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March 22, 2007

Oil & GasUK E&Ps – Time to Drill

We have a preference for explorers rather than

producers. Exploration activity is due to accelerate

during the course of the year. The level of newsflow this

will generate will inevitably lead to an increased level of

interest in the sector after a period of weak performance,

in our view. Exploration activity is particularly focused onSoco and Tullow in the first part of the year and then

Dana in the latter part. Soco, Tullow and Dana are our

preferred names in the sector.

We are initiating on Soco International with an

Overweight-V rating and price target of 1800p/share.

Our price target implies upside potential of 28%.

Following recent exploration success in Vietnam at the

end of 2006, Soco is carrying out a very active

exploration programme in Vietnam in 2007, which

should generate a significant level of newsflow over the

next 6-12 months, and could act as a material catalyst

for the shares. Soco is drilling for prospects in 2007 thatare worth around 2370p/share unrisked, in our view.

We are also resuming coverage on Cairn Energy

with an Equal-weight-V rating and a price target of

1750p. Our price target implies upside potential of 13%.

With the partial-IPO of Cairn India complete, the market

will focus on progress from the midstream negotiations

with the Indian government and ongoing development of

the Rajasthan fields. We believe that Cairn offers good

valuation support and absolute upside from current

levels. However, Cairn is less likely to outperform the

explorers in our view and we believe significant progress

on the Rajasthan development needs to be made beforewe see a re-rating in the shares.

E&P sector to outperform large caps and the wider

market. M&A looks set to increase in the industry and is

likely to support valuations, in our view. Risks to the oil

price are upwards and the E&Ps are leveraged to this.

We believe valuation is at its most attractive for the last

12 months and the sector is now discounting around

$45/bbl.

GICS Sector: Energy

Strategists' Recommended Weight 11.

MSCI Europe Weight 9.

Companies Featured

Company Rating Price Tar

Soco International Overweight-V 180Tullow Oil Overweight-V 46

Dana Petroleum Overweight-V 130

Cairn Energy Equal-weight-V 175

Burren Energy Equal-weight-V 81

What’s Changed

Company – What’s changed From

Dana – Price Target 1405p to 130

Tullow – Price Target 450p to 46

Dana – ModelWare 2007e EPS 95.05 to 81

Tullow – ModelWare 2007e EPS 27.11 to 24

Source: Morgan Stanley Research

What’s New

Company What’s n

Soco International Initiating covera

Cairn Energy Resuming covera

Burren Energy Assuming covera Source: Morgan Stanley Research

Morgan Stanley does and seeks to do business wicompanies covered in its research reports. As aresult, investors should be aware that the firm mayhave a conflict of interest that could affect theobjectivity of this report. Investors should considerthis report as only a single factor in making theirinvestment decision. Customers of Morgan Stanleyin the U.S. can receive independent, third-partyresearch on the company covered in this report, at cost to them, where such research is available.Customers can access this independent research www.morganstanley.com/equityresearch or can ca1-800-624-2063 to request a copy of this research

For analyst certification and other importandisclosures, refer to the Disclosure Section+= Analysts employed by non-U.S. affiliates are not registered pursuant to NASD/NYSE rul

Morgan Stanley & Co. InternationalLimited+

Michael J [email protected]

+44 (0)20 7425 3016

Theepan Jothilingam, [email protected]

+44 (0)20 7425 9761

Neil W Perry+44 (0)20 7425 8903

M O R G A N S T A N L E Y R E S E A R C H

E U R O P E

ndustry View

Attractive

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Oil & Gas

Top Picks in UK E&P Sector

The E&P sector has been a poor performer so far this year,

but we think that this has now thrown up some interesting

opportunities. Despite a withdrawal of liquidity from the

market, nothing has changed in terms of the fundamental

picture for the E&Ps or energy more broadly. In fact, one could

argue that the backdrop is more favourable today than it

looked at the end of last year.

Exhibit 1

E&P sector has been a poor performer this year

-9.7%

-3.7%

-17.9%

-26.3%

2.1%

-18.6%-19.5%

17.2%

-1.4%

-14.1%

-17.5%

-9.4%

-11.4%

-2.3%

-30%

-25%

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

Cairn Tullow Burren Premier Dana Venture Soco

YTD 6 months

Source: Datastream

Weak performance driven by market concerns, macroconcerns and poor newsflow

The weakness in the E&P sector so far this year has been

driven by a combination of events.

1) The recent market correction hit higher beta stocks the

hardest. It is inevitable that the E&Ps suffer under these

conditions.

2) At the beginning of the year, the oil price fell from $62/bbl to

$50/bbl, raising concerns about further declines, but it has

since recovered to around $60/bbl. The UK gas price also fell

to 18 pence per therm driven by oversupply at a time ofunseasonably warm weather.

3) Poor newsflow has tended to dominate over the last four or

five months, with exploration disappointment at Dana on two

high potential wells and the disappointing debut of Cairn India.

With the exception of Tullow there has been little to raise

interest in the sector on the more positive side.

However, we now think that both the macro risk and the

newsflow outlook are becoming more positive

We now see some of the E&Ps as fundamentally

undervalued. We firmly expect to see material performance

from these levels by the end of this year. The main drivers are:

• Increased rate of exploration

• Valuations at the lowest levels relative to core values

for 12 months

•

Oil price risk on the upside

• Increased consolidation in the sector

• UK gas price offers interesting entry point

Ultimately, the most important driver of the E&P sector is

exploration. Over the course of the next 12 months we expect

the companies we cover to drill on prospects worth (unrisked)

around 90% of their current value. The activity is biased

towards Soco and Tullow in the first half of the year. Soco

remains fairly consistently exposed during the course of the

year, and Dana picks up in the second half. This is in stark

contrast to the last six months, when only Tullow recordedmaterial success and the number of high impact wells in

aggregate was relatively low. This is a step change in activity.

UK E&Ps Order of Preference

• Soco

• Tullow

• Dana

• Cairn

• Burren

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Oil & Gas

The second most important consideration is of course

valuation. Following the market sell off and the oil price

decline from the middle of last year, we now see the E&Ps inaggregate trading closer to core value than at any time in the

last 12 months. Certainly, macro concerns have justified some

of the underperformance and market concerns cannot be

ignored. But following this period of weakness, we think that

current prices represent very attractive entry points into our

preferred stocks. Most investors who avoided the E&Ps last

year did so because they thought that the sector was

overheated or that there was more oil price risk. Now the

sector is not overheated and the oil price risk is on the upside,

in our view.

Top picks

We believe that, overall, the sub-sector should outperform

energy between now and the end of the year. Furthermore,

we think that this performance could well be front-end loaded

as we see the exploration programmes ramp up. Our top picks

are biased towards those that we think will offer the most

gearing to exploration over the next 6-12 months.

Soco International, Overweight-V, Price Target 1800p

Soco’s recent outperformance relative to the sector still leaves

the shares trading at a 13% discount to our base case NAV.

Our bull case implies some 68% upside potential from current

levels. We believe the upside potential from Soco comes from:

• Exploration exposure. In 2007, Soco is drilling for

prospects in Vietnam that could be worth

2370p/share unrisked.

• Strong operational and earnings momentum. We

also expect production volumes to ramp up from 6.7

kboe/d. in 2006 to 30.3k boe/d by 2010, an increase

of 46% CAGR. We expect earnings to rise by around

45% CAGR over the same period.

• Valuation support from increased M&A activity.

Soco’s management team have previously run two

E&P companies that were acquired by larger oilcompanies (Conquest Exploration and Superior Oil).

Given management history, we think that the sale of

the company at some point is likely to be considered.

This is the key year for Soco in Vietnam, at the end of

which it should have broadly defined the scope of its

business in that country.

Tullow Oil, Overweight-V, Price Target 460p

Valuation support for Tullow is not as compelling as it is for the

other stocks under our coverage, with the shares trading at a7% discount to our base case NAV. However, Tullow is

entering the key phase of its exploration and appraisal

process in Uganda. With the potential for moving from an

interesting domestic development to a company making

international development as well as other exploration options

elsewhere in the portfolio, we think that the risk-reward

remains highly attractive. In aggregate Tullow is drilling for

prospects that could potentially double the share price over

the next 12 months in our view. The three key areas in

Tullow’s exploration programme are:

• Uganda — we have included around 78p/share for

the exploration upside potential in Uganda in ourbase case NAV. However, we believe Uganda could

be worth 290p/share unrisked.

• Namibia — we have included around 40p/share for

the exploration upside potential in Namibia in our

base case NAV. However, we believe Namibia could

be worth around 230p/share unrisked.

• India — we have included around 15p/share for the

exploration upside potential in India in our base case

NAV. However, we believe India could be worth

90p/share unrisked.

Dana Petroleum, Overweight-V, Price Target 1300p

The weakness year to date, driven by the low UK gas price

and drilling disappointments in Kenya and Mauritania, leaves

the shares discounting very little further success from Dana’s

remaining exploration portfolio. The shares are trading at a

20% discount to our base case NAV and our bull case implies

some 79% upside potential from current levels. With implied

downside of just 13% to the core value, there is precious little

“hope value” built into the price, we believe.

• Exploration exposure: We estimate that Dana will

still drill for some 710 mboe or 6.5x the current assetbase in the next two years. It remains one of the the

most geared to the drillbit among its peers. Unrisked

this translates to about 2250p or about 2.0x the

current share price.

• Operational momentum: During the course of this

year we expect volumes to grow by 50% to

34kboe/d.

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Oil & Gas

• Deal flow: Alongside exploration Dana has

expanded its portfolio by frequent deal making -

particularly in the North Sea. We expect this processto continue during the course of this year.

• Management buying shares: The company’s

senior management has recently increased its stake

in the business by 6.4%, purchasing an additional42,202 shares.

Exhibit 2

UK E&P sector: Bear, base and bull case valuations

13%7% 11%20%7%

-18%

-54%

-13%

-26%

-80%

-60%

-40%

-20%

0%

20%

40%

60%

80%

100%

TLW CNE DNX BUR SIA

Upside to Base Downside to Core Upside to Bull Downside to Bear

1838p

677p

170p

1470p

2200p1121p

808p

895p

2377p

1596p

1043p

+83%+79%

+54%

+68%

599p

396p

1230p

+42%

1647p

1895p23%

-5%

Price Target

Source: Morgan Stanley Research estimates

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March 22, 2007

Oil & Gas

E&Ps – Time to Drill

We believe that now is the right time to be returning to the E&P

sector with a view to potentially material outperformance from

this level to the end of the year.

• Risks to oil prices are upwards over the course of the

year — and the E&Ps are leveraged to this.

• Exploration activity is due to accelerate during the

course of this year following a rather barren period

over the last 12 months with the exception of Tullow.

• Valuation is at its most attractive for the last 12

months.

• The weak UK gas price is fully discounted in share

prices and rather than being a negative at this stage

offers an opportunity to enter at a more attractive

level.

• Consolidation will continue to support and we believe

will accelerate. Timing this is virtually impossible, but

waiting for it to start is pointless.

Exploration activity ramping up

E&P sector performance is all about the E part rather than the

P part. We anticipate a raised level of activity within the sector

over the course of the next 12 months, with a particular focus

on Soco and Tullow in the first part of the year and then Dana

in the latter part.

Exhibit 3

Unrisked exploration as a percentage of share price

0%

50%

100%

150%

200%

250%

300%

TLW SIA DNX BUR CNE

2007 2008/9


The level of newsflow this can be expected to generate will

inevitably lead to an increased level of interest in the sector

after what has been a period of weak performance and

disappointing newsflow (again with the exception of Tullow).

In aggregate, we see the five companies under coverage

drilling on prospects over the next two years that could add

around 150% to their combined value on an unrisked basis.

