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Oil & Gas


Global Cost Study

Oil & Gas Global Cost Study

JUNE

2 010

Randy Ollenberger

(403) 515-1502

BMO Nesbitt Burns Inc. (Canada)

Jim Byrne, P. Eng., CFA

june

BMO Nesbitt Burns Inc. (Canada)

(303) 436-1125

BMO Capital Markets Corp. (U.S.)

(403) 515-1557

BMO Nesbitt Burns Inc. (Canada)

Mark Leggett, CFA

Alan Laws, CFA


Mike Mazar, CFA

(403) 515-1501

BMO Nesbitt Burns Inc. (Canada)

(403) 515-1538

BMO Nesbitt Burns Inc. (Canada)

(403) 515-1508

Gord Tait, CFA


Dan McSpirit

(303) 436-1117

BMO Capital Markets Corp. (U.S.)

Christopher Brown, P.Eng. (403) 515-1574


BMO Nesbitt Burns Inc. (Canada)

2010

this report was prepared in part by analysts employed by a canadian affiliate, bmo nesbitt burns inc., and a uk affiliate, bmo
capital markets ltd., authorised and regulated by the financial services authority in the uk, and who are not registered
as research analysts under finra rules. for disclosure statements, including the analysts certification, please refer to
pages g3 to g5.

BMO Capital Markets Oil & Gas Research

Equity Research
co-heads of Equity research
R. Jackson Blackstock, CFA

Co-Heads of Equity Research


Paul Campbell
(416) 359-5424

North American Coverage

International Coverage

United States Coverage

Randy Ollenberger
BMO Nesbitt Burns Inc. Canada
North American Energy
(403) 515-1502
randy.ollenberger@bmo.com

Christopher Brown, P.Eng.


BMO Nesbitt Burns Inc. Canada
O&G Producers
(403) 515-1574
christopher.brown@bmo.com

Jim Byrne, P.Eng., CFA


BMO Nesbitt Burns Inc. Canada
Integrateds/Refiners/Producers
(403) 515-1557
jim.byrne@bmo.com

Canadian Coverage

Dan McSpirit
BMO Capital Markets Corp. U.S.
O&G Producers
(303) 436-1117
dan.mcspirit@bmo.com

Alan Laws, CFA


BMO Capital Markets Corp. U.S.
North American Oilfield Services
(303) 436-1125
alan.laws@bmo.com
Mike Mazar, CFA
BMO Nesbitt Burns Inc. Canada
North American Oilfield Services
(403) 515-1538
michael.mazar@bmo.com

212-885-4113

416-359-5424

Mark Leggett, CFA


BMO Nesbitt Burns Inc. Canada
O&G Producers
(403) 515-1508
mark.leggett@bmo.com
Gord Tait, CFA
BMO Nesbitt Burns Inc. Canada
Oil & Gas Royalty Trusts
(403) 515-1501
gordon.tait@bmo.com

FinAnciAls ___________________

MAtEriAls ___________________

EnErgy & UtilitiEs ___________

Financial services strategist


Hugh Brown, CFA

416-359-4303

canadian Banks
John Reucassel, CFA

integrated Oils/refiners
Randy Ollenberger
Jim Byrne, P. Eng.

416-359-4379

Us Banks
Lana Chan
Peter Winter

212-885-4109
212-885-4108

Metals & Mining


Tony Robson
David Radclyffe
David Cotterell
Edward Sterck
Meredith Bandy

insurance
Tom MacKinnon, FSA, FCIA

416-359-4629

Diversified Financials
John Reucassel, CFA
Atul Shah
David Chiaverini, CFA

416-359-4379
416-359-4691
212-885-4115

Exchanges & Discount Brokers


Michael Vinciquerra, CFA
404-926-1580
real Estate investment trusts
Paul E. Adornato, CFA
212-885-4170
Richard Anderson
212-885-4180
Karine MacIndoe
416-359-4269

Chris Sloan
(303) 436-1115
christopher.sloan@bmo.com

Paper & Forest Products


Stephen Atkinson

514-286-7309

Fertilizers
Edwin Chee
Joel Jackson, P.Eng., CFA

416-359-6193
416-359-4250

Electric Utilities & independent Power


Michael S. Worms
212-885-4031
Michael McGowan, CA, CFA 416-359-5807

retail - Broadlines/hardlines
Wayne Hood

404-926-1590

retail - Apparel & specialty


John D. Morris

212-885-4016

services - Equipment Distribution


Bert Powell, CFA
416-359-5301

retail - Food & Drug


Peter Sklar, CA
Karen Short

416-359-5188
212-885-4123

Food & Ag Products


Kenneth Zaslow, CFA

212-885-4017

212-883-5192

gaming
Jeffrey B. Logsdon

213-228-2234

Auto Parts
Peter Sklar, CA

416-359-5188

Diversified consumer
Stephen MacLeod, CFA

416-359-8069

Biotechnology
Jason Zhang, Ph.D.

Peter Kranz
Graham Cooke, CFA
(403) 515-1517
(403) 515-1572
graham.cooke@bmo.com peter.kranz@bmo.com

403-515-1574

Oil & gas: services & Equipment


Alan Laws, CFA
303-436-1125
Mike Mazar, CA, CFA
403-515-1538

MAcrO _______________________

212-883-5115

Managed care/Benefit Managers


Dave Shove
212-885-4146

Peyton B. Mason
(303) 623-1386
peyton.mason@bmo.com

Oil & gas: international E&P


Christopher Brown, P. Eng.

services - Marketing & Advertising


Daniel Salmon
212-885-4029

Medical technology
Joanne K. Wuensch

Jason Zhang
(403) 515-1571
jasonA.zhang@bmo.com

Mining Exploration & Development


John Hayes, P. Geo.
416-359-6189
Andrew Kaip, P. Geo.
416-359-7224

cOnsUMEr ___________________

Pharmaceuticals/Major & specialty


Robert Hazlett
212-885-4091

Jared Dziuba
(403) 515-3672
jared.dziuba@bmo.com

416-359-4052
416-359-8387

Oil & gas: north American E&P


Randy Ollenberger
403-515-1502
Jim Byrne, P. Eng.
403-515-1557
Dan McSpirit
303-436-1117
Mark Leggett, CFA
403-515-1508
Gordon Tait, CFA
403-515-1501

services - Education & staffing


Jeffrey M. Silber
212-885-4063

hEAlthcArE _________________

Matthew Brink
Jason Chang
(403) 515-1506
(403) 515-1527
matthew.brink@bmo.com jason.chang@bmo.com

Precious Metals
David Haughton
Andrew Breichmanas, P.Eng.

403-515-1502
403-515-1557

Pipelines
Carl Kirst, CFA

toys & leisure


Gerrick L. Johnson

Associates:

416-359-4034
+44 (0)20 7246 5433
+44 (0)20 7246 5430
+44 (0)20 7246 5421
303-436-1113

cAPitAl gOODs & sErVicEs ___

household & Personal care Products


Connie M. Maneaty
212-885-4004

Chris Bolton
(403) 515-1503
chris.bolton@bmo.com

Paul Campbell

R. Jackson Blackstock, CFA (212) 885-4113

212-885-4179

services - Engineering & construction


Avram Fisher
212-885-4094
transport - rails
Fadi Chamoun, CFA

416-359-6775

transport - trucks & logistics


Jason Granger, CA, CFA
416-359-4293
transport - Airlines
Claude Proulx, CFA

514-286-3501

Diversified industrials
Charles D. Brady
Claude Proulx, CFA
Bert Powell, CFA

617-960-2363
514-286-3501
416-359-5301

tEch/tElEcOM/MEDiA _________
tech - Enterprise hardware
Keith Bachman, CFA

Portfolio strategy
Ben Joyce
Jack A. Ablin, CFA
Don Coxe

713-546-9756

416-359-4659
312-461-7756
Coxe Advisors LLC

Economics
Dr. Sherry Cooper
Douglas Porter, CFA
Michael Gregory, CFA
Sal Guatieri

416-359-4112
416-359-4887
416-359-4747
416-359-5295

Quantitative/technical
Mark Steele
Ken Hartviksen, CFA
Qin Lu

416-359-4641
416-359-6211
416-359-6187

commodities
Bart Melek

416-359-4906

currency/Public Policy
Andy Busch

312-845-4080

small caps
Andreka Lapchinski, CFA

416-359-5767

212-885-4010

tech - communications Equipment


Tim Long
212-885-4101
tech - software
Thanos Moschopoulos, CFA

416-359-5428

tech - semiconductors
Ambrish Srivastava, Ph.D

415-591-2116

tech - specialty hardware


Brian Piccioni, CFA

416-359-5761

telecom services
Peter Rhamey, CFA

416-359-6191

Media - Digital Entertainment


Edward S. Williams
212-885-4054
Media - Entertainment & cable
Jeffrey B. Logsdon
213-228-2234
Tim Casey, CFA
416-359-4860

1 First Canadian Place, P.O. Box 150, Toronto, ON M5X 1H3 416-359-4000 Tour McGill College, 1501 McGill College Ave., Suite 3200, Montreal, PQ H3A 3M8 Dome Tower, 333 7th Ave.S.W., 22nd fl., Calgary,
Alberta, T2P 2Z1 95 Queen Victoria Street, London, U.K., EC4V 4HG 3 Times Square, New York, NY 10036 212-885-4000 Tower Place 200, 3348 Peachtree Rd. NE, Suite 1430, Atlanta, GA 30326
175 Federal Street, 8th Floor, Boston, MA 02110 617-451-0670 600 17th Street, Suite 2240, South Tower, Denver, CO 80202 700 Louisiana Street, Suite 4400, Houston, TX 77002 713-546-9746
601 South Figueroa Street, Suite 1730, Los Angeles, CA 90017 213-228-2161 100 Pine Street, Suite 2400, San Francisco, CA 94111 415-591-2100

Table of Contents
Executive Summary..................................................................................................................................................... A1
Post-Crash Relief..................................................................................................................................................... A8
2009 Reserve Replacement Costs An Improvement, but Is It Just Timing?...........................................................A11
Big Improvement at Home......................................................................................................................................A12
Breakeven Oil Prices...................................................................................................................................................A16
Lacklustre Returns Continue...................................................................................................................................A18
A Temporary Reprieve............................................................................................................................................A19
Unconventional Implications..................................................................................................................................A21
The Myth of 6:1......................................................................................................................................................A24
Company Rankings: Low Cost = Higher Share Price.................................................................................................A27
Upstream Revenue: Bust After the Boom...................................................................................................................A35
Costs: Relieving Some Pressure...................................................................................................................................A38
Worldwide Breakeven Oil Price...................................................................................................................................A44
A Global View.........................................................................................................................................................A47
Integrateds and Supermajors......................................................................................................................................A53
Upstream Revenue..................................................................................................................................................A53
Upstream Cost Performance ......................................................................................................................................A55
Breakeven Oil Price.................................................................................................................................................A61
Peer Comparison: Integrated Oils and Supermajors................................................................................................A63
North American Senior Producers..............................................................................................................................A68
Upstream Revenue . ................................................................................................................................................A68
Cost Performance....................................................................................................................................................A71
Breakeven Oil Price: Senior Producers.....................................................................................................................A77
Peer Comparison: North American Senior Producers.................................................................................................A79
North American Intermediate/Junior Producers . ......................................................................................................A85
Revenue...................................................................................................................................................................A85
Cost Performance.......................................................................................................................................................A86
Breakeven Oil Price.....................................................................................................................................................A92
Intermediate/Junior Producers Peer Comparison........................................................................................................A93

International Producers ...........................................................................................................................................A100


Revenue ................................................................................................................................................................A100
Cost Performance.....................................................................................................................................................A101
Breakeven Oil Price...............................................................................................................................................A106
International Producers Peer Comparison.............................................................................................................A108
Methodology and Limitations..................................................................................................................................A112
Peer Groupings......................................................................................................................................................A114
Integrated Oils
BP PLC (BP - NYSE)...................................................................................................................................................B1
Cenovus Energy (CVE - TSX, NYSE)........................................................................................................................ B11
Chevron (CVX - NYSE)............................................................................................................................................. B19
China Petroleum and Chemical Corporation (Sinopec) (SNP - NYSE)...................................................................... B29
CNOOC (CEO - NYSE)............................................................................................................................................. B37
ConocoPhillips (COP - NYSE)................................................................................................................................... B46
Eni S.P.A. (E - NYSE)................................................................................................................................................. B56
Exxon Mobil (XOM - NYSE)..................................................................................................................................... B65
Hess Corp. (HES - NYSE).......................................................................................................................................... B75
Husky Energy Inc. (HSE - TSX)................................................................................................................................. B85
Imperial Oil (IMO - TSX; IMO - AMEX).................................................................................................................. B94
Marathon Oil Corp. (MRO - NYSE)........................................................................................................................ B102
Murphy Oil Corp. (MUR - NYSE)........................................................................................................................... B112
Petrobras (PBR - NYSE) ......................................................................................................................................... B122
PetroChina Company Limited (PTR - NYSE).......................................................................................................... B131
Royal Dutch Shell Plc. (RDS - NYSE)...................................................................................................................... B139
Statoil A.S.A. (STO - NYSE).................................................................................................................................... B149
Suncor Energy Inc. (SU - TSX, NYSE) ................................................................................................................... B159
Total S.A. (TOT - NYSE)......................................................................................................................................... B169
North American Senior Producers
Anadarko Petroleum Corp. (APC - NYSE)..................................................................................................................C1
Apache Corp. (APA - NYSE)......................................................................................................................................C11
ARC Energy Trust (AET.UN - TSX)..........................................................................................................................C21

Cabot Oil & Gas (COG - NYSE)................................................................................................................................C28


Canadian Natural Resources (CNQ - TSX, NYSE)....................................................................................................C35
Canadian Oil Sands Trust (COS.UN - TSX)...............................................................................................................C45
Chesapeake Energy Corp. (CHK - NYSE)..................................................................................................................C53
CNX Gas Corp. (CXG - NYSE).................................................................................................................................C60
Crescent Point Energy Corp. (CPG - TSX).................................................................................................................C67
Devon Energy Corp. (DVN - AMEX)........................................................................................................................C74
Encana Corp. (ECA - TSX, NYSE)............................................................................................................................C83
EOG Resources Inc. (EOG - NYSE)..........................................................................................................................C92
Equitable Resources Inc. (EQT - NYSE).................................................................................................................. C101
Forest Oil Corp. (FST - NYSE)................................................................................................................................ C108
Newfield Exploration Co. (NFX - NYSE)................................................................................................................ C115
Nexen Inc. (NXY - TSX, NYSE).............................................................................................................................. C125
Noble Energy (NBL - NYSE)................................................................................................................................... C135
Occidental Petroleum Corp. (OXY - NYSE)............................................................................................................. C145
Penn West Energy Trust (PWT.UN - TSX)............................................................................................................... C155
Petrohawk Energy Corporation (HK - NYSE).......................................................................................................... C162
Pioneer Natural Resources (PXD - NYSE)............................................................................................................... C169
Plains Exploration & Production Co. (PXP - NYSE)................................................................................................ C179
Quicksilver Resources (KWK - NYSE)..................................................................................................................... C187
Range Resources (RRC - NYSE).............................................................................................................................. C194
Southwestern Energy (SWN - NYSE)....................................................................................................................... C201
Talisman Energy Inc. (TLM - TSX, NYSE).............................................................................................................. C208
Ultra Petroleum (UPL - AMEX).............................................................................................................................. C218
XTO Energy Inc. (XTO - NYSE).............................................................................................................................. C227
Canadian Intermediate / Junior Producers
Advantage Oil & Gas (AAV - TSX)............................................................................................................................. D1
Anderson Energy Ltd. (AXL - TSX)........................................................................................................................... D7
Angle Energy Inc. (NGL - TSX)................................................................................................................................ D13
Baytex Energy Trust (BTE.UN - TSX)...................................................................................................................... D19
Birchcliff Energy Ltd. (BIR - TSX)........................................................................................................................... D25

Bonavista Energy Trust (BNP.UN - TSX).................................................................................................................. D31


Celtic Exploration Ltd. (CLT - TSX)......................................................................................................................... D37
Compton Petroleum (CMT - TSX)............................................................................................................................ D43
Crew Energy Inc. (CR - TSX).................................................................................................................................... D49
Delphi Energy Corp. (DEE - TSX)............................................................................................................................ D55
Ember Resources (EBR - TSX).................................................................................................................................. D61
Enerplus Resources Fund (ERF.UN - TSX).............................................................................................................. D67
Fairborne Energy Ltd. (FEL - TSX).......................................................................................................................... D73
Freehold Royalty Trust (FRU.UN - TSX).................................................................................................................. D79
Galleon Energy Inc. (GO - TSX)............................................................................................................................... D85
Iteration Energy Ltd. (ITX - TSX)............................................................................................................................. D91
Legacy Oil + Gas Inc. (LEG - TSX).......................................................................................................................... D97
Midnight Oil Exploration Company (MOX - TSX)..................................................................................................D103
Midway Energy Ltd. (MEL - TSX)...........................................................................................................................D109
NAL Oil & Gas Trust (NAE.UN - TSX)..................................................................................................................D115
NuVista Energy Ltd. (NVA - TSX)...........................................................................................................................D121
Orleans Energy Ltd. (OEX - TSX)............................................................................................................................D127
Paramount Energy Trust (PMT.UN - TSX)..............................................................................................................D133
Paramount Resources Ltd. (POU - TSX)..................................................................................................................D139
Pengrowth Energy Trust (PGF.UN - TSX)...............................................................................................................D145
PetroBakken Energy Ltd. (PBN - TSX)....................................................................................................................D151
Petrobank Energy and Resources Ltd. (PBG - TSX)................................................................................................D157
Peyto Energy Trust (PEY.UN - TSX)........................................................................................................................D165
Progress Energy Resources Corp. (PRQ - TSX)........................................................................................................D171
ProspEx Resources Ltd. (PSX - TSX).......................................................................................................................D177
Provident Energy Trust (PVE.UN - TSX).................................................................................................................D183
Rock Energy Inc. (RE - TSX)...................................................................................................................................D189
Storm Exploration (SEO - TSX)...............................................................................................................................D195
Trilogy Energy Trust (TET.UN - TSX).....................................................................................................................D201
Twoco Petroleums Ltd. (TWO - TSXV)....................................................................................................................D207
Vermilion Energy Trust (VET.UN - TSX).................................................................................................................D213
Vero Energy (VRO - TSX)........................................................................................................................................D219

West Energy (WTL - TSX)........................................................................................................................................D225


Zapata Energy Corp. (ZCO - TSXV)........................................................................................................................D231
Zargon Oil & Gas (ZAR.UN - TSX)........................................................................................................................D237
International Producers
Antrim Energy (AEN - TSX)........................................................................................................................................E1
Bankers (BNK - TSX; BNK - AIM).............................................................................................................................E7
Cirrus Energy (CYR - TSXV)..................................................................................................................................... E13
Gran Tierra (GTE - TSX, GTE - AMEX).................................................................................................................. E19
Niko Resources Ltd. (NKO - TSX)............................................................................................................................. E25
Pacific Rubiales (PRE - TSX)..................................................................................................................................... E31
Pan Orient Energy (POE - TSXV).............................................................................................................................. E37
Petrolifera Petroleum Ltd. (PDP - TSX)..................................................................................................................... E43
Petrominerales (PMG - TSX)..................................................................................................................................... E49
Santos Ltd. (STO - ASX; STOSY - NYSE)................................................................................................................ E55
TransGlobe Energy (TGL - TSX)............................................................................................................................... E61
Winstar Resources (WIX - TSX)................................................................................................................................. E67
U.S. Micro Caps
Bill Barrett Corporation (BBG - NYSE).......................................................................................................................F1
Brigham Exploration Company (BEXP - Nasdaq).......................................................................................................F7
Carrizo Oil & Gas Inc. (CRZO - Nasdaq).................................................................................................................. F13
Comstock Resources Inc. (CRK - NYSE)................................................................................................................... F19
Energy XXI Ltd. (EXXI - Nasdaq)............................................................................................................................ F25
Gasco (GSX - AMEX)............................................................................................................................................... F31
Goodrich Petroleum Corp. (GDP - NYSE)................................................................................................................. F37
Kodiak Oil & Gas Resource Corp (KOG - AMEX).................................................................................................... F43
Mariner Energy Inc. (ME - NYSE)............................................................................................................................. F49
NGAS Resources Inc. (NGAS - Nasdaq)................................................................................................................... F55
Penn Virginia Corporation (PVA - NYSE).................................................................................................................. F61
Unit Corp. (UNT - NYSE)......................................................................................................................................... F67
W&T Offshore Inc. (WTI - NYSE)............................................................................................................................. F73
Warren Resources Inc. (WRES - Nasdaq).................................................................................................................. F79

Oil & Gas Global Cost Study

Page A1

Executive Summary
Crude oil and natural gas prices have been anything but stable over the last decade, continually confounding investors. West Texas Intermediate (WTI) crude oil prices increased
by more than tenfold from their lows in 1999 to a peak of roughly $145/bbl in July 2008,
before falling back with the collapse of global capital markets and ensuing recession, and
bottoming out again at $35/bbl early in 2009. Prices have since recovered, largely trading
in the $6080/bbl range since mid-2009, but remain volatile. North American natural gas
prices have also been volatile, trading as low as $2/Mcf and as high as more than $15/
Mcf, but the level has generally been lower since mid-2008.
The rise in global commodity prices since 1999 has generally been fuelled by the combination of rising demand for energy from emerging market economies and rising supply costs.
The economic recession in 2009 and recent European credit market uncertainty have slowed
the rate of growth in global energy demand somewhat, but longer-term global energy
demand is still expected to grow with expanding emerging market economies. By 2020,
we believe that global oil demand could be roughly 14.6 million b/d higher than demand
in 2010. This demand growth (and the decline in existing sources of production) will need
to be met by new supplies of crude oil and natural gas. In the case of crude oil, the new
sources of supply are generally higher cost than those being currently consumed. New
sources of supply, such as deepwater Brazil, the Canadian oil sands or tight oil plays such
as the Bakken, generally require crude oil prices in excess of $50/bbl to generate economic
rates of return on investment. As more of these sources are required, the global supply
cost for crude oil will naturally rise. The story for natural gas is somewhat different, which
in part explains why the ratio between North American natural gas prices and crude oil
prices has increased from roughly 8x in 1999 to more than 17x currently. For natural gas,
new sources of supply, such as shale gas or liquefied natural gas (LNG), are becoming
more economic; that is, the supply cost is falling. To us this suggests that crude oil and
natural gas prices could remain decoupled for a long period of time.
This study provides a global review of the oil and gas industrys cost structure based on
the reported results of the Multi-National Oils, North American Integrated Oils, Senior
Producers, North American Junior/Intermediate Producers and International Producers.
In total, this report compiles the historical results for more than 200 companies, which have
over the years been consolidated into 114 companies with aggregate worldwide crude oil
production of 20.1 million b/d and worldwide natural gas production of approximately 89
Bcf/d. The group spent $1.4 trillion over the last five years to add roughly 89.8 billion boe
in proved reserves, and $266 billion in 2009 to add 21.6 billion boe in proved reserves. We
have translated the historical cost data (reserve replacement cost, production cost, G&A
and other, income taxes and royalties) into breakeven oil prices, which we define as the
crude oil-equivalent price that is required to recover all of the reported costs, including a
10% return on capital. Essentially, this represents the industrys average supply cost. We
then translate the breakeven oil price to a required WTI price, which is the price level
that WTI would need to be at in order for the company to generate sufficient revenue to
cover its costs, taking into consideration the quality of the product it produces relative
to WTI. Key findings of the study include:
Note: All values in U.S. dollars
See pages G1 to G2 for analyst coverage.

Page A2

Oil & Gas Global Cost Study


Timing Is Everything. Worldwide proved reserve replacement costs improved considerably
in 2009, falling 45% to $12.30/boe from $22.38 in 2008. The reasons for the dramatic
improvement likely include companies focusing on their best prospects as well as an
easing in inflationary pressures. However, more importantly, reserve bookings finally
caught up with capital spending, as evident by the more modest reduction in the threeyear weighted average to $16.04/boe from $17.54/boe the prior year. We believe that
the three-year average is a better indication of worldwide reserve replacement costs.

Chart 1: Worldwide
Reserve Replacement
Costs (US$/boe)

$25.00

$20.00

$15.00

$10.00

$5.00

$0.00
1999

2000

2001

2002

2003

2004

One-Year

2005

2006

2007

2008

2009

Three-Year

Source: BMO Capital Markets, Company reports

Supply Costs Fall With Lower Spending. The global supply cost on a WTI equivalent basis
improved in 2009 to $51.98/boe after spiking to $85.78/boe in 2008. The improvement
in the global supply cost reflected a combination of improved reserve replacement
performance coupled with reduced operating costs. The required WTI price based on
three-year average reserve replacement costs declined by 17% to $61.54/boe from $73.73/
boe in 2008.

See pages G1 to G2 for analyst coverage.

Oil & Gas Global Cost Study

Chart 2: Worldwide
Breakeven Oil Price (US$/
boe)

Page A3

$100.00
$90.00
$80.00

3-Year Average

$70.00
$60.00
$50.00
$40.00
$30.00
$20.00
$10.00
$0.00
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Op Costs

F&D

Source: BMO Capital Markets, Company reports

Return

Taxes

Quality/Royalty

Source: BMO Capital Markets, Company reports

Levelling the Playing Field. Asia continued to generate the lowest breakeven prices, with
a three-year average WTI-equivalent oil price requirement of $54.93/boe. South America
was again the region that required the highest breakeven oil price on the three-year basis,
at $67.16/boe. However, the regional disparity decreased significantly in 2009 with the
required breakeven oil price of Asia only 18% lower than that for South America. In
contrast, in 2008 the breakeven price required in Asia was roughly 50% lower than that
required in South America.

See pages G1 to G2 for analyst coverage.

Page A4

Chart 3: Worldwide
Breakeven Oil Price
Regional Performance
3-Year Average (US$/boe)

Oil & Gas Global Cost Study

$90.00
$80.00

$75.82

Worldwide
$67.16

$70.00

$64.39

$60.00

$59.79

$57.61
$54.93

$50.00
$40.00
$30.00
$20.00
$10.00
$0.00
"Other"

South
America

North
America

Africa

Europe

Asia

Source: BMO Capital Markets, Company Reports

Keeping It in Focus. Reduced cost pressures and high-grading of opportunities in 2009


led to a substantial improvement in reserve replacement costs and supply costs. However,
single-year results can be misleading due to timing differences in reserve additions and
capital spending. Moreover, our analysis relies on proved reserves only, whereas most
developments will ultimately include additional probable reserves. Consideration of
longer time periods helps to address these challenges. Charts 4 and 5 detail the one-,
three-, five- and 10-year performances of both worldwide proved reserve replacement
costs and breakeven oil prices. We think the three- and five-year results are representative
of the industrys average cost structure, with worldwide reserve replacement costs in
the range of $1516/boe and breakeven oil prices between $59/boe and $62/boe.

See pages G1 to G2 for analyst coverage.

Oil & Gas Global Cost Study

Page A5

Chart 4: Long-Term Reserve Replacement Costs (US$/boe)

Chart 5: Long-Term Average Worldwide Breakeven Oil Price


(US$/boe)

$25.00

$100.00
$90.00

$20.00

$80.00
$70.00

$15.00

$60.00
$50.00

$10.00

$40.00
$30.00

$5.00

$20.00
$10.00

$0.00

$0.00
1999

2000

2001

2002

1-Year

2003

2004

3-Year

2005
5-Year

2006

2007

2008

2009

1999

2000

2001

10-Year

2002

1-Year

Source: BMO Capital Markets, Company reports

2003

2004

3-Year

2005

2006

5-Year

2007

2008

2009

10-Year

Source: BMO Capital Markets, Company Reports


Notes: Includes Production and G&A/other costs

New Sources of Supply Shift the Cost Structure. The supply cost for natural gas had
been moving steadily higher over the last decade, rising from $3.03/Mcfe in 1999 to
$12.96/Mcfe in 2008. The emergence of unconventional natural gas in North American
(specifically shale gas) has fundamentally altered the natural gas industrys cost structure
due to advances in drilling and fracing technology coupled with operating experience.
As a result, in 2009 the one-year proved supply cost fell to $5.92/Mcfe.

Chart 6: North American


Natural Gas Supply Costs
(US$/Mcfe)

$16.00
$14.00
$12.00
$10.00
$8.00
$6.00
$4.00
$2.00
$0.00
1999

2000

2001

2002

2003

Gas Supply Cost


Source: BMO Capital Markets, Company reports

See pages G1 to G2 for analyst coverage.

2004

2005

2006

2007

Shale Gas Supply Cost

2008

2009

Page A6

Oil & Gas Global Cost Study


Unconventional Oil Improving. We estimate that the supply cost has fallen for many oil
sands projects to the $4560/bbl range, which is below the global average supply cost
of roughly $63/bbl. This is due to the combination of a shift to in situ developments
without upgraders as well as an overall lessening in inflationary pressures due to lower
activity. Tight oil plays such as the Bakken in North Dakota and Western Canada also
represent a source of unconventional oil. Like unconventional gas, the supply costs for
tight oil have fallen with advances in drilling and fracing technology. We estimate that
the supply cost for Bakken oil is below $50/bbl. However, unlike shale gas, we do not
believe the resource is large enough to fundamentally alter the global supply cost for
crude oil.

Chart 7: Unconventional
Crude Oil Supply Costs
(US$/boe)

$100.00
$90.00
$80.00
$70.00
$60.00
$50.00
$40.00
$30.00
$20.00
$10.00
$0.00
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Worldwide Average

Tight Oil

Integrated Oil Sands

In Situ Oil Sands

Source: BMO Capital Markets, Company reports

The Myth of 6-to-1 Natural Gas Conversion. The 6-to-1 ratio represents the energy
equivalency between crude oil and natural gas; however, it has rarely held when it comes
to the actual prices of the commodities in North America due to differing supply and
demand dynamics. To show the effect that the use of the 6-to-1 ratio has on proved
reserve replacement costs and supply costs, we have also run our industry analysis of
using the 10:1 ratio to more closely match historical market conditions. The impact can
be significant, especially for gas-weighted producers. For example, in 2009 the reserve
replacement cost of $12.30/boe under the traditional 6:1 gas-to-oil ratio rises to $14.69/
boe under the 10-to-1 scenario. Using 10:1 would increase the worldwide supply cost
in 2009 from $51.98/boe to $62.24/boe.

See pages G1 to G2 for analyst coverage.

Oil & Gas Global Cost Study

Page A7

Top Performers of 2009. Based on 2009 results, the Senior Producers generated the lowest
required WTI-equivalent oil prices, at $47.41/boe, helped by lower-cost additions from
unconventional resource plays. The North American Intermediate/Juniors Producers
group had the highest required breakeven, at $55.52/boe, followed by the International
Producers at $54.25/boe and the Integrateds & Multinationals at $52.51/boe. The three
companies with the lowest implied required oil price based on 2009 results were Peyto,
Southwestern Energy and CNX Gas. Based on three-year weighted average costs, the
top performers were Southwestern, Peyto and Cenovus.
Chart 8: Worldwide
Breakeven Oil Price Peer
Comparison (US$/boe)

$100.00
$90.00
$80.00
$70.00
$60.00
$50.00
$40.00
$30.00
$20.00
$10.00
$0.00
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Integrateds

Seniors

Source: BMO Capital Markets, Company reports

See pages G1 to G2 for analyst coverage.

Intermed/Juniors

Internationals

Page A8

Oil & Gas Global Cost Study


Costs Matter. We believe that the share prices of companies that consistently achieve
lower full-cycle costs (breakeven prices) should outperform those with higher cost
structures. Lower breakeven prices should over time translate into higher returns on
capital employed, which in turn should generate faster growth in underlying book value
and net asset value. Chart 9 compares the share price performance of the top quartile
(lowest cost) from our cost study compared to the bottom quartile (highest cost) over the
last three years. As illustrated, those companies with lower cost structures, on average,
have outperformed relative to the higher cost structure companies.

January 1, 2007 = 100


250

200
150
100
50

-0
8
Ju
l-0
8
O
ct
-0
8
Ja
n0
A 9
pr
-0
9
Ju
l-0
O 9
ct
-0
Ja 9
n1
A 0
pr
-1
0

08

pr

n-

Ja

ct
-0

l-0

-0

Ju

pr

n-

07

Ja

Chart 9: Share Price


Performance of Top
Quartile vs. Bottom
Quartile (20072009)

Top 30 Lowest Cost

Bottom 30 Highest Cost

Source: BMO Capital Markets, Bloomberg

Post-Crash Relief
The breakeven oil price (think of it as the industrys average supply cost) and WTI have
demonstrated a reasonably tight correlation since 1975, as illustrated in Chart 10. Supply costs in the oil and gas industry tend to track prices because rising prices generate
more cash flow than can be deployed, which leads to higher costs as companies compete
with each other for limited inputs and pursue higher-risk, more marginal prospects. But
prices can also track supply costs, particularly if supply is limited and demand is rising
because the marginal cost of supplying the incremental unit of demand becomes the
primary driver.

See pages G1 to G2 for analyst coverage.

Oil & Gas Global Cost Study

Chart 10: Worldwide


Supply Cost vs. WTI Price
(US$/boe)

Page A9

$120
$100
$80
$60
$40
$20

Worldwide Oil Supply Cost

08

20

05

20

02

20

99

19

96

19

93

19

90

19

87

19

84

19

81

19

78

19

19

75

$0

WTI Price

Source: BMO Capital Markets, Company reports

Another notable aspect of Chart 10 is that there have been periods (19751988) where
supply costs and oil prices were decoupled; specifically, the price was at times well below
the supply cost and over time the supply costs declined to the level of oil prices. We believe
this decoupling between prices and supply costs was enabled by the over-investment that
occurred during the high price cycle from 1973 to 1985, which created surplus producing capacity. This meant that rising demand could be met from the existing inventory of
producing prospects, essentially half-cycle economics1.
Equally important, reserve bookings and costs during the period were relatively volatile
as many assets were nationalized. However, the 19851999 period of relatively low crude
oil and natural gas prices stimulated global energy demand, which over time absorbed
the surplus production and refining capacity that existed, as shown in Charts 11 and 12.
We do not believe that prices and costs can remain decoupled in the current market, as
no such similar inventory of prospects exists (perhaps with the exception of shale gas in
North America) that can be drawn down.

Half-cycle economics refers to the phenomenon whereby producers ignore sunk exploration costs
such as land and evaluate prospects based solely on the cost of drilling and completing an incremental
well. This same dynamic is now in the North American natural gas market due to massive potential of
shale gas plays.

See pages G1 to G2 for analyst coverage.

Page A10

Oil & Gas Global Cost Study

Chart 11: Surplus Global Oil Production Capacity

Chart 12: Surplus Global Refining Capacity

% of Demand

Million b/d

% of Demand

Million b/d

10%

5%

5%

0%

0%

01

20

20

19

19

19

19

19

19

19

Spare Capacity

% Margin

Source: International Energy Agency, BP Statistical Review, BMO


Capital Markets

19

19

19

19
71
19
74
19
77
19
80
19
83
19
86
19
89
19
92
19
95
19
98
20
01
20
04
20
0
20 7
10
20 e
13
e
Spare Capacity

04
20
0
20 7
10
20 e
13
e

10%

98

95

15%

92

12

89

15%

86

12

83

20%

80

16

77

20%

16

74

25%

25%

71

20

20

% Margin

Source: International Energy Agency, BP Statistical Review, BMO


Capital Markets

We estimate that the price of WTI (equivalent) required in order to generate sufficient
revenue to recover all of the costs incurred in finding, developing and producing a barrel of crude oil and/or natural gas on a worldwide basis has risen to $51.98/boe in 2009
from $16.97/boe in 1999. Two primary factors have driven the increase in the breakeven
oil price (or gas price): rising finding and development costs (reserve replacement costs),
and operating costs. Worldwide reserve replacement costs have increased to $12.30/boe
in 2009 from $3.87/boe in 1999, while worldwide operating costs (including G&A/Other)
have expanded to $13.93/boe in 2009 from $4.60/boe in 1999.
Chart 13: Worldwide Reserve Replacement Costs (US$/boe)
$40.00

Chart 14: Worldwide Operating Costs (US$/boe)


$20.00
$18.00

$35.00

$16.00

$30.00

$14.00

$25.00

$12.00

$20.00

$10.00
$8.00

$15.00

$6.00

$10.00

$4.00

$5.00

$2.00
$0.00

$0.00

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Worldwide

Source: BMO Capital Markets

North America

Worldwide

International

North America

Source: BMO Capital Markets, Company Reports


Notes: Includes Production and G&A/other costs

See pages G1 to G2 for analyst coverage.

International

Oil & Gas Global Cost Study

Page A11

Other elements of the industrys cost structure, such as income taxes, have also increased,
contributing to an increase in total costs from approximately $15/boe in 1999 to $50/boe
in 2009 (including return on capital), as illustrated in Chart 15. At the same time, the
average quality of crude oil has deteriorated and the share of revenue captured by the
resource owner (typically governments) has increased, which has resulted in revenue growth
lagging the increase in commodity prices. As shown in Chart 16, net revenue received by
the industry has not kept pace with the increase in benchmark crude oil prices, such as
WTI. The net result is that the global oil and gas industry requires a significantly higher
commodity price level in order to recover its costs, including a return on capital.
Chart 15: Worldwide Cost Structure (US$/boe)

Chart 16: Worldwide Net Revenue vs. WTI (US$/boe)


$120.00

$80.00
$70.00

90%
80%

$100.00

70%

$60.00

$80.00

$50.00
$40.00

$60.00

$30.00

$40.00

$20.00

60%
50%
40%
30%
20%

$20.00

10%

$10.00

0%

$0.00

$0.00

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
F&D

Return

Income Taxes

Production

G&A/Other

Source: BMO Capital Markets, Company Reports

Worldwide

Exploration

WTI

Ratio to WTI

Source: BMO Capital Markets, Company Reports

2009 Reserve Replacement Costs An Improvement, but Is It Just


Timing?
Worldwide reserve replacement costs have increased fairly steadily from 1999 to 2008 as
rising commodity prices led to expanding cash flow and concomitantly higher levels of
capital spending. However, the year 2009 marked an improvement in reserve replacement
costs, as oil and gas prices plunged at the end of 2008 as a result of the global financial
crisis and economic recession, and producers had to high-grade their capital programs.
In 2008, producers were spending aggressively to grow production as commodity prices
soared with less concern for inflation, but when oil prices sank to lows of roughly $35/bbl
at the beginning of 2009, significant asset rationalization was forced to occur. The focus
for most companies moved to those assets with the lowest breakeven prices, as several
higher-cost plays became marginally economic or uneconomic, at least on a full-cycle
basis. With this renewed focus on higher quality assets, overall capital efficiency improved
concomitantly with lower finding and development costs. Another factor affecting this
years reserve replacement costs were higher oil prices toward the end of 2009. Higher oil
prices led to positive price-related revisions for many producers, with some adding back
what had been removed from the books at the end of 2008. On the downside, natural
gas prices remained relatively weak throughout 2009, which led to negative price-related
revisions at the end of the year. However, the reserves added through extensions and disSee pages G1 to G2 for analyst coverage.

Page A12

Oil & Gas Global Cost Study


coveries, in large part related to shale gas drilling, more than offset price-related revisions
for most of the shale-focused players.
The companies included in our study spent approximately $266 billion in 2009 to add
21.6 billion boe of proved crude oil and natural gas reserves. This translates to worldwide
reserve replacement costs of $12.30/boe in 2009 compared to $22.38/boe in 2008. Capital
spending had been increased fairly steadily from the period of 1999 to 2008 with rising
commodity prices and cash flow. But the decline in commodity prices and asset highgrading led to a reduced capital program for most companies. Along with rising reserve
replacement costs from 1999 to 2008, reserve performance was also deteriorating, falling
to replacement of around 100% of production in 2007 and 2008, which essentially means
that reserves were not growing in those years but rather just replacing production, despite
significant capital spending. However, as illustrated in Chart 18, this trend was reversed
in 2009 with roughly 150% being replaced that year. We believe this is due in part to the
timing difference between the relatively higher levels of capital spending between 2006
and 2009 and reserve additions.

Chart 17: Worldwide Capital Spending vs. Reserve


Additions
$Billion

Chart 18: Worldwide Reserve Replacement Performance


% of Production

Billion Boe

200%

25

$400

180%

$350

160%

20

$300

140%

$250

15

120%

$200

100%
10

$150
$100

80%
60%

40%

$50
$0

20%

0
1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

0%

2009

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Capital Spending

Reserve Additions

Source: BMO Capital Markets, Company Reports

Note: Reserve replacement is reserve addition as % of production


Source: BMO Capital Markets, Company Reports

Big Improvement at Home


Worldwide reserve replacement costs (including revisions) have risen at a compound
annual rate of 12% since 1999, with North American costs expanding by an 8% CAGR
and International costs climbing roughly 15%. This reversed the trend from 2008, when
North American reserve replacement costs were significantly higher than those internationally. In North America in particular, the dramatic improvement in reserve replacement costs, in addition to the high-grading mentioned above, can also be attributed to
ongoing enhancements in drilling and completion techniques, which have continued to
unlock additional oil and gas from the resource plays in a more cost effective manner.
While International reserve replacement costs also improved from 2008 levels, the reduction was more subdued.
See pages G1 to G2 for analyst coverage.

Oil & Gas Global Cost Study

Page A13

The positive revisions reported by many of the companies in 2009, whether price related
or technically driven, helped to improve overall reserve replacement results. When revisions are excluded from the results, the worldwide reserve replacement costs rise to $17.05/
boe, as shown in Chart 20. Even when revisions are excluded, North American reserve
replacement costs, at $14.28/boe, remain better than those outside of North America,
at $20.60/boe.
Chart 19: 2009 Worldwide Reserve Replacement Costs
Including Revisions (US$/net boe)

Chart 20: 2009 Worldwide Reserve Replacement Costs


Excluding Revisions (US$/net boe)

$50.00

$50.00

$45.00

$45.00

$40.00

$40.00

$35.00

$35.00

$30.00

$30.00

$25.00

$25.00

$20.00

$20.00

$15.00

$15.00

$10.00

$10.00

$5.00

$5.00

$0.00

$0.00
1999

2000

2001

2002

Worldwide

2003

2004

2005

North America

2006

2007

2008

2009

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

International

Source: BMO Capital Markets, Company Reports

Worldwide

North America

International

Source: BMO Capital Markets, Company Reports

Admittedly, single-year reserve replacement costs can provide a misleading indication of


reserve replacement performance because of the time lag between capital spending and
reserve recognition. As a result, three- or five-year average reserve replacement costs tend
to provide a more realistic representation of the industry cost structure and insight into
potential industry investment returns. Based on our survey, three-year average reserve
replacement costs fell 9% in 2008 to $16.04/boe. Three-year costs in North America decreased 19% to $17.76/boe, while International costs increased 3% to $14.61/boe.

See pages G1 to G2 for analyst coverage.

Page A14

Chart 21: Worldwide


3-Year Average Reserve
Replacement Costs (US$/
net boe)

Oil & Gas Global Cost Study

$50.00
$45.00
$40.00
$35.00
$30.00
$25.00
$20.00
$15.00
$10.00
$5.00
$0.00
2001

2002

2003

2004

Worldwide
Source: BMO Capital Markets, Company reports

See pages G1 to G2 for analyst coverage.

2005

2006

North American

2007

International

2008

2009

Oil & Gas Global Cost Study

Page A15

Table 1: Worldwide Reserve Replacement Cost Summary (US$)


Worldwide F&D Cost Summary (US$, net)
1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

3-Year

5-Year

Production:
57,733.8

63,776.6

69,915.8

75,888.1

80,409.7

82,213.8

81,365.9

83,619.5

84,629.7

88,121.2

88,633.8

87,128.2

85,274.0

Liquids Production (b/d)

16,301,762

17,506,174

18,092,090

19,418,334

20,306,790

20,906,548

20,620,255

20,732,758

20,520,121

20,108,532

20,138,434

20,255,696

20,424,020

Total Production (boe/d)

Gas Production (mmcf/d)

25,924,064

28,135,600

29,744,730

32,066,343

33,708,403

34,608,846

34,181,231

34,669,350

34,625,068

34,795,401

34,910,737

34,777,068

34,636,357

% Gas Production

37%

38%

39%

39%

40%

40%

40%

40%

41%

42%

42%

42%

41%

% Oil Production

63%

62%

61%

61%

60%

60%

60%

60%

59%

58%

58%

58%

59%

296,551

319,036

347,221

364,191

375,571

391,268

403,587

412,149

416,487

426,078

433,089

Proven Reserves:
Gas Reserves (bcf)
Oil Reserves (mmbbls)

425,218

418,278

70,535

76,842

78,988

83,946

87,050

86,526

84,726

83,957

81,005

79,733

88,016

82,918

83,487

119,960

130,015

136,858

144,644

149,645

151,737

151,990

152,649

150,419

150,746

160,197

153,788

153,200

% Gas Reserves

41%

41%

42%

42%

42%

43%

44%

45%

46%

47%

45%

46%

46%

% Oil Reserves

59%

59%

58%

58%

58%

57%

56%

55%

54%

53%

55%

54%

54%

Proven Reserve Life Index

12.8

12.7

12.7

12.4

12.2

12.1

12.2

12.1

11.9

11.9

12.6

12.1

12.1

Gas Additions (bcf)

41,441.2

43,419.7

52,152.6

44,010.3

39,130.7

45,400.8

49,423.6

50,208.9

39,285.6

42,583.2

45,753.5

127,622.3

227,254.8

Oil Additions (mmbbls)

10,091.7

11,917.5

8,583.1

11,890.9

10,418.3

7,135.9

7,072.4

8,865.5

5,679.4

6,248.3

11,374.5

23,302.2

39,240.1

Total Additions (mmboe)

16,998.6

19,154.1

17,275.2

19,225.9

16,940.1

14,702.7

15,309.7

17,233.6

12,227.0

13,345.5

19,000.1

44,572.6

77,115.9

10,293.6

12,367.5

11,645.1

10,551.5

10,110.5

8,701.5

13,409.8

31,051.6

Total Proven Reserves (mmboe)

Proven Net Reserve Additions:

Addition Components (mmboe):


Extensions, Discoveries and Additions
Acquisitions
Dispositions/Other
Revisions of Estimates

8,903.6

11,028.3

6,895.0

9,285.7

5,057.2

7,865.4

5,720.3

4,300.1

4,926.4

6,857.8

3,049.1

2,068.0

2,172.8

7,289.9

19,074.1

-2,710.0

7,920.0

-3,327.9

-903.6

-1,684.2

-2,634.9

-1,881.3

-1,625.9

-1,805.8

-4,906.6

8,940.3

-1,732.2

-2,602.9

-9,241.7

-12,673.4

51,713.6

4,893.6

4,292.7

2,093.3

2,751.1

1,487.1

638.7

1,457.7

2,071.1

5,144.2

4,308.2

6,020.4

15,472.8

19,001.6

Components as % of Total Additions (mmboe):


Extensions, Discoveries and Additions

46.5%

63.8%

53.5%

Acquisitions

40.6%

48.5%

29.3%

40.9%

33.8%

29.2%

32.2%

39.8%

24.9%

15.5%

11.4%

16.4%

24.7%

Dispositions

-15.9%

-17.4%

-5.2%

-8.8%

-15.6%

-12.8%

-10.6%

-10.5%

-40.1%

-13.0%

-13.7%

-20.7%

-16.4%

28.8%

22.4%

12.1%

14.3%

8.8%

4.3%

9.5%

12.0%

42.1%

32.3%

31.7%

34.7%

24.6%

Gas

196.7%

186.5%

204.4%

158.9%

133.3%

151.3%

166.4%

164.5%

127.2%

132.4%

141.4%

133.8%

146.0%

Oil

169.6%

186.5%

130.0%

167.8%

140.6%

93.5%

94.0%

117.2%

75.8%

85.1%

154.7%

105.1%

105.3%

Total

179.6%

186.5%

159.1%

164.3%

137.7%

116.4%

122.7%

136.2%

96.7%

105.1%

149.1%

117.0%

122.0%

Gas

14.0%

13.6%

15.0%

12.1%

10.4%

11.6%

12.2%

12.2%

9.4%

10.0%

10.6%

30.0%

54.3%

Oil

14.3%

15.5%

10.9%

14.2%

12.0%

8.2%

8.3%

10.6%

7.0%

7.8%

12.9%

28.1%

47.0%

Total

14.2%

14.7%

12.6%

13.3%

11.3%

9.7%

10.1%

11.3%

8.1%

8.9%

11.9%

29.0%

50.3%

Exploration

$10,557

$13,233

$16,052

$15,560

$16,705

$17,972

$24,011

$33,372

$38,887

$47,290

$42,114

$128,291

$185,675

Development

$36,664

$44,589

$58,144

$63,079

$85,984

$92,907

$117,304

$148,810

$168,065

$203,219

$171,987

$543,271

$809,385

Acquisitions

$28,974

$48,245

$31,923

$42,729

$24,544

$38,808

$57,281

$120,935

$54,164

$88,857

$54,862

$197,883

$376,099

$32

$128

$189

$57

$95

-$637

-$908

-$1,333

-$1,352

-$1,898

-$3,160

-$6,410

-$8,651

$76,226

$106,195

$106,308

$121,424

$127,328

$149,050

$197,688

$301,785

$259,764

$337,468

$265,803

$863,035

$1,362,508

Exploration

13.8%

12.5%

15.1%

12.8%

13.1%

12.1%

12.1%

11.1%

15.0%

14.0%

15.8%

14.9%

13.6%

Development

48.1%

42.0%

54.7%

51.9%

67.5%

62.3%

59.3%

49.3%

64.7%

60.2%

64.7%

62.9%

59.4%

Acquisitions

38.0%

45.4%

30.0%

35.2%

19.3%

26.0%

29.0%

40.1%

20.9%

26.3%

20.6%

22.9%

27.6%

$74,304

$124,469

$115,510

$114,176

$152,983

$182,416

$234,012

$264,692

$282,064

$357,569

$260,105

$899,737

$1,398,441

$7.85

$12.12

$10.64

$9.76

$12.43

$14.44

$18.76

$20.92

$22.32

$28.15

$20.41

$23.63

$22.12

2.0x

2.6x

1.8x

1.7x

1.9x

1.6x

1.6x

1.3x

1.5x

1.3x

1.7x

1.5x

1.5x

Revisions of Estimates

46.6%

73.0%

79.2%

68.9%

58.7%

73.1%

65.2%

70.6%

69.7%

67.1%

Additions as % of Production:

Additions as % of Reserves:

Capital Expenditures (US$million):

Other
Total Expenditures
Expenditures as % of Total (US$million):

Cashflow (US$million)
Cashflow (US$/boe)
Recycle Ratio
F&D Costs (US$/boe):
Exploration & Development (incl. Revisions

$3.69

$4.38

$5.65

$6.03

$7.41

$9.03

$11.77

$14.96

$14.69

$19.26

$11.02

$14.43

$14.07

Acquisition Costs

$4.20

$5.20

$6.31

$5.43

$4.29

$9.02

$11.63

$17.63

$17.76

$42.97

$25.25

$27.14

$19.72

All Sources (incl. Revisions)

$3.87

$4.72

$5.85

$5.81

$6.50

$8.99

$11.67

$15.85

$15.16

$22.38

$12.30

$16.04

$15.17

Exploration & Development (excl. revisions)

$5.96

$6.49

$6.73

$7.64

$8.30

$9.52

$13.39

$18.02

$23.15

$28.79

$15.97

$21.63

$19.24

Acquisition Costs

$4.20

$5.20

$6.31

$5.43

$4.29

$9.02

$11.63

$17.63

$17.76

$42.97

$25.25

$27.14

$19.72

All Sources (excl. revisions)

$5.16

$5.84

$6.61

$6.69

$7.04

$9.35

$12.79

$17.78

$21.67

$31.32

$17.05

$22.51

$19.25

North America

$4.90

$5.28

$8.18

$8.63

$9.03

$11.97

$10.45

$19.31

$16.52

$35.03

$10.89

$17.76

$16.53

International

$3.47

$4.16

$4.45

$4.48

$5.32

$7.12

$13.15

$12.40

$14.03

$15.85

$13.91

$14.61

$13.92

Geographically Segmented Costs

Source: BMO Capital Markets, Company Reports


Note: Reserve replacement costs calculated based on after royalty reserves

See pages G1 to G2 for analyst coverage.

Page A16

Oil & Gas Global Cost Study

Breakeven Oil Prices


We estimate that the price of WTI required in order to generate sufficient revenue to
recover all of the costs incurred in finding, developing and producing a barrel of crude
oil and/or natural gas on a worldwide basis has risen to $51.98/boe in 2009 from $16.97/
boe in 1999, as illustrated in Chart 22. As noted, one-year costs can provide a misleading
indication of reserve replacement performance and resulting breakeven oil price because
of the time lag between capital spending and reserve recognition, as well as noise from
reserve revisions due to reserve reporting regulations. This was particularly true over the
last couple of years as reserve replacement costs were skewed due to sizeable revisions.
As a result, we believe that using three- or five-year weighted average reserve replacement costs tends to provide a more realistic representation of the industry cost structure
and insight into potential industry investment returns. Chart 23 provides the estimated
breakeven WTI price that is required in order to cover the industrys costs, including a
return on capital, based on three-year average reserve replacement costs. Our analysis
suggests that the global oil and gas industrys breakeven oil price has risen to $61.54/boe
in 2009 from $22.48/boe in 2001.

Chart 22: Worldwide Required WTI Oil Price One-Year


(US$/boe)

Chart 23: Worldwide Required WTI Oil Price Three-Year


(US$/boe)
$100.00

$120.00

$90.00
$100.00

$80.00
$70.00

$80.00

$60.00
$50.00

$60.00

$40.00
$40.00

$30.00
$20.00

$20.00

$10.00
$0.00

$0.00

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Worldwide

North America

Source: BMO Capital Markets, Company Reports

2001

International

2002

2003

Worldwide

2004

2005

2006

2007

North America

2008

2009

International

Source: BMO Capital Markets, Company Reports

On a company-by-company basis, the top performers with regards to three-year required


breakeven WTI price were Southwestern, Peyto and Cenovus. The results of the breakeven
performance by the Top 30 companies included in the study are provided in Table 2,
below.

See pages G1 to G2 for analyst coverage.

Oil & Gas Global Cost Study

Page A17

Table 2: Worldwide Required WTI Oil Price (US$/boe) Top 30


Rank
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30

Company
Southwestern
Peyto
Cenovus
Storm
Ultra Petroleum
CNX Gas
Royal Dutch
Equitable Resources
Advantage
Gran Tierra
EOG
ARC Energy
Birchcliff
ProspEx
BP Plc
Delphi
Santos Ltd.
Petrohawk
Trilogy
Bill Barrett
Canadian Natural*
Bonavista
Celtic
EnCana
Comstock
Carrizo
PetroBank
Paramount Energy Trust
Mariner
Devon
Worldwide Average

SWN
PEY.UN
CVE
SEO
UPL
CXG
RD
EQT
AAV
GTE
EOG
AET
BIR
PSX
BP
DEE
Santos
HK
TET
BBG
CNQ
BNP.UN
CLT
ECA
CRK
CRZO
PBG
PMT.UN
ME
DVN

1999
16.58
(0.28)
na
15.19
7.05
17.16
16.39
14.71
36.23
14.39
na
15.82
11.09
33.91
12.49
16.97

2000
22.60
13.83
na
19.56
18.56
21.21
21.38
23.78
23.27
24.70
26.81
20.23
16.05
21.70
21.61
22.92

2001
18.20
13.20
na
18.10
192.00
24.36
25.32
24.49
17.92
45.25
51.69
27.89
28.14
22.89
28.52
13.75
28.18
25.05

2002
18.50
15.89
na
31.27
24.63
20.86
24.06
22.73
20.03
21.63
112.10
47.35
45.54
26.18
24.43
19.65
24.85
19.15
18.44
24.99
24.87

2003
28.41
23.35
21.19
40.83
37.42
339.62
77.74
30.44
26.01
26.33
35.75
29.54
15.16
39.96
33.43
33.62
33.78
27.06
35.62
28.82
80.32
168.72
31.93
30.98
29.60

2004
24.30
35.90
90.34
22.59
36.87
67.61
31.65
46.56
38.59
39.23
112.04
29.54
60.02
45.20
39.58
51.65
43.23
33.08
43.85
35.19
45.37
28.99
48.63
70.56
29.31
34.13
39.08

2005
36.06
41.58
41.57
31.62
29.62
55.57
30.16
50.82
143.42
45.19
45.07
99.00
61.20
42.51
65.23
50.73
86.52
50.14
74.55
42.82
45.72
65.33
37.89
87.79
43.71
62.01
65.78
42.84
38.99
53.57

2006
49.36
48.16
52.60
38.56
28.74
45.76
37.13
73.92
106.99
51.06
59.29
86.75
66.23
37.60
107.27
49.03
56.96
36.98
55.97
58.71
54.01
59.92
42.97
31.53
68.64
96.47
71.55
49.78
51.68
61.28

2007
45.69
34.46
34.43
50.97
42.00
74.52
49.55
42.59
43.72
78.55
50.79
54.80
63.22
55.20
45.49
70.62
51.37
61.85
29.70
53.63
52.62
62.25
71.03
49.46
50.53
41.15
57.51
53.46
46.85
48.88
60.55

2008
31.19
58.22
92.36
29.88
48.14
81.45
67.72
63.11
69.45
54.55
57.78
59.08
50.42
77.23
57.69
55.80
60.84
106.29
46.89
50.75
54.07
56.14
45.53
54.84
118.99
71.84
70.72
55.29
70.90
59.11
85.78

2009
21.91
19.57
28.95
74.30
34.96
22.02
37.07
35.76
41.89
36.67
37.52
35.21
28.28
49.81
45.44
30.29
34.93
30.98
41.36
44.43
50.44
41.39
47.90
58.37
33.29
38.86
41.27
54.72
44.01
32.42
51.98

Weighted Avg
3-Year
5-Year
28.55
30.68
29.57
46.22
38.79
na
39.58
40.86
41.40
39.38
41.78
36.97
44.62
45.80
44.88
40.70
45.97
57.31
46.55
57.54
46.86
47.19
47.54
48.15
47.61
52.06
47.84
53.25
48.67
45.59
48.80
80.61
48.83
48.98
48.99
53.59
49.44
42.53
49.48
51.83
50.00
49.76
50.26
49.84
50.41
54.24
50.65
44.63
50.80
45.98
51.15
51.22
51.18
56.74
52.42
56.54
53.91
55.10
54.26
50.60
65.18
62.28

Source: BMO Capital Markets, Company Reports


Note: Results ranked on the basis of three-year average

We have also segmented the companies into gas-weighted and oil-weighted to provide a
better comparison. The required breakeven Henry Hub prices for the top 15 gas-weighted
companies are provided in Table 3 below. The top three gas-weighted companies on the
basis of three-year average required breakeven Henry Hub-equivalent price were Southwestern, Peyto and Storm.
Table 3: Worldwide Required Henry Hub Price (US$/Mcfe) Top 15 Gas-Weighted Companies
Rank Company
1
Southwestern
2
Peyto
3
Storm
4
Ultra
5
CNX Gas
6
Equitable
7
EOG
8
Birchcliff
9
ProspEx
10
Delphi
11
Santos
12
Petrohawk
13
Trilogy
14
Bill Barrett
15
Celtic
Average Gas Weighted

SWN
PEY.UN
SEO
UPL
CXG
EQT
EOG
BIR
PSX
DEE
STOSY
HK
TET
BBG
CLT

1999
2.76
(0.05)
1.18
2.86
6.04
3.03

2000
3.77
2.30
3.09
3.53
3.88
3.57

2001
3.03
2.20
32.00
4.22
7.54
8.62
4.46

2002
3.08
2.65
4.10
4.01
3.61
18.68
7.89
4.36
4.14

2003
4.74
3.89
3.53
6.80
56.60
5.07
5.96
4.92
2.53
6.66
5.63
5.48

2004
4.05
5.98
15.06
3.76
6.14
5.28
6.43
18.67
10.00
7.53
6.60
8.61
7.31
6.32

2005
6.01
6.93
6.93
5.27
4.94
5.03
7.53
16.50
10.20
10.87
8.46
14.42
8.36
12.42
10.89
7.93

2006
8.23
8.03
8.77
6.43
4.79
6.19
8.51
14.46
11.04
17.88
8.17
9.49
6.16
9.33
9.99
9.16

2007
7.61
5.74
8.50
7.00
12.42
7.10
8.46
10.54
9.20
11.77
8.56
10.31
4.95
8.94
11.84
8.86

2008
5.20
9.70
4.98
8.02
13.57
10.52
9.63
8.40
12.87
9.30
10.14
17.72
7.81
8.46
7.59
12.96

2009
3.65
3.26
12.38
5.83
3.67
5.96
6.25
4.71
8.30
5.05
5.82
5.16
6.89
7.41
7.98
5.92

Weighted Avg
3-Year
5-Year
4.76
5.11
4.93
7.70
6.60
6.81
6.90
6.56
6.96
6.16
7.48
6.78
7.81
7.86
7.93
8.68
7.97
8.88
8.13
13.43
8.14
8.16
8.17
8.93
8.24
7.09
8.25
8.64
8.40
9.04
9.04
9.10

Source: BMO Capital Markets, Company Reports


Note: Includes companies with production weighted 70% or more toward natural gas in 2009

The required breakeven WTI prices for the top 15 oil-weighted companies are provided in
Table 4, below. The top three oil-weighted companies on the basis of three-year average
required breakeven WTI price were Gran Tierra, BP and Canadian Natural Resources.
See pages G1 to G2 for analyst coverage.

Page A18

Oil & Gas Global Cost Study

Table 4: Worldwide Required WTI Equivalent Oil Price (US$/boe) Top-15 Oil-Weighted Companies
Rank
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15

Company
Gran Tierra
BP Plc
Canadian Natural
Petrobank
Vermilion
Pan Orient
Freehold
Canadian Oil Sands
Petrominerales
ExxonMobil
Occidental
Nexen
PetroChina
Baytex
West Energy
Average of Oil Weighted

GTE
BP
CNQ
PBG
VET.UN
POE
FRU.UN
COS
PMG
XOM
OXY
NXY
PTR
BTE.UN
WTL

1999
14.71
14.39
9.78
14.44
18.98
13.01
20.47
15.38
24.04
17.05

2000
23.78
24.70
18.14
24.91
20.79
15.78
21.56
18.31
29.03
22.50

2001
17.92
27.89
28.80
19.85
23.61
15.77
25.04
21.10
39.87
24.64

2002
20.03
45.54
13.94
18.42
22.21
19.06
25.69
23.37
26.97
23.75

2003
26.33
33.43
80.32
22.62
22.19
25.59
29.03
19.99
46.57
29.04
27.43
28.27

2004
29.54
43.23
48.63
42.43
33.99
27.76
30.93
28.81
31.20
32.82
44.68
41.04
37.57

2005
143.42
42.51
42.82
62.01
39.22
103.60
72.44
34.24
39.58
45.29
64.10
46.94
40.64
186.63
50.62

2006
106.99
37.60
58.71
96.47
53.08
41.51
35.41
50.51
60.52
41.67
60.62
106.94
46.34
52.02
70.29
57.08

2007
78.55
45.49
52.62
57.51
65.89
50.71
74.38
53.51
52.83
46.50
65.59
62.49
56.45
64.02
82.08
62.55

2008
54.55
57.69
54.07
70.72
83.63
65.99
52.12
68.56
83.84
91.13
86.10
74.99
86.71
78.59
53.44
85.07

2009
36.67
45.44
50.44
41.27
32.90
49.51
31.41
65.48
46.11
54.12
39.38
65.90
54.50
60.18
74.94
54.20

Weighted Avg
3-Year
5-Year
46.55
57.54
48.67
45.59
50.00
49.76
51.18
56.74
54.48
50.43
55.75
76.84
57.50
63.19
58.11
51.45
59.47
61.18
60.03
50.56
60.22
57.57
63.98
68.06
65.01
57.53
68.31
59.21
68.92
78.67
66.55
62.41

Source: BMO Capital Markets, Company Reports


Note: Includes companies with production weighted 55% or more toward crude oil in 2009

Lacklustre Returns Continue


The dramatic increase in crude oil prices over the past decade has not translated into a
windfall for the global oil and gas industry. Chart 24 shows that the worldwide cash
flow recycle ratio (cash flow from operations divided by reserve replacement costs) has
actually declined despite an increase of more than 400% in crude oil prices, which suggests that full-cycle returns on capital employed have not improved. In addition, capital
depreciation charges (DD&A) have not kept pace with the rise in reserve replacement
costs. We believe that future capital depreciation charges may have to increase significantly
if reserve replacement cost performance does not improve, which could materially impair
future earnings and returns on capital employed.
Chart 24: Worldwide Cash Flow Recycle Ratio
US$/boe

Chart 25: Worldwide DD&A vs. F&D (US$/boe)

Recycle Ratio

$60.00

$30.00

4.0
3.5

$50.00

3.0
$40.00

$25.00
$20.00

2.5

$30.00

2.0
1.5

$20.00

$15.00
$10.00

1.0
$10.00

0.5
-

$0.00
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

F&D

Cash Flow

$5.00
$0.00
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Recycle Ratio

Source: BMO Capital Markets, Company Reports


Notes: Operating earnings used as a proxy for Upstream cash flow

DD&A

Worldwide F&D

Source: BMO Capital Markets, Company Reports

See pages G1 to G2 for analyst coverage.

Oil & Gas Global Cost Study

Page A19

Most tellingly, the industrys return on capital employed has declined steadily since 2005,
despite increasing underlying commodity prices through 2008. With comparatively weaker
commodity prices in 2009, returns fell even further. The continued fall in returns has
reflected both the increase in the cost of inputs such as land and labour, and the steady
decline in reserve replacement performance. Although the trend for reserve replacement
performance was reversed in 2009, weaker commodity prices more than offset given the
downwardly sticky cost of inputs. While high-grading and asset rationalization improved
reserve replacement performance, we believe that the industrys costs will begin to trend
higher again over time as producers struggle to replace reserves from mature oil basins
globally. This could translate to stagnant returns on capital employed in over the next
few years and a weaker-than-historical valuation for the industry.
Chart 26: Return on
Capital Employed vs. WTI
Oil Price

ROCE %
30%

US$/bbl
$120

25%

$100

20%

$80

15%

$60

10%

$40

5%

$20

0%

$0
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Worldwide ROACE

WTI Oil Price

Source: BMO Capital Markets, Company reports

A Temporary Reprieve
Commodity prices were substantially weakened at the beginning of 2009 in response to the
financial crisis and global economic downturn. The oil and gas industry responded to the
drop in commodity prices by significantly reducing capital spending. This in turn led to
some moderation in the industrys cost structure, particularly for drilling and completion,
which accounts for roughly 4060% of the industrys total spending. However, given the
specialized rigs and completion equipment used in the resource plays, demand for those
services remained relatively strong. Therefore, cost reductions for drilling and completion
costs were not as substantial as were seen for other contributors to reserve replacement
costs, such as acquisition costs, as shown in Chart 27.

See pages G1 to G2 for analyst coverage.

Page A20

Chart 27: Worldwide


Reserve Replacement
Costs by Type (US$/boe)

Oil & Gas Global Cost Study

$25.00

$20.00

$15.00

$10.00

$5.00

$0.00
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010E
Acquisitions

Geological

Lease Equipment

Drilling/Equipping

Other

Source: U.S. Energy Information Administration, BMO Capital Markets

We do not believe the reduction in the industrys cost structure will be sustained, for three
reasons. First, labour markets have loosened due to the slowdown in economic growth;
however, we still have not seen a material reduction in wages. Moreover, the shortage
of technical staff, such as engineers and geologists as well as skilled trades has not been
resolved. Thus, we expect that rising wage rates and reduced productivity would again
become factors pushing costs higher as the economy recovers. Second, the prices of inputs,
such as steel, have also declined with slower economic growth, but again we believe that
the drop in prices could prove transitoryparticularly as output in emerging economies
such as China and India begins to increase. Third, we estimate that approximately 40%
of the increase in reserve replacement costs is due to finding less oil and gas. In contrast,
during prior oil price cycles the sustained decline in the industrys cost structure resulted
from a shift to half-cycle economics that was enabled by the discovery of the North Sea
and Alaska North Slope, which created an inventory of low-cost opportunities that facilitated a reduction in the cost structure. No such analogy currently exits for the global oil
industry, although the emerging shale gas plays in North America have similar implications for North American natural gas prices.
As a result, we expect to see reserve replacement costs rise in 2010, albeit still well below the
high-water mark set in 2008. We believe companies will continue to pursue higher-margin
projects, especially for natural gas projects in North America, given the volatility in that
market and the significant supply that could be associated with shale gas development.
Overall, we expect that worldwide reserve replacement costs could increase by roughly 22%
to the $15/boe level in 2010. Taken together with a 10% overall increase in operating costs
for the year, we estimate the breakeven oil price for the industry could rise to just under the
$65/boe range in 2010.
See pages G1 to G2 for analyst coverage.

Oil & Gas Global Cost Study

Page A21

Chart 28: Reserve Replacement Costs by Region (US$/


boe)

Chart 29: Worldwide Required WTI Oil Price (US$/boe)

$120.00

$40.00
$35.00

$100.00

$30.00

$80.00

$25.00
$60.00

$20.00

$40.00

$15.00
$10.00

$20.00

$5.00

20
10
E

20
09

20
08

20
07

20
06

20
05

20
04

20
03

20
02

20
01

Worldwide

International

Source: BMO Capital Markets, Company Reports

20
00

09

10
E

20

08

20

07

20

06

North America

20

05

20

04

20

03

20

02

20

01

20

00

20

99

20

19

Worldwide

19
99

$0.00

$0.00

North America

International

Source: BMO Capital Markets, Company Reports

Unconventional Implications
Unconventional oil and gas resources continue to attract increased attention from oil and
gas companies and investors. In Canada, the primary focus has been on developing the
oil sands resource base and, more recently, tight oil plays such as the Bakken, while in
the United States companies are focused on unlocking the potential of shale gas, which
is estimated to hold more than 800 Tcf of recoverable resource. These unconventional
resources also exist in other countries outside of North America; however, with the exception of the Venezuelan oil sands there has been no significant development thus far.
The attraction of unconventional resource development is largely due to the size of the
resource because this provides an opportunity for lower and more stable reserve replacement costs, and in turn lower commodity prices are required in order to generate acceptable investment returns. However, the costs of developing unconventional resources have
also moved higher in tandem with rising crude oil and natural gas prices, as competition
for the inputs has increasedparticularly in the oil sands due to its relatively high capital
intensity.
The supply cost for natural gas in North America had been moving steadily higher over
the last decade, rising to $12.96/Mcfe in 2008 from $3.03/Mcfe in 1999. The emergence of
unconventional natural gas in North American (specifically shale gas) has fundamentally
altered the natural gas industrys cost structure. Advances in drilling and fracing technology coupled with operating experience have lowered the supply in some plays below
$4/Mcfe. However, actual reported results based on proved reserves do not seem to bear
this out, which has led to some scepticism regarding company claims. The disconnect
between company slide show presentations and reported results is largely due to the fact
that a significant portion of the resource potential will not be booked as proved reserves
for many years. This makes the upfront capital spending and supply costs appear very
high. Our Monte Carlo simulations for the major shale gas plays directionally support

See pages G1 to G2 for analyst coverage.

Page A22

Oil & Gas Global Cost Study


the company claims, although care must be taken to account for the differences in halfcycle and full-cycle costs2. The results in 2009 are also supportive, with the one-year
proved supply cost falling to $5.92/Mcfe.

Chart 30: North American


Natural Gas Supply Costs
(US$/Mcfe)

$16.00
$14.00
$12.00
$10.00
$8.00
$6.00
$4.00
$2.00
$0.00
1999

2000

2001

2002

2003

Gas Supply Cost

2004

2005

2006

2007

2008

2009

Shale Gas Supply Cost

Source: BMO Capital Markets, Company reports

The rise in crude oil supply costs has made it economic to consider the development of
unconventional source of oil supply. One of the main beneficiaries has been the Canadian
oil sands, which has seen more than $100 billion of capital invested over the last decade.
This heavy level of investment coupled with labour market constrains dramatically drove
up the supply costs for oil sands to more than $90/bbl by 2008 from $20/bbl in 1999. We
estimate that the remaining established resource base requires a weighted average WTI
price of approximately $64/bbl to justify investment, excluding any potential changes to
environmental regulations, as shown in Chart 31.
The cost of developing an integrated oil sands development (production and local upgrading) is expected to fall somewhat due to the slower pace of development under a relatively
lower oil price environment. However, we believe that it will be difficult to capture significant cost savings, as labour remains relatively tight in Alberta and competition for inputs
will again intensify as soon as projects come back onto the drawing board. Consequently,
we estimate that the typical integrated oil sands development will continue to require a
crude oil price of at least $70/bbl to justify investment. We estimate that the supply cost
has fallen for many oil sands projects to the $4560/bbl range, which is below the global
average supply cost of roughly $63/bbl. This is due to the combination of a shift to in situ
developments without upgraders as well as an overall lessening in inflationary pressures
due to lower activity.
2

See our October 2009 report Unconventional Gas: Montney Carlo Revisited.

See pages G1 to G2 for analyst coverage.

Oil & Gas Global Cost Study

Chart 31: Breakeven


Oil Price for Oil Sands
Resource Base

Page A23

US$/bbl
140
120
100

Athabasca
In Situ

80
60

Cold Lake
In Situ

40

Mineable

20
0
0

10,000

20,000
30,000
40,000
50,000
Remaining Established Resource (mmbbls)

60,000

Source: BMO Capital Markets, Company reports

Tight oil plays such as the Bakken in North Dakota and Western Canada also represent
a source of unconventional oil. The Bakken play is relatively mature, with the boundaries
of the play in Saskatchewan largely delineated. Development of the play has been largely
through 11-stage single leg horizontal wells. However, companies are currently experimenting with rising frac intensity, as well as other completion and recovery methods, including
water flooding and dual leg horizontals. In North Dakota, industry has reported strong
initial production rates on higher frac intensity.
In contrast to the Bakken, the Cardium play is still in the early stages of development, but
has garnered significant attention on the identification of a new oil resource play. Similar
to the Bakkens evolution during the initial stages of development, the areal extent of
the play is still being delineated, with prospective Cardium acreage covering a large area
across Alberta. As such, there is a significant number of companies with potential Cardium
holdings. Given the early stage of development, operating assumptions and characteristics
of the play are still being determined. This includes drilling and completion techniques,
which continue to be refined. Our bias is toward improved economics on higher recovery
rates and lower operating costs.
Our breakeven analysis on single leg horizontals for the Bakken and Cardium wells is
based on half-cycle economics and currently available public information. As previously
mentioned, the Cardium play is still in the early stages of development and our analysis
will be updated with further visibility. We estimate a WTI breakeven oil price of ~$44/
boe and $47/boe for a Bakken and Cardium single leg horizontal well, respectively. Our
relatively low estimated breakeven oil price highlights the impact of horizontal drilling,
which has changed the operating landscape for industry. Specifically, in addition to the
See pages G1 to G2 for analyst coverage.

Page A24

Oil & Gas Global Cost Study


unlocking of previously untapped reserves, there has been a significant reduction in the
commodity price required to drill due to stronger production rates and higher recoverable
reserves. We note that our breakeven oil price is positively impacted by the royalty incentives for the Bakken (2.5% royalty on first 37,500 barrels, additional incentive for deeper
wells) and Cardium (5% royalty over various time horizons and production volumes based
on measured depth). On a full-cycle basis, our estimated breakeven oil price would result
in a higher range. However, we are biased to the low end of the range given that land has
already been largely consolidated in the Bakken, while acreage positions and existing
infrastructure are already in place for the Cardium on legacy assets.

Chart 32: Unconventional


Oil Supply Costs (US$/
bbl)

$100.00
$90.00
$80.00
$70.00
$60.00
$50.00
$40.00
$30.00
$20.00
$10.00
$0.00
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Worldwide Average

Tight Oil

Integrated Oil Sands

In Situ Oil Sands

Source: BMO Capital Markets, Company reports

The Myth of 6:1


The application of the commonly used 6-to-1 oil to gas equivalency ratio can have broadranging effects when making comparisons and presenting data on a barrel of oil equivalent
basis. While the 6-to-1 ratio represents the energy equivalent of crude oil and natural
gas, it has rarely held when it comes to the actual prices of the commodities in North
America. Over the past 20 years, the average price ratio for the front-month NYMEX
natural gas to WTI crude oil has been in the range of 10:1, as illustrated in Chart 33. So
while theoretically the two commodities should be trading in closer proximity, this has
not been the case historically due to differing supply and demand dynamics; specifically,
crude oil has essentially become a transportation fuel whose price is determined by the
dynamics of gasoline and diesel markets while natural gas has become a power generation
fuel more closely linked to coal.
See pages G1 to G2 for analyst coverage.

Oil & Gas Global Cost Study

25
20
15
10
5

9
19 0
9
19 1
9
19 2
9
19 3
9
19 4
9
19 5
9
19 6
9
19 7
9
19 8
9
20 9
0
20 0
0
20 1
0
20 2
0
20 3
0
20 4
0
20 5
0
20 6
0
20 7
0
20 8
0
20 9
10

19

Chart 33: WTI-Henry Hub


Ratio

Page A25

Near-Month

Strip

6 to 1

1990-2010 Average

Source: BMO Capital Markets, Company reports

To show the effect that the use of the 6-to-1 ratio has on proved reserve replacement
costs and supply costs, we have also run our industry analysis of using the 10:1 ratio to
more closely match historical market conditions. As shown in Charts 34 and 35, below,
the impact can be significant, especially for gas-weighted producers. For example, in 2009
the reserve replacement cost of $12.30/boe under the traditional 6:1 gas-to-oil ratio rises
to $14.69/boe under the 10-to-1 scenario. Under the 6-to-1 ratio, gas reserves are valued
more highly than the market would dictate, skewing the results. This becomes all the more
meaningful with the gas-to-oil ratio widening even further over the first five months of
2010, averaging more than 17:1 over the period. The effect of higher reserve replacement
costs as well as all other costs, translates to a roughly 20% rise in overall global supply
costs to $62.24/boe.

See pages G1 to G2 for analyst coverage.

Page A26

Oil & Gas Global Cost Study

Chart 34: Worldwide F&D Cost (US$/boe) Gas Ratio 6:1


vs 10:1

Chart 35: Worldwide Required WTI Equivalent Oil Price


(US$/boe) Gas Ratio 6:1 vs. 10:1

$120.00

$35.00
$30.00

$100.00

3-yr Average 10:1

3-yr Average 10:1

$25.00

$80.00

3-yr Average 6:1

$20.00
$60.00

3-yr Average 6:1

$15.00

$40.00

$10.00

$20.00

$5.00
$0.00

$0.00
1999

2000

2001
6 to 1

2002

2003
10 to 1

2004

2005

2006

3-Yr 6 to 1

2007

2008

2009

1999

2000

3-Yr 10 to 1

2001
6 to 1

Source: BMO Capital Markets, Company Reports

2002

2003
10 to 1

2004

2005

3-Yr 6 to 1

2006

2007

2008

2009

3-Yr 10 to 1

Source: BMO Capital Markets, Company Reports

With regards to reserve replacement performance, as measured by reserve additions as a


percentage of production in each year, the results are a bit more mixed. Under the 10:1
scenario, production replacement is higher than under the traditional 6:1 analysis in several years, as shown in Chart 36. However, for the most part, replacement of production
would have been slightly lower had a 10-to-1 ratio been applied instead.

Chart 36: Worldwide


Reserve Replacement
Performance

200.0%
180.0%
160.0%
140.0%
120.0%
100.0%
80.0%
60.0%
40.0%
20.0%
0.0%
1999

2000

2001

2002

2003

2004

6 to 1

2005

10 to 1

Note: Reserve replacement is reserve addition as % of production


Source: BMO Capital Markets, Company Reports

See pages G1 to G2 for analyst coverage.

2006

2007

2008

2009

Oil & Gas Global Cost Study

Page A27

Company Rankings: Low Cost = Higher Share Price


We believe that the share prices of companies that consistently achieve lower full-cycle
costs (breakeven prices) should outperform those with higher cost structures. This is
because lower breakeven prices over time should translate into higher returns on capital
employed, which in turn should generate faster growth in underlying book value and net
asset value. Moreover, low-cost companies are afforded with increased capital flexibility,
which protects profitability and balance sheet strength through cyclical downturns in
commodity prices. Companies that consistently grow asset value faster than their peers,
particularly through challenging industry environments, are rewarded with higher valuation multiples. Chart 37 compares the share price performance of the top 30 companies
with the lowest three-year average breakeven oil prices from our study compared to the
bottom 30 over the last three years. As illustrated, those companies with lower cost structures have outperformed those companies with higher costs structures.

January 1, 2007 = 100


250

200
150
100
50

n0
A 7
pr
-0
7
Ju
l-0
7
O
ct
-0
Ja 7
n0
A 8
pr
-0
8
Ju
l-0
8
O
ct
-0
8
Ja
n0
A 9
pr
-0
9
Ju
l-0
O 9
ct
-0
Ja 9
n1
A 0
pr
-1
0

Ja

Chart 37: Three-Year


Share Price Performance
of Top Quartile vs. Bottom
Quartile (20072009)

Top 30 Lowest Cost

Bottom 30 Highest Cost

Source: BMO Capital Markets, Company reports

Table 5 ranks the oil and gas producers included in this study by three-year average required
WTI-equivalent oil price. Based on three-year weighted average costs, the top performers
were Southwestern, Peyto Energy Trust and Cenovus Energy. The five companies with the
lowest implied required oil price based on 2009 results were Peyto, Southwestern, CNX
Gas, Birchcliff and Cenovus.

See pages G1 to G2 for analyst coverage.

Page A28

Oil & Gas Global Cost Study

Table 5: Worldwide Required WTI Price Ranked by Three-Year Average (US$/boe)

Rank
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50
51
52
53
54
55
56
57

Company
Southwestern
Peyto
Cenovus
Storm
Ultra Petroleum
CNX Gas
Royal Dutch
Equitable Resources
Advantage
Gran Tierra
EOG
ARC Energy
Birchcliff
ProspEx
BP Plc
Delphi
Santos Ltd.
Petrohawk
Trilogy
Bill Barrett
Canadian Natural*
Bonavista
Celtic
Encana
Comstock
Carrizo
PetroBank
Paramount Energy Trust
Mariner
Devon
Range
Vermillion
NuVista
Pan Orient
Galleon
Orleans
Vero
Freehold Royalty
Canadian Oil Sands
Midnight
Petrominerales
Angle
Unit Corp.
Quicksilver
ExxonMobil
Forest
Occidental
Niko
XTO Energy
NAL Oil & Gas
Anadarko
Pengrowth
Penn Virginia
Zargon
Pacific Rubiales
Goodrich Petroleum
Nexen*
Worldwide Average

SWN
PEY.UN
CVE
SEO
UPL
CXG
RD
EQT
AAV
GTE
EOG
AET
BIR
PSX
BP
DEE
Santos
HK
TET
BBG
CNQ
BNP.UN
CLT
ECA
CRK
CRZO
PBG
PMT.UN
ME
DVN
RRC
VET.UN
NVA
POE
GO
OEX
VRO
FRU.UN
COS.UN
MOX
PMG
NGL
UNT
KWK
XOM
FST
OXY
NKO
XTO
NAE.UN
APC
PGF.UN
PVA
ZAR.UN
PRE
GDP
NXY

1999
16.58
(0.28)
na
15.19
7.05
17.16
16.39
14.71
36.23
14.39
na
15.82
11.09
33.91
12.49
12.98
9.78
14.44
11.79
18.01
18.98
21.25
13.01
11.74
15.68
20.41
22.71
18.74
20.30
16.38
16.63
20.47
16.97

2000
22.60
13.83
na
19.56
18.56
21.21
21.38
23.78
23.27
24.70
26.81
20.23
16.05
21.70
21.61
32.32
18.14
24.91
15.86
22.60
20.79
12.41
15.78
(0.05)
14.66
15.17
38.45
35.46
40.12
23.39
20.40
21.56
22.92

2001
18.20
13.20
na
18.10
192.00
24.36
25.32
24.49
17.92
45.25
51.69
27.89
28.14
22.89
28.52
13.75
28.18
30.40
28.80
19.85
25.64
26.71
23.61
22.09
15.77
9.32
20.95
17.07
28.82
23.85
63.80
25.95
21.99
25.04
25.05

2002
18.50
15.89
na
31.27
24.63
20.86
24.06
22.73
20.03
21.63
112.10
47.35
45.54
26.18
24.43
19.65
24.85
19.15
18.44
24.99
21.22
13.94
18.42
27.60
17.66
22.21
35.99
19.06
10.98
20.16
24.60
31.54
42.59
25.20
28.19
41.08
25.69
24.87

2003
28.41
23.35
21.19
40.83
37.42
339.62
77.74
30.44
26.01
26.33
35.75
29.54
15.16
39.96
33.43
33.62
33.78
27.06
35.62
28.82
80.32
168.72
31.93
30.98
27.99
22.62
27.09
22.19
25.59
34.02
39.79
29.03
30.95
19.99
119.15
26.07
29.35
28.72
35.68
38.00
33.32
24.84
46.57
29.60

2004
24.30
35.90
90.34
22.59
36.87
67.61
31.65
46.56
38.59
39.23
112.04
29.54
60.02
45.20
39.58
51.65
43.23
33.08
43.85
35.19
45.37
28.99
48.63
70.56
29.31
34.13
37.63
42.43
40.03
71.20
33.99
27.76
23.13
36.63
44.59
30.93
36.22
28.81
78.34
32.41
53.97
34.36
39.18
45.97
44.37
25.23
31.20
39.08

Source: BMO Capital Markets, Company reports

See pages G1 to G2 for analyst coverage.

