Aker BP ASA. New issuer: strong growth prospects beyond 2019, but near term declining production is a credit constraint. CREDIT OPINION 10 August 2017

Transcription

1 CREDIT OPINION Aker BP ASA New issuer: strong growth prospects beyond 2019, but near term declining production is a credit constraint New Issue Summary Rating Rationale RATINGS Aker BP ASA Domicile Norway Long Term Rating 2 Type LT Corporate Family Ratings Outlook Stable Please see the ratings section at the end of this report for more information. The ratings and outlook shown reflect information as of the publication date. Contacts Shruti Kulkarni Analyst shruti.kulkarni@moodys.com Anke N. Richter, CFA Associate Managing Director anke.richter@moodys.com Aker BP ASA (2, stable) benefits from (1) strong liquidity and financial profile with EBITDA margin expected to be maintained above 70% and gross adjusted debt/ebitda to remain in the range of 1.5x-2.0x in (2) strong presence as a mid-sized exploration & production (E&P) operator on the Norwegian Continental Shelf (NCS) and a stable operating environment in Norway (Aaa, stable) (3) exposure to a supportive tax regime in Norway (4) ownership structure with two strong shareholders Aker ASA (unrated) and BP p.l.c. (A1, positive) and, (5) strong upside growth potential after the start-up of Johan Sverdrup project, in which Aker BP retains a 11.6% interest, currently expected in Q Constraints on Aker BP are (1) lack of geographic diversification outside of Norway and current production concentration on the Alvheim area (2) smaller size of the production asset base with production expected to average at around 135 thousand barrels of oil equivalent per day (kboepd) in 2017 (3) declining production profile until 2019 owning to maturing and declining reserve life of the Alvheim and Skarv assets (4) high capital spending which could result in negative free cash flow (FCF) generation in assuming an oil price of 50 per barrel (bbl) (5) moderate execution risks on the Johan Sverdrup project, although, the company benefits from a strong partner and operator, Statoil ASA (Aa3, stable). Exhibit 1 Aker BP's Debt to EBITDA peaks in 2019 before production from Johan Sverdrup comes online Average Daily Production Debt to EBITDA x Moody's Forecast CLIENT SERVICES 2.8x Asia Pacific Japan EMEA x x Kboepd Americas 3.0x x 1.6x 2.1x 1.5x 1.2x x 1.0x x 0 0.0x A 2017F 2018F Source: Company Annual Report, Moody's estimates 2019F 2020F 2021F

2 Credit Strengths Strong presence as a E&P operator on the NCS Exposure to a favourable tax regime in Norway Strong growth potential beyond 2019 Strong financial and liquidity profile Credit Challenges Geographic concentration on the NCS Production concentration on the Alvheim area Mature and declining reserve life resulting in declining production until 2019 High capital spending exposure until 2019, resulting in negative FCF generation Rating Outlook The stable outlook reflects our view that Aker BP will maintain its strong financial profile in the longer term, despite some deterioration until 2019 due to the declining production. The outlook also reflects our expectations of maintaining a good liquidity profile and conservative financial policy in case of any major acquisitions, with no significant change in the stable operating environment. The outlook takes into account that the company should be able to manage its maturing asset base and assumes a timely delivery of the Johan Sverdrup project. Factors that Could Lead to an Upgrade The rating could be upgraded to 1 if Aker BP demonstrates a growing production profile exceeding 150 kboepd and adjusted RCF/ Debt maintained above 30% on a sustained basis, while retaining its competitive cost position. Factors that Could Lead to a Downgrade The rating could be downgraded to 3 if there is a deterioration in the financial profile of the company with adjusted RCF/Debt below 20% on a sustained basis. The rating could also be downgraded if there is a sustained negative FCF generation or weaker liquidity profile. Key Indicators Exhibit 2 KEY INDICATORS Aker BP ASA 31/12/ 31/12/ 12/31/2017F 12/31/2018F Average Daily Production (Mboe/d) Proved Developed Reserves (MMboe) x 1.8x 1.7x 44, , , , % 32.5% 48.8% 18.6% 6.6x 6.1x 7.0x 5.6x