Energy: Oil & Gas - Bahamas Petroleum Company Plc

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November 5, 2010 Europe: Energy: Oil & Gas - E&P E&P universe tends to steer clear of development projects We have analysed value levels of our E&P universe by development status. On an equal weighted basis, value is split fairly evenly between production (24%), discoveries (28%) and short-term exploration (24%), with medium-term exploration only being a relatively smaller part (14%) due to the 50% discount we attach to this type of activity and the fact that we are selective in when to give value to this. Development only accounts for 10% of the overall value. This is not unexpected given that the business model of many firms in the universe is to discover and farm out to companies with higher levels of technical ability. We note that the companies with substantial value in development are often those with unconventional or particularly large assets (i.e. Great Eastern, Nighthawk, Bankers). We believe that development for these companies should actually be a positive catalyst – as additional reserves are proved up, development risk decreases and production levels increase. Exhibit 28: Our E&P universe has relatively little value sitting in assets under development % value exposure of operational assets by development status Development status as % of total operational asset value 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Great Eastern Energy Nighthawk Energy Soco Bankers petroleum Amerisur Melrose Resources Maurel & Prom Green Dragon Global Energy Development Northern Petroleum Norse Energy Ithaca Tullow PA Resources Aminex Plc Noreco DNO Valiant Petroleum Regal Aurelian Igas Bowleven Det Norske Nautical Petroleum Encore Faroe Petroleum Panoro Lundin Petroleum Rockhopper Heritage Oil Cove Energy JKX Dana Petroleum Gulf Keystone Max Petroleum Hardy Oil Serica Premier Oil Salamander Enquest Dragon Oil Gulfsands Coastal Energy Falkland Oil & Gas Borders and Southern Desire Petroleum Sterling Energy Tower Resources Dominion BPC Chariot Oil & Gas Source: Company data, Goldman Sachs Research estimates. Development Producing and cash Discovery ST exploration LT exploration Goldman Sachs Global Investment Research 26
November 5, 2010 Europe: Energy: Oil & Gas - E&P Exploration portfolios: Re-rating potential should come at the right price Exploration is a key driver of share prices in the E&P space. We expect significant exploration catalysts over the next 12 months. Most of the companies with the highest re-rating potential are the smaller companies – a result of the greater impact that exploration catalysts have on a smaller capital base with higher leverage to the catalyst. We see the biggest re-rating potential in Borders and Southern and Falklands Oil and Gas as both companies are highly levered to exploration success in a frontier basin (the South Falklands basin) and neither has substantial core value outside these exploration catalysts. Desire also sees substantial rerating potential in the northern Falklands basin. Other companies with high-impact re-rating potential include Hardy (offshore exploration in India) and Max Petroleum (Kazakhstan). Of the larger companies (in excess of US$500 mn market cap), Rockhopper, Heritage, Noreco and Bowleven have the most leverage to exploration catalysts over the next 12 months on our estimates. Exhibit 29: Falklands basin offers the biggest potential to re-rate at present but risks are high Re-rating potential in the event of 100% success in the next 4 quarters; based on date of well spud (not TD). FOGL and Borders have 1347% and 1694% respectively Re‐rating potential in the event of 100% exploration success 800% 700% 600% 500% 400% 300% 200% 100% 0% Falkland Oil & Gas Borders and Southern Desire Petroleum Max Petroleum Serica Hardy Oil Noreco Bowleven Coastal Energy Aurelian Melrose Resources Heritage Oil Rockhopper Faroe Petroleum Tower Resources DNO Cove Energy Det Norske Salamander Sterling Energy Gulfsands Regal Valiant Petroleum Panoro JKX Lundin Petroleum Encore PA Resources Aminex Plc Premier Oil Gulf Keystone Maurel & Prom Nautical Petroleum Northern Petroleum Dana Petroleum Tullow Amerisur Dominion Enquest Bankers petroleum Soco Global Energy … Norse Energy Chariot Oil & Gas Nighthawk Energy Ithaca Great Eastern Energy BPC Igas Dragon Oil Green Dragon Source: Goldman Sachs Research estimates. Q4 2010 Q1 2011 Q2 2011 Q3 2011 Goldman Sachs Global Investment Research 27
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Energy: Oil & Gas - Bahamas Petroleum Company Plc

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