2005
36.06
41.58
41.57
31.62
29.62
55.57
30.16
50.82
143.42
45.19
45.07
99.00
61.20
42.51
65.23
50.73
86.52
50.14
74.55
42.82
45.72
65.33
37.89
87.79
43.71
62.01
65.78
42.84
38.99
48.59
39.22
53.44
103.60
46.36
44.41
55.26
72.44
34.24
97.91
44.26
51.46
39.58
56.99
45.29
53.20
41.55
49.20
51.16
48.94
70.48
51.78
48.51
64.10
53.57

2006
49.36
48.16
52.60
38.56
28.74
45.76
37.13
73.92
106.99
51.06
59.29
86.75
66.23
37.60
107.27
49.03
56.96
36.98
55.97
58.71
54.01
59.92
42.97
31.53
68.64
96.47
71.55
49.78
51.68
64.63
53.08
61.66
41.51
70.52
119.39
50.29
35.41
50.51
81.85
60.52
44.74
42.96
41.67
50.54
60.62
47.20
44.01
72.03
96.08
65.76
55.91
55.79
71.25
106.94
61.28

2007
45.69
34.46
34.43
50.97
42.00
74.52
49.55
42.59
43.72
78.55
50.79
54.80
63.22
55.20
45.49
70.62
51.37
61.85
29.70
53.63
52.62
62.25
71.03
49.46
50.53
41.15
57.51
53.46
46.85
48.88
51.21
65.89
58.29
50.71
67.37
71.81
43.96
74.38
53.51
98.38
52.83
51.58
48.29
46.50
60.49
65.59
38.09
49.96
62.48
43.71
60.96
53.41
67.26
33.05
62.49
60.55

2008
31.19
58.22
92.36
29.88
48.14
81.45
67.72
63.11
69.45
54.55
57.78
59.08
50.42
77.23
57.69
55.80
60.84
106.29
46.89
50.75
54.07
56.14
45.53
54.84
118.99
71.84
70.72
55.29
70.90
59.11
80.84
83.63
69.89
65.99
50.12
58.77
58.42
52.12
68.56
82.28
83.84
66.13
71.98
69.47
91.13
69.28
86.10
66.74
87.98
53.35
86.41
67.45
64.07
56.48
60.54
110.85
74.99
85.78

2009
21.91
19.57
28.95
74.30
34.96
22.02
37.07
35.76
41.89
36.67
37.52
35.21
28.28
49.81
45.44
30.29
34.93
30.98
41.36
44.43
50.44
41.39
47.90
58.37
33.29
38.86
41.27
54.72
44.01
32.42
36.38
32.90
39.93
49.51
59.56
42.00
48.75
31.41
65.48
50.71
46.11
51.57
53.20
37.69
54.12
44.51
39.38
52.01
39.23
69.40
57.03
60.12
62.66
63.65
62.84
84.82
65.90
51.98

Weighted Avg
3-Year
5-Year
28.55
30.68
29.57
46.22
38.79
na
39.58
40.86
41.40
39.38
41.78
36.97
44.62
45.80
44.88
40.70
45.97
57.31
46.55
57.54
46.86
47.19
47.54
48.15
47.61
52.06
47.84
53.25
48.67
45.59
48.80
80.61
48.83
48.98
48.99
53.59
49.44
42.53
49.48
51.83
50.00
49.76
50.26
49.84
50.41
54.24
50.65
44.63
50.80
45.98
51.15
51.22
51.18
56.74
52.42
56.54
53.91
55.10
54.26
50.60
54.34
55.13
54.48
50.43
55.25
55.94
55.75
76.84
56.93
57.56
57.14
72.58
57.24
49.42
57.50
63.19
58.11
51.45
59.16
71.01
59.47
61.18
59.84
na
59.93
53.57
59.98
56.23
60.03
50.56
60.05
58.18
60.22
57.57
60.91
58.98
61.16
55.54
61.45
58.51
61.78
76.55
61.86
62.61
61.92
60.12
62.19
59.37
62.69
62.69
62.73
63.96
63.98
68.06
65.18
62.28

Oil & Gas Global Cost Study

Page A29

Table 6: Worldwide Required WTI Price Ranked by Three-Year Average (US$/boe) contd.

Rank
58
59
60
61
62
63
64
65
66
67
68
69
70
71
72
73
74
75
76
77
78
79
80
81
82
83
84
85
86
87
88
89
90
91
92
93
94
95
96
97
98
99
100
101
102
103
104
105
106
107
108
109
110
111
112
113
114

Company
Newfield
PetroChina
Fairborne
Apache
Baytex
Crew
Cabot
West
Warren Resources
Hess Corp
Progress
Marathon
Zapata
Husky Energy
Petrobras
Chesapeake
Suncor*
Noble
Penn West
ConocoPhillips
ENI
Imperial Oil*
CNOOC
Total
Energy XXI
Ember
Chevron
Murphy
Anderson
Transglobe
Bankers
Crescent Point
Provident
Rock
W&T Offshore
Iteration
Sinopec
Twoco
NGAS Resources
Brigham
Talisman
Winstar
Statoil
Gasco Energy
Kodiak
Enerplus
Pioneer
Repsol
Compton Petroleum
Plains Exploration
Paramount Resources
Antrim
Petrolifera
Cirrus
Midway
Legacy
PetroBakken
Worldwide Average

NFX
PTR
FEL
APA
BTE.UN
CR
COG
WTL
WRES
HES
PRQ
MRO
ZCO
HSE
PBR
CHK
SU
NBL
PWT
COP
ENI
IMO
CEO
TOT
EXXI
EBR
CVX
MUR
AXL
TGL
BNK
CPG
PVE.UN
RE
WTI
ITX
SNP
TWO
NGAS
BEXP
TLM
WIX
STO
GSX
KOG
ERF.UN
PXD
REP
CMT
PXP
POU
AEN
PDP
CYR
MEL
LEG
PBN

1999
12.08
15.38
17.03
24.04
20.00
22.88
33.11
15.29
58.39
12.87
12.15
22.03
10.50
18.71
13.25
19.63
12.44
16.84
15.37
22.87
16.82
17.59
52.78
16.43
25.07
42.79
25.50
13.79
18.51
22.89
na
36.53
16.97

2000
18.95
18.31
19.78
29.03
29.76
22.67
33.39
21.73
30.35
25.80
18.44
27.80
22.53
24.37
11.27
23.19
41.51
26.16
24.43
20.90
29.85
21.30
51.72
36.86
23.24
53.74
15.96
24.02
20.97
28.33
35.37
42.98
22.92

2001
28.05
21.10
19.21
39.87
43.03
31.01
40.05
22.69
25.62
74.05
29.90
24.38
26.86
26.92
31.45
26.16
19.93
20.29
24.04
26.31
27.59
17.06
30.14
55.29
22.44
22.35
29.18
22.03
32.70
18.03
26.41
28.23
143.18
78.03
25.05

2002
23.53
23.37
22.01
26.97
24.07
21.99
19.18
21.50
33.22
17.78
21.75
21.14
44.44
30.38
32.66
26.00
31.62
20.25
21.33
24.88
72.78
16.67
28.94
31.88
14.64
20.26
35.50
27.72
558.65
23.23
30.96
24.10
27.51
25.13
42.45
46.91
24.87

2003
22.78
29.04
24.16
27.43
30.31
33.26
64.30
33.01
30.52
35.77
47.45
26.75
29.76
25.90
48.07
41.22
28.49
34.50
73.35
25.24
25.46
26.85
60.93
23.01
33.98
26.55
60.37
19.56
35.16
61.00
30.25
28.55
39.56
39.71
122.17
35.57
30.44
34.97
40.45
54.93
31.00
77.22
29.60

2004
32.87
32.82
29.90
44.68
31.73
37.11
41.04
185.54
44.48
56.10
30.10
47.75
51.80
40.09
33.84
37.34
29.88
51.03
30.10
40.22
69.85
42.51
39.25
52.38
43.69
31.34
37.03
62.82
78.48
35.30
60.99
44.49
29.96
58.17
73.80
36.01
58.16
100.05
37.47
45.10
51.20
49.22
41.08
45.11
77.05
39.08

Source: BMO Capital Markets, Company reports

See pages G1 to G2 for analyst coverage.

2005
39.87
46.94
50.27
42.17
40.64
52.78
48.98
186.63
41.50
61.03
53.96
41.94
141.35
48.75
60.01
52.34
60.59
55.48
65.17
44.08
100.42
51.94
45.95
48.97
173.04
66.71
102.56
51.05
48.13
76.79
65.95
56.17
78.69
49.72
35.53
53.89
62.13
49.18
68.00
69.65
50.58
69.44
70.43
48.23
48.15
67.87
110.57
60.98
80.19
130.21
61.02
51.20
181.61
53.57

2006
54.57
46.34
71.68
55.72
52.02
80.58
49.03
70.29
92.52
54.57
48.55
57.45
110.86
57.16
93.00
74.43
46.25
56.35
74.85
67.44
63.47
39.72
79.94
53.34
79.16
74.15
73.37
53.31
54.75
52.94
171.65
61.26
67.25
38.17
63.99
65.21
67.04
64.32
52.71
90.41
59.71
52.79
91.38
77.49
93.63
67.55
84.79
160.90
61.38
139.48
94.41
109.54
39.61
182.74
61.28

2007
59.69
56.45
83.09
53.93
64.02
57.35
57.58
82.08
172.45
62.58
60.94
105.50
109.00
55.65
62.80
59.83
56.64
53.48
81.02
56.16
72.21
53.68
70.05
77.11
71.30
55.92
95.75
102.86
67.59
79.62
97.65
73.82
58.72
105.14
116.87
54.17
67.95
64.09
145.80
149.93
88.06
69.61
96.48
54.10
185.37
85.40
84.02
88.20
82.74
108.95
30.30
114.33
68.51
135.64
60.55

2008
68.81
86.71
77.55
101.01
78.59
109.70
84.46
53.44
69.74
79.60
66.90
95.43
89.66
93.98
174.91
96.72
72.20
99.07
88.98
185.54
83.70
90.54
127.18
76.56
134.05
100.93
66.14
99.93
116.16
170.87
103.35
72.95
150.34
110.11
84.64
127.30
120.69
86.85
92.53
177.11
162.52
90.36
190.20
74.03
230.35
71.75
169.75
119.83
124.02
133.63
190.22
288.21
308.35
421.64
85.78

2009
38.12
54.50
48.01
62.43
60.18
35.49
58.82
74.94
35.27
68.93
61.74
47.72
46.25
51.96
54.35
43.02
76.38
99.73
51.48
57.02
77.53
79.57
54.16
74.57
59.01
47.59
104.10
53.34
38.47
30.20
60.23
95.51
187.36
54.80
117.79
68.47
95.23
81.71
43.95
44.79
79.32
93.77
81.03
54.00
68.79
158.12
142.98
na
120.98
81.91
87.75
114.83
138.15
737.45
62.56
81.95
102.96
51.98

Weighted Avg
3-Year
5-Year
64.47
59.95
65.01
57.53
65.73
71.56
67.45
58.40
68.31
59.21
68.70
71.41
68.92
61.75
68.92
78.67
68.96
143.21
69.86
64.81
69.90
64.61
70.62
59.21
70.86
81.13
72.46
62.41
72.57
71.79
72.69
68.06
73.82
69.42
74.05
61.24
74.81
74.97
75.37
65.94
76.25
76.08
76.35
58.14
76.57
71.97
76.70
65.67
76.87
na
77.00
79.34
77.43
72.96
78.00
72.04
79.86
62.86
82.33
65.95
83.71
85.96
83.81
76.46
85.06
90.73
86.06
75.93
86.15
92.43
86.35
83.46
86.51
77.42
88.98
73.81
91.05
163.78
93.28
87.55
99.40
81.20
105.98
72.44
109.32
101.15
109.86
179.17
110.38
117.63
115.56
77.85
116.10
95.05
121.42
107.54
131.92
81.39
141.30
138.61
147.02
121.23
170.37
133.52
205.00
103.96
509.59
367.66
na
na
na
na
na
na
65.18
62.28

Page A30

Oil & Gas Global Cost Study


Table 7 ranks the top 15 global oil-weighted producers with the lowest three-year average required WTI-equivalent oil prices in our study. Based on three-year weighted average costs, the
top oil-weighted performers include Gran Tierra, BP and Canadian Natural Resources.

Table 7: Top-15 Oil-Weighted Companies by Lowest Three-Year Average Required WTI Equivalent Oil Price (US$/boe)

Rank
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15

Company
Gran Tierra
BP Plc
Canadian Natural
Petrobank
Vermilion
Pan Orient
Freehold
Canadian Oil Sands
Petrominerales
ExxonMobil
Occidental
Nexen
PetroChina
Baytex
West Energy
Average of Oil Weighted

GTE
BP
CNQ
PBG
VET.UN
POE
FRU.UN
COS
PMG
XOM
OXY
NXY
PTR
BTE.UN
WTL

1999
14.71
14.39
9.78
14.44
18.98
13.01
20.47
15.38
24.04
17.05

2000
23.78
24.70
18.14
24.91
20.79
15.78
21.56
18.31
29.03
22.50

2001
17.92
27.89
28.80
19.85
23.61
15.77
25.04
21.10
39.87
24.64

2002
20.03
45.54
13.94
18.42
22.21
19.06
25.69
23.37
26.97
23.75

2003
26.33
33.43
80.32
22.62
22.19
25.59
29.03
19.99
46.57
29.04
27.43
28.27

2004
29.54
43.23
48.63
42.43
33.99
27.76
30.93
28.81
31.20
32.82
44.68
41.04
37.57

2005
143.42
42.51
42.82
62.01
39.22
103.60
72.44
34.24
39.58
45.29
64.10
46.94
40.64
186.63
50.62

2006
106.99
37.60
58.71
96.47
53.08
41.51
35.41
50.51
60.52
41.67
60.62
106.94
46.34
52.02
70.29
57.08

2007
78.55
45.49
52.62
57.51
65.89
50.71
74.38
53.51
52.83
46.50
65.59
62.49
56.45
64.02
82.08
62.55

2008
54.55
57.69
54.07
70.72
83.63
65.99
52.12
68.56
83.84
91.13
86.10
74.99
86.71
78.59
53.44
85.07

2009
36.67
45.44
50.44
41.27
32.90
49.51
31.41
65.48
46.11
54.12
39.38
65.90
54.50
60.18
74.94
54.20

Weighted Avg
3-Year
5-Year
46.55
57.54
48.67
45.59
50.00
49.76
51.18
56.74
54.48
50.43
55.75
76.84
57.50
63.19
58.11
51.45
59.47
61.18
60.03
50.56
60.22
57.57
63.98
68.06
65.01
57.53
68.31
59.21
68.92
78.67
66.55
62.41

Source: BMO Capital Markets, Company Reports


Note: Includes companies with production weighted 55% or more toward crude oil in 2009

Table 8 ranks the top 15 global natural gas-weighted producers with the lowest threeyear average required Henry Hub-equivalent oil prices in our study. Based on three-year
weighted average costs, the top gas-weighted performers include Southwestern, Peyto and
Storm Exploration.
Table 8: Top-15 Natural Gas-Weighted Companies by Lowest Three-Year Average Required Henry Hub Equivalent Oil Price
(US$/Mcfe)
Rank Company
1
Southwestern
2
Peyto
3
Storm
4
Ultra
5
CNX Gas
6
Equitable
7
EOG
8
Birchcliff
9
ProspEx
10
Delphi
11
Santos
12
Petrohawk
13
Trilogy
14
Bill Barrett
15
Celtic
Average Gas Weighted

SWN
PEY.UN
SEO
UPL
CXG
EQT
EOG
BIR
PSX
DEE
STOSY
HK
TET
BBG
CLT

1999
2.76
(0.05)
1.18
2.86
6.04
3.03

2000
3.77
2.30
3.09
3.53
3.88
3.57

2001
3.03
2.20
32.00
4.22
7.54
8.62
4.46

2002
3.08
2.65
4.10
4.01
3.61
18.68
7.89
4.36
4.14

2003
4.74
3.89
3.53
6.80
56.60
5.07
5.96
4.92
2.53
6.66
5.63
5.48

2004
4.05
5.98
15.06
3.76
6.14
5.28
6.43
18.67
10.00
7.53
6.60
8.61
7.31
6.32

2005
6.01
6.93
6.93
5.27
4.94
5.03
7.53
16.50
10.20
10.87
8.46
14.42
8.36
12.42
10.89
7.93

2006
8.23
8.03
8.77
6.43
4.79
6.19
8.51
14.46
11.04
17.88
8.17
9.49
6.16
9.33
9.99
9.16

2007
7.61
5.74
8.50
7.00
12.42
7.10
8.46
10.54
9.20
11.77
8.56
10.31
4.95
8.94
11.84
8.86

2008
5.20
9.70
4.98
8.02
13.57
10.52
9.63
8.40
12.87
9.30
10.14
17.72
7.81
8.46
7.59
12.96

2009
3.65
3.26
12.38
5.83
3.67
5.96
6.25
4.71
8.30
5.05
5.82
5.16
6.89
7.41
7.98
5.92

Weighted Avg
3-Year
5-Year
4.76
5.11
4.93
7.70
6.60
6.81
6.90
6.56
6.96
6.16
7.48
6.78
7.81
7.86
7.93
8.68
7.97
8.88
8.13
13.43
8.14
8.16
8.17
8.93
8.24
7.09
8.25
8.64
8.40
9.04
9.04
9.10

Source: BMO Capital Markets, Company Reports


Note: Includes companies with production weighted 70% or more toward natural gas in 2009

Based on 2009 results, the North American Senior Producers achieved the lowest breakeven
oil price, at $47.41/boe, followed by the Integrated Oils and Multinationals group at
$52.51. The breakeven price for the International Producers group was $54.25, followed
by the North American Intermediates/Juniors at $55.52. Based on the three-year average,
the International Producers have the lowest breakeven oil prices, at $58.67/boe, while the
North American Juniors maintain the highest, at $62.87/boe.
See pages G1 to G2 for analyst coverage.

Oil & Gas Global Cost Study

Chart 38: Worldwide


Required WTI Oil Price
Group Comparisons (US$/
boe)

Page A31

$100.00
$90.00
$80.00
$70.00
$60.00
$50.00
$40.00
$30.00
$20.00
$10.00
$0.00
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Integrateds

Seniors

Intermed/Juniors

Internationals

Source: BMO Capital Markets, Company reports

Within the Integrated Oils group, our analysis suggests that Cenovus, Royal Dutch and
BP require the lowest WTI oil price in order to break even based on 2009 results, at
$28.95/boe, $37.07/boe and $45.44/boe, respectively. We view three-year average reserve
replacement costs as a more appropriate indicator of corporate cost structure due to the
wide year-to-year fluctuations in the calculation. Using three-year reserve replacement
costs, the ranking is unchanged, with Cenovus, Royal Dutch and BP having the lowest
breakeven WTI price requirements, while Repsol, Statoil and Sinopec historically have
the highest price requirements.
Table 9: Integrateds Worldwide Required WTI Price Ranked by 2009 Results (US$/boe)

Cenovus
Royal Dutch
BP Plc
Marathon
Husky Energy
Murphy
ExxonMobil
CNOOC
Petrobras
PetroChina
ConocoPhillips
Hess Corp
Total
Suncor*
ENI
Imperial Oil*
Statoil
Sinopec
Chevron
Repsol
Weighted Group Avg.

CVE
RD
BP
MRO
HSE
MUR
XOM
CEO
PBR
PTR
COP
HES
TOT
SU
ENI
IMO
STO
SNP
CVX
REP

1999
na
15.19
14.71
33.11
58.39
16.82
18.98
16.84
12.87
15.38
13.25
22.88
15.37
22.03
19.63
12.44
42.79
17.59
22.87
18.51
16.70

2000
na
19.56
23.78
33.39
30.35
29.85
20.79
26.16
25.80
18.31
11.27
22.67
24.43
27.80
23.19
41.51
53.74
21.30
20.90
20.97
22.70

2001
na
18.10
17.92
40.05
25.62
27.59
23.61
20.29
74.05
21.10
31.45
31.01
24.04
24.38
26.16
19.93
29.18
30.14
26.31
18.03
24.11

2002
na
31.27
20.03
19.18
33.22
72.78
22.21
20.25
17.78
23.37
32.66
21.99
21.33
21.14
26.00
31.62
27.72
31.88
24.88
24.10
23.70

2003
na
37.42
26.33
30.52
47.45
60.93
29.03
25.24
26.75
29.04
28.49
33.01
25.46
25.90
34.50
73.35
39.71
61.00
26.85
34.97
28.59

2004
na
67.61
29.54
30.10
51.80
43.69
30.93
42.51
40.09
32.82
30.10
44.48
39.25
37.34
40.22
69.85
58.16
44.49
52.38
51.20
38.26

2005
na
55.57
42.51
41.94
48.75
102.56
39.58
45.95
60.01
46.94
44.08
61.03
48.97
60.59
100.42
51.94
69.44
53.89
66.71
110.57
54.12

2006
na
45.76
37.60
57.45
57.16
53.31
41.67
79.94
93.00
46.34
67.44
54.57
53.34
46.25
63.47
39.72
91.38
67.04
73.37
160.90
56.41

2007
34.43
49.55
45.49
105.50
55.65
102.86
46.50
70.05
62.80
56.45
56.16
62.58
77.11
56.64
72.21
53.68
96.48
67.95
95.75
88.20
61.85

2008
92.36
67.72
57.69
95.43
93.98
99.93
91.13
127.18
174.91
86.71
185.54
79.60
76.56
72.20
83.70
90.54
190.20
120.69
66.14
119.83
84.29

2009
28.95
37.07
45.44
47.72
51.96
53.34
54.12
54.16
54.35
54.50
57.02
68.93
74.57
76.38
77.53
79.57
81.03
95.23
104.10
na
52.51

Weighted Average
3-Year
5-Year
38.79
na
44.62
45.80
48.67
45.59
70.62
59.21
72.46
62.41
78.00
72.04
60.03
50.56
76.57
71.97
72.57
71.79
65.01
57.53
75.37
65.94
69.86
64.81
76.70
65.67
73.82
69.42
76.25
76.08
76.35
58.14
109.32
101.15
86.51
77.42
77.43
72.96
121.42
107.54
65.26
61.55

Source: BMO Capital Markets, Company Reports


Note: *Including oil sands mining - We use DD&A/bbl as a proxy for oil sands F&D costs given the large timing difference between capital
spending and additions. Blended with Conventional F&D results to calculate an adjusted F&D cost and Breakeven for the company
See pages G1 to G2 for analyst coverage.

Page A32

Oil & Gas Global Cost Study


Our comparison of the North American Senior Producers continues to reflect the impact of low-cost unconventional natural gas resource plays in North America. Based on
2009 results, unconventional gas producers Southwestern Energy, CNX Gas, Petrohawk,
Devon and Ultra Petroleum had the lowest required WTI-equivalent prices in the Senior
Producers group. Based on three-year average cost data, Southwestern, Ultra, CNX Gas
and Equitable Resources have historically maintained the lowest breakeven oil prices,
with required WTI-equivalent prices of $28.55/boe, $41.40/boe, $41.78/boe and $44.88/
boe, respectively.

Table 10: Senior Producers Worldwide Required WTI Price Ranked by 2009 Results (US$/boe)

Southwestern
CNX Gas
Petrohawk
Devon
Ultra Petroleum
ARC Energy
Equitable Resources
Range
EOG
Quicksilver
Newfield
XTO Energy
Occidental
Chesapeake
Forest
Canadian Natural*
Penn West
Anadarko
EnCana
Cabot
Apache
Canadian Oil Sands
Nexen*
Talisman
Plains Exploration
Crescent Point
Noble
Pioneer
Weighted Group Avg.

SWN
CXG
HK
DVN
UPL
AET
EQT
RRC
EOG
KWK
NFX
XTO
OXY
CHK
FST
CNQ
PWT
APC
ECA
COG
APA
COS.UN
NXY
TLM
PXP
CPG
NBL
PXD

1999
16.58
na
36.23
12.49
(0.28)
16.39
7.05
12.98
17.16
18.01
12.08
15.68
13.01
12.15
21.25
14.39
18.71
22.71
na
20.00
17.03
14.44
20.47
25.07
na
na
10.50
13.79
17.35

2000
22.60
na
23.27
21.61
13.83
21.38
18.56
32.32
21.21
22.60
18.95
14.66
15.78
18.44
12.41
24.70
24.37
38.45
26.81
29.76
19.78
24.91
21.56
23.24
35.37
na
22.53
24.02
22.29

2001
18.20
na
51.69
28.18
13.20
24.49
192.00
30.40
25.32
26.71
28.05
20.95
15.77
29.90
22.09
27.89
26.92
28.82
28.14
43.03
19.21
19.85
25.04
22.35
28.23
na
26.86
32.70
25.05

2002
18.50
na
112.10
24.99
15.89
22.73
24.63
21.22
24.06
17.66
23.53
20.16
19.06
21.75
35.99
45.54
30.38
31.54
24.43
24.07
22.01
18.42
25.69
35.50
25.13
na
44.44
30.96
27.78

2003
28.41
40.83
15.16
30.98
21.19
26.01
339.62
27.99
30.44
39.79
22.78
26.07
19.99
29.76
30.95
33.43
41.22
28.72
27.06
33.26
24.16
25.59
46.57
39.56
54.93
33.98
48.07
30.44
29.52

2004
24.30
36.87
39.58
34.13
22.59
39.23
31.65
37.63
38.59
44.59
32.87
32.41
28.81
33.84
36.22
43.23
51.03
34.36
35.19
37.11
29.90
27.76
31.20
36.01
41.08
37.03
29.88
45.10
36.68

2005
36.06
29.62
86.52
38.99
31.62
45.07
30.16
48.59
45.19
51.46
39.87
41.55
45.29
52.34
56.99
42.82
65.17
51.16
37.89
48.98
42.17
34.24
64.10
69.65
80.19
65.95
55.48
67.87
48.76

2006
49.36
28.74
56.96
51.68
38.56
59.29
37.13
64.63
51.06
42.96
54.57
44.01
60.62
74.43
50.54
58.71
74.85
96.08
42.97
49.03
55.72
50.51
106.94
59.71
139.48
61.26
56.35
84.79
63.92

2007
45.69
74.52
61.85
48.88
42.00
54.80
42.59
51.21
50.79
48.29
59.69
49.96
65.59
59.83
60.49
52.62
81.02
43.71
49.46
57.58
53.93
53.51
62.49
88.06
108.95
73.82
53.48
84.02
56.07

2008
31.19
81.45
106.29
59.11
48.14
59.08
63.11
80.84
57.78
69.47
68.81
87.98
86.10
96.72
69.28
54.07
88.98
86.41
54.84
84.46
101.01
68.56
74.99
162.52
133.63
72.95
99.07
169.75
86.48

2009
21.91
22.02
30.98
32.42
34.96
35.21
35.76
36.38
37.52
37.69
38.12
39.23
39.38
43.02
44.51
50.44
51.48
57.03
58.37
58.82
62.43
65.48
65.90
79.32
81.91
95.51
99.73
142.98
47.41

Weighted Average
3-Year
5-Year
28.55
30.68
41.78
36.97
48.99
53.59
54.26
50.60
41.40
39.38
47.54
48.15
44.88
40.70
54.34
55.13
46.86
47.19
59.98
56.23
64.47
59.95
61.16
55.54
60.22
57.57
72.69
68.06
60.05
58.18
50.00
49.76
74.81
74.97
61.78
76.55
50.65
44.63
68.92
61.75
67.45
58.40
58.11
51.45
63.98
68.06
99.40
81.20
141.30
138.61
83.81
76.46
74.05
61.24
116.10
95.05
62.44
60.07

Source: BMO Capital Markets, Company Reports


Note: *Including oil sands mining - We use DD&A/bbl as a proxy for oil sands F&D costs given the large timing difference between capital
spending and additions. Blended with Conventional F&D results to calculate an adjusted F&D cost and breakeven for the company

In 2009, North American Intermediate/Junior producers Peyto, Birchcliff, Delphi, Freehold


and Vermilion required the lowest WTI oil prices based on 2009 results, at $19.57/boe,
$28.28/boe, $30.29/boe, $31.41/boe and $32.90/boe, respectively. In contrast, Provident,
Enerplus and Compton showed the highest required oil prices based on our analysis. The
best three-year performance has been delivered by Peyto, Storm, Advantage, Birchcliff
and ProspEx, while the weakest three-year performance has been from Paramount Resources, Compton and Enerplus. We note that while the Canadian Royalty Trusts currently
benefit from low (or often nil) income taxes, this benefit will largely be erased after 2011,
when trusts become taxable in Canada. As a result, we expect many of the royalty trust
breakeven prices to increase after 2011, reflecting the higher tax burden.

See pages G1 to G2 for analyst coverage.

Oil & Gas Global Cost Study

Page A33

Table 11: North American Junior Producers Worldwide Required WTI Price Ranked by 2009 Results (US$/boe)
1999
Peyto
PEY.UN
Birchcliff
BIR
Delphi
DEE
Freehold Royalty
FRU.UN
Vermillion
VET.UN
Comstock
CRK
Warren Resources
WRES
Crew
CR
Anderson
AXL
Carrizo
CRZO
NuVista
NVA
PetroBank
PBG
Trilogy
TET
Bonavista
BNP.UN
Advantage
AAV
Orleans
OEX
NGAS Resources
NGAS
Mariner
ME
Bill Barrett
BBG
Brigham
BEXP
Zapata
ZCO
Ember
EBR
Celtic
CLT
Fairborne
FEL
Vero
VRO
ProspEx
PSX
Midnight
MOX
Angle
NGL
Unit Corp.
UNT
Gasco Energy
GSX
Paramount Energy Trust PMT.UN
Rock
RE
Energy XXI
EXXI
Galleon
GO
Pengrowth
PGF.UN
Baytex
BTE.UN
Progress
PRQ
Midway
MEL
Penn Virginia
PVA
Zargon
ZAR.UN
Iteration
ITX
Kodiak
KOG
NAL Oil & Gas
NAE.UN
Storm
SEO
West
WTL
Twoco
TWO
Legacy
LEG
Goodrich Petroleum
GDP
Paramount Resources POU
PetroBakken
PBN
W&T Offshore
WTI
Compton Petroleum
CMT
Enerplus
ERF.UN
Provident
PVE.UN
Weighted Group Avg.

9.78
15.82
11.09
52.78
33.91
16.43
15.29
11.79
18.74
24.04
20.30
16.38
20.41
16.63
36.53
22.89
25.50
19.53

2000
18.14
20.23
16.05
51.72
21.70
36.86
21.73
15.86
35.46
29.03
40.12
23.39
15.17
20.40
42.98
28.33
15.96
22.07

2001
28.80
22.89
28.52
24.36
55.29
13.75
22.44
22.69
25.64
23.85
39.87
63.80
25.95
17.07
21.99
143.18
26.41
22.03
17.06
23.82

2002
13.94
19.65
24.85
20.86
14.64
18.44
47.35
20.26
21.50
26.18
27.60
558.65
19.15
42.59
26.97
25.20
28.19
24.60
41.08
42.45
28.94
27.51
23.23
16.67
23.12

2003
23.35
35.75
22.19
22.62
35.62
64.30
30.31
28.82
27.09
80.32
33.62
77.74
30.25
31.93
39.96
28.55
35.77
33.78
34.02
122.17
168.72
60.37
35.68
27.43
38.00
33.32
35.16
29.35
24.84
31.00
19.56
40.45
35.57
26.55
44.12

2004
35.90
60.02
33.99
42.43
45.37
185.54
31.73
28.99
40.03
48.63
33.08
46.56
58.17
29.31
51.65
73.80
47.75
43.85
112.04
23.13
36.63
100.05
70.56
78.48
71.20
39.18
44.68
56.10
45.97
44.37
60.99
53.97
90.34
41.04
29.96
25.23
45.11
35.30
49.22
37.47
62.82
39.82

2005
41.58
99.00
65.23
72.44
39.22
87.79
41.50
52.78
51.05
43.71
53.44
62.01
50.14
45.72
50.82
44.41
49.18
42.84
74.55
68.00
141.35
173.04
65.33
50.27
55.26
61.20
97.91
44.26
70.43
65.78
78.69
46.36
48.94
40.64
53.96
70.48
51.78
35.53
48.23
49.20
41.57
186.63
62.13
48.51
130.21
49.72
60.98
48.15
56.17
53.61

2006
48.16
86.75
107.27
35.41
53.08
31.53
92.52
80.58
54.75
68.64
61.66
96.47
36.98
54.01
73.92
119.39
52.71
49.78
55.97
90.41
110.86
74.15
59.92
71.68
50.29
66.23
81.85
44.74
77.49
71.55
38.17
79.16
70.52
65.76
52.02
48.55
55.91
55.79
65.21
93.63
72.03
52.60
70.29
64.32
71.25
94.41
63.99
61.38
67.55
67.25
61.82

2007
34.46
63.22
70.62
74.38
65.89
50.53
172.45
57.35
67.59
41.15
58.29
57.51
29.70
62.25
43.72
71.81
145.80
46.85
53.63
149.93
109.00
55.92
71.03
83.09
43.96
55.20
98.38
51.58
54.10
53.46
105.14
71.30
67.37
60.96
64.02
60.94
53.41
67.26
54.17
185.37
62.48
50.97
82.08
64.09
33.05
30.30
116.87
82.74
85.40
58.72
56.35

2008
58.22
50.42
55.80
52.12
83.63
118.99
69.74
109.70
116.16
71.84
69.89
70.72
46.89
56.14
69.45
58.77
92.53
70.90
50.75
177.11
89.66
100.93
45.53
77.55
58.42
77.23
82.28
66.13
71.98
74.03
55.29
110.11
134.05
50.12
67.45
78.59
66.90
64.07
56.48
127.30
230.35
53.35
29.88
53.44
86.85
110.85
190.22
84.64
124.02
71.75
150.34
78.18

2009
19.57
28.28
30.29
31.41
32.90
33.29
35.27
35.49
38.47
38.86
39.93
41.27
41.36
41.39
41.89
42.00
43.95
44.01
44.43
44.79
46.25
47.59
47.90
48.01
48.75
49.81
50.71
51.57
53.20
54.00
54.72
54.80
59.01
59.56
60.12
60.18
61.74
62.56
62.66
63.65
68.47
68.79
69.40
74.30
74.94
81.71
81.95
84.82
87.75
102.96
117.79
120.98
158.12
187.36
55.52

Weighted Average
3-Year
5-Year
29.57
47.61
48.80
57.50
54.48
50.80
68.96
68.70
79.86
51.15
55.25
51.18
49.44
50.26
45.97
57.14
91.05
53.91
49.48
93.28
70.86
77.00
50.41
65.73
57.24
47.84
59.16
59.84
59.93
109.86
52.42
86.06
76.87
56.93
61.86
68.31
69.90
na
61.92
62.19
86.35
110.38
61.45
39.58
68.92
88.98
na
62.73
147.02
na
86.15
131.92
115.56
85.06
61.48

46.22
52.06
80.61
63.19
50.43
45.98
143.21
71.41
62.86
51.22
55.94
56.74
42.53
49.84
57.31
72.58
163.78
55.10
51.83
87.55
81.13
79.34
54.24
71.56
49.42
53.25
71.01
na
53.57
179.17
56.54
75.93
na
57.56
62.61
59.21
64.61
na
60.12
59.37
83.46
117.63
58.51
40.86
78.67
73.81
na
63.96
121.23
na
92.43
81.39
77.85
90.73
60.70

Source: BMO Capital Markets, Company reports

We note an interesting twist in recent trends regarding the cost structure of North American
Natural gas development. As illustrated in Chart 39, although U.S. natural gas development
costs have historically been lower than in Canada, reflecting the impact of the shale gas
boom, the trend appears to have largely reversed in 2009. Based on 2009 results, the average natural gas price required to break even over the last three years in Canada was roughly
$7/Mcfe compared to $7.59/Mcfe the U.S. In 2009, we estimate Canadian gas breakeven
at $5.16/Mcfe compared to the U.S. gas breakeven of $6.21/Mcfe. We believe that some of
this relative cost structure improvement in Canada reflects a concerted effort by some of
the larger natural gas producers in Western Canada to high-grade natural gas development
plans, as well as focus on advancing Canadian unconventional natural gas plays.
See pages G1 to G2 for analyst coverage.

Page A34

Oil & Gas Global Cost Study

Chart 39: Required Gas


Price United States vs.
Canada (US$/Mcfe)

$14.00
$12.00

U.S. 3-Yr Average

$10.00
$8.00
$6.00
Canada 3-Yr Average

$4.00
$2.00
$0.00

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Canada Gas

U.S. Gas

Source: BMO Capital Markets, Company Reports


Note: Includes companies with gas-weighted operations in U.S. and Canada

Within the International Producers group in 2009, TransGlobe, Santos and Gran Tierra
required the lowest WTI oil prices, at $30.20/boe, $34.93/boe and $36.67/boe, respectively.
Cirrus, Petrolifera and Antrim had the highest implied breakeven oil prices. Using threeyear average costs, the best historical performances have been delivered by Gran Tierra,
Santos and Pan Orient.
Table 12: International Producers Worldwide Required WTI Price Ranked by 2009 Results (US$/boe)
1999
Transglobe
Santos Ltd.
Gran Tierra
Petrominerales
Pan Orient
Niko
Bankers
Pacific Rubiales
Winstar
Antrim
Petrolifera
Cirrus
Weighted Group Avg.

TGL
STOSY
GTE
PMG
POE
NKO
BNK
PRE
WIX
AEN
PDP
CYR

11.74
11.74

2000
(0.05)
15.16

2001
45.25
9.32
78.03
22.83

2002
21.63
10.98
46.91
20.40

2003
23.01
29.54
119.15
77.22
28.64

2004
31.34
45.20
78.34
77.05
34.92

Source: BMO Capital Markets, Company Reports

See pages G1 to G2 for analyst coverage.

2005
48.13
50.73
143.42
103.60
53.20
76.79
50.58
61.02
51.20
181.61
49.26

2006
52.94
49.03
106.99
60.52
41.51
47.20
171.65
52.79
109.54
39.61
182.74
70.71

2007
79.62
51.37
78.55
52.83
50.71
38.09
97.65
69.61
114.33
68.51
135.64
59.94

2008
170.87
60.84
54.55
83.84
65.99
66.74
103.35
60.54
90.36
288.21
308.35
421.64
66.23

2009
30.20
34.93
36.67
46.11
49.51
52.01
60.23
62.84
93.77
114.83
138.15
737.45
54.25

Weighted Average
3-Year
5-Year
82.33
48.83
46.55
59.47
55.75
60.91
83.71
62.69
105.98
170.37
205.00
509.59
59.21

65.95
48.98
57.54
61.18
76.84
58.98
85.96
62.69
72.44
133.52
103.96
367.66
58.69

Oil & Gas Global Cost Study

Page A35

Upstream Revenue: Bust After the Boom


West Texas Intermediate crude oil prices toppled in the wake of the global financial meltdown in late 2008, only shortly after prices had soared to record levels near $145/bbl. The
crash brought about relatively weak crude oil and natural gas prices for the bulk of 2009,
with WTI crude oil averaging $61.96/bbl compared to $99.63/bbl in 2008, $72.32/bbl in
2007 and $66.24/bbl in 2006. NYMEX natural gas prices crashed even harder, reflecting
the dual impact of weakened demand and abundant domestic shale gas supply. NYMEX
natural gas prices averaged just $4.17/Mcf in 2009 compared to $8.90/Mcf in 2008. This
rapid deterioration in pricing had a significant negative impact on producers top-line
results in 2009, with average worldwide realized net revenue of only $42.76/boe, which
was 36% lower than $66.93/boe in 2008.
Chart 40: Upstream Net
Revenue by Region (US$/
boe)

$80.00
$70.00
$60.00
$50.00
$40.00
$30.00
$20.00
$10.00
$0.00
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Worldwide

North America

International

Source: BMO Capital Markets, Company Reports


Notes: Figures prior to 2009 excludes equity interest results for BP, RD, TOT and XOM

See pages G1 to G2 for analyst coverage.

Page A36

Oil & Gas Global Cost Study


Worldwide net revenue has increased at a compound annual rate of 10.8% since 1999. By
comparison, WTI crude oil prices have increased at a compound annual rate of 12.4%
since 1999. The slight variance in the rate of growth in benchmark commodity prices
versus realized prices on production reflects the deteriorating quality of global crude oil
production as high-quality, light oil pools are depleted, and production of lower-quality
sour and heavy crude oils take their place. Production Sharing Contracts (PSC) also
continue to contribute to the ongoing shortfall in net revenue versus benchmark crude
oil prices, as they award relatively more of the increase in crude oil price levels to the
resource owners, typically host-country governments.

Chart 41: Upstream Net


Revenue vs. West Texas
Intermediate (US$/boe)

$120.00
$100.00
$80.00
$60.00
$40.00
$20.00
$0.00
1999

2000

Worldwide

2001

2002

2003

North America

2004

2005

2006

International

2007

2008
WTI

Source: BMO Capital Markets, Company Reports


Note: Figures prior to 2009 excludes equity interest results for BP, RD, TOT and XOM

See pages G1 to G2 for analyst coverage.

2009

Oil & Gas Global Cost Study

Page A37

Table 13 provides a summary of the weighted average netbacks for the industry.

Table 13: Worldwide Netback Summary (US$/boe)

Worldwide
Net Revenue
Production Costs
Exploration
DD&A
Other
Pre-tax Earnings
Income Taxes
Net Earnings

North America
Net Revenue
Production Costs
Exploration
DD&A
Other
Pre-tax Earnings
Income Taxes
Net Earnings

International
Net Revenue
Production Costs
Exploration
DD&A
Other
Pre-tax Earnings
Income Taxes
Net Earnings

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

15.29
3.68
0.87
3.81
0.92
6.00
2.66
3.34

23.51
4.15
0.78
4.02
1.20
13.36
6.04
7.32

21.20
4.10
0.83
4.55
1.59
10.12
4.55
5.57

19.88
4.19
0.80
4.68
1.53
8.68
4.07
4.61

24.82
4.94
0.77
5.23
1.57
12.31
5.41
6.90

30.43
5.80
0.89
5.86
1.61
16.28
7.52
8.76

41.46
7.53
1.06
6.61
2.18
24.07
11.51
12.56

47.66
9.07
1.34
7.88
2.27
27.11
13.50
13.61

51.94
10.69
1.74
9.24
2.74
27.52
13.61
13.92

66.93
13.04
1.97
10.61
3.02
38.30
18.99
19.30

42.76
10.90
1.66
9.91
3.03
17.26
8.43
8.83

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

14.67
3.86
0.78
4.22
0.90
4.91
1.67
3.24

24.05
4.42
0.77
4.73
1.29
12.85
4.52
8.33

22.60
4.58
0.83
6.04
1.79
9.36
3.09
6.27

19.17
4.60
0.77
5.56
1.44
6.79
2.31
4.48

26.84
5.55
0.77
6.41
1.54
12.56
4.26
8.30

31.97
6.48
0.92
7.05
1.72
15.80
5.40
10.40

43.16
8.64
1.18
8.29
2.15
22.91
7.89
15.02

45.94
10.85
1.37
10.15
1.69
21.88
6.95
14.93

49.46
12.28
1.52
11.92
2.41
21.33
6.76
14.57

62.83
15.00
1.54
13.33
2.51
30.45
9.89
20.56

39.00
12.21
1.62
13.18
2.74
9.26
2.71
6.55

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

15.65
3.57
0.93
3.59
0.94
6.62
3.22
3.40

23.19
4.00
0.79
3.60
1.15
13.66
6.93
6.73

20.34
3.81
0.84
3.64
1.47
10.58
5.44
5.14

20.31
3.94
0.81
4.14
1.58
9.83
5.14
4.69

23.59
4.57
0.77
4.52
1.59
12.15
6.10
6.05

29.47
5.37
0.87
5.11
1.55
16.58
8.84
7.74

40.44
6.87
0.99
5.61
2.20
24.76
13.67
11.10

48.67
8.03
1.32
6.56
2.61
30.16
17.32
12.84

53.41
9.75
1.87
7.65
2.94
31.20
17.67
13.53

69.41
11.86
2.23
8.97
3.32
43.04
24.49
18.54

45.02
10.11
1.68
7.94
3.21
22.07
11.88
10.20

Source: BMO Capital Markets, Company Reports


Notes: Figures prior to 2009 excludes equity interest results for BP, RD, TOT and XOM

See pages G1 to G2 for analyst coverage.

Weighted Average
3-Year
5-Year
53.47
11.52
1.78
9.92
2.93
27.31
13.49
13.83

49.99
10.26
1.56
8.87
2.66
26.64
13.11
13.54

Weighted Average
3-Year
5-Year
50.03
13.13
1.56
12.83
2.56
19.95
6.32
13.63

47.90
11.81
1.45
11.42
2.31
20.90
6.75
14.15

Weighted Average
3-Year
5-Year
55.54
10.55
1.92
8.18
3.16
31.73
17.79
13.94

51.24
9.34
1.62
7.36
2.86
30.07
16.89
13.17

Page A38

Oil & Gas Global Cost Study

Costs: Relieving Some Pressure


The rapid increase in commodity prices up to 2008 drove unprecedented levels of industry spending and activity that resulted in rapidly inflated industry costs. However, the
worlds more recent state of economic affairs has clearly resulted in a marked decrease in
industry activity, which has taken some of the pressure off of demand for scarce materials, equipment and skilled labour. We estimate that Global production costs fell 16% in
2009, averaging $10.90/boe compared to $13.04/boe in 2008 and $10.69/boe in 2007. On a
worldwide basis, production costs have still increased by more than 196%, rising to $10.90/
boe in 2009 from $3.68/boe in 1999, which represents compound annual growth of nearly
12%. Regionally, North American production costs have grown at a relatively faster rate
over our survey period, increasing nearly 15% annually from $3.86/boe in 1999 to $12.21/
boe in 2009. Outside of North America, production costs have increased at a slower pace
of 13% annually, from $3.57/boe in 1999 to $10.11/boe in 2009. Production costs in North
America fell by 19% in 2009, while International production costs eased 15%.

Chart 42: Production


Costs by Region
(US$/boe)

$20.00
$18.00
$16.00
$14.00
$12.00
$10.00
$8.00
$6.00
$4.00
$2.00
$0.00
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Worldwide

North America

International

Source: BMO Capital Markets, Company reports


Note: Figures prior to 2009 exclude equity interest results for BP, RD, TOT and XOM

Despite the improvement in 2009, industry costs are somewhat inelastic, and the rapid
decline in commodity prices largely outpaced any reduction in cost pressure. The result
was an overwhelming decrease in industry margins and profits in 2009. In 2009, average
operating earnings (net revenue less production costs, exploration expense, G&A and
other costs) fell nearly 45%, to the lowest level since 2004. Operating earnings have risen
at a compound annual rate of 10.7% since 1999, with a 9.4% annual growth rate in North
America and an 11.4% growth rate internationally.

See pages G1 to G2 for analyst coverage.

Oil & Gas Global Cost Study

Chart 43: Upstream


Operating Earnings by
Region (US$/boe)

Page A39

$80.00
$70.00
$60.00
$50.00
$40.00
$30.00
$20.00
$10.00
$0.00
1999

2000

2001

2002

Worldwide

2003

2004

North America

2005

2006

2007

2008

2009

International

Source: BMO Capital Markets, Company Reports


Notes: Operating earnings calculated as net revenue less production costs, exploration costs, and Other
costs; Figures prior to 2009 exclude equity interest results for BP, RD, TOT and XOM

Standard earnings and cash flow measures fail to consider the impact of reserve replacement costs (finding and development costs) in determining the industrys total cost structure and its ultimate impact on returns on capital. Worldwide upstream capital spending
has increased approximately 13% annually since 1999 on average, with a huge 30% jump
in 2008 amidst the flurry of industry activity chasing record crude oil prices (Chart 44).
However, spending fell 21.2% in 2009 to pre-2008 levels in response to the global economic
downturn. As shown in Chart 45, despite the drop-off in industry capital spending,
proved reserve additions popped in 2009. We believe this partly reflects positive reserve
revisions in 2009 related to higher commodity price decks used by reserve evaluators as
compared to year-end 20083, as well as additions related to significant capital spending in
previous years (excluding multi-year long-lead-time projects). In addition, the industry
slowdown has driven some improvement in major input costs such as drilling equipment
and labour. Combined, these results drove a markedly positive improvement in reported
reserve replacement costs in 2009.

Prior to 2009, the U.S. Securities and Exchange Commission (SEC) mandated that evaluation of
proved reserves be based on year-end commodity prices. Year-end 2008 prices were very low as a
result of the global economic collapse, while industry costs were slow to adjust and still very high; the
unfortunate combination led to large negative economic reserve revisions for the year. However, the
SEC has since changed this rule, allowing reserve evaluations to be based on average commodity
prices over the prior 12 months.

See pages G1 to G2 for analyst coverage.

Page A40

Oil & Gas Global Cost Study

Chart 44: Upstream Capital Spending by Region


(US$ billion)

Chart 45: Worldwide Proved Reserve Additions by Region


(million boe)

$400

25,000

$350
20,000

$300
$250

15,000

$200
10,000

$150
$100

5,000

$50
$0

1999

2000

2001

2002

2003

North America

2004

2005

2006

2007

2008

1999

2009

2000

2001

International

2002

2003

North America

Source: BMO Capital Markets, Company Reports

2004

2005

2006

2007

2008

2009

International

Source: BMO Capital Markets, Company Reports


Notes: Reserve additions calculated after royalties (net)

Worldwide proved reserve replacement costs have increased to $12.30/boe in 2009 from
$3.87/boe in 1999, which represents compound annual growth of 12.3%. In 2009, reserve
replacement costs fell by 45% over 2008 due to the combination of positive reserve revisions, low capital spending activity and improvements in industry cost inputs.

Chart 46: Worldwide


Proved Reserve
Replacement Costs
(US$/boe)

$35.00
$30.00
$25.00
$20.00
$15.00
$10.00
$5.00
$0.00
1999

2000

2001

2002

2003

2004

Including Revisions

2005

2006

2007

2008

2009

Excluding Revisions

BMO Capital Markets, Company Reports


Notes: Figures prior to 2009 excludes equity interest results for BP, RD, TOT and XOM

Regionally, North American reserve replacement costs have increased 8% annually to


$10.89/boe in 2009 from $4.90/boe in 1999, while International costs have climbed 15%
annually to $13.91/boe in 2009 from $3.47/boe in 1999. In 2009, North American reserve
replacement costs decreased almost 70% due to a combination of positive revisions, highgraded drilling programs and additions from longer-lead-time projects for which spending
occurred in prior years. International reserve replacement costs declined a more modest
12% on the year.
See pages G1 to G2 for analyst coverage.

Oil & Gas Global Cost Study

Chart 47: Proved Reserve


Replacement Costs by
Region (US$/boe)

Page A41

$50.00
$45.00
$40.00
$35.00
$30.00
$25.00
$20.00
$15.00
$10.00
$5.00
$0.00
1999

2000

2001

2002

Worldwide

2003

2004

2005

North America

2006

2007

2008

2009

International

Source: BMO Capital Markets, Company Reports


Notes: Reserve replacement costs calculated after royalties (net)

Excluding revisions, North American reserve replacement costs were $14.28/boe in 2009,
which marks a 41% decrease over 2008 levels, while International costs were $20.60/boe,
down 57% from the prior year. These higher ex-revision replacement costs show the positive impact that revisions had in both North America and internationally.

Chart 48: Proved Reserve


Replacement Costs
Excluding Revisions by
Region (US$/boe)

$50.00
$45.00
$40.00
$35.00
$30.00
$25.00
$20.00
$15.00
$10.00
$5.00
$0.00
1999

2000

2001

2002

Worldwide

2003

2004

2005

North America

2006

2007

2008

2009

International

Source: BMO Capital Markets, Company Reports


Notes: Reserve replacement costs calculated after royalties (net)

Given the improvement in proved reserve replacement performance in 2009, the flat or
declining trend seen by the industry over the last few years was reversed. Despite this
falling capital spending during the year, reflecting that the group was able to spend more
efficiently, production also rose from 2008 levels, more then offsetting natural declines.
The end result has been a reversal of the general trend of the declining overall Reserve

See pages G1 to G2 for analyst coverage.

Page A42

Oil & Gas Global Cost Study


Life Index (RLI) for the group, with the RLI reaching 12.1 years in 2009, now back above
2002 levels.

Chart 49: Worldwide Proved Reserves vs RLI

Chart 50: Production by Region (Million boe)

180,000
160,000

120,000

14,000

12

12,000

10

10,000

100,000

80,000

60,000

40,000

20,000
0

8,000
Years

mmboe (net)

140,000

14

6,000
4,000
2,000
0

1999

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
North America

International

2000

2001

2002

2003

2004

North America

RLI

Source: BMO Capital Markets, Company Reports


Notes: Reserves presented after royalties (net)

2005

2006

2007

2008

2009

International

Source: BMO Capital Markets, Company Reports


Notes: Production includes all equity affiliate volumes, some of which
are excluded from netback calculations prior to 2009

Chart 51 shows the industrys cash flow recycle ratio (operating earnings/reserve replacement costs) compared to operating earnings. Until 1998, unit operating earnings had
been improving each year, while profitability was not, as the recycle ratio has deteriorated
steadily since 2000. In 2009, while operating earnings fell significantly with lower commodity prices given the improvement in reserve replacement performance, the group was
able to maintain a recycle ratio of 2.2x.
Chart 51: Worldwide
Operating Earnings vs
Recycle Ratio

Recycle Ratio

US$/boe
$60.00

4.0
3.5

$50.00

3.0
$40.00

2.5

$30.00

2.0
1.5

$20.00

1.0
$10.00

0.5

$0.00

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Operating Earnings

Recycle Ratio

Source: BMO Capital Markets, Company Reports


Notes: Operating earnings calculated as net revenue less production costs, exploration costs, and Other
costs

Worldwide unit DD&A charges expanded to $11.57/boe in 2009 from $4.69/boe in 1999,
representing a compound annual increase of roughly 10%. North American charges
have increased at a faster pace, rising to $14.79/boe in 2009 from $5.00/boe in 1999, while
See pages G1 to G2 for analyst coverage.

Oil & Gas Global Cost Study

Page A43

International charges have grown to $9.62/boe in 2009 from $4.51/boe in 1999. The increase in capital spending for reserve replacement continues to outpace DD&A charges,
albeit the gap narrowed significantly in 2009 (Chart 53). However, given that the gap has
persisted over a number of years, future capital depreciation charges are likely to increase
significantly if reserve replacement cost performance does not improve further, which we
believe could materially impair future earnings and return on capital employed.
Chart 52: Upstream DD&A and Exploration Costs by
Region (US$/boe)

Chart 53: Upstream DD&A vs Reserve Replacement Cost


(US$/boe)

$25.00

$25.00

$20.00

$20.00

$15.00

$15.00

$10.00

$10.00

$5.00

$5.00
$0.00

$0.00

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Worldwide

North America

DD&A

International

Source: BMO Capital Markets, Company Reports


Notes: Figures prior to 2009 exclude equity interest results for BP,
RD, TOT and XOM

Worldwide F&D

Source: BMO Capital Markets, Company Reports


Notes: Figures prior to 2009 exclude equity interest results for BP,
RD, TOT and XOM

Chart 54 provides upstream income taxes by operating region. Per-barrel income taxes
have expanded to $8.43/boe in 2009 from $2.66/boe in 1999, a compound annual grow
rate of 12%. As illustrated in Chart 55, both North American and International effective taxes decreased in 2009. In North America, this has continued the general trend of
a falling tax rate since 1999, but marked a reversal internationally, where tax rates had
generally been rising in recent years.
Chart 54: Upstream Income Taxes by Region (US$/boe)

Chart 55: Upstream Effective Tax Rates by Region (%)


60.0%

$30.00

55.0%

$25.00

50.0%

$20.00

45.0%
$15.00

40.0%

$10.00

35.0%

$5.00

30.0%
25.0%

$0.00

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Worldwide

North America

Worldwide

International

Source: BMO Capital Markets, Company Reports


Notes: Figures prior to 2009 excludes equity interest results for BP,
RD, TOT and XOM

North America

International

Source: BMO Capital Markets, Company Reports


Notes: Figures prior to 2009 excludes equity interest results for BP,
RD, TOT and XOM

See pages G1 to G2 for analyst coverage.

Page A44

Oil & Gas Global Cost Study


Net earnings for the industry have grown with rising commodity prices, increasing to
$19.44/boe in 2008 from $3.34/boe in 1999, for a compound annual growth rate of approximately 22%. North American earnings from upstream operations have increased
to $20.04/boe in 2008 from $3.21/boe in 1999, a 23% compound annual increase. This
compares to international earnings, which have increased 21% annually to $19.06/boe from
$3.40/boe. Upstream earnings in North America declined slightly through the 20052007
period, reflecting the relatively higher operating cost structure for conventional oil and
gas assets in Canada and the United States, but increased substantially in 2008 as a result
of the swift increase in commodity prices, and were positively impacted by an influx of
lower-cost production from natural gas resource plays, particularly U.S. shale gas.

Chart 56: Upstream Net


Earnings by Region
(US$/boe)

$25.00
$20.00
$15.00
$10.00
$5.00
$0.00
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Worldwide

North America

International

Source: BMO Capital Markets, Company Reports


Notes: Figures prior to 2009 exclude equity interest results for BP, RD, TOT and XOM

Worldwide Breakeven Oil Price


The goal of this study is to determine the price of crude oil and/or natural gas that is
required in order to cover the costs of finding, developing and producing crude oil and
natural gas globally. The preceding section acknowledges that rising commodity prices
have led to expanded earnings and cash flow for the oil and gas industry. However, the
concomitant increase in reserve replacement costs has prevented an improvement in overall
economics for oil and gas producers in general.
In this section, we translate total industry cost data into breakeven oil prices, which we
define as the crude oil price required to recover all of the reported costs (production, reserve
replacement, G&A/Other and taxes), plus provide a 10% return on capital employed. We
then translate the breakeven oil price into a required WTI price, that is, a breakeven oil
price plus a differential reflecting the difference in oil quality of the production base relative to WTI. We use reserve replacement costs as the capital replacement cost rather than
DD&A, as we believe reserve replacement costs are a more current indicator of underlying
cost trends and are more representative with the industrys marginal costs.
See pages G1 to G2 for analyst coverage.

Oil & Gas Global Cost Study

Page A45

Using this approach, we estimate that the level of WTI-equivalent prices that is necessary
in order for the industry to fully cover its costs and provide an incentive to invest has
increased to $51.98/boe in 2009 from $16.97/boe in 1999, as illustrated in Chart 57. Based
on reserve replacement cost results in 2009, we estimate a required WTI-equivalent price
of $48.35/boe is required for North American operations while international operations
imply a required price of $55.05/boe. Given the more recent return in industry activity,
especially in certain plays, we expect overall industry costs to rise from 2009 levels. As a
result, we expect that the breakeven oil price for the industry could rise in 2010 to just
over $63.00/boe.

$120.00
$100.00
$80.00
$60.00
$40.00
$20.00

Worldwide

North America

E
10

09

20

20

08
20

07
20

06
20

05
20

04
20

03
20

02
20

01
20

00
20

99

$0.00
19

Chart 57: One-Year


Required WTI Oil Price by
Region (US$/boe)

International

Source: BMO Capital Markets, Company Reports

Admittedly, single-year reserve replacement costs can provide a misleading indication of


reserve replacement performance, and thus skew the implied breakeven oil price because
of the time lag between capital spending and reserve recognition. As a result, three- or
five-year average reserve replacement costs tend to provide a more realistic representation of the industry cost structure and insight into potential industry investment returns.
Chart 58 provides the estimated breakeven WTI price that is required in order to cover
the industrys costs, including a return on capital, using three-year average reserve replacement costs. On this basis, our analysis suggests that the industrys breakeven oil price has
risen to $61.54/boe in 2009 from $22.48/boe in 2001. Assuming a similar modest rise in
the industrys cost structure in 2010, we estimate that the three-year average price should
climb to roughly $66.00/boe in 2010.

See pages G1 to G2 for analyst coverage.

Page A46

Oil & Gas Global Cost Study

Chart 58: Three-Year


Average Required WTI Oil
Price by Region (US$/boe)

$100.00
$90.00
$80.00
$70.00
$60.00
$50.00
$40.00
$30.00
$20.00
$10.00
$0.00
2001

2002

2003

2004

Worldwide

2005

2006

2007

North America

2008

2009 2010E

International

Source: BMO Capital Markets, Company Reports


Notes: Assumes three-year average F&D costs but single-year operating costs; breakeven components,
except F&D costs, excludes equity interest results for BP, RD, TOT and XOM prior to 2009

Table 14 provides the underlying cost data that builds up to the Breakeven Oil Price and
Required WTI Price estimates.
Table 14: Breakeven Oil Price Analysis by Region (US$/boe)

Worldwide
Operating Costs
Exploration Expense
G&A/Other
F&D Costs
Return on Capital
Income Taxes
Breakeven Oil Price
Quality/Royalty
Required WTI Price

1999
3.68
0.87
0.92
3.87
3.13
2.49
14.97
1.99
16.97

2000
4.15
0.78
1.20
4.72
3.84
3.17
17.86
5.06
22.92

2001
4.10
0.83
1.59
5.85
4.70
3.84
20.92
4.13
25.05

2002
4.19
0.80
1.53
5.81
4.57
4.03
20.93
3.95
24.87

2003
4.94
0.77
1.57
6.50
5.01
3.93
22.72
6.88
29.60

2004
5.80
0.89
1.61
8.99
6.88
5.91
30.08
9.00
39.08

2005
7.53
1.06
2.18
11.67
9.04
8.28
39.77
13.80
53.57

2006
9.07
1.34
2.27
15.85
12.14
12.04
52.70
8.58
61.28

2007
10.69
1.74
2.74
15.16
11.45
10.46
52.24
8.30
60.55

2008
13.04
1.97
3.02
22.38
16.91
16.25
73.57
12.21
85.78

2009
10.90
1.66
3.03
12.30
9.88
9.44
47.21
4.77
51.98

Weighted Average
3-Year
5-Year
11.52
10.26
1.78
1.56
2.93
2.66
16.04
15.17
12.35
11.69
11.65
11.07
56.28
52.41
8.90
9.87
65.18
62.28

North America
Operating Costs
Exploration Expense
G&A/Other
F&D Costs
Return on Capital
Income Taxes
Breakeven Oil Price
Quality/Royalty
Required WTI Price

1999
3.86
0.78
0.90
4.90
3.57
1.85
15.85
1.89
17.74

2000
4.42
0.77
1.29
5.28
3.98
2.16
17.91
3.91
21.82

2001
4.58
0.83
1.79
8.18
5.99
2.95
24.32
2.62
26.94

2002
4.60
0.77
1.44
8.63
6.09
3.14
24.68
4.08
28.75

2003
5.55
0.77
1.54
9.03
6.32
3.24
26.46
4.91
31.37

2004
6.48
0.92
1.72
11.97
8.52
4.42
34.03
6.57
40.60

2005
8.64
1.18
2.15
10.45
8.43
4.43
35.28
11.15
46.42

2006
10.85
1.37
1.69
19.31
16.29
7.58
57.09
7.37
64.46

2007
12.28
1.52
2.41
16.52
14.03
6.51
53.28
7.61
60.89

2008
15.00
1.54
2.51
35.03
29.46
14.17
97.70
10.07
107.77

2009
12.21
1.62
2.74
10.89
10.26
4.25
41.96
6.40
48.35

Weighted Average
3-Year
5-Year
13.13
11.81
1.56
1.45
2.56
2.31
17.76
16.53
15.51
14.20
7.19
6.77
57.72
53.08
8.55
8.86
66.27
61.95

International
Operating Costs
Exploration Expense
G&A/Other
F&D Costs
Return on Capital
Income Taxes
Breakeven Oil Price
Quality/Royalty
Required WTI Price

1999
3.57
0.93
0.94
3.47
2.98
2.82
14.71
2.05
16.76

2000
4.00
0.79
1.15
4.16
3.51
3.61
17.21
5.73
22.94

2001
3.81
0.84
1.47
4.45
3.81
4.03
18.42
5.06
23.47

2002
3.94
0.81
1.58
4.48
3.77
4.13
18.71
3.87
22.59

2003
4.57
0.77
1.59
5.32
4.38
4.42
21.05
8.07
29.11

2004
5.37
0.87
1.55
7.12
5.67
6.47
27.04
10.52
37.56

2005
6.87
0.99
2.20
13.15
10.06
12.40
45.68
15.38
61.06

2006
8.03
1.32
2.61
12.40
9.18
12.39
45.92
9.29
55.22

2007
9.75
1.87
2.94
14.03
10.14
13.24
51.97
8.71
60.68

2008
11.86
2.23
3.32
15.85
11.52
15.22
60.00
13.91
73.91

2009
10.11
1.68
3.21
13.91
10.28
11.98
51.18
3.87
55.05

Weighted Average
3-Year
5-Year
10.55
9.34
1.92
1.62
3.16
2.86
14.61
13.92
10.66
10.38
13.60
13.32
54.50
51.44
9.29
10.55
63.79
61.99

Source: BMO Capital Markets, Company Reports


Notes: Three and Five-year averages are weighted averages of all capital and operating costs; breakeven components, except F&D costs,
exclude equity interest results for BP, RD, TOT and XOM prior to 2009
See pages G1 to G2 for analyst coverage.

Oil & Gas Global Cost Study

Page A47

Charts 59 and 60 illustrate the various cost trends in North America versus international
operations. The Required WTI Price in North America has increased to $48.35/boe in
2009 from $17.74/boe in 1999, with a dramatic decline experienced from 2008 when the
required WTI oil price reached almost $110.00/boe. We calculate a three-year average of
$64.39/boe for North America, which is probably a more reasonable representation of the
average cost structure in the region given the effect of revisions over the last couple years
and the effect of long-lead-time capital spending, which will take some time to translate
into reserve bookings. The required WTI-equivalent price for international operations
expanded to $55.05/boe in 2009 from $16.76/boe in 1999. The three-year average required
price is calculated at $56.85/boe.

Chart 59: Required WTI Oil Price North America


(US$/boe)

Chart 60: Required WTI Oil Price - International (US$/boe)


$140.00

$120.00

$120.00

$100.00

$100.00

$80.00

$80.00
$60.00

$60.00

$40.00

$40.00

$20.00

$20.00
$0.00

$0.00
1999

2000

2001

Op Costs

2002
F&D

2003

2004

Return

2005
Taxes

2006

2007

2008

1999

2009

Quality/Royalty

Source: BMO Capital Markets, Company Reports


Notes: Breakeven components, except F&D costs, exclude equity
interest results for BP, RD, TOT and XOM prior to 2009

2000

2001

Op Costs

2002
F&D

2003

2004

Return

2005

Taxes

2006

2007

2008

2009

Quality/Royalty

Source: BMO Capital Markets, Company Reports


Notes: Breakeven components, except F&D costs, exclude equity
interest results for BP, RD, TOT and XOM prior to 2009

A Global View
The upward pressure on International costs has been more pronounced in recent years
as producers searched for ways to add production and reserves outside of the mature
conventional basins in North America, investing instead in international growth projects.
Many international exploration and development opportunities tend to be longer-leadtime projects such as offshore exploration and development, which results in lumpier
capital spending and corresponding reserve replacement costs from year to year. But this
international growth strategy has so far proved to be much more successful in certain
geographic regions than others, which is evident through the results of our survey.
Charts 6167 provide estimates of reserve replacement costs implied by the segmented
operations of the companies in our study for geographical regions outside of North
America, including Africa, Asia, Europe, South America and Other. We note that the
Other category includes roughly 20% of the international spending represented by companies in our survey, reflecting the fact that some companies are selective in their specific
disclosure of geographic segment results. According to our analysis, three-year average
See pages G1 to G2 for analyst coverage.

Page A48

Oil & Gas Global Cost Study


reserve replacement costs were highest in Europe, but the range from highest to lowest
has narrowed significantly. Europe was followed closely by Africa and North America.
The Other international region now represented the lowest-cost area on a three-year
average basis according to our study, with the traditional strong performer Asia a close
second. The reserve replacement performance out of South America experienced the
most significant improvement, falling 39% from 2008 levels. The improvement in South
America in 2009 marks a continuation of improving reserve replacement cost performance
on the three-year basis since 2006, which reached $39.35/boe.

Chart 61: 3-Year Average


Reserve Replacement
Costs by Operating
Region (US$/boe)

$30.00
$25.00
21.02

20.68

$20.00

17.76
16.04

15.47

$15.00

12.94

11.10

$10.00
$5.00
$0.00
Europe

Africa

North
America

Worldwide

South
America

Asia

Other

Source: BMO Capital Markets, Company Reports


Other segment reflects international operations that have not been segmented into specific regions by
the companies in our survey

See pages G1 to G2 for analyst coverage.

Oil & Gas Global Cost Study

Page A49

$40.00
$35.00
$30.00
$25.87

$25.00

$21.69

$20.00
$13.52

$15.00
$10.00
$5.00

$20.68

$17.56

$7.32
$3.06

$3.24

2001

2002

$5.06

$0.00
2003

2004

2005

2006

2007

2008

2009

See pages G1 to G2 for analyst coverage.

Page A50

Oil & Gas Global Cost Study

Table 15: Regional Reserve Replacement Costs (US$/boe)


1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

CAGR

$3.57

$2.32

$3.33
$3.06

$3.88
$3.24

$10.55
$5.06
$4.26

$10.63
$7.32
$5.26

$23.12
$13.52
$7.68

$21.86
$17.56
$11.40

$33.78
$25.87
$18.40

$16.95
$21.69
$19.53

$19.12
$20.68
$21.16

18.3%
27.0%
30.6%

$5.10

$6.87

$6.64
$6.11

$6.93
$6.84

$8.36
$7.25
$6.71

$16.91
$9.23
$8.27

$12.15
$11.80
$9.24

$29.63
$17.71
$11.84

$16.36
$17.43
$14.95

$62.33
$27.67
$20.86

$14.40
$21.02
$19.80

10.9%
16.7%
19.8%

$3.45

$3.14

$4.47
$3.66

$5.57
$4.32

$5.99
$5.33
$4.47

$6.13
$5.89
$4.98

$10.18
$7.59
$6.59

$7.13
$7.82
$7.11

$11.55
$9.40
$8.28

$13.73
$10.58
$9.79

$13.36
$12.94
$11.14

14.5%
17.1%
16.4%

$2.52

$3.49

$3.97
$2.94

$2.31
$3.05

$4.05
$3.32
$3.02

$8.50
$3.97
$3.88

-$33.49
$9.51
$5.76

$52.36
$39.35
$8.61

$13.07
$35.63
$13.40

$35.26
$25.26
$26.73

$10.51
$15.47
$22.45

15.4%
23.1%
39.7%

$4.90

$5.28

$8.18
$6.04

$8.63
$6.98

$9.03
$8.60
$7.02

$11.97
$9.87
$8.17

$10.45
$10.49
$9.70

$19.31
$14.18
$12.37

$16.52
$15.40
$13.83

$35.03
$21.95
$17.47

$10.89
$17.76
$16.53

8.3%
14.4%
15.3%

$3.24

$3.79

$4.27
$3.78

$3.99
$4.02

$4.03
$4.09
$3.89

$4.42
$4.15
$4.11

$8.25
$5.22
$4.82

$7.92
$6.68
$5.53

$10.26
$8.81
$6.67

$11.76
$9.88
$8.33

$11.63
$11.10
$9.73

13.6%
14.4%
16.5%

Africa
1 Year Proven
3 Year Proven
5 Year Proven
Europe
1 Year Proven
3 Year Proven
5 Year Proven
Asia
1 Year Proven
3 Year Proven
5 Year Proven
South America
1 Year Proven
3 Year Proven
5 Year Proven
North America
1 Year Proven
3 Year Proven
5 Year Proven
"Other" International
1 Year Proven
3 Year Proven
5 Year Proven

Source: BMO Capital Markets, Company Reports


Note: Reserve replacement costs calculated based on after royalty reserves
Other segment reflects international operations that are not segmented by specific region

Taking into consideration the available segmented disclosures of upstream costs, as well
as reserve replacement costs, we have calculated required WTI-equivalent oil prices for
each of the primary operating regions. Charts 6873 illustrate the WTI-equivalent oil
price requirement of each region, using one- and three-year average reserve replacement
costs. Using three-year average reserve replacement costs, Asia is estimated to have the
lowest required WTI oil price, at $54.93/boe in 2009, followed closely by Europe, which
maintained low operating costs and benefited from strong pricing in the region, which led
to a strong quality differential. Other international and South America are estimated to
have some of the highest cost structures based on three-year average reserve replacement
costs in 2009.

See pages G1 to G2 for analyst coverage.

Oil & Gas Global Cost Study

Page A51

Chart 68: Required WTI Oil Price - Africa (US$/boe)

Chart 69: Required WTI Oil Price - Asia (US$/boe)


$140.00

$140.00
$120.00

3-Year Average

$120.00

113.70

$100.00

$100.00
86.34
77.97

$80.00

3-Year Average

$80.00

72.95

67.21
56.33

$60.00

45.97

48.49

57.35

$60.00

52.01

$40.00

$40.00
19.03

$20.00

17.96

21.28

20.81

2000

2001

2002

$20.00

17.43

20.90

23.98

25.78

2000

2001

2002

30.42

35.64

2003

2004

56.04

44.07

$0.00

$0.00
1999

2003

2004

2005

2006

2007

2008

1999

2009

2005

2006

2007

2008

2009

Chart 71: Required WTI Oil Price South America


(US$/boe)

Chart 70: Required WTI Oil Price - Europe (US$/boe)


163.80

$140.00
152.32

$140.00

$120.00

3-Year Average

124.36

$120.00

$100.00

3-Year Average

$100.00

85.07

$80.00
$60.00

53.66

55.57

25.50
17.36

55.68
47.37

50.51

$40.00

30.44
23.17

66.64

$60.00
41.78

$40.00
$20.00

79.74

$80.00

$20.00

24.10

24.62

25.74

15.21

29.64
19.57

$0.00
1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

$0.00
1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

Chart 73: Required WTI Oil Price Other International


(US$/boe)

Chart 72: Required WTI Oil Price North America


(US$/boe)

$140.00

$140.00
$120.00

$120.00

108.50

$100.00

$100.00
3-Year Average

$80.00

60.89

$60.00
$40.00
$20.00

17.74

21.82

26.94

28.75

31.48

40.60

3-Year Average

$80.00
64.46

48.35

46.42

$60.00
$40.00
19.44

24.61

27.07

25.24

2000

2001

2002

29.47

31.75

2003

2004

51.58

50.79

2005

2006

76.50

57.11

60.00

2007

2008

$20.00
$0.00

$0.00
1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

1999

2009

Source: BMO Capital Markets, Company Reports


Notes: Figures prior to 2009 exclude equity interest results for BP, RD, TOT and XOM; Other segment reflects international operations that are
not segmented by specific region; 3-year average calculated using 3-year average reserve replacement costs, but individual year actual operating costs.
See pages G1 to G2 for analyst coverage.

Page A52

Oil & Gas Global Cost Study


Chart 74 outlines the details of the breakeven calculation for each geographic operating
region, assuming three-year average reserve replacement costs, operating costs and taxes.
The higher required oil price in South America, despite improved reserve replacement
costs over the past three years, reflects a combination of higher operating costs and a
high quality differential to WTI given the regions significant heavy oil production. Higher
Reserve replacement costs and government take (through taxes) lift the European and
African cost structures. While Asian quality differentials are relatively wide, companies
operating in the region recently have had significant success finding reserves and bringing
on production at very low costs, while operating costs remain relatively low and government tax regimes are advantageous.

Chart 74: Three-Year


Average Required WTI Oil
Price Geographic Details
(US$/boe)

$80.00
$70.00
$60.00
$50.00
$40.00
$30.00
$20.00
$10.00
$0.00
South
America

Africa

Op Costs/G&A/Other

Other

F&D/Exploration

North
America

Return

Europe

Taxes

Asia

Quality/Royalty

Source: BMO Capital Markets, Company Reports


Note: Other segment reflects international operations that are not segmented by specific region; calculated using 3-year average reserve replacement costs, operating costs, tax rates, quality differentials and
reserve life

See pages G1 to G2 for analyst coverage.

Oil & Gas Global Cost Study

Page A53

Integrateds and Supermajors


The Integrated Oils and Supermajors (Multinationals) have the highest exposure to
global industry trends, as a large portion of the groups assets typically lay outside of
North America. Approximately 80% of total production and reserves for the companies
in this group are considered international. Within the group, the Canadian Integrateds
have the least international exposure. In addition, the group in general is highly crude
oil levered and, therefore, benefits to a much larger extent from rising crude oil prices as
opposed to natural gas.

Upstream Revenue
Being heavily crude oil production-weighted, upstream revenue for the Integrateds and
Multinationals fluctuates in step with global crude oil prices. Many international business units operate under Production Sharing Contracts (PSCs), which typically award
more production and reserves to host-country governments as commodity prices increase.
While this would have dampened the blow from the significant decline in crude oil prices
in 2009 for many multinationals, upstream revenue was, no question, much lower than
experienced during the record-high crude oil price environment of the earlier parts of
2008. Worldwide net revenue for the Integrateds and Supermajors group has increased
to $43.90/boe in 2009 from $23.62/boe in 2000, after falling 37% from the record high
average realized in 2008. This reflects a 10-year CAGR of 7.1%. As shown in Chart 76,
this is slightly higher than for the other peer groups in our study since 1999.
Chart 75: Upstream Net Revenue by Region (US$/boe)

Chart 76: Upstream Net Revenue Group Comparison


(US$/boe)

$80.00

$80.00

$70.00

$70.00

$60.00

$60.00

$50.00

$50.00

$40.00

$40.00

$30.00

$30.00

$20.00

$20.00

$10.00

$10.00

$0.00
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Worldwide

North America

$0.00
1999

2001

Integrateds

International

Source: BMO Capital Markets, Company Reports


Notes: Excludes equity interest results for BP, RD, TOT and XOM

2000

2002

2003

Seniors

2004

2005

2006

Intermed/Juniors

2007

2008

2009

Internationals

Source: BMO Capital Markets, Company Reports


Notes: Excludes equity interest results for BP, RD, TOT and XOM

International operations have hindered revenue growth for the Supermajors relative to
increases in benchmark crude oil and natural gas prices, principally due to the negative
impact of PSCs. In addition, the widening spread between WTI crude oil and realized
revenues globally reflects the continued deterioration of crude oil quality as high-quality
light oil pools are depleted and replaced with heavier, more sour varieties. Chart 77 illustrates the trend in realized revenue relative to WTI crude oil prices since 1999.
See pages G1 to G2 for analyst coverage.

Page A54

Oil & Gas Global Cost Study

$120.00

Chart 77: Upstream Net


Revenue vs West Texas
Intermediate (US$/boe)

$100.00
$80.00
$60.00
$40.00
$20.00
$0.00
1999

2000

2001

2002

Worldwide

2003

2004

2005

North America

2006

2007

2008

International

2009

WTI

Source: BMO Capital Markets, Company Reports

Table 16 provides the average netback components for the Integrateds and Supermajors
group.

Table 16: Netback Summary Integrateds and Supermajors (US$/boe)

Worldwide
Net Revenue
Production Costs
Exploration
DD&A
Other
Pre-tax Earnings
Income Taxes
Net Earnings

North America
Net Revenue
Production Costs
Exploration
DD&A
Other
Pre-tax Earnings
Income Taxes
Net Earnings

International
Net Revenue
Production Costs
Exploration
DD&A
Other
Pre-tax Earnings
Income Taxes
Net Earnings

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

15.43
3.71
0.91
3.57
0.92
6.31
2.85
3.47

23.62
4.15
0.80
3.76
1.29
13.61
6.33
7.28

20.91
3.97
0.83
3.81
1.78
10.52
4.91
5.61

19.95
4.07
0.81
4.28
1.59
9.20
4.45
4.75

24.42
4.81
0.78
4.67
1.64
12.54
5.88
6.66

30.29
5.66
0.90
5.13
1.60
17.00
8.32
8.67

41.10
7.40
1.02
5.72
2.14
24.82
12.73
12.09

48.26
8.92
1.38
6.70
2.41
28.85
15.28
13.57

52.54
10.66
1.85
7.77
2.86
29.39
15.45
13.95

69.20
13.25
2.16
8.96
3.29
41.54
21.96
19.58

43.90
11.08
1.83
8.62
3.14
19.23
9.84
9.40

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

14.98
4.07
0.86
3.64
0.91
5.51
1.89
3.61

24.97
4.59
0.86
4.43
1.57
13.52
4.71
8.80

22.36
4.47
0.92
4.61
2.42
9.94
3.29
6.65

19.28
4.61
0.83
4.93
1.77
7.14
2.45
4.69

27.00
5.65
0.86
5.63
1.81
13.05
4.89
8.16

32.76
6.69
1.10
5.84
1.89
17.23
6.08
11.15

44.67
9.28
1.29
6.84
2.52
24.74
8.92
15.82

47.51
11.91
1.73
7.97
1.85
24.05
7.97
16.09

51.14
14.07
2.00
9.29
2.59
23.18
7.64
15.54

69.93
18.53
2.09
10.47
3.33
35.51
11.91
23.60

40.96
14.39
2.48
12.11
2.74
9.24
2.64
6.60

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

15.61
3.57
0.92
3.54
0.93
6.64
3.24
3.41

23.08
3.98
0.78
3.50
1.18
13.65
6.97
6.68

20.33
3.77
0.79
3.49
1.51
10.76
5.57
5.19

20.20
3.86
0.80
4.03
1.52
9.99
5.22
4.77

23.49
4.50
0.74
4.32
1.58
12.35
6.23
6.11

29.42
5.30
0.83
4.88
1.50
16.92
9.12
7.80

39.97
6.80
0.93
5.37
2.02
24.85
13.94
10.91

48.50
7.96
1.27
6.30
2.58
30.38
17.61
12.77

52.98
9.61
1.80
7.30
2.95
31.32
17.86
13.46

68.98
11.70
2.18
8.51
3.27
43.31
24.91
18.40

44.82
10.05
1.63
7.54
3.26
22.33
12.07
10.27

Source: BMO Capital Markets, Company Reports


See pages G1 to G2 for analyst coverage.

