keen to be partners in material developments, we identify companies with over 200mn bls of discovered resource in a single asset. We also believe that access to new, high-tech developments is an attraction for these purchasers. We highlight companies with stakes in assets which could fulfill this criteria.

Exhibit 1: Buy-rated stocks exposed to top E&P themes and potential upsides to our 12-month price targets

High impact exploration. Unconventional Gas Unconventional liquids Balanced Exploration NOC‐driven M&A Company Upside Company Upside Company Upside Company Upside Company Upside BPC 168% Aurelian 181% Panoro 154% Rockhopper 241% Cove Energy 108% Max Petroleum 159% Igas 117% Nighthawk Energy 125% Aurelian 181% Green Dragon 95% Falkland Oil & Gas 140% Green Dragon 95% Bowleven 107% Bankers Petroleum 89% Dominion 117% Great Eastern Energy 97% Aminex Plc 104% Borders and Southern 96% Noreco 96% Source: Goldman Sachs Research estimates, Bloomberg.

Goldman Sachs Global Investment Research 3 May 30, 2011 Europe: Energy: Oil & Gas - E&P

Exhibit 2: Thematic winners: descriptions and potential upside to our 12-month price targets

Potential uplift to valuation from Upside / Exploration re‐ complete de‐ downside to Company Theme Description & investment case Potential upside rating potential risking core Region BPC Exploration Early stage explorer in the Bahamas. Early indications from seismic indicate multi‐billion barrel potential 168% 1417% 1417% ‐74% Bahamas prospects. Previous wells in the area have encountered live oil shows and reservoir. Farm out and CPR the likely next catalysts in summer 2011 Dominion Exploration East African based explorer with licnces in Tanzania, Kenya, Uganda and DRC. 100% stake in Block 7 in 117% 1389% 1389% ‐82% East Africa deepwater Tanzania is the key near‐term driver. Seismic indicates multi‐tcf potential. Block is located close to blocks owned by Majors and in the same region as recent discoveries by Cove and BG Falkland Oil & Gas Exploration Explorer in South Falklands. High risk prospects, being drilled from 2D seismic with CSEM support with 140% 2504% 2504% ‐76% Falklands (South) prospect sizes well in excess of 1bn bls in many cases. Deepwater, harsh environment but discoveries of this size are likely to be commercial. Borders and Southern Exploration Targeting prospects in the South Falklands with the aid of 3D sesimic. Shares many of the same risks as 96% 1668% 1668% ‐74% Falklands (South) Falkland Oil & Gas. Drilling planned for early 2012. Max Petroleum Exploration Targeting shallow and deep prospects in Kazakhstan. Shallow wells are cheaper and smaller, whereas the 159% 259% 275% ‐26% Kazakkhstan liquids content of the deeper portion offers re‐rating potential in the event of success. Shallow drilling taking place throughout 2010 with sub‐salt wells to start drilling in mid‐2011 Aurelian Uncon. Gas / Primarily focused on Poland. Main asset is the Sierkierki tight gas asset ‐ first horizontal multi frac well 181% 345% 361% 17% Poland Balanced explorer programme is underway. First well showed promising, likely commercial geology but hit mechnical issues. Significant exploration acreage in Poland and Romania Green Dragon Uncon. Gas / NOC Chinese CBM play ‐ owns 6 PSCs containing c. 25tcf gas in place. Production from GSS PSC set to begin 95% 0% 177% 61% China M&A production ramp up which should de‐risk asset base. Continued drilling in other acreage and migration of 3P reserves into 2P should help drive performance. Igas Uncon. Gas Owns 100% of c. 300mn boe of CBM gas in England and Wales. At an early stage but production set to 117% 0% 106% 190% UK increase over the coming years. Great Eastern Energy Uncon. Gas / NOC 2 CBM licences in India containing c. 3tcf. Production from the Raniganj asset set to ramp up significantly in 97% 0% 52% 113% India M&A coming years. Pricing is advantaged (c. US$12/mcf+) due to lack of cheap substitutes in the region. Company owns infrastructure to take gas to market. Panoro Uncon. liquids Proucing gas asset (prices linked to Brazilian inflation) supports the share price. Company also has a 154% 53% 116% 134% Atlantic potentially signficant tight oil asset in Congo. Flow rates from early wells suggest commerciality. Additional exploration and discoveries in Brazil and West Africa. Nighthawk Energy Uncon. liquids Owns 50% stake in over 400,000 acres in the Jolly Ranch oil shale play in the US. Drilling is at an early stage at 125% 0% 386% 238% US present with vertical wells attempting to determine the baest completion and drilling methods. Wells being drilled at present are unlikely to be commercial but success could unlock significant value and create a compelling M&A story Rockhopper Balanced expl. Owns 100% of the Sea Lion discovery in North Falkland basin which more than supports the share price on a 241% 160% 196% 102% Falklands (North) risked basis and is commercial on our estimates. Further upside exists at the field from additional appraisal and seismic. The company holds c. 1,500 square kilometres of exploration acreage around the discovery which we believe will offer further, substantial upside. Bowleven Balanced expl. Exploration and appraisal in shallow water Cameroon licences. Recent Sapele discovery has substantially de‐ 107% 117% 145% 18% Cameroon risked surrounding acreage which should provide signfiicant exploration catalysts. Commercial thresholds for assets are low. Aminex Plc Balanced expl. Core value lies in the US and in Tanzania. Significant re‐rating potetnial through the Likonde permit in 104% 216% 225% 9% US / Tanzania Tanzania where Tullow are operators. The first well on the licence encountered encouraging signs of hydrocarbons and reservoir, although no commercial discovery was made. Success at this prospect would lift our valuation by over 150% as well as potentially de‐risking additional prospects

Noreco Balanced expl. Full cycle E&P operating primarily in the North Sea. Rerating potential in the next 12 months is signficiant 96% 180% 214% 17% Norway with 180% potential uplift to our valuations in the event of 100% success. Recent sale of Brage field also relieves funding pressure Cove Energy High‐tech Main driver is the 8.5% stake in Anadarko's deepwater offshore Rovuma block in Mozambique. Multi tcf 108% 189% 236% 14% East Africa discoveries justifiying a 2 train LNG development have already been made. Block covers c. 10,000 square kilometres offering significant scope for further exploration with oil a possibility in the south of the block. Also has a stake in the newly emerging Kenyan basin. Bankers Petroleum High‐tech Owns 100% of subtantial heavy oil field in Albania (238mnbls of 2P reserves and 1.2bn bls of 2C reserves). 89% 0% 99% 90% Albania Production from the 2P reserves is ongoing with the contingent requiring success of the thermal pilot programme. Source: Goldman Sachs Research estimates, Company data.

Goldman Sachs Global Investment Research 4 May 30, 2011 Europe: Energy: Oil & Gas - E&P

Frontier exploration set to be a major theme in late 2011/early 2012. Industry appetite for frontier exploration provides additional benefits for explorers

Potentially major new basins to be tested in the next 18 months; vast re-rating potential In the next 12-18 months, a number of companies in our coverage are expected to drill potentially transformational wells in new, frontier basins. Risks are clearly high, but volumes are significant, especially for the companies involved, and success could re-rate stocks and open up new basins. The key new basins we identify in our coverage universe are Namibia (Tower and Chariot), the South Falklands Basin (Borders and Southern and FOGL) and the Bahamas (BPC). We also note that Max Petroleum (Kazakhstan) and Dominion (Tanzania) are due to drill very large prospects in areas with previous successes in finding hydrocarbons.

Exhibit 3: Exploration re-rating potential by time period

3000%

2500% success

2000%

1500% exploration

100% 1000%

500% event

0% the

Oil Oil Oil Plc

JKX Oil

Gas Gas Igas

BPC

DNO ‐500% Soco Regal Prom & & Ithaca

Serica

Tullow Energy Energy Encore Energy Energy Energy Energy Norske

Panoro

Noreco Dragon

Enquest Aurelian Amerisur Oil Hardy Southern Oil Keystone Dominion Gulfsands

Bowleven

Resources Resources Resources Petroleum Petroleum Petroleum Petroleum petroleum Dragon Petroleum Petroleum Petroleum

Aminex

Det

potential Heritage Premier

Rockhopper Cove Salamander Norse and PA Development

Gulf Green

Coastal Sterling Eastern Maurel Max

Faroe Tower Chariot Desire Lundin Falkland rating Valiant Nighthawk ‐ Bankers Melrose Nautical Northern Energy Great Re

Borders

Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Rest of 2012 Global

Source: Goldman Sachs Research estimates.

Goldman Sachs Global Investment Research 5 May 30, 2011 Europe: Energy: Oil & Gas - E&P

High-impact explorers offer access to geographically diverse basins The companies we have highlighted as providing exposure to this frontier, high-impact exploration theme are testing different basins in a number of different regions of the world (Exhibit 5). While risks are high on these exploration wells, the re-rating potential is substantial – we estimate average upside of almost 1,500% in the event of success for our winners.

Where appropriate, we assume farm-outs to provide funding for these potentially expensive, high-risk wells. While we assume that farm-outs are typically dilutive from a valuation perspective, we believe that a likely increase in appetite from larger companies for access to high-impact exploration should increase competition, thereby potentially allowing farm-outs to take place on attractive terms, as well as providing additional credibility and additional clarity to the timing catalyst. Any such trend would be an upside risk to our valuation of these companies.

Exhibit 4: High-impact explorer metrics and re-rating potential Exhibit 5: High-impact explorers are testing a number of new basins Assuming GS estimates of farm-outs where appropriate High-impact explorers by location

Potential gross Existing resource to be Potential gross Potential upflit to Market cap discovered drilled in next 12 resource to be drilled Total potential valuation in event Upside to de‐ Company Location of main activity (US$mn) reserves months beyond 12 months net resource Average CoS of success risked valuation Falkland Oil & Gas Falklands 192 0 3200 0 1920 4% 2504% 6682% Borders and Southern Falklands 392 0 2040 0 2040 5% 1668% 3599% Winners BPC Bahamas 316 0 0 4305 1291 6% 1417% 3988% Dominion Tanzania 146 0 80 1641 745 13% 1389% 3292% Max Petroleum Kazakhstan 164 60 1262 0 1262 28% 259% 1324% Average 242 12 1316 1189 1452 11% 1447% 3777%

Chariot Oil & Gas Namibia 612 0 5081 667 2663 9% 1441% 2842% Max Sterling Energy Cameroon, Madagascar 159 0 0 1950 1387 17% 1229% 1062% Petroleum Others Tower Resources Namibia, Uganda 106 0 40 4366 675 9% 1997% 4177% Desire Petroleum Falklands 63 0 637 230 700 10% 611% 955% Hardy Oil India 241 0 1844 1147 299 40% 305% 517% Bahamas Average 236 0 1521 1672 1145 17% 1117% 1911% Petr o l eum Company

Hardy Oil & Gas

Sterling Energy

Dominion Petroleum Chariot Oil & Gas Tower Resources

Falkland Oil & Gas, Borders &Southern, Desire Petroleum

Source: Goldman Sachs Research estimates. Source: Company data.

Goldman Sachs Global Investment Research 6 May 30, 2011 Europe: Energy: Oil & Gas - E&P

High-impact exploration to become increasingly attractive to the industry Based on our Top 330 analysis, most of the discoveries that have been made over the last five years have been made in the deep offshore, with Brazil dominating, followed by GoM and Ghana. Onshore discoveries of substantial size have typically been limited to Kurdistan and Uganda. Notably, the more traditional areas of exploration (shallow GoM, Nigeria, Angola) that are typically the provinces of the majors, have been increasingly less relevant – it has been new frontiers that has driven this exploration. The result has been a relative lack of success with the drill bit for the larger companies, with majors having found less than other companies each year since 2003. With exploration budgets at the major’s looking set to increase, we believe this trend is set to reverse, and believe that competition for attractive, high-impact acreage is likely to increase, thereby improving potential farm-out terms.

Exhibit 6: A pick up in recent exploration success has been led by frontier Exhibit 7: Majors’ reliance on established basins has not been effective basins Top 330 oil reserves discovered by company type Oil reserves discovered each year in giant fields (Top 330 projects) – 2000 includes 15 bn bls from Kashagan

20000 25,000

18000

20,000 16000

14000 15,000 12000 bls 10000

10,000 mn

8000

5,000 6000

4000 0 2000 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

0 Traditional offshore Onshore traditional Onshore frontier Offshore frontier 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Major Other NOC

Source: Company data, Goldman Sachs Research estimates. Source: Company data, Goldman Sachs Research estimates.

Goldman Sachs Global Investment Research 7 May 30, 2011 Europe: Energy: Oil & Gas - E&P

Frontier exploration is well placed on the cost curve – another incentive for the majors We believe that aside from the potentially material volumes that reward frontier exploration, there are compelling economic reasons supporting the attractiveness of frontier exploration - namely the position that these fields hold on the cost curve. On our oil cost curve, we find that the majority of those projects (which break-even at low oil prices and generate significant returns) are fields that have been discovered in frontier territories (i.e. Brazil, Ghana, Uganda, Vietnam).

We believe this will become increasingly important in the future: in the last year, with the addition of new discoveries in attractive, frontier fiscal regimes, and the growing importance of unconventional liquids in the production mix, the breakeven cost required to achieve production from our Top 330 universe has dropped substantially. As a result, portfolios located at the top of the cost curve (heavy oil, deepwater Angola etc.) will become increasingly marginalized in our view. Consequently, we view exposure to low cost assets as a positive and would expect the attractiveness of such assets to increase for majors looking to grow production in the short to medium term.

We note that a risk to the value of frontier exploration is the tendency for advantageous fiscal regimes to eventually be renegotiated. As a result, we believe that it is possible that economics in frontier areas may worsen at some point in the future, but we believe that this is unlikely to happen until substantial levels of production have been achieved.

Exhibit 8: Frontier exploration sits low on the cost curve Exhibit 9: The cost curve has shifted down since last year, marginalising Frontier exploration shaded grey some majors’ portfolios Breakeven of non-producing oil assets: Top 330 vs. Top 280

100

Kashagan US$121/bl Frontier 100 Prirazlom US$110/bl Suzunskoye & TagulskoyeNorthern Lights Top 280 Top 330 Nasr US$109/bl Joslyn 90 Novoportovskoye US$107.50/bl SAS expansion Russkoye Yurubchenko‐Tahomskoye US$101.50/bl Carabobo 1 Fort Hills 90 Junin 5 MTPS Ugnu Ofon 2 Pearl GTL 80 80 Al GhubarHarweel Cascade & Chinook BS‐4 Lower ZakumDover Waha (North Gialo & NC‐98) Point Thomson liquids Membro Siri Firebag Greater ThornburyAmal SteamArea 70 Block 31 West Mariner Bressay 70 Kaskida Nsiko Goliat Papa Terra Hebron Thickwood Block 32 Phase 1 Pike Block 32 Phase 2 (US$/bl) Lucius Grouse Buckskin Block 31 SE Kearl LakeMacKay River Expansion LeismerVitoKirby Stones 60 Block 17 CLOV Block 31 NE Sunrise Jack / St Malo Perdido Rosebank TiberBosi 60 Clair RidgeBig Foot Carmon Creek (US$/bl) Appomattox Bakken Shale

breakeven Shenandoah Usan Freedom Narrows Lake 50 Mars B Nabiye Amal Bonga SW Aparo Itaipu Peregrino Lucapa Kodiak Delaware Basin HorizontalEgina Pazflor Wahoo 50 Block 15‐06 Knotty Head 40 Breakeven

Commercial Block 18 West El Merk Umm al‐Lulu Upper Zakum expansion Vesuvio Gumusut Carioca Kizomba Satellites Akri Bijeel Granite Wash Iara Surrounding Area Abare West Caesar TongaEagle Ford Lula & Cernambi 30 40 Jubilee Tempa Rossa California Shale Shaikan Guara MKB Iara Aruana Pipeline Waimea Uganda, Blocks 1, 2 & 3 20 TGTGuara South 30 Tupi Northeast Tweneboa FrancoFlorim Jidong Nanpu 10

20 ‐ 0 2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000 18,000 20,000 0 2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000 18,000 20,000 Cumulative peak oil production (kb/d) Cumulative Peak Production (kbls/d)

Source: Company data, Goldman Sachs Research estimates. Source: Company data, Goldman Sachs Research estimates.

Goldman Sachs Global Investment Research 8 May 30, 2011 Europe: Energy: Oil & Gas - E&P

Recent sell-off of non-producers creates an attractive opportunity to buy exploration We believe that the recent weakening in risk appetite has created an attractive entry point into those companies with limited production. Since the beginning of March, companies with more than 20% of their operational value in production have outperformed those companies with no production by almost 10%. Although the current backwardation of the forward oil curve would suggest a slight advantage for producing companies that can benefit from short-term oil price strength, we do not believe that this is sufficiently advantageous to warrant such outperformance. In our view, the fundamental operational metrics of exploration led-businesses have not changed for the worse, and we do not believe that a flight to producing assets is necessarily a theme that will create value in the medium term.

Exhibit 10: Performance of “producers” vs. “non-producers” since end-March 2011 23 firms count as “producers”, 27 firms as “non-producers”

110

105

100

Producers Non‐producers

Source: Datastream.

Goldman Sachs Global Investment Research 9 May 30, 2011 Europe: Energy: Oil & Gas - E&P

Rising gas prices, energy security and production ramp-ups to drive outperformance in unconventional gas

We are positive on gas price exposure in countries with substantial gas deficits, as we believe LNG prices (likely to remain the global determinant of marginal gas prices in importing markets) will remain strong or strengthen further in the medium term, providing increased tightness on global markets. As a result, we view companies exposed to gas importing markets, where LNG is likely to be the marginal fuel positively.

While we believe that the current situation in Japan is likely to put upward pressure on demand, we also see structural pressures on cost in the supply base providing support to global gas prices. We believe that the marginal costs of projects being brought on line will remain a key determinant of prices in the long term. Floating LNG projects remain the marginal cost area within LNG in our view, but there are a number of projects with imminent sanction dates that require US$13/mcf or more to reach an 11% cost of capital on our estimates, such as Gladstone LNG, Arrow LNG or Evans Shoal.

Exhibit 11: Marginal Top 330 gas fields require over US$12/mcf Breakeven of non-producing gas assets

14 LNG is the maringal asset type, providing support for 12 medium term global prices at c. US$13/mcf+

10 (US$/mcf)

8 breakeven

6 Horn River Shale Sierkierki Haynesville Shale

Commercial Fayetteville Shale UK CBMi Pinedale Tight Gas Unconventional gas breaks 4 even low down on the cost Shizhuang curve, partly as a result of its Raniganj proximity to local markets 2

‐ 0 2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000 18,000 20,000 Cumulative peak gas production (kboe/d) Source: Goldman Sachs Research estimates.

Goldman Sachs Global Investment Research 10 May 30, 2011 Europe: Energy: Oil & Gas - E&P

LNG cost inflation a further risk to the upside for gas prices We believe there is upside risk to our LNG cost forecast, which could provide further support to emerging market gas prices. We believe that LNG projects in Queensland, expected to come on stream between 2014 and 2016, are at risk from additional cost pressures, reflecting the level of activity the region is set to experience during the construction phase. Exhibit 12 shows our forecast for LNG capex in Queensland over the coming years, vs. the level of capex seen in the Canadian oil sands between 2003 and 2007. The oil sands projects suffered severe cost inflation during this period, as a result of raw material cost inflation, a lack of experienced construction and oil service workers and, in part, difficulties managing the unprecedented level of spend in the region. The labour markets in Queensland and Alberta are comparable in our view, as both are located in developed countries with heavily unionized labour forces, both are likely to rely in part on foreign labour to get through the construction phase and, like Alberta from the early 2000s, Queensland from 2011 is embarking on a transformational investment programme in its hydrocarbon industries.

We have run sensitivities showing the breakeven level of the Queensland gas projects in a hyperinflationary environment such as that seen in the oil sands (Exhibit 13). We believe this is an extreme scenario, as costs for the four oil sands projects we included in the Top 100 report in January 2005 increased 140% in capex per flowing barrel terms. We express breakeven in terms of the oil price implied as most long-term LNG contracts are linked to this.

Exhibit 12: We forecast a more aggressive ramp-up in Queensland LNG capex Exhibit 13: Should the same level of inflation be seen in Queensland, projects than we saw in the Canadian oil sands boom period would require up to US$170/boe oil contracts to break even Queensland CBM LNG capex vs. Canadian oil sands Commercial breakeven, base and extreme inflation scenario

18,000 200.00

16,000 180.00

14,000 160.00

140.00 12,000

120.00 mn)

10,000 (US$/boe)

(US$ 100.00 8,000 Capex breakeven

80.00 price 6,000 Oil 60.00 4,000 40.00 2,000 20.00 ‐ 01234‐

Year Arrow LNG Gladstone LNG APLNG Queensland Curtis LNG

LNG Capex, Queensland CBM projects, 2010 ‐ 2014 Canadian Oil Sands Capex, 2003 ‐ 2007 GS Base case Hyper‐inflation scenario

Source: Goldman Sachs Research estimates. Source: Goldman Sachs Research estimates.

Goldman Sachs Global Investment Research 11 May 30, 2011 Europe: Energy: Oil & Gas - E&P

Gas price leverage hard to come by in the E&P universe Obtaining exposure to this theme is not as easy as one may think in the E&P universe, with oil by far the most important commodity as a driver of the universe. Gas as a commodity represents only 17% of the operational value of the E&P companies under our coverage. Exposure is, however, significant for certain stocks. We would highlight Great Eastern (North East India), IGas (UK), Green Dragon (China), JKX (Ukraine), Dominion (LNG), Cove (LNG), Northern Petroleum (Netherlands), Aurealian (Poland) and Hardy (India) as stocks with significant gas exposure to markets where a net deficit exists. Although companies such as Panoro, Premier and Salamander have significant exposure to gas, we note that prices are fixed for significant portions of their volumes.

We have identified companies with over 40% of their value in markets with gas deficits, and where prices are not fixed by contracts or the government, and show the impact on our valuations of a 25% increase in gas prices. We note that a 25% increase to our gas price assumptions would not take prices above the US$13/mcf we see as the marginal cost for Queensland LNG projects apart from in the case of Great Eastern, where competing fuels are LPG / fuel oil more than LNG.