On a risked basis, this number comes down to around 20% of

the current values of these companies, but nonetheless

remains very material.

Activity in exploration is inevitably lumpy and interest

inevitably follows activity. In Exhibit 4 we show the timing ofwells by company and the unrisked value of those wells

should they be successful over the course of the next two

years. Activity levels are clearly highest at Tullow and Soco

during the first half of 2007 with increased exposure for Dana

as the year progresses. Notably, Soco remains exposed

consistently throughout the year, whereas others are very

prone to just one or two wells that make all the difference.

• Tullow is the most exposed in the first half of the

year, with major wells expected in Q2 in Namibia and

Uganda and then in Q3 with wells in India.

• Soco also has an active start to the year and remainsrelatively consistent throughout the year with wells

primarily in Vietnam.

• Dana also has a major programme in 2007. It is

slightly more back-end loaded than it is for the

others; however, it is focused on the UK and

therefore perhaps less risky than the wildcatting that

it has been doing over the last six months.

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March 22, 2007

Oil & Gas

Exhibit 4

UK E&Ps: Risked exploration activity in 2007 and 2008 as a percentage of base case NAV

0%

2%

4%

6%

8%

10%

12%

14%

Q1 07 Q2 07 Q3 07 Q4 07 Q1 08 Q2 08 Q3 08 Q4 08

Tullow Soco Dana Burren Cairn


Valuation at its most attractive for the last 12 months

The E&P sector has been a very weak performer over the

course of the last six months. Oil prices have fallen, UK gas

prices have fallen, exploration at Dana has been unsuccessful

and the market has recently placed a higher discount on risk.

The E&Ps suffer under all these circumstances.

However, at this point, we see the sector trading closer to its

core value than at any time over the course of the last 12

months, and indeed longer.

Exhibit 5

Sell off offers an attractive entry point into UK E&Ps

75

175

275

375

475

575

675

775

875

0 1 - J a n

- 0 4

0 1 - A p r

- 0 4

0 1 - J u l

- 0 4

0 1 - O c t

- 0 4

0 1 - J a n

- 0 5

0 1 - A p r

- 0 5

0 1 - J u l

- 0 5

0 1 - O c t

- 0 5

0 1 - J a n

- 0 6

0 1 - A p r

- 0 6

0 1 - J u l

- 0 6

0 1 - O c t

- 0 6

0 1 - J a n

- 0 7

Cairn Tullow

Burren Premier

Dana Venture

Soco

Source: Datastream

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Oil & Gas

Consolidation looms

We have touched on this theme many times over the past fewyears. However, it has been accelerating over the last 18

months and we think will extend to UK E&P over the next 12

months for several reasons:

• Finding and development costs continue to rise

• Emerging market players are becoming more

aggressive

• Company oil price views are now in line with or

moving above equity market views

Industry oil price views rising

Over the last five years, the equity market has been

consistently ahead of the industry in raising oil price views.

Equity markets tend to be more heavily influenced by spot

prices and have shorter memories. The oil companies tend to

be less swayed by spot and take longer-term views with the

memories of 1998 and 1999 very much in their minds.

However, since the decline in oil prices began in the middle of

2006, equity market expectations of fears of oil prices have

changed quite dramatically. On the other hand, expectations

of long-term oil prices appear to have continued to rise for Big

Oil. It is impossible to quantify exactly what the base

expectation is for oil companies as they have stopped giving a

view on mid-cycle prices. But their actions seem to indicate

price expectations are now in the $50’s. BP now explicitly

forecasts its volume numbers on the basis of $60/bbl and we

estimate that for most of the oil companies, we would need to

use an oil price of $50 + for them to be able to fund their capex

programme and pay the dividend without borrowing. The cashflow cycle is far tighter at $50 than many would imagine.

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Oil & Gas

Soco International: Significant Exploration Programme Ahead

We are initiating coverage on Soco International with an

Overweight-V rating and price target of 1800p. Our price target

implies 28% upside potential from current levels.

The shares have recently outperformed the sector following the

full year results and the announcement that the company is

preparing to drill an intensive exploration and appraisal drilling

campaign offshore Vietnam in 2007. The recent performance

still leaves the shares trading at a 13% discount to our base

case NAV. Our bull case implies some 68% upside potential

from current levels. We believe upside potential from Soco

comes from:

1) Exploration upside. The key focus of Soco’s

exploration programme is Vietnam in 2007 and we expect

the company to drill up to 8 wells from now until the end of

the year. Soco is drilling for prospects in Vietnam that we

estimate could be worth 2370p/share unrisked – we have

only included around 340p/share of the exploration upside

potential in Vietnam in our base case NAV.

2) Strong operational and earnings momentum.

Soco offers investors exposure to exploration upside, but

also strong operational and earnings momentum over the

period 2006-2010. We forecast production volumes to

ramp up from 7 kboe/d in 2006 to 30 k boe/d by 2010, anincrease of 46% CAGR. We expect earnings to rise by

around 45% CAGR over the same period. The company

also recently upgraded its reserves to 160.6m bbls at its

full year results from 133.2m bbls in 2005, following

successful appraisal drilling in both Vietnam and Yemen.

We expect more appraisal drilling in Yemen during 2007.

3) Valuation support from increased M&A activity.

Soco has a 16.8% interest in the East Shabwa block in

Yemen, which is a high quality asset operated by Total.

However, Soco’s interests in Block 9-2 and Block 16-1 in

Vietnam would offer the most interest to potential

acquirers in our view. With continued exploration andappraisal success in 2007, Block 9-2 and Block 16-1 in

Vietnam could develop into a “world class” basin. The

international integrated oil companies are already

operating in the region and Soco’s Vietnam assets could

provide a good strategic fit to their portfolios. Block 9-2 and

16-1 are located to the north of ConocoPhillips’ operations

and to the south of Talisman.

What to look for in 2007

2007 – Drilling on Block 16-1 (Vietnam) – unrisked 2370p/sh

H2 07 — Drilling in Yemen – unrisked 74p/sh

H2 07 – Congo/Angola – 2D seismic

Soco’s management team has also previously run two E&P

companies that were acquired (Conquest Exploration and

Superior Oil). Management has recently stated that the

company is “up for sale” every day.

The company has a relatively low free float of around 54% with

the remaining shareholders made up of long-term strategicinvestors and management. The CEO and CFO own around

2% of the issued share capital of the company. We argue that

this shareholder structure could increase the likelihood of M&A,

as majority shareholder approval would be easier to reach if a

bid were to be made for the company.

Valuation and catalysts

Soco’s valuation is attractive on a relative and absolute basis,

in our opinion. The shares are trading at a 13% discount to our

base case NAV of 1596p. We believe short-term newsflow

should act as a catalyst for the shares:

1) Vietnam drilling programme, 2007Soco plans to execute an intensive drilling programme in

Vietnam until the end of the year, drilling eight wells on Block

16-1. The company is currently drilling Prospect “S”, which is

estimated at around 200m bbls of recoverable reserves. We

expect an announcement of the well results in the next 3-4

weeks. We have 47p/share in our base case NAV for Prospect

“S”, but believe the well could be worth up to 280p/share

unrisked.

2) Yemen drilling programme, 2007

Soco plans to drill development and injector wells during 2007

in the Kharir field in Yemen to increase the productivity of the

basin. Water injection and further appraisal drilling could leadto further increases in reserves in our view. In addition, the

company plans to carry out an exploration program in the later

part of the year. We have 12p/share in our base case NAV, but

believe the programme could be worth up to 74p/share.

.

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March 22, 2007

Oil & Gas

Exhibit 9

Soco International: Core Value, Base Case and Bull Case

12

53

34041 23 20 12

19

643

138

1,043

2,377

1,596

0

500

1,000

1,500

2,000

2,500

C o r e

v a l u

e

V i e t n

a m

Y e m

e n

D R C

C o n g o

A n g o l a

V i e t n

a m

Y e m

e n

C o n g o

B a

s e

C a s e

E x

p l o

r a t i o

n

D e v e l o

p m e n t

B

u l l C

a s e

p e n c e / s h

"Base Exploration upside""Base Development

Upside"

Current shareprice 1411p

Increasedsuccess


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March 22, 2007

Oil & Gas

Soco International: Investment Positives

1) Material potential for exploration success in 2007

The key focus is Vietnam with an 8 well exploration program

planned. In addition, the company plans exploratory drilling

towards the end of the year in Yemen following an appraisal

and development drilling campaign during the year. We

estimate on an unrisked basis, exploration contributes about

430p to the base NAV of 1596p. On an unrisked basis, the

exploration portfolio could add up to 3000p of value or double

the current share price.

2) Further reserve and appraisal upside

Soco announced a reserve upgrade from 133.2m bbls to

160.6m bbls at the full year results following recent drillingsuccesses in Vietnam and Yemen. We expect further appraisal

upside potential in 2007 from Yemen (around 25m boe) and in

2008 from Vietnam (around 48m boe) and Congo (26m boe)

and reflected this in our base case. We have included 2P

reserves of 144m boe in our core NAV, applying a 50% risk

factor to the company’s 11.9m 2P reserves in Congo, as the

company plans an exploration and appraisal program in 2008

before developing these reserves. We have also included only

40% of Soco’s 2P reserves in Thailand of 18.4m boe, as the

company has recently signed an agreement that would reduce

its interest in the Bualaung field from 100% to 40%.

3) Operational and earnings momentumWe expect production to to ramp up significantly from 7 kboe/d

in 2006 to around 30 kboe/d in 2010, an increase of 46%. This

growth is underpinned by the development of two major

projects in Vietnam, CNV and TGT. We argue that this growth

alongside a smaller development planned in Thailand

(Buluang) should underpin strong growth in cash flow

generation. Our forecast growth in volumes drives earnings

growth of around 45% CAGR between 2006-2010.

4) Undemanding valuation versus peers

The shares have recently outperformed the sector following the

full year results and the announcement that the company is

preparing to drill the first well of an intensive exploration andappraisal drilling campaign offshore Vietnam in 2007.

However, the recent performance still leaves the shares

trading at a 13% discount to our base case NAV. Our bull case

implies some 68% upside potential from current levels. This

compares with Tullow at 66% and Dana at 79%.

5) Support from M&A activity

We expect the pace of M&A to intensify in the industry over the

next few years. The number of assets available of any real

quality is shrinking and the western oil companies are finding it

harder and harder to access resources. Consolidation in the

industry will provide Soco with valuation support. With

continued exploration and appraisal success in 2007, Soco’s

Vietnamese interests could develop into a “world-class” basin

and we argue that these assets could be of particular interest to

potential acquirers. Soco is predominantly an explorer, not a

developer, and realising value from Vietnam would allow

management to focus on developing its exploration activities in

West Africa, which we expect will be the next focus for Soco

following the exploration programme planned in Vietnam in

2007.

4) Harsh licensing terms in Vietnam is market perception

A widely perceived negative in the market is that the contract

terms in Vietnam are harsh when compared with other

countries. However, following detailed discussions with the

company, while the petroleum contracts signed with

Vietnamese government on Block 9-2 and 16-1 have

similarities to production sharing contracts, there is one key

difference. The profit oil is split between PetroVietnam

(representing the Vietnamese government) and foreign

contractors in line with their interests in the petroleum contract.

There is no additional government take from profit oil, which is

common under most PSCs. This adds material value to the

TGT and CNV field asset values, in our view.

