Climate Change Data

Environmental Metrics

Climate Goals & Targets

Environmental Challenges

• Deepwater Horizon oil spill and subsequent regulatory changes impacting U.S. Gulf of Mexico operations.
• Political and economic uncertainties in Angola and Gabon.
• Competition for resources and personnel in the oil and gas industry.
• Complex laws and regulations affecting the cost and feasibility of doing business.
• Environmental, health, and safety regulations and potential liabilities.
• Volatility in oil prices.
• Challenges in raising capital.
• Limited operating history and uncertain future performance.

Mitigation Strategies

• Diligent efforts to comply with new regulations in the U.S. Gulf of Mexico.
• Engagement of third-party consultants for compliance in Angola.
• Strategic alliances and partnerships to share costs and risks.
• Maintenance of insurance coverage for some operational risks.
• Exploration of additional funding options through asset sales, farm-out arrangements, and equity/debt financing.

Supply Chain Management

Climate-Related Risks & Opportunities

Physical Risks

• Severe weather events (tropical storms, hurricanes)

Transition Risks

• Regulatory changes related to GHG emissions
• Changes in market demand due to climate change policies

Environmental Metrics

Climate Goals & Targets

Environmental Challenges

• The legislative and regulatory response to the Deepwater Horizon drilling rig incident and oil spill significantly impacted our and our partners' ability to obtain permits and drill in the U.S. Gulf of Mexico.
• Increased governmental regulation and enforcement of our and our industry's operations in a number of areas, including health and safety, financial responsibility, environmental, licensing, taxation, equipment specifications and inspections and training requirements.
• Increased difficulty in obtaining leases and permits to drill offshore wells, including as a result of any bans or moratoria placed on offshore drilling.
• Potential legal challenges to the issuance of permits and the conducting of our operations.
• Higher drilling and operating costs.
• Higher royalty rates and fees on leases acquired in the future.
• Higher insurance costs and increased potential liability thresholds under proposed amendments to environmental regulations.
• Decreased partner participation in wells we operate.
• Higher capital costs as a result of any increase to the risks we or our industry face.
• Less favorable investor perception of the risk-adjusted benefits of deepwater offshore drilling.

Mitigation Strategies

• We have engaged third party consultants to assist us with our compliance efforts in Angola.
• We have identified certain unencumbered assets in the U.S. Gulf of Mexico to the Bureau of Ocean Energy Management (“BOEM”) in order to demonstrate $100 million of Oil Spill Financial Responsibility through self-insurance under the Oil Pollution Act of 1990.
• We maintain insurance coverage for only a portion of these risks.
• We are members of several industry groups that provide general and specific oil spill and well containment resources in the U.S. Gulf of Mexico, including the Helix Well Containment Group (“HWCG”), Clean Gulf Associates (“CGA”), the Marine Preservation Association (“MPA”), and National Response Corporation (“NRC”).
• For our operations offshore West Africa, we have contracts in place for the provision of oil spill management, equipment and response services.

Supply Chain Management

Climate-Related Risks & Opportunities

Physical Risks

• severe weather events, especially tropical storms and hurricanes in the U.S. Gulf of Mexico

Transition Risks

• regulatory changes, market shifts

Environmental Metrics

ESG Focus Areas

• Health, Safety and Environment

Environmental Achievements

• All operations in 2012, both in the Gulf of Mexico and in Angola, were conducted safely and without environmental impact.

Social Achievements

• Increased staff by 56% in 2012. Moved into new offices in Houston and Luanda, providing enhanced work environments.

