SAPURA ENERGY BERHAD - ChartNexusir.chartnexus.com/sapuraenergy/website_HTML/attachments/...SAPURA UPSTREAM SDN BHD (FORMERLY KNOWN AS SAPURA EXPLORATION AND PRODUCTION SDN BHD) (“SUSB”),

SAPURA ENERGY BERHAD (Company No. 950894-T) (Incorporated in Malaysia)

CIRCULAR TO SHAREHOLDERS IN RELATION TO THE

(I) PROPOSED STRATEGIC PARTNERSHIP BETWEEN SAPURA ENERGY BERHAD (“SEB”) AND OMV AKTIENGESELLSCHAFT (“OMV AG”), THROUGH SEB UPSTREAM SDN BHD (“SUP”), A JOINT VENTURE COMPANY INCORPORATED TO HOLD THE ENTIRE EQUITY INTEREST OF SAPURA UPSTREAM SDN BHD (FORMERLY KNOWN AS SAPURA EXPLORATION AND PRODUCTION SDN BHD) (“SUSB”), INVOLVING THE FOLLOWING:

(A) ISSUANCE OF SUCH NUMBER OF ORDINARY SHARES REPRESENTING 50% OF THE ENLARGED ISSUED SHARE CAPITAL OF SUP TO OMV EXPLORATION & PRODUCTION GMBH, A WHOLLY-OWNED SUBSIDIARY OF OMV AG, FOR A TOTAL CONSIDERATION OF UP TO USD625 MILLION (OR EQUIVALENT TO APPROXIMATELY RM2,600 MILLION);AND

(B) REPAYMENT OF AN AMOUNT OWING BY SUSB AND ITS SUBSIDIARIES TO SEB AND ITS SUBSIDIARIES OF USD350 MILLION (OR EQUIVALENT TO APPROXIMATELY RM1,456MILLION) IN CASH,

RESULTING IN A TOTAL CASH PROCEEDS OF UP TO USD975 MILLION (OR EQUIVALENT TO APPROXIMATELY RM4,056 MILLION), SUBJECT TO ADJUSTMENTS; AND

(II) PROPOSED PROVISION OF FINANCIAL ASSISTANCE BY SEB AND ITS SUBSIDIARIES TO SUP AND/OR ITS SUBSIDIARIES IN THE FORM OF CORPORATE GUARANTEES, UNDERTAKINGS AND/OR SECURITIES

AND

NOTICE OF EXTRAORDINARY GENERAL MEETING

Joint Principal Advisers

CIMB Investment Bank Berhad (18417-M)(A Participating Organisation of Bursa Malaysia Securities Berhad)

RHB Investment Bank Berhad (19663-P)(A Participating Organisation of Bursa Malaysia Securities Berhad)

The Notice of Extraordinary General Meeting (“EGM”) and the Proxy Form are enclosed in this Circular. The details of our EGM are as follows:

Date and time of the EGM : Monday, 28 January 2019 at 10.00 a.m.

Venue of the EGM : Multi-Purpose Hall, Ground Floor, Sapura@Mines No. 7 Jalan Tasik, The Mines Resort City 43300 Seri Kembangan, Selangor Darul Ehsan, Malaysia

Last date and time for lodging the Proxy Form : Sunday, 27 January 2019 at 10.00 a.m.

This Circular is dated 11 January 2019

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION.

If you are in any doubt as to the course of action to be taken, you should consult your stockbroker, bank manager, solicitor, accountant or other professional adviser immediately.

Bursa Malaysia Securities Berhad takes no responsibility for the contents of this Circular, makes no representation as to its accuracy or completeness and expressly disclaims any liability whatsoever for any loss howsoever arising from, or in reliance upon the whole or any part of the contents of this Circular.








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DEFINITIONS

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The following definitions shall apply throughout this Circular unless where the context requires otherwise:

ABN AMRO : ABN AMRO BANK N.V., Singapore Branch, being the international financial adviser for the Proposed Transaction

Additional Consideration

: Payment by OMV E&P to our Company of up to USD85 million (or equivalent to approximately RM354 million) upon the occurrence of certain events in relation to the achievement of Block 30 FID and Oil Price Differential pursuant to the Subscription Agreement

Agreements : Collectively, the Subscription Agreement, the Shareholders’ Agreement and the Warranty and Indemnity Deed

bbl : Barrels of oil

Block 30 : The petroleum block in the Sureste basin in Mexico awarded to and operated by Block 30 Consortium

Block 30 Consortium : Consortium formed by SEP Block 30 with Deutsche Erdoel Mexico S. de R.L. de C.V., and Premier Oil Exploration and Production Mexico, S.A. de C.V.

Block 30 FID : Final investment decision taken by the Block 30 Consortium to proceed with the commercial development of Block 30 as approved by CNH or as deemed approved by CNH as provided in the CEE

BNM : Bank Negara Malaysia

Board : Board of Directors of our Company

boe : Barrels of oil equivalent

Bursa Securities : Bursa Malaysia Securities Berhad

CA 2016 : Companies Act 2016

CEE : Contract for the Exploration and Extraction of Hydrocarbons under the Share Production Mode in Shallow Waters

CIMB IB : CIMB Investment Bank Berhad

Circular : This circular to our shareholders dated 11 January 2019 in relation to the Proposals

Closing : 31 January 2019, being the date on which the consummation of the Proposed Subscription shall take place, unless otherwise agreed to in writing by OMV E&P and our Company

CNH : Comisión Nacional de Hidrocarburos of Mexico, the Mexican O&Gregulator

EGM : Extraordinary general meeting

Energy Quest : Energy Quest Sdn Bhd, being the competent valuer for the reserves and resources of the SUSB Group

EPS : Earnings per SEB Share

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DEFINITIONS (Cont’d)

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EV : Enterprise value

Financing Facilities : Financing facilities for an aggregate amount of up to USD550 million (or equivalent to approximately RM2,288 million) but not less than USD350 million (or equivalent to approximately RM1,456 million)

FPE : Financial period ended

FYE : Financial year ended/ending, as the case may be

Independent Technical Expert Report

: The independent technical expert report in respect of the reserves and resources of the SUSB Group dated 8 November 2018 prepared by Ryder Scott

Independent Valuation Report

: The independent valuation report in respect of the valuation of the reserves and resources of the SUSB Group in Malaysia dated 19 November 2018 prepared by Energy Quest


: Collectively, Maybank IB, CIMB IB and RHB IB

Letter on the Fairness of the Consideration

: The letter on the fairness of the Total Consideration dated 22 November2018 from Merrill Lynch (Asia Pacific) Limited

LPD : 13 December 2018, being the latest practicable date prior to the printing of this Circular

LPS : Loss per SEB Share

Maybank IB : Maybank Investment Bank Berhad

mbbl : Thousands of bbl

mboe : Thousands of boe

Mexico Block 30 Guarantee

: A guarantee by our Company of up to an aggregate amount of USD750 million (or equivalent to approximately RM3,120 million) to CNH in relation to the obligations of SEP Block 30 under the CEE

mmcf : Million cubic feet of natural gas

NA : Net assets

O&G : Oil and gas

Oil Price Differential : Actual Brent prices exceeding the forecasted Brent prices for the SUSBGroup Production for 2019 to 2022 as set out in the Subscription Agreement

OMV AG : OMV Aktiengesellschaft

OMV E&P : OMV Exploration & Production GmbH

OMV Satisfaction Notice

: The notice served by OMV E&P on SEB which sets out that OMV E&P considers that the implementation of the arrangements contemplated in the Subscription Agreement (to the extent they relate to the right, title, right to use and interest in and to the properties by each SUSB Group member following the date of the Subscription Agreement) is progressing satisfactorily

Proposals : Collectively, Proposed Transaction and Proposed Financial Assistance

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Proposed Financial Assistance

: Proposed provision of financial assistance by our Group to the SUP Group in the form of corporate guarantees, undertakings and/or securities

Proposed Subscription

: Proposed subscription by OMV E&P of such number of new SUP Shares, representing 50% of the enlarged issued share capital of SUP, based on an EV of SUP on a “debt free, cash free” basis of USD1,600 million (or equivalent to approximately RM6,657 million) for the Total Consideration pursuant to the Subscription Agreement

Proposed Transaction : Proposed strategic partnership between our Company and OMV AG through SUP, a joint venture company incorporated to hold the entire equity interest of SUSB, involving the Proposed Subscription and repayment of an amount owing by the SUSB Group to our Group of USD350 million (or equivalent to approximately RM1,456 million) in cash through the Financing Facilities, resulting in a total cash proceeds of up to USD975 million (or equivalent to approximately RM4,056 million), subject to adjustments

PSC : Production sharing contract

RCPS-i : New Islamic redeemable convertible preference shares in our Company to be issued pursuant to the Rights Issue of RCPS-i

RHB IB : RHB Investment Bank Berhad

Rights Issue : Collectively, Rights Issue of Shares with Warrants and Rights Issue of RCPS-i

Rights Issue of RCPS-i

: Renounceable rights issue of 2,396,862,035 RCPS-i at an issue price of RM0.41 per RCPS-i on the basis of 2 RCPS-i for every 5 SEB Shares held at 5.00 p.m. on 31 December 2018 which was approved by our shareholders on 29 November 2018

Rights Issue of Shares with Warrants

: Renounceable rights issue of 9,986,925,145 Rights Shares at an issue priceof RM0.30 per Rights Share together with 998,692,514 free detachable warrants on the basis of 5 Rights Shares for every 3 SEB Shares held at 5.00 p.m. on 31 December 2018 and 1 warrant for every 10 Rights Shares subscribed which was approved by our shareholders on 29 November 2018

Rights Shares : New SEB Shares to be issued pursuant to the Rights Issue of Shares with Warrants

Ryder Scott : Ryder Scott Company, L.P., being the competent person for the reserves and resources of the SUSB Group

Sapura Debt : An amount owing by the SUSB Group to our Group (excluding management fees for the 3-months period prior to the Closing and amounts relating to the provision of O&G services by our Group) amounting to USD890 million (or equivalent to approximately RM3,703 million) as set out in the Subscription Agreement

SEB or Company : Sapura Energy Berhad

SEB Group or Group : Collectively, our Company and subsidiaries

SEB Satisfaction Notice

: The notice served by SEB on OMV E&P which sets out that SEB considers that the implementation of the arrangements contemplated in the Subscription Agreement (to the extent they relate to the right, title, right to use and interest in and to the properties by each SUSB Group member following the date of the Subscription Agreement) is progressing satisfactorily

SEB Shares : Ordinary shares in our Company

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SEP (Americas) : Sapura Exploration and Production (Americas) Sdn Bhd

SEP (Australia) : Sapura Exploration and Production (Australia) Sdn Bhd

SEP (Malaysia) : Sapura Exploration and Production (Malaysia) Inc

SEP (Mexico) : Sapura Exploration and Production (Mexico) Sdn Bhd

SEP (NZ) : Sapura Exploration and Production (NZ) Sdn Bhd (formerly known as Sapura Exploration and Production (JV) Sdn Bhd)

SEP (Oceania) : Sapura Exploration and Production (Oceania) Sdn Bhd

SEP (PM) : Sapura Exploration and Production (PM) Inc

SEP (Sabah) : Sapura Exploration and Production (Sabah) Inc

SEP (Sarawak) : Sapura Exploration and Production (Sarawak) Inc

SEP (Southeast Asia) : Sapura Exploration and Production (Southeast Asia) Inc (formerly known as Sapura Exploration and Production Inc)

SEP Block 30 : SEP Block 30, S. de R.L. de C.V.

SEP OMV JV : Sapura Exploration and Production OMV JV Sdn Bhd

SEP (Western Australia)

: Sapura Exploration and Production (Western Australia) Pty Ltd

Shareholders’ Agreement

: Shareholders’ agreement dated 9 November 2018 between our Company, OMV E&P, SUA, SUP and SUSB for purposes of regulating the joint management of SUP

SUA : Sapura Upstream Assets Sdn Bhd

Subscription Agreement

: Subscription agreement dated 9 November 2018 between our Company, SUA, OMV E&P and SUP for purposes of the Proposed Transaction

Subscription Price : USD540 million (or equivalent to approximately RM2,247 million), being the subscription price for the Proposed Subscription

SUP : SEB Upstream Sdn Bhd

SUP Group : SUP and its subsidiaries

SUP Shares : Ordinary shares in SUP

SUSB : Sapura Upstream Sdn Bhd (formerly known as Sapura Exploration and Production Sdn Bhd)

SUSB Group : Collectively, SUSB and its subsidiaries

SUSB Group Production

: For the purpose of calculating the Oil Price Differential as set out in Section 2.1.1 of this Circular, the amount of bbl and/or boe for condensates(excluding gas production) produced by and/or allocated to the SUSB Group

SUSB Shares : Ordinary shares in SUSB

TMC : Sapura TMC Sdn Bhd

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Total Consideration : Total consideration of up to USD625 million (or equivalent to approximately RM2,600 million) comprising the Subscription Price and Additional Consideration, subject to adjustments

UGSA : Upstream gas sale agreements

Warranty and Indemnity Deed

: Warranty and indemnity deed dated 4 December 2018 between our Company, SUA and OMV E&P where the parties have agreed to provide certain warranties, covenants and indemnities in relation to the Proposed Transaction

CURRENCIES

EUR : Euro

RM and sen : Ringgit Malaysia and sen

USD : United States Dollar

All references to “our Company” or “SEB” in this Circular are to SEB and references to “our Group” or “SEB Group” are to our Company and our subsidiaries, collectively. All references to “we”, “us”, “our” and “ourselves” are to our Company, and where the context requires otherwise, shall include our Company and our subsidiaries.

All references to “you” or “your” in this Circular are to our shareholders.

Words denoting the singular shall, where applicable, include the plural and vice versa, and words denoting the masculine gender shall, where applicable, include the feminine and/or neuter genders, and vice versa. Reference to persons shall include corporations, unless otherwise specified.

Any reference to any enactment, rules and regulations is a reference to that enactment, rules and regulations as may be amended or re- enacted from time to time.

Any reference to a time of day in this Circular is a reference to Malaysian time and date, unless otherwise stated.

Any discrepancy in the tables included in this Circular between the amounts listed, actual figures and the totals thereof are due to rounding.

This Circular includes forward-looking statements. All statements other than statements of historical facts included in this Circular including, without limitation, those regarding our Group’s financial position, business strategies, prospects, plans and objectives of our Company for future operations, are forward-looking statements. There can be no assurance that such forward-looking statements will materialise, be fulfilled or be achieved.

Unless otherwise stated, the exchange rate of USD1:00:RM4.1605, being the middle rate quoted by BNM at 5.00 p.m. on 8 November 2018, being the market day preceding the date of the announcement of the Proposed Transaction, is used throughout this Circular. Where applicable, the exchange rate of USD1:00:RM4.1800, being the middle rate quoted by BNM at 5.00 p.m. as at the LPD has also been used.

Any exchange rate translation in this Circular is provided solely for your convenience and should not be constituted as representative that the translated amount stated in this Circular could have been or would have been converted into such other amounts or vice versa.

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CONTENTS

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LETTER TO OUR SHAREHOLDERS IN RELATION TO THE PROPOSALS CONTAINING:

PAGE

1. INTRODUCTION 1 2. DETAILS OF THE PROPOSALS 2 3. RATIONALE AND BENEFITS OF THE PROPOSALS 10 4. RISK FACTORS 11 5. EFFECTS OF THE PROPOSALS 13 6. INDUSTRY OUTLOOK AND PROSPECTS OF OUR GROUP AND THE SUSB

GROUP 18

7. APPROVALS REQUIRED 21 8. CORPORATE EXERCISE/SCHEME ANNOUNCED BUT PENDING

COMPLETION 21

9. INTERESTS OF THE DIRECTORS, MAJOR SHAREHOLDERS AND/OR

PERSONS CONNECTED WITH THEM 21

10. DIRECTORS’ RECOMMENDATION 22 11. TENTATIVE TIMETABLE 22 12. EGM 22 13. FURTHER INFORMATION 22 APPENDICES

I INFORMATION ON SUSB 23 II INFORMATION ON OMV AG AND OMV E&P 49 III SALIENT TERMS OF THE AGREEMENTS 53 IV AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF SUSB FOR THE

FYE 31 JANUARY 2018 72

V INDEPENDENT TECHNICAL EXPERT REPORT 143 VI INDEPENDENT VALUATION REPORT 339 VII LETTER ON THE FAIRNESS OF THE CONSIDERATION 388 VIII FURTHER INFORMATION 394

NOTICE OF EGM ENCLOSED PROXY FORM ENCLOSED

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Registered OfficeSapura@Mines

No. 7 Jalan Tasik The Mines Resort City

43300 Seri Kembangan Selangor Darul Ehsan, Malaysia

11 January 2019

Board of DirectorsDato’ Hamzah Bakar (Chairman, Non-Independent Non-Executive Director)Tan Sri Dato’ Seri Shahril Shamsuddin (President and Group Chief Executive Officer, Non-Independent Executive Director)Tan Sri Datuk Amar (Dr) Hamid Bugo (Senior Independent Non-Executive Director) Dato’ Shahriman Shamsuddin (Non-Independent Non-Executive Director)Mohamed Rashdi Mohamed Ghazalli (Independent Non-Executive Director) Gee Siew Yoong (Independent Non-Executive Director)Datuk Muhamad Noor Hamid (Independent Non-Executive Director)Datuk Ramlan Abdul Rashid (Independent Non-Executive Director)

To : Our shareholders

Dear Sir/Madam,

(I) PROPOSED TRANSACTION; AND (II) PROPOSED FINANCIAL ASSISTANCE

1. INTRODUCTION

On 12 September 2018, our Company announced that a heads of agreement had been entered into between our Company and OMV AG to continue ongoing negotiations on the proposed strategic partnership through a sale by our Company of a 50% stake in SUSB on an exclusive basis.

On 9 November 2018, Maybank IB, on behalf of our Board, announced that the Subscription Agreement and the Shareholders’ Agreement had been entered into.

On 5 December 2018, Maybank IB, on behalf of our Board, announced that the Warranty and Indemnity Deed had been entered into.

On 24 December 2018, the Joint Principal Advisers announced, amongst others, that OMV E&P had served the OMV Satisfaction Notice on SEB, and that SEB had served the SEB Satisfaction Notice on OMV E&P in accordance with the Subscription Agreement.

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Registered OfficeSapura@Mines

No. 7 Jalan Tasik The Mines Resort City

43300 Seri Kembangan Selangor Darul Ehsan, Malaysia

11 January 2019

Board of DirectorsDato’ Hamzah Bakar (Chairman, Non-Independent Non-Executive Director)Tan Sri Dato’ Seri Shahril Shamsuddin (President and Group Chief Executive Officer, Non-Independent Executive Director)Tan Sri Datuk Amar (Dr) Hamid Bugo (Senior Independent Non-Executive Director) Dato’ Shahriman Shamsuddin (Non-Independent Non-Executive Director)Mohamed Rashdi Mohamed Ghazalli (Independent Non-Executive Director) Gee Siew Yoong (Independent Non-Executive Director)Datuk Muhamad Noor Hamid (Independent Non-Executive Director)Datuk Ramlan Abdul Rashid (Independent Non-Executive Director)

To : Our shareholders

Dear Sir/Madam,

(I) PROPOSED TRANSACTION; AND (II) PROPOSED FINANCIAL ASSISTANCE

1. INTRODUCTION

On 12 September 2018, our Company announced that a heads of agreement had been entered into between our Company and OMV AG to continue ongoing negotiations on the proposed strategic partnership through a sale by our Company of a 50% stake in SUSB on an exclusive basis.

On 9 November 2018, Maybank IB, on behalf of our Board, announced that the Subscription Agreement and the Shareholders’ Agreement had been entered into.

On 5 December 2018, Maybank IB, on behalf of our Board, announced that the Warranty and Indemnity Deed had been entered into.

On 24 December 2018, the Joint Principal Advisers announced, amongst others, that OMV E&P had served the OMV Satisfaction Notice on SEB, and that SEB had served the SEB Satisfaction Notice on OMV E&P in accordance with the Subscription Agreement.

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On 9 January 2019, the Joint Principal Advisers, on behalf of our Board, announced that in conjunction with the Proposed Transaction, our Company is proposing to seek our shareholders’ approval for the Proposed Financial Assistance.

Our Board had appointed:

(a) Maybank IB, CIMB IB and RHB IB as Joint Principal Advisers to our Company for the Proposals to advise on, among others, the timing, procedures and any other matters pertaining to the Proposals which are within their scope. The Joint Principal Advisers also co-ordinate the work of other professional advisers appointed for purposes of the Proposals in order to ensure a smooth and successful implementation of the Proposals;and

(b) ABN AMRO as international financial adviser to our Company for the Proposed Transaction to advise on the international aspects of the Proposed Transaction and the structure of the Proposed Transaction.

THE PURPOSE OF THIS CIRCULAR IS TO PROVIDE YOU WITH THE DETAILS OF THE PROPOSALS AND TO SEEK YOUR APPROVAL FOR THE RESOLUTIONS PERTAINING TO THE PROPOSALS TO BE TABLED AT THE FORTHCOMING EGM. THE NOTICE OF EGM AND PROXY FORM ARE ENCLOSED IN THIS CIRCULAR.

YOU ARE ADVISED TO READ AND CONSIDER CAREFULLY THE CONTENTS OF THIS CIRCULAR BEFORE VOTING ON THE RESOLUTIONS PERTAINING TO THE PROPOSALS TO BE TABLED AT THE FORTHCOMING EGM.

2. DETAILS OF THE PROPOSALS

2.1 Details of the Proposed Transaction

The Proposed Transaction involves the following:

(a) the issuance of such number of new SUP Shares representing 50% of the enlarged issued share capital of SUP to OMV E&P, based on an EV of SUP on a “debt free, cash free” basis of USD1,600 million (or equivalent to approximately RM6,657 million) for the Total Consideration comprising:

(i) cash subscription price of USD540 million (or equivalent to approximately RM2,247 million); and

(ii) cash payment of up to USD85 million (or equivalent to approximately RM354 million) upon the occurrence of certain events as set out in Section 2.1.1 of this Circular in relation to the achievement of Block 30 FID and Oil Price Differential, and

(b) repayment of the Sapura Debt of USD350 million (or equivalent to approximately RM1,456 million) in cash through a shareholders’ loan from an entity within the OMV AG group or bank borrowings to be obtained by the SUP Group,

resulting in a total cash proceeds of up to USD975 million (or equivalent to approximately RM4,056 million) to be received by our Group and SUP, subject to adjustments after Closing based on the difference between the net debt* and net working capital of the SUSB Group as at Closing compared to the net debt* and net working capital of the SUSB Group estimated in the closing preliminary statement to be prepared by our Company not later than 15 business days prior to Closing (“Closing Preliminary Statement”) (“Adjustment Amount”).

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Note:

* Being the net debt of the SUSB Group after the debt novation amount which is the amount equal to the net debt and net working capital of the SUSB Group as estimated in the Closing Preliminary Statement less the Sapura Debt of USD890 million and a reference working capital. The debt novation amount will be novated to our Company and capitalised pursuant to the Subscription Agreement.

For example, if the resulting Adjustment Amount is negative, OMV E&P shall pay our Company such Adjustment Amount multiplied by 0.5, and if the resulting Adjustment Amount is positive, our Company shall pay OMV E&P such Adjustment Amount multiplied by 0.5. For avoidance of doubt, the payment pursuant to the Adjustment Amount occurs after completion of the Proposed Transaction and is not expected to be significant.

In conjunction with the Proposed Transaction, our Company will transfer SUSB to SUP after the restructuring of debt such that the equity value of SUP reflects USD540 million, being the amount for SUA’s equity participation of 50% equity interest in SUP which is equal to the Subscription Price to be paid by OMV E&P for the Proposed Subscription, which shall be settled via issuance of new SUP Shares.