Exhibit 10

Vietnam Licensing Terms

Block 16-1 Block 9-2

Working Interests:

Petro-Vietnam (PV) (%) 41.0 50.0

SOCO VN (%) 28.5 25.0

OPECO (%) 2.0 0.0

PTTEP (%) 28.5 25.0

Summary PSA Terms

Cost Oil (%) 35.0 35 (50 if <20k boe/d)

Profit Oil (%) 65.0 65.0

Profit Oil split

PV (Government) (%) 41.0 50.0Foreign Parties (%) 59.0 50.0

For both Blocks:

Income tax (%) 50.0

Royalty Sliding Scale averaging 8%

Carried costs Recovered out of government cost oilSource: Company data

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Oil & Gas

Soco International: Investment Negatives

1) Less diversified – around 75% of value in Vietnam

Soco has interests in assets in Yemen, Thailand, Congo

(Republic and DRC) and Angola. However, the majority of the

company’s value and exploration programme, particularly in

2007, is focused in Vietnam. Soco’s Vietnamese interests

represent 79% of our core NAV value and 76% of our base

case NAV. Soco’s Vietnamese assets are held by its 80%

owned subsidiary Soco Vietnam, which has a 25% interest in

Block 9-2 (Ca Ngu Vang) and a 28.5% in Block 16-1 (Te Giac

Trang). Soco also owns a further direct 2% interest in Block

16-1 following its recent acquisition of OPECO for $22m in

June 2006.

Soco’s other core area is Yemen where it has a 16.8% stake in

the East Shabwa Block (operated by Total). This represents

around 14% of our core NAV and 11% of our base case NAV.

We believe that there is further exploration and appraisal

upside from Yemen in 2007.

The portfolio, outside of Vietnam and Yemen, continues to be

developed. The company expects the Bualuang field in

Thailand to be onstream in 2008 - we forecast net production of

around 3.6kb/d rising to around 4.0k b/d by 2009. In addition,

the company is developing its interests in Africa with seismic

testing at the Nganzi field (DRC) planned for 2007 and a drilling

program planned in the Marine XI block in Congo in 2008.

2) Low free float

Soco has a relatively low free float of 54% with the remaining

shares held by long-term strategic investors that have

representatives on the Soco Board. The largest shareholder is

Pontoil Intertrade Ltd, which owns around 20% of the issued

share capital of the company and has been a shareholder

since 1999. The next largest private shareholder is the family

trust of the company’s former chairman, Patrick Maugein, who

died last year, which has around an 8% stake in the company.

We believe the risk of the family trust selling its holding in the

near future is low given that one of the key advisers to the trust

is Soco’s new chairman, Mr Rui de Sousa. Management also

owns around 3% of the business — Ed Story, CEO and

co-founder of Soco, owns around 1.6m shares or 2.2% of the

issued share capital, and Roger Cagle, deputy CEO and CFO

owns 0.7m shares, or 1.0% of the issued share capital.

3) Exploration licences running out in Vietnam

We understand that any field areas not secured in an appraisal

area by December 2007 will have to be relinquished. Soco has

identified a number of exploration prospects that it plans to drill

before the end of the year. The company’s aim is to drill as

many prospects as possible and maximise the potential upside

from the drilling program. The company currently has only one

drilling rig operating at present, which is only available into thesecond quarter of 2007. However, 2 further rigs have been

contracted - one is expected to be available at the end of Q1

and the other in Q2. The company plans to drill 8 exploration

wells on Block 16-1 and 3-5 development wells on Block 9-2

during 2007.

Exhibit 11

Two major developments planned in Vietnam

Vietnam—Two Major Developments in Hand

Source: Company presentation

8/15/2019 SIA MS 22-Mar-07


13


March 22, 2007

Oil & Gas

Soco — Valuation Scenarios

Exhibit 12

Summary of Base Net Asset Valuation, 2007

NPV (p/share)

Thailand84

Vietnam 824

Yemen 145

Congo 27

Commercial + Contingent 1,080

Petrochina cash payments PV 24

(Net debt)/cash end of 2006 (24)

Overheads (37)

Core value 1,043

Total Risked Exploration 429

Total Risked Development 124

Risked Upside (E, D, A) 553

BASE NAV (Core + Risked upside) 1,596Source: Morgan Stanley Research estimates

Base case valuation — 1,596p

We estimate a base NAV or fair valuation for Soco of 1,596p

per share, assuming a long-term Brent oil price of US$53/bbl.

We provide a full breakdown of the NAV later in this report.

Our price target of 1,800p for Soco is derived by applying

around a 15% premium to our base case NAV of 1,530p. Webelieve this is justified given the material exploration-driven

newsflow that we anticipate in the coming months.

Bull case (2,377p)… and blue sky (3,516p)

Our bull case scenario implies a value of 2,377p or potential

upside of 68% from the current share price. It consists of our

core valuation and then the assumption that the company is

two and half times more successful in the exploration and

development of resources in our base case valuation (up to a

maximum of 100% certainty of success).

We have also estimated a blue sky valuation — this scenario

is a combination of the core value plus the complete de-riskingof potential exploration and development projects

incorporated in our base net asset valuation. We derive a

value of 3,516p on this basis or some 223% potential upside

to current levels.

Core valuation — 1,043p/sh

We estimate that the company’s producing assets have

reserves remaining of some 115 mboe (on an entitlement

basis) or 144m boe (on a working interest basis), which gives

a value of 1,043p. The scenario assumes zero potential

upside from both exploration and development projects in

Soco’s portfolio. We also add the present value of future

deferred payments relating to the sale of Soco’s Mongolian

assets to Petrochina in 2005 (24p/share) and deduct Soco’s

net debt following a $250m convertible bond issue in May

2006 (24p/share) and present value of group overheads

(37p/share).

Exhibit 13

SIA NAV at Different Oil Price Scenarios

Bull case

Bull case

Bear caseBear case

Bear case

Base case

Base case

Base case

Bull case

851p

1,043p 1,147p

1,596p

1,293p

1,760p

1,914p

2,377p

2,627p

0

500

1,000

1,500

2,000

2,500

3,000

$40 MS ass. $53 $60

0

500

1,000

1,500

2,000

2,500

3,000

Currentshareprice 1411p


SIA NAV at different oil price scenarios

• At US$53/bbl long term, the shares are trading at a

26% premium to our core valuation.

• At a long-term oil price of US$60, on our bull case

scenario we see upside potential of 68% (to 2,377p).

• However, if the shares were to assume US$40/bbl

and also return to their core valuation (that is, without

any risked upside), Soco could see a fall of 39% from

current levels, on our estimates.

• We estimate around a 1.5% move in the base NAV

for every US$1/bbl movement in the long-term oil

price.

8/15/2019 SIA MS 22-Mar-07


14


March 22, 2007

Oil & Gas

Tullow — Valuation Scenarios

Exhibit 14


Summary Base NAV NPV

(p/share)

UK 68

Congo 22

Cote d'Ivoire 20

Equatorial Guinea 49

Gabon 28

Pakistan 6

Nambia (Kudu Phase 1) 17

Uganda 23

Mauritania 19

Commercial + Contingent 253

PV Tariff Income 11

PV Hedge positions (3)

(Net debt)/cash (63)

Overheads (28)

Core value 170




BASE NAV (Core + Risked upside) 396

Source: Company data, Morgan Stanley Research

Base case valuation — 396p

We estimate a base NAV or fair valuation for Tullow of 396p

per share, assuming long-term prices of US$53/bbl Brent and

38p/th for UK gas prices. We have updated our NAV following

the full year results and increased our risked exploration in

Uganda by around 25p/share. Management indicated a range

for recoverable resources in Uganda of 100-250m barrels from

the existing discoveries to date, which does not include the

deeper primary target at Kingfisher (around 300m boe) that

Tullow plans to drill towards the end of the year. Management

also provided further guidance on the gross upside for the

Ngassa prospect in Uganda (900m boe), Mahogany in Ghana(600m boe) and Matamata (1000m boe). These prospect sizes

are significantly larger than previously indicated and underlines

Tullow’s exploration upside potential. Our NAV also

incorporates the change to our 2007 UK gas price assumption.

Our price target for Tullow is derived by applying around 15%

premium to our base case NAV of 396p. We believe this is

justified given the material newsflow that we anticipate in the

coming months.

Bull case (677p)… and blue sky (1,307p)

Our bull case scenario implies a value of 677p or potential





maximum of 100% certainty of success). Our bull case

valuation derives a value of 1,307p on this basis or some 254%

potential upside to current levels.

The bear case or a core valuation — 170p/sh

We estimate that the company has commercial and contingent

reserves remaining of some 357 mboe (on an entitlementbasis), which gives a value of 170p. The scenario assumes

zero potential upside from both exploration and development

projects in Tullow’s portfolio.

Exhibit 15

TLW NAV at Different Oil Price Scenarios

Bear case Bear case

Base case

Base caseBase case

Bull caseBull case

Bear case

Bull case

139p 170p 187p

396p345p

423p

605p

677p

715p

0

100

200

300

400

500

600

700

800

900

$40 MS ass. $53 $60

0

100

200

300

400

500

600

700

800

900



TLW NAV at different oil price scenarios

• At US$53/bbl long term, the shares are trading at a

7% discount to our base case.


scenario we see upside potential of 94% (to 715p).



any risked upside), Tullow could see a fall of 63%

from current levels, on our estimates.

• We estimate around a 1.0% move in the base NAV for

every US$1/bbl movement in the long-term oil price.

8/15/2019 SIA MS 22-Mar-07


15


March 22, 2007

Oil & Gas

Dana — Valuation Scenarios

Exhibit 16


NPV

(p/share)

UK 450

Netherlands 7

Russia 31

Commercial 488

UK 310

Netherlands 10

Commercial + Contingent 809

MV of 17.2% interest in Faroes Petroleum 16

(Net debt)/cash end 2006 128

Overheads (58)

Core value 895




Base NAV (Core + Risked upside) 1,230Source: Morgan Stanley Research estimates

Base case valuation —1,230p

We estimate a base NAV or fair valuation for Dana of 1,230pper share, assuming long-term prices of US$53/bbl Brent and

38p/th for UK gas prices. This incorporates the change to our

2007 UK gas price assumption, which reduces our base case

NAV by around 4%. This leaves the shares currently trading at

a 20% discount to our fair value estimate. We provide a full

breakdown of the NAV later in this report. Our price target for

Dana is derived by applying around a 5% premium to our base

case NAV of 1,230p. We believe this is justified given the risk

of higher oil prices, the risk of increased consolidation in the

sector and material newsflow on deals and exploration from

Dana in the coming months.

Bull case (1,838p)… and blue sky (3,417p)Our bull case scenario implies a value of 1,838p or potential





maximum of 100% certainty of success).

We have also estimated a blue sky valuation — this scenario is

a combination of the core value plus the complete de-risking of

potential exploration and development projects incorporated in

our base net asset valuation. We derive a value of 3,417p on

this basis or some 230% potential upside to current levels.

The bear case or a core valuation — 885p/sh

We estimate that the company’s producing assets have

reserves remaining of some 129 mboe (on an entitlement

basis), which gives a value of 895p.

Exhibit 17

DNX NAV at Different Oil Price Scenarios

Bull caseBull case

Bear caseBear caseBear case

Base caseBase case

Base case

Bull case

962895770

1,230

1,314

1,074

1,958

1,838

1,615

0

500

1,000

1,500

2,000

2,500

$40 MS ass. $53 $600

500

1,000

1,500

2,000

2,500



DNX NAV at different oil price scenarios


scenario we see upside potential of 90% (to 1,958p).



any risked upside), Dana could see a fall of 25% from

current levels, on our estimates.

• We estimate around a 0.9% move in the base NAV for

every US$1/bbl movement in the long-term oil price.

