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Angola Block Strategic Review


									Financing The World’s Toughest
      Energy Challenges
                 Presentation for
 Ross School of Business Corporate Finance Forum

                                                   September 21, 2007
Every 24 Hours . . .

                       Page 1
Size Matters

                2006 Net Income             $39.5 B
                  –   ROCE                   32%
                  –   Assets                 $219 B
                  –   Shareholder’s Equity   $114 B
                  –   Cash                   $33 B
                  –   Net Debt/Capital       (20%)

                Long-standing AAA rated company

                                                       Page 2
Proven Performance and Unmatched Scale
                                             Market Capitalization
                                     1. Exxon Mobil ($426 B)
                                     2. General Electric ($368 B)
                                     3. Microsoft ($274 B)
                                     4. Citigroup ($256 B)
                                     5. AT&T ($243 B)
                                     Source: Fortune, as of 3/23/07

                   Profit Ranking
     1. Exxon Mobil ($39.5 B)
     2. UAL ($22.8 B)
     3. Citigroup ($21.5 B)
     4. Bank of America ($21.1 B)
     5. General Electric ($20.8 B)
     Source: Fortune, 2006

                                                                      Page 3
Project Finance Overview: Considerations
What is project finance?
 Project financing is debt financing secured with future project cash flows plus, in many cases,
  project assets or JV interests
   – Lender recourse directly to the project owners is generally limited to the pre-completion period

Project financing can provide substantial benefits:
 Enables cash-constrained partners to fund their share of expenditures
   – Resolve budget constraints
   – Conserve available equity for funding of other / additional projects
   – Avoid project delays / interruptions and carries / guarantees that adversely impact project
 Imposes discipline on host country governments in high risk locations
   – Constrains governments from viewing contracts as “living” documents
   – Payments assured through offshore accounts and cash waterfall structure
 Political risk mitigation afforded by the presence of certain lenders
   – Actions against certain lenders impact government access to future funding
 Can serve as a potential means to reduce stake in project / country exposure
 Raises the borrower’s profile with lenders through project finance marketing process
 Can develop the local financial sector through the participation of local lenders

However there are potential drawbacks:
 Historically expensive source of funding versus centralized corporate borrowing
 Time consuming placement process that may result in project delay
 Loan administration / compliance often burdensome
                                                                                                   Page 4
 EM’s Project Financings have Spanned the Globe
                                            Azerbaijan                               Qatar
                                            ACG Early             Kazakhstan      Qatargas D/S
                                               Oil                TCO Expansion    $1,995 M
                    UK                       $285 M                 $4,400 M
                South Hook                                                        Qatargas U/S
                   LNG                                                              $570 M
                 $1,100 M                                                           RasGas
                                                                                    $2,550 M
                Canada                                                             Qatargas II
                 Hibernia                                                             U/S
                 $1,350 M                                                           $6,500 M

   USA         Venezuela                                                             refin.
Maritimes NE                                                                        $665 M
               Cerro Negro
  Pipeline       $900 M
 $1,010 M                                                                         Ras Gas II/3
                                                                                   $10,000 M
                                                                                   ($4,600 M
                 Nigeria                                                             raised)
                  Oso                            Saudi Arabia
                 $590 M                             Yanpet
                                                 Chemical Plant     Singapore
                  NGL I                            $2,300 M
                 $330 M
                 NGL II                                              Complex
                                                 Chemical Plant
                $1,275 M                                              $600 M
                                                    $700 M
               Satellite Oil       $600 M
               Field Project
                  $600 M

                                                                                    Page 5
Overview of Recent Deals

 2004/2005 Project Financings:
Project Scope:
  Offshore Development and Production                                               
  NGL Extraction and Processing                                             
  LNG Production                                                             
  Onshore Oil Extraction and Processing                                

Sources of Debt:
  Commercial Banks                                                                   
  Capital Markets                                                             
  Export Credit Agencies (USEXIM, SACE)                 
  Bi-laterals (OPIC)                            
  Islamic Finance                                       
  Co-Lending also has significant experience working with Multilateral Agencies such as
  • ExxonMobil
     the IFC, EBRD, IBRD, and the World Bank
                                                                                   Page 6
 Overview of Recent Deals (cont.)
                                            Top 10 Oil and Gas Financings 2004-2005