The structure of our Group immediately before the completion of the Proposed Transaction and after the Proposed Transaction are as follows:

Immediately before the completion of the Proposed Transaction

After the Proposed Transaction

Note:

* As part of the restructuring steps to facilitate the completion of the Proposed Transaction, our Company will sell all the SUP Shares held by our Company to SUA for a nominal amount of RM2, being the issued share capital of SUP.

The Proposed Transaction is subject to the terms and conditions of the Agreements, the salient terms and conditions of which are set out in Appendix III of this Circular.

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2.1.1 Basis and justification for the Total Consideration

The Total Consideration was arrived at on a “willing-buyer willing-seller” basis based on the EV of SUP on a “debt free, cash free” basis of USD1,600 million (or equivalent to approximately RM6,657 million) after negotiations between our Company and OMV, as follows:

USD’ million RM’ millionEV of SUP 1,600 6,657Less : Agreed retained debt(1) (350) (1,456)

Equity value of SUP 1,250 5,201Equity value represented by 50% equity interest in

SUP625 2,600

where the total proceeds to be received by our Group from the Proposed Transaction are as follows:(a) Subscription Price(2) 540 2,247(b) Additional Consideration(2) in relation to the

following:- Block 30(3) 55 229- Oil Price Differential(4) 30 125Total Consideration 625 2,600

(c) Part repayment of the Sapura Debt(5) 350 1,456Total proceeds from the Proposed Transaction 975 4,056

Notes:

(1) Being the agreed debt level of SUP pursuant to the Subscription Agreement of USD350 million (or equivalent to approximately RM1,456 million) upon completion of the Proposed Transaction.

(2) The Subscription Price to be received by SUP in full at Closing will be used to repay USD540 million of the Sapura Debt whilst the Additional Consideration will be paid to our Company by OMV E&P as detailed in notes (3) and (4) below.

(3) The amount of up to USD55 million (or equivalent to approximately RM229 million) is dependent on the achievement of Block 30 FID, to be calculated in the following manner:

USD55 millionX SUSB Group’s participating

interest in Block 30 immediately prior to Block 30 FID (%)

XReserves level(ii)

30%(i) 367 million(ii)

(i) Being the SUSB Group’s participating interest in Block 30, via SEP Block 30, as at the

date of the Subscription Agreement.

(ii) Means P50 (50% probability that actual quantities recovered will equal or exceed best estimates) reserves at the time of Block 30 FID, provided that the amount of reserves shall never be greater than 367 million boe gross.

OMV E&P shall pay the relevant amount to our Company within 15 business days of receipt by the SUSB Group of written confirmation from the Block 30 Consortium that the Block 30 FID has occurred. As at the LPD, Block 30 is in the exploration phase and Block 30 Consortium is planning the seismic activities which will commence in 2019.

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(4) The amount of up to USD30 million (or equivalent to approximately RM125 million) is based on 50% of the differential between the actual Brent prices and the forecasted Brent prices for the SUSB Group Production for 2019 to 2022, provided that the differential in any year shall never exceed 12% of the forecasted Brent price for that particular year. Any excess will be disregarded for the purpose of calculating the Oil Price Differential. The Oil Price Differential is intended to provide our Company with the benefit of potential upside in oil price for up to 3 years from the completion of the Proposed Transaction.

The actual Brent price shall be the Brent price on a lifting by lifting basis as determined by the actual Brent price achieved and finally determined at the end of each month as outlined in the month end invoices.

OMV E&P shall pay the relevant amount after the end of each relevant calendar year (i.e. 2019 to 2022) to our Company within 5 business days after the Oil Price Differential, the SUSB Group Production and the Additional Consideration for the Oil Price Differential with respect to each relevant calendar year are agreed by SEB and OMV E&P.

The historical Brent prices for the past 12 months up to the LPD are illustrated in the chart below:

(Source: Bloomberg)

(5) As at the LPD, the amount owing by the SUSB Group to our Group (excluding management fees for the 3-months period prior to the Closing and amounts relating to the provision of O&G services by our Group)* is approximately USD1,008 million (or equivalent to approximately RM4,213 million, based on the exchange rate of USD1.00:RM4.1800, being the middle rate quoted by BNM at 5.00 p.m. as at the LPD) (“Amount Owing by SUSB Group”) which was mainly used to finance the acquisition of SEP (Malaysia) (then known as Newfield Malaysia Holding Inc) for USD896 million which was completed on 11 February 2014, capital expenditures and working capital of the SUSB Group. For avoidance of doubt, the difference between the Amount Owing by SUSB Group (after adjusting for cash and working capital) based on the Closing Preliminary Statement and USD890 million, will be novated to our Company and capitalised pursuant to the Subscription Agreement.

* The amount relating to the management fees for the 3-months period prior to the Closing and amounts relating to the provision of O&G services by our Group will be treated as amounts payable by the SUSB Group to our Group and will be repaid in the ordinary course of business.

In evaluating the EV of SUP of USD1,600 million (or equivalent to approximately RM6,657 million) under the Proposed Transaction, our Company had taken into consideration, among others, the following:

(i) the SUSB Group’s O&G net proved and probable reserves (2P) and best estimate contingent resources (2C) of 265.5 million boe in aggregate as at 1 August 2018 based on the Independent Technical Expert Report included in Appendix V of this Circular;

Highest price USD85.14 (on 3 October 2018)Average price USD70.01Lowest price USD59.23 (on 23 November 2018)

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(ii) the valuation of the SUSB Group’s net proved and probable reserves (2P) and best estimate contingent resources (2C) in Malaysia as at 1 August 2018 as assessed by Energy Quest of between USD1,085 million and USD1,872 million (or equivalent to between approximately RM4,514 million and RM7,788 million).

Energy Quest had conducted its valuation based on, amongst others, the estimates of 2P and 2C derived by Ryder Scott as set out in the Independent Technical Expert Report and had adopted the income based approach. In arriving at the high case valuation of USD1,872 million, Energy Quest took into account the potential effect of favourable economic parameters such as the application of marginal field tax incentives on eligible assets, higher O&G prices, higher O&G production and, lower capital and operating expenditures. Conversely, in arriving at the low case valuation of USD1,085 million, Energy Quest took into account the potential effect of less favourable economic parameters such as lower O&G prices, lower O&G production,higher cost of financing, and higher capital and operating expenditures.

Further details on the valuation and assumptions used by Energy Quest are set out in the Independent Valuation Report included in Appendix VI of this Circular;

(iii) Merrill Lynch (Asia Pacific) Limited’s opinion that the Total Consideration is fair from a financial point of view is set out in the Letter on the Fairness of the Consideration included in Appendix VII of this Circular;

(iv) net book value of the SUSB Group’s expenditure on O&G properties of RM4,008.8 million and RM4,363.4 million based on the audited consolidated statement offinancial position of SUSB as at 31 January 2018 and unaudited consolidated statement of financial position of SUSB as at 30 November 2018;

(v) overview and outlook of the O&G sector as well as the prospects of the SUSB Group as detailed in Sections 6.3 and 6.5 of this Circular respectively;

(vi) rationale and benefits for the Proposed Transaction as set out in Section 3.1 of this Circular; and

(vii) potential upside arising from the potential development of Block 30 and ourCompany’s expectation of favourable movement in future O&G prices based on the outlook of the O&G sector as detailed in Section 6.3 of this Circular.

2.1.2 Use of proceeds

Our Company intends to use the proceeds to be received from the Proposed Transaction in the following manner:

AmountEstimated

timeframe for use from receipt of

proceedsDescription of use of proceeds USD’000 RM’000

Part repayment of the bank borrowings of our Group(a)

720,000 3,009,600 Within 2 months

Working capital of our Group(b) 245,000 1,024,100 Within 24 months

Defray estimated expenses relating to the Proposals(c)

10,000 41,800 Within 2 months

Total 975,000 4,075,500

6

(ii) the valuation of the SUSB Group’s net proved and probable reserves (2P) and best estimate contingent resources (2C) in Malaysia as at 1 August 2018 as assessed by Energy Quest of between USD1,085 million and USD1,872 million (or equivalent to between approximately RM4,514 million and RM7,788 million).

Energy Quest had conducted its valuation based on, amongst others, the estimates of 2P and 2C derived by Ryder Scott as set out in the Independent Technical Expert Report and had adopted the income based approach. In arriving at the high case valuation of USD1,872 million, Energy Quest took into account the potential effect of favourable economic parameters such as the application of marginal field tax incentives on eligible assets, higher O&G prices, higher O&G production and, lower capital and operating expenditures. Conversely, in arriving at the low case valuation of USD1,085 million, Energy Quest took into account the potential effect of less favourable economic parameters such as lower O&G prices, lower O&G production,higher cost of financing, and higher capital and operating expenditures.

Further details on the valuation and assumptions used by Energy Quest are set out in the Independent Valuation Report included in Appendix VI of this Circular;

(iii) Merrill Lynch (Asia Pacific) Limited’s opinion that the Total Consideration is fair from a financial point of view is set out in the Letter on the Fairness of the Consideration included in Appendix VII of this Circular;

(iv) net book value of the SUSB Group’s expenditure on O&G properties of RM4,008.8 million and RM4,363.4 million based on the audited consolidated statement offinancial position of SUSB as at 31 January 2018 and unaudited consolidated statement of financial position of SUSB as at 30 November 2018;

(v) overview and outlook of the O&G sector as well as the prospects of the SUSB Group as detailed in Sections 6.3 and 6.5 of this Circular respectively;

(vi) rationale and benefits for the Proposed Transaction as set out in Section 3.1 of this Circular; and

(vii) potential upside arising from the potential development of Block 30 and ourCompany’s expectation of favourable movement in future O&G prices based on the outlook of the O&G sector as detailed in Section 6.3 of this Circular.

2.1.2 Use of proceeds

Our Company intends to use the proceeds to be received from the Proposed Transaction in the following manner:

AmountEstimated

timeframe for use from receipt of

proceedsDescription of use of proceeds USD’000 RM’000

Part repayment of the bank borrowings of our Group(a)

720,000 3,009,600 Within 2 months

Working capital of our Group(b) 245,000 1,024,100 Within 24 months

Defray estimated expenses relating to the Proposals(c)

10,000 41,800 Within 2 months

Total 975,000 4,075,500

6

7

Notes:

(a) As at the LPD, the total outstanding amount of the bank borrowings of our Group is RM17,209 million. The proceeds from the Proposed Transaction will be used to partly repay the amount due to lenders of multi-currency term facilities and murabahah term financing facility which primarily was used for the following:

(i) USD1,737 million (or equivalent to approximately RM7,261 million*) to refinance a bridging facility which was used to part finance the acquisition of the tender rigbusiness i.e. Seadrill Tender Rig Limited for USD2,646 million (or equivalent to approximately RM8,031 million, based on the exchange rate of USD1.00:RM3.0353,being the average rate of the transactions), which was completed on 30 April 2013;

(ii) USD899 million (or equivalent to approximately RM3,758 million*) to finance the acquisition of the entire equity interest of SEP (Malaysia) (then known as Newfield Malaysia Holding Inc) for USD896 million and transaction costs of USD3 million, which was completed on 11 February 2014; and

(iii) USD670 million (or equivalent to approximately RM2,801 million*) and RM3,179 million for capital expenditures of our Group.

* Based on the exchange rate of USD1.00:RM4.1800, being the middle rate quoted by BNM at 5.00 p.m. as at the LPD.

The part repayment of the bank borrowings of our Group is expected to result in savings in finance cost of approximately RM139 million per annum based on the weighted average interest rate of approximately 4.6% per annum.

(b) The working capital of our Group includes, but is not limited to, day-to-day operating and administrative expenses of our Group such as payments to contractors and suppliers, staff wages and salaries, secretarial fees, audit fees, consultant fees as well as utilities and maintenance expenses.

For avoidance of doubt, the Additional Consideration when received upon occurrence of certain events as set out in Section 2.1.1 of this Circular will be used for the working capital of our Group.

(c) The estimated expenses relating to the Proposals comprise professional fees, fees payable to the relevant authorities, cost of convening the forthcoming EGM and other incidental expenses, as follows:

USD’000 RM’000

Professional fees* 9,378 39,200Fees payable to the relevant authorities 31 130Cost of convening the forthcoming EGM 431 1,800Miscellaneous and contingencies 160 670

10,000 41,800

* Comprising estimated fees, relevant taxes and out-of-pocket expenses for the following parties:

USD’000 RM’000

Legal advisers 2,847 11,900Joint Principal Advisers and international financial

adviser4,258 17,800

Accountants and tax advisers 359 1,500Technical and other experts 1,914 8,000

9,378 39,200

7

8

2.1.3 Original cost of investment

Our Company’s original cost of investment in the equity of SUSB is USD896 million (or equivalent to approximately RM2,983 million, based on an exchange rate of USD1.00:RM3.33, being the middle rate quoted by BNM at 5.00 p.m. on 11 February 2014), being the final consideration paid by our Company for the acquisition of the entire equity interest of SEP (Malaysia) (then known as Newfield Malaysia Holding Inc) on 11 February 2014.

2.1.4 Background information on SUSB, SUP and SUA

2.1.4.1 SUSB

SUSB was incorporated as a private limited company in Malaysia under theCompanies Act 1965 on 18 October 2013 under the name of Falcon Lane Sdn Bhd and is deemed registered under the CA 2016. It changed its name to SapuraKencana Energy Sdn Bhd on 15 January 2014 and to Sapura Exploration and Production Sdn Bhd on 28 April 2017, and assumed its present name on 21 August 2018.

As at the LPD, the issued share capital of SUSB is RM2 comprising 2 SUSB Shares.

SUSB is an investment holding company while its subsidiaries are principally involved in the exploration, development and production of crude oil and natural gas.

Further details on SUSB are set out in Appendix I of this Circular.

2.1.4.2 SUP

SUP was incorporated as a private limited company in Malaysia under the CA 2016 on 2 November 2018.

As at the LPD, the issued share capital of SUP is RM2 comprising 2 SUP Shares. Upon completion of the Proposed Transaction, the issued share capital of SUP will be an amount in RM equivalent to USD1,080 million comprising such number of SUP Shares based on an issue price to be determined later.

As at the LPD, SUP is an investment holding company and is wholly-owned by our Company. SUP does not have any subsidiary or associated company as at the LPD. SUP was incorporated to hold the entire equity interest of SUSB for the purposes of the Proposed Transaction. Following the Proposed Subscription, SUA and OMV E&P will equally hold 50% equity interest in SUP.

2.1.4.3 SUA

SUA was incorporated as a private limited company in Malaysia under the CA 2016 on 2 November 2018.

As at the LPD, the issued share capital of SUA is RM2 comprising 2 ordinary shares in SUA.

As at the LPD, SUA is an investment holding company and is wholly-owned by our Company. SUA does not have any subsidiary or associated company as at the LPD.

8

9

2.1.5 Background information on OMV AG and OMV E&P

Information on OMV AG and OMV E&P is set out in Appendix II of this Circular.

2.1.6 Liabilities to be assumed by OMV E&P

Save for OMV E&P’s share of guarantee to be provided for the Mexico Block 30 Guarantee as detailed below, there are no other liabilities, including contingent liabilities and guarantees, to be assumed by OMV E&P pursuant to the Proposed Transaction.

On 27 June 2018, the Block 30 Consortium entered into the CEE with CNH in respect of the exploration and production activities in Block 30 and on even date, our Company provided the Mexico Block 30 Guarantee in relation to the obligations of SEP Block 30 which is our indirect subsidiary.

Pursuant to the Subscription Agreement, it is the intention of our Company and OMV E&P to apply to CNH to release our Company from our obligations under the Mexico Block 30 Guarantee and for SUP to provide a similar guarantee in its place upon completion of the Proposed Transaction.

The release of our Company from the obligations under the Mexico Block 30 Guarantee may not take place if the approval from CNH is not obtained. Under such an event, pursuant to the Subscription Agreement, OMV E&P shall keep our Company fully indemnified against 50% of all payments made by our Company in respect of liabilities of SEP Block 30 under the Mexico Block 30 Guarantee where such liabilities are liabilities that arise with respect to obligations to be performed after the completion of the Proposed Transaction, provided that OMV E&P shall not be liable to pay unless and until our Company has paid in full any amount claimed by CNH.

Our Company’s net exposure in respect of Mexico Block 30 Guarantee based on 50% equity interest in SUP upon completion of the Proposed Transaction will be USD375 million (or equivalent to approximately RM1,560 million).

2.2 Details of the Proposed Financial Assistance

In conjunction with the Proposed Transaction, the SUP Group intends to obtain financing facilities for an aggregate amount of up to USD550 million (or equivalent to approximately RM2,288million) but not less than USD350 million (or equivalent to approximately RM1,456 million), of which an amount of USD350 million (or equivalent to approximately RM1,456 million) will be used to partially repay the Sapura Debt and the remaining, if any, for the working capital of the SUP Group. Our Group may be required to provide corporate guarantees, undertakings and/or securities for 50% of the Financing Facilities to be obtained by the SUP Group.

The Financing Facilities may be obtained from local and/or foreign financial institution(s) and/or OMV E&P or another entity within OMV AG group (“OMV Financing”), subject to the approvals by the Board and board of directors of OMV E&P.

In the event the OMV Financing is provided pursuant to the Subscription Agreement, the financing will be provided by OMV E&P or another entity within OMV AG group to the SUSB Group for an amount of USD350 million and would require SUA to pledge SUP Shares of an equity value, at Closing, of USD175 million as security in favour of OMV E&P or another entity within OMV AG group.

An announcement on the details of the Financing Facilities obtained and any corporate guarantees, undertakings and/or securities (including details of any SUP Shares pledged) provided by our Group will be made by our Company when the SUP Group obtains the Financing Facilities (including the OMV Financing).

9

10

However, other than for the OMV Financing, the actual quantum of such corporate guarantees, undertakings and/or securities to be provided by our Group cannot be determined at this juncture. In any event, our Group’s net exposure pursuant to the Proposed Financial Assistance shall be in proportion to the shareholding of our Company in SUP via SUA.

Paragraph 8.23(2) of the Main Market Listing Requirements of Bursa Securities states that where the provision of financial assistance is to an associated company or the joint arrangement of the listed issuer, and the aggregate amount provided or to be provided at any time to each associated company or joint arrangement of the listed issuer is equal to or exceeds 5% of the net tangible assets of the listed issuer, the listed issuer is required to issue a circular to its shareholders and seek its shareholders’ approval at a general meeting.

After the completion of the Proposed Transaction, SUP and SUSB will become 50%-owned associated companies of our Company. Accordingly, we are required to seek the approval of our shareholders for the Proposed Financial Assistance which involves the provision of corporate guarantees, undertakings and/or securities, when necessary, for the Financing Facilities to be obtained by the SUP Group.

3. RATIONALE AND BENEFITS OF THE PROPOSALS

3.1 Proposed Transaction

The Proposed Transaction is an opportunity for our Company to bring in OMV E&P as a strategic business partner, premised on creating sustainable long-term growth, expanding portfolios and future business activities while realising synergies in the value of the SUSB Group.

The existing footprint of OMV E&P offers new market opportunities for the SUSB Group’s upstream segment to grow its business. Further, the partnership with OMV AG complements ourGroup’s continued strategy to grow our global portfolio and increase market reach for our Group’s services segment where OMV AG operates. The partnership will also enhance the sharing of technology and knowledge between our Group and OMV AG.

The Proposed Transaction is also in line with our Board’s initiative to strengthen the financial position of our Group to weather the current economic conditions in the O&G industry. The Proposed Transaction presents an opportunity for our Group to monetise the assets that we hold under SUSB and realise our investment while still being able to participate in the SUSB Group’s future growth.

Pursuant to the Proposed Transaction, our Group will receive total cash proceeds of up to USD975 million (or equivalent to approximately RM4,056 million) which will be mainly used to pare down our Group’s bank borrowings and recognise a net gain on disposal of approximately USD649 million as detailed in Section 5.1 of this Circular (or equivalent to approximately RM2,713 million, based on the exchange rate of USD1:00:RM4.1800, being the middle rate quoted by BNM at 5.00 p.m. as at the LPD) after taking into consideration the estimated expenses for the Proposals of USD10 million. The reduction in our Group’s bank borrowings will result in interest savings and stronger liquidity and cash position for future growth.

3.2 Proposed Financial Assistance

The Proposed Financial Assistance will enable the SUP Group to obtain the Financing Facilities which in turn will be used to repay part of the Sapura Debt and the remaining, if any, to be used for the working capital of the SUP Group, for which our Group will still retain a 50% equity interest after the completion of the Proposed Transaction.

10

11

4. RISK FACTORS

Save as disclosed below, our Board does not foresee any other additional risks arising from the Proposals:

4.1 Completion risk

The completion of the Proposed Transaction is conditional upon the satisfaction and/or waiver of the conditions in the Subscription Agreement as set out in Section 1.6 of Appendix III of this Circular and approvals required as set out in Section 7 of this Circular. There can be no assurance that such approvals and/or conditions will be obtained and/or satisfied by Closing or any of the termination events will not occur such that the Proposed Transaction cannot be completed.

Notwithstanding, our Group will take all necessary and reasonable efforts to ensure the satisfaction and/or waiver of these conditions (as the case may be), and procure the approvals required as well as to mitigate the occurrence of termination events, which are within our Company’s control to ensure completion of the Proposed Transaction.

4.2 Risk associated with the Additional Consideration

The Additional Consideration is only receivable upon the occurrence of certain events in relation to the achievement of Block 30 FID and Oil Price Differential. There can be no assurance that any of these events will occur in the future.

Notwithstanding, our Group will take all necessary and reasonable efforts within our control to ensure that the Block 30 FID is achieved.

4.3 Risk associated with fluctuation in Brent prices

In addition to the impact on our Group’s exploration and production business, fluctuation in oil and natural gas prices (including Brent price) will affect the amount of Additional Consideration in respect of the Oil Price Differential to be received by our Company.

Both oil and natural gas prices have historically been volatile and may continue to be volatile in the future. In the event actual Brent prices on lifting are lower than the forecasted Brent prices for the SUSB Group Production for 2019 to 2022 as set out in the Subscription Agreement, our Company may not receive the full or any Additional Consideration in respect of the Oil Price Differential of up to USD30 million (or equivalent to approximately RM125 million).

4.4 Contractual risks

Our Company may be subject to certain contractual risks including, but not limited to, non-fulfilment of our obligations under the Warranty and Indemnity Deed and the Subscription Agreement and/or breach of any of the terms and conditions set out in the Warranty and Indemnity Deed and the Subscription Agreement. As set out in the Warranty and Indemnity Deed,the maximum potential aggregate liability of our Company to OMV E&P could be up to USD540 million (or equivalent to approximately RM2,257 million) in the case of title and capacity claims or up to USD162 million (or equivalent to approximately RM677 million) in the case of business warranty claims and tax warranty claims made by OMV E&P against our Company or SUA. The combined maximum aggregate liability of our Company to OMV E&P for all claims is limited to USD540 million (or equivalent to approximately RM2,257 million). (All conversions to RM are based on the exchange rate of USD1:RM4.1800 being the middle rate quoted by BNM at 5.00 p.m. as at the LPD).

We will endeavour to ensure our obligations under the Agreements are fully complied with and/or fulfilled.

11

12

4.5 Risks associated with the strategic partnership

After the completion of the Proposed Transaction, SUP will become a 50%-owned associatedcompany of our Group. Accordingly, our Group will not be able to solely influence the management, operation and performance of the SUSB Group through SUP.