8/15/2019 SIA MS 22-Mar-07


16


March 22, 2007

Oil & Gas

Cairn - Valuation Scenarios

Exhibit 18


NPV (p/share)

Capricorn 25

Cairn India (69%) 1,195

IPO proceeds to be distributed to shareholders 300

Remaining IPO Proceeds 127

Cairn Energy - Core value 1,647

Capricorn - Total Risked Upside 18

Cairn India - Total Risked Upside (69%) 229


BASE NAV (Core + Risked upside) 1,895Source: Morgan Stanley Research estimates

Base case valuation — 1,895p

We estimate a base NAV or fair valuation for Cairn of 1,895p

per share, assuming long-term prices of US$53/bbl Brent. This

leaves the shares currently trading at a 23% discount to our fair

value estimate. We provide a full breakdown of the NAV later

in this report. We have set our 12 month price target at around

a 10% discount to our base case NAV at 1,895p. We feel this is

justified given the risks around development of the Rajasthan

fields, the continued discount of Cairn India to what we see as

fair value and the lack of material exploration newsflow in the

short-term.

Bull case valuation — 2,200p

Our bull case scenario implies a value of 2,200p or potential





maximum of 100% certainty of success). These include:

• Enhanced oil recovery (EOR): Cairn has stated that

there is a strong likelihood that it will be able to use

EOR on the Northern fields and increase 2P reserves.

• Raising recovery factors to 35% on Mangala,Aishwariya, and Bhagyam: Individual field RFs

indicated by Cairn imply an aggregate RF of 33% for

the three largest Northern fields with an estimate for

Mangala at 36%. While not all fields or reservoirs are

alike, we believe that there is the possibility to

increase these recovery factors.

• Value of additional discoveries: Cairn has less

exposure to exploration than its peers. However,

exploration drilling planned for the Ravva (India) and

Sangu (Bangladesh). Cairn also has a 10% interest in

the UD-1 well in the KG basin.

The core valuation (1,647p/sh)… bear case (1,470p/sh)

We estimate Cairn’s core value at 1,647p, which is about 7%

above the current share price. Cairn’s 69% stake in Cairn India

represents around 73% of the core value, with the remaining

value split between the net IPO proceeds (26%) and Capricorn

(1.5%), which principally includes Bangladesh. We estimate

Cairn’s bear case at 1,470p/sh, which is around a 5% discount

to the current share price. Our bear case assumes:

• The discount on the crude sales agreement is 15%,

higher than Cairn management’s expectations of3-10% (and our base case assumption of 10%)

• Cairn pays its share (70%) of the Mangala/Viramgam

340km crude pipeline and is not eligble for cost

recovery, impacting our Cairn India NAV by $240m

• Cairn India has to pay CESS production tax (at Rs

900/MT), impacting our Cairn India NAV by $260m.

Exhibit 19

CNE NAV at Different Oil Price Scenarios

Core case Core caseCore case

Base case

Base case

Base caseBull case

Bull case

Bull case

1,404p 1,647p 1,772p

1,895p

1,602p

2,046p

1,852p

2,200p

2,380p

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

2,200

2,400

2,600

$40 MS ass. $53 $60

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

2,200

2,400

2,600



Cairn NAVs at different oil price scenarios

• Cairn offers the least spread in terms of our valuation

scenarios versus the current share price with our bear

case valuation at some 1,470p (-5%) while the bull

case implies some 42% potential upside at 2,200p.

This is due partly to the high contribution from the

core value and also the result of a limited exploration

program. We estimate a 1.3% move in the base NAV

for every US$1/bbl movement in long-term oil prices.

8/15/2019 SIA MS 22-Mar-07


8/15/2019 SIA MS 22-Mar-07


18


March 22, 2007

Oil & Gas

Exhibit 22

SOCO International - NAV Summary

Co Ent Rem NPV NPV NPV NPVInterest Reserves

(%) (2P, mboe) ($/ ent bbl) ($m) (£m) (p/share)

Commercial Reserves Country

East Shabwa Yemen 16.8% 8.9 22.6 201 106 145

Buluang Thailand 40.0% 5.2 22.5 116 61 84

Ca Ngu Vang Vietnam 20.0% 32.6 10.7 349 184 252

Te Giac Trang Vietnam 23.8% 65.3 12.1 791 416 572

Commercial Reserves 111.9 1,457 767 1,054

Marine XI Congo 50% 37.5% 2.7 13.5 37 19 27

Contingent Reserves 2.7 37 19 27

Petrochina cash payments PV 33 18 24

(Net debt)/cash end of 2006 (32) (18) (24)

Overheads (50) (27) (37)

Core value 115 1,443 759 1,043

Risked Upside Country Risk Co Ent Rem NPV Risked

Factor Interest Reserves NPV NPV NPV

% (%) (2P, mboe) ($/ ent bbl) ($m) (£m) (p/share)

Exploration (E)

Marine XI Congo 13% 38% 1.5 10.8 16 9 11.7

Marine XI Congo 13% 38% 1.5 10.8 16 9 11.7

Nganzi DRC 13% 85% 2.7 10.8 29 15 20.7

Nganzi DRC 13% 85% 2.7 10.8 29 15 20.7

East Shabwa Yemen 17% 17% 1 20.4 17 9 12.4

Cabinda North Angola 10% 17% 1 10.8 15 8 11.1

Block 16-1- Q Vietnam 17% 24% 3 10.9 32 17 23.5

Block 16-1- S Vietnam 17% 24% 6 10.9 65 34 46.9Block 16-1- T Vietnam 17% 24% 6 10.9 65 34 46.9

Block 16-1- L Vietnam 17% 24% 3 10.9 32 17 23.5

Block 16-1- M Vietnam 17% 24% 6 10.9 65 34 46.9

Block 16-1- N Vietnam 17% 24% 6 10.9 65 34 46.9

Block 16-1- O Vietnam 17% 24% 3 10.9 32 17 23.5

Block 16-1- E Vietnam 10% 24% 12 9.1 114 60 82.1

Total Risked Exploration 56 592 312 429

Development & Appraisal (D&A)

TGT upside - Waterflood Vietnam 25% 24% 2.2 10.9 24 13 17.6

TGT upside - Appraisal Vietnam 17% 24% 4.5 10.9 49 26 35.2

Marine XI Congo 20% 37.5% 2.4 10.8 26 14 18.7

Kharir - Water flood Yemen 20% 16.8% 0.8 20.4 15 8 11.1

Total Risked Development 13 172 91 124

Risked Upside (E, D & A) 68 764 402 553

BASE NAV (Core + Risked upside) 183 2,208 1,161 1,596Source: Morgan Stanley Research estimates

8/15/2019 SIA MS 22-Mar-07


19


March 22, 2007

Oil & Gas

Exhibit 23

Tullow Oil - NAV Summary: Core Value

Risk Co Rem NPV NPV NPV NPVFactor Interest Reserves

(%) (%) (2P, mboe) ($/ bbl) ($m) (£m) (p/share)


CMS area & Thames/Hewett UK Var 64 11.6 745 392 55

M'Boundi Congo 11.0% 16 18.7 305 161 22

Espoir Cote d'Ivoire 21.33% 17 16.0 278 146 20

Ceiba Equatorial Guinea 14.25% 12 16.6 206 108 15

Okume Equatorial Guinea 14.25% 22 21.0 458 241 34

Tchatamba Gabon 25.00% 8 19.4 162 85 12

Etame Gabon 7.50% 2 22.5 44 23 3

Niungo Gabon 40.00% 8 12.4 95 50 7

Turnix Gabon 27.50% 1 19.2 22 12 2

Echira Gabon 40.00% 1 15.3 12 7 1

Limande Gabon 20.00% 1 19.3 17 9 1

Oba, Obangue &Tsengui Gabon Var 2 15.3 28 15 2Chinguetti Mauritania 19.00% 7 20.0 142 75 10

Sara & Suri & Chachar Pakistan 38.18% 11 7.5 83 43 6

Commercial Reserves 173 15.0 2,595 1,366 191

Contingent Reserves Country

Chinguetti phase 3 & 4 Mauritania 25% 19% 2 20.0 35 18 3

Tiof Phase I Mauritania 75% 22% 8 10.0 81 43 6

Kudu Phase 1 Namibia 100% 90% 117 2.0 234 123 17

Uganda (Nzizi and Mputa) Uganda 75% 100% 41 7.5 311 164 23

UK (inc 2006 discs.) UK 16 11.6 183 96 13

Contingent Reserves 184 4.6 844 444 62

PV Tariff Income 158 80 11

PV Hedge positions (41) (21) (3)(Net debt)/cash (884) (449) (63)

Overheads (394) (200) (28)

Core value 357 2,277 1,220 170Source: Morgan Stanley Research estimates

8/15/2019 SIA MS 22-Mar-07


20


March 22, 2007

Oil & Gas

Exhibit 24

Tullow Oil- NAV Summary - Risked Exploration

Risked Upside Country Risk Co Rem NPV RiskedFactor Interest Reserves NPV NPV NPV


Exploration (E)

UK 20 231 122 17

Bangladesh 5 50 26 4

Cameroon 0 2 1 0

Cote d'Ivoire 8 118 62 9

Gabon 4 55 29 4

Mauritania 29 103 54 8

Namibia 228 571 300 42

India 17 207 109 15

Pakistan 6 48 25 3

Senegal 5 34 18 3

Uganda 143 1,075 566 79

Ghana 4 32 17 2Suriname 8 28 15 2

Falkland Islands 2 5 2 0

Guyane 39 233 122 17

Tanzania 1 5 3 0

Total Risked Exploration 520 2,797 1,472 205


Schooner & Ketch & NW upside UK 60% 100% 12 11.6 139 73 10

Bangora -1/Lalmai Bangledesh 100% 30% 7 9.8 67 35 5

Tevet Mauritania 50% 19% 1 3.5 3 2 0

Labeidna Mauritania 20% 22% 0 5.0 2 1 0

Banda Mauritania 20% 24% 4 5.0 20 10 1

Pelican Mauritania 20% 16% 10 3.5 36 19 3

Faucon Mauritania 5% 16% 1 3.5 2 1 0


Risked Upside (E, D, A) 555 3,066 1,614 225

BASE NAV (Core + Risked upside) 912 5,343 2,834 396Source: Morgan Stanley Research estimates

8/15/2019 SIA MS 22-Mar-07


21


March 22, 2007

Oil & Gas

Exhibit 25

Dana Petroleum - NAV Summary: Core Value

Risk Co Rem NPV NPV NPV NPVFactor Interest Reserves



Anglia UK 25.00% 1.8 6.9 12 7 8

Banff UK 12.40% 2.2 4.3 10 5 6

Caledonia UK 25.78% 0.1 4.9 0 0 0

Claymore UK 7.52% 8.8 4.0 35 19 22

GKA UK 50.00% 32.2 11.3 364 198 230

Hudson UK 47.50% 10.1 16.7 169 92 107

Johnston UK 49.89% 5.9 11.2 66 36 42

Otter UK 19.00% 2.8 18.2 50 27 32

Victor UK 10.00% 1.8 3.5 6 3 4

F-16-E Netherlands 1.18% 0.7 14.9 11 6 7

South Vat Yoganskoye Russia 80.00% 11.7 4.3 50 27 31

Commercial Reserves 78 9.9 773 420 488


Under development

Cavendish UK 50.0% 10 12.5 123 67 78

Enoch UK 8.8% 1 17.6 21 12 13

Awaiting development

Babbage UK 40.0% 10 7.1 69 37 43

Barbara UK 66.1% 17 9.9 168 91 106

Christian UK 22.9% 2 9.8 15 8 10

Gunn UK 57.8% 2 7.9 14 8 9

Melville UK 26.6% 1 8.1 11 6 7

Monkwell UK 100.0% 3 14.9 51 28 32

29-2a UK 13.5% 2 8.4 20 11 13

A15-3 Netherlands 9.0% 1 4.8 5 3 3

B17a-6 Netherlands 8.8% 2 6.2 12 6 7Contingent Reserves 51 10.0 509 276 321

MV of 17.2% interest in Faroes Petroleum 25 14 16

(Net debt)/cash end 2006 198 110 128

Overheads (90) (50) (58)

