pacific exploration & production corporation dip budget

June 16, 2016 1

Pacific Exploration & Production Corporation

DIP Budget – Initial Cash Flow

Projection

CASH FLOW PROJECTION

DELIVERED SUBJECT TO THE TERMS

OF THE UNDERTAKING OF PACIFIC

EXPLORATION & PRODUCTION

CORPORATION DATED JUNE 16, 2016

Table of Contents

2

I. DIP Budget Assumptions

II. DIP Budget Detail

III. Financial Covenants

IV. Sensitivity Analysis

3

9

15

21


DELIVERED SUBJECT TO THE

TERMS OF THE UNDERTAKING

OF PACIFIC EXPLORATION &

PRODUCTION CORPORATION

DATED JUNE 16, 2016

3

DIP Budget - Initial Cash Flow

Projection

Assumptions






DATED JUNE 16, 2016

DIP Budget AssumptionsThe key assumptions related to the DIP Budget outlined in this package are the

following :

4

Consolidation The Cash Flow Projection contained herein (the « DIP Budget ») for Pacific Exploration & Production

Corporation (« Pacific » or the « Company ») has been prepared on a consolidated basis and does not

reflect intercompany transfers between and among Pacific and its subsidiaries.

The DIP Budget does not identify receipts and disbursements of individual entities.

Timing The DIP Budget is a weekly forecast spanning 30 weeks, from week ending June 4, 2016 through week

ending December 24, 2016 (27 weeks after initial DIP loan funding).

A plan is confirmed and Pacific exits from CCAA proceedings in the week ending November 5, 2016,

approximately 27 weeks after filing.

Forecast Basis The DIP Budget considered cash, accounts receivable & accounts payable balances as of May 28, 2016

(opening balance sheet).

Receipts and disbursements as of week 6/4 until 8/13 of the DIP Budget are substantively similar to the

Company’s 13-week projection.

After 11 weeks, the DIP Budget applies production, operating expenses, and capital expenditures

assumptions substantively similar to the Business Plan’s ‘Strip + Consensus Reduced Capex OBC 48”

scenario.

Development drilling and facility capital expenditures are based on the 2016 requirements, excluding

capital expenditures in Colombia on which the Company expect to receive a moratorium from ANH for

2016.

Exploration capital commitments and/ or applicable penalties were included for a total cost of $103.61

million for 2016. The assumptions are as follows:

All Colombia penalties will be deferred as a result of negotiations with the ANH.

Capitalized G&A for Colombia exploration activities will be reduced to $15 million.

Drilling capital committed for Blocks Llanos-25 and Sabanero (totaling $8.7MM) is going to be

incurred over the DIP Budget period.

All Peru commitments/ penalties for 2016 will be incurred over the DIP Budget period, totaling $10

million over the DIP Budget period.

Exploration commitments for Brazil will be included at a cost of $69.9MM over the DIP Budget

Period.

Volumes, operating expenses, and capital expenditures use projections from the Company’s

optimization models.






DATED JUNE 16, 2016

DIP Budget Assumptions (cont’)

5

Pricing The ICE Brent benchmark price is based on the following assumptions:

The actual average ICE BRENT was applied for the month of May 2016, and held constant in June

and July.

Futures prices were used for August through December 2016 based on futures as published by ICE

at market close May 31, 2016.

Realized price differentials:

A $6/boe differential was applied for the months of May, June and July on the basis of contracts

made available by the Company.

Thereafter, the DIP model employs increased differentials ($7.00-$8.00/boe range) to reflect

uncertainty surrounding macro-economic factors which may impact realized pricing

No hedging is assumed during the DIP Budget forecast period.

DIP Facility Company will have access to $480 million in DIP proceeds in week ending June 25, 2016, less minimum

cash requirements of $200 million (which include $50M reserve in PwC account).

Annual interest rate of 12.0% for $500 million loan value, paid monthly in the last week of each month

Covenants include minimum cash requirement of $200 million and the following disbursement restrictions,

which are tested every four weeks on a cumulative basis:

Disbursements to Company professionals not to exceed 125% of this DIP Budget

Disbursements for JV Funding not to exceed 130% of this DIP Budget (to be reforecast at a later date

for periods after week 11)

Net disbursements (total disbursements less all professional disbursements and JV funding

disbursements) not to exceed 125% of this DIP Budget

LC Facility & Treatment Company will have access to $134 million LC facility in week ending June 25, 2016

Annual fees of 5.0%, paid monthly in the last week of each month

Letters of credit with institutions in the revolving facility will be addressed through the $134 million LC

facility, and no cash collateralization associated with such letters of credit will be necessary after filing

Exit Facility After exit in week ending November 5, 2016, the DIP Facility outlined above will convert to $250 million

exit facility

No additional funding pursuant to such facility is assumed

Annual interest rate of 10.0% on $250 million face value, paid monthly in the last week of each month

It is assumed that there is no minimum cash requirement or covenants associated with this facility






DATED JUNE 16, 2016


6

Accounts Receivable During the Dip Budget’s first 11 weeks (as of week 6/4 until 8/13), receipts are substantively consistent

with the Company’s 13-week forecast and based on a 22 days sales outstanding.

