acquire, divest and invest with confidence (3-nov-16 course) · verifying that the change order...

DNV GL © 2016

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03 November 2016 SAFER, SMARTER, GREENERDNV GL © 2016

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03 November 2016

Acquire, Divest and Invest with Confidence

1

Jarrett Henderson

DNV GL © 2016

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03 November 2016

Agenda

1. Acquire, Divest and Invest

2. Types of Services

3. Challenges

4. General Technical and Commercial Solutions

5. Upstream Risks, Solutions and Examples

6. Midstream Risks, Solutions and Examples

7. Downstream Risks, Solutions and Examples

8. Environmental Due Diligence

9. Asset Appraisals

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Introduction

Facilitator – Jarrett Henderson

– BA in Finance, MBA and PMP certification

– Project Manager with 13 years experience in the oil and gas industry

– Rest of experience with service company before current consulting role

– 5 years with DNV GL (Noble Denton)

– Project Manager, Commercial Lead and Asset Appraisals

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1. Acquire, Divest and Invest

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Acquire, Divest and Invest

Independent expert consultants

Comprehensive understanding

Challenges of the investment

Investigation or audit prior to an investment, divesture or selling transaction

Material facts are correct

Reduces the probability of risk

Technical and commercial experts

Comprehensive understanding

Adequately identified, mitigated and are being controlled

Concept to completion

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Parties Involved in Transaction Due Diligence

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Asset Transaction

Legal Consultants

Environmental Consultants

Sponsors/Owners /Buyers

Insurance Consultants

Lending Group

Financial Consultants

Technical Consultants/ Technical Due

Diligence

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Global Upstream M&A

Source: O&G Finance Journal

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The Assets

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2. Types of Services

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Typical Buyer Due Diligence process

Expert session with Seller’s technical team

Review of publicly available data

Review of key documents in VDR

Deep dive in VDR

Red Flag report

Access to further data (technical & commercial)

Clarification session with Seller’s management team

Opening of Virtual Data Room (VDR) or data from Seller

Detailed due diligence report

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Typical Vendor Due Diligence process

Clarification session(s) with Seller technical team

Site visits, including interviews with relevant personnel

Review of technical, environmental and commercial data

Assist in setting up the Virtual Data Room (VDR)

Draft Vendor Due Diligence Report

Access to further data (technical & commercial)

Issue of reliance letters to bidders

Kick-off meeting with Seller

Q&A Session(s) with potential buyers and/or their advisors

Provide input for the Information Memorandum

Final Vendor Due Diligence Report

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Typical Project Finance Due Diligence/IE Role Process

Technical and Contractual Document Review

Draft Report

Kick-off meeting with Mandated Lead Arranger or Senior Lenders

Construction Monitoring Reports

Final Report

Clarifications from SponsorsFeedback from MLAs or SLs

Completion Test and Certificate

Technical/Completion Supply/ Reserves Sales/Offtake/Charter

Operations and MaintenanceCompliance Environmental/Equator Principles

Financial Close

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3. Project Challenges

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Challenging Market for Investments

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Challenging Market for Assets

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Unproven Assets

New-build asset construction has significantly slowed in recent years.

The new risk is buying completed assets that have never been operated.

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New risks are created from:

– Never being through an operations acceptance protocol

– No owner representation during construction

– Immediately needing additional CapEx due to the possible change in operating region/field

– Example: Maersk Drilling acquired new-build harsh environment jack-up rig with a five-year drilling contract from Hercules

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Stacked Assets

Another new risk is buying completed assets that have been stacked.

The number of stacked assets are steadily increasing and so are the risks.

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Stacked Assets Missing Technical Factors

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Source: Oil and Gas Journal

Risks beyond Class requirements:

Drilling system (as applicable)

DP system (1/3 newer vessels)

Communication system

Accommodation systems

Automated electrical equipment

Automated mechanical equipment

Safety systems not covered under SOLAS

Technical interface with third party contractors equipment

Anything that is NOT on the Class Survey itemized list or covered under Statutory (Flag State) Certificates (i.e. Load Line, IOPP, IAPP)

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Recent US Pipeline Incidents