Core value 129 1,415 770 895Source: Morgan Stanley Research estimates

8/15/2019 SIA MS 22-Mar-07


22


March 22, 2007

Oil & Gas

Exhibit 26

Dana Petroleum - NAV Summary - Risked Exploration

Risked Upside Country Risk Co Rem NPV RiskedFactor Interest Reserves NPV NPV NPV


Exploration (E)

Norway Norway Var. Var. 9.8 9.8 69 36 42

Netherlands Netherlands Var. Var. 0 0.3 2 1 1

Mauritania Mauritania Var. Var. 1 3.2 4 2 2

Egypt Egypt Var. Var. 1 4.8 4 2 3

UK UK Var. Var. 19 10.2 195 103 120

Total Risked Exploration potential in 2007 31 8.8 274 144 168

Egypt Egypt Var. Var. 2 4.8 7 4 5

UK UK Var. Var. 10 10.2 106 56 65

Kenya Kenya Var. Var. 0 0.0 0 0 0Australia Australia Var. Var. 2 7.0 16 8 10

Senegal Senegal Var. Var. 15 3.2 48 25 29

Mauritania Mauritania Var. Var. 6 3.2 20 10 12

Morocco Morocco Var. Var. 3 4.8 17 9 10

Total Risked Exploration potential in 2008 39 5.5 214 112 131

Total Risked Exploration 70 7.0 487 257 298


UK var. discoveries 4 9.2 39 21 24

Netherlands 0 5.6 2 1 1

Pelican Mauritania 5 3.2 16 8 10

Faucon Mauritania 1 3.2 3 1 2


Risked Upside (E, D, A) 80 547 288 335

Base NAV (Core + Risked upside) 210 1,962 1,058 1,230Source: Morgan Stanley Research estimates

8/15/2019 SIA MS 22-Mar-07


23


March 22, 2007

Oil & Gas

Exhibit 27

Cairn Energy NAV Summary

Cairn Energy Group NPV NPV NPVInterest

(%) ($m) (£m) (p/share)

Core Value

Capricorn 100% 77 41 25

Cairn India 69% 3,639 1,915 1,195

IPO proceeds to be distributed to shareholders 914 481 300

Remaining IPO Proceeds 386 203 127

Cairn Energy - Core value 5,016 2,640 1,647

Risked Value

Capricorn 100% 56 30 18

Cairn India 69% 699 368 229

Cairn Energy - Risked upside (E, D & A) 755 397 248

Cairn Energy NAV (Core + Risked upside) 5,771 3,037 1,895Source: Company data, Morgan Stanley Research

Exhibit 28

Capricorn NAV Summary

Capricorn Co WI Rem Ent Rem NPV NPV NPV NPV

Interest Reserves Reserves

(%) (2P, mboe) (2P, mboe) ($/ ent bbl) ($m) (£m) (p/share)

Commercial Reserves Area/Country

Sangu Bangladesh 75% 18 10 11.7 117 62 38

Commercial Reserves 18 10 11.7 117 62 38

(Net debt)/cash end 2006 (40) (21) (13)

Overheads 0 0 0

Capricorn - Core value 18 10 77 41 25

Risked Upside Risk Co WI Rem Ent Rem NPV Risked

Factor Interest Reserves Reserves NPV NPV NPV

% (%) (2P, mboe) (2P, mboe) ($/ ent bbl) ($m) (£m) (p/share)

Exploration (E)

Hatia Bangladesh 13% 75% 2 1.2 10.5 12 6 4

Magnama Bangladesh 13% 75% 6 3 10.5 33 17 11

Bangladesh 9 4 45 24 15


Sangu south Bangladesh 13% 75% 2 0.8 10.5 8 4 3Sangu - 10 Bangladesh 13% 75% 1 0 10.5 3 2 1

Total Risked Development 2 1 11 6 4

Risked Upside (E, D & A) 11 5 56 30 18

Capricorn NAV (Core + Risked upside) 28 15 133 70 44Source: Morgan Stanley Research estimates

8/15/2019 SIA MS 22-Mar-07


24


March 22, 2007

Oil & Gas

Exhibit 29

Cairn India NAV Summary

Cairn India Co WI Rem Ent Rem NPV NPV NPV NPVInterest Reserves Reserves

(%) (2P, mboe) (2P, mboe) ($/ ent bbl) ($m) (Rs m) (Rs /share)

Field Area/Country

Ravva East India 22.5% 24 11 12.3 132 5,873 3

Lakshimi West India 40% 2 2 12.6 20 912 1

Gauri West India 40% 4 4 10.4 45 2,026 1

Mangala, Aishwariya & Bhagyam Rajasthan, India 70% 437 295 14.6 4,299 191,754 108

Saraswati and Raageshwari Rajasthan, India 70% 31 20 12.6 252 11,237 6

Reserves 498 332 14.3 4,749 211,803 119

(Net debt)/cash end 2006 525 23,415 13

Overheads 0 0 0

Cairn India - Core value 498 332 5,274 235,218 132

Risked Upside Risk Co WI Rem Ent Rem NPV Risked

Factor Interest Reserves Reserves NPV NPV NPV

% (%) (2P, mboe) (2P, mboe) ($/ ent bbl) ($m) (Rs m)(Rs /share)

Exploration (E)

Other exploration (Ravva, N-I) India 20% 70% 21 14 11.1 154 6,847 4

KG basin India 13% 10% 31 15 7.0 107 4,781 3

Total Risked Exploration 52 29 261 11,627 7


M, Aishwariya & Bhagyam (EOR) Rajasthan, India 50% Var. 69 45 13.1 585 26,108 15

V&V, Kameshwari, Guda & N-R Rajasthan, India 25% Var. 13 9 11.1 95 4,253 2

Mangala, Aishwariya & Bhagyam (RF) Rajasthan, India 25% Var. 8 5 13.1 71 3,169 2

Total Risked Development 90 59 752 33,531 19

Risked Upside (E, D & A) 142 88 1,013 45,158 25

Cairn India NAV (Core + Risked upside) 641 420 6,286 280,376 158Source: Morgan Stanley Research estimates

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25


March 22, 2007

Oil & Gas

Exhibit 30

Burren Energy - Summary NAV

Co Ent Rem NPV NPV NPV NPVInterest Reserves

(%) (2P, mboe) ($/ ent bbl) ($m) (£m) (p/share)


Burun Turkmenistan 100% 47.7 13.0 620 326 235

M'Boundi Congo 37.0% 52.5 19.5 1,026 540 389

Commercial Reserves 100.2 16.4 1,646 866 624


Kouakouala Congo 25% 0.5 17.6 9 5 4

Contingent Reserves 0.5 17.6 9 5 4

Investment in HOEC 31.1 17 12

(Net debt)/cash 47.0 25 18

Overheads (150.0) (81) (58)

Core value 101 1,583 832 599

Risked Upside Country Risk Co Ent Rem NPV Risked

Factor Interest Reserves NPV NPV NPV

% (%) (2P, mboe) ($/ ent bbl) ($m) (£m) (p/share)

Exploration (E)

N M'Boundi Congo 17% 35% 1.2 16.2 19 10 7.2

Loufika NW Congo 17% 35% 1.2 16.2 19 10 7.2

Tchivouba Congo 13% 35% 0.9 16.2 14 7 5.4

Zingila Congo 13% 35% 0.9 16.2 14 7 5.4

Nanga Congo 13% 37% 0.9 16.2 15 8 5.7

Dongou Congo 13% 37% 0.9 16.2 15 8 5.7

East Kanayis - Cretaceous prospects Egypt 17% 100% 1.3 14.0 18 9 6.6

East Kanayis - Jurassic prospects Egypt 17% 100% 2.8 14.0 39 20 14.6

North Hughada Egypt 10% 100% 2.3 14.0 32 17 11.9North Lagia Egypt 10% 90% 0.8 14.0 11 6 4.3

Yemen Block 6 Yemen 10% 92% 5.8 8.0 46 24 17.4

Oman Block 50 Oman 5% 40% 7 7.2 50 27 19.1

Total Risked Exploration 26 292 153 110


Nebit Dag Turkmenistan 17% 100% 1.3 10.8 13 7 5.1

Burun Gas Export Turkmenistan 17% 100% 5.5 3.6 20 10 7.5

Burun Gas Export assoc condensate Turkmenistan 17% 100% 1.8 10.8 20 10 7.5

Burun (RF to 30% from 22%) Turkmenistan 25% 621% 9.3 10.8 100 53 38.0

Kouilou - 6 shallow wells Congo 17% 35.0% 2.7 16.2 43 23 16.5

M'Boundi (RF to 30% from 23%) Congo 25% 31.5% 3.9 16.2 63 33 23.7


Risked Upside (E, D & A) 50 551 290 209

BASE NAV (Core + Risked upside) 151 2,134 1,122 808Source: Morgan Stanley Research estimates

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26


March 22, 2007

Oil & Gas

Soco International Summary Financials 2004-2010e

Exhibit 31

Soco International Summary Financials 2004-2010

MS P&L (adj excep & specs) $'000 2004 2005 2006 2007E 2008E 2009E 2010E

Brent price $/bbl 38.19 53.72 65.18 58.00 48.00 53.00 53.00

$/£average 1.83 1.83 1.85 1.90 1.90 1.90 1.90

Total Ent production (kboe/d) 2.8 1.7 3.2 3.5 6.6 19.4 21.3

Total WI production (kboe/d) 0.0 5.1 6.7 7.5 16.8 29.0 30.3

Revenue 29,386 57,160 76,476 77,712 148,729 357,741 385,827

Cost of Sales (11,347) (19,588) (21,162) (23,859) (55,118) (124,494) (134,395)

Gross Profit 18,039 37,572 55,314 53,853 93,611 233,247 251,432

Adminstrative expenses (4,039) (5,295) (8,772) (8,860) (8,948) (9,038) (9,128)

Exploration cost written off (1,946) (1,013) (231) 0 0 0 0

Operating profit 12,054 31,264 46,311 44,994 84,663 224,209 242,304

Investment revenue 659 2,042 9,292 12,760 3,108 1,196 1,405

Other Gains and losses 113 853 690 0 0 0 0Finance costs (95) (497) (8,136) (9,892) (10,515) (13,501) (12,281)

Profit before tax 12,731 33,662 48,157 47,862 77,256 211,904 231,428

Income tax expense (6,686) (13,366) (19,094) (19,145) (33,290) (95,357) (104,143)

Profit for the period - Adjusted 6,045 20,296 29,063 28,717 43,966 116,547 127,285

Per share data (cents) 2004 2005 2006E 2007E 2008E 2009E 2010E

No. Shares (avg, basic) 69,741 70,003 70,530 70,146 70,146 70,146 70,146

No. Shares (avg, diluted) 78,813 79,437 78,766 78,555 78,555 78,555 78,555

Adj EPS - basic (cents) 8.67 29.02 41.32 40.94 62.68 166.15 181.46

Adj EPS - diluted (cents) 7.67 25.61 36.95 36.56 55.97 148.36 162.03

ModelWare EPS (cents) 7.67 25.61 36.95 36.56 55.97 148.36 162.03

Cash flow ($'000) 2004 2005 2006E 2007E 2008E 2009E 2010E


Depletion, depreciation & amortisation 6,461 7,325 9,526 9,544 21,124 48,776 52,981

Working capital (3,134) 3,872 (3,443) 0 0 0 0

Other 7,160 521 560 0 0 0 0

Cash flow from operations (pre-int/tax) 24,697 42,982 52,954 54,537 105,787 272,985 295,285

Interest paid/received 601 1,483 (981) 2,869 (7,407) (12,306) (10,876)

Income tax paid (6,141) (13,929) (18,743) (19,145) (33,290) (95,357) (104,143)

