A Financial Analysis of Risks in Poland from the perspective of EOG September 11, 2013

1. A Financial Analysis of Risks in Poland from the perspective of EOGSeptember 11, 2013 Christopher Denny Elena Shrestha Vera Uboytseva Ayodele Sonupe

2. Background Info. • $48 billion company spun off of Enron in 1999 (pre-bankruptcy) • First mover in the Bakken Shale play in 2008 • First mover in the Eagle Ford Shale play in 2010 • Acquired large plots of land at very attractive rates at the time • Divested dry gas assets to focus more on liquid assets before the collapse in natural gas prices • Has grown production at a CAGR of 38% over the last seven years

3. EOG Shale Plays

4. Economic Outlook Foreign Exchange Potential causes for foreign exchange movement • The Zloty has reacted to the Eurozone crisis • The Polish Central Bank intends to intervene in the foreign exchange market to strengthen the Zloty • Interest rates in Poland is high • Poland intends to adopt the Euro Source: Global Insight Economic Data Source: Global Insight Economic Data

5. Economic Outlook Interest & Inflation Rate Inflation • Domestic demand in Poland may increase • Close attention is paid to monetary policies • Poland needs to ensure that interest rates remain at no more than 1.5 percentage points above the average of the three European Union countries with the lowest inflation. Interest Rates • Euro crisis is eroding growth in Poland • Inflation is expected to remain low • The polish central bank intends to strengthen the Zloty Source: Global Insight Economic Data Source: Global Insight Economic Data

6. Economic Outlook Fiscal Policy & Balance of Payments Fiscal Policy • Poland has no tax regulations around upstream extractions • Revenues are projected to fall below target but the polish government cannot continue to cut spending because of domestic demand stimulus Balance of Payments • There is a decline in the amount of imported goods • Exports in Poland is dependent on the demand from Euro buyers • Domestic demand in Poland is struggling.

7. Financial Market Factors involved in the development of financial market: • One of the fastest growing economies in Europe • In 2010, the Polish economic growth rate was 3.9% • The growth of the Warsaw Stock Exchange (WSE) facilitated the development of Poland’s capital market • Derivative instruments for currencies and interest rates started being traded in the mid-1990s • Polish banks and foreign banks actively participated in the OTC derivatives market. • Liquidity is primarily created by foreign banks. • Foreign investors play a major role in the futures and options market of the WSE.

8. Financial Market – Derivative Instruments • Investor structure on the options market.  • Investor structure on the futures market. 

9. Recommendation is to not invest at the moment until fiscal regulations are clarified