If any disagreement arise between our Group and OMV E&P, there can be no assurance that these disagreements can be resolved in a manner favourable to our Group. Furthermore, these disagreements may significantly affect the operations of the SUSB Group which may adversely affect the financial position and results of our Group.

Nevertheless, this may be mitigated by the Shareholders’ Agreement which governs the joint management of SUP between our Group and OMV E&P.

4.6 Risk of default of the Financing Facilities by the SUP Group

Any corporate guarantee and/or undertaking provided by our Group will be recognised as contingent liabilities in our Group’s financial statements. The corporate guarantees, undertakings and/or securities may be called upon or claimed by the financial institution(s) and/or OMV E&P or another entity within OMV AG group in any event of default by the SUP Group in respect of the Financing Facilities to be obtained by the SUP Group, which as a consequence, our Group will be required to repay the indebtedness of the SUP Group and/or securities provided will be claimed by the financial institution(s) and/or OMV E&P or another entity within OMV AG group to the extent of the amount guaranteed under the corporate guarantees, undertakings and/or securities to be provided by our Group.

Hence, in the event the corporate guarantees, undertakings and/or securities are called upon or claimed, it will have an adverse impact on the financial position of our Group.

Nevertheless, our Group, together with OMV E&P, will continuously monitor and review the Financing Facilities to be obtained by the SUP Group and its cash flows to ensure the SUP Group’s ability to meet its obligations is not compromised vis-à-vis the SUP Group’s requirements for capital and operating expenditures.

As at the LPD, our Group has provided the bank guarantees on behalf of the SUP Group for an aggregate amount of equivalent to RM97 million and the Mexico Block 30 Guarantee. Pursuant to the Subscription Agreement, it is the intention of our Company and OMV E&P to procure the SUP Group to replace the bank guarantees provided by our Group by bank guarantees to be provided by the SUP Group upon completion of the Proposed Transaction and the Mexico Block 30 Guarantee (as detailed in Section 2.1.6 of this Circular).

[The rest of this page has been intentionally left blank]

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13

5. EFFECTS OF THE PROPOSALS

The Proposed Financial Assistance will not have any effect on the share capital and shareholdings of the substantial shareholders of our Company, NA per SEB Share as well as the gearing, earnings and EPS of our Group.

Upon completion of the Proposed Transaction, OMV E&P will fully consolidate the SUP Group in OMV AG's consolidated financial statements in accordance with International Financial Reporting Standards (“IFRS”) (in particular IFRS 10). Thereafter, our Group will recognise SUP as a 50%-owned associated company. Consequently, we will record our cost of investment in SUP as an asset based on 50% of the fair value of SUP as at Closing, and going forward report our proportionate share of 50% of SUP’s net income or net losses in our consolidated financial statements by applying the equity accounting method.

As the Proposed Transaction do not involve any issuance of new SEB Shares, the Proposed Transaction will not have any effect on the share capital and shareholdings of the substantial shareholders of our Company.

For illustrative purposes only, the effects of the Proposed Transaction on the NA per SEB Share, gearing, earnings and EPS have been shown based on the following scenarios:

Scenario 1 : Assuming completion of the Proposed Transaction only

Scenario 2 : Assuming the Proposed Transaction is completed after the Rights Issue


13

14

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ompa

ny d

ivid

ed b

y to

tal n

umbe

r of S

EB

Sha

res

in is

sue.

(e)

Afte

r the

repa

ymen

t of b

ank

borr

owin

gs o

f US

D72

0 m

illio

n (o

r equ

ival

ent t

o ap

prox

imat

ely

RM

2,80

4 m

illio

n, b

ased

on

the

exch

ange

rate

of U

SD

1:00

:RM

3.89

45)a

nd

the

resu

ltant

acc

eler

ated

am

ortis

atio

n of

tran

sact

ion

cost

s ar

isin

g fro

m th

e re

paym

ent o

f bor

row

ings

of a

ppro

xim

atel

y R

M43

mill

ion.

(f)

Com

pute

d ba

sed

on to

tal b

orro

win

gs d

ivid

ed b

y eq

uity

attr

ibut

able

to th

e ow

ners

of o

ur C

ompa

ny.

(g)

Afte

r the

repa

ymen

t of b

ank

borr

owin

gs o

f RM

3,89

8 m

illio

n an

d th

e re

sulta

nt a

ccel

erat

ed a

mor

tisat

ion

of tr

ansa

ctio

n co

sts

aris

ing

from

the

repa

ymen

t of b

orro

win

gs o

f ap

prox

imat

ely

RM

61 m

illio

n.

(h)

Due

to n

et g

ain

on d

ispo

sal a

risin

g fro

m th

e P

ropo

sed

Tran

sact

ion

of a

ppro

xim

atel

y U

SD

649

mill

ion

(or

equi

vale

nt to

app

roxi

mat

ely

RM

2,52

6 m

illio

n, b

ased

on

the

exch

ange

rate

of U

SD

1:00

:RM

3.89

45) a

s de

taile

d in

not

e (c

) abo

ve. T

he re

tain

ed p

rofit

s ar

e fu

rther

redu

ced

by th

e ac

cele

rate

d am

ortis

atio

n of

tran

sact

ion

cost

s ar

isin

g fro

m th

e re

paym

ent o

f bor

row

ings

of a

ppro

xim

atel

y R

M11

2 m

illio

n (in

clud

ing

the

effe

cts

of re

paym

ent o

f bor

row

ings

pur

suan

t to

the

Rig

hts

Issu

e).

(i)

Afte

r the

repa

ymen

t of b

ank

borr

owin

gs o

f US

D72

0 m

illio

n (o

r equ

ival

ent t

o ap

prox

imat

ely

RM

2,80

4 m

illio

n, b

ased

on

the

exch

ange

rate

of U

SD

1:00

:RM

3.89

45) a

nd

the

resu

ltant

acc

eler

ated

am

ortis

atio

n of

tran

sact

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cost

s ar

isin

g fro

m th

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paym

ent o

f bor

row

ings

of a

ppro

xim

atel

y R

M51

mill

ion

(incl

udin

g th

e ef

fect

s of

repa

ymen

t of

bor

row

ings

pur

suan

t to

the

Rig

hts

Issu

e).

15

16

5.2

Earn

ings

and

EPS

For

illust

rativ

e pu

rpos

es o

nly,

bas

ed o

n th

e au

dite

d co

nsol

idat

ed s

tate

men

ts o

f com

preh

ensi

ve in

com

e of

our

Gro

up f

or th

e FY

E 31

Jan

uary

201

8 an

d as

sum

ing

that

the

Prop

osed

Tra

nsac

tion

had

been

effe

cted

on

1 Fe

brua

ry 2

017,

bei

ng th

e be

ginn

ing

of th

e FY

E 31

Jan

uary

201

8, th

e pr

o fo

rma

effe

cts

of

the

Prop

osed

Tra

nsac

tion

on th

e co

nsol

idat

ed e

arni

ngs

of o

ur G

roup

and

EPS

are

as

follo

ws:

Scen

ario

1Sc

enar

io 2

Aud

ited

fort

he F

YE

31 J

anua

ry 2

018

Afte

r the

Pro

pose

d Tr

ansa

ctio

nA

udite

d fo

r the

FYE

31

Jan

uary

201

8

Afte

r the

Rig

hts

Issu

ean

d th

e Pr

opos

ed

Tran

sact

ion

Net

(los

s)/p

rofit

attr

ibut

able

to

th

e ow

ners

of

ou

rC

ompa

ny (R

M’0

00)

(2,5

03,4

73)

451,

894(a

)N

et (l

oss)

/pro

fit a

ttrib

utab

le

to

the

owne

rs

of

our

Com

pany

(RM

’000

)

(2,5

03,4

73)

568,

230(c

)

No.

of S

EB

Sha

res

in is

sue

(‘000

)5,

992,

155

5,99

2,15

5N

o. o

f SE

B S

hare

s in

issu

e (‘0

00)

5,99

2,15

515

,979

,080

(LP

S)/E

PS

(sen

)(b)

(41.

78)

7.54

(LP

S)/E

PS

(sen

)(b)

(41.

78)

3.56

Not

es:

(a)

Afte

r adj

ustin

g fo

r the

follo

win

g:

RM

’000

Net

loss

attr

ibut

able

to th

e ow

ners

of o

ur C

ompa

ny fo

r the

FY

E 3

1 Ja

nuar

y 20

18(2

,503

,473

)A

dd:

Gai

n on

dis

posa

l3,

022,

696(1

)

Less

:D

econ

solid

atio

n of

the

net p

rofit

of t

he S

US

B G

roup

for t

he F

YE

31

Janu

ary

2018

(2

18,1

22)

Add

:S

hare

of t

he n

et p

rofit

of t

he S

US

B G

roup

for t

he F

YE

31

Janu

ary

2018

109,

061

Add

: A

nnua

l est

imat

ed s

avin

gs in

fina

nce

cost

upo

n re

paym

ent o

f bor

row

ings

129,

121

Less

: E

stim

ated

exp

ense

s re

latin

g to

the

Pro

posa

ls(4

4,29

5)(2

)

Less

: A

ccel

erat

ed a

mor

tisat

ion

of tr

ansa

ctio

n co

st a

risin

g fro

m th

e re

paym

ent o

f bor

row

ings

(43,

094)

451,

894

(b)

Com

pute

d ba

sed

on n

et p

rofit

/(los

s) a

ttrib

utab

le to

the

owne

rs o

f our

Com

pany

div

ided

by

num

ber o

f SE

B S

hare

s in

issu

e.

16

17

(c)

Afte

r adj

ustin

g fo

r the

follo

win

g:

RM

’000

Net

loss

attr

ibut

able

to th

e ow

ners

of o

ur C

ompa

ny fo

r the

FY

E 3

1 Ja

nuar

y 20

18(2

,503

,473

)Le

ss:

Acc

eler

ated

am

ortis

atio

nof

tran

sact

ion

cost

aris

ing

from

the

repa

ymen

t of b

orro

win

gs p

ursu

ant t

o th

e fo

llow

ing:

(i)

Rig

hts

Issu

eof

Sha

res

with

War

rant

s(4

5,82

5)(ii

) R

ight

s Is

sue

of R

CP

S-i

(15,

450)

Add

: A

nnua

l est

imat

ed s

avin

gs in

fina

nce

cost

upo

n re

paym

ent o

f bor

row

ings

171,

490

Pro

form

a lo

ss a

ttrib

utab

le to

the

owne

rs o

f our

Com

pany

afte

r the

Rig

hts

Issu

e(2

,393

,258

)A

dd:

Gai

n on

dis

posa

l3,

022,

696(1

)

Less

:D

econ

solid

atio

n of

the

net p

rofit

of t

he S

US

B G

roup

for t

he F

YE

31

Janu

ary

2018

(2

18,1

22)

Add

:S

hare

of t

he n

et p

rofit

of t

he S

US

B G

roup

for t

he F

YE

31

Janu

ary

2018

109,

061

Add

: A

nnua

l est

imat

ed s

avin

gs in

fina

nce

cost

upo

n re

paym

ent o

f bor

row

ings

142,

772

Less

: E

stim

ated

exp

ense

s re

latin

g to

the

Pro

posa

ls(4

4,29

5)(2

)

Less

: A

ccel

erat

ed a

mor

tisat

ion

of tr

ansa

ctio

n co

st a

risin

g fro

m th

e re

paym

ent o

f bor

row

ings

(50,

624)

568,

230

(1)

Gai

n on

dis

posa

l aris

ing

from

the

Pro

pose

d Tr

ansa

ctio

n of

app

roxi

mat

ely

US

D68

2 m

illio

n ba

sed

on N

A o

f the

SU

SB

Gro

up (e

xclu

ding

SE

P (S

abah

)) a

s at

1

Febr

uary

201

7 an

d ex

chan

ge ra

te o

f US

D1:

00:R

M4.

4295

as

at 1

Feb

ruar

y 20

17, c

ompu

ted

as fo

llow

s:

USD

’000

Sub

scrip

tion

Pric

e54

0,00

0P

roce

eds

to b

e re

ceiv

ed b

y ou

r Gro

up fo

r par

trep

aym

ent o

f the

Sap

ura

Deb

t 35

0,00

089

0,00

0A

dd:

Fair

valu

e fo

r our

Com

pany

’s 5

0% e

quity

inte

rest

in S

UP

540,

000

Less

: D

econ

solid

atio

n of

aud

ited

NA

of th

e S

US

B G

roup

(exc

ludi

ng S

EP

(Sab

ah))

as

at 1

Feb

ruar

y 20

17(7

47,6

00)

682,

400

(2)

Est

imat

ed e

xpen

ses

rela

ting

to th

e P

ropo

sals

of a

ppro

xim

atel

y U

SD

10 m

illio

n ba

sed

on a

n ex

chan

ge ra

te U

SD

1.00

:RM

4.42

95 a

s at

1 F

ebru

ary

2017

.

17

18

6. INDUSTRY OUTLOOK AND PROSPECTS OF OUR GROUP AND THE SUSB GROUP

6.1 Overview and outlook of the global economy

The global economy is expected to expand 3.7% in 2018 and 2019, lower than the earlier forecast of 3.9% (International Monetary Fund, 2018). The downward revision reflects elevating policy uncertainties with several risks stemming to growth from escalating trade tension and outflows of capital from emerging economies. At the same time, global growth has become less synchronized with mixed developments in advanced economies while projection for emerging economies, in particular, developing Asia remains favourable.

Within the advanced economies, the United States of America (“USA”) is expected to record strong growth buoyed by pro-cyclical fiscal stimulus and accommodative monetary policy. Nevertheless, the euro area, the United Kingdom and Japan are forecasted to expand at a moderate pace. Major economies in the euro area such as France and Germany, are anticipated to expand moderately given the softer external demand and deteriorating growth in productivity. In the United Kingdom, growth is weighed down by anticipation of more barriers to trade following Brexit, while Japan faces declining labour force with unfavourable demographics.

Growth in emerging economies, in particular, developing Asia is expected to remain steady supported by strong domestic demand led by India whereas China is projected to expand marginally slower given the regulatory tightening in the financial and property sectors. Meanwhile, fuel-exporting countries are expected to benefit from higher global oil prices. Nevertheless, growth in other emerging economies (Latin America and the Caribbean) is forecast to be subdued reflecting dampening trade and investment activities as well as disruptions in the financial markets.

Given heightening trade tensions, investment and industrial activities are expected to slow down. This, in turn, will reduce the demand for capital and intermediate goods which contributes significantly to global trade. Consequently, global trade is projected to expand by 4.2% in 2018 and 4% in 2019 as compared to 5.2% in 2017 (International Monetary Fund, 2018). In the near term, the outlook for global growth is tilted downwards given the tightening financial conditions, escalating trade threats and risks of a shift towards protectionism as well as geopolitical tensions.

(Source: Economic Outlook 2019, Ministry of Finance Malaysia)

6.2 Overview and outlook of the Malaysian economy

The Malaysian economy recorded a sustained growth of 4.4% in the 3Q of 2018 (2Q 2018: 4.5%), supported by expansion in domestic demand amid a decline in net exports.

Growth in the mining sector contracted further as natural gas continued to be affected by unplanned supply outages and pipeline repairs in East Malaysian facilities.

Manufactured exports grew by 7.4% (2Q 2018: 10.7%), supported by higher electronics & electrical exports (10.7%; 2Q 2018: 9.8%), with continued demand from major trading partners, particularly in the Asian region. Of significance, growth of semiconductor exports remained robust at 24.2% (2Q 2018: 21.0%), reflecting continued expansion in the global technology cycle. However, non-electronics & electrical exports moderated, particularly in petroleum products, and manufactures of metal and transport equipment. Commodities exports registered a smaller contraction of -3.0% (2Q 2018: -3.8%) as the continued decline in crude palm oil exports was partly offset by the stronger growth in mineral exports (9.3%; 2Q 2018: 8.1%), particularly in crude petroleum exports.

Headline inflation, as measured by the annual percentage change in the Consumer Price Index, declined to 0.5% in 3Q 2018 (2Q 2018: 1.3%). The lower inflation mainly reflected the impact from the goods and services tax zerorisation. Core inflation, excluding the impact of consumption tax policy changes, moderated slightly to 1.4% (2Q 2018: 1.5%).

(Source: Quarterly Bulletin: Economic and Financial Development in Malaysian Economy in the Third Quarter of 2018, BNM)

18

19

6.3 Overview and outlook of the O&G sector

Global supply growth remains robust, with 2018 and 2019 revised up. Global liquids supply is forecast to grow 2.2 million barrels per day (“b/d”) in 2018 and 1.6 million b/d in 2019. Supply in Q4 2018 is forecast to average close to 101.3 million b/d, up 3% from Q4 2017. Production has been bolstered by substantial increases in Russia and Saudi Arabia, as compliance to production cuts eases in a bid to alleviate market concerns over perceived tightness in the market.

Organisation of Petroleum Exporting Countries’ (“OPEC”) crude oil production rose to 32.2 million b/d in September 2018, as Saudi Arabia, Kuwait and United Arab Emirates (“UAE”) continue to boost production to help balance the market, and Libya’s crude production ramped up above 1 million b/d. This has helped to offset the drop in Iranian output, as the USA sanctions take effect. Iranian output is expected to fall further once the sanctions are in place, and OPEC crude production is expected to fall to 31.2 million b/d in 2019 as Iran reaches the lower limits of sanctions-induced losses, and Venezuelan output continues to decline. As a result of the supply growth outlook for 2019, OPEC faces the need to curtail its output moderately.

On 5 November 2018, USA secondary sanctions targeting Iran’s energy sector took effect. The USA also announced on the same day the countries that have received waivers: China, India, Italy, Greece, Japan, South Korea, Taiwan and Turkey for 120 days. The intent is to avoid disruption to the oil market and prices rising too high to hurt economic growth. Many importers have indicated their willingness to either reduce or cease imports of Iranian oil to comply with USA sanctions. Some fully halted imports ahead of the sanctions deadline. South Korea, one of Iran’s main customers, has cut all imports since August. France has not bought Iranian oil since July 2018, and Italy, Spain and Greece took their last cargoes in October 2018. Iran is assumed to have exported 1.5 million b/d of crude oil and close to 300,000 b/d of condensate in September 2018.

Global oil demand is forecast to grow 1.1 million b/d in 2018, led by the USA, China, and India. Overall growth in global oil demand is maintained at around 1.1 million b/d in 2019. India overtakes China in 2019 to become the main driver of oil demand growth, as a cooling economy combined with tightening environmental policies curb Chinese demand into 2019.

Project sanctions in 3Q 2018 continued to build off of the momentum generated in the first half of the year. From the start of 2018, 37 major projects have received FID, which surpasses the total number of project sanctions achieved in 2017. Compared with last year, producer's confidence in upstream sector investment is returning, and large mega-projects are becoming more prominent.

Roughly half of the total reserves sanctioned so far in 2018 are attributable to three major projects: Marjan Crude Increment (Saudi Arabia), LNG Canada, and Kharasaveiskoye (Russia). Whereas at this time last year the growth was primarily sourced from deepwater projects in Brazil. In 2018, Iraq, Saudi Arabia and the UAE continue to focus on developing onshore and shallow water oil fields, while major projects in Russia, Norway and Canada are almost exclusively seeking to develop onshore and shallow water gas reserves. Over the past year, the average size of development reserves has risen to 730 mmboe from 423 mmboe, and project costs have increased to an average of USD4.3 billion up from USD3.3 billion.

(Sources: Wood Mackenzie Macro Oils short-term outlook report, November 2018, Wood Mackenzie Q3 2018 pre-FID upstream project tracker, November 2018)

6.4 Prospects of our Group

Our Group is well-positioned to capitalise on the emerging opportunities in the O&G industry. The industry has seen an increase in capital spend and resurgence in activities in relation to our services businesses, comprising our Engineering and Construction (“E&C”) and Drilling businesses, and our Exploration and Production business. The encouraging industry outlook has continued to fuel our Group’s growth and is expected to continue to contribute positively in the foreseeable future.

19

20

For our E&C and Drilling businesses, our Group’s strategy during the downturn was to strengthen our presence in existing core markets in South East Asia, Mexico, Brazil, India and Australia, while opening up new markets in Europe, the Middle East, East and West Africa, Caspian and the Mediterranean, where activities are expected to improve. The strategy has put us in a good position to capitalise on these markets as the industry recovers.

Our Group has been successful in expanding our global footprint and has secured significant contract wins since the start of 2018. The cumulative value of contract wins for our Group as at the LPD is RM8.5 billion, including the award of contract with a value of approximately RM1.5 billion announced on 6 December 2018. Our Group has been able to demonstrate our ability to capitalise on the growth in the industry by securing new contracts globally. Out of the RM8.5 billion cumulative value of contract wins, approximately RM4.6 billion are for contracts secured globally including Mexico, India, Australia and Africa while the remaining RM3.9 billion are for contracts in Malaysia.

The strategy employed has enabled our Group’s order book to grow to RM18.6 billion, after taking into account the contract win announced on 6 December 2018, from RM14.9 billion as at 31 January 2018. In addition, our Group has seen a significant increase in bidding activities for an enlarged customer base and for larger contracts in multiple geographies. Our Group’s recent entry into Saudi Aramco’s long-term agreement (LTA) programme will open up new engineering, procurement, construction and installation opportunities with Saudi Aramco and deepen our presence in the Middle East. As at the LPD, our Group is in active pursuit of bids worth USD8.8 billion (equivalent to approximately RM36.9 billion) and further prospects of USD14.3 billion (equivalent to approximately RM59.9 billion) in the key geographical markets mentioned above.

Our Group is entering a strong growth phase today, being recognised for our strong track record, state-of-the-art facilities and assets as well as deep technical expertise of our people. Given our global operating centres in key countries/regions, such as Australia, South East Asia, India, the Middle East, Africa, the United Kingdom, Brazil, Mexico and the USA, our Group is poised to leverage on growth opportunities as the market recovers. The growing order book provides the platform for increasing revenue and higher utilisation of our Group’s assets in the future.

Upon completion of the Proposed Transaction, SEB will recognise a net gain on disposal of approximately USD649 million as detailed in Section 5.1 of this Circular (or equivalent to approximately RM2,713 million, based on the exchange rate of USD1:00:RM4.1800, being the middle rate quoted by BNM at 5.00 p.m. as at the LPD) after taking into consideration the estimated expenses for the Proposals of USD10 million. The reduction in our Group’s bank borrowings will result in interest savings and stronger liquidity and cash position for future growth.

The completion of the Rights Issue and the Proposed Transaction will significantly strengthen the financial position of our Group. This will further enable our businesses to bid and execute higher value projects globally.

6.5 Prospects of the SUSB Group

Our Exploration and Production business has undertaken extensive exploration programmes comprising 11 exploration wells in block SK408 over the past four (4) years, and made nine (9) natural gas discoveries, of which six (6) are commercial. Our Exploration and Production business has significant net proved and probable reserves (2P) and best estimate contingent resources (2C) of natural gas from its near-term liquefied natural gas developments at blocks SK310 and SK408 as detailed in Appendix I of this Circular. Two (2) of the larger fields of block SK408 have gas discoveries of more than a trillion cubic feet and are located in the prolific Central Luconia basin offshore of Sarawak. This success has enabled our Exploration and Production business to further embark on an international growth strategy. Our Exploration and Production business has successfully acquired prospective exploration acreage in highly prolific regions in the Sureste basin in Mexico, the Taranaki basin in New Zealand, and the Carnarvon basin and Vulcan sub-basin in Western Australia in 2018.

20

21

On the development front, our Exploration and Production business has completed the development of the B15 natural gas field within block SK310 and successfully commenced production in October 2017. It has also commenced the construction of the facilities for the development of the Gorek, Larak and Bakong fields within block SK408 which is expected to begin production in late 2019.