Exhibit 14: Exposure to gas in attractive locations is not a common theme Exhibit 15: Potential increase to valuation from a 25% increase in gas prices among European E&Ps in deficit markets Gas price exposure by value Revised gas prices take Poland to c.US$12/mcf, the UK to US$12.5/mcf, India (KG basin) to US$10/mcf, Chinese bucket price after downstream / midstream margins to US$13/mcf

40%

120% 35%

100% 30% prices

region gas

80% in by

25% gas

increase 60% 25%

a 20%

attribute

from

value 40%

% 15% valuation

to 20%

Upside 10%

0% …

Oil Oil Oil Plc

Oil

JKX Gas

Gas Igas BPC

DNO Soco Regal Prom & Serica & Ithaca

Tullow 5% Energy Energy Energy Energy Energy Energy Encore Energy Norske Panoro Dragon

Noreco

& Enquest

Aurelian Hardy Oil Keystone Amerisur Oil Southern

Dominion Gulfsands Bowleven

Resources Resources Resources Dragon Petroleum Petroleum Petroleum Petroleum Petroleum Petroleum

Petroleum petroleum

Aminex

Det

Heritage Premier Rockhopper Salamander Cove Norse PA and Global Green Gulf

Coastal Eastern Sterling Maurel Max

Faroe Chariot Tower Desire Lundin Nighthawk Valiant Falkland Melrose Bankers Nautical 0% Northern Great Borders Regal Great Eastern Igas Green Dragon Aurelian JKX Northern Petroleum Hardy Oil Western Europe gas Emerging market gas LNG Eastern Europe gas Energy

Source: Goldman Sachs Research estimates. Source: Goldman Sachs Research estimates.

Goldman Sachs Global Investment Research 12 May 30, 2011 Europe: Energy: Oil & Gas - E&P

Unconventional gas assets over-risked in our view; breakevens are low and production ramp ups / flow tests should begin to challenge bearish assumptions We are especially positive on unconventional gas assets, and believe that in many cases, excessive risking is applied to them by the market, reflecting a belief that they are marginal and that transferability of technology is limited to areas of successful application (primarily in the US and Australia) to new geologies.

On the commerciality issue, despite the relatively intensive nature of the drilling, the cost profile of these fields is hugely advantaged vs. LNG, reflecting the proximity to an LNG consuming market. We would highlight, Aurelian (Poland), Great Eastern Energy (India), Green Dragon (China) and Igas (UK) as being particularly well placed to benefit from the global tightness in the markets and marginal costs in LNG, without exposure to the likely cost inflation and capex spend that we see in the LNG space.

While we believe that technology is not directly transferrable from region to region, and while completion techniques will likely be different in different locations, we believe that the operational knowledge that has been built up from the development of large-scale unconventional gas in the US and Australia should help service providers and upstream operators start from a long way up the learning curve in developing similar assets in different regions. We believe that with production ramp up expected from Great Eastern Energy and Green Dragon in 2011, assumptions on risk related to CBM assets in these regions will be tested, while Aurelian’s testing of its Sierkierki asset should also highlight the potential from a de-risking of this asset.

Exhibit 16: Unconventional gas assets can be attractive if in close proximity Exhibit 17: In line execution for unconventional assets could drive to a net importing market outperformance Breakeven of global gas assets at commercial hurdle rates (unconventional E&P Impact of de-risking unconventional assets under development for unconventional assets highlighted) gas players

16.00 80%

14.00 70%

12.00 currently

60% assets 10.00 gas

(US$/mcf) 8.00 50% Breakeven unconventinal

6.00 40% of

development

4.00 risking ‐ under

de 30%

2.00

20% valuation ‐ 2 1 1 7 2 1 9

on ‐

Qir Gas Gas Gas

Gas

LNG LNG LNG LNG

M LNG LNG LNG LNG LNG LNG LNG LNG LNG

CBM

Satis CBM Shah Yokri Shaif Shale Shale Shale 405B Shale Shale Perla Skarv

Shwe

South Shoal

LNG LNG South

Liwan

Ahnet Miran

Tamar Train Cluster APLNG Jupiter

Gorgon Project Ichthys

Gehem OK Abu

Phase Culzean Kovykta Prelude UK

Gendalo Reggane Raniganj Tormore Tight domestic Tight

Poseidon Kinteroni

Sierkierki Platong Makarem Longgang Chayanda Brass Margarita Leviathan

Sakhalin Shtokman Curtis Shizhuang Maranhao Alaska Abadi

Yamal WLGP Arrow Area Gas Umm River Sanga

Block 10% Bovanenko

Gas

LNG Angola

Evans Sunrise Pluto Pluto

Browse

Sulige Development Impact

Severenergiya Myanmar Chuandongbei Forcados Delta Bongkot Mediterranean Gladstone MacKenzie Barzan

Greater Marcellus Laggan PNG Woodford Horn Wheatstone Haynesville Gas Sanga Fayetteville

Pinedale Montney Nigeria Nile

Offshore Greater Khazzan

West Queensland Kebabangan West

Vietnam 0% Rovuma Igas Great Eastern Energy Green Dragon Aurelian

Source: Goldman Sachs Research estimates. Source: Goldman Sachs Research estimates.

Goldman Sachs Global Investment Research 13 May 30, 2011 Europe: Energy: Oil & Gas - E&P

We expect performance of unconventional assets to improve, in line with US shale assets We believe that these unconventional assets will begin to improve drilling economics through time, in line with the trend that we have seen in more established basins in the US. We believe that this expected improvement is likely to drive further performance and help de-risk the unconventional assets in our coverage further.

Exhibit 18: The “legacy” and emerging shale plays in the US have seen material improvement in drilling economics over time Average initial production rates and days to drill (excludes completion and tie in time)

2,400 25 2,300 25 Average Average Averagedrilling days in the 2,200 24 2,300 drilling days drilling days in days the drilling Average 20 2,100 23 Fayetteville Shale Fayetteville 2,200 Barnett Shale 2,000 22 2,100 15 1,900 21 1,800 20 2,000 10 1,700 19 Shale, MMcf/d Shale, 1,900 1,600 18

5 MMcf/d Shale, 1,500 Average IP 17

Average IP rate in theBarnett Average IP 1,800 rate rate 1,400 16 1,700 0 1,300 15 Average IP rate intheFayetteville 2007 2008 2009 2010 2007 2008 2009 2010

Barnett/Fayetteville Shale annual averages based on data from CHK/DVN and CHK/SWN respectively

8,700 58 8,600 60 Averagedrilling days in the 8,200 Average 56 in the days drilling Average 7,600 drilling days 50 54 7,700 Shale Haynesville

6,600 Granite Wash 52 Average 40 7,200 drilling days 50 5,600 6,700 30 48 4,600 6,200 46 MMcf/d Wash, 20 3,600 5,700 Average IP

Shale, MMcf/d Shale, 44 Average IP 10 rate Average IP rate intheGranite 2,600 rate 5,200 42 4,700 40 1,600 0 Average IP rate in the Haynesville Haynesville the in IP rate Average 2007 2008 2009 2007 2008 2009 2010

Haynesville Shale and Granite Wash annual averages based on data from CHK Source: Chesapeake Energy, Devon Energy, Southwestern Energy.

Goldman Sachs Global Investment Research 14 May 30, 2011 Europe: Energy: Oil & Gas - E&P

Unconventional liquids – de-risking of assets and potential M&A the key driver

As with the levels of risking we see in unconventional gas assets, we believe that a similarly high risking is applied to unconventional liquids outside the more established basins in the US (such as the Bakken, Eagle Ford, Granite Wash etc.). Again, while we believe that the drilling techniques perfected in these basins are unlikely to be able to applied directly to different geologies, we believe that the experience in these basins serves to help the process of unlocking the potential of new basins. We also note that the trend is for well performance to improve through time, as more is learnt about the optimal way in which to drill and complete wells, and therefore we expect to see incremental improvements from these assets at an early stage of development. As shown in Exhibits 19 and 20, drilling efficiencies also tend to improve, with times to drill, and costs decreasing through time.

Exhibit 19: Flow rates in the the Bakken Shale have gradually increased Exhibit 20: North Dakota monthly implied spud-to-spud days and average rig through time count Initial production rates for wells in tier 1 of the Bakken Shale

3.50 60 180

55 160

140 3.00 50

120 Count Rig Average 45 100 2.50 40 80 (kbopd)

35 rates

Spud-to-spud Days Spud-to-spud IP 60 2.00 30 40

25 20 1.50

20 0 Jul-07 Jul-08 Jul-09 Jul-10 Oct-07 Oct-08 Oct-09 Oct-10 1.00 Jan-07 Apr-07 Jan-08 Apr-08 Jan-09 Apr-09 Jan-10 Apr-10 Jan-11 1 2 3 4 5 6 7 8 9 1011121314151617181920212223242526272829303132333435363738394041424344454647484950515253545556575859 Rig count Implied Spud-to-spud days IP rates from tier 1 Bakken shale assets Linear (IP rates from tier 1 Bakken shale assets)

Source: Company data. Source: North Dakota Oil & Gas Commission. Goldman Sachs Research estimates.

Goldman Sachs Global Investment Research 15 May 30, 2011 Europe: Energy: Oil & Gas - E&P

Flow rates and costs key to unlocking value We highlight Panoro (with its low permeability MKB asset in Congo) and Nighthawk (with its oil shale Jolly Ranch play in the US) as companies with exposure to unconventional liquids assets at an early stage of development. We believe that a de-risking of these assets could result in substantial upside from current levels. While we note that risk remains around these assets (especially for Nighthawk, which has only drilled one well to date that we would consider commercial), we believe that the heavy risk factors that we apply to these assets account for this uncertainty.

We believe there is significant further upside to be realized from both these assets from:

 A de-risking of the assets as drilling continues;

 The potential to improve flow rates;

 The potential for drilling efficiencies to improve and, subsequently, for costs to come down.

In the event of de-risking these plays, we see significant re-rating potential for both Panoro and Nighthawk (Exhibit 22). We see the key to de-risking these unconventional assets and determining value as the flow rates that can be achieved by the wells.

Exhibit 21: Assumed flow rates per well Exhibit 22: Increased flow rates, more efficient drilling and de-risking of unconventional liquid assets have the potential to re-rate Panoro and Nighthawk Potential uplift to valuation as percentage of market cap

120% 1100% 0.60 0.08

0.07 100% 900% 0.50

0.06

(Nighthawk) 80% 700%

cap

0.40 0.05 market

of 60% 500% %

as 0.30 0.04 kbopd kbopd added

40% 300%

0.03 value

0.20

0.02 Potential 20% 100% 0.10 0.01

0% ‐100% 0.00 0.00 De‐risking 50% higher IP rate (no risking changes) Drop in costs by 50% 12345678910 100% de‐risking IP rates 50% higher Costs 50% down

Assumed MKB flow rates (Panoro ‐ LHS) Assumed Jolly ranch vertical flow rates (Nighthawk ‐ RHS) Panoro (LHS) Nighthawk (RHS)

Source: Company data, Goldman Sachs Research estimates. Source: Goldman Sachs Research estimates.

Goldman Sachs Global Investment Research 16 May 30, 2011 Europe: Energy: Oil & Gas - E&P

Unconventional liquids set for M&A in the future We note that the majors are conspicuously absent from unconventional liquids at present. Despite the presence of some majors in the Eagle Ford shale (i.e. Shell, Statoil) the only two majors with significant exposure to the unconventional liquids plays in the US are Exxon and Conoco.

We note that Panoro’s and Nighthawk’s operations are at an early stage, and that further drilling and de-risking is required before these are likely to screen as potential M&A targets. Nonetheless, we believe the early results at Panoro’s MKB fields are very encouraging. Nighthawk’s Jolly Ranch asset has greater risk in our view, but as Exhibit 23 shows, in the event of the company proving the geology of the play, the potential upside based on US deal metrics from similar assets could be substantial.

Exhibit 23: Majors are generally under-represented in unconventional liquids Exhibit 24: The size of the prize for unlocking new plays is substantial NPV of unconventional liquids resource as % of EV (as at April 6, 2011) Oil shale transaction implications for Nighthawk

Buyer Seller Date Asset 000 acres Price (US$mn) 000' US$ / acre Implied Nighthawk value Implied upside 70% High Bid Wyoming lease sale 4/9/10 Niobrara 0.6 3.8 5.9 1195 3248% Hess Marathon 28/7/10 Bakken 85.0 445.0 5.2 1060 2870% XTO Headington 15/7/08 Bakken 352.0 1800.0 5.1 1035 2801% 60% High Bid Wyoming lease sale 9/7/10 Niobrara 0.3 1.0 3.2 647 1712% EV High Bid Wyoming lease sale 12/5/10 Niobrara 0.6 1.9 3.0 606 1598%

2011 Northern Oil Windsor bakken 1/6/09 Bakken 3.0 7.3 2.4 491 1276%

El Paso UoT lease sale 23/9/10 Wolfcamp 123.1 180.0 1.5 294 723% % 50% Rex Energy Private company 30/6/10 Niobrara 18.7 18.7 1.0 200 461% a

as Hilcorp Energy Lucas Energy 5/7/10 Eagle Ford 9.525 8.9 0.9 187 423%

Average 2.9 577.5 1518%

portfolio 40%

liquids

30% unconventional 20% of

2011

NPV 10%

Source: Goldman Sachs Research estimates, Bloomberg. Source: Company data, Goldman Sachs Research estimates, Wyoming Land Auction data.

Goldman Sachs Global Investment Research 17 May 30, 2011 Europe: Energy: Oil & Gas - E&P

Free exploration options remain a compelling investment case

Since we expanded our universe of stocks on November 5, 2010, a key theme of ours has been identifying those companies in which the value of their cash, production and discoveries supports the share price, but which also contain material exploration upside – essentially providing re-rating potential through exploration that does not need to be paid for in the share price. Since November, these companies have outperformed our coverage by c.10%.

We believe that these companies offer a compelling mix of value and exploration upside, and therefore highlight those companies in our universe which we estimate have re-rating potential of over 66% in the next six months, combined with a share price that is fully supported by cash, production, developments and risked discoveries. Of particular interest, in our view, are Bowleven and Rockhopper, due to the de-risked nature of their exploration.

Exhibit 25: Balanced explorers have performed well since November 2010 Exhibit 26: Exploration re-rating potential with core value support is an Balanced explorers vs. E&P coverage attractive combination 6-month re-rating potential vs. upside / downside to core value (+discoveries)

140

Free, material 135 Short term re‐ Aminex Plc rating potential short term re‐ rating potential 220%comes at a cost 130 Noreco

125

170% 120 months

12 Encore Det Norske 115 120% Bowleven Faroe Petroleum Rockhopper within Salamander 110 upside

105 70%

100 Exploration

Less20% material re‐ 95 rating potential partially priced into stock 90 ‐20% 30% 80% 130% 180% Cheap core value 08/11/2010 08/12/2010 08/01/2011 08/02/2011 08/03/2011 08/04/2011 08/05/2011 ‐30%

Core value / price

Balanced explorers E&P universe Aurelian has 314% re-rating potential and 17% upside to core valuation, Amerisur has 297% and 3%.

Source: IHS Herold. Source: Goldman Sachs Research.

Goldman Sachs Global Investment Research 18 May 30, 2011 Europe: Energy: Oil & Gas - E&P

M&A – Materiality and technical access a further potential driver of NOC activity

We believe that M&A remains a key theme in the industry. However, with NOC’s the most price insensitive buyers, in our view, we believe that isolating M&A likely to be driven by NOCs is the most attractive way to play this theme.

We believe that larger assets are likely to be attractive to NOCs and therefore consider companies with discovered resource of greater than 200 mn bls in a single block / asset to screen attractively in this regard (Exhibit 28).

In recent years, we have also seen an increasing bias towards NOC purchases of complex assets. We believe that this is in large part inspired by a desire to develop technical skills, through exposure to highly skilled operators, pushing back the technological boundaries of the industry. We would expect this trend to continue, with a number of “gaps” remaining in the portfolios of NOCs.

We have assessed which companies could provide a possible entry point into such assets. In our view, there are a number in our coverage that provide exposure to what we regard as technical asset types. Companies with particularly high exposure include a number of early stage CBM operators, such as and Green Dragon (China). Cove Energy represents an interesting potential entry into a deepwater LNG scheme, while Bankers offers a high level of exposure to heavy oil developments. Tullow also offers exposure to deepwater expertise.

Exhibit 27: NOC transactions have been highly focused on technical assets Exhibit 28: Materiality a key concern for NOCs NOC deals in high-tech win zones since 2006 Percentage of value lying in assets of 200 mn bls or more. Assets exposed to technical frontiers are highlighted.

Unconventional gas 120% Heavy Oil DW Brazil DW West Africa / liquids LNG Eagle Ford, 2010 OML 130 (Akpo, Wyoming, CNOOC Egina), 2006 Colorado, 2011 Curtis LNG, 2010 100% Gazprom Sakhalin II, 2006 KNOC CRTHE, 2009 Eagle Ford, 2011 ONGC BC‐10, 2006 Encana Cutbank 80% bls Ridge gas assets, PetroChina MacKay River & Dover, 2009 2011 Arrow Energy, 2010 200mn

over Petronas Mauritania, 2007 Gladstone LNG, 2008 60%

PTTEP Kai Kos Dehseh, 2010 assets

in Marcellus, 2010

Reliance Eagle Ford, 2010 value

Rosneft % 40% Sinochem Peregrino, 2010 Northern Lights, 2009 Tanganyika, 2008 Block 15, 17, 18/06, Sinopec Syncrude, 2010 Repsol Brasil, 2010 2006 20%

0% Bankers Dragon Oil Green Dragon Gulf Keystone Cove Energy Tullow Heritage Oil petroleum

Source: Goldman Sachs Research. Source: Goldman Sachs Research estimates.

Goldman Sachs Global Investment Research 19 May 30, 2011 Europe: Energy: Oil & Gas - E&P

NOC interest could be a material value driver We are especially attracted towards M&A that could potentially involve NOCs as we note that recent deals involving NOCs as the acquirers have been done at significantly higher prices than those that have attracted IOC attention. We believe that this is a function of the IOCs typically looking to buy assets at commercial costs of capital (to generate value), while the NOCs’ deal rationales are often more strategic. Exhibit 29 shows the discount rates implied by recent deals, with NOC’s paying discount rates of 8% or lower in order to secure assets.

Exhibit 30 shows the re-rating potential from those companies that we believe could attract NOC attention either as a result of the large materiality, or as a result of the technical nature of the asset if we use an 8% discount rate to value those assets we view as attractive.

Exhibit 29: NOC acquisitions have been more price insensitive driving Exhibit 30: Deals done at NOC costs of capital could see significant upside to potentially greater returns current valuations Implied discount rates of recent deals Highlighted companies screen attractively for both materiality and technical access

90% 18.00% NOC acquirer but with 80% 16.00% controlling stake

IOC acquirers 14.00% NOC acquirers 70%

12.00% Average WACC for sector per GS 60% valuations 10.00% valuations

50% NOC

8.00%

40%

6.00% valaution

4.00% Uplift 30%

2.00% 20%

Discount rate implied by deal at long run oil price oil run long at by deal implied rate Discount 0.00%

Peregrino Athabasca Oil Dana * Block 32 - Jack/St Malo Mariner** Uganda, Dragon 10% Sands Marathon blocks 1 & 3 Corporation stake (ENI & assets Heritage) * Excluding exploration value 0% ** Assuming 80% development risking Cove Energy Dragon Oil Gulf Keystone Green Dragon Bankers petroleum Heritage Oil Tullow

Source: IHS Herold. Source: Goldman Sachs Research.

Goldman Sachs Global Investment Research 20 May 30, 2011 Europe: Energy: Oil & Gas - E&P

Thematic summary for E&P universe

In this report we have highlighted as thematic winners only those stocks on which we have a Buy rating. In Exhibit 31 we show where all our coverage sits in relation to our five key themes, regardless of rating.

Exhibit 31: Thematic exposure of entire E&P coverage universe

High impact exploration. Unconventional Gas Unconventional liquids Balanced Exploration NOC‐driven M&A Others Company Upside Company Upside Company Upside Company Upside Company Upside Company Upside BPC 168% Aurelian 181% Panoro 154% Rockhopper 241% Cove Energy 108% Global Energy Development 189% Max Petroleum 159% Igas 117% Nighthawk Energy 125% Aurelian 181% Green Dragon 95% Northern Petroleum 164% Falkland Oil & Gas 140% Green Dragon 95% Bowleven 107% Bankers Petroleum 89% PA Resources 132% Thematic, buy rated Dominion 117% Great Eastern Energy 97% Aminex Plc 104% Aminex Plc 104% winners Borders and Southern 96% Noreco 96% Nautical Petroleum 112% Maurel & Prom 89%

Sterling Energy 82% JKX 40% Faroe Petroleum 82% Gulf Keystone 85% Gulfsands 78% Thematic exposure Chariot Oil & Gas 81% Regal 32% Det Norske 81% Heritage Oil 55% Norse Energy 79% already in price Tower Resources 72% Hardy Oil 22% Salamander 79% Dragon Oil 35% Serica 75% (netural & sell rated Desire Petroleum 48% Amerisur 60% Tullow 32% Coastal Energy 82% stocks) Hardy Oil 22% Encore 38% Valiant Petroleum 64% Ithaca 52% DNO 64% Soco 34% Melrose Resources 28% Enquest 28% Premier Oil 22% Lundin Petroleum 14% Source: Goldman Sachs Research estimates.

Goldman Sachs Global Investment Research 21 May 30, 2011 Europe: Energy: Oil & Gas - E&P

Oil price sensitivity and the E&Ps; higher fiscal risk, but lower commercial thresholds; maintaining US$100/bl in our valuations

We currently value our E&P universe using a long-run oil price of US$100/bl. At present, with the 3-year forward Brent price trading at c.US$100/bl, we see no need to adjust our valuations.

