1. May 8, 2012
50 E&Ps
Equity Research
M&A in selected assets remains an opportunity
Compelling M&A targets but selection is key CGT an emerging consideration
SUMMARY OF RATING CHANGES
Share price weakness in the last few weeks has We believe companies with unsanctioned assets Ratings changes for companies Old rating New rating
not fully eroded gains made in the last six in emerging market economies have the potential Genel
Soco
Neutral
Neutral
Buy
Buy
Global Energy Development Neutral Buy
months. Although we do not believe share prices to lose value via additional transaction taxes and Serica Neutral Buy
Falkland Oil & Gas Neutral Buy
are at levels to incentivize widespread M&A, we highlight those we believe are most at risk. Afren Buy Neutral
Chariot Oil & Gas Buy Neutral
attractive targets remain. We update our M&A Valiant Petroleum Buy Neutral
Nautical Petroleum Buy Neutral
screens, which highlight value and strategic Reinstate Cairn as Neutral; Tullow to Noreco Buy Neutral
Aurelian Buy Neutral
assets. Conviction Buys Rockhopper, Bowleven Integrated coverage Aminex
Desire
Neutral
Sell
Sell
Neutral
and Panoro screen well as do Buy rated Genel, We reinstate on Cairn with a Neutral rating. We Cairn NR Neutral
Source: Datastream, Goldman Sachs Research estimates
Bankers Petroleum and Maurel et Prom. believe it has strong core value and that in the
COVERAGE VIEW:
current environment its strong cash balance is E&P – Attractive; Integrated Oils – Attractive
Focus on monetization of value attractive but see higher upside elsewhere. We
With this report Ruth Brooker assumes primary coverage of
E&P companies have typically funded move Tullow into our Integrated Oils coverage the following stocks: Amerisur Resources, Chariot Oil & Gas,
Global Energy Development, Petroceltic International and
development through cash flows, equity markets, group from E&P, but maintain our Neutral rating. Tower Resources.
debt or via asset or corporate sales. With Although we recognize the exceptional quality of
asset/corporate sales attracting CGT and banks the company’s asset base, we see better value
increasingly reluctant to offer debt financing, elsewhere.
monetization of value could become more
difficult. As a result, we believe companies with We separate large and small E&Ps
access to organic cash flows deserve valuations We split our universe into large and small E&Ps
that reflect a structural advantage. We highlight at for ratings purposes with US$1 bn as the market
risk companies and apply discounts of 15%-30% cap cut-off, although all stocks remain in the E&P
to our valuation of their unfunded discoveries, coverage group. Genel and Soco both move up to
implying increased costs of funding of 2%-5%. Buy (from Neutral) in our US$1 bn+ universe.
Christophor Jost Goldman Sachs does and seeks to do business with companies
+44(20)7774-0014 christophor.jost@gs.com Goldman Sachs International
Ruth Brooker
covered in its research reports. As a result, investors should be aware
+44(20)7774-6842 ruth.brooker@gs.com Goldman Sachs International that the firm may have a conflict of interest that could affect the
Michele della Vigna, CFA objectivity of this report. Investors should consider this report as only a
+44(20)7552-9383 michele.dellavigna@gs.com Goldman Sachs International
single factor in making their investment decision. For Reg AC
Peter Hackworth, CFA
+44(20)7774-7073 peter.hackworth@gs.com Goldman Sachs International certification and other important disclosures, see the Disclosure
Appendix, or go to www.gs.com/research/hedge.html. Analysts
employed by non-US affiliates are not registered/qualified as research
analysts with FINRA in the U.S.
The Goldman Sachs Group, Inc. Global Investment Research

2. May 8, 2012 50 E&Ps
Table of Contents
Recent pullback has not eroded gains made since October 3
Recent performance makes widespread M&A less likely but selected value remains 4
Monetisation of value a risk; access to debt and CGT the key areas of focus 7
Price targets, ratings and screen changes and we introduce our new E&P universes 12
Material changes to 12-month target prices and rationale 14
Average potential upside of 100% across our universe 17
Subsector trading at discount to core value and risked discoveries at US$100/bl 18
Value versus exploration potential; Cairn Energy screens as cheap core value 19
Changes to the exploration screens 21
Changes to M&A and commodity screens 23
Cairn Energy (CNE.L): Solid core value support, but more upside elsewhere 27
Falkland Oil & Gas (FOGL.L): Cheap exposure to the South Falklands Basin, up to Buy 29
Global Energy Development (GBLE.L): Upgrade to Buy following weak performance 30
Soco International (SIA.L): Up to Buy, replenishment of exploration pipeline and TGT performance is key 31
Serica Energy (SQZ.L): Strong core value with long term rerating potential, up to Buy 32
Genel Energy (GENL.L): Pure play Kurdistan but cash offers other optionality; up to Buy 33
Aminex (AMNX.L): Near-term valuation challenging although long-term potential exists; down to Sell 34
Aurelian Oil & Gas (AUL.L): Removing from Buy List, better upside elsewhere; Neutral 35
Noreco (NOR.OL): Remove from Buy List after strong recent recovery, better upside elsewhere; Neutral 37
Chariot Oil & Gas (CHARC.L): Down to Neutral following strong performance 39
Afren (AFRE.L): Downgrading to Neutral after recent outperformance 41
Nautical Petroleum (NPE.L): Removing from Buy List, better upside elsewhere; Neutral 43
Valiant Petroleum (VPP.L): Down to Neutral following outperformance 45
Desire Petroleum (DES.L): Upgrade from Sell to Neutral following discovery 47
Disclosure Appendix 49
The prices in the body of this report are based on the market close of May 7, 2012 unless otherwise stated.
Goldman Sachs Global Investment Research 2

