SAPURA ENERGY BERHAD (Company No T) (Incorporated in Malaysia)

Transcription

1 THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. If you are in any doubt as to the course of action to be taken, you should consult your stockbroker, bank manager, solicitor, accountant or other professional adviser immediately. Bursa Malaysia Securities Berhad takes no responsibility for the contents of this Circular, makes no representation as to its accuracy or completeness and expressly disclaims any liability whatsoever for any loss howsoever arising from, or in reliance upon the whole or any part of the contents of this Circular. SAPURA ENERGY BERHAD (Company No T) (Incorporated in Malaysia) CIRCULAR TO SHAREHOLDERS IN RELATION TO THE (I) PROPOSED STRATEGIC PARTNERSHIP BETWEEN SAPURA ENERGY BERHAD ( SEB ) AND OMV AKTIENGESELLSCHAFT ( OMV AG ), THROUGH SEB UPSTREAM SDN BHD ( SUP ), A JOINT VENTURE COMPANY INCORPORATED TO HOLD THE ENTIRE EQUITY INTEREST OF SAPURA UPSTREAM SDN BHD (FORMERLY KNOWN AS SAPURA EXPLORATION AND PRODUCTION SDN BHD) ( SUSB ), INVOLVING THE FOLLOWING: (A) (B) ISSUANCE OF SUCH NUMBER OF ORDINARY SHARES REPRESENTING 50% OF THE ENLARGED ISSUED SHARE CAPITAL OF SUP TO OMV EXPLORATION & PRODUCTION GMBH, A WHOLLY-OWNED SUBSIDIARY OF OMV AG, FOR A TOTAL CONSIDERATION OF UP TO USD625 MILLION (OR EQUIVALENT TO APPROXIMATELY RM2,600 MILLION); AND REPAYMENT OF AN AMOUNT OWING BY SUSB AND ITS SUBSIDIARIES TO SEB AND ITS SUBSIDIARIES OF USD350 MILLION (OR EQUIVALENT TO APPROXIMATELY RM1,456 MILLION) IN CASH, RESULTING IN A TOTAL CASH PROCEEDS OF UP TO USD975 MILLION (OR EQUIVALENT TO APPROXIMATELY RM4,056 MILLION), SUBJECT TO ADJUSTMENTS; AND (II) PROPOSED PROVISION OF FINANCIAL ASSISTANCE BY SEB AND ITS SUBSIDIARIES TO SUP AND/OR ITS SUBSIDIARIES IN THE FORM OF CORPORATE GUARANTEES, UNDERTAKINGS AND/OR SECURITIES AND NOTICE OF EXTRAORDINARY GENERAL MEETING Joint Principal Advisers RHB Investment Bank Berhad (19663-P) (A Participating Organisation of Bursa Malaysia Securities Berhad) The Notice of Extraordinary General Meeting ( EGM ) and the Proxy Form are enclosed in this Circular. The details of our EGM are as follows: Date and time of the EGM : Monday, 28 January 2019 at a.m. Venue of the EGM : Multi-Purpose Hall, Ground Floor, Sapura@Mines No. 7 Jalan Tasik, The Mines Resort City Seri Kembangan, Selangor Darul Ehsan, Malaysia Last date and time for lodging the Proxy Form : Sunday, 27 January 2019 at a.m. This Circular is dated 11 January 2019

2 DEFINITIONS The following definitions shall apply throughout this Circular unless where the context requires otherwise: ABN AMRO : ABN AMRO BANK N.V., Singapore Branch, being the international financial adviser for the Proposed Transaction Additional Consideration : Payment by OMV E&P to our Company of up to USD85 million (or equivalent to approximately RM354 million) upon the occurrence of certain events in relation to the achievement of Block 30 FID and Oil Price Differential pursuant to the Subscription Agreement Agreements : Collectively, the Subscription Agreement, the Shareholders Agreement and the Warranty and Indemnity Deed bbl : Barrels of oil Block 30 : The petroleum block in the Sureste basin in Mexico awarded to and operated by Block 30 Consortium Block 30 Consortium : Consortium formed by SEP Block 30 with Deutsche Erdoel Mexico S. de R.L. de C.V., and Premier Oil Exploration and Production Mexico, S.A. de C.V. Block 30 FID : Final investment decision taken by the Block 30 Consortium to proceed with the commercial development of Block 30 as approved by CNH or as deemed approved by CNH as provided in the CEE BNM : Bank Negara Malaysia Board : Board of Directors of our Company boe : Barrels of oil equivalent Bursa Securities : Bursa Malaysia Securities Berhad CA 2016 : Companies Act 2016 CEE : Contract for the Exploration and Extraction of Hydrocarbons under the Share Production Mode in Shallow Waters CIMB IB : CIMB Investment Bank Berhad Circular : This circular to our shareholders dated 11 January 2019 in relation to the Proposals Closing : 31 January 2019, being the date on which the consummation of the Proposed Subscription shall take place, unless otherwise agreed to in writing by OMV E&P and our Company CNH : Comisión Nacional de Hidrocarburos of Mexico, the Mexican O&G regulator EGM : Extraordinary general meeting Energy Quest : Energy Quest Sdn Bhd, being the competent valuer for the reserves and resources of the SUSB Group EPS : Earnings per SEB Share i

3 DEFINITIONS (Cont d) EV : Enterprise value Financing Facilities : Financing facilities for an aggregate amount of up to USD550 million (or equivalent to approximately RM2,288 million) but not less than USD350 million (or equivalent to approximately RM1,456 million) FPE : Financial period ended FYE : Financial year ended/ending, as the case may be Independent Technical Expert Report Independent Valuation Report Joint Principal Advisers Letter on the Fairness of the Consideration : The independent technical expert report in respect of the reserves and resources of the SUSB Group dated 8 November 2018 prepared by Ryder Scott : The independent valuation report in respect of the valuation of the reserves and resources of the SUSB Group in Malaysia dated 19 November 2018 prepared by Energy Quest : Collectively, Maybank IB, CIMB IB and RHB IB : The letter on the fairness of the Total Consideration dated 22 November 2018 from Merrill Lynch (Asia Pacific) Limited LPD : 13 December 2018, being the latest practicable date prior to the printing of this Circular LPS : Loss per SEB Share Maybank IB : Maybank Investment Bank Berhad mbbl : Thousands of bbl mboe : Thousands of boe Mexico Block 30 Guarantee : A guarantee by our Company of up to an aggregate amount of USD750 million (or equivalent to approximately RM3,120 million) to CNH in relation to the obligations of SEP Block 30 under the CEE mmcf : Million cubic feet of natural gas NA : Net assets O&G : Oil and gas Oil Price Differential : Actual Brent prices exceeding the forecasted Brent prices for the SUSB Group Production for 2019 to 2022 as set out in the Subscription Agreement OMV AG : OMV Aktiengesellschaft OMV E&P : OMV Exploration & Production GmbH OMV Satisfaction Notice : The notice served by OMV E&P on SEB which sets out that OMV E&P considers that the implementation of the arrangements contemplated in the Subscription Agreement (to the extent they relate to the right, title, right to use and interest in and to the properties by each SUSB Group member following the date of the Subscription Agreement) is progressing satisfactorily Proposals : Collectively, Proposed Transaction and Proposed Financial Assistance ii

4 DEFINITIONS (Cont d) Proposed Financial Assistance Proposed Subscription : Proposed provision of financial assistance by our Group to the SUP Group in the form of corporate guarantees, undertakings and/or securities : Proposed subscription by OMV E&P of such number of new SUP Shares, representing 50% of the enlarged issued share capital of SUP, based on an EV of SUP on a debt free, cash free basis of USD1,600 million (or equivalent to approximately RM6,657 million) for the Total Consideration pursuant to the Subscription Agreement Proposed Transaction : Proposed strategic partnership between our Company and OMV AG through SUP, a joint venture company incorporated to hold the entire equity interest of SUSB, involving the Proposed Subscription and repayment of an amount owing by the SUSB Group to our Group of USD350 million (or equivalent to approximately RM1,456 million) in cash through the Financing Facilities, resulting in a total cash proceeds of up to USD975 million (or equivalent to approximately RM4,056 million), subject to adjustments PSC : Production sharing contract RCPS-i : New Islamic redeemable convertible preference shares in our Company to be issued pursuant to the Rights Issue of RCPS-i RHB IB : RHB Investment Bank Berhad Rights Issue : Collectively, Rights Issue of Shares with Warrants and Rights Issue of RCPS-i Rights Issue of RCPS-i Rights Issue of Shares with Warrants : Renounceable rights issue of 2,396,862,035 RCPS-i at an issue price of RM0.41 per RCPS-i on the basis of 2 RCPS-i for every 5 SEB Shares held at 5.00 p.m. on 31 December 2018 which was approved by our shareholders on 29 November 2018 : Renounceable rights issue of 9,986,925,145 Rights Shares at an issue price of RM0.30 per Rights Share together with 998,692,514 free detachable warrants on the basis of 5 Rights Shares for every 3 SEB Shares held at 5.00 p.m. on 31 December 2018 and 1 warrant for every 10 Rights Shares subscribed which was approved by our shareholders on 29 November 2018 Rights Shares : New SEB Shares to be issued pursuant to the Rights Issue of Shares with Warrants Ryder Scott : Ryder Scott Company, L.P., being the competent person for the reserves and resources of the SUSB Group Sapura Debt : An amount owing by the SUSB Group to our Group (excluding management fees for the 3-months period prior to the Closing and amounts relating to the provision of O&G services by our Group) amounting to USD890 million (or equivalent to approximately RM3,703 million) as set out in the Subscription Agreement SEB or Company : Sapura Energy Berhad SEB Group or Group : Collectively, our Company and subsidiaries SEB Satisfaction Notice : The notice served by SEB on OMV E&P which sets out that SEB considers that the implementation of the arrangements contemplated in the Subscription Agreement (to the extent they relate to the right, title, right to use and interest in and to the properties by each SUSB Group member following the date of the Subscription Agreement) is progressing satisfactorily SEB Shares : Ordinary shares in our Company iii

5 DEFINITIONS (Cont d) SEP (Americas) : Sapura Exploration and Production (Americas) Sdn Bhd SEP (Australia) : Sapura Exploration and Production (Australia) Sdn Bhd SEP (Malaysia) : Sapura Exploration and Production (Malaysia) Inc SEP (Mexico) : Sapura Exploration and Production (Mexico) Sdn Bhd SEP (NZ) : Sapura Exploration and Production (NZ) Sdn Bhd (formerly known as Sapura Exploration and Production (JV) Sdn Bhd) SEP (Oceania) : Sapura Exploration and Production (Oceania) Sdn Bhd SEP (PM) : Sapura Exploration and Production (PM) Inc SEP (Sabah) : Sapura Exploration and Production (Sabah) Inc SEP (Sarawak) : Sapura Exploration and Production (Sarawak) Inc SEP (Southeast Asia) : Sapura Exploration and Production (Southeast Asia) Inc (formerly known as Sapura Exploration and Production Inc) SEP Block 30 : SEP Block 30, S. de R.L. de C.V. SEP OMV JV : Sapura Exploration and Production OMV JV Sdn Bhd SEP (Western Australia) Shareholders Agreement : Sapura Exploration and Production (Western Australia) Pty Ltd : Shareholders agreement dated 9 November 2018 between our Company, OMV E&P, SUA, SUP and SUSB for purposes of regulating the joint management of SUP SUA : Sapura Upstream Assets Sdn Bhd Subscription Agreement : Subscription agreement dated 9 November 2018 between our Company, SUA, OMV E&P and SUP for purposes of the Proposed Transaction Subscription Price : USD540 million (or equivalent to approximately RM2,247 million), being the subscription price for the Proposed Subscription SUP : SEB Upstream Sdn Bhd SUP Group : SUP and its subsidiaries SUP Shares : Ordinary shares in SUP SUSB : Sapura Upstream Sdn Bhd (formerly known as Sapura Exploration and Production Sdn Bhd) SUSB Group : Collectively, SUSB and its subsidiaries SUSB Group Production : For the purpose of calculating the Oil Price Differential as set out in Section of this Circular, the amount of bbl and/or boe for condensates (excluding gas production) produced by and/or allocated to the SUSB Group SUSB Shares : Ordinary shares in SUSB TMC : Sapura TMC Sdn Bhd iv

6 DEFINITIONS (Cont d) Total Consideration : Total consideration of up to USD625 million (or equivalent to approximately RM2,600 million) comprising the Subscription Price and Additional Consideration, subject to adjustments UGSA : Upstream gas sale agreements Warranty and Indemnity Deed : Warranty and indemnity deed dated 4 December 2018 between our Company, SUA and OMV E&P where the parties have agreed to provide certain warranties, covenants and indemnities in relation to the Proposed Transaction CURRENCIES EUR : Euro RM and sen : Ringgit Malaysia and sen USD : United States Dollar All references to our Company or SEB in this Circular are to SEB and references to our Group or SEB Group are to our Company and our subsidiaries, collectively. All references to we, us, our and ourselves are to our Company, and where the context requires otherwise, shall include our Company and our subsidiaries. All references to you or your in this Circular are to our shareholders. Words denoting the singular shall, where applicable, include the plural and vice versa, and words denoting the masculine gender shall, where applicable, include the feminine and/or neuter genders, and vice versa. Reference to persons shall include corporations, unless otherwise specified. Any reference to any enactment, rules and regulations is a reference to that enactment, rules and regulations as may be amended or re- enacted from time to time. Any reference to a time of day in this Circular is a reference to Malaysian time and date, unless otherwise stated. Any discrepancy in the tables included in this Circular between the amounts listed, actual figures and the totals thereof are due to rounding. This Circular includes forward-looking statements. All statements other than statements of historical facts included in this Circular including, without limitation, those regarding our Group s financial position, business strategies, prospects, plans and objectives of our Company for future operations, are forwardlooking statements. There can be no assurance that such forward-looking statements will materialise, be fulfilled or be achieved. Unless otherwise stated, the exchange rate of USD1:00:RM4.1605, being the middle rate quoted by BNM at 5.00 p.m. on 8 November 2018, being the market day preceding the date of the announcement of the Proposed Transaction, is used throughout this Circular. Where applicable, the exchange rate of USD1:00:RM4.1800, being the middle rate quoted by BNM at 5.00 p.m. as at the LPD has also been used. Any exchange rate translation in this Circular is provided solely for your convenience and should not be constituted as representative that the translated amount stated in this Circular could have been or would have been converted into such other amounts or vice versa. v

7 CONTENTS LETTER TO OUR SHAREHOLDERS IN RELATION TO THE PROPOSALS CONTAINING: PAGE 1. INTRODUCTION 1 2. DETAILS OF THE PROPOSALS 2 3. RATIONALE AND BENEFITS OF THE PROPOSALS RISK FACTORS EFFECTS OF THE PROPOSALS INDUSTRY OUTLOOK AND PROSPECTS OF OUR GROUP AND THE SUSB GROUP APPROVALS REQUIRED CORPORATE EXERCISE/SCHEME ANNOUNCED BUT PENDING COMPLETION 9. INTERESTS OF THE DIRECTORS, MAJOR SHAREHOLDERS AND/OR PERSONS CONNECTED WITH THEM DIRECTORS RECOMMENDATION TENTATIVE TIMETABLE EGM FURTHER INFORMATION 22 APPENDICES I INFORMATION ON SUSB 23 II INFORMATION ON OMV AG AND OMV E&P 49 III SALIENT TERMS OF THE AGREEMENTS 53 IV AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF SUSB FOR THE FYE 31 JANUARY V INDEPENDENT TECHNICAL EXPERT REPORT 143 VI INDEPENDENT VALUATION REPORT 339 VII LETTER ON THE FAIRNESS OF THE CONSIDERATION 388 VIII FURTHER INFORMATION 394 NOTICE OF EGM PROXY FORM ENCLOSED ENCLOSED vi