Weighted Average
3-Year
5-Year
54.69
11.63
1.94
8.45
3.10
29.57
15.48
14.09

50.76
10.26
1.65
7.57
2.77
28.50
14.91
13.60

Weighted Average
3-Year
5-Year
53.19
15.56
2.20
10.68
2.87
21.87
7.12
14.74

50.34
13.57
1.92
9.37
2.59
22.88
7.65
15.23

Weighted Average
3-Year
5-Year
55.15
10.43
1.86
7.77
3.16
31.91
18.03
13.89

50.89
9.24
1.56
7.02
2.83
30.24
17.15
13.09

Oil & Gas Global Cost Study

Page A55

Upstream Cost Performance


Traditionally, rising costs and diminishing prospects in North America resulted in many
operators pursuing international growth opportunities. As presented in Chart 78, these
diminished domestic opportunities resulted in higher levels of international capital
spending through much of the last decade. However, in recent years the Integrateds and
Supermajors have been slowly returning to North America, lured by promising deepwater prospects, a late entry to unconventional resource plays and cost inflation in many
international markets. In 2009, North American capital spending represented almost
33% of total spending, setting a new high mark. Despite this trend, additions to North
American reserves have not meaningfully improved, as the bulk of 2009 North American
reserves can be attributed to the inclusion of Oil Sands mining reserves. Accordingly,
the group continues to report North American reserve replacement costs above those for
International operations.
Chart 78: Capital Spending by Region (US$ billion)

Chart 79: Proved Reserve Additions by Region (million boe)


18,000

$250

16,000
$200

14,000
12,000

$150

10,000
8,000

$100

6,000
4,000

$50

2,000
$0
1999

2000

2001

2002

2003

2004

North America

2005

2006

2007

2008

2009

1999

2001

2002

2003

2004

North America

International

Source: BMO Capital Markets, Company Reports

2000

2005

2006

2007

2008

2009

International

Source: BMO Capital Markets, Company Reports


Notes: Reserve additions calculated after royalties (net)

Worldwide upstream capital spending for the Integrateds and Supermajors group has
increased roughly 11.2% annually since 2000, despite falling 5% in 2009. Meanwhile,
there has been a negligible improvement in reserve additions. Consequently, worldwide
reserve replacement costs for the group have increased to $12.08/boe in 2009 from $4.46/
boe in 2000, a CAGR of roughly 11.7%. By comparison, reserve replacement costs for
the Senior Producers have increased 9.4% annually since 2000 to $12.36/boe (Chart 81).

See pages G1 to G2 for analyst coverage.

Page A56

Oil & Gas Global Cost Study

Chart 80: Worldwide Proved Reserve Replacement Costs


(US$/boe)

Chart 81: Worldwide Proved Reserve Replacement Costs


Group Comparison (US$/boe)

$25.00

$35.00
20.33

$30.00

$20.00

$25.00
$15.00

13.25

14.60

$10.00

$5.00

$20.00

12.08

11.17

$15.00

8.12

3.65

4.46

5.16

5.13

5.65

$10.00
$5.00

$0.00
1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

$0.00

2009

1999

2000

2001

Integrateds

Worldwide F&D

Source: BMO Capital Markets, Company Reports


Notes: Excludes equity interest results for BP, RD, TOT and XOM

2002

Seniors

2003

2004

2005

2006

Intermed/Juniors

2007

2008

2009

Internationals

Source: BMO Capital Markets, Company Reports


Notes: Excludes equity interest results for BP, RD, TOT and XOM

As shown in Chart 82, below, 2009 North American costs declined 24% year over year,
yet the region continues to outpace the rise in International costs. North American costs
have climbed 17.9% annually, to $22.26/boe in 2009 from $5.05/boe in 2000 (excluding
revisions in 2008), while International costs have increased 14.6% annually, to $13.84/boe
in 2009 from $4.07/boe in 2000.

Chart 82: Proved Reserve


Replacement Costs by
Region (US$/boe)

$35.00
$30.00
$25.00
$20.00
$15.00
$10.00
$5.00
$0.00
1999

2000

2001

2002

2003

2004

North American

2005

2006

2007

2008

2009

International

Source: BMO Capital Markets, Company Reports


Notes: Reserve replacement costs calculated after royalties (net); North American costs for 2008 are
non-meaningful (negative), therefore costs presented in the chart are excluding reserve revisions

See pages G1 to G2 for analyst coverage.

Oil & Gas Global Cost Study

Page A57

The groups production increased over 14% in 2009, reaching 9.7 billion boe compared
with 2008 production of 8.5 million boe primarily due to a bounce-back in industrywide activity as commodity prices recovered. Despite this sharp increase in production,
substantial reserve additions increased the groups Reserve Life Index (RLI) to 12.6 years
and reversed three years of a declining RLI index.

Chart 84: Production by Region (Million boe)


12,000

140,000

14.0

120,000

12.0

10,000

100,000

10.0

8,000

80,000

8.0

60,000

6.0

40,000

4.0

20,000

2.0

Years

mmboe (net)

Chart 83: Worldwide Proved Reserves vs RLI

6,000
4,000
2,000

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
North America

International

Source: BMO Capital Markets, Company Reports


Notes: Reserves presented after royalties (net)

1999

2000

2001

2002

2003

2004

North America

RLI

2005

2006

2007

2008

2009

International

Source: BMO Capital Markets, Company Reports


Notes: Production includes all equity affiliate volumes, some of which
are excluded from netback calculations

The 22.3% decline in 2009 North American production costs exceeded the 14.1% reported
Internationally but failed to offset the sharp North American increases over the prior
three- to four-year period. Unfortunately, the effect of the large drop in North American
production costs is muted by the groups international focus. Accordingly, worldwide
production costs for the group decreased 16.4% year over year to average $11.08/boe.
However, in 2000, production costs averaged $4.15/boe, resulting in a 10-year CAGR of
11.5%. This annual increase is roughly in line with the North American Senior Producers,
which have reported a 10-year CAGR of 11.2%, but averaged $10.02/boe in 2009. North
American production costs for the Integrateds and Supermajors have increased 13.5%
annually, to $14.39/boe in 2009 from $4.59/boe in 2000, while international costs have
increased 10.9% annually, to $10.05/boe in 2009 from $3.98/boe in 2000.

See pages G1 to G2 for analyst coverage.

Page A58

Oil & Gas Global Cost Study

Chart 85: Production Costs by Region (US$/boe)

Chart 86: Production Costs Group Comparison (US$/boe)


$20.00

$20.00

$18.00

$18.00

$16.00

$16.00

$14.00

$14.00
$12.00

$12.00

$10.00

$10.00

$8.00

$8.00

$6.00

$6.00

$4.00

$4.00

$2.00

$2.00
$0.00

$0.00

1999

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Worldwide

North America

2000

Integrateds

International

Source: BMO Capital Markets, Company Reports


Notes: Excludes equity interest results for BP, RD, TOT and XOM

2001

2002

2003

Seniors

2004

2005

2006

Intermed/Juniors

2007

2008

2009

Internationals

Source: BMO Capital Markets, Company Reports


Notes: Excludes equity interest results for BP, RD, TOT and XOM

Chart 87 illustrates the trends in operating earnings (a proxy for cash flow) for the Integrateds and Supermajors group, split by geographical region. Despite falling 45% from
2008, weighted average operating earnings have increased at a compound annual rate of
5.4% since 2000, which is slightly above the overall industry trend. Although earnings
and cash flow have expanded, reserve replacement costs for the group have outpaced this,
increasing roughly 11.7% annually over the same period, and resulting in a decrease in
the groups recycle ratio and overall profitability.

Chart 88: Worldwide Operating Earnings vs. Reserve


Replacement Cost (US$/boe)

Chart 87: Upstream Operating Earnings by Region


(US$/boe)
$60.00

$60.00

$50.00

$50.00

$40.00

$40.00

$30.00

$30.00

$20.00

$20.00

$10.00

$10.00

$0.00
1999

2000

2001

2002

Worldwide

2003

2004

2005

North America

2006

2007

2008

2009

$0.00
1999

International

Source: BMO Capital Markets, Company Reports


Notes: Operating earnings calculated as net revenue less production
costs, exploration costs, and Other costs; excludes equity interest
results for BP, RD, TOT and XOM

2000

2001

2002

2003

2004

Operating Earnings

2005

2006

2007

2008

2009

Worldwide F&D

Source: BMO Capital Markets, Company Reports


Notes: Operating earnings calculated as net revenue less production
costs, exploration costs, and Other costs; excludes equity interest
results for BP, RD, TOT and XOM

See pages G1 to G2 for analyst coverage.

Oil & Gas Global Cost Study

Page A59

Worldwide DD&A for the group has increased to $10.46/boe in 2009 from $4.57/boe in
2000. North American charges have led overall DD&A higher, rising to $14.59 in 2009
from $5.29/boe in 2000 (11.9% annually). International DD&A charges have grown to
$9.17 in 2009 from $4.27/boe in 2000 (8.9% annually), but declined 14.2% in 2009. Reserve
replacement costs also continue to greatly outpace DD&A charges, which could negatively
impact future earnings if reserve replacement costs do not improve materially.

Chart 89: DD&A and Exploration Costs by Region


(US$/boe)

Chart 90: DD&A vs. Reserve Replacement Cost (US$/boe)

$25.00

$25.00

$20.00

$20.00

$15.00

$15.00

$10.00

$10.00

$5.00

$5.00

$0.00

$0.00

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Worldwide

North America

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
DD&A

International

Source: BMO Capital Markets, Company Reports


Notes: Excludes equity interest results for BP, RD, TOT and XOM

Worldwide F&D

Source: BMO Capital Markets, Company Reports


Notes: Excludes equity interest results for BP, RD, TOT and XOM

See pages G1 to G2 for analyst coverage.

Page A60

Oil & Gas Global Cost Study


Chart 91 provides upstream income taxes by region for the Integrateds and Supermajors
group. Income taxes per boe have expanded to $9.84/boe in 2009 from $6.33/boe in 2000
(5% annually). Despite the 55% decline in the 2009 income tax per boe, effective tax rates
have increased dramatically for the Integrated Oil and Supermajors since 2002, supported
by international tax hikes and erosion in available tax shields as a result of high commodity
prices. Tax hikes have been driven primarily by international operations, while tax rates
have been fairly stable in North America.

Chart 91: Upstream Income Taxes by Region (US$/boe)

Chart 92: Upstream Income Taxes Group Comparison


(US$/boe)
$30.00

$30.00

$25.00
$25.00

$20.00
$20.00

$15.00

$15.00

$10.00

$10.00

$5.00

$5.00

$0.00
-$5.00

$0.00

1999

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Worldwide

North America

2000

2001

Integrateds

International

2002

2003

Seniors

2004

2005

2006

Intermed/Juniors

2007

2008

2009

Internationals

Source: BMO Capital Markets, Company Reports


Notes: Excludes equity interest results for BP, RD, TOT and XOM

Source: BMO Capital Markets, Company Reports


Notes: Excludes equity interest results for BP, RD, TOT and XOM

Chart 93: Upstream Effective Tax Rates by Region (%)

Chart 94: Effective Tax Rates Group Comparison (%)


80.0%

80.0%

70.0%

70.0%

60.0%

60.0%

50.0%
40.0%

50.0%

30.0%
20.0%

40.0%

10.0%

30.0%

0.0%

20.0%

-10.0%

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Worldwide

North America

1999

Integrateds

International

Source: BMO Capital Markets, Company Reports


Notes: Excludes equity interest results for BP, RD, TOT and XOM

2000

2001

2002
Seniors

2003

2004

2005

2006

Intermed/Juniors

2007

2008

2009

Internationals

Source: BMO Capital Markets, Company Reports


Notes: Excludes equity interest results for BP, RD, TOT and XOM

Overall, net earnings for the Integrateds and Supermajors group have increased 2.9%
annually to $9.40/boe in 2009 from $7.28/boe in 2000, despite falling 52% in 2009 alone.
Earnings from North American operations were the hardest hit in 2009, falling 72% to
average $6.60/boe, which is the lowest level since 2002. International operations fared
better, falling 44.2% in 2009 but reporting a 10-year CAGR of 4.9%.
See pages G1 to G2 for analyst coverage.

Oil & Gas Global Cost Study

Page A61

Chart 95: Net Earnings by Region (US$/boe)

Chart 96: Net Earnings Group Comparison (US$/boe)


$25.00

$25.00

$20.00

$20.00

$15.00

$15.00

$10.00

$10.00
$5.00

$5.00

$0.00

$0.00
1999

2000

2001

2002

Worldwide

2003

2004

2005

North America

2006

2007

2008

2009

-$5.00
1999

2000

2001

Integrateds

International

Source: BMO Capital Markets, Company Reports


Notes: Excludes equity interest results for BP, RD, TOT and XOM

2002

2003

Seniors

2004

2005

2006

Intermed/Juniors

2007

2008

2009

Internationals

Source: BMO Capital Markets, Company Reports


Notes: Excludes equity interest results for BP, RD, TOT and XOM

Breakeven Oil Price


Based on our analysis of 2009 results, the one-year breakeven oil price for the Integrateds
and Supermajors group (excluding quality differential) has risen to $47.99/boe in 2009
from $17.57/boe in 2000, reflecting an 11.8% annual increase over the time period, despite
a 33% decrease in 2009. Including quality differentials for the group, we calculate that the
required WTI price for the group has increased to $52.51/boe in 2009 from $22.70/boe in
2000, reflecting a 9.8% average annual increase since 2000. The substantial improvement
in the 2009 WTI-equivalent breakeven price relative to 2008 results can be attributed to
the slowdown in the world economy, which placed downward pressure on operating costs
(down 16%) and reserve replacement costs (down 41%).
Chart 97: Required WTI Oil Price by Region (US$/boe)
$120.00

Chart 98: Required WTI Oil Price Group Comparison


(US$/boe)
$100.00
$90.00

$100.00

$80.00
$70.00

$80.00

$60.00
$60.00

$50.00
$40.00

$40.00

$30.00
$20.00

$20.00

$10.00
$0.00

$0.00
1999

2000

2001

2002

Worldwide

2003

2004

2005

North America

2006

2007

2008

2009

1999

2001

Integrateds

International

Source: BMO Capital Markets, Company Reports


Notes: Excludes equity interest results for BP, RD, TOT and XOM

2000

2002

2003

Seniors

2004

2005

2006

Intermed/Juniors

2007

2008

2009

Internationals

Source: BMO Capital Markets, Company Reports


Notes: Excludes equity interest results for BP, RD, TOT and XOM

Table 17 provides the unit data that builds up to the Breakeven Oil Price and Required WTI
Price estimates on a one-year basis. The Integrated Oils and Multinationals group had the
See pages G1 to G2 for analyst coverage.

Page A62

Oil & Gas Global Cost Study


second-lowest required breakeven in our study based on 2009 results, at $52.51/boe, which
is significantly above the industry-leading Senior Producers but below the Internationals
and Intermediate/Junior producers. Given the large, long-lead-time capital projects that
comprise the majority of development for the Integrateds and Supermajors, we continue
to believe that the three-year breakeven oil price is a better indicator of performance for
the group. The three-year required WTI price equates to $65.26/boe for the group in
2009. While this WTI equivalent breakeven price represents the highest in the industry,
the group also reported the highest three-year net revenue per boe result.

Table 17: Breakeven Oil Price Analysis by Region Integrateds and Supermajors (US$/boe)
Worldwide
Operating Costs
Exploration Expense
G&A/Other
F&D Costs
Return on Capital
Income Taxes
Breakeven Oil Price
Quality/Royalty
Required WTI Price

1999
3.71
0.91
0.92
3.65
3.01
2.47
14.67
2.02
16.70

2000
4.15
0.80
1.29
4.46
3.67
3.19
17.57
5.13
22.70

2001
3.97
0.83
1.78
5.16
4.24
3.71
19.69
4.42
24.11

2002
4.07
0.81
1.59
5.13
4.15
3.89
19.63
4.07
23.70

2003
4.81
0.78
1.64
5.65
4.47
3.94
21.29
7.30
28.59

2004
5.66
0.90
1.60
8.12
6.32
6.07
28.67
9.59
38.26

2005
7.40
1.02
2.14
11.17
8.64
9.09
39.46
14.66
54.12

2006
8.92
1.38
2.41
13.25
10.05
11.32
47.32
9.09
56.41

2007
10.66
1.85
2.86
14.60
10.91
12.08
52.96
8.89
61.85

2008
13.25
2.16
3.29
20.33
15.24
17.09
71.35
12.94
84.29

2009
11.08
1.83
3.14
12.08
9.71
10.16
47.99
4.52
52.51

Weighted Average
3-Year
5-Year
11.63
10.26
1.94
1.65
3.10
2.77
15.06
14.00
11.56
10.76
12.62
11.73
55.91
51.17
9.35
10.38
65.26
61.55

North America
Operating Costs
Exploration Expense
G&A/Other
F&D Costs
Return on Capital
Income Taxes
Breakeven Oil Price
Quality/Royalty
Required WTI Price

1999
4.07
0.86
0.91
4.51
3.20
1.68
15.23
1.92
17.15

2000
4.59
0.86
1.57
5.05
3.82
2.04
17.93
3.38
21.31

2001
4.47
0.92
2.42
7.50
5.45
2.69
23.45
2.85
26.29

2002
4.61
0.83
1.77
9.91
6.87
3.59
27.58
4.37
31.95

2003
5.65
0.86
1.81
8.73
5.94
3.56
26.55
4.84
31.39

2004
6.69
1.10
1.89
25.88
17.61
9.61
62.78
6.84
69.62

2005
9.28
1.29
2.52
8.02
6.28
3.54
30.92
10.94
41.86

2006
11.91
1.73
1.85
16.93
13.67
6.77
52.86
8.22
61.08

2007
14.07
2.00
2.59
18.68
15.26
7.51
60.12
8.66
68.78

2008
18.53
2.09
3.33
29.44
24.68
12.45
90.52
10.63
101.15

2009
14.39
2.48
2.74
22.26
22.31
8.93
73.11
6.57
79.68

Weighted Average
3-Year
5-Year
15.56
13.57
2.20
1.92
2.87
2.59
17.25
15.22
15.30
12.94
7.39
6.50
60.57
52.75
9.45
9.44
70.02
62.19

International
Operating Costs
Exploration Expense
G&A/Other
F&D Costs
Return on Capital
Income Taxes
Breakeven Oil Price
Quality/Royalty
Required WTI Price

1999
3.57
0.92
0.93
3.49
3.03
2.88
14.82
2.06
16.88

2000
3.98
0.78
1.18
4.07
3.46
3.62
17.09
5.83
22.92

2001
3.77
0.79
1.51
4.51
3.88
4.16
18.63
5.06
23.70

2002
3.86
0.80
1.52
4.23
3.60
3.94
17.96
3.95
21.91

2003
4.50
0.74
1.58
5.10
4.24
4.32
20.47
8.20
28.67

2004
5.30
0.83
1.50
6.71
5.42
6.34
26.10
10.55
36.65

2005
6.80
0.93
2.02
12.76
9.94
12.70
45.16
15.85
61.01

2006
7.96
1.27
2.58
11.69
8.65
11.92
44.08
9.37
53.45

2007
9.61
1.80
2.95
13.63
9.93
13.18
51.10
8.96
60.06

2008
11.70
2.18
3.27
15.42
11.31
15.31
59.20
13.99
73.19

2009
10.05
1.63
3.26
13.84
10.35
12.17
51.29
3.92
55.21

Weighted Average
3-Year
5-Year
10.43
9.24
1.86
1.56
3.16
2.83
14.31
13.53
10.55
10.22
13.69
13.40
54.01
50.79
9.44
10.73
63.45
61.52

Source: BMO Capital Markets, Company Reports


Notes: Breakeven components, except F&D costs, exclude equity interest results for BP, RD, TOT and XOM

Charts 99 and 100 provide a graphical depiction of the cost trends for the Integrated &
Supermajor groups North American and International operations. The required WTI
price implied by the groups North American operations declined 21% year over year to
$79.68/boe but remains high relative to historical levels, with a 10-year CAGR of 15.8%.
The required oil price implied by international operations remains significantly below the
International number, falling 25% year over year to average $55.21/boe in 2009. Additionally, the groups international operations have experienced a more modest 10-year CAGR
of 10.3%. Furthermore, we believe the three- or five-year averages are more appropriate
proxies for the groups exposure to more long-lead-time projects. On these longer-term
metrics, the performance is less disparate, with a North America required oil price of
$70.02/boe on a three-year basis and $62.19/boe for the five-year average compared to
$63.45/boe and $61.52/boe, respectively, for International operations.
See pages G1 to G2 for analyst coverage.

Oil & Gas Global Cost Study

Page A63

Chart 99: North America Required WTI Oil Price (US$/boe)

Chart 100: International Required WTI Oil Price (US$/boe)

$120.00

$120.00

$100.00

$100.00

$80.00

$80.00

$60.00

$60.00

$40.00

$40.00

$20.00

$20.00

$0.00

$0.00
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Op Costs

F&D

Return

Taxes

1999

2000 2001
Op Costs

Quality/Royalty

Source: BMO Capital Markets, Company Reports


Notes: Breakeven components, except F&D costs, exclude equity
interest results for BP, RD, TOT and XOM

2002 2003
F&D

2004

Return

2005 2006
Taxes

2007 2008

2009

Quality/Royalty

Source: BMO Capital Markets, Company Reports


Notes: Breakeven components, except F&D costs, exclude equity
interest results for BP, RD, TOT and XOM

Peer Comparison: Integrated Oils and Supermajors


The relative performance of companies within the Integrateds and Supermajors group
are highlighted in the following section of tables and charts. In 2009, CNOOC, ENI
and Murphy led the group with the highest per-barrel net revenue. Suncor and Murphy
stand out as having the highest historical net revenue realizations, with three-year average
net revenue of $64.76/boe and $63.56/boe, respectively. BP and ConocoPhillips had the
lowest net revenue among the peer group in 2009.
Table 18: Upstream Net Revenue Integrateds and Supermajors (US$/boe)

CNOOC
ENI
Murphy
Suncor*
Statoil
Petrobras
Royal Dutch
Hess Corp
Total
Imperial Oil*
Sinopec
PetroChina
Chevron
ExxonMobil
Marathon
Cenovus
Husky Energy
ConocoPhillips
BP PLC
Repsol
Weighted Group Avg.
*Includes Oil Sands Mining

CEO
ENI
MUR
SU
STO
PBR
RD
HES
TOT
IMO
SNP
PTR
CVX
XOM
MRO
CVE
HSE
COP
BP
REP

1999
18.04
17.29
15.49
13.29
15.77
16.55
17.12
15.79
15.06
12.87
14.41
15.01
13.85
14.18
14.40
na
11.95
24.90
15.84
12.84
15.43

2000
26.13
25.09
24.40
19.86
24.27
23.44
25.49
22.12
23.02
19.69
24.13
23.66
22.68
21.97
17.23
na
19.41
35.49
24.85
19.41
23.62

2001
22.14
21.68
21.25
19.32
21.18
18.59
23.15
21.99
20.26
16.14
21.23
20.26
20.45
20.00
20.71
na
17.10
20.89
23.10
16.80
20.91

2002
22.71
22.08
20.70
21.29
20.92
21.36
20.00
22.40
20.01
17.19
19.38
19.72
19.54
19.12
20.36
na
18.90
20.35
20.35
13.53
19.95

2003
26.57
24.64
22.68
27.72
24.47
24.70
24.70
22.05
23.85
23.06
23.63
23.27
24.47
24.66
23.51
na
23.26
24.78
26.14
15.41
24.42

2004
28.40
30.80
33.14
29.49
30.99
28.81
33.77
26.72
29.46
28.32
28.76
27.95
29.37
30.79
28.78
na
24.46
30.92
31.90
17.65
30.29

2005
42.76
41.32
50.31
46.99
42.58
39.47
44.00
33.77
40.74
36.79
39.10
38.22
40.05
41.80
41.11
na
39.36
42.24
43.32
23.20
41.10

2006
51.31
48.95
51.65
57.70
52.57
47.36
54.05
48.75
49.13
42.48
48.72
45.77
45.59
48.66
48.57
na
45.80
46.24
48.20
28.96
48.26

2007
56.93
53.29
54.80
63.90
59.02
54.12
58.43
53.49
52.27
47.46
49.45
51.40
50.16
52.12
49.53
37.22
51.13
50.75
51.73
30.78
52.54

2008
74.53
67.82
87.98
87.06
73.67
71.62
76.72
68.89
68.22
71.23
73.74
69.12
65.57
70.08
65.05
48.53
72.16
65.07
70.52
40.07
69.20

2009
54.02
53.28
50.94
50.40
48.67
46.90
46.00
44.97
44.84
44.28
44.20
44.09
44.07
44.03
43.41
42.79
42.40
41.02
34.77
na
43.90

Weighted Average
3-Year
5-Year
61.60
56.56
58.21
53.02
63.56
59.20
64.76
60.79
60.40
56.48
57.40
52.03
58.68
54.80
55.56
50.32
54.49
50.60
53.99
47.71
55.78
51.27
54.90
50.01
53.04
49.11
54.28
50.71
52.31
49.52
42.72
42.72
55.52
50.52
52.18
49.28
49.46
48.10
32.96
27.61
54.69
50.76

Source: BMO Capital Markets, Company Reports


Notes: Values for BP, RD, TOT and XOM exclude equity interest results; *Including Oil Sands Mining

The lowest 2009 production costs for the group were reported by Total, Statoil and ENI,
which led the group for the second consecutive year, at $5.66/boe, $6.52/boe and $6.81/
boe, respectively. In addition to these strong 2009 results, Total, Statoil and ENI have
See pages G1 to G2 for analyst coverage.

Page A64

Oil & Gas Global Cost Study


a strong track record of low production costs with group-leading five-year averages of
$4.85/boe, $6.25/boe and $6.40/boe, respectively.

Table 19: Production Costs Integrateds and Supermajors (US$/boe)

Total
Statoil
ENI
Cenovus
ExxonMobil
Chevron
Marathon
BP PLC
Murphy
Hess Corp
Husky Energy
Royal Dutch
PetroChina
CNOOC
ConocoPhillips
Sinopec
Petrobras
Imperial Oil*
Suncor*
Repsol
Weighted Group Avg.
*Includes Oil Sands Mining

TOT
STO
ENI
CVE
XOM
CVX
MRO
BP
MUR
HES
HSE
RD
PTR
CEO
COP
SNP
PBR
IMO
SU
REP

1999
2.81
3.45
3.67
na
3.21
3.81
4.33
3.29
3.62
3.85
4.01
4.46
4.73
3.85
6.25
6.60
4.82
4.54
5.56
3.52
3.71

2000
2.62
3.08
3.82
na
3.23
4.28
5.13
3.14
4.07
3.98
4.33
4.98
4.98
4.39
6.24
6.61
7.80
5.45
7.26
4.77
4.15

2001
2.62
3.01
2.98
na
3.27
4.49
5.32
3.27
4.18
4.40
4.87
4.32
4.67
4.05
4.29
6.51
6.87
5.21
8.41
4.79
3.97

2002
2.59
3.01
2.92
na
3.44
4.74
5.68
3.26
4.32
4.86
5.30
4.22
4.71
4.58
4.66
6.46
7.86
5.64
7.55
3.46
4.07

2003
2.67
3.08
3.03
na
3.97
5.09
5.83
4.54
3.18
5.69
6.27
4.92
4.75
5.44
4.66
6.86
9.59
8.47
9.15
4.76
4.81

2004
2.84
3.54
3.26
na
4.62
5.81
7.07
5.69
4.32
6.45
7.47
6.33
5.05
6.32
5.72
7.35
10.36
8.68
9.98
5.43
5.66

2005
3.17
3.51
5.09
na
5.15
6.80
8.80
7.66
5.41
8.08
9.14
7.61
6.02
6.83
9.68
9.04
14.36
11.20
16.52
7.30
7.40

2006
3.88
4.09
5.56
na
5.81
7.17
7.79
9.68
8.10
9.34
10.53
8.72
11.01
10.81
13.29
13.32
16.25
13.09
21.53
9.89
8.92

2007
5.03
8.18
6.81
7.02
6.86
8.90
9.08
11.48
9.73
11.28
11.51
10.45
14.16
14.32
16.61
16.46
17.80
15.76
28.42
10.03
10.66

2008
6.59
7.30
7.69
8.57
8.36
11.40
10.26
14.47
10.67
13.15
14.75
11.71
22.00
23.00
22.13
27.80
23.03
23.34
36.89
13.69
13.25

2009
5.66
6.52
6.81
7.68
8.07
10.03
10.18
10.46
10.98
11.88
13.63
13.64
13.89
14.50
15.08
17.16
18.50
20.80
30.41
na
11.08

Weighted Average
3-Year
5-Year
5.74
4.85
7.33
6.25
7.11
6.40
7.74
7.74
7.77
6.86
10.10
8.89
9.88
9.27
11.86
10.69
10.58
9.22
12.10
10.84
13.23
11.91
12.11
10.54
16.72
13.61
17.25
14.33
17.91
15.57
20.48
16.93
19.78
18.06
19.78
16.44
31.69
27.44
11.10
9.08
11.63
10.26

Source: BMO Capital Markets, Company Reports


Notes: Values for BP, RD, TOT and XOM exclude equity interest results; *Including Oil Sands Mining

The best overall earnings results were reported by CNOOC, Cenovus and PetroChina, with
earnings from upstream operations of $19.53/boe, $16.93/boe and $16.46/boe, respectively,
in 2009. On a three-year average basis, the companies with the highest reported earnings
were CNOOC, PetroChina and Imperial. The weakest longer-term performances were
posted by Repsol, Statoil and Royal Dutch.

Table 20: Net Earnings Integrateds and Supermajors (US$/boe)

CNOOC
Cenovus
PetroChina
ENI
Petrobras
Imperial Oil*
Murphy
ExxonMobil
Husky Energy
Chevron
BP Plc
Sinopec
Total
Marathon
Statoil
ConocoPhillips
Hess Corp
Royal Dutch
Suncor*
Repsol
Weighted Group Avg.
*Includes Oil Sands Mining

CEO
CVE
PTR
ENI
PBR
IMO
MUR
XOM
HSE
CVX
BP
SNP
TOT
MRO
STO
COP
HES
RD
SU
REP

1999
7.97
na
5.78
4.19
4.58
3.32
3.27
3.31
2.32
2.58
4.12
3.32
3.02
2.81
1.88
5.01
2.83
4.22
2.23
3.07
3.47

2000
14.25
na
10.06
7.99
8.00
6.93
6.50
7.04
5.93
6.96
8.60
9.46
5.99
2.58
4.23
10.70
6.32
8.77
4.21
6.49
7.28

2001
8.51
na
8.09
5.52
5.54
5.54
4.32
6.15
3.85
4.47
7.22
6.88
5.03
5.65
2.69
4.63
5.47
6.71
4.80
4.50
5.61

2002
8.82
na
8.00
5.66
6.76
5.87
3.06
5.65
4.99
4.94
3.89
5.28
5.06
4.62
3.11
3.71
(0.48)
4.79
6.34
3.13
4.75

2003
10.78
na
10.11
5.91
8.36
7.66
7.16
7.79
6.18
7.21
6.73
7.27
7.04
7.43
4.20
6.36
2.84
6.29
8.13
3.45
6.66

2004
10.86
na
13.13
8.74
9.72
10.12
11.43
9.56
5.30
10.75
10.77
9.59
8.66
8.44
5.79
9.02
5.42
6.84
9.08
3.96
8.67

2005
20.57
na
19.88
12.02
13.90
13.58
17.42
13.62
12.59
13.38
14.71
15.74
11.38
15.38
8.46
13.22
7.96
9.79
14.08
3.76
12.09

2006
23.09
na
21.40
14.75
17.63
17.80
15.90
14.67
15.43
13.81
16.48
18.34
12.82
13.83
9.90
11.72
11.09
12.27
24.64
5.77
13.57

Source: BMO Capital Markets, Company Reports


Notes: Values for BP, RD, TOT and XOM exclude equity interest results; *Including Oil Sands Mining

See pages G1 to G2 for analyst coverage.

2007
22.94
13.04
23.54
13.78
18.85
18.49
15.90
14.65
17.83
14.91
15.97
14.36
12.75
12.34
9.25
12.85
13.02
12.72
24.22
4.20
13.95

2008
30.47
20.29
30.46
15.49
27.00
29.42
33.74
20.43
30.39
22.39
21.75
23.53
16.75
19.18
13.46
16.32
17.32
18.33
30.10
7.99
19.58

2009
19.53
16.93
16.46
13.77
12.65
12.39
11.61
11.15
11.07
10.95
9.25
8.77
8.61
8.26
7.93
6.09
5.76
5.48
3.35
na
9.40

Weighted Average
3-Year
5-Year
24.10
23.32
16.67
16.67
23.46
22.39
14.36
13.97
19.38
17.99
20.01
18.11
19.63
18.63
15.00
14.67
19.99
17.68
15.96
15.04
14.61
14.97
15.53
16.12
12.48
12.32
13.05
13.63
10.21
9.89
11.72
11.96
11.89
11.03
11.40
11.25
17.00
18.17
5.93
5.05
14.09
13.60

Oil & Gas Global Cost Study

$50.00
$45.00
$40.00
$35.00
$30.00
$25.00
$20.00
$15.00

Integrated Average

$10.00
$5.00

RD
CV
E

BP

ES
TO
T
M
U
R
CE
O
H
SE
IM
O
*
CO
P
PT
R
M
RO
X
O
M
SU
*
PB
R

$0.00
CV
X
SN
P
EN
I
ST
O

Chart 101: One-Year


Proved F&D Costs
Integrateds and
Supermajors (US$/boe)

Page A65

Source: BMO Capital Markets, Company Reports


Note: Reserve replacement costs calculated after royalties (net); *Including Oil Sands Mining - We use
DD&A/bbl as a proxy for oil sands F&D costs given the large timing difference between capital spending
and additions. Blended with Conventional F&D results to calculate an adjusted F&D cost and Breakeven
for the company

See pages G1 to G2 for analyst coverage.

Page A66

Oil & Gas Global Cost Study

Chart 104: Worldwide Upstream Operating Earnings


(US$/boe)

T
TO

I
EN

ST
O

M
O

CV
E

CV
X

M
RO

BP

ES
H

M
U

RD

H
SE

PT
R

CE
O

P
SN

CO
P

Chart 105: Worldwide Upstream Net Earnings (US$/boe)

$80.00

$80.00

$70.00

$70.00

$60.00

$60.00

$50.00

$50.00

$40.00

$40.00

$30.00

$30.00

$20.00

$20.00

$10.00

$10.00

$0.00

$0.00
SU*

BP IMO* SNP COP PBR

RD

HES PTR HSE XOM TOT MRO CVX MUR CVE CEO STO

ENI

Chart 106: Worldwide Required WTI Oil Price (US$/boe)


$100.00

SU

I
EN

CE
O

SU

M
U

TO

O
IM

SN

O
X

$0.00
R

$0.00
ST
O

$10.00

PB
R

$20.00

$10.00

ES

$20.00

RD

$30.00

$30.00

$40.00

$40.00

PT
R

$50.00

$50.00

CV
X

$60.00

M
RO

$60.00

H
SE

$70.00

CV
E

$70.00

BP

$80.00

CO
P

$80.00

PB
R

Chart 103: Worldwide Production Costs (US$/boe)

IM

Chart 102: Worldwide Upstream Net Revenue (US$/boe)

$104.10

SU*

RD

HES COP STO MRO TOT SNP

BP

CVX HSE XOM MUR IMO* PBR

ENI

PTR CVE CEO

Chart 107: Worldwide 3-Year Average Required WTI Oil


Price (US$/boe)
$120.00

$90.00

$100.00
$80.00
$70.00

$80.00

$60.00

$60.00

$50.00
$40.00

$40.00

$30.00

$20.00

$20.00
$10.00

$0.00
STO SNP MUR CVX TOT CEO IMO

$0.00
CVX SNP STO IMO* ENI

SU* TOT HES COP PTR PBR CEO XOM MUR HSE MRO

BP

RD

CVE

ENI COP

Op Cost/G&A/Other

SU

PBR HSE MRO HES PTR XOM

F&D/Exploration

Return

Taxes

BP

RD

CVE

Quality

Source: BMO Capital Markets, Company Reports


Notes: Values for BP, RD, TOT and XOM exclude equity interest results; *Including Oil Sands - We use DD&A/bbl as a proxy for oil sands
F&D costs given the large timing difference between capital spending and additions. Blended with Conventional F&D results to calculate an
adjusted F&D cost and Breakeven for the company

See pages G1 to G2 for analyst coverage.

Oil & Gas Global Cost Study

Page A67

Table 21, below, summarizes the required WTI oil prices for the Integrated and Supermajor
companies in the study, ranked by one-year results in 2009. Our analysis suggests that
Cenovus, Royal Dutch and BP require the lowest WTI oil price in order to break even
as a result of their relatively low cost structures in 2009, at $28.95/boe, $37.07/boe and
$45.44/boe, respectively. In addition to this low 2009 breakeven, Cenovus, Royal Dutch
and BP appear to also have the lowest breakeven WTI price requirements on a three-year
basis, at $38.79/boe, $44.62/boe and $48.67/boe, respectively. The weakest three-year
performances were reported by Sinopec, Statoil and Repsol.
Table 21: Required WTI Oil Price Summary Integrateds and Supermajors (US$/boe)

Cenovus
Royal Dutch
BP Plc
Marathon
Husky Energy
Murphy
ExxonMobil
CNOOC
Petrobras
PetroChina
ConocoPhillips
Hess Corp
Total
Suncor*
ENI
Imperial Oil*
Statoil
Sinopec
Chevron
Repsol
Weighted Group Avg.

CVE
RD
BP
MRO
HSE
MUR
XOM
CEO
PBR
PTR
COP
HES
TOT
SU
ENI
IMO
STO
SNP
CVX
REP

1999
na
15.19
14.71
33.11
58.39
16.82
18.98
16.84
12.87
15.38
13.25
22.88
15.37
22.03
19.63
12.44
42.79
17.59
22.87
18.51
16.70

2000
na
19.56
23.78
33.39
30.35
29.85
20.79
26.16
25.80
18.31
11.27
22.67
24.43
27.80
23.19
41.51
53.74
21.30
20.90
20.97
22.70

2001
na
18.10
17.92
40.05
25.62
27.59
23.61
20.29
74.05
21.10
31.45
31.01
24.04
24.38
26.16
19.93
29.18
30.14
26.31
18.03
24.11

2002
na
31.27
20.03
19.18
33.22
72.78
22.21
20.25
17.78
23.37
32.66
21.99
21.33
21.14
26.00
31.62
27.72
31.88
24.88
24.10
23.70

2003
na
37.42
26.33
30.52
47.45
60.93
29.03
25.24
26.75
29.04
28.49
33.01
25.46
25.90
34.50
73.35
39.71
61.00
26.85
34.97
28.59

2004
na
67.61
29.54
30.10
51.80
43.69
30.93
42.51
40.09
32.82
30.10
44.48
39.25
37.34
40.22
69.85
58.16
44.49
52.38
51.20
38.26

2005
na
55.57
42.51
41.94
48.75
102.56
39.58
45.95
60.01
46.94
44.08
61.03
48.97
60.59
100.42
51.94
69.44
53.89
66.71
110.57
54.12

2006
na
45.76
37.60
57.45
57.16
53.31
41.67
79.94
93.00
46.34
67.44
54.57
53.34
46.25
63.47
39.72
91.38
67.04
73.37
160.90
56.41

2007
34.43
49.55
45.49
105.50
55.65
102.86
46.50
70.05
62.80
56.45
56.16
62.58
77.11
56.64
72.21
53.68
96.48
67.95
95.75
88.20
61.85

2008
92.36
67.72
57.69
95.43
93.98
99.93
91.13
127.18
174.91
86.71
185.54
79.60
76.56
72.20
83.70
90.54
190.20
120.69
66.14
119.83
84.29

2009
28.95
37.07
45.44
47.72
51.96
53.34
54.12
54.16
54.35
54.50
57.02
68.93
74.57
76.38
77.53
79.57
81.03
95.23
104.10
na
52.51

Weighted Average
3-Year
5-Year
38.79
na
44.62
45.80
48.67
45.59
70.62
59.21
72.46
62.41
78.00
72.04
60.03
50.56
76.57
71.97
72.57
71.79
65.01
57.53
75.37
65.94
69.86
64.81
76.70
65.67
73.82
69.42
76.25
76.08
76.35
58.14
109.32
101.15
86.51
77.42
77.43
72.96
121.42
107.54
65.26
61.55

Source: BMO Capital Markets, Company Reports


Notes: Breakeven components, except F&D costs, exclude equity interest results for BP, RD, TOT and XOM; *Including Oil Sands - We use
DD&A/bbl as a proxy for oil sands F&D costs given the large timing difference between capital spending and additions. Blended with Conventional F&D results to calculate an adjusted F&D cost and Breakeven for the company

See pages G1 to G2 for analyst coverage.

Page A68

Oil & Gas Global Cost Study

North American Senior Producers


The North American Senior Producers hold a mix of domestic and international assets,
although operations are largely concentrated in Canada and the U.S. As a result of this
North American focus, the Senior Producers have traditionally held an asset base with
greater exposure to mature basins relative to the Integrateds and Supermajors group.
However, the Senior Producers have been at the forefront of the unconventional revolution
in drilling and completions technology. With an increasing number of these emerging
plays reaching commercial operation, and the divesting of non-core mature assets, the
group has significantly improved its cost structure over the past few years.

Upstream Revenue
Due to the Senior Producers North American focus, price realizations generally track
U.S. benchmark commodity prices such as WTI crude oil and NYMEX natural gas more
closely than for international operators. In addition, Senior Producers have vastly less
exposure to production under PSCs, which can limit what portion of commodity price
increases are realized. Despite these positive factors, on a per-boe basis, net revenue for
the Senior Producers has tended to lag that of other segments. This can be primarily
attributed to the increasing impact of natural gas resource plays on the groups production mix. Natural gas-weighted onshore resource plays have not only increased the
production of gas relative to oil, but this surging production also has placed a ceiling on
North American natural gas price, widening the gas-oil ratio from the standard energy
equivalence of 6:1 to the 2009 average of almost 15:1.
Chart 108: Upstream Net Revenue by Region ($/boe)

Chart 109: Upstream Net Revenue Group Comparison


($/boe)

$80.00

$80.00

$70.00

$70.00

$60.00

$60.00

$50.00

$50.00

$40.00

$40.00

$30.00

$30.00
$20.00

$20.00

$10.00

$10.00

$0.00

$0.00
1999

2000

2001

2002

Worldwide

2003

2004

2005

North America

2006

2007

2008

1999

2009

Integrateds

International

Source: BMO Capital Markets, Company Reports

2000

2001

2002
Seniors

2003

2004

2005

2006

Intermed/Juniors

2007

2008

2009

Internationals

Source: BMO Capital Markets, Company Reports


Notes: Excludes equity interest results for BP, RD, TOT and XOM

See pages G1 to G2 for analyst coverage.

Oil & Gas Global Cost Study

Page A69

Chart 110 shows regional net revenue for the Senior Producers group relative to WTI
crude oil prices. Worldwide net revenue for the Senior Producers decreased 35% in 2009
to average $39.03/boe. The group reported a 10-year CAGR of 6.0%, trailing both the
Industry and the Integrated & Supermajors, which reported 10-year growth rates of 7.1%
and 6.9%, respectively. Growth in the groups international production revenue continues to
outpace growth implied by North American production, reflecting the higher gas weighting
domestically. North American net revenue for the group has increased 5.6%, to $36.81/
boe in 2009 from $22.49/boe in 2000, while international net revenue has grown 7.7%
annually, to $49.46/boe in 2009 from $25.27/boe in 2000. As illustrated in Chart 110, the
increase in net revenue for the North American Senior Producers has historically tracked
very closely with increases in benchmark U.S. commodity prices, but widening oil quality
differentials have created a wider spread between the two measures in recent years.

Chart 110: Upstream Net


Revenue vs West Texas
Intermediate ($/boe)

$120.00
$100.00
$80.00
$60.00
$40.00
$20.00
$0.00
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Worldwide

North America

Source: BMO Capital Markets, Company Reports

See pages G1 to G2 for analyst coverage.

International

WTI

Page A70

Oil & Gas Global Cost Study


Table 22 provides the weighted average netback components for the Senior Producers
group.

Table 22: Netback Summary Senior Producers ($/boe)

Worldwide
Net Revenue
Production Costs
Exploration
DD&A
Other
Pre-tax Earnings
Income Taxes
Net Earnings

North America
Net Revenue
Production Costs
Exploration
DD&A
Other
Pre-tax Earnings
Income Taxes
Net Earnings

International
Net Revenue
Production Costs
Exploration
DD&A
Other
Pre-tax Earnings
Income Taxes
Net Earnings

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

14.57
3.46
0.70
5.29
0.93
4.19
1.59
2.60

23.07
4.18
0.71
5.27
0.69
12.21
4.70
7.51

22.81
4.74
0.90
7.86
0.72
8.59
3.16
5.44

19.80
4.74
0.78
6.28
1.25
6.73
2.64
4.11

26.63
5.39
0.81
7.27
1.16
11.93
3.98
7.95

31.03
6.14
0.91
7.89
1.44
14.65
5.35
9.30

42.53
7.82
1.27
8.79
1.96
22.70
8.27
14.43

45.90
9.57
1.27
10.79
1.29
22.98
8.51
14.47

50.01
10.68
1.50
12.73
1.56
23.52
8.59
14.92

60.14
12.28
1.56
14.22
1.53
30.63
11.00
19.63

39.03
10.02
1.18
12.93
1.87
13.02
4.72
8.30

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

14.02
3.39
0.62
5.56
0.86
3.58
1.23
2.36

22.49
4.13
0.62
5.21
0.73
11.79
4.34
7.45

23.10
4.78
0.70
8.26
0.67
8.69
3.01
5.68

19.05
4.60
0.69
6.34
0.88
6.54
2.26
4.28

26.64
5.34
0.69
7.19
0.98
12.43
3.86
8.59

31.10
6.15
0.75
7.92
1.24
15.03
5.19
9.84

41.56
7.94
1.14
8.94
1.31
22.23
7.62
14.61

44.14
9.69
1.10
11.03
0.93
21.37
7.03
14.32

47.66
10.37
1.16
13.08
1.41
21.65
6.99
14.66

56.49
11.91
1.21
14.12
1.11
28.15
9.14
19.01

36.81
9.86
0.90
12.82
1.85
11.38
3.54
7.84

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

16.38
3.67
0.99
4.40
1.14
6.18
2.80
3.38

25.27
4.36
1.06
5.50
0.63
13.79
6.07
7.72

21.63
4.60
1.73
6.22
0.91
8.17
3.75
4.42

22.86
5.31
1.15
6.05
2.76
7.58
4.17
3.41

26.17
5.60
1.32
7.59
1.93
9.72
4.49
5.23

30.73
6.10
1.50
7.76
2.17
13.23
5.98
7.25

46.20
7.37
1.74
8.23
4.40
24.43
10.73
13.73

53.02
9.07
1.96
9.72
2.75
29.52
14.43
15.09

60.06
12.03
2.97
11.36
2.19
31.50
15.43
16.05

77.14
13.96
3.20
14.71
3.53
41.73
19.68
22.03

49.46
10.78
2.48
13.47
1.97
20.77
10.29
10.47

Source: BMO Capital Markets, Company Reports

See pages G1 to G2 for analyst coverage.

Weighted Average
3-Year
5-Year
49.52
10.98
1.41
13.31
1.66
22.17
8.03
14.13

47.47
10.09
1.35
11.95
1.65
22.42
8.17
14.25

Weighted Average
3-Year
5-Year
46.78
10.71
1.08
13.34
1.47
20.19
6.49
13.70

45.29
9.98
1.10
12.07
1.34
20.80
6.81
13.99

Weighted Average
3-Year
5-Year
62.03
12.24
2.88
13.18
2.63
31.17
15.07
16.10

56.81
10.56
2.45
11.43
3.00
29.37
13.99
15.39

Oil & Gas Global Cost Study

Page A71

Cost Performance
While negative revisions caused 2008 costs to surge, the shift toward unconventional
resource play development among the Senior Producers allowed the downward trend to
continue in 2009. With the 54% decline in 2009 costs, average reserve replacement costs
are now slightly above 2005 levels.
Chart 112: Proved Reserve Additions by Region
(million boe)

Chart 111: Capital Spending by Region ($ billion)


$120

7,000

$100

6,000
5,000

$80

4,000

$60

3,000
$40

2,000

$20

1,000

$0
1999

2000

2001

2002

2003

2004

North America

2005

2006

2007

2008

2009

1999

2000

2001

2002

2003

2004

North America

International

Source: BMO Capital Markets, Company Reports

2005

2006

2007

2008

2009

International

Source: BMO Capital Markets, Company Reports


Notes: Reserve additions calculated after royalties (net)

As shown in Chart 113, worldwide one-year reserve replacement costs for the Senior Producers group have increased an average 9.4% annually, to $12.36/boe in 2009 from $5.50/
boe in 2000. This compares to annual increases of 11.7% and 11.2% for the industry and
the Integrateds and Supermajors group, respectively. Excluding revisions, these metrics
appear even more favourable, with 2009 proved reserves added at a cost of just $10.40/
boe, corresponding to a 10-year CAGR of 6.8%.
Chart 113: Worldwide Proved Reserve Replacement Costs
($/boe)

Chart 114: Worldwide Proved Reserve Replacement Costs


Group Comparison ($/boe)
$35.00

$35.00
$30.00

$30.00

27.11

$25.00

$25.00
19.33

$20.00

$20.00
15.51

$15.00
$10.00
$5.00

12.36

11.92

4.79

5.50

7.38

8.15

8.23

9.87

$15.00
$10.00
$5.00
$0.00

$0.00
1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

1999

2009

Integrateds

Worldwide F&D

Source: BMO Capital Markets, Company Reports


Notes: Excludes equity interest results for BP, RD, TOT and XOM

2000

2001

2002

Seniors

2003

2004

2005

Intermed/Juniors

2006

2007

2008

2009

Internationals

Source: BMO Capital Markets, Company Reports


Notes: Excludes equity interest results for BP, RD, TOT and XOM

See pages G1 to G2 for analyst coverage.

Page A72

Oil & Gas Global Cost Study


Regional reserve replacement performance for the Senior Producers is shown in Chart
115. The cost of reserve additions decreased in North America and Internationally in
2009, falling 56% and 43%, respectively. Over the longer term, North American costs
have climbed to $11.83/boe in 2009 from $5.60/boe in 2000, reflecting a 10-year CAGR of
8.7%. By comparison, international reserve replacement costs have increased to $15.99/
boe in 2009 from $5.14/boe in 2000, representing an annual increase of 13.4%.

Chart 115: Proved


Reserve Replacement
Costs by Region ($/boe)

$35.00
$30.00
$25.00
$20.00
$15.00
$10.00
$5.00
$0.00
1999

2000

2001

2002

2003

2004

North America

2005

2006

2007

2008

2009

International

Source: BMO Capital Markets, Company Reports


Notes: Reserve replacement costs calculated after royalties (net)

Proved reserves for the Senior Producers group stalled during the 20042006 period with
declines in production supporting an increase in the Reserve Life Index (RLI). However,
over the past three years, an influx of reserve additions related to resource play activities
has helped offset declining conventional reserves. In 2009, reserves increased 8.3% year
over year compared with a 5.5% increase in production, to increase the RLI to 13.0 from
12.7 and halt two consecutive years of declining RLI.

See pages G1 to G2 for analyst coverage.

Oil & Gas Global Cost Study

Page A73

Chart 116: Worldwide Proved Reserves vs. RLI

Chart 117: Production by Region (Million boe)

40,000

14.0

3,000

35,000

12.0

2,500

10.0

25,000

8.0

20,000
6.0

15,000

4.0

10,000

2.0

5,000
0

Years

mmboe (net)

30,000

2,000
1,500
1,000
500
0

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
North America

International

1999

2000

2001

2002

2003

2004

North America

RLI

Source: BMO Capital Markets, Company Reports

2005

2006

2007

2008

2009

International

Source: BMO Capital Markets, Company Reports

In 2009, worldwide production costs for the Senior Producers group declined for the first
time since the inception of our study, falling 18%. Despite this one-year decrease, costs
have expanded to $10.02/boe in 2009 from $4.18/boe in 2000, which represents compound
annual growth of 10.2% and exceeds the 6.0% annual increase in revenue during the same
period. This cost increase compares favourably to both the Integrateds and Supermajors,
and the industry in general, which reported 10-year CAGRs of 11.5% and 11.3%, respectively. These trends have been present in both the North American and International
businesses. North American production costs for the Seniors increased 10.2% annually,
to $9.86/boe in 2009 from $4.13/boe in 2000, while international costs have increased
10.6%, to $10.78/boe in 2009 from $4.36/boe in 2000.

Chart 118: Production Costs by Region ($/boe)

Chart 119: Production Costs Group Comparison ($/boe)

$20.00

$20.00

$18.00

$18.00

$16.00

$16.00

$14.00

$14.00

$12.00

$12.00

$10.00

$10.00

$8.00

$8.00

$6.00

$6.00

$4.00

$4.00

$2.00

$2.00
$0.00

$0.00
1999

2000

2001

2002

Worldwide

2003

2004

2005

North America

2006

2007

2008

1999

2009

Integrateds

International

Source: BMO Capital Markets, Company Reports

2000

2001

2002
Seniors

2003

2004

2005

2006

Intermed/Juniors

2007

2008

2009

Internationals

Source: BMO Capital Markets, Company Reports


Notes: Excludes equity interest results for BP, RD, TOT and XOM

See pages G1 to G2 for analyst coverage.

Page A74

Oil & Gas Global Cost Study


Chart 120 illustrates the trend in operating earnings for the Senior Producers group on
both a worldwide and regional basis. Due to the 2009 recession-driven slide in commodity prices, operating earnings declined 42% year over year to $25.95/boe. This results in
a compound annual growth rate of 4.5% since 2000, which is below the overall industry
growth trend of 5.1% per year. However, the decrease in reserve replacement costs outpaced this decline in operating earnings, resulting in an increase in the recycle ratio to
2.1x from 1.7x. This remains below the Integrated and Supermajors recycle ratio of 2.3x
and the industry total of 2.2x.

Chart 120: Upstream Operating Earnings by Region ($/boe)

Chart 121: Worldwide Operating Earnings vs. Reserve


Replacement Cost ($/boe)

$60.00

$60.00

$50.00

$50.00

$40.00

$40.00

$30.00

$30.00

$20.00

$20.00

$10.00

$10.00
$0.00

$0.00
1999

2000

2001

2002

Worldwide

2003

2004

2005

North America

2006

2007

2008

1999

2009

2001

2002

2003

2004

Operating Earnings

International

Source: BMO Capital Markets, Company Reports


Notes: Operating earnings calculated as net revenue less production
costs, exploration costs, and Other costs

2000

2005

2006

2007

2008

2009

Worldwide F&D

Source: BMO Capital Markets, Company Reports


Notes: Operating earnings calculated as net revenue less production
costs, exploration costs, and Other costs

DD&A charges for the Senior Producers have increased to $14.11/boe in 2009 from $5.99/
boe in 2000, reflecting a 10.0% annual rate of increase. International charges diverged in
2008 as the industry overheated and have not converged during the recent slowdown, resulting in a 10-year CAGR of 10.4% compared with 10.0% in the domestic business. While
one-year DD&A charges and reserve replacement costs converged in 2009, increases in
DD&A charges have generally not kept pace with three-year reserve replacement costs.

See pages G1 to G2 for analyst coverage.

Oil & Gas Global Cost Study

Page A75

Chart 122: DD&A and Exploration Costs by Region ($/boe)

Chart 123: DD&A vs. Reserve Replacement Cost ($/boe)


$30.00

$20.00
$18.00

$25.00

$16.00
$14.00

$20.00

$12.00
$10.00

$15.00

$8.00
$10.00

$6.00
$4.00

$5.00

$2.00
$0.00
1999

2000

2001

2002

Worldwide

2003

2004

2005

2006

North America

2007

2008

2009

$0.00
1999

2000

2001

2002

2003
DD&A

International

Source: BMO Capital Markets, Company Reports

2004

2005

2006

2007

2008

2009

Worldwide F&D

Source: BMO Capital Markets, Company Reports

Chart 124 provides upstream income taxes by region for the Senior Producers group.
With the decreased levels of profitability in 2009, per-barrel income taxes for the Senior
Producers declined 43% year over year to $4.72/boe and are unchanged from 2000 levels.
As illustrated in Chart 127, effective tax rates for the Senior Producers have remained relatively constant since 1999, reflecting the generally stable tax policies in North America.

Chart 124: Upstream Income Taxes by Region ($/boe)

Chart 125: Upstream Income Taxes Group Comparison


($/boe)
$30.00

$30.00

$25.00

$25.00

$20.00
$20.00

$15.00
$15.00

$10.00

$10.00

$5.00

$5.00

$0.00
-$5.00

$0.00
1999

2000

2001

2002

Worldwide

2003

2004

2005

North America

2006

2007

2008

1999

2009

Integrateds

International

Source: BMO Capital Markets, Company Reports

2000

2001

2002

Seniors

2003

2004

2005

2006

Intermed/Juniors

Source: BMO Capital Markets, Company Reports

See pages G1 to G2 for analyst coverage.

2007

2008

Internationals

2009

Page A76

Oil & Gas Global Cost Study

Chart 126: Upstream Effective Tax Rates by Region (%)

Chart 127: Upstream Effective Tax Rates Group


Comparison (%)
80.0%

80.0%

70.0%

75.0%
70.0%

60.0%

65.0%

50.0%

60.0%

40.0%

55.0%

30.0%

50.0%
45.0%

20.0%

40.0%

10.0%

35.0%

0.0%

30.0%
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Worldwide

North America

-10.0%
1999

Source: BMO Capital Markets, Company Reports


Notes: Excludes equity interest results for BP, RD, TOT and XOM

2000

2001

Integrateds

International

2002

2003

Seniors

2004

2005

2006

Intermed/Juniors

2007

2008

2009

Internationals

Source: BMO Capital Markets, Company Reports


Notes: Excludes equity interest results for BP, RD, TOT and XOM

Due to a 58% decline in 2009 net earnings, the Senior Producers group has increased just
1.1% annually over the past 10 years to $8.30/boe in 2009 from $7.51/boe in 2000. Despite
this collapse, these results are among the highest of the peer groups in our study. This
can be attributed primarily to the groups relatively lower tax burden on North American assets. North American earnings for the Senior Producers group have increased an
average 0.6% annually over the past 10 years, while International earnings have grown
3.4% per annum.

Chart 128: Net Earnings by Region ($/boe)

Chart 129: Net Earnings Group Comparison ($/boe)


$25.00

$25.00

$20.00

$20.00

$15.00

$15.00
$10.00

$10.00

$5.00

$5.00

$0.00

$0.00

-$5.00

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Worldwide

North America

1999

2001

Integrateds

International

Source: BMO Capital Markets, Company Reports

2000

2002

2003

Seniors

2004

2005

2006

Intermed/Juniors

Source: BMO Capital Markets, Company Reports

See pages G1 to G2 for analyst coverage.

2007

2008

2009

Internationals

Oil & Gas Global Cost Study

Page A77

Breakeven Oil Price: Senior Producers


Our analysis suggests that a WTI-equivalent oil price of approximately $47.41/boe is
required for the Senior Producers to break even, based on one-year reserve replacement
costs in 2009. This suggests that the required oil price for the group has increased by
roughly 9% annually over the past 10 years, despite falling 45% in 2009. Given the sharp
fall in F&D costs attributable to the recession-induced industry slowdown, we believe that
the use of three-year average costs probably provides a more reasonable approximation
of the cost structure facing North American Producers. Using three-year average F&D
costs, we estimate a required WTI oil price of $59.81/boe, which is still lowest among the
peer segments in our survey.

Chart 130: Required WTI Oil Price by Region ($/boe)

Chart 131: Required WTI Oil Price Group Comparison ($/boe)

$100.00

$100.00

$90.00

$90.00

$80.00

$80.00

$70.00

$70.00

$60.00

$60.00

$50.00

$50.00

$40.00

$40.00

$30.00

$30.00

$20.00

$20.00

$10.00

$10.00

$0.00
1999

2000

2001

2002

Worldwide

2003

2004

2005

North America

2006

2007

2008

2009

$0.00
1999

International

Source: BMO Capital Markets, Company Reports


Notes: Excludes equity interest results for BP, RD, TOT and XOM

2000

Integrateds

2001

2002
Seniors

2003

2004

2005

Intermed/Juniors

2006

2007

2008

2009

Internationals

Source: BMO Capital Markets, Company Reports


Notes: Excludes equity interest results for BP, RD, TOT and XOM

See pages G1 to G2 for analyst coverage.

Page A78

Oil & Gas Global Cost Study


Table 23 provides the unit data that builds up to the Breakeven Oil Price and Required
WTI Price estimates on a one-year basis for the Senior Producers.

Table 23: Breakeven Oil Price Analysis by Region Senior Producers ($/boe)
Worldwide
Operating Costs
Exploration Expense
G&A/Other
F&D Costs
Return on Capital
Income Taxes
Breakeven Oil Price
Quality/Royalty
Required WTI Price

1999
3.46
0.70
0.93
4.79
3.54
2.17
15.60
1.76
17.35

2000
4.18
0.71
0.69
5.50
4.09
2.56
17.74
4.56
22.29

2001
4.74
0.90
0.72
7.38
5.55
3.22
22.52
2.53
25.05

2002
4.74
0.78
1.25
8.15
5.83
3.74
24.51
3.28
27.78

2003
5.39
0.81
1.16
8.23
5.98
2.99
24.56
4.96
29.52

2004
6.14
0.91
1.44
9.87
7.20
4.15
29.71
6.98
36.68

2005
7.82
1.27
1.96
11.92
9.38
5.38
37.71
11.05
48.76

2006
9.57
1.27
1.29
19.33
16.26
9.55
57.27
6.65
63.92

2007
10.68
1.50
1.56
15.51
12.85
7.40
49.50
6.58
56.07

2008
12.28
1.56
1.53
27.11
21.85
12.29
76.62
9.86
86.48

2009
10.02
1.18
1.87
12.36
10.24
5.83
41.50
5.92
47.41

Weighted Average
3-Year
5-Year
10.98
10.09
1.41
1.35
1.66
1.65
17.78
16.86
14.56
13.81
8.28
7.91
54.67
51.68
7.76
8.39
62.44
60.07

North America
Operating Costs
Exploration Expense
G&A/Other
F&D Costs
Return on Capital
Income Taxes
Breakeven Oil Price
Quality/Royalty
Required WTI Price

1999
3.39
0.62
0.86
5.19
3.92
2.04
16.04
1.75
17.78

2000
4.13
0.62
0.73
5.60
4.21
2.45
17.73
4.75
22.49

2001
4.78
0.70
0.67
8.66
6.43
3.41
24.65
2.17
26.82

2002
4.60
0.69
0.88
7.91
5.73
3.03
22.84
3.60
26.43

2003
5.34
0.69
0.98
8.48
6.18
2.78
24.45
4.96
29.41

2004
6.15
0.75
1.24
9.67
7.36
3.88
29.05
6.26
35.31

2005
7.94
1.14
1.31
11.14
9.44
4.92
35.89
11.40
47.28

2006
9.69
1.10
0.93
19.70
17.83
8.77
58.02
6.54
64.56

2007
10.37
1.16
1.41
14.98
13.20
6.30
47.40
6.89
54.29

2008
11.91
1.21
1.11
27.02
22.99
11.05
75.29
9.68
84.96

2009
9.86
0.90
1.85
11.83
10.43
4.71
39.57
6.66
46.23

Weighted Average
3-Year
5-Year
10.71
9.98
1.08
1.10
1.47
1.34
17.41
16.52
15.11
14.40
7.15
7.01
52.92
50.35
8.07
8.53
61.00
58.88

International
Operating Costs
Exploration Expense
G&A/Other
F&D Costs
Return on Capital
Income Taxes
Breakeven Oil Price
Quality/Royalty
Required WTI Price

1999
3.67
0.99
1.14
3.28
2.22
1.83
13.13
1.80
14.92

2000
4.36
1.06
0.55
5.14
3.68
2.89
17.69
3.82
21.51

2001
4.60
1.73
0.91
3.98
3.12
2.65
16.99
3.97
20.96

2002
5.31
1.15
2.76
9.58
6.50
7.95
33.24
1.98
35.23

2003
5.60
1.32
1.93
7.50
5.35
4.60
26.31
4.94
31.25

2004
6.10
1.50
2.17
11.23
6.86
5.66
33.51
9.64
43.15

2005
7.37
1.74
4.40
19.20
10.94
8.55
52.21
9.72
61.93

2006
9.07
1.96
2.75
17.16
10.91
10.43
52.29
7.10
59.39

2007
12.05
2.97
2.19
20.30
12.46
11.99
61.96
5.25
67.21

2008
13.96
3.20
3.53
27.89
16.67
14.88
80.15
11.57
91.71

2009
10.78
2.48
1.97
15.99
9.41
9.25
49.89
2.44
52.33

Weighted Average
3-Year
5-Year
12.24
10.56
2.88
2.45
2.55
3.00
20.71
19.42
12.46
11.69
11.66
10.63
62.50
57.76
6.64
7.94
69.14
65.70

Source: BMO Capital Markets, Company Reports

Charts 132 and 133 outline the regional differences in breakeven cost trends for the Senior
Producers. After gradually increasing through 2006, the groups cost structure and breakeven
have been volatile over the past few years. Breakeven metrics improved substantially in 2007
with the impact of positive reserve replacement performance from North American unconventional resource plays. However, costs and breakevens rebounded significantly in 2008, with
additional industry cost pressures as well as very high reserve replacement costs that came as
a result of severely low commodity prices at year-end. As the frenzy cooled, North American
costs and breakevens declined in 2009, falling 46%. The required WTI price implied by the
groups North American operations has increased to $46.23/boe in 2009 from $22.49/boe in
2000, while the required oil price for international assets has increased to $52.33/boe in 2009
from $21.51/boe in 2000. Three- and five-year required WTI oil prices equate to $61.00/boe
and $58.88/boe, respectively, for North American operations and $69.14/boe and $65.70/boe,
respectively for international operations.

See pages G1 to G2 for analyst coverage.

Oil & Gas Global Cost Study

Page A79

Chart 132: North America Required WTI Oil Price ($/boe)

Chart 133: International Required WTI Oil Price ($/boe)

$100.00

$100.00

$90.00

$90.00

$80.00

$80.00

$70.00

$70.00

$60.00

$60.00

$50.00

$50.00

$40.00

$40.00

$30.00

$30.00
$20.00

$20.00

$10.00

$10.00

$0.00

$0.00
1999

2000

2001

Op Costs

2002
F&D

2003

2004

Return

2005
Taxes

2006

2007

2008

1999

2009

Quality/Royalty

2000

2001

Op Costs

Source: BMO Capital Markets, Company Reports

2002

F&D

2003

2004

Return

2005

Taxes

2006

2007

2008

2009

Quality/Royalty

Source: BMO Capital Markets, Company Reports

Peer Comparison: North American Senior Producers


The relative performances of companies within the Senior Producers group are highlighted
in the following tables and charts. Canadian Oil Sands, Crescent Point and XTO generated
the highest levels of net revenue per barrel in 2009, at $67.79/boe, $57.06/boe and $52.03/boe,
respectively. The first two benefit from high crude oil leverage relative to their peers while XTO
received a lift from its aggressive hedging program. On a three-year average basis, Canadian
Oil Sands, Nexen and Occidental stand out as receiving the highest value for their product
on a boe basis.
Table 24: Upstream Net Revenue Senior Producers ($/boe)

Canadian Oil Sands


Crescent Point
XTO Energy
Nexen*
Occidental
Canadian Natural*
Cabot
Penn West
Talisman
CNX Gas
EnCana
Quicksilver
Apache
ARC Energy
Plains Exploration
Pioneer
Range Resources
Anadarko
Chesapeake
Southwestern
Newfield
Noble
Devon
EOG
Forest
Petrohawk
Ultra Petroleum
Equitable Resources
Weighted Group Avg.

COS.UN
CPG
XTO
NXY
OXY
CNQ
COG
PWT
TLM
CXG
ECA
KWK

APA
AET
PXP
PXD
RRC
APC
CHK
SWN

NFX
NBL

DVN
EOG
FST
HK
UPL
EQT

1999
23.56
na
14.25
15.09
16.10
11.74
13.13
12.43
13.98
na
na
13.58
15.34
13.12
na
12.15
18.10
13.95
12.61
13.68
15.22
13.87
14.59
12.71
13.20
14.81
26.60
14.22
14.57

2000
32.19
na
21.98
24.42
28.48
19.07
19.21
20.94
21.56
na
19.89
19.29
24.05
20.68
17.46
19.69
21.72
25.21
21.02
18.66
22.62
22.41
22.74
22.00
28.66
25.09
22.51
16.47
23.07

2001
24.22
na
26.26
20.44
28.98
18.34
25.07
20.27
21.55
na
20.61
18.70
22.22
20.07
23.26
20.33
23.64
22.55
27.33
23.21
25.67
22.68
22.32
23.03
24.94
23.99
20.24
21.29
22.81

2002
26.02
na
21.39
22.03
23.71
18.31
18.46
17.44
21.72
na
18.18
17.18
20.61
17.85
20.18
17.04
20.99
19.16
21.67
18.30
21.57
16.88
17.66
17.12
19.65
18.50
14.94
19.94
19.80

2003
30.67
25.38
24.90
26.90
29.40
25.31
27.28
25.30
26.86
25.31
24.27
20.76
27.64
26.47
24.72
23.01
25.40
26.16
28.99
25.70
27.67
23.39
25.86
26.50
26.35
27.98
25.26
23.05
26.55

2004
39.15
27.93
31.44
34.84
36.26
28.64
31.11
28.76
31.20
43.33
25.87
24.02
32.36
32.91
29.37
25.71
26.83
31.28
32.04
31.80
33.33
29.84
29.89
30.22
31.67
39.61
31.15
26.07
31.03

Source: BMO Capital Markets, Company Reports


Note: *Including Oil Sands Mining
See pages G1 to G2 for analyst coverage.

2005
59.63
39.65
43.47
44.95
50.02
36.80
41.38
43.61
46.01
68.08
38.00
35.72
44.95
41.86
40.08
33.61
36.85
45.28
41.90
39.67
43.76
37.78
39.63
40.97
38.58
52.40
41.97
29.74
42.53

2006
60.35
44.51
49.22
54.57
56.98
38.11
44.88
45.84
51.96
47.99
39.29
37.85
44.14
47.92
45.44
34.67
46.42
52.36
58.29
40.78
41.21
40.12
41.56
37.21
40.33
44.16
38.83
27.85
45.90

2007
63.19
55.15
49.76
63.03
64.21
47.04
44.74
48.43
56.59
44.66
42.95
41.95
48.63
50.11
55.21
45.43
43.97
64.87
47.24
42.05
41.68
41.35
42.81
38.15
41.73
45.54
31.23
28.48
50.01

2008
87.16
67.23
54.03
82.28
80.53
56.74
52.27
59.33
72.12
55.02
49.37
48.70
63.03
64.56
71.74
52.34
56.24
66.14
55.95
45.99
56.78
46.69
55.01
50.71
52.12
55.47
44.78
30.28
60.14

2009
67.79
57.06
52.03
49.91
49.14
48.32
46.64
43.95
43.57
41.06
40.83
40.36
40.27
38.89
38.81
36.84
34.21
33.57
33.44
31.82
31.36
27.39
26.17
25.94
25.19
25.01
22.21
21.99
39.03

Weighted Average
3-Year
5-Year
70.58
63.06
59.98
56.30
52.11
50.50
65.18
59.79
64.28
60.10
50.54
45.46
47.96
46.15
51.05
49.25
57.31
53.86
46.64
50.08
44.49
42.14
43.52
41.68
50.32
48.22
51.20
48.88
55.81
51.28
44.82
39.83
44.40
43.65
54.34
52.51
45.15
46.88
38.26
38.62
42.89
42.73
38.51
38.72
41.40
41.08
37.98
38.33
39.74
39.59
39.09
40.62
32.00
34.22
26.62
27.41
49.52
47.47

Page A80

Oil & Gas Global Cost Study


Petrohawk continued to report the lowest operating costs among the Seniors peer group in
2009, at $2.67/boe. The next best performance came from Equitable Resources, Ultra and
Southwestern, with costs of $3.51/boe, $5.09/boe and $5.18/boe, respectively, representing
the only companies below the $6.00/boe level. Based on three-year averages, Petrohawk, Equitable, Southwestern and Ultra are the lowest cost producers in the group. The highest-cost
producers on this basis include Canadian Oil Sands, Plains Exploration and Talisman.

Table 25: Production Costs Senior Producers ($/boe)

Petrohawk
Equitable Resources
Ultra Petroleum
Southwestern
Range Resources
Chesapeake
EnCana
Forest
Cabot
Devon
Noble
Newfield
Quicksilver
EOG
Apache
CNX Gas
Crescent Point
XTO Energy
Pioneer
Nexen*
Anadarko
ARC Energy
Occidental
Plains Exploration
Talisman
Canadian Natural*
Penn West
Canadian Oil Sands
Weighted Group Avg.

HK
EQT
UPL
SWN
RRC
CHK
ECA
FST
COG
DVN
NBL
NFX
KWK

EOG
APA
CXG
CPG
XTO
PXD
NXY
APC
AET.UN
OXY
PXP
TLM
CNQ
PWT.UN
COS.UN

1999
1.01
2.16
8.04
2.56
3.87
2.68
na
3.35
3.53
4.39
3.53
2.84
5.35
2.70
2.56
na
na
4.95
3.12
3.57
3.97
3.56
2.91
na
4.27
2.64
3.05
10.76
3.46

2000
4.27
2.83
4.54
3.33
4.39
3.35
2.58
6.43
4.19
5.00
4.11
3.51
6.66
3.38
2.68
na
na
2.44
4.35
4.23
5.17
4.04
4.67
6.89
4.43
3.75
3.68
15.85
4.18

2001
6.51
2.89
4.43
3.56
4.68
4.03
2.76
6.50
4.32
5.48
4.36
4.32
7.99
3.91
3.24
na
na
5.73
5.04
4.53
4.73
4.28
5.95
7.27
4.91
5.37
4.11
12.27
4.74

2002
6.61
2.32
3.93
3.82
4.43
4.24
3.82
6.61
4.20
4.72
3.48
4.20
6.46
3.66
4.00
na
na
5.16
4.82
5.36
3.81
4.96
5.65
8.40
5.87
5.97
4.61
12.21
4.74

2003
7.23
3.06
5.24
3.64
5.10
4.82
4.69
6.20
5.21
5.63
4.82
4.27
7.79
4.20
5.00
7.01
5.77
5.82
4.95
5.27
4.40
6.83
6.13
8.52
7.12
7.44
5.63
15.72
5.39

2004
9.55
3.57
6.16
3.93
5.59
5.11
5.16
8.29
5.94
6.13
5.27
4.78
8.84
5.17
5.77
7.68
6.97
6.88
4.60
6.96
4.92
7.03
7.24
9.75
8.12
7.97
7.65
15.25
6.14

2005
6.91
4.68
7.28
5.01
6.75
6.72
6.69
9.51
7.36
7.44
5.99
6.68
10.07
6.34
6.88
8.52
9.55
8.93
6.64
8.31
8.53
7.78
9.31
12.11
9.51
9.32
9.86
22.83
7.82

2006
4.97
4.67
7.21
5.68
7.69
6.91
7.47
10.68
7.88
8.55
6.71
8.33
10.85
6.96
8.02
9.39
11.53
9.72
8.73
11.09
10.47
9.70
11.48
13.97
12.03
10.93
12.00
25.30
9.57

2007
3.73
4.50
6.67
5.16
7.71
7.19
7.86
9.36
8.15
9.64
6.92
9.66
11.77
7.89
8.90
10.57
11.87
10.29
11.51
10.78
13.72
11.25
12.94
17.92
15.59
12.26
12.92
24.12
10.68

2008
3.12
5.22
8.02
5.99
8.40
8.35
8.85
8.53
8.87
11.52
8.21
10.77
9.51
9.28
10.56
11.87
11.89
12.26
13.32
11.91
16.39
12.71
14.82
18.70
16.95
14.79
14.22
35.32
12.28

2009
2.67
3.51
5.09
5.18
6.26
6.51
6.74
6.92
7.06
7.17
7.31
7.55
7.68
7.77
8.48
9.59
10.27
10.34
10.58
11.18
11.33
11.75
12.25
13.93
15.09
15.27
16.21
37.43
10.02

Weighted Average
3-Year
5-Year
3.09
3.60
4.36
4.48
6.47
6.68
5.44
5.43
7.39
7.35
7.34
7.18
7.84
7.53
8.21
8.84
7.99
7.85
9.46
8.89
7.49
7.11
9.29
9.29
9.37
9.68
8.32
7.76
9.28
8.63
10.60
10.09
11.21
11.13
10.97
10.50
11.80
9.80
11.30
10.72
13.74
12.27
11.90
10.72
13.32
12.19
16.82
15.50
15.87
13.75
14.09
12.56
14.60
13.56
28.29
25.03
10.98
10.09

Source: BMO Capital Markets, Company Reports


Note: *Including Oil Sands Mining

The top performers from a net earnings perspective are dominated by companies that employ aggressive gas hedging, with Quicksilver, XTO and Encana
reporting net earnings of $16.27/boe, $14.60/boe and $14.13/boe, respectively.
Focusing on longer-term profits, Canadian Oil Sands, Occidental and ARC Energy stand out as having the highest per-barrel netbacks over the past three years.

See pages G1 to G2 for analyst coverage.

Oil & Gas Global Cost Study

Page A81

Table 26: Net Earnings Senior Producers ($/boe)

Quicksilver
XTO Energy
EnCana
Canadian Oil Sands
Occidental
CNX Gas
Canadian Natural*
Crescent Point
Southwestern
Cabot
Chesapeake
ARC Energy
Apache
Nexen*
Plains Exploration
Penn West
Ultra Petroleum
Equitable Resources
Noble
Range
Devon
Forest
Newfield
EOG
Pioneer
Petrohawk
Talisman
Anadarko
Weighted Group Avg.

KWK
XTO
ECA
COS.UN
OXY
CXG
CNQ
CPG
SWN
COG
CHK
AET.UN
APA
NXY
PXP
PWT.UN
UPL
EQT
NBL
RRC
DVN
FST
NFX
EOG
PXD
HK
TLM
APC

1999
2.92
2.98
na
7.13
5.41
na
3.34
na
2.96
1.27
3.51
2.97
3.94
1.50
na
2.82
12.31
4.31
1.46
(0.92)
(0.32)
3.72
2.80
0.96
2.03
(12.45)
1.60
3.12
2.60

2000
5.55
8.73
8.42
9.71
11.80
na
7.10
na
5.39
3.91
8.08
9.10
8.90
7.02
5.25
6.26
14.57
6.44
5.74
3.96
7.07
7.81
7.14
7.07
5.65
11.77
5.52
5.48
7.51

2001
4.43
10.93
8.87
7.11
10.60
na
4.42
na
7.84
4.69
10.09
6.88
6.86
4.61
8.16
5.82
11.50
10.34
4.21
5.25
1.61
6.71
5.24
6.39
4.65
(10.96)
5.06
0.02
5.44

2002
4.29
6.55
4.73
8.39
7.77
na
3.48
na
4.57
2.25
6.07
3.37
5.49
5.10
5.26
3.46
5.92
10.44
0.80
2.82
2.19
3.42
4.88
3.13
3.33
(8.28)
3.51
5.58
4.11

2003
5.72
7.20
8.65
8.44
10.35
6.57
5.67
3.86
9.39
2.34
9.87
12.72
8.79
6.32
7.33
9.98
11.41
10.77
2.43
3.20
8.13
6.33
8.21
8.21
5.69
9.75
4.88
8.62
7.95

2004
6.79
9.70
6.90
14.39
13.69
9.76
7.13
10.02
13.02
7.41
11.07
10.95
11.06
9.62
8.06
6.38
14.29
12.02
7.76
3.54
9.75
6.58
10.57
9.72
6.40
9.46
6.20
10.98
9.30

2005
13.18
16.12
13.56
21.93
19.45
12.30
10.31
14.77
16.40
11.87
15.07
17.74
16.33
10.68
12.32
16.25
19.93
13.99
14.56
7.63
13.87
9.38
15.67
15.54
9.05
(3.38)
12.40
17.19
14.43

2006
13.69
16.90
13.40
19.08
19.95
17.30
9.24
7.98
14.50
13.33
22.93
21.46
13.68
8.66
13.32
16.43
16.94
11.93
12.76
11.77
14.08
10.24
12.14
11.67
8.36
8.76
11.94
17.72
14.47

2007
14.95
17.52
14.79
22.15
21.30
16.07
13.02
7.72
13.67
12.32
15.27
26.40
15.29
14.61
14.90
8.99
11.43
12.06
15.08
12.48
14.46
11.28
6.66
10.33
8.99
2.73
9.05
21.18
14.92

2008
19.33
16.81
18.17
31.79
30.27
20.92
17.90
13.55
17.12
13.49
20.47
22.69
20.75
23.63
21.34
8.86
19.42
11.95
17.51
16.68
19.10
17.34
15.49
17.73
8.11
16.16
14.21
17.17
19.55

2009
16.27
14.60
14.13
13.70
13.52
13.33
13.09
11.88
11.59
11.38
11.16
10.55
10.22
7.96
7.26
7.18
6.75
6.66
5.98
5.97
5.72
5.42
4.16
1.92
1.85
1.04
0.74
(0.50)
8.30

Weighted Average
3-Year
5-Year
16.92
15.96
16.09
16.22
15.75
14.84
24.56
22.28
21.52
20.81
16.56
16.04
14.58
12.71
11.39
11.19
13.75
14.04
12.37
12.46
15.54
16.70
19.92
19.85
15.27
15.15
15.45
13.50
14.69
14.04
8.29
10.62
12.14
13.80
9.99
11.07
12.86
13.10
11.42
10.93
13.12
13.45
11.43
10.83
8.58
8.58
9.79
11.05
6.23
7.41
5.62
5.59
7.96
9.71
12.32
14.15
14.13
14.25

Source: BMO Capital Markets, Company Reports


Note: *Including Oil Sands Mining

In general, unconventional resource players continued to deliver the best reserve replacement
cost performances among the Senior Producers. Excluding Pioneer and Canadian Natural
Resources, which both reported large negative revisions, the best one-year performance
among the group came from CNX Gas with costs of $8.09/boe, followed by Equitable
and Southwestern with costs of $4.07/boe and $5.16/boe, respectively. Excluding revisions, Equitable reported the best performance, followed by CNX and Quicksilver, with
one-year reserve replacement costs of $3.74/boe, $4.56/boe and $5.00/boe, respectively.

See pages G1 to G2 for analyst coverage.

Page A82

$50.00
$40.00
$30.00
$20.00
Producer Average

$10.00
$0.00
($18.16)

($10.00)

($33.80)

NBL
NXY
CPG
PXP
ECA
APA
TLM
APC
PWT
COG
FST
CHK
AET
XTO
COS
NFX
OXY
UPL
EOG
HK
KWK
RRC
DVN
SWN
EQT
CXG
CNQ
PXD

Chart 134: One-Year


Proved F&D Costs
Senior Producers ($/boe)

Oil & Gas Global Cost Study

Source: BMO Capital Markets, Company Reports


Note: Reserve replacement costs calculated after royalties (net); *Including Oil Sands Mining - We use
DD&A/bbl as a proxy for oil sands F&D costs given the large timing difference between capital spending
and additions. Blended with Conventional F&D results to calculate an adjusted F&D cost and Breakeven
for the company

See pages G1 to G2 for analyst coverage.