By joining forces through the Proposed Transaction, our Company and OMV AG will enhance the sharing of technology and knowledge, concurrently enabling development of local talent in-country. The combined capabilities and shared financial commitment of our Group and OMV AG will also provide risk mitigation in exploration and development activities. The partnership will complement our Group’s continued strategy to grow our portfolio and expand our acreage position.

7. APPROVALS REQUIRED

The Proposals are subject to the following being obtained:

(a) approval of our shareholders at the forthcoming EGM; and (b) approval, waiver and/or consent of any other relevant authority and/or party.

The Proposed Financial Assistance is conditional upon the Proposed Transaction but not vice versa.

8. CORPORATE EXERCISE/SCHEME ANNOUNCED BUT PENDING COMPLETION

Save for the Proposals and as disclosed below, there are no other corporate exercises/schemes which have been announced by our Company but is pending completion as at the LPD:

On 24 August 2018, Maybank IB had, on behalf of our Board, announced that our Company proposed to undertake the Rights Issue and amendments to our Constitution which were approved by our shareholders on 29 November 2018. The abridged prospectus together with the notices of provisional allotment and rights subscription forms for the Rights Shares with warrants and RCPS-i were despatched to our shareholders on 31 December 2018. The expected completion date of the Rights Issue is 29 January 2019.

In conjunction with the Rights Issue, an exemption was sought by Permodalan Nasional Berhad,Amanah Saham Bumiputera and persons acting in concert with them from the Securities Commission Malaysia (“SC”) from the obligation to undertake a mandatory take-over offer for all the remaining SEB Shares, warrants and RCPS-i not already owned by them pursuant to Paragraphs 4.08(1)(b) and 4.08(1)(c) of Rule 4, Part B of the Rules on Take-overs, Mergers and Compulsory Acquisitions (“Exemption”), which was approved by the SC vide its letter dated 6 December 2018.

The Proposals are not conditional upon the Rights Issue, Exemption or any other corporate exercise/scheme of our Company.

9. INTERESTS OF THE DIRECTORS, MAJOR SHAREHOLDERS AND/OR PERSONS CONNECTED WITHTHEM

None of the Directors and/or major shareholders of our Company as well as persons connected with them have any interest, direct or indirect, in the Proposals.

21

22

10. DIRECTORS’ RECOMMENDATION

Our Board, having considered all aspects of the Proposals including the basis and justification for the Total Consideration, rationale, benefits and effects of the Proposals, as well as salient terms of the Agreements, is of the opinion that the Proposals are in the best interest of our Company.

Accordingly, our Board recommends that you vote in favour of the resolutions pertaining to the Proposals to be tabled at our forthcoming EGM.

11. TENTATIVE TIMETABLE

Barring any unforeseen circumstances, the Proposed Transaction is expected to be completed by the first (1st) quarter of 2019.

The tentative timetable for the Proposed Transaction is as follows:

Event Tentative timeline

EGM 28 January 2019

Completion of the Proposed Transaction 31 January 2019

12. EGM

Our EGM will be held at the Multi-Purpose Hall, Ground Floor, Sapura@Mines, No. 7 Jalan Tasik, The Mines Resort City, 43300 Seri Kembangan, Selangor Darul Ehsan, Malaysia on Monday, 28January 2019 at 10.00 a.m. or any adjournment thereof, for the purpose of considering and if deemed fit, passing the resolutions with or without any modification to give effect to the Proposals. You are advised to refer to the Notice of EGM and Proxy Form which are enclosed in this Circular.

If you are unable to attend and vote in person at the forthcoming EGM, you may appoint proxy or proxies to attend and vote on your behalf. If you wish to do so, you must complete and deposit the Proxy Form with the Share Registrar of our Company, Symphony Share Registrars Sdn Bhd at Level 6, Symphony House, Pusat Dagangan Dana 1, Jalan PJU 1A/46, 47301 Petaling Jaya, Selangor Darul Ehsan, Malaysia, not less than 24 hours before the time appointed for holding our EGM or any adjournment thereof. The Proxy Form should be completed strictly in accordance with the instructions contained therein. The lodging of the Proxy Form will not preclude you from attending and voting in person at our EGM should you subsequently decide to do so.

13. FURTHER INFORMATION

You are advised to refer to the attached appendices for further information.

Yours faithfullyFor and on behalf of our Board SAPURA ENERGY BERHAD

DATO’ HAMZAH BAKAR Chairman, Non-Independent Non-Executive Director

22

APPENDIX I

INFORMATION ON SUSB

23

1. HISTORY AND BUSINESS

SUSB was incorporated as a private limited company in Malaysia under the Companies Act 1965 on 18 October 2013 under the name of Falcon Lane Sdn Bhd and is deemed registered under the CA 2016. It changed its name to SapuraKencana Energy Sdn Bhd on 15 January 2014 and to Sapura Exploration and Production Sdn Bhd on 28 April 2017, and assumed its present name on 21 August 2018. On 11 February 2014, our Company, via SUSB, acquired the entire equity interest of SEP (Malaysia) for a consideration of USD895.9 million (“Newfield Acquisition”), which through its wholly-owned subsidiaries, have participating interests in eight PSCs in Peninsular Malaysia, Sabah and Sarawak.

SEP Malaysia’s business was founded in 2004 by Newfield Exploration Company, a Houston-based independent oil and natural gas exploration company.

SEP Malaysia initially built a core oil business by developing shallow-water oilfields offshore of Peninsular Malaysia. In 2004, SEP Malaysia acquired its first three PSCs, blocks AAKBNLP and PM318 offshore of Peninsular Malaysia and block Deepwater 2C offshore of Sarawak.

After the completion of the Newfield Acquisition, the SUSB Group has undertaken extensive exploration programmes comprising eleven exploration wells in block SK408 over the past four years, and made nine natural gas discoveries, of which six are commercial. The SUSB Group has significant net proved and probable reserves (2P) and best estimate contingent resources (2C) of natural gas from its near-term liquefied natural gas developments at blocks SK310 and SK408. Two of the larger fields of block SK408 have gas discoveries of more than a trillion cubic feet and are located in the prolific Central Luconia basin offshore of Sarawak.

Its success in Malaysia had enabled the SUSB Group to embark on an international growth strategy. The SUSB Group had acquired prospective exploration acreage in proven petroleum regions in the Sureste basin in Mexico, the Taranaki basin in New Zealand, and the Carnarvon basin and Vulcan sub-basin in Western Australia in 2018.

On the development front, the SUSB Group has developed the B15 natural gas field within block SK310 and successfully commenced production in October 2017. It has also commenced the construction of the facilities for the development of the Gorek, Larak and Bakong fields within block SK408.

Arising from its exploration and development successes, the SUSB Group has further strengthened and diversified its existing business portfolio and revenue stream. As at the LPD,the portfolio of assets provides a balanced mix of assets from exploration and production assets, allowing the SUSB Group to capitalise on the cash flows generated from its producing assets to fund further exploration and development activities.

At present, Petroliam Nasional Berhad (“PETRONAS”) is the sole offtaker of the natural gas produced by the SUSB Group via multi-year negotiated UGSAs for each gas-producing PSC, while the crude oil produced at the SUSB Group’s blocks is sold on the open market via PETRONAS Trading Corporation Sdn Bhd, a subsidiary of PETRONAS engaged in trading of crude oil and petroleum internationally, as our sales service agent to a variety of customers.

SUSB is an investment holding company while its subsidiaries are principally involved in the upstream O&G industry, i.e. exploration, development and production of crude oil and natural gas.

As at the LPD, the SUSB Group has 314 full-time employees, of which 163 are in technical roles including geoscientists, petroleum engineers and operational specialists, and 15 contract employees.

The SUSB Group’s average daily net production rate was about 12.2 mboe per day in calendar year 2018.

APPENDIX I

INFORMATION ON SUSB

23













APPENDIX I

INFORMATION ON SUSB

23













APPENDIX I

INFORMATION ON SUSB

23













APPENDIX I

INFORMATION ON SUSB

23













APPENDIX I

INFORMATION ON SUSB

23













23

APPENDIX I

INFORMATION ON SUSB (Cont’d)

24

2. CONCESSIONS AND ASSETS OF THE SUSB GROUP

As at the LPD, the SUSB Group has operations with different stages in the entire upstream O&G life cycle (i.e. exploration, development and production stages) located in Malaysia, Australia, New Zealand and Mexico.

The SUSB Group’s current portfolio in Malaysia is as follows:

(a) four oil-producing PSCs offshore of Peninsular Malaysia, namely PM323, PM329, AAKBNLP and PM318;

(b) two natural gas PSCs offshore of Sarawak with large natural gas reserves and resources, namely SK408 and SK310; and

(c) two onshore exploration PSCs in Sabah*, namely SB331 and SB332.

Note:

* For the avoidance of doubt, the two onshore exploration PSCs in Sabah do not form part of the portfolio of assets under the Proposed Transaction. Both SB331 and SB332 will continue to remain within our Group.

These PSCs are located primarily in proven petroleum regions such as the Malay and Central Luconia basins. SUSB solely operates five blocks under the PSCs, namely SK310, PM323, PM329, SB331 and SB332, and jointly operates SK408 with Sarawak Shell Berhad (“Sarawak Shell”).

In 2018, the SUSB Group had also secured a PSC in the Gulf of Mexico, exploration permits for five blocks offshore of New Zealand and explorations permits for three blocks offshore of Australia.

The total size of the SUSB Group’s concession area is 48,057 square kilometers as at the LPD.

The net book value of the SUSB Group’s expenditure on O&G properties is RM4,008.8 millionand RM4,363.4 million based on the audited consolidated statement of financial position of SUSB as at 31 January 2018 and unaudited consolidated statement of financial position of SUSB as at 30 November 2018 respectively. The SUSB Group’s expenditure on O&G properties was funded through internal funds and/or borrowings from financial institutions through TMC.


24

APP

END

IX I

INFO

RM

ATIO

N O

N S

USB

(Con

t’d)

25

A su

mm

ary

of e

ach

of th

e PS

Cs

of th

e S

US

B G

roup

and

per

mits

as

at th

e LP

D is

as

follo

ws:

Blo

ckFi

eld

Ass

et ty

peSt

atus

Ope

rato

r(a)

Wor

king

inte

rest

of

part

icip

ants

(b)

Expl

orat

ion

stag

eEs

timat

ed y

ear o

f ex

piry

SK

408

(Sar

awak

)Te

jaN

atur

al g

as a

nd

cond

ensa

teE

xplo

ratio

n/

Dev

elop

men

t

SE

P(S

araw

ak)

(for

expl

orat

ion

and

deve

lopm

ent

of

wes

t cl

uste

r of

blo

ck S

K40

8);

and

S

araw

ak

She

ll (fo

r de

velo

pmen

t of

ea

st

clus

ter o

f blo

ck S

K40

8)

40

.0%

SE

P (S

araw

ak)

30

.0%

Sar

awak

She

ll

30.0

% P

ETR

ON

AS

Car

igal

i S

dn

Bhd

(“P

ETR

ON

AS

Car

igal

i”)

On-

goin

g20

39 (b

ased

on

expe

cted

firs

t pr

oduc

tion

in D

ecem

ber

2019

)(c)

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ekP

epul

ut

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kN

atur

al g

as a

nd

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ensa

teD

evel

opm

ent

SE

P(S

araw

ak)

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nB

akon

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(Sar

awak

)B

14N

atur

al g

as a

nd

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ensa

teD

evel

opm

ent

SE

P(S

araw

ak)

30

.0%

SE

P(S

araw

ak)

30

.0%

Dia

mon

d En

ergy

S

araw

ak S

dn B

hd

40

.0%

PE

TRO

NA

S C

arig

ali

Com

plet

ed20

37(c

)(d)

B15

Pro

duci

ng

PM32

3(P

enin

sula

r M

alay

sia)

Eas

t Bel

umut

Oil

Pro

duci

ngS

EP

(PM

)

60.0

% S

EP

(PM

)

40.0

% P

ETR

ON

AS

Car

igal

i C

ompl

eted

2028

(c)

Wes

t Bel

umut

Che

rmin

gat

PM32

9(P

enin

sula

r M

alay

sia)

Eas

t Pia

tuO

il an

d as

soci

ated

gas

Pro

duci

ngS

EP

(PM

)

70.0

% S

EP

(PM

)

30.0

% P

ETR

ON

AS

Car

igal

iC

ompl

eted

2031

(c)

PM31

8(P

enin

sula

r M

alay

sia)

Put

eri/

Pad

ang

Oil

Pro

duci

ngP

ETR

ON

AS

Car

igal

i

50.0

% S

EP

(PM

)

50.0

% P

ETR

ON

AS

Car

igal

iC

ompl

eted

2033

(c)

AA

KB

NLP

(Pen

insu

lar

Mal

aysi

a)

Pen

ara

Oil

Pro

duci

ngP

ETR

ON

AS

Car

igal

i

50.0

% S

EP

(PM

)

50.0

% P

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AS

Car

igal

iC

ompl

eted

(i) 2

024

or (i

i) ec

onom

ic

life

of th

e fie

ld(c

)

Nor

th L

ukut

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abah

)-

Unk

now

nE

xplo

ratio

nS

EP

(Sab

ah)

70

.0%

SE

P (S

abah

)

20.0

% P

ETR

ON

AS

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igal

i

10.0

% S

abah

Inte

rnat

iona

l P

etro

leum

(SB3

31) S

dn B

hd

On-

goin

g20

41

25

APP

END

IX I

INFO

RM

ATIO

N O

N S

USB

(Con

t’d)

26

Blo

ckFi

eld

Ass

et ty

peSt

atus

Ope

rato

r(a)

Wor

king

inte

rest

of

part

icip

ants

(b)

Expl

orat

ion

stag

eEs

timat

ed y

ear o

f ex

piry

SB

332

(Sab

ah)

-U

nkno

wn

Exp

lora

tion

SE

P(S

abah

)

70.0

% S

EP

(Sab

ah)

20

.0%

PE

TRO

NA

S C

arig

ali

10

.0%

Sab

ah In

tern

atio

nal

Pet

role

um (S

B332

) Sdn

Bhd

On-

goin

g20

41

Blo

ck 3

0(M

exic

o)-

Exp

ecte

d to

be

oil

pron

eE

xplo

ratio

nD

euts

che

Erd

oel M

exic

o, S

. de

R.L

. de

C.V

.(“D

EA”)

30

.0%

SU

SB

40

.0%

DE

A

30.0

% P

rem

ier O

il

On-

goin

g20

48

PEP

5190

6(N

ewZe

alan

d)

-E

xpec

ted

to b

e oi

l pr

one

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lora

tion

OM

V N

ew Z

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nd L

imite

d(“

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V N

Z”)

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.0%

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P(N

Z)

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% O

MV

NZ

On-

goin

g20

21

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5 (N

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alan

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-E

xpec

ted

to b

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l pr

one

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lora

tion

OM

V N

Z

30.0

% S

EP

(NZ)

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.0%

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V N

ZO

n-go

ing

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1,

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d 60

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(New

Zeal

and)

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xpec

ted

to b

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l pr

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lora

tion

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V N

Z

30.0

% S

EP

(NZ)

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.0%

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V N

Z

30.0

% M

itsui

E&

P A

ustra

lia

Pty

Ltd

On-

goin

g20

28

Perm

its

EP48

3 &

TP

/25

(Aus

tralia

)

-E

xpec

ted

to b

e ga

s pr

one

Exp

lora

tion

SU

SB

70

.0%

SU

SB

30

.0%

Fin

der E

xplo

ratio

n P

ty L

td (“

Find

er”)

On-

goin

g20

20

Perm

it W

A-

412-

P(A

ustra

lia)

-E

xpec

ted

to b

e oi

l pr

one

Exp

lora

tion

SU

SB

70

.0%

SU

SB

30

.0%

Fin

der

On-

goin

g20

20

AC

/P 6

1(A

ustra

lia)

-E

xpec

ted

to b

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l pr

one

Exp

lora

tion

SU

SB

70

.0%

SU

SB

30

.0%

Fin

der

On-

goin

g20

22

26

APP

END

IX I

INFO

RM

ATIO

N O

N S

USB

(Con

t’d)

27

Not

es:

(a)

The

oper

ator

is re

spon

sibl

e fo

r con

duct

ing

all e

xplo

ratio

n, d

evel

opm

ent a

nd/o

r pro

duct

ion

oper

atio

ns in

acc

orda

nce

with

app

rove

d w

ork

prog

ram

mes

and

bud

get v

ia

join

t ope

ratin

g ar

rang

emen

ts. T

he o

pera

tor i

s al

so re

quire

d to

est

ablis

h an

d m

aint

ain

a jo

int a

ccou

nt (o

n op

erat

or’s

cos

t) fo

r ope

ratio

ns o

n be

half

of a

ll pa

rtici

pant

s of

th

e re

spec

tive

bloc

ks w

here

cos

ts w

ill u

sual

ly b

e sh

ared

bet

wee

n pa

rtici

pant

s in

pro

porti

on to

thei

r res

pect

ive

wor

king

inte

rest

s.

(b)

A m

anag

emen

t com

mitt

ee c

ompr

isin

g th

e pa

rtici

pant

s w

ill b

e es

tabl

ishe

d to

pro

vide

ove

rall

supe

rvis

ion

and

dire

ctio

n of

ope

ratio

ns a

nd to

app

rove

the

oper

ator

’s w

ork

prog

ram

mes

and

bud

gets

via

join

t ope

ratin

g ar

rang

emen

ts. A

par

ticip

ant m

ay a

lso

elec

t to

proc

eed

with

a d

evel

opm

ent o

r app

rais

al a

t its

ow

n ris

k (w

ithou

t the

oth

er

parti

cipa

nts)

but

sub

ject

to c

erta

in c

ondi

tions

agr

eed

via

the

join

t ope

ratin

g ar

rang

emen

ts.

In th

e ev

ent o

f a d

efau

lt by

the

parti

cipa

nts,

the

defa

ultin

g pa

rty w

ill lo

se it

s rig

ht to

atte

nd a

nd v

ote

at th

e m

anag

emen

t com

mitt

ee m

eetin

gs. I

n su

ch c

ircum

stan

ces,

th

e no

n-de

faul

ting

parti

es w

ill b

e re

quire

d to

pay

the

defa

ultin

g pa

rty’s

sha

re o

f cos

ts d

urin

g th

e de

faul

t per

iod,

and

if th

e de

faul

ting

party

fails

to re

med

y th

e de

faul

t, its

wor

king

inte

rest

is fo

rfeite

d an

d tra

nsfe

rred

to th

e no

n-de

faul

ting

parti

es.

(c)

Any

furth

er re

new

als

will

dep

end

on n

egot

iatio

ns w

ith P

ETR

ON

AS

.

(d)

The

prod

uctio

n of

non

-ass

ocia

ted

gas

at th

e B

14 fi

eld

may

be

carr

ied

out f

or a

max

imum

of 2

4ye

ars

afte

r nat

ural

gas

pro

duct

ion

or fi

veye

ars

afte

r the

exp

iry o

f the

P

SC

, whi

chev

er is

ear

lier.

[The

rest

of t

his

page

has

bee

n in

tent

iona

lly le

ft bl

ank]

27

APPENDIX I


28

The following maps show the locations of the SUSB Group’s PSCs and permits as at the LPD:

Malaysia

Mexico

APPENDIX I


28


Malaysia

Mexico

APPENDIX I


28


Malaysia

Mexico

28

APPENDIX I


29

New Zealand

Australia

3. RESERVES AND RESOURCES OF THE SUSB GROUP

3.1. Classification of reserves and resources

Figure 1 below illustrates the resources classification framework in the Petroleum Resources Management System jointly approved by the Society of Petroleum Engineers, World Petroleum Council, American Association of Petroleum Geologists, and Society of Petroleum Evaluation Engineers (“SPE-PRMS”). The SPE-PRMS classifies O&G reserves and resources according to increasing chance of commerciality (vertical axis) and range of uncertainty (horizontal axis) of the estimated quantities of petroleum potentially recoverable.

APPENDIX I


29

New Zealand

Australia




APPENDIX I


29

New Zealand

Australia




APPENDIX I


29

New Zealand

Australia




APPENDIX I


29

New Zealand

Australia




29

APPENDIX I


30

Figure 1: Resources classification framework

Based on the Independent Technical Expert Report, the chance of commerciality were determined by the probability of a discrete event occurring while Ryder Scott had assessed the range of uncertainty using a deterministic incremental (risk-based) approach.

To summarise the resources classification framework, the total petroleum-initially-in-place (“PIIP”), which is the quantity of petroleum estimated to exist, is subdivided into:

(a) discovered PIIP which refers to an estimated quantity of petroleum as at a given date, contained in known accumulations. Discovered PIIP is further subdivided into commercial (reserves) and sub-commercial (contingent resources) categories whereby:

(i) reserves means such quantity of petroleum anticipated to be commercially recoverable by application of development projects to known accumulations under defined conditions.

The range of uncertainty for reserves is expressed in cumulative quantities as 1P (Proved), 2P (Proved + Probable), and 3P (Proved + Probable + Possible), respectively; and

(ii) contingent resources means such quantity of petroleum estimated to be potentially recoverable by application of development projects, but are subject to one or more contingencies.

The range of uncertainty used by Ryder Scott for contingent resources is expressed in incremental quantities as 1C incremental (1Ci), 2C incremental (2Ci) and 3C incremental (3Ci); and

(b) undiscovered PIIP which refers to estimated quantity of petroleum which is estimated, as at a given date, to be contained in accumulations yet to be discovered whereby:

(i) prospective resources means such quantity of petroleum estimated to be potentially recoverable from undiscovered accumulations by application of future projects.

The range of uncertainty used by Ryder Scott for prospective resources isexpressed in incremental quantities as low estimate incremental (LEi), best estimate incremental (BEi) and high estimate incremental (HEi).

APPENDIX I


30












APPENDIX I


30












APPENDIX I


30












APPENDIX I


30












APPENDIX I


30












APPENDIX I


30












APPENDIX I


30












APPENDIX I


30












APPENDIX I


30












30

APPENDIX I


31

Further, unrecoverable refers to such portion of discovered or undiscovered PIIP quantity estimated not to be recoverable by future development projects. A portion of these quantities may become recoverable in the future as commercial circumstances change or technological developments occur while the remaining portion may never be recovered due to physical/chemical constraints represented by subsurface interaction of fluids and reservoir rocks.

As a probabilistic approach is used for the range of commerciality, results of quantity actually recovered should generally correspond to the following:

(a) at least a 90% probability (P90) will equal or exceed the 1P, 1C or Low Estimate; (b) at least a 50% probability (P50) will equal or exceed the 2P, 2C or Best Estimate; and (c) at least a 10% probability (P10) will equal or exceed the 3P, 3C or High Estimate.

3.2. Net reserves and contingent resources

Information on the net reserves and contingent resources of the SUSB Group represents the SUSB Group’s share of reserves and resources after applying the applicable fiscal terms of the PSCs (i.e. after deducting the portion allocable to royalties and partners’ shares, but before payment of any applicable taxes).