8 SAPURA ENERGY BERHAD (Company No T) (Incorporated in Malaysia) Registered Office No. 7 Jalan Tasik The Mines Resort City Seri Kembangan Selangor Darul Ehsan, Malaysia 11 January 2019 Board of Directors Dato Hamzah Bakar (Chairman, Non-Independent Non-Executive Director) Tan Sri Dato Seri Shahril Shamsuddin (President and Group Chief Executive Officer, Non-Independent Executive Director) Tan Sri Datuk Amar (Dr) Hamid Bugo (Senior Independent Non-Executive Director) Dato Shahriman Shamsuddin (Non-Independent Non-Executive Director) Mohamed Rashdi Mohamed Ghazalli (Independent Non-Executive Director) Gee Siew Yoong (Independent Non-Executive Director) Datuk Muhamad Noor Hamid (Independent Non-Executive Director) Datuk Ramlan Abdul Rashid (Independent Non-Executive Director) To : Our shareholders Dear Sir/Madam, (I) (II) PROPOSED TRANSACTION; AND PROPOSED FINANCIAL ASSISTANCE 1. INTRODUCTION On 12 September 2018, our Company announced that a heads of agreement had been entered into between our Company and OMV AG to continue ongoing negotiations on the proposed strategic partnership through a sale by our Company of a 50% stake in SUSB on an exclusive basis. On 9 November 2018, Maybank IB, on behalf of our Board, announced that the Subscription Agreement and the Shareholders Agreement had been entered into. On 5 December 2018, Maybank IB, on behalf of our Board, announced that the Warranty and Indemnity Deed had been entered into. On 24 December 2018, the Joint Principal Advisers announced, amongst others, that OMV E&P had served the OMV Satisfaction Notice on SEB, and that SEB had served the SEB Satisfaction Notice on OMV E&P in accordance with the Subscription Agreement. 1

9 On 9 January 2019, the Joint Principal Advisers, on behalf of our Board, announced that in conjunction with the Proposed Transaction, our Company is proposing to seek our shareholders approval for the Proposed Financial Assistance. Our Board had appointed: (a) (b) Maybank IB, CIMB IB and RHB IB as Joint Principal Advisers to our Company for the Proposals to advise on, among others, the timing, procedures and any other matters pertaining to the Proposals which are within their scope. The Joint Principal Advisers also co-ordinate the work of other professional advisers appointed for purposes of the Proposals in order to ensure a smooth and successful implementation of the Proposals; and ABN AMRO as international financial adviser to our Company for the Proposed Transaction to advise on the international aspects of the Proposed Transaction and the structure of the Proposed Transaction. THE PURPOSE OF THIS CIRCULAR IS TO PROVIDE YOU WITH THE DETAILS OF THE PROPOSALS AND TO SEEK YOUR APPROVAL FOR THE RESOLUTIONS PERTAINING TO THE PROPOSALS TO BE TABLED AT THE FORTHCOMING EGM. THE NOTICE OF EGM AND PROXY FORM ARE ENCLOSED IN THIS CIRCULAR. YOU ARE ADVISED TO READ AND CONSIDER CAREFULLY THE CONTENTS OF THIS CIRCULAR BEFORE VOTING ON THE RESOLUTIONS PERTAINING TO THE PROPOSALS TO BE TABLED AT THE FORTHCOMING EGM. 2. DETAILS OF THE PROPOSALS 2.1 Details of the Proposed Transaction The Proposed Transaction involves the following: (a) the issuance of such number of new SUP Shares representing 50% of the enlarged issued share capital of SUP to OMV E&P, based on an EV of SUP on a debt free, cash free basis of USD1,600 million (or equivalent to approximately RM6,657 million) for the Total Consideration comprising: (i) (ii) cash subscription price of USD540 million (or equivalent to approximately RM2,247 million); and cash payment of up to USD85 million (or equivalent to approximately RM354 million) upon the occurrence of certain events as set out in Section of this Circular in relation to the achievement of Block 30 FID and Oil Price Differential, and (b) repayment of the Sapura Debt of USD350 million (or equivalent to approximately RM1,456 million) in cash through a shareholders loan from an entity within the OMV AG group or bank borrowings to be obtained by the SUP Group, resulting in a total cash proceeds of up to USD975 million (or equivalent to approximately RM4,056 million) to be received by our Group and SUP, subject to adjustments after Closing based on the difference between the net debt* and net working capital of the SUSB Group as at Closing compared to the net debt* and net working capital of the SUSB Group estimated in the closing preliminary statement to be prepared by our Company not later than 15 business days prior to Closing ( Closing Preliminary Statement ) ( Adjustment Amount ). 2

10 Note: * Being the net debt of the SUSB Group after the debt novation amount which is the amount equal to the net debt and net working capital of the SUSB Group as estimated in the Closing Preliminary Statement less the Sapura Debt of USD890 million and a reference working capital. The debt novation amount will be novated to our Company and capitalised pursuant to the Subscription Agreement. For example, if the resulting Adjustment Amount is negative, OMV E&P shall pay our Company such Adjustment Amount multiplied by 0.5, and if the resulting Adjustment Amount is positive, our Company shall pay OMV E&P such Adjustment Amount multiplied by 0.5. For avoidance of doubt, the payment pursuant to the Adjustment Amount occurs after completion of the Proposed Transaction and is not expected to be significant. In conjunction with the Proposed Transaction, our Company will transfer SUSB to SUP after the restructuring of debt such that the equity value of SUP reflects USD540 million, being the amount for SUA s equity participation of 50% equity interest in SUP which is equal to the Subscription Price to be paid by OMV E&P for the Proposed Subscription, which shall be settled via issuance of new SUP Shares. The structure of our Group immediately before the completion of the Proposed Transaction and after the Proposed Transaction are as follows: Immediately before the completion of the Proposed Transaction After the Proposed Transaction Note: * As part of the restructuring steps to facilitate the completion of the Proposed Transaction, our Company will sell all the SUP Shares held by our Company to SUA for a nominal amount of RM2, being the issued share capital of SUP. The Proposed Transaction is subject to the terms and conditions of the Agreements, the salient terms and conditions of which are set out in Appendix III of this Circular. 3

11 2.1.1 Basis and justification for the Total Consideration The Total Consideration was arrived at on a willing-buyer willing-seller basis based on the EV of SUP on a debt free, cash free basis of USD1,600 million (or equivalent to approximately RM6,657 million) after negotiations between our Company and OMV, as follows: USD million RM million EV of SUP 1,600 6,657 Less : Agreed retained debt (1) (350) (1,456) Equity value of SUP 1,250 5,201 Equity value represented by 50% equity interest in SUP 625 2,600 where the total proceeds to be received by our Group from the Proposed Transaction are as follows: (a) Subscription Price (2) 540 2,247 (b) Additional Consideration (2) in relation to the following: - Block 30 (3) Oil Price Differential (4) Total Consideration 625 2,600 (c) Part repayment of the Sapura Debt (5) 350 1,456 Total proceeds from the Proposed Transaction 975 4,056 Notes: (1) Being the agreed debt level of SUP pursuant to the Subscription Agreement of USD350 million (or equivalent to approximately RM1,456 million) upon completion of the Proposed Transaction. (2) The Subscription Price to be received by SUP in full at Closing will be used to repay USD540 million of the Sapura Debt whilst the Additional Consideration will be paid to our Company by OMV E&P as detailed in notes (3) and (4) below. (3) The amount of up to USD55 million (or equivalent to approximately RM229 million) is dependent on the achievement of Block 30 FID, to be calculated in the following manner: USD55 million X SUSB Group s participating Reserves level (ii) X 30% (i) interest in Block 30 immediately 367 million (ii) prior to Block 30 FID (%) (i) (ii) Being the SUSB Group s participating interest in Block 30, via SEP Block 30, as at the date of the Subscription Agreement. Means P50 (50% probability that actual quantities recovered will equal or exceed best estimates) reserves at the time of Block 30 FID, provided that the amount of reserves shall never be greater than 367 million boe gross. OMV E&P shall pay the relevant amount to our Company within 15 business days of receipt by the SUSB Group of written confirmation from the Block 30 Consortium that the Block 30 FID has occurred. As at the LPD, Block 30 is in the exploration phase and Block 30 Consortium is planning the seismic activities which will commence in

12 (4) The amount of up to USD30 million (or equivalent to approximately RM125 million) is based on 50% of the differential between the actual Brent prices and the forecasted Brent prices for the SUSB Group Production for 2019 to 2022, provided that the differential in any year shall never exceed 12% of the forecasted Brent price for that particular year. Any excess will be disregarded for the purpose of calculating the Oil Price Differential. The Oil Price Differential is intended to provide our Company with the benefit of potential upside in oil price for up to 3 years from the completion of the Proposed Transaction. The actual Brent price shall be the Brent price on a lifting by lifting basis as determined by the actual Brent price achieved and finally determined at the end of each month as outlined in the month end invoices. OMV E&P shall pay the relevant amount after the end of each relevant calendar year (i.e to 2022) to our Company within 5 business days after the Oil Price Differential, the SUSB Group Production and the Additional Consideration for the Oil Price Differential with respect to each relevant calendar year are agreed by SEB and OMV E&P. The historical Brent prices for the past 12 months up to the LPD are illustrated in the chart below: Highest price USD85.14 (on 3 October 2018) Average price USD70.01 Lowest price USD59.23 (on 23 November 2018) (Source: Bloomberg) (5) As at the LPD, the amount owing by the SUSB Group to our Group (excluding management fees for the 3-months period prior to the Closing and amounts relating to the provision of O&G services by our Group)* is approximately USD1,008 million (or equivalent to approximately RM4,213 million, based on the exchange rate of USD1.00:RM4.1800, being the middle rate quoted by BNM at 5.00 p.m. as at the LPD) ( Amount Owing by SUSB Group ) which was mainly used to finance the acquisition of SEP (Malaysia) (then known as Newfield Malaysia Holding Inc) for USD896 million which was completed on 11 February 2014, capital expenditures and working capital of the SUSB Group. For avoidance of doubt, the difference between the Amount Owing by SUSB Group (after adjusting for cash and working capital) based on the Closing Preliminary Statement and USD890 million, will be novated to our Company and capitalised pursuant to the Subscription Agreement. * The amount relating to the management fees for the 3-months period prior to the Closing and amounts relating to the provision of O&G services by our Group will be treated as amounts payable by the SUSB Group to our Group and will be repaid in the ordinary course of business. In evaluating the EV of SUP of USD1,600 million (or equivalent to approximately RM6,657 million) under the Proposed Transaction, our Company had taken into consideration, among others, the following: (i) the SUSB Group s O&G net proved and probable reserves (2P) and best estimate contingent resources (2C) of million boe in aggregate as at 1 August 2018 based on the Independent Technical Expert Report included in Appendix V of this Circular; 5

13 (ii) the valuation of the SUSB Group s net proved and probable reserves (2P) and best estimate contingent resources (2C) in Malaysia as at 1 August 2018 as assessed by Energy Quest of between USD1,085 million and USD1,872 million (or equivalent to between approximately RM4,514 million and RM7,788 million). Energy Quest had conducted its valuation based on, amongst others, the estimates of 2P and 2C derived by Ryder Scott as set out in the Independent Technical Expert Report and had adopted the income based approach. In arriving at the high case valuation of USD1,872 million, Energy Quest took into account the potential effect of favourable economic parameters such as the application of marginal field tax incentives on eligible assets, higher O&G prices, higher O&G production and, lower capital and operating expenditures. Conversely, in arriving at the low case valuation of USD1,085 million, Energy Quest took into account the potential effect of less favourable economic parameters such as lower O&G prices, lower O&G production, higher cost of financing, and higher capital and operating expenditures. Further details on the valuation and assumptions used by Energy Quest are set out in the Independent Valuation Report included in Appendix VI of this Circular; (iii) (iv) (v) (vi) Merrill Lynch (Asia Pacific) Limited s opinion that the Total Consideration is fair from a financial point of view is set out in the Letter on the Fairness of the Consideration included in Appendix VII of this Circular; net book value of the SUSB Group s expenditure on O&G properties of RM4,008.8 million and RM4,363.4 million based on the audited consolidated statement of financial position of SUSB as at 31 January 2018 and unaudited consolidated statement of financial position of SUSB as at 30 November 2018; overview and outlook of the O&G sector as well as the prospects of the SUSB Group as detailed in Sections 6.3 and 6.5 of this Circular respectively; rationale and benefits for the Proposed Transaction as set out in Section 3.1 of this Circular; and (vii) potential upside arising from the potential development of Block 30 and our Company s expectation of favourable movement in future O&G prices based on the outlook of the O&G sector as detailed in Section 6.3 of this Circular Use of proceeds Our Company intends to use the proceeds to be received from the Proposed Transaction in the following manner: Amount Description of use of proceeds USD 000 RM 000 Estimated timeframe for use from receipt of proceeds Part repayment of the bank 720,000 3,009,600 Within 2 months borrowings of our Group (a) Working capital of our Group (b) 245,000 1,024,100 Within 24 months Defray estimated expenses relating to the Proposals (c) 10,000 41,800 Within 2 months Total 975,000 4,075,500 6

14 Notes: (a) As at the LPD, the total outstanding amount of the bank borrowings of our Group is RM17,209 million. The proceeds from the Proposed Transaction will be used to partly repay the amount due to lenders of multi-currency term facilities and murabahah term financing facility which primarily was used for the following: (i) (ii) (iii) USD1,737 million (or equivalent to approximately RM7,261 million*) to refinance a bridging facility which was used to part finance the acquisition of the tender rig business i.e. Seadrill Tender Rig Limited for USD2,646 million (or equivalent to approximately RM8,031 million, based on the exchange rate of USD1.00:RM3.0353, being the average rate of the transactions), which was completed on 30 April 2013; USD899 million (or equivalent to approximately RM3,758 million*) to finance the acquisition of the entire equity interest of SEP (Malaysia) (then known as Newfield Malaysia Holding Inc) for USD896 million and transaction costs of USD3 million, which was completed on 11 February 2014; and USD670 million (or equivalent to approximately RM2,801 million*) and RM3,179 million for capital expenditures of our Group. * Based on the exchange rate of USD1.00:RM4.1800, being the middle rate quoted by BNM at 5.00 p.m. as at the LPD. The part repayment of the bank borrowings of our Group is expected to result in savings in finance cost of approximately RM139 million per annum based on the weighted average interest rate of approximately 4.6% per annum. (b) The working capital of our Group includes, but is not limited to, day-to-day operating and administrative expenses of our Group such as payments to contractors and suppliers, staff wages and salaries, secretarial fees, audit fees, consultant fees as well as utilities and maintenance expenses. For avoidance of doubt, the Additional Consideration when received upon occurrence of certain events as set out in Section of this Circular will be used for the working capital of our Group. (c) The estimated expenses relating to the Proposals comprise professional fees, fees payable to the relevant authorities, cost of convening the forthcoming EGM and other incidental expenses, as follows: USD 000 RM 000 Professional fees * 9,378 39,200 Fees payable to the relevant authorities Cost of convening the forthcoming EGM 431 1,800 Miscellaneous and contingencies ,000 41,800 * Comprising estimated fees, relevant taxes and out-of-pocket expenses for the following parties: USD 000 RM 000 Legal advisers 2,847 11,900 Joint Principal Advisers and international financial adviser 4,258 17,800 Accountants and tax advisers 359 1,500 Technical and other experts 1,914 8,000 9,378 39,200 7