Leveraged Full-Cycle Ratio E&P Debt / Average Daily Production E&P Debt / PD Reserves boe RCF / Debt EBITDA / Interest Expense Source: Moody's Financial Metrics. All figures and ratios are calculated using Moody's estimates and standard adjustments. Moody's Forecast (F) and Projections (proj.) are Moody's opinion and do not represent the views of the issuer. Periods are Financial Year-End unless indicated. LTM = Last Twelve Months. This publication does not announce a credit rating action. For any credit ratings referenced in this publication, please see the ratings tab on the issuer/entity page on for the most updated credit rating action information and rating history. 2

3 Overview of the Transaction Aker BP raised 400m of senior unsecured notes due 2022 priced at 6% in June The notes have been issued by Aker BP ASA and were not guaranteed as of the issuance date. Proceeds have been used to repay the 330m subordinated seven year 10.25% coupon PIK toggle bond issued in (including premium), as well as to reimburse part of the drawings under the company's Reserve-sed lending facility (RBL) and to pay for costs, fees and expenses related to the offering. Exhibit 3 Sources and Uses Sources of Funds Mn Uses of Funds Mn New Senior Unsecured Notes 400 Subordinated PIK toggle bond's redemption 330 Total Sources of Funds Repayment of drawing under the existing RBL 58 Costs, fees and expenses related to the transaction Total Uses of Funds 400 Source: Company Offering memorandum dated 27th June 2017 The following chart shows Aker BP's corporate and financing structure on a pro-forma basis after giving effect to the issuance of the notes. Exhibit 4 Aker BP is currently in advanced discussions with the lenders in the RBL syndicate about amending this facility. The aim is to achieve a cost effective structure with flexibility and ease of administration, while maintaining the current size of 4 billion. As part of this process, the company also intends to cancel its 550 million second lien Revolving Credit Facility which was established in June and is currently undrawn. 3

4 Corporate Profile Aker BP ASA is a Norwegian oil and gas company primarily involved in the exploration, development and production of petroleum resources on the Norwegian Continental Shelf. Its production assets are entirely located in Norway and the company operates around 99% of its fields' portfolio. In June, Det norske oljeselskap ASA merged with BP p.l.c.'s Norwegian assets, BP Norge AS and Aker BP ASA was formed. In, Aker BP reported an average production (on a working interest basis) of 118 kboepd, revenues of 1.26 billion and 2P proved plus probable (2P) reserves of 711 million barrels of oil equivalent (boe). Aker BP is owned 40% by Aker ASA (Unrated), 30% by BP p.l.c. (A1, positive) and the remaining is free float. The market capitalization of the company was 5.9 billion as of 20th July Detailed Credit Considerations STRONG PRESENCE ON THE NCS HELPS COUNTERACT GEOGRAPHIC AND PRODUCTION CONCENTRATION Aker BP is a medium-sized E&P company with average annual production of 118 kboepd in. The size positions Aker BP according to our E&P methodology in the rating range and compares well with its European peer L1E Finance GmbH & Co KG (Dea) (138 kboepd, 3 stable) but is smaller than some of the US rated peers like Marathon Oil Corporation (392 kboepd, 1 stable) and Concho Resources Inc. (151 kboepd, 1 stable). As Exhibit 3 shows, Aker BP has an oil focussed portfolio accounting for around 77% of its production, which is in line with most of the European E&P peer group, except Dea, which has a fairly equal oil and natural gas production split. Aker BP benefits from a 12.2 years of reserve life (1P/ Total Annual Production), which is in line with most of its rated European E&P peers. Exhibit 5 Exhibit 6 Working Interest Split by Commodity Production Split by Field Other 1% Natural Gas 23% Valhall/Hod 13% Skarv Area 25% Ula/Tambar Hub 8% Oil 77% Alvheim Area 53% Source: Company Annual Report Source: Company Annual Report Aker BP's asset base is concentrated on the NCS accounting for 100% of its production with field concentration on the Alvheim area accounting for 53% of its production in. This focus on the Alvheim area is expected to decline to