3. May 8, 2012 50 E&Ps
Recent pullback has not eroded gains made since October
Despite some share price weakness in recent weeks, in our view as a result of investor focus again on the Eurozone, we have seen a
significant rerating in our E&P universe, with the sector up c.40% in absolute terms since October and significantly outperforming
the long dated crude price (Exhibit 1). We believe this rerating has been driven by an improvement in risk appetite among investors
and increasing levels of M&A activity (discussed in more detail in our February 27, 2012 publication 50 E&Ps: M&A revisited: Recent
activity has led to outperformance, but compelling targets remain). While this has, rightly in our view, raised valuations from the
excessive discounts at which they were trading relative to the long dated crude price during parts of 2H2011, we believe that the
macro environment is not wholly positive for the stocks. We increasingly believe that with access to capital becoming more difficult
and the monetization of unrisked value for unfunded companies becoming harder to achieve without some form of value erosion,
owing to government taxes, investors need to differentiate companies based on their ability to monetize the value of assets.
Exhibit 1: E&P sector has performed strongly in last six months despite a recent pullback
E&P universe performance indexed to 100
200
180
160
140
120
100
80
60
40
20
0
01/01/2007 01/01/2008 01/01/2009 01/01/2010 01/01/2011 01/01/2012
Source: Thomson, Datastream, Bloomberg.
Goldman Sachs Global Investment Research 3

4. May 8, 2012 50 E&Ps
Recent performance makes widespread M&A less likely but selected value remains
We believe the key determinant of M&A in most cases is value – making the difference between the expected commodity price and
the price of the equity of key importance. In the last 6 months, the E&P equities have significantly outperformed the long dated
crude price, suggesting that, despite the recent pullback, wide-scale M&A is less likely within the sector than it was in
September/October last year. We still believe attractive targets remain but believe that more selectivity is now required in picking
potential bid targets. As a result we update out value and strategic based M&A screens to highlight these opportunities.
Exhibit 2: E&P sector has significantly outperformed long dated crude prices, making widespread M&A less likely in our view.
E&P universe performance vs. three year Brent price
20 Cove
Ithaca
approaches
approaches
10
0.05 deals per day
0
01/01/2007 01/01/2008 01/01/2009 01/01/2010 01/01/2011 01/01/2012
0.08 deals per day
‐10
0.08 deals per day
‐20
0.05 deals per day
‐30
0.12 deals per day
‐40
Ophir /
Dominion Premier /
‐50 Encore
‐60
‐70
Source: Thomson Datastream, Bloomberg.
Goldman Sachs Global Investment Research 4

5. May 8, 2012 50 E&Ps
Value based M&A – potential remains in selected names
We believe that companies that trade at a significant discount to the value of their core + discoveries are the most attractive non-
strategic take-out candidates, especially if that value is concentrated in a single country. We update our M&A value screen, which
assesses these attributes, and highlight Conviction Buys Bowleven, Panoro and Rockhopper as names that screen as particularly
attractive on this metric.
Exhibit 3: Value upside and concentration
Upside to risked core
EV value + discoveries Concentration of value Unrisked discovered Risked discovered GS funding discount Capital constrained
Company (US$mn) (undiscounted) in a single country resources (mn boe) resources (mn boe) applied ramp up assumed?
Panoro 172 246% 63% 123 67 ‐9% yes
Igas 275 216% 100% 904 156 0% yes
Global Energy Development 53 215% 82% 179 36 ‐3% yes
Great Eastern Energy 642 188% 100% 273 173 0%
Northern Petroleum 108 183% 65% 101 40 ‐6%
Rockhopper 1281 172% 100% 423 338 0%
Bowleven 247 167% 100% 189 93 -14%
Bankers petroleum 902 120% 100% 1267 340 0%
Gulfsands 116 116% 84% 99 40 0%
Green Dragon 1115 115% 100% 433 193 0% yes
Amerisur 311 89% 100% 109 61 -8%
JKX 366 82% 64% 98 87 0%
Maurel & Prom 2169 86% 92% 263 219 0%
Petroceltic 196 71% 87% 543 312 -12%
Valiant Petroleum 260 68% 95% 88 41 ‐3%
Source: Goldman Sachs Research estimates.
Goldman Sachs Global Investment Research 5