October 31 - pipeline mainline exploded and burned in Shelby County, Alabama

October 24 - pipeline ruptured on the Seaway Pipeline, in Cushing, Oklahoma

October 21 - 8 inch pipeline ruptured in Lycoming County, Pennsylvania

October 19 - contractor hit gas pipeline during work in Portland, Oregon

October 17 - 8-inch ammonia pipeline started leaking near Tekamah, Nebraska

September 10 – 1 year old pipeline ruptured near Sweetwater, Texas

September 9 - pipeline mainline leak was noticed in Shelby County, Alabama

September 5 - pipeline was hit by dredging operations in Bay Long, Louisiana

September 4 - pipeline broke in Kern County, California

August 12 – oil terminal pipeline plug failed and ignited in Nederland, Texas

July 6 - pipeline was noticed to be leaking in Goochland County, Virginia

June 23 – crude pipeline leaked in Ventura County, California

April 2 - pipeline girth weld cracked and was leaking near Freeman, South Dakota

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US Pipeline Incident Count

Source: Pipeline and Hazardous Materials Safety Administration reports

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US Pipeline Incident Cost

Source: Pipeline and Hazardous Materials Safety Administration reports

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4. General Technical and Commercial Solutions

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Benchmarking

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Contracts

Are standard industry contracts being used?

What are the penalties / liquidated damages?

Are the legal locations as expected?

Step-in / assignment rights?

What are the gaps between contracts?

What are the termination clauses?

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Engineering

Is the design proven?

What new technology is involved for this asset/region?

Lack of definition, compliance (gap review), rules & regulations?

Specialist reports, specifics and who performed?

Track record?

Software compatibility with the constructor?

Further risk based studies recommended?

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Quality

Delivery record contracted / actual?

Who will be doing the commissioning (fixed/variable)?

Where will acceptance protocol be carried out?

Protocol of delivery documentation (punch list / carry over)?

Transportation/Installation on site?

Pre-charter acceptance? Class/Certifications in place?

Quality Assurance, Quality Control and Quality Surveillance?

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Change Orders

Verifying that the Change Order process is applicable and followed:

– Project Management Plan

– Change Controls

– Standards, policies, plans and other docs

– Procedures for issuing, approving, validating and implementing

– Baseline changes

– Change Logs

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Condition/Construction Assessments

Where will construction take place?

How much is subcontracted and where?

Concurrent projects and manpower resourcing planned / actual / subcontracted?

Planning & scheduling should be consolidated, time-lined with critical path?

HSE / QA performance (LTI / defects)?

Is the asset being operated and maintained adequately?

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Commercial Risks during Construction

Source: The World Bank

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How much of the project is fixed price and how much is variable?

Is the contingency adequate?

Are the planned reserves adequate?

Is the asset value being maintained compared to the outstanding loan?

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Commercial Risks during Operations

Source: The World Bank

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5. Upstream

Technical Risks, Commercial Risks, Solutions and Examples

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Yard Experience

Korea Herald

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Yard Experience

Yard Team

Owners Team

Facilities

– Storage, Handling, Fabrication and Outfitting

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Offshore Transaction Technical Challenges

Condition of Asset(s)

Residual Transaction Risks

New Transaction Risks

Preserved Charter/Tender Contract

New Charterer/Tenderer

Required Refurbishment and Replacement

New Operating Requirements

New Region Requirements

Mobilization

Insurance Coverage

Acceptance Criteria

Prior Maintenance

New Operating Crew/Team/Management

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Approach and Solutions

Key areas of competence:

Capital and operating cost assessment

Asset integrity reviews

Process safety reviews

Capacity management reviews

Operating and maintenance philosophy reviews and OpEx Modelling

Environmental reviews

Governance, risk management and compliance reviews

Review of decommissioning issues

Corporate responsibility and Business continuity plan reviews

Review of supply chain risks

Economic analysis

Pipeline integrity solutions

Failure analysis and Flow Assurance

Materials and corrosion control advisory

Solutions:

Risk Management Advisory

Technical Advisory

Technical Assurance, including Certification, Verification and Inspection

Noble Denton marine services

Offshore Classification

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Confidential

Project R, Mexico

Technical Advisory role during construction, delivery, acceptance and operations for Project Financing

Scope of Work

Technical:

Shipyard experience, manpower and main supplier evaluation;

Review of the main contracts and agreements;

Comparison of rig specification with operator requirements.