We note, however, that our assumption is below the current Brent spot price, and substantially below the level at which the oil price peaked in late April/early May (at c.US$125/bl). As a result, we have run sensitivities at US$125/bl (with additional cost inflation included) to show the potential impact on valuation (Exhibit 31). The companies most exposed to the commodity are those with either high operational leverage (i.e. Regal, Dominion), high exposure to oil-based reserves in licence regimes (Lundin, Noreco), or those with high levels of financial leverage (i.e. Noreco, PA Resources).

However, the equity market appears reluctant to price in high spot prices into valuations, as shown by the divergence of the spot price and equity performance in mid-2008, and in the early part of 2011 (Exhibit 33). We believe this is the result of (1) a greater focus on the long-term crude price (where most of the value in these stocks lies), (2) a reluctance to price in potentially short-term spikes in the oil price, and (3) a recognition that at higher oil prices the operating environment becomes more challenging as a result of inflation, higher fiscal risk and risks of bottlenecks in service capacity. We believe that to price in higher oil prices in equity valuations, the market will need to see sustained high oil prices across the curve.

Exhibit 32: Oil price sensitivity to US$125/bl Exhibit 33: E&P equities have typically failed to price in spot price highs Impact of increase in oil price from US$100/bl to US$125/bl on valuation Brent spot price vs. E&P sector

60% 160

50% 140

120 US$125/bl 40% to

100 US$100/bl

30% from

80 20% valuation

60 Uplift 10%

Oil Oil Oil Plc

Oil

JKX

Gas

Gas Igas BPC

DNO Soco Regal

Prom 20 & & Serica Ithaca

Tullow

Energy Energy Energy Energy Energy Energy Encore Norske Panoro Dragon

Noreco

& Enquest

Aurelian Hardy Oil Amerisur Keystone Southern Oil Dominion Bowleven Gulfsands

Resources Resources Resources Petroleum Dragon Petroleum Petroleum Petroleum Petroleum Petroleum petroleum

Petroleum

Aminex

Det

Heritage Premier Rockhopper Salamander Cove Norse PA Development and Gulf Green

Coastal Eastern Sterling Maurel Max

Faroe Chariot Tower Desire Lundin Valiant Nighthawk Falkland 0 Melrose Bankers Nautical Northern Great Energy

Borders

Global

Brent spot price E&P sector performance (indexed to Brent spot price)

Source: Goldman Sachs Research estimates. Source: Datastream.

Goldman Sachs Global Investment Research 22 May 30, 2011 Europe: Energy: Oil & Gas - E&P

Oil prices and commerciality - fiscal risk increases under higher oil prices Higher oil prices do not necessarily result in higher valuations as they can also cause countries to adjust their fiscal regimes to effectively tax away outsized returns gained through access to a country’s hydrocarbons. We believe that three factors are worthy of consideration in assessing whether a country is at risk of adjusting its fiscal terms:  High returns for producers in the country. Countries need to ensure that companies continue activities and therefore low returns are likely to reduce the likelihood of fiscal changes;  A low existing tax rate. If a government’s fiscal take is already high, a relatively large proportion of profits will go to the government in any case and the possible delta by which to move the tax take is more limited  Assets are already producing. We believe there is less incentive to avoid changing the fiscal terms as oil companies in the country will have already sunk substantial costs and will be less able to simply halt development. Most frontier areas remain at lower tax rates until production begins (with Israel’s recent tax rise being a notable exception).

We show in Exhibits 33 and 34 the returns vs. tax take at US$85/bl (the 5-year forward price through most of 2009/2010) and at US$110/bl. We believe in a sustained high oil price environment, tax rates in many countries to the right of the line in Exhibit 35 will be at risk of change, although those countries with an immature or emerging industry may be reluctant to make changes to fiscal regimes until production has been established.

Exhibit 34: High P/Is and low tax rates put outsized returns at risk Exhibit 35: Higher oil price may lead to further tax increases Country tax rates vs. PIs for pre-sanction and under development projects Country tax rates vs. PI at US$110/bl

100% 100% Low returns and / or high Low returns and / or high existing tax rates limit chance existing tax rates limit UAE chance of fiscal of fiscal renegotiation Iraq UAE renegotiation 90% Iraq 90% Peru Peru Algeria Algeria 80% Malaysia Uganda: 80% Libya Israel Libya Israel PI 3.52x, Malaysia Kazakhstan 73% Kazakhstan Uganda Norway 70% Oman 70% Myanmar Myanmar Oman Angola Venezuela Qatar Qatar Norway Russia Russia Venezuela UK Angola UK Nigeria Vietnam 60% Vietnam 60% Egypt Thailand Egypt Nigeria Thailand Indonesia Indonesia Canada Congo Canada Bolivia Congo 50% 50% Bolivia Overall tax take Ghana UK - Top 280 China Australia China Italy Australia Brazil Italy Brazil 40% Ghana 40%

US US

Mozambique Israel - Top 280 US$110/bl @ take tax Overall High returns and relatively low 30% High returns and relatively 30% Papua New Guinea Papua New Guinea Mozambique existing tax rates increase low existing tax rates risk of fiscal renegotiation increase risk of fiscal renegotiation 20% 20% 1.00x 1.50x 2.00x 2.50x 3.00x 3.50x 1.00x 1.50x 2.00x 2.50x 3.00x 3.50x

PI ratio PI ratio @ US$110/bl

Source: Goldman Sachs Research estimates. Source: Goldman Sachs Research estimates.

Goldman Sachs Global Investment Research 23 May 30, 2011 Europe: Energy: Oil & Gas - E&P

Commercial thresholds drop at higher oil prices which should also drive de-risking The other major impact of an increased oil price environment is that it allows commercialization of previously unattractive assets. Although valuations of marginal assets increase at higher oil prices, we believe that there is rarely an additional increase in the valuations equity markets ascribe to more marginal assets as a result of reductions in the commerciality risk at higher oil prices.

We highlight the North Falklands Basin as an asset where the market regards commerciality with a degree of scepticism as a result of its relative isolation. Although we believe that these concerns are substantially overdone (with the use of FPSOs limiting the need for major infrastructure in the area), we note that in the current oil price environment, concerns should be receding; at the current oil price, even costs of over US$30/bl are comfortably commercial using a 15% hurdle rate. We do not believe that the market has fully accounted for this impact in more marginal basins in our coverage, and we believe that projects perceived as marginal have seen little de-risking in this higher oil price environment.

Exhibit 36: Higher oil prices should drive de-risking of more marginal assets IRR and NPV/bl of North Falklands asset at differing cost and oil price assumptions (assuming US$16/bl opex costs)

Oil price Oil price NPV12/bl US$70 US$85 US$100 US$115 US$130 IRR US$70 US$85 US$100 US$115 US$130 $10 7.67 11.33 14.99 18.64 22.30 $10 50% 65% 79% 91% 102% $15 4.88 8.54 12.2 15.85 19.51 $15 29% 41% 52% 62% 71% F&D per F&D per $20 2.02 5.68 9.33 12.99 16.65 $20 18% 27% 36% 45% 53% barrel barrel $25 ‐0.84 2.81 6.47 10.13 13.78 $25 10% 18% 26% 33% 40% $30 ‐3.63 0.03 3.68 7.34 11.00 $30 5% 12% 19% 25% 31%

Uncommercial at 12% hurdle rate Uncommercial at 12% hurdle rate Uncommercial at 15% hurdle rate Uncommercial at 15% hurdle rate Source: Goldman Sachs Research estimates.

Goldman Sachs Global Investment Research 24 May 30, 2011 Europe: Energy: Oil & Gas - E&P

Adjustment to long-term exploration discount We previously applied a 50% discount to medium-term drilling catalysts, reflecting uncertainties with long-dated catalysts (timing of drilling, resource updates following additional seismic, lack of CPRs, etc.). Following further analysis of the performance of stocks into drilling campaigns, we note that performance into a major catalyst is far from uniform, with many stocks outperforming up to two years before the campaign. Catalysts, such as the booking of rigs, CPRs etc., however continue to drive shares. As a result, we remove the blanket discount we had previously used and replace it with asset-specific discounts to account for specific uncertainties in the build up to drilling. We also apply these discounts to high-impact exploration prospects being drilled in the next 12 months, where these prospects represent greater than 50% of a company’s valuation. We now adjust our chances of success for the following:

 Lack of 3D seismic over prospects, 15% discount to chance of success (CoS);

 Lack of CPR, 20% discount to CoS;

 Lack of rig booked, 10% discount to CoS.

Exhibit 37: Chariot Oil has outperformed steadily into drilling in Namibia… Exhibit 38: …while much of Desire’s outperformance came over 12 months Chariot Oil’s share price performance vs. E&P universe before Desire’s share price performance vs. E&P universe

900% 250%

Rig booked 800% Nimrod Liz well dry structure 200% identified 700%

150% 600% CPR (small decrease in prospective resource) 500% 100% Increase in Farm in 400% prospective resources partner announced 50% 300% Seismic acquired (no sizes) 200% 0%

100%

‐50% 0%

‐100% ‐100%

Source: Datastream. Source: Datastream.

Goldman Sachs Global Investment Research 25 May 30, 2011 Europe: Energy: Oil & Gas - E&P

Impact on long-dated exploration Our adjustments have the following impact on our chances of success for long-dated exploration drilling:

Exhibit 39: Material medium-term exploration catalysts

No processed Company Prospect Basic CoS No CPR No rig Final CoS Processed 3D seismic 3D? CPR? Rig? Amerisur Paraguay 5% 15% 20% 10% 3% N N N Borders and Southern Falklands 5% 0% 0% 0% 5% Y Y Y BPC Bahamas 10% 15% 20% 10% 6% N N N Chariot Oil & Gas Namibia 10% 0% 0% 10% 9% Y Y N Cove Energy Gas 40% 0% 20% 0% 32% Y N Y Cove Energy Oil 15% 0% 20% 0% 12% Y N Y Dominion Alpha ‐ gas 15% 15% 0% 10% 14% N Y N Dominion Alpha ‐ oil 3% 15% 0% 10% 2% N Y N Dominion Beta ‐ gas 15% 15% 20% 10% 9% N N N Dominion Beta ‐ oil 3% 15% 20% 10% 2% N N N Falkland Oil & Gas Falklands 5% 10% 20% 0% 4% N N Y Hardy Oil D9 10% 0% 0% 0% 10% Y Y y Hardy Oil D3 60% 0% 0% 0% 60% Y Y Y Max Kasakhstan ‐ weighted average 28% 0% 0% 0% 28% Y Y Y Northern petroleum Sicily 15% 0% 20% 10% 11% Y N N PA Resources Greenland 10% 15% 20% 10% 6% N N N Panoro Santos basin 25% 0% 20% 10% 18% Y N N Rockhopper Falklands 20% 0% 0% 0% 20% Y Y y Sterling Cameroon 25% 15% 20% 10% 15% N N N Sterling Madagascar 10% 15% 0% 10% 8% N Y N Tower Namibia 10% 15% 0% 10% 8% N Y N

*CPR: Competent person report, CoS: Chance of Success Source: Goldman Sachs Research estimates, Company data

Goldman Sachs Global Investment Research 26 May 30, 2011 Europe: Energy: Oil & Gas - E&P

E&P screens; updating target prices and ratings

We make several adjustments to the valuations of the companies in our coverage, reflecting recent newsflow. As in our last sub-sector publication on January 31, 2011, we use a US$100/bl oil price to value the E&Ps, broadly in line with the forward curve and our 2011 oil price estimates. Our target prices imply average potential upside for the sector of 88%, (26% excluding exploration value) and hence we retain our Attractive coverage view. We also update for movements in fx.

Exhibit 40: Target prices and ratings changes (sorted by upside potential to 12-month target price) % change from previous, does not include the impact of the roll-forward.

Updated Updated New Previous target price target price potential % change Upside / Market cap Current target (not rolled (with roll‐ upside to from downside to 12‐month re‐ # Company (USDmn) price price forward) forward) target price previous core value rating potential Old rating New rating Currency 1 Rockhopper 901 2.15 6.84 6.57 7.32 241% ‐4% 102% 73% B* B* GBp 2 Global Energy Development 37 0.64 1.94 1.65 1.85 189% ‐15% 283% 0% B B GBp 3 Aurelian 411 0.52 1.52 1.34 1.46 181% ‐12% 17% 314% B* B* GBp 4 BPC 316 0.16 0.31 0.38 0.42 168% 19% ‐74% 0% B B GBp 5 Northern Petroleum 173 1.16 2.58 2.84 3.05 164% 10% 120% 18% B B GBp 6 Max Petroleum 164 0.13 0.32 0.29 0.34 159% ‐8% ‐26% 259% B B GBp 7 Panoro 261 6.18 15.40 14.48 15.72 154% ‐6% 134% 12% B* B* NOK 8 Falkland Oil & Gas 192 0.62 2.08 1.33 1.48 140% ‐36% ‐76% 2504% B B GBp 9 PA Resources 418 4.14 9.92 8.35 9.61 132% ‐16% 46% 34% B B SEK 10 Nighthawk Energy 36 0.06 0.20 0.13 0.14 125% ‐38% 238% 0% B B GBp 11 Dominion 146 0.06 0.11 0.11 0.12 117% 5% ‐82% 39% B B GBp 12 Igas 187 0.73 1.65 1.45 1.57 117% ‐12% 190% 0% B B GBp 13 Nautical Petroleum 470 3.29 7.03 6.44 6.97 112% ‐8% 76% 65% B B GBp 14 Cove Energy 691 0.87 1.55 1.62 1.80 108% 5% 14% 60% B B GBp 15 Bow leven 1,074 3.06 5.78 5.69 6.35 107% ‐2% 18% 78% B* B* GBp 16 Aminex Plc 100 0.08 0.17 0.15 0.16 104% ‐16% 9% 208% B B GBp 17 Great Eastern Energy 771 4.20 6.49 7.37 8.28 97% 14% 113% 0% B B GBp 18 Borders and Southern 392 0.56 1.21 1.00 1.10 96% ‐17% ‐74% 1668% B B GBp 19 Noreco 523 11.90 28.50 22.01 23.37 96% ‐23% 17% 180% N B NOK 20 Green Dragon 1,718 12.95 23.80 22.37 25.20 95% ‐6% 61% 0% B B USD 21 Maurel & Prom 2,604 15.22 18.05 25.89 28.82 89% 43% 64% 37% N B EUR 22 Bankers petroleum 1,950 4.90 8.80 8.36 9.26 89% ‐5% 90% 0% B B GBp 23 Gulf Keystone 1,778 1.45 2.34 2.34 2.68 85% 0% ‐12% 44% N N GBp 24 Sterling Energy 159 0.45 0.89 0.74 0.81 82% ‐17% ‐58% 17% N N GBp 25 Coastal Energy 758 4.25 7.75 7.06 7.74 82% ‐9% 25% 54% B N GBp

Source: Bloomberg, Goldman Sachs Research estimates. *Conviction List member.

Goldman Sachs Global Investment Research 27 May 30, 2011 Europe: Energy: Oil & Gas - E&P

Exhibit 40 cont'd: Target price and ratings changes (sorted by upside potential to 12-month target price)

Updated Updated New Previous target price target price potential % change Upside / Market cap Current target (not rolled (with roll‐ upside to from downside to 12‐month re‐ # Company (USDmn) price price forward) forward) target price previous core value rating potential Old rating New rating Currency 26 Faroe Petroleum 479 1.39 2.59 2.40 2.52 82% ‐7% 52% 78% N N GBp 27 Det Norske 612 30.60 54.70 52.40 55.46 81% ‐4% 36% 95% B N NOK 28 Chariot Oil & Gas 612 2.08 3.84 3.37 3.76 81% ‐12% ‐69% 1331% N N GBp 29 Norse Energy 86 0.64 2.06 1.08 1.15 79% ‐48% 92% 0% N N NOK 30 Salamander 702 2.80 4.65 4.60 5.00 79% ‐1% 15% 66% B N GBp 31 Gulfsands 513 2.59 4.78 4.22 4.63 78% ‐12% 49% 60% N N GBp 32 Serica 78 0.27 0.61 0.43 0.48 75% ‐30% ‐4% 127% N N GBp 33 Tower Resources 106 0.06 0.07 0.09 0.10 72% 21% ‐95% 53% N N GBp 34 Valiant Petroleum 343 5.32 10.06 8.03 8.75 64% ‐20% 51% 47% N N GBp 35 DNO 1,201 7.02 9.70 10.50 11.49 64% 8% 10% 60% S N NOK 36 Amerisur 357 0.24 0.28 0.36 0.38 60% 27% 3% 297% N N GBp 37 Heritage Oil 1,115 2.38 4.20 3.54 3.69 55% ‐16% 5% 55% N N GBp 38 Ithaca 545 1.31 1.99 1.87 1.99 52% ‐6% 58% 0% N N GBp 39 Desire Petroleum 63 0.11 0.53 0.15 0.17 48% ‐71% ‐52% 84% N N GBp 40 JKX 808 2.89 4.02 3.70 4.05 40% ‐8% ‐11% 46% N N GBp 41 Encore 328 0.70 1.33 0.88 0.96 38% ‐34% 6% 86% S N GBp 42 Dragon Oil 4,416 5.26 6.96 6.77 7.08 35% ‐3% 27% 1% N N GBp 43 Soco 2,120 3.83 5.08 4.80 5.11 34% ‐6% 7% 6% N N GBp 44 Regal 229 0.44 0.42 0.52 0.58 32% 24% ‐6% 0% N N GBp 45 Tullow 18,684 12.92 17.03 16.22 17.03 32% ‐5% ‐24% 40% N N GBp 46 Melrose Resources 457 2.45 3.19 2.81 3.14 28% ‐12% ‐18% 147% N N GBp 47 Enquest 1,718 1.32 1.77 1.52 1.69 28% ‐14% 27% 0% N N GBp 48 Hardy Oil 241 2.06 1.73 2.32 2.52 22% 34% ‐52% 158% S S GBp 49 Premier Oil 3,578 4.72 5.97 5.54 5.74 22% ‐7% 8% 28% N S GBp 50 Lundin Petroleum 4,315 84.15 80.00 90.72 96.00 14% 13% ‐12% 57% S S SEK

Source: Bloomberg, Goldman Sachs Research estimates. *Conviction List member.

Material changes to 12-month target prices and rationale We discuss the rationale for our target price changes in excess of 10% below: We make revisions to our assumed farm-out terms following discussions with management teams, and now typically assume a 33% stake retention in return for a 1-2 well carry. We also roll forward our valuation, making 2011 our new front year.

 Aurelian – increasing of risking at Sierkierki from 70% to 65% chance of success following mechanical issues with the Trzek 2 well.

 Amerisur – removal of long-dated drilling discount

 Aminex – dilution from placing and updating US reserves following recent guidance.

 Borders and Southern – adjustment of chances of success for South Falklands prospects in line with new methodology.

Goldman Sachs Global Investment Research 28 May 30, 2011 Europe: Energy: Oil & Gas - E&P

 BPC – increase of prospect sizes to 4.3 bn bls for two prospects based on preliminary seismic data and a removal of our medium-term drilling discount. Partly offset by an increase in WACC to 14% to reflect concerns over ability to drill before US elections and potential delays to drilling and a reduction in assumed block retention post farm-out to 30% (from 50%).

 Chariot – greater retention of Southern blocks following placement, offset by adjustment of chance of success to account for lack of rig under new methodology and revised farm-out terms for Northern blocks (now assuming 33% retention for two well programme, vs. 50% before).

 Coastal Energy – reserves downgrade at the Bua Ban asset largely offset by recent drilling success.

 Cove Energy – updating exploration timeline. Removing long-term drilling discount on prospects, but adjusting chances of success for medium-term exploration in line with new methodlogy.

 Desire – dry well at Ninky.

 Det Norske – dry wells at Gulris and Dovregrubben.

 DNO – de-risking of KRG contracts following exports and release of oil export payments from Baghdad to contractors.

 Encore – UK tax adjustment and adjustment to Cladhan volumes following unsuccessful appraisal well reduce target price. Downwards effect is partially offset by an increase in assumed volumes in and around Catcher.

 Enquest – adjustment for increase in UK tax.

 Faroe Petroleum – adjustment for increase in UK tax.

 Great Eastern Energy – increase in estimated ramp up and production plateau per well.

 Gulfsands – increase in political risking for Syria (to 75% chance of success from 100%) following political unrest. We also update for results at Twaiba, Yousefieh South and KHE-101.

 Hardy Oil – increase in Indian gas price assumptions (to US$8/mcf in the long term) following recent news of partial price liberalization for D6 block.

 Heritage Oil – increased risking and delays to Malta drilling catalysts due to Libyan conflict likely impacting negotiations on border dispute.

 Igas – adjustment for increased UK tax.

 Ithaca – adjustment for increased UK tax.

 Lundin – Increasing of assumed volumes in Alvheim and surrounding area. We now assume a P50 volume for Alvheim of 300mn boe (ahead of current guidance).

 Maurel & Prom – updating for 2011 exploration programme and reserves upgrade in Gabon.

Goldman Sachs Global Investment Research 29 May 30, 2011 Europe: Energy: Oil & Gas - E&P

 Melrose – adjustments to reserves following year-end and operational update, especially related to the shrinking of Kaliakra. Adjustments to exploration programme, with Mansoura exploration prospects removed.

 Nautical – adjustment for increased UK tax. Partially offset by increase in assumed volumes in and around Catcher and the purchase of an additional stake in the Kraken field.

 Nighthawk – increased risking on Jolly Ranch to 25% chance of success following well updates that show flow rates remain below our assumed rate required for the project to be commercial for recently completed wells. We do not believe that the recent reserves report was sufficiently wide-ranging to justify a downgrade to our estimates of the potential resource.

 Norse Energy – increased political risking to New York shale gas assets following recent Chesapeake spill incident.

 Northern Petroleum – Removal of medium-term drilling discount.

 Noreco – dry well at Ronaldo, failure of Oselvar/Enoch divestment, un-commercial find at Svaneogle and sale of Brage.

 PA Resources – further downgrade of our reserves assumptions at Azurite and more conservative assumptions on potential farm-out terms in Greenland (now assuming retention of c. one-third of block for a two well carry, in line with the rest of our coverage).