6. May 8, 2012 50 E&Ps
Strategic M&A – value less of a concern with Cove highlighting potential for gains
In our view the strong share price performance of Cove in recent months was driven by bids for the company that were in excess of
what we believe the market expected. We believe that price insensitivity in the bidding process is a characteristics of strategic assets
that (in our view) are bought for reasons of supply security rather than in order to generate commercial returns at hurdle rates that
the equity market would deem to be acceptable. We believe there are a number of companies within our universe that also have
access to this type of asset base and screen below for winners in this category. For the purposes of this exercise we assume that oil
or oil price linked assets in which a company holds a net stake in excess of 200mn net barrels is deemed to be strategic.
Exhibit 4: Strategic asset M&A screen
Upside to strategic
% value in asset over valuation of risked Unrisked Uplift from
200mn bls (non Upside to risked core core value + discovered Risked discovered strategic
Company strategic valuation) value + discoveries discoveries strategic resource strategic resource valuation at 8%
Maurel & Prom 95% 86% 137% 177 174 19%
Rockhopper 89% 172% 261% 423 338 32%
Dragon Oil 78% 48% 82% 1140 1014 37%
DNO 71% 34% 69% 346 346 25%
Bankers Petroleum 67% 120% 178% 219 197 29%
Gulf Keystone 60% 4% 73% 1643 1148 45%
Petroceltic 58% 71% 193% 423 284 56%
Det Norske 53% 43% 63% 260 234 12%
Cove Energy 52% ‐44% 32% 354 319 118%
Ophir 51% ‐78% 96% 137 116 128%
Green Dragon 51% 115% 176% 211 127 31%
Tullow 39% ‐36% ‐11% 1167 1074 25%
Lundin Petroleum 34% ‐5% 18% 440 374 9%
Genel 27% 27% 54% 285 285 17%
Afren 16% 10% 39% 304 219 18%
NB: Upside to strategic valuation for Ophir includes exploration upside potential.
Source: Goldman Sachs Research estimates.
Goldman Sachs Global Investment Research 6

7. May 8, 2012 50 E&Ps
Monetisation of value a risk; access to debt and CGT the key areas of focus
Historically, E&Ps monetized the value inherent in their assets either through debt financing (typically through lending based on the
collateral of reserves in the ground), organic cashflows or through asset sales or sales of the company with recourse to the equity
market a final fallback position. Under those circumstances, there was little need to apply discounts to the valuation of assets even if
there was little clarity on the funding needed to develop them. However, we note that specific challenges to many of these routes to
funding have emerged.
 Reserve based lending becoming more expensive. Reserve based lending can enable companies with small capital bases
to use reserves in the ground as collateral to access funds in order to bring developments online. However, with European
banks finding it difficult to access dollar based funding and many leaving the space, such funding of oil assets with no
current associated cashflows is likely to become more expensive. Effectively this means that some of the potential debt
supply leaves the lending market. We believe that as a result, the funding market for non-productive assets will remain tight
and will become more expensive than has been the case.
 Asset sales/corporate sales beginning to attract tax from host governments. Historically an attractive way for small
E&P companies to keep capital under construction low and to crystallize value of discovered resource was by selling assets
on to better funded industry players. However, we note that in emerging market economies capital gains tax is increasingly
being levied on such transactions, adding additional costs to this strategy. For example, capital gains tax was levied on
recent transactions in Uganda involving Tullow and Heritage and Cairn Energy’s sale of a stake in Cairn India to Vedanta as
well as on the corporate sale of Cove Energy.
As a result of these developments within the industry, if a company is not organically funded to develop an asset, a discount to the
asset valuation is arguably required in order to reflect either rising costs of debt, the dilutive impact of receiving equity based
funding or the risk of government taxation of any transaction. We believe investors will therefore need to pay increasing attention to
the viability and cost of monetizing the value of a company’s unfunded assets and believe that a simple sum of the parts approach
does not capture the risks and potential costs involved.
Goldman Sachs Global Investment Research 7

8. May 8, 2012 50 E&Ps
We apply discounts of between 15% to 30% for unfunded discoveries
In view of these potential headwinds to realizing the value of assets, we incorporate discounts to our valuations of assets that do not
have full funding to first production.
 Unfunded exploration: attracts a 45% discount
 Unfunded appraisal: attracts a 30% discount
 Unfunded development: attracts a 15% discount
We apply these discounts on an asset by asset basis rather than to the equity as a whole, thereby allowing full credit for those parts
of the portfolio that are organically funded. Alternatively, we view acquisitive companies with surplus cash positively, assuming that
they will be able to squeeze potential sellers. Cairn and Genel benefit from having surplus cash and in both cases we apply a
premium to the cash balance assuming that tight capital markets will enable them to lever balance sheets to take value from
unfunded sellers. Dragon has the financial potential to benefit from this as well, but we do not apply a premium owing to concerns
over whether it will be aggressive enough to execute on any potential deal.
Exhibit 5: Impact of GS funding discount on stocks
50%
40%
30%
20%
10%
0%
Serica
Afren
PA Resources
Max Petroleum
Melrose Resources
Petroceltic
Valiant Petroleum
Enquest
Premier Oil
Panoro
San Leon
BPC
Regal
Tullow
Desire Petroleum
Northern Petroleum
Dragon Oil
Bowleven
Ophir
Aurelian
Genel
Nautical Petroleum
Faroe Petroleum
Lundin Petroleum
Rockhopper
Noreco
Coastal Energy
Soco
Green Dragon
DNO
Tower Resources
Gulf Keystone
Hardy Oil
Heritage Oil
Aminex Plc
Salamander
Bankers petroleum
Amerisur
Great Eastern Energy
Cairn Energy
JKX
Chariot Oil & Gas
Global Energy Development
Ithaca
Maurel & Prom
Borders and Southern
Cove Energy
Igas
Gulfsands
Sterling Energy
Det Norske
Falkland Oil & Gas
‐10%
Source: Goldman Sachs Research estimates.
Goldman Sachs Global Investment Research 8