15 2.1.3 Original cost of investment Our Company s original cost of investment in the equity of SUSB is USD896 million (or equivalent to approximately RM2,983 million, based on an exchange rate of USD1.00:RM3.33, being the middle rate quoted by BNM at 5.00 p.m. on 11 February 2014), being the final consideration paid by our Company for the acquisition of the entire equity interest of SEP (Malaysia) (then known as Newfield Malaysia Holding Inc) on 11 February Background information on SUSB, SUP and SUA SUSB SUP SUA SUSB was incorporated as a private limited company in Malaysia under the Companies Act 1965 on 18 October 2013 under the name of Falcon Lane Sdn Bhd and is deemed registered under the CA It changed its name to SapuraKencana Energy Sdn Bhd on 15 January 2014 and to Sapura Exploration and Production Sdn Bhd on 28 April 2017, and assumed its present name on 21 August As at the LPD, the issued share capital of SUSB is RM2 comprising 2 SUSB Shares. SUSB is an investment holding company while its subsidiaries are principally involved in the exploration, development and production of crude oil and natural gas. Further details on SUSB are set out in Appendix I of this Circular. SUP was incorporated as a private limited company in Malaysia under the CA 2016 on 2 November As at the LPD, the issued share capital of SUP is RM2 comprising 2 SUP Shares. Upon completion of the Proposed Transaction, the issued share capital of SUP will be an amount in RM equivalent to USD1,080 million comprising such number of SUP Shares based on an issue price to be determined later. As at the LPD, SUP is an investment holding company and is wholly-owned by our Company. SUP does not have any subsidiary or associated company as at the LPD. SUP was incorporated to hold the entire equity interest of SUSB for the purposes of the Proposed Transaction. Following the Proposed Subscription, SUA and OMV E&P will equally hold 50% equity interest in SUP. SUA was incorporated as a private limited company in Malaysia under the CA 2016 on 2 November As at the LPD, the issued share capital of SUA is RM2 comprising 2 ordinary shares in SUA. As at the LPD, SUA is an investment holding company and is wholly-owned by our Company. SUA does not have any subsidiary or associated company as at the LPD. 8

16 2.1.5 Background information on OMV AG and OMV E&P Information on OMV AG and OMV E&P is set out in Appendix II of this Circular Liabilities to be assumed by OMV E&P Save for OMV E&P s share of guarantee to be provided for the Mexico Block 30 Guarantee as detailed below, there are no other liabilities, including contingent liabilities and guarantees, to be assumed by OMV E&P pursuant to the Proposed Transaction. On 27 June 2018, the Block 30 Consortium entered into the CEE with CNH in respect of the exploration and production activities in Block 30 and on even date, our Company provided the Mexico Block 30 Guarantee in relation to the obligations of SEP Block 30 which is our indirect subsidiary. Pursuant to the Subscription Agreement, it is the intention of our Company and OMV E&P to apply to CNH to release our Company from our obligations under the Mexico Block 30 Guarantee and for SUP to provide a similar guarantee in its place upon completion of the Proposed Transaction. The release of our Company from the obligations under the Mexico Block 30 Guarantee may not take place if the approval from CNH is not obtained. Under such an event, pursuant to the Subscription Agreement, OMV E&P shall keep our Company fully indemnified against 50% of all payments made by our Company in respect of liabilities of SEP Block 30 under the Mexico Block 30 Guarantee where such liabilities are liabilities that arise with respect to obligations to be performed after the completion of the Proposed Transaction, provided that OMV E&P shall not be liable to pay unless and until our Company has paid in full any amount claimed by CNH. Our Company s net exposure in respect of Mexico Block 30 Guarantee based on 50% equity interest in SUP upon completion of the Proposed Transaction will be USD375 million (or equivalent to approximately RM1,560 million). 2.2 Details of the Proposed Financial Assistance In conjunction with the Proposed Transaction, the SUP Group intends to obtain financing facilities for an aggregate amount of up to USD550 million (or equivalent to approximately RM2,288 million) but not less than USD350 million (or equivalent to approximately RM1,456 million), of which an amount of USD350 million (or equivalent to approximately RM1,456 million) will be used to partially repay the Sapura Debt and the remaining, if any, for the working capital of the SUP Group. Our Group may be required to provide corporate guarantees, undertakings and/or securities for 50% of the Financing Facilities to be obtained by the SUP Group. The Financing Facilities may be obtained from local and/or foreign financial institution(s) and/or OMV E&P or another entity within OMV AG group ( OMV Financing ), subject to the approvals by the Board and board of directors of OMV E&P. In the event the OMV Financing is provided pursuant to the Subscription Agreement, the financing will be provided by OMV E&P or another entity within OMV AG group to the SUSB Group for an amount of USD350 million and would require SUA to pledge SUP Shares of an equity value, at Closing, of USD175 million as security in favour of OMV E&P or another entity within OMV AG group. An announcement on the details of the Financing Facilities obtained and any corporate guarantees, undertakings and/or securities (including details of any SUP Shares pledged) provided by our Group will be made by our Company when the SUP Group obtains the Financing Facilities (including the OMV Financing). 9

17 However, other than for the OMV Financing, the actual quantum of such corporate guarantees, undertakings and/or securities to be provided by our Group cannot be determined at this juncture. In any event, our Group s net exposure pursuant to the Proposed Financial Assistance shall be in proportion to the shareholding of our Company in SUP via SUA. Paragraph 8.23(2) of the Main Market Listing Requirements of Bursa Securities states that where the provision of financial assistance is to an associated company or the joint arrangement of the listed issuer, and the aggregate amount provided or to be provided at any time to each associated company or joint arrangement of the listed issuer is equal to or exceeds 5% of the net tangible assets of the listed issuer, the listed issuer is required to issue a circular to its shareholders and seek its shareholders approval at a general meeting. After the completion of the Proposed Transaction, SUP and SUSB will become 50%-owned associated companies of our Company. Accordingly, we are required to seek the approval of our shareholders for the Proposed Financial Assistance which involves the provision of corporate guarantees, undertakings and/or securities, when necessary, for the Financing Facilities to be obtained by the SUP Group. 3. RATIONALE AND BENEFITS OF THE PROPOSALS 3.1 Proposed Transaction The Proposed Transaction is an opportunity for our Company to bring in OMV E&P as a strategic business partner, premised on creating sustainable long-term growth, expanding portfolios and future business activities while realising synergies in the value of the SUSB Group. The existing footprint of OMV E&P offers new market opportunities for the SUSB Group s upstream segment to grow its business. Further, the partnership with OMV AG complements our Group s continued strategy to grow our global portfolio and increase market reach for our Group s services segment where OMV AG operates. The partnership will also enhance the sharing of technology and knowledge between our Group and OMV AG. The Proposed Transaction is also in line with our Board s initiative to strengthen the financial position of our Group to weather the current economic conditions in the O&G industry. The Proposed Transaction presents an opportunity for our Group to monetise the assets that we hold under SUSB and realise our investment while still being able to participate in the SUSB Group s future growth. Pursuant to the Proposed Transaction, our Group will receive total cash proceeds of up to USD975 million (or equivalent to approximately RM4,056 million) which will be mainly used to pare down our Group s bank borrowings and recognise a net gain on disposal of approximately USD649 million as detailed in Section 5.1 of this Circular (or equivalent to approximately RM2,713 million, based on the exchange rate of USD1:00:RM4.1800, being the middle rate quoted by BNM at 5.00 p.m. as at the LPD) after taking into consideration the estimated expenses for the Proposals of USD10 million. The reduction in our Group s bank borrowings will result in interest savings and stronger liquidity and cash position for future growth. 3.2 Proposed Financial Assistance The Proposed Financial Assistance will enable the SUP Group to obtain the Financing Facilities which in turn will be used to repay part of the Sapura Debt and the remaining, if any, to be used for the working capital of the SUP Group, for which our Group will still retain a 50% equity interest after the completion of the Proposed Transaction. 10

18 4. RISK FACTORS Save as disclosed below, our Board does not foresee any other additional risks arising from the Proposals: 4.1 Completion risk The completion of the Proposed Transaction is conditional upon the satisfaction and/or waiver of the conditions in the Subscription Agreement as set out in Section 1.6 of Appendix III of this Circular and approvals required as set out in Section 7 of this Circular. There can be no assurance that such approvals and/or conditions will be obtained and/or satisfied by Closing or any of the termination events will not occur such that the Proposed Transaction cannot be completed. Notwithstanding, our Group will take all necessary and reasonable efforts to ensure the satisfaction and/or waiver of these conditions (as the case may be), and procure the approvals required as well as to mitigate the occurrence of termination events, which are within our Company s control to ensure completion of the Proposed Transaction. 4.2 Risk associated with the Additional Consideration The Additional Consideration is only receivable upon the occurrence of certain events in relation to the achievement of Block 30 FID and Oil Price Differential. There can be no assurance that any of these events will occur in the future. Notwithstanding, our Group will take all necessary and reasonable efforts within our control to ensure that the Block 30 FID is achieved. 4.3 Risk associated with fluctuation in Brent prices In addition to the impact on our Group s exploration and production business, fluctuation in oil and natural gas prices (including Brent price) will affect the amount of Additional Consideration in respect of the Oil Price Differential to be received by our Company. Both oil and natural gas prices have historically been volatile and may continue to be volatile in the future. In the event actual Brent prices on lifting are lower than the forecasted Brent prices for the SUSB Group Production for 2019 to 2022 as set out in the Subscription Agreement, our Company may not receive the full or any Additional Consideration in respect of the Oil Price Differential of up to USD30 million (or equivalent to approximately RM125 million). 4.4 Contractual risks Our Company may be subject to certain contractual risks including, but not limited to, nonfulfilment of our obligations under the Warranty and Indemnity Deed and the Subscription Agreement and/or breach of any of the terms and conditions set out in the Warranty and Indemnity Deed and the Subscription Agreement. As set out in the Warranty and Indemnity Deed, the maximum potential aggregate liability of our Company to OMV E&P could be up to USD540 million (or equivalent to approximately RM2,257 million) in the case of title and capacity claims or up to USD162 million (or equivalent to approximately RM677 million) in the case of business warranty claims and tax warranty claims made by OMV E&P against our Company or SUA. The combined maximum aggregate liability of our Company to OMV E&P for all claims is limited to USD540 million (or equivalent to approximately RM2,257 million). (All conversions to RM are based on the exchange rate of USD1:RM being the middle rate quoted by BNM at 5.00 p.m. as at the LPD). We will endeavour to ensure our obligations under the Agreements are fully complied with and/or fulfilled. 11

19 4.5 Risks associated with the strategic partnership After the completion of the Proposed Transaction, SUP will become a 50%-owned associated company of our Group. Accordingly, our Group will not be able to solely influence the management, operation and performance of the SUSB Group through SUP. If any disagreement arise between our Group and OMV E&P, there can be no assurance that these disagreements can be resolved in a manner favourable to our Group. Furthermore, these disagreements may significantly affect the operations of the SUSB Group which may adversely affect the financial position and results of our Group. Nevertheless, this may be mitigated by the Shareholders Agreement which governs the joint management of SUP between our Group and OMV E&P. 4.6 Risk of default of the Financing Facilities by the SUP Group Any corporate guarantee and/or undertaking provided by our Group will be recognised as contingent liabilities in our Group s financial statements. The corporate guarantees, undertakings and/or securities may be called upon or claimed by the financial institution(s) and/or OMV E&P or another entity within OMV AG group in any event of default by the SUP Group in respect of the Financing Facilities to be obtained by the SUP Group, which as a consequence, our Group will be required to repay the indebtedness of the SUP Group and/or securities provided will be claimed by the financial institution(s) and/or OMV E&P or another entity within OMV AG group to the extent of the amount guaranteed under the corporate guarantees, undertakings and/or securities to be provided by our Group. Hence, in the event the corporate guarantees, undertakings and/or securities are called upon or claimed, it will have an adverse impact on the financial position of our Group. Nevertheless, our Group, together with OMV E&P, will continuously monitor and review the Financing Facilities to be obtained by the SUP Group and its cash flows to ensure the SUP Group s ability to meet its obligations is not compromised vis-à-vis the SUP Group s requirements for capital and operating expenditures. As at the LPD, our Group has provided the bank guarantees on behalf of the SUP Group for an aggregate amount of equivalent to RM97 million and the Mexico Block 30 Guarantee. Pursuant to the Subscription Agreement, it is the intention of our Company and OMV E&P to procure the SUP Group to replace the bank guarantees provided by our Group by bank guarantees to be provided by the SUP Group upon completion of the Proposed Transaction and the Mexico Block 30 Guarantee (as detailed in Section of this Circular). [The rest of this page has been intentionally left blank] 12

20 5. EFFECTS OF THE PROPOSALS The Proposed Financial Assistance will not have any effect on the share capital and shareholdings of the substantial shareholders of our Company, NA per SEB Share as well as the gearing, earnings and EPS of our Group. Upon completion of the Proposed Transaction, OMV E&P will fully consolidate the SUP Group in OMV AG's consolidated financial statements in accordance with International Financial Reporting Standards ( IFRS ) (in particular IFRS 10). Thereafter, our Group will recognise SUP as a 50%- owned associated company. Consequently, we will record our cost of investment in SUP as an asset based on 50% of the fair value of SUP as at Closing, and going forward report our proportionate share of 50% of SUP s net income or net losses in our consolidated financial statements by applying the equity accounting method. As the Proposed Transaction do not involve any issuance of new SEB Shares, the Proposed Transaction will not have any effect on the share capital and shareholdings of the substantial shareholders of our Company. For illustrative purposes only, the effects of the Proposed Transaction on the NA per SEB Share, gearing, earnings and EPS have been shown based on the following scenarios: Scenario 1 : Assuming completion of the Proposed Transaction only Scenario 2 : Assuming the Proposed Transaction is completed after the Rights Issue [The rest of this page has been intentionally left blank] 13

21 5.1 NA per SEB Share and gearing For illustrative purposes only, based on the audited consolidated statement of financial position of our Group as at 31 January 2018 and assuming that the Proposed Transaction had been effected on that date, the pro forma effects of the Proposed Transaction on the consolidated NA per SEB Share and gearing of our Group are as follows based on the following scenarios: Scenario 1 Audited as at 31 January 2018 After the Proposed Transaction (a) Scenario 2 Audited as at 31 January 2018 After the Rights Issue (b) (I) (II) After (I) and the Proposed Transaction (a) RM 000 RM 000 Share capital 8,066,410 8,066,410 Shares held under trust (114,942) (114,942) Other reserves 1,443,619 1,443,619 Retained profits 54,879 2,538,021 (c) Equity attributable to the 9,449,966 11,933,108 owners of our Company Non-controlling interests Total equity 9,450,365 11,933,507 No. of SEB Shares in issue ( 000) NA per SEB Share 5,992,155 5,992, attributable to the owners of our Company (RM) (d) Total borrowings 16,415,155 13,654,209 (e) RM 000 RM 000 RM 000 Share capital 8,066,410 10,865,914 10,865,914 Shares held under trust (114,942) (114,942) (114,942) RCPS-i - 982, ,713 Warrants reserve - 115, ,274 Other reserves 1,443,619 1,443,619 1,443,619 Retained profits 54,879 (6,396) (g) 2,469,217 (h) Equity attributable to the owners of our Company 9,449,966 13,286,182 15,761,795 Non-controlling interests Total equity 9,450,365 13,286,581 15,762,194 No. of SEB Shares in issue ( 000) NA per SEB Share attributable to the owners of our Company (RM) (d) 5,992,155 15,979,080 15,979, Gearing (times) (f) Total borrowings 16,415,155 12,578,939 (g) 9,825,522 (i) Gearing (times) (f)

22 Notes: (a) An exchange rate of USD1.00:RM3.8945, being the rate used in preparing our Company s audited consolidated financial statements as at 31 January 2018, is used to illustrate the pro forma effects. (b) Excluding the effects of any exercise of the warrants and conversion of the RCPS-i to be issued pursuant to the Rights Issue of Shares with Warrants. (c) Due to net gain on disposal arising from the Proposed Transaction of approximately USD649 million (or equivalent to approximately RM2,526 million, based on the exchange rate of USD1:00:RM3.8945), computed as follows: USD 000 Subscription Price 540,000 Proceeds to be received by our Group for part repayment of the Sapura Debt 350, ,000 Add: Fair value for our Company s 50% equity interest in SUP 540,000 Less: Deconsolidation of audited NA of the SUSB Group (excluding SEP (Sabah)) as at 31 January 2018 (771,330) Less: Estimated expenses relating to the Proposals (10,000) 648,670 The retained profits are further reduced by the accelerated amortisation of transaction cost arising from the repayment of borrowings of approximately RM43 million. (d) Computed based on equity attributable to the owners of our Company divided by total number of SEB Shares in issue. (e) After the repayment of bank borrowings of USD720 million (or equivalent to approximately RM2,804 million, based on the exchange rate of USD1:00:RM3.8945) and the resultant accelerated amortisation of transaction costs arising from the repayment of borrowings of approximately RM43 million. (f) Computed based on total borrowings divided by equity attributable to the owners of our Company. (g) After the repayment of bank borrowings of RM3,898 million and the resultant accelerated amortisation of transaction costs arising from the repayment of borrowings of approximately RM61 million. (h) Due to net gain on disposal arising from the Proposed Transaction of approximately USD649 million (or equivalent to approximately RM2,526 million, based on the exchange rate of USD1:00:RM3.8945) as detailed in note (c) above. The retained profits are further reduced by the accelerated amortisation of transaction costs arising from the repayment of borrowings of approximately RM112 million (including the effects of repayment of borrowings pursuant to the Rights Issue). (i) After the repayment of bank borrowings of USD720 million (or equivalent to approximately RM2,804 million, based on the exchange rate of USD1:00:RM3.8945) and the resultant accelerated amortisation of transaction costs arising from the repayment of borrowings of approximately RM51 million (including the effects of repayment of borrowings pursuant to the Rights Issue). 15

