Structured Finance and Hedging for Oil&Gas Producers in Africa

9TH AFRICA OIL & GAS, TRADE & FINANCE CONFERENCE NOT AN OFFICIAL UNCTAD RECORD Structured Finance and Hedging for Oil&Gas Producers in Africa SG CIB Commodities Group2 June 2005

Disclaimer This presentation contains indicative terms for presentation and discussion purposes only and does not represent a commitment of Société Générale. The information set forth herein is believed to be reliable, but no representation is made as to its accuracy or its completeness. The information set forth herein is subject to change without notice. Société Générale does not provide investment, trading, accounting, tax or legal advice. This information is made available to you based on our understanding that you have the knowledge and sophistication to appraise, and that you will, to the extent necessary, consult with your own advisors, to independently assess, the economic consequences, risks, terms, and conditions of the proposal and to independently determine the merits of the proposal.

Content • General Presentation • Case Study 1: One Shop – Two Products • Case Study 2: Indexed Loan Facility • Awards and Ranking • Contacts

Société Générale at a Glance • Key Figures : • Total Assets : Euros 539 billion • Equity : Euros 18.6 billion • 92,000 employees worldwide in 80 countries • Market capitalization : Euros 33.1 billion • Ratings : AA-, Aa2, AA- (S&P, Moody’s, Fitch) • 3rd largest corporate and investment bank in the Euro Zone (Net Banking Income) An Integrated Universal Bank • Established in 1864, Société Générale (“SG”) is a preeminent universal bank, with focus on three core areas • Retail banking • Asset management and private banking • Corporate and investment banking

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Case 1: One Shop - Two Products • Independent producer with a few assets located in a country considered as « high risk » for international rating agencies (« single B» range). • Strong corporate situation • Proved reserves in excess of 300Mbbl; • Experienced management; • Production in excess of 100,000 b/d; • Low upstream costs. • However, because of the underlying « country risk » perception of international creditors, the access to international debt finance remains limited to short-term export backed structures. • The company is cash rich but needs to be able for the coming years to: • Lock-in a minimum value of cash flow, regardless of the price and • Dispose of available medium to long term credit lines, In order to be in a position to consider attractive investment opportunities when they arise.

Case 1: One Shop - Two Products • SG CIB’s response was in the form of a committed credit line, available for • Cash advances; • Counterparty risk under hedging transactions with the bank (medium term swaps). • Hedging transactions are available for a notional volume in excess of 2 mio bbl and usually include a sub-limit (the “Threshold”) in USD terms for a maximum marked to market value for which the bank is committed. • The company has the flexibility to fix the Threshold within a given range. In fixing the Threshold below the top of the range, it makes additional capacity available for cash advances. • The available committed amount is determined on the basis of a borrowing base, i.e. the projection of free cash flow of the company, to be reviewed on a regular basis. • The tenor of the commitment is up to 5 years.

Case 1: One Shop - Two Products • The only requested security is the assignment of a contingent export contract. • This contract provides for the export of a crude oil volume, which is sufficient to repay the facility over a period of 18 months. • No delivery takes place under the contract unless the economic or political situation in the country of operations deteriorates significantly (“Trigger Events”). • Unless a Trigger Event occurs, the company is not obliged to allocate specified export sales to the repayment of the facility. • In other words, the facility remains unsecured, unless a Trigger Event occurs, upon which it turns into a pre-export financing scheme.

Case 2: Indexed Loan Facility • Rationale behind the oil indexed Loan Facility • To lower the facility burden when revenues of the user of the facility are shrinking because of diminishing oil price (Oil producer case) • Indexation mechanism for producer is a positive relation between oil price evolution and debt payment • Positive points • Reassuring arguments for lenders possibly afraid of adverse market evolution • Logical mechanism in terms of financial communication • Initial loan coverage ratio is improved as cash flow volatility to oil prices is reduced thanks to indexation • Capped debt payment in case of favorable (up) oil prices • A Commodity producer wants to be in a position to reduce its financial expenses if the crude oil price decreases.

Case 2: Indexed Loan Facility • SG CIB proposes an Indexed Loan Facility: • Parameters of indexation mechanism are directly linked to characteristics of the underlying loan • The borrower will repay facility depending on the evolution of the brent IPE • This amount can be reduced down to zero and is anyhow capped on the upside • The indexation can apply to both Principal and Interests. • The proposed structure involves the embedding of a crude oil derivative instrument within the bank loan.

Case 2: Indexed Loan Facility • For example sake the following underlying loan facility is considered : • Facility Amount: USD100,000,000 • Grace Period: 3 months • Tenor: 4 years • Interest Rate: 6% pa. • Total Financial expenses (P+I): USD112,000,000. • Start date : jan 06 • Indexation apply to • 50% of the Facility Amount • Interest 100% indexed

Case 2: Indexed Loan Facility • Mechanism of the indexation • Underlying : Brent IPE • Quarterly : to match quarterly installments and interests payments • Levels of indexation • If the quarterly average of Brent IPE is below 28$/b • Indexed part of nominal to be repaid : 0 • Interests to be paid : 0 • Total (I+P) : 50M USD • If the quarterly average of Brent IPE is from 28$/b to 38$/b, • Indexed part of nominal to be repaid : from 0 (28$/b) to 50 M USD (38$/b) • Interests to be paid : from 0 (28$/b) to 12 M USD (38$/b) • Total (I+P) : from 50 M USD (28$/b) to 112M USD (38$/b)

Case 2: Indexed Loan Facility • Levels of indexation • If the quarterly average of Brent IPE is from 38$/b to 53$/b, • Indexed part of nominal to be repaid : 50 M USD • Interests to be paid : 12 M USD (38$/b) • Total (I+P) : 112M USD • If the quarterly average of Brent IPE is from 53$/b to 58$/b, • Indexed part of nominal to be repaid : from 50 M USD (53$/b) to 75 MUSD (58$/b) • Interests to be paid : from 12 M USD (53$/b) to 18 M USD (58$/b) • Total (I+P) : from 112M USD (53$/b) to 143 MUSD (58$/b)

Case 2: Indexed Loan Facility

Crude Oil House of the Year - 2004 Oil Products House of the Year - 2003 Energy/Commodity House of the Year - 2004 Energy/Commodity House of the Year - 2003 N°1 : Fuel Oil - Swap Singapore N°3 : Fuel Oil - Options N°3 :Gasoline - Options Europe Trading Awards N° 1 : Gold - Forward/Averages/Swap to five years

Financing Awards • Each year Trade Finance magazine ranks the international banks active in structured commodity finance.In 2003, 2004 and 2005 SGCIB was ranked number 1. • SGCIB was also elected: • Best Energy & Commodity Finance (Global Finance magazine). • Best Trade Finance and Highly Commended Commodity Bank (Global Finance magazine).

Web Site Commodities Capital Market : www.commodities.sgcib.com

Contacts Christophe Roux, Managing Director, Structured Commodity Finance, Oil&Gas Tel: 33 1 5898 1601 Mob: 33 6 0918 1562 E-mail: christophe.roux@sgcib.com Nathalie Morichon Director, Energy Derivatives marketing, Oil&Gas Tel : + 33 1 42 13 44 07 Mob : + 33 6 85 81 45 55 E-mail : nathalie.morichon@sgcib.com Cédric Viviant Vice President, Commodities and Trade Finance, Oil&Gas Tel : + 33 1 41 45 97 36 E-mail : cedric.viviant@sgcib.com

Structured Finance and Hedging for Oil&Gas Producers in Africa