 Premier Oil – UK tax adjustment, dry hole at Cherry, downgrade of Ca Rong Do reserves all reduce valuation. Partially offset by higher assumed volumes in and around Catcher.

 Regal – De-risking of asset following partial takeover on assumptions of increased funding capabilities.

 Salamander – reducing chances of success at Dao Ruang to 20% following a disappointing first well and adjustments to our modeling of the SRB tax in Thailand, offset by increases in Bualuang reserves.

 Serica – adjustments for increased UK tax, further Kambuna reserves downgrade and increased risking at Columbus following delay of expected sanction.

 Sterling Energy– removal of medium-term drilling discount offset by adjustment to assumed farm-out terms in Cameroon to bring in line with rest of sector (33% retention for two well carry). We also make adjustments to assumptions for the Sangaw North well, de-risking our gas case and increasing the risk on the oil case following the company’s recent update.

 Tower Resources – removal of medium-term drilling discount.

 Valiant Petroleum – UK tax adjustment, downgrade of assumed reserves potential at Tybalt (to 13mn bls), adjustment of assumptions on farm out at Handcross (now assuming retention of one-third of asset vs. half previously).

Goldman Sachs Global Investment Research 30 May 30, 2011 Europe: Energy: Oil & Gas - E&P

Average potential upside of 88% across our coverage Following recent share price moves and adjustments to our price targets we see an average 88% potential upside across our coverage. Underperformance of DNO and Encore leads us to upgrade the stocks, while outperformance over the last three months has led us to downgrade Det Norske, Salamander and Coastal Energy to Neutral. Premier has outperformed the sector since our last update, despite the increase in North Sea taxes, a dry well at Cherry and a disappointing appraisal at Ca Rong Do. As a result, we downgrade the stock to Sell. The underperformance of Encore and Noreco leads us to upgrade the stocks (to Neutral and Buy respectively).

Exhibit 41: Valuation at US$100/bl crude price assumption Valuations by sanctioned projects and cash, discoveries and short- and long-term exploration. Includes impact of warrants, options and assumed equity raise. Dotted line = 0% upside

400%

350%

300%

250% price

200% share

of 150%

% 100% as

50% Value 0%

‐50%

‐100%

Oil Oil Oil Plc JKX

Oil

Gas Gas Igas

BPC

DNO Soco Prom Regal & & Ithaca

Serica

Tullow Energy Energy Encore Energy Energy Energy Energy Norske

Panoro Noreco

Dragon

Enquest Aurelian Amerisur Oil Hardy Southern Oil Keystone Dominion Gulfsands

Bowleven

Resources Resources Resources Petroleum Petroleum Petroleum Petroleum petroleum Dragon Petroleum Petroleum Petroleum

Aminex

Det

Heritage Premier Rockhopper Cove Salamander Norse and PA Development

Gulf Green

Coastal Sterling Eastern Maurel Max

Faroe Tower Chariot Desire Lundin Falkland Valiant Nighthawk Bankers Melrose Nautical Northern Energy Great

Borders Global

Sanctioned assets, cash and other Discoveries Short term exploration Long term exploration Strategic asset premium Liquidity discount NAV / Price

Source: Goldman Sachs Research estimates.

Goldman Sachs Global Investment Research 31 May 30, 2011 Europe: Energy: Oil & Gas - E&P

Recent de-risking in equities has led to underperformance vs. the long-dated crude price; producers have been more insulated Since our last subsector update on January 31, 2011, the E&P universe has underperformed the Brent price by c.10%. We believe that this has been driven by a weakening risk appetite among investors, which has driven up equity risk premia. However, we maintain our belief that tangible, dollar-based assets are not the right assets to be selling during periods of instability, and we would expect the sector to ultimately revert back to levels implied by the long run crude price. As a result, we remain positive on the subsector.

Another impact of this reduced appetite for risk has been a favouring of companies with production over companies without. Since the end of March, companies with over 20% of their value in producing assets (GS estimates) have outperformed those with less by almost 10%. We believe that this has created an attractive entry point into the non-producers, especially given the thematic advantages that we believe the high-impact explorers will increasingly enjoy.

Exhibit 42: Equities have underperformed the crude price since our last Exhibit 43: Producers have outperformed explorers subsector update 23 companies classed as “producers”, 27 classed as “non-producers”

140

130 110

105 120

100 110

100

90 85

80 80

E&Ps Brent price Producers Non‐producers

Source: Datastream. Source: Datastream.

Goldman Sachs Global Investment Research 32 May 30, 2011 Europe: Energy: Oil & Gas - E&P

Subsector trading at discount to core value + discoveries at US $100/bl Our estimates suggest that assuming a long run oil price of US$100/bl the core value (including risked discoveries) of the sector is currently pricing in average upside of 26% to current share prices. This has increased from a 6% premium since our last subsector update – a result of the weakness in the sector that has taken place during the period and a result of rolling forward our numbers to make 2011 our front year. Given the re-rating potential we see in a number of stocks in the universe and that we are using a long- run oil price close to the current 3-year forward price, we regard the risk / reward in the sector as attractive and believe that the drops in share prices as a result of de-risking has been overdone.

Exhibit 44: Average 26% upside to core value is attractive in our view Upside/downside excluding liquidity/funding adjustments

350%

300%

250%

200% value 150% core 100% to

50% Upside 0%

‐50%

‐100%

‐150% Oil Oil Oil Plc JKX

Oil

Igas

Gas Gas BPC DNO Soco

Prom Regal Ithaca

Serica & Tullow & Energy Encore Energy Energy Energy Energy

Norske

Panoro Noreco Dragon

Energy &

Enquest Aurelian Amerisur Hardy Keystone Gulfsands Bowleven

Oil Oil Southern Dominion Resources Resources

Petroleum Petroleum Petroleum Petroleum petroleum Dragon Petroleum Petroleum Petroleum

Aminex

Resources Det

Heritage Premier Rockhopper Cove Salamander Norse PA Development Gulf Green

and

Coastal Eastern Maurel Max

Sterling Faroe Desire Tower Chariot Lundin Valiant Nighthawk Falkland Bankers Melrose Nautical Northern Energy Great

Borders

Global Source: Goldman Sachs Research estimates, Bloomberg.

Goldman Sachs Global Investment Research 33 May 30, 2011 Europe: Energy: Oil & Gas - E&P

Medium-term exploration & balanced explorers still top performing exploration screens

We continue to track the performance of our E&P investment screens. Balanced explorers have continued to perform well, reinforcing our view that a combination of value and catalysts together are conceptually important to E&P stock selection. To date, however, the clear outperformer within the E&P exploration screens has been the medium-dated exploration theme, in which we include stocks that have greater than 40% of their value in high-impact catalysts due to be drilled in more than 12 months time. Despite a recent pull back, the screen has still outperformed the sector by c.50% since we created it in November 2010. Other screens have been weaker. The high-risk screen has been especially impacted by Desire’s unsuccessful Ninky well, the underperformance of Nighthawk Energy following a reserves report that disappointed the market and the recent reduction in risk appetite. The play openers screen has also been weak, but has begun to strengthen recently and is now outperforming the short-term explorers - our less preferred short term exploration theme which continues to perform poorly.

Exhibit 45: Performance of exploration screens since November 8, 2010

210

190

170 Medium term explorers 150

Performance 130

Balanced explorers 110 Play openers Short term 90 explorers (excluding other screen members) 70 Short term explorers

High risk, binary

Balanced explorers Short term explorers Short term explorers excluding other basket Medium term explorers Play openers High risk, binary Overall perfoarmance

Source: Datastream

Goldman Sachs Global Investment Research 34 May 30, 2011 Europe: Energy: Oil & Gas - E&P

M&A and commodity screens

The performance of our M&A and commodity screens has been more muted. Despite a generally strong oil price, the oil price leverage screen has not been a particularly strong performer, being dragged down in part by poor operational performance from PA resources and the impact of the North Sea tax on Nautical Petroleum. The strategic assets screen has been reasonably strong – highlighting the attractiveness of large resources in a time when concerns over risk are high.

Exhibit 46: Performance of M&A and commodity screens since November 8, 2010

130

125

120

115

110

105 Strategic 100 assets

95 M&A Oil price leverage 90 Unconventional Resource 85 Unrealised 80 potential

M&A Unrealised potential Strategic assets Universe Oil price leverage Unconventiontal Resource

Source: Datastream.

Goldman Sachs Global Investment Research 35 May 30, 2011 Europe: Energy: Oil & Gas - E&P

Changes to the exploration screens We make the following changes to our exploration screens as a result of changes in our assumptions and share price movements:

Balanced explorers: We remove Valiant as a result of changes to our assumed exploration programme. Gulfsands is also removed as results have come in on Twaiba and Yousefiah South, thereby reducing short-term exploration re-rating potential. Coastal is also removed as we downgrade our core value to reflect the Bua Ban reserves downgrade. We add Noreco, Encore and Bowleven as recent drops in their share prices leave the companies trading at a discount to our estimate of their core value.

Short-term exploration: Desire is removed after the failed Ninky well. Coastal is also removed as its exploration programme progresses and we de-risk certain prospects near Bua Ban, thereby reducing upside potential. Det Norske is included as drilling catalysts at Ulvetanna and Aldous Major approach.

Exhibit 47: Update exploration screens

Exploration screens Balanced explorers Short term exploration Medium term exploration Play openers High risk binary plays DESCRIPTION We are sceptical of having a We believe that short term Companies without short term We believe that companies which In our view, the market is overly geological "edge" entering into exploration catalysts are often catalysts tend to have long term have significant de‐risked acreage conservative in assessing drilling catalysts. This basket aggressively valued to the point at catalysts discounted excessively by and high levels of follow‐on potential companies with high levels of includes companies which which the risk / reward balance the market. Despite our from de‐risked discoveries have a binary risk. Baskets of these stocks combine strong core value and becomes less compelling. We application of a 50% discount to structural advantage over peers with can therefore buy diversified risk high levels of exploration impact have isolated explorers with the medium term exploration, the access to material, lower risk at good value. This basket includes potential to double from screen still offers substantial exploration catalysts over a period of a diversified portfolio of exploration in the next 12 months average upside. We believe that a 2‐3 years which may not be fully companies with a large proportion and see relatively little upside to screen of these stocks can priced in by the market at an early of value in high‐risk assets. this basket, especially when outperform as drilling catalysts stage. This screen includes members of other baskets are approach, rigs are booked and companies which have recently excluded seismic interpretations clarified participated in opening up new basins SCREENING * Short term exploration impact * Short term exploration impact * Over 40% of valuation in * 30%+ of value in net acreage of > * Greater than 40% of value in a CRITERIA of > 70% in next 12 months of > 75% in next 2 quarters exploration catalysts expected 1000 km2 which contains at least 1 single asset / play risked at greater * Greater than 100% of market beyond 12 months discovery of commercial size, which than 50% cap supported by core value has been successfully flow tested but * Potential uplift of 100% from de‐ has no production risking event

COMPANIES Amerisur Det Norske BPC Rockhopper Norse Energy Aminex Plc Hardy Oil Tower Resources Salamander Desire Petroleum Bowleven Max Petroleum Sterling Energy Cove Energy Falkland Oil & Gas Rockhopper Melrose Resources Dominion Tullow Borders and Southern Det Norske Noreco Green Dragon Nighthawk Energy Faroe Petroleum Bowleven Regal Noreco Chariot Oil & Gas Salamander Aurelian Encore

REMOVED Gulfsands Desire Petroleum Coastal DNO Valiant Petroleum Coastal Energy New companies shaded grey

Source: Goldman Sachs Research estimates.

Goldman Sachs Global Investment Research 36 May 30, 2011 Europe: Energy: Oil & Gas - E&P

Changes to M&A and commodity screens We make the following changes to our M&A/commodity screens as a result of changes in our assumptions and share price movements:

M&A: As a result of the recent underperformance of many E&P stocks, we increase our benchmark for this screen from 30% upside from core value to 75% to maintain differentiation. As a result of the relative performance of the two stocks, we switch Rockhopper for Green Dragon in this basket.

Exhibit 48: Updated M&A/commodity screens

M&A screens Commodity price screens M&A Unrealised potential Strategic assets Oil price leverage Unconventional resource DESCRIPTION Concentrated and sizable resource Stocks with high‐class assets that Our analysis suggests that large, We are constructive on the oil We believe that higher commodity in core valuations are attractive have insufficient cash to fully oily assets are attractive to NOCs price with a forecast price of prices should encourage additional value candidates for potential develop these trade at a discount who are willing to pay premiums US$100/bl in 2011. Stocks investment in unconventional industry acquirers in our view. Attractive as M&A to equity market valuations. exposed to oily assets with higher resource technology as well as candidates as a stronger balance Buying companies with significant operating leverage and licence making more marginal fields sheet can unlock additional NPV value in these types of assets based fiscal regimes are the most profitable. We include companies therefore offers exposure to an leveraged to the commodity with material exposure to NOC / equity market discount rate unconventional resource plays in arbitrage this screen

SCREENING * Core value offers over 75% * Over 50% of company's * More than 30% of company's * Sensitivity to a US$10/bl move in * Greater than 70% of value lies in CRITERIA upside to current valuations when valuation in an asset whose value value sits in a "strategic" asset (> the oil price of greater than 20% either CBM, shale gas or shale oil valued at the forward curve and could be increased by greater than 200mn boe) without inflation (15% with our costs of capital 30% due to a significant capital * Net stake is greater than 50 mn inflation) * >95% of value concentrated in injection boe * Greater than 90% of value in one region * Over 100mn boe net * Asset is oil, LNG or EM based gas discovered resource recoverable in the asset * Weighted average portfolio chance of success > 50%

COMPANIES Global Energy Development Igas Great Eastern Energy Noreco Igas Northern Petroleum Global Energy Development Bankers Petroleum Nautical Petroleum Norse Energy Rockhopper Norse Energy Green Dragon PA Resources Great Eastern Energy Norse Energy Nighthawk Energy Dragon Oil Igas Nighthawk Energy Nighthawk Energy Great Eastern Energy Soco Bankers petroleum Green Dragon Great Eastern Energy Gulf Keystone Bankers petroleum Heritage Oil Igas Rockhopper Tullow

REMOVED Green Dragon

Source: Goldman Sachs Research estimates.

Goldman Sachs Global Investment Research 37 May 30, 2011 Europe: Energy: Oil & Gas - E&P

Portfolio update for the E&Ps

Although investment cases in companies with no exploration, or high-impact explorers can be compelling, we also see a combination of high impact exploration in companies where the valuation is well supported by the core value as attractive. We chart the combination of discovered value vs. exploration upside in our universe to assess where “free” exploration exposure may be found. Of particular interest are those “balanced explorers” in the top right quadrant which we see as particularly advantaged.

Exhibit 49: Percentage of core value support for share price vs. short-term exploration upside

220% Short term re‐ Aminex Plc Free, material rating potential short term re‐ rating potential comes at a cost Noreco 170% Hardy Oil Melrose Resources months

Serica 12 120% within Det Norske Desire Petroleum Encore

upside Bowleven Faroe Petroleum 70% Salamander Rockhopper Cove Energy DNO Nautical Petroleum Heritage Oil Gulfsands Tower Resources Tullow Coastal Energy JKX Valiant Petroleum Maurel & Prom

Exploration Dominion Gulf KeystoneLundin Petroleum PA Resources Premier Oil 20% Sterling Energy Soco Dragon Oil Green Dragon Bankers petroleum BPC Regal Enquest Ithaca Norse Energy ‐20% 30% 80% 130% 180% Great Eastern Energy Cheap core value Less material‐30% re‐ratingpotential partially priced into stock Core value / price

Source: Goldman Sachs Research estimates, Bloomberg.

Goldman Sachs Global Investment Research 38 May 30, 2011 Europe: Energy: Oil & Gas - E&P

South Falklands explorers still show highest potential uplift to exploration in the next 12 months but risks are clear; 1Q 2012 drilling beginning to fall into investable time horizon We see the two companies planning to explore the South Falkland basin (Borders and Southern and FOGL) as having the highest potential uplift through exploration until the end of 1Q 2012. Drilling is expected to begin in the South Falklands basin towards the end of 2011, following the announcement that a rig is to be mobilized to the area in 4Q 2011, to undertake the combined Borders & Southern and FOGL drilling programme. We believe that the market will soon begin pricing in exploration activity set to take place through to the end of 1Q 2012 (assuming a 12-month time horizon), and believe that companies especially well placed to benefit from this (i.e. those companies with valuable exploration options sitting in 1Q 2012 are Chariot (Namibia), Aminex (Tanzania), Aurelian (Karpaty East) and Max Petroleum (pre-salt prospects). As such, we remove our 50% discount for long-dated drilling for 1Q 2012 exploration catalysts.

Exhibit 50: 2011 exploration re-rating potential Exploration catalysts by quarter

800%

700% success 600%

500% exploration

400%

300% 100%

of 200%

event 100%

the 0% in

Oil Oil Oil Plc JKX

Oil

Gas Gas

Igas

‐100% BPC

DNO Soco Regal Prom & & Ithaca

Serica

Tullow Energy Encore Energy Energy Energy Energy Energy Norske

Panoro Noreco

Dragon

Enquest Aurelian Amerisur Hardy Oil Southern Oil Keystone Dominion Gulfsands

Bowleven

potential Resources Resources Resources Petroleum Petroleum Petroleum Petroleum

petroleum Petroleum Dragon Petroleum Petroleum

Aminex

Det

Heritage Premier Rockhopper Cove Salamander Norse and PA Development

Gulf Green

Coastal Sterling Eastern Maurel Max

rating Faroe Tower Chariot ‐ Desire Lundin Falkland Valiant Nighthawk Bankers Melrose Nautical Re Northern Energy Great

Borders Global Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012

Source: Goldman Sachs Research estimates.

Goldman Sachs Global Investment Research 39 May 30, 2011 Europe: Energy: Oil & Gas - E&P

North Sea performance weak on tax change; Falklands and Kurdistan remain weak

We continue to track the performance of the regions. Since our last sector update (January 31, 2011), the Kurdistan and Falkland regions have remained weak. Desire’s disappointing Ninky well result has impacted the Falklands basin significantly. Stocks exposed to the UK’S North Sea have been particularly weak, following the UK budget ruling on increased tax to be paid in oil price environments above US$75/bl.

Ukraine has been the best performer, driven by continuing good performance from Regal. Nambia’s approaching drilling catalysts have also helped strong performance, despite some concerns over resource nationalism following reports of changes to future mining contracts.

Exhibit 51: Regional performance since November 8, 2010

240.0

220.0 Ukraine

200.0

180.0

160.0 Namibia

West Africa 140.0 East Africa

120.0 Norway

100.0 UK North Sea Kurdistan

80.0 Falklands

60.0

Falklands Kurdistan North Sea Ukraine East Africa West Africa Norway Namibia

Source: Datastream.

Goldman Sachs Global Investment Research 40 May 30, 2011 Europe: Energy: Oil & Gas - E&P

Our revised EPS estimates are shown in Exhibit 52. We also introduce 2014 estimates for Great Eastern Energy. We update our oil price deck, in line with that published in ”Oil entering demand rationing phase”, May 23, 2011.