Oil & Gas Global Cost Study

Page A83

Chart 135: Worldwide Upstream Net Revenue ($/boe)

Chart 136: Worldwide Production Costs ($/boe)

$80.00

$80.00

$70.00

$70.00

$60.00

$60.00

$50.00

$50.00

$40.00

$40.00

$30.00

$30.00

$20.00

$20.00

$10.00

$10.00

$0.00

Chart 137: Worldwide Upstream Operating Earnings ($/boe)

ET
A
P
N C
X
Y
*
PX
D
X
TO
CP
G
CX
G
A
PA
EO
G
K
W
K
N
FX
N
BL
D
V
N
CO
G
FS
T
EC
A
CH
K
RR
C
SW
N
U
PL
EQ
T
H
K

PX

CO
S
PW
T
CN
Q
TL
M

EQ
T
U
PL
H
K
FS
T
EO
G
D
V
N
N
BL
N
FX
SW
N
CH
K
A
PC
RR
C
PX
D
PX
P
A
ET
A
PA
K
W
K
EC
A
CX
G
TL
M
PW
T
CO
G
CN
Q
O
X
N Y
X
Y
*
X
TO
CP
G
CO
S

$0.00

Chart 138: Worldwide Upstream Net Earnings ($/boe)

$80.00

$80.00

$70.00

$70.00
$60.00

$60.00

$50.00

$50.00

$40.00

$40.00
$30.00

$30.00

$20.00

$20.00

U
PL
TO
X

A
PA
A
PC
A
ET
CO
S
CP
G
PW
T
CH
K
CN
Q
PX
P
CO
G
CX
G
D
V
N
EC
A
EO
G
EQ
T
FS
T

Chart 139: Worldwide Required WTI Oil Price ($/boe)

Chart 140: 3-Year Avg Required WTI Oil Price


Group Sample ($/boe)

$142.98
$160.00

$90.00

$140.00

$80.00

$120.00

$70.00

$10.00

PX

PX
D
N
BL
CP
G
PX
P
TL
M
N
X
Y
*
CO
S
A
PA
CO
G
EC
A
A
PC
PW
T
CN
Q
FS
T
CH
K
O
X
Y
X
TO
N
FX
K
W
K
EO
G
RR
C
EQ
T
A
ET
U
PL
D
V
N
H
K
CX
G
SW
N

$0.00

PX

$0.00
($20.00)

Op Cost/G&A/Other

F&D/Exploration

Return

Taxes

$20.00

$20.00

ET
EO
G
EQ
T
CX
G
U
PL
SW
N

$40.00

$30.00

$60.00

$40.00

$80.00

$50.00

TL
M
CP
G
PW
T
N
BL
CH
K
CO
G
A
PA
N
FX
N
X
Y
A
PC
X
TO
O
X
Y
FS
T
K
W
K
CO
S
RR
C
D
V
N
EC
A
CN
Q

$100.00

$60.00

$100.00

A
PC
TL
M

-$10.00

H
K
W
K
N
BL
N
FX
N
X
Y
*
O
X
Y
PX
D
RR
C
SW
N
TL
M

$0.00

$0.00

H
K
PX
D
EO
G
N
FX
FS
T
D
V
N
RR
C
N
BL
EQ
T
U
PL
PW
T
PX
N P
X
Y
*
A
PA
A
ET
CH
K
CO
G
SW
N
CP
G
CN
Q
CX
G
O
X
Y
CO
S
EC
A
X
TO
K
W
K

$10.00

$10.00

Quality

Source: BMO Capital Markets, Company Reports


Note: *Including Oil Sands Mining - We use DD&A/bbl as a proxy for oil sands F&D costs given the large timing difference between capital
spending and additions. Blended with Conventional F&D results to calculate an adjusted F&D cost and Breakeven for the company
See pages G1 to G2 for analyst coverage.

Page A84

Oil & Gas Global Cost Study


As would be expected, unconventional players required the lowest WTI equivalent oil
price to break even and earn a 10% return. On a one-year basis, Southwestern, CNX and
Petrohawk reported the lowest breakeven prices, at $21.91/boe, $22.02/boe and $30.98/boe,
respectively. From a longer-term perspective, Southwestern, Ultra and CNX Gas reported
the lowest required WTI-equivalent price on three-year average, at $28.55/boe, $41.40/boe
and $41.78/boe, respectively. At the other end of the table, Pioneer, Noble and Crescent
Point required the highest WTI-equivalent price in 2009, with Plains, Pioneer and Talisman
leading on the three-year metric.

Table 27: Required WTI Oil Price Summary Senior Producers ($/boe)

Southwestern
CNX Gas
Petrohawk
Devon
Ultra Petroleum
ARC Energy
Equitable Resources
Range
EOG
Quicksilver
Newfield
XTO Energy
Occidental
Chesapeake
Forest
Canadian Natural*
Penn West
Anadarko
EnCana
Cabot
Apache
Canadian Oil Sands
Nexen*
Talisman
Plains Exploration
Crescent Point
Noble
Pioneer
Weighted Group Avg.

SWN
CXG
HK
DVN
UPL
AET
EQT
RRC
EOG
KWK
NFX
XTO
OXY
CHK
FST
CNQ
PWT
APC
ECA
COG
APA
COS.UN
NXY
TLM
PXP
CPG
NBL
PXD

1999
16.58
na
36.23
12.49
(0.28)
16.39
7.05
12.98
17.16
18.01
12.08
15.68
13.01
12.15
21.25
14.39
18.71
22.71
na
20.00
17.03
14.44
20.47
25.07
na
na
10.50
13.79
17.35

2000
22.60
na
23.27
21.61
13.83
21.38
18.56
32.32
21.21
22.60
18.95
14.66
15.78
18.44
12.41
24.70
24.37
38.45
26.81
29.76
19.78
24.91
21.56
23.24
35.37
na
22.53
24.02
22.29

2001
18.20
na
51.69
28.18
13.20
24.49
192.00
30.40
25.32
26.71
28.05
20.95
15.77
29.90
22.09
27.89
26.92
28.82
28.14
43.03
19.21
19.85
25.04
22.35
28.23
na
26.86
32.70
25.05

2002
18.50
na
112.10
24.99
15.89
22.73
24.63
21.22
24.06
17.66
23.53
20.16
19.06
21.75
35.99
45.54
30.38
31.54
24.43
24.07
22.01
18.42
25.69
35.50
25.13
na
44.44
30.96
27.78

2003
28.41
40.83
15.16
30.98
21.19
26.01
339.62
27.99
30.44
39.79
22.78
26.07
19.99
29.76
30.95
33.43
41.22
28.72
27.06
33.26
24.16
25.59
46.57
39.56
54.93
33.98
48.07
30.44
29.52

2004
24.30
36.87
39.58
34.13
22.59
39.23
31.65
37.63
38.59
44.59
32.87
32.41
28.81
33.84
36.22
43.23
51.03
34.36
35.19
37.11
29.90
27.76
31.20
36.01
41.08
37.03
29.88
45.10
36.68

2005
36.06
29.62
86.52
38.99
31.62
45.07
30.16
48.59
45.19
51.46
39.87
41.55
45.29
52.34
56.99
42.82
65.17
51.16
37.89
48.98
42.17
34.24
64.10
69.65
80.19
65.95
55.48
67.87
48.76

2006
49.36
28.74
56.96
51.68
38.56
59.29
37.13
64.63
51.06
42.96
54.57
44.01
60.62
74.43
50.54
58.71
74.85
96.08
42.97
49.03
55.72
50.51
106.94
59.71
139.48
61.26
56.35
84.79
63.92

2007
45.69
74.52
61.85
48.88
42.00
54.80
42.59
51.21
50.79
48.29
59.69
49.96
65.59
59.83
60.49
52.62
81.02
43.71
49.46
57.58
53.93
53.51
62.49
88.06
108.95
73.82
53.48
84.02
56.07

2008
31.19
81.45
106.29
59.11
48.14
59.08
63.11
80.84
57.78
69.47
68.81
87.98
86.10
96.72
69.28
54.07
88.98
86.41
54.84
84.46
101.01
68.56
74.99
162.52
133.63
72.95
99.07
169.75
86.48

2009
21.91
22.02
30.98
32.42
34.96
35.21
35.76
36.38
37.52
37.69
38.12
39.23
39.38
43.02
44.51
50.44
51.48
57.03
58.37
58.82
62.43
65.48
65.90
79.32
81.91
95.51
99.73
142.98
47.41

Weighted Average
3-Year
5-Year
28.55
30.68
41.78
36.97
48.99
53.59
54.26
50.60
41.40
39.38
47.54
48.15
44.88
40.70
54.34
55.13
46.86
47.19
59.98
56.23
64.47
59.95
61.16
55.54
60.22
57.57
72.69
68.06
60.05
58.18
50.00
49.76
74.81
74.97
61.78
76.55
50.65
44.63
68.92
61.75
67.45
58.40
58.11
51.45
63.98
68.06
99.40
81.20
141.30
138.61
83.81
76.46
74.05
61.24
116.10
95.05
62.44
60.07

Source: BMO Capital Markets, Company Reports


Note: *Including Oil Sands Mining - We use DD&A/bbl as a proxy for oil sands F&D costs given the large timing difference between capital
spending and additions. Blended with Conventional F&D results to calculate an adjusted F&D cost and Breakeven for the company

See pages G1 to G2 for analyst coverage.

Oil & Gas Global Cost Study

Page A85

North American Intermediate/Junior Producers


Operations for the Canadian Intermediate/Junior producers and U.S. Microcaps are
focused in Canada and the U.S. with a natural gas-weighted production profile. We have
incorporated the Royalty Trust group into the Intermediate/Junior producers section in this
years study, reflecting the trust groups conversion to corporations ahead of the 2011 deadline. As such, this years study includes the historical results of 83 Canadian Intermediate/
Junior producers, which have been consolidated into 41 companies in this years study, as
well as 14 U.S. Microcaps. Despite weaker commodity prices, the estimated breakeven oil
price for the Intermediate/Junior producer group fell in 2009 versus 2008, largely reflecting
lower reserve replacement costs. Lower reserve replacement costs are largely attributable
to the impact of horizontal drilling with multi-stage fracture technology, which has accessed previously untapped reserves on existing and new resource plays. Producers with
operations in Alberta were also helped by royalty incentive programs implemented by
the provincial government to stimulate investment. Alberta royalty incentives included
drilling credits that were netted off capital expenditures by most companies.

Revenue
The Intermediate/Junior Producers groups price realizations generally track North
American benchmark commodity prices, reflecting operations primarily focused in
Canada and the U.S. Worldwide net revenue has increased to $39.45/boe in 2009 from
$13.27/boe in 1999, for a CAGR of 11.5%. Net revenue growth is slightly ahead of the
Senior Producers (10.4%).

Chart 141: Upstream Net Revenue by Region (US$/boe)

Chart 142: Upstream Net Revenue Group Comparison


(US$/boe)
$80.00

$80.00

$70.00

$70.00

$60.00

$60.00

$50.00

$50.00

$40.00

$40.00

$30.00

$30.00
$20.00

$20.00

$10.00

$10.00
$0.00

$0.00

1999

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Integrateds

Worldwide Net Revenue

Source: BMO Capital Markets, Company Reports

2000

2001

2002
Seniors

2003

2004

2005

2006

Junior/Intermediate

2007

2008

2009

Internationals

Source: BMO Capital Markets, Company Reports


Notes: Excludes equity interest results for BP, RD, TOT and XOM

Reflecting lower commodity prices in 2009, net revenue for the Intermediate/Junior
producers fell to $39.45/boe in 2009 from $60.35/boe in 2008.
See pages G1 to G2 for analyst coverage.

Page A86

Oil & Gas Global Cost Study

Chart 143: Upstream Net Revenue vs. West Texas


Intermediate (US$/boe)

Chart 144: WTI vs. AECO

$120.00

$120

$12

$100

$10

$80

$8

$60.00

$60

$6

$40.00

$40

$4

$20.00

$20

$2

$100.00
$80.00

$0.00

$0
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Net Revenue

$0
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

WTI

WTI

Source: BMO Capital Markets, Company Reports

AECO

Source: BMO Capital Markets

Table 28, below, provides the weighted average netback components for the companies
in the Intermediate/Junior producers group.
Table 28: Netback Summary Intermediate/Junior Producers (US$/boe)

North America
Net Revenue
Production Costs
Exploration
DD&A
Other
Pre-tax Earnings
Income Taxes
Net Earnings

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

13.27
3.36
0.22
5.31
1.04
3.34
0.58
2.76

21.03
3.92
0.29
5.97
1.29
9.56
2.07
7.49

21.84
4.69
0.34
9.92
1.77
5.11
-0.17
5.28

18.47
4.54
0.68
8.15
1.71
3.39
0.48
2.92

26.57
6.20
0.33
9.56
3.05
7.44
-0.15
7.59

31.28
7.13
0.48
11.70
3.74
8.22
0.54
7.68

42.71
8.61
0.60
14.31
4.87
14.32
2.32
12.00

45.20
10.12
0.52
18.95
4.45
11.16
0.32
10.84

49.18
11.88
0.65
21.27
6.70
8.68
0.32
8.37

60.35
13.42
0.44
24.16
5.99
16.33
3.33
13.01

39.45
12.15
0.33
22.20
8.02
-3.26
-1.79
-1.48

Weighted Average
3-Year
5-Year
49.72
12.49
0.47
22.56
6.90
7.29
0.64
6.66

47.57
11.33
0.50
20.39
6.04
9.31
0.86
8.45

Source: BMO Capital Markets, Company Reports

Cost Performance
As previously mentioned, reserve replacement costs fell in 2009, reflecting the impact
of horizontal drilling with multi-stage fracture technology, which more than offset the
scale-back in drilling activity. Additionally, producers benefitted from lower service costs
emanating from the downturn that began in the second half of 2008. We expect producers to continue to demonstrate higher efficiencies as completion techniques on horizontal
multi-stage frac wells are further refined, which is expected to lead to further cost reductions and higher productivity. As a partial offset, land sale metrics have risen accordingly
as industry players compete to establish footholds in emerging resource plays, such as the
Cardium. The migration to resource plays has resulted in the consolidation of companies
that are too small or unable to compete. We expect the number of Intermediate-sized
companies to continue to increase through consolidation or merger activity given the
significant capital required to expand and develop resource plays.

See pages G1 to G2 for analyst coverage.

Oil & Gas Global Cost Study

Page A87

Chart 145: Upstream Capital Spending (US$ billion)

Chart 146: Worldwide Proved Reserve Additions (million boe)

$30.0

1,200

$25.0

1,000

$20.0

800

$15.0

600

$10.0

400

$5.0

200

$0.0

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

Proven Reserve Additions

Worldwide Capital Spending

Source: BMO Capital Markets, Company Reports

Source: BMO Capital Markets, Company Reports

Our analysis indicates that one-year reserve replacement costs on a US$ net basis for
the Intermediate/Junior Producers group have increased 10% annually, to $17.98/boe in
2009 from $6.98/boe in 1999 (Chart 147), matching the Senior Producers group over the
same time period. One-year reserve replacement costs were down 40% in 2009 versus
the previous year.

Chart 147: Worldwide Proved Reserve Replacement Costs


(US$/boe)

$35.00

$35.00
29.95

$30.00

$30.00

25.80

$25.00
19.49

$20.00

$25.00
19.99

17.98

17.16
13.94

$15.00
$10.00

Chart 148: Worldwide Proved Reserve Replacement Costs


Group Comparisons (US$/boe)

6.98

$20.00
$15.00
$10.00

8.43
7.10

5.47

$5.00

$5.00

$0.00

$0.00
1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

1999

2009

Integrateds

Worldwide F&D

Source: BMO Capital Markets, Company Reports

2000

2001

2002

Seniors

2003

2004

2005

Intermed/Juniors

2006

2007

2008

2009

Internationals

Source: BMO Capital Markets, Company Reports


Notes: Excludes equity interest results for BP, RD, TOT and XOM

Chart 149 shows three-year average reserve replacement costs for the Intermediate/Junior
producers on a US$ net basis. Three-year average reserve replacement costs have increased
15% annually, to $22.21/boe in 2009 from $7.19/boe in 2001. However, compared to 2008,
three-year average replacement costs are down 10%.

See pages G1 to G2 for analyst coverage.

Page A88

Oil & Gas Global Cost Study

Chart 149: Three-Year


Average Proved Reserve
Replacement Costs (US$/
boe)

$35.00
$30.00
$24.74

$25.00
$19.75

$20.00

$22.21

$21.45

$16.14

$15.00

$13.30
$10.98

$10.00

$7.19

$7.18

2001

2002

$5.00
$0.00
2003

2004

2005

2006

2007

2008

2009

3-Year F&D
Source: BMO Capital Markets, Company Reports
Notes: Reserve replacement costs calculated after royalties (net)

Total proved reserves for the Intermediate/Junior producers group was up, while production was slightly lower in 2009 versus 2008. The reserve life index has averaged 8.7 years
over the past three years.
Chart 150: Worldwide Proved Reserves vs. RLI
4,000

Chart 151: Worldwide Production (Million boe)


400

12.0

3,500

350

10.0

300

8.0

2,500
2,000

6.0

1,500

4.0

250

Years

mmboe (net)

3,000

200
150
100

1,000
2.0

500
0

50
0
1999

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Proven Reserves

2001

2002

2003

2004

2005

2006

2007

2008

2009

Worldwide Juniors

RLI

Source: BMO Capital Markets, Company Reports


Notes: Reserves presented after royalties (net)

2000

Source: BMO Capital Markets, Company Reports

Production costs for the Intermediate/Junior producers group have increased to $12.15/
boe in 2009 from $3.36/boe in 1999, which represents compound annual growth of 14%.
Production costs for the Senior Producers have increased an average of 11% annually
over the same period. On a year-over-year basis, production costs for the Intermediate/
Junior producers group fell 9% from $13.42/boe in 2008.

See pages G1 to G2 for analyst coverage.

Oil & Gas Global Cost Study

Page A89

Chart 152: Production Costs by Region (US$/boe)

Chart 153: Production Costs Group Comparisons (US$/boe)

$16.00

$20.00
$18.00

$14.00

$16.00

$12.00

$14.00

$10.00

$12.00

$8.00

$10.00

$6.00

$8.00
$6.00

$4.00

$4.00

$2.00

$2.00
$0.00

$0.00
1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

1999

2009

2000

Integrateds

North America

Source: BMO Capital Markets, Company Reports

2001

2002

Seniors

2003

2004

2005

Intermed/Juniors

2006

2007

2008

2009

Internationals

Source: BMO Capital Markets, Company Reports


Notes: Excludes equity interest results for BP, RD, TOT and XOM

Chart 154 illustrates the trend in operating earnings (a proxy for cash flow) for the group.
Operating earnings for the group have increased at a compound annual growth rate of
8% since 1999, but were down 53% on a year-over-year basis in 2009.
Chart 154: Upstream Operating Earnings (US$/boe)

Chart 155: Worldwide Operating Earnings vs Reserve


Replacement Cost (US$/boe)

$45.00

$45.00

$40.00

$40.00

$35.00

$35.00

$30.00

$30.00

$25.00

$25.00

$20.00

$20.00

$15.00

$15.00

$10.00

$10.00

$5.00

$5.00
$0.00

$0.00
1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

2009

Operating Earnings

Source: BMO Capital Markets, Company Reports


Notes: Operating earnings calculated as net revenue less production
costs, exploration costs, and Other costs

Operating Earnings

Worldwide F&D

Source: BMO Capital Markets, Company Reports


Notes: Operating earnings calculated as net revenue less production
costs, exploration costs, and Other costs

DD&A and exploration charges for the Intermediate/Junior producers have increased to
$22.54 in 2009 from $5.53/boe in 1999, representing a 15% CAGR. Capital depreciation
charges (DD&A) have generally followed the same trend as reserve replacement costs
since 1999.

See pages G1 to G2 for analyst coverage.

Page A90

Oil & Gas Global Cost Study

Chart 156: Upstream DD&A and Exploration Costs (US$/boe)

Chart 157: Worldwide DD&A vs Reserve Replacement Cost


(US$/boe)

$45.00

$45.00

$40.00

$40.00

$35.00

$35.00

$30.00

$30.00

$25.00

$25.00

$20.00

$20.00

$15.00

$15.00

$10.00

$10.00

$5.00

$5.00
$0.00

$0.00
1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

2009

DD&A/Exploration Cost

Source: BMO Capital Markets, Company Reports

DD&A

Worldwide F&D

Source: BMO Capital Markets, Company Reports

Chart 158 provides upstream income taxes for the Intermediate/Junior producers group.
Per-barrel income taxes were ($1.79)/boe in 2009, reflecting a net loss for the group. We
note that the income tax expenses for Intermediate/Junior producers can vary greatly
from year to year, reflecting the relatively rapid pace of change for companies, which can
result in significant income tax recoveries or charges in a given year. As such, income tax
expenses can have a significant impact on our breakeven analysis.

See pages G1 to G2 for analyst coverage.

Oil & Gas Global Cost Study

Page A91

Chart 158: Worldwide Upstream Income Taxes (US$/boe)

Chart 159: Worldwide Upstream Income Taxes (US$/boe)

$25.00

$25.00

$20.00

$20.00

$15.00

$15.00

$10.00

$10.00

$5.00

$5.00

$0.00

$0.00

-$5.00
1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

-$5.00
1999

2000

2001

Integrateds

Taxes

2002

2003

Seniors

2004

2005

2006

Intermed/Juniors

2007

2008

2009

Internationals

Source: BMO Capital Markets, Company Reports

Source: BMO Capital Markets, Company Reports

Chart 160: Worldwide Effective Upstream Tax Rate (%)

Chart 161: Worldwide Effective Upstream Tax Rate (%)


80.0%

60.0%

70.0%

50.0%

60.0%

40.0%

50.0%
40.0%

30.0%

30.0%

20.0%

20.0%

10.0%

10.0%

0.0%

0.0%

-10.0%

-10.0%

1999 2000 2001 2002

2003 2004 2005

1999

2006 2007 2008 2009

2001

Integrateds

Effective Tax Rate

Source: BMO Capital Markets, Company Reports


Notes: 2009 effective tax rate for Int/Jnr group nm

2000

2002

2003

Seniors

2004

2005

2006

Intermed/Juniors

2007

2008

2009

Internationals

Source: BMO Capital Markets, Company Reports


Notes: Excludes equity interest results for BP, RD, TOT and XOM;
2009 effective tax rate for Int/Jnr group nm

As shown in Chart 162, the Intermediate/Junior producers group reported a net loss of
$1.48/boe in 2009 versus net earnings of $2.76/boe in 1999. The Senior Producers group
reported net earnings increases of 12% annually since 1999.

See pages G1 to G2 for analyst coverage.

Page A92

Oil & Gas Global Cost Study

Chart 162: Upstream Net Earnings (US$/boe)

Chart 163: Upstream Net Earnings Group Comparisons


(US$/boe)
$25.00

$20.00

$20.00

$15.00

$15.00
$10.00

$10.00
$5.00

$5.00

$0.00

$0.00
-$5.00

-$5.00
1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

1999

2009

2000

2001

Integrateds

Net Earnings

Source: BMO Capital Markets, Company Reports

2002

2003

Seniors

2004

2005

2006

Intermed/Juniors

2007

2008

2009

Internationals

Source: BMO Capital Markets, Company Reports


Notes: Excludes equity interest results for BP, RD, TOT and XOM

Breakeven Oil Price


Our analysis suggests that a WTI-equivalent oil price of $55.52/boe is required for the
North American Intermediate/Junior producers to break even in 2009, which includes
the impact of a $3.72/boe quality/royalty differential. The required oil price for the Intermediate/Junior producers group has increased 11.0% annually since 1999, in line with
the Senior Producers increase of 10.6% annually since 1999.
Chart 164: Required WTI Oil Price by Region (US$/boe)

Chart 165: Required WTI Oil Price Group Comparison


(US$/boe)
$100.00

$90.00

$90.00

$80.00

$80.00

$70.00

$70.00

$60.00

$60.00

$50.00

$50.00

$40.00

$40.00

$30.00

$30.00

$20.00

$20.00

$10.00

$10.00

$0.00
1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

$0.00
1999

Worldwide Required WTI Price

Source: BMO Capital Markets, Company Reports

2000

Integrateds

2001

2002
Seniors

2003

2004

2005

Intermed/Juniors

2006

2007

2008

2009

Internationals

Source: BMO Capital Markets, Company Reports


Notes: Excludes equity interest results for BP, RD, TOT and XOM

The required WTI oil price is down 29% from 2008, largely reflecting lower reserve replacement costs in 2009. We note that income tax expenses can also have a significant
impact on the breakeven price due to large recoveries and charges in a given year. Using
three-year average reserve replacement costs, we estimate a required WTI oil price of
$61.48/boe.
See pages G1 to G2 for analyst coverage.

Oil & Gas Global Cost Study

Page A93

Chart 166: Required WTI


Oil Price (US$/bbl)

$90.00
$80.00
$70.00
$60.00
$50.00
$40.00
$30.00
$20.00
$10.00
$0.00
1999

2000

2001

Op Costs

2002

2003

F&D

2004

Return

2005

Taxes

2006

2007

2008

2009

Quality/Royalty

Source: BMO Capital Markets, Company Reports

Table 29 provides the unit data that builds up to the Breakeven Oil Price and Required
WTI Price estimates on a one-year basis for the Intermediate/Junior producers. As previously mentioned, the three-year breakeven oil price for the Intermediate/Junior producers
equates to $61.48/boe, and would be $60.70/boe based on five-year average data.

Table 29: Breakeven Oil Price Analysis Intermediate/Junior Producers (US$/bbl)

Operating Costs
Exploration Expense
G&A/Other
F&D Costs
Return on Capital
Income Taxes
Breakeven Oil Price
Quality/Royalty
Required WTI Price

1999
3.36
0.22
1.04
6.98
4.47
0.93
16.99
2.54
19.53

2000
3.92
0.29
1.29
5.47
3.51
0.97
15.44
6.63
22.07

2001
4.69
0.34
1.77
8.43
5.58
(0.18)
20.64
3.18
23.82

2002
4.54
0.68
1.71
7.10
4.36
0.71
19.10
4.02
23.12

2003
6.20
0.33
3.05
19.49
9.98
(0.19)
38.85
5.27
44.12

2004
7.13
0.48
3.74
13.94
7.56
0.53
33.39
6.43
39.82

2005
8.61
0.60
4.87
17.16
9.45
1.83
42.52
11.09
53.61

2006
10.12
0.52
4.45
25.80
14.18
0.42
55.47
6.35
61.82

2007
11.88
0.65
6.70
19.99
11.33
0.43
50.98
5.37
56.35

2008
13.42
0.44
5.99
29.95
15.21
3.89
68.90
9.27
78.18

2009
12.15
0.33
8.02
17.98
10.00
3.33
51.81
3.71
55.52

Weighted Average
3-Year
5-Year
12.49
11.33
0.47
0.50
6.90
6.04
22.21
22.19
12.09
12.09
1.16
1.24
55.32
53.39
6.16
7.31
61.48
60.70

Source: BMO Capital Markets, Company Reports

Intermediate/Junior Producers Peer Comparison


The relative performance of companies within the Intermediate/Junior producers group
is highlighted in the following section of tables and charts. As highlighted in Table 30,
Energy XXI generated the highest net revenue per barrel, at $61.47/boe, followed by the
Bakken players Legacy, PetroBank, PetroBakken and Kodiak.

See pages G1 to G2 for analyst coverage.

Page A94

Oil & Gas Global Cost Study

Table 30: Upstream Net Revenue Intermediate/Junior Producers (US$/boe)


1999
Energy XXI
EXXI
Legacy
LEG
PetroBank
PBG
PetroBakken
PBN
Kodiak
KOG
Baytex
BTE.UN
NAL Oil & Gas
NAE.UN
Vermillion
VET.UN
Zargon
ZAR.UN
Zapata
ZCO
Mariner
ME
Paramount Energy Trus PMT.UN
Pengrowth
PGF.UN
Fairborne
FEL
West
WTL
Provident
PVE.UN
Bill Barrett
BBG
Warren Resources
WRES
Advantage
AAV
Brigham
BEXP
W&T Offshore
WTI
Freehold Royalty
FRU.UN
Peyto
PEY.UN
Enerplus
ERF.UN
Delphi
DEE
Birchcliff
BIR
Bonavista
BNP.UN
Celtic
CLT
NGAS Resources
NGAS
Galleon
GO
Trilogy
TET
Unit Corp.
UNT
NuVista
NVA
Rock
RE
Paramount Resources POU
Crew
CR
ProspEx
PSX
Compton Petroleum
CMT
Midway
MEL
Orleans
OEX
Iteration
ITX
Vero
VRO
Storm
SEO
Midnight
MOX
Progress
PRQ
Gasco Energy
GSX
Angle
NGL
Penn Virginia
PVA
Comstock
CRK
Anderson
AXL
Ember
EBR
Goodrich Petroleum
GDP
Carrizo
CRZO
Twoco
TWO
Weighted Group Avg.

11.43
14.47
12.95
13.12
13.13
16.26
nm
14.34
13.91
12.71
12.18
12.93
10.73
12.37
14.78
14.75
15.88
14.21
13.27

2000
15.19
23.15
22.45
21.85
20.03
23.95
nm
17.41
22.32
19.74
17.48
23.92
18.17
19.11
23.76
26.86
25.04
24.22
21.03

2001
13.21
22.25
20.09
21.99
25.37
21.78
16.78
nm
10.90
20.24
17.92
20.04
16.98
23.93
23.78
18.07
24.24
26.98
24.53
29.18
21.84

2002
16.24
18.96
18.27
15.31
23.85
14.10
19.97
15.98
14.73
nm
15.08
21.07
21.20
18.52
16.31
23.18
22.46
17.78
14.56
15.66
21.73
20.43
20.80
22.09
22.31
18.47

2003
21.61
20.14
31.25
23.35
25.77
25.48
25.63
27.49
28.55
19.77
24.76
26.25
24.32
28.97
32.08
26.05
30.14
24.83
26.10
25.90
26.91
31.48
28.95
22.48
19.63
28.14
23.51
26.68
25.33
28.45
31.06
32.05
31.30
30.95
26.57

2004
22.22
19.82
35.04
32.89
30.13
32.73
34.21
30.21
32.42
39.14
23.11
32.16
31.61
24.49
35.07
37.03
32.48
33.43
27.85
32.20
29.08
34.88
39.94
31.61
32.67
28.64
33.42
35.38
32.90
29.67
28.81
24.25
32.85
37.26
34.53
40.18
37.24
36.75
36.63
37.07
25.23
31.28

2005
42.51
56.71
32.07
51.33
43.79
41.43
44.87
40.44
38.38
44.48
42.04
55.22
34.83
43.95
43.32
40.50
48.76
49.41
36.49
44.59
38.06
45.89
52.48
39.80
50.11
53.67
48.74
36.18
46.53
40.81
47.69
43.46
48.71
42.02
39.77
47.49
42.94
63.31
45.75
45.55
45.61
59.08
49.34
47.31
45.09
49.77
47.21
48.80
42.06
42.71

2006
55.05
46.22
60.28
38.66
51.73
52.49
43.88
44.86
48.90
43.09
45.47
46.32
62.83
42.33
43.22
49.52
42.31
48.12
48.42
42.77
46.73
42.32
46.66
42.16
40.78
46.08
50.70
44.97
48.20
39.99
36.99
37.64
64.32
39.92
38.70
39.15
44.31
35.83
50.85
41.60
45.20
39.17
40.36
44.95
45.65
36.02
32.17
43.98
42.51
34.70
45.20

2007
57.71
68.99
65.30
42.70
49.23
55.37
48.18
48.00
52.24
43.89
50.82
49.03
67.80
37.05
38.27
57.35
47.39
47.66
52.81
42.27
51.33
46.25
51.57
52.70
44.78
55.77
51.19
47.88
47.44
42.24
38.23
41.07
49.81
44.19
44.49
40.57
46.81
39.64
41.98
42.58
55.06
40.95
31.26
42.93
47.12
40.26
40.56
39.16
43.16
29.21
49.18

2008
67.15
80.40
70.66
56.60
61.70
74.32
56.00
63.83
63.25
46.91
59.26
54.56
101.46
45.95
47.78
72.05
57.07
66.88
74.51
62.22
56.26
58.03
58.03
67.51
54.46
51.65
57.96
68.72
65.06
51.69
49.82
58.47
61.91
52.30
50.05
54.19
54.35
58.34
57.29
57.53
71.85
51.76
51.91
53.50
55.88
59.11
49.45
39.48
53.49
50.73
29.03
60.35

2009
61.47
59.52
56.36
56.30
51.70
51.08
46.21
45.35
45.08
44.88
43.49
43.06
42.94
41.38
40.94
40.07
39.99
39.61
39.38
39.17
38.67
38.41
38.18
37.96
37.86
37.60
37.53
37.45
37.05
36.17
36.06
34.85
34.49
33.67
32.71
32.47
32.30
31.02
30.80
30.13
29.99
28.96
28.67
28.44
27.98
27.95
26.92
26.90
26.68
25.48
22.28
22.23
20.74
19.40
39.45

Weighted Average
3-Year
5-Year
62.90
na
65.80
na
59.97
50.29
52.48
58.54
49.69
52.51
52.81
44.69
51.03
48.10
71.95
41.08
42.17
55.82
48.38
51.12
55.26
47.76
48.63
47.62
48.56
51.88
45.43
46.27
48.27
51.07
49.35
43.08
40.94
44.63
48.64
42.01
43.47
43.04
na
43.70
43.23
41.88
42.03
51.29
34.86
37.49
38.71
41.41
44.21
38.08
30.08
36.95
35.99
26.29
49.72

na
na
63.96
na
59.97
44.67
52.17
55.03
47.14
49.29
51.32
43.28
49.03
46.66
69.22
40.01
42.56
54.23
46.12
50.03
53.03
44.50
47.41
44.84
47.79
50.40
43.45
46.64
49.30
49.92
46.23
42.99
40.39
43.72
50.15
42.37
42.31
41.49
na
44.04
42.52
42.94
42.39
49.14
35.77
39.99
na
43.08
44.89
38.34
30.73
39.05
38.04
29.35
47.57

Source: BMO Capital Markets, Company Reports

On a production cost basis, Baytex, Provident and Energy XXI generated the highest
production costs. Peyto, Freehold Royalty and Carrizo had the lowest production costs
in 2009.

See pages G1 to G2 for analyst coverage.

Oil & Gas Global Cost Study

Page A95

Table 31: Production Cost Intermediate/Junior Producers (US$/boe)


1999
Peyto
Freehold Royalty
Carrizo
Angle
Comstock
Unit Corp.
Bill Barrett
Storm
PetroBakken
Penn Virginia
Twoco
Goodrich Petroleum
Gasco Energy
Ember
NuVista
Anderson
Kodiak
Midnight
ProspEx
Progress
Brigham
West
Enerplus
PetroBank
Vero
Celtic
Fairborne
Galleon
Advantage
Bonavista
NAL Oil & Gas
Paramount Energy Trust
Birchcliff
Delphi
Vermillion
Mariner
Orleans
Compton Petroleum
Zargon
Rock
W&T Offshore
Trilogy
Pengrowth
Crew
NGAS Resources
Legacy
Iteration
Midway
Paramount Resources
Warren Resources
Zapata
Energy XXI
Provident
Baytex
Weighted Group Avg.

PEY.UN
FRU.UN
CRZO
NGL
CRK
UNT
BBG
SEO
PBN
PVA
TWO
GDP
GSX
EBR
NVA
AXL
KOG
MOX
PSX
PRQ
BEXP
WTL
ERF.UN
PBG
VRO
CLT
FEL
GO
AAV
BNP.UN
NAE.UN
PMT.UN
BIR
DEE
VET.UN
ME
OEX
CMT
ZAR.UN
RE
WTI
TET
PGF.UN
CR
NGAS
LEG
ITX
MEL
POU
WRES
ZCO
EXXI
PVE.UN
BTE.UN

1.40
4.23
3.88
3.53
3.44
4.07
3.09
3.42
3.29
3.25
3.14
4.19
4.16
1.00
2.41
nm
4.24
2.86
3.36

2000
1.49
4.46
4.71
4.45
3.60
6.08
3.57
4.13
3.78
4.13
3.58
4.85
4.45
15.13
2.80
nm
3.37
3.47
3.92

2001
1.35
4.60
5.22
5.13
4.18
1.53
3.13
4.74
2.64
4.22
5.25
3.84
4.89
5.63
14.12
3.39
nm
4.46
5.25
4.05
4.69

2002
1.43
4.09
4.90
4.77
4.10
4.42
1.92
10.82
3.44
4.47
8.08
3.46
4.23
4.19
5.51
4.14
5.43
3.34
6.34
12.56
4.05
nm
5.28
5.16
3.98
4.54

2003
1.68
1.93
5.41
6.24
5.40
7.19
5.52
2.22
7.52
3.29
4.31
6.64
6.71
6.43
4.53
5.35
6.19
4.68
7.37
6.00
5.57
5.90
5.81
5.01
5.78
7.65
4.12
11.83
3.84
8.23
17.08
9.16
6.61
6.93
6.20

2004
1.75
2.52
6.05
7.31
6.49
7.69
8.80
5.82
4.28
2.40
10.13
4.65
12.16
5.36
9.43
4.54
8.49
7.48
6.23
8.11
7.64
4.91
6.39
6.85
7.40
10.46
7.26
4.55
6.21
7.16
8.12
6.37
8.14
5.15
16.88
5.40
9.86
18.57
11.96
8.51
7.73
7.13

2005
2.48
1.79
6.52
7.95
7.91
9.89
10.08
6.75
5.54
2.80
7.14
10.84
6.23
13.76
25.26
9.91
5.77
9.68
5.30
9.98
8.27
7.67
9.93
10.42
9.18
8.99
7.76
8.72
9.58
8.88
10.24
12.21
8.56
6.64
8.74
7.26
8.46
12.68
7.13
7.86
10.52
6.06
13.68
8.15
10.70
21.77
15.31
10.96
10.24
8.61

2006
3.05
2.55
8.42
9.57
8.04
8.22
10.51
7.62
5.81
2.27
9.80
10.24
7.41
10.65
11.71
10.51
7.58
10.01
6.66
15.22
9.12
7.55
9.65
12.74
11.37
12.78
10.22
10.78
10.24
11.17
11.14
12.89
10.69
7.88
11.41
10.32
9.66
13.26
7.70
13.26
13.11
7.20
13.99
9.61
15.10
20.65
16.83
11.67
13.60
11.15
10.12

2007
3.64
3.21
8.46
8.48
9.23
8.58
10.85
9.63
6.11
0.80
9.02
10.59
9.47
13.50
12.32
15.00
10.41
11.39
5.31
12.22
10.68
8.51
9.62
14.54
11.45
12.50
13.15
12.08
10.73
12.64
13.01
14.87
12.85
10.44
16.40
11.46
12.37
14.05
12.15
15.85
14.97
10.07
13.91
12.11
18.59
22.17
18.66
12.27
16.84
13.61
11.88

2008
3.92
3.56
8.87
7.49
8.68
9.68
9.90
10.94
10.52
6.23
11.92
12.54
10.52
10.76
12.99
36.31
15.04
10.05
13.32
9.28
14.29
11.57
12.87
10.89
13.08
13.13
17.21
15.72
13.28
12.98
13.87
16.39
16.48
14.47
13.42
15.21
13.57
13.37
16.10
15.60
16.90
17.02
13.02
18.96
14.82
20.11
20.72
23.12
15.82
12.98
16.97
13.42

2009
3.28
3.75
5.49
5.96
6.34
7.43
7.78
8.04
8.39
8.50
8.73
8.85
9.31
9.42
9.87
9.97
10.12
10.17
10.78
10.82
11.00
11.13
11.13
11.15
11.45
11.64
11.80
12.27
12.32
12.33
12.36
12.46
12.83
12.95
13.24
13.39
13.53
13.66
13.72
13.83
13.87
13.97
14.72
15.06
15.83
15.83
16.06
16.24
16.36
16.93
17.41
18.08
18.90
22.74
12.15

Weighted Average
3-Year
5-Year
3.61
3.49
7.31
6.64
7.88
8.78
8.71
9.79
na
9.52
6.92
7.96
10.36
9.92
10.12
11.98
16.41
13.41
10.37
11.42
8.18
12.67
11.15
11.42
10.78
12.77
12.16
14.08
13.82
12.56
12.08
13.01
14.14
14.68
13.53
12.54
14.91
12.77
13.21
14.73
13.72
15.57
15.55
13.12
16.36
na
14.88
na
18.42
19.61
19.82
15.60
15.79
17.93
12.49

3.26
2.96
7.37
na
8.24
8.51
8.78
9.94
na
8.83
6.60
6.55
9.96
9.97
9.35
11.92
15.83
12.29
9.22
11.21
7.31
12.88
10.22
11.08
10.66
12.52
11.47
13.37
12.27
11.49
11.36
11.94
13.36
13.97
12.21
11.34
14.00
11.06
11.70
14.31
11.54
13.38
14.33
11.70
15.64
na
13.88
na
15.44
19.88
18.24
na
14.33
15.21
11.33

Source: BMO Capital Markets, Company Reports

The top five Intermediate/Junior producer groups bottom-line performances consisted


of Peyto, Vermillion, Warren Resources, Freehold Royalty and PetroBank.

See pages G1 to G2 for analyst coverage.

Page A96

Oil & Gas Global Cost Study

Table 32: Net Earnings Intermediate/Junior Producers (US$/boe)


1999
Peyto
PEY.UN
Vermillion
VET.UN
Warren Resources
WRES
Freehold Royalty
FRU.UN
PetroBank
PBG
Energy XXI
EXXI
Baytex
BTE.UN
Bonavista
BNP.UN
PetroBakken
PBN
Brigham
BEXP
Mariner
ME
Bill Barrett
BBG
Pengrowth
PGF.UN
Enerplus
ERF.UN
NGAS Resources
NGAS
Paramount Energy Trust PMT.UN
NAL Oil & Gas
NAE.UN
Zargon
ZAR.UN
Gasco Energy
GSX
NuVista
NVA
Carrizo
CRZO
W&T Offshore
WTI
Storm
SEO
Compton Petroleum
CMT
Angle
NGL
Zapata
ZCO
Comstock
CRK
Delphi
DEE
Celtic
CLT
Trilogy
TET
Fairborne
FEL
Rock
RE
Penn Virginia
PVA
Galleon
GO
Birchcliff
BIR
West
WTL
Progress
PRQ
Unit Corp.
UNT
Crew
CR
Vero
VRO
Advantage
AAV
Iteration
ITX
ProspEx
PSX
Kodiak
KOG
Ember
EBR
Anderson
AXL
Orleans
OEX
Legacy
LEG
Twoco
TWO
Provident
PVE.UN
Midnight
MOX
Goodrich Petroleum
GDP
Midway
MEL
Paramount Resources POU
Weighted Group Avg.

nm
3.46
1.57
2.47
2.14
3.63
2.36
1.85
1.78
2.92
5.46
2.61
2.39
2.18
4.22
3.02
4.50
1.77
2.76

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

nm
11.56
2.82
4.31
6.50
8.41
6.17
(3.27)
8.64
6.34
12.38
4.54
7.21
9.58
8.34
9.03
12.71
5.03
7.49

nm
8.37
(6.66)
8.83
9.72
4.57
7.12
(2.57)
10.00
5.38
11.42
5.32
6.83
8.59
(3.60)
8.49
3.19
(12.04)
12.74
6.60
5.28

nm
8.44
2.39
8.86
7.66
(4.59)
2.40
3.86
(0.48)
1.03
3.91
3.70
(510.18)
7.09
0.56
1.71
1.73
4.78
0.61
4.15
4.44
2.27
0.97
12.45
0.48
2.92

11.89
4.31
(6.37)
13.80
(5.88)
2.39
10.80
16.04
9.49
(1.31)
9.21
8.51
10.60
8.84
11.41
8.23
(56.13)
6.69
11.94
9.01
12.01
6.15
10.62
3.06
5.78
2.81
7.82
10.50
6.27
7.78
4.38
2.19
16.09
0.08
7.59

10.75
(1.55)
(6.44)
15.87
0.31
0.99
12.67
13.56
13.40
(1.00)
7.44
8.72
8.88
(3.15)
9.36
6.81
(47.04)
8.51
14.90
11.01
26.20
6.15
6.80
14.34
2.88
7.98
8.05
9.72
(0.30)
(2.32)
8.31
11.10
10.07
4.36
(0.59)
5.53
4.54
(0.85)
0.73
23.18
2.95
7.68

22.18
16.54
11.53
15.97
10.04
6.15
16.90
19.14
17.15
3.62
15.19
14.65
23.30
7.07
16.11
12.45
(0.13)
12.46
24.38
15.82
23.06
7.61
9.08
20.29
4.54
11.52
12.01
10.34
4.03
13.79
9.09
3.20
8.23
14.28
18.23
17.16
13.46
10.09
3.01
18.06
11.69
2.63
0.90
59.82
11.78
3.18
4.46
28.50
(8.93)
12.00

26.03
14.68
18.25
13.88
12.11
11.62
11.99
16.90
14.69
14.23
7.14
12.36
18.15
14.41
(2.20)
10.02
16.27
(1.35)
9.02
5.25
11.26
7.56
12.17
5.73
6.30
3.99
17.84
17.18
12.08
(1.27)
11.17
4.63
(0.60)
7.62
9.42
12.61
5.87
1.59
6.14
(3.07)
4.75
(33.44)
(12.07)
(2.52)
(29.58)
2.55
7.56
0.06
15.74
19.62
10.84

32.16
14.82
24.95
(0.35)
23.44
13.46
11.06
12.94
16.00
14.18
2.62
12.84
12.25
16.86
(3.60)
8.33
9.31
(4.24)
6.08
10.66
10.16
6.04
12.99
2.00
4.73
(6.59)
3.46
(7.16)
4.09
0.79
9.75
2.04
(6.94)
(23.68)
8.01
12.34
2.93
2.25
(0.78)
(4.61)
(0.90)
(34.88)
0.14
1.30
(7.45)
(1.96)
14.89
(1.85)
6.64
77.95
8.37

29.77
19.85
36.75
34.64
24.37
10.06
20.56
26.13
19.28
16.89
8.32
15.63
28.54
21.82
3.17
22.73
22.88
16.19
11.56
16.97
15.33
16.98
(4.78)
15.88
8.42
14.89
2.70
13.24
20.23
10.20
1.75
12.51
16.17
10.08
6.62
12.34
0.19
(14.03)
12.12
(1.97)
(43.82)
6.12
(90.92)
1.72
(10.87)
(2.65)
1.27
(25.71)
8.50
5.20
(26.71)
13.01

23.54
15.49
10.50
10.21
8.13
6.71
6.17
5.60
4.56
4.12
3.81
3.36
3.17
2.81
1.84
1.54
1.47
0.78
0.51
0.27
0.22
(0.04)
(0.12)
(1.23)
(1.36)
(2.45)
(3.34)
(3.55)
(4.75)
(5.01)
(5.07)
(5.17)
(6.14)
(6.54)
(6.74)
(6.77)
(6.78)
(7.36)
(8.30)
(8.67)
(8.95)
(11.58)
(11.63)
(11.69)
(12.00)
(13.51)
(14.27)
(14.81)
(15.23)
(15.96)
(17.04)
(20.81)
(21.11)
(22.71)
(1.48)

Weighted Average
3-Year
5-Year
28.56
16.76
23.64
14.57
15.28
9.90
12.52
14.71
na
13.57
11.31
4.85
10.65
14.82
12.99
0.42
10.91
10.77
4.59
5.66
8.26
8.72
6.74
3.07
6.28
2.86
5.10
(2.30)
3.02
2.23
2.80
(1.17)
4.83
3.98
(0.82)
(5.97)
(0.56)
1.35
(7.64)
1.17
(3.74)
(23.61)
(1.00)
(35.83)
(6.06)
(8.82)
(8.06)
na
(4.50)
(7.05)
(3.77)
(5.36)
na
14.96
6.66

26.73
16.35
22.19
14.72
14.93
na
11.23
15.56
na
14.87
12.20
5.07
11.67
15.45
14.39
1.12
11.60
12.09
2.99
6.81
9.49
10.26
8.75
6.04
na
4.77
7.19
(0.06)
5.97
7.70
5.79
(0.75)
7.09
4.60
(0.47)
(2.71)
1.03
6.05
(3.58)
1.30
0.09
(19.65)
2.59
(34.78)
(6.39)
(7.07)
(6.31)
na
(1.58)
(1.95)
(1.88)
1.21
na
8.67
8.45

Source: BMO Capital Markets, Company Reports

Top-quartile reserve replacement cost performances among the Intermediate/Junior


producers group in 2009 included Birchcliff, Peyto, Warren Resources, Crew, Kodiak,
Carrizo, PetroBank, Freehold Royalty, Comstock, Zapata, Bill Barrett, Anderson, Midway, Trilogy and Bonavista.

See pages G1 to G2 for analyst coverage.

Oil & Gas Global Cost Study

Page A97

Chart 167: Top-Quartile One-Year Proved F&D Costs Intermediate/Junior Producers (US$/boe)
$25.00

$20.00

Junior Average

$15.00

$10.00

$5.00

BIR

PEY.UN

WRES

CR

KOG

CRZO

PBG

FRU.UN

CRK

ZCO

BBG

AXL

MEL

BNP.UN

TET

$0.00

Source: BMO Capital Markets, Company Reports


Note: Reserve replacement costs calculated after royalties (net)

Chart 168: Top-Quartile Worldwide Net Revenue (US$/boe)

Chart 169: Top-Quartile Worldwide Production Costs (US$/boe)

See pages G1 to G2 for analyst coverage.

N
PE
Y
.U

N
.U
FR
U

L
G

CR
ZO

CR
K

T
N
U

BB
G

SE
O

PB
N

PV

O
TW

P
D
G

G
SX

EB
R

I
X

LE
G

EX

PB
G

PB
N

O
K

BT
E.
U

A
N

R.
U

ET
.U
V

ZA

T.
U
PM

F.
U
PG

$0.00

$10.00

$0.00
E.
U
N

$20.00

$10.00

$30.00

$20.00

ZC
O

$40.00

$30.00

$50.00

$40.00

M
E

$60.00

$50.00

$70.00

$60.00

FE
L

$70.00

Page A98

Oil & Gas Global Cost Study

Chart 170: Top-Quartile Worldwide Operating Earnings


(US$/boe)

Chart 171: Top-Quartile Worldwide Net Earnings (US$/boe)

$70.00

$70.00

$60.00
$60.00

$50.00
$50.00

$40.00

$40.00

$30.00

$30.00

$20.00

$20.00

$10.00
$0.00

$10.00

N
ET
.U

PE
Y
.U

N
.U

RE
S
W

FR
U

PB
G

X
EX

BT
E.
U

BN
P.
U

PB
N

M
E

BE
X

F.
U
PG

ER
F.
U

E.
U
N
A
N

N
T.
U

R.
U
ZA

PM

I
X

TE
T

EX

ET
.U

PB
G

PB
N

LE
G

.U
FR
U

T
N

PE
Y
.U

M
E

TL
W

BB
G

-$10.00

$0.00

Chart 172: Top-Quartile Worldwide Required WTI Oil Price


(US$/boe)

Chart 173: Top-Quartile Worldwide 3-Year Average Breakeven


Oil Price (US$/boe)

$70.00

$70.00

$60.00

$60.00

$50.00

$50.00

$40.00

$40.00

$30.00

$30.00

$20.00

$20.00
$10.00

$10.00

Source: BMO Capital Markets, Company Reports

N
T.
U
PM

PB
G

CR
ZO

CR
K

CL
T

BB
G

BN
P.
U

TE
T

EE
D

PS
X

BI
R

A
A

PE
Y
.U

$0.00
SE
O

N
BN
P.
U

TE
T

PB
G

V
N

CR
ZO

L
X
A

CR

RE
S
W

CR
K

ET
.U
V

EE

.U
FR
U

BI
R

PE
Y
.U

$0.00

Note: Excludes companies with one year of operations

Table 33, below, summarizes the breakeven WTI oil prices implied by the operations of
the Intermediate/Junior Producers, ranked by one-year results in 2009. Peyto, Birchcliff,
Delphi, Freehold Royalty, Vermillion, Comstock, Warren Resources, Crew, Anderson,
Carrizo and NuVista generated implied price requirements of less than $40/boe. On the
other end of the spectrum, Provident, Enerplus, Compton, W&T Offshore and PetroBakken had the highest implied price requirements, at more than $100/boe.

See pages G1 to G2 for analyst coverage.

Oil & Gas Global Cost Study

Page A99

Table 33: Required WTI Oil Price Summary Intermediate/Junior Producers (US$/boe)

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50
51
52
53
54

Peyto
PEY.UN
Birchcliff
BIR
Delphi
DEE
Freehold Royalty
FRU.UN
Vermillion
VET.UN
Comstock
CRK
Warren Resources
WRES
Crew
CR
Anderson
AXL
Carrizo
CRZO
NuVista
NVA
PetroBank
PBG
Trilogy
TET
Bonavista
BNP.UN
Advantage
AAV
Orleans
OEX
NGAS Resources
NGAS
Mariner
ME
Bill Barrett
BBG
Brigham
BEXP
Zapata
ZCO
Ember
EBR
Celtic
CLT
Fairborne
FEL
Vero
VRO
ProspEx
PSX
Midnight
MOX
Angle
NGL
Unit Corp.
UNT
Gasco Energy
GSX
Paramount Energy Trust PMT.UN
Rock
RE
Energy XXI
EXXI
Galleon
GO
Pengrowth
PGF.UN
Baytex
BTE.UN
Progress
PRQ
Midway
MEL
Penn Virginia
PVA
Zargon
ZAR.UN
Iteration
ITX
Kodiak
KOG
NAL Oil & Gas
NAE.UN
Storm
SEO
West
WTL
Twoco
TWO
Legacy
LEG
Goodrich Petroleum
GDP
Paramount Resources POU
PetroBakken
PBN
W&T Offshore
WTI
Compton Petroleum
CMT
Enerplus
ERF.UN
Provident
PVE.UN
Weighted Group Avg.

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

9.78
15.82
11.09
52.78
33.91
16.43
15.29
11.79
18.74
24.04
20.30
16.38
20.41
16.63
36.53
22.89
25.50
19.53

18.14
20.23
16.05
51.72
21.70
36.86
21.73
15.86
35.46
29.03
40.12
23.39
15.17
20.40
42.98
28.33
15.96
22.07

28.80
22.89
28.52
24.36
55.29
13.75
22.44
22.69
25.64
23.85
39.87
63.80
25.95
17.07
21.99
143.18
26.41
22.03
17.06
23.82

13.94
19.65
24.85
20.86
14.64
18.44
47.35
20.26
21.50
26.18
27.60
558.65
19.15
42.59
26.97
25.20
28.19
24.60
41.08
42.45
28.94
27.51
23.23
16.67
23.12

23.35
35.75
22.19
22.62
35.62
64.30
30.31
28.82
27.09
80.32
33.62
77.74
30.25
31.93
39.96
28.55
35.77
33.78
34.02
122.17
168.72
60.37
35.68
27.43
38.00
33.32
35.16
29.35
24.84
31.00
19.56
40.45
35.57
26.55
44.12

35.90
60.02
33.99
42.43
45.37
185.54
31.73
28.99
40.03
48.63
33.08
46.56
58.17
29.31
51.65
73.80
47.75
43.85
112.04
23.13
36.63
100.05
70.56
78.48
71.20
39.18
44.68
56.10
45.97
44.37
60.99
53.97
90.34
41.04
29.96
25.23
45.11
35.30
49.22
37.47
62.82
39.82

41.58
99.00
65.23
72.44
39.22
87.79
41.50
52.78
51.05
43.71
53.44
62.01
50.14
45.72
50.82
44.41
49.18
42.84
74.55
68.00
141.35
173.04
65.33
50.27
55.26
61.20
97.91
44.26
70.43
65.78
78.69
46.36
48.94
40.64
53.96
70.48
51.78
35.53
48.23
49.20
41.57
186.63
62.13
48.51
130.21
49.72
60.98
48.15
56.17
53.61

48.16
86.75
107.27
35.41
53.08
31.53
92.52
80.58
54.75
68.64
61.66
96.47
36.98
54.01
73.92
119.39
52.71
49.78
55.97
90.41
110.86
74.15
59.92
71.68
50.29
66.23
81.85
44.74
77.49
71.55
38.17
79.16
70.52
65.76
52.02
48.55
55.91
55.79
65.21
93.63
72.03
52.60
70.29
64.32
71.25
94.41
63.99
61.38
67.55
67.25
61.82

34.46
63.22
70.62
74.38
65.89
50.53
172.45
57.35
67.59
41.15
58.29
57.51
29.70
62.25
43.72
71.81
145.80
46.85
53.63
149.93
109.00
55.92
71.03
83.09
43.96
55.20
98.38
51.58
54.10
53.46
105.14
71.30
67.37
60.96
64.02
60.94
53.41
67.26
54.17
185.37
62.48
50.97
82.08
64.09
33.05
30.30
116.87
82.74
85.40
58.72
56.35

58.22
50.42
55.80
52.12
83.63
118.99
69.74
109.70
116.16
71.84
69.89
70.72
46.89
56.14
69.45
58.77
92.53
70.90
50.75
177.11
89.66
100.93
45.53
77.55
58.42
77.23
82.28
66.13
71.98
74.03
55.29
110.11
134.05
50.12
67.45
78.59
66.90
64.07
56.48
127.30
230.35
53.35
29.88
53.44
86.85
110.85
190.22
84.64
124.02
71.75
150.34
78.18

19.57
28.28
30.29
31.41
32.90
33.29
35.27
35.49
38.47
38.86
39.93
41.27
41.36
41.39
41.89
42.00
43.95
44.01
44.43
44.79
46.25
47.59
47.90
48.01
48.75
49.81
50.71
51.57
53.20
54.00
54.72
54.80
59.01
59.56
60.12
60.18
61.74
62.56
62.66
63.65
68.47
68.79
69.40
74.30
74.94
81.71
81.95
84.82
87.75
102.96
117.79
120.98
158.12
187.36
55.52

Source: BMO Capital Markets, Company Reports

See pages G1 to G2 for analyst coverage.

Weighted Average
3-Year
5-Year
29.57
47.61
48.80
57.50
54.48
50.80
68.96
68.70
79.86
51.15
55.25
51.18
49.44
50.26
45.97
57.14
91.05
53.91
49.48
93.28
70.86
77.00
50.41
65.73
57.24
47.84
59.16
59.84
59.93
109.86
52.42
86.06
76.87
56.93
61.86
68.31
69.90
na
61.92
62.19
86.35
110.38
61.45
39.58
68.92
88.98
na
62.73
147.02
na
86.15
131.92
115.56
85.06
61.48

46.22
52.06
80.61
63.19
50.43
45.98
143.21
71.41
62.86
51.22
55.94
56.74
42.53
49.84
57.31
72.58
163.78
55.10
51.83
87.55
81.13
79.34
54.24
71.56
49.42
53.25
71.01
na
53.57
179.17
56.54
75.93
na
57.56
62.61
59.21
64.61
na
60.12
59.37
83.46
117.63
58.51
40.86
78.67
73.81
na
63.96
121.23
na
92.43
81.39
77.85
90.73
60.70

Page A100

Oil & Gas Global Cost Study

International Producers
Our International Producers universe contains companies with core operations in South
America, Africa, Europe and the Middle East. We have included the historical results of
12 International Producers. The International group continues to have a comparatively
more oily weighting and operates in a variety of different fiscal and political regimes
throughout the world. At the start of 2009, much of the world was continuing in their
struggles to recover from a major recession. International producers were adversely affected and commensurate with weak crude prices at the beginning of 2009, decreased
capital spending and production. This dynamic was further exacerbated by tight credit
and capital markets.

Revenue
The International Producers group price realizations track both WTI and Brent Crude
oil prices, reflecting operations focused in South America, as well as primary locations
in Africa, Europe and the Middle East. Worldwide net revenue for the Internationals
decreased considerably to $39.60/boe in 2009 from $65.31/boe in 2008. However, since
1999, the groups net revenue has generated a CAGR of 10%.
Chart 174: Upstream Net Revenue by Region (US$/boe)

Chart 175: Upstream Net Revenue Group Comparison


(US$/boe)

$80.00

$80.00

$70.00

$70.00

$60.00

$60.00

$50.00

$50.00

$40.00

$40.00

$30.00

$30.00

$20.00

$20.00

$10.00

$10.00

$0.00
1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

$0.00
1999

Worldwide Net Revenue

Source: BMO Capital Markets, Company Reports

2000

Integrateds

2001

2002
Seniors

2003

2004

2005

2006

Junior/Intermediate

2007

2008

2009

Internationals

Source: BMO Capital Markets, Company Reports


Notes: Excludes equity interest results for BP, RD, TOT and XOM

Chart 176 highlights the continued relationship between the groups net revenue realizations and crude prices. Despite the latter half of 2009 showing a modest recovery, average
crude prices fell to levels below 2006 given the dismal start to the year. This served to
significantly decrease net revenue for the Internationals.

See pages G1 to G2 for analyst coverage.

Oil & Gas Global Cost Study

Page A101

Chart 176: Upstream Net Revenue vs. World Crude Oil Prices (US$/boe)
$120.00
$100.00
$80.00
$60.00
$40.00
$20.00
$0.00
1999

2000

2001

2002

2003

Brent

2004

2005

2006

Net Revenue

2007

2008

2009

WTI

Source: BMO Capital Markets, Company Reports

Table 34 below provides the weighted average netback components for the companies in
the International Producers group.
Table 34: Netback Summary International Producers (US$/boe)

Worldwide
Net Revenue
Production Costs
Exploration
DD&A
Other
Pre-tax Earnings
Income Taxes
Net Earnings

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

15.24
2.19
0.00
0.63
7.53
4.88
3.68
1.21

14.76
1.70
0.00
0.88
0.74
11.45
5.12
6.33

13.94
3.55
0.00
3.81
0.50
6.08
1.79
4.29

15.34
4.02
0.00
4.39
0.56
6.37
2.03
4.35

18.26
5.21
0.00
6.37
0.66
6.02
1.52
4.50

24.62
7.55
0.00
8.34
1.47
7.26
2.22
5.04

43.11
9.70
1.46
9.42
2.96
19.57
9.33
10.24

41.95
7.83
2.01
10.11
3.59
18.42
10.36
8.06

53.18
9.03
1.63
13.96
5.36
23.20
14.96
8.24

65.31
12.67
1.32
13.20
5.07
33.04
19.36
13.68

39.60
12.10
1.80
12.87
5.66
7.18
4.20
2.97

Weighted Average
3-Year
5-Year
54.04
11.22
1.56
13.38
5.33
22.54
13.69
8.85

49.98
10.31
1.64
12.13
4.63
21.27
12.37
8.90

Source: BMO Capital Markets, Company Reports

Cost Performance
Reserve replacement costs for the International group improved on an annual basis in
2009. Improved costs were driven by lower service costs and the continued high grading
of drilling inventories as producers focused on lower-cost basins in the midst of uncertain
macro economic headwinds. Looking ahead, we expect the International Producers to
further explore unconventional plays around the world, with enhanced recovery techniques to help discover additional untapped reserves that could lead to improved reserve
replacement costs.

See pages G1 to G2 for analyst coverage.

Page A102

Oil & Gas Global Cost Study

Chart 177: Upstream Capital Spending (US$ billion)

Chart 178: Worldwide Proved Reserve Additions (million boe)

450

$6.0

400

$5.0

350
300

$4.0

250

$3.0

200
150

$2.0

100

$1.0

50
0

$0.0
1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

1999

2009

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

Proven Reserve Additions

Worldwide Capital Spending

Source: BMO Capital Markets, Company Reports

Source: BMO Capital Markets, Company Reports

In Chart 179, our study implies that one-year reserve replacement costs (on a US$ net
basis) for the International Producers group have increased approximately 41% annually
to $11.18/boe in 2009 from $0.35/boe in 1999. However, the reserves data for the International group in our study for the 1999 to 2000 period is limited to a select few companies
given the relatively early-stage assembly of the International Junior Producers group. As
such, we believe the three-year average reserve replacement cost is a more appropriate
measure of the groups performance over the time frame of this study.
Chart 179: Worldwide Proved Reserve Replacement Costs
(US$/boe)
$25.00

Chart 180: Worldwide Proved Reserve Replacement Costs


Group Comparisons (US$/boe)
$35.00
$30.00

$20.00

$25.00
$15.00

$20.00
$15.00

$10.00

$10.00
$5.00

$5.00
$0.00

$0.00
1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

1999

2009

Worldwide F&D

Source: BMO Capital Markets, Company Reports

2000

2001

Integrateds

2002

2003

Seniors

2004

2005

2006

Intermed/Juniors

2007

2008

2009

Internationals

Source: BMO Capital Markets, Company Reports


Notes: Excludes equity interest results for BP, RD, TOT and XOM

Chart 181 shows three-year average reserve replacement costs for the International Producers on a US$ net basis. Three-year average reserve replacement costs have increased
21% annually to $12.70/boe from $2.77 in 2001, and are down roughly 16% from $15.05/
boe in 2008.
See pages G1 to G2 for analyst coverage.

Oil & Gas Global Cost Study

Page A103

$18.00

Chart 181: Three-Year


Average Proved Reserve
Replacement Costs
(US$/boe)

15.36

$16.00
$14.00

15.05

12.70

12.66

$12.00
$10.00
$8.00

7.55

$6.00
$4.00

5.86

5.35
4.08
2.77

$2.00
$0.00
2001

2002

2003

2004

2005

2006

2007

2008

2009

3-Year F&D

Source: BMO Capital Markets, Company Reports


Notes: Reserve replacement costs calculated after royalties (net)

From 2005 to 2008, total proved reserves for the International Producers group showed a
continued rise, reflecting the increase in the number of International Producers included
in the study. This year, four companies were removed from the study, as they either
merged or became targets and were eventually purchased. Production has also generally
increased throughout the years, but saw a decline this year due to the exclusion of those
that had been acquired.
Chart 182: Worldwide Proved Reserves vs. RLI

Chart 183: Worldwide Production (Million boe)


140

1,200

30.0

120

1,000

25.0

100

800

20.0

80

600

15.0

60

400

10.0

40

200

5.0

20

mmboe (net)

35.0

Years

1,400

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Proven Reserves

1999

Source: BMO Capital Markets, Company Reports


Notes: Reserves presented after royalties (net)

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

Internationals

RLI

Source: BMO Capital Markets, Company Reports

Production costs for the International Producers group have increased to $12.10/boe in
2009 from $2.19/boe in 1999, which represents compound annual growth of 19%. In contrast, production costs for the Senior and Intermediate/Junior Producers have increased
an average of 11% and 14% annually over the same period, respectively.
See pages G1 to G2 for analyst coverage.

Page A104

Oil & Gas Global Cost Study

Chart 184: Production Costs by Region (US$/boe)

Chart 185: Production Costs Group Comparisons (US$/boe)


$20.00

$20.00

$18.00

$18.00

$16.00

$16.00
$14.00

$14.00

$12.00

$12.00

$10.00

$10.00

$8.00

$8.00

$6.00

$6.00

$4.00

$4.00

$2.00

$2.00
$0.00

$0.00

1999

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

2000

2001

Integrateds

Production Costs

Source: BMO Capital Markets, Company Reports

2002

2003

Seniors

2004

2005

2006

Intermed/Juniors

2007

2008

2009

Internationals

Source: BMO Capital Markets, Company Reports


Notes: Excludes equity interest results for BP, RD, TOT and XOM

Chart 186 illustrates the trend in operating earnings (a proxy for cash flow) for the
International Producers group. Operating earnings for the group have increased at a
compound annual growth rate of 14% since 1999, but are down 57% from last year. This
was primarily driven by a drastic decrease in the groups net revenue per barrel to $39.60/
boe from $65.31/boe in 2008.
Chart 186: Upstream Operating Earnings (US$/boe)

Chart 187: Worldwide Operating Earnings vs. Reserve


Replacement Cost (US$/boe)

$50.00

$50.00

$45.00

$45.00

$40.00

$40.00

$35.00

$35.00

$30.00

$30.00

$25.00

$25.00

$20.00

$20.00

$15.00

$15.00

$10.00

$10.00

$5.00

$5.00
$0.00

$0.00
1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

1999

2009

2001

2002

2003

2004

Operating Earnings

Operating Earnings

Source: BMO Capital Markets, Company Reports


Notes: Operating earnings calculated as net revenue less production
costs, exploration costs, and Other costs

2000

2005

2006

2007

2008

2009

Worldwide F&D

Source: BMO Capital Markets, Company Reports


Notes: Operating earnings calculated as net revenue less production
costs, exploration costs, and Other costs

DD&A and exploration charges for the International Producers have increased to $14.67/
boe in 2009 from $0.63/boe in 1999, representing a 35% CAGR. Capital depreciation
charges (DD&A) have generally risen consistently with increasing reserve replacement
costs since 1999. However, after the reserve replacement cost spike in 2006, worldwide
F&D costs for the Internationals have seen continual declines.
See pages G1 to G2 for analyst coverage.

Oil & Gas Global Cost Study

Page A105

Chart 188: Upstream DD&A and Exploration Costs (US$/boe)


$40.00

Chart 189: Worldwide DD&A vs. Reserve Replacement Cost


(US$/boe)
$25.00

$35.00

$20.00

$30.00
$25.00

$15.00

$20.00

$10.00

$15.00
$10.00

$5.00

$5.00

$0.00

$0.00
1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

1999

2009

2000

2001

DD&A/Exploration Cost

2002

2003

DD&A

Source: BMO Capital Markets, Company Reports

2004

2005

2006

2007

2008

2009

Worldwide F&D

Source: BMO Capital Markets, Company Reports

Chart 190 provides upstream income taxes for the International Producers group. Perbarrel income taxes in 2009 were $4.20/boe, representing a 1% CAGR over income taxes of
$3.68/boe in 1999. Income tax expenses for International Producers can exhibit significant
variances from year to year, reflecting the relatively rapid change of pace for companies
and the diversities in fiscal regimes. As such, income tax expenses can have a significant
impact on our breakeven analysis.

Chart 190: Worldwide Upstream Income Taxes (US$/boe)


$25.00

Chart 191: Worldwide Upstream Income Taxes (US$/boe)


$25.00
$20.00

$20.00

$15.00
$15.00

$10.00
$10.00

$5.00

$5.00

$0.00
-$5.00

$0.00
1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

1999

2009

Integrateds

Taxes

Source: BMO Capital Markets, Company Reports

2000

2001

2002
Seniors

2003

2004

2005

2006

Intermed/Juniors

Source: BMO Capital Markets, Company Reports

See pages G1 to G2 for analyst coverage.

2007

2008

Internationals

2009

Page A106

Oil & Gas Global Cost Study

Chart 192: Worldwide Effective Upstream Tax Rate (%)

Chart 193: Worldwide Effective Upstream Tax Rate (%)

80.0%

80.0%

70.0%

70.0%
60.0%

60.0%

50.0%

50.0%

40.0%

40.0%

30.0%

30.0%

20.0%

20.0%

10.0%

10.0%

0.0%
-10.0%

0.0%
1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

1999

2009

2000

2001

2002

Integrateds

Effective Tax Rate

Source: BMO Capital Markets, Company Reports

2003

2004

Seniors

2005

2006

Intermed/Juniors

2007

2008

2009

Internationals

Source: BMO Capital Markets, Company Reports


Notes: Excludes equity interest results for BP, RD, TOT and XOM

As shown in Chart 194, overall net earnings for the International Producers group have
increased to $2.97/boe in 2009 from $1.21/boe in 1999, representing a CAGR of 10%.
Year over year, net earnings for the group were considerably lower as a result of decreasing revenues on the back of weakening crude prices.

Chart 194: Upstream Net Earnings (US$/boe)

Chart 195: Upstream Net Earnings Group Comparisons


(US$/boe)

$20.00

$25.00

$18.00

$20.00

$16.00
$14.00

$15.00

$12.00
$10.00

$10.00

$8.00

$5.00

$6.00
$4.00

$0.00

$2.00

-$5.00

$0.00
1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

1999

2009

Integrateds

Net Earnings

Source: BMO Capital Markets, Company Reports

2000

2001

2002

Seniors

2003

2004

2005

Intermed/Juniors

2006

2007

2008

2009

Internationals

Source: BMO Capital Markets, Company Reports


Notes: Excludes equity interest results for BP, RD, TOT and XOM

Breakeven Oil Price


Our analysis suggests that a WTI equivalent oil price of $54.25/boe is required for the
International Producers to break even in 2009. The required oil price for the International
Producers group has increased 17% annually since 1999.

See pages G1 to G2 for analyst coverage.

Oil & Gas Global Cost Study

Page A107

Chart 196: Required WTI Oil Price by Region (US$/boe)

Chart 197: Required WTI Oil Price Group Comparison (US$/boe)


$100.00

$80.00

$90.00

$70.00

$80.00

$60.00

$70.00

$50.00

$60.00

$40.00

$50.00

$30.00

$40.00
$30.00

$20.00

$20.00

$10.00

$10.00

$0.00
1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

$0.00

2009

1999

2000

2001

Integrateds

Worldwide Required WTI Price

Source: BMO Capital Markets, Company Reports

2002

2003

Seniors

2004

2005

2006

Intermed/Juniors

2007

2008

2009

Internationals

Source: BMO Capital Markets, Company Reports


Notes: Excludes equity interest results for BP, RD, TOT and XOM

The required oil price for International Producers has decreased 18% from 2008 levels,
which reflects improved reserve replacement costs that more than offset operating cost
pressures, including an increase in G&A and other expenses. We note that income tax
expenses can also have a significant impact on the breakeven price due to large recoveries
and charges in a given year. Using three-year average costs, we estimate a required WTI
oil price of $59.21/boe.
Chart 198: Required WTI
Oil Price (US$/boe)

$80.00
$70.00
$60.00
$50.00
$40.00
$30.00
$20.00
$10.00
$0.00
-$10.00
1999

2000

2001
Op Costs

2002
F&D

2003

2004

Return

2005

Taxes

2006

2007

2008

2009

Quality/Royalty

Source: BMO Capital Markets, Company Reports

Table 35 provides the unit data that builds up to the Breakeven Oil Price and Required
WTI Price estimates on a one-year basis for the International Producers. As previously
mentioned, the three-year average breakeven oil price for the International Producers
equates to $59.21/boe, and amounts to $58.69/boe based on five-year average data.
See pages G1 to G2 for analyst coverage.

Page A108

Oil & Gas Global Cost Study

Table 35: Breakeven Oil Price Analysis International Producers (US$/boe)

Operating Costs
Exploration Expense
G&A/Other
F&D Costs
Return on Capital
Income Taxes
Breakeven Oil Price
Quality/Royalty
Required WTI Price

1999
2.19
7.53
0.35
0.75
2.27
13.10
(1.36)
11.74

2000
1.70
0.74
0.32
0.66
0.53
3.95
11.22
15.16

2001
3.55
0.50
5.13
1.92
0.80
11.90
10.93
22.83

2002
4.02
0.56
5.47
2.27
1.06
13.37
7.02
20.40

2003
5.21
0.66
5.38
2.49
0.84
14.58
14.06
28.64

2004
7.55
1.47
6.45
3.86
1.70
21.03
13.88
34.92

2005
9.70
1.46
2.96
10.56
6.46
5.88
37.03
12.23
49.26

2006
7.83
2.01
3.59
20.76
10.00
12.87
57.05
13.66
70.71

2007
9.03
1.63
5.36
14.65
7.67
13.92
52.26
7.67
59.94

2008
12.67
1.32
5.07
12.21
7.13
10.09
48.49
17.74
66.23

2009
12.10
1.80
5.66
11.18
8.38
11.83
50.96
3.29
54.25

Weighted Average
3-Year
5-Year
11.22
10.31
1.56
1.64
5.33
4.63
12.70
13.68
7.84
8.04
12.14
11.19
50.80
49.49
8.41
9.21
59.21
58.69

Source: BMO Capital Markets, Company Reports

International Producers Peer Comparison


The relative performance of companies within the International Producers group is highlighted in the following section of tables and charts. As highlighted in Table 36, Gran Tierra
generated the highest net revenue per barrel, at $62.20/boe, followed by Petrominerales
and Winstar at $57.40/boe and $57.19/boe, respectively.
Table 36: Upstream Net Revenue International Producers (US$/boe)
1999
Gran Tierra
Petrominerales
Winstar
Transglobe
Pan Orient
Pacific Rubiales
Cirrus
Petrolifera
Santos Ltd.
Bankers
Niko
Antrim
Weighted Group Avg.

GTE
PMG
WIX
TGL
POE
PRE
CYR
PDP
Santos
BNK
NKO
AEN

15.23
15.24

2000
14.76
14.76

2001
13.86
19.78
22.75
13.94

2002
14.51
17.12
23.19
15.34

2003
26.89
17.99
19.18
26.21
18.26

2004
35.87
24.09
18.82
30.87
24.62

2005
29.42
48.20
49.81
11.81
46.07
18.01
32.28
26.39
26.61
9.52
43.11

2006
46.08
55.36
51.99
58.28
66.19
59.95
40.81
33.81
27.95
18.97
33.29
41.95

2007
59.16
67.84
66.25
70.87
61.76
55.81
42.40
35.37
37.93
20.47
31.35
53.18

2008
85.69
84.24
77.59
85.84
73.66
74.00
81.35
43.57
44.28
47.21
30.36
28.41
65.31

2009
62.20
57.40
57.19
55.78
52.65
51.58
44.08
39.02
33.05
32.37
27.32
21.93
39.60

Weighted Average
3-Year
5-Year
67.04
66.56
67.65
69.83
63.69
64.38
60.06
42.00
37.50
39.03
25.43
26.84
54.04

65.98
67.09
62.69
64.34
63.31
64.38
58.64
41.41
35.68
36.45
24.02
22.25
49.98

Source: BMO Capital Markets, Company Reports

On a production cost basis, Cirrus, Pacific Rubiales and Bankers generated the highest production costs. Niko, Pan Orient and Gran Tierra had the lowest production costs in 2009.
Table 37: Production Costs International Producers (US$/boe)

Niko
Pan Orient
Gran Tierra
Santos Ltd.
Antrim
Petrolifera
Transglobe
Winstar
Petrominerales
Bankers
Pacific Rubiales
Cirrus
Weighted Group Avg.

NKO
POE
GTE
Santos
AEN
PDP
TGL
WIX
PMG
BNK
PRE
CYR

1999

2000

2001

2002

2003

2004

2.19
2.19

1.70
1.70

1.56
3.56
7.86
3.55

0.88
3.95
4.07
4.02

1.05
5.38
8.89
5.68
5.21

1.03
8.04
6.39
8.01
7.55

2005
2.88
1.97
10.98
8.78
3.00
5.37
8.65
16.13
16.26
26.00
9.70

2006
2.01
30.61
16.16
7.85
8.19
4.55
9.21
13.87
7.49
14.17
36.73
7.83

2007
2.75
7.74
19.20
8.14
9.23
6.64
12.41
15.26
9.67
15.31
34.34
9.03

2008
3.43
4.46
14.44
12.02
10.74
10.14
13.13
16.15
12.74
19.26
34.02
54.11
12.67

2009
3.80
6.55
9.62
9.73
11.92
12.46
14.00
14.56
14.69
16.75
23.55
46.01
12.10

Weighted Average
3-Year
5-Year
3.27
5.65
11.52
9.91
10.71
9.34
13.28
15.37
13.48
17.23
29.24
43.27
11.22

2.90
5.78
11.71
9.24
10.71
8.21
11.76
15.17
13.38
16.70
29.24
40.13
10.31

Source: BMO Capital Markets, Company Reports

The International Producers groups bottom line performance was led by Petrominerales,
Pan Orient and Santos.
See pages G1 to G2 for analyst coverage.

Oil & Gas Global Cost Study

Page A109

Table 38: Net Earnings International Producers (US$/boe)

Petrominerales
Pan Orient
Santos Ltd.
Gran Tierra
Winstar
Bankers
Transglobe
Petrolifera
Niko
Pacific Rubiales
Antrim
Cirrus
Weighted Group Avg.

PMG
POE
Santos
GTE
WIX
BNK
TGL
PDP
NKO
PRE
AEN
CYR

1999

2000

1.21
1.21

6.33
6.33

2001
4.30
8.09
(18.23)
4.29

2002
3.76
7.80
4.59
4.35

2003

2004

2005

2006

2007

2008

2009

4.31
9.05
7.80
(16.19)
4.50

4.70
6.71
7.09
(27.57)
5.04

(32.32)
9.03
(61.64)
(4.73)
(6.86)
16.75
(2.98)
23.31
(3.03)
(118.20)
10.24

20.13
44.05
9.19
(22.23)
3.34
(1.50)
21.72
17.93
(1.75)
3.22
(55.38)
8.06

29.81
12.98
5.99
(15.52)
19.76
(1.60)
10.41
10.64
(6.96)
(17.25)
(48.14)
8.24

35.57
16.92
11.17
17.66
(5.85)
(0.94)
15.74
4.50
(7.27)
9.95
(27.38)
(25.58)
13.68

13.63
8.68
6.37
3.29
2.40
(0.07)
(4.76)
(5.88)
(6.93)
(12.39)
(21.17)
(207.28)
2.97

Weighted Average
3-Year
5-Year
22.08
13.09
7.79
4.74
5.64
(0.75)
6.16
4.35
(7.04)
(2.86)
(21.19)
(84.84)
8.85

22.14
12.10
8.33
3.26
4.13
(1.31)
10.73
7.32
(1.28)
(2.86)
(12.18)
(81.77)
8.90

Source: BMO Capital Markets, Company Reports

As shown in Chart 199, below, the top performers in terms of reserve replacement cost
among the International Producers group in 2009 included Bankers, Pacific Rubiales
and TransGlobe.
Chart 199: One-Year Proved F&D Costs International Producers (US$/boe)
$40.00

$107.96

$35.00
$30.00
$25.00
$20.00
$15.00

International Average

$10.00
$5.00

BNK

PRE

TGL

Santos

GTE

CYR

PMG

POE

$0.00

Source: BMO Capital Markets, Company Reports


Note: Reserve replacement costs calculated after royalties (net), WIX, NKO, AEN, PDP excluded as
costs are not meaningful

Chart 200: Worldwide Net Revenue (US$/boe)

Chart 201: Worldwide Production Costs (US$/boe)

$80.00

$80.00

$70.00

$70.00

$60.00

$60.00

$50.00

$50.00

$40.00

$40.00

$30.00

$30.00

$20.00

$20.00

$10.00

$10.00

$0.00
AEN

NKO

BNK

Santos

PDP

Source: BMO Capital Markets

CYR

PRE

POE

TGL

WIX

PMG

GTE

$0.00
CYR

PRE

BNK

PMG

WIX

Source: BMO Capital Markets


See pages G1 to G2 for analyst coverage.

TGL

PDP

AEN

Santos

GTE

POE

NKO

Page A110

Oil & Gas Global Cost Study

Chart 202: Worldwide Operating Earnings (US$/boe)

Chart 203: Worldwide Net Earnings (US$/boe)


$80.00

$80.00

$60.00

$60.00

$40.00

$40.00

$20.00

$20.00

$0.00

$0.00

-$20.00

-$20.00

(173.62)

-$40.00
CYR

AEN

-$40.00
PRE

NKO

BNK

PDP

Santos

WIX

POE

TGL

PMG

GTE

Chart 204: Worldwide Required WTI Oil Price (US$/boe)

$120.00

$138.15

AEN

PRE

NKO

PDP

TGL

BNK

WIX

GTE

Santos

POE

PMG

Chart 205: Worldwide 3-Year Average Breakeven


Oil Price (US$/boe)

$114.83

$230.00

$100.00

$180.00

$80.00

$130.00

$60.00
$80.00

$40.00
$30.00

$20.00
($20.00)
PDP

$0.00
PDP

AEN

WIX

PRE

BNK

NKO

POE

PMG

GTE

Source: BMO Capital Markets, Company Reports


Note: Excludes CYR as breakeven is not meaningful

Santos

TGL

AEN

WIX

BNK

TGL

Op Cost/G&A/Other

NKO

F&D/Exploration

PMG
Return

POE
Taxes

Santos
Quality

Note: Excludes CYR as breakeven is not meaningful

See pages G1 to G2 for analyst coverage.

