NOIA Annual Meeting April 2016

1. “Where Are We Headed, and Who Pays For It?” James K. Wicklund Managing Director, Research April 2016 NOIA Annual Meeting April 2016 Source: Atwood DISCLOSURE APPENDIX AT THE BACK OF THIS REPORT CONTAINS IMPORTANT DISCLOSURES, ANALYST CERTIFICATIONS, AND THE STATUS OF NON-US ANALYSTS.  US Disclosure: Credit Suisse does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the Firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. 

2. Who Are the Players Now? • Deepwater has historically been the domain of major oil companies and national oil companies but in the last few years, Deep Gulf, LLOG, Anadarko, Stone Energy, Cobalt, Kosmos and others have joined the ranks and have made an impact. • Now that oil prices have corrected down and the returns by some of the biggest oil companies were substandard, even with $100+ oil prices, many have stepped away from deepwater to focus on shorter cash return markets, which clearly included US unconventional.

3. Money Money Money • What happens now in deepwater? Can the independents continue to play and if so, what funding sources are available? • Deep Gulf is tied to First Reserve • Overall private equity has raised over $100 billion for E&P • Equity offerings continue to hit the market • New OCC regulations make lending to any E&P over 4x leveraged difficult • Where does the funding come from? Internal cash flow, capital markets, banks or private equity?

4. What are the Biggest Challenges to a Return to deepwater? • Everyone talks about standardization and working earlier with the operators to reduce the cost to drilling, develop and produce oil and gas but offshore was going into a downcycle even at $100 oil. • What is the breakeven oil price to develop a field today? • Large scale independent projects • Shallow water and 2-3 subsea tiebacks • Floating LNG • Drilling rigs are in over-supply and equipment manufacturing is under-utilized. Do these companies continue to operate as they have in the past or will things be different this time? Are large scale developments a thing of the past and 1-3 well “fields” will be the wave of the future?

5. Shallow Water – Does it Work? • Shallow water offshore remains a different market and has a much wider participation base. Jack-up rigs continue to come out of shipyards but higher oil prices make shallow water economic first over deepwater. What is the future of our shelf and shallow drilling worldwide? •  The capital commitment, not just for the rig but for all aspects of exploration and development are lower as water depths get less. Does that market come back first and where? •  Wintershall tendered for a jackup rig in the Arabian Gulf. 41 rigs were bid. Who ends up buying these rigs from Chinese shipyards and where will they be put to work if at all? •  Energy XXI sought bankruptcy protection last week and has been one of the most prolific shallow water operator in the GOM. Do companies like that have a future and if so, what is required for capital to be attracted to those opportunities?

6. Offshore Outlook Recovery is a Long Ways Away • Rig companies are cutting costs aggressively, however, rates will continue to fall, with almost cash costs already leading edge • Some deepwater projects will move forward, but many will be delayed and are now being dropped from planning cycles The real issue is time • At the IADC last week, a projected deepwater rig recovery was pushed to 2018-2020 • CVX and other IOCs are dropping large offshore projects out of the planning cycle, favoring onshore projects • Time to first oil from any new offshore project loses to US onshore Source: Credit Suisse

7. IOC Commentary – Removing Offshore Risk • Royal Dutch Shell • "Overall, we are making changes to Shell's mix by reducing our longer-term upstream options worldwide, and managing affordability in the current world of lower oil prices. And this is driving tough choices at Shell, and I hope this sets the context for the charges in the result that you have seen today.” • Conoco Phillips • "Over the past few years we've high graded the portfolio, organically grown a world-class position in North American unconventional plays and are nearing completion on several major projects. We are increasing our capital flexibility, lowering the underlying cost structure of the business and continuing to reduce exposures to assets that won't compete for capital in our portfolio including deepwater exploration and North American natural gas." • BP • Around 80% of our potential investments are currently expected to break-even below a $60 Brent oil price, and we would expect this break-even to move lower, as we further take advantage of deflation." Source: Company Data

8. Offshore Drillers Major Customers Represent 70% of 2015 Spend on Floaters Source: IHS Petrodata, Credit Suisse estimates

9. Deepwater Production Necessary Long-Term Source: FTI

10. Disclosures