After 11 weeks (i.e. after August 13th), production collections are based on a 28 days sales outstanding.

Accounts Payable The DIP Budget splits accounts payable balances between pre-2016 payables and new payables

generated in 2016. Based on Company ledger, the DIP Budget considers that total accounts payable as

of May 28, 2016 is $333 million (numbers are on net basis).

New 2016 payables are assumed to be paid as follows:

Production, operating and SG&A costs – all such expenses are paid in approximately 3 months; 8% is

paid in each of the 12 weeks following the week of incurrence, with the exception of the fourth week in

which 12% is paid

Capital expenditures (excluding exploration costs for Brazil & Peru) – all such expenses are paid in

approximately 5 months; 8% is paid in each of weeks 9 through 20 following the week of incurrence,

with the exception of the week 12 in which 12% is paid

Exploration capital commitments for Brazil and Peru assets were assumed to be payable within 30

days of the week of incurrence (through cash calls from JV partners).

Tax As of December 31, 2015, the Company’s VAT receivables totaled $109 million. None of this is expected

to be collected during the DIP Budget forecast period

The Company continues to pay VAT on operating costs, SG&A and capital expenditures. The DIP Budget

assumes VAT payments equal to 14.0% of production and operating costs and 1.9% of SG&A are

recoverable, totaling $25 million from week ending June 25, 2016 to week ending December 24, 2016. No

recovery is projected during the DIP Budget forecast period

As of December 31, 2015, the Company’s income tax receivable totaled $207 million. None of this is

expected to be collected during the DIP Budget period.

It is assumed that the Company pays withholding tax on 3.3% of Colombian production revenues monthly.

Such payments total approximately $21 million from week ending June 25, 2016 to week ending

December 17, 2016.

The Company will pay $13 million for the Wealth Tax from week ending June 25, 2016 to week ending

December 17, 2016.






DATED JUNE 16, 2016


7

Asset Sales The DIP Budget reflects the following asset sales:

The sale of the “oil terminal” portion of Pacific Infrastructure Ventures Inc., which will net the Company

approximately $110 million in week ending November 5, 2016.

The sale of the “dry cargo” portion of Pacific Infrastructure Ventures Inc., which will net the Company

approximately $60 million in week ending December 3, 2016.

The sale of land owned by Major Oil to the Rubiales Joint Venture in week ending July 9, 2016.

Negotiations between the Company and Ecopetrol are ongoing and price has not been finalized. DIP

Budget reflects an estimate of $17.9 million in proceeds.

Sale of pipe materials is assumed to net $6 million in week ending November 5, 2016, with additional

proceeds of $6 million occurring in week ending December 3, 2016.

There are no assumed sales of tax refunds or credits (including Títulos de Devolución de Impuestos

Nacionales) during the DIP budget period.

Rubiales Termination

Assumptions

$33 million funded into Joint Venture account over June and July primarily for funding of Meta Petroleum’s

portion of environmental clean-up obligations, severance of property-level employees and the land

purchase from Major Oil, in week ending July 9, 2016.

$10.3 million as holdback refunds, in week ending July 9, 2016.

$17.9 million in proceeds received from the sale of the land owned by Major Oil in week ending July 9,

2016.






DATED JUNE 16, 2016


8

Professional Fees Professional fees are based on best estimates and the guidance provided by each professional

Payments to professionals continue to be made in the ordinary course through the bankruptcy period, with

disbursements primarily occurring on the 10th day of each month for the work performed during the prior

month

Success fees are paid at emergence from bankruptcy with the exception of a portion of Lazard’s success

fee.

The DIP Budget for professional fees does not include fees for legal counsel of certain local jurisdictions,

including British Columbia, Bermuda, Barbados and the British Virgin Islands. We estimate the monthly

fees in respect of such external counsel to be $400,000 per month in the aggregate.

The DIP Budget does not include fees incurred by the Company in respect of day-to-day legal matters and

is only with respect to professional fees incurred as a result of the restructuring transaction.