GTE

PRE

Oil & Gas Global Cost Study

Page A111

Table 39, below, summarizes the breakeven WTI oil prices implied by the operations of
the International Producers, ranked by one-year results in 2009. Transglobe, Santos and
Gran Tierra required the lowest WTI oil price in 2009 at $30.20/boe, $34.93/boe and $36.67/
boe, respectively. On the other end of the spectrum, Cirrus, Petrolifera and Antrim had
the highest implied price requirements, at more than $110/boe.
Table 39: Required WTI Oil Price Summary International Producers (US$/boe)
1999
Transglobe
Santos Ltd.
Gran Tierra
Petrominerales
Pan Orient
Niko
Bankers
Pacific Rubiales
Winstar
Antrim
Petrolifera
Cirrus
Weighted Group Avg.

TGL
Santos
GTE
PMG
POE
NKO
BNK
PRE
WIX
AEN
PDP
CYR

11.74
11.74

2000
(0.05)
15.16

2001
45.25
9.32
78.03
22.83

2002
21.63
10.98
46.91
20.40

2003
23.01
29.54
119.15
77.22
28.64

2004
31.34
45.20
78.34
77.05
34.92

Source: BMO Capital Markets, Company Reports

See pages G1 to G2 for analyst coverage.

2005
48.13
50.73
143.42
103.60
53.20
76.79
50.58
61.02
51.20
181.61
49.26

2006
52.94
49.03
106.99
60.52
41.51
47.20
171.65
52.79
109.54
39.61
182.74
70.71

2007
79.62
51.37
78.55
52.83
50.71
38.09
97.65
69.61
114.33
68.51
135.64
59.94

2008
170.87
60.84
54.55
83.84
65.99
66.74
103.35
60.54
90.36
288.21
308.35
421.64
66.23

2009
30.20
34.93
36.67
46.11
49.51
52.01
60.23
62.84
93.77
114.83
138.15
737.45
54.25

Weighted Average
3-Year
5-Year
82.33
48.83
46.55
59.47
55.75
60.91
83.71
62.69
105.98
170.37
205.00
509.59
59.21

65.95
48.98
57.54
61.18
76.84
58.98
85.96
62.69
72.44
133.52
103.96
367.66
58.69

Page A112

Oil & Gas Global Cost Study

Methodology and Limitations


The primary intent of the Global Cost Study is to estimate what commodity price levels
are required in order to recover all of the industrys costs including a 10% return on capital
employed. The data used in this study has been taken from the regulatory filings of the
individual companies. All of the large-cap companies (Senior Producers and Integrateds &
Supermajors) as well as the U.S. Micro-cap producers in this study disclose annual financial
results under U.S. Securities and Exchange Commission (SEC) regulations. Our primary
sources of data for these companies are the SEC statements prepared in accordance to
the Financial Accounting Standards Board (FASB) Standard No. 69, Disclosures about
Oil and Gas Producing Activities. These supplemental disclosures outline annual changes
in reserve quantities, costs incurred in exploration and development activities (capital
expenditures) and financial results of operations (effectively an income statement) for
oil and gas producing activities.
For companies that do not file U.S. Securities Exchange Commission (SEC) compliant
information, particularly the Canadian Junior Producers, we have used their reported
segmented financial statements and related reserve disclosures. One limitation of this
approach is that different companies use different reserve evaluators (or none at all) and
employ different accounting standards. As a result, company-to-company comparisons
may not be fully representative or an indicator of future performance. In addition, SEC
reporting regulations prevent companies with oil sands mining operations to report reserves
and financial results along conventional upstream operations. As a result, comparable
supplemental information on the oil sands mining operations is not always available.
We have included historical results from oil sands mining operations for those companies
with material exposure to the operating segment based on the data available from public
sources. This adjustment is applicable to Canadian Natural Resources, Canadian Oil
Sands Trust, Imperial Oil, Nexen and Suncor. Starting in 2009, the SEC has mandated
that all companies with oil sands mining operations report related results of operations,
costs incurred and reserve information. These disclosures will be included in our analysis going forward. Given the lumpy nature of reserve additions and spending for oil
sands mining operations, we smooth the reserve replacement costs we use to calculate
breakeven oil prices by using reported DD&A charges for the oil sands mining segment
as a proxy for the segments annual F&D cost. We believe this is a more reasonable representation of the normalized cost structures of these companies.
Net proved reserves, net production and reported financial information (revenues, costs,
income taxes) are used to calculate per-barrel netback components for each individual
company, as well as the industry average. This reported cost information provides the
basis for our calculation of the breakeven oil price, that is, the oil price required to cover
all costs and provide a 10% return on investment. The calculation of breakeven oil price
incorporates several important components: annual per-barrel cash costs, reserve replacement costs, effective income tax rates and reserve life index. These elements enable

See pages G1 to G2 for analyst coverage.

Oil & Gas Global Cost Study

Page A113

us to determine the required per-barrel return on capital component.4 The sum of these
components is the breakeven oil price. We make a further adjustment to make results
across groups and between companies more comparable by taking into consideration
the quality of the product that each company produces (e.g., light oil, heavy oil, natural
gas). This is accomplished by adjusting each companys results for a corporate quality
differential versus WTI.
It is important to note that single-year reserve replacement costs have a significant impact
on the calculation of breakeven oil price, as they determine not only the level of revenue
needed to cover capital costs per barrel, but also the quantity of reserves that can be
produced to generate cash flow. So high reserve replacement costs in a particular year
can result in a materially higher breakeven oil price calculation, or can lead to results that
are not meaningful. For example, negative reserve replacement costs will not generate a
meaningful reserve assumption, and so will also not generate a positive return on capital.
In these cases, the reserve replacement cost assumptions used to calculate breakeven oil
prices in those years have been adjusted. Non-meaningful reserve replacement costs are
generally replaced with either reserve replacement costs excluding the impact of reserve
revisions during the year, or three- or five-year average reserve replacement cost figures.
While some companies have historically reported detailed financial results for equityaccounted investments, others have disclosed only bottom-line equity interest profit in
a separate note. The SEC has changed reporting requirements for the details of equity
affiliate results, mandating that they be disclosed from 2009 forward. However, historical equity interest results (including related production volumes) for BP, Royal Dutch,
Total and Exxon Mobil have been excluded from company and industry netback and
breakeven calculations prior to 2009 as a result of a lack of historical disclosure. Equity
interest results for these companies, however, are included in both capital expenditures
and reserve quantities used to calculate reserve replacement costs.
It is possible in any given year that the relationship among the worldwide, North America
and International breakeven oil price calculations may not appear to be weighted correctly.
For example, in a given year, both North America and International breakeven prices
could be either smaller or larger than that of the worldwide implied price. This anomaly
in the data occurs because of our choice to use reserve replacement costs in determining
capital requirements under our breakeven simulationwhile worldwide per-barrel cost
figures and tax rates are weighted by production, reserve replacement costs are weighted
by reserve additions and Reserve Life Index (RLI) is weighted by total reserves.
The per-barrel return on capital is calculated through a simulation exercise, where an assumed capital
investment in reserves is blown down (produced) annually according to each companys reported
Reserve Life Index (RLI). This production generates after-tax cash flow in each year, which is based on
reported per-barrel costs, reserve replacement costs, the annual effective tax rate, and a missing factor,
per-barrel return on capital employed. Of course, the annual cash flow calculation must be found to
determine an overall rate of return on the initial capital investment. Our simulation uses a goal-seek
function to determine what level of cash flow is needed to equate the internal rate of return on the projected cash flow stream to 10%. To do this, the simulation is asked to set the calculation of internal rate
of return (IRR) on the projected stream of cash flows to 10% by changing the value of per-barrel return
used to calculate the cash flow. The simulation essentially runs through a number of different scenarios
(iterations) of per-barrel returns in order to achieve this goal.

See pages G1 to G2 for analyst coverage.

Page A114

Oil & Gas Global Cost Study

Peer Groupings
The 2008 Global Cost Study is segmented into four primary peer groupings: the Integrated Oils and Supermajors, the North American Senior Producers, the North American
Intermediate/Junior Producers (including U.S. Microcaps) and the International Producers. Peer groups are further separated by operating region and company origin. Unless
otherwise noted, all reserve and production information is presented net of royalties,
and financial figures are presented in U.S. dollars. Worldwide or Industry averages
include the results of all companies and peer groupings in this study.
The Integrated Oils and Supermajors maintain worldwide upstream operations and
downstream operations located for the most part in Europe and North America. Companies in this grouping include Integrateds Cenovus, Hess, Husky, Imperial, Marathon,
Murphy and Suncor, as well as Supermajors BP Plc, Chevron, CNOOC, ConocoPhillips,
Eni, ExxonMobil, Petrobras, PetroChina, Repsol, Royal Dutch, Sinopec, StatoilHydro
and Total. The North American Senior Producers maintain domestic and international
operations, albeit to a lesser extent than the Integrateds and Supermajors. The North
American Senior Producers include ARC Energy Trust, Anadarko, Apache, Cabot, Canadian Natural, Canadian Oil Sands Trust, Chesapeake, CNX Gas, Crescent Point, Devon,
EnCana, EOG, Equitable Resources, Forest, Newfield, Nexen, Noble Energy, Occidental,
Penn West Energy Trust, Petrohawk, Pioneer, Plains, Quicksilver, Range, Southwestern,
Talisman, Ultra Petroleum and XTO. Our study also includes the historical results of
98 Canadian Juniors Producers (27 existing companies), 17 U.S. Microcaps (14 existing
companies), 19 Intermediate/Junior Royalty Trusts (13 existing) and 25 International
Producers (12 existing).
To facilitate comparisons in this report, all reserves and production information has been
presented after royalties (net) and in U.S. dollars. For those companies that report volumes
before royalties, net production and reserves information has been estimated based on
annual average royalty rates. The financial figures of the Canadian Royalty Trusts and
Canadian Juniors have been converted from Canadian dollars to U.S. dollars at average
annual exchange rates.

See pages G1 to G2 for analyst coverage.

Oil & Gas Global Cost Study

Company Summaries
Integrated Oils
BP PLC (BP - NYSE)....................................................................................................................................................................................... B1
Cenovus Energy (CVE - TSX, NYSE)............................................................................................................................................................B11
Chevron (CVX - NYSE)................................................................................................................................................................................. B19
China Petroleum and Chemical Corporation (Sinopec) (SNP - NYSE)......................................................................................................... B29
CNOOC (CEO - NYSE)................................................................................................................................................................................. B37
ConocoPhillips (COP - NYSE)....................................................................................................................................................................... B46
Eni S.P.A. (E - NYSE).................................................................................................................................................................................... B56
Exxon Mobil (XOM - NYSE)......................................................................................................................................................................... B65
Hess Corp. (HES - NYSE).............................................................................................................................................................................. B75
Husky Energy Inc. (HSE - TSX).................................................................................................................................................................... B85
Imperial Oil (IMO - TSX; IMO - AMEX)...................................................................................................................................................... B94
Marathon Oil Corp. (MRO - NYSE)............................................................................................................................................................ B102
Murphy Oil Corp. (MUR - NYSE)................................................................................................................................................................B112
Petrobras (PBR - NYSE) ............................................................................................................................................................................. B122
PetroChina Company Limited (PTR - NYSE).............................................................................................................................................. B131
Royal Dutch Shell Plc. (RDS - NYSE)......................................................................................................................................................... B139
Statoil A.S.A. (STO - NYSE)....................................................................................................................................................................... B149
Suncor Energy Inc. (SU - TSX, NYSE) ...................................................................................................................................................... B159
Total S.A. (TOT - NYSE)............................................................................................................................................................................. B169
North American Senior Producers
Anadarko Petroleum Corp. (APC - NYSE)...................................................................................................................................................... C1
Apache Corp. (APA - NYSE)..........................................................................................................................................................................C11
ARC Energy Trust (AET.UN - TSX).............................................................................................................................................................. C21
Cabot Oil & Gas (COG - NYSE).................................................................................................................................................................... C28
Canadian Natural Resources (CNQ - TSX, NYSE)........................................................................................................................................ C35
Canadian Oil Sands Trust (COS.UN - TSX).................................................................................................................................................. C45
Chesapeake Energy Corp. (CHK - NYSE)..................................................................................................................................................... C53
CNX Gas Corp. (CXG - NYSE)..................................................................................................................................................................... C60
Crescent Point Energy Corp. (CPG - TSX).................................................................................................................................................... C67
Devon Energy Corp. (DVN - AMEX)............................................................................................................................................................ C74
Encana Corp. (ECA - TSX, NYSE)................................................................................................................................................................ C83
EOG Resources Inc. (EOG - NYSE).............................................................................................................................................................. C92
Equitable Resources Inc. (EQT - NYSE)..................................................................................................................................................... C101
Forest Oil Corp. (FST - NYSE).................................................................................................................................................................... C108
Newfield Exploration Co. (NFX - NYSE).....................................................................................................................................................C115
Nexen Inc. (NXY - TSX, NYSE).................................................................................................................................................................. C125
Noble Energy (NBL - NYSE)....................................................................................................................................................................... C135
Occidental Petroleum Corp. (OXY - NYSE)................................................................................................................................................ C145
Penn West Energy Trust (PWT.UN - TSX)................................................................................................................................................... C155

Oil & Gas Global Cost Study

Petrohawk Energy Corporation (HK - NYSE)............................................................................................................................................. C162


Pioneer Natural Resources (PXD - NYSE).................................................................................................................................................. C169
Plains Exploration & Production Co. (PXP - NYSE)................................................................................................................................... C179
Quicksilver Resources (KWK - NYSE)....................................................................................................................................................... C187
Range Resources (RRC - NYSE)................................................................................................................................................................. C194
Southwestern Energy (SWN - NYSE).......................................................................................................................................................... C201
Talisman Energy Inc. (TLM - TSX, NYSE)................................................................................................................................................. C208
Ultra Petroleum (UPL - AMEX)................................................................................................................................................................... C218
XTO Energy Inc. (XTO - NYSE)................................................................................................................................................................. C227
Canadian Intermediate / Junior Producers
Advantage Oil & Gas (AAV - TSX)................................................................................................................................................................. D1
Anderson Energy Ltd. (AXL - TSX)................................................................................................................................................................ D7
Angle Energy Inc. (NGL - TSX)..................................................................................................................................................................... D13
Baytex Energy Trust (BTE.UN - TSX)........................................................................................................................................................... D19
Birchcliff Energy Ltd. (BIR - TSX)................................................................................................................................................................ D25
Bonavista Energy Trust (BNP.UN - TSX)...................................................................................................................................................... D31
Celtic Exploration Ltd. (CLT - TSX).............................................................................................................................................................. D37
Compton Petroleum (CMT - TSX)................................................................................................................................................................. D43
Crew Energy Inc. (CR - TSX)........................................................................................................................................................................ D49
Delphi Energy Corp. (DEE - TSX)................................................................................................................................................................. D55
Ember Resources (EBR - TSX)...................................................................................................................................................................... D61
Enerplus Resources Fund (ERF.UN - TSX)................................................................................................................................................... D67
Fairborne Energy Ltd. (FEL - TSX)............................................................................................................................................................... D73
Freehold Royalty Trust (FRU.UN - TSX)...................................................................................................................................................... D79
Galleon Energy Inc. (GO - TSX).................................................................................................................................................................... D85
Iteration Energy Ltd. (ITX - TSX).................................................................................................................................................................. D91
Legacy Oil + Gas Inc. (LEG - TSX)............................................................................................................................................................... D97
Midnight Oil Exploration Company (MOX - TSX)..................................................................................................................................... D103
Midway Energy Ltd. (MEL - TSX).............................................................................................................................................................. D109
NAL Oil & Gas Trust (NAE.UN - TSX)...................................................................................................................................................... D115
NuVista Energy Ltd. (NVA - TSX)............................................................................................................................................................... D121
Orleans Energy Ltd. (OEX - TSX)............................................................................................................................................................... D127
Paramount Energy Trust (PMT.UN - TSX).................................................................................................................................................. D133
Paramount Resources Ltd. (POU - TSX)...................................................................................................................................................... D139
Pengrowth Energy Trust (PGF.UN - TSX)................................................................................................................................................... D145
PetroBakken Energy Ltd. (PBN - TSX)........................................................................................................................................................ D151
Petrobank Energy and Resources Ltd. (PBG - TSX).................................................................................................................................... D157
Peyto Energy Trust (PEY.UN - TSX)........................................................................................................................................................... D165
Progress Energy Resources Corp. (PRQ - TSX)........................................................................................................................................... D171
ProspEx Resources Ltd. (PSX - TSX).......................................................................................................................................................... D177
Provident Energy Trust (PVE.UN - TSX).................................................................................................................................................... D183
Rock Energy Inc. (RE - TSX)....................................................................................................................................................................... D189

Oil & Gas Global Cost Study


Storm Exploration (SEO - TSX)................................................................................................................................................................... D195
Trilogy Energy Trust (TET.UN - TSX)......................................................................................................................................................... D201
Twoco Petroleums Ltd. (TWO - TSXV)....................................................................................................................................................... D207
Vermilion Energy Trust (VET.UN - TSX).................................................................................................................................................... D213
Vero Energy (VRO - TSX)............................................................................................................................................................................ D219
West Energy (WTL - TSX)........................................................................................................................................................................... D225
Zapata Energy Corp. (ZCO - TSXV)............................................................................................................................................................ D231
Zargon Oil & Gas (ZAR.UN - TSX)............................................................................................................................................................ D237
International Producers
Antrim Energy (AEN - TSX).............................................................................................................................................................................E1
Bankers (BNK - TSX; BNK - AIM)..................................................................................................................................................................E7
Cirrus Energy (CYR - TSXV).........................................................................................................................................................................E13
Gran Tierra (GTE - TSX, GTE - AMEX)........................................................................................................................................................E19
Niko Resources Ltd. (NKO - TSX).................................................................................................................................................................E25
Pacific Rubiales (PRE - TSX)..........................................................................................................................................................................E31
Pan Orient Energy (POE - TSXV)...................................................................................................................................................................E37
Petrolifera Petroleum Ltd. (PDP - TSX)..........................................................................................................................................................E43
Petrominerales (PMG - TSX)..........................................................................................................................................................................E49
Santos Ltd. (STO - ASX; STOSY - NYSE).....................................................................................................................................................E55
TransGlobe Energy (TGL - TSX)....................................................................................................................................................................E61
Winstar Resources (WIX - TSX).....................................................................................................................................................................E67
U.S. Micro Caps
Bill Barrett Corporation (BBG - NYSE)...........................................................................................................................................................F1
Brigham Exploration Company (BEXP - Nasdaq)............................................................................................................................................F7
Carrizo Oil & Gas Inc. (CRZO - Nasdaq).......................................................................................................................................................F13
Comstock Resources Inc. (CRK - NYSE).......................................................................................................................................................F19
Energy XXI Ltd. (EXXI - Nasdaq)..................................................................................................................................................................F25
Gasco (GSX - AMEX).....................................................................................................................................................................................F31
Goodrich Petroleum Corp. (GDP - NYSE)......................................................................................................................................................F37
Kodiak Oil & Gas Resource Corp (KOG - AMEX)........................................................................................................................................F43
Mariner Energy Inc. (ME - NYSE)..................................................................................................................................................................F49
NGAS Resources Inc. (NGAS - Nasdaq)........................................................................................................................................................F55
Penn Virginia Corporation (PVA - NYSE).......................................................................................................................................................F61
Unit Corp. (UNT - NYSE)...............................................................................................................................................................................F67
W&T Offshore Inc. (WTI - NYSE).................................................................................................................................................................F73
Warren Resources Inc. (WRES - Nasdaq).......................................................................................................................................................F79

Oil & Gas Global Cost Study

Page B1

BP PLC (BP - NYSE)

US$, net

BP reported results from operations of $9.25/boe, roughly in line with the group average, as lower per boe revenue was offset by lower income taxes
and a below-average operating cost structure.

BP once again reported the groups second-lowest reserve replacement cost, at $8.45/boe compared with the group average of $12.08/boe. Excluding
revisions, BPs reserve replacement costs increased to $13.01/boe but appear even more favourable relative to the group average of $21.72/boe.

Supported by the companys low operating cost structure and strong reserve replacement performance, BPs operations imply the groups third-lowest
required WTI breakeven oil price, at $45.44/boe compared with the group average of $52.51/boe. The company is also third on a three-year average
basis with a required WTI breakeven oil price of $48.67/boe.

Notes: All upstream financial figures, as well as reserve and production values are based upon FASB Statement No. 69 disclosure.
Proven Reserves vs RLI

Capital Spending by Region (US$million)

20,000

16.0

18,000

14.0

16,000

$20,000

12.0

14,000
12,000

10.0

10,000

8.0

8,000

6.0

6,000

4.0

4,000

$15,000
Years

mmboe (net)

$25,000

$10,000

$5,000

2.0

2,000
0

0.0
2000

2001

2002

2003

2004

Proven Reserves

2005

2006

2007

2008

$0

2009

2000

2001

2002

North America

RLI

Proven Reserve Additions by Region (million boe)

2003
Europe

2004

2005

Africa

2006

2007

2008

2009

Other International

F&D Costs Including Revisions (US$/boe)


$50.00

3,000

$45.00

2,500

$40.00

2,000

$35.00

1,500

$30.00

1,000

$25.00
$20.00

500

$15.00

$10.00

-500

$5.00
$0.00

-1,000
2000

2001

2002

2003

North America

2004
UK

2005
Europe

2006

2007

2008

$25.00
$50.00

90.54

2001

2002

2003

2004

2005

Exploration and Development

Other International

F&D Costs Including Revisions by Region (US$/boe)


182.10

2000

2009

2006

2007

Acquisitions

2008

2009

All Sources

3-Year Average F&D Costs Including Revisions (US$/boe)

122.74

310.52

$40.00
$50.00
$45.00
$35.00
$40.00
$30.00
$35.00

$20.00
$40.00
$15.00
$30.00

$25.00
$30.00

$10.00
$20.00
$5.00

$25.00
$20.00
$20.00
$15.00
$15.00
$10.00
$10.00

$10.00
$0.00
$0.00
-$5.00

$5.00

-27.03

-$10.00
2000

2001

2002

2003

North America
America
North

2004

2005

2006

-75.67

2007

2008

UK
Europe Africa
Other International
Europe
Other International

Source: BMO Capital Markets, Company Reports


See pages G1 to G2 for analyst coverage.

2009

$0.00
$0.00

2001
2001

2002
2002

2003
2003
BP BP

2004
2004

2005
2005
Integrateds
Integrateds

2006
2006

2007
2007
Industry
Industry

2008
2008

2009
2009

Page B2

Integrated Oils

BP PLC (BP - NYSE)

US$/boe, net

Worldwide
Upstream Net Revenue (US$/boe)

Production Costs (US$/boe)

$80.00

$80.00

$70.00

$70.00

$60.00

$60.00

$50.00

$50.00

$40.00

$40.00

$30.00

$30.00

$20.00

$20.00

$10.00

$10.00
$0.00

$0.00
2000

2001

2002

2003

2004
BP

2005

2006

2007

2008

2000

2009

2001

2002

2003

2004
BP

Integrateds

Upstream Operating Earnings (US$/boe)

2005

2006

2007

2008

2009

2007

2008

2009

2007

2008

2009

Integrateds

Upstream Net Income (US$/boe)

$80.00

$80.00

$70.00

$70.00

$60.00

$60.00

$50.00

$50.00

$40.00

$40.00

$30.00

$30.00

$20.00

$20.00

$10.00

$10.00

$0.00

$0.00
2000

2001

2002

2003

2004
BP

2005

2006

2007

2008

2009

2000

2001

2002

2003

Integrateds

2004
BP

Breakeven Details (US$/boe)

2005

2006

Integrateds

Required WTI Oil Price (US$/boe)

$90.00

$90.00

$80.00

$80.00

$70.00

$70.00

$60.00

$60.00

$50.00

$50.00

$40.00

$40.00

$30.00

$30.00

$20.00

$20.00

$10.00

$10.00

$0.00

$0.00
2000

2001

2002

2003

Op Cost/G&A/Other

2004

2005

2006

2007

2008

F&D/Exploration

Return

Taxes

Quality

Source: BMO Capital Markets, Company Reports

See pages G1 to G2 for analyst coverage.

2009

2000

2001

2002

2003

2004
BP

2005

2006

Integrateds

Oil & Gas Global Cost Study

Page B3

BP PLC (BP - NYSE)

US$/boe, net

North America
Upstream Net Revenue (US$/boe)

Production Costs (US$/boe)

$80.00

$80.00

$70.00

$70.00

$60.00

$60.00

$50.00

$50.00

$40.00

$40.00

$30.00

$30.00

$20.00

$20.00

$10.00

$10.00
$0.00

$0.00
2000

2001

2002

2003

2004
BP

2005

2006

2007

2008

2000

2009

2001

2002

2003

2004

BP

Integrateds

Upstream Operating Earnings (US$/boe)

2005

2006

2007

2008

2009

2006

2007

2008

2009

2007

2008

2009

Integrateds

Upstream Net Income (US$/boe)

$80.00

$80.00

$70.00

$70.00

$60.00

$60.00

$50.00

$50.00

$40.00

$40.00

$30.00

$30.00

$20.00

$20.00

$10.00

$10.00

$0.00

$0.00
2000

2001

2002

2003

2004
BP

2005

2006

2007

2008

2009

2000

2001

2002

2003

Integrateds

2004
BP

Breakeven Details (US$/boe)

2005

Integrateds

Required WTI Oil Price (US$/boe)

$120.00

$120.00

$100.00

$100.00

$80.00

$80.00

$60.00

$60.00

$40.00

$40.00

$20.00

$20.00

$0.00

$0.00
2000

2001

2002

2003

Op Cost/G&A/Other

2004

2005

2006

2007

2008

F&D/Exploration

Return

Taxes

Quality

Source: BMO Capital Markets, Company Reports

See pages G1 to G2 for analyst coverage.

2009

2000

2001

2002

2003

2004
BP

2005

2006

Integrateds

Page B4

Integrated Oils

BP PLC (BP - NYSE)

US$/boe, net

Total International
Upstream Net Revenue (US$/boe)

Production Costs (US$/boe)

$80.00

$80.00

$70.00

$70.00

$60.00

$60.00

$50.00

$50.00

$40.00

$40.00

$30.00

$30.00

$20.00

$20.00

$10.00

$10.00
$0.00

$0.00
2000

2001

2002

2003

2004

BP

2005

2006

2007

2008

2000

2009

2001

2002

2003

2004

BP

Integrateds

Upstream Operating Earnings (US$/boe)

2005

2006

2007

2008

2009

Integrateds

Upstream Net Income (US$/boe)

$80.00

$80.00

$70.00

$70.00

$60.00

$60.00

$50.00

$50.00

$40.00

$40.00

$30.00

$30.00

$20.00

$20.00

$10.00

$10.00

$0.00

$0.00
2000

2001

2002

2003

2004
BP

2005

2006

2007

2008

2009

2000

2001

2002

2003

Integrateds

2004
BP

Breakeven Details (US$/boe)

2005

2006

2007

2008

2009

2007

2008

2009

Integrateds

Required WTI Oil Price (US$/boe)

$80.00

$80.00

$70.00

$70.00

$60.00

$60.00

$50.00

$50.00

$40.00

$40.00

$30.00

$30.00

$20.00

$20.00

$10.00

$10.00

$0.00

$0.00
2000

2001

2002

2003

Op Cost/G&A/Other

2004

2005

2006

2007

2008

F&D/Exploration

Return

Taxes

Quality

Source: BMO Capital Markets, Company Reports

See pages G1 to G2 for analyst coverage.

2009

2000

2001

2002

2003

2004
BP

2005

2006

Integrateds

Oil & Gas Global Cost Study

Page B5

BP PLC (BP - NYSE)

US$/boe, net

International Segments
Upstream Net Revenue (US$/boe)

Production Costs (US$/boe)

$80.00

$80.00

$70.00

$70.00

$60.00

$60.00

$50.00

$50.00

$40.00

$40.00

$30.00

$30.00

$20.00

$20.00

$10.00

$10.00
$0.00

$0.00
2000

2001

2002

2003

2004

North America

Europe

2005

2006

Africa

2007

2008

2000

2009

2001

2002

2003

North America

Other

Upstream Operating Earnings (US$/boe)

2004

2005

Europe

2006

Africa

2007

2008

2009

Other

Upstream Net Income (US$/boe)

$80.00

$80.00

$70.00

$70.00

$60.00

$60.00

$50.00

$50.00

$40.00

$40.00

$30.00

$30.00

$20.00

$20.00

$10.00

$10.00
$0.00

$0.00
2000

2001

2002

2003

North America

2004
Europe

2005

2006

Africa

2007

2008

2000

2009

2001

Other

2002

2003

2004

North America

3-Year Average Breakeven Details by Region (US$/boe)

2005

Europe

2006

Africa

2007

2008

2009

2008

2009

Other

Required WTI Oil Price (US$/boe)

$100.00

$100.00

$90.00

$90.00

$80.00

$80.00

$70.00

$70.00

$60.00

$60.00

$50.00

$50.00

$40.00

$40.00

$30.00

$30.00

$20.00

$20.00

$10.00

$10.00

$0.00

182.55

103.70

$0.00
Europe

Africa

Op Cost/G&A/Other

F&D/Exploration

Other
Return

Source: BMO Capital Markets, Company Reports

See pages G1 to G2 for analyst coverage.

North America
Taxes

Quality

2000

2001

2002

North America

2003

2004

Europe

2005
Africa

2006

2007

Other

Peer Average

Page B6

Integrated Oils

BP PLC (BP - NYSE)


Consolidated Statements
Table 1: Income Statement (US$million)
Upstream Revenue, net of Royalties
Midstream / Downstream Revenue
Other
Total Revenue and Other Income

2000
30,942
128,896
(8,423)
151,415

2001
27,540
137,041
(13,060)
151,521

2002
25,083
138,398
(9,269)
154,212

2003
30,621
170,797
(28,122)
173,296

2004
34,700
202,460
(32,704)
204,456

2005
47,210
248,695
(40,746)
255,159

2006
52,600
213,306
8,410
274,316

2007
54,550
229,815
7,073
291,438

2008
64,941
296,202
5,910
367,053

2009
40,750
198,522
6,866
246,138

Crude Oil and Product Purchases


Production and Transportation Expenses
Marketing Expenses
Exploration / Dry Hole Costs
General and Administrative
Depreciation, Depletion and Amortization
Interest, net
Other
Earnings Before Income Tax
Current Income Taxes
Future Income Taxes
Total Income Taxes
Minority Interest
Earnings From Continuing Operations
Discontinued Operations/Extraordinary Items
Cumulative Change in Accounting Principle
Net Earnings
Preferred Stock Dividends
Net Earnings to Common Shareholders

110,163
7,011
599
7,741
7,449
1,770
(252)
16,934
5,084
(112)
4,972
11,962
11,962
11,962

104,027
13,296
480
9,603
8,683
1,670
770
12,992
5,131
1,244
6,375
6,617
6,617
6,617

101,208
16,275
644
11,590
9,127
1,140
3,039
11,189
3,148
1,169
4,317
6,872
6,872
6,872

115,978
15,853
542
12,270
8,076
1,045
1,801
17,731
4,723
327
5,050
12,681
(63)
12,618
12,618

135,907
19,479
637
12,768
8,529
780
1,390
24,966
6,861
221
7,082
17,884
(622)
17,262
17,262

172,699
24,102
684
13,706
8,771
761
2,515
31,921
8,624
849
9,473
22,448
184
22,632
22,632

187,183
26,914
1,045
14,447
9,128
718
(261)
35,142
11,800
716
12,516
22,626
(25)
22,601
22,601

200,766
29,928
756
15,371
10,579
741
1,686
31,611
10,201
241
10,442
21,169
21,169
21,169

266,982
35,709

163,772
26,954

882
15,412
10,985
956
1,844
34,283
13,383
(766)
12,617
21,666
21,666
21,666

1,116
14,038
12,106
1,302
1,726
25,124
5,745
2,620
8,365
16,759
16,759
16,759

Source: BMO Capital Markets, Company Reports

Table 2: Statement of Cash Flows (US$million)


Net Earnings
Charges and Credits Not Impacting Cash
Other
Cash Flow From Operations
Change in Working Capital / Other
Net Cash From Operating Activities

2000
11,962
6,291
(801)
17,452
(2,848)
14,604

2001
6,617
10,274
(455)
16,436
1,051
17,487

2002
6,872
10,843
(781)
16,934
(991)
15,943

2003
12,681
8,525
(3,188)
18,018
(1,715)
16,303

2004
17,884
9,202
78
27,164
(3,786)
23,378

2005
22,448
8,451
(711)
30,188
(3,467)
26,721

2006
22,626
5,370
(204)
27,792
380
28,172

2007
21,169
11,488
(1,550)
31,107
(6,398)
24,709

2008
21,666
11,543
9
33,218
4,877
38,095

2009
16,759
14,900
(110)
31,549
(3,833)
27,716

Upstream Spending
Midstream / Downstream Spending
Acquisitions, net
Other
Net Cash From Investing Activities

(6,383)
(3,837)
(6,265)
10,159
(6,326)

(8,627)
(3,554)
(1,210)
1,820
(11,571)

(9,266)
(2,832)
(4,324)
5,457
(10,965)

(8,390)
(3,495)
(211)
2,815
(9,281)

(8,696)
(3,590)
(1,503)
2,458
(11,331)

(8,751)
(3,530)
(60)
10,612
(1,729)

(11,504)
(3,621)
6,025
(418)
(9,518)

(13,039)
(4,791)
2,427
566
(14,837)

(17,287)
(5,371)
(556)
447
(22,767)

(16,205)
(4,445)
2,682
(165)
(18,133)

Net Change in Debt


Net Change in Common Stock
Net Change in Preferred Stock
Cash Dividends Paid
Other
Net Cash From Financing Activities
Effect of Exchange Rate on Cash
Net Increase/(Decrease) in Cash
Cash and Equivalents, Beginning of Year
Cash and Equivalents, End of Year

(1,374)
(2,039)
(4,439)
(7,852)
(50)
376
1,455
1,831

128
(1,133)
(4,881)
(5,886)
(53)
(23)
1,831
1,808

736
(573)
(5,304)
(5,141)
90
(73)
1,808
1,735

760
(1,889)
(5,674)
(6,803)
121
340
1,716
2,056

447
(7,208)
(6,074)
(12,835)
91
(697)
2,056
1,359

(3,802)
(11,315)
(8,186)
(23,303)
(88)
1,601
1,359
2,960

4,049
(15,151)
(7,969)
(19,071)
47
(370)
2,960
2,590

6,411
(7,113)
(8,333)
(9,035)
135
972
2,590
3,562

2,825
(2,567)
(10,767)
(10,509)
(184)
4,635
3,562
8,197

1,141
207
(10,899)
(9,551)
110
142
8,197
8,339

Source: BMO Capital Markets, Company Reports

See pages G1 to G2 for analyst coverage.

Oil & Gas Global Cost Study

Page B7

BP PLC (BP - NYSE)


Table 3: Balance Sheet (US$million)
Total Current Assets
Net Property, Plant and Equipment
Other Assets
Total Assets

2000
40,119
75,173
28,646
143,938

2001
31,427
77,410
32,867
141,704

2002
38,821
87,682
28,952
155,455

2003
45,074
88,607
38,810
172,491

2004
61,443
93,092
40,095
194,630

2005
75,290
85,947
45,677
206,914

2006
75,339
90,999
51,263
217,601

2007
80,202
97,989
57,885
236,076

2008
66,384
103,200
58,654
228,238

2009
67,653
108,275
60,040
235,968

37,147
19,995
1,822
10,973
69,937

38,461
15,381
11,702
10,419
75,963

47,017
15,334
13,514
15,118
90,983

49,783
17,499
16,051
18,894
102,227

63,126
16,488
16,701
20,080
116,395

71,497
12,165
16,443
26,044
126,149

75,352
11,086
18,116
27,582
132,136

77,231
15,651
19,215
29,327
141,424

69,793
17,464
16,198
32,674
136,129

59,320
25,518
18,662
30,355
133,855

585
5,653
30,639
36,668
456
73,416
143,938

598
5,629
30,997
28,560
(43)
65,143
141,704

638
5,616
31,276
26,928
14
63,834
155,455

1,125
5,552
31,034
31,997
556
69,139
172,491

1,343
5,403
32,798
37,999
692
76,892
194,630

789
5,185
34,561
50,052
(9,822)
79,976
206,914

841
5,385
-

962
5,237
88,453
93,690
236,076

806
5,176
86,127
91,303
228,238

500
5,179
96,434
101,613
235,968

Total Current Liabilities


Long-term Debt
Deferred Income Taxes
Other Liabilities and Deferred Credits
Total Liabilities
Minority Interests
Common Shares
Contributed Surplus (Paid-in Capital)
Preferred Stock
Retained Earnings
Other / Comprehensive Income (Loss)
Total Shareholders' Equity
Total Liabilities and Shareholders' Equity

79,239
84,624
217,601

Source: BMO Capital Markets, Company Reports

Table 4: Results of Operations from Oil & Gas Producing Activities (US$million)
Cumulative
2000

2001

2002

2003

2004

2005

2006

2007

26,829

25,768

23,104

27,920

31,736

41,814

45,633

47,636

3,392

3,647

3,699

4,846

5,664

7,390

9,162

10,573

599

480

644

542

637

684

1,045

756

4,705

5,617

6,702

6,764

5,157

5,628

6,143

7,288

2008

2009

3-Year

5-Year

64,941

50,835

163,412

250,859

13,326

15,294

39,193

55,745

882

1,176

2,814

4,543

7,883

10,579

25,750

37,521

Worldwide
Net Revenue
Production Costs
Exploration
DD&A
Other

5,151

4,599

4,080

3,580

4,233

5,964

3,198

5,415

9,242

3,563

18,220

27,382

12,982

11,425

7,979

12,188

16,045

22,148

26,085

23,604

33,608

20,223

77,435

125,668

3,703
9,279

3,374
8,051

3,564
4,415

5,003
7,185

5,327
10,718

7,950
14,198

10,479
15,606

8,902
14,702

13,576
20,032

6,706
13,517

29,184
48,251

47,613
78,055

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

3-Year

5-Year

10,997

11,287

9,178

12,599

13,529

16,890

15,953

15,789

23,620

16,072

55,481

88,324

1,748

1,763

1,707

1,891

1,905

2,424

3,198

4,042

5,605

3,470

13,117

18,739

257

256

258

204

361

426

634

252

305

663

1,220

2,280

DD&A

2,406

3,034

3,129

3,404

2,268

2,288

2,083

2,118

2,729

3,857

8,704

13,075

Other

1,624

1,743

1,558

2,023

2,228

2,432

681

2,092

3,748

2,353

8,193

11,306

Pre-tax Earnings

4,962

4,491

2,526

5,077

6,767

9,320

9,357

7,285

11,233

5,729

24,247

42,924

Income Taxes
Net Earnings

1,042
3,920

933
3,558

890
1,636

2,117
2,960

2,103
4,664

3,377
5,943

3,136
6,221

2,560
4,725

3,857
7,376

1,835
3,894

8,252
15,995

14,765
28,159

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

3-Year

5-Year

15,832

14,481

13,926

15,321

18,207

24,924

29,680

31,847

41,321

34,763

107,931

162,535

1,644

1,884

1,992

2,955

3,759

4,966

5,964

6,531

7,721

11,824

26,076

37,006

342

224

386

338

276

258

411

504

577

513

1,594

2,263

DD&A

2,299

2,583

3,573

3,360

2,889

3,340

4,060

5,170

5,154

6,722

17,046

24,446

Other

3,527

2,856

2,522

1,557

2,005

3,532

2,517

3,323

5,494

1,210

10,027

16,076

Pre-tax Earnings

8,020

6,934

5,453

7,111

9,278

12,828

16,728

16,319

22,375

14,494

53,188

82,744

Income Taxes
Net Earnings

2,661
5,359

2,441
4,493

2,674
2,779

2,886
4,225

3,224
6,054

4,573
8,255

7,343
9,385

6,342
9,977

9,719
12,656

4,870
9,624

20,931
32,257

32,847
49,897

Pre-tax Earnings
Income Taxes
Net Earnings

Cumulative
North America
Net Revenue
Production Costs
Exploration

Cumulative
International
Net Revenue
Production Costs
Exploration

Note: Based on FASB 69 disclosure


Source: BMO Capital Markets, Company Reports

See pages G1 to G2 for analyst coverage.

Page B8

Integrated Oils

BP PLC (BP - NYSE)


Note: Worldwide and International Netbacks Calculated excluding equity accounted affiliates

Table 5: Upstream Netbacks (US$/boe)


Weighted Average
2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

3-Year

5-Year

24.85

23.10

20.35

26.14

31.90

43.32

48.20

51.73

70.52

34.77

49.46

48.10

3.14

3.27

3.26

4.54

5.69

7.66

9.68

11.48

14.47

10.46

11.86

10.69

Worldwide
Net Revenue
Production Costs
Exploration

0.55

0.43

0.57

0.51

0.64

0.71

1.10

0.82

0.96

0.80

0.85

0.87

DD&A

4.36

5.04

5.90

6.33

5.18

5.83

6.49

7.91

8.56

7.24

7.79

7.19

Other
Pre-tax Earnings
Income Taxes
Net Earnings

4.77

4.12

3.59

3.35

4.25

6.18

3.38

5.88

10.04

2.44

5.52

5.25

12.03

10.24

7.03

11.41

16.13

22.95

27.55

25.63

36.50

13.83

23.44

24.09

3.43
8.60

3.02
7.22

3.14
3.89

4.68
6.73

5.35
10.77

8.24
14.71

11.07
16.48

9.67
15.97

14.74
21.75

4.59
9.25

8.83
14.61

9.13
14.97

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

24.62

24.05

19.27

28.57

33.84

45.94

47.64

50.04

71.58

41.40

53.67

50.87

3.91

3.76

3.58

4.29

4.76

6.59

9.55

12.81

16.98

8.94

12.69

10.79

Weighted Average
3-Year

5-Year

North America
Net Revenue
Production Costs
Exploration

0.58

0.55

0.54

0.46

0.90

1.16

1.89

0.80

0.92

1.71

1.18

1.31

DD&A

5.39

6.46

6.57

7.72

5.67

6.22

6.22

6.71

8.27

9.94

8.42

7.53

Other
Pre-tax Earnings
Income Taxes
Net Earnings

3.64

3.71

3.27

4.59

5.57

6.61

2.03

6.63

11.36

6.06

7.93

6.51

11.11

9.57

5.30

11.51

16.92

25.35

27.95

23.09

34.04

14.76

23.46

24.72

2.33
8.78

1.99
7.58

1.87
3.43

4.80
6.71

5.26
11.66

9.18
16.16

9.37
18.58

8.11
14.98

11.69
22.35

4.73
10.03

7.98
15.47

8.50
16.22

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

25.02

22.41

21.13

24.44

30.60

41.71

48.50

52.61

69.94

32.37

47.55

46.71

2.60

2.92

3.02

4.71

6.32

8.31

9.75

10.79

13.07

11.01

11.49

10.64

Weighted Average
3-Year

5-Year

International
Net Revenue
Production Costs
Exploration

0.54

0.35

0.59

0.54

0.46

0.43

0.67

0.83

0.98

0.48

0.70

0.65

DD&A

3.63

4.00

5.42

5.36

4.86

5.59

6.63

8.54

8.72

6.26

7.51

7.03

Other
Pre-tax Earnings
Income Taxes
Net Earnings

5.57

4.42

3.83

2.48

3.37

5.91

4.11

5.49

9.30

1.13

4.42

4.62

12.67

10.73

8.27

11.34

15.59

21.47

27.33

26.96

37.87

13.50

23.43

23.78

4.20
8.47

3.78
6.95

4.06
4.22

4.60
6.74

5.42
10.17

7.65
13.82

12.00
15.33

10.48
16.48

16.45
21.42

4.54
8.96

9.22
14.21

9.44
14.34

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

23.11

21.42

20.94

23.43

31.24

43.39

51.14

56.18

74.79

47.85

59.89

53.55

2.54

2.96

3.37

3.72

5.80

8.53

10.86

14.12

15.40

12.00

13.91

11.80

International Segments (US$/boe):


Weighted Average
3-Year

5-Year

Europe
Net Revenue
Production Costs
Exploration

0.23

0.11

0.24

0.21

0.22

0.16

0.10

0.32

0.93

0.50

0.58

0.36

DD&A

4.60

4.49

6.56

7.59

7.44

8.78

9.97

12.32

9.56

11.39

11.12

10.24

Other
Pre-tax Earnings
Income Taxes
Net Earnings

2.16

1.94

1.16

-0.24

-0.66

4.01

-7.02

-4.98

-0.54

-3.63

-3.10

-2.18

13.58

11.92

9.61

12.16

18.43

21.90

37.22

34.40

49.43

27.58

37.37

33.32

4.87
8.71

4.36
7.57

5.78
3.84

5.40
6.77

7.80
10.64

6.38
15.52

18.36
18.86

15.78
18.62

24.24
25.20

10.73
16.85

17.09
20.28

14.61
18.71

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

3-Year

5-Year

Weighted Average
Africa
Net Revenue

21.23

24.83

24.31

29.71

41.16

49.06

53.27

72.89

47.57

57.85

53.76

Production Costs

4.55

3.85

4.13

4.97

5.05

5.52

6.23

6.53

6.03

6.26

5.95

Exploration

0.85

0.81

0.55

0.69

0.89

1.43

1.79

1.59

1.46

1.59

1.45

DD&A

2.57

5.92

3.81

5.34

5.95

9.39

13.43

15.82

13.56

14.31

12.18

Other

4.44

5.38

0.65

1.88

1.07

0.79

1.21

1.89

0.96

1.35

1.21

Pre-tax Earnings

8.81

8.86

15.17

16.83

28.20

31.93

30.60

47.06

25.56

34.34

32.97

Income Taxes
Net Earnings

2.08
6.73

-1.40
10.26

5.86
9.31

6.78
10.05

11.44
16.76

14.41
17.52

14.31
16.29

19.94
27.12

10.08
15.48

14.61
19.73

14.07
18.90

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

27.19

23.84

20.54

25.32

30.31

40.77

46.90

50.99

66.78

27.29

41.64

42.34

2.66

2.55

2.47

5.68

7.00

9.14

10.30

10.75

14.82

11.80

12.21

11.47

Weighted Average
3-Year

5-Year

Other International
Net Revenue
Production Costs
Exploration

0.89

0.54

0.91

0.82

0.60

0.47

0.77

0.77

0.74

0.29

0.50

0.54

DD&A

2.53

3.67

4.09

3.73

2.80

3.38

4.07

5.63

5.47

4.15

4.80

4.48

Other
Pre-tax Earnings
Income Taxes
Net Earnings

9.47

7.44

6.36

5.18

6.73

8.61

11.07

10.91

16.28

1.85

7.19

8.00

11.64

9.64

6.71

9.90

13.18

19.17

20.70

22.93

29.47

9.20

16.94

17.85

3.44
8.20

3.39
6.25

3.37
3.33

3.68
6.22

3.33
9.85

7.36
11.81

7.88
12.82

7.26
15.68

11.90
17.57

2.60
6.60

5.76
11.19

6.32
11.53

Source: BMO Capital Markets, Company Reports


See pages G1 to G2 for analyst coverage.

Oil & Gas Global Cost Study

Page B9

BP PLC (BP - NYSE)


Table 6: Reserve Replacement Performance
2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

3-Year

5-Year

Production:
Gas Production (mmcf/d)

7,783.6

8,800.0

8,874.0

8,838.4

8,769.9

8,624.7

8,909.6

8,706.8

8,838.4

8,975.3

8,840.2

8,811.0

Liquids Production (b/d)

1,890,411

1,854,795

1,947,945

2,043,836

2,463,014

2,498,630

2,416,438

2,353,425

2,386,301

2,509,589

2,416,438

2,432,877

Total Production (boe/d)

3,187,671

3,321,461

3,426,941

3,516,895

3,924,658

3,936,073

3,901,370

3,804,566

3,859,361

4,005,479

3,889,802

3,901,370

% Gas Production

41%

44%

43%

42%

37%

37%

38%

38%

38%

37%

38%

38%

% Oil Production

59%

56%

57%

58%

63%

63%

62%

62%

62%

63%

62%

62%

Proven Reserves:
Gas Reserves (bcf)

45,130

45,079

45,356

7,643

8,376

9,165

10,316

10,730

10,407

9,781

10,073

10,353

10,511

10,312

10,225

14,963

16,072

17,297

18,071

18,322

18,009

17,436

17,556

17,888

18,033

17,826

17,784

% Gas Reserves

49%

48%

47%

43%

41%

42%

44%

43%

42%

42%

42%

43%

% Oil Reserves

51%

52%

53%

57%

59%

58%

56%

57%

58%

58%

58%

57%

Proven Reserve Life Index

12.9

13.3

13.8

14.1

12.8

12.5

12.2

12.6

12.7

12.3

12.6

12.5

11,233.0

5,469.0

5,877.0

966.0

2,222.0

3,207.0

879.0

2,147.0

3,534.0

3,198.0

8,879.0

12,965.0

761.0

1,410.0

1,505.0

1,897.0

1,313.0

589.0

1,098.0

1,151.0

1,151.0

1,074.0

3,376.0

5,063.0

2,633.2

2,321.5

2,484.5

2,058.0

1,683.3

1,123.5

1,244.5

1,508.8

1,740.0

1,607.0

1,724.7

1,422.5

908.7

1,321.3

1,212.3

Oil Reserves (mmbbls)


Total Proven Reserves (mmboe)

43,918

46,175

48,789

46,529

45,550

45,609

45,931

44,900

45,208

Proven Reserve Additions:


Gas Additions (bcf)
Oil Additions (mmbbls)
Total Additions (mmboe)

4,855.8

7,223.8

Addition Components (mmboe):


2,540.5

1,927.8

1,791.7

Acquisitions

2,415.5

39.7

456.2

1,656.3

252.8

13.3

28.0

72.3

230.0

33.7

Dispositions

Extensions, Discoveries and Additions

-1,700.2

-40.7

-69.0

-998.8

-144.2

-323.5

-412.2

-132.8

-200.5

-311.8

193.2

-218.0

169.5

-391.2

152.2

448.0

860.5

660.7

389.2

672.8

65.5%

61.7%

60.2%

Revisions of Estimates

985.7

768.2

3,442.3
336.0
(645.2)
1,722.7

5,196.2
377.3
(1,380.8)
3,031.2

Components as % of Total Additions (mmboe):


Extensions, Discoveries and Additions

109.4%

77.6%

87.1%

84.5%

Acquisitions

91.7%

1.7%

18.4%

80.5%

15.0%

1.2%

2.2%

4.8%

13.2%

2.1%

6.9%

5.2%

Dispositions

-64.6%

-1.8%

-2.8%

-48.5%

-8.6%

-28.8%

-33.1%

-8.8%

-11.5%

-19.4%

-13.3%

-19.1%

7.3%

-9.4%

6.8%

-19.0%

9.0%

39.9%

69.1%

43.8%

22.4%

41.9%

35.5%

42.0%

Additions as % of Production:
Gas

395.4%

170.3%

181.4%

29.9%

69.4%

101.9%

27.0%

67.6%

109.5%

97.6%

91.7%

80.6%

Oil

110.3%

208.3%

211.7%

254.3%

146.1%

64.6%

124.5%

134.0%

132.1%

117.2%

127.6%

114.0%

Total

226.3%

191.5%

198.6%

160.3%

117.5%

78.2%

87.4%

108.7%

123.5%

109.9%

114.0%

101.5%

Gas

25.6%

11.8%

12.0%

2.1%

4.9%

7.0%

1.9%

4.8%

7.8%

7.1%

19.7%

28.6%

Oil

10.0%

16.8%

16.4%

18.4%

12.2%

5.7%

11.2%

11.4%

11.1%

10.2%

32.7%

49.5%

Total

17.6%

14.4%

14.4%

11.4%

9.2%

6.2%

7.1%

8.6%

9.7%

8.9%

27.2%

40.6%

Revisions of Estimates

87.7%

75.9%

75.4%

70.9%

71.9%

Additions as % of Reserves:

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

3-Year

5-Year

$1,295

$1,102

$1,108

$826

$1,038

$1,266

$1,765

$1,892

$2,290

$2,906

$7,088

$10,119

Development

$6,053

$7,277

$8,085

$13,829

$8,373

$8,883

$10,797

$12,705

$15,026

$12,392

$40,123

$59,803

Acquisitions

$16,334

$264

$100

$0

$78

$63

$154

$994

$4,499

$907

$6,400

$6,617

Dispositions

na

na

na

na

na

na

na

na

na

na

na

na

$23,682

$8,643

$9,293

$14,655

$9,489

$10,212

$12,716

$15,591

$21,815

$16,205

$53,611

$76,539

5.5%
25.6%
69.0%

12.8%
84.2%
3.1%

11.9%
87.0%
1.1%

5.6%
94.4%
0.0%

10.9%
88.2%
0.8%

12.4%
87.0%
0.6%

13.9%
84.9%
1.2%

12.1%
81.5%
6.4%

10.5%
68.9%
20.6%

17.9%
76.5%
5.6%

13.2%
74.8%
11.9%

13.2%
78.1%
8.6%

$13,984
$12.02
2.2x

$13,668
$11.27
3.1x

$11,117
$8.89
2.4x

$13,949
$10.87
2.3x

$15,875
$11.08
2.1x

$19,826
$13.80
2.0x

$21,749
$15.27
2.0x

$21,990
$15.84
1.7x

$27,915
$19.82
1.8x

$24,096
$16.48
2.0x

$74,001
$17.37
1.8x

$115,576
$16.23
1.8x

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

3-Year

5-Year

Capital Expenditures (US$million):


Exploration

Total Expenditures
Expenditures as % of Total (US$million):
Exploration
Development
Acquisitions
Cashflow (US$million)
Cashflow (US$/boe)
Recycle Ratio

F&D Costs (US$/boe):


Exploration & Development (incl. revisions)

$3.83

$3.61

$4.38

$10.46

$5.98

$7.08

$7.71

$9.30

$10.12

$8.11

$9.14

$8.50

Acquisition Costs

$6.76

$6.66

$0.22

$0.00

$0.31

$4.73

$5.50

$13.74

$19.56

$26.94

$19.05

$17.54

All Sources (incl. revisions)

$5.47

$3.66

$3.64

$4.79

$5.19

$7.06

$7.68

$9.50

$11.24

$8.45

$9.75

$8.90

Exploration & Development (excl. revisions)

$4.26

$3.30

$4.77

$8.18

$6.62

$10.30

$16.35

$16.06

$13.10

$12.62

$13.71

$13.46

Acquisition Costs

$6.76

$6.66

$0.22

$0.00

$0.31

$4.73

$5.50

$13.74

$19.56

$26.94

$19.05

$17.54

All Sources (excl. revisions)

$5.72

$3.35

$3.90

$4.25

$5.66

$10.22

$15.97

$15.89

$14.06

$13.01

$14.19

$13.73

North America

$7.03

$4.38

$10.73

$10.96

$16.28

$5.73

$23.25

$12.02

$310.52

$10.14

$20.46

$15.72

Europe

$6.08

$7.29

$182.10

$3.12

$90.54

$25.37

$122.74

$19.94

$19.62

$7.82

$12.24

$15.48

na

$2.22

$4.44

$13.54

$13.53

-$27.03

$35.16

-$75.67

$7.11

$41.33

$19.08

$27.10

$3.75

$2.75

$1.43

$3.57

$2.14

$4.26

$3.06

$4.67

$4.81

$4.79

$4.76

$4.27

Geographically Segmented Costs

Africa
Other International

Source: BMO Capital Markets, Company Reports

See pages G1 to G2 for analyst coverage.

Page B10

Integrated Oils

BP PLC (BP - NYSE)


Breakeven Analysis
Table 7: Breakeven Oil Price Analysis (US$/boe)
Worldwide
Operating Costs
Exploration Expense
G&A/Other
F&D Costs
Return on Capital
Income Taxes
Breakeven Oil Price
Quality Differential
Required WTI Price

North America
Operating Costs
Exploration Expense
G&A/Other
F&D Costs
Return on Capital
Income Taxes
Breakeven Oil Price
Quality Differential
Required WTI Price

International
Operating Costs
Exploration Expense
G&A/Other
F&D Costs
Return on Capital
Income Taxes
Breakeven Oil Price
Quality Differential
Required WTI Price

2000
3.14
0.55
4.77
5.47
4.47
1.78
20.18
3.60
23.78

2000
3.91
0.58
3.64
7.03
5.62
1.50
22.27
3.77
26.04

2000
2.60
0.54
5.57
4.35
3.64
1.81
18.51
3.48
21.98

2001
3.27
0.43
4.12
3.66
3.08
1.29
15.85
2.08
17.92

2001
3.76
0.55
3.71
4.38
3.61
0.95
16.95
1.09
18.04

2001
2.92
0.35
4.42
3.20
2.75
1.50
15.13
2.79
17.92

2002
3.26
0.57
3.59
3.64
3.23
2.61
16.90
3.13
20.03

2002
3.58
0.54
3.27
10.73
8.48
4.61
31.21
4.14
35.35

2002
3.02
0.59
3.83
2.40
2.27
2.18
14.28
2.40
16.68

2003
4.54
0.51
3.35
4.79
4.33
3.02
20.54
5.79
26.33

2003
4.29
0.46
4.59
10.96
8.69
6.22
35.20
3.34
38.55

2003
4.71
0.54
2.48
4.01
3.86
2.64
18.24
7.51
25.75

2004
5.69
0.64
4.25
5.19
4.23
2.10
22.12
7.42
29.54

2004
4.76
0.90
5.57
16.28
13.85
6.24
47.61
5.59
53.21

2004
6.32
0.46
3.37
3.60
2.88
1.53
18.16
8.65
26.81

2005
7.66
0.71
6.18
7.06
5.63
3.15
30.39
12.12
42.51

2005
6.59
1.16
6.61
5.73
5.64
3.21
28.94
9.58
38.53

2005
8.31
0.43
5.91
8.08
5.95
3.29
31.97
13.68
45.65

2006
9.68
1.10
3.38
7.68
5.97
4.01
31.82
5.79
37.60

2006
9.55
1.89
2.03
23.25
26.22
13.22
76.17
7.17
83.34

2006
9.75
0.67
4.11
5.62
3.81
2.98
26.94
5.03
31.97

2007
11.48
0.82
5.88
9.50
7.64
4.63
39.94
5.55
45.49

2007
12.81
0.80
6.63
12.02
14.45
7.83
54.53
8.50
63.03

2007
10.79
0.83
5.49
8.69
6.07
3.86
35.73
4.01
39.74

2008
14.47
0.96
10.04
11.24
9.10
6.17
51.98
5.71
57.69

2008
16.98
0.92
11.36
17.15
18.43
9.64
74.49
8.57
83.06

2008
13.07
0.98
9.30
6.14
4.48
3.44
37.41
4.11
41.52

2009
10.46
0.80
2.44
8.45
6.62
3.28
32.05
13.38
45.44

2009
8.94
1.71
6.06
10.14
9.46
4.46
40.76
6.16
46.92

2009
11.01
0.48
1.13
7.70
5.64
2.86
28.82
15.99
44.81

International Segments (US$/boe):


Europe
Operating Costs
Exploration Expense
G&A/Other
F&D Costs
Return on Capital
Income Taxes
Breakeven Oil Price
Quality Differential
Required WTI Price

Africa
Operating Costs
Exploration Expense
G&A/Other
F&D Costs
Return on Capital
Income Taxes
Breakeven Oil Price
Quality Differential
Required WTI Price

Other International
Operating Costs
Exploration Expense
G&A/Other
F&D Costs
Return on Capital
Income Taxes
Breakeven Oil Price
Quality Differential
Required WTI Price

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2.54
0.23
2.16
6.08
2.97
1.66
15.65
5.77
21.42

2.96
0.11
1.94
7.29
3.43
1.98
17.71
3.94
21.66

3.37
0.24
1.16
13.95
6.10
9.19
34.01
3.23
37.25

3.72
0.21
(0.24)
3.12
1.50
1.20
9.51
8.29
17.79

5.80
0.22
(0.66)
90.54
45.01
32.98
173.88
8.67
182.55

8.53
0.16
4.01
25.37
11.42
4.70
54.20
12.38
66.58

10.86
0.10
(7.02)
14.79
7.11
6.92
32.76
6.04
38.80

14.12
0.32
(4.98)
19.94
11.83
10.03
51.25
5.41
56.66

15.40
0.93
(0.54)
19.62
12.09
11.63
59.13
6.59
65.72

12.00
0.50
(3.63)
7.82
6.05
3.85
26.60
0.84
27.44

2003

2004

2006

2007

2008

2009

2000
-

2000
2.66
0.89
9.47
3.82
4.45
1.87
23.16
0.86
24.02

2001
4.55
0.85
4.44
2.22
4.12
1.27
17.45
4.33
21.78

2001
2.55
0.54
7.44
2.75
3.05
1.66
17.99
1.10
19.09

2002
3.85
0.81
5.38
4.44
7.93
(1.08)
21.34
(0.18)
21.16

2002
2.47
0.91
6.36
1.47
1.84
1.87
14.91
2.05
16.96

Source: BMO Capital Markets, Company Reports


See pages G1 to G2 for analyst coverage.

4.13
0.55
0.65
13.54
20.66
13.01
52.54
7.22
59.76

2003
5.68
0.82
5.18
3.79
4.41
2.61
22.49
6.90
29.39

4.97
0.69
1.88
13.53
18.75
12.66
52.49
10.56
63.05

2004
7.00
0.60
6.73
2.25
1.91
0.65
19.14
8.22
27.37

2005
5.05
0.89
1.07
21.17
17.29
11.80
57.27
14.78
72.05

2005
9.14
0.47
8.61
4.91
3.95
2.46
29.55
14.22
43.76

5.52
1.43
0.79
35.16
28.02
23.04
93.98
9.72
103.70

2006
10.30
0.77
11.07
3.87
2.74
1.68
30.43
3.20
33.63

6.23
1.79
1.21
33.22
20.52
18.03
81.01
10.00
91.01

2007
10.75
0.77
10.91
4.76
3.47
1.61
32.26
1.74
34.00

6.53
1.59
1.89
7.11
4.68
3.44
25.24
15.35
40.59

2008
14.82
0.74
16.28
5.70
4.34
2.94
44.82
(1.50)
43.32

6.03
1.46
0.96
41.33
22.99
14.97
87.73
4.20
91.93

2009
11.80
0.29
1.85
6.76
5.09
2.01
27.79
20.39
48.19

Weighted Average
3-Year
5-Year
11.86
0.85
5.52
9.75
7.78
4.70
40.45
8.21
48.67

10.69
0.87
5.25
8.90
7.07
4.31
37.08
8.51
45.59

Weighted Average
3-Year
5-Year
12.69
1.18
7.93
20.46
22.17
11.44
75.87
7.74
83.61

10.79
1.31
6.51
15.72
16.92
8.87
60.13
8.00
68.12

Weighted Average
3-Year
5-Year
11.49
0.70
4.42
7.31
5.27
3.42
32.61
8.04
40.64

10.64
0.65
4.62
7.04
4.99
3.28
31.21
8.57
39.78

Weighted Average
3-Year
5-Year
13.91
0.58
(3.10)
12.24
7.96
6.70
38.29
4.28
42.57

11.80
0.36
(2.18)
15.48
8.84
6.90
41.19
6.25
47.45

Weighted Average
3-Year
5-Year
6.26
1.59
1.35
19.08
11.67
8.64
48.59
9.85
58.44

5.95
1.45
1.21
27.10
18.65
13.89
68.26
10.81
79.07

Weighted Average
3-Year
5-Year
12.21
0.50
7.19
4.76
3.57
1.84
30.06
6.88
36.94

11.47
0.54
8.00
4.27
3.18
1.75
29.21
7.61
36.82

Oil & Gas Global Cost Study

Page B11

Cenovus Energy (CVE - TSX, NYSE)

US$, net

Due to the companys above-average gas weighting, Cenovus reported revenue per boe below the group average. However, the groups lowest operating
cost structure helped the company report the groups second-highest net income per boe. Cenovus reported operating costs and net income of $7.68/
boe and $16.93/boe compared with the group averages of $18.70/boe and $9.40/boe, respectively.

Reserve replacement costs led the group in 2009 with Cenovus replacing reserves at a cost of just $4.78/boe compared with the group average of $12.08/
boe. Excluding revisions, reserve replacement costs increased 14% to $5.45/boe, significantly below the group average of $21.72/boe.

Driven by both the groups lowest operating cost structure and reserve replacement performance, we calculate that Cenovus requires a WTI oil price of
$28.95/boe to break even. This is the groups best result, significantly below the group average of $52.51/boe, and almost $10/boe below the secondlowest breakeven.

Notes: All upstream financial figures, as well as reserve and production values are based upon FASB Statement No. 69 disclosure.
Proven Reserves vs RLI

Capital Spending by Region (US$million)


15.0

1,420
1,400

1,360

$1,400

14.0

$1,200

1,340

13.5

1,320

13.0

1,300

12.5

1,280
1,260
1,240
2007

2008
Proven Reserves

$1,000
Years

mmboe (net)

1,380

$1,600

14.5

$800
$600
$400

12.0

$200

11.5

$0

2009

2007

2008

2009

North America

RLI

Proven Reserve Additions by Region (million boe)

F&D Costs Including Revisions (US$/boe)

250

$30.00

200

$25.00

150
100

$20.00

50

$15.00

0
-50

$10.00

-100

$5.00

-150
-200

$0.00
2007

2008

2009

2007

North America

2008
Cenovus

F&D Costs Including Revisions by Region (US$/boe)

2009
Integrateds

3-Year Average F&D Costs Including Revisions (US$/boe)

$30.00

$30.00

$25.00

$25.00

$20.00

$20.00

$15.00

$15.00

$10.00

$10.00

$5.00

$5.00

$0.00
2007

2008
North America

Source: BMO Capital Markets, Company Reports


See pages G1 to G2 for analyst coverage.

2009

$0.00
2007

2008
Cenovus

Integrateds

2009
Industry

Page B12

Integrated Oils

Cenovus Energy (CVE - TSX, NYSE)

US$/boe, net

Worldwide
Upstream Net Revenue (US$/boe)

Production Costs (US$/boe)

$80.00

$80.00

$70.00

$70.00

$60.00

$60.00

$50.00

$50.00

$40.00

$40.00

$30.00

$30.00

$20.00

$20.00

$10.00

$10.00
$0.00

$0.00
2007

2008

2007

2009

Cenovus

2008
Cenovus

Integrateds

Upstream Operating Earnings (US$/boe)

2009
Integrateds

Upstream Net Income (US$/boe)

$80.00

$80.00

$70.00

$70.00

$60.00

$60.00

$50.00

$50.00

$40.00

$40.00

$30.00

$30.00

$20.00

$20.00

$10.00

$10.00

$0.00

$0.00
2007

2008

Cenovus

2009

2007

Integrateds

2008

Cenovus

Breakeven Details - Worldwide (US$/boe)

2009

Integrateds

Required WTI Oil Price - Worldwide (US$/boe)

$100.00

$100.00

$90.00

$90.00

$80.00

$80.00

$70.00

$70.00

$60.00

$60.00

$50.00

$50.00

$40.00

$40.00

$30.00

$30.00

$20.00

$20.00

$10.00

$10.00

$0.00

$0.00
2007
Op Cost/G&A/Other

2008
F&D/Exploration

2009
Return

Source: BMO Capital Markets, Company Reports

See pages G1 to G2 for analyst coverage.

Taxes

Quality

2007

2008
Cenovus

2009
Integrateds

Oil & Gas Global Cost Study

Page B13

Cenovus Energy (CVE - TSX, NYSE)

US$/boe, net

North America
Upstream Net Revenue (US$/boe)

Production Costs (US$/boe)

$80.00

$80.00

$70.00

$70.00

$60.00

$60.00

$50.00

$50.00

$40.00

$40.00

$30.00

$30.00

$20.00

$20.00

$10.00

$10.00
$0.00

$0.00
2007

2008
Cenovus

2007

2009

2008
Cenovus

Integrateds

Upstream Operating Earnings (US$/boe)

2009
Integrateds

Upstream Net Income (US$/boe)

$80.00

$80.00

$70.00

$70.00

$60.00

$60.00

$50.00

$50.00

$40.00

$40.00

$30.00

$30.00

$20.00

$20.00

$10.00

$10.00

$0.00

$0.00
2007

2008
Cenovus

2009

2007

Integrateds

2008
Cenovus

Breakeven Details - North America (US$/boe)

2009
Integrateds

Required WTI Oil Price - North America (US$/boe)

$100.00

$100.00

$90.00

$90.00

$80.00

$80.00

$70.00

$70.00

$60.00

$60.00

$50.00

$50.00

$40.00

$40.00

$30.00

$30.00

$20.00

$20.00

$10.00

$10.00

$0.00

$0.00
2007
Op Cost/G&A/Other

2008
F&D/Exploration

2009
Return

Source: BMO Capital Markets, Company Reports

See pages G1 to G2 for analyst coverage.

Taxes

Quality

2007

2008
Cenovus

2009
Integrateds

Page B14

Integrated Oils

Cenovus Energy (CVE - TSX, NYSE)


Consolidated Statements
Table 1: Income Statement (US$million)
Upstream Revenue, net of Royalties
Midstream / Downstream Revenue
Other
Total Revenue and Other Income
Crude Oil and Product Purchases
Production and Transportation Expenses
Marketing Expenses
Exploration / Dry Hole Costs
General and Administrative
Depreciation, Depletion and Amortization
Interest, net
Other
Earnings Before Income Tax
Current Income Taxes
Future Income Taxes
Total Income Taxes
Minority Interest
Earnings From Continuing Operations
Discontinued Operations/Extraordinary Items
Cumulative Change in Accounting Principle
Net Earnings
Preferred Stock Dividends
Net Earnings to Common Shareholders

2000
-

2001
-

2002
-

2003
-

2004
-

2005
-

2006
-

2007
6,528
7,315
(437)
13,406

2008
6,972
9,011
576
16,559

2009
5,598
5,280
(738)
10,140

9,710
2,261
167
1,357
218
(247)
3,093
340
385
725
2,368
(2,246)
122
122

5,250
1,864
188
1,382
218
288
950
853
(551)
302
648
1,979
2,627
2,627

7,476
1,933
145
1,426
187
412
1,827
605
(182)
423
1,404
1,265
2,669
2,669

2001
-

2002
-

2003
-

2004
-

2005
-

2006
-

2007
1,404
1,244
888
3,536
(522)
3,014

2008
2,368
1,703
(983)
3,088
(401)
2,687

2009
648
792
1,032
2,472
1,024
3,496

Source: BMO Capital Markets, Company Reports

Table 2: Statement of Cash Flows (US$million)


Net Earnings
Charges and Credits Not Impacting Cash
Other
Cash Flow From Operations
Change in Working Capital / Other
Net Cash From Operating Activities

2000
-

Upstream Spending
Midstream / Downstream Spending
Acquisitions, net
Other
Net Cash From Investing Activities

(1,245)
(244)
(44)
(1,533)

(1,516)
(530)
47
35
(1,964)

(954)
(941)
209
(94)
(1,780)

Net Change in Debt


Net Change in Common Stock
Net Change in Preferred Stock
Cash Dividends Paid
Other
Net Cash From Financing Activities
Effect of Exchange Rate on Cash
Net Increase/(Decrease) in Cash
Cash and Equivalents, Beginning of Year
Cash and Equivalents, End of Year

684
(1,976)
(1,292)
7
196
106
302

(471)
(381)
(852)
(20)
(149)
302
153

(251)
1
(151)

Source: BMO Capital Markets, Company Reports

See pages G1 to G2 for analyst coverage.

(1,730)
9
(5)
153
148

Oil & Gas Global Cost Study

Page B15

Cenovus Energy (CVE - TSX, NYSE)


Table 3: Balance Sheet (US$million)
2000
-

Total Current Assets


Net Property, Plant and Equipment
Other Assets
Total Assets
Total Current Liabilities
Long-term Debt
Deferred Income Taxes
Other Liabilities and Deferred Credits
Total Liabilities
Minority Interests
Common Shares
Contributed Surplus (Paid-in Capital)
Preferred Stock
Retained Earnings
Other / Comprehensive Income (Loss)
Total Shareholders' Equity
Total Liabilities and Shareholders' Equity

2001
-

2002
-

2003
-

2004
-

2005
-

2006
-

2007
-

2008
2,248
12,260
3,958
18,466

2009
2,284
14,537
3,731
20,552

1,798
2,952
2,411
3,557
10,718

1,836
3,493
2,357
3,686
11,372

7,748
7,748
18,466

2,223
4,751
39
2,167
9,180
20,552

Source: BMO Capital Markets, Company Reports

Table 4: Results of Operations from Oil & Gas Producing Activities (US$million)
Cumulative
2000

2001

2002

2003

2004

Net Revenue

Production Costs

Exploration

DD&A

2005

2006

2007

2008

2009

3-Year

5-Year

3,883

4,732

4,058

12,673

12,673

732

836

728

2,296

2,296

1,217

1,103

1,090

3,410

3,410

Worldwide

Other

Pre-tax Earnings

1,934

2,793

2,240

6,967

6,967

Income Taxes
Net Earnings

574
1,360

815
1,978

634
1,606

2,023
4,944

2,023
4,944

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

3-Year

5-Year

Cumulative
North America
Net Revenue

3,883

4,732

4,058

12,673

12,673

Production Costs

732

836

728

2,296

2,296

Exploration

DD&A

1,217

1,103

1,090

3,410

3,410

Other

Pre-tax Earnings

1,934

2,793

2,240

6,967

6,967

Income Taxes
Net Earnings

574
1,360

815
1,978

634
1,606

2,023
4,944

2,023
4,944

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

3-Year

5-Year

Net Revenue

na

na

na

na

na

na

na

na

na

na

na

na

Production Costs

na

na

na

na

na

na

na

na

na

na

na

na

Exploration

na

na

na

na

na

na

na

na

na

na

na

na

DD&A

na

na

na

na

na

na

na

na

na

na

na

na

Other

na

na

na

na

na

na

na

na

na

na

na

na

Pre-tax Earnings

na

na

na

na

na

na

na

na

na

na

na

na

Income Taxes
Net Earnings

na
na

na
na

na
na

na
na

na
na

na
na

na
na

na
na

na
na

na
na

na
na

na
na

Cumulative
International

Source: BMO Capital Markets, Company Reports

See pages G1 to G2 for analyst coverage.

Page B16

Integrated Oils

Cenovus Energy (CVE - TSX, NYSE)


Table 5: Upstream Netbacks (US$/boe)
Weighted Average
2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

3-Year

5-Year

Net Revenue

na

na

na

na

na

na

na

37.22

48.53

42.79

42.72

42.72

Production Costs

na

na

na

na

na

na

na

7.02

8.57

7.68

7.74

7.74

Exploration

na

na

na

na

na

na

na

0.00

0.00

0.00

0.00

0.00

DD&A

na

na

na

na

na

na

na

11.66

11.31

11.49

11.49

11.49

Other

na

na

na

na

na

na

na

0.00

0.00

0.00

0.00

0.00

Pre-tax Earnings

na

na

na

na

na

na

na

18.54

28.65

23.62

23.48

23.48

Income Taxes
Net Earnings

na
na

na
na

na
na

na
na

na
na

na
na

na
na

5.50
13.04

8.36
20.29

6.69
16.93

6.82
16.67

6.82
16.67

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

3-Year

5-Year

Net Revenue

na

na

na

na

na

na

na

37.22

48.53

42.79

42.72

42.72

Production Costs

na

na

na

na

na

na

na

7.02

8.57

7.68

7.74

7.74

Exploration

na

na

na

na

na

na

na

0.00

0.00

0.00

0.00

0.00

DD&A

na

na

na

na

na

na

na

11.66

11.31

11.49

11.49

11.49

Other

na

na

na

na

na

na

na

0.00

0.00

0.00

0.00

0.00

Pre-tax Earnings

na

na

na

na

na

na

na

18.54

28.65

23.62

23.48

23.48

Income Taxes
Net Earnings

na
na

na
na

na
na

na
na

na
na

na
na

na
na

5.50
13.04

8.36
20.29

6.69
16.93

6.82
16.67

6.82
16.67

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

3-Year

5-Year

Net Revenue

na

na

na

na

na

na

na

na

na

na

na

na

Production Costs

na

na

na

na

na

na

na

na

na

na

na

na

Exploration

na

na

na

na

na

na

na

na

na

na

na

na

DD&A

na

na

na

na

na

na

na

na

na

na

na

na

Other

na

na

na

na

na

na

na

na

na

na

na

na

Pre-tax Earnings

na

na

na

na

na

na

na

na

na

na

na

na

Income Taxes
Net Earnings

na
na

na
na

na
na

na
na

na
na

na
na

na
na

na
na

na
na

na
na

na
na

na
na

Worldwide

Weighted Average
North America

Weighted Average
International

Source: BMO Capital Markets, Company Reports

See pages G1 to G2 for analyst coverage.

Oil & Gas Global Cost Study

Page B17

Cenovus Energy (CVE - TSX, NYSE)


Table 6: Reserve Replacement Performance
2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

3-Year

5-Year

Production:
Gas Production (mmcf/d)

1,024.7

945.2

835.6

935.2

561.1

Liquids Production (b/d)

115,068

109,589

120,548

115,068

69,041

Total Production (boe/d)

285,845

267,123

259,817

270,928

162,557

% Gas Production

60%

59%

54%

58%

58%

% Oil Production

40%

41%

46%

42%

42%

Gas Reserves (bcf)

2,144

1,954

1,546

1,881

1,129

Oil Reserves (mmbbls)

988

975

1,143

1,035

621

Total Proven Reserves (mmboe)

1,345

1,301

1,401

1,349

809

% Gas Reserves

27%

25%

18%

23%

23%

% Oil Reserves

73%

75%

82%

77%

77%

Proven Reserve Life Index

12.9

13.3

14.8

13.7

8.2

Gas Additions (bcf)

159.0

155.0

-103.0

211.0

211.0

Oil Additions (mmbbls)

-163.0

27.0

212.0

76.0

76.0

Total Additions (mmboe)

-136.5

52.8

194.8

111.2

111.2

Extensions, Discoveries and Additions

190.3

21.2

175.5

Acquisitions

0.0

0.0

0.0

Dispositions

-449.0

0.0

-5.5

(454.5)

(454.5)

Revisions of Estimates

122.2

31.7

24.8

178.7

178.7

Extensions, Discoveries and Additions

-139.4%

40.1%

90.1%

348.1%

348.1%

Acquisitions

0.0%

0.0%

0.0%

0.0%

0.0%

Dispositions

328.9%

0.0%

-2.8%

-408.8%

-408.8%

Revisions of Estimates

-89.5%

59.9%

12.7%

160.7%

160.7%

Additions as % of Production:
Gas

42.5%

44.9%

-33.8%

20.6%

20.6%

Oil

-388.1%

67.5%

481.8%

60.3%

60.3%

Total

-130.8%

54.2%

205.4%

37.5%

37.5%

Gas

7.4%

7.9%

-6.7%

11.2%

18.7%

Oil

-16.5%

2.8%

18.5%

7.3%

12.2%

Total

-10.1%

4.1%

13.9%

8.2%

13.7%

2007

2008

2009

3-Year

5-Year

Proven Reserves:

Proven Reserve Additions:

Addition Components (mmboe):


387.0

387.0

Components as % of Total Additions (mmboe):

Additions as % of Reserves:

2000

2001

2002

2003

2004

2005

2006

Capital Expenditures (US$million):


Exploration

$101

$195

$60

$356

$356

Development

$1,140

$1,305

$894

$3,339

$3,339

Acquisitions

Dispositions

$0

$0

$0

$0

$0

Total Expenditures

$1,255

$1,500

$957

$3,712

$3,712

8.0%
90.8%
1.1%

13.0%
87.0%
0.0%

6.3%
93.4%
0.3%

9.6%
90.0%
0.5%

9.6%
90.0%
0.5%

$3,756
$36.00
9.0x

$3,115
$31.95
1.1x

$2,845
$30.00
6.3x

$9,716
$32.75
5.0x

$9,716
$32.75
5.0x

2007

2008

2009

3-Year

5-Year

$3.97

$28.39

$4.76

$6.53

$6.53

$14

$0

$3

$17

$17

Expenditures as % of Total (US$million):


Exploration
Development
Acquisitions
Cashflow (C$million)
Cashflow (C$/boe)
Recycle Ratio

2000

2001

2002

2003

2004

2005

2006

F&D Costs (US$/boe):


Exploration & Development (incl. revisions)

Acquisition Costs

na

na

na

nm

nm

All Sources (incl. revisions)

$4.02

$28.39

$4.78

$6.56

$6.56

Exploration & Development (excl. revisions)

$6.52

$70.87

$5.44

$9.55

$9.55

Acquisition Costs

na

na

na

nm

nm

All Sources (excl. revisions)

$6.59

$70.87

$5.45

$9.59

$9.59

North America

$4.02

$28.39

$4.78

$7.10

$7.10

Other International

na

na

na

na

na

Geographically Segmented Costs

Note: Reserve estimates reported after royalties


Source: BMO Capital Markets, Company Reports

See pages G1 to G2 for analyst coverage.

Page B18

Integrated Oils

Cenovus Energy (CVE - TSX, NYSE)


Breakeven Analysis
Table 7: Breakeven Oil Price Analysis (US$/boe)

Worldwide
Operating Costs
Exploration Expense
G&A/Other
F&D Costs
Return on Capital
Income Taxes
Breakeven Oil Price
Quality Differential
Required WTI Price

North America
Operating Costs
Exploration Expense
G&A/Other
F&D Costs
Return on Capital
Income Taxes
Breakeven Oil Price
Quality Differential
Required WTI Price

International
Operating Costs
Exploration Expense
G&A/Other
F&D Costs
Return on Capital
Income Taxes
Breakeven Oil Price
Quality Differential
Required WTI Price

2000
-

2001
-

2000
-

2002
-

2001
-

2003
-

2002
-

2004
-

2003
-

2005
-

2004
-

2006
-

2005
-

2007
7.02
4.02
3.30
1.39
15.73
18.70
34.43

2006
-

2007
7.02
4.02
3.30
1.39
15.73
18.70
34.43

2008
8.57
28.39
24.87
10.25
72.09
20.27
92.36

2008
8.57
28.39
24.87
10.25
72.09
20.27
92.36

2009
7.68
4.78
4.54
1.79
18.79
10.16
28.95

2009
7.68
4.78
4.54
1.79
18.79
10.16
28.95

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

na
na
na
na
na
na
na
na

na
na
na
na
na
na
na
na

na
na
na
na
na
na
na
na

na
na
na
na
na
na
na
na

na
na
na
na
na
na
na
na

na
na
na
na
na
na
na
na

na
na
na
na
na
na
na
na

na
na
na
na
na
na
na
na

na
na
na
na
na
na
na
na

na
na
na
na
na
na
na
na

Source: BMO Capital Markets, Company Reports

See pages G1 to G2 for analyst coverage.