Cash flow from operations 19,157 30,536 33,230 38,261 65,090 165,323 180,267

Disposals 19,899 27,510 0 0 0 0 0

Shares issued 660 (1,823) 231,594 0 94,419 0 0

Total sources of funds 39,716 56,223 264,824 38,261 159,509 165,323 180,267

Capex (27,583) (76,175) (114,339) (200,000) (170,000) (120,000) (120,000)

Acquisitions 0 0 0 0 0 0 0

Dividends 0 0 0 0 0 0 0

Share purchases 0 0 (13,634) 0 0 0 0

Other 0 0 0 0 0 0 0

Total uses of funds (27,583) (76,175) (127,973) (200,000) (170,000) (120,000) (120,000)

Cash surplus / (deficit) 12,133 (19,952) 136,851 (161,739) (10,491) 45,323 60,267

FX / other 96 (203) (27) 0 0 0 0Decrease in net debt 12,229 (20,155) 136,824 (161,739) (10,491) 45,323 60,267

Balance Sheet (£'000) 2004 2005 2006E 2007E 2008E 2009E 2010E

Net debt (71,122) (50,967) 32,442 194,181 299,091 253,768 193,501

Total debt 0 0 220,233 220,233 314,652 273,861 219,621

Equity (inc mins) 247,187 266,239 295,792 324,509 368,475 485,022 612,308

Capital employed 176,065 215,272 328,234 518,690 667,566 738,791 805,809

Debt/Equity (%) 0 0 74 68 85 56 36

Debt/Debt & Equity (%) 0 0 43 40 46 36 26

Net debt/Equity (%) -29 -19 11 60 81 52 32

Net debt/Net debt & Equity (%) -40 -24 10 37 45 34 24

Source: Company data, Morgan Stanley Research; e = Morgan Stanley Research estimates

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27


March 22, 2007

Oil & Gas

Tullow Oil Summary Financials 2004-2008e

Exhibit 32

Tullow Oil Profit & Loss: 2004-08e

MS P&L (adj excep & specs) £000 2004 2005 2006E 2007E 2008E 2009E 2010E

Brent price $/bbl 38.19 53.72 65.18 58.00 48.00 53.00 53.00

UK - (p/therm) 0.00 36.98 43.43 33.50 38.20 38.20 38.20

$/£average 1.83 1.83 1.85 1.90 1.90 1.90 1.90



Revenue 225,256 445,232 593,668 648,323 620,612 501,093 411,572

Cost of Sales (141,228) (243,149) (243,116) (294,559) (302,617) (235,722) (196,709)

Gross Profit 84,028 202,083 350,552 353,764 317,995 265,371 214,862

Adminstrative expenses (10,926) (13,793) (15,396) (15,550) (15,705) (15,862) (16,021)

Profit on sale of license interest/ oil & gas assets 2,292 36,061 0 0 0 0 0

Exploration cost written off (17,961) (25,783) (30,151) (31,500) (31,500) (31,500) (31,500)

Other expenses (647) 0 0 0 0 0 0Operating profit 56,786 198,568 305,005 306,714 270,790 218,008 167,341

Finance revenue 3,458 4,367 5,961 4,309 (404) (2,519) (5,526)

Finance costs (13,449) (24,197) (17,137) (20,761) (29,026) (29,026) (29,026)

Profit before tax 46,795 178,738 293,829 290,262 241,360 186,463 132,789

Income tax expense (15,460) (63,751) (114,968) (110,299) (91,717) (70,856) (50,460)

Profit for the period - Adjusted 31,335 114,987 178,861 179,962 149,643 115,607 82,329

Net (Loss)/Gain on hedging instruments 0 (1,851) 12,522 0 0 0 0

Profit for the period - Reported 31,335 113,136 191,383 179,962 149,643 115,607 82,329

Per share data (pence) 2004 2005 2006E 2007E 2008E 2009E 2010E



EPS adjusted - basic (pence) 5.88 17.78 27.51 25.10 20.87 16.12 11.48

EPS adjusted - diluted (pence) 5.81 17.43 27.02 24.76 20.59 15.90 11.33

EPS reported - basic (pence) 5.88 17.50 29.43 25.10 20.87 16.12 11.48

EPS reported - diluted (pence) 5.81 17.15 28.91 24.76 20.59 15.90 11.33

ModelWare EPS 5.39 11.96 27.02 24.76 20.59 15.90 11.33

DPS (pence) 1.75 4.00 5.00 5.00 5.00 5.00 5.00

e = Morgan Stanley Research est imatesSource: Company data, Morgan Stanley Research

Note: Tullow 2006 financials shown have not been adjusted for the full year 2006 results.

8/15/2019 SIA MS 22-Mar-07


28


March 22, 2007

Oil & Gas

Exhibit 33

Tullow Oil Balance Sheet & Cash Flow: 2004-08e

Cash flow (£000) 2004 2005 2006E 2007E 2008E 2009E 2010EOperating profit 46,795 178,579 307,851 290,262 241,360 186,463 132,789


Working capital 4,243 -35,622 11,902 0 0 0 0

Other 12,181 -8,644 34,812 31,500 31,500 31,500 31,500


Interest paid/received 9,991 19,830 11,176 16,452 29,430 31,545 34,552

Income tax paid -14,497 -25,360 -80,852 -144,500 -121,692 -98,704 -73,167


Disposals 4,730 88,996 727 0 0 0 0

Shares issued 120,913 1,570 1,772 0 0 0 0


Capex -95,105 -368,086 -342,385 -370,000 -340,000 -300,000 -300,000

Acquisitions -166,055 0 -40,000 -270,000 0 0 0

Dividends -6,995 -14,555 -32,744 -36,347 -36,347 -36,347 -36,347

Share purchases 0 0 0 0 0 0 0Other -9,108 -27,605 -13,038 -16,452 -29,430 -31,545 -34,552

Total uses of funds -277,263 -410,246 -428,167 -692,799 -405,777 -367,893 -370,899

Cash surplus / (deficit) -11,809 -71,200 -9,204 -332,733 -54,436 -84,167 -134,301

FX / other -110 12,638 -3,281 0 0 0 0

Decrease in net debt -11,919 -58,562 -12,485 -332,733 -54,436 -84,167 -134,301

Balance Sheet (£000) 2004 2005 2006E 2007E 2008E 2009E 2010E

Net debt 63,630 132,986 166,018 498,751 553,187 637,354 771,655

Total debt 148,700 198,372 322,183 483,766 483,766 483,766 483,766

Equity (inc mins) 375,467 389,019 756,163 899,778 1,013,074 1,092,334 1,138,315

Capital employed 439,097 522,005 922,181 1,398,529 1,566,261 1,729,687 1,909,970

Debt/Equity (%) 40 51 43 54 48 44 42

Debt/Debt & Equity (%) 28 34 30 35 32 31 30

Net debt/Equity (%) 17 34 22 55 55 58 68

Net debt/Net debt & Equity (%) 14 25 18 36 35 37 40

e = Morgan Stanley Research est imatesSource: Company data, Morgan Stanley Research

8/15/2019 SIA MS 22-Mar-07


29


March 22, 2007

Oil & Gas

Dana Petroleum Summary Financials 2004-2010e

Exhibit 34

Dana Petroleum Financial Summary: 2004-2010e

P&L £m 2004 2005 2006E 2007E 2008E 2009E 2010E

Brent ($/bbl) 38.19 53.72 65.27 58.00 48.00 53.00 53.00

UK - (p/therm) 24.10 36.98 43.16 33.50 38.20 38.20 38.20

$/£average 1.83 1.83 1.84 1.90 1.90 1.90 1.90


Revenue 109,476 165,625 210,243 277,846 322,151 360,322 281,143

Cost of Sales (58,294) (71,836) (81,408) (123,205) (164,286) (173,550) (135,236)

Gross Profit 51,182 93,789 128,835 154,642 157,864 186,772 145,907

Exploration & Evaluation - 13,550 (5,510) (7,000) (7,000) (7,000) (7,000)

Administrative Expenses (3,363) (6,243) (7,375) (7,000) (7,000) (7,000) (7,000)

Operating Profit 37,754 105,723 109,897 140,642 143,864 172,772 131,907

Gain on Sale of Available-for-Sale Investment - 3,456 - - - - -

Provision for Impairment of Associated Company (2,851) - - - - - -Profit on Ordinary Activities before Int & Tax 34,903 109,179 109,897 140,642 143,864 172,772 131,907

Interest Income 778 1,642 3,416 2,550 2,356 2,859 4,792

Finance Costs (3,200) (3,053) (2,543) - - - -

Profit on Ordinary Activities before Tax 32,481 107,768 110,770 143,191 146,220 175,630 136,699

Taxation (19,805) (43,613) (60,533) (71,596) (73,110) (87,815) (68,350)

Profit for the Financial Year 12,676 64,155 50,237 71,596 73,110 87,815 68,350

Per share data (pence) 2004 2005 2006E 2007E 2008E 2009E 2010E


EPS - diluted (pence) 19.8 78.9 57.4 81.3 83.1 99.9 77.6

EPS - ModelWare 19.0 78.5 57.4 81.3 83.1 99.9 77.6

DPS (pence) 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Cash flow (£m) 2004 2005 2006E 2007E 2008E 2009E 2010E


Depletion, depreciation & amortisation (+ explor) 29,489 12,804 38,531 59,092 76,584 80,474 64,395

Working capital -5,725 -7,850 9,713 0 0 0 0Other 3,085 -7,081 4,382 0 0 0 0


Interest paid/received -1,065 537 1,954 2,550 2,356 2,859 4,792

Income tax paid -6,928 -22,049 -24,936 -78,295 -72,519 -81,133 -78,219


Disposals 0 13,968 0 0 0 0 0

Shares issued 587 36,560 3,068 0 0 0 0


Capex -32,782 -63,872 -114,649 -140,000 -140,000 -80,000 -80,000

Acquisitions -44 -4,016 -4,310 0 0 0 0

Dividends 0 0 0 0 0 0 0

Share purchases 0 0 0 0 0 0 0


Cash surplus / (deficit) 21,520 68,180 23,650 -16,012 10,285 94,971 42,875

FX / other -2,625 4,489 -6,075 0 0 0 0Decrease in net debt 18,895 72,669 17,575 -16,012 10,285 94,971 42,875

Balance Sheet (£m) 2004 2005 2006E 2007E 2008E 2009E 2010E

Net debt -20,497 -91,827 -110,082 -94,070 -104,355 -199,326 -242,201

Total debt 20,833 11,588 0 0 0 0 0

Equity (inc mins) 157,825 270,675 321,348 392,943 466,053 553,869 622,218

Capital employed 137,328 178,848 211,265 298,873 361,698 354,542 380,017

Debt/Equity (%) 13 4 0 0 0 0 0

Debt/Debt & Equity (%) 12 4 0 0 0 0 0

Net debt/Equity (%) -13 -34 -34 -24 -22 -36 -39

Net debt/Net debt & Equity (%) -15 -51 -52 -31 -29 -56 -64


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30


March 22, 2007

Oil & Gas

Burren Energy Summary Financials 2004-2010e

Exhibit 35

Burren Energy Profit & Loss: 2004-2010e

MS P&L (adj excep & specs) $m 2004 2005 2006 2007E 2008E 2009E 2010E

Brent price $/bbl 38.19 55.55 65.18 58.00 48.00 53.00 53.00

$/£average 1.83 1.83 1.85 1.90 1.90 1.90 1.90

Oil Ent production (kboe/d) 14.2 22.4 19.1 23.0 24.2 26.0 29.5

Gas Ent production (mmcf/d) 0.0 0.0 0.0 0.0 0.0 0.0 0.0



Revenue 185,787 390,333 416,022 452,124 388,989 464,299 527,368

Cost of sales -87,866 -118,438 -111,405 -115,412 -111,777 -119,243 -138,134

Gross profit 97,921 271,895 304,617 336,711 277,211 345,056 389,234

Administrative expenses -10,723 -15,426 -13,926 -15,000 -16,000 -17,000 -18,000

Other operating expenses -12 -1,411 -19,863 0 0 0 0

Share of associate's profit 0 1,612 3,362 1,000 1,000 1,000 1,000Adj. Operating profit 87,186 256,670 274,190 322,711 262,211 329,056 372,234