around 40% in 2017 and beyond as the production from Ivar Aasen ramps up, which started producing first oil in December, and further decline to below 25% once Johan Sverdrup starts producing in Aker BP is the operator in most of its fields with 99% of the expected 2017 production of 135 kboepd kboepd being operated by the company. This percentage of operatorship is high compared to most of its other European E&P peers. This provides the company with control over the operations and also provides flexibility to change and adapt different relationship styles with suppliers leading to better management of cost reductions. The company also benefits from the support of its two main shareholders, Aker ASA (unrated) and BP Plc (A1, positive). STRONG GROWTH POTENTIAL BEYOND 2019 MITIGATES MATURING RESERVE LIFE OF ASSETS Alvheim and Skarv assets have a mature and declining reserve life and production from these assets is expected to decline by 55%-60% by This should result in the decline of total production to 105 kboepd in 2019 from 135 kboepd in The decline in production is mitigated to some extent by the ramp-up of production from the Ivar Aasen project in However, production 4

5 is expected to increase beyond 2019, once Johan Sverdrup project starts producing, currently expected in Q Timely delivery of Johan Sverdrup project, in which Aker BP retains a 11.6% interest, remains a key driver for growth as this project offers a great upside potential to increase production above 200 kboepd beyond This risk is mitigated as Aker BP has a strong partner, Statoil (Aa3, stable) which has the required expertise and technology to act as an operator for one of the most strategic and large projects on the Norwegian Continental Shelf. The company is also in the process of sanctioning two new projects in the Alvheim and Skarv area in 2017 (Storklakken and Snadd respectively) which will add to the reserve life and production from these fields. AKER BP BENEFITS FROM SUPPORTIVE TAX REGIME IN NORWAY Operations of Aker BP are based in Norway which is a Aaa, stable rated country. Norway provides a stable operating environment combined with a supportive tax regime. 89% of capex investments are recovered from the government over a period of 6 years from the time the amount is spent, exploration expenses can be claimed from the government, even if it results into a dry well, tax losses can be carried forward for an indefinite period and possible cash refunds on the tax losses can be derived from the government if petroleum activities cease. These incentives provide a very supportive operating environment for the company and help in recovering the amount spent for the operations to a significant extent. OPERATING PERFORMANCE SUPPORTED BY INORGANIC GROWTH DESPITE LOWER OIL & GAS PRICES Aker BP's revenues increased to 1.4 billion in, up from 1.2 billion the prior year, despite lower oil & gas prices. This was mainly due to the acquisition of BP Norge assets in September, however, revenues reflect only 3 months of consolidation and do not take into account the full year impact of the acquisition. Production volumes increased to 118 kboepd (: 60 kboepd) as a result of this acquisition, while proforma revenues amount to 1.9 billion. Average realised oil prices decreased to 47/bbl in from 54/bbl in and natural gas prices fell to 0.18/scm from 0.27/scm. Production costs increased marginally to 8/bbl in from 6/bbl in, due to the acquisition of BP assets which demonstrates a competitive cost position versus its rated European peers, as the company benefits from low cost operations on the NCS. These numbers are lower and are distorted to some extent due to the differences in the Norwegian tax regime which requires no royalties to be paid by the company. Aker BP's adjusted EBITDA improved to 1.1 billion in from 1.0 billion in mainly due to the partial acquisition impact. The company demonstrates high profitability with EBITDA margin of 87% in versus 84% in and is in line with profitability margins of oil focussed E&P companies. Aker BP has a hedging policy which allows for hedging up to 100% of its after-tax exposure. The Norwegian government sets a norm price to calculate the taxes to be paid by E&P companies in Norway and this norm price is