Weighted Average
3-Year
5-Year
7.74
6.56
5.76
2.36
22.41
16.38
38.79

na
na
na
na
na
na
na

Weighted Average
3-Year
5-Year
7.74
6.56
5.76
2.36
22.41
16.38
38.79

na
na
na
na
na
na
na

Weighted Average
3-Year
5-Year

na
na
na
na
na
na
na
na

na
na
na
na
na
na
na
na

Oil & Gas Global Cost Study

Page B19

Chevron (CVX - NYSE)

US$, net

Chevrons results from operations were once again above the Integrateds and Multinationals peer averages in 2009, reflecting above-average realized
revenue and lower-than-average operating costs. The company generated net earnings of $10.95/boe, above the peer average of $9.40/boe.
However, Chevron posted relatively weak worldwide F&D costs in 2009 of $35.41/boe, which is more than double the $13.93/boe reported in 2008
and the highest cost reported among the peer group. However, this was largely driven by large negative reserve revisions during the year. Excluding
revisions, reserve replacement costs were $16.24/boe compared with the group average of $21.72/boe.
The significant increase in Chevrons all-in F&D costs has resulted in a 57% increase in our estimate of the companys breakeven oil price for 2009.
Based on 2009 cost results, we estimate Chevron required a WTI equivalent oil price of $104.10/boe to break even versus the peer average of roughly
$52.50/boe.
Notes: All upstream financial figures, as well as reserve and production values are based upon FASB Statement No. 69 disclosure.
Capital Spending by Region (US$million)

12,000

16.0

11,500

14.0

11,000

12.0

10,500

10.0

10,000

8.0

9,500

6.0

9,000

4.0

8,500

2.0

8,000

$30,000
$25,000
$20,000

Years

mmboe (net)

Proven Reserves vs RLI

0.0
2000

2001

2002

2003

2004

2005

Proven Reserves

2006

2007

2008

$15,000
$10,000
$5,000
$0
2000

2009

2001

2002

2003

North America

RLI

Proven Reserve Additions by Region (million boe)

2004

Africa

2005

Asia Pacific

2006

2007

2008

2009

Other International

F&D Costs Including Revisions (US$/boe)


72.57 71.92

$60.00

1,800

80.08

1,600
$50.00

1,400
1,200

$40.00

1,000
800

$30.00

600
400

$20.00

200
0

$10.00

-200
-400

$0.00
2000

2001

2002

2003

North America

2004

Africa

2005

2006

Asia Pacific

2007

2008

Other International

$60.00

76.76

192.35

2001

2002

2003

2004

2005

Exploration and Development

F&D Costs Including Revisions by Region (US$/boe)


93.66

2000

2009

2006

2007

Acquisitions

2008

2009

All Sources

3-Year Average F&D Costs Including Revisions (US$/boe)


183.29 254.38

286.48

$50.00

$60.00
$50.00

$40.00

$40.00

$30.00
$30.00

$20.00

$20.00

$10.00

$10.00

$0.00
-$10.00
2000

2001

2002

2003

-47.07

-57.83

-18.53

2004

North America

2005
Africa

2006
Asia Pacific

Source: BMO Capital Markets, Company Reports


See pages G1 to G2 for analyst coverage.

2007

2008

-106.29

2009

$0.00
2001

2002

2003

2004

Chevron

2005

2006

Integrateds

2007
Industry

2008

2009

Page B20

Integrated Oils

Chevron (CVX - NYSE)

US$/boe, net

Worldwide
Upstream Net Revenue (US$/boe)

Production Costs (US$/boe)

$80.00

$80.00

$70.00

$70.00

$60.00

$60.00

$50.00

$50.00

$40.00

$40.00

$30.00

$30.00

$20.00

$20.00

$10.00

$10.00

$0.00

$0.00
2000

2001

2002

2003

2004

Chevron

2005

2006

2007

2008

2000

2009

2001

2002

2003

2004
Chevron

Integrateds

Upstream Operating Earnings (US$/boe)

2005

2006

2007

2008

2009

2007

2008

2009

2007

2008

2009

Integrateds

Upstream Net Income (US$/boe)

$80.00

$80.00

$70.00

$70.00

$60.00

$60.00

$50.00

$50.00

$40.00

$40.00

$30.00

$30.00

$20.00

$20.00

$10.00

$10.00

$0.00

$0.00
2000

2001

2002

2003

2004

Chevron

2005

2006

2007

2008

2009

2000

2001

2002

Integrateds

2003

2004

Chevron

Breakeven Details (US$/boe)

2005

2006

Integrateds

Required WTI Oil Price (US$/boe)

$110.00

$110.00

$100.00

$100.00

$90.00

$90.00

$80.00

$80.00

$70.00

$70.00

$60.00

$60.00

$50.00

$50.00

$40.00

$40.00

$30.00

$30.00

$20.00

$20.00

$10.00

$10.00

$0.00

$0.00
2000

2001

2002

2003

Op Cost/G&A/Other

2004

2005

2006

2007

2008

F&D/Exploration

Return

Taxes

Quality

Source: BMO Capital Markets, Company Reports

See pages G1 to G2 for analyst coverage.

2009

2000

2001

2002

2003

2004
Chevron

2005

2006

Integrateds

Oil & Gas Global Cost Study

Page B21

Chevron (CVX - NYSE)

US$/boe, net

North America
Upstream Net Revenue (US$/boe)

Production Costs (US$/boe)

$80.00

$80.00

$70.00

$70.00

$60.00

$60.00

$50.00

$50.00

$40.00

$40.00

$30.00

$30.00

$20.00

$20.00

$10.00

$10.00
$0.00

$0.00
2000

2001

2002

2003

2004

Chevron

2005

2006

2007

2008

2000

2009

2001

2002

2003

2004

Chevron

Integrateds

Upstream Operating Earnings (US$/boe)

2005

2006

2007

2008

2009

2007

2008

2009

Integrateds

Upstream Net Income (US$/boe)

$80.00

$80.00

$70.00

$70.00

$60.00

$60.00

$50.00

$50.00

$40.00

$40.00

$30.00

$30.00

$20.00

$20.00

$10.00

$10.00

$0.00

$0.00
2000

2001

2002

2003

2004

Chevron

2005

2006

2007

2008

2009

2000

2001

2002

Integrateds

2003

2004

Chevron

Breakeven Details (US$/boe)

2005

2006

Integrateds

Required WTI Oil Price (US$/boe)

$140.00

$140.00

$120.00

$120.00

$100.00

$100.00

$80.00

$80.00

$60.00

$60.00

$40.00

$40.00

$20.00

$20.00

$0.00

194.27

153.44

2001

2002

228.09

$0.00
2000

2001

2002

2003

Op Cost/G&A/Other

2004

2005

2006

2007

2008

F&D/Exploration

Return

Taxes

Quality

Source: BMO Capital Markets, Company Reports

See pages G1 to G2 for analyst coverage.

2009

2000

2003

2004
Chevron

2005

2006

Integrateds

2007

2008

2009

Page B22

Integrated Oils

Chevron (CVX - NYSE)

US$/boe, net

Total International
Upstream Net Revenue (US$/boe)

Production Costs (US$/boe)

$80.00

$80.00

$70.00

$70.00

$60.00

$60.00

$50.00

$50.00

$40.00

$40.00

$30.00

$30.00

$20.00

$20.00

$10.00

$10.00
$0.00

$0.00
2000

2001

2002

2003

2004

Chevron

2005

2006

2007

2008

2000

2009

2001

2002

2003

2004

Chevron

Integrateds

Upstream Operating Earnings (US$/boe)

2005

2006

2007

2008

2009

2007

2008

2009

2007

2008

2009

Integrateds

Upstream Net Income (US$/boe)

$80.00

$80.00

$70.00

$70.00

$60.00

$60.00

$50.00

$50.00

$40.00

$40.00

$30.00

$30.00

$20.00

$20.00

$10.00

$10.00

$0.00

$0.00
2000

2001

2002

2003

2004

Chevron

2005

2006

2007

2008

2009

2000

2001

2002

2003

2004

Chevron

Integrateds

Breakeven Details (US$/boe)

2005

2006

Integrateds

Required WTI Oil Price (US$/boe)

$110.00

$110.00

$100.00

$100.00

$90.00

$90.00

$80.00

$80.00

$70.00

$70.00

$60.00

$60.00

$50.00

$50.00

$40.00

$40.00

$30.00

$30.00

$20.00

$20.00

$10.00

$10.00

$0.00

$0.00
2000

2001

2002

2003

Op Cost/G&A/Other

2004

2005

2006

2007

2008

F&D/Exploration

Return

Taxes

Quality

Source: BMO Capital Markets, Company Reports

See pages G1 to G2 for analyst coverage.

2009

2000

2001

2002

2003

2004
Chevron

2005

2006

Integrateds

Oil & Gas Global Cost Study

Page B23

Chevron (CVX - NYSE)

US$/boe, net

International Segments
Upstream Net Revenue (US$/boe)

Production Costs (US$/boe)

$100.00

$100.00

$90.00

$90.00

$80.00

$80.00

$70.00

$70.00

$60.00

$60.00

$50.00

$50.00

$40.00

$40.00

$30.00

$30.00

$20.00

$20.00

$10.00

$10.00
$0.00

$0.00
2000

2001

2002

2003

North America

2004
Africa

2005

2006

Asia

2007

2008

2000

2009

2001

2002

2003

2004

North America

Other

Upstream Operating Earnings (US$/boe)

Africa

2005

2006

Asia

2007

2008

2009

2007

2008

2009

Other

Upstream Net Income (US$/boe)

$100.00

$100.00

$90.00

$90.00

$80.00

$80.00

$70.00

$70.00

$60.00

$60.00

$50.00

$50.00

$40.00

$40.00

$30.00

$30.00

$20.00

$20.00

$10.00

$10.00

$0.00

$0.00
2000

2001

2002

2003

North America

2004
Africa

2005

2006

Asia

2007

2008

2009

2000

2001

2002

2003

2004

North America

Other

3-Year Average Breakeven Details by Region (US$/boe)

Africa

2005

2006

Asia

Other

Required WTI Oil Price (US$/boe)

$160.00

$160.00

$140.00

$140.00

$120.00

$120.00

$100.00

$100.00

$80.00

$80.00

$60.00

$60.00

$40.00

$40.00

$20.00

$20.00

$0.00

194.27

247.83 285.17

228.09 518.41 196.36

$0.00
Africa
Op Cost/G&A/Other

Asia
F&D/Exploration

Other
Return

Source: BMO Capital Markets, Company Reports

See pages G1 to G2 for analyst coverage.

North America
Taxes

Quality

2000

2001

2002

North America

2003

2004

Africa

2005
Asia

2006
Other

2007

2008

2009

Peer Average

Page B24

Integrated Oils

Chevron (CVX - NYSE)


Consolidated Statements
Table 1: Income Statement (US$million)
Upstream Revenue, net of Royalties
Midstream / Downstream Revenue
Other
Total Revenue and Other Income
Crude Oil and Product Purchases
Production and Transportation Expenses
Marketing Expenses
Exploration / Dry Hole Costs
General and Administrative
Depreciation, Depletion and Amortization
Interest, net
Other
Earnings Before Income Tax
Current Income Taxes
Future Income Taxes
Total Income Taxes
Minority Interest
Earnings From Continuing Operations
Discontinued Operations/Extraordinary Items
Cumulative Change in Accounting Principle
Net Earnings
Preferred Stock Dividends
Net Earnings to Common Shareholders

2000
32,710
92,345
(5,925)
119,130

2001
32,393
81,920
(8,068)
106,245

2002
23,229
86,841
(11,157)
98,913

2003
28,749
104,492
(11,480)
121,761

2004
33,793
133,890
(12,383)
155,300

2005
48,537
166,198
(16,535)
198,200

2006
32,621
172,271
5,226
210,118

2007
33,949
180,142
6,813
220,904

2008
42,972
221,986
8,047
273,005

2009
22,573
144,829
4,234
171,636

69,814
8,323
949
3,626
5,321
1,110
15,827
14,160
5,801
521
6,322
(111)
7,727
7,727
15
7,712

60,549
7,650
1,039
3,984
7,059
833
16,719
8,412
4,986
(626)
4,360
(121)
3,931
(643)
3,288
6
3,282

57,249
7,848
591
4,155
5,231
565
19,061
4,213
3,105
(81)
3,024
(57)
1,132
1,132
1,132

71,583
8,553
571
4,440
5,384
474
17,906
12,850
5,180
164
5,344
(80)
7,426
(196)
7,230
7,230

94,419
9,832
697
4,557
4,935
406
19,818
20,636
7,741
(224)
7,517
(85)
13,034
294
13,328
13,328

127,968
12,191
743
4,828
5,913
482
20,782
25,293
9,696
1,402
11,098
(96)
14,099
14,099
14,099

128,151
14,624
1,364
5,093
7,506
451
20,883
32,046
14,224
614
14,838
(70)
17,138
17,138
17,138

133,309
16,932
1,323
5,926
8,708
166
22,266
32,274
13,218
261
13,479
(107)
18,688
18,688
18,688

171,397
20,795

99,653
17,857

1,169
5,756
9,528
21,303
43,057
18,428
598
19,026
(100)
23,931
23,931
23,931

1,342
4,527
12,110
28
17,591
18,528
7,498
467
7,965
(80)
10,483
10,483
10,483

Source: BMO Capital Markets, Company Reports

Table 2: Statement of Cash Flows (US$million)


Net Earnings
Charges and Credits Not Impacting Cash
Other
Cash Flow From Operations
Change in Working Capital / Other
Net Cash From Operating Activities

2000
7,727
6,304
(655)
13,376
91
13,467

2001
3,288
6,937
589
10,814
643
11,457

2002
1,132
5,438
2,248
8,818
1,125
9,943

2003
7,230
5,804
(881)
12,153
162
12,315

2004
13,328
4,997
(4,065)
14,260
430
14,690

2005
14,099
7,532
(1,472)
20,159
(54)
20,105

2006
17,138
8,640
(1,831)
23,947
376
24,323

2007
18,688
9,476
(3,376)
24,788
189
24,977

2008
23,931
10,501
(2,153)
32,279
(2,647)
29,632

2009
10,483
13,129
(869)
22,743
(3,370)
19,373

Upstream Spending
Midstream / Downstream Spending
Acquisitions, net
Other
Net Cash From Investing Activities

(4,950)
(2,679)
1,229
758
(5,642)

(4,873)
(4,840)
298
(127)
(9,542)

(5,001)
(2,596)
2,341
209
(5,047)

(5,022)
(603)
1,107
446
(4,072)

(4,674)
(1,636)
3,671
(860)
(3,499)

(7,057)
(1,644)
(3,253)
393
(11,561)

(10,919)
(2,894)
989
605
(12,219)

(15,538)
(1,140)
3,338
(593)
(13,933)

(17,460)
(2,206)
1,491
1,094
(17,081)

(17,109)
(2,734)
2,564
707
(16,572)

Net Change in Debt


Net Change in Common Stock
Net Change in Preferred Stock
Cash Dividends Paid
Other
Net Cash From Financing Activities
Effect of Exchange Rate on Cash
Net Increase/(Decrease) in Cash
Cash and Equivalents, Beginning of Year
Cash and Equivalents, End of Year

(3,202)
(2,789)
(1,498)
(7,489)
(5)
331
1,997
2,328

1,386
(751)
(2,858)
128
(2,095)
(31)
(211)
2,328
2,117

(1,121)
(2,991)
41
(4,071)
15
840
2,117
2,957

(3,941)
(75)
(3,070)
57
(7,029)
95
1,309
2,957
4,266

(1,284)
(18)
(3,277)
(1,645)
(6,224)
58
5,025
4,266
9,291

(1,055)
(140)
(3,876)
(2,597)
(7,668)
(124)
752
9,291
10,043

(2,901)
(4,456)
(4,491)
(11,848)
194
450
10,043
10,493

(3,038)
(4,868)
(6,389)
(14,295)
120
(3,131)
10,493
7,362

1,682
(5,261)
(6,821)
(10,400)
(166)
1,985
7,362
9,347

1,659
(5,302)
97
(3,546)
114
(631)
9,347
8,716

Source: BMO Capital Markets, Company Reports

See pages G1 to G2 for analyst coverage.

Oil & Gas Global Cost Study

Page B25

Chevron (CVX - NYSE)


Table 3: Balance Sheet (US$million)
Total Current Assets
Net Property, Plant and Equipment
Other Assets
Total Assets

2000
17,913
44,319
15,389
77,621

2001
18,327
43,233
16,012
77,572

2002
17,776
44,155
15,428
77,359

2003
19,426
44,538
17,506
81,470

2004
28,503
44,458
20,247
93,208

2005
34,336
63,690
27,807
125,833

2006
36,304
68,858
27,466
132,628

2007
39,377
78,610
30,799
148,786

2008
36,470
91,780
32,915
161,165

2009
37,216
96,468
30,937
164,621

Total Current Liabilities


Long-term Debt
Deferred Income Taxes
Other Liabilities and Deferred Credits
Total Liabilities
Minority Interests
Common Shares
Contributed Surplus (Paid-in Capital)
Preferred Stock
Retained Earnings
Other / Comprehensive Income (Loss)
Total Shareholders' Equity
Total Liabilities and Shareholders' Equity

16,661
12,494
6,687
7,664
43,506
746
862
5,505
300
32,206
(5,504)
33,369
77,621

20,654
8,704
6,132
7,841
43,331
283
853
4,811
32,767
(4,473)
33,958
77,572

19,876
10,666
5,619
9,291
45,452
303
853
4,833
30,942
(5,024)
31,604
77,359

16,111
10,651
6,417
11,728
44,907
268
853
4,855
35,315
(4,728)
36,295
81,470

18,795
10,217
7,268
11,526
47,806
172
1,706
4,160
45,414
(6,050)
45,230
93,208

25,011
11,807
11,262
14,877
62,957
200
1,832
13,894
55,738
(8,788)
62,676
125,833

28,409
7,679
11,647
15,749
63,484
209
1,832
14,126
68,464
(15,487)
68,935
132,628

33,798
6,070
12,170
19,456
71,494
204
1,832
14,289
82,329
(21,362)
77,088
148,786

32,023
5,742
11,539
24,744
74,048
469
1,832
14,448
101,102
(30,734)
86,648
161,165

26,211
9,829
11,521
24,499
72,060
647
1,832
14,631
106,289
(30,838)
91,914
164,621

Source: BMO Capital Markets, Company Reports

Table 4: Results of Operations from Oil & Gas Producing Activities (US$million)
Cumulative
2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

3-Year

5-Year

22,755

20,102

18,727

22,535

25,481

34,756

42,560

47,469

60,103

43,076

150,648

227,964

4,293

4,410

4,541

4,687

5,036

5,899

6,693

8,421

10,447

9,809

28,677

41,269

954

1,088

591

571

698

743

1,389

1,323

1,169

1,342

3,834

5,966

3,209

3,195

3,392

3,648

3,547

4,503

5,704

6,414

7,527

10,433

24,374

34,581

Worldwide
Net Revenue
Production Costs
Exploration
DD&A
Other
Pre-tax Earnings
Income Taxes
Net Earnings

565

2,293

1,020

1,154

-1,454

577

1,421

2,429

-579

846

2,696

4,694

13,734

9,116

9,183

12,475

17,654

23,034

27,353

28,882

41,539

20,646

91,067

141,454

6,755
6,979

4,719
4,397

4,454
4,729

5,838
6,637

8,328
9,326

11,421
11,613

14,461
12,892

14,776
14,106

21,014
20,525

9,946
10,700

45,736
45,331

71,618
69,836

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

3-Year

5-Year

10,265

9,015

7,162

9,428

9,982

12,106

13,564

14,241

17,750

11,411

43,402

69,072

2,182

2,272

2,321

2,315

2,377

2,821

3,294

3,921

4,538

3,648

12,107

18,222

395

424

216

193

233

320

431

511

370

451

1,332

2,083

1,558

1,614

1,577

1,601

1,446

1,803

2,134

2,276

2,286

3,687

8,249

12,186

Cumulative
North America
Net Revenue
Production Costs
Exploration
DD&A
Other

680

1,861

394

193

-476

531

691

354

-351

72

75

1,297

Pre-tax Earnings

5,450

2,844

2,654

5,126

6,402

6,631

7,014

7,179

10,907

3,553

21,639

35,284

Income Taxes
Net Earnings

1,927
3,523

1,074
1,770

933
1,721

1,890
3,236

2,366
4,036

2,348
4,283

2,629
4,385

2,599
4,580

3,856
7,051

1,258
2,295

7,713
13,926

12,690
22,594

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

3-Year

5-Year

12,490

11,087

11,565

13,107

15,499

22,650

28,996

33,228

42,353

31,665

107,246

158,892

2,111

2,138

2,220

2,372

2,659

3,078

3,399

4,500

5,909

6,161

16,570

23,047

559

664

375

378

465

423

958

812

799

891

2,502

3,883

1,651

1,581

1,815

2,047

2,101

2,700

3,570

4,138

5,241

6,746

16,125

22,395

Cumulative
International
Net Revenue
Production Costs
Exploration
DD&A
Other

-115

432

626

961

-978

46

730

2,075

-228

774

2,621

3,397

Pre-tax Earnings

8,284

6,272

6,529

7,349

11,252

16,403

20,339

21,703

30,632

17,093

69,428

106,170

Income Taxes
Net Earnings

4,828
3,456

3,645
2,627

3,521
3,008

3,948
3,401

5,962
5,290

9,073
7,330

11,832
8,507

12,177
9,526

17,158
13,474

8,688
8,405

38,023
31,405

58,928
47,242

Note: Based on FASB 69 disclosure


Source: BMO Capital Markets, Company Reports

See pages G1 to G2 for analyst coverage.

Page B26

Integrated Oils

Chevron (CVX - NYSE)


Table 5: Upstream Netbacks (US$/boe)
Weighted Average
2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

3-Year

5-Year

Worldwide
Net Revenue

22.68

20.45

19.54

24.47

29.37

40.05

45.59

50.16

65.57

44.07

53.04

49.11

Production Costs

4.28

4.49

4.74

5.09

5.81

6.80

7.17

8.90

11.40

10.03

10.10

8.89

Exploration

0.95

1.11

0.62

0.62

0.80

0.86

1.49

1.40

1.28

1.37

1.35

1.29

DD&A

3.20

3.25

3.54

3.96

4.09

5.19

6.11

6.78

8.21

10.67

8.58

7.45

Other
Pre-tax Earnings
Income Taxes
Net Earnings

0.56

2.33

1.06

1.25

-1.68

0.66

1.52

2.57

-0.63

0.87

0.95

1.01

13.69

9.28

9.58

13.55

20.35

26.54

29.30

30.52

45.32

21.12

32.06

30.47

6.73
6.96

4.80
4.47

4.65
4.94

6.34
7.21

9.60
10.75

13.16
13.38

15.49
13.81

15.61
14.91

22.92
22.39

10.17
10.95

16.10
15.96

15.43
15.04

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

24.36

23.19

19.55

27.69

33.48

45.57

48.59

52.49

72.30

43.53

55.72

52.18

5.18

5.85

6.34

6.80

7.97

10.62

11.80

14.45

18.48

13.91

15.54

13.76

Weighted Average
3-Year

5-Year

North America
Net Revenue
Production Costs
Exploration

0.94

1.09

0.59

0.57

0.78

1.20

1.54

1.88

1.51

1.72

1.71

1.57

DD&A

3.70

4.15

4.30

4.70

4.85

6.79

7.64

8.39

9.31

14.06

10.59

9.21

Other
Pre-tax Earnings
Income Taxes
Net Earnings

1.61

4.79

1.08

0.57

-1.60

2.00

2.48

1.30

-1.43

0.27

0.10

0.98

12.94

7.32

7.24

15.05

21.47

24.96

25.12

26.46

44.43

13.55

27.78

26.65

4.57
8.36

2.76
4.55

2.55
4.70

5.55
9.50

7.94
13.54

8.84
16.12

9.42
15.71

9.58
16.88

15.71
28.72

4.80
8.75

9.90
17.88

9.59
17.07

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

3-Year

5-Year

Weighted Average
International
Net Revenue

21.47

18.66

19.54

22.58

27.22

37.61

44.31

49.23

63.10

44.27

52.02

47.89

Production Costs

3.63

3.60

3.75

4.09

4.67

5.11

5.19

6.67

8.80

8.61

8.04

6.95

Exploration

0.96

1.12

0.63

0.65

0.82

0.70

1.46

1.20

1.19

1.25

1.21

1.17

DD&A

2.84

2.66

3.07

3.53

3.69

4.48

5.46

6.13

7.81

9.43

7.82

6.75

Other

-0.20

0.73

1.06

1.66

-1.72

0.08

1.12

3.07

-0.34

1.08

1.27

1.02

Pre-tax Earnings

14.24

10.56

11.03

12.66

19.76

27.24

31.08

32.15

45.64

23.90

33.68

32.00

8.30
5.94

6.13
4.42

5.95
5.08

6.80
5.86

10.47
9.29

15.07
12.17

18.08
13.00

18.04
14.11

25.56
20.08

12.15
11.75

18.44
15.23

17.76
14.24

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

3-Year

5-Year

Income Taxes
Net Earnings

International Segments (US$/boe):


Weighted Average
Africa
Net Revenue

26.00

23.24

23.30

27.60

32.96

47.58

58.55

67.89

84.35

57.41

69.05

63.09

Production Costs

3.05

3.39

3.67

4.58

4.97

5.01

5.34

7.44

10.71

9.35

9.19

7.68

Exploration

1.25

1.00

0.89

1.07

1.95

0.97

2.27

2.11

1.72

1.49

1.75

1.71

DD&A

2.54

2.61

2.95

3.02

3.23

3.60

4.44

5.11

9.06

14.18

9.81

7.63

Other

-0.22

1.09

1.62

1.68

-0.22

2.42

3.75

3.89

3.26

-0.55

2.00

2.42

Pre-tax Earnings

19.39

15.14

14.18

17.25

23.02

35.58

42.76

49.34

59.60

32.94

46.30

43.66

Income Taxes
Net Earnings

14.86
4.52

11.05
4.09

10.06
4.12

12.26
4.99

16.92
6.10

28.35
7.23

36.32
6.44

38.79
10.55

46.61
12.99

20.34
12.59

34.20
12.10

33.55
10.10

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

3-Year

5-Year

Weighted Average
Asia
Net Revenue

18.98

17.18

18.92

21.03

16.06

32.98

38.45

42.25

53.00

37.65

44.57

41.30

Production Costs

3.56

3.62

4.03

3.99

2.64

5.42

5.34

6.33

8.58

8.05

7.62

6.76

Exploration

0.73

0.99

0.46

0.60

0.32

0.44

1.00

0.85

1.01

0.40

0.77

0.76

DD&A

2.41

2.11

2.83

3.18

1.90

5.48

6.73

6.78

7.48

8.36

7.49

6.99

Other
Pre-tax Earnings
Income Taxes
Net Earnings

0.08

0.92

1.72

2.25

-0.01

0.03

1.59

2.18

-0.44

1.32

1.02

0.97

12.20

9.54

9.89

11.01

11.21

21.60

23.78

26.11

36.38

19.51

27.67

25.81

7.10
5.10

6.06
3.48

6.03
3.86

6.34
4.68

6.48
4.72

11.09
10.51

12.63
11.16

12.73
13.38

18.91
17.47

10.40
9.11

14.16
13.51

13.31
12.50

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

3-Year

5-Year

Weighted Average
Other International
Net Revenue

26.71

23.61

18.26

21.64

34.54

37.66

44.35

49.20

65.45

43.47

51.97

47.81

Production Costs

5.07

4.97

3.51

3.94

6.38

4.80

4.87

6.74

8.00

8.76

7.92

6.76

Exploration

1.31

1.77

0.68

0.49

0.69

0.87

1.67

1.23

1.15

1.96

1.49

1.40

DD&A

4.40

4.40

3.37

4.11

5.57

3.78

4.13

5.70

7.55

7.80

7.09

5.91

Other

-0.64

0.42

0.11

1.08

-4.06

-1.16

-1.29

4.02

-2.33

1.77

1.18

0.27

Pre-tax Earnings

16.57

12.05

10.59

12.02

25.96

29.38

34.97

31.52

51.08

23.18

34.29

33.46

6.81
9.76

4.51
7.54

3.77
6.81

4.60
7.42

10.82
15.14

12.49
16.89

14.95
20.02

14.10
17.42

22.90
28.18

9.23
13.95

14.91
19.38

14.45
19.01

Income Taxes
Net Earnings

Source: BMO Capital Markets, Company Reports


See pages G1 to G2 for analyst coverage.

Oil & Gas Global Cost Study

Page B27

Chevron (CVX - NYSE)


Table 6: Reserve Replacement Performance
2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

3-Year

5-Year

Production:
Gas Production (mmcf/d)

4,474.0

4,419.2

4,375.3

4,290.4

3,969.9

4,254.8

4,956.2

5,019.2

5,139.7

4,989.0

5,049.3

4,871.8

Liquids Production (b/d)

2,002,740

1,956,164

1,895,890

1,808,219

1,715,068

1,668,493

1,731,507

1,756,164

1,654,795

1,846,575

1,752,511

1,731,507

Total Production (boe/d)

2,748,402

2,692,694

2,625,114

2,523,288

2,376,712

2,377,626

2,557,534

2,592,694

2,511,416

2,678,082

2,594,064

2,543,470

% Gas Production

27%

27%

28%

28%

28%

30%

32%

32%

34%

31%

32%

32%

% Oil Production

73%

73%

72%

72%

72%

70%

68%

68%

66%

69%

68%

68%

17,844

19,410

19,335

20,191

19,675

23,434

22,884

22,140

23,075

26,049

23,755

8,519

8,524

8,668

8,599

7,973

8,000

7,806

7,087

7,350

6,973

7,137

7,443

11,493

11,759

11,891

11,964

11,252

11,906

11,620

10,777

11,196

11,315

11,096

11,363

Proven Reserves:
Gas Reserves (bcf)
Oil Reserves (mmbbls)
Total Proven Reserves (mmboe)
% Gas Reserves

26%

28%

27%

28%

29%

33%

33%

34%

34%

38%

36%

23,516

34%

% Oil Reserves

74%

72%

73%

72%

71%

67%

67%

66%

66%

62%

64%

66%

Proven Reserve Life Index

11.5

12.0

12.4

13.0

13.0

13.7

12.4

11.4

12.2

11.6

11.7

12.3

2,314.0

3,179.0

1,522.0

2,422.0

933.0

5,312.0

1,259.0

1,088.0

2,811.0

4,795.0

8,694.0

15,265.0

986.0

719.0

836.0

591.0

0.0

636.0

438.0

-78.0

867.0

-429.0

360.0

1,434.0

1,371.7

1,248.8

1,089.7

994.7

155.5

1,521.3

647.8

103.3

1,335.5

370.2

1,809.0

Proven Reserve Additions:


Gas Additions (bcf)
Oil Additions (mmbbls)
Total Additions (mmboe)

3,978.2

Addition Components (mmboe):


Extensions, Discoveries and Additions

1,075.0

931.0

842.5

489.7

230.5

457.3

325.3

166.5

92.0

833.2

1,091.7

1,874.3

Acquisitions

187.7

187.0

24.8

24.7

3.5

1,514.7

154.8

384.7

85.5

36.0

506.2

2,175.7

Dispositions

-314.8

-41.0

-3.5

-77.7

-270.2

-102.3

-39.8

-482.8

-27.7

-28.5

(539.0)

(681.2)

423.8

171.8

225.8

558.0

191.7

-348.3

207.5

35.0

1,185.7

-470.5

750.2

609.3

Revisions of Estimates
Components as % of Total Additions (mmboe):
Extensions, Discoveries and Additions

78.4%

74.5%

77.3%

49.2%

148.2%

30.1%

50.2%

161.1%

6.9%

225.1%

60.3%

47.1%

Acquisitions

13.7%

15.0%

2.3%

2.5%

2.3%

99.6%

23.9%

372.3%

6.4%

9.7%

28.0%

54.7%

Dispositions

-23.0%

-3.3%

-0.3%

-7.8%

-173.7%

-6.7%

-6.1%

-467.3%

-2.1%

-7.7%

-29.8%

-17.1%

30.9%

13.8%

20.7%

56.1%

123.3%

-22.9%

32.0%

33.9%

88.8%

-127.1%

41.5%

15.3%

Additions as % of Production:
Gas

141.7%

197.1%

95.3%

154.7%

64.4%

342.0%

69.6%

59.4%

149.8%

263.3%

157.2%

171.7%

Oil

134.9%

100.7%

120.8%

89.5%

0.0%

104.4%

69.3%

-12.2%

143.5%

-63.6%

18.8%

45.4%

Total

136.7%

127.1%

113.7%

108.0%

17.9%

175.3%

69.4%

10.9%

145.7%

37.9%

63.7%

85.7%

Gas

13.0%

16.4%

7.9%

12.0%

4.7%

22.7%

5.5%

4.9%

12.2%

18.4%

36.6%

64.9%

Oil

11.6%

8.4%

9.6%

6.9%

0.0%

8.0%

5.6%

-1.1%

11.8%

-6.2%

5.0%

19.3%

Total

11.9%

10.6%

9.2%

8.3%

1.4%

12.8%

5.6%

1.0%

11.9%

3.3%

16.3%

35.0%

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

3-Year

5-Year

Exploration

$1,428

$1,589

$1,153

$975

$1,077

$1,365

$1,947

$1,833

$1,929

$1,924

$5,686

$8,998

Development

$3,913

$4,508

$4,495

$4,201

$4,746

$6,474

$10,039

$14,303

$15,950

$12,161

$42,414

$58,927

Acquisitions

$701

$599

$166

$149

$254

$17,405

$959

$518

$1,116

$32

$1,666

$20,030

Dispositions

na

na

na

na

na

na

na

na

na

na

na

na

$6,042

$6,696

$5,814

$5,325

$6,077

$25,244

$12,945

$16,654

$18,995

$14,117

$49,766

$87,955

23.6%
64.8%
11.6%

23.7%
67.3%
8.9%

19.8%
77.3%
2.9%

18.3%
78.9%
2.8%

17.7%
78.1%
4.2%

5.4%
25.6%
68.9%

15.0%
77.6%
7.4%

11.0%
85.9%
3.1%

10.2%
84.0%
5.9%

13.6%
86.1%
0.2%

11.4%
85.2%
3.3%

10.2%
67.0%
22.8%

$11,142
$11.11
3.1x

$8,680
$8.83
1.7x

$8,712
$9.09
1.7x

$10,856
$11.79
2.4x

$13,571
$15.64
1.1x

$16,859
$19.43
1.2x

$19,985
$21.41
1.1x

$21,843
$23.08
0.8x

$29,221
$31.88
2.3x

$22,475
$22.99
0.6x

$73,539
$25.89
1.2x

$110,383
$23.78
1.3x

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

3-Year

5-Year
$27.35

Revisions of Estimates

Additions as % of Reserves:

Capital Expenditures (US$million):

Total Expenditures
Expenditures as % of Total (US$million):
Exploration
Development
Acquisitions
Cashflow (US$million)
Cashflow (US$/boe)
Recycle Ratio

F&D Costs (US$/boe):


Exploration & Development (incl. revisions)

$3.56

$5.53

$5.29

$4.94

$13.79

$71.92

$22.49

$80.08

$13.99

$38.84

$26.12

Acquisition Costs

$3.74

$3.20

$6.68

$6.04

$72.57

$11.49

$6.19

$1.35

$13.05

$0.89

$3.29

$9.21

All Sources (incl. revisions)

$3.58

$5.19

$5.32

$4.97

$14.28

$15.55

$18.82

$28.41

$13.93

$35.41

$21.20

$18.88
$36.24

Exploration & Development (excl. revisions)

$4.97

$6.55

$6.70

$10.57

$25.26

$17.14

$36.84

$96.91

$194.34

$16.91

$44.06

Acquisition Costs

$3.74

$3.20

$6.68

$6.04

$72.57

$11.49

$6.19

$1.35

$13.05

$0.89

$3.29

$9.21

All Sources (excl. revisions)

$4.79

$5.99

$6.70

$10.35

$25.97

$12.80

$26.96

$30.22

$107.01

$16.24

$31.15

$21.72

North America

$6.21

$93.66

$76.76

$11.65

-$18.53

$15.56

$31.30

$57.90

$183.29

$45.71

$70.67

$32.80

Africa

$1.80

$2.40

$1.44

$10.29

$14.74

$16.06

$192.35

-$47.07

$254.38

$286.48

-$181.59

$208.72

Asia Pacific

$5.33

$4.72

$11.11

$3.82

-$57.83

$13.76

$8.63

$56.85

$7.35

-$106.29

$13.81

$13.01

Other International

$2.20

$3.07

$5.58

$2.63

$4.98

$25.47

$12.47

$5.36

$6.30

$10.88

$7.06

$9.39

Geographically Segmented Costs

Note: Reserve estimates reported after royalties


Source: BMO Capital Markets, Company Reports

See pages G1 to G2 for analyst coverage.

Page B28

Integrated Oils

Chevron (CVX - NYSE)


Breakeven Analysis
Table 7: Breakeven Oil Price Analysis (US$/boe)
Worldwide
Operating Costs
Exploration Expense
G&A/Other
F&D Costs
Return on Capital
Income Taxes
Breakeven Oil Price
Quality Differential
Required WTI Price

North America
Operating Costs
Exploration Expense
G&A/Other
F&D Costs
Return on Capital
Income Taxes
Breakeven Oil Price
Quality Differential
Required WTI Price

International
Operating Costs
Exploration Expense
G&A/Other
F&D Costs
Return on Capital
Income Taxes
Breakeven Oil Price
Quality Differential
Required WTI Price

2000
4.28
0.95
0.56
3.58
2.60
2.51
14.48
6.42
20.90

2000
5.18
0.94
1.61
6.21
3.63
1.99
19.56
4.10
23.66

2000
3.63
0.96
(0.20)
2.83
2.34
3.27
12.84
8.10
20.94

2001

2002

4.49
1.11
2.33
5.19
3.94
4.22
21.28
5.03
26.31

4.74
0.62
1.06
5.32
4.20
3.95
19.89
4.99
24.88

2001
5.85
1.09
4.79
93.66
54.05
32.79
192.22
2.04
194.27

2002
6.34
0.59
1.08
76.76
41.78
22.65
149.19
4.24
153.44

2001
3.60
1.12
0.73
3.28
2.90
4.02
15.63
6.98
22.62

2002
3.75
0.63
1.06
3.70
3.52
4.12
16.79
5.39
22.18

2003
5.09
0.62
1.25
4.97
4.11
3.62
19.66
7.18
26.85

2003
6.80
0.57
0.57
11.65
6.32
3.69
29.59
4.10
33.69

2003
4.09
0.65
1.66
3.98
4.02
4.67
19.06
8.86
27.92

2004
5.81
0.80
(1.68)
14.28
11.81
10.55
41.56
10.81
52.38

2004
7.97
0.78
(1.60)
23.36
11.53
6.76
48.80
6.27
55.08

2004
4.67
0.82
(1.72)
8.29
8.37
9.44
29.87
13.21
43.08

2005
6.80
0.86
0.66
15.55
13.67
13.44
50.98
15.73
66.71

2005
10.62
1.20
2.00
15.56
9.44
5.18
44.01
10.15
54.16

2005
5.11
0.70
0.08
15.54
15.56
19.26
56.25
18.41
74.66

2006
7.17
1.49
1.52
18.82
14.86
16.66
60.53
12.84
73.37

2006
11.80
1.54
2.48
31.30
16.85
10.10
74.07
8.03
82.10

2006
5.19
1.46
1.12
15.84
14.35
19.96
57.92
14.80
72.72

2007
8.90
1.40
2.57
28.41
20.46
21.43
83.16
12.59
95.75

2007
14.45
1.88
1.30
57.90
31.32
17.78
124.64
8.54
133.17

2007
6.67
1.20
3.07
21.79
17.57
22.46
72.77
14.22
86.99

2008
11.40
1.28
(0.63)
13.93
10.81
11.07
47.85
18.29
66.14

2008
18.48
1.51
(1.43)
110.44
57.53
31.46
218.00
10.09
228.09

2008
8.80
1.19
(0.34)
9.95
8.67
11.04
39.32
21.29
60.61

2009
10.03
1.37
0.87
35.41
25.91
24.09
97.69
6.41
104.10

2009
13.91
1.72
0.27
45.71
19.77
10.84
92.23
6.42
98.65

2009
8.61
1.25
1.08
32.56
28.24
29.19
100.93
6.41
107.34

International Segments (US$/boe):


Africa
Operating Costs
Exploration Expense
G&A/Other
F&D Costs
Return on Capital
Income Taxes
Breakeven Oil Price
Quality Differential
Required WTI Price

Asia
Operating Costs
Exploration Expense
G&A/Other
F&D Costs
Return on Capital
Income Taxes
Breakeven Oil Price
Quality Differential
Required WTI Price

Other
Operating Costs
Exploration Expense
G&A/Other
F&D Costs
Return on Capital
Income Taxes
Breakeven Oil Price
Quality Differential
Required WTI Price

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

3.05
1.25
(0.22)
1.80
1.40
4.61
11.90
4.17
16.07

3.39
1.00
1.09
2.40
2.15
5.81
15.84
2.65
18.49

3.67
0.89
1.62
1.44
1.91
4.66
14.18
2.59
16.77

4.58
1.07
1.68
10.29
14.28
35.08
66.99
3.48
70.47

4.97
1.95
(0.22)
14.74
19.14
53.10
93.69
8.24
101.93

5.01
0.97
2.42
16.06
20.88
81.86
127.20
8.97
136.18

5.34
2.27
3.75
27.20
30.50
172.11
241.17
6.66
247.83

7.44
2.11
3.89
46.00
47.55
174.79
281.79
3.38
285.17

10.71
1.72
3.26
89.37
87.47
313.75
506.27
12.14
518.41

9.35
1.49
(0.55)
64.48
45.38
73.30
193.45
2.91
196.36

2000

2001

3.56
0.73
0.08
5.33
3.65
2.55
15.90
10.72
26.62

3.62
0.99
0.92
4.72
3.41
2.04
15.72
8.52
24.24

2000

2001

5.07
1.31
(0.64)
2.20
1.10
1.53
10.57
2.14
12.71

4.97
1.77
0.42
3.07
1.44
2.51
14.19
1.73
15.92

2002
4.03
0.46
1.72
11.11
7.54
4.18
29.03
6.14
35.17

2002
3.51
0.68
0.11
5.58
5.88
9.18
24.94
6.06
31.00

Source: BMO Capital Markets, Company Reports


See pages G1 to G2 for analyst coverage.

2003
3.99
0.60
2.25
3.82
2.73
1.69
15.08
10.42
25.49

2003
3.94
0.49
1.08
2.63
2.95
4.00
15.09
9.98
25.07

2004
2.64
0.32
(0.01)
26.96
18.63
13.32
61.86
24.33
86.19

2005
5.42
0.44
0.03
13.76
9.79
7.24
36.68
22.89
59.57

2006
5.34
1.00
1.59
8.63
4.96
3.71
25.24
18.35
43.58

2004

2005

2006

6.38
0.69
(4.06)
4.98
5.95
8.17
22.11
5.53
27.64

4.80
0.87
(1.16)
25.47
31.79
33.54
95.31
18.26
113.57

4.87
1.67
(1.29)
12.47
16.39
18.55
52.65
14.46
67.11

2007
6.33
0.85
2.18
56.85
27.94
22.61
116.76
17.97
134.73

2007
6.74
1.23
4.02
5.36
6.54
6.22
30.10
14.70
44.80

2008
8.58
1.01
(0.44)
7.35
4.53
3.68
24.69
25.53
50.22

2008
8.00
1.15
(2.33)
6.30
7.93
8.58
29.62
20.44
50.06

2009
8.05
0.40
1.32
13.81
7.63
5.05
36.26
9.32
45.59

2009
8.76
1.96
1.77
10.88
13.88
15.85
53.10
5.45
58.56

Weighted Average
3-Year
5-Year
10.10
1.35
0.95
21.20
15.64
15.78
65.01
12.43
77.43

8.89
1.29
1.01
18.88
14.67
15.05
59.79
13.17
72.96

Weighted Average
3-Year
5-Year
15.54
1.71
0.10
70.67
33.95
18.80
140.78
8.35
149.13

13.76
1.57
0.98
32.80
16.93
9.51
75.56
8.65
84.20

Weighted Average
3-Year
5-Year
8.04
1.21
1.27
15.95
13.46
16.30
56.23
13.97
70.20

6.95
1.17
1.02
15.81
14.03
17.50
56.48
15.02
71.51

Weighted Average
3-Year
5-Year
9.19
1.75
2.00
66.62
63.55
179.70
322.81
6.14
328.95

7.68
1.71
2.42
66.64
70.05
232.65
381.14
6.81
387.96

Weighted Average
3-Year
5-Year
7.62
0.77
1.02
13.81
7.64
5.88
36.74
17.61
54.35

6.76
0.76
0.97
13.01
7.67
5.83
35.00
18.81
53.81

Weighted Average
3-Year
5-Year
7.92
1.49
1.18
7.06
8.86
9.29
35.80
13.53
49.33

6.76
1.40
0.27
9.39
11.83
12.60
42.26
14.66
56.92

Oil & Gas Global Cost Study

Page B29

China Petroleum and Chemical Corporation (Sinopec) (SNP - NYSE)

US$, net

Sinopec reported operating costs above the group average but reported the groups second-lowest income tax burden. This low tax rate supported net income
of $8.77/boe, slightly below the group average of $9.40/boe.
Reserve replacement performance was sub-par, as Sinopec reported the groups second-highest F&D costs, at $31.00/boe compared with the peer average
of $12.08/boe. Despite this weakness, Sinopec benefited from positive revisions. Excluding this benefit, reserve replacement costs increased to $44.45/boe
and remain above the group average of $21.72/boe.
The companys high cost structure and poor reserve replacement performance resulted in an implied WTI equivalent breakeven oil price of $95.23/boe,
above the group average of $52.51/boe. On a three-year average basis Sinopec required the groups third-highest implied breakeven price, at $86.51/boe
compared with the group average of $65.26/boe.
Notes: All upstream financial figures, as well as reserve and production values are based upon FASB Statement No. 69 disclosure. All financial figures have
been converted from yuan to U.S. dollars using average annual exchange rates.
Capital Spending by Region (US$million)

4,200

13.5

4,100

13.0

4,000

12.5

3,900

12.0

3,800

11.5

3,700

11.0

3,600

10.5

3,500

$25,000

$20,000

$15,000
Years

mmboe (net)

Proven Reserves vs RLI

10.0
2000

2001

2002

2003

2004

2005

2006

Proven Reserves

2007

2008

$10,000

$5,000

$0
2000

2009

2001

2002

2003

2004

2005

2006

2007

2008

2009

China

RLI

Proven Reserve Additions by Region (million boe)

F&D Costs Including Revisions (US$/boe)

700

$40.00

600

$35.00
$30.00

500

$25.00

400

$20.00
300

$15.00

200

$10.00

100

$5.00

$0.00
2000

2001

2002

2003

2004

2005

2006

2007

2008

2000

2009

China

$40.00

$35.00

$35.00

$30.00

$30.00

$25.00

$25.00

$20.00

$20.00

$15.00

$15.00

$10.00

$10.00

$5.00

$5.00

$0.00
2002

2003

2004

2005

2003

2004

2005

2006

China

Source: BMO Capital Markets, Company Reports


See pages G1 to G2 for analyst coverage.

2006

2007

Acquisitions

2008

2009

All Sources

3-Year Average F&D Costs Including Revisions (US$/boe)

$40.00

2001

2002

Exploration and Development

F&D Costs Including Revisions by Region (US$/boe)

2000

2001

2007

2008

2009

$0.00
2001

2002

2003

2004

Sinopec

2005

2006

Integrateds

2007
Industry

2008

2009

Page B30

Integrated Oils

China Petroleum and Chemical Corporation (Sinopec) (SNP - NYSE) US$/boe, net
Worldwide
Upstream Net Revenue (US$/boe)

Production Costs (US$/boe)

$80.00

$80.00

$70.00

$70.00

$60.00

$60.00

$50.00

$50.00

$40.00

$40.00

$30.00

$30.00

$20.00

$20.00

$10.00

$10.00
$0.00

$0.00
2000

2001

2002

2003

2004

2005

Sinopec

2006

2007

2008

2000

2009

2001

2002

2003

2004
Sinopec

Integrateds

Upstream Operating Earnings (US$/boe)

2005

2006

2007

2008

2009

2007

2008

2009

2007

2008

2009

Integrateds

Upstream Net Income (US$/boe)

$80.00

$80.00

$70.00

$70.00

$60.00

$60.00

$50.00

$50.00

$40.00

$40.00

$30.00

$30.00

$20.00

$20.00

$10.00

$10.00

$0.00

$0.00
2000

2001

2002

2003

2004

2005

Sinopec

2006

2007

2008

2009

2000

2001

2002

2003

Integrateds

2004
Sinopec

Breakeven Details - International (US$/boe)

2005

2006

Integrateds

Required WTI Oil Price - International (US$/boe)

$140.00

$140.00

$120.00

$120.00

$100.00

$100.00

$80.00

$80.00

$60.00

$60.00

$40.00

$40.00

$20.00

$20.00

$0.00

$0.00
2000

2001

2002

2003

Op Cost/G&A/Other

2004

2005

2006

2007

2008

F&D/Exploration

Return

Taxes

Quality

Source: BMO Capital Markets, Company Reports

See pages G1 to G2 for analyst coverage.

2009

2000

2001

2002

2003

2004
Sinopec

2005

2006

Integrateds

Oil & Gas Global Cost Study

Page B31

China Petroleum and Chemical Corporation (Sinopec) (SNP - NYSE) US$/boe, net
Total International
Upstream Net Revenue (US$/boe)

Production Costs (US$/boe)

$80.00

$80.00

$70.00

$70.00

$60.00

$60.00

$50.00

$50.00

$40.00

$40.00

$30.00

$30.00

$20.00

$20.00

$10.00

$10.00
$0.00

$0.00
2000

2001

2002

2003

2004

2005

Sinopec

2006

2007

2008

2000

2009

2001

2002

2003

2004
Sinopec

Integrateds

Upstream Operating Earnings (US$/boe)

2005

2006

2007

2008

2009

2007

2008

2009

2007

2008

2009

Integrateds

Upstream Net Income (US$/boe)

$80.00

$80.00

$70.00

$70.00

$60.00

$60.00

$50.00

$50.00

$40.00

$40.00

$30.00

$30.00

$20.00

$20.00

$10.00

$10.00

$0.00

$0.00
2000

2001

2002

2003

2004

2005

Sinopec

2006

2007

2008

2009

2000

2001

2002

2003

Integrateds

2004
Sinopec

Breakeven Details - International (US$/boe)

2005

2006

Integrateds

Required WTI Oil Price - International (US$/boe)

$140.00

$140.00

$120.00

$120.00

$100.00

$100.00

$80.00

$80.00

$60.00

$60.00

$40.00

$40.00

$20.00

$20.00

$0.00

$0.00
2000

2001

2002

2003

Op Cost/G&A/Other

2004

2005

2006

2007

2008

F&D/Exploration

Return

Taxes

Quality

Source: BMO Capital Markets, Company Reports

See pages G1 to G2 for analyst coverage.

2009

2000

2001

2002

2003

2004
Sinopec

2005

2006

Integrateds

Page B32

Integrated Oils

China Petroleum and Chemical Corporation (Sinopec) (SNP - NYSE)


Consolidated Statements
Table 1: Income Statement (US$million)
Upstream Revenue, net of Royalties
Midstream / Downstream Revenue
Other
Total Revenue and Other Income

2000
7,063
32,237
753
40,053

2001
6,576
30,194
1,706
38,476

2002
6,080
34,257
1,958
42,296

2003
7,518
44,427
2,302
54,246

2004
9,185
62,968
2,729
74,882

2005
14,063
85,675
1,193
100,931

2006
17,963
115,220
647
133,830

2007
19,154
139,241
639
159,034

2008
25,582
182,226
7,317
215,126

2009
15,568
181,324
196,892

Crude Oil and Product Purchases


Production and Transportation Expenses
Marketing Expenses
Exploration / Dry Hole Costs
General and Administrative
Depreciation, Depletion and Amortization
Interest, net
Other
Earnings Before Income Tax
Current Income Taxes
Future Income Taxes
Total Income Taxes
Minority Interest
Earnings From Continuing Operations
Discontinued Operations/Extraordinary Items
Cumulative Change in Accounting Principle
Net Earnings
Preferred Stock Dividends
Net Earnings to Common Shareholders

27,040
1,887
366
3,960
2,510
701
(160)
3,749
1,089
75
1,164
(219)
2,366
2,366
2,366

26,149
1,928
456
3,935
2,710
426
(108)
2,980
778
192
970
(74)
1,936
1,936
1,936

28,543
1,937
527
4,547
3,201
553
(24)
3,010
800
105
905
(136)
1,969
1,969
1,969

37,892
2,073
741
5,466
3,377
488
(24)
4,234
1,331
(45)
1,286
(238)
2,709
2,709
2,709

54,158
2,214
773
6,210
3,908
509
(90)
7,202
2,239
(87)
2,152
(697)
4,352
4,352
4,352

78,647
2,858
783
6,543
3,802
650
(229)
7,877
2,581
(155)
2,426
(403)
5,048
5,048
5,048

106,773
4,368
1,001
7,364
4,209
823
(561)
9,852
3,041
(92)
2,948
(180)
6,724
6,724
6,724

126,992
5,582
1,460
8,018
5,694
908
(593)
10,973
3,796
(546)
3,250
(291)
7,432
7,432
7,432

184,830
9,614
1,196
9,032
6,665
1,649
(1,042)
3,182
119
(527)
(409)
514
4,104
4,104
4,104

159,428
6,022
1,544
10,150
7,390
1,040
(475)
11,794
2,420
(65)
2,354
(399)
9,041
9,041
9,041

Source: BMO Capital Markets, Company Reports

Table 2: Statement of Cash Flows (US$million)


Net Earnings
Charges and Credits Not Impacting Cash
Other
Cash Flow From Operations
Change in Working Capital / Other
Net Cash From Operating Activities

2000
2,585
2,992
(123)
5,453
(1,928)
3,525

2001
1,936
3,129
(31)
5,035
1,644
6,679

2002
1,969
3,522
59
5,550
1,307
6,856

2003
2,709
3,959
398
7,065
437
7,502

2004
4,352
4,853
744
9,949
(1,602)
8,346

2005
5,451
4,180
(7)
9,624
(21)
9,602

2006
6,904
5,206
(440)
11,670
(66)
11,604

2007
7,723
6,511
(226)
14,008
1,715
15,722

2008
3,591
5,057
(520)
8,128
1,443
9,571

2009
9,439
10,919
(376)
19,982
2,279
22,261

Upstream Spending
Midstream / Downstream Spending
Acquisitions, net
Other
Net Cash From Investing Activities

(1,789)
(3,727)
(175)
(2,078)
(7,769)

(2,450)
(4,308)
(325)
2,434
(4,649)

(2,444)
(2,703)
(159)
99
(5,207)

(2,492)
(3,372)
(118)
(141)
(6,124)

(2,565)
(6,329)
(80)
34
(8,940)

(3,110)
(5,718)
(817)
110
(9,535)

(4,415)
(5,527)
(3,079)
53
(12,968)

(7,165)
(7,278)
(983)
493
(14,933)

(8,294)
(7,378)
(210)
50
(15,832)

(7,546)
(7,789)
(651)
(1,000)
(16,986)

1,214
2,938
(70)
(96)
3,987
(0)
(258)
2,628
2,370

(1,629)
1,407
(811)
(827)
(1,859)
(1)
169
2,371
2,540

(941)
(1,047)
(27)
(2,015)
1
(365)
2,700
2,335

(832)
(943)
27
(1,749)
1
(370)
2,335
1,965

2,068
(1,048)
(413)
607
0
14
1,965
1,979

1,333
(1,270)
(582)
(520)
(3)
(455)
2,297
1,842

1,751
(1,414)
23
361
(3)
(1,007)
1,893
886

1,790
(1,824)
(664)
(698)
(8)
83
929
1,012

8,408
(1,809)
(438)
6,161
(11)
(112)
1,120
1,008

(2,798)
(1,985)
(237)
(5,020)
255
1,026
1,281

Net Change in Debt


Net Change in Common Stock
Net Change in Preferred Stock
Cash Dividends Paid
Other
Net Cash From Financing Activities
Effect of Exchange Rate on Cash
Net Increase/(Decrease) in Cash
Cash and Equivalents, Beginning of Year
Cash and Equivalents, End of Year

Source: BMO Capital Markets, Company Reports

See pages G1 to G2 for analyst coverage.

Oil & Gas Global Cost Study

Page B33

China Petroleum and Chemical Corporation (Sinopec) (SNP - NYSE)


Table 3: Balance Sheet (US$million)
Total Current Assets
Net Property, Plant and Equipment
Other Assets
Total Assets

2000
16,449
23,419
2,984
42,851

2001
13,265
26,564
4,475
44,304

2002
12,563
30,155
4,322
47,039

2003
12,449
32,709
5,608
50,765

2004
14,531
34,328
8,482
57,340

2005
17,951
38,743
10,327
67,021

2006
18,375
44,625
13,621
76,621

2007
24,336
49,318
22,673
96,328

2008
23,798
66,932
21,380
112,109

2009
29,464
60,301
38,736
128,501

Total Current Liabilities


Long-term Debt
Deferred Income Taxes
Other Liabilities and Deferred Credits
Total Liabilities
Minority Interests
Common Shares
Contributed Surplus (Paid-in Capital)
Preferred Stock
Retained Earnings
Other / Comprehensive Income (Loss)
Total Shareholders' Equity
Total Liabilities and Shareholders' Equity

15,118
8,577
214
54
23,963
2,804
10,135
5,949
16,084
42,851

15,067
8,095
360
97
23,619
2,844
10,475
7,366
17,841
44,304

14,430
9,325
435
156
24,346
2,901
10,475
9,318
19,793
47,039

15,618
10,547
556
175
26,896
3,147
10,475
10,247
20,722
50,765

17,673
11,790
681
122
30,266
3,751
10,475
12,848
23,323
57,340

21,364
13,708
729
95
35,896
3,745
10,584
16,797
27,380
67,021

27,141
12,624
795
104
40,664
2,800
10,876
22,282
33,157
76,621

34,885
15,817
741
1,139
52,582
3,329
11,398
29,018
40,417
96,328

41,245
18,294
753
1,668
61,960
2,972
12,475
34,703
47,177
112,109

45,879
21,347
729
2,161
70,116
3,395
12,692
42,299
54,990
128,501

Source: BMO Capital Markets, Company Reports

Table 4: Results of Operations from Oil & Gas Producing Activities (US$million)
Cumulative
2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

3-Year

5-Year

Net Revenue

6,884

6,288

5,811

7,145

8,872

12,356

15,973

16,770

25,502

15,508

57,781

86,110

Production Costs

1,887

1,928

1,937

2,073

2,268

2,858

4,368

5,582

9,614

6,022

21,217

28,443

Worldwide

Exploration

366

456

527

741

773

783

1,001

1,460

1,196

1,544

4,199

5,983

DD&A

694

861

983

1,049

1,414

1,293

1,631

2,458

3,844

3,842

10,143

13,067

Other

Pre-tax Earnings

3,937

3,043

2,364

3,282

4,417

7,422

8,973

7,271

10,849

4,101

22,221

38,616

Income Taxes
Net Earnings

1,238
2,699

1,004
2,039

780
1,584

1,083
2,199

1,458
2,959

2,449
4,973

2,961
6,012

2,399
4,871

2,712
8,137

1,025
3,076

6,137
16,084

11,547
27,069

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

3-Year

5-Year

Net Revenue

na

na

na

na

na

na

na

na

na

na

na

na

Production Costs

na

na

na

na

na

na

na

na

na

na

na

na

Exploration

na

na

na

na

na

na

na

na

na

na

na

na

DD&A

na

na

na

na

na

na

na

na

na

na

na

na

Other

na

na

na

na

na

na

na

na

na

na

na

na

Pre-tax Earnings

na

na

na

na

na

na

na

na

na

na

na

na

Income Taxes
Net Earnings

na
na

na
na

na
na

na
na

na
na

na
na

na
na

na
na

na
na

na
na

na
na

na
na

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

3-Year

Cumulative
North America

Cumulative
5-Year

International
Net Revenue

6,884

6,288

5,811

7,145

8,872

12,356

15,973

16,770

25,502

15,508

57,781

86,110

Production Costs

1,887

1,928

1,937

2,073

2,268

2,858

4,368

5,582

9,614

6,022

21,217

28,443

Exploration

366

456

527

741

773

783

1,001

1,460

1,196

1,544

4,199

5,983

DD&A

694

861

983

1,049

1,414

1,293

1,631

2,458

3,844

3,842

10,143

13,067

Pre-tax Earnings

Other

3,937

3,043

2,364

3,282

4,417

7,422

8,973

7,271

10,849

4,101

22,221

38,616

Income Taxes
Net Earnings

1,238
2,699

1,004
2,039

780
1,584

1,083
2,199

1,458
2,959

2,449
4,973

2,961
6,012

2,399
4,871

2,712
8,137

1,025
3,076

6,137
16,084

11,547
27,069

Note: Based on FASB 69 disclosure


Source: BMO Capital Markets, Company Reports

See pages G1 to G2 for analyst coverage.

Page B34

Integrated Oils

China Petroleum and Chemical Corporation (Sinopec) (SNP - NYSE)


Table 5: Upstream Netbacks (US$/boe)
Weighted Average
2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

3-Year

5-Year

24.13

21.23

19.38

23.63

28.76

39.10

48.72

49.45

73.74

44.20

55.78

51.27

6.61

6.51

6.46

6.86

7.35

9.04

13.32

16.46

27.80

17.16

20.48

16.93

Worldwide
Net Revenue
Production Costs
Exploration

1.28

1.54

1.76

2.45

2.50

2.48

3.05

4.30

3.46

4.40

4.05

3.56

DD&A

2.43

2.91

3.28

3.47

4.58

4.09

4.97

7.25

11.11

10.95

9.79

7.78

Other

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

13.80

10.28

7.88

10.85

14.32

23.49

27.37

21.44

31.37

11.69

21.45

22.99

4.34
9.46

3.39
6.88

2.60
5.28

3.58
7.27

4.72
9.59

7.75
15.74

9.03
18.34

7.07
14.36

7.84
23.53

2.92
8.77

5.92
15.53

6.87
16.12

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

Net Revenue

na

na

na

na

na

na

na

na

na

na

na

na

Production Costs

na

na

na

na

na

na

na

na

na

na

na

na

Exploration

na

na

na

na

na

na

na

na

na

na

na

na

DD&A

na

na

na

na

na

na

na

na

na

na

na

na

Other

na

na

na

na

na

na

na

na

na

na

na

na

Pre-tax Earnings

na

na

na

na

na

na

na

na

na

na

na

na

Income Taxes
Net Earnings

na
na

na
na

na
na

na
na

na
na

na
na

na
na

na
na

na
na

na
na

na
na

na
na

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

24.13

21.23

19.38

23.63

28.76

39.10

48.72

49.45

73.74

44.20

55.78

51.27

6.61

6.51

6.46

6.86

7.35

9.04

13.32

16.46

27.80

17.16

20.48

16.93

Pre-tax Earnings
Income Taxes
Net Earnings

Weighted Average
3-Year

5-Year

North America

Weighted Average
3-Year

5-Year

International
Net Revenue
Production Costs
Exploration

1.28

1.54

1.76

2.45

2.50

2.48

3.05

4.30

3.46

4.40

4.05

3.56

DD&A

2.43

2.91

3.28

3.47

4.58

4.09

4.97

7.25

11.11

10.95

9.79

7.78

Other
Pre-tax Earnings
Income Taxes
Net Earnings

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

13.80

10.28

7.88

10.85

14.32

23.49

27.37

21.44

31.37

11.69

21.45

22.99

4.34
9.46

3.39
6.88

2.60
5.28

3.58
7.27

4.72
9.59

7.75
15.74

9.03
18.34

7.07
14.36

7.84
23.53

2.92
8.77

5.92
15.53

6.87
16.12

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

24.13

21.23

19.38

23.63

28.76

39.10

48.72

49.45

73.74

44.20

55.78

51.27

6.61

6.51

6.46

6.86

7.35

9.04

13.32

16.46

27.80

17.16

20.48

16.93

International Segments (US$/boe):


Weighted Average
3-Year

5-Year

China
Net Revenue
Production Costs
Exploration

1.28

1.54

1.76

2.45

2.50

2.48

3.05

4.30

3.46

4.40

4.05

3.56

DD&A

2.43

2.91

3.28

3.47

4.58

4.09

4.97

7.25

11.11

10.95

9.79

7.78

Other
Pre-tax Earnings
Income Taxes
Net Earnings

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

13.80

10.28

7.88

10.85

14.32

23.49

27.37

21.44

31.37

11.69

21.45

22.99

4.34
9.46

3.39
6.88

2.60
5.28

3.58
7.27

4.72
9.59

7.75
15.74

9.03
18.34

7.07
14.36

7.84
23.53

2.92
8.77

5.92
15.53

6.87
16.12

Source: BMO Capital Markets, Company Reports

See pages G1 to G2 for analyst coverage.

Oil & Gas Global Cost Study

Page B35

China Petroleum and Chemical Corporation (Sinopec) (SNP - NYSE)


Table 6: Reserve Replacement Performance
2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

3-Year

5-Year

Production:
367.1

446.6

490.4

515.1

567.1

608.2

704.1

775.3

802.7

819.2

799.1

741.9

Liquids Production (b/d)

Gas Production (mmcf/d)

720,548

736,986

739,726

742,466

750,685

764,384

780,822

800,000

813,699

824,658

812,785

796,712

Total Production (boe/d)

781,735

811,416

821,461

828,311

845,205

865,753

898,174

929,224

947,489

961,187

945,967

920,365

% Gas Production

8%

9%

10%

10%

11%

12%

13%

14%

14%

14%

14%

13%

% Oil Production

92%

91%

90%

90%

89%

88%

87%

86%

86%

86%

86%

87%

Gas Reserves (bcf)

3,342

3,488

3,329

2,888

3,033

2,952

2,856

6,331

6,959

6,739

6,676

5,167

Oil Reserves (mmbbls)

3,168

3,215

3,320

3,257

3,267

3,294

3,293

3,024

2,841

2,820

2,895

3,054

Total Proven Reserves (mmboe)

Proven Reserves:

3,725

3,796

3,875

3,738

3,773

3,786

3,769

4,079

4,001

3,943

4,008

3,916

% Gas Reserves

15%

15%

14%

13%

13%

13%

13%

26%

29%

28%

28%

22%

% Oil Reserves

85%

85%

86%

87%

87%

87%

87%

74%

71%

72%

72%

78%

Proven Reserve Life Index

13.1

12.8

12.9

12.4

12.2

12.0

11.5

12.0

11.6

11.2

11.6

11.7

Proven Reserve Additions:


1,445.0

309.0

20.0

-253.0

352.0

141.0

161.0

3,758.0

921.0

79.0

4,758.0

5,060.0

Oil Additions (mmbbls)

Gas Additions (bcf)

403.0

316.0

375.0

208.0

284.0

306.0

284.0

23.0

114.0

280.0

417.0

1,007.0

Total Additions (mmboe)

643.8

367.5

378.3

165.8

342.7

329.5

310.8

649.3

267.5

293.2

1,210.0

544.5

462.0

281.5

355.0

335.5

310.5

322.3

862.3

327.7

204.5

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

1,850.3

Addition Components (mmboe):


Extensions, Discoveries and Additions
Acquisitions
Dispositions
Revisions of Estimates

1,394.5
-

2,027.3
-

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

99.3

-94.5

96.8

-189.2

7.2

19.0

-11.5

-213.0

-60.2

88.7

(184.5)

(177.0)

Components as % of Total Additions (mmboe):


Extensions, Discoveries and Additions

84.6%

125.7%

74.4%

214.1%

97.9%

94.2%

103.7%

132.8%

122.5%

69.8%

115.2%

109.6%

Acquisitions

0.0%

0.0%

0.0%

0.0%

0.0%

0.0%

0.0%

0.0%

0.0%

0.0%

0.0%

0.0%

Dispositions

0.0%

0.0%

0.0%

0.0%

0.0%

0.0%

0.0%

0.0%

0.0%

0.0%

0.0%

0.0%

15.4%

-25.7%

25.6%

-114.1%

2.1%

5.8%

-3.7%

-32.8%

-22.5%

30.2%

-15.2%

-9.6%
373.7%

Revisions of Estimates
Additions as % of Production:
Gas

1078.4%

189.6%

11.2%

-134.6%

170.0%

63.5%

62.6%

1327.9%

314.3%

26.4%

543.8%

Oil

153.2%

117.5%

138.9%

76.8%

103.6%

109.7%

99.6%

7.9%

38.4%

93.0%

46.9%

69.3%

Total

225.6%

124.1%

126.2%

54.9%

111.1%

104.3%

94.8%

191.4%

77.3%

83.6%

116.8%

110.2%

Gas

43.2%

8.9%

0.6%

-8.8%

11.6%

4.8%

5.6%

59.4%

13.2%

1.2%

71.3%

97.9%

Oil

12.7%

9.8%

11.3%

6.4%

8.7%

9.3%

8.6%

0.8%

4.0%

9.9%

14.4%

33.0%

Total

17.3%

9.7%

9.8%

4.4%

9.1%

8.7%

8.2%

15.9%

6.7%

7.4%

30.2%

47.3%

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

3-Year

5-Year

$523

$685

$700

$980

$1,025

$1,109

$1,396

$2,074

$1,863

$2,133

$6,070

$8,575

$1,690

$2,221

$2,271

$2,398

$2,551

$2,784

$4,021

$6,551

$7,627

$6,957

$21,134

$27,939

Acquisitions

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

Dispositions

na

na

na

na

na

na

na

na

na

na

na

na

$2,213

$2,906

$2,971

$3,378

$3,576

$3,893

$5,417

$8,625

$9,490

$9,090

$27,204

$36,513

23.6%
76.4%
0.0%

23.6%
76.4%
0.0%

23.6%
76.4%
0.0%

29.0%
71.0%
0.0%

28.7%
71.3%
0.0%

28.5%
71.5%
0.0%

25.8%
74.2%
0.0%

24.0%
76.0%
0.0%

19.6%
80.4%
0.0%

23.5%
76.5%
0.0%

22.3%
77.7%
0.0%

23.5%
76.5%
0.0%

$3,759
$13.17
3.8x

$3,356
$11.33
1.4x

$3,093
$10.32
1.3x

$3,989
$13.19
0.6x

$5,146
$16.68
1.6x

$7,049
$22.31
1.9x

$8,644
$26.37
1.5x

$8,789
$25.91
2.0x

$13,176
$38.10
1.1x

$8,461
$24.12
0.8x

$30,426
$29.37
1.3x

$46,119
$27.46
1.4x

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

3-Year

5-Year

$3.44

$7.91

$7.85

$20.37

$10.43

$11.81

$17.43

$13.28

$35.48

$31.00

$22.48

$19.73

na

na

na

na

na

na

na

na

na

na

na

na

All Sources (incl. revisions)

$3.44

$7.91

$7.85

$20.37

$10.43

$11.81

$17.43

$13.28

$35.48

$31.00

$22.48

$19.73

Exploration & Development (excl. revisions)

$4.06

$6.29

$10.55

$9.52

$10.66

$12.54

$16.80

$10.00

$28.96

$44.45

$19.51

$18.01

na

na

na

na

na

na

na

na

na

na

na

na

$4.06

$6.29

$10.55

$9.52

$10.66

$12.54

$16.80

$10.00

$28.96

$44.45

$19.51

$18.01

$3.44

$7.91

$7.85

$20.37

$10.43

$11.81

$17.43

$13.28

$35.48

$31.00

$22.48

$19.73

Additions as % of Reserves:

Capital Expenditures (US$million):


Exploration
Development

Total Expenditures
Expenditures as % of Total (US$million):
Exploration
Development
Acquisitions
Cashflow (US$million)
Cashflow (US$/boe)
Recycle Ratio

F&D Costs (US$/boe):


Exploration & Development (incl. revisions)
Acquisition Costs

Acquisition Costs
All Sources (excl. revisions)
Geographically Segmented Costs
China

Note: Reserve estimates reported after royalties


Source: BMO Capital Markets, Company Reports

See pages G1 to G2 for analyst coverage.

Page B36

Integrated Oils

China Petroleum and Chemical Corporation (Sinopec) (SNP - NYSE)


Breakeven Analysis
Table 7: Breakeven Oil Price Analysis (US$/boe)

Worldwide
Operating Costs
Exploration Expense
G&A/Other
F&D Costs
Return on Capital
Income Taxes
Breakeven Oil Price
Quality Differential
Required WTI Price

North America
Operating Costs
Exploration Expense
G&A/Other
F&D Costs
Return on Capital
Income Taxes
Breakeven Oil Price
Quality Differential
Required WTI Price

International
Operating Costs
Exploration Expense
G&A/Other
F&D Costs
Return on Capital
Income Taxes
Breakeven Oil Price
Quality Differential
Required WTI Price

2000
6.61
1.28
3.44
2.85
1.31
15.49
5.81
21.30

2001
6.51
1.54
7.91
6.46
3.18
25.60
4.54
30.14

2002
6.46
1.76
7.85
6.47
3.19
25.73
6.15
31.88

2003
6.86
2.45
20.37
15.89
7.83
53.40
7.60
61.00

2004
7.35
2.50
10.43
8.07
3.97
32.34
12.15
44.49

2005
9.04
2.48
11.81
8.88
4.37
36.59
17.30
53.89

2006
13.32
3.05
17.43
12.67
6.24
52.71
14.33
67.04

2007
16.46
4.30
13.28
10.16
5.00
49.20
18.75
67.95

2008
27.80
3.46
35.48
25.95
8.65
101.33
19.36
120.69

2009
17.16
4.40
31.00
22.62
7.54
82.73
12.50
95.23

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

na
na
na
na
na
na
na
na
na

na
na
na
na
na
na
na
na
na

na
na
na
na
na
na
na
na
na

na
na
na
na
na
na
na
na
na

na
na
na
na
na
na
na
na
na

na
na
na
na
na
na
na
na
na

na
na
na
na
na
na
na
na
na

na
na
na
na
na
na
na
na
na

na
na
na
na
na
na
na
na
na

na
na
na
na
na
na
na
na
na

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

6.61
1.28
3.44
2.85
1.31
15.49
5.81
21.30

6.51
1.54
7.91
6.46
3.18
25.60
4.54
30.14

6.46
1.76
7.85
6.47
3.19
25.73
6.15
31.88

Source: BMO Capital Markets, Company Reports

See pages G1 to G2 for analyst coverage.

6.86
2.45
20.37
15.89
7.83
53.40
7.60
61.00

7.35
2.50
10.43
8.07
3.97
32.34
12.15
44.49

9.04
2.48
11.81
8.88
4.37
36.59
17.30
53.89

13.32
3.05
17.43
12.67
6.24
52.71
14.33
67.04

16.46
4.30
13.28
10.16
5.00
49.20
18.75
67.95

27.80
3.46
35.48
25.95
8.65
101.33
19.36
120.69

17.16
4.40
31.00
22.62
7.54
82.73
12.50
95.23

Weighted Average
3-Year
5-Year
20.48
4.05
22.48
16.37
6.25
69.64
16.87
86.51

16.93
3.56
19.73
14.54
6.20
60.97
16.45
77.42

Weighted Average
3-Year
5-Year
na
na
na
na
na
na
na
na
na

na
na
na
na
na
na
na
na
na

Weighted Average
3-Year
5-Year
20.48
4.05
22.48
16.37
6.25
69.64
16.87
86.51

16.93
3.56
19.73
14.54
6.20
60.97
16.45
77.42

Oil & Gas Global Cost Study

Page B37

CNOOC (CEO - NYSE)

US$, net

CNOOC reported the groups highest revenue, at $54.02/boe compared to the average of $43.90/boe. Strong revenue, combined with a below-average cost
structure and income taxes, resulted in CNOC reporting the groups highest net income at $19.53/boe compared with the group average of $9.40/boe.
The companys 2009 F&D costs decreased 56% year over year, outpacing the groups 41% decline and returning to 2007 levels. However, at $17.95/boe,
reserve replacement costs continue to exceed the group average of $12.08/boe. Excluding revisions, reserve replacement costs actually increased relative
to 2008 with CNOOC reporting costs of $33.20/boe, significantly exceeding the group average of $21.72/boe.
The companys higher F&D costs and lower operating cost structure roughly offset each other, resulting in a WTI equivalent breakeven price of $54.16/boe
compared with the group average of $52.51/boe. The companys three-year WTI equivalent breakeven price averaged $76.57/boe, significantly exceeding
the group average of $65.26/boe.
Notes: All upstream financial figures, as well as reserve and production values are based upon FASB Statement No. 69 disclosure. All financial figures have
been converted from yuan to U.S. dollars using average annual exchange rates.
Proven Reserves vs RLI

Capital Spending by Region (US$million)


$9,000

25.0

3,000

$8,000
$7,000

20.0

$6,000

2,000

15.0

1,500
10.0

1,000

Years

mmboe (net)

2,500

5.0

500

$5,000
$4,000
$3,000
$2,000
$1,000

0.0
2000

2001

2002

2003

2004

2005

2006

Proven Reserves

2007

2008

$0
2000

2009

2001

2002

2003
China

RLI

Proven Reserve Additions by Region (million boe)

2004

2005

Indonesia

2006

2007

2008

2009

Other

F&D Costs Including Revisions (US$/boe)

400

$45.00

350

$40.00

300

$35.00

250

$30.00

200

$25.00

150

$20.00

100

$15.00

50

$10.00

$5.00

-50

$0.00
2000

2001

2002

2003

2004

China

2005

Indonesia

2006

2007

2008

2009

2000

Other

2001

2002

2003

2004

2005

Exploration and Development

F&D Costs Including Revisions by Region (US$/boe)

2006

2007

Acquisitions

2008

2009

All Sources

3-Year Average F&D Costs Including Revisions (US$/boe)

$103.41

$40.00

$40.00

$35.00

$35.00

$30.00

$30.00

$25.00

$25.00

$20.00

$20.00

$15.00

$15.00

$10.00

$10.00

$5.00

$5.00

$0.00
2000

2001

2002

2003
China

2004

2005

Indonesia

2006
Other

Source: BMO Capital Markets, Company Reports


See pages G1 to G2 for analyst coverage.

2007

2008

2009

$0.00
2001

2002

2003

2004

CNOOC

2005

2006

Integrateds

2007
Industry

2008

2009

Page B38

Integrated Oils

CNOOC (CEO - NYSE)

US$/boe, net

Worldwide
Upstream Net Revenue (US$/boe)

Production Costs (US$/boe)

$80.00

$80.00

$70.00

$70.00

$60.00

$60.00

$50.00

$50.00

$40.00

$40.00

$30.00

$30.00

$20.00

$20.00

$10.00

$10.00
$0.00

$0.00
2000

2001

2002

2003

2004

2005

CNOOC

2006

2007

2008

2000

2009

2001

2002

2003

2004
CNOOC

Integrateds

Upstream Operating Earnings (US$/boe)

2005

2006

2007

2008

2009

2007

2008

2009

2007

2008

Integrateds

Upstream Net Income (US$/boe)

$80.00

$80.00

$70.00

$70.00

$60.00

$60.00

$50.00

$50.00

$40.00

$40.00

$30.00

$30.00

$20.00

$20.00

$10.00

$10.00

$0.00

$0.00
2000

2001

2002

2003

2004

2005

CNOOC

2006

2007

2008

2009

2000

2001

2002

2003

Integrateds

2004
CNOOC

Breakeven Details - Worldwide (US$/boe)

2005

2006

Integrateds

Required WTI Oil Price - Worldwide (US$/boe)

$140.00

$140.00

$120.00

$120.00

$100.00

$100.00

$80.00

$80.00

$60.00

$60.00

$40.00

$40.00

$20.00

$20.00

$0.00

$0.00
2000

2001

2002

2003

Op Cost/G&A/Other

2004

2005

2006

2007

2008

F&D/Exploration

Return

Taxes

Quality

Source: BMO Capital Markets, Company Reports

See pages G1 to G2 for analyst coverage.

2009

2000

2001

2002

2003

2004
CNOOC

2005

2006

Integrateds

2009

Oil & Gas Global Cost Study

Page B39

CNOOC (CEO - NYSE)

US$/boe, net

Total International
Upstream Net Revenue (US$/boe)

Production Costs (US$/boe)

$80.00

$80.00

$70.00

$70.00

$60.00

$60.00

$50.00

$50.00

$40.00

$40.00

$30.00

$30.00

$20.00

$20.00

$10.00

$10.00
$0.00

$0.00
2000

2001

2002

2003

2004

2005

CNOOC

2006

2007

2008

2000

2009

2001

2002

2003

2004
CNOOC

Integrateds

Upstream Operating Earnings (US$/boe)

2005

2006

2007

2008

2009

Integrateds

Upstream Net Income (US$/boe)

$80.00

$80.00

$70.00

$70.00

$60.00

$60.00

$50.00

$50.00

$40.00

$40.00

$30.00

$30.00

$20.00

$20.00

$10.00

$10.00

$0.00

$0.00
2000

2001

2002

2003

2004

2005

CNOOC

2006

2007

2008

2009

2000

2001

2002

2003

2004
CNOOC

Integrateds

Breakeven Details - International (US$/boe)

2005

2006

2007

2008

2009

Integrateds

Required WTI Oil Price - International (US$/boe)

$140.00

$140.00

$120.00

$120.00

$100.00

$100.00

$80.00

$80.00

$60.00

$60.00

$40.00

$40.00

$20.00

$20.00

$0.00

$0.00
2000

2001

2002

2003

Op Cost/G&A/Other

2004

2005

2006

2007

2008

F&D/Exploration

Return

Taxes

Quality

Source: BMO Capital Markets, Company Reports

See pages G1 to G2 for analyst coverage.

2009

2000

2001

2002

2003

2004
CNOOC

2005

2006

Integrateds

2007

2008

2009

Page B40

Integrated Oils

CNOOC (CEO - NYSE)

US$/boe, net

International Segments
Upstream Net Revenue (US$/boe)

Production Costs (US$/boe)

$80.00

$80.00

$70.00

$70.00

$60.00

$60.00

$50.00

$50.00

$40.00

$40.00

$30.00

$30.00

$20.00

$20.00

$10.00

$10.00
$0.00

$0.00
2000

2001

2002

2003

2004

China

2005

2006

2007

2008

2000

2009

2001

2002

2003

2004
China

Indonesia

Upstream Operating Earnings (US$/boe)

2005

2006

2007

2008

2009

2006

2007

2008

2009

2006

2007

2008

2009

Indonesia

Upstream Net Income (US$/boe)

$80.00

$80.00

$70.00

$70.00

$60.00

$60.00

$50.00

$50.00

$40.00

$40.00

$30.00

$30.00

$20.00

$20.00

$10.00

$10.00

$0.00

$0.00
2000

2001

2002

2003

2004
China

2005

2006

2007

2008

2009

2000

2001

2002

2003

2004
China

Indonesia

3-Year Average Breakeven Details by Region (US$/boe)

2005
Indonesia

Required WTI Oil Price - International (US$/boe)

$140.00

$140.00

$120.00

$120.00

$100.00

$100.00

$80.00

$80.00

$60.00

$60.00

$40.00

$40.00

$20.00

$20.00

$0.00

$0.00
China
Op Cost/G&A/Other

Indonesia
F&D/Exploration

Return

Source: BMO Capital Markets, Company Reports

See pages G1 to G2 for analyst coverage.