Exhibit 52: EPS estimate changes

Company name Reporting currency name EPS old EPS old EPS old EPS new EPS new EPS new % change % change % change Reason for movements 2011E 2012E 2013E 2011E 2012E 2013E Amerisur Resources Plc U.S. Dollar 0.01 0.10 0.11 0.02 0.12 0.18 21% 20% 60% Oil price adjustments Aminex Plc U.S. Dollar 0.01 0.02 0.00 0.00 0.00 0.00 -85% -87% -133% Oil price adjustments, updated capex and production profile, included placing and open offer Aurelian Oil & Gas Plc Euro 0.00 0.00 0.00 0.00 0.00 0.00 -49% -10% -10% Updated capex profile, included Romania asset disposal Bahamas Petroleum Company Plc U.S. Dollar 0.00 0.00 0.00 0.00 0.00 0.00 45% 7% 9% Updated capex, included equity raise Bankers Petroleum Ltd U.S. Dollar 0.41 0.43 0.88 0.58 0.81 1.56 40% 90% 77% Updated production profile and tax/royalty adjustments Borders and Southern U.S. Dollar 0.00 0.00 0.00 0.00 0.00 0.00 -20% -76% -183% Updated capex profile BowLeven Plc U.S. Dollar -0.04 -0.04 -0.04 -0.04 -0.04 -0.04 0% 0% 0% Chariot Oil and Gas Ltd U.S. Dollar -0.01 -0.01 -0.01 -0.01 -0.01 0.00 13% -37% -72% Updated capex profile and included equity raise Coastal Energy Company U.S. Dollar 1.62 2.21 0.41 1.62 1.93 0.53 0% -13% 27% Oil price adjustments, updated capex and production profile Cove Energy Plc U.S. Dollar 0.00 0.00 0.00 0.00 0.00 0.00 -143% -263% -378% Updated capex profile Desire Petroleum Plc U.S. Dollar -0.01 -0.01 -0.01 -0.01 -0.01 -0.01 -7% -12% -12% Updated capex profile Det Norske Oljeselskap ASA Norwegian Krone -0.92 -0.97 2.42 -5.49 0.16 2.50 500% -117% 3% Oil price adjustments, updated capex and production profile, expensed dry well costs DNO International ASA Norwegian Krone 1.00 0.69 0.68 1.47 1.93 0.65 47% 179% -4% Oil price adjustments, updated capex profile Dominion Petroleum Ltd U.S. Dollar -0.01 -0.01 -0.01 -0.01 -0.01 -0.01 -1% -2% -2% Updated capex profile Dragon Oil PLC U.S. Dollar 1.07 1.29 0.94 1.53 1.83 1.93 42% 42% 105% Oil price adjustments and flow rate assumptions EnCore Oil Plc British Pounds/Pence -0.58 -0.62 -0.64 -0.58 -0.62 -0.64 0% 0% 0% EnQuest Plc U.S. Dollar 0.30 0.42 0.31 0.29 0.35 0.39 -5% -16% 25% Oil price adjustments, updated capex and production profile, updated for share issue associated with Stratic Energy acquisition, UK tax adjust Falkland Oil & Gas Ltd U.S. Dollar -0.01 -0.01 -0.01 -0.01 -0.01 -0.01 -45% -49% -37% Updated capex profile and updated for equity raise Faroe Petroleum Plc British Pounds/Pence -1.73 -1.70 -1.76 6.10 7.31 5.81 -454% -530% -429% Oil price adjustments, updated production and capex profile, UK tax adjustments Global Energy Development Plc U.S. Dollar 1.70 4.41 6.91 0.64 2.28 5.26 -62% -48% -24% Oil price adjustments, updated production profile Great Eastern Energy Corporation L U.S. Dollar 0.01 0.08 0.30 0.00 0.08 0.30 -100% 1% 1% Green Dragon Gas Ltd U.S. Dollar 0.05 0.36 1.24 0.05 0.36 1.22 5% 1% -2% Updated for issue of shares associated with placing Gulf Keystone Petroleum Ltd U.S. Dollar -0.01 0.00 0.03 -0.02 0.08 0.12 24% -4244% 364% Oil price adjustments, updated capex and production profile Gulfsands Petroleum Plc U.S. Dollar 1.17 2.09 2.19 1.17 1.71 2.04 1% -18% -7% Oil price adjustments, updated capex and production profile Hardy Oil and Gas Plc U.S. Dollar 0.06 0.40 0.14 0.05 0.30 0.34 -12% -26% 140% Updated production profile, oil price adjustments Heritage Oil U.S. Dollar -0.01 0.07 0.07 0.02 0.01 0.09 -569% -89% 23% Production profile adjustments to Russian asset, oil price adjustments IGAS Energy Plc British Pounds/Pence 2.97 11.00 13.65 0.56 3.57 5.65 -81% -68% -59% Updated for completion of acquisition and placing, UK tax adjustment, commodity price adjustment Ithaca Energy Inc U.S. Dollar 0.31 0.47 0.50 0.25 0.44 0.66 -19% -7% 34% Oil price adjustments, updated production profile and UK tax adjustment JKX Oil and Gas U.S. Dollar 0.95 1.23 0.78 0.73 1.11 1.08 -22% -10% 39% Oil price adjustments, updated production profile Lundin Petroleum Swedish Krona 5.31 5.92 4.05 0.70 1.07 1.21 -87% -82% -70% Production profile adjustments to Russian asset, oil price adjustments Maurel & Prom Euro 2.51 2.66 2.24 2.19 2.47 3.33 -13% -7% 49% Oil price adjustments, updated capex and production profiles Max Petroleum Plc U.S. Dollar -0.02 -0.02 -0.01 -0.02 -0.01 0.00 -6% -33% -70% Oil price adjustments, expensed dry well and updated shares for the exercise of options Melrose Resources Plc U.S. Dollar 0.69 0.66 0.49 0.56 0.56 0.51 -18% -16% 5% Oil price adjustments, updated production and capex profile Nautical Petroleum Plc British Pounds/Pence -1.80 -0.69 -0.74 -1.80 -0.69 -0.74 0% 0% 0% Nighthawk Energy Plc U.S. Dollar 0.01 0.02 0.03 0.01 0.03 0.05 28% 22% 76% Oil price adjustments, adjustment for exceptional item Norse Energy Corp U.S. Dollar 0.01 0.03 0.05 -0.0016 0.01 0.03 -120% -54% -44% Updated for private placement and change to interest expense Northern Petroleum Plc Euro 0.04 0.06 0.03 0.07 0.09 0.11 60% 54% 292% Commodity price adjustment Norwegian Energy Company ASA Norwegian Krone 0.87 1.38 3.70 0.37 1.22 7.28 -58% -11% 97% Oil price adjustments, updated capex and production profile, expensed dry wells PA Resources AB Swedish Krona 0.40 1.27 1.03 0.42 1.02 1.11 4% -19% 7% Oil price adjustments, updated production and capex profile Panoro Energy ASA U.S. Dollar 0.09 0.31 0.34 0.09 0.19 0.39 -4% -36% 15% Oil price adjustments, updated production profile and included equity raise Premier Oil U.S. Dollar 0.74 1.56 1.23 1.07 2.24 2.48 44% 44% 101% Oil price adjustments and production profile adjustments Regal Petroleum U.S. Dollar 0.03 0.03 0.02 0.03 0.04 0.04 27% 39% 111% Oil price adjustments Rockhopper Exploration Plc U.S. Dollar -0.13 0.00 -0.01 -0.13 0.00 -0.01 0% 0% 0% Salamander Energy PLC U.S. Dollar 0.63 0.75 0.45 0.75 0.81 0.82 18% 7% 80% Oil price adjustments, production profile adjustments, SRB tax adjustments Serica Energy Plc U.S. Dollar 0.05 0.04 0.02 0.03 0.02 0.02 -33% -48% -36% Oil price adjustments, updated capex and production profiles Soco International Plc U.S. Dollar 0.58 1.16 0.84 0.63 1.70 1.31 8% 46% 55% Oil price adjustments and production profile adjustments Sterling Energy Plc U.S. Dollar -0.01 -0.01 -0.01 -0.01 -0.01 -0.01 -32% -28% -27% Tower Resources Plc U.S. Dollar 0.00 0.00 0.00 0.00 0.00 0.00 -34% -39% -40% Updated capex profile and included equity raise Tullow Oil Plc U.S. Dollar 0.94 1.64 1.66 1.34 1.99 2.41 43% 21% 45% Oil price adjustments and production profile adjustments Valiant Petroleum Plc U.S. Dollar 1.99 2.72 1.54 2.13 2.73 2.64 7% 0% 72% Oil price adjustments and production profile adjustments Source: Goldman Sachs Research estimates.

Goldman Sachs Global Investment Research 41 May 30, 2011 Europe: Energy: Oil & Gas - E&P

Exhibit 53: Risks to our 12-month price targets (based on a SOTP at US$100/bl oil price)

Company Risks to 12 month target price Amerisur Failure to unlock Fenix block or failure to progress Paraguay leads to a drill ready state Aminex Plc Failure in the exploration programme or a delay or cancellation of upcoming catalysts Aurelian Disappointing results at the Trzek‐2 well or failures and delays in the exploration programme Bankers petroleum Disappointing production numbers, worse than expected conversion of contingent reserves to 2P Borders and Southern Failure in the exploration programme or a deterioration of political relations between the UK and Argentina Bowleven Disappointment in the lower sections of Sapele or in the company's 2011 exploration / appraisal programme BPC Disappointing seismic update, delays in or a failure to farm out acreage, a refusal for the application for Western blocks Chariot Oil & Gas Exploration failure or a delay in the driling timetable Coast al En er g y Delays or cost overruns in developing assets and a disappointing exploration / appraisal programme Cove En er gy Worse than expected drilling success or, in the longer term, delays or problems in selling asset stakes or developing assets Desire Pet roleum Exploration failure, an inability to raise further funds for additional drilling, deteriorating UK / Argentine relations Det Norske Failure in exploration programme, falls in the commodity price, tightening of regulation of offshore drilling in Norway DNO Positive resolutions on Kurdish exports, exploration success or a bid for the company Dominion Exploration failure, or delays in farming out and drilling Block 7 in Tanzania Dragon Oil Production disappointments, value destructive acquisitions or drops in the oil price. En co r e Greater than expected exploration success at Cladhan or Catcher, a bid for the company or monetisation of gas storage asset Enquest Lower than expected production or drops in the oil price Falkland Oil & Gas Failure in the exploration programme or a deterioration of political relations between the UK and Argentina Faroe Pet roleum Failure in exploration programme, falls in the commodity price, tightening of regulation of offshore drilling in Norway Global Energy Development Difficulties in executing 3 year plan, failure to obtain a farm in partner or a fall in the oil price Great East ern Energy Drop in regional gas prices, poor well performance or difficulties in ramping up production Green Dragon Difficulties in developing the resource base and political risks in China Gulf Keyst one Greater than expected volumes at Shaikan, greater than expected exploration success, positive resolution to Kurdish exports Gulf sands Drop in the commodity price or worse than expected exploration success Hardy Oil Lack of success in the D9 block or delays in sanctioning discoveries Heritage Oil Geological issues impacting valuation of Miran asset or a worse than expected resolution to Kurdish exports Igas Technical failures in the development of the asset base or persistent weakness in the UK gas market Ithaca Delays or cost overruns in the development programme JKX Disappointing flow rates or a lack of success in the Callovian horizon in Russia Lundin Petroleum Greater than expected exploration success, especially at the company's core Luno acreage Maurel & Prom Difficulties in ramping up Nigerian production or worse than expected success in the exploration programme Max Petroleum Worse than expected drilling success in Kazakhstan, or an inablity to raise funds to drill pre‐salt targets Melrose Resources Delays or cost overruns in developments, exploration failure or difficulties with the sale of the US assets# Nautical Petroleum Poor exploration programme around the Catcher prospects or Kraken asset proving more complicated than we currently expect Nighthawk Energy Technical failures in the development and understanding of the Jolly Ranch shale or persistent oil price weakness Noreco Failure in exploration programme, falls in the commodity price, tightening of regulation of offshore drilling in Norway Norse Energy Extension of the moratorium on hydraulic fracturing in New York state or additional funding being required for Herkimer Northern Petroleum Weakening gas prices, cost overruns in developing assets or delays in exploration and sanctioning in Italy PA Resources Cost overruns and delays or disappointing seismic results in the company's Greenland acreage Pan o r o Disappointment at the Dussafu exploration asset and delays in sanctioning Santos basin assets Pr em i er Oi l Failure of exploration / appraisal campaign and lower commodity prices Reg a l An eventual bid coming in at a substantially higher or lower price than we estimate, or a retraction of existing bids Rockhopper The Sea Lion asset proving more complicated than we currently expect, detoriation of UK / Argentine relations Salamander Failure in additional exploration in the company's acreage around the Angklung prospect Ser i ca Delays to the 2011 exploration programme or failure in this programme So co Disappointing appraisal on the TGT asset and delays to first oil from the asset St er l i n g En er g y Failure in deeper sections of the Sangaw well and further delays in drilling in Cameroon and Madagascar Tower Resources Continuing poor exploration in Uganda, or a delay to drilling in Namibia Tul low Failure in the upcoming exploration programme and continuing delays to farm out in Uganda Valiant Petroleum Failure of the 2011 exploration programme and drops in the oil price Source: Goldman Sachs Research estimates.

Goldman Sachs Global Investment Research 42 May 30, 2011 Europe: Energy: Oil & Gas - E&P

Maurel & Prom (MAUP.PA): Core value and ‘free’ exploration exposure; up to Buy

Investment Profile Low High Source of opportunity Growth Growth We upgrade Maurel et Prom to Buy from Neutral with a 12-month target price of €28.8, implying 85% potential Returns * Returns * upside. On our estimates, the stock trades at a discount to the value of its core assets, hence providing “free” Multiple Multiple exposure to its 2011 exploration programme. We believe the stock offers exposure to organic growth in Africa Volatility Volatility and South America, and view the fiscal benefits afforded to it as an indigenous Nigerian company through its Percentile 20th 40th 60th 80th 100th Maurel & Prom (MAUP.PA) 45% stake in SEPLAT as a significant source of potential future value (as it gives the company the ability to

Europe Oil & Gas Peer Group Average access attractive fiscal terms and therefore inexpensive resources through acquisitions). We expect the recent * Returns = Return on Capital For a complete description of the investment deal with Shell to be digested before new opportunities are pursued however. profile measures please refer to the disclosure section of this document. We believe that Maurel et Prom’s Gabon acreage also offers an attractive mixture of core value and relatively

Key data Current low-risk exploration upside, that is not currently being valued by the market. In our view, the key to the future Price (€) 15.55 performance of the stock will be the company’s ability to develop its Nigerian reserves, the success of future 12 month price target (€) 28.80 Upside/(downside) (%) 85 exploration and appraisal activities, and, in the longer term, its ability to do further deals in Nigeria. Pacifico Market cap (€ mn) 1,885.5 Enterprise value (€ mn) 2,383.1 Rubiales’ recent farm-in to the company’s Colombian acreage also highlights the value of the company’s South 12/10 12/11E 12/12E 12/13E EBIT (€ mn) New (106.8) 287.9 320.1 419.7 American portfolio. Updating for its 2011 exploration programme, and a reserves upgrade in Gabon, on our EBIT revision (%) NM (13.4) (8.1) 42.8 estimates we believe that the market is under-pricing the value inherent in Maurel et Proms core assets, and see EPS (€) New (1.26) 2.19 2.47 3.33 EPS (€) Old 0.732.512.662.24c.64% potential upside to our valuation of these. Combined with the potential for a c. 37% uplift from successful EV/DACF (X) 9.6 7.7 6.0 3.7 P/E (X) NM 7.1 6.3 4.7 exploration over the next 12-months, we believe the company offers a well-balanced and diversified portfolio, Dividend yield (%) 0.0 0.0 0.0 0.0 and as such we add the stock to the Buy List. FCF yield (%) (32.4) 4.6 16.6 22.0 CROCI (%) NMNMNMNM CROCI/WACC (X)------EV/GCI NM NM NM NM Catalyst We believe production growth in Nigeria and (to a lesser degree) Gabon will help drive the shares up, as should

Price performance chart exploration success in the company’s African and South American exploration programmes. Additional deals in 16 370 Nigeria could also drive the stock, although we do not expect another deal in the short term as we believe it will 15 360 take time to develop the assets most recently acquired. 14 350

13 340 12 330 Valuation 11 320 Our 12-month SOTP-based target price of €28.8 is calculated using a US$100/bl oil price with exploration and 10 310

9 300 appraisal assets being valued on a NPV/bl basis.

8 290 May-10 Aug-10 Dec-10 Mar-11

Maurel & Prom (L) FTSE World Europe (EUR) (R) Key risks The key downside risks to our view and price target are failures in ramping up production of the Nigerian portfolio or worse than expected failure in the company’s exploration programme. Share price performance (%) 3 month 6 month 12 month Absolute 18.5 54.0 64.9 Rel. to FTSE World Europe (EUR) 21.8 48.3 41.8

Source: Company data, Goldman Sachs Research estimates, FactSet. Price as of 5/26/2011 close. Source: Company data, Goldman Sachs Research estimates, FactSet. This page is priced as of the close of May 26, 2011.

Goldman Sachs Global Investment Research 43 May 30, 2011 Europe: Energy: Oil & Gas - E&P

Noreco (NOR.OL): Core value combined with ‘free’ Norwegian exploration option; Buy

Investment Profile Low High Source of opportunity Growth Growth We upgrade Norwegian Energy Company (“Noreco”) to Buy from Neutral with a 12-month target price of Returns * Returns * Nkr23.4, implying 99% potential upside. As a result of the stock’s recent underperformance (down 33% vs. the Multiple Multiple E&Ps themselves down 7% since the beginning of 2011), which we believe reflected the disappointing outcome Volatility Volatility of the stock’s failed strategic review, we now view the risk/reward on the stock positively. On our estimates, the Percentile 20th 40th 60th 80th 100th Norwegian Energy Company ASA (NOR.OL) stock trades at a 14% discount to its core assets, resulting in a “free” exposure to its 2011 exploration

Europe Oil & Gas Peer Group Average programme. The company operates in Norway, Denmark and the UK with a mixture of production, development * Returns = Return on Capital For a complete description of the investment potential and exploration. We believe it has some of the highest re-rating potential in the Norwegian North Sea profile measures please refer to the disclosure section of this document. of the companies in our coverage, principally from the Luna, Albert, Lupin and Chamonix wells. A total de-risking of the exploration portfolio in the next 12 months would result in an uplift of c.180% to our valuation. Key data Current Price (Nkr) 11.75 We view free exploration exposure of this magnitude positively and include the stock in our Balanced Explorers 12 month price target (Nkr) 23.40 screen. We note a large proportion of its exploration costs are refunded, as a result of tax rebates, and we Upside/(downside) (%) 99 Market cap (Nkr mn) 2,855.7 therefore believe it offers a low risk way to gain exposure to North Sea exploration in Norway. We also note that Enterprise value (Nkr mn) 6,859.3 12/10 12/11E 12/12E 12/13E the recent Brage sale has helped de-risk the balance sheet in our view. As a result of a strong core value, a EBIT (Nkr mn) New 194.5 594.8 1,342.4 2,460.3 beneficial tax regime for exploration and 12-month re-rating potential from exploration success, we upgrade the EBIT revision (%) (53.2) (48.5) (23.5) 65.1 EPS (Nkr) New 0.570.371.227.28stock from Neutral to Buy. EPS (Nkr) Old 0.350.871.383.70 EV/DACF (X) 11.0 6.3 5.7 1.7 P/E (X) 27.6 31.8 9.6 1.6 Dividend yield (%) 0.0 0.0 0.0 0.0 Catalyst FCF yield (%) 2.8 (45.0) (4.3) 81.9 CROCI (%) NMNMNMNMExploration success at prospects such as Albert and Luna are the most obvious potential catalysts. We believe CROCI/WACC (X)------that, in the event of success at a material prospect, the company could benefit disproportionately as the market EV/GCI NM NM NM NM not only de-risks the specific asset, but focuses its attention on the core value of the company implied by the

share price, which we believe is too low at present. Price performance chart 20 480 19 460 Valuation 18 440 We value Noreco using a SOTP methodology assuming a US$100/bl oil price assumption. Exploration and 17 420 16 400 discoveries are valued using a risked NPV/bl approach. 15 380 14 360 13 340 Key risks 12 320 A disappointing exploration campaign or lower oil and gas prices are the biggest downside risks to our price 11 300 May-10 Aug-10 Dec-10 Mar-11 target and view. Norwegian Energy Company ASA (L) FTSE World Europe (GBP) (R)

Share price performance (%) 3 month 6 month 12 month Absolute (34.7) (29.6) (11.3) Rel. to FTSE World Europe (GBP) (33.4) (33.5) (25.1)

Goldman Sachs Global Investment Research 44 May 30, 2011 Europe: Energy: Oil & Gas - E&P

Premier Oil (PMO.L): Company’s strengths already in the price, down to Sell.

Investment Profile Low High Source of opportunity Growth Growth We downgrade Premier Oil from Neutral and add the stock to the Sell List with a 12-month target price of 574p, Returns * Returns * implying 24% potential upside. The company has had significant success in recent months via the Catcher Multiple Multiple discovery in which Premier has a 35% stake, and where we expect substantial potential follow on activity Volatility Volatility towards the end of 2011. The stock is also likely to experience significant production growth over the next few Percentile 20th 40th 60th 80th 100th Premier Oil (PMO.L) years, which could eventually take production above 100 kboepd. Despite this however, we believe expectations

Europe Oil & Gas Peer Group Average for the stock are high, and that failure (or even success that fails to match expectations) could put the share price * Returns = Return on Capital For a complete description of the investment under pressure. The stock has outperformed our coverage by 6% ytd, despite the announced UK tax increase, a profile measures please refer to the disclosure section of this document. disappointing exploration result at Cherry and a downgrade of its Ca Rong Do reserves. On our forecasts, the stock has 8% upside to its core value (vs. a sector average upside of c.26%) and short-term re-rating potential of Key data Current Price (p) 464.1 c.28% in the event of success (vs. a sector average of 172%). We therefore see more upside in both respects in 12 month price target (p) 574 other stocks in our coverage. Upside/(downside) (%) 24 Market cap (£ mn) 2,128.3 Enterprise value ($ mn) 4,216.8 We note that the success the company has achieved to date has expanded its market cap to a level at which 12/10 12/11E 12/12E 12/13E EBIT ($ mn) New 127.7 773.6 1,385.2 1,498.2 future wells are likely to have a smaller impact than was previously the case. The major remaining catalysts in EBIT revision (%) (67.8) 16.6 18.2 69.8 the short term are wells in the Tuna block in Indonesia, which we believe could add c.15% to our valuation in the EPS ($) New 0.791.072.242.48 EPS ($) Old 0.260.741.561.23event that oil is found – relatively small in relation to our universe as a whole. As a result, we believe that EV/DACF (X) 2.3 4.2 1.9 1.2 P/E (X) 7.0 7.1 3.4 3.1 despite the quality of the asset base and the track record of management, there are less expensive ways to gain Dividend yield (%) 0.0 0.0 0.0 0.0 FCF yield (%) (147.7) 4.9 37.4 36.4 exposure to E&P. In our opinion, the risk/reward profile is skewed to the downside vs. our universe. As a result CROCI (%) 23.629.040.938.8we downgrade Premier to Sell from Neutral. CROCI/WACC (X)------EV/GCI 0.5 1.1 0.8 0.5

Catalyst

Price performance chart Any failure in exploration activity, particularly in the upcoming Tuna block, or success that fails to meet current 550 420 high expectations, would likely result in share price weakness.