set monthly. Hedging forward could result in paying taxes on income which the company might not earn. Hence, due to this tax symmetry between petroleum revenues and derivatives, the company hedges using options. Due to the maturing asset base, Aker BP's production is expected to decline to around 105 kboepd in 2019 from 135 kboepd in 2017, followed by an increase in 2020 and beyond, once Johan Sverdrup starts producing (see exhibit 1 and 7). Looking ahead, we do not expect a substantial rise in the oil or natural gas prices in the near future and assume an oil price in the middle of the range of 40-60/ bbl in our analysis. We expect the company's financial profile to deteriorate to some extent as a result of the decline in production until 2019, still fairly strong compared to similarly rated peers, followed by a recovery from 2020 assuming the Johan Sverdrup project starts producing on time. Moody's adjusted EBITDA is expected to drop to 1.1 billion in 2019 from around 1.7 billion in 2017, followed by a recovery in The company is expected to maintain the unleveraged cash margin at around 30/bbl in due to its competitive cost position. 5

6 Exhibit 7 Johan Sverdrup coming online will boost production in 2020 and beyond ( actual and projected production split by field) Alvheim Area Skarv Area Ivar Aasen Other Johan Sverdrup 100% 22% 20% 27% 80% 24% 34% 32% % on Mboe/day 12% 60% 25% 17% 22% 31% 21% 28% 20% 40% 18% 53% 20% 46% 36% 17% 17% 11% 28% 9% 17% 14% 2020F 2021F 0% 2017F 2018F 2019F Source: Company Annual Report, Moody's estimates HIGH CAPITAL SPENDING LIKELY TO RESULT IN NEGATIVE FCF GENERATION IN Aker BP's funds from operations (FFO) increased 1.0 billion in from 0.8 billion in, mainly due to the partial effect of the BP acquisition. Working capital outflows, higher capital spending of 1.0 billion to bring Ivar Aasen project into production combined with dividend payments of 63 million which were announced for the first time in, resulted in continued negative FCF generation of 300 million in versus 350 million in. Gross adjusted debt/ebitda declined to 2.4x in from 2.8x in, while retained cash flow (RCF)/gross debt improved to 36% from 30% year-on-year, due to the partial impact of the BP acquisition. Looking ahead, we expect FFO in 2017 to range between billion, due to full consolidation of the BP assets combined with a tax refund received from the government as a result of the BP acquisition. This combined with capex and dividend payments of 850 million and 250 million respectively, should enable the company to generate positive FCF in 2017 of around million. However, we expect the company to turn FCF negative in of around 100 million to 200 million per year, after annual capex and dividend payments of million and 250 million, respectively. Adjusted debt/ebitda ratio is expected to remain in the range of 1.5x-2.0x in , peaking in 2019 to range between 2.0x-3.0x, followed by a return to below 2.0x in 2020, after Johan Sverdrup starts producing. Liquidity Analysis Aker BP has a good liquidity profile with reported cash balance of 66 million end of Q and is expected to generate positive FCF in 2017 of around 300 million-350 million and turn FCF negative in of around 100 million to 200 million per year. We believe the company should be able to fund all its funding needs in the coming months using the cash balance, internal cash generation and availability of 2.1 billion (undrawn) under its 3.9 billion reserve based lending facility as of June The company has no scheduled debt repayments due in Structural Considerations The 3 rating assigned to the 400 million senior unsecured notes issued by Aker BP ASA takes into account that the proceeds of the bond was used to repay the 300 million subordinated bond and a portion of the RBL facility. The 3 rating on the senior unsecured notes is one notch below the 2 CFR and it reflects the sizable secured debt (1.8 billion as of 30th June 2017) of the RBL ranking ahead of the notes within the capital structure. The 3 rating also reflects the expectation of a higher recovery rate for the notes compared to similarly rated peers due to the favorable tax regime that Aker BP benefits from in Norway. The tax losses are refunded in cash by the government if petroleum activities are discontinued on the NCS. 6