23 5.2 Earnings and EPS For illustrative purposes only, based on the audited consolidated statements of comprehensive income of our Group for the FYE 31 January 2018 and assuming that the Proposed Transaction had been effected on 1 February 2017, being the beginning of the FYE 31 January 2018, the pro forma effects of the Proposed Transaction on the consolidated earnings of our Group and EPS are as follows: Scenario 1 Scenario 2 Audited for the FYE 31 January 2018 After the Proposed Transaction Audited for the FYE 31 January 2018 After the Rights Issue and the Proposed Transaction Net (loss)/profit attributable to the owners of our Company (RM 000) No. of SEB Shares in issue ( 000) (2,503,473) 451,894 (a) Net (loss)/profit attributable to the owners of our Company (RM 000) 5,992,155 5,992,155 No. of SEB Shares in issue ( 000) (2,503,473) 568,230 (c) 5,992,155 15,979,080 (LPS)/EPS (sen) (b) (41.78) 7.54 (LPS)/EPS (sen) (b) (41.78) 3.56 Notes: (a) After adjusting for the following: RM 000 Net loss attributable to the owners of our Company for the FYE 31 January 2018 (2,503,473) Add: Gain on disposal 3,022,696 (1) Less: Deconsolidation of the net profit of the SUSB Group for the FYE 31 January 2018 (218,122) Add: Share of the net profit of the SUSB Group for the FYE 31 January ,061 Add: Annual estimated savings in finance cost upon repayment of borrowings 129,121 Less: Estimated expenses relating to the Proposals (44,295) (2) Less: Accelerated amortisation of transaction cost arising from the repayment of borrowings (43,094) 451,894 (b) Computed based on net profit/(loss) attributable to the owners of our Company divided by number of SEB Shares in issue. 16

24 (c) After adjusting for the following: RM 000 Net loss attributable to the owners of our Company for the FYE 31 January 2018 (2,503,473) Less: Accelerated amortisation of transaction cost arising from the repayment of borrowings pursuant to the following: (i) Rights Issue of Shares with Warrants (45,825) (ii) Rights Issue of RCPS-i (15,450) Add: Annual estimated savings in finance cost upon repayment of borrowings 171,490 Pro forma loss attributable to the owners of our Company after the Rights Issue (2,393,258) Add: Gain on disposal 3,022,696 (1) Less: Deconsolidation of the net profit of the SUSB Group for the FYE 31 January 2018 (218,122) Add: Share of the net profit of the SUSB Group for the FYE 31 January ,061 Add: Annual estimated savings in finance cost upon repayment of borrowings 142,772 Less: Estimated expenses relating to the Proposals (44,295) (2) Less: Accelerated amortisation of transaction cost arising from the repayment of borrowings (50,624) 568,230 (1) Gain on disposal arising from the Proposed Transaction of approximately USD682 million based on NA of the SUSB Group (excluding SEP (Sabah)) as at 1 February 2017 and exchange rate of USD1:00:RM as at 1 February 2017, computed as follows: USD 000 Subscription Price 540,000 Proceeds to be received by our Group for part repayment of the Sapura Debt 350, ,000 Add: Fair value for our Company s 50% equity interest in SUP 540,000 Less: Deconsolidation of audited NA of the SUSB Group (excluding SEP (Sabah)) as at 1 February 2017 (747,600) 682,400 (2) Estimated expenses relating to the Proposals of approximately USD10 million based on an exchange rate USD1.00:RM as at 1 February

25 6. INDUSTRY OUTLOOK AND PROSPECTS OF OUR GROUP AND THE SUSB GROUP 6.1 Overview and outlook of the global economy The global economy is expected to expand 3.7% in 2018 and 2019, lower than the earlier forecast of 3.9% (International Monetary Fund, 2018). The downward revision reflects elevating policy uncertainties with several risks stemming to growth from escalating trade tension and outflows of capital from emerging economies. At the same time, global growth has become less synchronized with mixed developments in advanced economies while projection for emerging economies, in particular, developing Asia remains favourable. Within the advanced economies, the United States of America ( USA ) is expected to record strong growth buoyed by pro-cyclical fiscal stimulus and accommodative monetary policy. Nevertheless, the euro area, the United Kingdom and Japan are forecasted to expand at a moderate pace. Major economies in the euro area such as France and Germany, are anticipated to expand moderately given the softer external demand and deteriorating growth in productivity. In the United Kingdom, growth is weighed down by anticipation of more barriers to trade following Brexit, while Japan faces declining labour force with unfavourable demographics. Growth in emerging economies, in particular, developing Asia is expected to remain steady supported by strong domestic demand led by India whereas China is projected to expand marginally slower given the regulatory tightening in the financial and property sectors. Meanwhile, fuel-exporting countries are expected to benefit from higher global oil prices. Nevertheless, growth in other emerging economies (Latin America and the Caribbean) is forecast to be subdued reflecting dampening trade and investment activities as well as disruptions in the financial markets. Given heightening trade tensions, investment and industrial activities are expected to slow down. This, in turn, will reduce the demand for capital and intermediate goods which contributes significantly to global trade. Consequently, global trade is projected to expand by 4.2% in 2018 and 4% in 2019 as compared to 5.2% in 2017 (International Monetary Fund, 2018). In the near term, the outlook for global growth is tilted downwards given the tightening financial conditions, escalating trade threats and risks of a shift towards protectionism as well as geopolitical tensions. (Source: Economic Outlook 2019, Ministry of Finance Malaysia) 6.2 Overview and outlook of the Malaysian economy The Malaysian economy recorded a sustained growth of 4.4% in the 3Q of 2018 (2Q 2018: 4.5%), supported by expansion in domestic demand amid a decline in net exports. Growth in the mining sector contracted further as natural gas continued to be affected by unplanned supply outages and pipeline repairs in East Malaysian facilities. Manufactured exports grew by 7.4% (2Q 2018: 10.7%), supported by higher electronics & electrical exports (10.7%; 2Q 2018: 9.8%), with continued demand from major trading partners, particularly in the Asian region. Of significance, growth of semiconductor exports remained robust at 24.2% (2Q 2018: 21.0%), reflecting continued expansion in the global technology cycle. However, non-electronics & electrical exports moderated, particularly in petroleum products, and manufactures of metal and transport equipment. Commodities exports registered a smaller contraction of -3.0% (2Q 2018: -3.8%) as the continued decline in crude palm oil exports was partly offset by the stronger growth in mineral exports (9.3%; 2Q 2018: 8.1%), particularly in crude petroleum exports. Headline inflation, as measured by the annual percentage change in the Consumer Price Index, declined to 0.5% in 3Q 2018 (2Q 2018: 1.3%). The lower inflation mainly reflected the impact from the goods and services tax zerorisation. Core inflation, excluding the impact of consumption tax policy changes, moderated slightly to 1.4% (2Q 2018: 1.5%). (Source: Quarterly Bulletin: Economic and Financial Development in Malaysian Economy in the Third Quarter of 2018, BNM) 18

26 6.3 Overview and outlook of the O&G sector Global supply growth remains robust, with 2018 and 2019 revised up. Global liquids supply is forecast to grow 2.2 million barrels per day ( b/d ) in 2018 and 1.6 million b/d in Supply in Q is forecast to average close to million b/d, up 3% from Q Production has been bolstered by substantial increases in Russia and Saudi Arabia, as compliance to production cuts eases in a bid to alleviate market concerns over perceived tightness in the market. Organisation of Petroleum Exporting Countries ( OPEC ) crude oil production rose to 32.2 million b/d in September 2018, as Saudi Arabia, Kuwait and United Arab Emirates ( UAE ) continue to boost production to help balance the market, and Libya s crude production ramped up above 1 million b/d. This has helped to offset the drop in Iranian output, as the USA sanctions take effect. Iranian output is expected to fall further once the sanctions are in place, and OPEC crude production is expected to fall to 31.2 million b/d in 2019 as Iran reaches the lower limits of sanctions-induced losses, and Venezuelan output continues to decline. As a result of the supply growth outlook for 2019, OPEC faces the need to curtail its output moderately. On 5 November 2018, USA secondary sanctions targeting Iran s energy sector took effect. The USA also announced on the same day the countries that have received waivers: China, India, Italy, Greece, Japan, South Korea, Taiwan and Turkey for 120 days. The intent is to avoid disruption to the oil market and prices rising too high to hurt economic growth. Many importers have indicated their willingness to either reduce or cease imports of Iranian oil to comply with USA sanctions. Some fully halted imports ahead of the sanctions deadline. South Korea, one of Iran s main customers, has cut all imports since August. France has not bought Iranian oil since July 2018, and Italy, Spain and Greece took their last cargoes in October Iran is assumed to have exported 1.5 million b/d of crude oil and close to 300,000 b/d of condensate in September Global oil demand is forecast to grow 1.1 million b/d in 2018, led by the USA, China, and India. Overall growth in global oil demand is maintained at around 1.1 million b/d in India overtakes China in 2019 to become the main driver of oil demand growth, as a cooling economy combined with tightening environmental policies curb Chinese demand into Project sanctions in 3Q 2018 continued to build off of the momentum generated in the first half of the year. From the start of 2018, 37 major projects have received FID, which surpasses the total number of project sanctions achieved in Compared with last year, producer's confidence in upstream sector investment is returning, and large mega-projects are becoming more prominent. Roughly half of the total reserves sanctioned so far in 2018 are attributable to three major projects: Marjan Crude Increment (Saudi Arabia), LNG Canada, and Kharasaveiskoye (Russia). Whereas at this time last year the growth was primarily sourced from deepwater projects in Brazil. In 2018, Iraq, Saudi Arabia and the UAE continue to focus on developing onshore and shallow water oil fields, while major projects in Russia, Norway and Canada are almost exclusively seeking to develop onshore and shallow water gas reserves. Over the past year, the average size of development reserves has risen to 730 mmboe from 423 mmboe, and project costs have increased to an average of USD4.3 billion up from USD3.3 billion. (Sources: Wood Mackenzie Macro Oils short-term outlook report, November 2018, Wood Mackenzie Q pre-fid upstream project tracker, November 2018) 6.4 Prospects of our Group Our Group is well-positioned to capitalise on the emerging opportunities in the O&G industry. The industry has seen an increase in capital spend and resurgence in activities in relation to our services businesses, comprising our Engineering and Construction ( E&C ) and Drilling businesses, and our Exploration and Production business. The encouraging industry outlook has continued to fuel our Group s growth and is expected to continue to contribute positively in the foreseeable future. 19

27 For our E&C and Drilling businesses, our Group s strategy during the downturn was to strengthen our presence in existing core markets in South East Asia, Mexico, Brazil, India and Australia, while opening up new markets in Europe, the Middle East, East and West Africa, Caspian and the Mediterranean, where activities are expected to improve. The strategy has put us in a good position to capitalise on these markets as the industry recovers. Our Group has been successful in expanding our global footprint and has secured significant contract wins since the start of The cumulative value of contract wins for our Group as at the LPD is RM8.5 billion, including the award of contract with a value of approximately RM1.5 billion announced on 6 December Our Group has been able to demonstrate our ability to capitalise on the growth in the industry by securing new contracts globally. Out of the RM8.5 billion cumulative value of contract wins, approximately RM4.6 billion are for contracts secured globally including Mexico, India, Australia and Africa while the remaining RM3.9 billion are for contracts in Malaysia. The strategy employed has enabled our Group s order book to grow to RM18.6 billion, after taking into account the contract win announced on 6 December 2018, from RM14.9 billion as at 31 January In addition, our Group has seen a significant increase in bidding activities for an enlarged customer base and for larger contracts in multiple geographies. Our Group s recent entry into Saudi Aramco s long-term agreement (LTA) programme will open up new engineering, procurement, construction and installation opportunities with Saudi Aramco and deepen our presence in the Middle East. As at the LPD, our Group is in active pursuit of bids worth USD8.8 billion (equivalent to approximately RM36.9 billion) and further prospects of USD14.3 billion (equivalent to approximately RM59.9 billion) in the key geographical markets mentioned above. Our Group is entering a strong growth phase today, being recognised for our strong track record, state-of-the-art facilities and assets as well as deep technical expertise of our people. Given our global operating centres in key countries/regions, such as Australia, South East Asia, India, the Middle East, Africa, the United Kingdom, Brazil, Mexico and the USA, our Group is poised to leverage on growth opportunities as the market recovers. The growing order book provides the platform for increasing revenue and higher utilisation of our Group s assets in the future. Upon completion of the Proposed Transaction, SEB will recognise a net gain on disposal of approximately USD649 million as detailed in Section 5.1 of this Circular (or equivalent to approximately RM2,713 million, based on the exchange rate of USD1:00:RM4.1800, being the middle rate quoted by BNM at 5.00 p.m. as at the LPD) after taking into consideration the estimated expenses for the Proposals of USD10 million. The reduction in our Group s bank borrowings will result in interest savings and stronger liquidity and cash position for future growth. The completion of the Rights Issue and the Proposed Transaction will significantly strengthen the financial position of our Group. This will further enable our businesses to bid and execute higher value projects globally. 6.5 Prospects of the SUSB Group Our Exploration and Production business has undertaken extensive exploration programmes comprising 11 exploration wells in block SK408 over the past four (4) years, and made nine (9) natural gas discoveries, of which six (6) are commercial. Our Exploration and Production business has significant net proved and probable reserves (2P) and best estimate contingent resources (2C) of natural gas from its near-term liquefied natural gas developments at blocks SK310 and SK408 as detailed in Appendix I of this Circular. Two (2) of the larger fields of block SK408 have gas discoveries of more than a trillion cubic feet and are located in the prolific Central Luconia basin offshore of Sarawak. This success has enabled our Exploration and Production business to further embark on an international growth strategy. Our Exploration and Production business has successfully acquired prospective exploration acreage in highly prolific regions in the Sureste basin in Mexico, the Taranaki basin in New Zealand, and the Carnarvon basin and Vulcan sub-basin in Western Australia in