Operability:

Opine on the construction, commissioning and completion testing acceptance;

Opine on the O&M of the project.

Construction Monitoring:

Identification of the key risks, critical path items and site visits;

Opine on the financial and schedule details.

CAPEX:

Technical input to the financial model and assumption review;

Assist in preparing closing and drawdown certificates.

Operations:

Provide comment and advice to the lenders at determined operating milestones;

Support the lenders from technical perspective when any material issues arise.

Client

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3 semi-submersible rigs

Deal Value

Multiple

Assets

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Confidential

Project Pacific, South Korea

Technical Advisory role during construction and delivery for Project Financing

Scope of Work

Technical:


Comparison of rig specification with operator requirements.

Operability:


Opine on the O&M of the project;

Comment on the projected uptime level and the associated ramp-up curve.




Project and Contract Review:


Review the technical alignment of the contract.

CAPEX:


CAPEX / OPEX advice.

Client

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4 new-build drillships

Deal Value

USD $1.8 Billion

Assets

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Confidential

Project Cantarell, Mexico

Technical Advisory role during construction, delivery, acceptance and operations for Lenders

Scope of Work

Technical:



Review of main contracts and agreements and comparison to rig specification.

Operability:



Comment on the projected uptime level and the associated ramp-up curve.

CAPEX:

Technical input to the financial model, assumption review and CAPEX / OPEX.

Operations:



Valuations:

Fair Market Value analysis based on the asset’s factors using the MarketApproach, Cost Approach and Income Approach methods.

Client

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5 new-build jack-up rigs

Deal Value

Not disclosed

Assets

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Shelf Drilling

Project Shelf, Global

Technical Advisory role during operations for Lenders

Scope of Work

Condition Surveys:

Sample surveys of the Jack-ups inclusive of the following:

Jack-up Certification (Class & Statutory)

Outstanding Class Recommendations

Jack-up Externals

Jack-up Internals

Machinery Equipment

Lifting Equipment

Drilling Equipment

Towing & Mooring Equipment

Jack-up Operability

Safety Equipment

Jacking System

Valuations:


Client

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Deal Value

USD $1.05 billion

Assets

38 rigs in operation

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Project Ventures, Nigeria

Technical Advisory role during operations for Lenders

Scope of Work

Technical:

Yard experience and manpower;


Opine on the operator capabilities, experience and track record.

Condition Surveys:

Sample surveys of the assets inclusive of the following:

Certifications (Class & Statutory)

Outstanding Class Recommendations

Vessel Externals

Vessel Internals

Machinery Equipment

Towing & Mooring Equipment

Safety Equipment

Valuations:


Client

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197 assets in total:Supply vessels, Security

boats, Smaller inland vessels, dry dock yards

and marine support bases

Deal Value

Not disclosed

Assets

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Confidential

Project OSA, Mexico

Technical and Environmental Advisory role during operations for Lenders

Scope of Work

Operability:




Project structure review and roles of the parties;

Review of the main contracts and agreements.

Condition Survey:

Survey of the asset inclusive of the following:

Certifications (Class & Statutory)

Vessel External/Internal

Machinery Equipment

Cranes

Safety Equipment

Environmental:

Compliance with environmental regulations (Equator Principles);

Planned operational monitoring against regulations.

Client

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1 multi-purpose vessel

Deal Value

Not disclosed

Assets

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6. Midstream


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Pipeline Failure Groupings

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AGA Report 200

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Midstream Asset Integrity Review

Condition of tanks, infrastructure and utilities

Day to Day activities:

– Corrective Maintenance, Preventative Maintenance and Backlogs

Inspections - EEMUA 159, API 653:

– Interim

– Major

CapEx / Repairs

Current operations:

– Availability – operating as expected taking into account preventative and corrective maintenance.