500 400

450 380 Valuation 400 360 Our 12-month SOTP-based target price is calculated using a US$100/bl oil price with exploration and appraisal 350 340 assets being valued on an NPV/bl basis. Some 10% of our target price is made up of a valuation of the 300 320 company’s strategic assets (namely discovered and producing resource, primarily in the North Sea)., valued at

250 300 an 8% discount rate, to reflect its potentially strategic importance May-10 Aug-10 Dec-10 Mar-11

Premier Oil (L) FTSE World Europe (GBP) (R) Key risks The main upside risks to our view and target price are greater than expected exploration and appraisal success Share price performance (%) 3 month 6 month 12 month in the company’s exploration programme, M&A activity, and greater than expected production uplift. Absolute (10.4) (1.5) 64.9 Rel. to FTSE World Europe (GBP) (8.7) (7.0) 39.3

Goldman Sachs Global Investment Research 45 May 30, 2011 Europe: Energy: Oil & Gas - E&P

DNO international (DNO.OL): Underperformance & political de-risking of KRG, Neutral

Investment Profile Low High What happened Growth Growth We are upgrading DNO to Neutral from Sell following the stock’s recent underperformance. Since being added Returns * Returns * to the Sell List on November 5, 2010 the stock is down 22.2% vs. the oil and gas sector up 11.1% and the FTSE Multiple Multiple World Europe Index up 1.3%; over 12 months DNO is down 7.7% vs. the FTSE World Europe’s gain of 18.4%. Volatility Volatility Percentile 20th 40th 60th 80th 100th DNO International ASA (DNO.OL) Current view Europe Oil & Gas Peer Group Average We upgrade DNO from Sell to Neutral with a 12-month price of Nkr11.50, implying 61% potential upside. * Returns = Return on Capital For a complete description of the investment profile measures please refer to the Following news on the commencement of exports from Kurdistan, and an announcement of possible payments disclosure section of this document. from Baghdad, we further reduce our political risk assumptions on assets there. We now attribute a 100% political chance of success to DNO’s Kurdish assets in the Tawke license (vs. 90% previously) and 75% for DNO’s Key data Current Price (Nkr) 7.15 other licenses (vs. 60% previously). We are less cautious on the political risks for DNO’s Tawke license (vs. other 12 month price target (Nkr) 11.50 Upside/(downside) (%) 61 Kurdistan assets for both DNO and other companies that operate there) because the Tawke license agreement Market cap (Nkr mn) 6,791.5 was signed earlier than other ones in the region, which we believe may imply some additional protection for the Enterprise value (Nkr mn) 6,180.3 12/10 12/11E 12/12E 12/13E fiscal terms. DNO has a 55% stake in the producing Tawke field in the Kurdistan region of Iraq and stakes in oil EBIT (Nkr mn) New 156.8 1,318.7 1,734.7 506.2 EBIT revision (%) (74.4) 40.8 171.8 (18.4) fields at various stages of the development cycle in Yemen. The exploration portfolio is diverse, with prospects EPS (Nkr) New (0.31) 1.47 1.93 0.65 in Kurdistan, Yemen and Mozambique likely to be the main areas of activity of the next 12 months. RAK EPS (Nkr) Old 0.681.000.690.68 EV/DACF (X) 13.4 3.5 1.7 2.6 Petroleum – a private Emirati oil company – has built a 30% stake in DNO, which has previously driven M&A P/E (X) NM 4.9 3.7 11.0 Dividend yield (%) 0.0 0.0 0.0 0.0 speculation. We give credit for M&A potential associated with stock: 40% of our target price is based on a FCF yield (%) 5.8 15.4 33.1 16.0 CROCI (%) NMNMNMNM“strategic” company valuation applying an 8% discount rate to the Tawke field. Therefore, on our updated CROCI/WACC (X)------forecasts, and given DNO’s recent underperformance on a sector-relative basis, we no longer see potential EV/GCI NM NM NM NM downside in the stock, and as such remove it from the Sell List and upgrade to Neutral.

Price performance chart We value DNO using a SOTP methodology assuming a US$100/bl oil price. Our 12-month price target is 11. 0 500 Nkr11.50 (from Nkr9.7). Some 40% of our target price is based on a company valuation in which the Tawke asset 10.5 480 10.0 460 is valued at a discount rate of 8% to reflect the strategic nature of the asset. 9.5 440 9.0 420 Key upside risks to our view and price target are further positive news on a possible payment mechanism for 8.5 400 8.0 380 exports, further resolution between the KRG and Baghdad allowing exports from the region on existing fiscal 7. 5 360 terms, exploration success in Kurdistan and Yemen, or a bid for the company. The key downside risk is worse 7. 0 340 6.5 320 than expected failure in the company’s exploration programme or a regression in the apparent progress being 6.0 300 May-10 Aug-10 Dec-10 Mar-11 made in Kurdistan.

DNO International ASA (L) FTSE World Europe (GBP) (R)

Share price performance (%) 3 month 6 month 12 month Absolute (23.7) (12.3) (7.7) Rel. to FTSE World Europe (GBP) (22.2) (17.1) (22.0)

Goldman Sachs Global Investment Research 46 May 30, 2011 Europe: Energy: Oil & Gas - E&P

Exhibit 54: Share price performance of DNO International versus peer group Prices as of the close of May 26, 2011

Price Price as of May Price performance 3 month price 6 month price 12 month price Company Ticker Primary analyst currency 26, 2011 since Nov 5, 2010 performance performance performance Europe Oil & Gas Peer Group

DNO International ASA DNO.OL Christophor Jost Nkr 7.15 -22.2% -23.7% -12.3% -7.7% Amerisur Resources Plc AMER.L Christophor Jost p 27.25 113.7% 14.7% 87.9% 65.2% Aminex Plc AMNX.L Christophor Jost p 7.88 5.7% -12.5% -10.4% 5.7% Aurelian Oil & Gas Plc AUL.L Christophor Jost p 53.75 -9.7% -37.3% -6.5% 34.4% Bahamas Petroleum Company Plc BPCB.L Christophor Jost p 16.25 159.6% -23.5% 35.4% 415.9% Bankers Petroleum Ltd BNKq.L Christophor Jost p 492.50 7.1% -15.5% 13.9% 1.0% BG Group BG.L Michele della Vigna, CFA p 1392.00 7.7% -7.0% 15.3% 37.1% Borders and Southern BSTH.L Christophor Jost p 56.00 -15.2% -2.6% -15.5% -23.5% BowLeven Plc BLVN.L Christophor Jost p 302.00 59.8% -10.0% -7.1% 182.2% BP plc BP.L Michele della Vigna, CFA p 461.20 3.3% -6.8% 5.8% -6.3% BP plc (ADS) BP Michele della Vigna, CFA $ 45.38 3.6% -5.7% 10.9% 7.0% Cairn Energy PLC CNE.L Christophor Jost p 440.70 14.3% 3.5% 11.6% 12.5% CEPSA CEP.MC Henry Morris € 27.82 53.7% -0.8% 50.4% 55.1% Chariot Oil and Gas Ltd CHARC.L Christophor Jost p 219.00 22.3% -9.1% 16.2% 61.9% Coastal Energy Company CEO.L Christophor Jost p 422.50 47.0% -2.9% 28.0% 99.8% Cove Energy Plc COVE.L Christophor Jost p 86.50 3.6% -8.0% -1.7% 73.0% Desire Petroleum Plc DES.L Christophor Jost p 11.50 -89.3% -64.9% -89.9% -85.5% Det Norske Oljeselskap ASA DETNOR.OL Christophor Jost Nkr 31.00 22.5% 10.7% 11.5% 16.5% Dominion Petroleum Ltd DOPL.L Christophor Jost p 5.73 59.0% -11.2% 15.7% -2.6% Dragon Oil PLC DGO.L Christophor Jost p 520.00 15.6% -11.4% 18.8% 31.0% EnCore Oil Plc EO.L Christophor Jost p 68.50 -45.4% -42.9% -41.5% 321.5% ENI ENI.MI Michele della Vigna, CFA € 16.24 -1.0% -7.5% 3.8% 8.8% EnQuest Plc ENQ.L Christophor Jost p 132.10 -3.9% -5.8% 1.5% 42.4% ERG ERG.MI Henry Morris € 9.16 -8.0% -8.6% -3.6% -3.5% Falkland Oil & Gas Ltd FOGL.L Christophor Jost p 61.25 -41.0% -24.4% -44.7% -67.8% Faroe Petroleum Plc FPM.L Christophor Jost p 152.50 -14.3% -17.3% -15.3% 33.2% Galp GALP.LS Henry Morris € 14.47 -1.1% -5.1% 10.5% 24.1% Global Energy Development Plc GBLE.L Christophor Jost p 64.00 -3.0% -31.9% -14.1% -41.6% Great Eastern Energy Corporation Ltd GEECq.L Christophor Jost p 417.50 -5.1% 14.4% 14.4% -14.2% Green Dragon Gas Ltd GDG.L Christophor Jost $ 12.85 53.0% -1.3% 15.5% 126.3% Gulf Keystone Petroleum Ltd GKP.L Christophor Jost p 145.25 -24.2% -1.5% -19.5% 86.8% Gulfsands Petroleum Plc GPX.L Christophor Jost p 250.00 -25.8% -20.0% -31.9% -2.7% Hardy Oil and Gas Plc HAOG.L Christophor Jost p 209.25 11.3% 27.0% 12.2% 28.8% Hellenic Petroleum HEPr.AT Henry Morris € 6.67 22.6% -10.2% 21.1% 9.9% Heritage Oil HOIL.L Christophor Jost p 238.60 -33.9% -10.6% -37.0% -28.7% IGAS Energy Plc IGAS.L Christophor Jost p 72.50 13.3% -2.0% 9.8% -14.7% Ithaca Energy Inc IAE.L Christophor Jost p 133.63 -10.9% -27.4% -6.6% -7.5% JKX Oil and Gas JKX.L Christophor Jost p 292.40 1.8% -3.8% -6.6% 28.2% Lundin Petroleum LUPE.ST Christophor Jost Skr 83.70 21.2% 6.1% 22.1% 139.5% Maurel & Prom MAUP.PA Christophor Jost € 15.55 43.0% 18.5% 54.0% 64.9% Max Petroleum Plc MXP.L Christophor Jost p 13.75 -37.5% -22.5% -34.5% -5.2% Melrose Resources Plc MRS.L Christophor Jost p 238.25 -10.1% -4.7% -0.7% -17.0% MOL MOLB.BU Henry Morris HUF 22800.00 11.5% -4.3% 21.3% 39.9% Motor Oil Hellas MORr.AT Henry Morris € 9.05 16.0% 1.7% 21.6% 22.3% Nautical Petroleum Plc NPE.L Christophor Jost p 328.00 -9.6% -26.3% -5.7% 556.0% Neste Oil NES1V.HE Henry Morris € 11.74 -2.4% -8.0% 5.8% -1.8% Nighthawk Energy Plc NGTE.L Christophor Jost p 6.36 -49.2% -28.5% -52.0% -69.0% Norse Energy Corp NEC.OL Christophor Jost Nkr 0.66 -47.2% -50.7% -50.7% -72.1% Northern Petroleum Plc NOP.L Christophor Jost p 112.50 15.4% -15.9% 7.1% -3.0% Norwegian Energy Company ASA NOR.OL Christophor Jost Nkr 11.75 -29.2% -34.7% -29.6% -11.3% OMV OMVV.VI Michele della Vigna, CFA € 28.16 4.3% -9.9% 5.4% 9.6% PA Resources AB PAR.ST Christophor Jost Skr 4.18 -24.0% -2.6% -28.5% -36.2% Panoro Energy ASA PENO.OL Christophor Jost Nkr 6.17 7.3% -20.4% -20.7% NA PKN PKNA.WA Henry Morris PLN 52.35 14.3% 16.8% 17.8% 42.6% Premier Oil PMO.L Christophor Jost p 464.10 5.2% -10.4% -1.5% 64.9% Regal Petroleum RPT.L Christophor Jost p 46.50 204.9% 22.0% 138.5% 31.9% Repsol YPF REP.MC Michele della Vigna, CFA € 22.56 13.0% -6.6% 19.8% 40.1% Rockhopper Exploration Plc RKH.L Christophor Jost p 206.25 -34.1% -11.5% -34.7% -10.3% Royal Dutch Shell plc (A ADR) RDSa Michele della Vigna, CFA $ 70.28 3.5% -1.8% 12.9% 39.6% Royal Dutch Shell plc (A) RDSa.AS Michele della Vigna, CFA € 24.66 2.6% -4.7% 5.0% 18.6% Royal Dutch Shell plc (B ADR) RDSb Michele della Vigna, CFA $ 70.90 6.3% -0.8% 15.1% 45.5% Royal Dutch Shell plc (B) RDSb.L Michele della Vigna, CFA p 2142.00 4.8% -2.7% 9.1% 26.5% Salamander Energy PLC SMDR.L Christophor Jost p 282.60 27.6% -7.6% 21.2% 24.7% Saras SRS.MI Henry Morris € 1.69 13.4% -6.3% 20.3% 4.5% Schoeller-Bleckmann SBOE.VI Rudolf Dreyer € 64.50 22.9% 5.4% 15.5% 79.2% Serica Energy Plc SQZ.L Christophor Jost p 28.00 -29.6% -26.1% -44.3% -67.3% Soco International Plc SIA.L Christophor Jost p 377.50 16.9% 12.0% 8.4% -3.2% Statoil STL.OL Michele della Vigna, CFA Nkr 136.40 10.5% -7.0% 9.0% 6.5% Sterling Energy Plc SEY.L Christophor Jost p 45.75 -31.2% -34.9% -11.2% -60.6% TOTAL SA TOTF.PA Michele della Vigna, CFA € 39.20 -3.4% -10.5% 3.9% 4.3% Tower Resources Plc TOWR.L Christophor Jost p 5.78 40.0% -9.8% 42.6% 344.2% Tullow Oil Plc TLW.L Christophor Jost p 1305.00 4.3% -7.8% 10.4% 23.8% Tupras TUPRS.IS Henry Morris YTL 42.80 11.5% 6.7% 23.3% 45.1% Valiant Petroleum Plc VPP.L Christophor Jost p 538.00 -7.2% -16.6% -2.7% -16.3% Petroplus Holdings PPHN.S Henry Morris SFr 13.10 22.7% -11.8% 31.7% -20.0%

Average 11.1% -10.6% 2.5% 44.8%

FTSE World Europe (GBP) 388.58 1.3% -1.9% 5.8% 18.4%

Note: Prices as of most recent available close, which could vary from the price date indicated above This table shows movement in absolute share price and not total shareholder return. Results presented should not and cannot be viewed as an indicator of future performance. Source: FactSet, Quantum database.

Goldman Sachs Global Investment Research 47 May 30, 2011 Europe: Energy: Oil & Gas - E&P

Salamander Energy (SMDR.L): Downgrading to Neutral after recent outperformance

Investment Profile Low High What happened Growth Growth We are downgrading Salamander Energy from Buy to Neutral with a 12-month target price of 500p. Since being Returns * Returns * added to the Buy List on April 7, 2010 the stock is up 0.9% vs. the oil and gas sector up 33% and the FTSE World Multiple Multiple Europe Index’s gain of 1%; over 12 months Salamander is up 24.7% vs. the FTSE World Europe’s rise of 18.4%. Volatility Volatility Since being added to the Buy List the stock has underperformed largely as a result of a disappointing Percentile 20th 40th 60th 80th 100th Salamander Energy PLC (SMDR.L) exploration campaign towards the beginning of 2010. Since we expanded our coverage universe (on November

Europe Oil & Gas Peer Group Average 5, 2010), however, Salamander has outperformed, up 27.6%, vs. our Oil and Gas universe up 11.2%. * Returns = Return on Capital For a complete description of the investment profile measures please refer to the disclosure section of this document. Current view We continue to see attractive upside potential (77%) to our 12-month target price of 500p and potential Key data Current Price (p) 282.6 attractions in the investment case. On our revised estimates, Salamander is currently trading at a c.13% discount 12 month price target (p) 500 Upside/(downside) (%) 77 to our core valuation, and as such, the potential benefits of drilling in the company’s 2011 exploration Market cap (£ mn) 356.8 programme are “free”. On our estimates, the potential uplift to our valuation in the event of 100% exploration Enterprise value ($ mn) 942.9 12/10 12/11E 12/12E 12/13E success in the short term would be c.66% (vs. a sector average of c.172%) – with Cat Ba (Vietnam) and future EBIT ($ mn) New 35.5 230.1 234.6 225.5 EBIT revision (%) (21.3) 1.9 (6.2) 49.4 drilling around the Angklung prospect offering the most significant re-rating potential. In the medium term, we EPS ($) New (0.12) 0.75 0.81 0.82 believe that the company’s de-risked acreage around the 2010 Angklung discovery should provide additional EPS ($) Old (0.02) 0.63 0.75 0.45 EV/DACF (X) 4.8 4.4 3.7 2.6 catalysts. We also note that production is likely to continue to increase, with 30kboepd of production a real P/E (X) NM 6.2 5.7 5.6 Dividend yield (%) 0.0 0.0 0.0 0.0 possibility in the medium term. FCF yield (%) 0.4 2.1 22.3 27.7 CROCI (%) 13.014.714.215.9 CROCI/WACC (X)------However, despite these attractions, following the recent outperformance of the stock since we expanded our EV/GCI 0.6 0.6 0.5 0.4 coverage universe, we now see greater upside and a better risk/reward in other names in our E&P coverage. We therefore downgrade Salamander from Buy to Neutral. Price performance chart Our 12-month SOTP-based target price is calculated using a US$100/bl oil price with exploration and appraisal 320 420 assets being valued on an NPV/bl basis. 300 400

280 380 The main upside risks to our view and target price are greater than expected exploration and appraisal success

260 360 in the company’s exploration programme and greater than expected production uplift. The key downside risk is

240 340 worse than expected failure in the company’s exploration programme.

220 320 200 300 May-10 Aug-10 Dec-10 Mar-11

Salamander Energy PLC (L) FTSE World Europe (GBP) (R)

Share price performance (%) 3 month 6 month 12 month Absolute (7.6) 21.2 24.7 Rel. to FTSE World Europe (GBP) (5.8) 14.5 5.4

Goldman Sachs Global Investment Research 48 May 30, 2011 Europe: Energy: Oil & Gas - E&P

Exhibit 55: Share price performance of Salamander Energy versus peer group Prices as of the close of May 26, 2011

Price Price as of May Price performance 3 month price 6 month price 12 month price Company Ticker Primary analyst currency 26, 2011 since Apr 7, 2010 performance performance performance Europe Oil & Gas Peer Group

Salamander Energy PLC SMDR.L Christophor Jost p 282.60 0.9% -7.6% 21.2% 24.7% Amerisur Resources Plc AMER.L Christophor Jost p 27.25 62.7% 14.7% 87.9% 65.2% Aminex Plc AMNX.L Christophor Jost p 7.88 -31.4% -12.5% -10.4% 5.7% Aurelian Oil & Gas Plc AUL.L Christophor Jost p 53.75 17.5% -37.3% -6.5% 34.4% Bahamas Petroleum Company Plc BPCB.L Christophor Jost p 16.25 291.6% -23.5% 35.4% 415.9% Bankers Petroleum Ltd BNKq.L Christophor Jost p 492.50 -18.6% -15.5% 13.9% 1.0% BG Group BG.L Michele della Vigna, CFA p 1392.00 19.7% -7.0% 15.3% 37.1% Borders and Southern BSTH.L Christophor Jost p 56.00 0.9% -2.6% -15.5% -23.5% BowLeven Plc BLVN.L Christophor Jost p 302.00 125.4% -10.0% -7.1% 182.2% BP plc BP.L Michele della Vigna, CFA p 461.20 -28.2% -6.8% 5.8% -6.3% BP plc (ADS) BP Michele della Vigna, CFA $ 45.38 -22.8% -5.7% 10.9% 7.0% Cairn Energy PLC CNE.L Christophor Jost p 440.70 3.2% 3.5% 11.6% 12.5% CEPSA CEP.MC Henry Morris € 27.82 34.1% -0.8% 50.4% 55.1% Chariot Oil and Gas Ltd CHARC.L Christophor Jost p 219.00 265.0% -9.1% 16.2% 61.9% Coastal Energy Company CEO.L Christophor Jost p 422.50 36.3% -2.9% 28.0% 99.8% Cove Energy Plc COVE.L Christophor Jost p 86.50 61.7% -8.0% -1.7% 73.0% Desire Petroleum Plc DES.L Christophor Jost p 11.50 -74.4% -64.9% -89.9% -85.5% Det Norske Oljeselskap ASA DETNOR.OL Christophor Jost Nkr 31.00 1.3% 10.7% 11.5% 16.5% DNO International ASA DNO.OL Christophor Jost Nkr 7.15 -8.0% -23.7% -12.3% -7.7% Dominion Petroleum Ltd DOPL.L Christophor Jost p 5.73 -10.2% -11.2% 15.7% -2.6% Dragon Oil PLC DGO.L Christophor Jost p 520.00 4.4% -11.4% 18.8% 31.0% EnCore Oil Plc EO.L Christophor Jost p 68.50 321.5% -42.9% -41.5% 321.5% ENI ENI.MI Michele della Vigna, CFA € 16.24 -6.4% -7.5% 3.8% 8.8% EnQuest Plc ENQ.L Christophor Jost p 132.10 32.2% -5.8% 1.5% 42.4% ERG ERG.MI Henry Morris € 9.16 -13.8% -8.6% -3.6% -3.5% Falkland Oil & Gas Ltd FOGL.L Christophor Jost p 61.25 -54.8% -24.4% -44.7% -67.8% Faroe Petroleum Plc FPM.L Christophor Jost p 152.50 26.6% -17.3% -15.3% 33.2% Galp GALP.LS Henry Morris € 14.47 10.5% -5.1% 10.5% 24.1% Global Energy Development Plc GBLE.L Christophor Jost p 64.00 -37.6% -31.9% -14.1% -41.6% Great Eastern Energy Corporation Ltd GEECq.L Christophor Jost p 417.50 -18.1% 14.4% 14.4% -14.2% Green Dragon Gas Ltd GDG.L Christophor Jost $ 12.85 95.6% -1.3% 15.5% 126.3% Gulf Keystone Petroleum Ltd GKP.L Christophor Jost p 145.25 64.1% -1.5% -19.5% 86.8% Gulfsands Petroleum Plc GPX.L Christophor Jost p 250.00 -25.4% -20.0% -31.9% -2.7% Hardy Oil and Gas Plc HAOG.L Christophor Jost p 209.25 -3.6% 27.0% 12.2% 28.8% Hellenic Petroleum HEPr.AT Henry Morris € 6.67 -16.0% -10.2% 21.1% 9.9% Heritage Oil HOIL.L Christophor Jost p 238.60 -40.8% -10.6% -37.0% -28.7% IGAS Energy Plc IGAS.L Christophor Jost p 72.50 -18.1% -2.0% 9.8% -14.7% Ithaca Energy Inc IAE.L Christophor Jost p 133.63 -5.6% -27.4% -6.6% -7.5% JKX Oil and Gas JKX.L Christophor Jost p 292.40 1.2% -3.8% -6.6% 28.2% Lundin Petroleum LUPE.ST Christophor Jost Skr 83.70 67.1% 6.1% 22.1% 139.5% Maurel & Prom MAUP.PA Christophor Jost € 15.55 23.2% 18.5% 54.0% 64.9% Max Petroleum Plc MXP.L Christophor Jost p 13.75 -34.5% -22.5% -34.5% -5.2% Melrose Resources Plc MRS.L Christophor Jost p 238.25 -21.9% -4.7% -0.7% -17.0% MOL MOLB.BU Henry Morris HUF 22800.00 8.1% -4.3% 21.3% 39.9% Motor Oil Hellas MORr.AT Henry Morris € 9.05 -8.6% 1.7% 21.6% 22.3% Nautical Petroleum Plc NPE.L Christophor Jost p 328.00 583.3% -26.3% -5.7% 556.0% Neste Oil NES1V.HE Henry Morris € 11.74 -13.4% -8.0% 5.8% -1.8% Nighthawk Energy Plc NGTE.L Christophor Jost p 6.36 -74.1% -28.5% -52.0% -69.0% Norse Energy Corp NEC.OL Christophor Jost Nkr 0.66 -78.3% -50.7% -50.7% -72.1% Northern Petroleum Plc NOP.L Christophor Jost p 112.50 -10.0% -15.9% 7.1% -3.0% Norwegian Energy Company ASA NOR.OL Christophor Jost Nkr 11.75 -39.4% -34.7% -29.6% -11.3% OMV OMVV.VI Michele della Vigna, CFA € 28.16 -6.4% -9.9% 5.4% 9.6% PA Resources AB PAR.ST Christophor Jost Skr 4.18 -67.4% -2.6% -28.5% -36.2% Panoro Energy ASA PENO.OL Christophor Jost Nkr 6.17 NA -20.4% -20.7% NA PKN PKNA.WA Henry Morris PLN 52.35 35.5% 16.8% 17.8% 42.6% Premier Oil PMO.L Christophor Jost p 464.10 42.6% -10.4% -1.5% 64.9% Regal Petroleum RPT.L Christophor Jost p 46.50 -33.6% 22.0% 138.5% 31.9% Repsol YPF REP.MC Michele della Vigna, CFA € 22.56 24.0% -6.6% 19.8% 40.1% Rockhopper Exploration Plc RKH.L Christophor Jost p 206.25 252.6% -11.5% -34.7% -10.3% Royal Dutch Shell plc (A ADR) RDSa Michele della Vigna, CFA $ 70.28 19.5% -1.8% 12.9% 39.6% Royal Dutch Shell plc (A) RDSa.AS Michele della Vigna, CFA € 24.66 11.7% -4.7% 5.0% 18.6% Royal Dutch Shell plc (B ADR) RDSb Michele della Vigna, CFA $ 70.90 25.6% -0.8% 15.1% 45.5% Royal Dutch Shell plc (B) RDSb.L Michele della Vigna, CFA p 2142.00 15.5% -2.7% 9.1% 26.5% Saras SRS.MI Henry Morris € 1.69 -18.3% -6.3% 20.3% 4.5% Schoeller-Bleckmann SBOE.VI Rudolf Dreyer € 64.50 51.8% 5.4% 15.5% 79.2% Serica Energy Plc SQZ.L Christophor Jost p 28.00 -69.2% -26.1% -44.3% -67.3% Soco International Plc SIA.L Christophor Jost p 377.50 -11.9% 12.0% 8.4% -3.2% Statoil STL.OL Michele della Vigna, CFA Nkr 136.40 -3.5% -7.0% 9.0% 6.5% Sterling Energy Plc SEY.L Christophor Jost p 45.75 -67.3% -34.9% -11.2% -60.6% TOTAL SA TOTF.PA Michele della Vigna, CFA € 39.20 -10.7% -10.5% 3.9% 4.3% Tower Resources Plc TOWR.L Christophor Jost p 5.78 344.2% -9.8% 42.6% 344.2% Tullow Oil Plc TLW.L Christophor Jost p 1305.00 -0.2% -7.8% 10.4% 23.8% Tupras TUPRS.IS Henry Morris YTL 42.80 31.7% 6.7% 23.3% 45.1% Valiant Petroleum Plc VPP.L Christophor Jost p 538.00 -13.9% -16.6% -2.7% -16.3% Petroplus Holdings PPHN.S Henry Morris SFr 13.10 -37.9% -11.8% 31.7% -20.0%