9. May 8, 2012 50 E&Ps
Our asset discounts imply increased costs of capital of 2%-5%. High cost, long lead developments
are most sensitive to increased funding costs
We assess the potential impact of increased costs of debt funding by applying sensitivities to the discount rates we use to value
assets – taking a selection of significant asset types through our E&P universe and increasing discount rates by 2% and 5%. The
assets show a significant spread – the result of cashflow timings (with high upfront capital intensity and long-run cash inflows
typically faring worse). However, the average impact of a 2% increase in funding costs would equate to an average value destruction
across these assets of 17%, with a 5% increase in funding costs resulting in an average 27% of value destruction – broadly in line
with our currently assumed discounts.
Exhibit 6: Increase of 2%-5% in funding costs could result in value destruction broadly in line with our applied discounts
Impact of higher discount rates on pre-sanction asset valuations
60%
Increasing sensitivity to higher funding costs
50%
Average impact at 5% increase Cove transaction tax
40%
Average impact at 2% increase
30% GS
diiscount
for
discovered
20%
resource
10%
0%
Impact of value of 2% increase in funding costs Impact on value of 5% increase in funding costs
Source: Goldman Sachs Research estimates.
Goldman Sachs Global Investment Research 9

10. May 8, 2012 50 E&Ps
Companies with large discoveries in non-OECD economies could be at risk of tax when
monetizing value
Given the trend towards taxation of corporate/asset transactions by governments, we attempt to assess those companies most at
risk to this. As a result, we screen for companies with high levels of value in non-producing assets in emerging market economies.
Although we note that there are many examples of developed, OECD economies changing fiscal regimes, we do not believe the risk
is as high for rewriting tax laws to change capital gains status and note that all unexpected capital gains charges have so far been
levied in emerging market economies. Although we note that producing assets could also be subject to similar taxation, we are not
so concerned about the risk as these assets do not require funding and therefore do not need to be sold in order to monetize the
value.
Exhibit 7: Company exposure to non-producing emerging market assets as % of GS valuation
120%
100%
80%
60%
40%
20%
0%
Genel
Lundin Petroleum
Nautical Petroleum
Desire Petroleum
Noreco
Aurelian
Afren
Soco
Serica
Faroe Petroleum
Rockhopper
JKX
Tower Resources
Global Energy Development
Bankers petroleum
Maurel & Prom
Ithaca
Amerisur
PA Resources
Melrose Resources
Max Petroleum
Valiant Petroleum
San Leon
Enquest
Borders and Southern
Petroceltic
Igas
Cove Energy
Gulfsands
BPC
Premier Oil
Bowleven
Panoro
Northern Petroleum
Ophir
Tullow
Regal
Dragon Oil
Sterling Energy
Falkland Oil & Gas
Coastal Energy
Green Dragon
Aminex Plc
Hardy Oil
Heritage Oil
Cairn Energy
DNO
Chariot Oil & Gas
Gulf Keystone
Salamander
Great Eastern Energy
Det Norske
% of value in non‐OECD discoveries % of value in non‐OECD exploration
Source: Company data, Goldman Sachs Research estimates.
Goldman Sachs Global Investment Research 10

11. May 8, 2012 50 E&Ps
Unfunded companies are at particular risk of CGT as asset/corporate sales represent the most
obvious funding route
While the above screen is an important indication of the risk of taxation on EM asset transactions, we believe that where companies
can organically fund their development, there is less risk of CGT as an asset sale is not completely necessary since these companies
should be able to realize value from the assets through organic development. As a result, we screen below for those companies with
exposure to non-producing emerging market assets but exclude those assets that we believe can be funded by the company based
on existing cash reserves and portfolio. We note that for CGT to be a relevant factor, significant gains must be made – as a result we
note that Bowleven is partly protected owing to its sizable investment to date in its asset base.
Exhibit 8: Company exposure to non-producing emerging market assets as % of GS valuation (excluding funded assets)
120%
100%
80%
60%
40%
20%
0%
Genel
Lundin Petroleum
Desire Petroleum
Noreco
Nautical Petroleum
Aurelian
Faroe Petroleum
Afren
Serica
Soco
Rockhopper
Tower Resources
JKX
Global Energy Development
Amerisur
Bankers petroleum
Maurel & Prom
Ithaca
PA Resources
Melrose Resources
Max Petroleum
Valiant Petroleum
San Leon
Enquest
Borders and Southern
Petroceltic
Igas
Cove Energy
BPC
Gulfsands
Premier Oil
Northern Petroleum
Bowleven
Panoro
Ophir
Tullow
Sterling Energy
Regal
Dragon Oil
Falkland Oil & Gas
Coastal Energy
Green Dragon
Aminex Plc
Chariot Oil & Gas
DNO
Hardy Oil
Heritage Oil
Cairn Energy
Gulf Keystone
Salamander
Great Eastern Energy
Det Norske
% of value in unfunded non‐OECD discoveries % of value in unfunded non‐OECD exploration
Source: Goldman Sachs Research estimates.
Goldman Sachs Global Investment Research 11