Dividends Includes $19 million in dividends from Pacific Midstream in week ending September 24, 2016.

KERP The DIP Budget includes a $14 million KERP

The KERP is paid 25% in the week of bankruptcy filing and 75% upon bankruptcy emergence

LNG Project Continued payment of $1 million per month during the forecast period for settlement with Ex Mar

Cash Balances Assumes the free flow of cash across borders, jurisdictions and between the local branches

Unrestricted cash balance of $107 million at May 28, 2016

Available cash does not include JVA and other restricted cash






DATED JUNE 16, 2016

9

DIP Budget Initial Cash Flow

Projection

Detail






DATED JUNE 16, 2016

DIP Budget - June 4 to July 9

10

Period Ending 6/4/16 6/11/16 6/18/16 6/25/16 7/2/16 7/9/16

Week # 1 2 3 4 5 6

(all figures in USD thousands, unless otherwise stated)

Aggregate Cash Flows

Operating Receipts 16.376 62.790 26.624 22.267 29.659 47.284

Asset Sales - - - - - 17.900

Other - - - - - -

Total Receipts 16.376 62.790 26.624 22.267 29.659 65.184

Net Disbursements (26.824) (19.571) (27.709) (52.684) (44.329) (32.344)

Joint Venture Funding (4.060) (22.616) (3.810) (10.880) (2.023) (60.926)

Company Professional Fees (488) (5.688) - (12.250) - (1.458)

Banks', Bondholders' and Other Professional Fees - (5.487) - - - (2.097)

Total Disbursements (31.372) (53.362) (31.519) (75.814) (46.351) (96.825)

Aggregate Cash Flow (14.997) 9.428 (4.894) (53.547) (16.692) (31.641)

Cash Balances

Starting Unrestricted Operating Cash 107.000 92.003 101.431 96.537 522.990 506.297

Aggregate Cash Flow (14.997) 9.428 (4.894) (53.547) (16.692) (31.641)

DIP Loan Funding - - - 480.000 - -

Ending Unrestricted Operating Cash [1] 92.003 101.431 96.537 522.990 506.297 474.656

Minimum Unrestricted Cash Covenant - - - (200.000) (200.000) (200.000)

Cash Cushion Above Min Cash Covenant 92.003 101.431 96.537 322.990 306.297 274.656

Starting Cash in Cash Collateral Cash [2] - - - - 480.000 422.990

DIP Loan Funding - - - 480.000 - -

Transfers to / (from) Cash Collateral Accounts - - - - (57.010) (16.692)

Ending Cash in Cash Collateral Accounts - - - 480.000 422.990 406.297

Cumulative Transfers to / (from) CCAs - - - - (57.010) (73.703)

Ending Cash in Operating Accounts 92.003 101.431 96.537 42.990 83.308 68.359

[1] Between weeks 4 and Exit (assumed to be week 23) Unrestricted Operating Cash includes $50m in relation to the Colombian Recognition Order Cash (as defined in the DIP Indenture dated June 22, 2016).

[2] Includes Colombian Recognition Order Cash

CASH FLOW PROJECTION DELIVERED

SUBJECT TO THE TERMS OF THE

UNDERTAKING OF PACIFIC



DIP Budget - July 16 to August 20

11

Period Ending 7/16/16 7/23/16 7/30/16 8/6/16 8/13/16 8/20/16

Week # 7 8 9 10 11 12




Asset Sales - - - - - -

Other - - - - - 5.272

Total Receipts 3.726 46.732 50.750 3.493 2.704 52.121


Joint Venture Funding (7.954) (14.129) (17.699) (25.285) (9.662) (590)

Company Professional Fees - - - (3.075) - -

Banks', Bondholders' and Other Professional Fees - - - (3.842) - -


Aggregate Cash Flow (22.653) (9.659) 7.325 (59.703) (23.608) 15.428

Cash Balances


Aggregate Cash Flow (22.653) (9.659) 7.325 (59.703) (23.608) 15.428

DIP Loan Funding - - - - - -


Minimum Unrestricted Cash Covenant (200.000) (200.000) (200.000) (200.000) (200.000) (200.000)


Starting Cash in Cash Collateral Cash [2] 406.297 374.656 352.004 342.345 349.670 289.967


Transfers to / (from) Cash Collateral Accounts (31.641) (22.653) (9.659) 7.325 (59.703) (23.608)

Ending Cash in Cash Collateral Accounts 374.656 352.004 342.345 349.670 289.967 266.359