Interest and investment income 678 1,998 9,722 3,758 3,478 6,910 12,414

Finance costs -1,709 -4,069 -1,456 0 0 0 0

Adj. Profit on ordinary activities before interest 86,155 254,599 282,456 326,469 265,690 335,966 384,648

Tax on profit on ordinary activities -17,748 -33,670 -33,583 -33,000 -22,000 -24,000 -24,000

Adj. Profit attributable to equity holders of parent co 68,407 220,929 248,873 293,469 243,690 311,966 360,648

Exceptional gain on sale of oil & gas assets 0 0 0 0 0 0 0

Currency gain/(loss) 0 0 0 0 0 0 0

Profit attributable to equity holders of parent company (Rep) 68,407 220,929 248,873 293,469 243,690 311,966 360,648




Rep EPS - basic (cents) 50.07 158.50 177.29 209.37 173.85 222.56 257.30

Rep EPS - diluted (cents) 47.90 153.09 172.81 203.84 169.27 216.69 250.50

Adj EPS - basic (cents) 50.07 159.04 177.25 209.37 173.85 222.56 257.30

Adj EPS - diluted (cents) 47.90 154.12 172.81 203.84 169.27 216.69 250.50

ModelWare EPS 47.91 154.12 172.81 203.84 169.27 216.69 250.50

DPS (cents) 5.53 21.47 26.16 27.13 27.67 28.50 29.36

Adj EPS - basic (pence) 27.30 87.78 96.54 110.19 91.50 117.14 135.42

Adj EPS - diluted (pence) 26.12 84.78 94.10 107.29 89.09 114.05 131.84

DPS (pence) 3.00 12.00 14.00 14.28 14.57 15.00 15.45


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31


March 22, 2007

Oil & Gas

Exhibit 36

Burren Energy Balance Sheet & Cash Flow: 2004-2010e

Cash flow ($m) 2004 2005 2006 2007E 2008E 2009E 2010EOperating profit 87,186 256,670 274,190 322,711 262,211 329,056 372,234


Working capital -23,960 -38,600 -2,335 -36,622 -17,112 -17,316 -17,880

Other 10,579 -4,369 2,847 3,000 3,000 3,000 3,000


Interest paid/received -596 -388 8,046 3,758 3,478 6,910 12,414

Income tax paid -130 -1,625 -26,239 -33,000 -22,000 -24,000 -24,000


Disposals 0 0 4,461 0 0 0 0

Shares issued 1,083 1,492 491 2,000 2,000 2,000 2,000


Capex -88,749 -150,842 -213,668 -405,000 -170,000 -170,000 -170,000

Acquisitions 0 -26,022 -9,932 0 0 0 0

Dividends 0 -13,697 -35,689 -37,498 -38,248 -39,124 -40,297

Share purchases 0 0 0 0 0 0 0Other -8,468 -3,512 -1,239 0 0 0 0


Cash surplus / (deficit) 7,128 85,189 76,782 -105,808 96,908 169,085 228,064

FX / other 2,711 -370 607 0 0 0 0

Decrease in net debt 9,839 84,819 77,389 -105,808 96,908 169,085 228,064

Balance Sheet ($m) 2004 2005 2006E 2007E 2008E 2009E 2010E

Net debt -38,462 -121,999 -202,170 -96,362 -193,270 -362,355 -590,419

Total debt 1,500 2,782 0 0 0 0 0

Equity (inc mins) 263,340 472,368 690,201 948,172 1,155,614 1,430,456 1,752,807

Capital employed 224,878 350,369 488,031 851,810 962,344 1,068,101 1,162,388

Debt/Equity (%) 1 1 0 0 0 0 0

Debt/Debt & Equity (%) 1 1 0 0 0 0 0

Net debt/Equity (%) -15 -26 -29 -10 -17 -25 -34

Net debt/Net debt & Equity (%) -17 -35 -41 -11 -20 -34 -51

ROAE (%) - 60 46 36 23 24 23

ROACE (%) - 77 62 43 26 30 31


8/15/2019 SIA MS 22-Mar-07


32


March 22, 2007

Oil & Gas

Cairn Energy Summary Financials 2004-2010e

Exhibit 37

Cairn Energy Financial Summary: 2004-2010eMS P&L ($m, adj excep & specs) 2004 2005 2006E 2007E 2008E 2009E 2010E

Brent ($/bbl) 38.19 54.45 65.26 53.00 48.00 53.00 53.00

$/£average 1.83 1.83 1.84 1.90 1.90 1.90 1.90

Total production (kboe/d) 22.8 28.3 25.9 25.1 25.0 62.2 105.7

Revenue 173 263 286 219 205 827 1,618

Production costs -51 -50 -59 -53 -53 -128 -215

Unsuccessful exploration costs -36 -27 -55 -23 -14 -34 -58

Depletion & decommissioning charge -72 -92 -123 -62 -62 -167 -291

Gross profit 14 94 49 81 76 498 1,054

Administrative expenses -27 -38 -55 -45 -47 -50 -52

Adj Operating profit/(loss) -13 56 -7 36 29 449 1,002

Net interest -2 3 -7 -8 -26 -44 -38

Profit/(loss) before taxation -15 59 -14 27 2 404 964

Taxation on profit/(loss) 15 -18 -13 -10 -1 -142 -337

Adj Profit/(loss) for the period attributable to equity holders -0 41 -26 18 1 263 626

Exceptional gain on sale of oil & gas assets 0 11 -4 0 0 0 0

Currency gain/(loss) -16 27 -18 0 0 0 0

Profit for the year attributable to equity holders (Reported) -16 79 -48 18 1 263 626


No. Shares (avg, basic) 152.5 157.0 157.4 151.4 142.6 131.6 113.4

No. Shares (avg, diluted) 153.7 157.8 157.8 152.1 143.4 132.5 114.3

Rep EPS - basic (cents) (10.3) 50.4 (30.8) 11.7 1.0 198.1 553.0

Rep EPS - diluted (cents) (10.2) 50.1 (30.7) 11.6 1.0 196.9 548.8

Adj EPS - basic (cents) (0.0) 26.3 (16.8) 11.7 1.0 198.1 553.0

Adj EPS - diluted (cents) (0.0) 26.2 (16.7) 11.6 1.0 196.9 548.8

DPS (pence) 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Adj EPS - basic (pence) (0.0) 14.3 (8.8) 6.2 0.5 104.3 291.1

Adj EPS - diluted (pence) (0.0) 14.3 (32.1) 22.1 1.9 374.0 1,042.8

DPS (USD) 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Cash flow ($m) 2004 2005 2006E 2007E 2008E 2009E 2010EOperating profit -13 71 -12 36 29 449 1,002

Depletion, depreciation & amortisation 75 97 128 65 65 170 294

Unsuccessful exploration costs 36 27 55 23 14 34 58

Working capital 5 -5 -2 0 0 0 0

Other 34 -49 7 0 0 0 0

Cash flow from operations (pre-int/tax) 138 140 175 124 108 652 1,354

Interest paid/received 1 3 -5 -4 -10 -15 -13

Income tax paid -9 -7 -3 -2 -0 -35 -84

Cash flow from operations 131 136 168 118 98 602 1,256

Disposals 13 128 0 0 0 0 0

Shares issued 193 4 2 0 0 0 0

Total sources of funds 337 268 170 118 98 602 1,256

Capex -174 -291 -275 -490 -560 -500 -440

Acquisitions -43 0 0 0 0 0 0

Dividends 0 0 0 0 0 0 0

Share purchases -17 -17 -22 -18 -18 -18 -18

Other -15 -6 20 0 0 0 0Total uses of funds -247 -314 -277 -508 -578 -518 -458

Cash surplus / (deficit) 89 -46 -107 -390 -480 84 798

FX / other 2 -1 -1 0 0 0 0

Decrease in net debt 91 -47 -108 -390 -480 84 798

Balance Sheet ($m) 2004 2005 2006E 2007E 2008E 2009E 2010E

Net debt -138 -96 43 438 935 880 107

Equity (inc mins) 711 758 730 730 713 958 1,567

Capital employed 573 662 773 1,168 1,648 1,838 1,674

ROAE (%) 5.6 -3.6 2.4 0.2 31.5 49.6

ROACE (%) 6.3 -3.0 2.4 1.4 16.9 37.2


Note: Forecasts for 2007-2010e include 100% of Cairn India. Guidance on accounting for minority interest likely to be provided at the full year results on March 26 2007.

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Price Target Methodology

Exhibit 38

Summary of UK E&P Ratings and Price Targets

CompanyCurrent

price (p) RatingPrice

target (p)

ImpliedPotential

Upside (%)

Soco International 1411 Overweight -V 1,800 28

Tullow Oil 369 Overweight -V 460 25

Dana Petroleum 1,029 Overweight -V 1,300 26

Cairn Energy 1,546 Equal-weight -V 1,750 13

Burren Energy 730 Equal-weight -V 810 11Source: Morgan Stanley Research

Our price targets for the UK E&Ps are derived from a

combination of our net asset valuation (based on our long-term

oil price assumption of US$53/bbl Brent and 38.2p/therm for

UK gas prices) and more subjective factors. Our base net

asset valuation is essentially the discounted cash flows on a

field-by-field basis and our best estimate of risk upside. At any

given oil price, we expect E&P shares to trade somewhere

between a core valuation and a bull case scenario. The

premium (or discount) to the core value is mostly determined

by: 1) by short-term oil prices and the perception of longer-term

oil prices and 2) levels of M&A activity in the industry. Within

this framework, individual companies are likely to trade at

different premium/discounts depending on specific stock

characteristics. These are as follows:

•

the potential for upgrades to existing reserves(commercial and technical);

• the potential for appraisal upside from additional

discoveries for which actual volumes are yet to be

determined;

• exploration activity; and

• news flow intensity around the shares.

Exhibit 39

UK gas price and Brent oil price assumptions

2006 2007e 2008e 2009e 2010e

UK Gas price (p/therm) 43.2 33.5 38.2 38.2 38.2

Brent ($/bbl) 65.3 58.0 48.0 53.0 53.0Source: Datastream, Morgan Stanley Research; e = Morgan Stanley Research estimates

Risks to price targets

Oil and gas, and particularly exploration, is a high-risk

business. Putting this together with uncertainty over short-term

commodity prices, we assign a volatility flag to our ratings for

the UK E&P stocks. The following are key drivers for the sector

that may lead the shares to under or outperform our

assumptions:

Downside: 1) Sharp fall in commodity prices; 2) disappointing

exploration or appraisal;. 3) increases to capex/delays to

development projects; 4) increased political and fiscal risks.

Upside: 1) Continued increased in short-term and longer-termassumptions of commodity prices; 2) better than assumed

exploration success; 3) increased M&A activity in the industry.

Specific risks for TLW: On the downside: 1) disappointing

drilling results from the UK, Uganda or India; 2) a significant

delay in the gas sales agreement for phase 1 Kudu and

unsuccessful appraisal for phase 2; 3) operational problems at

existing fields; 4) weakness in the UK gas price. On the upside,

we see risks from materially better success from the drill bit.