7 Rating Methodology and Scorecard Factor The 2 rating is in line with the output from the Independent Exploration and Production Industry methodology Exhibit 8 Rating Factors Aker BP ASA Energy, Oil & Gas - Independent E & P Industry Grid Factor 1 : Scale (20%) Current 12/31/ Moody's Month Forward View Measure Score Measure Score a) Average Daily Production (Mboe/d) b) Proved Developed Reserves (MMboe) x a 1.6x - 1.9x Factor 2 : Business Profile (10%) a) Business Profile Factor 3 : Profitability and Efficiency (25%) a) Leveraged Full-Cycle Ratio Factor 4 : Leverage and Coverage (30%) a) E&P Debt / Average Daily Production 22, b) E&P Debt / PD Reserves boe 12.2 Caa Caa c) RCF / Debt 32.5% a 30% - 50% a 6.1x 5.5x - 7.5x d) EBITDA / Interest Expense Factor 5 : Financial Policy (15%) a) Financial Policy Rating: a) Indicated Outcome from Scorecard 2 2 b) Actual Rating Assigned 2 2 Source: Moody's Financial Metrics. All figures and ratios calculated using Moody's estimates and standard adjustments. Moody's Forward View, Forecasts (F), or Projections (proj.) are Moody's opinion and do not represent the views of the issuer. Periods are Financial Year-End unless indicated. LTM = Last Twelve Months. Ratings Exhibit 9 Category AKER BP ASA Outlook Corporate Family Rating Senior Unsecured Moody's Rating Stable 2 3/LGD5 Source: Moody's Investors Service 7

8 Appendix The 2 rating also takes into account the rating positioning of Aker BP compared to its US rated peers Marathon Oil Corporation (Marathon), Concho Resources Inc, (Concho) and Murphy Oil Corporation (Murphy). Marathon (1, stable) is seen as having a more solid business profile with larger scale and geographically diversified operations compared to Aker BP. Concho (1, stable) has a similar financial profile combined with geographic concentration risks in the Permian sin but demonstrates a different risk profile than Aker BP given its onshore operations. Murphy (3, stable) is larger in size in terms of production than Aker BP, but demonstrates a weaker financial profile. Exhibit 10 Aker BP's Peers Comparison (In USD Million) Aker BP ASA Concho Resources Inc. Marathon Oil Corporation Murphy Oil Corporation L1E Finance GmbH & Co KG 2, Stable 1, Stable 1, Stable 3, Stable 3, Stable Revenues 1, Average Daily Production (Mboe/d) 1, , , , , , , , , EBITDA 970 1,117 1,650 1,575 2,443 1,831 1,637 1, Total Adjusted Debt 2,677 2,634 3,382 2,784 7,913 7,861 3,692 3,606 2,446 2,256 Cash&Cash Equivalents ,221 2, EBITDA/Interest Expense RCF/Debt 6.6x 6.1x 7.6x 7.7x 6.6x 4.4x 10.6x 5.7x 6.9x 8.0x 27.8% 32.5% 44.4% 52.1% 17.7% 13.4% 25.8% 12.3% 11.8% 20.2% 23,608 18,494 18,436 20,073 17,598 20,652 21,179 16,232 E&P Debt/ Average Daily Production ('000/boe) 44,616 22,347 E&P Debt / PD Reserves boe (/boe) Source: Moody s Financial Metrics. All figures & ratios calculated using Moody s estimates & standard adjustments. FYE = Financial Year-End. LTM = Last 12 Months Exhibit 11 Aker BP's Historical Moody's - Adjusted Debt Breakdown As Reported Debt Pensions Operating Leases Non - Standard Adjustment Moody's Adjusted Debt 2,622 2, ,677 2,634 Source: Moody's Financial Metrics. All figures & ratios calculated using Moody's estimates and standard adjustments. FYE = Financial Year-End. LTM = Last Twelve Months. Exhibit 12 Aker BP's Historical Moody's - Adjusted EBITDA Breakdown As Reported EBITDA Pensions Operating Leases Unusual Moody's Adjusted EBITDA ,117 Source: Moody's Financial Metrics. All figures & ratios calculated using Moody's estimates and standard adjustments. FYE = Financial Year-End. LTM = Last Twelve Months. 8

