ENERGY ALERT

September 29, 2017

ENERGY ALERT Recent developments in the Oil & Gas industry in Mexico: 1) CNH announces the First Call of Round 3; 2) SENER requests to remove block 30 from Round 2.4 bidding process. Round 3 First Call On September 28 2017 the governing body of the CNH announced the First Call of Round 3 for the bidding of 35 shallow waters blocks:

First Call of Round 3 - Contractual Areas Number of Contractual Areas

Size of the Contractual Areas (Km2)

Burgos

14

From 390 to 820

Tampico-Misantla -Veracurz

13

From 785 to 1,225

Southeast Basin

8

From 401 to 1,027

Geological Province

 

 

 

In addition, CNH approved the first draft of the Bidding Terms and Production Sharing Contract corresponding to this process. Please find below a brief summary with the most relevant information mentioned during the CNH governing body meeting: ► • Interested Parties shall pay $8 million MXP to have access to the data rooms. Such payment is only mandatory for the Operator. It is worth mentioning that companies which previously acquired the License codes for the use of the information that corresponds to this bidding shall not be required to make this payment.

• Both Operator and non-Operators shall cover the Registry fee of $750,000 MXP. ► • Prequalification requirements remain similar as in Round 2.1. In case shallow water Bidders (i.e. Rounds 1.1, 1.2 and 2.1 and Farm-Out Ayín-Batsil) information remains with no changes, such interested parties will be automatically prequalified just by presenting the corresponding CNH Format (Statement under oath), stating the former. In addition, the interested party may credit these requirements with the documentation submitted for the onshore and deep waters Farm-Outs and bidding processes of Rounds 1 and 2 (excepting the financial, experience and technical requirements). To prequalify for Round 3.1 bidding process companies have to demonstrate among others, the following: o Technical Requirements:  • Participation as i) Operator in hydrocarbon’s exploration and/or extraction projects, or ii) capital investments in exploration and/or extraction projects for at least 1 billion dollars, and  • Experience in industrial safety and environmental protection. o Financial Requirements:  • Operator: • Shareholder’s equity of at least 1 billion dollars; or • Total assets with a value of at least 10 billion dollars and an investment credit rate • Non-operator: • Shareholder’s equity of at least $250 million USD • The model Contract for this bidding process will be Production Sharing, which is expected to be in the same terms as in Round 2.1. • The initial term of the Contracts will be 30 years. The term may be extended for 2 more periods of 5 years each. The Exploration Period length will be 4 years with an extensions of 2 years each. The Appraisal Period may last up to 12 months with possible extension subject to CNH´s approval. • The Awarded Bidder will be the one with the highest Economic Bid Value (Government • Participation on the Operating Profit + Additional Investment Factor). • Unlike Round 2.1, it was established that just with the fact of bidding the Maximum Bid Variables of Government Participation on the Operating Profit (pending to be published by the Ministry of Finance) and the Additional Investment Factor (investment equivalent to 2 wells), the “Signing Bonus” that is offered in case of a tie, will automatically become part of the Economic Value of the Proposal. In other words, even in the case that there is no tie in the Economic Value of Proposals, with only the fact of bidding the Maximum Bid Variables, the Bidder will have the obligation to pay the “Signing Bonus”. • Bidders will be able to participate as an individual bidder or as part of one or more consortiums, which shall have at least one Operator (with 30% participation) • The Awarded Bidder shall provide a Bidding bond of $500 thousand USD • The Awarded Bidder shall also submit a Corporate Guarantee issued by their ultimate holding company or by another entity. In case the Corporate Guarantee is not issued by the ultimate holding company the contractors should file audited consolidated financial statements that demonstrate a shareholder’s equity of $2.5 billion USD. In case of a Consortium, the amount should be equal to the $2.5 billion USD multiplied by its percentage of Working Interest. • There will be no limitation regarding to the number of Consortiums in which an Interested Party may participate. However, the restriction of only submitting one proposal by Contractual Area under any figure the Bidder participates (Individual Bidder or Consortium) remains. • The most important dates for the bidding process are the following: o December 19 2017, due date to carry out the Registry fee payment ($750 thousand MXP) o January 16 2018, due date to have access to data room information o Between 22 and 24 January 2018 (depending on the appointment schedules), the interested parties shall file prequalification documents o Prequalified companies will be announce on February 26 2018 o Final Bidder’s structure will be published on March 19 2018 o Proposals Opening and Contract awarding will take place on March 27 2018 From tomorrow, the Bidding Guidelines and the PSC Contract will be available in the CNH’s webpage.

Block #30 of Round 2.4

Contacts:

On August 15, 2017, CNH confirmed that Block #30, which is located in the Yucatan Peninsula was at least 44 km away from the closest Protected Natural Area and that it was clearly far enough away from any environmentally restricted area. Safeguarded Zone Yucatan and Mexican Caribbean Platform National Park Escorpion Reef

Escorpion Reef

Alfredo Álvarez [email protected] Rodrigo Ochoa [email protected] Enrique Pérez-Grovas [email protected] Javier Noguez [email protected] Rodrigo Mondragón [email protected] Jimena González de Cossío [email protected] José Fano [email protected]

Block 30 - Yucatan Platform

Regardless the above, yesterday the Ministry of Energy requested to the National Agency for the Industrial Safety and Environmental Protection of the Hydrocarbons Sector (ASEA, per its acronym in Spanish) to carry out an additional environmental analysis over said block in order to secure the integrity of any Protected Natural Area around said block. In this order of ideas, given the deadline appointed by CNH for the opening proposals date (i.e. January 31, 2018) and the time it will take ASEA to conclude this analysis, block #30 will be removed Round 2.4 bidding process. With that being said, Round 2.4 will be offering only 29 deep waters blocks:

Yuri Barrueco [email protected] Jeffrey Helm [email protected] Salvador Meljem [email protected]