12. May 8, 2012 50 E&Ps
Price targets, ratings and screen changes and we introduce our new E&P universes
Given the breadth of our E&P coverage universe, despite applying a liquidity discount there remains a significant valuation
discrepancy between small illiquid stocks and the larger names. To address this we divide our E&P coverage universe of 52 stocks
into two groups based on a market capitalization threshold of US$1 bn in order to select ratings on a more comparable peer group
basis. Given the division of our E&P universe on a market cap basis, we make several ratings changes (Exhibits 9 & 10).
We make several adjustments to our valuations of the companies in our coverage universes, reflecting recent news flow. We also
roll forward our valuations, now discounting back to 2012. As in our last subsector publication on December 6, 2011, we continue to
run our valuations of stocks under our coverage using the 3-year forward Brent crude price as a reference point (we use US$100/bl).
This is unchanged as the 3-year forward price remains around this level (c.US$100.7/bl as of May 2, 2012). On this basis, our 12-
month price targets imply 100% average potential upside for the sector (54% excluding exploration value), hence we retain our
Attractive coverage view. We also update for movements in FX and continue to apply a discount to those assets that we believe are
not fully funded through to development.
Exhibit 9: E&P coverage group > US$1 bn market capitalisation “big portfolio”
(All price targets have a 12-month time horizon, B* denotes Conviction List membership)
New Upside /
Previous Updated target Target price Updated and Target price 12‐month
Market cap Current potential downside to New
Company Currency target price (2011 change new target price change exploration re‐ Old rating Currency
(USDmn) price upside to value of core rating
price base) (2011 base) (2012 base) (2012 base) rating potential
target price + discoveries
Rockhopper 1,447 GBp 3.16 7.70 7.68 0% 8.56 11% 171% 172% 2% B* B* GBp
Green Dragon 1,161 USD 8.50 20.80 19.10 ‐8% 20.39 7% 140% 115% 0% B B USD
Maurel & Prom 1,912 EUR 11.99 31.30 25.98 ‐17% 26.03 0% 117% 98% 23% B B EUR
Genel 3,101 GBP 6.88 12.18 11.62 ‐5% 12.53 8% 82% 27% 27% N B GBP
Soco 1,498 GBP 2.75 5.37 4.66 ‐13% 4.72 1% 71% 42% 0% N B GBP
Enquest 1,645 GBP 1.27 1.98 1.96 ‐1% 2.10 7% 65% 65% 2% B B GBP
Premier Oil 2,999 GBP 3.52 5.76 5.31 ‐8% 5.53 4% 57% 39% 31% N N GBP
Det Norske 1,807 NOK 81.25 116.00 115.66 0% 126.97 10% 56% 43% 57% N N NOK
Afren 2,203 GBP 1.27 1.78 1.84 4% 1.99 8% 56% 10% 130% B N GBP
Ophir 3,508 GBP 5.48 4.09 7.58 85% 8.50 12% 55% ‐78% 174% N N GBP
Dragon Oil 4,667 GBP 5.67 7.90 8.65 10% 8.78 2% 55% 48% 1% N N GBP
Coastal Energy 1,904 GBP 10.35 14.94 14.17 ‐5% 15.42 9% 49% ‐5% 42% N N GBP
Gulf Keystone 3,023 GBP 2.14 3.01 2.74 ‐9% 3.12 14% 46% 4% 41% N N GBP
DNO 1,598 NOK 8.99 11.22 12.08 8% 12.67 5% 41% 34% 10% N N NOK
Tullow 21,434 GBP 14.69 16.83 17.17 2% 20.20 18% 38% ‐31% 40% N N GBP
Cairn Energy 3,172 GBP 3.26 NA 4.20 NA 4.59 NA 41% 17% 22% NR N GBP
Lundin Petroleum 6,766 SEK 144.10 165.00 152.91 ‐7% 164.27 7% 14% ‐5% 45% S S SEK
Cove Energy 1,769 GBP 2.24 2.06 2.03 ‐1% 2.28 12% 2% ‐44% 145% N N GBP
Source: Bloomberg, Goldman Sachs Research estimates.
Goldman Sachs Global Investment Research 12