Average 33.0% -10.5% 2.5% 45.3%

FTSE World Europe (GBP) 388.58 1.0% -1.9% 5.8% 18.4%

Goldman Sachs Global Investment Research 49 May 30, 2011 Europe: Energy: Oil & Gas - E&P

Det Norske (DETNOR.OL): Downgrading to Neutral following outperformance

Investment Profile Low High What happened Growth Growth We are downgrading Det Norske from Buy to Neutral with a 12-month target price of Nkr55.50 following the Returns * Returns * stock’s recent strong performance. Since being added to the Buy List on November 5, 2010 the stock is up 22.5% Multiple Multiple vs. the oil and gas sector up 11.1% and the FTSE World Europe Index’s rise of 1.3%; over 12 months, Det Norske Volatility Volatility is up 16.5% vs. the FTSE World Europe’s rise of 18.4%. Percentile 20th 40th 60th 80th 100th Det Norske Oljeselskap ASA (DETNOR.OL) Europe Oil & Gas Peer Group Average Current view * Returns = Return on Capital For a complete description of the investment profile measures please refer to the We continue to see attractive upside potential (79%) to our 12-month target price of Nkr55.50, but now see better disclosure section of this document. opportunities elsewhere in the sector on a 12-month basis, following the stock’s recent outperformance and recent dry wells at Gullris and Dovregubben. There remain attractive elements to the investment case. On our Key data Current Price (Nkr) 31.00 updated estimates, reflecting the reserve and dry well updates, Det Norske is currently trading at a c.27% 12 month price target (Nkr) 55.50 Upside/(downside) (%) 79 discount to our core valuation, and as such exploration drilling in the company’s 2011 exploration programme is Market cap (Nkr mn) 3,444.4 “free”. We also note that a large proportion of its exploration costs are refunded as a result of tax rebates, and Enterprise value (Nkr mn) 4,589.6 12/10 12/11E 12/12E 12/13E we therefore believe it provides a low-risk exposure to North Sea exploration in Norway. The company plans to EBIT (Nkr mn) New (1,999.6) (530.4) 122.5 430.3 EBIT revision (%) (644.2) (458.2) NM (16.6) drill a number of wells in the coming quarters, resulting in further diversity of risk, but in aggregate we believe EPS (Nkr) New (6.21) (5.49) 0.16 2.50 that success at each one of these wells could result in an uplift of c.95% to our valuation. We view free EPS (Nkr) Old (2.31) (0.92) (0.97) 2.42 EV/DACF (X) 2.3 30.6 27.2 9.4 exploration of this order of magnitude positively, and include the stock in our Balanced Explorers Screen. P/E (X) NM NM 189.7 12.4 Dividend yield (%) 0.0 0.0 0.0 0.0 However, despite these benefits, we now see greater upside in other names in our E&P coverage and therefore FCF yield (%) 22.0 (58.6) (15.1) 11.3 CROCI (%) NMNMNMNMdowngrade Det Norske from Buy to Neutral. CROCI/WACC (X)------EV/GCI NM NM NM NM Our 12-month SOTP-based target price is calculated using a US$100/bl oil price with exploration and appraisal assets being valued on an NPV/bl basis. Price performance chart The main upside risks to our view and target price are greater than expected exploration and appraisal success 34 460

32 440 in the company’s exploration programme and greater than expected production uplift. The key downside risk is 30 420 worse than expected failure in the company’s exploration programme. Other risks include a fall in commodity 28 400 prices. 26 380 24 360 22 340

20 320

18 300 May-10 Aug-10 Dec-10 Mar-11

Det Norske Oljeselskap ASA (L) FTSE World Europe (GBP) (R)

Share price performance (%) 3 month 6 month 12 month Absolute 10.7 11.5 16.5 Rel. to FTSE World Europe (GBP) 12.9 5.4 (1.5)

Goldman Sachs Global Investment Research 50 May 30, 2011 Europe: Energy: Oil & Gas - E&P

Exhibit 56: Share price performance of Det Norske versus peer group Prices as of the close of May 26, 2011

Det Norske Oljeselskap ASA DETNOR.OL Christophor Jost Nkr 31.00 22.5% 10.7% 11.5% 16.5% Amerisur Resources Plc AMER.L Christophor Jost p 27.25 113.7% 14.7% 87.9% 65.2% Aminex Plc AMNX.L Christophor Jost p 7.88 5.7% -12.5% -10.4% 5.7% Aurelian Oil & Gas Plc AUL.L Christophor Jost p 53.75 -9.7% -37.3% -6.5% 34.4% Bahamas Petroleum Company Plc BPCB.L Christophor Jost p 16.25 159.6% -23.5% 35.4% 415.9% Bankers Petroleum Ltd BNKq.L Christophor Jost p 492.50 7.1% -15.5% 13.9% 1.0% BG Group BG.L Michele della Vigna, CFA p 1392.00 7.7% -7.0% 15.3% 37.1% Borders and Southern BSTH.L Christophor Jost p 56.00 -15.2% -2.6% -15.5% -23.5% BowLeven Plc BLVN.L Christophor Jost p 302.00 59.8% -10.0% -7.1% 182.2% BP plc BP.L Michele della Vigna, CFA p 461.20 3.3% -6.8% 5.8% -6.3% BP plc (ADS) BP Michele della Vigna, CFA $ 45.38 3.6% -5.7% 10.9% 7.0% Cairn Energy PLC CNE.L Christophor Jost p 440.70 14.3% 3.5% 11.6% 12.5% CEPSA CEP.MC Henry Morris € 27.82 53.7% -0.8% 50.4% 55.1% Chariot Oil and Gas Ltd CHARC.L Christophor Jost p 219.00 22.3% -9.1% 16.2% 61.9% Coastal Energy Company CEO.L Christophor Jost p 422.50 47.0% -2.9% 28.0% 99.8% Cove Energy Plc COVE.L Christophor Jost p 86.50 3.6% -8.0% -1.7% 73.0% Desire Petroleum Plc DES.L Christophor Jost p 11.50 -89.3% -64.9% -89.9% -85.5% DNO International ASA DNO.OL Christophor Jost Nkr 7.15 -22.2% -23.7% -12.3% -7.7% Dominion Petroleum Ltd DOPL.L Christophor Jost p 5.73 59.0% -11.2% 15.7% -2.6% Dragon Oil PLC DGO.L Christophor Jost p 520.00 15.6% -11.4% 18.8% 31.0% EnCore Oil Plc EO.L Christophor Jost p 68.50 -45.4% -42.9% -41.5% 321.5% ENI ENI.MI Michele della Vigna, CFA € 16.24 -1.0% -7.5% 3.8% 8.8% EnQuest Plc ENQ.L Christophor Jost p 132.10 -3.9% -5.8% 1.5% 42.4% ERG ERG.MI Henry Morris € 9.16 -8.0% -8.6% -3.6% -3.5% Falkland Oil & Gas Ltd FOGL.L Christophor Jost p 61.25 -41.0% -24.4% -44.7% -67.8% Faroe Petroleum Plc FPM.L Christophor Jost p 152.50 -14.3% -17.3% -15.3% 33.2% Galp GALP.LS Henry Morris € 14.47 -1.1% -5.1% 10.5% 24.1% Global Energy Development Plc GBLE.L Christophor Jost p 64.00 -3.0% -31.9% -14.1% -41.6% Great Eastern Energy Corporation Ltd GEECq.L Christophor Jost p 417.50 -5.1% 14.4% 14.4% -14.2% Green Dragon Gas Ltd GDG.L Christophor Jost $ 12.85 53.0% -1.3% 15.5% 126.3% Gulf Keystone Petroleum Ltd GKP.L Christophor Jost p 145.25 -24.2% -1.5% -19.5% 86.8% Gulfsands Petroleum Plc GPX.L Christophor Jost p 250.00 -25.8% -20.0% -31.9% -2.7% Hardy Oil and Gas Plc HAOG.L Christophor Jost p 209.25 11.3% 27.0% 12.2% 28.8% Hellenic Petroleum HEPr.AT Henry Morris € 6.67 22.6% -10.2% 21.1% 9.9% Heritage Oil HOIL.L Christophor Jost p 238.60 -33.9% -10.6% -37.0% -28.7% IGAS Energy Plc IGAS.L Christophor Jost p 72.50 13.3% -2.0% 9.8% -14.7% Ithaca Energy Inc IAE.L Christophor Jost p 133.63 -10.9% -27.4% -6.6% -7.5% JKX Oil and Gas JKX.L Christophor Jost p 292.40 1.8% -3.8% -6.6% 28.2% Lundin Petroleum LUPE.ST Christophor Jost Skr 83.70 21.2% 6.1% 22.1% 139.5% Maurel & Prom MAUP.PA Christophor Jost € 15.55 43.0% 18.5% 54.0% 64.9% Max Petroleum Plc MXP.L Christophor Jost p 13.75 -37.5% -22.5% -34.5% -5.2% Melrose Resources Plc MRS.L Christophor Jost p 238.25 -10.1% -4.7% -0.7% -17.0% MOL MOLB.BU Henry Morris HUF 22800.00 11.5% -4.3% 21.3% 39.9% Motor Oil Hellas MORr.AT Henry Morris € 9.05 16.0% 1.7% 21.6% 22.3% Nautical Petroleum Plc NPE.L Christophor Jost p 328.00 -9.6% -26.3% -5.7% 556.0% Neste Oil NES1V.HE Henry Morris € 11.74 -2.4% -8.0% 5.8% -1.8% Nighthawk Energy Plc NGTE.L Christophor Jost p 6.36 -49.2% -28.5% -52.0% -69.0% Norse Energy Corp NEC.OL Christophor Jost Nkr 0.66 -47.2% -50.7% -50.7% -72.1% Northern Petroleum Plc NOP.L Christophor Jost p 112.50 15.4% -15.9% 7.1% -3.0% Norwegian Energy Company ASA NOR.OL Christophor Jost Nkr 11.75 -29.2% -34.7% -29.6% -11.3% OMV OMVV.VI Michele della Vigna, CFA € 28.16 4.3% -9.9% 5.4% 9.6% PA Resources AB PAR.ST Christophor Jost Skr 4.18 -24.0% -2.6% -28.5% -36.2% Panoro Energy ASA PENO.OL Christophor Jost Nkr 6.17 7.3% -20.4% -20.7% NA PKN PKNA.WA Henry Morris PLN 52.35 14.3% 16.8% 17.8% 42.6% Premier Oil PMO.L Christophor Jost p 464.10 5.2% -10.4% -1.5% 64.9% Regal Petroleum RPT.L Christophor Jost p 46.50 204.9% 22.0% 138.5% 31.9% Repsol YPF REP.MC Michele della Vigna, CFA € 22.56 13.0% -6.6% 19.8% 40.1% Rockhopper Exploration Plc RKH.L Christophor Jost p 206.25 -34.1% -11.5% -34.7% -10.3% Royal Dutch Shell plc (A ADR) RDSa Michele della Vigna, CFA $ 70.28 3.5% -1.8% 12.9% 39.6% Royal Dutch Shell plc (A) RDSa.AS Michele della Vigna, CFA € 24.66 2.6% -4.7% 5.0% 18.6% Royal Dutch Shell plc (B ADR) RDSb Michele della Vigna, CFA $ 70.90 6.3% -0.8% 15.1% 45.5% Royal Dutch Shell plc (B) RDSb.L Michele della Vigna, CFA p 2142.00 4.8% -2.7% 9.1% 26.5% Salamander Energy PLC SMDR.L Christophor Jost p 282.60 27.6% -7.6% 21.2% 24.7% Saras SRS.MI Henry Morris € 1.69 13.4% -6.3% 20.3% 4.5% Schoeller-Bleckmann SBOE.VI Rudolf Dreyer € 64.50 22.9% 5.4% 15.5% 79.2% Serica Energy Plc SQZ.L Christophor Jost p 28.00 -29.6% -26.1% -44.3% -67.3% Soco International Plc SIA.L Christophor Jost p 377.50 16.9% 12.0% 8.4% -3.2% Statoil STL.OL Michele della Vigna, CFA Nkr 136.40 10.5% -7.0% 9.0% 6.5% Sterling Energy Plc SEY.L Christophor Jost p 45.75 -31.2% -34.9% -11.2% -60.6% TOTAL SA TOTF.PA Michele della Vigna, CFA € 39.20 -3.4% -10.5% 3.9% 4.3% Tower Resources Plc TOWR.L Christophor Jost p 5.78 40.0% -9.8% 42.6% 344.2% Tullow Oil Plc TLW.L Christophor Jost p 1305.00 4.3% -7.8% 10.4% 23.8% Tupras TUPRS.IS Henry Morris YTL 42.80 11.5% 6.7% 23.3% 45.1% Valiant Petroleum Plc VPP.L Christophor Jost p 538.00 -7.2% -16.6% -2.7% -16.3% Petroplus Holdings PPHN.S Henry Morris SFr 13.10 22.7% -11.8% 31.7% -20.0%

Average 11.1% -10.6% 2.5% 44.8%

FTSE World Europe (GBP) 388.58 1.3% -1.9% 5.8% 18.4%

Goldman Sachs Global Investment Research 51 May 30, 2011 Europe: Energy: Oil & Gas - E&P

Coastal Energy (CEO.L): Removing from Buy List, better upside elsewhere; Neutral

Investment Profile Low High What happened Growth Growth We are downgrading Coastal Energy from Buy to Neutral with a 12-month target price of 774p. Since being Returns * Returns * added to the Buy List on January 31, 2011 the stock is down 4% vs. the oil and gas sector’s fall of 8.8% and the Multiple Multiple FTSE World Europe’s fall of 0.6%; over 12 months, Coastal is up 99.8% vs. the FTSE World Europe’s rise of Volatility Volatility 81.4%. Percentile 20th 40th 60th 80th 100th Coastal Energy Company (CEO.L) Europe Oil & Gas Peer Group Average Current view * Returns = Return on Capital For a complete description of the investment profile measures please refer to the We continue to see attractive upside potential (83%) to our 12-month target price of 774p but now see better disclosure section of this document. opportunities elsewhere in the sector over the next 12 months following the stock’s decent performance, despite a reserves downgrade at Bua Ban. On our revised forecasts, including the reserve downgrade at the Bua Ban Key data Current Price (p) 422.5 asset, Coastal continues to trade at a discount to our core valuation. Coastal’s operations are focused in 12 month price target (p) 774 Upside/(downside) (%) 83 Thailand, where it holds a 100% interest in blocks G5/43 and G5/50 in the Gulf of Thailand. Future exploration Market cap (£ mn) 463.1 activity is likely to focus on various plays around the Bua Ban asset. On our estimates, the potential uplift to our Enterprise value ($ mn) 793.5 12/10 12/11E 12/12E 12/13E valuation in the event of 100% exploration success in the short term would be c.54% (vs. a sector average of EBIT ($ mn) New 47.0 342.8 388.9 77.8 EBIT revision (%) (78.0) (1.5) (14.9) 28.8 c.172%) – on an individual basis the exploration wells due to be drilled offer relatively little upside, but EPS ($) New 0.131.621.930.53combined, they provide attractive materiality. Additional upside could result if it transpires that the shale play EPS ($) Old 0.921.622.210.41 EV/DACF (X) 4.5 4.1 2.5 7.4 (currently risked at a 10% likelihood of success) at Bua Ban is commercial. However, despite these advantages, P/E (X) 33.2 4.3 3.6 13.2 Dividend yield (%) 0.0 0.0 0.0 0.0 we now see greater upside and a better risk/reward in other names in our E&P coverage and therefore FCF yield (%) (7.9) 5.0 29.2 8.9 CROCI (%) NMNMNMNMdowngrade Coastal from Buy to Neutral. CROCI/WACC (X)------EV/GCI NM NM NM NM Our 12-month SOTP-based target price is calculated using a US$100/bl oil price. We currently give value for two exploration prospects around Bua Ban North, one on the Bua Ban Terrace and one exploration well at Bua Ban

Price performance chart South. We also give a small amount of risked value (now risked at 15% likelihood of success versus 10% 550 440 previously) for potential commercialization of the lacustrine shale play. 500 420

450 400 The main upside risks to our view and target price are greater than expected exploration and appraisal success

400 380 in the company’s exploration programme and greater than expected production uplift. The key downside risk is

350 360 worse than expected failure in the company’s exploration programme.