Cumulative Transfers to / (from) CCAs (105.344) (127.996) (137.655) (130.330) (190.033) (213.641)









DIP Budget - August 27 to October 1

12

Period Ending 8/27/16 9/3/16 9/10/16 9/17/16 9/24/16 10/1/16

Week # 13 14 15 16 17 18




Asset Sales - - - - - -

Other - 152 203 - 19.086 78

Total Receipts 24.409 25.088 25.143 24.009 43.095 24.170


Joint Venture Funding (590) (1.744) (1.744) (1.744) (1.744) (1.744)

Company Professional Fees - - (2.744) - - -

Banks', Bondholders' and Other Professional Fees - - (3.742) - - -


Aggregate Cash Flow (17.580) (28.594) (15.978) (4.029) 11.126 (8.297)

Cash Balances





Minimum Unrestricted Cash Covenant (200.000) (200.000) (200.000) (200.000) (200.000) (200.000)


Starting Cash in Cash Collateral Cash [2] 266.359 281.787 264.207 235.613 219.635 215.606


Transfers to / (from) Cash Collateral Accounts 15.428 (17.580) (28.594) (15.978) (4.029) 11.126

Ending Cash in Cash Collateral Accounts 281.787 264.207 235.613 219.635 215.606 226.731










DIP Budget - Oct 8 to Nov 12

13

Period Ending 10/8/16 10/15/16 10/22/16 10/29/16 11/5/16 11/12/16

Week # 19 20 21 22 23 24




Asset Sales - - - - 116.000 -

Other 468 - - - (1.240) (496)

Total Receipts 24.949 23.825 23.825 23.825 139.646 23.406


Joint Venture Funding (1.913) (1.913) (1.913) (1.913) (3.845) (3.845)

Company Professional Fees (2.835) - - - (9.390) -

Banks', Bondholders' and Other Professional Fees (4.062) - - - (15.029) -



Cash Balances





Minimum Unrestricted Cash Covenant (200.000) (200.000) (200.000) (200.000) - -


Starting Cash in Cash Collateral Cash [2] 226.731 218.434 209.264 207.676 201.443 -


Transfers to / (from) Cash Collateral Accounts (8.297) (9.170) (1.588) (6.233) - -

Ending Cash in Cash Collateral Accounts 218.434 209.264 207.676 201.443 - -










DIP Budget - Nov 19 to Dec 24

14

Period Ending 11/19/16 11/26/16 12/3/16 12/10/16 12/17/16 12/24/16

Week # 25 26 27 28 29 30




Asset Sales - - 66.000 - - -

Other - - (382) (509) - -

Total Receipts 23.338 23.338 89.534 23.410 22.898 22.898


Joint Venture Funding (3.845) (3.845) - - - -

Company Professional Fees - - - (2.000) - -

Banks', Bondholders' and Other Professional Fees - - - (563) - -


Aggregate Cash Flow (4.659) (8.598) 59.823 (6.235) (4.378) (4.209)

Cash Balances


Aggregate Cash Flow (4.659) (8.598) 59.823 (6.235) (4.378) (4.209)



Minimum Unrestricted Cash Covenant - - - - - -


Starting Cash in Cash Collateral Cash [2] - - - - - -


Transfers to / (from) Cash Collateral Accounts - - - - - -

Ending Cash in Cash Collateral Accounts - - - - - -










15


Projection

Financial Covenants






DATED JUNE 16, 2016

Financial covenants

June 25 to July 16

16

Period Ending 6/25/16 7/2/16 7/9/16 7/16/16

Week # 4 5 6 7


Covenants

Professional Fees Covenant

Weekly Proj. Company Professional Fees Disbursements 12.250 - 1.458 -

Cumulative Proj. Company Professional Fees Disbursements 12.250 12.250 13.708 13.708

Covenant 125,0%

Maximum Allowable Company Professional Fee Disbursements 17.134

Joint Venture Funding Covenant

Weekly Proj. Joint Venture Funding Disbursements [1] 10.880 2.023 60.926 7.954

Cumulative Proj. Joint Venture Funding Disbursements 10.880 12.903 73.829 81.782

Covenant 130,0%

Maximum Allowable Joint Venture Funding Disbursements 106.317

Net Disbursements Covenant

Weekly Projected Total Disbursements 75.814 46.351 96.825 26.378

Less: Weekly Professional Fees Disbursements (12.250) - (3.555) -

Less: Weekly Joint Venture Funding Disbursements [1] (10.880) (2.023) (60.926) (7.954)