28 On the development front, our Exploration and Production business has completed the development of the B15 natural gas field within block SK310 and successfully commenced production in October It has also commenced the construction of the facilities for the development of the Gorek, Larak and Bakong fields within block SK408 which is expected to begin production in late By joining forces through the Proposed Transaction, our Company and OMV AG will enhance the sharing of technology and knowledge, concurrently enabling development of local talent incountry. The combined capabilities and shared financial commitment of our Group and OMV AG will also provide risk mitigation in exploration and development activities. The partnership will complement our Group s continued strategy to grow our portfolio and expand our acreage position. 7. APPROVALS REQUIRED The Proposals are subject to the following being obtained: (a) (b) approval of our shareholders at the forthcoming EGM; and approval, waiver and/or consent of any other relevant authority and/or party. The Proposed Financial Assistance is conditional upon the Proposed Transaction but not vice versa. 8. CORPORATE EXERCISE/SCHEME ANNOUNCED BUT PENDING COMPLETION Save for the Proposals and as disclosed below, there are no other corporate exercises/schemes which have been announced by our Company but is pending completion as at the LPD: On 24 August 2018, Maybank IB had, on behalf of our Board, announced that our Company proposed to undertake the Rights Issue and amendments to our Constitution which were approved by our shareholders on 29 November The abridged prospectus together with the notices of provisional allotment and rights subscription forms for the Rights Shares with warrants and RCPS-i were despatched to our shareholders on 31 December The expected completion date of the Rights Issue is 29 January In conjunction with the Rights Issue, an exemption was sought by Permodalan Nasional Berhad, Amanah Saham Bumiputera and persons acting in concert with them from the Securities Commission Malaysia ( SC ) from the obligation to undertake a mandatory take-over offer for all the remaining SEB Shares, warrants and RCPS-i not already owned by them pursuant to Paragraphs 4.08(1)(b) and 4.08(1)(c) of Rule 4, Part B of the Rules on Take-overs, Mergers and Compulsory Acquisitions ( Exemption ), which was approved by the SC vide its letter dated 6 December The Proposals are not conditional upon the Rights Issue, Exemption or any other corporate exercise/scheme of our Company. 9. INTERESTS OF THE DIRECTORS, MAJOR SHAREHOLDERS AND/OR PERSONS CONNECTED WITHTHEM None of the Directors and/or major shareholders of our Company as well as persons connected with them have any interest, direct or indirect, in the Proposals. 21

29 10. DIRECTORS RECOMMENDATION Our Board, having considered all aspects of the Proposals including the basis and justification for the Total Consideration, rationale, benefits and effects of the Proposals, as well as salient terms of the Agreements, is of the opinion that the Proposals are in the best interest of our Company. Accordingly, our Board recommends that you vote in favour of the resolutions pertaining to the Proposals to be tabled at our forthcoming EGM. 11. TENTATIVE TIMETABLE Barring any unforeseen circumstances, the Proposed Transaction is expected to be completed by the first (1 st ) quarter of The tentative timetable for the Proposed Transaction is as follows: Event Tentative timeline EGM 28 January 2019 Completion of the Proposed Transaction 31 January EGM Our EGM will be held at the Multi-Purpose Hall, Ground Floor, Sapura@Mines, No. 7 Jalan Tasik, The Mines Resort City, Seri Kembangan, Selangor Darul Ehsan, Malaysia on Monday, 28 January 2019 at a.m. or any adjournment thereof, for the purpose of considering and if deemed fit, passing the resolutions with or without any modification to give effect to the Proposals. You are advised to refer to the Notice of EGM and Proxy Form which are enclosed in this Circular. If you are unable to attend and vote in person at the forthcoming EGM, you may appoint proxy or proxies to attend and vote on your behalf. If you wish to do so, you must complete and deposit the Proxy Form with the Share Registrar of our Company, Symphony Share Registrars Sdn Bhd at Level 6, Symphony House, Pusat Dagangan Dana 1, Jalan PJU 1A/46, Petaling Jaya, Selangor Darul Ehsan, Malaysia, not less than 24 hours before the time appointed for holding our EGM or any adjournment thereof. The Proxy Form should be completed strictly in accordance with the instructions contained therein. The lodging of the Proxy Form will not preclude you from attending and voting in person at our EGM should you subsequently decide to do so. 13. FURTHER INFORMATION You are advised to refer to the attached appendices for further information. Yours faithfully For and on behalf of our Board SAPURA ENERGY BERHAD DATO HAMZAH BAKAR Chairman, Non-Independent Non-Executive Director 22

30 APPENDIX I INFORMATION ON SUSB 1. HISTORY AND BUSINESS SUSB was incorporated as a private limited company in Malaysia under the Companies Act 1965 on 18 October 2013 under the name of Falcon Lane Sdn Bhd and is deemed registered under the CA It changed its name to SapuraKencana Energy Sdn Bhd on 15 January 2014 and to Sapura Exploration and Production Sdn Bhd on 28 April 2017, and assumed its present name on 21 August On 11 February 2014, our Company, via SUSB, acquired the entire equity interest of SEP (Malaysia) for a consideration of USD895.9 million ( Newfield Acquisition ), which through its wholly-owned subsidiaries, have participating interests in eight PSCs in Peninsular Malaysia, Sabah and Sarawak. SEP Malaysia s business was founded in 2004 by Newfield Exploration Company, a Houstonbased independent oil and natural gas exploration company. SEP Malaysia initially built a core oil business by developing shallow-water oilfields offshore of Peninsular Malaysia. In 2004, SEP Malaysia acquired its first three PSCs, blocks AAKBNLP and PM318 offshore of Peninsular Malaysia and block Deepwater 2C offshore of Sarawak. After the completion of the Newfield Acquisition, the SUSB Group has undertaken extensive exploration programmes comprising eleven exploration wells in block SK408 over the past four years, and made nine natural gas discoveries, of which six are commercial. The SUSB Group has significant net proved and probable reserves (2P) and best estimate contingent resources (2C) of natural gas from its near-term liquefied natural gas developments at blocks SK310 and SK408. Two of the larger fields of block SK408 have gas discoveries of more than a trillion cubic feet and are located in the prolific Central Luconia basin offshore of Sarawak. Its success in Malaysia had enabled the SUSB Group to embark on an international growth strategy. The SUSB Group had acquired prospective exploration acreage in proven petroleum regions in the Sureste basin in Mexico, the Taranaki basin in New Zealand, and the Carnarvon basin and Vulcan sub-basin in Western Australia in On the development front, the SUSB Group has developed the B15 natural gas field within block SK310 and successfully commenced production in October It has also commenced the construction of the facilities for the development of the Gorek, Larak and Bakong fields within block SK408. Arising from its exploration and development successes, the SUSB Group has further strengthened and diversified its existing business portfolio and revenue stream. As at the LPD, the portfolio of assets provides a balanced mix of assets from exploration and production assets, allowing the SUSB Group to capitalise on the cash flows generated from its producing assets to fund further exploration and development activities. At present, Petroliam Nasional Berhad ( PETRONAS ) is the sole offtaker of the natural gas produced by the SUSB Group via multi-year negotiated UGSAs for each gas-producing PSC, while the crude oil produced at the SUSB Group s blocks is sold on the open market via PETRONAS Trading Corporation Sdn Bhd, a subsidiary of PETRONAS engaged in trading of crude oil and petroleum internationally, as our sales service agent to a variety of customers. SUSB is an investment holding company while its subsidiaries are principally involved in the upstream O&G industry, i.e. exploration, development and production of crude oil and natural gas. As at the LPD, the SUSB Group has 314 full-time employees, of which 163 are in technical roles including geoscientists, petroleum engineers and operational specialists, and 15 contract employees. The SUSB Group s average daily net production rate was about 12.2 mboe per day in calendar year

31 APPENDIX I INFORMATION ON SUSB (Cont d) 2. CONCESSIONS AND ASSETS OF THE SUSB GROUP As at the LPD, the SUSB Group has operations with different stages in the entire upstream O&G life cycle (i.e. exploration, development and production stages) located in Malaysia, Australia, New Zealand and Mexico. The SUSB Group s current portfolio in Malaysia is as follows: (a) (b) (c) four oil-producing PSCs offshore of Peninsular Malaysia, namely PM323, PM329, AAKBNLP and PM318; two natural gas PSCs offshore of Sarawak with large natural gas reserves and resources, namely SK408 and SK310; and two onshore exploration PSCs in Sabah*, namely SB331 and SB332. Note: * For the avoidance of doubt, the two onshore exploration PSCs in Sabah do not form part of the portfolio of assets under the Proposed Transaction. Both SB331 and SB332 will continue to remain within our Group. These PSCs are located primarily in proven petroleum regions such as the Malay and Central Luconia basins. SUSB solely operates five blocks under the PSCs, namely SK310, PM323, PM329, SB331 and SB332, and jointly operates SK408 with Sarawak Shell Berhad ( Sarawak Shell ). In 2018, the SUSB Group had also secured a PSC in the Gulf of Mexico, exploration permits for five blocks offshore of New Zealand and explorations permits for three blocks offshore of Australia. The total size of the SUSB Group s concession area is 48,057 square kilometers as at the LPD. The net book value of the SUSB Group s expenditure on O&G properties is RM4,008.8 million and RM4,363.4 million based on the audited consolidated statement of financial position of SUSB as at 31 January 2018 and unaudited consolidated statement of financial position of SUSB as at 30 November 2018 respectively. The SUSB Group s expenditure on O&G properties was funded through internal funds and/or borrowings from financial institutions through TMC. [The rest of this page has been intentionally left blank] 24

32 APPENDIX I INFORMATION ON SUSB (Cont d) A summary of each of the PSCs of the SUSB Group and permits as at the LPD is as follows: Block Field Asset type Status Operator (a) participants (b) stage Working interest of Exploration SK408 (Sarawak) Teja Natural gas and Gorek condensate Pepulut Exploration/ Development SEP (Sarawak) (for exploration and development of west cluster of block SK408); and Sarawak Shell (for development of east cluster of block SK408) 40.0% SEP (Sarawak) 30.0% Sarawak Shell 30.0% PETRONAS Carigali Sdn Bhd ( PETRONAS Carigali ) Estimated year of expiry On-going 2039 (based on expected first production in December 2019) (c) SK310 (Sarawak) Larak Natural gas and Jerun condensate Bakong B14 Natural gas and condensate B15 Producing Development SEP (Sarawak) Development SEP (Sarawak) 30.0% SEP (Sarawak) 30.0% Diamond Energy Sarawak Sdn Bhd 40.0% PETRONAS Carigali Completed 2037 (c)(d) PM323 (Peninsular Malaysia) PM329 (Peninsular Malaysia) PM318 (Peninsular Malaysia) AAKBNLP (Peninsular Malaysia) East Belumut Oil Producing SEP (PM) 60.0% SEP (PM) West Belumut 40.0% PETRONAS Carigali Chermingat East Piatu Oil and associated gas Producing SEP (PM) 70.0% SEP (PM) 30.0% PETRONAS Carigali Puteri/ Padang Oil Producing PETRONAS Carigali 50.0% SEP (PM) 50.0% PETRONAS Carigali Penara Oil Producing PETRONAS Carigali 50.0% SEP (PM) 50.0% PETRONAS Carigali North Lukut Completed 2028 (c) Completed 2031 (c) Completed 2033 (c) Completed (i) 2024 or (ii) economic life of the field (c) SB331 (Sabah) - Unknown Exploration SEP (Sabah) 70.0% SEP (Sabah) 20.0% PETRONAS Carigali 10.0% Sabah International Petroleum (SB331) Sdn Bhd On-going

33 APPENDIX I INFORMATION ON SUSB (Cont d) Block Field Asset type Status Operator (a) participants (b) stage Working interest of Exploration SB332 (Sabah) Block 30 (Mexico) PEP (New Zealand) PEP (New Zealand) PEP 60091, and (New Zealand) Permits EP483 & TP/25 (Australia) Permit WA- 412-P (Australia) AC/P 61 (Australia) - Unknown Exploration SEP (Sabah) 70.0% SEP (Sabah) 20.0% PETRONAS Carigali 10.0% Sabah International Petroleum (SB332) Sdn Bhd - Expected to be oil prone - Expected to be oil prone - Expected to be oil prone - Expected to be oil prone - Expected to be gas prone - Expected to be oil prone - Expected to be oil prone Exploration Deutsche Erdoel Mexico, S. de R.L. de C.V. ( DEA ) Exploration OMV New Zealand Limited ( OMV NZ ) 30.0% SUSB 40.0% DEA 30.0% Premier Oil 30.0% SEP (NZ) 70.0% OMV NZ Exploration OMV NZ 30.0% SEP (NZ) 70.0% OMV NZ Exploration OMV NZ 30.0% SEP (NZ) 40.0% OMV NZ 30.0% Mitsui E&P Australia Pty Ltd Exploration SUSB 70.0% SUSB 30.0% Finder Exploration Pty Ltd ( Finder ) Exploration SUSB 70.0% SUSB 30.0% Finder Exploration SUSB 70.0% SUSB 30.0% Finder Estimated year of expiry On-going 2041 On-going 2048 On-going 2021 On-going 2027 On-going 2028 On-going 2020 On-going 2020 On-going

34 APPENDIX I INFORMATION ON SUSB (Cont d) Notes: (a) The operator is responsible for conducting all exploration, development and/or production operations in accordance with approved work programmes and budget via joint operating arrangements. The operator is also required to establish and maintain a joint account (on operator s cost) for operations on behalf of all participants of the respective blocks where costs will usually be shared between participants in proportion to their respective working interests. (b) A management committee comprising the participants will be established to provide overall supervision and direction of operations and to approve the operator s work programmes and budgets via joint operating arrangements. A participant may also elect to proceed with a development or appraisal at its own risk (without the other participants) but subject to certain conditions agreed via the joint operating arrangements. In the event of a default by the participants, the defaulting party will lose its right to attend and vote at the management committee meetings. In such circumstances, the non-defaulting parties will be required to pay the defaulting party s share of costs during the default period, and if the defaulting party fails to remedy the default, its working interest is forfeited and transferred to the non-defaulting parties. (c) Any further renewals will depend on negotiations with PETRONAS. (d) The production of non-associated gas at the B14 field may be carried out for a maximum of 24 years after natural gas production or five years after the expiry of the PSC, whichever is earlier. [The rest of this page has been intentionally left blank] 27

35 APPENDIX I INFORMATION ON SUSB (Cont d) The following maps show the locations of the SUSB Group s PSCs and permits as at the LPD: Malaysia Mexico 28

36 APPENDIX I INFORMATION ON SUSB (Cont d) New Zealand Australia 3. RESERVES AND RESOURCES OF THE SUSB GROUP 3.1. Classification of reserves and resources Figure 1 below illustrates the resources classification framework in the Petroleum Resources Management System jointly approved by the Society of Petroleum Engineers, World Petroleum Council, American Association of Petroleum Geologists, and Society of Petroleum Evaluation Engineers ( SPE-PRMS ). The SPE-PRMS classifies O&G reserves and resources according to increasing chance of commerciality (vertical axis) and range of uncertainty (horizontal axis) of the estimated quantities of petroleum potentially recoverable. 29

37 APPENDIX I INFORMATION ON SUSB (Cont d) Figure 1: Resources classification framework Based on the Independent Technical Expert Report, the chance of commerciality were determined by the probability of a discrete event occurring while Ryder Scott had assessed the range of uncertainty using a deterministic incremental (risk-based) approach. To summarise the resources classification framework, the total petroleum-initially-in-place ( PIIP ), which is the quantity of petroleum estimated to exist, is subdivided into: (a) discovered PIIP which refers to an estimated quantity of petroleum as at a given date, contained in known accumulations. Discovered PIIP is further subdivided into commercial (reserves) and sub-commercial (contingent resources) categories whereby: (i) reserves means such quantity of petroleum anticipated to be commercially recoverable by application of development projects to known accumulations under defined conditions. (b) (ii) The range of uncertainty for reserves is expressed in cumulative quantities as 1P (Proved), 2P (Proved + Probable), and 3P (Proved + Probable + Possible), respectively; and contingent resources means such quantity of petroleum estimated to be potentially recoverable by application of development projects, but are subject to one or more contingencies. The range of uncertainty used by Ryder Scott for contingent resources is expressed in incremental quantities as 1C incremental (1Ci), 2C incremental (2Ci) and 3C incremental (3Ci); and undiscovered PIIP which refers to estimated quantity of petroleum which is estimated, as at a given date, to be contained in accumulations yet to be discovered whereby: (i) prospective resources means such quantity of petroleum estimated to be potentially recoverable from undiscovered accumulations by application of future projects. The range of uncertainty used by Ryder Scott for prospective resources is expressed in incremental quantities as low estimate incremental (LEi), best estimate incremental (BEi) and high estimate incremental (HEi). 30