13. May 8, 2012 50 E&Ps
Exhibit 10: E&P coverage group < US$1 bn market capitalisation: “small portfolio”
(All price targets have a 12-month time horizon, B* denotes Conviction List membership)
New Upside /
Previous Updated target Target price Updated and Target price 12‐month
Market cap Current potential downside to New
Company Currency target price (2011 change new target price change exploration re‐ Old rating Currency
(USDmn) price upside to value of core rating
price base) (2011 base) (2012 base) (2012 base) rating potential
target price + discoveries
Panoro 161 NOK 3.94 14.93 13.24 ‐11% 14.15 7% 259% 246% 114% B* B* NOK
San Leon 182 GBP 0.10 0.25 0.31 25% 0.34 10% 244% ‐15% 823% B B GBP
Bowleven 396 GBp 0.84 2.53 2.34 ‐8% 2.61 12% 212% 167% 54% B* B* GBp
Tower Resources
76 GBp 0.03 0.10 0.09 ‐14% 0.10 13% 206% ‐90% 0% B B GBp
Max Petroleum 193 GBP 0.12 0.30 0.28 ‐7% 0.33 17% 182% ‐1% 196% B B GBP
PA Resources 146 SEK 1.55 4.66 3.41 ‐27% 4.31 26% 178% 277% 21% B B SEK
Igas 175 GBP 0.67 1.71 1.68 ‐2% 1.82 8% 171% 216% 0% B B GBP
Northern Petroleum 129 GBP 0.84 2.01 2.03 1% 2.20 8% 162% 183% 39% B B GBP
Great Eastern Energy 609 GBP 3.18 9.05 7.40 ‐18% 8.19 11% 158% 188% 0% B B GBP
BPC 162 GBP 0.08 0.21 0.20 ‐6% 0.21 7% 158% ‐66% 0% B B GBP
Serica
84 GBP 0.30 0.33 0.65 96% 0.73 13% 149% 49% 93% N B GBP
Global Energy Development
59 GBP 1.03 2.21 2.14 ‐3% 2.40 12% 133% 215% 6% N B GBP
Falkland Oil & Gas 483 GBP 0.94 0.94 1.92 105% 2.12 11% 126% ‐81% 1817% N B GBP
Salamander 793 GBP 1.93 4.86 3.99 ‐18% 4.20 5% 118% 17% 164% B B GBP
Bankers petroleum 896 GBP 2.20 7.28 4.46 ‐39% 4.76 7% 116% 120% 0% B B GBP
Petroceltic 274 GBP 0.07 0.14 0.13 ‐3% 0.16 15% 116% 71% 0% B B GBP
JKX 359 GBP 1.30 3.32 2.04 ‐38% 2.69 32% 107% 82% 50% B B GBP
Desire Petroleum 132 GBP 0.24 0.15 0.44 203% 0.49 11% 105% 153% 17% S N GBP
Chariot Oil & Gas 519 GBP 1.61 2.58 2.96 15% 3.29 11% 104% ‐70% 1489% B N GBP
Heritage Oil 573 GBP 1.38 3.54 2.64 ‐26% 2.80 6% 103% 53% 95% N N GBP
Valiant Petroleum 363 GBP 5.54 9.18 10.20 11% 10.79 6% 95% 68% 54% B N GBP
Gulfsands 240 GBP 1.22 3.92 2.14 ‐45% 2.28 7% 87% 116% 0% N N GBP
Faroe Petroleum 584 GBP 1.71 2.69 2.87 7% 3.18 11% 86% 47% 85% N N GBP
Regal 145 GBP 0.28 0.58 0.46 ‐21% 0.52 14% 86% 55% 0% N N GBP
Borders and Southern 663 GBP 0.85 1.57 1.41 ‐10% 1.56 11% 84% 17% 490% N N GBP
Melrose Resources 227 GBP 1.23 1.97 2.03 3% 2.24 10% 82% 96% 44% N N GBP
Nautical Petroleum 466 GBP 3.30 6.73 5.53 ‐18% 5.99 8% 81% 63% 41% B N GBP
Noreco 286 NOK 6.74 14.70 11.02 ‐25% 12.13 10% 80% ‐15% 287% B N NOK
Sterling Energy 137 GBP 0.39 0.60 0.62 3% 0.68 9% 74% ‐30% 0% N N GBP
Amerisur 347 GBP 0.24 0.26 0.34 31% 0.38 11% 63% 89% 159% N N GBP
Hardy Oil 153 GBP 1.30 2.45 1.68 ‐32% 1.82 9% 40% 4% 0% N N GBP
Aurelian 176 GBP 0.22 0.55 0.34 ‐38% 0.29 ‐15% 30% 2% 178% B N GBP
Ithaca 745 GBP 1.79 1.89 2.00 6% 2.18 9% 22% 27% 0% N N GBP
Aminex Plc
59 GBP 0.04 0.05 0.04 ‐23% 0.05 13% 5% ‐21% 87% N S GBP
Source: Bloomberg, Goldman Sachs Research estimates.
Goldman Sachs Global Investment Research 13