   Rank                       Project                            Country                 (US$M)                                    Participants
           1    Qatargas II                               Qatar                                6,500      Qatar Petroleum, ExxonMobil

           2    Ras Gas II/3                              Qatar                                4,600      Qatar Petroleum, ExxonMobil

           3    Tengiz Chevroil (TCO)                     Kazakhstan                           4,400      ChevronTexaco, ExxonMobil, KMG

           4    Qatargas 3                                Qatar                                4,341      CONOCOPHILLIPS, Qatar Petroleum

           5    Baku-Tbilisi-Ceyhan (BTC)                 Azerbaijan                           3,020      BP, SOCAR, TPAO, Statoil, Unocal, Itochu, Amerada Hess,
                Pipeline                                                                                  Eni, TotalFinaElf, INPEX, ConocoPhillips

           6    Mitsui O.S.K. Lines LNG                   Qatar                                1,650      MITSUI & CO LIMITED, IINO KAIUN KAISHA LIMITED,
                Ships (Serve Ras Gas II/3)                                                                NIPPON YUSEN KABUSHIKI KAISHA, KAWASAKI KISEN
                                                                                                          KAISHA LTD, MITSUI O.S.K LINES LIMITED

           7    MPN Natural Gas Liquids                   Nigeria                              1,275      ExxonMobil, NNPC
                Plant (NGL II)

           8    South Hook LNG Terminal                   UK                                   1,100      Qatar Petroleum, ExxonMobil

           9    Gazprom Refinancing                       Russia                               1,100      Gazpromneft

         10     Dampier-to-Bunbury Natural                Australia                            1,017      Alcoa World Alumina Australia, Alint, DUET
                Gas Pipeline

                Total for ExxonMobil:                                                         17,875

Source: Thomson Project Finance International- data includes project sponsor loans to the extent known and excludes bridge loans

                                                                                                                                                         Page 7
Unrivaled Scale

   Lead Arrangers - Bank Loans (US$ M)             Lead Managers - Project Bonds (US$ M)

 2004                                Amount       2004                                Amount
 Rank Name                         Underwritten   Rank Name                         Underwritten

  1   Citigroup                          $6,414    1   Lehman Brothers                     $4,548
  2   BNP Paribas                         4,272    2   Citigroup                             4,530
  3   Credit Suisse First Boston          4,178    3   Goldman Sachs                         3,453
  4   Royal Bank of Scotland              3,785    4   Societe Generale                      2,019
  5   Societe Generale                    3,529    5   HSBC                                  1,667
  6   Sumitomo Mitsui                     3,475    6   Credit Suisse First Boston            1,451
  7   Bank of Tokyo Mitsubishi            3,456    7   Calyon                                1,428
  8   HSBC                                3,391    8   Deutsche Bank                         1,203
  9   Korea Development Bank              3,325    9   JP Morgan                             1,128
 10   ABN AMRO                            3,155   10   Royal Bank of Canada                    748
      Other                              77,459        Other                                6,472
      Total Market                    $116,439         Total Market                      $28,647

 2004: #1 bank Citigroup $10.9 B as Lead Arranger / Manager compared to
                           ExxonMobil $13.9 B

                                                                                        Page 8
Qatargas II

Financing for 2 large (7.8 MTA each) LNG Trains and UK Receiving Terminal (EM 30%)

   Raised $7.6 B in total (including UK South Hook Receiving Terminal)
    –   $3.2 billion from commercial banks
    –   $530 million in Shari’a-compliant Islamic financing
    –   $800 million in ECA facilities (US Exim and Sace)
    –   £420 million bank facility
    –   $2.3 billion in ExxonMobil co-lending

   Standard project financing with several step-out structural elements
    – Limited restrictions on project’s business
    – Limited incremental loan compliance requirements

 Largest ever energy project financing / 3rd largest project financing ever
    – First LNG project financed wellhead to terminal in an integrated financing
    – Largest long term Islamic project financing
    – Terminal financing is the longest pound sterling denominated bank energy transaction without
      government or mono-line credit support