38 APPENDIX I INFORMATION ON SUSB (Cont d) Further, unrecoverable refers to such portion of discovered or undiscovered PIIP quantity estimated not to be recoverable by future development projects. A portion of these quantities may become recoverable in the future as commercial circumstances change or technological developments occur while the remaining portion may never be recovered due to physical/chemical constraints represented by subsurface interaction of fluids and reservoir rocks. As a probabilistic approach is used for the range of commerciality, results of quantity actually recovered should generally correspond to the following: (a) (b) (c) at least a 90% probability (P90) will equal or exceed the 1P, 1C or Low Estimate; at least a 50% probability (P50) will equal or exceed the 2P, 2C or Best Estimate; and at least a 10% probability (P10) will equal or exceed the 3P, 3C or High Estimate Net reserves and contingent resources Information on the net reserves and contingent resources of the SUSB Group represents the SUSB Group s share of reserves and resources after applying the applicable fiscal terms of the PSCs (i.e. after deducting the portion allocable to royalties and partners shares, but before payment of any applicable taxes). The following table sets out the SUSB Group s net proved and probable reserves (2P) and best estimate contingent resources (2C) as at 1 August 2018 based on the Independent Technical Expert Report: Net reserves Net contingent resources Proved Probable 2P 1Ci 2Ci 2C Block SK408 Oil (mbbl) 3, ,062 1,152 11,880 13,032 Natural gas (mmcf) 389,154 27, ,891 79, , ,830 Total (mboe) 68,602 4,941 73,543 14, , ,837 Block SK310 Oil (mbbl) ,176 1,710 Natural gas (mmcf) 50,482-50,482 87, , ,906 Total (mboe) 8,724-8,724 15,124 32,738 47,861 Block PM323 Oil (mbbl) 2, ,482 1, ,478 Natural gas (mmcf) Total (mboe) 2, ,482 1, ,478 Block PM329 Oil (mbbl) 2, , Natural gas (mmcf) 3, , Total (mboe) 3, , Block PM318 Oil (mbbl) Natural gas (mmcf) Total (mboe) Block AAKBNLP Oil (mbbl) 1, , Natural gas (mmcf) Total (mboe) 1, ,

39 APPENDIX I INFORMATION ON SUSB (Cont d) APPENDIX I INFORMATION ON SUSB (Cont d) Net reserves Net contingent resources Proved Probable 2P 1Ci 2Ci 2C Totals Net reserves Net contingent resources Oil (mbbl) Proved 11,682 Probable 1,980 13,662 2P 1Ci 3,043 13,177 2Ci 2C 16,220 Totals Natural gas (mmcf) 443,287 28, , , , ,736 Oil Total (mbbl) (mboe) 11,682 85,563 1,980 6,712 13,662 92,275 30,806 3, ,370 13, ,176 16,220 Natural gas (mmcf) 443,287 28, , , , ,736 Notes: Total (mboe) 85,563 6,712 92,275 30, , ,176 (a) 1.0 mboe is 6.0 mmcf. Notes: (a) (b) 1.0 The mboe estimated is 6.0 quantities mmcf. of reserves and resources presented in this Circular are based on escalated price and cost parameters which may differ significantly from the quantities (b) which The estimated would be quantities estimated of using reserves constant and price resources and cost presented parameters. in this Circular are based on escalated price and cost parameters which may differ significantly from the quantities For further which details would on be the estimated reserves using and constant resources price classifications, and cost parameters. methodology of estimates of reserves and resources, and the assumptions, please refer to the Independent Technical Expert For further details on the reserves and resources classifications, methodology of estimates of Report in Appendix V of this Circular. reserves and resources, and the assumptions, please refer to the Independent Technical Expert Report in Appendix V of this Circular. As at the LPD, no material changes have occurred since the effective date of the Independent As Technical at the LPD, Expert no Report material which changes has or have will occurred have any since material the effective on date the of content, the Independent validity or Technical accuracy of Expert the Independent Report which Technical has or Expert will have Report. any material effect on the content, validity or accuracy of the Independent Technical Expert Report. Based on the Independent Valuation Report, the value of the SUSB Group s net proved and probable Based on reserves the Independent (2P) and best Valuation estimate Report, contingent the value resources of the (2C) SUSB in Group s Malaysia net as proved at 1 August and probable 2018 are reserves estimated (2P) to be and between best estimate USD1,085 contingent million resources and USD1,872 (2C) in million Malaysia (or as equivalent at 1 August to 2018 between are approximately estimated to be RM4,514 between million USD1,085 and million RM7,788 and million). USD1,872 For million further (or details equivalent on the to between valuation approximately of the reserves RM4,514 and resources million of and the SUSB RM7,788 Group, million). please For refer further to the details Independent on the valuation Valuation of Report the reserves in Appendix and resources VI of this Circular. of the SUSB Group, please refer to the Independent Valuation Report in Appendix VI of this Circular. As at the LPD, no material changes have occurred since the effective date of the Independent Valuation As at the LPD, Report, no which material has changes or will have have any occurred material since effect the on effective the content, date validity of the Independent or accuracy of Valuation the Independent Report, which Valuation has or Report. will have any material effect on the content, validity or accuracy of the Independent Valuation Report Additional information on net reserves and contingent resources The extraction rates and returns for the FYE 31 January 2018 of the O&G assets which are currently producing are as follows: FYE 31 January 2018 No. Block Net production Revenue (RM 000) 1. Block SK mboe RM3, Block PM323 1,411 mboe RM378, Block PM mboe RM243, Block PM mboe RM100, Block AAKBNLP 519 mboe RM118,109 Note: (a) Production at the B15 field of block SK310 only commenced in October Total net production for the FYEs 31 January 2017 and 2016 were about 4,048 mboe and 3,458 mboe respectively

40 APPENDIX I INFORMATION ON SUSB (Cont d) Subject to regulatory approvals, the estimated timeframe to advance the O&G assets to commercial production is as follows: No. Block Expected final investment decision ( FID ) Expected year of commercial production 1. Block SK408 - Jerun End Teja End Gorek FID obtained Larak FID obtained End Bakong FID obtained End Pepulut End Block SK310 - B-14 End Save as disclosed above, the timeframe to commercial production for the other on-going exploration blocks as disclosed in Section 2 of this Appendix has not been determined at this juncture. 4. CAPITAL EXPENDITURES FOR EXPLORATION AND DEVELOPMENT As at the LPD, the SUSB Group s planned capital expenditure for the FYE 31 January 2019 is as follows: RM 000 Planned exploration expenditure (a) 63,579 Planned development expenditure (b) 410,359 Total 473,938 Notes: (a) (b) Includes all costs necessarily incurred in the exploration and evaluation of hydrocarbons. Includes all costs necessarily incurred in the further development of hydrocarbon reserves and resources. A majority of the capital expenditure planned for the FYE 31 January 2019 are earmarked for block SK408 phase 1 development and block PM323 infill drilling. The SUSB Group expects to have significant additional exploration expenditure for the blocks/permits in New Zealand, Australia and Mexico. The SUSB Group expects to fund the capital expenditures through internal funds, borrowings from financial institutions and/or opportunistically accessing the debt capital markets. The total capital expenditure incurred up to 30 November 2018 by the SUSB Group is as follows: RM 000 Exploration expenditure 107,203 Development expenditure 149,270 Total 256,473 The exploration expenditure are mainly used for exploration activities in relation to Block 30 (RM67.9 million) and New Zealand assets (RM39.4 million). The development expenditure are mainly used for development of Bakong and Larak fields of block SK408 (RM140.9 million) and drilling activities at B15 field of block SK310 (RM8.4 million). 33

41 APPENDIX I INFORMATION ON SUSB (Cont d) 5. SHARE CAPITAL As at the LPD, the issued share capital of SUSB is RM2 comprising 2 SUSB Shares. 6. SHAREHOLDER As at the LPD, SUSB is a wholly-owned subsidiary of our Company. 7. DIRECTORS The directors of SUSB as at the LPD are as follows: Name Designation Nationality Tan Sri Dato Seri Shahril Bin Shamsuddin Director Malaysian Datuk Kris Azman Bin Abdullah Director Malaysian Reza Bin Abdul Rahim Director Malaysian Dato Shahriman Bin Shamsuddin Director Malaysian Tan Sri Ibrahim Bin Menudin Director Malaysian Choo Shan Director Malaysian Mariah Binti Mohamad Said Director Malaysian Datuk Kris Azman Bin Abdullah (Alternate Director to Tan Sri Dato Seri Shahril Bin Shamsuddin) Director Malaysian As at the LPD, none of the directors of SUSB hold any SUSB Shares. 8. SUBSIDIARIES AND ASSOCIATED COMPANIES The group structure of the SUSB Group as at the LPD is as follows: 34

42 APPENDIX APPENDIX I APPENDIX I INFORMATION INFORMATION ON ON SUSB SUSB (Cont d) (Cont d) INFORMATION ON SUSB (Cont d) The The subsidiaries subsidiaries of of SUSB SUSB as as at at the the LPD LPD are are as as follows: follows: The subsidiaries of SUSB as at the LPD are as follows: Date Date and and place place of of Effective Effective incorporation/ incorporation/ Issued Issued share share equity equity Date and place of Effective Name Name formation formation capital capital interest interest Principal Principal activities activities incorporation/ Issued share equity Name formation capital interest % Principal activities Directly Directly held held subsidiaries subsidiaries % Directly held subsidiaries SEP SEP (Southeast (Southeast Asia) Asia) 8 January January 2014/ 2014/ USD1.00 USD Investment Investment holding holding SEP (Southeast Asia) 8 Bahamas Bahamas January 2014/ USD Investment holding Bahamas SEP SEP (Oceania) (Oceania) April April 2018/ 2018/ RM2.00 RM Investment Investment holding holding SEP (Oceania) 19 Malaysia Malaysia April 2018/ RM Investment holding Malaysia SEP SEP (Americas) (Americas) April April 2018/ 2018/ RM2.00 RM Investment Investment holding holding SEP (Americas) 18 Malaysia Malaysia April 2018/ RM Investment holding Malaysia SEP SEP Block Block May May 2018/ 2018/ $3,000 $3, (a) (a) (a) (a) Exploration, Exploration, SEP Block Mexico Mexico May 2018/ (Mexican (Mexican $3,000 pesos) pesos) (a) Exploration, development development and and Mexico (Mexican pesos) development production production of of and crude crude oil oil production and and natural natural of gas gas crude oil Note: and natural gas Note: Note: (a) 99% of equity interest in SEP Block 30 is held directly by SUSB while the remaining 1% is held (a) 99% of equity interest in SEP Block 30 is held directly by SUSB while the remaining 1% is held through SEP (Mexico), a wholly-owned subsidiary of SUSB. (a) 99% through of equity SEP (Mexico), interest in wholly-owned SEP Block 30 subsidiary is held directly of SUSB. by SUSB while the remaining 1% is held through SEP (Mexico), a wholly-owned subsidiary of SUSB. Indirectly Indirectly held held subsidiaries subsidiaries Indirectly held subsidiaries Subsidiary Subsidiary of of SEP SEP (Southeast (Southeast Asia) Asia) Subsidiary of SEP (Southeast Asia) SEP SEP (Malaysia) (Malaysia) February February 2013/ 2013/ USD5, USD5, Investment Investment holding holding SEP (Malaysia) 22 February 2013/ USD5, Investment holding Bahamas Bahamas Bahamas Subsidiary Subsidiary Subsidiary of of of SEP SEP SEP (Oceania) (Oceania) (Oceania) SEP SEP SEP (NZ) (NZ) (NZ) December December December 2014/ 2014/ 2014/ RM2.00 RM2.00 RM Production Production Production of of of crude crude crude Malaysia Malaysia Malaysia gaseous gaseous gaseous hydrocarbon hydrocarbon hydrocarbon (natural (natural (natural gas), gas), draining draining gas), draining and and and separation separation separation of of of liquid liquid liquid hydrocarbon hydrocarbon hydrocarbon fractions fractions fractions and and and mining mining mining of of of hydrocarbon hydrocarbon hydrocarbon liquids liquids liquids obtained obtained obtained through through through liquefaction liquefaction liquefaction or or or pyrolysis pyrolysis pyrolysis SEP SEP (Australia) (Australia) September September 2018/ 2018/ RM2.00 RM Investment Investment holding holding SEP (Australia) 18 September 2018/ RM Investment holding Malaysia Malaysia Malaysia Subsidiary Subsidiary of of SEP SEP (Americas) (Americas) Subsidiary of SEP (Americas) SEP SEP (Mexico) (Mexico) April April 2018/ 2018/ RM2.00 RM Investment Investment holding holding SEP (Mexico) 23 April 2018/ RM Investment holding Malaysia Malaysia Malaysia Subsidiaries Subsidiaries of of SEP SEP (Malaysia) (Malaysia) Subsidiaries of SEP (Malaysia) SEP SEP (PM) (PM) January January 2002/ 2002/ USD USD Exploration, Exploration, SEP (PM) 28 January 2002/ USD Exploration, Bahamas Bahamas development development and and Bahamas development and production production of of crude crude oil oil production of crude oil and and natural natural gas gas 35 and natural gas 35 35

43 APPENDIX I INFORMATION ON SUSB (Cont d) Name Date and place of incorporation/ formation SEP (Sabah) 29 August 2011/ Bahamas SEP (Sarawak) 4 February 2004/ Bahamas Subsidiary of SEP (NZ) SEP OMV JV 19 April 2018/ Malaysia Issued share capital Effective equity interest % Principal activities USD125, Exploration, development and production of crude oil and natural gas USD125, Exploration, development and production of crude oil and natural gas RM Production of crude gaseous hydrocarbon (natural gas), draining and separation of liquid hydrocarbon fractions and mining of hydrocarbon liquids obtained through liquefaction or pyrolysis Subsidiary of SEP (Australia) SEP (Western Australia) 26 September 2018/ Australia $2.00 (Australian dollars) Exploration, development and production of crude oil and natural gas SUSB does not have any associated company as at the LPD. 9. SALIENT FEATURES OF THE CONTRACTUAL AGREEMENTS ENTERED INTO BY THE SUSB GROUP FOR ITS O&G ASSETS 9.1 PSCs Malaysia PSCs SUSB's exploration acreage in Malaysia are governed under PSCs, which were entered into with PETRONAS, who owns and has the exclusive rights and powers over hydrocarbon resources in Malaysia. While the specific terms of each of the Malaysia PSCs vary, a summary of the salient features of the Malaysia PSCs is as follows. (a) a PSC is entered into between PETRONAS, which grants the rights to conduct exploration, development and production activities in the contract area, and the relevant subsidiary of the SUSB Group as contractor together with other PSC participants. In each PSC, one or more of the participants will assume the role as operator, who is responsible for all operations, including exploration, development and production activities; 36

44 APPENDIX I INFORMATION ON SUSB (Cont d) (b) (c) (d) (e) (f) each PSC has a specific tenure and is subject to early termination of the PSC (e.g. a relinquishment of the contract area as a result of a failure to make a commercial discovery). In addition, PETRONAS may terminate the PSC with respect to any of the participants upon occurrence of certain events, such as nonpayment of any amount due to PETRONAS under the PSC, material breaches of the PSC by that contractor, insolvency, winding-up or appointment of receivers of that contractor and change in control or ownership of the contractor without PETRONAS prior consent; each PSC has an exploration period, during which the PSC participants must fulfil certain minimum work and financial commitments. In the case where PETRONAS is not reasonably satisfied with the minimum work performed by the participants, there will be a financial penalty imposed for the remaining financial commitment relating to the amount of the remaining work; as at the LPD, the minimum work and financial commitments have been fulfilled for blocks SK310, PM323, PM329, PM318 and AAKBNLP, and the related bank guarantees have been released. The original minimum work and financial commitment under the PSC has been fulfilled for block SK408, but SUSB has recently exercised the option to extend the SK408 exploration period for one more year from 12 June 2018 to 11 June As at the LPD, SEP (Sarawak) has provided a bank guarantee in favour of PETRONAS with respect to block SK408; as at the LPD, the outstanding minimum work and financial commitments under the PSC for blocks SB331 and SB332 include to: (i) acquire and process high quality seismic data; (ii) drill wildcat wells with aggregate depth of no less than certain metres below mudline; (iii) review hydrocarbon potential through studies on a regional scale trend and prospect level; and (iv) fulfil certain minimum financial commitments. As at the LPD, SEP (Sabah) has provided a bank guarantee in favour of PETRONAS with respect to blocks SB331 and SB332; and PSC commitments are fulfilled when both work and financial commitments are met. The fiscal terms of the Malaysia PSCs provide that: (a) (b) (c) (d) a maximum of 10.0% of any oil or gas produced under the PSC to be allocated for royalties to the Malaysian federal and state governments; after the allocation of the royalties, the remaining portion of the oil and natural gas is allocated to the PSC participants based on the relative relationship between the PSC participants cumulative revenue and cumulative PSC costs; a portion of the remaining oil and natural gas is allocated to the PSC participants to reimburse the petroleum operations expenditures of the PSC participants or cost recovery by the PSC participants on a quarterly basis, excluding nonrecoverable costs. This amount is known as Cost Oil or Cost Gas. Cost Oil and Cost Gas are subject to variable caps that range from 70.0% to 30.0% of total oil or gas production (as applicable); after the allocation of the Cost Oil or Cost Gas as described above, all remaining oil or gas is designated as Profit Oil or Profit Gas. The PSC participants are allocated a share equal to a percentage of the Profit Oil or Profit Gas in each quarter depending on: (i) (ii) the revenue-to-cost ratio for the immediately preceding quarter; and whether cumulative oil or gas production for that quarter exceeds a specified cumulative production threshold. 37