The following table sets out the SUSB Group’s net proved and probable reserves (2P) and best estimate contingent resources (2C) as at 1 August 2018 based on the Independent Technical Expert Report:

Net reserves Net contingent resourcesProved Probable 2P 1Ci 2Ci 2C

Block SK408Oil (mbbl) 3,743 319 4,062 1,152 11,880 13,032Natural gas (mmcf) 389,154 27,737 416,891 79,040 585,790 664,830Total (mboe) 68,602 4,941 73,543 14,325 109,512 123,837

Block SK310Oil (mbbl) 310 - 310 534 1,176 1,710Natural gas (mmcf) 50,482 - 50,482 87,535 189,371 276,906Total (mboe) 8,724 - 8,724 15,124 32,738 47,861

Block PM323Oil (mbbl) 2,860 622 3,482 1,357 121 1,478Natural gas (mmcf) - - - - - -Total (mboe) 2,860 622 3,482 1,357 121 1,478

Block PM329Oil (mbbl) 2,500 475 2,975 - - -Natural gas (mmcf) 3,651 653 4,304 - - -Total (mboe) 3,109 584 3,693 - - -

Block PM318Oil (mbbl) 707 174 881 - - -Natural gas (mmcf) - - - - - -Total (mboe) 707 174 881 - - -

Block AAKBNLPOil (mbbl) 1,562 390 1,952 - - -Natural gas (mmcf) - - - - - -Total (mboe) 1,562 390 1,952 - - -

31

APPENDIX I


32


TotalsOil (mbbl) 11,682 1,980 13,662 3,043 13,177 16,220Natural gas (mmcf) 443,287 28,390 471,677 166,575 775,161 941,736

Total (mboe) 85,563 6,712 92,275 30,806 142,370 173,176

Notes:

(a) 1.0 mboe is 6.0 mmcf.

(b) The estimated quantities of reserves and resources presented in this Circular are based on escalated price and cost parameters which may differ significantly from the quantities which would be estimated using constant price and cost parameters.

For further details on the reserves and resources classifications, methodology of estimates of reserves and resources, and the assumptions, please refer to the Independent Technical Expert Report in Appendix V of this Circular.

As at the LPD, no material changes have occurred since the effective date of the Independent Technical Expert Report which has or will have any material effect on the content, validity or accuracy of the Independent Technical Expert Report.

Based on the Independent Valuation Report, the value of the SUSB Group’s net proved and probable reserves (2P) and best estimate contingent resources (2C) in Malaysia as at 1 August 2018 are estimated to be between USD1,085 million and USD1,872 million (or equivalent to between approximately RM4,514 million and RM7,788 million). For further details on the valuation of the reserves and resources of the SUSB Group, please refer to the Independent Valuation Report in Appendix VI of this Circular.

As at the LPD, no material changes have occurred since the effective date of the Independent Valuation Report, which has or will have any material effect on the content, validity or accuracy of the Independent Valuation Report.

3.3. Additional information on net reserves and contingent resources

The extraction rates and returns for the FYE 31 January 2018 of the O&G assets which are currently producing are as follows:

FYE 31 January 2018

No. Block Net production Revenue (RM’000)

1. Block SK310 68 mboe RM3,950

2. Block PM323 1,411 mboe RM378,624

3. Block PM329 945 mboe RM243,506

4. Block PM318 454 mboe RM100,167

5. Block AAKBNLP 519 mboe RM118,109

Note:

(a) Production at the B15 field of block SK310 only commenced in October 2017.

Total net production for the FYEs 31 January 2017 and 2016 were about 4,048 mboe and 3,458 mboe respectively.

APPENDIX I


32



Total (mboe) 85,563 6,712 92,275 30,806 142,370 173,176

Notes:









FYE 31 January 2018



2. Block PM323 1,411 mboe RM378,624

3. Block PM329 945 mboe RM243,506

4. Block PM318 454 mboe RM100,167


Note:



APPENDIX I


32



Total (mboe) 85,563 6,712 92,275 30,806 142,370 173,176

Notes:









FYE 31 January 2018



2. Block PM323 1,411 mboe RM378,624

3. Block PM329 945 mboe RM243,506

4. Block PM318 454 mboe RM100,167


Note:



APPENDIX I


32



Total (mboe) 85,563 6,712 92,275 30,806 142,370 173,176

Notes:









FYE 31 January 2018



2. Block PM323 1,411 mboe RM378,624

3. Block PM329 945 mboe RM243,506

4. Block PM318 454 mboe RM100,167


Note:



APPENDIX I


32



Total (mboe) 85,563 6,712 92,275 30,806 142,370 173,176

Notes:









FYE 31 January 2018



2. Block PM323 1,411 mboe RM378,624

3. Block PM329 945 mboe RM243,506

4. Block PM318 454 mboe RM100,167


Note:



APPENDIX I


32



Total (mboe) 85,563 6,712 92,275 30,806 142,370 173,176

Notes:









FYE 31 January 2018



2. Block PM323 1,411 mboe RM378,624

3. Block PM329 945 mboe RM243,506

4. Block PM318 454 mboe RM100,167


Note:



APPENDIX I


32



Total (mboe) 85,563 6,712 92,275 30,806 142,370 173,176

Notes:









FYE 31 January 2018



2. Block PM323 1,411 mboe RM378,624

3. Block PM329 945 mboe RM243,506

4. Block PM318 454 mboe RM100,167


Note:



APPENDIX I


32



Total (mboe) 85,563 6,712 92,275 30,806 142,370 173,176

Notes:









FYE 31 January 2018



2. Block PM323 1,411 mboe RM378,624

3. Block PM329 945 mboe RM243,506

4. Block PM318 454 mboe RM100,167


Note:



APPENDIX I


32



Total (mboe) 85,563 6,712 92,275 30,806 142,370 173,176

Notes:









FYE 31 January 2018



2. Block PM323 1,411 mboe RM378,624

3. Block PM329 945 mboe RM243,506

4. Block PM318 454 mboe RM100,167


Note:



32

APPENDIX I


33

Subject to regulatory approvals, the estimated timeframe to advance the O&G assets tocommercial production is as follows:

No. Block Expected final investment

decision (“FID”)Expected year of

commercial production

1. Block SK408- Jerun End 2019 2023- Teja End 2020 2023- Gorek FID obtained 2020- Larak FID obtained End 2019- Bakong FID obtained End 2019- Pepulut End 2020 2023

2. Block SK310- B-14 End 2020 2023

Save as disclosed above, the timeframe to commercial production for the other on-going exploration blocks as disclosed in Section 2 of this Appendix has not been determined at this juncture.

4. CAPITAL EXPENDITURES FOR EXPLORATION AND DEVELOPMENT

As at the LPD, the SUSB Group’s planned capital expenditure for the FYE 31 January 2019 isas follows:

RM’000Planned exploration expenditure(a) 63,579Planned development expenditure(b) 410,359Total 473,938

Notes:

(a) Includes all costs necessarily incurred in the exploration and evaluation of hydrocarbons.

(b) Includes all costs necessarily incurred in the further development of hydrocarbon reserves and resources.

A majority of the capital expenditure planned for the FYE 31 January 2019 are earmarked for block SK408 phase 1 development and block PM323 infill drilling. The SUSB Group expects to have significant additional exploration expenditure for the blocks/permits in New Zealand,Australia and Mexico.

The SUSB Group expects to fund the capital expenditures through internal funds, borrowings from financial institutions and/or opportunistically accessing the debt capital markets.

The total capital expenditure incurred up to 30 November 2018 by the SUSB Group is as follows:

RM’000Exploration expenditure 107,203Development expenditure 149,270Total 256,473

The exploration expenditure are mainly used for exploration activities in relation to Block 30 (RM67.9 million) and New Zealand assets (RM39.4 million).

The development expenditure are mainly used for development of Bakong and Larak fields of block SK408 (RM140.9 million) and drilling activities at B15 field of block SK310 (RM8.4 million).

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APPENDIX I


34

5. SHARE CAPITAL


6. SHAREHOLDER

As at the LPD, SUSB is a wholly-owned subsidiary of our Company.

7. DIRECTORS

The directors of SUSB as at the LPD are as follows:

Name Designation Nationality

Tan Sri Dato’ Seri Shahril Bin Shamsuddin

Director

Malaysian

Datuk Kris Azman Bin Abdullah Director Malaysian

Reza Bin Abdul Rahim

Director

Malaysian

Dato’ Shahriman Bin Shamsuddin Director Malaysian

Tan Sri Ibrahim Bin Menudin Director Malaysian

Choo Shan Director Malaysian

Mariah Binti Mohamad Said Director Malaysian

Datuk Kris Azman Bin Abdullah(Alternate Director to Tan Sri Dato’ Seri Shahril Bin Shamsuddin)

Director Malaysian

As at the LPD, none of the directors of SUSB hold any SUSB Shares.

8. SUBSIDIARIES AND ASSOCIATED COMPANIES

The group structure of the SUSB Group as at the LPD is as follows:

APPENDIX I


34

5. SHARE CAPITAL


6. SHAREHOLDER


7. DIRECTORS




Director

Malaysian



Director

Malaysian






Director Malaysian




APPENDIX I


34

5. SHARE CAPITAL


6. SHAREHOLDER


7. DIRECTORS




Director

Malaysian



Director

Malaysian






Director Malaysian




APPENDIX I


34

5. SHARE CAPITAL


6. SHAREHOLDER


7. DIRECTORS




Director

Malaysian



Director

Malaysian






Director Malaysian




APPENDIX I


34

5. SHARE CAPITAL


6. SHAREHOLDER


7. DIRECTORS




Director

Malaysian



Director

Malaysian






Director Malaysian




APPENDIX I


34

5. SHARE CAPITAL


6. SHAREHOLDER


7. DIRECTORS




Director

Malaysian



Director

Malaysian






Director Malaysian




APPENDIX I


34

5. SHARE CAPITAL


6. SHAREHOLDER


7. DIRECTORS




Director

Malaysian



Director

Malaysian






Director Malaysian




APPENDIX I


34

5. SHARE CAPITAL


6. SHAREHOLDER


7. DIRECTORS




Director

Malaysian



Director

Malaysian






Director Malaysian




34

APPENDIX I


35

The subsidiaries of SUSB as at the LPD are as follows:

Name

Date and place ofincorporation/ formation

Issued share capital

Effectiveequity

interest Principal activities%

Directly held subsidiaries

SEP (Southeast Asia) 8 January 2014/Bahamas

USD1.00 100.0 Investment holding

SEP (Oceania) 19 April 2018/ Malaysia

RM2.00 100.0 Investment holding

SEP (Americas) 18 April 2018/ Malaysia


SEP Block 30 11 May 2018/ Mexico

$3,000 (Mexican pesos)

100.0(a) Exploration, development and production of crude oil and natural gas

Note:

(a) 99% of equity interest in SEP Block 30 is held directly by SUSB while the remaining 1% is held through SEP (Mexico), a wholly-owned subsidiary of SUSB.

Indirectly held subsidiaries

Subsidiary of SEP (Southeast Asia)

SEP (Malaysia) 22 February 2013/ Bahamas

USD5,000.00 100.0 Investment holding

Subsidiary of SEP (Oceania)

SEP (NZ) 30 December 2014/ Malaysia

RM2.00 100.0 Production of crude gaseous hydrocarbon (natural gas), draining and separation of liquid hydrocarbon fractions and mining of hydrocarbon liquids obtained through liquefaction or pyrolysis

SEP (Australia) 18 September 2018/ Malaysia


Subsidiary of SEP (Americas)

SEP (Mexico) 23 April 2018/ Malaysia


Subsidiaries of SEP (Malaysia)

SEP (PM) 28 January 2002/ Bahamas

USD100.00 100.0 Exploration, development and production of crude oil and natural gas

APPENDIX I


35


Name



Effectiveequity












Note:

















APPENDIX I


35


Name



Effectiveequity












Note:

















APPENDIX I


35


Name



Effectiveequity












Note:

















APPENDIX I


35


Name



Effectiveequity












Note:

















APPENDIX I


35


Name



Effectiveequity












Note:

















APPENDIX I


35


Name



Effectiveequity












Note:

















APPENDIX I


35


Name



Effectiveequity












Note:

















APPENDIX I


35


Name



Effectiveequity












Note:

















APPENDIX I


35


Name



Effectiveequity












Note:

















35

APPENDIX I


36

Name



Effectiveequity


SEP (Sabah) 29 August 2011/ Bahamas

USD125,000.00 100.0 Exploration, development and production of crude oil and natural gas

SEP (Sarawak) 4 February 2004/ Bahamas

USD125,000.00 100.0 Exploration, development and production of crude oil and natural gas

Subsidiary of SEP (NZ)

SEP OMV JV 19 April 2018/ Malaysia


Subsidiary of SEP (Australia)

SEP (Western Australia)

26 September 2018/ Australia

$2.00 (Australian

dollars)

100.0 Exploration, development and production of crude oil and natural gas

SUSB does not have any associated company as at the LPD.

9. SALIENT FEATURES OF THE CONTRACTUAL AGREEMENTS ENTERED INTO BY THE SUSB GROUP FOR ITS O&G ASSETS

9.1 PSCs

9.1.1 Malaysia PSCs

SUSB's exploration acreage in Malaysia are governed under PSCs, which were entered into with PETRONAS, who owns and has the exclusive rights and powers over hydrocarbon resources in Malaysia.

While the specific terms of each of the Malaysia PSCs vary, a summary of the salient features of the Malaysia PSCs is as follows.

(a) a PSC is entered into between PETRONAS, which grants the rights to conduct exploration, development and production activities in the contract area, and the relevant subsidiary of the SUSB Group as contractor together with other PSC participants. In each PSC, one or more of the participants will assume the role as operator, who is responsible for all operations, including exploration, development and production activities;

36

APPENDIX I


37

(b) each PSC has a specific tenure and is subject to early termination of the PSC (e.g. a relinquishment of the contract area as a result of a failure to make a commercial discovery). In addition, PETRONAS may terminate the PSC with respect to any of the participants upon occurrence of certain events, such as non-payment of any amount due to PETRONAS under the PSC, material breaches of the PSC by that contractor, insolvency, winding-up or appointment of receivers of that contractor and change in control or ownership of the contractor without PETRONAS’ prior consent;

(c) each PSC has an exploration period, during which the PSC participants must fulfil certain minimum work and financial commitments. In the case where PETRONAS is not reasonably satisfied with the minimum work performed by the participants, there will be a financial penalty imposed for the remaining financial commitment relating to the amount of the remaining work;

(d) as at the LPD, the minimum work and financial commitments have been fulfilled for blocks SK310, PM323, PM329, PM318 and AAKBNLP, and the related bank guarantees have been released. The original minimum work and financial commitment under the PSC has been fulfilled for block SK408, but SUSB hasrecently exercised the option to extend the SK408 exploration period for one more year from 12 June 2018 to 11 June 2019. As at the LPD, SEP (Sarawak) has provided a bank guarantee in favour of PETRONAS with respect to block SK408;

(e) as at the LPD, the outstanding minimum work and financial commitments under the PSC for blocks SB331 and SB332 include to: (i) acquire and process high quality seismic data; (ii) drill wildcat wells with aggregate depth of no less than certain metres below mudline; (iii) review hydrocarbon potential through studies on a regional scale trend and prospect level; and (iv) fulfil certain minimum financial commitments. As at the LPD, SEP (Sabah) has provided a bank guarantee in favour of PETRONAS with respect to blocks SB331 and SB332; and

(f) PSC commitments are fulfilled when both work and financial commitments are met.

The fiscal terms of the Malaysia PSCs provide that:

(a) a maximum of 10.0% of any oil or gas produced under the PSC to be allocated for royalties to the Malaysian federal and state governments;

(b) after the allocation of the royalties, the remaining portion of the oil and natural gas is allocated to the PSC participants based on the relative relationship between the PSC participants’ cumulative revenue and cumulative PSC costs;

(c) a portion of the remaining oil and natural gas is allocated to the PSC participants to reimburse the petroleum operations expenditures of the PSC participants or cost recovery by the PSC participants on a quarterly basis, excluding non-recoverable costs. This amount is known as “Cost Oil” or “Cost Gas”. Cost Oiland Cost Gas are subject to variable caps that range from 70.0% to 30.0% of total oil or gas production (as applicable);

(d) after the allocation of the Cost Oil or Cost Gas as described above, all remaining oil or gas is designated as “Profit Oil” or “Profit Gas”. The PSC participants are allocated a share equal to a percentage of the Profit Oil or Profit Gas in each quarter depending on:

(i) the revenue-to-cost ratio for the immediately preceding quarter; and

(ii) whether cumulative oil or gas production for that quarter exceeds a specified cumulative production threshold.

APPENDIX I


37













APPENDIX I


37













APPENDIX I


37













37

APPENDIX I


38

The PSC participants’ allocation of the Profit Oil or Profit Gas ranges from 80.0% to 10.0% for most PSCs except for blocks SK408, SB331 and SB332 which have a range from 70.0% to 10.0% specific to Profit Oil only;

(e) the PSC participants share their allocated Profit Oil or Profit Gas, as calculated based on the formulae described in item (d)(ii) above, among themselves in proportion to their respective Working Interests while PETRONAS is allocated with the remaining Profit Oil or Profit Gas;

(f) if the Cost Oil or Cost Gas cap described above is higher than the actual petroleum operations expenditures during any quarter, the unused portion of Cost Oil or Cost Gas is included as part of the Profit Oil or Profit Gas, and the PSC participants are allocated such portion of the Profit Oil or Profit Gas in a more favourable apportionment. The PSC participants’ allocation of the unused portion of the Cost Oil or Cost Gas range from 80% to 20% for most PSCs except for blocks SK408, SB331 and SB332 which have a range from 70% to 20% specific to unused Cost Oil portion only;

(g) if the prevailing cumulative revenue-to-cost ratio exceed 1, the PSC participants are obligated to pay PETRONAS a supplemental tax which is an amount that is equal to 70.0% of the excess difference between the realised oil or gas price and prevailing base price on the Profit Oil or Profit Gas portion (except for blocks SK408, SB331 and SB332 for which it is 60.0% with respect to gas), in each case less export duties on such supplemental tax;

(h) the PSC participants are required to comply with the Malaysian national objective of maximising Malaysian participation through the use of local equipment, facilities, goods, materials, suppliers and services;

(i) PETRONAS has the discretion to decide that if two fields in any contract area form part of a single geological structure, the contractors working on such fields must cooperate on a unified field to avoid competitive drilling;

(j) the PSC participants are required to pay PETRONAS research cess which is a small percentage of Cost Oil and/or Cost Gas and the PSC participants’ share of Profit Oil and/or Profit Gas;

(k) the PSC participants are required to pay to PETRONAS abandonment cess, beginning on the first anniversary of production, the quantum of which is based on abandonment estimates distributed over the remaining life of the PSC. The amounts paid to PETRONAS are cost recoverable under Cost Oil or Cost Gas, as the case may be. If a PSC is terminated early, the PSC participants are liable for any outstanding abandonment cess payments within three months of notice of early termination;

(l) Petroleum income tax is assessed at 38% of taxable income as per the Petroleum

(Income Tax) Act. PSC participants are not subjected to normal corporate income tax assessable to other industries;

(m) Capital Allowances are allowed in determination of taxable income as per

Malaysian tax guideline provided by the Malaysian Inland Revenue Board; and

(n) the PSC participants are required to pay training commitment at an agreed sum to be used for training of PETRONAS’ personnel in respect of the petroleum operations. Costs related to training commitment are cost recoverable.

38

APPENDIX I


39

9.1.2 Mexico PSC

SUSB’s rights to block 30 in Mexico are governed by a PSC entered into with CNH,which regulates all hydrocarbon activities in Mexico, and certain other joint venture partners.

A summary of the salient features of the Block 30 PSC is as follows:

(a) the Block 30 PSC grants the rights to conduct exploration, development and production activities in the contract area, and each of SEP Block 30, DEA and Premier Oil as PSC participants;

(b) the Block 30 PSC is for a term of 30 years with an extension to the term being available five years from the expiry of the term, for up to two additional terms of up to five years or until the economic limit of the development areas (in the event this last term is shorter). The contractor shall submit the request for the additional term at least 18 months prior to the expiry of the original term of the PSC;

(c) the Block 30 PSC is subject to early termination in certain circumstances such as the relinquishment of part of the contract area as a result of a failure to make acommercial discovery. In addition, CNH may terminate the Block 30 PSC after a failure to remedy the following, among other things, the breach within 30 days of being notified, in each case: (i) an insolvency event occurring in relation to a PSC participant or its guarantor; (ii) a PSC participant fails to maintain its letters of credit (relating to the minimum work commitments) or guarantee; and (iii) a PSC participant commits another material breach of the PSC. There is an administrative termination procedure for less serious breaches of the PSC, which gives the PSC participants more time to remedy the breach;

(d) the Block 30 PSC has an exploration period during which the PSC participants must fulfil certain minimum work and financial commitments. The participants are required to deliver an unconditional and irrevocable letter of credit, issued in favour of CNH, in respect of the minimum work commitments comprising two exploration wells. Failure to satisfy the minimum work commitments results in the participants being required to pay to the Mexican Petroleum Fund for Stabilization and Development an amount necessary to carry out the outstanding work. CNH may enforce the letters of credit delivered by the participants in the event of failure to pay the Mexican Petroleum Fund for Stabilization and Development. As at the LPD, the exploration plan with respect to the Block 30 PSC has not been submitted to CNH;

(e) in the event of a discovery during the exploration period, the PSC participants shall submit to CNH the appraisal program setting out the appraisal activities to be carried out and deliver a report following the end of the appraisal period to CNH. Subsequently, the PSC participants shall inform CNH whether it considers the discovery to be a commercial discovery and in such cases, the PSC participants shall submit a development plan to CNH for its approval within 18months following the declaration of a commercial discovery; and

(f) the PSC participants shall submit annual work plans to the CNH for approval for each of the petroleum activities, including abandonment, which shall be resolved by CNH within a period not exceeding 30 days after receipt of the necessary information. The work programs must contain a detailed list of the individual activities that the PSC participants plan to carry out and the estimated time for each of those activities.

39

APPENDIX I


40

The fiscal terms of the Block 30 PSC provide that:

(a) the Mexican state’s remuneration is the sum of: (i) royalties which are at different rates based on the type of hydrocarbons produced, each with a specified starting rate (i.e. the starting for oil production is 7.5%), and adjusted for inflation in accordance with the PSC; (ii) a contractual fee of approximately 1,200 Mexican pesos per square km for the exploratory phase (if applicable to the contract area) within the first 60 months of the PSC and approximately 3,000 Mexican pesos per square km starting from the 61st month;

(b) the PSC participants’ remuneration is the sum of: (i) an amount to reimburse the PSC participants for expenditure incurred as part of operations (cost recovery), provided that such costs: (1) comply with guidelines issued by the MexicanMinistry of Finance and the accounting procedure set out in the PSC; and (2) do not exceed the limit on recoverable costs, which is calculated by multiplying the sum of the value of the hydrocarbons and certain other income from the contract area in accordance with the PSC and a cost recovery percentage of 60%; and (ii) the remaining operating profit for that month, after deducting the portion that is part of the Mexican state’s remuneration;

(c) once the development plan has been approved by CNH, the PSC participants must open an investment trust in a suitable Mexican financial institution. The PSC participants are required to deposit a quarterly abandonment cess payment to the trust (the amount is calculated using a mechanism set out in the PSC and is subject to various factors including the production levels and forecast abandonment costs). Sums in the trust shall not be used for any purpose other than carrying out the abandonment operations in the contract area;

(d) the PSC participants must at all times have a corporate guarantor that can demonstrate a minimum net worth of USD2.5 billion. As at the LPD, SUSB has given a corporate guarantee of USD750 million in favour of CNH with respect to Block 30 in accordance with the Block 30 PSC(i);

(e) the PSC participants are required to comply with national content requirements

through the use of local equipment, facilities, goods, materials, suppliers and services; and

(f) the PSC participants are required to fully indemnify CNH for all losses, actions, proceedings, costs, charges, expenses and claims which arise from or relate to, among other things, the PSC participants’ failure to comply with the PSC.

Note:

(i) The corporate guarantee of USD750 million is provided to cover for catastrophic events which, in the ordinary course of business, would usually be covered by mandatory insurance policies.