Governance Achievements

• Not disclosed

Climate Goals & Targets

Environmental Challenges

• Challenging deepwater environment requiring absolute vigilance toward safety, employee health, and environmental protection.
• Deepwater drilling generally requires more time and more advanced drilling technologies, involving a higher risk of technological failure and usually higher drilling costs.
• Deepwater operations generally, and operations in the Lower Tertiary and offshore West Africa trends in particular, lack the physical and oilfield service infrastructure present on the shelf.
• Our operations in the U.S. Gulf of Mexico may be adversely impacted by tropical storms and hurricanes.
• Geographic concentration of properties in the U.S. Gulf of Mexico and offshore Angola and Gabon subjects us to an increased risk of loss of revenue or curtailment of production from factors specifically affecting those regions.
• Regulations enacted as a result of the Deepwater Horizon drilling rig accident and resulting oil spill may have significantly increased certain of the risks we face and increased the cost of operations in the U.S. Gulf of Mexico.
• Various risks associated with increased activism against oil and gas exploration and development activities.
• Operations may be adversely affected by political and economic circumstances in the countries in which we operate.
• Intense competition in the oil and gas industry.
• Complex laws affecting the cost, manner or feasibility of doing business.
• Numerous environmental, health and safety regulations which may result in material liabilities and costs.
• Potential liabilities under the U.S. Foreign Corrupt Practices Act.
• Potential for inadequate insurance coverage for substantial losses and liability claims.

Mitigation Strategies

• Intense focus on deepwater below salt oil exploration in the Gulf of Mexico and offshore West Africa.
• Assembled a best-in-class team of professionals.
• Built financial strength to execute plans.
• Membership in industry groups providing oil spill and well containment resources (HWCG, CGA, MPA, NRC).
• Insurance coverage in place for U.S. Gulf of Mexico and West Africa operations.
• Engaged third-party consultants to assist with compliance efforts in Angola.
• Developed an Oil Spill Response Plan for West Africa operations.
• Internal SEMS assessment and plan for a third-party SEMS audit in 2013 to ensure compliance with regulations.

Supply Chain Management

Supplier Audits: Not disclosed

Responsible Procurement

• Not disclosed

Climate-Related Risks & Opportunities

Physical Risks

• Severe weather events, especially tropical storms and hurricanes in the U.S. Gulf of Mexico

Transition Risks

• Changes in environmental laws or the implementation or interpretation of those laws
• U.S. federal climate change legislation or regulation or climate change legislation or regulation in other regions in which we conduct business

Opportunities

• Not disclosed

Reporting Standards

Frameworks Used: Null

Certifications: Null

Third-party Assurance: Not disclosed

UN Sustainable Development Goals

• Not disclosed

Not disclosed

Sustainable Products & Innovation

• Not disclosed

Awards & Recognition

• Not disclosed

Environmental Metrics

ESG Focus Areas

• Health, Safety, Security and Environment

Climate Goals & Targets

Environmental Challenges

• Angola Transaction: Failure to receive Angolan government approvals for the sale of working interests in Blocks 20 and 21 resulted in the termination of the Purchase and Sale Agreement with Sonangol.
• Substantial level of indebtedness.
• Depressed oil and natural gas prices.
• Challenges in executing appraisal and development projects due to various factors (financing, personnel, technology, regulatory approvals).
• Uncertainty regarding the productivity of the Heidelberg field.
• Limited proved reserves and the risk that exploration efforts may not yield commercially viable hydrocarbons.
• Risks associated with increased activism against oil and natural gas exploration and development activities.
• Potential liabilities under the U.S. Foreign Corrupt Practices Act.
• Risks associated with operating in politically and economically unstable regions (Angola, Gabon).
• Intense competition in the oil and natural gas industry.
• Complex laws and regulations affecting the cost and feasibility of doing business.
• Risks associated with acquisitions and integration of acquired operations.
• Risk of cyber incidents.
• Numerous environmental, health, and safety regulations subject to change.
• Potential for substantial losses and liability claims for which adequate insurance coverage may not be available.
• Potential for material cash payment to Whitton Petroleum Services Limited.
• Potential for conversions of Convertible Notes to have a material adverse effect on financial condition.

Mitigation Strategies

• Working with Sonangol to resolve the financial and operational implications of the terminated agreement and pursuing arbitration if necessary.
• Considering actions to increase liquidity (minimizing capital expenditures, asset sales, managing working capital, issuing new debt or equity).
• Successfully renegotiated Rowan rig contract, resulting in savings of ~$80 million.
• Completed debt restructuring transaction to better align debt with timing of first production.
• Implementing cost-cutting measures.
• Maintaining memberships in industry groups providing oil spill and well containment resources.
• Maintaining insurance coverage (though not fully insured against all risks).
• Vigorously defending against lawsuits.

Supply Chain Management

Climate-Related Risks & Opportunities

Physical Risks

• Severe weather events (tropical storms, hurricanes)

Transition Risks

• Changes in energy policy, GHG emissions regulations