– Utilization – ratio of actual production by design capacity

– Operational Incidents

Decommissioning:

– Removal and same environmental state as compared to prior to permit

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Environment – Preventing an impact

Integrated Pollution Prevention andControl (IPPC):

– Product dependant

– Receptor dependant

Compliance Focus:

– Air (CO2 & fugitive)

– Water (disposal & contamination)

– Soil (contamination)

Contamination:

– Historical and current soil andground water

– CapEx

– Excavation and disposal offsite as hazardous waste

– Heavily contaminated material with hydrocarbons

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Pipeline Integrity Management System

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Identify Credible Threats

Design, Fabrication and Installation Issues

Internal/External degradation mechanisms

3rd Party Inspection

Structural

Natural Hazard

Incorrect operation

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Pipeline Buyer/Seller Due Diligence

Data Room Support

– Record validation

– Gap analysis

Risk Assessment

– Red flag assessment

– Failure mode effect analysis

Integrity Review

– Pressure test review

– Integrity assessment evaluation

– Corrosion prevention assessment

Operability Review

– Flow modeling and analysis

– Material and design validation

– Service history review

– Change of service assessment

Regulatory Compliance Review

Safety Management System evaluation

Business integration support services

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Future condition and OpEx & CapEx Assessment

Use technical review to assess whether CAPEX/OPEX estimates are reasonable

Review historical and future OPEX costs:

– Maintenance activities / OPEX

– Inspection & testing activities

– Management costs / Asset age

Review future CAPEX cost in line with any life extension studies:

– Replacement

– Network expansion

CAPEX estimates are reviewed in conjunction with market and regulatory statistics:

– Review life extension studies / or carry out life extension study

– Review and comment on potential future decommissioning obligations

– Review potential environmental issues

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Confidential

Liquid Bulk Terminal, Colombia

Technical due diligence to support project financing

Assets

Scope of Work

Technical review of a fleet of 136 assets including pusher tugs, tank barges, hopperbarges and LPG barges for submission to lenders

Scope included: Technical & Operational Review of Existing Barge and Pusher Fleet

Visual inspection of existing fleet delivered to sponsor in Columbia to assessquality of vessels and standard of maintenance onboard.

Technical Review of New-buildings under construction, including vesselspecification (including Makers’ List of equipment), yard capability, planned vs actualschedule for delivery and identify any issues which may impact the delivery time,cost and quality of the new-buildings.

Assessment of variations to contracts and effect on cost, delivery and any otherliquidated damages implications.

Shipyard Audits in Croatia and USA where the new-buildings are being constructed

Operational & Maintenance Review: including review of the OPEX andOperational & Maintenance (O&M) assumptions, trip schedules, vessel capacity andspeed.

Navigational review: Provide an independent opinion regarding the capability ofthe vessels to navigate the river system based upon the information given by theClient (i.e. river depths, widths currents on a seasonal basis.

Independent resale values for the vessels

Client

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Liquid bulk Barges

pushers

LPG Barges

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Project Loire, UK

Technical and Environmental Due Diligence for an offshore subsea gas development and onshore gas plant

Scope of Work

Organization & Governance: Proposed organization and operational readiness; Opine on the recent project progress history and current status; Likelihood of meeting first gas target.

Operations & Maintenance: Design, installation and commissioning assessment; Inspection & maintenance programme comparison against industry standards; Expected availability of the asset’s export routes; Future expansion debottlenecking.

Safety: Readiness to meet safety regulations.

Environmental: Existence of environmental regulatory permits; Readiness to meet emissions requirements.

Decommissioning: Evaluate the potential future abandonment obligations and related CAPEX.

OPEX: Review of the seller OPEX forecast; Compassion of the seller OPEX against typical industry benchmarks.

Client

Confidential

Deal Value

50

Not disclosed

Assets

500mmscf/d (expected) onshore gas processing terminal

2 subsea developments and 2 tie-backs

500 km of Offshore pipelines

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Project Vermeer, The Netherlands

Technical and Environmental Due Diligence for Gas Infrastructure

Scope of Work

Operations & Maintenance: Comment on the technical integrity of the assets; Confirm that the asset’s maintenance complies with industry standards; Opine on the performance and operation of the assets.

Safety:

Assess compliance with safety regulations and standards.

Environmental: Compliance with regulatory permits; Emissions performance and potential future impacts to operations.

Decommissioning:

Assess future abandonment liabilities and related capital costs.

CAPEX & OPEX: Review of the seller CAPEX & OPEX forecast based on findings from DD review; Compassion of the seller CAPEX & OPEX against typical industry benchmarks.

Client

Confidential

Assets

42 million Nm3

per day onshore gas processing terminal

470 km of offshore pipelines

Riser platform

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USD $240 million

Deal Value

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Project TOP, Brazil

Technical Advisory role during construction, delivery, acceptance and operations for Project Financing

Scope of Work

Technical:



Comparison of vessel specification with charterer requirements.