9.1.3 New Zealand Permits

The New Zealand Petroleum & Minerals (“NZPM”), which governs the allocation rights to the New Zealand government’s petroleum and minerals portfolio, is responsible in issuing permits to prospect, explore or mine petroleum.

A summary of the salient features of the New Zealand permits is as follows:

(a) the permits grant the rights to explore petroleum resources (other than gas hydrates and coal seam gas) and conventional petroleum (excluding coal seam gas and gas hydrates), and carry out seismic survey in permitted areas are granted by NZPM to the relevant subsidiary of SUSB as permit operator;

APPENDIX I


40









Note:






APPENDIX I


40









Note:






APPENDIX I


40









Note:






40

APPENDIX I


41

(b) the right of the permit holder is to (i) explore for the specified petroleum resources in the permit area is exclusive; and (ii) to prospect for the specific petroleum resources in the permit area is non-exclusive;

(c) as at the LPD, the outstanding key committed activities under permit 60091 from its commencement date include to: (i) within 12 months, complete various exploration studies and reprocessing of seismic; and (ii) within 24 months, either commit to carry out the next stage of the work programme or surrender the permit;

(d) as at the LPD, the outstanding key committed activities under permit 60092 from its commencement date include to: (i) within six months, complete reprocessing of seismic data; (ii) within 12 months, complete various exploration studies; (iii) within 18 months, complete a petroleum systems study; and (iv) within 24 months, either commit to carry out the next stage of the work programme or surrender the permit;

(e) as at the LPD, the outstanding key committed activities under permit 60093 from its commencement date include to: (i) within 12 months, complete various exploration studies; (ii) within 18 months, complete additional exploration studies; (iii) within 24 months, either commit to carry out the next stage of the work programme or surrender the permit;

(f) as at the LPD, the outstanding key committed activities under permit 51906 from its commencement date include to: (i) within 52 months, drill one exploration well to an approved depth/objective and initiate further exploration studies; (ii) within 60 months, acquire and process three-dimensional (“3D”) seismic data and either commit to acquire and process additional 3D seismic data, and relinquish 25% of the original permit area, or relinquish 50% of the original permit area; (iii) interpret the data acquired in (ii) and, acquire and process additional 3D seismic data; and (iv) within 84 months, interpret the data acquired in (iii) and, relinquish 25% of the original permit area; and either commit to carry out the next stage of the work programme or surrender the permit; and

(g) as at the LPD, the outstanding key committed activities under permit 57075 from its commencement date include to: (i) within 12 months, reprocess two-dimensional (“2D”) and 3D seismic data; and (ii) within 18 months, commit to carry out the next stage of the work programme or surrender the permit and undertake and submit various studies.

The fiscal terms of the permits provide that:

(a) the permit holder shall pay the following: (i) annual fees and any other applicable fees relating to the permit; (ii) royalty to the Crown on New Zealand; and (iii) any royalties due in accordance with the relevant regulations; and

(b) the relevant minister will define the point(s) of valuation for royalty calculation in consultation with the permit holder for royalties payable.

The current expiry date of the New Zealand permits are as follows:

No. Permits Current expiry date

1. PEP 51906 18 November 20212. PEP 57075 31 March 20273. PEP 60091 31 March 20284. PEP 60092 31 March 20285. PEP 60093 31 March 2028

41

APPENDIX I


42

9.1.4 Australia Permits

SUSB’s rights in Australia are governed by the Australia Permits which are issued pursuant to the Offshore Petroleum and Greenhouse Gas Storage Act (2006)(Cth),Petroleum and Geothermal Energy Resources Act 1967 (WA) and the Petroleum (Submerged Lands) Act 1982 (WA), and transferred to them pursuant to various farmin agreements, all dated 4 September 2018, with Finder No. 1 Pty Ltd, Finder No. 3 Pty Ltd and Finder No. 3 Pty Ltd.

The permits set out, among others, the basins, area size and blocks in which the permit holder is entitled to explore, the expiration date of the permits and work programs that are to be carried out under the permit which includes 2D seismic reprocessing, new 3D seismic survey, geotechnical studies, environmental studies, 3D seismic processing, geophysical studies, well planning, exploration well and commercial studies.

The current expiry date of the Australia permits are as follows:

No. Permits Current expiry date

1. EP 483 6 January 20202. TP/25 6 January 20203. WA-412-P 9 June 20204. AC/P 61 22 June 2022

9.2. Malaysia UGSAs

The SUSB Group has entered into UGSAs with the following parties:

Contract Effective date Parties Estimated year of expirySK408 UGSA Term Sheet

28 February 2018 PETRONAS SEP (Sarawak) Sarawak Shell PETRONAS Carigali

2039

UGSA relating to SK310 (for B15 field)

23 June 2016 PETRONAS SEP (Sarawak) Diamond Energy PETRONAS Carigali

2023

UGSA relating to PM329

31 October 2011 PETRONAS SEP (PM) PETRONAS Carigali

Earlier of (i) expiration of oil production at the East Piatu field or (ii) expiration of the PSC relating to PM329

9.2.1 Block SK408

Pursuant to a term sheet relating to the sales of natural gas produced from block SK408 dated 28 February 2018 between PETRONAS, SEP (Sarawak) and the other SK408 PSC participants (“SK408 UGSA Term Sheet”), the parties had agreed to the main commercial principles which will be included in a fully termed UGSA (“SK408 UGSA”)to be entered into with the SK408 participants as sellers and PETRONAS as buyer.

Pursuant to the SK408 UGSA Term Sheet, the SK408 participants will sell, and PETRONAS will purchase natural gas produced from the phase 1 gas fields at an agreed annual quantity (and for phase 2 gas fields, the annual quantity of natural gas will be revised and agreed no later than three years prior to the expected first commercial natural gas production from the phase 2 gas fields).

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APPENDIX I


43

9.2.2 Block SK310

On 23 June 2016, SEP (Sarawak), together with the other SK310 participants, as sellers, entered into a UGSA relating to the B15 field of block SK310 with PETRONAS as buyer (“SK310 UGSA”).

Pursuant to the SK310 UGSA, the SK310 participants will sell, and PETRONAS will purchase natural gas at an agreed annual quantity for the contract period, with theSK310 participants having the ability to make additional natural gas volumes available and PETRONAS may request for additional volumes to be delivered (subject to such volumes being available).

9.2.3 Block PM329

On 31 October 2011, SEP (PM), together with the other PM329 participants, as sellers, entered into a UGSA relating to associated gas from crude oil production at the East Piatu field with PETRONAS as buyer (“PM329 UGSA”).

Under the PM329 UGSA, the PM329 participants are required to use reasonable endeavours to sell, and PETRONAS is required to use reasonable endeavours to purchase natural gas at an agreed daily quantity during the contract period. The PM329 UGSA does not include a firm commitment to sell or purchase an annual contract quantity.

10. MATERIAL COMMITMENTS AND CONTINGENT LIABILITIES

10.1 Material commitments

Save as disclosed below, as at the LPD, the board of directors of SUSB is not aware of any material commitments incurred or known to be incurred by the SUSB Group which may have a material impact on the profits and/or NA of the SUSB Group:

RM’000Approved and contracted for 146,016Approved but not contracted for 740,148Total capital expenditures for O&G properties 886,164

10.2. Contingent liabilities

Save as disclosed below, as at the LPD, the board of directors of SUSB is not aware of any contingent liabilities which upon becoming enforceable, may have a material impact on the profits and/or NA of the SUSB Group:

The SUSB Group has provided corporate guarantees to TMC as borrower of its multi-currency term and revolving loan facilities.

11. MATERIAL CONTRACTS The SUSB Group has not entered into any material contracts (not being contracts entered into in the ordinary course of business) within two years immediately preceding the LPD.

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12. MATERIAL LITIGATION

Save as disclosed below, as at the LPD, the SUSB Group is not engaged in any material litigation, claims or arbitration, either as plaintiff or defendant, and the board of directors of SUSB is not aware of any proceedings, pending or threatened, against the SUSB Group or of any facts likely to give rise to any proceedings which may materially affect the business or financial position of the SUSB Group:

(a) On 11 February 2014, our Company and SEP (Southeast Asia) (then known as Sapura Exploration and Production Inc) (collectively, “Sapura”) completed the acquisition of Newfield Malaysia Holdings Inc (currently known as SEP (Malaysia)) from Newfield International Holding Inc. and Newfield Exploration Company (collectively, “Newfield”).Arbitration proceedings between Sapura as claimants and Newfield as respondents arose out of the post-closing purchase price adjustments (“Adjustments”) and tax indemnity related to the acquisition.

On closing of the Newfield Acquisition, Sapura paid to Newfield a total of USD895.9 million for the acquisition, subject to adjustments. This amount was arrived at after taking into account certain items such as the estimated value of SEP (Malaysia)’s net working capital as at an agreed effective time (“ETNWC”).

After the closing of the transaction, Newfield delivered the final calculation of the adjusted purchase price to Sapura, claiming that Sapura owed Newfield an additional USD15,868,810 as a result of the adjustments.

Sapura in turn delivered its report on the changes that were necessary to properly calculate the final purchase price, claiming that during this process it discovered that the preliminary estimate of the ETNWC did not match the agreed formulas. Sapura claimed that as a result of this discrepancy, the ETNWC adjustment was overvalued by approximately USD81.4 million. Sapura notified Newfield of this discrepancy, but Newfield refused to adjust the purchase price, claiming that the agreed numbers were fixed and final.

As the parties were unable to resolve the dispute, Sapura submitted a Request for Arbitration (“Request”) against Newfield on 19 October 2017 at the London Court of International Arbitration (“LCIA”), requesting the tribunal to set the final value of the adjustments and the final adjusted purchase price. Sapura also requested the tribunal to order Newfield to refund Sapura the amount by which the closing amount paid by Sapura exceeds the adjusted purchase price and indemnify Sapura for taxes which Sapura has paid on behalf of SEP (Malaysia) and award Sapura all damages, cost and equitable relief.

In its response to the Request (“Response”), Newfield has contested all of Sapura’s claims, arguing that the ETNWC was locked at the time of closing and thus is not subject to adjustment. In the Response, Newfield has also asserted its intention to cross-claim against Sapura, that: (1) Sapura owes Newfield RM34,048,008, which Newfield claims was its share of a tax refund received by SEP (Malaysia) for taxes paid in excess during the straddle period prior to completion of the acquisition; and (2) Sapura owes Newfield USD15,868,810 for post-closing adjustments to net intergroup advances and receipts.

The parties are at the discovery stage and it is anticipated that final hearings on this matter will conclude on or around April 2019. SEP (Southeast Asia) has been advised by its counsels that it is difficult at the present stage to provide any opinion on the likely outcome of this matter.

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45

(b) On 20 October 2017, in parallel and as a back-up to the arbitration proceedings disclosed in paragraph (a) above, SEP (Southeast Asia) filed an Original Petition and Application for Order at the Texas State Court (“Court”) pursuant to the Texas CivilPractice and Remedies Code (“Petition”) against Newfield International Holdings, Inc and Newfield Exploration Company (collectively, the ”Defendants”) and requested the Court to enter an order temporarily staying judicial proceedings on the claims pending the outcome of the arbitration in the LCIA.

On 18 December 2017, the Defendants responded to the Plaintiff’s Petition opposing the petition in similar fashion to the arbitration proceedings.

The Court has officially stayed the case and there are no claims in this matter that are distinct from the claims raised in the LCIA. The litigation will only proceed if necessary after the arbitration proceeding, to effectuate the tribunal’s final judgment.

In the event Sapura succeeds in its claim against Newfield, the maximum financial gain to the SUSB Group is approximately RM340.3 million. Conversely, if Newfield succeeds in its counter claim, the maximum financial loss to the SUSB Group is approximately RM100.4 million. The claims are not expected to have any operational impact on the SUSB Group.


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46

13. FINANCIAL INFORMATION

A summary of the financial information of the SUSB Group based on the audited consolidated financial statements of SUSB for the past three FYEs 31 January 2016, 2017 and 2018 and the unaudited consolidated results of SUSB for the 9-month FPEs 31 October 2017 and 2018 is as follows:

FYE 31 January FPE 31 October2016 2017 2018 2017 2018

RM’000 RM’000 RM’000 RM’000 RM’000Revenue 997,229 794,094 844,356 557,808 733,509Cost of sales (777,413) (497,927) (502,427) (313,946) (448,494)Gross profit 219,816 296,167 341,929 243,862 285,015Other income 34,618 13,476 10,839 20,285 44,539(Provision for)/reversal of

impairment on expenditure on O&G properties

(1,369,792) 247,665 - - -

Write off of deposits on acquisition of O&G properties

(158,764) - - - -

(Write off)/reversal of expenditure on O&G properties

(856) (249,237) - (2,078) 996

Other operating expenses (24,147) (42,859) (29,407) (6,939) (19,392)Administrative expenses (126,633) (124,577) (139,590) (71,690) (137,397)Operating (loss)/profit (1,425,758) 140,635 183,771 183,440 173,761Finance costs (140,218) (174,384) (194,895) (149,782) (162,206)(Loss)/Profit before

taxation(1,565,976) (33,749) (11,124) 33,658 11,555

Income tax credit/(expense)

329,656 50,818 (27,173) (50,338) (69,829)

Net (loss)/profit after taxation

(1,236,320) 17,069 (38,297) (16,680) (58,274)

Earnings before interest, taxes, depreciation and amortisation (“EBITDA”)(a)(b)

224,574 102,479 415,390 344,501 347,814

Adjusted EBITDA(a)(c) 239,654 144,153 442,600 330,874 308,987

Adjusted earnings before interest, taxes, depreciation and amortisation and exploration expense (“EBITDAX”)(a)(d)

425,513 416,670 451,191 341,185 319,667

No. of SUSB Shares in issue (’000)

* * * * *

(Loss)/Profit before taxation per SUSB Share attributable to owner of the parent

(782,988) (16,875) (5,562) 16,829 5,778

Net (loss)/profit after taxation per SUSB Share attributable to owner of the parent

(618,160) 8,535 (19,149) (8,340) (29,137)

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(1,369,792) 247,665 - - -


(158,764) - - - -


(856) (249,237) - (2,078) 996


taxation(1,565,976) (33,749) (11,124) 33,658 11,555


329,656 50,818 (27,173) (50,338) (69,829)


(1,236,320) 17,069 (38,297) (16,680) (58,274)


224,574 102,479 415,390 344,501 347,814



425,513 416,670 451,191 341,185 319,667


* * * * *


(782,988) (16,875) (5,562) 16,829 5,778


(618,160) 8,535 (19,149) (8,340) (29,137)

APPENDIX I


46






(1,369,792) 247,665 - - -


(158,764) - - - -


(856) (249,237) - (2,078) 996


taxation(1,565,976) (33,749) (11,124) 33,658 11,555


329,656 50,818 (27,173) (50,338) (69,829)


(1,236,320) 17,069 (38,297) (16,680) (58,274)


224,574 102,479 415,390 344,501 347,814



425,513 416,670 451,191 341,185 319,667


* * * * *


(782,988) (16,875) (5,562) 16,829 5,778


(618,160) 8,535 (19,149) (8,340) (29,137)

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47


RM’000 RM’000 RM’000 RM’000 RM’000

Total assets 4,941,782 5,882,608 4,813,895 5,621,004 5,019,098Total liabilities 5,920,267 6,907,488 5,751,086 6,616,906 6,086,368

Shareholder’s deficit(e) (978,485) (1,024,880) (937,191) (995,902) (1,067,270)Shareholder’s deficit

attributable to owner of the parent per SUSB Share in issue

(489,243) (512,440) (468,596) (497,951) (533,635)

Current ratio (times)(f) 0.5 0.3 0.3 0.2 0.2

Notes:

* Denote 2 SUSB Shares, with an aggregate issued share capital of RM2.

(a) EBITDA, adjusted EBITDA and adjusted EBITDAX are non-Malaysian Financial Reporting Standards/International Financial Reporting Standards measures and hence, do not have standardised meanings.

(b) Computed based on loss before taxation + depreciation of property, plant and equipment + amortisation of expenditure on O&G properties + provision for impairment on expenditures on O&G properties + finance cost - interest income - reversal of impairment on expenditures on O&G properties.

(c) Computed by adjusting EBITDA for writing down of assets and net unrealised foreign exchange gain or losses.

(d) Computed based on Adjusted EBITDA adjusted for non-cash items related to the write off of deposits on acquisition of O&G properties, write off of expenditures on O&G properties, and cash and non-cash items related to new venture costs.

(e) Includes net amount owing by the SUSB Group to our Group of RM3,755 million, RM4,947 million and RM4,112 million for the FYEs 31 January 2016, 2017 and 2018, respectively.

(f) Computed based on current assets divided by current liabilities.

There were no accounting policies adopted by SUSB which are peculiar and no audit qualifications reported in the audited consolidated financial statements of SUSB for the FYEs 31 January 2017 and 2018.

Commentaries:

FYE 31 January 2016 vs. FYE 31 January 2017

The SUSB Group’s revenue decreased by 20.4% from RM997.2 million in the FYE 31 January 2016 to RM794.1 million in the FYE 31 January 2017. The decrease was attributable to the decrease in the average sales prices of the SUSB Group’s oil and natural gas, and a decreasein the net sales volumes of oil, which made up almost the entire revenue of the SUSB Group,driven by the natural decline of the SUSB Group’s maturing oil fields.

The SUSB Group registered a lower loss before taxation of RM33.7 million in the FYE 31 January 2017 compared to a loss before taxation of RM1.6 billion in the FYE 31 January 2016. The decrease was mainly attributable to the following:

(a) recognition of provision of impairment on expenditure on O&G properties of about RM1.4 billion in the FYE 31 January 2016 as compared to a net impairment reversal of RM247.7 million in the FYE 31 January 2017;

APPENDIX I


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RM’000 RM’000 RM’000 RM’000 RM’000




(489,243) (512,440) (468,596) (497,951) (533,635)


Notes:









Commentaries:





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RM’000 RM’000 RM’000 RM’000 RM’000




(489,243) (512,440) (468,596) (497,951) (533,635)


Notes:









Commentaries:





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RM’000 RM’000 RM’000 RM’000 RM’000




(489,243) (512,440) (468,596) (497,951) (533,635)


Notes:









Commentaries:





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RM’000 RM’000 RM’000 RM’000 RM’000




(489,243) (512,440) (468,596) (497,951) (533,635)


Notes:









Commentaries:





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RM’000 RM’000 RM’000 RM’000 RM’000




(489,243) (512,440) (468,596) (497,951) (533,635)


Notes:









Commentaries:





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RM’000 RM’000 RM’000 RM’000 RM’000




(489,243) (512,440) (468,596) (497,951) (533,635)


Notes:









Commentaries:





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RM’000 RM’000 RM’000 RM’000 RM’000




(489,243) (512,440) (468,596) (497,951) (533,635)


Notes:









Commentaries:





APPENDIX I


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RM’000 RM’000 RM’000 RM’000 RM’000




(489,243) (512,440) (468,596) (497,951) (533,635)


Notes:









Commentaries:





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48

(b) decrease in cost of sales from RM777.4 million in the FYE 31 January 2016 to RM497.9 million in the FYE 31 January 2017. The decrease was primarily a result of lower operating costs through the cessation of oil production at the Abu field of block AAKBNLP which became uneconomical under a low oil price environment and cost-saving initiatives; and

(c) write off of RM158.8 million for the deposit paid for an acquisition of assets in Vietnam which was terminated due to low oil prices which had affected the commercial viability of the project in the FYE 31 January 2016.


The SUSB Group’s revenue increased by 6.3% from RM794.1 million in the FYE 31 January 2017 to RM844.4 million in the FYE 31 January 2018. The increase in revenue was primarily a result of the increase in the average sales prices of the oil and natural gas during the period. However, such increase was partially offset by a decline in net sales volumes of oil primarily driven by lower production from the maturing oil fields due to their natural decline and cessation of operations at the Abu field.

The SUSB Group’s loss before taxation decreased by 67.1% from RM33.7 million in the FYE 31 January 2017 to RM11.1 million in the FYE 31 January 2018. The decrease was mainly due to the following:

(a) higher revenue recorded in the FYE 31 January 2018 as detailed above; and

(b) decrease in other operating expenses from RM42.9 million in the FYE 31 January 2017 to RM29.4 million in the FYE 31 January 2018 as a result of lower write off in obsolete consumables, materials and spares inventories in the FYE 31 January 2018.

Despite the lower loss before taxation recorded in the FYE 31 January 2018, a loss after taxation of about RM38.3 million was recorded compared to a profit after taxation of RM17.1 million in the FYE 31 January 2017. This is mainly due to one off income tax credit of RM50.8 million recognised in the FYE 31 January 2017.

FPE 31 October 2017 vs. FPE 31 October 2018

The SUSB Group’s revenue increased by 31.5% from RM557.8 million in the FPE 31 October 2017 to RM733.5 million in the FPE 31 October 2018. The increase in revenue was primarily a result of the increase in average sales prices of the oil and natural gas. Additionally, gas production at block SK310 commenced in October 2017. However, such increase was partially offset by a decline in net sales volumes of oil, primarily driven by lower production from the maturing oil fields due to their natural decline and cessation of operations at the Abu field.

The SUSB Group’s profit before taxation decreased by 65.6% from RM33.7 million in the FPE 31 October 2017 to RM11.6 million in the FPE 31 October 2018. The decrease in profit was mainly due to the following:

(a) increase in cost of sales from RM313.9 million in the FPE 31 October 2017 to RM448.5 million in the FPE 31 October 2018 as result of cost optimization during the lower crude oil price period by the deferment of maintenance activities to FPE 31 October 2018;

(b) increase in other operating expenses from RM6.9 million in the FPE 31 October 2017 to RM19.4 million in the FPE 31 October 2018 as result of higher realised foreign exchange loss recognised in the FPE 31 October 2018; and

(c) increase in administrative expenses from RM71.7 million in the FPE 31 October 2017 to RM137.4 million in the FPE 31 October 2018 as a result of higher management fees and commission paid on bank guarantee for SEP Block 30 in the FPE 31 October 2018.

The income tax expenses recorded in the FPE 31 October 2018 is mainly due to recognition of deferred tax expense or liability arising from temporary differences between the carrying amount of the asset in the statement of financial position and its tax base.

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48

APPENDIX II

INFORMATION ON OMV AG AND OMV E&P

49

The information below is extracted from the OMV Factbook 2017, which can also be accessed through https://www.omv.com/en/about-us. For the purpose of this Appendix, all references to “bn” are to billion,“Group” are to OMV Group, “kboe/d” are to mboe per day, “mn t” are to million tonnes, “OMV” are to OMV AG, and where the context requires, to OMV Group, “OMV Upstream” are to OMV E&P and “TWh” are to terawatt hours.

1. BACKGROUND INFORMATION ON OMV AG

OMV produces and markets oil and gas, innovative energy and high-end petrochemical solutions – in a responsible way. OMV has a balanced international Upstream portfolio, and its Downstream Oil and Gas business features a European footprint. In 2017, Group sales amounted to more than EUR 20 bn and year-end market capitalization was more than EUR 17 bn. The majority of OMV’s over 20,000 employees work at its integrated European sites.

OMV is an international, integrated oil and gas company. Upstream carries out operations in Central Eastern Europe, the Middle East and Africa, the North Sea, Russia and Australasia. In 2017, production stood at 348 kboe/d. Downstream comprises the Downstream Oil and Gas businesses. Downstream Oil covers the Group’s refining and marketing as well as petrochemical activities. In 2017, total refined fuels and petrochemicals sales were 24 mn t. Downstream Gas engages in gas transport, storage, marketing and trading primarily in Austria, Romania and Germany. Gas sales volumes amounted to 113 TWh.