Net Disbursements 52.684 44.329 32.344 18.425

Cumulative Net Disbursements 52.684 97.013 129.357 147.782

Covenant 125,0%

Maximum Allowable Net Disbursements 184.727

[1] To be updated for the August Cash Flow Projection






DATED JUNE 16, 2016

Financial covenants

July 23 to August 13

17

Period Ending 7/23/16 7/30/16 8/6/16 8/13/16

Week # 8 9 10 11


Covenants


Weekly Proj. Company Professional Fees Disbursements - - 3.075 -


Covenant 125,0%



Weekly Proj. Joint Venture Funding Disbursements [1] 14.129 17.699 25.285 9.662

Cumulative Proj. Joint Venture Funding Disbursements 95.911 113.610 138.895 148.557

Covenant 130,0%

Maximum Allowable Joint Venture Funding Disbursements 193.124



Less: Weekly Professional Fees Disbursements - - (6.917) -

Less: Weekly Joint Venture Funding Disbursements [1] (14.129) (17.699) (25.285) (9.662)



Covenant 125,0%








DATED JUNE 16, 2016

Financial covenants

August 20 to Sept 10

18

Period Ending 8/20/16 8/27/16 9/3/16 9/10/16

Week # 12 13 14 15


Covenants


Weekly Proj. Company Professional Fees Disbursements - - - 2.744


Covenant 125,0%



Weekly Proj. Joint Venture Funding Disbursements [1]

Cumulative Proj. Joint Venture Funding Disbursements

Covenant

Maximum Allowable Joint Venture Funding Disbursements



Less: Weekly Professional Fees Disbursements - - - (6.485)

Less: Weekly Joint Venture Funding Disbursements [1] - - - -



Covenant 125,0%








DATED JUNE 16, 2016

Financial covenants

Sept 17 to Oct 8

19

Period Ending 9/17/16 9/24/16 10/1/16 10/8/16

Week # 16 17 18 19


Covenants


Weekly Proj. Company Professional Fees Disbursements - - - 2.835


Covenant 125,0%





Covenant




Less: Weekly Professional Fees Disbursements - - - (6.896)

Less: Weekly Joint Venture Funding Disbursements [1] - - - -



Covenant 125,0%








DATED JUNE 16, 2016

Financial covenants

Oct 15 to Oct 29

20

Period Ending 10/15/16 10/22/16 10/29/16

Week # 20 21 22


Covenants


Weekly Proj. Company Professional Fees Disbursements - - -

Cumulative Proj. Company Professional Fees Disbursements 22.361 22.361 22.361

Covenant

Maximum Allowable Company Professional Fee Disbursements




Covenant



Weekly Projected Total Disbursements 25.413 30.058 29.436

Less: Weekly Professional Fees Disbursements - - -

Less: Weekly Joint Venture Funding Disbursements [1] - - -

Net Disbursements 25.413 30.058 29.436

Cumulative Net Disbursements 575.524 605.582 635.018

Covenant

Maximum Allowable Net Disbursements







DATED JUNE 16, 2016

21


Projection

Sensitivity analysis






DATED JUNE 16, 2016

Sensitivity analysisFinancial covenants

22

Period Ending 11/5/16 11/12/16 11/19/16 11/26/16 12/3/16 12/10/16 12/17/16

Week # 23 24 25 26 27 28 29


Covenants


Weekly Proj. Company Professional Fees Disbursements 2,835 - - - 2,790 - -

Cumulative Proj. Company Professional Fees Disbursements 25,196 25,196 25,196 25,196 27,986 27,986 27,986

Covenant 125.0% 125.0%

Maximum Allowable Company Professional Fee Disbursements 31,495 34,982




Covenant



Weekly Projected Total Disbursements 51,264 27,956 27,997 31,937 41,296 27,082 27,276

Less: Weekly Professional Fees Disbursements (6,896) - - - (8,669) - -

Less: Weekly Joint Venture Funding Disbursements [1] - - - - - - -

Net Disbursements 44,368 27,956 27,997 31,937 32,627 27,082 27,276

Cumulative Net Disbursements 679,386 707,342 735,339 767,276 799,903 826,985 854,261

Covenant 125.0% 125.0%

Maximum Allowable Net Disbursements 849,233 999,879


The following section of this presentation constitute a sensitivity analysis in order to foreseen what

would be the required financial covenants of the Company, as per the DIP Indenture dated June 22, 2016,

if the DIP Budget exit date of November 5, 2016 is delayed to the end of the 26 weeks after initial DIP loan

funding (December 22, 2016).






pacific exploration & production corporation dip budget

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