Operability:


Opine on the O&M of the project.




CAPEX:


Review of the milestone EPC disbursements and change orders.

Operations:



Client

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2 pipe-lay vessels

Deal Value

Not disclosed

Assets

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Confidential

Project TLO, Rotterdam

Technical Advisory role during construction and delivery for Project Financing

Scope of Work

Technical:


Comparison of vessel specification with operator requirements.

Operability:









CAPEX:


Assist in preparing closing and drawdown certificates;

CAPEX / OPEX advice.

Client

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Deal Value

Multiple

Assets

5 pipe-lay vessels

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Project Impala, Colombia

Technical Due Diligence for Maritime Assets

Scope of Work

Technical / Completions:

Vessel design review;

Yard assessment.

Operability:

Opinion on capability of the vessels to navigate the river system;

Review of existing barge and pusher fleet.


Planned vs actual schedule for delivery;

Identification of any issues that may impact the delivery time;

Assessment of the cost and quality of the new-builds.

Completions:

Inspection of existing fleet;

Assessment of quality of vessels and standard of maintenance on-board.

CAPEX:

Independent valuation of the resale value of the vessels.

Client

Confidential

Deal Value

54

Not disclosed

Assets

136 assets including pusher tugs, tank barges, hopper barges and LPG barges

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Project Hidrovias, Paraguay

Technical Due Diligence of Waterway Pusher Tugs, Barges and Dry-dock

Scope of Work

Technical: Vessel designs;

Yard capability review.

Project and Contract Review: Project structure review and roles of the parties;



Construction Monitoring: Identification of the key risks, critical path items and site visits;

Review of the milestone EPC disbursements and change orders;

Opine on the financial and schedule details.Operations & Management: Assessment of the ship management approach;

Status of the inspection and maintenance strategy;



Client

Hidrovias do Brasil

Deal Value

55

USD $210 million

8 Pushers

Assets

Floating Dry-dock

144 Barges

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Project Store, Spain

Technical, Environmental & Commercial Due Diligence for an Underground Offshore Gas Storage Facility

Scope of Work

Process Design: Design and technology review; Expected reliability and availability of final design.Safety: High-level verification of the safety engineering and integrity of surface plant; Compliance with safety regulations and industry standards.Wells: Examination of design, drilling and completions; Overall integrity of injection, production and monitoring wells.Reservoir: Reservoir analysis and contamination review.Environmental: Compliance with environmental regulations throughout the project; Planned operational monitoring against regulations.CAPEX & OPEX: Independent parametric CAPEX projection and comparison with actuals; Examination and update to the OPEX projection for the 25 year design life.Financial: Audit of procurement-to-pay transactions and contracting behaviour.

Client

Confidential

Deal Value

56

USD $2,260 million

Onshore gas compression and treatment plant

Underground Storage site2 fixed platform13 wells

30 km of OffshorePipeline

Assets

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Project Othello, Germany

Technical, Environmental and Commercial Due Diligence for Gas Transmission Network

Scope of Work

Operations & Maintenance:

Technical integrity of assets, opined against industry standards;

Top-down Pipeline Integrity Management System (PIMS) review;

Benchmark asset performance, operation and maintenance with the industry.

Environmental:

Review and confirm existence of all relevant environmental regulatory permits;

Ensure operations prevent air, soil and groundwater contamination;

Analysis of historic and potential waste litigation, complaints or disputes;

CAPEX & OPEX:

Independent OPEX benchmarking analysis;

CAPEX market analysis;

Review of the seller CAPEX & OPEX forecast;

Ensure all material impacts are accounted for in the OPEX and CAPEX forecast.

Commercial:

Market and commercial assessment of the gas transport business;

Evaluation of system capacity extension on the revenue model.

Client

Confidential

Deal Value

57

USD $4,100 million

Assets

10,000 kmOnshore

Pipelines

200 Compressor Stations

1,500 Pressure reduction and metering stations

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Project Starfish, Sweden

Technical Due Diligence for a Gas Transmission Network

Scope of Work


Availability and utilization of the facility, opined against industry standards;

Maturity of the integrity management systems;

Status of inspection and maintenance program;

Assess the safety of the future planned development.