APPENDIX II


49





APPENDIX II


49





49

APPENDIX II

INFORMATION ON OMV AG AND OMV E&P (Cont’d)

50

OMV’s shareholder structure comprised the following at year-end: 43.0% free float, 31.5% Österreichische Bundes und Industriebeteiligungen GmbH (ÖBIB, representing the Austrian government), 24.9% International Petroleum Investment Company (“IPIC”), 0.3% employee share programs and 0.2% treasury shares.

OMV follows a two-tier system with a transparent and effective separation of company management and supervision between the Executive Board and Supervisory Board. The Executive Board members have joint responsibility. The individual areas of responsibility, the reporting and approval obligations and the procedures are defined in the rules of procedure approved by the Supervisory Board.

The Supervisory Board appoints the Executive Board and supervises management’s conduct of business. It consists of ten shareholder representatives elected at the Annual General Meeting (AGM) and five employee representatives delegated by the Group works council.

Executive Board Supervisory BoardRainer Seele Peter LöscherJohann Pleininger Gertrude Tumpel-GugerellManfred Leitner Alyazia Ali Al KuwaitiReinhard Florey Wolfgang C. Berndt

Helmut DraxlerMarc H. HallMansour Mohamed Al MullaKarl RoseHerbert WernerElif Bilgi ZapparoliAngela SchornaChristine AspergerHerbert LindnerAlfred RedlichGerhard Singer

APPENDIX II


50






APPENDIX II


50






APPENDIX II


50






APPENDIX II


50






APPENDIX II


50





Helmut DraxlerMarc H. HallMansour Mohamed Al MullaKarl RoseHerbert WernerElif Bilgi ZapparoliAngela SchornaChristine AspergerHerbert LindnerAlfred RedlichGerhard Singer50

APPENDIX II


51

The history of OMV begins more than 60 years ago. On July 3, 1956, the company name “Österreichische Mineralölverwaltung Aktiengesellschaft” is officially entered in the commercial register. In 1987, the first step towards privatization was taken. In 1994, IPIC (Abu Dhabi) bought a share into OMV.

OMV has successfully grown into one of the largest Austrian industrial companies with an international focus – from a state-owned company into a global player with more than 24,000 employees from 60 nations in 30 countries.

2. BACKGROUND INFORMATION ON OMV E&P

OMV Upstream has operations in Europe, Russia, the Middle East, Africa and Australasia with a solid safety record. In 2017, daily production was 348 kboe/d. The strategic priorities of OMV’s Upstream business are to renew and improve the quality of the asset base, double reserves, extend the track record of operational excellence and increase cash generation.

51

APPENDIX II


52

The strategic priorities of OMV’s Upstream business are to renew and improve the quality of the asset base, double reserves, extend the track record of operational excellence and increase cash generation.

OMV will continue to focus its portfolio on five regions with a production of more than 50 kboe/d: Central Eastern Europe, Middle East and Africa, North Sea and Russia. Australasia is to be developed into a core region in order to unlock the growth potential of the rapidly growing Asian market.


52

APPENDIX III

SALIENT TERMS OF THE AGREEMENTS

53

1. Subscription Agreement

1.1 Agreement to Subscribe

SUP shall, and SEB agrees to procure that SUP shall, issue the new shares amounting to 50% of SUP’s fully diluted issued share capital (“New Shares”) to OMV E&P, and OMV E&P agrees to subscribe, accept and pay the subscription price for the New Shares.

1.2 Consideration

The consideration for the issuance of the New Shares by SUP to OMV E&P and for SEB procuring such issuance shall consist of:

(i) the amount of USD540,000,000 being the subscription price for the New Shares payable to SUP (the “Subscription Price”);

(ii) an amount equal to the Block 30 Additional Consideration (as defined in Section 1.4 of this appendix) and the Oil Price Additional Consideration (as defined in Section 1.4 of this appendix) which may become due and payable to SEB on the occurrence of certain events, being the additional consideration for SEB procuring the issue of the New Shares (the “Additional Consideration”); and

(iii) the amount of any positive or negative adjustment amount, based on the difference in net debt and/or net working capital of the SUSB Group as set out in Section 1.3 of this appendix,payable to SEB or OMV E&P (as the case may be).

1.3 Adjustment to Subscription Price

The Subscription Price is subject to adjustments after Closing based on the difference between thenet debt* and net working capital of the SUSB Group as at Closing compared to the net debt* and net working capital of the SUSB Group estimated in the closing preliminary statement to be prepared by our Company not later than 15 business days prior to Closing (“Closing Preliminary Statement”).

Note:

* Being the net debt of the SUSB Group after the debt novation amount which is the amount equal to the net debt and net working capital of the SUSB Group as estimated in the Closing Preliminary Statement less the Sapura Debt of USD890 million and a reference working capital. The debt novation amount will be novated to our Company and capitalised pursuant to the Subscription Agreement.

1.4 Additional Consideration

The Additional Consideration shall comprise the following elements, which shall become due and payable by OMV E&P to SEB, subject to the terms and conditions set out below:

(i) Block 30 Additional Consideration

OMV E&P shall pay to SEB an amount of up to USD55,000,000 equal to the Participating Interest Amount on achievement of the Block 30 FID (“Block 30 Additional Consideration”).

For the purposes of this clause:

“Participating Interest Amount” shall mean an amount in USD equal to the amount calculated by applying the following formula:

(55,000,000 / 30) x Participating Interest x (Reserve Level / 367);

53

APPENDIX III

SALIENT TERMS OF THE AGREEMENTS (Cont’d)

54

“Participating Interest” shall mean the participating interest held by a SUP Group member in Block 30 immediately prior to the Final Investment Decision; and

“Reserve Level” shall mean the statement of P50 reserves in the field development plan for Block 30 approved (or deemed to be approved) by CNH, provided that, for the purposes of calculating the Participating Interest Amount, the amount of the reserve level shall never be greater than 367 million boe gross.

(ii) Oil Price Additional Consideration

OMV E&P shall pay to SEB an amount of up to USD30,000,000 (the “Oil Price Additional Consideration”) based on the differential between the Actual Brent Prices and the average forecasted Brent price for 2019 to 2022 (“Forecast Brent Price”) (such excess being referred to as the “Oil Price Differential”). OMV E&P will pay as Additional Consideration an amount equal to 50% of the Oil Price Differential for the SUSB Group Production (“Oil Price Additional Consideration Amount”) to SEB, provided that in calculating the Oil Price Differential for the relevant calendar year, the Oil Price Differential may never exceed 12%.

“Actual Brent Price” shall be the Brent price on lifting by lifting basis as determined by the actual Brent price achieved and finally determined at the end of each month as outlined in the month end invoices.

1.5 Pre-closing, Closing and post-Closing

1.5.1 Closing

Consummation of the subscription for the New Shares contemplated by the Subscription Agreement shall, unless otherwise agreed to in writing by OMV E&P and SEB, take place at the offices of SUSB at Kuala Lumpur, Malaysia on 31 January 2019.

1.5.2 SUP actions at Closing

(a) At the Closing, SEB shall procure:

(i) that SUP executes all documents required to issue and allot the New Shares to OMV E&P and delivers certified copies of the same to OMV E&P;

(ii) that SUP executes all employment contracts with each of the Chief Executive Officer, Chief Financial Officer and Chief Operating Officer of SUP in accordance with the Shareholders Agreement;

(iii) that the borrower under a loan and related ancillary arrangements for an amount of USD350,000,000 (“Refinancing Facility”) draws down under the Refinancing Facility and uses the proceeds of such drawdown to repay the sum of USD350,000,000 (“Retained Debt”); and

(iv) except the extent that it has been repaid, that SUP shall use the proceeds of the subscription for the New Shares to procure the repayment of the sum of USD890,000,000 of debt to SEB.

1.5.3 Excluded Assets

SEP (Sabah), and the arbitration initiated by SEP (Southeast Asia) against Newfield International Holdings Inc. and Newfield Exploration Company (“Newfield Arbitration”) will be excluded and transferred out from the SUP Group.

54

APPENDIX III


55

1.5.4 Australian Restructuring Steps

(a) For the provisions in the Subscription Agreement relating to the Australian interests to be effective, OMV E&P is required to make certain filings to the Foreign Investment Review Board (“FIRB”) in accordance with the Foreign Acquisitions and Takeovers Act 1975 (Cth) ("FATA") (“FIRB Condition”).

(b) In the event that, OMV E&P having made the relevant filings as contemplated above, either: (a) the FIRB Condition is not satisfied or waived on or before the date that is five (5) business days from the date of Closing; or (b) OMV E&P receives a no objection notice (within the meaning of FATA), but pursuant to that notice the treasurer wishes to impose one or more conditions to his or her approval under the FATA that OMV E&P considers in its sole discretion to be unacceptable, then OMV E&P shall promptly notify SEB and SEB shall procure that the Australian Restructuring Steps are completed with no liability to SUP or any SUSB Group member within four (4) business days of the earlier of those two dates to occur and in any event prior to Closing; and immediately following completion of the last of the Australian Restructuring Steps, provisions of the Subscription Agreement relating to the Australian interests not in effect to such time, shall become binding and effective.

(c) If, after the Australian Restructuring Steps have been completed, the FIRB Condition is satisfied, SEB shall have the option, exercisable in its sole discretion and at its full cost and expense, to reverse the Australian Restructuring Steps and transfer the Australian interests back into the SUSB Group on terms identical to those of the Australian Restructuring Steps.

“Australian Restructuring Steps” means the sale and transfer of the entire issued share capital of Sapura Exploration and Production (Western Australia) Pty Ltd by Sapura Exploration and Produce (Australia) Sdn Bhd to a wholly-owned subsidiary of SEB for USD1 plus good and valuable consideration.

In the event of the Australian Restructuring Steps being implemented, Sapura Exploration and Production (Western Australia) Pty Ltd will not be part of the Proposed Transaction and the Subscription Price will remain the same.

1.5.5 Refinancing Facility and Working Capital and Guarantee Facility OMV E&P

SEB, SUA and OMV E&P agree to, and SEB shall procure that SUP shall negotiate the terms of a refinancing facility and a working capital and guarantee facility in good faith and acting reasonably such that the conditions to Closing are satisfied as soon as reasonably practicable after the date of the Subscription Agreement.

1.5.6 Restructuring Steps

“Restructuring Steps” means:

Step 1A Prior to the date of the Subscription Agreement (“Effective Date”), SEB has established SUA and SUP, both such entities being 100% owned by SEB.

Step 1B As soon as reasonably practicable after the Effective Date, but in any case by 31 January 2019, SEB shall sell all of its SUP Shares to SUA for a nominal amount of RM2, being the paid-up capital of SUP.

Step 2 As soon as reasonably practicable after the Effective Date, but in any case by 31 January 2019, SEB and SUP shall enter into a sale and purchase agreement whereby SEB shall sell all of its SUSB Shares to SUP (“SUSB SPA”).

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The consideration for such sale shall be settled via debt novations and capitalisations from SUP to SUA and then from SUA to SEB, resulting in both SUP and SUA having to issue new share capital to SUA and SEB respectively.

Step 3 Upon completion of the SUSB SPA, SEB, SUA and SUP shall enter into a debt novation agreement whereby a subsidiary of SUP, SEP (Southeast Asia), shall transfer and SEB shall accept such debt by way of an issue of shares in SEP (Southeast Asia), SUSB, SUP and SUA and a cancellation of the corresponding amount from the total SUP debt.

Step 4 Upon completion of the debt novation agreement, SEB shall notify OMV E&P that Steps 1, 2 and 3 have been completed and OMV E&P shall (subject to satisfaction or (where permissible) waiver of the conditions precedent) immediately subscribe for SUP Shares by paying SUP or by paying directly into TMC’s USD bank account the Subscription Price for such shares and SUP shall thereupon issue such sharesto OMV E&P.

Step 5 At Closing, the Refinancing Facility shall be completed, resulting in disbursement of such Refinancing Facility into SUP or any SUP Group member.

Step 6 At Closing and immediately upon receipt by SUP or by TMC of the Subscription Price, SEB and OMV E&P shall procure that the SEB Group procures that SUP repays a portion of the Sapura Debt equivalent to an amount of USD540 million.

Step 7 At Closing and immediately upon receipt by SUP or any SUSB Group member of the Refinancing Facility, SEB and OMV E&P shall procure that, to the extent that such Refinancing Facility has not already been drawn down and used to repay the Retained Debt, the relevant SUSB Group borrower under the Refinancing Facility repays an additional USD350 million of the Sapura Debt utilising the Refinancing Facility.

(a) SEB confirmed Restructuring Step 1A has been completed and undertakes to implement and complete Restructuring Steps 1B, 2 and 3 as soon as reasonably practicable after the date of the Subscription Agreement and in any event by 31 January 2019 without liability to SUP or any SUP Group member other than where such liability is expressly contemplated by the Restructuring Steps.

(b) The parties agree that Restructuring Steps 4-7 (inclusive) shall be implemented and completed simultaneously at Closing without liability to SUP or any SUP Group member other than where such liability is expressly contemplated by the Restructuring Steps.

1.5.7 Pledge Documents, Other Documents, Warranty and Indemnity Deed, Disclosure Letter, OMV PCG and Mexico Deed of Indemnity and Contribution

(a) SEB, SUA and OMV E&P agree to, and SEB shall procure that SUP shall negotiate the terms of the Pledge Documents in good faith and acting reasonably and based on agreed pledge principles such that the Pledge Documents are agreed as soon as reasonably practicable after the date of the Subscription Agreement.

(b) Pursuant to the pledge principles, SEB and SUA’s obligations under the Warranty and Indemnity Deed shall be secured by:

(i) a sum amounting to USD80.0 million (“Escrow Sum”) that is to be deducted from the Subscription Price and paid into an escrow account; or

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(ii) a share pledge over SUA’s shares in SUP (“Share Pledge”) of an equity value at Closing of up to USD300.0 million (i.e. 55.56% of SUA’s shares held at Closing) provided that where SEB or any SUSB Group member is able to secure third party financing of USD350.0 million without any recourse or security provided by SUP’s shareholders, the equity value of the pledged shares shall be reduced to USD125.0 million.

(c) also pursuant to the pledge principles, where the Refinancing Facility is financed at Closing by OMV E&P, the equity value of the pledged shares to be pledged shall be as follows:

(i) where the Escrow Sum is provided, the amount of USD175 million; or (ii) where the Escrow Sum is not provided the amount of USD300 million.

(d) SEB, SUA and OMV E&P agree to, and SEB shall procure that SUP and the SUP Group members shall: (a) negotiate the terms of the other documents necessary for the implementation of the Subscription Agreement (“Other Documents”) in good faith and acting reasonably such that the other documents are agreed as soon as reasonably practicable after the date of the Subscription Agreement and the parties agree that where there are principles relating to a particular other document, such other document shall incorporate such principles, and (b) negotiate the terms of the Warranty and Indemnity Deed, Disclosure Letter, OMV PCG and Mexico Deed of Indemnity and Contribution in good faith such that the Warranty and Indemnity Deed, Disclosure Letter, OMV PCG and Mexico Deed of Indemnity and Contribution are agreed as soon as reasonably practicable after the date of the Subscription Agreement and in any event prior to 27 November 2018.

(i) “Disclosure Letter” means a disclosure letter delivered in connection with the Warranty and Indemnity Deed;

(ii) “Mexico Deed of Indemnity and Contribution” means a deed of indemnity and contribution provided by OMV E&P to SEB in respect of the Mexico Block 30 Guarantee;

(iii) “OMV PCG” means a parent company guarantee from OMV AG to SUP to secure the payment by OMV E&P of the Subscription Price, capped at 10% of the Subscription Price; and

(iv) “Pledge Documents” means the documents in relation to security to be granted in favour of OMV E&P as contemplated by the principles set out in the Subscription Agreement.

1.6 Key Conditions to Closing

Closing is subject to the satisfaction of, amongst others, the following conditions:

(a) The Refinancing Facility shall have closed and the borrower thereunder has the unconditional right to drawdown an amount equal to the Retained Debt;

(b) A credit and bank guarantee facility and related ancillary arrangements of between USD100,000,000 and USD200,000,000 (“Working Capital and Guarantee Facility”) shall have closed and the borrower or borrowers thereunder (as applicable) has or have the unconditional right to make drawdowns thereunder;

(c) All authorisations, consents, waivers and approvals being obtained;

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(d) The bank guarantees set out in the Subscription Agreement has been replaced by bank guarantees provided by SUP or a SUSB Group member under a Working Capital and Guarantee Facility;

(e) SEB shareholders shall have approved the transaction;

(f) The form and substance of the Pledge Documents and Other Documents have been agreed to by each of the parties and such agreement is confirmed in writing by each of them;

(g) The execution and delivery of a Warranty and Indemnity Deed and a Mexico Deed of Indemnity and Contribution by each of the parties thereto, and delivery of the Disclosure Letter by SEB and SUA to OMV E&P and OMV E&P having acknowledged the receipt of the Disclosure Letter in writing; and

(h) SEB and OMV E&P, that it considers, each in its sole and absolute discretion, that the implementation of the arrangements contemplated by the Subscription Agreement (to the extent they relate to the right, title, right to use and interest in and to the properties by each SUSB Group member following the date of the Subscription Agreement) is progressing satisfactorily (“Satisfaction Notice”).

1.7 Termination

(a) The Subscription Agreement may be terminated in the following circumstances:

(i) By mutual prior written agreement of SUP, SEB, SUA and OMV E&P;

(ii) By either SEB or OMV E&P, if Closing has not occurred on or before the prescribed date;

(iii) By SEB, if any of the conditions of SEB to Closing (other than conditions relating to matters relating to the properties) become incapable of satisfaction before the prescribed date;

(iv) By OMV E&P, if any of the conditions of OMV E&P to Closing (other than conditions relating to matters relating to the properties) become incapable of satisfaction before the prescribed date; or

(v) By the non-defaulting party for failure to close the transaction.

(b) The Subscription Agreement shall automatically terminate if either SEB or OMV E&P has not served a Satisfaction Notice to the other party within six (6) weeks of the date of the Subscription Agreement.

1.8 Governing Law

The Subscription Agreement is governed and construed in accordance with the law of England and Wales.

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2. Shareholders’ Agreement

2.1 Entry into Force

The Shareholders’ Agreement is conditional upon the Closing of the Subscription Agreement (“Effective Date”) except for certain undertakings set out in Section 2.2 below, which shall enter into force as of signing of the Shareholders’ Agreement.

2.2 Undertaking

SEB, SUA and OMV E&P shall, after the date of the Shareholders’ Agreement but before and as a condition to the occurrence of the Effective Date, negotiate and agree in good faith acting reasonably:

(a) the rules of procedure for the Board of SUP and for the executive and management committee (“E&M Committee”) (“Rules of Procedure”) based on the provisions of the Shareholders’ Agreement, in particular its corporate governance provisions;

(b) the thresholds for the Board matters requiring the positive vote of at least 2 directors nominated by OMV E&P and at least 2 directors nominated by SUA (“Board Reserved Matters”) and shareholder matters requiring the unanimous vote of all shares in SUP present or represented (“Shareholders Reserved Matters”); and

(c) initial annual budget and the initial 3-year rolling business plan (“Mid Term Business Plan”) for SUP which shall be annually updated.

2.3 Business and Area of Mutual Interest

(a) The business of the SUP and its subsidiaries (“SUP Group”) shall be upstream oil and gas activities including the exploration for and development, production and sale of hydrocarbons (“Business”) in the Area of Mutual Interest ("AMI").

(b) The AMI shall comprise the following countries: Malaysia, Thailand, Vietnam, Indonesia, Myanmar, Papua New Guinea, Brunei Darussalam, Mexico, Laos, Cambodia and NorthWestern Australia (comprising Western Australia and the Northern Territory (including any onshore areas, internal waters and coastal waters) and any adjacent Commonwealth offshore areas). The SUP Group holds the assets in New Zealand that will remain part of the SUP Group. After the Effective Date, the shareholders will consider the SUP Group’s exit from New Zealand through a swap of such assets with OMV E&P’s North Western Australian discoveries.

(c) The parties envisage establishing and using the SUP Group as a platform for growth in the AMI with the goal to make the SUP Group a leading regional independent.

(d) Accordingly, the parties shall, and shall procure that their affiliates shall, to the extent permitted by applicable law, refrain from carrying out Business in the AMI other than through the SUP Group.

2.4 New business opportunities

(a) Each party undertakes to notify the other party and the Board of SUP of any projects or opportunities in the SUP Group’s area of Business which may arise in the AMI ("New Project"). If a party wishes to further pursue such New Project it shall propose it to the shareholders meeting (together with a proposal for the financing of the New Project) for approval that such New Project shall be pursued by the SUP Group.

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(b) If:

(i) such party has supported the New Project and also committed to finance the New Project on behalf of the SUP Group ("Supporting Shareholder") and also the directors nominated by the Supporting Shareholder have supported the New Project, and

(ii) the other shareholder (“Non-Supporting Shareholder”) has (A) voted against the New Project, or (B) voted for the New Project in such shareholders’ meeting but has not committed to finance the New Project on behalf of the SUP Group, then

the Supporting Shareholder may carry out the New Project outside the SUP Group on a sole risk and reward basis.

2.5 Name

SUP’s name shall be changed to “Sapura OMV Upstream Sdn Bhd”. SEB shall grant and shall procure that those persons holding the respective rights grant SUP and its subsidiaries a license for the use of the name "Sapura" on a non-exclusive and not sub-licensable basis for as long as SEB holds (directly or indirectly) at least 25% of the shares in SUP. OMV AG shall grant SUP and its subsidiaries a license for the use of the name "OMV" on a non-exclusive and not sub-licensable basis for as long as OMV AG holds (directly or indirectly) at least 25% of the shares in SUP and is able to fully consolidate SUP.

2.6 Full Consolidation

The parties acknowledge OMV E&P's need to fully consolidate the SUP Group in OMV AG's consolidated financial statements in accordance with International Financial Reporting Standards (“IFRS”) (in particular also IFRS 10).

2.7 Board of Directors

(a) The Board of SUP shall consist of six (6) members.

(b) OMV E&P shall be entitled to nominate three (3) members to the Board of SUP ("OMV Directors") and SUA shall be entitled to nominate three (3) members to the Board of SUP ("Sapura Directors").

(c) The right to nominate the chairman of the Board of SUP (“Chairman”) and the deputy chairman of the Board of SUP (“Deputy Chairman”) shall alternate between the shareholders every three (3) years. For the first three (3) years following the Effective Date, the Chairman shall be nominated by SUA and the Deputy Chairman shall be nominated by OMV E&P. Thereafter the Chairman shall be nominated by OMV E&P and the Deputy Chairman shall be nominated by SUA for a three (3)-year period.

2.8 Quorum of the Board of SUP

(a) The Board of SUP shall only be able to adopt resolutions in a meeting where at least four (4) directors including the Chairman or the Deputy Chairman and an equal number of Sapura Directors and OMV Directors are present.

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(b) Resolutions of the Board of SUP on any matter which was not resolved by the E&M Committee or any matter for which the decision of the Board of SUP was requested (“E&M Escalation Matters”) and/or any matter which is within the Board of SUP’s competence or subject to its approval (other than a matter which is a Board Reserved Matter or which is an E&M Escalation Matter) (“Board Escalation Matters”) which are decided with an OMV Majority (as defined in Section 2.9(c) below) shall have a quorum of two (2) OMV Directors who are present.

(c) For the avoidance of doubt, each director shall be entitled to appoint an alternate director who may attend and vote at a Board meeting in the absence of the appointing director and who shall be counted towards the quorum.

2.9 Majority

(a) All decisions of the Board of SUP shall be taken and resolutions passed by a simple majority of the votes of the directors (without prejudice to paragraphs (b) and (c) below).

(b) For resolutions of the Board of SUP on Board Reserved Matters the positive vote of at least two (2) OMV Directors and at least two (2) Sapura Directors shall be required for a valid resolution.

