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Brian Reinsborough President Nexen Petroleum U.S.A., Inc. Friday, December 5, 2008

Challenges in the Deepwater Gulf of Mexico. Brian Reinsborough President Nexen Petroleum U.S.A., Inc. Friday, December 5, 2008. Agenda. Why Deepwater Gulf of Mexico? Challenges Our Industry Faces The Path Forward. Why Deepwater GoM?. Long-Term Demand for Oil Remains Strong

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Brian Reinsborough President Nexen Petroleum U.S.A., Inc. Friday, December 5, 2008

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  1. Challenges in the Deepwater Gulf of Mexico Brian Reinsborough President Nexen Petroleum U.S.A., Inc. Friday, December 5, 2008

  2. Agenda • Why Deepwater Gulf of Mexico? • Challenges Our Industry Faces • The Path Forward

  3. Why Deepwater GoM? • Long-Term Demand for Oil Remains Strong • Deepwater has Large Yet-to-Find Resources • Fiscal Regime is Stable and Attractive • Proximity to a Consuming Market • Deepwater Drilling will Account for 25% of Offshore Production • Technology Breakthroughs will Drive Activity

  4. Challenges Our Industry Faces: External Environment Access Costs Entrants CompetitiveLandscape Lease Sales M&A Knowledge Resource Constraints Execution Development Access External Environment Tie-Back Infrastucture Development Seismic Complex Geology New Plays Infrastructure Technology

  5. Competitive Landscape Access Technology Infrastructure Development Access Costs Entrants CompetitiveLandscape Competitive Landscape • Players / New Entrants • Access • Costs

  6. Competitive Landscape Access Technology Infrastructure Development Lease Sales M&A Access Access • Lease Sales • M&A

  7. Competitive Landscape Access Technology Infrastructure Development Seismic Complex Geology New Plays Technology Technology • Seismic • New Plays • Complex Geology

  8. Competitive Landscape Access Technology Infrastructure Development Tie-Back Infrastucture Development Infrastructure Infrastructure • InfrastructureDevelopment • Tie-backs

  9. Competitive Landscape Access Technology Infrastructure Development Knowledge Resource Constraints Execution Development Development • Resource Constraints • Execution • Knowledge

  10. Majors Large Caps E&P NOC – Resource Holder Service Companies Seek to reduce costs Exploration review Reduce discretionary expenditure Cut exploration activity Domestic budget pressures Margins at risk as activity falls Maintain low debt levels (reduce buy-backs?) Conserve cash Struggle to raise finance Lack of project finance Slow investment in new equipment Exploit “opportunistic” M&A Delay /phase major projects Asset rationalisation for some Sell assets to fund developments Seek financially strong partners Become more competitive seeking service contracts with NOCs Impact of Lower Prices & Recession Type of Company Lower Oil Price Credit Tightness Response

  11. The Path Forward • Longer-Term Oil Price Forecast Remains Strong • recession believed to be short term • worldwide supply/demand equation will balance • Projects may Slow Short Term • industry consolidation expected to occur • some companies will conserve capital • Deepwater Projects are Long-Term Focused • Deepwater Rigs will keep Drilling • assumes capital is available for contract owners • deepwater rigs still in short supply • Technology Advancements will Improve Economics of New Plays

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