Safety:

Maturity of safety management systems;

Compliance with safety regulations and performance.

Environmental:

Compliance with regulatory permits;

Emissions performance and potential future impacts to operations.

CAPEX & OPEX:


Update to the OPEX and CAPEX forecast with findings from the DD.

Client

Confidential

Deal Value

58

USD $665 million

One trunk line and 600km of branch line

Assets

Underground storage facility

Meteringstation

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Project Bonny, Nigeria

Technical Due Diligence for LNG Carriers

Scope of Work

Organization & Governance:

Review of the Fleet management strategy;

Review of the Fleet managers’ performance relating to ship condition, maintenance, safety and environmental;

Review of the Ship manager’s approach to ensuring compliance with international and national regulations.


Condition & operational history of ships;

Life expectancy of the fleet and required refurbishment plans;

Opine on the ship technology;

Classification, registration and certification of the fleet.

Commercial:

Contractual and financial arrangements based on lenders’ requirements.

Client

Bonny Gas Transport

Deal Value

59

USD $680 million

13 LNG carriers

Assets

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Risk Picture

From the identified threats:

– What is the risk of failure now?

– What is the cumulative risk profile?

– What are the risks going forward?

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LNG Challenges

Peak Shaving - send out gas when commercial conditions are most advantageous

– Handling Boil-Off Gas

– Flare or vent

– Use as fuel gas e.g. Combined Heat and Power Plant

– Export to local distribution zone

– Reliquefaction

– Weathering

Base load - continuous send out of gas to distribution network

– Availability and reliability

– Low throughput (minimum send out) can challenge plant integrity

Offloading

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Infrastructure Project Solutions – Pre-Close (1)

Project Participants

– Sponsors, Project Company, EPC Contractor, O&M Contractor, OEMs, etc.

Project site Assessment

– Suitability, logistics, soil, climatic constraints, required infrastructure, etc.

Review of Technology and Plant Design

– Detailed technical review of design, capacity, capability, suitability, critical components, supply chain and installations

Input Assessment

– Resource assessments

Project Contracts Review

– Key aspects of agreements, contracts, strategies and penalties

Construction and Completion Testing Review

– Schedule of construction, milestones, interface, commissioning, completion and start-up

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Infrastructure Project Solutions – Pre-Close (2)

O&M Structure Review

– Operating definitions and specifications

Interconnection Review

– Adequacy, reliability, redundancy and availability of proposed connection arrangements

Licenses and Permits

– Necessary licenses and permits have been granted to construct and operate

Cost and Schedule

– Costs, expenses, contingencies and cash flow

Financial Model Assumptions Review

– Engineering and operational assumptions used in the financial model including project costs, performance assumption, O&M cost and Reserve Accounts

Project Set-up / Market

– Technology as compared to region market and competitors

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Infrastructure Project Solutions – Post-Close

Construction:

Construction Monitoring

– Progress, quality control, disbursements, change orders and risk changes

Acceptance Testing review, witnessing and reporting

– Testing methodology, plans, procedures and reports

Consultant Certificates and Construction Completion

– Completion, punch lists, guarantees and warranty

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Operations:

Operational performance

– Production, availability, efficiency, budget, issues, deviations, etc.

Condition assessments

Safety performance

Remaining punch lists

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Project Meteorite, UK

Technical & Environmental Due Diligence for Bio-LNG Infrastructure

Scope of Work


Availability and utilization of the facilities;

Maturity of the integrity management systems;

Status of inspection and maintenance programs.

Safety:

Maturity of safety management systems;

Compliance with safety regulations and performance.

Environmental:

Compliance with regulatory permits;

Emissions performance and potential future impacts to operations;

Historical land & groundwater contamination and subsequent liabilities.

CAPEX & OPEX:


Update to the OPEX and CAPEX forecast with findings from the DD.