9 Exhibit 13 Aker BP Summary Financials and Ratios with Projections In USD Million 2017 Proj 2018 Proj INCOME STATEMENT Revenues 1,159 1,261 2,114 1,846 EBITDA 970 1,117 1,552 1,316 EBIT Interest Expense Net Income BALANCE SHEET Cash&Cash Equivalents Total Adjusted Debt 2,677 2,634 2,432 2,742 Total Adjusted Liabilities 4,887 6,875 6,697 7,006 Funds from Operations , Change in Working Capital items (109) (109) Cash Flow from Operations Capital Expenditures (CAPEX) (978) (1,032) (852) (711) CASH FLOW Dividends Free Cash Flow (FCF) Retained Cash Flow (RCF) (1) 1,436 (1) (203) , RCF / Debt 27.8% 33% 48.8% 18.6% FCF / Debt -12.8% 0.0% 13.8% -7.4% 9% 68% -13% EBIT Margin % 41.3% 47% 41.7% 37.0% EBITDA Margin % 83.7% 89% 73.4% 71.3% EBIT / Interest Expense 3.2x 3.2x 4.0x 2.9x EBITDA / Interest Expense 6.6x 6.1x 7.0x 5.6x -0.1x 0.5x 3.2x 2.6x 2.8x 2.4x 1.6x 2.1x PROFITABILITY % Change of Sales (YoY) INTEREST COVERAGE (EBITDA - CAPEX) / Interest Expense LEVERAGE Debt / EBITDA Debt / (EBITDA - CAPEX) x 31.2x 3.5x 4.5x Debt / Book Capitalization 62.1% 43.7% 40.4% 44.0% Avg. Assets / Avg. Equity 11.7x 5.4x 3.8x 3.8x Source: Moody's Financial Metrics. All figures & ratios calculated using Moody's estimates and standard adjustments. FYE = Financial Year-End. LTM = Last Twelve Months. 9

10 2017 Moody s Corporation, Moody s Investors Service, Inc., Moody s Analytics, Inc. and/or their licensors and affiliates (collectively, MOODY S ). All rights reserved. CREDIT RATINGS ISSUED BY, INC. AND ITS RATINGS AFFILIATES ( MIS ) ARE MOODY S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND MOODY S PUBLICATIONS MAY INCLUDE MOODY S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES. MOODY S DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL, FINANCIAL OBLIGATIONS AS THEY COME DUE AND ANY ESTIMATED FINANCIAL LOSS IN THE EVENT OF DEFAULT. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS AND MOODY S OPINIONS INCLUDED IN MOODY S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. MOODY S PUBLICATIONS MAY ALSO INCLUDE QUANTITATIVE MODEL-BASED ESTIMATES OF CREDIT RISK AND RELATED OPINIONS OR COMMENTARY PUBLISHED BY MOODY S ANALYTICS, INC. CREDIT RATINGS AND MOODY S PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND CREDIT RATINGS AND MOODY S PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL, OR HOLD PARTICULAR SECURITIES. NEITHER CREDIT RATINGS NOR MOODY S PUBLICATIONS COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. MOODY S ISSUES ITS CREDIT RATINGS AND PUBLISHES MOODY S PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL, WITH DUE CARE, MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING, OR SALE. MOODY S CREDIT RATINGS AND MOODY S PUBLICATIONS ARE NOT INTENDED FOR USE BY RETAIL INVESTORS AND IT WOULD BE RECKLESS AND INAPPROPRIATE FOR RETAIL INVESTORS TO USE MOODY S CREDIT RATINGS OR MOODY S PUBLICATIONS WHEN MAKING AN INVESTMENT DECISION. IF IN DOUBT YOU SHOULD CONTACT YOUR FINANCIAL OR OTHER PROFESSIONAL ADVISER. ALL INFORMATION CONTAINED HEREIN IS PROTECTED BY LAW, INCLUDING BUT NOT LIMITED TO, COPYRIGHT LAW, AND NONE OF SUCH INFORMATION MAY BE COPIED OR OTHERWISE REPRODUCED, REPACKAGED, FURTHER TRANSMITTED, TRANSFERRED, DISSEMINATED, REDISTRIBUTED OR RESOLD, OR STORED FOR SUBSEQUENT USE FOR ANY SUCH PURPOSE, IN WHOLE OR IN PART, IN ANY FORM OR MANNER OR BY ANY MEANS WHATSOEVER, BY ANY PERSON WITHOUT MOODY S PRIOR WRITTEN CONSENT. All information contained herein is obtained by MOODY S from sources believed by it to be accurate and reliable. Because of the possibility of human or mechanical error as well as other factors, however, all information contained herein is provided AS IS without warranty of any kind. MOODY'S adopts all necessary measures so that the information it uses in assigning a credit rating is of sufficient quality and from sources MOODY'S considers to be reliable including, when appropriate, independent third-party sources. However, MOODY S is not an auditor and cannot in every instance independently verify or validate information received in the rating process or in preparing the Moody s publications. To the extent permitted by law, MOODY S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability to any person or entity for any indirect, special, consequential, or incidental losses or damages whatsoever arising from or in connection with the information contained herein or the use of or inability to use any such information, even if MOODY S or any of its directors, officers, employees, agents, representatives, licensors or suppliers is advised in advance of the possibility of such losses or damages, including but not limited to: (a) any loss of present or prospective profits or (b) any loss or damage arising where the relevant financial instrument is not the subject of a particular credit rating assigned by MOODY S. To the extent permitted by law, MOODY