Taxes

2000
Quality

2001

2002

2003
China

2004

2005

Indonesia

Peer Average

Oil & Gas Global Cost Study

Page B41

CNOOC (CEO - NYSE)


Consolidated Statements
Table 1: Income Statement (US$million)
Upstream Revenue, net of Royalties
Midstream / Downstream Revenue
Other
Total Revenue and Other Income

2000
2,273
619
34
2,926

2001
2,122
307
87
2,515

2002
2,873
287
26
3,186

2003
3,397
1,498
53
4,947

2004
4,457
2,198
17
6,672

2005
6,521
1,941
17
8,478

2006
8,508
2,630
19
11,157

2007
9,602
2,287
38
11,927

2008
14,508
3,305
314
18,126

2009
12,284
3,038
77
15,399

Crude Oil and Product Purchases


Production and Transportation Expenses
Marketing Expenses
Exploration / Dry Hole Costs
General and Administrative
Depreciation, Depletion and Amortization
Interest, net
Other
Earnings Before Income Tax
Current Income Taxes
Future Income Taxes
Total Income Taxes
Minority Interest
Earnings From Continuing Operations
Discontinued Operations/Extraordinary Items
Cumulative Change in Accounting Principle
Net Earnings
Preferred Stock Dividends
Net Earnings to Common Shareholders

616
382
67
55
311
29
4
1,450
199
34
233
26
1,244
1,244
1,244

296
388
126
74
310
(24)
15
1,319
331
38
368
11
961
961
961

281
580
159
122
486
18
3
1,523
389
39
428
20
1,115
1,115
1,115

1,485
695
102
146
561
21
(10)
1,926
517
42
559
27
1,394
1,394
1,394

2,170
821
159
128
659
28
(69)
2,751
866
(29)
837
42
1,956
1,956
1,956

1,917
1,041
158
167
728
90
(48)
4,394
1,313
27
1,340
37
3,091
3,091
3,091

2,581
1,294
214
194
870
132
320
5,494
1,589
67
1,655
40
3,879
3,879
3,879

2,246
1,517
451
229
969
179
663
5,599
1,677
(92)
1,584
95
4,109
4,109
4,109

3,263
2,141
491
251
1,447
(97)
2,135
8,274
1,943
1,943
54
6,385
6,385
6,385

2,994
2,362
473
331
2,334
(15)
968
5,950
1,659
1,659
25
4,316
4,316
4,316

Source: BMO Capital Markets, Company Reports

Table 2: Statement of Cash Flows (US$million)


2000
1,244
438
(43)
1,639
(40)
1,599

2001
961
349
26
1,337
84
1,421

2002
1,115
579
79
1,773
(9)
1,764

2003
1,394
695
30
2,119
34
2,153

2004
1,956
601
22
2,578
119
2,698

2005
3,091
863
97
4,051
(126)
3,925

2006
3,879
888
227
4,994
(74)
4,920

2007
4,109
1,075
77
5,262
354
5,615

2008
6,385
1,583
(421)
7,547
473
8,020

2009
4,291
3,631
13
7,935
(197)
7,737

Upstream Spending
Midstream / Downstream Spending
Acquisitions, net
Other
Net Cash From Investing Activities

(532)
3
(421)
(950)

(525)
1
(849)
(1,373)

(826)
(572)
(19)
(1,416)

(999)
(495)
346
(1,149)

(1,552)
(698)
(723)
(2,973)

(2,027)
(105)
(1,450)
(3,583)

(2,890)
(2,656)
588
(4,958)

(3,531)
6
510
(3,016)

(5,225)
(36)
(1,787)
(7,048)

(6,209)
(145)
420
(5,934)

Net Change in Debt


Net Change in Common Stock
Net Change in Preferred Stock
Cash Dividends Paid
Other
Net Cash From Financing Activities
Effect of Exchange Rate on Cash
Net Increase/(Decrease) in Cash
Cash and Equivalents, Beginning of Year
Cash and Equivalents, End of Year

(366)
(492)
441
(417)
(1)
232
106
338

(121)
1,220
(516)
(197)
387
435
338
772

84
(274)
18
(173)
175
772
947

442
(653)
(211)
793
947
1,740

983
(7)
(737)
238
(37)
1,740
1,703

(2)
(949)
1
(950)
(14)
(623)
1,720
1,098

201
1,787
(1,231)
0
757
(46)
674
1,128
1,802

115
(1,515)
(1,400)
(18)
1,182
1,888
3,071

655
(2,108)
(4)
(1,457)
(32)
(517)
3,361
2,843

704
(2,075)
(5)
(1,376)
(9)
418
2,893
3,310

Net Earnings
Charges and Credits Not Impacting Cash
Other
Cash Flow From Operations
Change in Working Capital / Other
Net Cash From Operating Activities

Source: BMO Capital Markets, Company Reports

See pages G1 to G2 for analyst coverage.

Oil & Gas Global Cost Study

Page B43

CNOOC (CEO - NYSE)


Table 5: Upstream Netbacks (US$/boe)
Weighted Average
2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

3-Year

5-Year

26.13

22.14

22.71

26.57

28.40

42.76

51.31

56.93

74.53

54.02

61.60

56.56

4.39

4.05

4.58

5.44

6.32

6.83

10.81

14.32

23.00

14.50

17.25

14.33

Worldwide
Net Revenue
Production Costs
Exploration

0.77

1.31

1.26

0.80

0.85

1.04

1.29

2.68

2.52

2.09

2.40

1.97

DD&A

3.58

3.24

3.84

4.55

5.10

4.98

5.60

6.19

7.43

10.26

8.17

7.17

Other

0.00

0.00

0.00

0.09

0.08

0.16

0.19

0.24

0.28

0.30

0.28

0.24

Pre-tax Earnings

17.39

13.54

13.03

15.70

16.06

29.76

33.41

33.51

41.29

26.86

33.50

32.86

Income Taxes
Net Earnings

3.15
14.25

5.03
8.51

4.21
8.82

4.92
10.78

5.20
10.86

9.19
20.57

10.32
23.09

10.57
22.94

10.83
30.47

7.34
19.53

9.41
24.10

9.54
23.32

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

Net Revenue

na

na

na

na

na

na

na

na

na

na

na

na

Production Costs

na

na

na

na

na

na

na

na

na

na

na

na

Exploration

na

na

na

na

na

na

na

na

na

na

na

na

DD&A

na

na

na

na

na

na

na

na

na

na

na

na

Other

na

na

na

na

na

na

na

na

na

na

na

na

Pre-tax Earnings

na

na

na

na

na

na

na

na

na

na

na

na

Income Taxes
Net Earnings

na
na

na
na

na
na

na
na

na
na

na
na

na
na

na
na

na
na

na
na

na
na

na
na

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

26.13

22.14

22.71

26.57

28.40

42.76

51.31

56.93

74.53

54.02

61.60

56.56

4.39

4.05

4.58

5.44

6.32

6.83

10.81

14.32

23.00

14.50

17.25

14.33

Weighted Average
3-Year

5-Year

North America

Weighted Average
3-Year

5-Year

International
Net Revenue
Production Costs
Exploration

0.77

1.31

1.26

0.80

0.85

1.04

1.29

2.68

2.52

2.09

2.40

1.97

DD&A

3.58

3.24

3.84

4.55

5.10

4.98

5.60

6.19

7.43

10.26

8.17

7.17

Other

0.00

0.00

0.00

0.09

0.08

0.16

0.19

0.24

0.28

0.30

0.28

0.24

Pre-tax Earnings

17.39

13.54

13.03

15.70

16.06

29.76

33.41

33.51

41.29

26.86

33.50

32.86

Income Taxes
Net Earnings

3.15
14.25

5.03
8.51

4.21
8.82

4.92
10.78

5.20
10.86

9.19
20.57

10.32
23.09

10.57
22.94

10.83
30.47

7.34
19.53

9.41
24.10

9.54
23.32

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

26.13

22.14

22.45

26.78

28.04

43.20

52.50

59.30

78.53

55.67

64.44

58.51

4.39

4.05

3.83

4.69

5.73

6.29

10.49

14.37

24.20

15.09

17.96

14.53

International Segments (US$/boe):


Weighted Average
3-Year

5-Year

China
Net Revenue
Production Costs
Exploration

0.77

1.31

1.42

0.87

0.85

1.04

1.10

1.76

2.19

1.96

1.98

1.65

DD&A

3.58

3.24

3.45

4.19

4.80

4.75

5.35

6.03

7.40

8.98

7.59

6.68

Other

0.00

0.00

0.00

0.11

0.09

0.18

0.21

0.27

0.32

0.35

0.32

0.27

Pre-tax Earnings

17.39

13.54

13.73

16.93

16.57

30.95

35.34

36.86

44.43

29.29

36.60

35.38

Income Taxes
Net Earnings

3.15
14.25

5.03
8.51

4.22
9.51

5.08
11.85

5.19
11.38

9.28
21.66

10.60
24.74

11.06
25.80

11.11
33.32

7.32
21.97

9.68
26.91

9.79
25.59

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

Net Revenue

na

na

24.39

25.53

31.11

38.61

44.45

47.47

53.12

40.04

46.71

44.70

Production Costs

na

na

9.31

9.19

10.67

11.87

15.15

18.15

17.92

17.22

17.74

16.10

Weighted Average
3-Year

5-Year

Indonesia

Exploration

na

na

0.22

0.48

0.85

0.65

0.90

1.19

0.89

1.00

1.02

0.93

DD&A

na

na

6.26

6.33

7.37

7.13

8.54

9.35

10.60

9.96

9.98

9.15

Other

na

na

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

Pre-tax Earnings

na

na

8.60

9.53

12.23

18.96

19.85

18.78

23.71

11.85

17.96

18.52

Income Taxes
Net Earnings

na
na

na
na

4.13
4.47

4.11
5.42

5.27
6.95

8.29
10.67

8.56
11.29

8.10
10.68

10.23
13.49

5.11
6.74

7.75
10.22

8.01
10.51

Source: BMO Capital Markets, Company Reports

See pages G1 to G2 for analyst coverage.

Page B44

Integrated Oils

CNOOC (CEO - NYSE)


Table 6: Reserve Replacement Performance
2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

3-Year

5-Year

Production:
Gas Production (mmcf/d)

197.3

194.5

287.7

276.7

350.7

369.9

490.4

569.9

652.1

695.9

639.3

555.6

Liquids Production (b/d)

205,479

230,137

298,630

304,110

317,808

356,164

372,603

367,123

424,658

509,589

433,790

406,027

Total Production (boe/d)

238,356

262,557

346,575

350,228

376,256

417,808

454,338

462,100

533,333

625,571

540,335

498,630

% Gas Production

14%

12%

14%

13%

16%

15%

18%

21%

20%

19%

20%

19%

% Oil Production

86%

88%

86%

87%

84%

85%

82%

79%

80%

81%

80%

81%

Gas Reserves (bcf)

3,250

3,248

3,548

4,105

4,603

5,395

6,231

6,223

5,647

5,962

5,944

5,892

Oil Reserves (mmbbls)

1,216

1,279

1,425

1,431

1,451

1,453

1,488

1,564

1,580

1,670

1,605

1,551

Total Proven Reserves (mmboe)

Proven Reserves:

1,758

1,820

2,016

2,115

2,218

2,352

2,527

2,601

2,521

2,664

2,595

2,533

% Gas Reserves

31%

30%

29%

32%

35%

38%

41%

40%

37%

37%

38%

39%

% Oil Reserves

69%

70%

71%

68%

65%

62%

59%

60%

63%

63%

62%

61%

Proven Reserve Life Index

20.2

19.0

15.9

16.5

16.2

15.4

15.2

15.4

13.0

11.7

13.3

14.1
2,373.0

Proven Reserve Additions:


Gas Additions (bcf)

-10.0

69.0

405.0

710.0

626.0

927.0

1,015.0

200.0

-338.0

569.0

431.0

Oil Additions (mmbbls)

49.0

147.0

255.0

121.0

136.0

132.0

171.0

210.0

171.0

276.0

657.0

Total Additions (mmboe)

47.3

158.5

322.5

239.3

240.3

286.5

340.2

243.3

114.7

370.8

728.8

960.0
1,355.5

Addition Components (mmboe):


Extensions, Discoveries and Additions

76.8

226.7

178.2

199.7

228.2

188.2

158.3

215.2

193.7

194.7

603.5

950.0

Acquisitions

0.0

0.0

183.2

76.7

32.8

125.5

158.7

0.0

0.0

9.7

9.7

293.8

Dispositions

-41.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

-22.3

-7.0

(29.3)

(29.3)

11.5

-68.2

-38.8

-37.0

-20.7

-27.2

23.2

28.2

-56.7

173.5

145.0

141.0

Revisions of Estimates
Components as % of Total Additions (mmboe):
Extensions, Discoveries and Additions

162.3%

143.0%

55.2%

83.4%

94.9%

65.7%

46.5%

88.4%

168.9%

52.5%

82.8%

70.1%

Acquisitions

0.0%

0.0%

56.8%

32.0%

13.7%

43.8%

46.6%

0.0%

0.0%

2.6%

1.3%

21.7%

Dispositions

-86.6%

0.0%

0.0%

0.0%

0.0%

0.0%

0.0%

0.0%

-19.5%

-1.9%

-4.0%

-2.2%

24.3%

-43.0%

-12.0%

-15.5%

-8.6%

-9.5%

6.8%

11.6%

-49.4%

46.8%

19.9%

10.4%

Revisions of Estimates
Additions as % of Production:
Gas

-13.9%

97.2%

385.7%

703.0%

489.1%

686.7%

567.0%

96.2%

-142.0%

224.0%

61.6%

234.0%

Oil

65.3%

175.0%

233.9%

109.0%

117.2%

101.5%

125.7%

156.7%

110.3%

148.4%

138.3%

129.6%

Total

54.4%

165.4%

254.9%

187.2%

175.0%

187.9%

205.1%

144.3%

58.9%

162.4%

123.2%

149.0%

Additions as % of Reserves:
Gas

-0.3%

2.1%

11.4%

17.3%

13.6%

17.2%

16.3%

3.2%

-6.0%

9.5%

7.3%

40.3%

Oil

4.0%

11.5%

17.9%

8.5%

9.4%

9.1%

11.5%

13.4%

10.8%

16.5%

40.9%

61.9%

Total

2.7%

8.7%

16.0%

11.3%

10.8%

12.2%

13.5%

9.4%

4.5%

13.9%

28.1%

53.5%

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

3-Year

5-Year

Capital Expenditures (US$million):


Exploration
Development
Acquisitions
Dispositions

$74

$120

$188

$160

$235

$249

$411

$803

$917

$1,070

$2,790

$3,450

$505

$478

$750

$967

$1,491

$2,045

$2,851

$3,494

$4,475

$5,564

$13,533

$18,429

$555

$4,670

$0

$0

$572

$191

$427

$0

$144

$149

$293

$5,519

na

na

na

na

na

na

na

na

na

na

na

na

$578

$599

$1,510

$1,318

$2,152

$2,848

$7,932

$4,297

$5,537

$6,783

$16,617

$27,397

12.7%
87.3%
0.0%

20.1%
79.9%
0.0%

12.4%
49.7%
37.9%

12.2%
73.3%
14.5%

10.9%
69.3%
19.8%

8.7%
71.8%
19.5%

5.2%
35.9%
58.9%

18.7%
81.3%
0.0%

16.6%
80.8%
2.6%

15.8%
82.0%
2.2%

16.8%
81.4%
1.8%

12.6%
67.3%
20.1%

$1,618
$18.60
2.8x

$1,251
$13.05
3.5x

$1,761
$13.92
3.0x

$2,062
$16.13
2.9x

$2,308
$16.80
1.9x

$4,054
$26.58
2.7x

$4,972
$29.98
1.3x

$5,364
$31.80
1.8x

$7,868
$40.42
1.0x

$7,279
$31.88
1.8x

$20,511
$34.67
1.6x

$29,537
$32.46
1.6x

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

3-Year

5-Year

$6.55

$3.78

$6.73

$6.93

$8.32

$14.25

$17.97

$17.66

$39.36

$18.02

$21.81

$20.05

na

na

$3.12

$2.49

$12.99

$4.42

$29.43

na

na

$15.40

$30.34

$18.78

All Sources (incl. revisions)

$6.55

$3.78

$4.68

$5.51

$8.96

$9.94

$23.32

$17.66

$40.42

$17.95

$21.92

$19.78

Exploration & Development (excl. revisions)

$7.53

$2.64

$5.26

$5.65

$7.56

$12.19

$20.60

$19.97

$27.84

$34.08

$27.05

$23.03

na

na

$3.12

$2.49

$12.99

$4.42

$29.43

na

na

$15.40

$30.34

$18.78

$7.53

$2.64

$4.18

$4.77

$8.25

$9.08

$25.02

$19.97

$28.59

$33.20

$27.10

$22.03

Total Expenditures
Expenditures as % of Total (US$million):
Exploration
Development
Acquisitions
Cashflow (US$million)
Cashflow (US$/boe)
Recycle Ratio

F&D Costs (US$/boe):


Exploration & Development (incl. revisions)
Acquisition Costs

Acquisition Costs
All Sources (excl. revisions)
Geographically Segmented Costs
North America
China
Indonesia

na

na

na

na

na

na

na

na

na

na

na

na

$6.55

$3.78

$6.42

$4.86

$7.92

$11.16

$14.61

$15.37

$30.92

$20.51

$21.16

$18.14

na

na

$3.49

nm

$15.18

nm

$3.24

nm

$39.47

$4.17

$17.71

$10.28

Note: Reserve estimates reported after royalties


Source: BMO Capital Markets, Company Reports

See pages G1 to G2 for analyst coverage.

Oil & Gas Global Cost Study

Page B45

CNOOC (CEO - NYSE)


Breakeven Analysis
Table 7: Breakeven Oil Price Analysis (US$/boe)

Worldwide
Operating Costs
Exploration Expense
G&A/Other
F&D Costs
Return on Capital
Income Taxes
Breakeven Oil Price
Quality Differential
Required WTI Price

North America
Operating Costs
Exploration Expense
G&A/Other
F&D Costs
Return on Capital
Income Taxes
Breakeven Oil Price
Quality Differential
Required WTI Price

International
Operating Costs
Exploration Expense
G&A/Other
F&D Costs
Return on Capital
Income Taxes
Breakeven Oil Price
Quality Differential
Required WTI Price

2000
4.39
0.77
6.55
8.94
1.97
22.61
3.55
26.16

2001
4.05
1.31
3.78
4.76
2.81
16.71
3.59
20.29

2002
4.58
1.26
4.68
4.83
2.30
17.65
2.60
20.25

2003
5.44
0.80
0.09
5.51
5.98
2.72
20.53
4.71
25.24

2004
6.32
0.85
0.08
8.96
9.46
4.53
30.19
12.33
42.51

2005
6.83
1.04
0.16
9.94
9.97
4.45
32.39
13.56
45.95

2006
10.81
1.29
0.19
23.32
23.34
10.43
69.39
10.55
79.94

2007
14.32
2.68
0.24
17.66
17.71
8.16
60.76
9.30
70.05

2008
23.00
2.52
0.28
40.42
33.41
11.87
111.50
15.68
127.18

2009
14.50
2.09
0.30
17.95
13.25
4.98
53.08
1.09
54.16

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

na
na
na
na
na
na
na
na
na

na
na
na
na
na
na
na
na
na

na
na
na
na
na
na
na
na
na

na
na
na
na
na
na
na
na
na

na
na
na
na
na
na
na
na
na

na
na
na
na
na
na
na
na
na

na
na
na
na
na
na
na
na
na

na
na
na
na
na
na
na
na
na

na
na
na
na
na
na
na
na
na

na
na
na
na
na
na
na
na
na

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

4.39
0.77
6.55
8.94
1.97
22.61
3.55
26.16

4.05
1.31
3.78
4.76
2.81
16.71
3.59
20.29

4.58
1.26
4.68
4.83
2.30
17.65
2.60
20.25

5.44
0.80
0.09
5.51
5.98
2.72
20.53
4.71
25.24

6.32
0.85
0.08
8.96
9.46
4.53
30.19
12.33
42.51

6.83
1.04
0.16
9.94
9.97
4.45
32.39
13.56
45.95

10.81
1.29
0.19
23.32
23.34
10.43
69.39
10.55
79.94

14.32
2.68
0.24
17.66
17.71
8.16
60.76
9.30
70.05

23.00
2.52
0.28
40.42
33.41
11.87
111.50
15.68
127.18

14.50
2.09
0.30
17.95
13.25
4.98
53.08
1.09
54.16

International Segments (US$/boe):


China
Operating Costs
Exploration Expense
G&A/Other
F&D Costs
Return on Capital
Income Taxes
Breakeven Oil Price
Quality Differential
Required WTI Price

Indonesia
Operating Costs
Exploration Expense
G&A/Other
F&D Costs
Return on Capital
Income Taxes
Breakeven Oil Price
Quality Differential
Required WTI Price
F&D/Exploration
Op Cost/G&A/Other

2000
4.39
0.77
6.55
8.94
1.97
22.61
3.55
26.16

2000

2001
4.05
1.31
3.78
4.76
2.81
16.71
3.59
20.29

2002
3.83
1.42
6.42
7.11
3.16
21.95
2.96
24.91

2001

2003
4.69
0.87
0.11
4.86
6.01
2.58
19.12
4.44
23.56

2004
5.73
0.85
0.09
7.92
8.89
4.05
27.54
12.78
40.32

2005
6.29
1.04
0.18
11.16
11.06
4.74
34.46
13.19
47.64

2006
10.49
1.10
0.21
14.61
13.51
5.79
45.71
10.19
55.90

2007
14.37
1.76
0.27
15.37
14.55
6.23
52.56
8.67
61.23

2008
24.20
2.19
0.32
30.92
24.98
8.33
90.93
14.34
105.28

2009
15.09
1.96
0.35
20.51
15.05
5.02
57.99
1.09
59.08

2002

2003

2004

2005

2006

2007

2008

2009

Weighted Average
3-Year
5-Year
17.25
2.40
0.28
21.92
18.73
7.31
67.88
8.69
76.57

14.33
1.97
0.24
19.78
18.18
7.43
61.93
10.03
71.97

Weighted Average
3-Year
5-Year
na
na
na
na
na
na
na
na
na

na
na
na
na
na
na
na
na
na

Weighted Average
3-Year
5-Year
17.25
2.40
0.28
21.92
18.73
7.31
67.88
8.69
76.57

14.33
1.97
0.24
19.78
18.18
7.43
61.93
10.03
71.97

Weighted Average
3-Year
5-Year
17.96
1.98
0.32
21.16
17.39
6.26
65.07
8.04
73.10

14.53
1.65
0.27
18.14
15.73
6.01
56.34
9.50
65.83

Weighted Average
3-Year
5-Year

9.31
0.22
3.49
2.19
2.02
17.22
0.27
17.49

9.19
0.48
55.65
22.57
17.12
105.01
6.06
111.07

10.67
0.85
15.18
9.01
6.83
42.55
8.91
51.46

11.87
0.65
26.02
13.59
10.56
62.69
17.09
79.78

15.15
0.90
3.24
3.57
2.71
25.57
10.86
36.43

18.15
1.19
9.98
10.12
7.67
47.11
9.67
56.79

17.92
0.89
39.47
32.22
24.43
114.94
21.15
136.08

17.22
1.00
4.17
3.82
2.89
29.11
2.88
31.99

17.74
1.02
17.71
16.23
12.31
65.02
11.23
76.25

16.10
0.93
10.28
8.83
6.73
42.87
12.33
55.20

3.71
9.31

56.13
9.19

16.03
10.67

26.66
11.87

4.14
15.15

11.18
18.15

40.36
17.92

5.18
17.22

18.74
17.74

11.21
16.10

Source: BMO Capital Markets, Company Reports


See pages G1 to G2 for analyst coverage.

Page B46

Integrated Oils

ConocoPhillips (COP - NYSE)

US$, net

ConocoPhillips reported the second-lowest realized revenue/bbl within the Integrated Oils peer group in 2009 at $41.02/boe, while operating costs came
in above average at $15.08/boe. As a result, overall results from operations were only $6.09/boe, below the group average of $9.40/boe.

ConocoPhillips reserve replacement costs improved in 2009, falling to $12.83/boe compared with the group average of $12.08/boe. Excluding revisions,
F&D costs were $16.49/boe.

Given the improvement in the companys reserve replacement costs in 2009, we estimate that ConocoPhillips operations require a WTI oil price of approximately $57.02/boe to break even compared to $185.54/boe calculated based on 2008 cost results, and only slightly above the peer average.

Notes: All upstream financial figures, as well as reserve and production values are based upon FASB Statement No. 69 disclosure.

Proven Reserves vs RLI

Capital Spending by Region (US$million)

12,000

8,000
6,000

18.0

$40,000

16.0

$35,000

14.0

$30,000

12.0

$25,000

10.0
8.0

4,000

Years

10,000

mmboe (net)

$45,000

20.0

6.0
4.0

2,000
0
2000

2001

2002

2003

2004

2005

2006

Proven Reserves

2007

2008

$20,000
$15,000
$10,000

2.0

$5,000

0.0

$0
2000

2009

2001

2002

2003

North America

RLI

Proven Reserve Additions by Region (million boe)

2004

2005

Europe

2006

2007

2008

2009

Other International

F&D Costs Including Revisions (US$/boe)

3,500

$40.00

3,000

$35.00

67.89

60.16

58.57

$30.00

2,500

$25.00

2,000

$20.00

1,500

$15.00

1,000

$10.00
$5.00

500

$0.00

-$5.00

-500

-$10.00
2000

2001

2002

2003

North America

2004

2005

Europe

2006

2007

2008

2009

2000

Other International

2002

2003

2004

2005

Exploration and Development

F&D Costs Including Revisions by Region (US$/boe)

2006

2007

Acquisitions

2008

2009

All Sources

3-Year Average F&D Costs Including Revisions (US$/boe)


54.00

$40.00

2001

114.84

$40.00

$35.00

$35.00

$30.00

$30.00

$25.00
$20.00

$25.00

$15.00

$20.00

$10.00

$15.00

$5.00

$10.00

$0.00

$5.00

-$5.00
-129.46

-$10.00
2000

2001

2002

2003

North America

2004
Europe

2005

2006

2007

Other International

Source: BMO Capital Markets, Company Reports


See pages G1 to G2 for analyst coverage.

-26.90

2008

2009

$0.00
2001

2002

2003

2004

ConocoPhillips

2005

2006

Integrateds

2007

2008

Industry

2009

Oil & Gas Global Cost Study

Page B47

ConocoPhillips (COP - NYSE)

US$/boe, net

Worldwide
Upstream Net Revenue (US$/boe)

Production Costs (US$/boe)

$80.00

$80.00

$70.00

$70.00

$60.00

$60.00

$50.00

$50.00

$40.00

$40.00

$30.00

$30.00

$20.00

$20.00

$10.00

$10.00

$0.00

$0.00
2000

2001

2002

2003

2004

2005

ConocoPhillips

2006

2007

2008

2009

2000

2001

2002

Integrateds

2003

2004

2005

ConocoPhillips

Upstream Operating Earnings (US$/boe)

2006

2007

2008

2009

2008

2009

Integrateds

Upstream Net Income (US$/boe)

$80.00

$80.00

$70.00

$70.00

$60.00

$60.00

$50.00

$50.00

$40.00

$40.00

$30.00

$30.00

$20.00

$20.00

$10.00

$10.00

$0.00

$0.00
2000

2001

2002

2003

2004

ConocoPhillips

2005

2006

2007

2008

2009

2000

$150.00

$130.00

$130.00

$110.00

$110.00

$90.00

$90.00

$70.00

$70.00

$50.00

$50.00

$30.00

$30.00

$10.00

$10.00

-$10.00

-$10.00
2002

2003

Op Cost/G&A/Other

2004

2003

2004

2005

2006

2007

Integrateds

Required WTI Oil Price - Worldwide (US$/boe)

$150.00

2001

2002

ConocoPhillips

Breakeven Details - Worldwide (US$/boe)

2000

2001

Integrateds

2005

2006

2007

2008

F&D/Exploration

Return

Taxes

Quality

Source: BMO Capital Markets, Company Reports

See pages G1 to G2 for analyst coverage.

2009

185.54

2000

2001

2002

2003

2004

ConocoPhillips

2005

2006
Integrateds

2007

2008

2009

Page B48

Integrated Oils

ConocoPhillips (COP - NYSE)

US$/boe, net

North America
Upstream Net Revenue (US$/boe)

Production Costs (US$/boe)

$80.00

$80.00

$70.00

$70.00

$60.00

$60.00

$50.00

$50.00

$40.00

$40.00

$30.00

$30.00

$20.00

$20.00

$10.00

$10.00
$0.00

$0.00
2000

2001

2002

2003

2004

2005

ConocoPhillips

2006

2007

2008

2000

2009

2001

2002

2003

2004

2005

ConocoPhillips

Integrateds

Upstream Operating Earnings (US$/boe)

2006

2007

2008

2009

Integrateds

Upstream Net Income (US$/boe)

$80.00

$80.00

$70.00

$70.00

$60.00

$60.00

$50.00

$50.00

$40.00

$40.00

$30.00

$30.00

$20.00

$20.00

$10.00

$10.00

$0.00

$0.00
2000

2001

2002

2003

2004

2005

ConocoPhillips

2006

2007

2008

2009

2000

2001

2002

Integrateds

2003

2004

2005

ConocoPhillips

Breakeven Details - North America (US$/boe)

2006

2007

2008

2009

Integrateds

Required WTI Oil Price - North America (US$/boe)

$160.00

$160.00

$140.00

$140.00

$120.00

$120.00

$100.00

$100.00

$80.00

$80.00

$60.00

$60.00

$40.00
$20.00

$40.00

$0.00

$20.00

-$20.00

$0.00
2000

2001

2002

2003

Op Cost/G&A/Other

2004

2005

2006

2007

2008

F&D/Exploration

Return

Taxes

Quality

Source: BMO Capital Markets, Company Reports

See pages G1 to G2 for analyst coverage.

2009

2000

2001

2002

2003

2004

ConocoPhillips

2005

2006

2007

Integrateds

2008

2009

Oil & Gas Global Cost Study

Page B49

ConocoPhillips (COP - NYSE)

US$/boe, net

Total International
Upstream Net Revenue (US$/boe)

Production Costs (US$/boe)

$80.00

$80.00

$70.00

$70.00

$60.00

$60.00

$50.00

$50.00

$40.00

$40.00

$30.00

$30.00

$20.00

$20.00

$10.00

$10.00
$0.00

$0.00
2000

2001

2002

2003

2004

2005

ConocoPhillips

2006

2007

2008

2000

2009

2001

2002

2003

2004

2005

ConocoPhillips

Integrateds

Upstream Operating Earnings (US$/boe)

2006

2007

2008

2009

Integrateds

Upstream Net Income (US$/boe)

$80.00

$80.00

$70.00

$70.00

$60.00

$60.00

$50.00

$50.00

$40.00

$40.00

$30.00

$30.00

$20.00

$20.00

$10.00

$10.00

$0.00

$0.00
2000

2001

2002

2003

2004

2005

ConocoPhillips

2006

2007

2008

2009

2000

2001

2002

2003

2004

2005

ConocoPhillips

Integrateds

Breakeven Details - International (US$/boe)

2006

2007

2008

2009

Integrateds

Required WTI Oil Price - International (US$/boe)

$110.00

$110.00

$100.00

$100.00

$90.00

$90.00

$80.00

$80.00

$70.00

$70.00

$60.00

$60.00

$50.00

$50.00

$40.00

$40.00

$30.00

$30.00

$20.00

$20.00

$10.00

$10.00

$0.00

$0.00
2000

2001

2002

2003

Op Cost/G&A/Other

2004

2005

2006

2007

2008

F&D/Exploration

Return

Taxes

Quality

Source: BMO Capital Markets, Company Reports

See pages G1 to G2 for analyst coverage.

2009

2000

2001

2002

2003

2004

ConocoPhillips

2005

2006

2007

Integrateds

2008

2009

Page B50

Integrated Oils

ConocoPhillips (COP - NYSE)

US$/boe, net

International Segments
Upstream Net Revenue (US$/boe)

Production Costs (US$/boe)


80.13

$80.00

$80.00

$70.00

$70.00

$60.00

$60.00

$50.00

$50.00

$40.00

$40.00

$30.00

$30.00

$20.00

$20.00

$10.00

$10.00
$0.00

$0.00
2000

2001

2002

2003

2004

2005

2006

North America

Europe

Other

2007

2008

2000

2009

2001

2002

2003

2004

North America

Upstream Operating Earnings (US$/boe)

2005

2006

Europe

Other

2005

2006

Europe

Other

2007

2008

2009

2007

2008

2009

Upstream Net Income (US$/boe)

$80.00

$80.00

$70.00

$70.00
$60.00

$60.00

$50.00

$50.00

$40.00

$40.00

$30.00

$30.00

$20.00

$20.00

$10.00

$10.00

$0.00

$0.00

-$10.00
2000

2001

2002

2003

2004

North America

2005

2006

Europe

Other

2007

2008

2000

2009

2001

2002

2003

2004

North America

3-Year Average Breakeven Details by Region (US$/boe)

Required WTI Oil Price - International (US$/boe)

$140.00

$140.00

$120.00

$120.00

$100.00

$100.00

$80.00

$80.00

$60.00

$60.00

$40.00

$40.00

$20.00

$20.00

$0.00

141.98 251.23

$0.00
Europe
Op Cost/G&A/Other

Other International
F&D/Exploration

North America
Return

Source: BMO Capital Markets, Company Reports

See pages G1 to G2 for analyst coverage.

Taxes

Quality

2000

2001

2002

2003

North America

2004
Europe

2005

2006
Other

2007

2008

Peer Average

2009

Oil & Gas Global Cost Study

Page B51

ConocoPhillips (COP - NYSE)


Consolidated Statements
Table 1: Income Statement (US$million)
Upstream Revenue, net of Royalties
Midstream / Downstream Revenue
Other
Total Revenue and Other Income
Crude Oil and Product Purchases
Production and Transportation Expenses
Marketing Expenses
Exploration / Dry Hole Costs
General and Administrative
Depreciation, Depletion and Amortization
Interest, net
Other
Earnings Before Income Tax
Current Income Taxes
Future Income Taxes
Total Income Taxes
Minority Interest
Earnings From Continuing Operations
Discontinued Operations/Extraordinary Items
Cumulative Change in Accounting Principle
Net Earnings
Preferred Stock Dividends
Net Earnings to Common Shareholders

2000
38,737
550
39,287

2001
7,611
17,281
138
25,030

2002
10,284
46,464
453
57,201

2003
25,844
78,202
1,051
105,097

2004
34,192
100,679
2,045
136,916

2005
48,525
130,366
4,473
183,364

2006
50,166
133,484
4,873
188,523

2007
48,154
139,283
7,058
194,495

2008
69,818
171,024
5,340
246,182

2009
37,097
112,244
3,499
152,840

23,921
2,215
279
794
1,301
338
6,981
3,458
1,320
236
1,556

13,708
2,643
306
613
1,344
338
2,837
3,241
1,068
572
1,640

37,823
4,698
592
1,950
2,223
566
7,208
2,141
1,309
134
1,443

67,475
7,144
601
2,179
3,485
844
15,032
8,337
3,231
513
3,744

90,182
7,372
703
2,128
3,798
546
17,818
14,369
5,340
922
6,262

124,925
8,562
661
2,247
4,253
497
18,672
23,547
9,065
842
9,907

1,902
1,902
1,902

1,601
32
28
1,661
1,661

118,899
10,413
834
2,476
7,284
1,087
19,197
28,333
12,520
263
12,783
15,550
15,550
15,550

123,429
10,683
1,007
2,306
8,298
1,253
24,247
23,272
11,538
(157)
11,381
11,891
11,891
11,891

168,663
11,818
1,337
2,229
9,012
935
55,781
(3,593)
13,833
(428)
13,405
(16,998)
18,996
1,998
1,998

102,433
10,339
1,182
1,830
9,295
1,289
16,440
10,032
6,205
(1,109)
5,096
(78)
4,858
514
5,372
5,372

698
(993)
(295)
(295)

4,593
237
(95)
4,735
4,735

8,107
22
8,129
8,129

13,640
(23)
(88)
13,529
13,529

Source: BMO Capital Markets, Company Reports

Table 2: Statement of Cash Flows (US$million)


Net Earnings
Charges and Credits Not Impacting Cash
Other
Cash Flow From Operations
Change in Working Capital / Other
Net Cash From Operating Activities
Upstream Spending
Midstream / Downstream Spending
Acquisitions, net
Other
Net Cash From Investing Activities

2000
1,902
1,625
(280)
3,247
191
3,438

2001
1,601
1,982
145
3,728
(169)
3,559

2002
698
2,849
247
3,794
1,184
4,978

2003
4,593
4,438
(453)
8,578
778
9,356

2004
8,107
5,404
(912)
12,599
(640)
11,959

2005
13,640
5,745
(1,998)
17,387
241
17,628

2006
15,550
8,581
(981)
23,150
(1,634)
21,516

2007
11,891
13,634
(2,725)
22,800
1,750
24,550

2008
(16,998)
43,821
(3,146)
23,677
(1,019)
22,658

2009
4,936
9,327
(1,246)
13,017
(538)
12,479

(1,921)
(834)
283
(2,472)

(2,516)
(500)
342
(96)
(2,770)

(3,276)
(1,112)
1,995
(191)
(2,584)

(4,508)
(1,661)
2,659
12
(3,498)

(5,249)
(4,247)
1,591
117
(7,788)

(6,684)
(4,936)
768
(164)
(11,016)

(9,513)
(6,083)
(13,740)
(657)
(29,993)

(9,935)
(1,856)
3,572
(343)
(8,562)

(16,456)
(2,643)
1,640
(157)
(17,616)

(8,899)
(1,962)
1,270
(344)
(9,935)

(342)
(78)
(474)
(26)
(920)
(21)
25
317
342

(379)
51
(403)
(68)
(799)
3
(7)
149
142

(1,090)
44
(300)
(684)
(190)
(2,220)
(9)
165
142
307

(4,811)
108
(1,107)
111
(5,699)
24
183
307
490

(2,775)
430
(1,232)
178
(3,399)
125
897
490
1,387

(2,550)
(1,522)
(1,639)
27
(5,684)
(101)
827
1,387
2,214

10,232
(705)
(2,277)
(185)
7,065
15
(1,397)
2,214
817

(5,519)
(6,716)
(2,661)
(444)
(15,340)
(9)
639
817
1,456

5,760
(8,051)
(2,854)
(619)
(5,764)
21
(701)
1,456
755

1,229
13
(2,832)
(1,265)
(2,855)
98
(213)
755
542

Net Change in Debt


Net Change in Common Stock
Net Change in Preferred Stock
Cash Dividends Paid
Other
Net Cash From Financing Activities
Effect of Exchange Rate on Cash
Net Increase/(Decrease) in Cash
Cash and Equivalents, Beginning of Year
Cash and Equivalents, End of Year

Source: BMO Capital Markets, Company Reports

See pages G1 to G2 for analyst coverage.

Page B52

Integrated Oils

ConocoPhillips (COP - NYSE)


Table 3: Balance Sheet (US$million)
Total Current Assets
Net Property, Plant and Equipment
Other Assets
Total Assets

2000
3,411
12,207
2,509
18,127

2001
6,498
22,133
6,586
35,217

2002
10,903
43,030
22,903
76,836

2003
11,192
47,428
23,835
82,455

2004
15,021
50,902
26,938
92,861

2005
19,612
54,669
32,718
106,999

2006
25,066
86,201
53,514
164,781

2007
24,735
89,003
64,019
177,757

2008
20,843
83,947
38,075
142,865

2009
21,167
87,708
43,713
152,588

Total Current Liabilities


Long-term Debt
Deferred Income Taxes
Other Liabilities and Deferred Credits
Total Liabilities
Minority Interests
Common Shares
Contributed Surplus (Paid-in Capital)
Preferred Stock
Retained Earnings
Other / Comprehensive Income (Loss)
Total Shareholders' Equity
Total Liabilities and Shareholders' Equity

4,187
4,138
1,911
1,926
12,162
337
6
4,932
1,460
(770)
5,628
18,127

4,821
8,610
4,015
2,776
20,222
655
538
9,069
7,197
(2,464)
14,340
35,217

12,816
18,917
8,361
6,224
46,318
1,001
7
25,178
5,621
(1,289)
29,517
76,836

14,011
16,340
8,565
8,331
47,247
842
7
25,361
9,234
(236)
34,366
82,455

15,586
14,370
10,385
8,692
49,033
1,105
14
26,047
16,128
534
42,723
92,861

21,359
10,758
11,439
9,503
53,059
1,209
14
26,754
28,018
(2,055)
52,731
106,999

26,431
23,091
20,074
11,337
80,933
1,202
17
41,926
41,292
(589)
82,646
164,781

26,882
20,289
21,018
19,412
87,601
1,173
17
42,724
50,510
(4,268)
88,983
177,757

21,780
27,085
18,167
19,568
86,600
1,100
17
43,396
30,642
(18,890)
55,165
142,865

23,695
26,925
17,962
20,949
89,531
590
17
43,681
32,658
(13,889)
62,467
152,588

Source: BMO Capital Markets, Company Reports

Table 4: Results of Operations from Oil & Gas Producing Activities (US$million)
Cumulative
2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

3-Year

5-Year

Net Revenue

9,629

6,705

8,389

15,179

18,713

28,503

40,641

43,526

54,869

35,447

133,842

202,986

Production Costs

1,692

1,377

1,921

2,854

3,463

6,531

11,681

14,242

18,658

13,029

45,929

64,141

385

315

584

594

702

725

906

1,085

1,428

1,237

3,750

5,381

1,558

1,022

1,639

2,761

2,911

3,434

6,302

7,560

8,308

9,100

24,968

34,704

Worldwide

Exploration
DD&A
Other

653

1,016

1,068

1,714

1,340

950

733

103

146

1,330

1,579

3,262

Pre-tax Earnings

5,341

2,975

3,177

7,256

10,297

16,863

21,019

20,536

26,329

10,751

57,616

95,498

Income Taxes
Net Earnings

2,438
2,903

1,490
1,485

1,647
1,530

3,362
3,894

4,837
5,460

7,941
8,922

10,721
10,298

9,515
11,021

12,567
13,762

5,484
5,267

27,566
30,050

46,228
49,270

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

3-Year

5-Year

Net Revenue

6,956

4,614

4,795

7,879

9,197

12,542

17,099

19,514

24,118

13,358

56,990

86,631

Production Costs

1,397

1,118

1,331

1,719

1,798

3,016

5,096

6,344

8,577

5,848

20,769

28,881

192

130

241

293

295

333

573

669

808

701

2,178

3,084

1,094

738

1,003

1,333

1,361

1,690

3,887

4,803

4,787

5,060

14,650

20,227

Cumulative
North America

Exploration
DD&A
Other

518

896

821

1,194

1,064

410

325

-38

76

453

491

1,226

Pre-tax Earnings

3,755

1,732

1,399

3,340

4,679

7,093

7,218

7,736

9,870

1,296

18,902

33,213

Income Taxes
Net Earnings

1,386
2,369

572
1,160

409
990

1,154
2,186

1,599
3,080

2,470
4,623

2,280
4,938

2,576
5,160

2,998
6,872

328
968

5,902
13,000

10,652
22,561

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

3-Year

5-Year

Cumulative
International
Net Revenue

2,673

2,091

3,594

7,300

9,516

15,961

23,542

24,012

30,751

22,089

76,852

116,355

Production Costs

295

259

590

1,135

1,665

3,515

6,585

7,898

10,081

7,181

25,160

35,260

Exploration

193

185

343

301

407

392

333

416

620

536

1,572

2,297

DD&A

464

284

636

1,428

1,550

1,744

2,415

2,757

3,521

4,040

10,318

14,477

Other

135

120

247

520

276

540

408

141

70

877

1,088

2,036

Pre-tax Earnings

1,586

1,243

1,778

3,916

5,618

9,770

13,801

12,800

16,459

9,455

38,714

62,285

Income Taxes
Net Earnings

1,052
534

918
325

1,238
540

2,208
1,708

3,238
2,380

5,471
4,299

8,441
5,360

6,939
5,861

9,569
6,890

5,156
4,299

21,664
17,050

35,576
26,709

Note: Based on FASB 69 disclosure


Source: BMO Capital Markets, Company Reports

See pages G1 to G2 for analyst coverage.

Oil & Gas Global Cost Study

Page B53

ConocoPhillips (COP - NYSE)


Table 5: Upstream Netbacks (US$/boe)
Weighted Average
2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

3-Year

5-Year

Worldwide
Net Revenue

35.49

20.89

20.35

24.78

30.92

42.24

46.24

50.75

65.07

41.02

52.18

49.28

Production Costs

6.24

4.29

4.66

4.66

5.72

9.68

13.29

16.61

22.13

15.08

17.91

15.57

Exploration

1.42

0.98

1.42

0.97

1.16

1.07

1.03

1.27

1.69

1.43

1.46

1.31

DD&A

5.74

3.18

3.97

4.51

4.81

5.09

7.17

8.81

9.85

10.53

9.73

8.43

Other

2.41

3.17

2.59

2.80

2.21

1.41

0.83

0.12

0.17

1.54

0.62

0.79

Pre-tax Earnings

19.68

9.27

7.70

11.85

17.02

24.99

23.91

23.94

31.23

12.44

22.46

23.19

Income Taxes
Net Earnings

8.99
10.70

4.64
4.63

3.99
3.71

5.49
6.36

7.99
9.02

11.77
13.22

12.20
11.72

11.09
12.85

14.90
16.32

6.35
6.09

10.75
11.72

11.22
11.96

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

3-Year

5-Year

Weighted Average
North America
Net Revenue

40.02

20.77

19.18

25.53

32.01

44.69

43.92

47.79

62.08

34.76

48.25

46.80

Production Costs

8.04

5.03

5.32

5.57

6.26

10.75

13.09

15.54

22.08

15.22

17.58

15.60

Exploration

1.10

0.59

0.96

0.95

1.03

1.19

1.47

1.64

2.08

1.82

1.84

1.67

DD&A

6.29

3.32

4.01

4.32

4.74

6.02

9.98

11.76

12.32

13.17

12.40

10.93

Other

2.98

4.03

3.28

3.87

3.70

1.46

0.83

-0.09

0.20

1.18

0.42

0.66

Pre-tax Earnings

21.60

7.80

5.60

10.82

16.28

25.27

18.54

18.95

25.41

3.37

16.00

17.94

Income Taxes
Net Earnings

7.97
13.63

2.57
5.22

1.64
3.96

3.74
7.08

5.56
10.72

8.80
16.47

5.86
12.68

6.31
12.64

7.72
17.69

0.85
2.52

5.00
11.01

5.75
12.19

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

3-Year

5-Year

Weighted Average
International
Net Revenue

27.42

21.16

22.14

24.03

29.94

40.49

48.08

53.44

67.63

46.03

55.54

51.31

Production Costs

3.03

2.62

3.63

3.74

5.24

8.92

13.45

17.58

22.17

14.97

18.18

15.55

Exploration

1.98

1.87

2.11

0.99

1.28

0.99

0.68

0.93

1.36

1.12

1.14

1.01

DD&A

4.76

2.87

3.92

4.70

4.88

4.42

4.93

6.14

7.74

8.42

7.46

6.38

Other

1.38

1.21

1.52

1.71

0.87

1.37

0.83

0.31

0.15

1.83

0.79

0.90

Pre-tax Earnings

16.27

12.58

10.95

12.89

17.68

24.79

28.18

28.49

36.20

19.70

27.98

27.47

Income Taxes
Net Earnings

10.79
5.48

9.29
3.29

7.63
3.33

7.27
5.62

10.19
7.49

13.88
10.91

17.24
10.95

15.44
13.04

21.05
15.15

10.75
8.96

15.66
12.32

15.69
11.78

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

3-Year

5-Year

International Segments (US$/boe):


Weighted Average
Europe
Net Revenue

24.08

22.59

22.83

25.31

31.25

43.44

54.38

61.91

80.13

50.53

64.42

57.75

Production Costs

2.13

2.32

3.04

3.25

4.89

5.80

7.12

9.96

9.98

9.21

9.72

8.32

Exploration

0.67

0.44

0.59

0.64

0.48

0.53

0.45

0.74

1.58

1.09

1.14

0.86

DD&A

3.25

3.27

4.62

5.94

6.25

6.58

7.32

9.85

12.85

15.42

12.72

10.24

Other

1.13

0.73

1.78

1.86

0.54

0.62

1.12

2.25

-2.36

1.57

0.44

0.63

Pre-tax Earnings

16.91

15.84

12.79

13.63

19.10

29.91

38.38

39.11

58.09

23.25

40.40

37.71

Income Taxes
Net Earnings

11.79
5.12

10.95
4.89

8.71
4.08

8.18
5.45

12.74
6.36

20.27
9.64

27.91
10.46

25.41
13.70

35.14
22.95

15.93
7.32

25.62
14.78

24.97
12.75

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

3-Year

5-Year

Weighted Average
Other International
Net Revenue

38.64

17.46

20.58

21.94

28.33

38.40

44.90

49.55

61.53

44.12

51.48

48.05

Production Costs

6.04

3.40

4.97

4.52

5.67

11.12

16.64

21.08

28.13

17.41

22.05

19.20

Exploration

6.40

5.57

5.56

1.55

2.26

1.33

0.80

1.01

1.26

1.13

1.13

1.09

DD&A

9.85

1.84

2.32

2.69

3.19

2.90

3.73

4.43

5.25

5.44

5.05

4.44

Other
Pre-tax Earnings
Income Taxes
Net Earnings

2.24

2.46

0.95

1.48

1.28

1.90

0.69

-0.57

1.38

1.94

0.94

1.03

14.10

4.19

6.79

11.69

15.93

21.16

23.05

23.60

25.51

18.20

22.30

22.29

7.43
6.67

5.02
-0.83

5.17
1.61

5.78
5.91

7.05
8.88

9.36
11.80

11.86
11.19

10.86
12.74

14.17
11.35

8.54
9.66

11.10
11.20

11.00
11.29

Source: BMO Capital Markets, Company Reports

See pages G1 to G2 for analyst coverage.

Page B54

Integrated Oils

ConocoPhillips (COP - NYSE)


Table 6: Reserve Replacement Performance
2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

3-Year

5-Year

Production:
Gas Production (mmcf/d)

1,550.7

1,561.6

2,306.8

3,854.8

3,767.1

3,712.3

5,671.2

5,780.8

5,739.7

5,624.7

5,715.1

5,305.8

Liquids Production (b/d)

484,932

619,178

745,205

1,035,616

1,030,137

1,230,137

1,463,014

1,386,301

1,353,425

1,430,137

1,389,954

1,372,603

Total Production (boe/d)

743,379

879,452

1,129,680

1,678,082

1,657,991

1,848,858

2,408,219

2,349,772

2,310,046

2,367,580

2,342,466

2,256,895

% Gas Production

35%

30%

34%

38%

38%

33%

39%

41%

41%

40%

41%

39%

% Oil Production

65%

70%

66%

62%

62%

67%

61%

59%

59%

60%

59%

61%

Gas Reserves (bcf)

8,534

8,829

16,040

16,060

17,696

19,061

26,835

25,438

24,948

24,247

24,878

Oil Reserves (mmbbls)

3,597

3,660

5,137

5,199

5,786

6,439

6,857

6,453

5,931

6,285

6,223

6,393

Total Proven Reserves (mmboe)

5,019

5,132

7,810

7,876

8,735

9,616

11,330

10,693

10,089

10,326

10,369

10,411

% Gas Reserves

28%

29%

34%

34%

34%

33%

39%

40%

41%

39%

40%

39%

% Oil Reserves

72%

71%

66%

66%

66%

67%

61%

60%

59%

61%

60%

61%

Proven Reserve Life Index

18.5

16.0

18.9

12.9

14.4

14.2

12.9

12.5

12.0

11.9

12.1

12.7

Proven Reserves:
24,106

Proven Reserve Additions:


Gas Additions (bcf)

2,736.0

865.0

8,053.0

1,427.0

3,011.0

2,720.0

9,844.0

713.0

1,605.0

1,352.0

3,670.0

16,234.0

Oil Additions (mmbbls)

2,603.0

289.0

1,749.0

440.0

963.0

1,102.0

983.0

102.0

-28.0

620.0

694.0

2,779.0

Total Additions (mmboe)

3,059.0

433.2

3,091.2

677.8

1,464.8

1,555.3

2,623.7

220.8

239.5

845.3

1,305.7

5,484.7

Addition Components (mmboe):


Extensions, Discoveries and Additions

777.2

248.7

235.0

679.5

495.7

526.5

601.8

699.5

268.5

637.5

1,605.5

Acquisitions

2,182.2

32.3

3,041.2

25.5

894.7

891.5

2,501.8

408.0

103.8

25.5

537.3

Dispositions

-57.8

-4.3

-83.7

-187.3

-40.5

-13.3

-28.2

-1,183.7

-86.0

-7.2

Revisions of Estimates

157.5

156.5

-101.3

160.2

115.0

150.7

-451.8

297.0

-46.8

189.5

439.7

Extensions, Discoveries and Additions

25.4%

57.4%

7.6%

100.2%

33.8%

33.9%

22.9%

316.8%

112.1%

75.4%

123.0%

49.8%

Acquisitions

71.3%

7.5%

98.4%

3.8%

61.1%

57.3%

95.4%

184.8%

43.4%

3.0%

41.2%

71.7%

Dispositions

-1.9%

-1.0%

-2.7%

-27.6%

-2.8%

-0.9%

-1.1%

-536.0%

-35.9%

-0.8%

-97.8%

-24.0%

5.1%

36.1%

-3.3%

23.6%

7.9%

9.7%

-17.2%

134.5%

-19.6%

22.4%

33.7%

2.5%
167.7%

(1,276.8)

2,733.8
3,930.7
(1,318.3)
138.5

Components as % of Total Additions (mmboe):

Revisions of Estimates
Additions as % of Production:
Gas

483.4%

151.8%

956.4%

101.4%

219.0%

200.7%

475.6%

33.8%

76.6%

65.9%

58.6%

Oil

1470.6%

127.9%

643.0%

116.4%

256.1%

245.4%

184.1%

20.2%

-5.7%

118.8%

45.6%

110.9%

Total

1127.4%

134.9%

749.7%

110.7%

242.1%

230.5%

298.5%

25.7%

28.4%

97.8%

50.9%

133.2%

Gas

32.1%

9.8%

50.2%

8.9%

17.0%

14.3%

36.7%

2.8%

6.4%

5.6%

14.8%

67.3%

Oil

72.4%

7.9%

34.0%

8.5%

16.6%

17.1%

14.3%

1.6%

-0.5%

9.9%

11.2%

43.5%

Total

60.9%

8.4%

39.6%

8.6%

16.8%

16.2%

23.2%

2.1%

2.4%

8.2%

12.6%

52.7%

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

3-Year

5-Year

Additions as % of Reserves:

Capital Expenditures (US$million):


Exploration

$376

$417

$582

$766

$717

$797

$1,237

$1,370

$1,878

$1,676

$4,924

$6,958

Development

$1,172

$1,915

$2,671

$3,722

$3,647

$5,204

$8,947

$10,673

$11,457

$8,736

$30,866

$45,017

Acquisitions

$6,048

$282

$14,439

-$8

$2,275

$4,507

$31,285

$524

$10,855

$46,647

Dispositions
Total Expenditures

$4,249

$6,082

na

na

na

na

na

na

na

na

na

na

na

na

$7,596

$2,614

$17,692

$4,480

$6,639

$10,508

$41,469

$16,292

$19,417

$10,936

$46,645

$98,622

4.9%
15.4%
79.6%

16.0%
73.3%
10.8%

3.3%
15.1%
81.6%

17.1%
83.1%
-0.2%

10.8%
54.9%
34.3%

7.6%
49.5%
42.9%

3.0%
21.6%
75.4%

8.4%
65.5%
26.1%

9.7%
59.0%
31.3%

15.3%
79.9%
4.8%

10.6%
66.2%
23.3%

7.1%
45.6%
47.3%

$4,846
$17.86
7.3x

$2,822
$8.79
1.5x

$3,753
$9.10
1.6x

$7,249
$11.84
2.3x

$9,073
$14.99
3.4x

$13,081
$19.38
2.9x

$17,506
$19.92
1.3x

$19,666
$22.93
2.0x

$23,498
$27.87
0.5x

$15,604
$18.06
1.4x

$58,768
$22.91
1.3x

$89,355
$21.69
1.5x

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

3-Year

5-Year
$18.10

Expenditures as % of Total (US$million):


Exploration
Development
Acquisitions
Cashflow (US$million)
Cashflow (US$/boe)
Recycle Ratio

F&D Costs (US$/boe):


Exploration & Development (incl. revisions)

$1.66

$5.76

$24.34

$5.34

$7.15

$8.86

$67.89

$12.09

$60.16

$12.59

$17.50

Acquisition Costs

$2.77

$8.72

$4.75

-$0.31

$2.54

$5.06

$12.50

$10.41

$58.57

$20.55

$20.20

$11.87

All Sources (incl. revisions)

$2.44

$5.97

$5.57

$5.18

$4.41

$6.70

$15.64

$11.60

$59.65

$12.83

$18.06

$14.50
$19.01

Exploration & Development (excl. revisions)

$1.99

$9.38

$13.84

$6.60

$8.80

$11.40

$16.92

$17.22

$49.66

$16.33

$22.29

Acquisition Costs

$2.77

$8.72

$4.75

-$0.31

$2.54

$5.06

$12.50

$10.41

$58.57

$20.55

$20.20

$11.87

All Sources (excl. revisions)

$2.57

$9.30

$5.40

$6.35

$4.78

$7.41

$13.36

$14.71

$52.15

$16.49

$21.77

$14.80

North America

$2.85

$5.17

$7.45

$4.66

$8.80

$12.11

$15.28

$14.12

-$26.90

$10.02

$29.19

$17.82

Europe

$2.94

$4.53

$5.81

$11.68

$7.85

$17.74

-$129.46

$54.00

$114.84

$30.05

$55.98

$63.27

Other International

$0.94

$7.40

$4.02

$4.15

$3.21

$4.71

$11.59

$8.96

$17.85

$14.45

$12.60

$9.90

Geographically Segmented Costs

Note: Reserve estimates reported after royalties


Source: BMO Capital Markets, Company Reports

See pages G1 to G2 for analyst coverage.

Oil & Gas Global Cost Study

Page B55

ConocoPhillips (COP - NYSE)


Breakeven Analysis
Table 7: Breakeven Oil Price Analysis (US$/boe)
2000

Worldwide
Operating Costs
Exploration Expense
G&A/Other
F&D Costs
Return on Capital
Income Taxes
Breakeven Oil Price
Quality Differential
Required WTI Price

North America
Operating Costs
Exploration Expense
G&A/Other
F&D Costs
Return on Capital
Income Taxes
Breakeven Oil Price
Quality Differential
Required WTI Price

6.24
1.42
2.41
2.44
2.98
2.50
17.98
(6.71)
11.27

2000
8.04
1.10
2.98
2.85
3.29
1.92
20.18
(11.47)
8.71

International
Operating Costs
Exploration Expense
G&A/Other
F&D Costs
Return on Capital
Income Taxes
Breakeven Oil Price
Quality Differential
Required WTI Price

2000
3.03
1.98
1.38
1.13
1.54
3.04
12.10
1.77
13.87

2001
4.29
0.98
3.17
5.97
6.23
6.25
26.89
4.56
31.45

2001
5.03
0.59
4.03
5.17
4.51
2.22
21.55
4.66
26.21

2001
2.62
1.87
1.21
6.78
9.80
27.68
49.97
4.33
54.29

2002
4.66
1.42
2.59
5.57
7.05
7.58
28.87
3.79
32.66

2002
5.32
0.96
3.28
7.45
7.23
2.99
27.24
4.82
32.06

2002
3.63
2.11
1.52
4.71
8.20
18.79
38.97
2.21
41.18

2003
4.66
0.97
2.80
5.18
4.24
3.66
21.51
6.98
28.49

2003
5.57
0.95
3.87
4.66
3.59
1.90
20.54
6.31
26.85

2003
3.74
0.99
1.71
5.55
4.80
6.21
23.01
7.66
30.66

2004
5.72
1.16
2.21
4.41
4.11
3.64
21.25
8.85
30.10

2004
6.26
1.03
3.70
8.80
7.15
3.71
30.64
7.45
38.10

2004
5.24
1.28
0.87
3.72
3.87
5.26
20.23
10.10
30.34

2005
9.68
1.07
1.41
6.70
6.15
5.47
30.48
13.60
44.08

2005
10.75
1.19
1.46
12.11
10.03
5.36
40.88
10.87
51.75

2005
8.92
0.99
1.37
5.57
5.47
6.97
29.29
15.55
44.83

2006
13.29
1.03
0.83
15.64
12.84
13.37
57.01
10.43
67.44

2006
13.09
1.47
0.83
15.28
13.10
6.05
49.82
9.21
59.03

2006
13.45
0.68
0.83
16.73
13.27
20.90
65.86
11.41
77.27

2007
16.61
1.27
0.12
11.60
9.21
7.95
46.75
9.41
56.16

2007
15.54
1.64
(0.09)
14.12
11.32
5.65
48.18
8.16
56.34

2007
17.58
0.93
0.31
10.67
8.33
9.87
47.69
10.54
58.23

2008
22.13
1.69
0.17
59.65
45.21
41.28
170.14
15.40
185.54

2008
22.08
2.08
0.20
49.79
38.79
16.92
129.85
12.13
141.98

2008
22.17
1.36
0.15
21.22
16.44
22.83
84.18
18.20
102.37

2009
15.08
1.43
1.54
12.83
9.72
10.12
50.71
6.30
57.02

2009
15.22
1.82
1.18
10.02
7.98
2.70
38.92
7.36
46.28

2009
14.97
1.12
1.83
16.18
11.73
14.07
59.89
5.46
65.35

International Segments (US$/boe):


Europe
Operating Costs
Exploration Expense
G&A/Other
F&D Costs
Return on Capital
Income Taxes
Breakeven Oil Price
Quality Differential
Required WTI Price

Other International
Operating Costs
Exploration Expense
G&A/Other
F&D Costs
Return on Capital
Income Taxes
Breakeven Oil Price
Quality Differential
Required WTI Price

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2.13
0.67
1.13
2.94
2.28
5.25
14.40
4.92
19.32

2.32
0.44
0.73
4.53
3.61
8.09
19.72
2.87
22.59

3.04
0.59
1.78
5.81
5.30
11.30
27.83
1.34
29.17

3.25
0.64
1.86
11.68
5.75
8.64
31.81
6.50
38.31

4.89
0.48
0.54
7.85
4.05
8.11
25.92
8.40
34.32

5.80
0.53
0.62
17.74
9.21
19.37
53.28
12.24
65.52

7.12
0.45
1.12
28.30
13.52
36.08
86.59
1.60
88.19

9.96
0.74
2.25
54.00
25.65
47.55
140.15
(2.48)
137.66

9.98
1.58
(2.36)
114.84
50.54
77.36
251.93
(0.71)
251.23

9.21
1.09
1.57
30.05
11.09
24.13
77.13
(3.07)
74.06

2007

2008

2009

2000
6.04
6.40
2.24
0.94
3.06
3.40
22.08
(8.82)
13.26

2001
3.40
5.57
2.46
7.40
22.39
41.58
82.79
8.08
90.86

2002
4.97
5.56
0.95
4.02
13.44
43.17
72.10
4.17
76.27

Source: BMO Capital Markets, Company Reports

See pages G1 to G2 for analyst coverage.

2003
4.52
1.55
1.48
4.15
6.54
6.41
24.66
9.54
34.20

2004
5.67
2.26
1.28
3.21
5.75
4.57
22.73
12.20
34.94

2005
11.12
1.33
1.90
4.71
6.33
5.02
30.41
17.89
48.29

2006
16.64
0.80
0.69
11.59
11.47
12.16
53.34
16.34
69.68

21.08
1.01
(0.57)
8.96
8.36
7.13
45.96
16.53
62.49

28.13
1.26
1.38
17.85
17.96
22.42
88.99
27.43
116.42

17.41
1.13
1.94
14.45
12.85
11.36
59.14
9.09
68.22

Weighted Average
3-Year
5-Year
17.91
1.46
0.62
18.06
14.06
12.89
65.00
10.37
75.37

15.57
1.31
0.79
14.50
11.73
11.01
54.91
11.03
65.94

Weighted Average
3-Year
5-Year
17.58
1.84
0.42
29.19
23.18
10.52
82.73
9.22
91.95

15.60
1.67
0.66
17.82
14.30
6.75
56.80
9.54
66.34

Weighted Average
3-Year
5-Year
18.18
1.14
0.79
14.83
11.37
14.45
60.76
11.40
72.16

15.55
1.01
0.90
12.11
9.85
13.12
52.53
12.23
64.76

Weighted Average
3-Year
5-Year
9.72
1.14
0.44
55.98
23.13
40.10
130.51
(2.09)
128.42

8.32
0.86
0.63
63.27
28.34
55.52
156.94
1.52
158.46

Weighted Average
3-Year
5-Year
22.05
1.13
0.94
12.60
11.84
11.74
60.31
17.68
77.99

19.20
1.09
1.03
9.90
10.16
9.90
51.30
17.45
68.75

Page B56

Integrated Oils

Eni S.P.A. (E - NYSE)

US$, net

Enis results from operations were within the top quartile of its peer group in 2009 with net earnings of $13.77/boe, as a result of strong realized prices for its international natural gas production relative to price weakness for many North American peers. Meanwhile, its production
costs remain among the lowest in the peer group, at $6.81/boe.
Eni reported the second-highest all-in F&D costs among its peers in 2009, at $28.59/boe compared to $20.58/boe in 2008. Excluding positive
revisions posted during the year, reserve replacement costs were even worse, at $50.01/boe.
Despite the higher F&D costs reported, we estimate Enis required WTI equivalent breakeven oil price fell 7% on the year to $77.53/boe,
reflecting the companys lower operating costs and a large negative differential against benchmark commodity prices during the year.
Notes: All upstream financial figures, as well as reserve and production values are based upon FASB Statement No. 69 disclosure. All financial
figures have been converted from euros to U.S. dollars using average annual exchange rates.
Capital Spending by Region (US$million)
$20,000

8,000

16.0

7,000

14.0

6,000

12.0

$14,000

5,000

10.0

$12,000

4,000

8.0

3,000

6.0

2,000

4.0

1,000

2.0

$2,000

0.0

$0

2000

2001

2002

2003

2004

2005

Proven Reserves

2006

2007

2008

$18,000
$16,000

Years

mmboe (net)

Proven Reserves vs RLI

$10,000
$8,000
$6,000
$4,000

2009

2000

2001

2002

2003

Europe

RLI

Proven Reserve Additions by Region (million boe)

2004

Africa

2005

2006

2007

2008

2009

Other International

F&D Costs Including Revisions (US$/boe)

1,600

$50.00

1,400

$45.00

1,200

$40.00

1,000

$35.00

800

$30.00

600

$25.00

400

$20.00

200

$15.00

$10.00

-200

$5.00

-400

58.14

286.57 106.90

284.04

$0.00
2000

2001

2002

2003
Europe

2004

2005

Africa

2006

2007

2008

2009

2000

Asia and Other

2001

2002

2003

2004

2005

Exploration and Development

F&D Costs Including Revisions by Region (US$/boe)

2006

2007

Acquisitions

2008

2009

All Sources

3-Year Average F&D Costs Including Revisions (US$/boe)


$201.40

$50.00

$50.00

$45.00

$45.00

$40.00

$40.00

$35.00

$35.00

$30.00

$30.00

$25.00
$20.00

$25.00

$15.00

$20.00

$10.00

$15.00

$5.00

$10.00

$0.00
-54.69

-$5.00
2000

2001

2002

2003
Europe

2004
Africa

2005

$5.00

-186.06

2006

Other International

Source: BMO Capital Markets, Company Reports


See pages G1 to G2 for analyst coverage.

2007

2008

2009

$0.00
2001

2002

2003

2004
Eni

2005
Integrateds

2006

2007
Industry

2008

2009

Oil & Gas Global Cost Study

Page B57

Eni S.P.A. (E - NYSE)

US$/boe, net

Worldwide
Upstream Net Revenue (US$/boe)

Production Costs (US$/boe)

$80.00

$80.00

$70.00

$70.00

$60.00

$60.00

$50.00

$50.00

$40.00

$40.00

$30.00

$30.00

$20.00

$20.00

$10.00

$10.00
$0.00

$0.00
2000

2001

2002

2003

2004
Eni

2005

2006

2007

2008

2000

2009

2001

2002

2003

2004

Eni

Integrateds

Upstream Operating Earnings (US$/boe)

2005

2006

2007

2008

2009

2006

2007

2008

2009

2007

2008

2009

Integrateds

Upstream Net Income (US$/boe)

$80.00

$80.00

$70.00

$70.00

$60.00

$60.00

$50.00

$50.00

$40.00

$40.00

$30.00

$30.00

$20.00

$20.00

$10.00

$10.00

$0.00

$0.00
2000

2001

2002

2003

2004
Eni

2005

2006

2007

2008

2009

2000

2001

2002

Integrateds

2003

2004

Eni

Breakeven Details (US$/boe)

2005

Integrateds

Required WTI Oil Price (US$/boe)

$100.00

100.42

$100.00
$90.00

$80.00

$80.00
$70.00

$60.00

$60.00
$40.00

$50.00
$40.00

$20.00

$30.00
$20.00

$0.00

$10.00
-$20.00

$0.00
2000

2001

2002

2003

Op Cost/G&A/Other

2004

2005

2006

2007

2008

F&D/Exploration

Return

Taxes

Quality

Source: BMO Capital Markets, Company Reports

See pages G1 to G2 for analyst coverage.

2009

2000

2001

2002

2003

2004
Eni

2005

2006

Integrateds

Page B58

Integrated Oils

Eni S.P.A. (E - NYSE)

US$/boe, net

Total International
Upstream Net Revenue (US$/boe)

Production Costs (US$/boe)

$80.00

80.00

$70.00

70.00

$60.00

60.00

$50.00

50.00

$40.00

40.00

$30.00

30.00

$20.00

20.00

$10.00

10.00
0.00

$0.00
2000

2001

2002

2003

2004

Eni

2005

2006

2007

2008

2000

2009

2001

2002

2003

2004

Eni

Integrateds

Upstream Operating Earnings (US$/boe)

2005

2006

2007

2008

2009

Integrateds

Upstream Net Income (US$/boe)

$80.00

$80.00

$70.00

$70.00

$60.00

$60.00

$50.00

$50.00

$40.00

$40.00

$30.00

$30.00

$20.00

$20.00

$10.00

$10.00

$0.00

$0.00
2000

2001

2002

2003

2004
Eni

2005

2006

2007

2008

2009

2000

2001

2002

2003

Integrateds

2004

2005

Eni

Breakeven Details (US$/boe)

2006

2007

2008

2009

Integrateds

Breakeven Oil Price (US$/boe)

$100.00

100.42

$100.00
$90.00

$80.00

$80.00
$70.00

$60.00

$60.00
$40.00

$50.00
$40.00

$20.00

$30.00
$20.00

$0.00

$10.00
-$20.00

$0.00
2000

2001

2002

2003

Op Cost/G&A/Other

2004

2005

2006

2007

2008

F&D/Exploration

Return

Taxes

Quality

Source: BMO Capital Markets, Company Reports

See pages G1 to G2 for analyst coverage.

2009

2000

2001

2002

2003

2004
Eni

2005

2006

Integrateds

2007

2008

2009

Oil & Gas Global Cost Study

Page B59

Eni S.P.A. (E - NYSE)

US$/boe, net

International Segments
Upstream Net Revenue (US$/boe)

Production Costs (US$/boe)

$80.00

$80.00

$70.00

$70.00

$60.00

$60.00

$50.00

$50.00

$40.00

$40.00

$30.00

$30.00

$20.00

$20.00

$10.00

$10.00
$0.00

$0.00
2000

2001

2002

2003

Europe

2004
Africa

2005

2006

2007

2008

2000

2009

2001

2002

2003

Europe

Asia & Other

Upstream Operating Earnings (US$/boe)

2004
Africa

2005

2006

2007

2008

2009

Asia & Other

Upstream Net Income (US$/boe)

$80.00

$80.00

$70.00

$70.00

$60.00

$60.00

$50.00

$50.00

$40.00

$40.00

$30.00

$30.00

$20.00

$20.00

$10.00

$10.00

$0.00

$0.00
2000

2001

2002

2003

2004

Europe

2005

Africa

2006

2007

2008

2009

2000

2001

2002

2003

2004

Europe

Asia & Other

Breakeven Details (US$/boe)

2005

Africa

2006

2007

2008

2009

Asia & Other

Breakeven Oil Price (US$/boe)

$110.00

267.74

$110.00

$100.00

299.48

$100.00

$90.00

$90.00

$80.00

$80.00

$70.00

$70.00

$60.00

$60.00

$50.00

$50.00

$40.00
$30.00

$40.00

$20.00

$30.00

$10.00

$20.00

$0.00

$10.00

-$10.00

$0.00
Europe
Op Cost/G&A/Other

Africa
F&D/Exploration

Asia & Other


Return

Source: BMO Capital Markets, Company Reports

See pages G1 to G2 for analyst coverage.

Taxes

Quality

2000

2001

2002

Europe

2003
Africa

2004

2005

2006

Asia & Other

2007

2008

Peer Average

2009

Page B60

Integrated Oils

Eni S.P.A. (E - NYSE)


Consolidated Statements
Table 1: Income Statement (US$million)
Upstream Revenue, net of Royalties
Midstream / Downstream Revenue
Other
Total Revenue and Other Income
Crude Oil and Product Purchases
Production and Transportation Expenses
Marketing Expenses
Exploration / Dry Hole Costs
General and Administrative
Depreciation, Depletion and Amortization
Interest, net
Other
Earnings Before Income Tax
Current Income Taxes
Future Income Taxes
Total Income Taxes
Minority Interest
Earnings From Continuing Operations
Discontinued Operations/Extraordinary Items
Cumulative Change in Accounting Principle
Net Earnings
Preferred Stock Dividends
Net Earnings to Common Shareholders

2000
11,370
44,393
(10,641)
45,123

2001
12,509
41,270
(9,113)
44,666

2002
12,183
43,432
(9,253)
46,362

2003
14,436
55,506
(10,595)
59,346

2004
19,095
67,713
(13,491)
73,317

2005
27,966
85,463
(20,704)
92,725

2006
34,153
103,539
(28,484)
109,208

2007
37,396
111,269
(27,910)
120,754

2008
49,017
145,778
(34,630)
160,164

2009
33,199
107,940
(23,414)
117,725

25,779
2,717
518
2,574
3,499
(90)
556
9,568
5,142
(1,137)
4,005
5,563
5,563
5,563

25,932
2,591
563
2,555
4,186
426
(2,123)
10,536
2,953
211
3,163
7,373
7,373
7,373

27,419
2,903
641
2,936
4,695
117
(248)
7,899
3,457
(499)
2,959
4,941
4,941
4,941

36,663
3,295
729
3,586
5,334
194
(1,095)
10,640
4,621
(950)
3,671
6,970
6,970
6,970

33,082
13,385
526
4,038
5,721
194
116
16,254
5,541
1,330
6,871
9,383
9,383
9,383

43,401
14,102
541
4,169
6,854
455
1,584
21,618
9,116
997
10,113
11,505
11,505
11,505

56,134
14,980
4,588
8,070
(202)
10
25,629
11,659
1,624
13,283
12,346
12,346
12,346

61,532
17,964
5,209
9,920
114
(1,442)
27,457
13,102
(463)
12,638
14,818
14,818
14,818

86,376
23,411
5,891
14,440
313
1,414
28,320
17,781
(3,522)
14,259
14,062
14,062
14,062

58,952
22,439
5,832
13,688
763
(788)
16,840
11,432
(2,009)
9,424
7,416
7,416
7,416

Source: BMO Capital Markets, Company Reports

Table 2: Statement of Cash Flows (US$million)


Net Earnings
Charges and Credits Not Impacting Cash
Other
Cash Flow From Operations
Change in Working Capital / Other
Net Cash From Operating Activities

2000
5,563
5,328
588
11,480
(1,471)
10,009

2001
7,373
2,366
(1,835)
7,903
(177)
7,727

2002
4,941
5,893
253
11,086
(483)
10,603

2003
6,970
5,738
726
13,433
(527)
12,907

2004
9,383
7,894
(592)
16,685
(1,131)
15,554

2005
11,505
9,273
819
21,597
(3,013)
18,583

2006
12,346
9,860
449
22,655
(1,287)
21,368

2007
14,818
10,008
(1,268)
23,558
(2,285)
21,272

2008
14,062
10,787
3,971
28,819
3,254
32,073

2009
7,416
8,663
1,102
17,182
(1,649)
15,533

Upstream Spending
Midstream / Downstream Spending
Acquisitions, net
Other
Net Cash From Investing Activities

(3,269)
(1,748)
(313)
(2,610)
(7,940)

(3,832)
(2,062)
(616)
637
(5,873)

(5,313)
(2,302)
(209)
(246)
(8,070)

(6,434)
(3,535)
318
524
(9,126)

(6,039)
(3,292)
1,109
(10)
(8,232)

(6,176)
(3,048)
584
162
(8,479)

(6,540)
(3,306)
265
718
(8,862)

(6,807)
(7,715)
(12,877)
(152)
(27,551)

(13,654)
(7,769)
(4,472)
947
(24,948)

(13,232)
(5,871)
4,659
141
(14,303)

Net Change in Debt


Net Change in Common Stock
Net Change in Preferred Stock
Cash Dividends Paid
Other
Net Cash From Financing Activities
Effect of Exchange Rate on Cash
Net Increase/(Decrease) in Cash
Cash and Equivalents, Beginning of Year
Cash and Equivalents, End of Year

112
(1,403)
(553)
(1,845)
38
261
1,249
1,510

(479)
1,198
(1,556)
(494)
(1,330)
34
558
1,465
2,023

3,535
59
(2,872)
(826)
(104)
(61)
2,369
2,136
4,505

1,845
15
(3,410)
(3,324)
(4,875)
(121)
(1,215)
5,393
4,178

(4,657)
(81)
(3,827)
774
(7,792)
(68)
(539)
1,787
1,248

(672)
(1,228)
(7,824)
(11)
(9,735)
41
411
1,248
1,659

(857)
(1,453)
(6,073)
(537)
(8,920)
(253)
3,333
1,675
5,009

12,011
(1,322)
(6,679)
(22)
3,988
(274)
(2,565)
5,463
2,898

1,442
(1,174)
(7,660)
(7,393)
10
(257)
3,110
2,853

5,358
13
(6,299)
(721)
(1,650)
(42)
(462)
2,705
2,243

Source: BMO Capital Markets, Company Reports

See pages G1 to G2 for analyst coverage.

Oil & Gas Global Cost Study

Page B61

Eni S.P.A. (E - NYSE)


Table 3: Balance Sheet (US$million)
Total Current Assets
Net Property, Plant and Equipment
Other Assets
Total Assets

2000
18,434
24,756
8,880
52,070

2001
17,622
29,852
8,742
56,216

2002
20,603
31,878
9,782
62,263

2003
23,249
41,180
11,833
76,262

2004
25,025
50,501
15,125
90,651

2005
31,394
56,005
16,927
104,326

2006
37,733
55,695
17,570
110,998

2007
46,356
68,733
24,003
139,093

2008
54,622
87,028
29,875
171,525

2009
43,420
88,122
32,393
163,935

Total Current Liabilities


Long-term Debt
Deferred Income Taxes
Other Liabilities and Deferred Credits
Total Liabilities
Minority Interests
Common Shares
Contributed Surplus (Paid-in Capital)
Preferred Stock
Retained Earnings
Other / Comprehensive Income (Loss)
Total Shareholders' Equity
Total Liabilities and Shareholders' Equity

18,702
4,726
1,250
5,152
29,830
1,545
3,818
17,407
(530)
20,695
52,070

16,534
5,452
2,349
5,726
30,061
1,529
3,585
22,895
(1,853)
24,627
56,216

20,429
6,197
2,470
6,343
35,439
1,981
3,786
23,741
(2,685)
24,843
62,263

24,214
9,441
2,766
7,769
44,190
1,837
4,534
29,285
(3,583)
30,235
76,262

23,160
9,465
4,913
8,891
46,429
3,939
4,982
39,319
(4,018)
40,283
90,651

27,973
9,522
6,084
11,953
55,532
2,923
4,983
46,134
(5,246)
45,871
104,326

29,850
9,312
7,355
12,698
59,216
2,727
5,034
50,776
(6,755)
49,055
110,998

41,461
15,532
7,500
15,833
80,326
3,344
5,491
58,157
(8,224)
55,423
139,093

52,008
20,492
8,448
19,211
100,158
5,994
5,892
69,422
(9,941)
65,373
171,525

42,526
25,196
6,845
19,554
94,121
5,549
5,586
68,103
(9,425)
64,265
163,935

Source: BMO Capital Markets, Company Reports

See pages G1 to G2 for analyst coverage.

Page B62

Integrated Oils

Eni S.P.A. (E - NYSE)


Note: Converted to US$ from euros

Table 5: Upstream Netbacks (US$/boe)


Weighted Average
2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

3-Year

5-Year

Worldwide
Net Revenue

25.09

21.68

22.08

24.64

30.80

41.32

48.95

53.29

67.82

53.28

58.21

53.02

Production Costs

3.82

2.98

2.92

3.03

3.26

5.09

5.56

6.81

7.69

6.81

7.11

6.40

Exploration

1.23

1.13

1.23

1.30

0.90

0.93

1.11

4.00

4.80

4.00

4.27

2.98

DD&A

4.08

4.55

5.56

5.55

6.27

7.23

7.75

8.36

12.47

8.35

9.75

8.85

Other

1.16

2.23

1.81

3.01

3.48

2.59

3.05

3.49

5.17

3.49

4.06

3.57

14.79

10.78

10.57

11.75

16.88

25.49

31.49

30.63

37.68

30.63

33.02

31.22

6.80
7.99

5.27
5.52

4.90
5.66

5.85
5.91

8.14
8.74

13.47
12.02

16.73
14.75

16.86
13.78

22.19
15.49

16.85
13.77

18.67
14.36

17.25
13.97

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

3-Year

5-Year

Net Revenue

na

na

na

na

na

na

na

na

na

na

na

na

Production Costs

na

na

na

na

na

na

na

na

na

na

na

na

Exploration

na

na

na

na

na

na

na

na

na

na

na

na

DD&A

na

na

na

na

na

na

na

na

na

na

na

na

Other

na

na

na

na

na

na

na

na

na

na

na

na

Pre-tax Earnings

na

na

na

na

na

na

na

na

na

na

na

na

Income Taxes
Net Earnings

na
na

na
na

na
na

na
na

na
na

na
na

na
na

na
na

na
na

na
na

na
na

na
na

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

3-Year

5-Year

Pre-tax Earnings
Income Taxes
Net Earnings

Weighted Average
North America

Weighted Average
International
Net Revenue

25.09

21.68

22.08

24.64

30.80

41.32

48.95

53.29

67.82

53.28

58.21

53.02

Production Costs

3.82

2.98

2.92

3.03

3.26

5.09

5.56

6.81

7.69

6.81

7.11

6.40

Exploration

1.23

1.13

1.23

1.30

0.90

0.93

1.11

4.00

4.80

4.00

4.27

2.98

DD&A

4.08

4.55

5.56

5.55

6.27

7.23

7.75

8.36

12.47

8.35

9.75

8.85

Other
Pre-tax Earnings
Income Taxes
Net Earnings

1.16

2.23

1.81

3.01

3.48

2.59

3.05

3.49

5.17

3.49

4.06

3.57

14.79

10.78

10.57

11.75

16.88

25.49

31.49

30.63

37.68

30.63

33.02

31.22

6.80
7.99

5.27
5.52

4.90
5.66

5.85
5.91

8.14
8.74

13.47
12.02

16.73
14.75

16.86
13.78

22.19
15.49

16.85
13.77

18.67
14.36

17.25
13.97

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

3-Year

5-Year

International Segments (US$/boe):


Weighted Average
Europe
Net Revenue

26.87

24.04

24.33

27.06

33.19

44.11

54.49

58.69

74.60

69.62

67.36

59.25

Production Costs

3.39

3.40

3.09

3.29

3.74

5.35

6.16

8.26

9.17

9.65

8.99

7.54

Exploration

1.26

0.53

0.86

0.91

0.89

1.01

1.15

2.45

3.31

2.87

2.87

2.07

DD&A

4.07

4.87

6.08

5.99

7.00

7.82

8.17

9.99

12.60

11.96

11.47

9.92

Other
Pre-tax Earnings
Income Taxes
Net Earnings

0.45

1.43

2.02

1.88

1.10

1.54

2.14

2.67

4.56

3.46

3.54

2.78

17.70

13.81

12.27

14.99

20.46

28.39

36.87

35.33

44.97

41.68

40.49

36.94

7.80
9.90

6.40
7.41

5.23
7.05

6.79
8.20

9.41
11.05

13.75
14.64

18.58
18.29

17.61
17.71

23.67
21.29

20.74
20.94

20.59
19.90

18.59
18.35

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

3-Year

5-Year

Weighted Average
Africa
Net Revenue

25.01

20.60

21.81

24.43

31.34

42.31

49.19

54.16

68.97

54.22

59.31

54.19

Production Costs

4.71

2.50

2.95

3.07

3.05

5.75

5.84

6.73

7.51

6.73

7.00

6.54

Exploration

0.69

0.78

0.83

0.94

0.59

0.41

0.72

2.83

4.01

2.84

3.24

2.22

DD&A

3.47

3.28

4.07

4.08

4.57

5.66

6.24

6.09

9.40

6.10

7.24

6.75

Other
Pre-tax Earnings
Income Taxes
Net Earnings

1.58

2.86

1.36

3.77

5.35

2.53

2.99

3.87

5.11

3.83

4.29

3.71

14.55

11.18

12.60

12.57

17.77

27.96

33.40

34.64

42.93

34.73

37.54

34.97

7.50
7.06

5.53
5.66

6.31
6.29

7.20
5.37

9.65
8.13

16.92
11.04

19.22
14.18

20.62
14.02

27.06
15.87

20.65
14.08

22.86
14.68

21.05
13.92

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

3-Year

5-Year

Weighted Average
Asia & Other
Net Revenue

19.77

17.96

17.43

20.00

25.72

35.14

39.50

43.89

57.41

35.59

45.35

42.29

Production Costs

2.08

3.04

2.44

2.42

2.87

3.26

3.81

5.10

6.52

4.25

5.26

4.61

Exploration

2.99

3.67

3.02

2.84

1.54

1.94

2.16

9.07

8.42

7.60

8.31

5.97

DD&A

6.23

6.90

7.79

7.57

8.42

9.80

11.32

12.02

19.99

9.77

13.85

12.60

Other

1.94

2.82

2.37

3.83

3.74

4.23

4.66

3.59

5.99

2.78

4.09

4.22

Pre-tax Earnings

6.54

1.52

1.81

3.33

9.16

15.90

17.54

14.13

16.49

11.19

13.84

14.89

Income Taxes
Net Earnings

1.30
5.25

1.53
-0.01

0.85
0.96

1.14
2.19

3.02
6.14

5.51
10.38

6.76
10.78

6.18
7.95

8.39
8.10

4.95
6.24

6.46
7.37

6.32
8.57

Source: BMO Capital Markets, Company Reports


See pages G1 to G2 for analyst coverage.