Client

Confidential

Deal Value

66

Not disclosed

5,300 tonne per annumLiquefaction Plant

11 retail sites

Assets

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Project SPEC, South America

IE role for the Project Financing of a LNG regasification terminal

Scope of Work

Design and Technical Review: Assess appropriateness of the infrastructure, site and technology; Confirm that the technical specifications of Contracts are aligned.Project Contracts and Documents: Assess compatibility of the Contracts’ terms and conditions with Project’s objectives; Opine on liquidated damages, penalties/bonuses and other contingencies.Construction Arrangements, Schedule, Capital Cost Estimate: Review the reasonableness of the construction schedule and cost estimate; Advice the lenders on potential change in the scope of work; Review the financial model and opine on the technical/operational assumptions used. Permits and Licences: Confirm and provide a detailed current status of the necessary licences.O&M Philosophy and Costs: Review and evaluate staffing plan, O&M plan and adequacy of O&M budget.Review of Financial Model: Opine on the technical assumption that impact the financial model.Completion Testing: Provide input to and advice on the suitability of the testing.Site visits: A site visit and draw down report at each milestone.

Client

Confidential

Deal Value

67

Ongoing

Assets

Onshore gas processing terminal

Jetty connection to FSRU

Pipeline

DNV GL © 2016

Ungraded

03 November 2016

Project Deep Blue, Norway

Technical Buyer Due Diligence for Offshore Oil and Gas Assets and Exploration Licences

Scope of Work

Technical integrity: Review systems and processes for effective maintenance & inspection

management;

Opine on the Seller’s philosophy, asset condition and preventative & corrective maintenance statistics.

Operational performance: Top down approach to assess: availability, reliability and operating efficiency;

Review historic operational performance, throughput, maintenance and projects.

Reserves & Wells:

Review of historical production data and review quality control of reservoir simulation models;

Identify special well construction risks.

CAPEX, OPEX, ABEX & DRILLEX:

Historical review of the expenditures and comparing those with the forecast expenditure accounting for existing and planned capital projects in the pipelines;

CAPEX/OPEX forecast review in light of the technical findings;

Produce an independent CAPEX, OPEX, ABEX and DRILLEX profile forecast for P10, P50 and P90 scenarios.

Client

Confidential

Deal Value

68

Not disclosed

Assets

Existing offshore assets including an FPSO, semi-sub

& subsea tieback

Exploration licences

DNV GL © 2016

Ungraded

03 November 2016

Project Panda, Norway

Technical and Environmental Vendor Due Diligence on Pipelines, Riser Platform & Gas Process Terminal

Scope of Work

Organization & Governance: Company organizational set up and management approach; Company philosophy documents.Terminal Operations & Maintenance: Availability and utilization of the facility, opined against industry standards; Maturity of pipeline and asset integrity management systems; Status of inspection and maintenance programs.Safety: Maturity of safety management systems; Opine on the condition and performance of the process plants and gas terminals; Compliance with safety regulations and performance.Environmental: Compliance with regulatory permits; Review of the historical and possible future leaks and the liabilities as a result of

contamination; Review potential future decommissioning obligations.CAPEX & OPEX: Review of the vendor’s CAPEX & OPEX forecast including expansion CAPEX; Opinion on the OPEX and CAPEX forecast with findings from the DD.

Client

Confidential

Deal Value

69

Not disclosed

5 platforms

Assets

17 pipelines totalling 7,500km

2 Process plants&7 Gas Terminals

DNV GL © 2016

Ungraded

03 November 2016

Project Neptune, UK

Technical and Environmental Due Diligence on an Offshore Platform and FPSO including Subsea systems

Scope of Work

Operations & Maintenance: Availability and utilization of the facility, opined against industry standards; Status of inspection and maintenance programs; FPSO compliance with verification schemes; Opine on life extension plans and projects.Safety: Compliance with safety regulations and performance.Environmental: Compliance with regulatory permits; Emissions performance and potential future impacts to operations.Decommissioning: Potential future decommissioning obligations and estimated CAPEX.CAPEX & OPEX: Review of the seller CAPEX & OPEX forecast; Update to the OPEX and CAPEX forecast with findings from the DD.

Client

Confidential

Deal Value

70

FPSO – USD $105 million

15,000bbls/dFPSO

14,000bbls/d Offshore Platform

4 subseasystems

Assets

DNV GL © 2016

Ungraded

03 November 2016

Other Technical Reference: e.g. Environmental Project References

72

Client Project Name Project Description

BP Review of BP Group Defined Practice against IFC Performance Standards

A team from DNV GL UK provided Environmental and Social Responsibility subject matter expertise into the assessment of the design effectiveness of the Draft E&S Group Defined Practice (GDP) for BP. The team assessed the completeness, appropriateness and applicability of the GDP against industry benchmarks and against IFC Performance Standards & identified risks that would influence effective implementation given the diverse locations/businesses within BP.

