Oil & Gas Industry Update. Sept. 25, 2012 Kara Moriarty, Executive Director

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1 Oil & Gas Industry Update Sept. 25, 2012 Kara Moriarty, Executive Director

2 AOGA Member Companies

3 Oil & Gas Has been Good to Alaska Jobs & Revenue State of Alaska has collected $160+ billion from oil & gas since 1959 Oil & gas continue to dominate state s unrestricted revenue, accounting for 92% ($7 billion) in FY 2011 State estimates 90% of its revenue will continue to come from oil and gas even with falling production Industry creates jobs and provides income for many 44,800 jobs and $2.65 billion in annual payroll (does not include State jobs, or jobs related to capital budgets) 1 = 9 - Nine oil industry-related jobs created in Alaska for every primary company job

4 Do you own an oil company?

5 North Slope Activity Great Potential: 40 bbo in Arctic; 5 bbo in existing fields Unconventional: 2 bbo potential Point Thomson Gas Development Exploration Not Yet Booming : 8 wells/6 companies : 4 companies Exploration Production - 5 to 7 Years - ND Surpassed AK; AK now 3 rd

6 Production Decline Is Real Production in July 2011: 602,381 bpd Production in July 2012: 523,393 bpd

7 ANS Production & Price Forecast Comparison 2012: Prices UP 70% 2012: Production DOWN 14% Source: DOR Fall 2007 & Fall 2011 Revenue Sources Books; preliminary FY 2012 Actuals

8 Alaska s Tax Structure: How Bad is it? Your state has about the worst energy tax policy in the world. The only worse I could find is North Korea. - Economist Steve Forbes at the Anchorage Economic Development Corporation s economic forecast luncheon on January 25, 2012.

9 Effective Tax Rate Uncompetitive Tax Rates Effective Tax Rate at $115/bbl Market Price (all taxes & royalties) 90% 80% 70% 60% 50% 40% 30% Source: Roger Marks, 2/8/12 Presentation

10 100% 90% Share of Profit under ACES Share of Profit under ACES 20% 20% 18% 15% 14% 13% 12% 12% 11% 10% 80% 70% 60% 50% 44% 42% 49% 56% 61% 63% 65% 67% 69% 71% 40% 30% 20% 10% 36% 38% 33% 28% 25% 24% 23% 21% 20% 19% 0% $40 $65 $90 $115 $140 $165 $190 $215 $240 $265 ANS West Coast ($/bbl) Producer State Federal Profit defined as total gross value of all oil produced, less transportation costs and lease expenditures. Assumes FY 2012 Transport costs of $8.72/ bbl, Opex of $14.03 per taxable barrel, and Capex of $10.25 per taxable bbl.

11 Competition at High Oil Prices

12 A Grim Future Without Oil & Gas Sources of FY 2011 Unrestricted Revenue Oil and Gas Royalties & Taxes ($7B) 92% Excise Taxes ($165M) 2% Corporate Income Taxes ($157M) 2% Mining Taxes ($49M).6% Licenses & Permits ($43M).6% Fisheries Taxes ($23M).2% Source: Alaska Department of Revenue Fall 2011 Sources Book

13 Summary Exploration does not guarantee production Projects underway are not stemming decline Legacy fields can not be ignored Alaska s Oil Tax Structure Must Change

14 APACHE CORPORATION Soldotna/Kenai Joint Chamber Sept. 25, 2012 John L. Hendrix

15 APACHE S COOK INLET ACREAGE With more than 1 million acres, Apache is the largest acreage holder in Cook Inlet Multi-year 3-D seismic program launched November 2011 Approximately 300 square miles acquired to date Working cooperatively with all stakeholders Wireless technology minimizes environmental impact Extensive mitigation program to avoid marine mammals 1 million hours; no lost-time accidents

16 ONSHORE & OFFSHORE SEISMIC NODES

17 SEISMIC DRILL EQUIPMENT

18 FIRST WELL: WEST SIDE OF COOK INLET Spud planned for 4Q 2012 Estimate 100 people employed during drilling Rig secured from the Bakken play in North Dakota Also brought back some Alaskans from North Dakota

19 PERMIT FEDERAL Incidental Harassment Authorization (IHA) ; Section 7 Endangered Species Consultation APPROVAL AGENCY National Marine Fisheries Service - Alaska Regional Office & Washington, D. C. 19 Nationwide 6 Permit STATE Geophysical Land Use Permit Fish Habitat Permit ( Title 16 permit ) ; Stream Crossing; and others Letter of Concurrence Land Use Permit Special Area Permit LOCAL Land Use Permit Land Use Permit Land Use Permit Land Use Permit Land Use Permit Land Use Permit Revocable Use Permit (Private Native Allotments) OTHER Letters of Non-Objection Private Permits US Corps of Army Engineers Alaska Department of Natural Resources Division of Oil and Gas Alaska Department of Fish and Game State Historic Preservation Office Mental Health Trust Alaska Department of Fish and Game Kenai Peninsula Borough Tyonek Native Corporation Native Village of Tyonek Cook Inlet Regional Corporation Salamatof Native Corporation Ninilchik Native Association Bureau of Indian Affairs Affected lease owners Landowners

20 APACHE: EXPLORING WHAT S POSSIBLE Questions? Thank you.

21 Oil & Gas Industry Update Sept. 25, 2012

22 SHELL ALASKA VENTURE 2012 Program Update Cam Toohey Alaska Government Affairs Manager Copyright of COMPANY NAME RESTRICTED September,

23 MARINE FLEET BY LOCATION Fennica Primary Ice Management Vessel Tor Viking AHTS & Secondary Ice Management Nanuq Purpose Built for Shell Spill Recovery & Accommodation Klamath / Guardsman Spill Recovery Barge & Tug Tukpuk Landing Craft Discoverer Affinity Fuel Supply & CSR Tanker Arctic Challenger / Corbin Foss Containment System Barge & Tug Wainwright 21 Person Camp Barrow 75 Person Camp 1 x S92 Helicopter 1 x S92 SAR Helicopter 1 x Twin Otter MMO Kulluk Deadhorse 88 Person Camp 1 x S92 Helicopter 1 x Twin Otter MMO Nordica Primary Ice Management Vessel Aiviq Purpose Built for Shell AHTS & Secondary Ice Management Harvey Sisauq Modified while in Shipyard for Shell Supply Vessel / Waste Lauren Foss / Tuuq Supply & Waste Storage Endeavor / Pt Oliktok Spill Recovery Barge & Tug Arctic Seal Landing Craft Harvey Explorer Supply Vessel Harvey Spirit Supply Vessel Barbara Foss Towing Anchorage Main Embarkation 1 x 737/ Hotel Rooms Copyright of COMPANY NAME KRS 330 / Warrior Towing and Storage Dutch Harbor 10 Hotel Rooms Discoverer Resupply Red = Drilling Rig Green = Marine Vessel RESTRICTED Purple = Shorebase & Aviation

24 THE ARCTIC CONTAINMENT SYSTEM Copyright of COMPANY NAME RESTRICTED September,

25 THE PRIZE IS STILL THERE USGS: Alaska OCS = 25 Billion Barrels of Oil ISER/Northern Econ: Alaska OCS = 54,000 Jobs for 50 Years $145 Billion in Payroll $200 Billion in Federal Treasury Estimated 700,000 New Barrels of Oil per day for TAPS Copyright of COMPANY NAME RESTRICTED September,