300 340

250 320

200 300 May-10 Aug-10 Dec-10 Mar-11

Coastal Energy Company (L) FTSE World Europe (GBP) (R)

Share price performance (%) 3 month 6 month 12 month Absolute (2.9) 28.0 99.8 Rel. to FTSE World Europe (GBP) (1.0) 21.0 68.8

Goldman Sachs Global Investment Research 52 May 30, 2011 Europe: Energy: Oil & Gas - E&P

Exhibit 57: Share price performance for Coastal Energy versus peer group Prices as of the close of May 26, 2011

Price Price as of May Price performance 3 month price 6 month price 12 month price Company Ticker Primary analyst currency 26, 2011 since Jan 31, 2011 performance performance performance Europe Oil & Gas Peer Group

Coastal Energy Company CEO.L Christophor Jost p 422.50 -4.0% -2.9% 28.0% 99.8% Amerisur Resources Plc AMER.L Christophor Jost p 27.25 19.8% 14.7% 87.9% 65.2% Aminex Plc AMNX.L Christophor Jost p 7.88 -6.6% -12.5% -10.4% 5.7% Aurelian Oil & Gas Plc AUL.L Christophor Jost p 53.75 -30.0% -37.3% -6.5% 34.4% Bahamas Petroleum Company Plc BPCB.L Christophor Jost p 16.25 -15.6% -23.5% 35.4% 415.9% Bankers Petroleum Ltd BNKq.L Christophor Jost p 492.50 -5.3% -15.5% 13.9% 1.0% BG Group BG.L Michele della Vigna, CFA p 1392.00 -0.6% -7.0% 15.3% 37.1% Borders and Southern BSTH.L Christophor Jost p 56.00 -11.1% -2.6% -15.5% -23.5% BowLeven Plc BLVN.L Christophor Jost p 302.00 -13.8% -10.0% -7.1% 182.2% BP plc BP.L Michele della Vigna, CFA p 461.20 -4.9% -6.8% 5.8% -6.3% BP plc (ADS) BP Michele della Vigna, CFA $ 45.38 -4.4% -5.7% 10.9% 7.0% Cairn Energy PLC CNE.L Christophor Jost p 440.70 6.4% 3.5% 11.6% 12.5% CEPSA CEP.MC Henry Morris € 27.82 31.1% -0.8% 50.4% 55.1% Chariot Oil and Gas Ltd CHARC.L Christophor Jost p 219.00 -15.9% -9.1% 16.2% 61.9% Cove Energy Plc COVE.L Christophor Jost p 86.50 -17.6% -8.0% -1.7% 73.0% Desire Petroleum Plc DES.L Christophor Jost p 11.50 -70.1% -64.9% -89.9% -85.5% Det Norske Oljeselskap ASA DETNOR.OL Christophor Jost Nkr 31.00 9.5% 10.7% 11.5% 16.5% DNO International ASA DNO.OL Christophor Jost Nkr 7.15 -26.1% -23.7% -12.3% -7.7% Dominion Petroleum Ltd DOPL.L Christophor Jost p 5.73 -12.6% -11.2% 15.7% -2.6% Dragon Oil PLC DGO.L Christophor Jost p 520.00 -10.4% -11.4% 18.8% 31.0% EnCore Oil Plc EO.L Christophor Jost p 68.50 -49.1% -42.9% -41.5% 321.5% ENI ENI.MI Michele della Vigna, CFA € 16.24 -6.1% -7.5% 3.8% 8.8% EnQuest Plc ENQ.L Christophor Jost p 132.10 -6.6% -5.8% 1.5% 42.4% ERG ERG.MI Henry Morris € 9.16 -12.3% -8.6% -3.6% -3.5% Falkland Oil & Gas Ltd FOGL.L Christophor Jost p 61.25 -34.8% -24.4% -44.7% -67.8% Faroe Petroleum Plc FPM.L Christophor Jost p 152.50 -22.6% -17.3% -15.3% 33.2% Galp GALP.LS Henry Morris € 14.47 -3.0% -5.1% 10.5% 24.1% Global Energy Development Plc GBLE.L Christophor Jost p 64.00 -24.3% -31.9% -14.1% -41.6% Great Eastern Energy Corporation Ltd GEECq.L Christophor Jost p 417.50 14.4% 14.4% 14.4% -14.2% Green Dragon Gas Ltd GDG.L Christophor Jost $ 12.85 24.5% -1.3% 15.5% 126.3% Gulf Keystone Petroleum Ltd GKP.L Christophor Jost p 145.25 -8.6% -1.5% -19.5% 86.8% Gulfsands Petroleum Plc GPX.L Christophor Jost p 250.00 -25.2% -20.0% -31.9% -2.7% Hardy Oil and Gas Plc HAOG.L Christophor Jost p 209.25 39.5% 27.0% 12.2% 28.8% Hellenic Petroleum HEPr.AT Henry Morris € 6.67 -4.3% -10.2% 21.1% 9.9% Heritage Oil HOIL.L Christophor Jost p 238.60 -26.8% -10.6% -37.0% -28.7% IGAS Energy Plc IGAS.L Christophor Jost p 72.50 2.8% -2.0% 9.8% -14.7% Ithaca Energy Inc IAE.L Christophor Jost p 133.63 -22.1% -27.4% -6.6% -7.5% JKX Oil and Gas JKX.L Christophor Jost p 292.40 0.4% -3.8% -6.6% 28.2% Lundin Petroleum LUPE.ST Christophor Jost Skr 83.70 4.1% 6.1% 22.1% 139.5% Maurel & Prom MAUP.PA Christophor Jost € 15.55 13.5% 18.5% 54.0% 64.9% Max Petroleum Plc MXP.L Christophor Jost p 13.75 -32.1% -22.5% -34.5% -5.2% Melrose Resources Plc MRS.L Christophor Jost p 238.25 1.4% -4.7% -0.7% -17.0% MOL MOLB.BU Henry Morris HUF 22800.00 2.0% -4.3% 21.3% 39.9% Motor Oil Hellas MORr.AT Henry Morris € 9.05 -2.3% 1.7% 21.6% 22.3% Nautical Petroleum Plc NPE.L Christophor Jost p 328.00 -34.8% -26.3% -5.7% 556.0% Neste Oil NES1V.HE Henry Morris € 11.74 -14.8% -8.0% 5.8% -1.8% Nighthawk Energy Plc NGTE.L Christophor Jost p 6.36 -36.5% -28.5% -52.0% -69.0% Norse Energy Corp NEC.OL Christophor Jost Nkr 0.66 -54.2% -50.7% -50.7% -72.1% Northern Petroleum Plc NOP.L Christophor Jost p 112.50 -18.5% -15.9% 7.1% -3.0% Norwegian Energy Company ASA NOR.OL Christophor Jost Nkr 11.75 -37.8% -34.7% -29.6% -11.3% OMV OMVV.VI Michele della Vigna, CFA € 28.16 -13.1% -9.9% 5.4% 9.6% PA Resources AB PAR.ST Christophor Jost Skr 4.18 -17.2% -2.6% -28.5% -36.2% Panoro Energy ASA PENO.OL Christophor Jost Nkr 6.17 -28.9% -20.4% -20.7% NA PKN PKNA.WA Henry Morris PLN 52.35 9.7% 16.8% 17.8% 42.6% Premier Oil PMO.L Christophor Jost p 464.10 -8.4% -10.4% -1.5% 64.9% Regal Petroleum RPT.L Christophor Jost p 46.50 69.1% 22.0% 138.5% 31.9% Repsol YPF REP.MC Michele della Vigna, CFA € 22.56 -1.8% -6.6% 19.8% 40.1% Rockhopper Exploration Plc RKH.L Christophor Jost p 206.25 -42.1% -11.5% -34.7% -10.3% Royal Dutch Shell plc (A ADR) RDSa Michele della Vigna, CFA $ 70.28 -1.0% -1.8% 12.9% 39.6% Royal Dutch Shell plc (A) RDSa.AS Michele della Vigna, CFA € 24.66 -4.3% -4.7% 5.0% 18.6% Royal Dutch Shell plc (B ADR) RDSb Michele della Vigna, CFA $ 70.90 0.5% -0.8% 15.1% 45.5% Royal Dutch Shell plc (B) RDSb.L Michele della Vigna, CFA p 2142.00 -1.3% -2.7% 9.1% 26.5% Salamander Energy PLC SMDR.L Christophor Jost p 282.60 -2.9% -7.6% 21.2% 24.7% Saras SRS.MI Henry Morris € 1.69 -6.0% -6.3% 20.3% 4.5% Schoeller-Bleckmann SBOE.VI Rudolf Dreyer € 64.50 7.5% 5.4% 15.5% 79.2% Serica Energy Plc SQZ.L Christophor Jost p 28.00 -29.6% -26.1% -44.3% -67.3% Soco International Plc SIA.L Christophor Jost p 377.50 3.7% 12.0% 8.4% -3.2% Statoil STL.OL Michele della Vigna, CFA Nkr 136.40 -2.7% -7.0% 9.0% 6.5% Sterling Energy Plc SEY.L Christophor Jost p 45.75 -33.0% -34.9% -11.2% -60.6% TOTAL SA TOTF.PA Michele della Vigna, CFA € 39.20 -8.2% -10.5% 3.9% 4.3% Tower Resources Plc TOWR.L Christophor Jost p 5.78 13.8% -9.8% 42.6% 344.2% Tullow Oil Plc TLW.L Christophor Jost p 1305.00 -1.7% -7.8% 10.4% 23.8% Tupras TUPRS.IS Henry Morris YTL 42.80 2.9% 6.7% 23.3% 45.1% Valiant Petroleum Plc VPP.L Christophor Jost p 538.00 -15.0% -16.6% -2.7% -16.3% Petroplus Holdings PPHN.S Henry Morris SFr 13.10 -15.3% -11.8% 31.7% -20.0%

Average -8.8% -10.6% 2.5% 44.8%

FTSE World Europe (GBP) 388.58 -0.6% -1.9% 5.8% 18.4%

Goldman Sachs Global Investment Research 53 May 30, 2011 Europe: Energy: Oil & Gas - E&P

Encore Oil (EO.L): Underperformance and Cladhan reaction overdone; up to Neutral

Investment Profile Low High What happened Growth Growth We are upgrading Encore Oil to Neutral from Sell following the stock’s recent underperformance. Since being Returns * Returns * added to the Sell List on November 5, 2010 the stock is down 45.4% vs. the oil and gas sector up 11.1% and the Multiple Multiple FTSE World Europe Index up 1.3%; over 12 months Encore is up 321.5% vs. the FTSE World Europe up 18.4%. Volatility Volatility Percentile 20th 40th 60th 80th 100th EnCore Oil Plc (EO.L) Current view Europe Oil & Gas Peer Group Average We upgrade Encore from Sell to Neutral with a 12-month target price of 96p, implying 40% potential upside, * Returns = Return on Capital For a complete description of the investment profile measures please refer to the following a period of sector-relative underperformance. Although recent news flow on the Cladhan appraisal disclosure section of this document. drilling has been disappointing, we believe too much value has been taken out of the stock and thus upgrade Encore to Neutral. Following the announcement on the first well on May 18, 2011, the stock is down 39% Key data Current Price (p) 68.5 implying a c.US$200 mn loss as a result of the failed Cladhan appraisal wells. We believe this overstates the 12 month price target (p) 96 Upside/(downside) (%) 40 downside risk, as on our updated estimates, we valued the Cladhan discovery and associated upside at Market cap (£ mn) 198.8 c.US$146 mn on a pre-drill basis (and note that some value still remains). Following results of the appraisal Enterprise value (£ mn) 178.7 6/10 6/11E 6/12E 6/13E drilling on the Cladhan field we update our estimates for the discovered resource to 30 mnbls (on a gross EBIT (£ mn) New (15.1) (2.8) (2.8) (2.8) EBIT revision (%) 0.0 0.0 0.0 0.0 un-risked basis) versus 45 mn bls previously. We also update our estimate of potential gross upside (on top of EPS (p) New 3.86 (0.58) (0.62) (0.64) existing, discovered resource) from 84 mn bls down to c. 17 mn bls. Despite the downgrade of our Cladhan EPS (p) Old 3.86 (0.58) (0.62) (0.64) EV/DACF (X) NMNMNMNMvolume estimates, we see a number of positives for Encore. The company holds a 15% stake at its operated P/E (X) 4.4 NM NM NM Dividend yield (%) 0.0 0.0 0.0 0.0 Catcher discovery where we expect substantial follow-on towards end of this year. We regard Spaniards as a FCF yield (%) (6.0) (5.6) (5.7) (0.9) CROCI (%) NMNMNMNMpotentially interesting exploration play, with the potential for high upside in the event of proving up additional CROCI/WACC (X)------reserves, while Tudor Rose, and the potential for a gas storage project at Esmond, offer further portfolio EV/GCI NM NM NM NM optionality. On our estimates the stock currently offers c.6% upside to our core valuation and offers short-term

re-rating potential of 86% in the event of success. Price performance chart 160 460 We value Encore using a SOTP methodology, assuming a US$100/bl oil price assumption. We have a 12-month 140 440 price target of 96p (from 133p). Exploration and discoveries are valued using a risked NPV/bl approach. 120 420 100 400 Key downside risks to our view and target price are worse than expected exploration and appraisal activities. 80 380 Key upside risks to our view and target price are greater than expected volumes at Cladhan and greater than 60 360

40 340 expected success around the Catcher discovery. We note that Encore’s position in the Catcher block could make 20 320 it an attractive target for the larger partners in the block at the right price. 0 300 May-10 Aug-10 Dec-10 Mar-11

EnCore Oil Plc (L) FTSE World Europe (GBP) (R)

Share price performance (%) 3 month 6 month 12 month Absolute (42.9) (41.5) 321.5 Rel. to FTSE World Europe (GBP) (41.8) (44.7) 256.1

Goldman Sachs Global Investment Research 54 May 30, 2011 Europe: Energy: Oil & Gas - E&P

Exhibit 58: Share price performance for Encore Oil versus peer group Prices as of the close of May 26, 2011

EnCore Oil Plc EO.L Christophor Jost p 68.50 -45.4% -42.9% -41.5% 321.5% Amerisur Resources Plc AMER.L Christophor Jost p 27.25 113.7% 14.7% 87.9% 65.2% Aminex Plc AMNX.L Christophor Jost p 7.88 5.7% -12.5% -10.4% 5.7% Aurelian Oil & Gas Plc AUL.L Christophor Jost p 53.75 -9.7% -37.3% -6.5% 34.4% Bahamas Petroleum Company Plc BPCB.L Christophor Jost p 16.25 159.6% -23.5% 35.4% 415.9% Bankers Petroleum Ltd BNKq.L Christophor Jost p 492.50 7.1% -15.5% 13.9% 1.0% BG Group BG.L Michele della Vigna, CFA p 1392.00 7.7% -7.0% 15.3% 37.1% Borders and Southern BSTH.L Christophor Jost p 56.00 -15.2% -2.6% -15.5% -23.5% BowLeven Plc BLVN.L Christophor Jost p 302.00 59.8% -10.0% -7.1% 182.2% BP plc BP.L Michele della Vigna, CFA p 461.20 3.3% -6.8% 5.8% -6.3% BP plc (ADS) BP Michele della Vigna, CFA $ 45.38 3.6% -5.7% 10.9% 7.0% Cairn Energy PLC CNE.L Christophor Jost p 440.70 14.3% 3.5% 11.6% 12.5% CEPSA CEP.MC Henry Morris € 27.82 53.7% -0.8% 50.4% 55.1% Chariot Oil and Gas Ltd CHARC.L Christophor Jost p 219.00 22.3% -9.1% 16.2% 61.9% Coastal Energy Company CEO.L Christophor Jost p 422.50 47.0% -2.9% 28.0% 99.8% Cove Energy Plc COVE.L Christophor Jost p 86.50 3.6% -8.0% -1.7% 73.0% Desire Petroleum Plc DES.L Christophor Jost p 11.50 -89.3% -64.9% -89.9% -85.5% Det Norske Oljeselskap ASA DETNOR.OL Christophor Jost Nkr 31.00 22.5% 10.7% 11.5% 16.5% DNO International ASA DNO.OL Christophor Jost Nkr 7.15 -22.2% -23.7% -12.3% -7.7% Dominion Petroleum Ltd DOPL.L Christophor Jost p 5.73 59.0% -11.2% 15.7% -2.6% Dragon Oil PLC DGO.L Christophor Jost p 520.00 15.6% -11.4% 18.8% 31.0% ENI ENI.MI Michele della Vigna, CFA € 16.24 -1.0% -7.5% 3.8% 8.8% EnQuest Plc ENQ.L Christophor Jost p 132.10 -3.9% -5.8% 1.5% 42.4% ERG ERG.MI Henry Morris € 9.16 -8.0% -8.6% -3.6% -3.5% Falkland Oil & Gas Ltd FOGL.L Christophor Jost p 61.25 -41.0% -24.4% -44.7% -67.8% Faroe Petroleum Plc FPM.L Christophor Jost p 152.50 -14.3% -17.3% -15.3% 33.2% Galp GALP.LS Henry Morris € 14.47 -1.1% -5.1% 10.5% 24.1% Global Energy Development Plc GBLE.L Christophor Jost p 64.00 -3.0% -31.9% -14.1% -41.6% Great Eastern Energy Corporation Ltd GEECq.L Christophor Jost p 417.50 -5.1% 14.4% 14.4% -14.2% Green Dragon Gas Ltd GDG.L Christophor Jost $ 12.85 53.0% -1.3% 15.5% 126.3% Gulf Keystone Petroleum Ltd GKP.L Christophor Jost p 145.25 -24.2% -1.5% -19.5% 86.8% Gulfsands Petroleum Plc GPX.L Christophor Jost p 250.00 -25.8% -20.0% -31.9% -2.7% Hardy Oil and Gas Plc HAOG.L Christophor Jost p 209.25 11.3% 27.0% 12.2% 28.8% Hellenic Petroleum HEPr.AT Henry Morris € 6.67 22.6% -10.2% 21.1% 9.9% Heritage Oil HOIL.L Christophor Jost p 238.60 -33.9% -10.6% -37.0% -28.7% IGAS Energy Plc IGAS.L Christophor Jost p 72.50 13.3% -2.0% 9.8% -14.7% Ithaca Energy Inc IAE.L Christophor Jost p 133.63 -10.9% -27.4% -6.6% -7.5% JKX Oil and Gas JKX.L Christophor Jost p 292.40 1.8% -3.8% -6.6% 28.2% Lundin Petroleum LUPE.ST Christophor Jost Skr 83.70 21.2% 6.1% 22.1% 139.5% Maurel & Prom MAUP.PA Christophor Jost € 15.55 43.0% 18.5% 54.0% 64.9% Max Petroleum Plc MXP.L Christophor Jost p 13.75 -37.5% -22.5% -34.5% -5.2% Melrose Resources Plc MRS.L Christophor Jost p 238.25 -10.1% -4.7% -0.7% -17.0% MOL MOLB.BU Henry Morris HUF 22800.00 11.5% -4.3% 21.3% 39.9% Motor Oil Hellas MORr.AT Henry Morris € 9.05 16.0% 1.7% 21.6% 22.3% Nautical Petroleum Plc NPE.L Christophor Jost p 328.00 -9.6% -26.3% -5.7% 556.0% Neste Oil NES1V.HE Henry Morris € 11.74 -2.4% -8.0% 5.8% -1.8% Nighthawk Energy Plc NGTE.L Christophor Jost p 6.36 -49.2% -28.5% -52.0% -69.0% Norse Energy Corp NEC.OL Christophor Jost Nkr 0.66 -47.2% -50.7% -50.7% -72.1% Northern Petroleum Plc NOP.L Christophor Jost p 112.50 15.4% -15.9% 7.1% -3.0% Norwegian Energy Company ASA NOR.OL Christophor Jost Nkr 11.75 -29.2% -34.7% -29.6% -11.3% OMV OMVV.VI Michele della Vigna, CFA € 28.16 4.3% -9.9% 5.4% 9.6% PA Resources AB PAR.ST Christophor Jost Skr 4.18 -24.0% -2.6% -28.5% -36.2% Panoro Energy ASA PENO.OL Christophor Jost Nkr 6.17 7.3% -20.4% -20.7% NA Petroplus Holdings PPHN.S Henry Morris SFr 13.10 22.7% -11.8% 31.7% -20.0% PKN PKNA.WA Henry Morris PLN 52.35 14.3% 16.8% 17.8% 42.6% Premier Oil PMO.L Christophor Jost p 464.10 5.2% -10.4% -1.5% 64.9% Regal Petroleum RPT.L Christophor Jost p 46.50 204.9% 22.0% 138.5% 31.9% Repsol YPF REP.MC Michele della Vigna, CFA € 22.56 13.0% -6.6% 19.8% 40.1% Rockhopper Exploration Plc RKH.L Christophor Jost p 206.25 -34.1% -11.5% -34.7% -10.3% Royal Dutch Shell plc (A ADR) RDSa Michele della Vigna, CFA $ 70.28 3.5% -1.8% 12.9% 39.6% Royal Dutch Shell plc (A) RDSa.AS Michele della Vigna, CFA € 24.66 2.6% -4.7% 5.0% 18.6% Royal Dutch Shell plc (B ADR) RDSb Michele della Vigna, CFA $ 70.90 6.3% -0.8% 15.1% 45.5% Royal Dutch Shell plc (B) RDSb.L Michele della Vigna, CFA p 2142.00 4.8% -2.7% 9.1% 26.5% Salamander Energy PLC SMDR.L Christophor Jost p 282.60 27.6% -7.6% 21.2% 24.7% Saras SRS.MI Henry Morris € 1.69 13.4% -6.3% 20.3% 4.5% Schoeller-Bleckmann SBOE.VI Rudolf Dreyer € 64.50 22.9% 5.4% 15.5% 79.2% Serica Energy Plc SQZ.L Christophor Jost p 28.00 -29.6% -26.1% -44.3% -67.3% Soco International Plc SIA.L Christophor Jost p 377.50 16.9% 12.0% 8.4% -3.2% Statoil STL.OL Michele della Vigna, CFA Nkr 136.40 10.5% -7.0% 9.0% 6.5% Sterling Energy Plc SEY.L Christophor Jost p 45.75 -31.2% -34.9% -11.2% -60.6% TOTAL SA TOTF.PA Michele della Vigna, CFA € 39.20 -3.4% -10.5% 3.9% 4.3% Tower Resources Plc TOWR.L Christophor Jost p 5.78 40.0% -9.8% 42.6% 344.2% Tullow Oil Plc TLW.L Christophor Jost p 1305.00 4.3% -7.8% 10.4% 23.8% Tupras TUPRS.IS Henry Morris YTL 42.80 11.5% 6.7% 23.3% 45.1% Valiant Petroleum Plc VPP.L Christophor Jost p 538.00 -7.2% -16.6% -2.7% -16.3%

Average 11.1% -10.6% 2.5% 44.8%

FTSE World Europe (GBP) 388.58 1.3% -1.9% 5.8% 18.4% Index performance in stock price currency 388.58 1.3% -1.9% 5.8% 18.4%

Goldman Sachs Global Investment Research 55 May 30, 2011 Europe: Energy: Oil & Gas - E&P

Financial Advisory disclosures

Goldman Sachs is acting as financial advisor to another party in an announced strategic transaction which may be material to Tullow Oil Plc.

Goldman Sachs Global Investment Research 56 May 30, 2011 Europe: Energy: Oil & Gas - E&P

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Goldman Sachs Global Investment Research 57 May 30, 2011 Europe: Energy: Oil & Gas - E&P

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Goldman Sachs Global Investment Research 58 May 30, 2011 Europe: Energy: Oil & Gas - E&P

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Goldman Sachs Global Investment Research 59 May 30, 2011 Europe: Energy: Oil & Gas - E&P

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Goldman Sachs Global Investment Research 60