Oil & Gas Global Cost Study

Page B63

Eni S.P.A. (E - NYSE)


Note: Converted to US$ from euros

Table 6: Reserve Replacement Performance


2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

3-Year

5-Year

Production:
Gas Production (mmcf/d)

2,413.7

2,995.1

3,103.8

3,352.3

3,411.5

3,594.5

3,978.1

4,093.2

4,430.1

4,372.6

4,298.6

4,093.7

Liquids Production (b/d)

750,685

860,274

915,068

978,082

1,032,877

1,112,329

1,076,712

1,024,658

1,030,137

1,008,219

1,021,005

1,050,411

Total Production (boe/d)

1,152,968

1,359,452

1,432,374

1,536,804

1,601,461

1,711,416

1,739,726

1,706,849

1,768,493

1,736,986

1,737,443

1,732,694

% Gas Production

35%

37%

36%

36%

36%

35%

38%

40%

42%

42%

41%

39%

% Oil Production

65%

63%

64%

64%

64%

65%

62%

60%

58%

58%

59%

61%

Proven Reserves:
Gas Reserves (bcf)

14,770

17,070

18,626

18,006

18,433

17,591

16,965

19,571

20,229

17,850

19,217

18,441

Oil Reserves (mmbbls)

3,422

3,948

3,783

4,138

4,008

3,773

3,481

3,269

3,385

3,463

3,372

3,474

Total Proven Reserves (mmboe)

5,884

6,793

6,887

7,139

7,080

6,705

6,309

6,531

6,757

6,438

6,575

6,548

% Gas Reserves

42%

42%

45%

42%

43%

44%

45%

50%

50%

46%

49%

47%

% Oil Reserves

58%

58%

55%

58%

57%

56%

55%

50%

50%

54%

51%

53%

Proven Reserve Life Index

14.0

13.7

13.2

12.7

12.1

10.7

9.9

10.5

10.5

10.2

10.4

10.4

Proven Reserve Additions:


Gas Additions (bcf)

1,988.5

3,392.7

2,689.4

603.1

1,672.1

468.0

826.0

4,100.0

2,275.0

-783.0

5,592.0

6,886.0

Oil Additions (mmbbls)

559.0

840.0

169.0

712.0

247.0

135.0

101.0

162.0

492.0

446.0

1,100.0

1,336.0

Total Additions (mmboe)

890.4

1,405.5

617.2

812.5

525.7

213.0

238.7

845.3

871.2

315.5

104.3

2,032.0

2,483.7

Addition Components (mmboe):


Extensions, Discoveries and Additions

225.2

151.6

346.4

382.0

388.8

239.5

263.3

220.7

Acquisitions

251.6

754.4

39.5

159.9

0.0

103.8

0.7

747.5

89.3

24.8

861.7

966.2

Dispositions

-1.0

-5.7

-95.8

-22.8

-79.4

0.0

-173.2

0.0

-58.7

-303.5

(362.2)

(535.3)

414.7

505.2

327.2

293.5

216.3

-130.3

147.8

-122.8

736.2

265.2

878.5

896.0
46.6%

Revisions of Estimates

329.0

654.0

1,156.8

Components as % of Total Additions (mmboe):


Extensions, Discoveries and Additions

25.3%

10.8%

56.1%

47.0%

74.0%

112.4%

110.3%

26.1%

12.0%

104.3%

32.2%

Acquisitions

28.3%

53.7%

6.4%

19.7%

0.0%

48.7%

0.3%

88.4%

10.3%

7.9%

42.4%

38.9%

Dispositions

-0.1%

-0.4%

-15.5%

-2.8%

-15.1%

0.0%

-72.6%

0.0%

-6.7%

-96.2%

-17.8%

-21.6%

Revisions of Estimates

46.6%

35.9%

53.0%

36.1%

41.1%

-61.2%

61.9%

-14.5%

84.5%

84.0%

43.2%

36.1%

Additions as % of Production:
Gas

225.7%

310.3%

237.4%

49.3%

134.3%

35.7%

56.9%

274.4%

140.7%

-49.1%

118.8%

92.2%

Oil

204.0%

267.5%

50.6%

199.4%

65.5%

33.3%

25.7%

43.3%

130.9%

121.2%

98.4%

69.7%

Total

211.6%

283.2%

118.1%

144.9%

89.9%

34.1%

37.6%

135.7%

135.0%

49.8%

106.8%

78.5%

Gas

13.5%

19.9%

14.4%

3.3%

9.1%

2.7%

4.9%

20.9%

11.2%

-4.4%

29.1%

37.3%

Oil

16.3%

21.3%

4.5%

17.2%

6.2%

3.6%

2.9%

5.0%

14.5%

12.9%

32.6%

38.5%

Total

15.1%

20.7%

9.0%

11.4%

7.4%

3.2%

3.8%

12.9%

12.9%

4.9%

30.9%

37.9%

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

3-Year

5-Year

Additions as % of Reserves:

Capital Expenditures (US$million):


Exploration

$824

$976

$853

$740

$621

$826

$1,727

$3,063

$3,328

$3,116

$9,507

$12,060

Development

$2,141

$3,101

$3,868

$5,168

$5,071

$5,521

$6,171

$7,396

$11,372

$7,525

$26,293

$37,986

Acquisitions

$1,497

$4,318

$300

$506

$0

$361

$191

$6,933

$4,434

$7,054

$18,421

$18,972

Dispositions

na

na

na

na

na

na

na

na

na

na

na

na

Other

$0

$0

$0

$0

$0

$60

$0

$0

$0

$0

$0

$60

$4,461

$8,395

$5,021

$6,414

$5,691

$6,768

$8,089

$17,391

$19,134

$17,695

$54,221

$69,078

18.5%
48.0%
33.5%

11.6%
36.9%
51.4%

17.0%
77.0%
6.0%

11.5%
80.6%
7.9%

10.9%
89.1%
0.0%

12.2%
81.6%
5.3%

21.3%
76.3%
2.4%

17.6%
42.5%
39.9%

17.4%
59.4%
23.2%

17.6%
42.5%
39.9%

17.5%
48.5%
34.0%

17.5%
55.0%
27.5%

$5,599
$13.31
2.7x

$5,559
$11.20
1.9x

$6,508
$12.45
1.8x

$7,154
$12.75
1.7x

$9,301
$15.91
1.7x

$12,603
$20.17
0.6x

$14,995
$23.61
1.2x

$16,281
$26.13
1.3x

$21,148
$32.76
1.6x

$16,565
$26.13
0.9x

$53,994
$28.38
1.3x

$81,592
$25.80
1.1x

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

3-Year

5-Year
$24.38

Total Expenditures
Expenditures as % of Total (US$million):
Exploration
Development
Acquisitions
Cashflow (US$million)
Cashflow (US$/boe)
Recycle Ratio

F&D Costs (US$/boe):


Exploration & Development (incl. revisions)

$4.63

$6.21

$7.01

$8.75

$9.41

$58.14

$19.21

$106.90

$17.49

$17.91

$23.36

Acquisition Costs

$5.95

$5.72

$7.60

$3.17

na

$3.47

$286.57

$9.27

$49.64

$284.04

$21.38

$19.64

All Sources (incl. revisions)

$5.00

$5.95

$7.04

$7.68

$9.41

$31.78

$19.64

$20.57

$20.58

$28.59

$22.65

$22.88

$13.17

$26.90

$47.40

Exploration & Development (excl. revisions)

$26.50

$29.99

$140.89

$32.34

Acquisition Costs

$5.95

$5.72

$7.60

$3.17

na

$3.47

$286.57

$9.27

$49.64

$284.04

$21.38

$19.64

All Sources (excl. revisions)

$9.36

$9.27

$13.01

$13.63

$11.84

$15.46

$14.64

$14.64

$19.71

$30.64

$17.96

$98.80

$50.01

$35.77

$54.74

$32.54

$43.26

$22.81

Geographically Segmented Costs


Europe

$10.84

$8.54

$8.52

$10.49

$18.37

$13.64

$49.01

$31.97

-$186.06

$6.87

$21.86

Africa

$3.73

$4.84

$7.07

$11.76

$6.92

$20.82

$19.52

$34.85

$21.25

$17.47

$22.28

$21.75

Other

$4.01

$5.40

$6.50

$4.41

$11.25

-$54.69

$11.43

$16.05

$13.92

$201.40

$23.11

$23.94

Note: Reserve estimates reported after royalties


Note: Dollar amounts have been converted from Euros to U.S. Dollars at average annual exchange rates
Source: BMO Capital Markets, Company Reports

See pages G1 to G2 for analyst coverage.

Page B64

Integrated Oils

Eni S.P.A. (E - NYSE)


Breakeven Analysis
Table 7: Breakeven Oil Price Analysis (US$/boe)
Worldwide
Operating Costs
Exploration Expense
G&A/Other
F&D Costs
Return on Capital
Income Taxes
Breakeven Oil Price
Quality Differential
Required WTI Price

North America
Operating Costs
Exploration Expense
G&A/Other
F&D Costs
Return on Capital
Income Taxes
Breakeven Oil Price
Quality Differential
Required WTI Price

International
Operating Costs
Exploration Expense
G&A/Other
F&D Costs
Return on Capital
Income Taxes
Breakeven Oil Price
Quality Differential
Required WTI Price

2000
3.82
1.23
1.16
5.00
4.48
3.81
19.51
3.69
23.19

2001
2.98
1.13
2.23
5.95
5.23
5.00
22.51
3.65
26.16

2002
2.92
1.23
1.81
7.04
5.93
5.13
24.06
1.93
26.00

2003
3.03
1.30
3.01
7.68
6.23
6.16
27.41
7.08
34.50

2004
3.26
0.90
3.48
9.41
7.30
6.80
31.15
9.07
40.22

2005
5.09
0.93
2.59
31.78
21.48
24.08
85.94
14.48
100.42

2006
5.56
1.11
3.05
19.64
12.23
13.87
55.47
7.99
63.47

2007
6.81
4.00
3.49
20.57
13.56
16.60
65.04
7.18
72.21

2008
7.69
4.80
5.17
20.58
13.55
19.41
71.20
12.50
83.70

2009
6.81
4.00
3.49
28.59
18.65
22.82
84.35
(6.83)
77.53

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

na
na
na
na
na
na
na
na
na

na
na
na
na
na
na
na
na
na

na
na
na
na
na
na
na
na
na

na
na
na
na
na
na
na
na
na

na
na
na
na
na
na
na
na
na

na
na
na
na
na
na
na
na
na

na
na
na
na
na
na
na
na
na

na
na
na
na
na
na
na
na
na

na
na
na
na
na
na
na
na
na

na
na
na
na
na
na
na
na
na

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

3.82
1.23
1.16
5.00
4.48
3.81
19.51
3.69
23.19

2.98
1.13
2.23
5.95
5.23
5.00
22.51
3.65
26.16

2.92
1.23
1.81
7.04
5.93
5.13
24.06
1.93
26.00

3.03
1.30
3.01
7.68
6.23
6.16
27.41
7.08
34.50

3.26
0.90
3.48
9.41
7.30
6.80
31.15
9.07
40.22

5.09
0.93
2.59
31.78
21.48
24.08
85.94
14.48
100.42

5.56
1.11
3.05
19.64
12.23
13.87
55.47
7.99
63.47

6.81
4.00
3.49
20.57
13.56
16.60
65.04
7.18
72.21

7.69
4.80
5.17
20.58
13.55
19.41
71.20
12.50
83.70

6.81
4.00
3.49
28.59
18.65
22.82
84.35
(6.83)
77.53

International Segments (US$/boe):


Europe
Operating Costs
Exploration Expense
G&A/Other
F&D Costs
Return on Capital
Income Taxes
Breakeven Oil Price
Quality Differential
Required WTI Price

Africa
Operating Costs
Exploration Expense
G&A/Other
F&D Costs
Return on Capital
Income Taxes
Breakeven Oil Price
Quality Differential
Required WTI Price

Asia and Other


Operating Costs
Exploration Expense
G&A/Other
F&D Costs
Return on Capital
Income Taxes
Breakeven Oil Price
Quality Differential
Required WTI Price

2000
3.39
1.26
0.45
10.84
7.91
6.23
30.09
0.91
31.00

2000
4.71
0.69
1.58
3.73
3.78
4.02
18.51
4.60
23.11

2000
2.08
2.99
1.94
4.01
4.19
1.03
16.24
9.21
25.45

2001
3.40
0.53
1.43
8.54
5.18
4.47
23.54
1.01
24.55

2001
2.50
0.78
2.86
4.84
5.10
4.98
21.07
5.04
26.10

2001
3.04
3.67
2.82
5.40
6.58
3.54
25.05
7.37
32.42

2002
3.09
0.86
2.02
8.52
4.79
3.55
22.85
(1.15)
21.69

2002
2.95
0.83
1.36
7.07
7.01
7.03
26.24
3.18
29.42

2002
2.44
3.02
2.37
6.50
7.76
6.93
29.02
6.28
35.30

Source: BMO Capital Markets, Company Reports


See pages G1 to G2 for analyst coverage.

2003
3.29
0.91
1.88
10.49
5.24
4.33
26.15
4.92
31.06

2003
3.07
0.94
3.77
11.76
11.38
15.28
46.20
6.98
53.18

2003
2.42
2.84
3.83
4.41
5.30
2.78
21.60
11.83
33.43

2004
3.74
0.89
1.10
18.37
9.01
7.67
40.78
6.04
46.83

2004
3.05
0.59
5.35
6.92
6.05
7.18
29.15
9.16
38.30

2004
2.87
1.54
3.74
11.25
11.81
5.82
37.02
13.95
50.96

2005
5.35
1.01
1.54
13.64
6.95
6.53
35.01
11.29
46.30

2005
5.75
0.41
2.53
20.82
14.39
22.06
65.96
13.77
79.72

2005
3.26
1.94
4.23
18.84
16.81
8.93
54.01
20.61
74.62

2006

2007

6.16
1.15
2.14
49.01
23.87
24.24
106.57
(0.44)
106.13

8.26
2.45
2.67
31.97
15.68
15.60
76.62
(1.07)
75.55

2006

2007

5.84
0.72
2.99
19.52
11.36
15.40
55.84
10.01
65.85

2006
3.81
2.16
4.66
11.43
11.35
7.12
40.54
15.66
56.20

6.73
2.83
3.87
34.85
19.42
28.57
96.27
8.62
104.89

2007
5.10
9.07
3.59
16.05
19.11
14.86
67.78
14.37
82.15

2008
9.17
3.31
4.56
118.28
62.06
69.00
266.38
1.35
267.74

2008
7.51
4.01
5.11
21.25
11.43
19.50
68.83
14.44
83.27

2008
6.52
8.42
5.99
13.92
17.16
17.76
69.77
20.05
89.82

2009
9.65
2.87
3.46
6.87
3.69
3.65
30.20
(27.58)
2.61

2009
6.73
2.84
3.83
17.47
9.91
14.53
55.31
(4.99)
50.31

2009
4.25
7.60
2.78
99.89
98.12
77.76
290.39
9.09
299.48

Weighted Average
3-Year
5-Year
7.11
4.27
4.06
22.65
14.73
19.15
71.97
4.28
76.25

6.40
2.98
3.57
22.88
14.85
18.34
69.01
7.06
76.08

Weighted Average
3-Year
5-Year
na
na
na
na
na
na
na
na
na

na
na
na
na
na
na
na
na
na

Weighted Average
3-Year
5-Year
7.11
4.27
4.06
22.65
14.73
19.15
71.97
4.28
76.25

6.40
2.98
3.57
22.88
14.85
18.34
69.01
7.06
76.08

Weighted Average
3-Year
5-Year
8.99
2.87
3.54
21.86
10.88
11.25
59.39
(9.10)
50.28

7.54
2.07
2.78
22.81
11.35
11.50
58.05
(3.29)
54.76

Weighted Average
3-Year
5-Year
7.00
3.24
4.29
22.28
12.32
19.19
68.33
6.02
74.35

6.54
2.22
3.71
21.75
12.76
19.29
66.27
8.37
74.64

Weighted Average
3-Year
5-Year
5.26
8.31
4.09
23.11
25.55
22.39
88.72
14.50
103.22

4.61
5.97
4.22
23.94
24.83
18.32
81.88
15.96
97.84

Oil & Gas Global Cost Study

Page B65

Exxon Mobil (XOM - NYSE)

US$, net

Exxon Mobil reported net earnings of $11.15/boe, slightly above the group average of $9.40/boe. These results were driven by the companys
lower cost structure, which more than offset slightly higher income taxes.
In 2009, Exxon-Mobils F&D costs declined 39% to average $11.82/boe, in line with the group average. Excluding positive revisions, reserve
replacement costs increased were $19.44/boe but were below the group average of $21.72/boe.
After increasing dramatically in 2008, Exxons breakeven oil price requirement declined 41% in 2009 to average $54.12/boe and drop below
its three-year average of $60.03/boe. This remains slightly above the 2009 group average of $52.51/boe; however, the three-year average is
below the peer average of $65.26/boe.
Notes: All upstream financial figures, as well as reserve and production values are based upon FASB Statement No. 69 disclosure.
Proven Reserves vs RLI

Capital Spending by Region (US$million)

23,000
22,000

16.0

$30,000

15.0

$25,000

14.0

$20,000

20,000
19,000

13.0

18,000

12.0

17,000
11.0

16,000
15,000

10.0
2000

2001

2002

2003

2004

2005

Proven Reserves

2006

2007

2008

Years

mmboe (net)

21,000

$15,000
$10,000
$5,000
$0
2000

2009

2001

2002

North America

RLI

Proven Reserve Additions by Region (million boe)

2003

Europe

2004

2005

Asia Pacific

2006

2007

2008

2009

2008

2009

Other International

F&D Costs Including Revisions (US$/boe)

2,500

$40.00
$35.00

2,000

$30.00
1,500

$25.00
$20.00

1,000

$15.00
500

$10.00
$5.00

$0.00

-500
2000

2001

2002

2003

North America

2004

Europe

2005
Asia Pacific

2006

2007

2008

$40.00

2001

2002

2003
Exxon

Other International

F&D Costs Including Revisions by Region (US$/boe)


144.71

2000

2009

2004

2005

2006

2007

Integrateds

3-Year Average F&D Costs Including Revisions (US$/boe)

127.35

163.84

$40.00

$35.00

$35.00

$30.00

$30.00

$25.00

$25.00

$20.00

$20.00

$15.00
$10.00

$15.00

$5.00

$10.00

$0.00
-13.21

-$5.00
2000

2001

2002

North America

2003
Europe

2004

2005

Asia Pacific

$5.00

-16.61

-43.87

2006

2007

2008

Other International

Source: BMO Capital Markets, Company Reports


See pages G1 to G2 for analyst coverage.

2009

$0.00
2001

2002

2003

2004
Exxon

2005
Integrateds

2006

2007
Industry

2008

2009

Page B66

Integrated Oils

Exxon Mobil (XOM - NYSE)

US$/boe, net

Worldwide
Upstream Net Revenue (US$/boe)

Production Costs (US$/boe)

$80.00

$80.00

$70.00

$70.00

$60.00

$60.00

$50.00

$50.00

$40.00

$40.00

$30.00

$30.00

$20.00

$20.00

$10.00

$10.00
$0.00

$0.00
2000

2001

2002

2003

2004

Exxon

2005

2006

2007

2008

2000

2009

2001

2002

2003

2004

Exxon

Integrateds

Upstream Operating Earnings (US$/boe)

2005

2006

2007

2008

2009

2007

2008

2009

2007

2008

2009

Integrateds

Upstream Net Income (US$/boe)

$80.00

$80.00

$70.00

$70.00

$60.00

$60.00

$50.00

$50.00

$40.00

$40.00

$30.00

$30.00

$20.00

$20.00

$10.00

$10.00

$0.00

$0.00
2000

2001

2002

2003

2004

Exxon

2005

2006

2007

2008

2009

2000

2001

2002

Integrateds

2003

2004

Exxon

Breakeven Details (US$/boe)

2005

2006

Integrateds

Required WTI Oil Price (US$/boe)

$100.00

$100.00

$90.00

$90.00

$80.00

$80.00

$70.00

$70.00

$60.00

$60.00

$50.00

$50.00

$40.00

$40.00

$30.00

$30.00

$20.00

$20.00

$10.00

$10.00

$0.00

$0.00
2000

2001

2002

2003

Op Cost/G&A/Other

2004

2005

2006

2007

2008

F&D/Exploration

Return

Taxes

Quality

Source: BMO Capital Markets, Company Reports

See pages G1 to G2 for analyst coverage.

2009

2000

2001

2002

2003

2004
Exxon

2005

2006

Integrateds

Oil & Gas Global Cost Study

Page B67

Exxon Mobil (XOM - NYSE)

US$/boe, net

North America
Upstream Net Revenue (US$/boe)

Production Costs (US$/boe)

$70.00

$70.00

$60.00

$60.00

$50.00

$50.00

$40.00

$40.00

$30.00

$30.00

$20.00

$20.00

$10.00

$10.00
$0.00

$0.00
2000

2001

2002

2003

2004

Exxon

2005

2006

2007

2008

2000

2009

2001

2002

2003

2004

Exxon

Integrateds

Upstream Operating Earnings (US$/boe)

2005

2006

2007

2008

2009

2007

2008

2009

Integrateds

Upstream Net Income (US$/boe)

$70.00

$70.00

$60.00

$60.00

$50.00

$50.00

$40.00

$40.00

$30.00

$30.00

$20.00

$20.00

$10.00

$10.00

$0.00

$0.00
2000

2001

2002

2003

2004

Exxon

2005

2006

2007

2008

2009

2000

2001

2002

Integrateds

2003

2004

Exxon

Breakeven Details (US$/boe)

2005

2006

Integrateds

Required WTI Oil Price (US$/boe)

$140.00

$140.00

$120.00

$120.00

$100.00

$100.00

$80.00

$80.00

$60.00

$60.00

$40.00

$40.00

$20.00

$20.00

$0.00

182.87

$0.00
2000

2001

2002

2003

Op Cost/G&A/Other

2004

2005

2006

2007

2008

F&D/Exploration

Return

Taxes

Quality

Source: BMO Capital Markets, Company Reports

See pages G1 to G2 for analyst coverage.

2009

2000

2001

2002

2003

2004
Exxon

2005

2006

Integrateds

2007

2008

2009

Page B68

Integrated Oils

Exxon Mobil (XOM - NYSE)

US$/boe, net

Total International
Upstream Net Revenue (US$/boe)

Production Costs (US$/boe)

$80.00

$80.00

$70.00

$70.00

$60.00

$60.00

$50.00

$50.00

$40.00

$40.00

$30.00

$30.00

$20.00

$20.00

$10.00

$10.00
$0.00

$0.00
2000

2001

2002

2003

2004
Exxon

2005

2006

2007

2008

2000

2009

2001

2002

2003

2004
Exxon

Integrateds

Upstream Operating Earnings (US$/boe)

2005

2006

2007

2008

2009

2007

2008

2009

2007

2008

2009

Integrateds

Upstream Net Income (US$/boe)

$80.00

$80.00

$70.00

$70.00

$60.00

$60.00

$50.00

$50.00

$40.00

$40.00

$30.00

$30.00

$20.00

$20.00

$10.00

$10.00

$0.00

$0.00
2000

2001

2002

2003

2004
Exxon

2005

2006

2007

2008

2009

2000

2001

2002

2003

Integrateds

2004
Exxon

Breakeven Details (US$/boe)

2005

2006

Integrateds

Required WTI Oil Price (US$/boe)

$80.00

$80.00

$70.00

$70.00

$60.00

$60.00

$50.00

$50.00

$40.00

$40.00

$30.00

$30.00

$20.00

$20.00

$10.00

$10.00

$0.00

$0.00
2000

2001

2002

2003

Op Cost/G&A/Other

2004

2005

2006

2007

2008

F&D/Exploration

Return

Taxes

Quality

Source: BMO Capital Markets, Company Reports

See pages G1 to G2 for analyst coverage.

2009

2000

2001

2002

2003

2004
Exxon

2005

2006

Integrateds

Oil & Gas Global Cost Study

Page B69

Exxon Mobil (XOM - NYSE)

US$/boe, net

International Segments
Upstream Net Revenue (US$/boe)

Production Costs (US$/boe)

$90.00

$90.00

$80.00

$80.00

$70.00

$70.00

$60.00

$60.00

$50.00

$50.00

$40.00

$40.00

$30.00

$30.00

$20.00

$20.00

$10.00

$10.00
$0.00

$0.00
2000

2001

2002

2003

2004

North America

2005

Europe

2006
Asia

2007

2008

2000

2009

2001

2002

2003

2004

North America

Africa

Upstream Operating Earnings (US$/boe)

2005

Europe

2006
Asia

2007

2008

2009

2008

2009

Africa

Upstream Net Income (US$/boe)

$90.00

$90.00

$80.00

$80.00

$70.00

$70.00

$60.00

$60.00

$50.00

$50.00

$40.00

$40.00

$30.00

$30.00

$20.00

$20.00

$10.00

$10.00

$0.00

$0.00
2000

2001

2002

2003

2004

North America

2005

Europe

2006
Asia

2007

2008

2009

2000

2001

Africa

2002

2003

2004

North America

3-Year Average Breakeven Details by Region (US$/boe)

2005

Europe

2006
Asia

2007

Africa

Required WTI Oil Price (US$/boe)

$140.00

$140.00

$120.00

$120.00

$100.00

$100.00

$80.00

$80.00

$60.00

$60.00

$40.00

$40.00

$20.00

$20.00

$0.00

294.00

186.65

182.87

260.43

$0.00
Africa
Op Cost/G&A/Other

Asia
F&D/Exploration

Europe
Return

Source: BMO Capital Markets, Company Reports

See pages G1 to G2 for analyst coverage.

North America
Taxes

Quality

2000

2001

2002

North America

2003

2004

Europe

2005
Asia

2006

2007

Africa

2008

2009

Peer Average

Page B70

Integrated Oils

Exxon Mobil (XOM - NYSE)


Consolidated Statements
Table 1: Income Statement (US$million)
Upstream Revenue, net of Royalties
Midstream / Downstream Revenue
Other
Total Revenue and Other Income

2000
21,443
206,996
4,309
232,748

2001
18,567
190,148
4,070
212,785

2002
16,484
184,465
3,557
204,506

2003
21,330
215,724
9,684
246,738

2004
23,033
268,219
6,783
298,035

2005
30,054
328,901
11,725
370,680

2006
32,875
332,592
12,168
377,635

2007
28,656
361,672
14,224
404,552

2008
39,113
420,466
17,780
477,359

2009
24,761
276,739
9,086
310,586

Crude Oil and Product Purchases


Production and Transportation Expenses
Marketing Expenses
Exploration / Dry Hole Costs
General and Administrative
Depreciation, Depletion and Amortization
Interest, net
Other
Earnings Before Income Tax
Current Income Taxes
Future Income Taxes
Total Income Taxes
Minority Interest
Earnings From Continuing Operations
Discontinued Operations/Extraordinary Items
Cumulative Change in Accounting Principle
Net Earnings
Preferred Stock Dividends
Net Earnings to Common Shareholders

108,951
18,135
936
12,044
8,130
589
56,470
27,493
11,081
10
11,091
(412)
15,990
1,730
17,720
17,720

92,257
17,743
1,175
12,898
7,848
293
56,032
24,539
8,317
650
8,967
(569)
15,003
317
15,320
15,320

90,950
17,831
920
12,356
8,310
398
56,022
17,719
6,202
297
6,499
(209)
11,011
449
11,460
11,460

107,658
21,260
1,010
13,396
9,047
207
61,500
32,660
9,179
1,827
11,006
(694)
20,960
550
21,510
21,510

139,224
23,225
1,098
13,849
9,767
638
68,217
42,017
17,045
(1,134)
15,911
(776)
25,330
25,330
25,330

185,219
26,819
964
14,402
10,253
496
72,296
60,231
23,731
(429)
23,302
(799)
36,130
36,130
36,130

182,546
29,528
1,181
14,273
11,416
654
69,584
68,453
26,185
1,717
27,902
(1,051)
39,500
39,500
39,500

199,498
31,885
1,469
14,890
12,250
400
72,681
71,479
29,740
124
29,864
(1,005)
40,610
40,610
40,610

249,454
37,905
1,451
15,873
12,379
673
76,227
83,397
35,131
1,399
36,530
(1,647)
45,220
45,220
45,220

152,806
33,027
2,021
14,735
11,917
548
60,755
34,777
15,119
15,119
(378)
19,280
19,280
19,280

Source: BMO Capital Markets, Company Reports

Table 2: Statement of Cash Flows (US$million)


Net Earnings
Charges and Credits Not Impacting Cash
Other
Cash Flow From Operations
Changes in Working Capital/Other
Net Cash From Operating Activities

2000
17,720
8,140
(2,675)
23,185
(248)
22,937

2001
15,320
8,498
951
24,769
(1,880)
22,889

2002
11,460
8,607
(551)
19,516
1,752
21,268

2003
21,510
10,874
(1,483)
30,901
(2,403)
28,498

2004
25,330
8,633
557
34,520
6,031
40,551

2005
36,130
9,824
(1,263)
44,691
3,447
48,138

2006
39,500
13,133
(3,512)
49,121
165
49,286

2007
40,610
12,374
42
53,026
(1,024)
52,002

2008
45,220
13,778
(1,195)
57,803
1,922
59,725

2009
19,280
11,917
(1,584)
29,613
(1,175)
28,438

Upstream Spending
Midstream / Downstream Spending
Acquisitions, net
Other
Net Cash From Investing Activities

(5,822)
(2,624)
5,770
(622)
(3,298)

(7,679)
(2,310)
1,078
700
(8,211)

(8,968)
(2,469)
2,793
(1,114)
(9,758)

(10,602)
(2,257)
2,290
(273)
(10,842)

(9,863)
(2,123)
2,754
(5,678)
(14,910)

(11,513)
(2,326)
6,036
(2,467)
(10,270)

(11,677)
(3,785)
3,080
(1,848)
(14,230)

(10,734)
(4,653)
4,204
1,455
(9,728)

(13,244)
(6,074)
5,985
(2,166)
(15,499)

(16,280)
(6,211)
1,545
(1,473)
(22,419)

(5,705)
(1,859)
(6,374)
(227)
(14,165)
(82)
5,392
1,688
7,080

(2,772)
(5,420)
(6,448)
(401)
(15,041)
(170)
(533)
7,080
6,547

(307)
(4,499)
(6,386)
(161)
(11,353)
525
682
6,547
7,229

(2,124)
(5,447)
(6,945)
(247)
(14,763)
504
3,397
7,229
10,626

(1,951)
(8,991)
(7,111)
(215)
(18,268)
532
7,905
10,626
18,531

(1,502)
(17,280)
(7,478)
(681)
(26,941)
(787)
10,140
18,531
28,671

73
(28,385)
(7,867)
(31)
(36,210)
727
(427)
28,671
28,244

598
(30,743)
(7,910)
(290)
(38,345)
1,808
5,737
28,244
33,981

(527)
(35,400)
(8,433)
333
(44,027)
(2,743)
(2,544)
33,981
31,437

(153)
(18,951)
(8,303)
124
(27,283)
520
(20,744)
31,437
10,693

Net Change in Debt


Net Change in Common Stock
Net Change in Preferred Stock
Cash Dividends Paid
Other
Net Cash From Financing Activities
Effect of Exchange Rate on Cash
Net Increase/(Decrease) in Cash
Cash and Equivalents, Beginning of Year
Cash and Equivalents, End of Year

Source: BMO Capital Markets, Company Reports

See pages G1 to G2 for analyst coverage.

Oil & Gas Global Cost Study

Page B71

Exxon Mobil (XOM - NYSE)


Table 3: Balance Sheet (US$million)
Total Current Assets
Net Property, Plant and Equipment
Other Assets
Total Assets

2000
40,399
89,829
18,772
149,000

2001
35,681
89,602
17,891
143,174

2002
38,291
94,940
19,413
152,644

2003
45,960
104,965
23,353
174,278

2004
60,377
108,639
26,240
195,256

2005
73,342
107,010
27,983
208,335

2006
75,777
113,687
29,551
219,015

2007
85,963
120,869
35,250
242,082

2008
72,266
121,346
34,440
228,052

2009
55,235
139,116
38,972
233,323

Total Current Liabilities


Long-term Debt
Deferred Income Taxes
Other Liabilities and Deferred Credits
Total Liabilities
Minority Interests
Common Shares
Contributed Surplus (Paid-in Capital)
Preferred Stock
Retained Earnings
Other / Comprehensive Income (Loss)
Total Shareholders' Equity
Total Liabilities and Shareholders' Equity

38,191
7,280
16,442
13,100
75,013
3,230
3,661
86,652
(19,556)
70,757
149,000

30,114
7,099
16,359
13,616
67,188
2,825
3,789
95,718
(26,346)
73,161
143,174

33,175
6,655
16,484
18,965
75,279
2,768
4,217
100,961
(30,581)
74,597
152,644

38,386
4,756
20,118
17,721
80,981
3,382
4,468
115,956
(30,509)
89,915
174,278

42,981
5,013
21,092
20,462
89,548
3,952
5,067
134,390
(37,701)
101,756
195,256

46,307
6,220
20,878
20,217
93,622
3,527
5,743
163,335
(57,892)
111,186
208,335

48,817
6,645
20,851
25,054
101,367
3,804
4,786
195,207
(86,149)
113,844
219,015

58,312
7,183
22,899
27,644
116,038
4,282
4,933
228,518
(111,689)
121,762
242,082

49,100
7,025
19,726
34,678
110,529
4,558
5,314
265,680
(158,029)
112,965
228,052

52,061
7,129
23,148
35,593
117,931
4,823
5,503
276,937
(171,871)
110,569
233,323

Source: BMO Capital Markets, Company Reports

Table 4: Results of Operations from Oil & Gas Producing Activities (US$million)
Cumulative
2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

3-Year

5-Year

35,358

31,844

30,341

38,641

40,054

52,321

62,953

65,055

79,568

65,427

210,050

325,324

5,198

5,200

5,464

6,218

6,005

6,441

7,523

8,562

9,487

11,998

30,047

44,011

954

1,191

957

1,033

1,086

955

1,181

1,471

1,441

2,034

4,946

7,082

5,301

4,983

5,434

5,763

6,022

6,477

7,419

8,256

8,334

8,697

25,287

39,183

Worldwide
Net Revenue
Production Costs
Exploration
DD&A
Other

2,981

3,033

2,781

3,913

2,540

3,483

6,052

5,809

7,825

8,377

22,011

31,546

Pre-tax Earnings

20,924

17,437

15,705

21,714

24,401

34,965

40,778

40,957

52,481

34,321

127,759

203,502

Income Taxes
Net Earnings

9,599
11,325

7,651
9,786

6,745
8,960

9,512
12,202

11,969
12,432

17,918
17,047

21,801
18,977

22,672
18,285

29,282
23,199

17,750
16,571

69,704
58,055

109,423
94,079

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

3-Year

5-Year

12,674

11,579

9,733

13,187

14,898

17,735

16,502

16,734

20,614

14,898

52,246

86,483

1,826

2,022

2,171

2,489

2,527

2,632

3,234

3,319

3,829

5,164

12,312

18,178

226

324

288

349

285

194

320

544

421

559

1,524

2,038

1,959

1,962

2,193

2,238

2,304

2,164

2,013

2,498

2,209

2,781

7,488

11,665

Cumulative
North America
Net Revenue
Production Costs
Exploration
DD&A

670

599

490

579

599

791

862

1,424

2,041

845

4,310

5,963

Pre-tax Earnings

Other

7,993

6,672

4,591

7,532

9,183

11,954

10,073

8,949

12,114

5,549

26,612

48,639

Income Taxes
Net Earnings

3,155
4,838

2,500
4,172

1,639
2,952

2,755
4,777

3,561
5,622

4,620
7,334

3,662
6,411

3,470
5,479

4,692
7,422

1,724
3,825

9,886
16,726

18,168
30,471

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

3-Year

5-Year

22,684

20,265

20,608

25,454

25,156

34,586

46,451

48,321

58,954

50,529

157,804

238,841

3,372

3,178

3,293

3,729

3,478

3,809

4,289

5,243

5,658

6,834

17,735

25,833

728

867

669

684

801

761

861

927

1,020

1,475

3,422

5,044

3,342

3,021

3,241

3,525

3,718

4,313

5,406

5,758

6,125

5,916

17,799

27,518

Cumulative
International
Net Revenue
Production Costs
Exploration
DD&A
Other
Pre-tax Earnings
Income Taxes
Net Earnings

2,311

2,434

2,291

3,334

1,941

2,692

5,190

4,385

5,784

7,532

17,701

25,583

12,931

10,765

11,114

14,182

15,218

23,011

30,705

32,008

40,367

28,772

101,147

154,863

6,444
6,487

5,151
5,614

5,106
6,008

6,757
7,425

8,408
6,810

13,298
9,713

18,139
12,566

19,202
12,806

24,590
15,777

16,026
12,746

59,818
41,329

91,255
63,608

Note: Based on FASB 69 disclosure


Source: BMO Capital Markets, Company Reports

See pages G1 to G2 for analyst coverage.

Page B72

Integrated Oils

Exxon Mobil (XOM - NYSE)


Note: Worldwide and International Numbers post 2003 exclude equity interests - different calculations

Table 5: Upstream Netbacks (US$/boe)


Weighted Average
2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

3-Year

5-Year
50.71

Worldwide
Net Revenue

21.97

20.00

19.12

24.66

30.79

41.80

48.66

52.12

70.08

44.03

54.28

Production Costs

3.23

3.27

3.44

3.97

4.62

5.15

5.81

6.86

8.36

8.07

7.77

6.86

Exploration

0.59

0.75

0.60

0.66

0.83

0.76

0.91

1.18

1.27

1.37

1.28

1.10

DD&A

3.29

3.13

3.42

3.68

4.63

5.17

5.73

6.61

7.34

5.85

6.53

6.11

Other

1.85

1.91

1.75

2.50

1.95

2.78

4.68

4.65

6.89

5.64

5.69

4.92

13.00

10.95

9.90

13.86

18.76

27.93

31.52

32.81

46.23

23.10

33.02

31.72

5.96
7.04

4.81
6.15

4.25
5.65

6.07
7.79

9.20
9.56

14.31
13.62

16.85
14.67

18.16
14.65

25.79
20.43

11.94
11.15

18.01
15.00

17.06
14.67

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

Pre-tax Earnings
Income Taxes
Net Earnings

Weighted Average
3-Year

5-Year
45.89

North America
Net Revenue

22.03

20.41

17.71

25.21

31.27

40.96

42.97

45.56

63.56

39.64

48.94

Production Costs

3.17

3.56

3.95

4.76

5.30

6.08

8.42

9.04

11.81

13.74

11.53

9.65

Exploration

0.39

0.57

0.52

0.67

0.60

0.45

0.83

1.48

1.30

1.49

1.43

1.08

DD&A

3.40

3.46

3.99

4.28

4.84

5.00

5.24

6.80

6.81

7.40

7.01

6.19

Other

1.16

1.06

0.89

1.11

1.26

1.83

2.24

3.88

6.29

2.25

4.04

3.16

13.89

11.76

8.35

14.40

19.27

27.61

26.23

24.36

37.35

14.76

24.93

25.81

5.48
8.41

4.41
7.35

2.98
5.37

5.27
9.13

7.47
11.80

10.67
16.94

9.54
16.70

9.45
14.92

14.47
22.88

4.59
10.18

9.26
15.67

9.64
16.17

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

3-Year

5-Year
52.72

Pre-tax Earnings
Income Taxes
Net Earnings

Weighted Average
International
Net Revenue

21.94

19.78

19.87

24.38

30.52

42.24

51.05

54.86

72.69

45.51

56.32

Production Costs

3.26

3.10

3.17

3.57

4.22

4.65

4.71

5.95

6.98

6.16

6.33

5.70

Exploration

0.70

0.85

0.65

0.66

0.97

0.93

0.95

1.05

1.26

1.33

1.22

1.11

DD&A

3.23

2.95

3.12

3.38

4.51

5.27

5.94

6.54

7.55

5.33

6.35

6.07

Other

2.24

2.38

2.21

3.19

2.35

3.29

5.70

4.98

7.13

6.78

6.32

5.65

12.51

10.51

10.72

13.58

18.46

28.10

33.75

36.34

49.77

25.92

36.10

34.18

6.23
6.27

5.03
5.48

4.92
5.79

6.47
7.11

10.20
8.26

16.24
11.86

19.94
13.81

21.80
14.54

30.32
19.45

14.44
11.48

21.35
14.75

20.14
14.04

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

3-Year

5-Year
63.37

Pre-tax Earnings
Income Taxes
Net Earnings

International Segments (US$/boe):


Weighted Average
Africa
Net Revenue

26.90

22.86

23.57

27.46

34.25

49.80

59.63

66.50

83.75

57.86

69.13

Production Costs

3.33

3.25

3.50

3.44

3.37

3.39

3.34

4.39

6.50

7.88

6.23

5.05

Exploration

1.63

1.70

1.36

1.32

1.51

1.25

1.14

1.75

1.78

2.57

2.03

1.69

DD&A

2.83

2.50

2.72

2.80

3.94

5.33

7.24

7.82

10.02

8.92

8.89

7.85

Other

3.71

2.95

2.65

3.22

3.39

4.68

5.57

5.96

7.36

5.22

6.16

5.75

15.40

12.46

13.33

16.67

22.05

35.15

42.34

46.57

58.08

33.27

45.82

43.03

9.10
6.30

8.03
4.43

7.48
5.85

9.13
7.54

13.08
8.96

20.77
14.39

23.77
18.57

27.05
19.52

32.94
25.14

18.15
15.12

25.96
19.85

24.50
18.53

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

3-Year

5-Year
42.91

Pre-tax Earnings
Income Taxes
Net Earnings

Weighted Average
Asia
Net Revenue

20.33

16.35

17.42

20.23

25.82

34.81

41.99

43.07

57.60

37.99

44.59

Production Costs

2.57

2.82

2.57

2.59

3.34

3.59

3.72

3.89

4.94

3.76

4.11

3.98

Exploration

0.78

0.53

0.38

0.68

0.58

0.77

0.71

0.91

1.46

0.84

1.03

0.94

DD&A

2.63

2.86

2.82

3.38

3.58

4.22

3.05

3.09

3.40

2.05

2.70

2.95

Other

2.39

2.10

1.75

2.08

3.39

5.31

11.98

8.37

12.84

8.05

9.40

9.34

Pre-tax Earnings
Income Taxes
Net Earnings

11.96

8.04

9.90

11.50

14.93

20.92

22.53

26.81

34.95

23.28

27.35

25.70

4.76
7.21

3.19
4.85

4.07
5.83

4.86
6.64

5.48
9.45

8.31
12.61

12.74
9.79

16.62
10.19

22.49
12.46

13.75
9.53

16.86
10.49

15.07
10.63

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

3-Year

5-Year
51.81

Weighted Average
Europe
Net Revenue

22.05

20.83

20.34

24.66

30.77

41.06

50.63

52.96

73.42

45.31

56.30

Production Costs

3.63

3.32

3.71

4.31

4.93

5.79

6.44

8.87

8.71

7.88

8.45

7.46

Exploration

0.30

0.27

0.27

0.37

0.29

0.17

0.45

0.51

0.60

1.04

0.74

0.55

DD&A

4.25

3.83

4.31

4.68

5.31

5.68

6.10

7.58

8.34

6.05

7.24

6.66

Other

0.80

1.13

0.89

1.68

1.48

1.84

2.38

2.23

3.23

7.61

4.54

3.51

13.06

12.28

11.15

13.63

18.76

27.58

35.25

33.77

52.54

22.73

35.33

33.63

7.31
5.75

5.98
6.31

5.96
5.20

7.41
6.22

11.27
7.49

17.49
10.09

22.60
12.65

22.46
11.31

35.60
16.94

13.95
8.78

23.26
12.07

21.87
11.76

Pre-tax Earnings
Income Taxes
Net Earnings

Source: BMO Capital Markets, Company Reports


See pages G1 to G2 for analyst coverage.

Oil & Gas Global Cost Study

Page B73

Exxon Mobil (XOM - NYSE)


Table 6: Reserve Replacement Performance
2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

3-Year

5-Year

Production:
Gas Production (mmcf/d)

11,446.6

11,391.8

11,602.7

11,082.2

10,443.8

9,852.1

9,720.5

9,479.5

8,890.4

10,126.0

9,498.6

9,613.7

Liquids Production (b/d)

2,501,370

2,463,014

2,413,699

2,446,575

2,490,411

2,454,795

2,591,781

2,616,000

2,411,589

2,383,562

2,470,384

2,491,545

Total Production (boe/d)

4,409,132

4,361,644

4,347,489

4,293,607

4,231,050

4,096,804

4,211,872

4,195,909

3,893,324

4,071,233

4,053,489

4,093,828

% Gas Production

43%

44%

44%

43%

41%

40%

38%

38%

38%

41%

39%

39%

% Oil Production

57%

56%

56%

57%

59%

60%

62%

62%

62%

59%

61%

61%

Gas Reserves (bcf)

55,866

55,946

55,718

55,614

58,634

66,907

67,560

68,262

65,879

68,007

67,383

67,323

Oil Reserves (mmbbls)

11,561

11,491

11,823

12,075

11,694

10,622

10,850

10,380

10,135

11,651

10,722

10,728

Total Proven Reserves (mmboe)

Proven Reserves:

20,872

20,815

21,109

21,344

21,466

21,773

22,110

21,757

21,115

22,986

21,952

21,948

% Gas Reserves

45%

45%

44%

43%

46%

51%

51%

52%

52%

49%

51%

51%

% Oil Reserves

55%

55%

56%

57%

54%

49%

49%

48%

48%

51%

49%

49%

Proven Reserve Life Index

13.0

13.1

13.3

13.6

13.9

14.6

14.4

14.2

14.9

15.5

14.8

14.7

Proven Reserve Additions:


Gas Additions (bcf)

3,248.0

4,238.0

4,007.0

3,941.0

5,824.0

10,848.0

26,918.0

Oil Additions (mmbbls)

1,214.0

829.0

1,213.0

1,145.0

528.0

-176.0

1,174.0

484.8

635.2

845.0

1,965.1

2,963.1

Total Additions (mmboe)

1,755.3

1,535.3

1,880.8

1,801.8

6,832.0
1,666.7

11,869.0
1,802.2

4,201.0
1,874.2

4,162.0
1,178.5

862.0
778.9

1,815.7

3,773.1

7,449.4

Addition Components (mmboe):


Extensions, Discoveries and Additions

813.2

1,152.3

1,304.5

1,217.2

1,783.8

1,472.2

1,173.5

613.5

298.2

1,106.0

2,017.7

Acquisitions

1.7

0.2

0.3

2.7

11.5

121.8

755.5

1.5

0.0

1.3

2.8

Dispositions

-7.3

-20.5

-20.2

-36.0

-211.5

-265.2

-103.3

-488.3

-96.2

-5.2

947.8

403.3

596.2

618.0

82.8

473.3

48.5

1,051.8

576.8

713.5

Revisions of Estimates

(589.7)
2,342.2

4,663.4
880.2
(958.2)
2,864.0

Components as % of Total Additions (mmboe):


Extensions, Discoveries and Additions

46.3%

75.1%

69.4%

67.6%

107.0%

81.7%

62.6%

52.1%

38.3%

60.9%

53.5%

Acquisitions

0.1%

0.0%

0.0%

0.1%

0.7%

6.8%

40.3%

0.1%

0.0%

0.1%

0.1%

62.6%
11.8%

Dispositions

-0.4%

-1.3%

-1.1%

-2.0%

-12.7%

-14.7%

-5.5%

-41.4%

-12.3%

-0.3%

-15.6%

-12.9%

Revisions of Estimates

54.0%

26.3%

31.7%

34.3%

5.0%

26.3%

2.6%

89.3%

74.1%

39.3%

62.1%

38.4%

Additions as % of Production:
Gas

77.7%

101.9%

94.6%

97.4%

179.2%

330.1%

118.4%

120.3%

26.6%

157.6%

104.3%

153.4%

Oil

133.0%

92.2%

137.7%

128.2%

58.1%

-19.6%

124.1%

50.8%

72.2%

97.1%

72.6%

65.2%

Total

109.1%

96.4%

118.5%

115.0%

107.9%

120.5%

121.9%

77.0%

54.8%

122.2%

85.0%

99.7%

Gas

5.8%

7.6%

7.2%

7.1%

11.7%

17.7%

6.2%

Oil

10.5%

7.2%

10.3%

9.5%

4.5%

-1.7%

10.8%

4.7%

6.3%

7.3%

18.3%

27.6%

8.4%

7.4%

8.9%

8.4%

7.8%

8.3%

8.5%

5.4%

3.7%

7.9%

17.2%

33.9%

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

3-Year

5-Year

Exploration

$1,288

Development

Additions as % of Reserves:

Total

6.1%

1.3%

8.6%

16.1%

40.0%

Capital Expenditures (US$million):


$1,560

$1,163

$1,181

$1,245

$1,437

$1,703

$1,723

$2,241

$3,111

$7,075

$10,215

$4,534

$6,119

$7,805

$9,421

$8,618

$10,076

$11,933

$11,343

$14,131

$17,130

$42,604

$64,613

Acquisitions

$241

$124

$187

$45

$134

$453

$497

$194

$663

$1,285

$2,142

$3,092

Dispositions

na

na

na

na

na

na

na

na

na

na

na

na

$6,063

$7,803

$9,155

$10,647

$9,997

$11,966

$14,133

$13,260

$17,035

$21,526

$51,821

$77,920

21.2%
74.8%
4.0%

20.0%
78.4%
1.6%

12.7%
85.3%
2.0%

11.1%
88.5%
0.4%

12.5%
86.2%
1.3%

12.0%
84.2%
3.8%

12.0%
84.4%
3.5%

13.0%
85.5%
1.5%

13.2%
83.0%
3.9%

14.5%
79.6%
6.0%

13.7%
82.2%
4.1%

13.1%
82.9%
4.0%

$17,580
$10.92
3.2x

$15,960
$10.03
2.0x

$15,351
$9.67
2.0x

$18,998
$12.12
2.1x

$19,540
$12.65
2.4x

$24,479
$16.37
2.8x

$27,577
$17.94
2.5x

$28,012
$18.29
2.3x

$32,974
$23.20
1.2x

$27,302
$18.37
1.6x

$88,288
$19.89
1.7x

$140,344
$18.78
2.0x

Total Expenditures
Expenditures as % of Total (US$million):
Exploration
Development
Acquisitions
Cashflow (US$million)
Cashflow (US$/boe)
Recycle Ratio

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

3-Year

5-Year

$3.31

$4.94

$4.72

$5.78

$5.28

$5.92

$11.16

$7.85

$18.71

$11.12

$11.39

$9.94

$144.60

$744.00

$561.00

$16.88

$11.65

$3.72

$0.66

$129.33

na

$963.75

$756.00

$3.51

$3.44

$5.02

$4.82

$5.79

$5.32

$5.79

$7.15

$7.96

$19.47

$11.82

$11.88

$9.27

F&D Costs (US$/boe):


Exploration & Development (incl. revisions)
Acquisition Costs
All Sources (incl. revisions)
Exploration & Development (excl. revisions)

$7.16

$6.66

$6.87

$8.71

$5.53

$7.82

$11.62

$21.30

$54.90

$18.30

$24.62

$144.60

$744.00

$561.00

$16.88

$11.65

$3.72

$0.66

$129.33

na

$963.75

$756.00

$3.51

$7.44

$6.77

$7.02

$8.73

$5.57

$7.51

$7.33

$21.56

$57.12

$19.44

$25.65

$14.06

North America

$2.69

$6.28

$9.31

$21.73

$144.71

$4.15

-$43.87

$6.28

-$16.61

$7.32

$12.37

$11.73

Europe

$6.17

$5.34

$10.11

$10.34

$34.89

$9.42

$127.35

$12.38

$163.84

$28.69

$25.64

$24.90

$14.59

$9.31

$4.20

$4.02

-$13.21

$2.79

$1.52

$5.08

$3.29

$3.12

$3.65

$2.78

$2.53

$3.49

$2.95

$3.96

$2.89

$6.93

$10.05

$10.54

$20.19

nm

$24.32

$13.76

Acquisition Costs
All Sources (excl. revisions)

$16.05

Geographically Segmented Costs

Asia Pacific
Other International

Note: Reserve estimates reported after royalties


Source: BMO Capital Markets, Company Reports

See pages G1 to G2 for analyst coverage.

Page B74

Integrated Oils

Exxon Mobil (XOM - NYSE)


Breakeven Analysis
Table 7: Breakeven Oil Price Analysis (US$/boe)
Worldwide
Operating Costs
Exploration Expense
G&A/Other
F&D Costs
Return on Capital
Income Taxes
Breakeven Oil Price
Quality Differential
Required WTI Price

North America
Operating Costs
Exploration Expense
G&A/Other
F&D Costs
Return on Capital
Income Taxes
Breakeven Oil Price
Quality Differential
Required WTI Price

International
Operating Costs
Exploration Expense
G&A/Other
F&D Costs
Return on Capital
Income Taxes
Breakeven Oil Price
Quality Differential
Required WTI Price

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

3.23
0.59
1.85
3.44
2.83
2.40
14.35
6.44
20.79

3.27
0.75
1.91
5.02
4.19
3.27
18.39
5.22
23.61

3.44
0.60
1.75
4.82
4.10
3.09
17.80
4.41
22.21

3.97
0.66
2.50
5.79
5.01
3.90
21.83
7.19
29.03

4.62
0.83
1.95
5.32
4.72
4.55
21.99
8.93
30.93

5.15
0.76
2.78
5.79
5.45
5.72
25.65
13.94
39.58

5.81
0.91
4.68
7.15
6.63
7.61
32.79
8.88
41.67

6.86
1.18
4.65
7.96
7.27
9.01
36.93
9.57
46.50

8.36
1.27
6.89
19.47
18.72
23.63
78.33
12.79
91.13

8.07
1.37
5.64
11.82
11.88
12.73
51.52
2.61
54.12

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

3.17
0.39
1.16
2.69
2.09
1.36
10.87
6.31
17.17

3.56
0.57
1.06
6.28
4.86
2.91
19.25
4.78
24.03

3.95
0.52
0.89
9.31
7.18
3.99
25.85
5.83
31.68

4.76
0.67
1.11
21.73
16.31
9.41
53.97
6.67
60.64

5.30
0.60
1.26
48.24
36.27
22.97
114.64
8.26
122.90

6.08
0.45
1.83
4.15
3.46
2.18
18.14
14.61
32.75

2000

2001

2002

2003

2004

2005

8.42
0.83
2.24
37.07
32.33
18.47
99.36
12.15
111.52

2006

9.04
1.48
3.88
6.28
5.78
3.66
30.13
13.74
43.86

2007

11.81
1.30
6.29
57.84
54.53
34.47
166.24
16.63
182.87

2008

13.74
1.49
2.25
7.32
9.22
4.15
38.16
8.66
46.82

2009

3.26
0.70
2.24
4.10
3.50
3.48
17.28
6.52
23.80

3.10
0.85
2.38
4.48
3.88
3.56
18.24
5.45
23.69

3.17
0.65
2.21
3.98
3.56
3.03
16.60
3.66
20.26

3.57
0.66
3.19
4.66
4.34
3.95
20.36
7.46
27.82

4.22
0.97
2.35
4.06
3.89
4.80
20.30
9.32
29.62

4.65
0.93
3.29
6.43
6.33
8.67
30.30
13.58
43.88

4.71
0.95
5.70
5.49
5.24
7.56
29.65
7.50
37.15

5.95
1.05
4.98
8.61
7.84
11.76
40.19
7.84
48.03

6.98
1.26
7.13
11.19
10.89
16.97
54.41
11.25
65.67

6.16
1.33
6.78
16.50
15.16
19.06
64.98
0.56
65.54

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

3.33
1.63
3.71
1.31
1.81
2.61
14.40
3.29
17.70

3.25
1.70
2.95
6.23
8.26
14.98
37.37
3.03
40.41

3.50
1.36
2.65
6.63
9.34
11.93
35.42
2.45
37.87

3.44
1.32
3.22
11.17
12.75
15.45
47.35
3.59
50.94

3.37
1.51
3.39
20.84
17.45
25.47
72.03
7.06
79.09

3.39
1.25
4.68
20.89
12.96
18.71
61.88
6.87
68.75

3.34
1.14
5.57
43.83
21.35
27.34
102.57
6.25
108.82

4.39
1.75
5.96
14.30
7.41
10.27
44.08
5.10
49.18

6.50
1.78
7.36
17.86
10.40
13.62
57.52
14.47
71.99

7.88
2.57
5.22
114.74
57.70
69.26
257.37
3.07
260.43

International Segments (US$/boe):


Africa
Operating Costs
Exploration Expense
G&A/Other
F&D Costs
Return on Capital
Income Taxes
Breakeven Oil Price
Quality Differential
Required WTI Price

Asia
Operating Costs
Exploration Expense
G&A/Other
F&D Costs
Return on Capital
Income Taxes
Breakeven Oil Price
Quality Differential
Required WTI Price

Europe
Operating Costs
Exploration Expense
G&A/Other
F&D Costs
Return on Capital
Income Taxes
Breakeven Oil Price
Quality Differential
Required WTI Price

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2.57
0.78
2.39
14.59
9.07
5.98
35.38
7.53
42.91

2.82
0.53
2.10
9.31
6.03
3.97
24.75
8.70
33.45

2.57
0.38
1.75
4.20
2.28
1.59
12.77
5.28
18.05

2.59
0.68
2.08
4.02
2.25
1.64
13.26
11.87
25.13

3.34
0.58
3.39
83.04
52.64
30.51
173.50
13.15
186.65

3.59
0.77
5.31
2.79
1.91
1.26
15.63
20.40
36.03

3.72
0.71
11.98
1.52
1.27
1.65
20.85
12.43
33.28

3.89
0.91
8.37
5.08
4.08
6.66
29.00
13.99
42.99

4.94
1.46
12.84
3.29
3.29
5.94
31.75
18.58
50.33

3.76
0.84
8.05
3.12
4.64
6.70
27.11
3.31
30.42

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

3.63
0.30
0.80
6.17
2.94
3.73
17.58
6.35
23.93

3.32
0.27
1.13
5.34
2.57
2.43
15.06
4.35
19.41

3.71
0.27
0.89
10.11
4.82
5.53
25.33
3.04
28.37

Source: BMO Capital Markets, Company Reports


See pages G1 to G2 for analyst coverage.

4.31
0.37
1.68
10.34
4.73
5.63
27.05
7.26
34.31

4.93
0.29
1.48
34.89
14.12
21.24
76.95
8.63
85.58

5.79
0.17
1.84
9.42
3.57
6.19
26.97
14.42
41.39

6.44
0.45
2.38
127.35
54.98
98.26
289.87
4.13
294.00

8.87
0.51
2.23
12.38
4.30
8.55
36.85
5.62
42.47

8.71
0.60
3.23
34.07
10.51
22.09
79.22
3.78
83.00

7.88
1.04
7.61
28.69
15.47
24.59
85.28
(6.48)
78.81

Weighted Average
3-Year
5-Year
7.77
1.28
5.69
11.88
11.40
13.69
51.71
8.32
60.03

6.86
1.10
4.92
9.27
8.71
10.14
41.00
9.56
50.56

Weighted Average
3-Year
5-Year
11.53
1.43
4.04
12.37
12.74
7.53
49.64
13.01
62.65

9.65
1.08
3.16
11.73
11.19
6.67
43.49
13.16
56.65

Weighted Average
3-Year
5-Year
6.33
1.22
6.32
11.70
10.96
15.86
52.40
6.55
58.95

5.70
1.11
5.65
8.66
8.18
11.73
41.04
8.14
49.19

Weighted Average
3-Year
5-Year
6.23
2.03
6.16
26.03
13.89
18.17
72.51
7.55
80.06

5.05
1.69
5.75
38.83
21.04
27.80
100.16
7.15
107.31

Weighted Average
3-Year
5-Year
4.11
1.03
9.40
3.65
3.98
6.40
28.58
11.96
40.54

3.98
0.94
9.34
2.78
2.65
3.76
23.45
13.74
37.20

Weighted Average
3-Year
5-Year
8.45
0.74
4.54
25.64
10.18
19.62
69.18
0.98
70.15

7.46
0.55
3.51
24.90
9.77
18.17
64.35
4.29
68.65

Oil & Gas Global Cost Study

Page B75

Hess Corp. (HES - NYSE)

US$, net

The companys above-average operating cost structure and DD&A expense more than offset the companys reduced tax burden,
leading to below-average results. Based on its upstream results in 2009, Hess reported below-average earnings of $5.76/boe,
reflecting higher-than-average DD&A and exploration expenses during the year.
Hess also reported above-average reserve replacement costs in 2009, at $19.90/boe. Excluding revisions, Hess F&D costs
increased to $65.60/boe, considerably above the group average.
Based on 2009 reported results, we estimate Hess required an equivalent WTI oil price of $68.93/boe to break even, which is
below last year, but well above the peer average of $52.51/boe.
Notes: All upstream financial figures, as well as reserve and production values are based upon FASB Statement No. 69 disclosure.
Proven Reserves vs RLI

Capital Spending by Region (US$million)

1,600

$6,000

12.0

1,400

$5,000

10.0

$4,000

8.0

1,000
800

6.0

600

Years

mmboe (net)

1,200

4.0

400
2.0

200
0

0.0
2000

2001

2002

2003

2004

2005

2006

Proven Reserves

2007

2008

$3,000
$2,000
$1,000
$0
2000

2009

2001

2002

2003

2004

North America

RLI

Proven Reserve Additions by Region (million boe)

2005

Europe

2006

2007

2008

2009

2008

2009

Other International

F&D Costs Including Revisions (US$/boe)

450

$30.00

400

$25.00

350
300

$20.00

250

$15.00

200
150

$10.00

100
$5.00

50
0

$0.00

-50

-31.66

-$5.00

-100
2000

2001

2002

2003

North America

2004

2005

Europe

2006

2007

2008

2001

2002

2003

2004

2005

Hess

Other International

F&D Costs Including Revisions by Region (US$/boe)


345.60

2000

2009

2006

2007

Integrateds

3-Year Average F&D Costs Including Revisions (US$/boe)

41.65

45.42

$30.00

$30.00

$25.00

$25.00

$20.00

$20.00

$15.00
$15.00

$10.00
$5.00

$10.00

$0.00

$5.00

-13.07

-$5.00
2000

2001

2002

North America

2003
Europe

2004

2005

2006

Other International

2007

2008

2009

$0.00
2001

2002

2003

2004

Hess Corp

Source: BMO Capital Markets, Company Reports


See pages G1 to G2 for analyst coverage.

2005

2006

Integrateds

2007
Industry

2008

2009

Page B76

Integrated Oils

Hess Corp. (HES - NYSE)

US$/boe, net

Worldwide
Upstream Net Revenue (US$/boe)

Production Costs (US$/boe)

$80.00

$80.00

$70.00

$70.00

$60.00

$60.00

$50.00

$50.00

$40.00

$40.00

$30.00

$30.00

$20.00

$20.00

$10.00

$10.00
$0.00

$0.00
2000

2001

2002

2003

2004

Hess

2005

2006

2007

2008

2000

2009

2001

2002

2003

2004

Hess

Integrateds

Upstream Operating Earnings (US$/boe)

2005

2006

2007

2008

2009

Integrateds

Upstream Net Income (US$/boe)

$80.00

$80.00

$70.00

$70.00

$60.00

$60.00
$50.00

$50.00

$40.00

$40.00

$30.00

$30.00

$20.00

$20.00

$10.00

$10.00

$0.00

$0.00

-$10.00
2000

2001

2002

2003

2004

Hess

2005

2006

2007

2008

2009

2000

2001

2002

Integrateds

2003

2004

Hess

Breakeven Details (US$/boe)

2005

2006

2007

2008

2009

2006

2007

2008

2009

Integrateds

Required WTI Oil Price (US$/boe)

$90.00

$90.00

$80.00

$80.00

$70.00

$70.00

$60.00

$60.00

$50.00

$50.00

$40.00

$40.00

$30.00
$20.00

$30.00

$10.00

$20.00

$0.00

$10.00

-$10.00

$0.00
2000

2001

2002

2003

Op Cost/G&A/Other

2004

2005

2006

2007

2008

F&D/Exploration

Return

Taxes

Quality

Source: BMO Capital Markets, Company Reports

See pages G1 to G2 for analyst coverage.

2009

2000

2001

2002

2003

2004
Hess

2005

Integrateds

Oil & Gas Global Cost Study

Page B77

Hess Corp. (HES - NYSE)

US$/boe, net

North America
Upstream Net Revenue (US$/boe)

Production Costs (US$/boe)

$90.00

$90.00

$80.00

$80.00

$70.00

$70.00

$60.00

$60.00

$50.00

$50.00

$40.00

$40.00

$30.00

$30.00

$20.00

$20.00

$10.00

$10.00
$0.00

$0.00
2000

2001

2002

2003

2004

Hess

2005

2006

2007

2008

2000

2009

2001

2002

2003

2004

Hess

Integrateds

Upstream Operating Earnings (US$/boe)

2005

2006

2007

2006

2007

2008

2009

Integrateds

Upstream Net Income (US$/boe)

$90.00

$90.00

$80.00

$80.00

$70.00

$70.00
$60.00

$60.00

$50.00

$50.00

$40.00

$40.00

$30.00

$30.00

$20.00

$20.00

$10.00

$10.00

$0.00

$0.00

-$10.00
2000

2001

2002

2003

2004

Hess

2005

2006

2007

2008

2000

2009

2001

2002

Integrateds

2003

2004

Hess

Breakeven Details (US$/boe)

2005

2008

2009

Integrateds

Required WTI Oil Price (US$/boe)

$160.00

$160.00

$140.00

$140.00

$120.00

$120.00

$100.00

$100.00

$80.00

$80.00

$60.00

$60.00

$40.00

$40.00

$20.00

$20.00

$0.00

370.14

$0.00
2000

2001

2002

2003

Op Cost/G&A/Other

2004

2005

2006

2007

2008

F&D/Exploration

Return

Taxes

Quality

Source: BMO Capital Markets, Company Reports

See pages G1 to G2 for analyst coverage.

2009

2000

2001

2002

2003

2004
Hess

2005

2006

Integrateds

2007

2008

2009

Page B78

Integrated Oils

Hess Corp. (HES - NYSE)

US$/boe, net

Total International
Upstream Net Revenue (US$/boe)

Production Costs (US$/boe)

$80.00

$80.00

$70.00

$70.00

$60.00

$60.00

$50.00

$50.00

$40.00

$40.00

$30.00

$30.00

$20.00

$20.00

$10.00

$10.00
$0.00

$0.00
2000

2001

2002

2003

2004
Hess

2005

2006

2007

2008

2000

2009

2001

2002

2003

2004
Hess

Integrateds

Upstream Operating Earnings (US$/boe)

2005

2006

2007

2008

2009

2007

2008

2009

2007

2008

2009

Integrateds

Upstream Net Income (US$/boe)

$80.00

$80.00

$70.00

$70.00

$60.00

$60.00

$50.00

$50.00

$40.00

$40.00

$30.00

$30.00

$20.00

$20.00

$10.00

$10.00

$0.00

$0.00
2000

2001

2002

2003

2004
Hess

2005

2006

2007

2008

2009

2000

2001

2002

2003

Integrateds

2004
Hess

Breakeven Details (US$/boe)

2005

2006

Integrateds

Required WTI Oil Price (US$/boe)


202.96

$80.00

$80.00

$70.00

$70.00

$60.00

$60.00

$50.00

$50.00

$40.00

$40.00

$30.00

$30.00

$20.00

$20.00

$10.00

$10.00

$0.00

$0.00
2000

2001

2002

2003

Op Cost/G&A/Other

2004

2005

2006

2007

2008

F&D/Exploration

Return

Taxes

Quality

Source: BMO Capital Markets, Company Reports

See pages G1 to G2 for analyst coverage.

2009

2000

2001

2002

2003

2004
Hess

2005

2006

Integrateds

Oil & Gas Global Cost Study

Page B79

Hess Corp. (HES - NYSE)

US$/boe, net

International Segments
Upstream Net Revenue (US$/boe)

Production Costs (US$/boe)

$80.00

$80.00

$70.00

$70.00

$60.00

$60.00

$50.00

$50.00

$40.00

$40.00

$30.00

$30.00

$20.00

$20.00

$10.00

$10.00
$0.00

$0.00
2000

2001

2002

2003

North America

2004

2005

Europe

Other

2006

2007

2008

2000

2009

$80.00

$70.00

$70.00

$60.00

$60.00

$50.00

$50.00

$40.00

$40.00

$30.00

$30.00

$20.00

$20.00

$10.00

$10.00

$0.00

$0.00

-$10.00

-$10.00
2002

2003

North America

2004
Europe

2003

2004

2005

Europe

Other

2004

2005

2006

2007

2008

2009

2006

2007

2008

2009

Upstream Net Income (US$/boe)

$80.00

2001

2002

North America

Upstream Operating Earnings (US$/boe)

2000

2001

2005

2006

2007

2008

2009

2000

2001

Other

2002

2003

North America

3-Year Average Breakeven Details by Region (US$/boe)

Europe

Other

Required WTI Oil Price (US$/boe)


124.95

370.14

$100.00

156.51

$100.00

$90.00

$90.00

$80.00

$80.00

$70.00

$70.00
$60.00

$60.00

$50.00

$50.00

$40.00

$40.00

$30.00

$30.00

$20.00
$10.00

$20.00

$0.00

$10.00

-$10.00

$0.00

2000
Europe
Op Cost/G&A/Other

Other
F&D/Exploration

Return

Source: BMO Capital Markets, Company Reports

See pages G1 to G2 for analyst coverage.

2001

2002

2003

2004

2005

2006

2007

2008

North America
Taxes

Quality

North America

Europe

Other

Peer Average

2009

Page B80

Integrated Oils

Hess Corp. (HES - NYSE)


Consolidated Statements
Table 1: Income Statement (US$million)
Upstream Revenue, net of Royalties
Midstream / Downstream Revenue
Other
Total Revenue and Other Income
Crude Oil and Product Purchases
Production and Transportation Expenses
Marketing Expenses
Exploration / Dry Hole Costs
General and Administrative
Depreciation, Depletion and Amortization
Interest, net
Other
Earnings Before Income Tax
Current Income Taxes
Future Income Taxes
Total Income Taxes
Minority Interest
Earnings From Continuing Operations
Discontinued Operations/Extraordinary Items
Cumulative Change in Accounting Principle
Net Earnings
Preferred Stock Dividends
Net Earnings to Common Shareholders

2000
3,178
8,815
284
12,277

2001
3,598
9,454
208
13,260

2002
3,200
8,351
181
11,732

2003
2,838
11,473
169
14,480

2004
3,285
13,448
393
17,126

2005
4,074
18,673
508
23,255

2006
6,585
21,480
655
28,720

2007
7,732
23,913
279
31,924

2008
9,858
31,307
(71)
41,094

2009
7,149
22,465
(45)
29,569

7,883
557
542
289
224
714
162
234
1,672
485
164
649
1,023
1,023
1,023

8,739
642
663
347
311
833
194
213
1,318
438
64
502
816
98
914
914

7,226
736
703
316
253
1,118
256
1,189
(65)
481
(301)
180
(245)
27
(218)
(218)

9,947
796
709
369
340
1,053
293
192
781
251
63
314
467
169
7
643
5
638

11,971
825
737
287
342
970
241
195
1,558
801
(213)
588
970
7
977
48
929

17,041
1,007
842
397
357
1,025
224
136
2,226
1,097
(113)
984
1,242
1,242
48
1,194

19,912
1,250
940
552
471
1,224
201
130
4,040
1,840
284
2,124
1,916
1,916
44
1,872

22,573
1,581
944
515
614
1,576
256
161
3,704
1,746
126
1,872
1,832
1,832
1,832

29,595
1,872
1,025
725
672
2,029
267
209
4,700
2,397
(57)
2,340
2,360
2,360
2,360

20,961
1,805
1,008
829
647
2,254
360
183
1,522
1,153
(438)
715
807
(3)
804
804

Source: BMO Capital Markets, Company Reports

Table 2: Statement of Cash Flows (US$million)


2000
1,023
1,044
(119)
1,948
(105)
1,843

2001
914
1,120
101
2,135
(175)
1,960

2002
(218)
2,082
210
2,074
(109)
1,965

2003
643
1,387
(316)
1,714
(133)
1,581

2004
977
917
(218)
1,676
227
1,903

2005
1,242
1,155
(149)
2,248
(408)
1,840

2006
1,916
1,843
(172)
3,587
(96)
3,491

2007
1,832
1,710
103
3,645
(138)
3,507

2008
2,360
2,307
6
4,673
(106)
4,567

2009
807
2,314
357
3,478
(432)
3,046

Upstream Spending
Midstream / Downstream Spending
Net Acquisitions
Other
Net Cash From Investing Activities

(783)
(155)
27
(38)
(949)

(2,341)
(160)
(2,653)
(51)
(5,205)

(1,404)
(130)
412
26
(1,096)

(1,286)
(72)
545
36
(777)

(1,434)
(87)
57
93
(1,371)

(2,235)
(106)
74
12
(2,255)

(3,675)
(169)
444
111
(3,289)

(3,438)
(140)
93
11
(3,474)

(4,251)
(187)
(6)
(4,444)

(2,800)
(118)
(6)
(2,924)

Net Change in Debt


Net Change in Common Stock
Net Change in Preferred Stock
Cash Dividends Paid
Other
Net Cash From Financing Activities
Effect of Exchange Rate on Cash
Net Increase/(Decrease) in Cash
Cash and Equivalents, Beginning of Year
Cash and Equivalents, End of Year

(407)
(220)
(54)
59
(622)
(1)
271
41
312

3,105
(100)
(94)
59
2,970

(630)
(107)
28
(709)

(275)
312
37

160
37
197

(1,028)
653
(108)
(483)
321
197
518

(106)
(157)
90
(173)
359
518
877

(50)
(159)
62
(147)
(562)
877
315

(13)
(161)
40
(134)
68
315
383

208
(127)
110
191
224
383
607

(32)
(130)
340
178
301
607
908

447
(131)
16
332
454
908
1,362

Net Earnings
Charges and Credits Not Impacting Cash
Other
Cash Flow From Operations
Change in Working Capital / Other
Net Cash From Operating Activities

Source: BMO Capital Markets, Company Reports

See pages G1 to G2 for analyst coverage.

Oil & Gas Global Cost Study

Page B81

Hess Corp. (HES - NYSE)


Table 3: Balance Sheet (US$million)
Total Current Assets
Net Property, Plant and Equipment
Other Assets
Total Assets

2000
4,115
4,323
1,836
10,274

2001
3,946
8,165
3,258
15,369

2002
2,756
7,032
3,474
13,262

2003
3,186
7,978
2,819
13,983

2004
4,335
8,505
3,472
16,312

2005
5,290
9,512
4,313
19,115

2006
5,848
12,308
4,248
22,404

2007
6,926
14,634
4,571
26,131

2008
7,332
16,271
4,986
28,589

2009
7,987
16,627
4,851
29,465

Total Current Liabilities


Long-term Debt
Deferred Income Taxes
Other Liabilities and Deferred Credits
Total Liabilities
Minority Interests
Common Shares
Contributed Surplus (Paid-in Capital)
Preferred Stock
Retained Earnings
Other / Comprehensive Income (Loss)
Total Shareholders' Equity
Total Liabilities and Shareholders' Equity

3,538
1,985
510
358
6,391
89
864
3,069
(139)
3,883
10,274

3,718
5,283
1,111
350
10,462
89
903
3,807
108
4,907
15,369

2,553
4,976
1,044
440
9,013
89
932
3,482
(254)
4,249
13,262

2,669
3,868
1,144
962
8,643
90
1,603
14
4,011
(378)
5,340
13,983

4,697
3,785
1,184
1,049
10,715
92
1,727
14
4,831
(1,067)
5,597
16,312

6,447
3,759
1,401
1,222
12,829
93
1,842
14
5,914
(1,577)
6,286
19,115

6,739
3,745
2,099
1,710
14,293

8,024
3,918
2,362
2,053
16,357

7,730
3,812
2,241
2,499
16,282

315
1,689
7,671
(1,564)
8,111
22,404

321
1,882
9,412
(1,841)
9,774
26,131

326
2,347
11,642
(2,008)
12,307
28,589

6,850
4,319
2,222
2,546
15,937
144
327
2,481
12,251
(1,675)
13,384
29,465

Source: BMO Capital Markets, Company Reports

Table 4: Results of Operations from Oil & Gas Producing Activities (US$million)
Cumulative
2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

3-Year

5-Year
34,873

Worldwide
Net Revenue

3,097

3,551

3,786

3,087

3,416

4,210

6,524

7,498

9,806

6,835

24,139

Production Costs

557

711

822

796

825

1,007

1,250

1,581

1,872

1,805

5,258

7,515

Exploration

289

368

319

369

287

397

552

515

725

829

2,069

3,018

DD&A

667

913

1,263

998

918

965

1,159

1,503

1,952

2,167

5,622

7,746

86

153

1,243

168

150

140

209

257

302

255

814

1,163

1,498

1,406

139

756

1,236

1,701

3,354

3,642

4,955

1,779

10,376

15,431

613
885

523
883

220
-81

358
398

543
693

709
992

1,870
1,484

1,817
1,825

2,490
2,465

904
875

5,211
5,165

7,790
7,641

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

3-Year

Net Revenue

938

1,234

1,044

785

909

1,097

1,232

1,211

1,652

1,611

4,474

6,803

Production Costs

147

213

241

194

198

253

221

280

373

431

1,084

1,558

Other
Pre-tax Earnings
Income Taxes
Net Earnings

Cumulative
5-Year

North America

Exploration

141

156

85

147

135

233

353

302

305

383

990

1,576

DD&A

175

368

460

260

147

145

127

187

238

503

928

1,200

44

80

440

65

57

74

95

130

159

130

419

588

Pre-tax Earnings

Other

431

417

-182

119

372

392

436

312

577

164

1,053

1,881

Income Taxes
Net Earnings

158
273

143
274

-64
-118

42
77

132
240

141
251

161
275

121
191

223
354

64
100

408
645

710
1,171

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

3-Year

5-Year
28,070

Cumulative
International
Net Revenue

2,159

2,317

2,742

2,302

2,507

3,113

5,292

6,287

8,154

5,224

19,665

Production Costs

410

498

581

602

627

754

1,029

1,301

1,499

1,374

4,174

5,957

Exploration

148

212

234

222

152

164

199

213

420

446

1,079

1,442

DD&A

492

545

803

738

771

820

1,032

1,316

1,714

1,664

4,694

6,546

42

73

803

103

93

66

114

127

143

125

395

575

1,067

989

321

637

864

1,309

2,918

3,330

4,378

1,615

9,323

13,550

455
612

380
609

284
37

316
321

411
453

568
741

1,709
1,209

1,696
1,634

2,267
2,111

840
775

4,803
4,520

7,080
6,470

Other
Pre-tax Earnings
Income Taxes
Net Earnings

Note: Based on FASB 69 disclosure


Source: BMO Capital Markets, Company Reports

See pages G1 to G2 for analyst coverage.

Page B82

Integrated Oils

Hess Corp. (HES - NYSE)


Table 5: Upstream Netbacks (US$/boe)
Weighted Average
2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

3-Year

5-Year

Worldwide
Net Revenue

22.12

21.99

22.40

22.05

26.72

33.77

48.75

53.49

68.89

44.97

55.56

50.32

Production Costs

3.98

4.40

4.86

5.69

6.45

8.08

9.34

11.28

13.15

11.88

12.10

10.84

Exploration

2.06

2.28

1.89

2.64

2.25

3.18

4.12

3.67

5.09

5.45

4.76

4.35

DD&A

4.76

5.65

7.47

7.13

7.18

7.74

8.66

10.72

13.71

14.26

12.94

11.18

Other
Pre-tax Earnings
Income Taxes
Net Earnings

0.61

0.95

7.36

1.20

1.17

1.12

1.56

1.83

2.12

1.68

1.87

1.68

10.70

8.71

0.82

5.40

9.67

13.64

25.06

25.98

34.81

11.70

23.88

22.27

4.38
6.32

3.24
5.47

1.30
-0.48

2.56
2.84

4.25
5.42

5.69
7.96

13.97
11.09

12.96
13.02

17.49
17.32

5.95
5.76

11.99
11.89

11.24
11.03

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

3-Year

5-Year
53.36

Weighted Average
North America
Net Revenue

22.51

22.92

22.37

22.22

29.17

38.05

50.98

56.77

79.94

49.57

60.05

Production Costs

3.53

3.96

5.16

5.49

6.35

8.77

9.14

13.13

18.05

13.26

14.55

12.22

Exploration

3.38

2.90

1.82

4.16

4.33

8.08

14.61

14.16

14.76

11.78

13.29

12.36

DD&A

4.20

6.84

9.86

7.36

4.72

5.03

5.26

8.77

11.52

15.48

12.46

9.41

Other

1.06

1.49

9.43

1.84

1.83

2.57

3.93

6.09

7.69

4.00

5.62

4.61

Pre-tax Earnings
Income Taxes
Net Earnings

10.34

7.75

-3.90

3.37

11.94

13.60

18.04

14.63

27.92

5.05

14.13

14.75

3.79
6.55

2.66
5.09

-1.37
-2.53

1.19
2.18

4.24
7.70

4.89
8.71

6.66
11.38

5.67
8.95

10.79
17.13

1.97
3.08

5.48
8.66

5.57
9.18

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

3-Year

5-Year

Weighted Average
International
Net Revenue

21.96

21.52

22.41

21.99

25.93

32.48

48.26

52.91

67.02

43.72

54.63

49.64

Production Costs

4.17

4.63

4.75

5.75

6.49

7.87

9.38

10.95

12.32

11.50

11.59

10.53

Exploration

1.51

1.97

1.91

2.12

1.57

1.71

1.81

1.79

3.45

3.73

3.00

2.55

DD&A

5.00

5.06

6.56

7.05

7.98

8.56

9.41

11.07

14.09

13.92

13.04

11.58

Other
Pre-tax Earnings
Income Taxes
Net Earnings

0.96

0.69

1.18

1.05

1.10

1.02

10.85

9.19

2.62

6.09

8.94

13.66

26.61

28.02

35.98

13.51

25.90

23.96

4.63
6.22

0.43

3.53
5.66

0.68

2.32
0.30

6.56

3.02
3.07

0.98

4.25
4.69

5.93
7.73

15.58
11.02

1.04

14.27
13.75

1.07

18.63
17.35

7.03
6.49

13.34
12.56

12.52
11.44

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

22.63

22.18