14. May 8, 2012 50 E&Ps
Material changes to 12-month target prices and rationale
We discuss the rationale for our 12-month target price changes where they are in excess of 10% for our coverage below.
 Afren: We update for the company’s drilling success at the Okoro East prospect and at its Simrit well in Kurdistan. We also
update for Keta well, which was found to be water bearing.
 Amerisur Resources: We raise our assumed COS for the Platanillo Block and lower the chances of success on the Fenix
Block owing to the relative activity in each area. We also increase our assumption of the value of the Platanillo block on an
NPV/bl basis following remodeling of the costs and expected well performance.
 Aminex: Much of the reduction in our price target comes from updating our assumptions following the Ntorya well.
Volumes are still uncertain but we assume 10mn boe of gas. We also reduce our assumed valuation for the company’s US
assets following the print from the recent Somerset asset disposal.
 Aurelian: We update the company’s exploration programme in line with guidance. The major move in this respect comes
from the disappointing shrinkage of the Karpaty East project and the guidance that this is likely to be gas rather than oil – a
change that significantly reduces our valuation of the company.
 Bankers Petroleum – We increase our risking of the value of the company’s contingent reserves to a 10% chance of success
(vs. 25% previously). This reflects the ambiguous initial results of the programme and the reduction in the volumes when a
transfer between 2C and 2P was made at year-end. Although we note that the oil in place remains unchanged, the higher
capital hurdles apparently being applied to 2P reserves make us more cautious as to the proportion of contingent reserves
that can be translated to 2P reserves in a success case.
 Borders & Southern: We reduce our target price as a result of the company’s recent equity raise (dilutive to our valuation).
 Bowleven: We update for recent guidance on the oil in place on the Deep Omicron discovery, which has a positive impact
on our forecasts. However, owing to the requirement to monetize gas providing an effective ceiling in terms of likely
production, the discount reduces the potential impact of this change and is offset by increased risking over the assets
following Vitol’s decision not to exercise its remaining option over MLHP7.
 Chariot: We increase our valuation with the inclusion of some potential for pre-salt prospectivity offsetting the impact of the
recent equity raise.
 Coastal Energy: We update our estimates as a result of recent successful drilling activity.
 Dragon Oil: We adjust our production profile and risking for gas monetization, and reduce our discount rate for
Turkmenistan to 14%.
 Desire: The increase in our valuation results from the inclusion of volumes from the recent drilling campaign as determined
by Rockhopper’s Gaffney Cline report (rather than Desire’s Senergy report).
 DNO: Preliminary success at the company’s Peshkabir prospect and success at the Tawke 16 well, which increase our
assumption of recoverable reserves from the Tawke field increase our valuation.
 Falkland Oil & Gas: We adjust for the company’s equity raise and update our expected drilling campaign accordingly given
the greater potential for prospective resource that this additional funding provides for the company. This is partly offset by
Goldman Sachs Global Investment Research 14

15. May 8, 2012 50 E&Ps
the company’s recent farm-out which, while encouraging for the potential credibility of the drilling programme, we see as
dilutive to valuation.
 Faroe Petroleum: We update for the company’s latest exploration programme, which accounts for much of the increase in
our target price, offsetting some recent disappointments in the drilling programme (i.e. Kalvklumpen, T-Rex). We also
update our estimates surrounding the assets obtained from the Petoro deal following more information being given on
these at the company’s final results.
 Gulf Keystone: We reduce our assumptions over the recovery factor on Shaikan from 30% to 25% and reduce the chances of
success on the Bekhme asset as result of the appraisal well result. This is offset by the inclusion of 2 additional exploration
wells.
 Great Eastern Energy: We reduce our valuation primarily as a result of the increased de-watering time being seen in the
sourthern area of the licence, which delays production ramp up, thereby losing some value due to the discounting effect.
 Green Dragon: Minor adjustments to risking and timing of monetization of prospective assets given revised assumptions of
the likely timeline for the large scale drilling on these assets.
 Gulfsands Petroleum: We further increase our political risking in Syria as a result of our view of the increasing political
deterioration in the country.
 Hardy Oil and Gas: We remove exploration upside from the D9 block as a result of the company’s decision to relinquish the
acreage. We also adjust our assumed timeline for monetization of the D3 block.
 Heritage Oil: We reduce our assumed plateau production from the company’s Russian asset, believing that the company’s
focus will likely lie elsewhere. We also increase our risking on the company’s Maltese drilling campaign as a result of
continuing uncertainty over the likely timing of activity.
 Ithaca Energy: We make adjustments to our assumptions on first production and sanction for the Athena project owing to
delays in the project upgrade works. This is more than offset by changes to tax allowances and a remodeling of the Greater
Stella Area.
 JKX: We reduce our share price to reflect a revision of our assumptions of the risk profiles over the Rudenkovskoye asset
and the upside potential from the company’s Koshekhablskoye asset following the company’s annual results presentation
and an update with management.
 Lundin: We reduce our price target slightly in order to account for our estimate of lost volumes as a result of the
disappointing 16/5-25 well result drilled on the Alvadsnes asset. We note that no guidance to this has been given by
management to date, but assume a loss of c.200mn bls.
 Maurel et Prom: The majority of our target price reduction results from the removal of Maurel & Prom Nigeria as a result of
the spin out of this asset. We also reduce our target price as a result of adjustments to the Columbian reserves base
following greater clarity from the final results conference call. We also account for the failure of the ETBIB-1 well in Gabon.
 Max Petroleum: The reduction of our target price caused by the disappointing exploration result at the primary target of the
Asanketken prospect is partly but not fully offset by the inclusion of the company’s new exploration programme.
Goldman Sachs Global Investment Research 15