45 APPENDIX I INFORMATION ON SUSB (Cont d) The PSC participants allocation of the Profit Oil or Profit Gas ranges from 80.0% to 10.0% for most PSCs except for blocks SK408, SB331 and SB332 which have a range from 70.0% to 10.0% specific to Profit Oil only; (e) (f) (g) (h) (i) (j) (k) (l) the PSC participants share their allocated Profit Oil or Profit Gas, as calculated based on the formulae described in item (d)(ii) above, among themselves in proportion to their respective Working Interests while PETRONAS is allocated with the remaining Profit Oil or Profit Gas; if the Cost Oil or Cost Gas cap described above is higher than the actual petroleum operations expenditures during any quarter, the unused portion of Cost Oil or Cost Gas is included as part of the Profit Oil or Profit Gas, and the PSC participants are allocated such portion of the Profit Oil or Profit Gas in a more favourable apportionment. The PSC participants allocation of the unused portion of the Cost Oil or Cost Gas range from 80% to 20% for most PSCs except for blocks SK408, SB331 and SB332 which have a range from 70% to 20% specific to unused Cost Oil portion only; if the prevailing cumulative revenue-to-cost ratio exceed 1, the PSC participants are obligated to pay PETRONAS a supplemental tax which is an amount that is equal to 70.0% of the excess difference between the realised oil or gas price and prevailing base price on the Profit Oil or Profit Gas portion (except for blocks SK408, SB331 and SB332 for which it is 60.0% with respect to gas), in each case less export duties on such supplemental tax; the PSC participants are required to comply with the Malaysian national objective of maximising Malaysian participation through the use of local equipment, facilities, goods, materials, suppliers and services; PETRONAS has the discretion to decide that if two fields in any contract area form part of a single geological structure, the contractors working on such fields must cooperate on a unified field to avoid competitive drilling; the PSC participants are required to pay PETRONAS research cess which is a small percentage of Cost Oil and/or Cost Gas and the PSC participants share of Profit Oil and/or Profit Gas; the PSC participants are required to pay to PETRONAS abandonment cess, beginning on the first anniversary of production, the quantum of which is based on abandonment estimates distributed over the remaining life of the PSC. The amounts paid to PETRONAS are cost recoverable under Cost Oil or Cost Gas, as the case may be. If a PSC is terminated early, the PSC participants are liable for any outstanding abandonment cess payments within three months of notice of early termination; Petroleum income tax is assessed at 38% of taxable income as per the Petroleum (Income Tax) Act. PSC participants are not subjected to normal corporate income tax assessable to other industries; (m) Capital Allowances are allowed in determination of taxable income as per Malaysian tax guideline provided by the Malaysian Inland Revenue Board; and (n) the PSC participants are required to pay training commitment at an agreed sum to be used for training of PETRONAS personnel in respect of the petroleum operations. Costs related to training commitment are cost recoverable. 38

46 APPENDIX I INFORMATION ON SUSB (Cont d) Mexico PSC SUSB s rights to block 30 in Mexico are governed by a PSC entered into with CNH, which regulates all hydrocarbon activities in Mexico, and certain other joint venture partners. A summary of the salient features of the Block 30 PSC is as follows: (a) (b) (c) (d) (e) (f) the Block 30 PSC grants the rights to conduct exploration, development and production activities in the contract area, and each of SEP Block 30, DEA and Premier Oil as PSC participants; the Block 30 PSC is for a term of 30 years with an extension to the term being available five years from the expiry of the term, for up to two additional terms of up to five years or until the economic limit of the development areas (in the event this last term is shorter). The contractor shall submit the request for the additional term at least 18 months prior to the expiry of the original term of the PSC; the Block 30 PSC is subject to early termination in certain circumstances such as the relinquishment of part of the contract area as a result of a failure to make a commercial discovery. In addition, CNH may terminate the Block 30 PSC after a failure to remedy the following, among other things, the breach within 30 days of being notified, in each case: (i) an insolvency event occurring in relation to a PSC participant or its guarantor; (ii) a PSC participant fails to maintain its letters of credit (relating to the minimum work commitments) or guarantee; and (iii) a PSC participant commits another material breach of the PSC. There is an administrative termination procedure for less serious breaches of the PSC, which gives the PSC participants more time to remedy the breach; the Block 30 PSC has an exploration period during which the PSC participants must fulfil certain minimum work and financial commitments. The participants are required to deliver an unconditional and irrevocable letter of credit, issued in favour of CNH, in respect of the minimum work commitments comprising two exploration wells. Failure to satisfy the minimum work commitments results in the participants being required to pay to the Mexican Petroleum Fund for Stabilization and Development an amount necessary to carry out the outstanding work. CNH may enforce the letters of credit delivered by the participants in the event of failure to pay the Mexican Petroleum Fund for Stabilization and Development. As at the LPD, the exploration plan with respect to the Block 30 PSC has not been submitted to CNH; in the event of a discovery during the exploration period, the PSC participants shall submit to CNH the appraisal program setting out the appraisal activities to be carried out and deliver a report following the end of the appraisal period to CNH. Subsequently, the PSC participants shall inform CNH whether it considers the discovery to be a commercial discovery and in such cases, the PSC participants shall submit a development plan to CNH for its approval within 18 months following the declaration of a commercial discovery; and the PSC participants shall submit annual work plans to the CNH for approval for each of the petroleum activities, including abandonment, which shall be resolved by CNH within a period not exceeding 30 days after receipt of the necessary information. The work programs must contain a detailed list of the individual activities that the PSC participants plan to carry out and the estimated time for each of those activities. 39

47 APPENDIX I INFORMATION ON SUSB (Cont d) The fiscal terms of the Block 30 PSC provide that: (a) (b) (c) (d) (e) (f) the Mexican state s remuneration is the sum of: (i) royalties which are at different rates based on the type of hydrocarbons produced, each with a specified starting rate (i.e. the starting for oil production is 7.5%), and adjusted for inflation in accordance with the PSC; (ii) a contractual fee of approximately 1,200 Mexican pesos per square km for the exploratory phase (if applicable to the contract area) within the first 60 months of the PSC and approximately 3,000 Mexican pesos per square km starting from the 61 st month; the PSC participants remuneration is the sum of: (i) an amount to reimburse the PSC participants for expenditure incurred as part of operations (cost recovery), provided that such costs: (1) comply with guidelines issued by the Mexican Ministry of Finance and the accounting procedure set out in the PSC; and (2) do not exceed the limit on recoverable costs, which is calculated by multiplying the sum of the value of the hydrocarbons and certain other income from the contract area in accordance with the PSC and a cost recovery percentage of 60%; and (ii) the remaining operating profit for that month, after deducting the portion that is part of the Mexican state s remuneration; once the development plan has been approved by CNH, the PSC participants must open an investment trust in a suitable Mexican financial institution. The PSC participants are required to deposit a quarterly abandonment cess payment to the trust (the amount is calculated using a mechanism set out in the PSC and is subject to various factors including the production levels and forecast abandonment costs). Sums in the trust shall not be used for any purpose other than carrying out the abandonment operations in the contract area; the PSC participants must at all times have a corporate guarantor that can demonstrate a minimum net worth of USD2.5 billion. As at the LPD, SUSB has given a corporate guarantee of USD750 million in favour of CNH with respect to Block 30 in accordance with the Block 30 PSC (i) ; the PSC participants are required to comply with national content requirements through the use of local equipment, facilities, goods, materials, suppliers and services; and the PSC participants are required to fully indemnify CNH for all losses, actions, proceedings, costs, charges, expenses and claims which arise from or relate to, among other things, the PSC participants failure to comply with the PSC. Note: (i) The corporate guarantee of USD750 million is provided to cover for catastrophic events which, in the ordinary course of business, would usually be covered by mandatory insurance policies New Zealand Permits The New Zealand Petroleum & Minerals ( NZPM ), which governs the allocation rights to the New Zealand government s petroleum and minerals portfolio, is responsible in issuing permits to prospect, explore or mine petroleum. A summary of the salient features of the New Zealand permits is as follows: (a) the permits grant the rights to explore petroleum resources (other than gas hydrates and coal seam gas) and conventional petroleum (excluding coal seam gas and gas hydrates), and carry out seismic survey in permitted areas are granted by NZPM to the relevant subsidiary of SUSB as permit operator; 40

48 APPENDIX I INFORMATION ON SUSB (Cont d) (b) (c) (d) (e) (f) (g) the right of the permit holder is to (i) explore for the specified petroleum resources in the permit area is exclusive; and (ii) to prospect for the specific petroleum resources in the permit area is non-exclusive; as at the LPD, the outstanding key committed activities under permit from its commencement date include to: (i) within 12 months, complete various exploration studies and reprocessing of seismic; and (ii) within 24 months, either commit to carry out the next stage of the work programme or surrender the permit; as at the LPD, the outstanding key committed activities under permit from its commencement date include to: (i) within six months, complete reprocessing of seismic data; (ii) within 12 months, complete various exploration studies; (iii) within 18 months, complete a petroleum systems study; and (iv) within 24 months, either commit to carry out the next stage of the work programme or surrender the permit; as at the LPD, the outstanding key committed activities under permit from its commencement date include to: (i) within 12 months, complete various exploration studies; (ii) within 18 months, complete additional exploration studies; (iii) within 24 months, either commit to carry out the next stage of the work programme or surrender the permit; as at the LPD, the outstanding key committed activities under permit from its commencement date include to: (i) within 52 months, drill one exploration well to an approved depth/objective and initiate further exploration studies; (ii) within 60 months, acquire and process three-dimensional ( 3D ) seismic data and either commit to acquire and process additional 3D seismic data, and relinquish 25% of the original permit area, or relinquish 50% of the original permit area; (iii) interpret the data acquired in (ii) and, acquire and process additional 3D seismic data; and (iv) within 84 months, interpret the data acquired in (iii) and, relinquish 25% of the original permit area; and either commit to carry out the next stage of the work programme or surrender the permit; and as at the LPD, the outstanding key committed activities under permit from its commencement date include to: (i) within 12 months, reprocess twodimensional ( 2D ) and 3D seismic data; and (ii) within 18 months, commit to carry out the next stage of the work programme or surrender the permit and undertake and submit various studies. The fiscal terms of the permits provide that: (a) (b) the permit holder shall pay the following: (i) annual fees and any other applicable fees relating to the permit; (ii) royalty to the Crown on New Zealand; and (iii) any royalties due in accordance with the relevant regulations; and the relevant minister will define the point(s) of valuation for royalty calculation in consultation with the permit holder for royalties payable. The current expiry date of the New Zealand permits are as follows: No. Permits Current expiry date 1. PEP November PEP March PEP March PEP March PEP March

49 APPENDIX I INFORMATION ON SUSB (Cont d) Australia Permits 9.2. Malaysia UGSAs SUSB s rights in Australia are governed by the Australia Permits which are issued pursuant to the Offshore Petroleum and Greenhouse Gas Storage Act (2006)(Cth), Petroleum and Geothermal Energy Resources Act 1967 (WA) and the Petroleum (Submerged Lands) Act 1982 (WA), and transferred to them pursuant to various farmin agreements, all dated 4 September 2018, with Finder No. 1 Pty Ltd, Finder No. 3 Pty Ltd and Finder No. 3 Pty Ltd. The permits set out, among others, the basins, area size and blocks in which the permit holder is entitled to explore, the expiration date of the permits and work programs that are to be carried out under the permit which includes 2D seismic reprocessing, new 3D seismic survey, geotechnical studies, environmental studies, 3D seismic processing, geophysical studies, well planning, exploration well and commercial studies. The current expiry date of the Australia permits are as follows: No. Permits Current expiry date 1. EP January TP/25 6 January WA-412-P 9 June AC/P June 2022 The SUSB Group has entered into UGSAs with the following parties: Contract Effective date Parties Estimated year of expiry SK408 UGSA 28 February 2018 PETRONAS 2039 Term Sheet SEP (Sarawak) Sarawak Shell PETRONAS Carigali UGSA relating to SK310 (for B15 field) UGSA relating to PM June 2016 PETRONAS SEP (Sarawak) Diamond Energy PETRONAS Carigali 31 October 2011 PETRONAS SEP (PM) PETRONAS Carigali 2023 Earlier of (i) expiration of oil production at the East Piatu field or (ii) expiration of the PSC relating to PM Block SK408 Pursuant to a term sheet relating to the sales of natural gas produced from block SK408 dated 28 February 2018 between PETRONAS, SEP (Sarawak) and the other SK408 PSC participants ( SK408 UGSA Term Sheet ), the parties had agreed to the main commercial principles which will be included in a fully termed UGSA ( SK408 UGSA ) to be entered into with the SK408 participants as sellers and PETRONAS as buyer. Pursuant to the SK408 UGSA Term Sheet, the SK408 participants will sell, and PETRONAS will purchase natural gas produced from the phase 1 gas fields at an agreed annual quantity (and for phase 2 gas fields, the annual quantity of natural gas will be revised and agreed no later than three years prior to the expected first commercial natural gas production from the phase 2 gas fields). 42

50 APPENDIX I INFORMATION ON SUSB (Cont d) Block SK310 On 23 June 2016, SEP (Sarawak), together with the other SK310 participants, as sellers, entered into a UGSA relating to the B15 field of block SK310 with PETRONAS as buyer ( SK310 UGSA ). Pursuant to the SK310 UGSA, the SK310 participants will sell, and PETRONAS will purchase natural gas at an agreed annual quantity for the contract period, with the SK310 participants having the ability to make additional natural gas volumes available and PETRONAS may request for additional volumes to be delivered (subject to such volumes being available) Block PM329 On 31 October 2011, SEP (PM), together with the other PM329 participants, as sellers, entered into a UGSA relating to associated gas from crude oil production at the East Piatu field with PETRONAS as buyer ( PM329 UGSA ). Under the PM329 UGSA, the PM329 participants are required to use reasonable endeavours to sell, and PETRONAS is required to use reasonable endeavours to purchase natural gas at an agreed daily quantity during the contract period. The PM329 UGSA does not include a firm commitment to sell or purchase an annual contract quantity. 10. MATERIAL COMMITMENTS AND CONTINGENT LIABILITIES 10.1 Material commitments Save as disclosed below, as at the LPD, the board of directors of SUSB is not aware of any material commitments incurred or known to be incurred by the SUSB Group which may have a material impact on the profits and/or NA of the SUSB Group: RM 000 Approved and contracted for 146,016 Approved but not contracted for 740,148 Total capital expenditures for O&G properties 886, Contingent liabilities Save as disclosed below, as at the LPD, the board of directors of SUSB is not aware of any contingent liabilities which upon becoming enforceable, may have a material impact on the profits and/or NA of the SUSB Group: The SUSB Group has provided corporate guarantees to TMC as borrower of its multi-currency term and revolving loan facilities. 11. MATERIAL CONTRACTS The SUSB Group has not entered into any material contracts (not being contracts entered into in the ordinary course of business) within two years immediately preceding the LPD. 43

