Drilling & Completion Category Report

1. Drilling & Completion Category Report 2006 – 2008 TCO Confidential

2. July - December 2006 What Went Well • Captured $400K from AralParker - Severance Pay Adjustment • Resolved $89K from Weatherford Audit Finding • Sold $505K Drilling Rig Equipment • Awarded $220MM Drlg Rig Svcs Contract - $1.4MM Savings • eSourced & Awarded $3MM H2S Safety Contract - $1MM svngs • Moved SLB to 2nd call-out for hydrochloric acid ($911/MT) and HAL to 1st call ($512/MT) - $1MM savings • Established 3rd party inspection svcs at Cameron Mfg Facility • Key participant in WH/trees contractor default issues • Initiated backcharge of $1MM • Resolved pressure gauges shipped w/o GOST certifications • Addressing contractor’s demand for prepayment TCO Confidential

3. July - December 2006 What Could Have Gone Better • Training - Contracts Workshop Canceled • No Contracts & Strategic Procurement Manager • OPEX Issues • Selling Surplus Equipment • Transaction very time consuming & resource intensive • No clear process • Export Subcontractor Equipment • Consigned to TCO, not on books as asset, title w/subcontr • No clear process • No cooperation from KZ Customs Agency • Could become very expensive with fees, duties, taxes, possible criminal charges, and monthly rental from contr. TCO Confidential

4. 2007 - Forward Focus Items • Get new Drlg Rig Service Contractor in place (MOC) • Negotiate 5-yr contract w/Cameron for WH/Trees • Local Content Business Plan • ASR? • Begin Sourcing Effort for CSP (16 Product Service Lines) • Develop Sourcing Strategy • Keep bundled - unbundle? • Move surplus inventory - drilling fluids, etc. • Replace all stainless steel WH/trees with new metalurgy • IRIS opportunity with old WH/trees? • Develop Sourcing Strategy for OCTG TCO Confidential

5. TCO Drilling & CompletionsCategory Plan - Most Likely Drilling Schedule • 2007 (1 Feb 2007): No rigs running at beginning of new contract, Emergency Response DB Personnel only. Begin operations on TCO Rig 4 on August 1. • 2008: Continue with Rig 4, begin Non-rig 8-month campaign operations on March 1. Begin operations on Contractor 1500 Hp WO rig on October 1. • 2009: Continue with Rig 4, Non-rig campaign and Contractor 1500 Hp WO rig. No other Contractor rigs operating. • 2010: Continue with Rig 4, Non-rig campaign, Contractor 1500 Hp WO rig. Begin operations on one 3000 Hp Contractor rig on January 1 and one 3000 Hp on July 1. • 2011-2012: Continue with Rig 4, Non-rig campaign, Contractor 1500 Hp WO rig and two-3000 Hp Contractor rigs. Begin operations on one additional 3000 Hp Contractor rig on July 1. Continue with this schedule through end of contract, 1 Feb 2012. • Since no rigs are required when Contract begins, no Mobile Equipment will be provided by Contractor until first Contract Rig (1500 Hp WO) begins in October 2008; TCO will use available rental equipment to move Rig 4 and Non-rig if necessary. Rental Mobile Equipment cost is not included in analysis until first Contract rig is mobilized. TCO Confidential

6. TCO Drilling & Completions Category Plan - Vision and Objectives Vision MainObjectives To be recognized by TCO and Partners as creating value while being viewed by suppliers as the customer of choice through working category management at the enterprise level and having alignment with the company’s business unit goals. • Develop PIT/ASR’s to drive OE/TCO improvements • Utilize KPI’s & scorecards to manage performance • Implement new “off the shelf” technologies • Cost Management • Strategic Sourcings Key Elements of Business Strategy In Scope Out of Scope • N/A • Achieve Incident Free Operations • Collaboration with suppliers on the implementation of existing technologies and the development of new technologies • Create value through OE/TCO opportunities that align with the OPCO business goals • Improve Supplier Performance • EBU • TCO Category Structure Well Construction Services Currently bundled w/Schlumberger CSP Contract Well Construction Commodities Pumping Dir. Drlg Fluids Wireline Rentals& Svc Well Const Eqp Surface Equip OCTG • Cementing • Cementing Tools • Stimulation • Sand Control Pumping & Tools • Directional Tools & Services • MWD/LWD • Whipstocks • Survey Tools • Drilling Fluids • Completion Fluids • Completion Fluids Filtration • Solids Control • Coil Tubing • Fishing Tools • Tubular Running • TCP • Coring • Liner Hangers • Rental Pipe & BOP‘s • SCSSV‘s • ECP‘s • Screens/Blanks • Cased Hole Logging • Open Hole Logging • Perforating • Wellheads • Trees • CRA • Tubing • Drill Pipe TCO Confidential