16. May 8, 2012 50 E&Ps
 Nautical: We reduce our target price as the dilution caused by the farm out of part of its Kraken stake to Enquest is greater
than the removal of the funding discount we applied to this asset. We also remove value for the Tudor Rose prospect
following the disappointing appraisal well result.
 Noreco: We remove value for the Kalklumpen, Luna and Eike wells due to the disappointing drilling results. Cash burn was
also greater than we anticipated.
 Ophir Energy: We increase volumes as a result of the company’s updated exploration programme and the company’s
recent analyst trip to Tanzania and derisk the Jodari prospect following success at the asset. We also increase our strategic
M&A weighting (in which we value the assets at an 8% cost of capital) to 50% of our valuation 30%, following the
preliminary offers for Cove Energy. We now give risked value for 20tcf of potential resource in the tertiary slope play, 23 tcf
of potential resource in the cretaceous slope play and 30tcf for the basin floor play.
 PA Resources: Adjustments to the Didon and Didon North assets in Tunisia and reserves in Congo reduce our target price.
 Panoro: We increase our political risking on the BS3 assets as a result of the lack of clarity over sanctioning. We make minor
adjustments to our assumptions on the upside on the MKB asset, although we believe that the recent pilot programme has
been encouraging for the base case on this asset.
 Petroceltic: We assume better flow rates from the Ain Tsila field following the results of the AT-9 result and also update our
estimates for management’s latest guidance on plateau rates estimates for the field.
 Premier Oil: We make adjustments for the recent drilling results and update our capex and production profile assumptions.
 Salamander Energy: We factor the dilutive impact of the rights issue into our estimates, although we note that this is
significantly offset by the inclusion of additional exploration prospects in the North Kutei Basin and the Gulf of Thailand and
the improvements to the Bravo platform in Thailand, which can be funded through these additional funds.
 Serica: We include value for the company’s Namibian and Moroccan assets. While we appreciate that drilling activity on
Namibia is likely to be medium term, the company is potentially funded for any wells on this asset through the BP farm-out
and we believe that current activity in the country could still serve to act as a positive catalyst for the stock. We also believe
that Morocco could be drilled sooner with our understanding being that many of the prospects are drill ready and awaiting
a farm down (which we assume in our estimates).
 San Leon: Following the Tarfaya oil shale update, we increase our estimate of the likelihood of success from 2% to 5% given
that the reservoir appears to be in communication. As with Serica we include farmed down value for the company’s
offshore Moroccan acreage, believing that a farm in to the asset could be achieved this year, with drilling not too long
afterwards.
 Soco: Estimate revisions of the ramp up of the TGT asset based on revised guidance and updates for drilling results in
Congo.
 Tower Resources: We remove value for the Mvule-1 exploration prospect in Uganda following the disappointing
exploration well result. We also update our estimates for the recent equity raise and SEDA facility draw down.
 Tullow: Disappointing well results in the West Africa Transform Margin are offset by the successful preliminary results from
the Ngamia well in Kenya, which leads us to model basin-wide potential from the region.
 Valiant Petroleum: On our estimates the impact of the Rocksource acquisition and changes to our North Sea tax
assumptions more than offsets the disappointing results from Cladhan South, thereby increasing our target price.
Goldman Sachs Global Investment Research 16

17. May 8, 2012 50 E&Ps
Average potential upside of 100% across our universe
Following recent share price movements and adjustments to our price targets we see an average 100% upside potential across our
coverage universe. Since the publication of our last sector update of December 6, 2011, 50 E&Ps: Three regions and five new stocks:
Spreading the net further for more E&P potential, the level of average potential upside for the sector has decreased from 104%
despite the fact that, in general, our target prices have increased as a result of rolling forward our valuations so that we now
discount back to 2012. This is largely a result of the recent strong E&P sector performance.
Exhibit 11: Valuation at US$100/bl crude price assumption
Potential upsides/downsides to target price sorted by upside/downside in production and cash
600%
500%
400%
Value as % of share price
300%
200%
100%
0%
‐100%
‐200%
‐300%
Serica
Afren
PA Resources
Melrose Resources
Max Petroleum
Petroceltic
Premier Oil
Panoro
Northern Petroleum
Valiant Petroleum
Enquest
San Leon
Ophir
Regal
BPC
Dragon Oil
Desire Petroleum
Bowleven
Nautical Petroleum
Aurelian
Tullow
Genel
Coastal Energy
Faroe Petroleum
Noreco
Soco
Lundin Petroleum
Rockhopper
Green Dragon
Tower Resources
Aminex Plc
Heritage Oil
DNO
Cairn Energy
Hardy Oil
Salamander
Gulf Keystone
Maurel & Prom
Bankers petroleum
Amerisur
JKX
Chariot Oil & Gas
Great Eastern Energy
Global Energy Development
Ithaca
Borders and Southern
Igas
Gulfsands
Cove Energy
Sterling Energy
Det Norske
Falkland Oil & Gas
Sanctioned assets, cash and other Discoveries Short term exploration Long term exploration Strategic asset premium Liquidity / funding discount NAV / Price
Source: Bloomberg, Goldman Sachs Research estimates.
Goldman Sachs Global Investment Research 17