SIS Business Consulting Asset Portfolio Optimization (APO)

1. SIS Business Consulting Asset Portfolio Optimization (APO) Market Offering Credentialing Overview Marty Stetzer, APO Practice Leader

2. Business Context Industry Best Practice Schlumberger APO Solution Getting Started Contents

3. Business Context HeadlineMajors and independents targeting exceptional but risky prospects • “New reality places premium on sound management principles and decision making fundamentals” • Rex Tillerson - ExxonMobil Upstream Profitability by Region Source: Merrill Lynch estimates

4. Business Context Capturing Uncertainty ImportantE&P decision making interrelated and complex… • Portfolio questions • How will a new investment affect shareholder value over the next 5 or 10 years? • What impact does a major project failure have on our corporate goals and valuation? Massive Business Challenge • “Overarching task is to reduce decline in mature fields and add new supplies – many in remote, high risk areas” • Source: CERA Week 2004 - Houston • Portfolio analysis related questions • What is the probability of achieving our corporate goals if oil price drops 20%? • What investments are best to include in our portfolio if there is an decrease/increase in available funds? • Corporate strategy questions • Are all of today’s investment decisions supporting the ability of my company to meet its long-term strategic goals?

5. APO Supports Industry Best PracticeExternal research indicates… • The more an E&P company integrates people, process and technology with a probabilistic approach in decision making, the better the company will perform. • Industry references: • Jonkman et. al., 2000, SPE 65144 • Schroder Bank / Prudential Survey (1990 – 1999) • Simpson et. al. 2000, SPE 59455

8. Schlumberger APO Solution

9. Set Strategy and Vision • E&P CEO • Manage the Business Business Planning Process Reserves Mgmt Process Capital Allocation Process AcquireProspect ExploitProspect DevelopProspect ProduceProspect AbandonProspect • CXO Portfolio Focus • Asset Life Cycle • APO Key Citations • Domain Expertise PDO - Oman Completely Integrated Portfolio Analysis Shell Global Process / Platform Standardization Kerr McGee Reserve Management Benchmark Schlumberger APO Solution Guiding Principle: Asset Life CycleMust relate key strategic processes to the business… 1 2 3

10. Capital Planning Probabilistic portfolio optimization Set strategy. Define goals, business rules and objectives to generate optimized portfolios Introduction The Merak HeritageReliable tools for uncertainty analysis from project to portfolio… Application Role Capabilities Peep Capture project uncertainty Define project outcomes using scenarios ResultsBroker Consistent probabilistic results set Standardized calculation of results using project outcomes and correlated price outcomes

11. RES BRO Cap Plan Volts Reserves Management Standardized Result Calculations Rules, Goals, Optimization for Portfolio Analysis MMRA DCline • Probabilistic reserves estimation • Production forecasting Schlumberger APO Solution Our Domain Perspective is Invaluable AssetLeveraging Merak risk quantification experience… 1 2 3 Manage the E&P business Business Planning Process Reserves Mgmt Process Capital Allocation Process DTK Current Merak application architecture Decision & Risk Analysis PEEP Project Economics Fiscal Modeling

12. Guiding Principle: Consistency Important Whatever choices are made for representing uncertainty, we need to ensure consistency in the evaluation methodologies of all projects

13. North West Europe (6) North East Europe (2) United Kingdom (1) U.S. Lower 48 (1) North America Frontier (3) Central Asia (4) Southern Europe (4) North Africa (7) Middle East (8) South China Sea (9) West Africa (8) Southern Asia (5) Central Africa (4) South America Atlantic (9) South America Andean (8) Australasia (4) Southern Africa (6) Total: 89 models Guiding Principal: Global PerspectiveRemote prospects are the rule not the exception… • Understanding fiscal & regime modelling is the key to project forward economics

14. Getting Started Assess & Plan Engagement

15. Getting Started The APO Framework Identifies the Key Solution Drivers . . . APO Solution Components APO Solution Acceptance Improved Business Results Process 2 $ Risk External business drivers Internal business strategy E&P Portfolio Strategy Organization 3 1 Technology 4 • Regime economics • Political risk • Compliance • Technology advances • Risk reduction goals • R/P Ratio • Acquisition • Align APO strategy with overall business direction • Individual & group • Continuous • Proactive • Reduce risk • Improve return • Improve consistency

16. Getting Started The Quick Start Template Helps Us to Rapidly Identify Problems and Opportunities 1 2 3 4 Strategy Process Organization Technology • Preconditions: • Business drivers • Standards • No de-configuration • business • technical • Compliance requirements • Planning process definition • Performance monitoring • at what level(s) • of what data • Business archiving • Structure • virtual asset teams • co-located asset teams • departmental silos • centralized services • Roles • titles • number of people • reporting / decision structure • responsibilities • Competency • skills assessment • Logical data structure • Tools • use of • inputs • outputs • Data storage / access • working data • archived data • Security model • Strategic drivers/goals • Regime economics • Political risk • Corporate risk tolerance • Guidelines and principles