S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability for any direct or compensatory losses or damages caused to any person or entity, including but not limited to by any negligence (but excluding fraud, willful misconduct or any other type of liability that, for the avoidance of doubt, by law cannot be excluded) on the part of, or any contingency within or beyond the control of, MOODY S or any of its directors, officers, employees, agents, representatives, licensors or suppliers, arising from or in connection with the information contained herein or the use of or inability to use any such information. NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE ACCURACY, TIMELINESS, COMPLETENESS, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF ANY SUCH RATING OR OTHER OPINION OR INFORMATION IS GIVEN OR MADE BY MOODY S IN ANY FORM OR MANNER WHATSOEVER. Moody s Investors Service, Inc., a wholly-owned credit rating agency subsidiary of Moody s Corporation ( MCO ), hereby discloses that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by Moody s Investors Service, Inc. have, prior to assignment of any rating, agreed to pay to Moody s Investors Service, Inc. for appraisal and rating services rendered by it fees ranging from 1,500 to approximately 2,500,000. MCO and MIS also maintain policies and procedures to address the independence of MIS s ratings and rating processes. Information regarding certain affiliations that may exist between directors of MCO and rated entities, and between entities who hold ratings from MIS and have also publicly reported to the SEC an ownership interest in MCO of more than 5%, is posted annually at under the heading Investor Relations Corporate Governance Director and Shareholder Affiliation Policy. Additional terms for Australia only: Any publication into Australia of this document is pursuant to the Australian Financial Services License of MOODY S affiliate, Moody s Investors Service Pty Limited ABN AFSL and/or Moody s Analytics Australia Pty Ltd ABN AFSL (as applicable). This document is intended to be provided only to wholesale clients within the meaning of section 761G of the Corporations Act By continuing to access this document from within Australia, you represent to MOODY S that you are, or are accessing the document as a representative of, a wholesale client and that neither you nor the entity you represent will directly or indirectly disseminate this document or its contents to retail clients within the meaning of section 761G of the Corporations Act MOODY S credit rating is an opinion as to the creditworthiness of a debt obligation of the issuer, not on the equity securities of the issuer or any form of security that is available to retail investors. It would be reckless and inappropriate for retail investors to use MOODY S credit ratings or publications when making an investment decision. If in doubt you should contact your financial or other professional adviser. Additional terms for Japan only: Moody's Japan K.K. ( MJKK ) is a wholly-owned credit rating agency subsidiary of Moody's Group Japan G.K., which is wholly-owned by Moody s Overseas Holdings Inc., a wholly-owned subsidiary of MCO. Moody s SF Japan K.K. ( MSFJ ) is a wholly-owned credit rating agency subsidiary of MJKK. MSFJ is not a Nationally Recognized Statistical Rating Organization ( NRSRO ). Therefore, credit ratings assigned by MSFJ are Non-NRSRO Credit Ratings. Non-NRSRO Credit Ratings are assigned by an entity that is not a NRSRO and, consequently, the rated obligation will not qualify for certain types of treatment under U.S. laws. MJKK and MSFJ are credit rating agencies registered with the Japan Financial Services Agency and their registration numbers are FSA Commissioner (Ratings) No. 2 and 3 respectively. MJKK or MSFJ (as applicable) hereby disclose that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by MJKK or MSFJ (as applicable) have, prior to assignment of any rating, agreed to pay to MJKK or MSFJ (as applicable) for appraisal and rating services rendered by it fees ranging from JPY200,000 to approximately JPY350,000,000. MJKK and MSFJ also maintain policies and procedures to address Japanese regulatory requirements. REPORT NUMBER

11 CLIENT SERVICES 11 Americas Asia Pacific Japan EMEA