Banks and Industry

Equator Principles Studies

DNV GL have conducted several Equator Principle studies assessing their implementation in project financing. DNV GL have reviewed the quality of due diligence and environmental and social impact assessments conducted on behalf of the lender, and have recommended opportunities for improvement. DNV GL has worked for clients e.g. Santander, Bank of Tokyo-Mitsubishi, KFW, Barclays

Oil and Gas clients

EIA, ESIA, EHSIA Over the two decades, DNV GL have conducted dozens of EIAs worldwide in the UK, Middle East, Americas and Norway. DNV GL are currently managing the EIA for the decommissioning of the Shell Brent Field, which will be the most high-profile EIA in the UK in 2016. DNV GL can provide more detail on request.

Confidentialclients

Due Diligence studies –environmental

DNV GL have performed numerous environmental Due Diligence studies across the globe for both onshore and offshore oil and gas facilities. The studies confirm whether environmental regulatory permits, emissions requirements, EHS performance and potential environmental liabilities are in place/identified/adequately managed.

Atlantic LNG Environmental Management System

In 2014, DNV GL assisted Atlantic LNG in Trinidad and Tobago with the development of their EMS to ISO14001 standards.

DNV GL © 2016

Ungraded

03 November 2016

Client

Assets

Scope of Work

• Environmental due diligence assessment of 242 oil and gas operations in the Dominican Republic, Jamaica and St. Martens.

• Modified ASTM Phase 1 review of existing data room environmental studies and field inspection of facilities (walkthroughs).

• Identified facilities that required additional environmental reviews and/or ASTM Phase 2 studies (Environmental sampling, groundwater monitoring wells, clean-ups, house-keeping, waste management and/or remediation).

• Facility types included oil terminals, retail gas stations, warehouses, and airport fueling terminals.

• Primary deliverable was a risk ranking of all facilities and identification of potential environmental liabilities post acquisition.

• List of red flags for the investor, if any, related to compliance of the assets of the company with environmental regulations and industry standards.

• Conclusions and recommendations to the client for support of the decision process to acquire the assets or negotiate a financial hold-back or price discount.

Environmental due diligence

Confidential

Reference Project Marlin

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DNV GL © 2016

Ungraded

03 November 2016

Client

Assets

Scope of Work

• Environmental due diligence assessment of 167 of oil and gas operations in Haiti.

• Modified ASTM Phase 1 review of existing data room environmental studies and field inspection of facilities (walkthroughs).

• Identified facilities that required additional environmental reviews and/or ASTM Phase 2 studies (Environmental sampling, groundwater monitoring wells, clean-ups, house-keeping, waste management and/or remediation).

• Facility types included oil terminal, retail gas stations and airport fueling terminals.

• Primary deliverable was a risk ranking of all facilities and identification of potential environmental liabilities post acquisition.

• List of red flags for the investor, if any, related to compliance of the assets of the company with environmental regulations and industry standards.

• Conclusions and recommendations to the client for support of the decision process to acquire the assets or negotiate a financial hold-back or price discount.

Environmental due diligence

Confidential

Reference Project Guayaba

74

DNV GL © 2016

Ungraded

03 November 2016

Appraisal/Valuations

Estimating the Fair Market Value of assets would generally consider the following approaches:

• Method 1 - Market Approach: This approach researches the current market for identical or similar type properties that are for sale or were sold in order to compare and ascertain the value of the subject unit adjusted for age and condition.

• Method 2 - Cost Approach: Here the figure is arrived at by examining the total cost of the unit at the time of construction (or currently) and adjusting that amount for inflation and depreciation due to age.

• Method 3 - Income Approach: This method establishes the asset’s worth based on the amount that it will earn during the Remaining Useful Life after deductions for finance, operation, service, manning and administrative costs. Often referred to as the Discounted Cash Flow Method.

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DNV GL © 2016

Ungraded

03 November 2016

SAFER, SMARTER, GREENER

www.dnvgl.com

Acquire, Divest and Invest with Confidence

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Jarrett [email protected]