51 APPENDIX I INFORMATION ON SUSB (Cont d) 12. MATERIAL LITIGATION Save as disclosed below, as at the LPD, the SUSB Group is not engaged in any material litigation, claims or arbitration, either as plaintiff or defendant, and the board of directors of SUSB is not aware of any proceedings, pending or threatened, against the SUSB Group or of any facts likely to give rise to any proceedings which may materially affect the business or financial position of the SUSB Group: (a) On 11 February 2014, our Company and SEP (Southeast Asia) (then known as Sapura Exploration and Production Inc) (collectively, Sapura ) completed the acquisition of Newfield Malaysia Holdings Inc (currently known as SEP (Malaysia)) from Newfield International Holding Inc. and Newfield Exploration Company (collectively, Newfield ). Arbitration proceedings between Sapura as claimants and Newfield as respondents arose out of the post-closing purchase price adjustments ( Adjustments ) and tax indemnity related to the acquisition. On closing of the Newfield Acquisition, Sapura paid to Newfield a total of USD895.9 million for the acquisition, subject to adjustments. This amount was arrived at after taking into account certain items such as the estimated value of SEP (Malaysia) s net working capital as at an agreed effective time ( ETNWC ). After the closing of the transaction, Newfield delivered the final calculation of the adjusted purchase price to Sapura, claiming that Sapura owed Newfield an additional USD15,868,810 as a result of the adjustments. Sapura in turn delivered its report on the changes that were necessary to properly calculate the final purchase price, claiming that during this process it discovered that the preliminary estimate of the ETNWC did not match the agreed formulas. Sapura claimed that as a result of this discrepancy, the ETNWC adjustment was overvalued by approximately USD81.4 million. Sapura notified Newfield of this discrepancy, but Newfield refused to adjust the purchase price, claiming that the agreed numbers were fixed and final. As the parties were unable to resolve the dispute, Sapura submitted a Request for Arbitration ( Request ) against Newfield on 19 October 2017 at the London Court of International Arbitration ( LCIA ), requesting the tribunal to set the final value of the adjustments and the final adjusted purchase price. Sapura also requested the tribunal to order Newfield to refund Sapura the amount by which the closing amount paid by Sapura exceeds the adjusted purchase price and indemnify Sapura for taxes which Sapura has paid on behalf of SEP (Malaysia) and award Sapura all damages, cost and equitable relief. In its response to the Request ( Response ), Newfield has contested all of Sapura s claims, arguing that the ETNWC was locked at the time of closing and thus is not subject to adjustment. In the Response, Newfield has also asserted its intention to cross-claim against Sapura, that: (1) Sapura owes Newfield RM34,048,008, which Newfield claims was its share of a tax refund received by SEP (Malaysia) for taxes paid in excess during the straddle period prior to completion of the acquisition; and (2) Sapura owes Newfield USD15,868,810 for post-closing adjustments to net intergroup advances and receipts. The parties are at the discovery stage and it is anticipated that final hearings on this matter will conclude on or around April SEP (Southeast Asia) has been advised by its counsels that it is difficult at the present stage to provide any opinion on the likely outcome of this matter. 44

52 APPENDIX I INFORMATION ON SUSB (Cont d) (b) On 20 October 2017, in parallel and as a back-up to the arbitration proceedings disclosed in paragraph (a) above, SEP (Southeast Asia) filed an Original Petition and Application for Order at the Texas State Court ( Court ) pursuant to the Texas Civil Practice and Remedies Code ( Petition ) against Newfield International Holdings, Inc and Newfield Exploration Company (collectively, the Defendants ) and requested the Court to enter an order temporarily staying judicial proceedings on the claims pending the outcome of the arbitration in the LCIA. On 18 December 2017, the Defendants responded to the Plaintiff s Petition opposing the petition in similar fashion to the arbitration proceedings. The Court has officially stayed the case and there are no claims in this matter that are distinct from the claims raised in the LCIA. The litigation will only proceed if necessary after the arbitration proceeding, to effectuate the tribunal s final judgment. In the event Sapura succeeds in its claim against Newfield, the maximum financial gain to the SUSB Group is approximately RM340.3 million. Conversely, if Newfield succeeds in its counter claim, the maximum financial loss to the SUSB Group is approximately RM100.4 million. The claims are not expected to have any operational impact on the SUSB Group. [The rest of this page has been intentionally left blank] 45

53 APPENDIX I INFORMATION ON SUSB (Cont d) 13. FINANCIAL INFORMATION A summary of the financial information of the SUSB Group based on the audited consolidated financial statements of SUSB for the past three FYEs 31 January 2016, 2017 and 2018 and the unaudited consolidated results of SUSB for the 9-month FPEs 31 October 2017 and 2018 is as follows: FYE 31 January FPE 31 October RM 000 RM 000 RM 000 RM 000 RM 000 Revenue 997, , , , ,509 Cost of sales (777,413) (497,927) (502,427) (313,946) (448,494) Gross profit 219, , , , ,015 Other income 34,618 13,476 10,839 20,285 44,539 (Provision for)/reversal of (1,369,792) 247, impairment on expenditure on O&G properties Write off of deposits on (158,764) acquisition of O&G properties (Write off)/reversal of (856) (249,237) - (2,078) 996 expenditure on O&G properties Other operating expenses (24,147) (42,859) (29,407) (6,939) (19,392) Administrative expenses (126,633) (124,577) (139,590) (71,690) (137,397) Operating (loss)/profit (1,425,758) 140, , , ,761 Finance costs (140,218) (174,384) (194,895) (149,782) (162,206) (Loss)/Profit before (1,565,976) (33,749) (11,124) 33,658 11,555 taxation Income tax 329,656 50,818 (27,173) (50,338) (69,829) credit/(expense) Net (loss)/profit after taxation (1,236,320) 17,069 (38,297) (16,680) (58,274) Earnings before interest, 224, , , , ,814 taxes, depreciation and amortisation ( EBITDA ) (a)(b) Adjusted EBITDA (a)(c) 239, , , , ,987 Adjusted earnings before interest, taxes, depreciation and amortisation and exploration expense ( EBITDAX ) (a)(d) No. of SUSB Shares in issue ( 000) (Loss)/Profit before taxation per SUSB Share attributable to owner of the parent Net (loss)/profit after taxation per SUSB Share attributable to owner of the parent 425, , , , ,667 * * * * * (782,988) (16,875) (5,562) 16,829 5,778 (618,160) 8,535 (19,149) (8,340) (29,137) 46

54 APPENDIX I INFORMATION ON SUSB (Cont d) Current ratio (times) (f) Notes: FYE 31 January FPE 31 October RM 000 RM 000 RM 000 RM 000 RM 000 Total assets 4,941,782 5,882,608 4,813,895 5,621,004 5,019,098 Total liabilities 5,920,267 6,907,488 5,751,086 6,616,906 6,086,368 Shareholder s deficit (e) (978,485) (1,024,880) (937,191) (995,902) (1,067,270) Shareholder s deficit attributable to owner of the parent per SUSB Share in issue (489,243) (512,440) (468,596) (497,951) (533,635) * Denote 2 SUSB Shares, with an aggregate issued share capital of RM2. (a) (b) (c) (d) (e) EBITDA, adjusted EBITDA and adjusted EBITDAX are non-malaysian Financial Reporting Standards/International Financial Reporting Standards measures and hence, do not have standardised meanings. Computed based on loss before taxation + depreciation of property, plant and equipment + amortisation of expenditure on O&G properties + provision for impairment on expenditures on O&G properties + finance cost - interest income - reversal of impairment on expenditures on O&G properties. Computed by adjusting EBITDA for writing down of assets and net unrealised foreign exchange gain or losses. Computed based on Adjusted EBITDA adjusted for non-cash items related to the write off of deposits on acquisition of O&G properties, write off of expenditures on O&G properties, and cash and non-cash items related to new venture costs. Includes net amount owing by the SUSB Group to our Group of RM3,755 million, RM4,947 million and RM4,112 million for the FYEs 31 January 2016, 2017 and 2018, respectively. (f) Computed based on current assets divided by current liabilities. There were no accounting policies adopted by SUSB which are peculiar and no audit qualifications reported in the audited consolidated financial statements of SUSB for the FYEs 31 January 2017 and Commentaries: FYE 31 January 2016 vs. FYE 31 January 2017 The SUSB Group s revenue decreased by 20.4% from RM997.2 million in the FYE 31 January 2016 to RM794.1 million in the FYE 31 January The decrease was attributable to the decrease in the average sales prices of the SUSB Group s oil and natural gas, and a decrease in the net sales volumes of oil, which made up almost the entire revenue of the SUSB Group, driven by the natural decline of the SUSB Group s maturing oil fields. The SUSB Group registered a lower loss before taxation of RM33.7 million in the FYE 31 January 2017 compared to a loss before taxation of RM1.6 billion in the FYE 31 January The decrease was mainly attributable to the following: (a) recognition of provision of impairment on expenditure on O&G properties of about RM1.4 billion in the FYE 31 January 2016 as compared to a net impairment reversal of RM247.7 million in the FYE 31 January 2017; 47

55 APPENDIX I INFORMATION ON SUSB (Cont d) (b) (c) decrease in cost of sales from RM777.4 million in the FYE 31 January 2016 to RM497.9 million in the FYE 31 January The decrease was primarily a result of lower operating costs through the cessation of oil production at the Abu field of block AAKBNLP which became uneconomical under a low oil price environment and cost-saving initiatives; and write off of RM158.8 million for the deposit paid for an acquisition of assets in Vietnam which was terminated due to low oil prices which had affected the commercial viability of the project in the FYE 31 January FYE 31 January 2017 vs. FYE 31 January 2018 The SUSB Group s revenue increased by 6.3% from RM794.1 million in the FYE 31 January 2017 to RM844.4 million in the FYE 31 January The increase in revenue was primarily a result of the increase in the average sales prices of the oil and natural gas during the period. However, such increase was partially offset by a decline in net sales volumes of oil primarily driven by lower production from the maturing oil fields due to their natural decline and cessation of operations at the Abu field. The SUSB Group s loss before taxation decreased by 67.1% from RM33.7 million in the FYE 31 January 2017 to RM11.1 million in the FYE 31 January The decrease was mainly due to the following: (a) higher revenue recorded in the FYE 31 January 2018 as detailed above; and (b) decrease in other operating expenses from RM42.9 million in the FYE 31 January 2017 to RM29.4 million in the FYE 31 January 2018 as a result of lower write off in obsolete consumables, materials and spares inventories in the FYE 31 January Despite the lower loss before taxation recorded in the FYE 31 January 2018, a loss after taxation of about RM38.3 million was recorded compared to a profit after taxation of RM17.1 million in the FYE 31 January This is mainly due to one off income tax credit of RM50.8 million recognised in the FYE 31 January FPE 31 October 2017 vs. FPE 31 October 2018 The SUSB Group s revenue increased by 31.5% from RM557.8 million in the FPE 31 October 2017 to RM733.5 million in the FPE 31 October The increase in revenue was primarily a result of the increase in average sales prices of the oil and natural gas. Additionally, gas production at block SK310 commenced in October However, such increase was partially offset by a decline in net sales volumes of oil, primarily driven by lower production from the maturing oil fields due to their natural decline and cessation of operations at the Abu field. The SUSB Group s profit before taxation decreased by 65.6% from RM33.7 million in the FPE 31 October 2017 to RM11.6 million in the FPE 31 October The decrease in profit was mainly due to the following: (a) (b) (c) increase in cost of sales from RM313.9 million in the FPE 31 October 2017 to RM448.5 million in the FPE 31 October 2018 as result of cost optimization during the lower crude oil price period by the deferment of maintenance activities to FPE 31 October 2018; increase in other operating expenses from RM6.9 million in the FPE 31 October 2017 to RM19.4 million in the FPE 31 October 2018 as result of higher realised foreign exchange loss recognised in the FPE 31 October 2018; and increase in administrative expenses from RM71.7 million in the FPE 31 October 2017 to RM137.4 million in the FPE 31 October 2018 as a result of higher management fees and commission paid on bank guarantee for SEP Block 30 in the FPE 31 October The income tax expenses recorded in the FPE 31 October 2018 is mainly due to recognition of deferred tax expense or liability arising from temporary differences between the carrying amount of the asset in the statement of financial position and its tax base. 48

56 APPENDIX II INFORMATION ON OMV AG AND OMV E&P The information below is extracted from the OMV Factbook 2017, which can also be accessed through For the purpose of this Appendix, all references to bn are to billion, Group are to OMV Group, kboe/d are to mboe per day, mn t are to million tonnes, OMV are to OMV AG, and where the context requires, to OMV Group, OMV Upstream are to OMV E&P and TWh are to terawatt hours. 1. BACKGROUND INFORMATION ON OMV AG OMV produces and markets oil and gas, innovative energy and high-end petrochemical solutions in a responsible way. OMV has a balanced international Upstream portfolio, and its Downstream Oil and Gas business features a European footprint. In 2017, Group sales amounted to more than EUR 20 bn and year-end market capitalization was more than EUR 17 bn. The majority of OMV s over 20,000 employees work at its integrated European sites. OMV is an international, integrated oil and gas company. Upstream carries out operations in Central Eastern Europe, the Middle East and Africa, the North Sea, Russia and Australasia. In 2017, production stood at 348 kboe/d. Downstream comprises the Downstream Oil and Gas businesses. Downstream Oil covers the Group s refining and marketing as well as petrochemical activities. In 2017, total refined fuels and petrochemicals sales were 24 mn t. Downstream Gas engages in gas transport, storage, marketing and trading primarily in Austria, Romania and Germany. Gas sales volumes amounted to 113 TWh. 49

57 APPENDIX II INFORMATION ON OMV AG AND OMV E&P (Cont d) OMV s shareholder structure comprised the following at year-end: 43.0% free float, 31.5% Österreichische Bundes und Industriebeteiligungen GmbH (ÖBIB, representing the Austrian government), 24.9% International Petroleum Investment Company ( IPIC ), 0.3% employee share programs and 0.2% treasury shares. OMV follows a two-tier system with a transparent and effective separation of company management and supervision between the Executive Board and Supervisory Board. The Executive Board members have joint responsibility. The individual areas of responsibility, the reporting and approval obligations and the procedures are defined in the rules of procedure approved by the Supervisory Board. The Supervisory Board appoints the Executive Board and supervises management s conduct of business. It consists of ten shareholder representatives elected at the Annual General Meeting (AGM) and five employee representatives delegated by the Group works council. Executive Board Rainer Seele Johann Pleininger Manfred Leitner Reinhard Florey 50 Supervisory Board Peter Löscher Gertrude Tumpel-Gugerell Alyazia Ali Al Kuwaiti Wolfgang C. Berndt Helmut Draxler Marc H. Hall Mansour Mohamed Al Mulla Karl Rose Herbert Werner Elif Bilgi Zapparoli Angela Schorna Christine Asperger Herbert Lindner Alfred Redlich Gerhard Singer

58 APPENDIX II INFORMATION ON OMV AG AND OMV E&P (Cont d) The history of OMV begins more than 60 years ago. On July 3, 1956, the company name Österreichische Mineralölverwaltung Aktiengesellschaft is officially entered in the commercial register. In 1987, the first step towards privatization was taken. In 1994, IPIC (Abu Dhabi) bought a share into OMV. OMV has successfully grown into one of the largest Austrian industrial companies with an international focus from a state-owned company into a global player with more than 24,000 employees from 60 nations in 30 countries. 2. BACKGROUND INFORMATION ON OMV E&P OMV Upstream has operations in Europe, Russia, the Middle East, Africa and Australasia with a solid safety record. In 2017, daily production was 348 kboe/d. The strategic priorities of OMV s Upstream business are to renew and improve the quality of the asset base, double reserves, extend the track record of operational excellence and increase cash generation. 51