                                                                                                Page 9
RasGas II/3 Financing
 Financing for 5 LNG trains with a total capacity of 30 MTA (EM 30%)

    $10 B rated debt facility put into place; $4.6 B raised to date from commercial banks, the
     international capital markets and ExxonMobil co-loans
      – $2.25 billion from capital markets (15 and 22 year maturities)
      – $970 million from commercial banks
      – $1.38 billion in ExxonMobil co-lending

    Excellent ratings achieved (A1/A+/A)

    Hybrid structure resulted in extremely favorable loan terms:
      – No guarantees, support commitments or completion guarantees required
      – No restrictions or limits on project’s business or trade counterparties
      – No incremental loan compliance requirements; no rating affirmation required

    Bond portion was largest ever energy project financing in the capital markets

    Attractive pricing
      – Bonds priced below Qatar implied sovereign debt rates
      – Lowest bank pricing for any long-term energy financing in recent years

    Strong distribution across the US, Europe, the Middle East and Asia with significant number
     of new investors in Qatar
                                                                                              Page 10
Decrease in Qatar Debt Rate

                              Qatar borrowing rates fell as the
                              RasGasII/3 financing was marketed

                                                                  Page 11
TCO Expansion
Oil extraction and processing facilities expansion for TengizChevroil (EM 25%)

 Raised $4.4 B in total
   – $1.1 B from capital markets (10 year maturity)
   – $2.2 B from Chevron co-loans
   – $1.1 B in ExxonMobil co-lending

 Extremely favorable loan terms:
   – No completion guarantees, no recourse to partners, minimal compliance
   – No restrictions or limits related to permitted business or trade counterparties
   – TCO management of escrow accounts unless in default
   – No rating affirmation for new debt incurrence, distributions or expansions

 Largest financing and lowest all-in cost of financing ever for Kazakhstan
   – Largest project financing bond offering in 2004

 Co-lending resulted in all of the limited market capacity for TCO project financing being used by
  National Oil Company (KMG)

 Successful financing provides Kazakhstan with enhanced market credibility and improves future
  financing prospects
    – Road Show associated with project financing educated the lending community about Kazakhstan and
      its oil and gas projects resulting in an expanded pool of lenders

                                                                                             Page 12
Record of Success in our recent Project Financings

                   Qatargas II   2004 Project Finance International
                                 EMEA Gas Deal of the Year
                                 2004 Project Finance EuroMoney
                                   Global Deal of the Year

                   TCO           2004 Project Finance EuroMoney
                                   Corporate Bond Finance of the Year

                   RasGas II/3   2005 Project Finance EuroMoney
                                   EMEA Project Finance Deal of the Year
                                   Global Deal of the Year

                   Nigeria       2005 Trade Finance & 2005 Global Trade
                   Satellites       Review
                                   Deal of the Year Honors

                                                                        Page 13
Treasurer’s Role
 Strategy
   – Work closely with the business to ensure that commercial agreements are ‘bankable’
   – Assess risks and develop finance plan to support EM’s business objectives at lowest cost

 Financing Process
   – Represent EM on JV Finance Team and lead negotiation of all finance matters
   – Select and hire financial advisors, external counsel and all lender consultants / advisors
   – Develop financing term sheet and coordinate development of Information Memorandum, Offering
     Circular, Rating Agency presentations, financial model and ESIA
   – Negotiate financing documentation and coordinate / manage lender due diligence and consultant
   – Participate in / coordinate bond road show, bank meetings, pricing and deal closing

 Post Closing
   – Develop loan compliance processes / manual and define Treasurer’s, Business Line, Controller's,
     Law and SHE roles
   – Coordinate / manage loan compliance effort and act as interface with lenders / third parties
   – Conduct lessons learned with advisors / counsel to capture best practices and enhance future

                                                                                                Page 14

  As a leader in Project Finance, a career with ExxonMobil Treasurer’s offers
   unparalleled experience and training in this field

  Landscape constantly changing and innovation is always needed

  The Finance Function can create an additional source of competitive advantage
   and bring value to the organization through excellence in Project Finance

                                                                                 Page 15

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