(c) Resolutions of the Board of SUP on E&M Escalation Matters and/or Board Escalation Matters may be validly passed with the affirmative vote of two (2) OMV Directors present or represented (irrespective of the votes of the Sapura Directors) (“OMV Majority”).

2.10 E&M Escalation Matters

(a) Upon the request of any member of the E&M Committee or of any director, any E&MEscalation Matter shall be referred to the Board of SUP for decision within three (3) business days (which period shall be shortened in case of emergency or if otherwise necessary to prevent harm from the SUP Group or a shareholder) and a Board Reserved Matter shall not be an E&M Escalation Matter and any matter relating to an action taken by the E&M Committee or any of its members outside their respective (joint or individual) limits of authority delegated to them under the Shareholders’ Agreement or the Rules of Procedure shall be deemed to be a Board Escalation Matter.

(b) Should the Board of SUP fail to pass a resolution on an E&M Escalation Matter in a first meeting (because of a lack of the required quorum or of the required majority), a further meeting of the Board of SUP may be called by any Director giving forty-eight (48) hours notice (such period may be shortened in case of emergency or if otherwise necessary to prevent harm from the SUP Group or a shareholder) and in such second meeting the Board of SUP shall be able to pass valid resolutions on such E&M Escalation Matters by an OMV Majority.

2.11 E&M Committee

The E&M Committee shall consist of three (3) members appointed by the Board of SUP, namely the Chief Executive Officer (“CEO”), the Chief Financial Officer (“CFO”) and the Chief Operating Officer (“COO”).

2.12 Decision Making in the E&M Committee

All decisions and resolutions of the E&M Committee shall require the unanimous vote of the CEO and the CFO (or their respective representatives authorised by them in accordance with the Rules of Procedure). There shall be no casting vote of the CEO.

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2.13 Quorum of Shareholders Meeting

(a) The shareholders meeting shall only be able to adopt valid resolutions in a meeting in which the entire outstanding share capital of SUP is present or represented.

(b) For resolutions on any matters subject to a decision of the shareholders meeting (with the exception of Shareholders Reserved Matters), upon which the shareholders meeting fails to pass a resolution (because of a lack of the required quorum or of the required majority) (“Shareholder Escalation Matters”) for which OMV E&P shall have the right to exercise two (2) votes for every share it holds (even though SUA continues to have only one (1) vote for every share it holds) (“OMV Shareholder Meeting Majority”), the shareholders meeting shall have a quorum and be able to adopt valid resolutions if all of the OMV E&P shares are present or validly represented (irrespective of the presence or representation of the shares held by SUA).

2.14 Majority in shareholders decision making

(a) Resolutions of the shareholders meeting shall require a simple majority of the votes cast, unless a higher majority is required by mandatory corporate law applicable to SUP (without prejudice to (b) and (c) below).

(b) Resolutions of the shareholders meeting on any Shareholder Reserved Matters shall require the unanimous vote of all shares present or represented.

(c) Resolutions of the shareholders meeting on Shareholder Escalation Matters (following the escalation procedure) may be validly passed by an OMV Shareholders Meeting Majority.

2.15 Deadlock

(a) If a repeated and continuing deadlock concerns a fundamental strategic matter of extraordinary importance and the deadlock results in a prolonged and sustained frustration of the joint venture leaving no other solution, the shareholders shall hold good faith negotiations between them to resolve the deadlock as swiftly as possible. If such good faith negotiations have not resolved such prolonged and sustained frustration within a period of twelve (12) months from the deadlock having occurred, the shareholder declaring the deadlock (“Offeror”) may within one (1) month following the end of such negotiation period serve a notice in writing on the other shareholder (“Recipient”) specifying a single price per share in cash payable in USD or Euro (the “Separation Price”) and offering to:

(i) sell to the Recipient all (but not less than all) of the shares held by the Offeror at the Separation Price and all shareholder loans held by the Offeror and its affiliates for the principal amount outstanding plus accrued interest thereon; or

(ii) purchase from the Recipient all (but not less than all) of the shares held by the Recipient at the Separation Price and all shareholder loans held by the Recipient and its affiliates for the principal amount outstanding plus accrued interest thereon,

in each case of (i) and (ii) with all rights and liabilities pertaining thereto but free and clear from any encumbrances (a “Separation Notice”). A Separation Notice shall not be revocable.

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(b) The Recipient may within a period of twenty (20) business days after the date of service of a Separation Notice (the “Offer Period”), at its sole discretion, elect by notice in writing to the Offeror:

(i) to accept the Offeror’s offer to sell and to purchase all (but not less than all) of the shares held by the Offeror at the Separation Price and all shareholder loans held by the Offeror and its affiliates for the principal amount outstanding plus accrued interest thereon; or

(ii) to accept the Offeror’s to purchase and to sell to the Offeror all (but not less than all) of the shares held by the Recipient at the Separation Price and all shareholder loans held by the Recipient and its affiliates for the principal amount outstanding plus accrued interest thereon.

(c) If no election is made in writing by the Recipient within the Offer Period, then the Offeror may, by notice in writing served on the Recipient within five (5) business days after the end of the Offer Period, specify which of the options the Recipient shall be deemed to have elected. If an election is made in writing by the Recipient within the Offer Period (or a deemed election is made under this paragraph), the Offeror and the Recipient shall be bound to complete the sale and purchase of the relevant shares at the Separation Price and of the relevant shareholder loans at the principal amount outstanding plus accrued interest.

2.16 Annual Budget, Development and Business Plans

(a) The SUP Group shall carry on the Business in accordance with the applicable annual budget, the Mid Term Business Plan and the long term development plan which is reviewed every three (3) years (“Long Term Development Plan”). The initial annual budget, Mid Term Business Plan, Long Term Development Plan is attached to the Shareholders’ Agreement.

(b) The annual budget shall be prepared for each financial year on the basis of the Long Term Development Plan and the Mid Term Business Plan. The Mid Term Business Plan shall be updated every year.

(c) The annual budget and updated Mid Term Business Plan shall be prepared in line with IFRS and include all information required by the parties at a level of itemization generally compliant with best international petroleum industry practices and OMV E&P’s mid-term plan.

(d) The draft annual budget and updated Mid Term Business Plan shall be prepared by the E&M Committee based on the Long Term Development Plan and the assumptions provided to SUP by the parties and, to ensure full consolidation of the SUP Group within OMV E&P’s books under IFRS, in accordance with the OMV E&P mid-term planning process.

2.17 Financing

The shareholders agree that the financing of the SUP Group shall be provided from the following sources and in the following priority: (i) cash from the SUP Group’s operations, (ii) third party loans and (iii) shareholder funding including shareholder loans, equity or quasi-equity contributions, preference shares or any other instrument as the shareholders may agree in writing to the extent not prohibited by applicable law.

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2.18 National Development

SUP Group and SUSB shall procure and the other parties shall take reasonable steps to procure, to the extent required by applicable law:

(a) the SUP Group commits to exceed the local workforce requirements set out in the PETRONAS Procedures and Guidelines for Upstream Activities, the PETRONAS Malaysianisation Procedure for Upstream Activities (version 2016), and any similar guidelines covering these items;

(b) the composition of the SUP Group’s workforce (professional and skilled) and contracts awarded by the SUP Group for work in Malaysia adheres to the guidelines issued by PETRONAS;

(c) in the case of non-compliance, by the SUP Group, the Sapura Directors shall have the right to point out any such non-compliance to the OMV Directors in reasonable detail and propose an adequate remedy for resolving such non-compliance, which shall constitute a Board Escalation Matter. After following the procedure on resolving Board Escalation Matters, notwithstanding any other provision of the Shareholders’ Agreement, the respective remedy initially proposed by the Sapura Directors shall be implemented by the E&M Committee to the extent required for complying with the National Development Policy prevailing over any OMV Majority; and

(d) any board resolution deviating from the PETRONAS’s guidelines above shall constitute a Board Reserved Matter.

2.19 Further business cooperation

The parties shall discuss in good faith opportunities for a deeper collaboration between SEB and OMV E&P and their respective affiliates, including the SUP’s and OMV E&P’s adding SEB and its group companies to their approved bidders list of contractors and to the extent legally and contractually permitted and commercially viable for OMV E&P granting SEB and its group companies a right of first refusal for services in the areas (i) field development; (ii) EPC/EPCIC; (iii) subsea works; (iv) brownfield works; (v) decommissioning; (vi) project managementconsulting; and (vii) drilling.

2.20 Right of First Refusal

2.20.1 General Principle

Each shareholder may transfer all (but not less than all) of its shares and shareholder loans to a third party subject to the right of first refusal of the other shareholder ("Non-selling Shareholder") ("Right of First Refusal").

2.20.2 Sale Notice

If a shareholder intends to sell its shares to a third party it shall notify the Non-selling Shareholder by providing a written notice ("Sale Notice") which shall include a certified copy of a binding offer ("Third Party Offer") of a third party purchaser ("Third Party Purchaser"). The Third Party Offer shall:

(a) set out the identity, address and registration details of the Third Party Purchaser;

(b) be made for (i) all (but not less than all) of OMV E&P’s shares and shareholder loans or (ii) all (but not less than all) of SUA’s shares and shareholder loans, as the case may be, ("Sale Shares and Loans");

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(c) set out the offered purchase price for the Sale Shares and Loans which must be a cash consideration only and, to the extent not prohibited by applicable law, payable in USD or Euro;

(d) include all other terms and conditions for the acquisition of the Sale Shares and Loans including the proposed timing for Closing of the transaction;

(e) set out in reasonable detail (for the purposes of establishing the creditworthiness of the Third Party Purchaser and of compliance with applicable money-laundering laws and regulations) the sources of funding for the acquisition of the Sale Shares and Loans by the Third Party Purchaser (which shall be on a certain funds basis); and

(f) be binding subject only to the non-exercise of the Right of First Refusal by the Non-selling Shareholder.

The Sale Notice shall offer to sell the Sale Shares and Loans to the Non-selling Shareholder subject only to the conditions of any mandatory approval requirements of governmental authorities but otherwise on the terms set forth in the Third Party Offer ("Offer Conditions").

2.20.3 Exercise of Right of First Refusal

(a) The Right of First Refusal may be exercised by the Non-selling Shareholder by giving a written notice of acceptance ("Notice of Acceptance") within two (2) months after receipt of the Sale Notice ("Acceptance Period"). If the Non-selling Shareholder gives a Notice of Acceptance the sale of the Sale Shares and Loans to the Non-selling Shareholder (or any of its affiliates nominated in writing) shall be executed on the Offer Conditions and both shareholders shall promptly enter into a respective share purchase agreement and execute all other necessary documents and take all other actions reasonably to be taken for the transfer of the Sale Shares and Loans to the Non-selling Shareholder.

(b) If the Non-selling Shareholder fails to give the Notice of Acceptance within the Acceptance Period or to complete the acquisition of the Sale Shares and Loans within six (6) months following the Notice of Acceptance, the respective selling party shall, subject to the terms of the Shareholders’ Agreement be entitled to transfer the Sale Shares and Loans to the Third Party Purchaser (and the Non-selling Shareholder shall grant its consent for such transfer).

2.21 Call Option

2.21.1 Call Option Triggering Event

Each shareholder ("Calling Shareholder") shall have the right to purchase and acquire all (but not less than all) of the shares and shareholder loans (collectively "Option Shares") held by the other shareholder ("Called Shareholder") upon occurrence of a Call Option Triggering Event subject to the terms and conditions of the Shareholders’ Agreement ("Call Option"). The Call Option is subject to, and can only be exercised in the event that the Called Shareholder –

(i) is subject to a Change of Control; and/or

(ii) becomes insolvent or subject to insolvency proceedings within the meaning of insolvency laws applicable to it or subject to attachment, sequestration, distress or enforcement proceedings in respect of the Option Shares held by it.

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(each a "Call Option Triggering Event"). Further, any material breach by SEB and SUA of Clauses 4.7(c) or (d), 18 or 19 of the Shareholders’ Agreement shall also be a Call Option Triggering Event and give rise to a Call Option for OMV.

“Change of Control” shall have occurred in respect of –

(i) OMV E&P if any person (or persons acting in concert) other than the controlling person(s) as of the date of the Shareholders’ Agreement acquires control over OMV E&P, provided that no Change of Control shall be deemed to have occurred in respect of OMV E&P as long as the Republic of Austria (jointly or solely, directly or indirectly) controls or remains a major shareholder of or otherwise retains a significant influence over OMV AG; and/or

(ii) SEB, if any person (or persons acting in concert) other than the controlling person(s) as of the date of the Shareholders’ Agreement acquires control over SEB, provided that no Change of Control shall be deemed to have occurred in respect of SEB as long as the Government of Malaysia has a Controlling stake in major decisions of SEB including appointment of management positions, contract awards, strategy, restructuring and financing acquisition and divestments.

“Control” means, in respect of a person (i) owning, directly or indirectly, more than fifty per cent (50%) of (a) the share capital of such person or (b) the voting rights in the person’s shareholders’ meeting or equivalent corporate body (if applicable), or (ii) having otherwise, directly or indirectly, the power to (a) determine the composition of the majority of, or the outcome of decisions on financial or operating policies by, the Board or any other governing or managing body of such person or (b) to direct or procure the direction of the management and policies of such person, and “Controlling” and “Controlled” shall be construed accordingly.

2.21.2 Exercise of Options

The Calling Shareholder may exercise its Call Option by way of issuing a notice (“Option Notice”) to the Called Shareholder. The Option Notice shall be given to the other Shareholder not later than two (2) months after the actual occurrence of the Call Option Triggering Event or the Calling Shareholder gaining knowledge of the actual occurrence of the Call Option Triggering Event, whichever occurs later (such two (2) months period the “Exercise Period”). Upon delivery of the Option Notice, a share purchase and transfer agreement relating to the Option Shares shall enter into force, without any further acts or declarations required, pursuant to which the Called Shareholder shall sell and transfer all of the Option Shares with all rights and liabilities pertaining thereto but free and clear from any encumbrances to the Calling Shareholder and the Calling Shareholder shall acquire all of the Option Shares with all rights and liabilities pertaining thereto pursuant to the terms and conditions set forth in the Shareholders’ Agreement.

In the event SUA exercises the Call Option, SEB will comply with Paragraph 8.29(2) of the Main Market Listing Requirements of Bursa Securities.

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2.21.3 Purchase Price for Option Shares

The purchase price for the Option Shares ("Option Price") shall be price agreed between the Calling Shareholder and the Called Shareholder within thirty (30) business days of the date of the notice issued by the Calling Shareholder to the Called Shareholder (“Option Notice”), or, if not so agreed before the expiry of such period, the fair market value of the Option Shares as at the date of the Option Notice as determined by an independent expert and shall be due and payable by the Calling Shareholder to the Called Shareholder in USD in freely available funds or by wire transfer on the payment of the Option Price within ten (10) business days after the report by the independent expert has been delivered and the Option Price has been determined in a final and binding manner (“Call Option Completion Date”).

2.21.4 Valuation by Independent Expert

(a) The independent expert shall be an accounting firm independent from the shareholders, to be jointly chosen by the shareholders from the big four accounting firms. If the shareholders do not agree on the appointment of an independent expert within ten (10) business days from receipt of the Option Notice, the independent expert shall be determined by the President of the Institute of Chartered Accountants in England and Wales. The parties shall procure that SUP shall furnish the independent expert with all documents and information needed for rendering its determination of the Option Price as the independent expert may request. To the extent necessary, the independent expert may also decide on the interpretation of the Shareholders’ Agreement. Each party may request one (1) oral hearing in the presence of the independent expert and provide a written statement on the determination of the Option Price to the independent expert (with copy to the other party).

(b) Except to the extent that the parties agree otherwise in writing, the independent expert shall determine the Option Price based on the discounted cash flow method. The costs of the independent expert shall be borne by the parties pro rata to their shareholding in SUP.

2.22 Termination

The Shareholders’ Agreement shall be binding upon the parties thereto until, and terminate solely upon, (i) unanimous written agreement between the shareholders or (ii) acquisition by a shareholder of all the shares held by the other shareholder. For the avoidance of doubt, the Shareholders’ Agreement may not be terminated otherwise.

2.23 Governing Law

The Shareholders’ Agreement shall be governed and construed in accordance with the law of England and Wales.

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3. Warranty and Indemnity Deed

SEB, SUA and OMV E&P have entered into the Warranty and Indemnity Deed for the purpose of giving certain warranties and covenants in relation to the Proposed Transaction, including the subscription for the New Shares.

3.1 Parties’ Covenants on Conduct of Business

Except as required by applicable law, with the prior written consent of OMV E&P, or the extent expressly permitted by another clause of the Warranty and Indemnity Deed, during the period from the date of the Subscription Agreement until the earlier of the date of consummation of the subscription of the New Shares contemplated in the Subscription Agreement (“Closing Date”) or the termination of the Warranty and Indemnity Deed, SEB shall, among others:

(a) cause each of the SUSB Group members to carry on its respective business in the ordinary course consistent with past practice and in accordance with all laws, the petroleum contracts, the terms and conditions of the petroleum titles, its permits and other material contracts to which it is a party and good oilfield practice and not discontinue or cease to operate all or a material part of its business.

(b) not to sell, transfer, issue, allot, redeem or place an encumbrance other than a permitted encumbrance upon the shares that SEB holds in SUA or agree to do any of those things.

(c) cause each SUSB Group member not to sell, transfer or place an encumbrance other than a permitted encumbrance upon the shares of any SUSB Group member (including any royalty or net profit interest or net production interest or any other analogous interest) or agree to do any of those things.

(d) cause each SUSB Group member not to voluntarily terminate, waive any right or remedy under, amend, execute or extend any material contract or agree to do any of those things, other than execution or execution of contracts for the sale or exchange of hydrocarbons terminable on notice of ninety (90) days or less.

(e) cause each SUSB Group member not to (i) voluntarily relinquish any area covered by any petroleum contract or petroleum title, or agree to do so, or (ii) enter into, propose or approve any sole risk or non-consent proposal.

(f) cause each SUSB Group member to maintain its existing insurance policies and pay all sums due under each policy on a timely basis.

(g) cause SUP or SUA not to conduct any business (other than that of a holding company), own any assets (other than in the case of SUA its SUP Shares and in the case of SUP its SUSB Shares) or incur any liabilities or indebtedness, except as otherwise contemplated in the transaction documents.

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3.2 Parties’ Covenants on Corporate and Financial Matters

Except as required by applicable law, with the prior written consent of OMV E&P, or to the extent expressly permitted by another clause of the Warranty and Indemnity Deed, during the period from the date of the Subscription Agreement until the earlier of the Closing Date or the termination of the Warranty and Indemnity Deed, SEB shall cause each of SUP and each SUSB Group member not to (and not to agree to), amongst others:

(a) amend their respective constitutional documents.

(b) issue, allot issue, allot, redeem or otherwise acquire any of their shares or other equity interests or issue or allot any option, warrant or right relating to their shares or other equity interests, as applicable, or any securities convertible into or exchangeable for any of its shares or other equity interests, as applicable, except as contemplated in the transaction documents.

(c) amend the terms of its current indebtedness, except as expressly contemplated in the transaction documents.

(d) incur or assume any indebtedness or guarantee, indemnify or secure any such indebtedness or its or another person’s obligations (excluding (i) accounts payable in the ordinary course of business, and (ii) any debts owed to a SUP Group member), except as contemplated in the transaction documents.

(e) make any change in any method of accounting or accounting principles other than those required by Malaysian Financial Reporting Standards.

(f) save as is required by any applicable law, make any material change in the terms and conditions of employment (including pension rights) or engagement of any current workers, or self-employed independent contractors or consultants or dismiss of any of the key employees without reasonable cause in accordance with the terms and conditions of their employment and following a fair process, or engage any new employees with an annual salary exceeding USD50,000 not already engaged at the date of the Warranty and Indemnity Deed.

3.3 Warranties

3.3.1 SEB’s Warranties

(a) Unless otherwise expressly provided in respect of a SEB warranty, and save as disclosed, SEB warrant to OMV E&P that each (i) warranty given, to the extent that such warranties relate to the Subscription Agreement and to the Shareholders’ Agreement was true and accurate on the date of the Subscription Agreement and Shareholders’ Agreement, and (ii) of the SEB warranties is true and accurate at the date of the Warranty and Indemnity Deed. For the avoidance of doubt, (without limiting the SEB warranties) SEB is not making any representations in respect of SEB Warranties.

(b) SEB will be deemed to warrant to OMV E&P immediately before closing that each of the Closing Date warranties, is (by reference to the circumstances subsisting on the Closing Date and save as disclosed) true and accurate.

(c) SEB Warranties shall comprise of title and capacity warranties, business warranties and tax warranties set out in the Warranty and Indemnity Deed.

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3.4 Indemnities

With effect from the Closing Date, SEB undertakes to pay to OMV E&P (and each of its successors and assigns, permitted in accordance with the Subscription Agreement) in full and on demand, the amount of 50% of any losses and expenses (whether or not arising from any negligent act or omission or breach of duty) that SUP and any of SUSB Group member suffers or incurs from time to time relating to, arising out of, or connected with, directly or indirectly, among others:

(a) the Newfield Arbitration;

(b) assets agreed by the parties to be transferred out of the SUSB Group (including SEP (Sabah) and the Newfield Arbitration); and

(c) any and all past and present assets, business, property, licences, infrastructure, field property, interest or other things that were once the property of a SUP Group member and is not the property of a SUP Group member at the Closing Date or were once the property of SUP and is not the property of SUP at the Closing Date.

3.5 Limitation of Liability

3.5.1 Time Limitations

SEB shall not be liable under the Warranty and Indemnity Deed and Subscription Agreement in respect of any claim unless a written notice of such claim setting out reasonable details of the matters giving rise to such claim and, if reasonably practicable to do so (on a without prejudice basis), OMV E&P’s good faith estimate of the amount of such claim, is given by OMV E&P to SEB, no later than:

(a) in the case of a title and capacity claim, within the period of 3 years commencing on the Closing Date;

(b) in the case of a tax warranty claim (relating to related party or transfer pricing matters), within the period of 7 years commencing on the Closing Date;

(c) in the case of a tax warranty claim (matters other than related party or transfer pricing), within the period of 5 years commencing on the Closing Date;

(d) in the case of a tax warranty claim in respect of any matters relating to goods, sales or services tax, within 6 years commencing on the Closing Date;

(e) in the case of a business warranty claim, within 2 years commencing on the Closing Date;

(f) in the case of a tax indemnity claim, within 7 years commencing on the Closing Date; and

(g) in the case of indemnity claim, within 3 years commencing on the Closing Date.

3.5.2 Minimum Claims

SEB shall not be liable for any claim (or a series of claims arising from substantially identical facts or circumstances) where the liability agreed or determined in respect of any such claim(s) does not exceed USD1,000,000.

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3.5.3 Aggregate Minimum Claims

SEB shall not be liable for any claim unless the aggregate amount of all such claims exceeds USD7,500,000.

3.5.4 Maximum Liability

The aggregate liability of SEB in respect of all claims shall not exceed:

(a) USD540,000,000 in respect of title and capacity claims; and

(b) USD162,000,000 in respect of business warranty claims and tax warranty claims,

provided that the aggregate liability of SEB for all claims shall not in any circumstances exceed USD540,000,000.

3.5.5 Contingent Liabilities

SEB shall not be liable under the Warranty and Indemnity Deed and Subscription Agreement in respect of any liability which is contingent unless and until such contingent liability becomes an actual liability and is due and payable.


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AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF SUSB FOR THE FYE 31 JANUARY 2018

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AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF SUSB FOR THE FYE 31 JANUARY 2018 (Cont’d)

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