Specific risks for Dana: On the downside: 1) disappointing

drilling results from UK, Mauritania and Egypt; 2) operational

problems on existing fields in the UK portfolio; 3) weakness inthe UK gas price. On the upside, we see risks from materially

better success from the drill bit.

Specific risks for Burren: On the downside: 1) operational

difficulties at existing core assets (Burun and M’Boundi); 2)

political instability in Turkmenistan. On the upside we see risks

from: 1) materially better exploration success from drilling in the

Congo; 2) better than anticipated appraisal from water injection

at M’Boundi; 3) an earlier than expected sales agreement for

Turkmenistan.

Specific risk for Cairn: On the downside: 1) delays in the

timetable for development of existing assets in Rajasthan; 2)disappointing appraisal upside from Rajasthan. On the upside,

we see risks from materially better success from the drill bit in

the KG basin.

Specific risks for Soco: On the downside, disappointing

drilling results from Vietnam, Yemen and Congo. On the

upside, we see risks from materially better success from the

drill bit.

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Disclosure Section

Morgan Stanley & Co. International Limited, authorised and regulated by Financial Services Authority, disseminates in the UK research that it hasprepared, and approves solely for the purposes of section 21 of the Financial Services and Markets Act 2000, research which has been prepared byany of its affiliates.

Analyst CertificationThe following analysts hereby certify that their views about the companies and their securities discussed in this report are accurately expressed andthat they have not received and will not receive direct or indirect compensation in exchange for expressing specific recommendations or views in thisreport: Michael Alsford.

Unless otherwise stated, the individuals listed on the cover page of this report are research analysts.

Global Research Conflict Management PolicyThis research has been published in accordance with our conflict management policy, which is available atwww.morganstanley.com/institutional/research/conflictpolicies.

Important US Regulatory Disclosures on Subject CompaniesThe following analyst, strategist, or research associate (or a household member) owns securities in a company that he or she covers or recommendsin this report: Theepan Jothilingam - BG Group (common stock). Morgan Stanley policy prohibits research analysts, strategists and researchassociates from investing in securities in their sub industry as defined by the Global Industry Classification Standard ("GICS," which was developed byand is the exclusive property of MSCI and S&P). Analysts may nevertheless own such securities to the extent acquired under a prior policy or in amerger, fund distribution or other involuntary acquisition.

As of February 28, 2007, Morgan Stanley beneficially owned 1% or more of a class of common equity securities of the following companies covered inthis report: BP plc, Burren Energy, Cairn Energy, Dana Petroleum, Eni SpA, ERG, Hellenic Petroleum, Neste Oil, Petroplus, Repsol-YPF, Royal DutchShell, TOTAL.

As of March 1, 2007, Morgan Stanley held a net long or short position of US$1 million or more of the debt securities of the following issuers covered inthis report (including where guarantor of the securities): Eni SpA, Mol, Norsk Hydro AS, Repsol-YPF, Royal Dutch Shell, Statoil, TOTAL.

Within the last 12 months, Morgan Stanley managed or co-managed a public offering of securities of Cairn Energy, Galp Energia, Petroplus, Saras.

Within the last 12 months, Morgan Stanley has received compensation for investment banking services from BG Group, BP plc, Mol, OMV AG,Repsol-YPF, Saras, Statoil.

In the next 3 months, Morgan Stanley expects to receive or intends to seek compensation for investment banking services from BG Group, BP plc,Cairn Energy, ERG, Galp Energia, Hellenic Petroleum, Mol, Neste Oil, Norsk Hydro AS, OMV AG, PKN Orlen, Repsol-YPF, Saras, Statoil, TOTAL,Tullow Oil.

Within the last 12 months, Morgan Stanley & Co. Incorporated has received compensation for products and services other than investment bankingservices from BG Group, BP plc, Eni SpA, ERG, Hellenic Petroleum, Mol, Motor Oil, Neste Oil, Norsk Hydro AS, OMV AG, Repsol-YPF, Royal DutchShell, Saras, Statoil, TOTAL, Tullow Oil.

Within the last 12 months, Morgan Stanley has provided or is providing investment banking services to, or has an investment banking clientrelationship with, the following companies covered in this report: BG Group, BP plc, Cairn Energy, ERG, Galp Energia, Hellenic Petroleum, Mol, NesteOil, Norsk Hydro AS, OMV AG, PKN Orlen, Repsol-YPF, Saras, Statoil, TOTAL, Tullow Oil.

Within the last 12 months, Morgan Stanley has either provided or is providing non-investment banking, securities-related services to and/or in the pasthas entered into an agreement to provide services or has a client relationship with the following companies covered in this report: BG Group, BP plc,Eni SpA, ERG, Hellenic Petroleum, Mol, Motor Oil, Neste Oil, Norsk Hydro AS, OMV AG, Repsol-YPF, Royal Dutch Shell, Saras, Statoil, TOTAL,Tullow Oil.

Within the last 12 months, an affiliate of Morgan Stanley & Co. Incorporated has received compensation for products and services other thaninvestment banking services from Petroplus.

The research analysts, strategists, or research associates principally responsible for the preparation of this research report have receivedcompensation based upon various factors, including quality of research, investor client feedback, stock picking, competitive factors, firm revenues andoverall investment banking revenues.

Morgan Stanley & Co. International Ltd. is a corporate broker to BG Group.

Certain disclosures listed above are also for compliance with applicable regulations in non-US jurisdictions.

STOCK RATINGSDifferent securities firms use a variety of rating terms as well as different rating systems to describe their recommendations. For example, MorganStanley uses a relative rating system including terms such as Overweight, Equal-weight or Underweight (see definitions below). A rating system usingterms such as buy, hold and sell is not equivalent to our rating system. Investors should carefully read the definitions of all ratings used in eachresearch report. In addition, since the research report contains more complete information concerning the analyst's views, investors should carefully

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read the entire research report and not infer its contents from the rating alone. In any case, ratings (or research) should not be used or relied upon asinvestment advice. An investor's decision to buy or sell a stock should depend on individual circumstances (such as the investor's existing holdings)and other considerations.

Global Stock Ratings Distribution(as of February 28, 2007)

For disclosure purposes only (in accordance with NASD and NYSE requirements), we include the category headings of Buy, Hold, and Sell alongsideour ratings of Overweight, Equal-weight and Underweight. Morgan Stanley does not assign ratings of Buy, Hold or Sell to the stocks we cover.Overweight, Equal-weight, and Underweight are not the equivalent of buy, hold, and sell but represent recommended relative weightings (seedefinitions below). To satisfy regulatory requirements, we correspond Overweight, our most positive stock rating, with a buy recommendation; wecorrespond Equal-weight and Underweight to hold and sell recommendations, respectively.

Coverage Universe Investment Banking Clients (IBC)

Stock Rating Category Count % of Total Count% of Total

IBC% of Rating

Category

Overweight/Buy 834 38% 288 42% 35%

Equal-weight/Hold 1003 45% 308 45% 31%

Underweight/Sell 370 17% 91 13% 25%

Total 2,207 687

Data include common stock and ADRs currently assigned ratings. An investor's decision to buy or sell a stock should depend on individualcircumstances (such as the investor's existing holdings) and other considerations. Investment Banking Clients are companies from whom MorganStanley or an affiliate received investment banking compensation in the last 12 months.

Analyst Stock RatingsOverweight (O). The stock's total return is expected to exceed the average total return of the analyst's industry (or industry team's) coverage universe,on a risk-adjusted basis, over the next 12-18 months.

Equal-weight (E). The stock's total return is expected to be in line with the average total return of the analyst's industry (or industry team's) coverageuniverse, on a risk-adjusted basis, over the next 12-18 months.

Underweight (U). The stock's total return is expected to be below the average total return of the analyst's industry (or industry team's) coverageuniverse, on a risk-adjusted basis, over the next 12-18 months.

More volatile (V). We estimate that this stock has more than a 25% chance of a price move (up or down) of more than 25% in a month, based on aquantitative assessment of historical data, or in the analyst's view, it is likely to become materially more volatile over the next 1-12 months comparedwith the past three years. Stocks with less than one year of trading history are automatically rated as more volatile (unless otherwise noted). We notethat securities that we do not currently consider "more volatile" can still perform in that manner.

Unless otherwise specified, the time frame for price targets included in this report is 12 to 18 months.

Analyst Industry ViewsAttractive (A): The analyst expects the performance of his or her industry coverage universe over the next 12-18 months to be attractive vs. therelevant broad market benchmark, as indicated below.

In-Line (I): The analyst expects the performance of his or her industry coverage universe over the next 12-18 months to be in l ine with the relevantbroad market benchmark, as indicated below.

Cautious (C): The analyst views the performance of his or her industry coverage universe over the next 12-18 months with caution vs. the relevantbroad market benchmark, as indicated below.

Benchmarks for each region are as follows: North America - S&P 500; Latin America - relevant MSCI country index or MSCI Latin America Index;Europe - MSCI Europe; Japan - TOPIX; Asia - relevant MSCI country index.

Stock price charts and rating histories for companies discussed in this report are available at www.morganstanley.com/companycharts or from your local investment representative. You may also request this information by writing to Morgan Stanley at 1585 Broadway, (Attention: Equity Research Management), New York, NY, 10036 USA.

Other Important DisclosuresFor a discussion, if applicable, of the valuation methods used to determine the price targets included in this summary and the risks related to achieving these targets, please

refer to the latest relevant published research on these stocks. Research is available through your sales representative or on Client Link at www.morganstanley.com and

other electronic systems.

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This report does not provide individually tailored investment advice. It has been prepared without regard to the individual financial circumstances and objectives of persons

who receive it. The securities discussed in this report may not be suitable for all investors. Morgan Stanley recommends that investors independently evaluate particular

investments and strategies, and encourages investors to seek the advice of a financial adviser. The appropriateness of a particular investment or strategy will depend on an

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Additional information on recommended securities is available on request.

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Industry Coverage:Oil & Gas

Company (Ticker) Rating (as of) Price (03/21/2007)

Joseph Mares, CFA

ERG (ERG.MI) E (06/28/2006) €18.53

Galp Energia (GALP.LS) O-V (02/23/2007) €7.38

Hellenic Petroleum (HEPr.AT) U (09/21/2006) €10.60

Mol (MOLB.BU) E (10/23/2006) HUF 19,880.00

Motor Oil (MORr.AT) E (09/21/2006) €20.30

Neste Oil (NES1V.HE) E (10/23/2006) €25.57

OMV AG (OMVV.VI) E (08/18/2006) €42.24

Petroplus (PPHN.S) O-V (01/15/2007) SFr 83.35

PKN Orlen (PKNA.WA) E (10/23/2006) PLN 43.55

Saras (SRS.MI) E-V (06/28/2006) €4.17

Michael J Alsford

Tullow Oil (TLW.L)

Socco International (SIA.L)

O-V (01/15/2007)

O-V (03/22/2007)

369.00p

1411p

Neil W Perry

BG Group (BG.L) O (09/13/2006) 696.00pBP plc (BP.L) E (09/21/2006) 517.00p

Royal Dutch Shell (RDSa.L) NA () 1,636.00p

Royal Dutch Shell (RDSb.L) U (09/21/2006) 1,620.00p

TOTAL (TOTF.PA) O (03/15/2007) €49.88

Theepan Jothilingam, CFA

Burren Energy (BUR.L) E-V (04/25/2006) 760.00p

Cairn Energy (CNE.L) O-V (04/25/2006) 1,557.00p

Dana Petroleum (DNX.L) O-V (08/07/2006) 1,029.00p

Eni SpA (ENI.MI) E (03/05/2007) €23.19

Norsk Hydro AS (NHY.OL) ++ NKr 193.50

Repsol-YPF (REP.MC) U (03/21/2007) €23.92

Statoil (STL.OL) ++ NKr 157.00

Stock Ratings are subject to change. Please see latest research for each company.

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