M&A in subsurface use The role of a foreign consultant Steven Dalton, Herbert Smith 23 April 2010 Doc ID:

Why English law? Advantages of English Law Globalisation –International sellers, buyers, lenders –Overseas regulations affecting sellers, buyers, lenders –Target may have debt or equity securities listed overseas –Financial promotion regulations in overseas jurisdictions Flexibility There are few restrictions on how parties contract Certainty The court generally does not rewrite the parties ’ bargain by reference to a third party standard Precedent Over decades the court has considered in detail many of the usual points of contention Custom Buyers, sellers, financiers and other stakeholders are familiar with English law deals

Why an international law firm? English law capability Global reach –Presence in home jurisdictions of buyers, lenders, financiers and markets in which securities are commonly listed –Experience of market practice in relevant jurisdictions –Depth and breadth of human resources What is market? Deal structure deferred consideration/earn-outs conditionality adjustments to the consideration Deal protection warranty cover – extent of warranties, time and money caps seller security break fee

Stages in a typical private M&A auction 1 Financial advisor appointed by Seller 2 Potential bidders identified and approached 3 Confidentiality agreements entered into 4 Optimum deal structure developed and regulatory/third party consent analysis completed 5 Data room prepared. Seller documentation reviewed prior to disclosure 6 Information Memorandum circulated 7 Limited Due Diligence. Bidder’s questions answered

Stages in a typical private M&A auction 9 Detailed Due Diligence. Bidder’s questions answered. Bidder reviews Seller SPA 10 Binding Bids submitted. Seller and Seller’s counsel review Bidder mark-ups and any new deal structures proposed by Bidder 11 [Exclusivity Letter] 12 Negotiation with one or more Bidder (including on ancillary matters such as transitional services) 8 Indicative Bids submitted

Stages in a typical private M&A auction 13 Executed SPA and ancillary agreements 14 Conditions Precedent satisfied 15 Completion 16 [Completion Accounts] 17 Claims Period

So what is “market”? – Analysed deals… Energy deals concluded since January 2009 Cap on claims - 45% - 100% of consideration (‘all claims’) (average c.85%) Individual claim threshold - 0.3% consideration Aggregate claim threshold – 1.9% consideration Notification period – 26 months Commencement of claims – 10 months Arbitration – ½ (always when international) English law – ¾ (even when not UK) Security from buyer – approx ½ (usually Parent Company Guarantee), deposits not common Security from seller – 1/5 (retentions or Parent Company Guarantees) Material Adverse Change / Rescission rights – less than ¼ Energy deals concluded in 2006 – 2008 Cap on claims - 10% - 50% of consideration (‘all claims’) Individual claim threshold - 0.3% consideration Aggregate claim threshold – 2.5% consideration Notification period – 18 months Commencement of claims – 9 months Arbitration – ½ (always when international) English law – almost ¾ (even when not UK) Security – approx ¼ (usually PCG), deposits not common Material Adverse Change / Rescission rights – less than ¼

Recent natural resources M&A experience ENRC Eurasian Natural Resources Corporation on its acquisition of Central African Mining & Exploration Company for US$ 950 million BP on the disposal of its interests in the Caspian Pipeline Consortium (CPC) Pipeline and the Tengiz Oil Field in Kazakhstan and Russia, held through the KPV and LUKARCO joint ventures to KazMunaiGaz and LUKOIL respectively for a aggregate consideration of US$1.85 billion Sinopec Corporation on the US$3.72 billion acquisition of Udmurtneft from TNK-BP and the associated LBO and joint venture with Rosneft Gazprom Neft on its US$ 3 billion acquisition of Sibir Energy plc CNOOC on its LNG Project Development Agreement with BG or the purchase of LNG and acquisition of upstream and midstream interests in the Gladstone LNG project in Queensland PTT Exploration & Production (PTTEP) on the acquisition of a 100% interest of Coogee Resources, a private Western Australian company with interests in Australia BP on the sale of its West Java PSC interests to Indonesian state-owned oil and gas company PT Pertamina for US$280 million INPEX Corporation on the acquisition of a 10% stake in Joslyn Oil Sands Project in Canada

Alliance offices