Ms venny2012

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

Due to the nature of the fixed income market the issuers or bonds of the issuers recommended or discussed in this report may not be continuously followed Accordingly investors must regard this report as providing stand-alone analysis and should not expect continuing analysis or additional reports relating to such issuers or bonds of the issuers

Morgan Stanley does and seeks to do business with companies covered in Morgan Stanley Research As a result investors should be aware that the firm may have a conflict of interest that could affect the objectivity of Morgan Stanley Research Investors should consider Morgan Stanley Research as only a single factor in making their investment decision

For analyst certification and other important disclosures refer to the Disclosure Section located at the end of this report += Analysts employed by non-US affiliates are not registered with FINRA may not be associated persons of the member and may not be subject to NASDNYSE restrictions on communications with a subject company public appearances and trading securities held by a research analyst account

Morgan Stanley amp Co International plc+

EM Fixed Income Strategy

Vanessa Barrett VanessaBarrettmorganstanleycom

+44 207 677 9569

Regis Chatellier Regis Chatelliermorganstanleycom

+44 207 677 6982

Global

March 13 2012

EM Credit Strategy Update Venezuela and PdVSA Tilting the RiskReward

We maintain our overweight position in Venezuela risk and reiterate our long-held tactical constructive view However we think that recent bond outperformance has tilted the riskreward to be less attractive than previously In the medium term structural issues remain both at the sovereign and PdVSA level mitigated in part in the near term by elevated oil prices and investorsrsquo expectation of a change in the political landscape

Debt sustainability highlights the need for meaningful reforms We maintain our view that a near-term credit event is unlikely however our debt-sustainability analysis indicates that debt dynamics in the medium term remain challenging Although strong oil prices should partially support the credit the impact of the rising debt stock and increasing level of non-cash-generating oil exports mean that the minimum oil price required to effect an improvement in the debt path continues to creep higher

PdVSA remains the funding vehicle of choice The company increased debt stock by US$10 billion in 2011 further limiting financing flexibility Calls on cash remain unchanged and we expect the national oil company to look for alternative source of funding as the current pace of debt accumulation is unsustainable in our view

Idiosyncrasies to move into focus President Chavezrsquos health together with the probability of change in the political landscape will move into focus ahead of the October 7 elections As anticipated investors have partially priced out political risk premium in the past months We assess several political scenarios and present possible triggers for our change in view with regard to this credit We estimate that the political risk premium is around 260bp

Strategy implications We maintain our overweight position in Venezuela risk and monitor the political landscape closely We see value in the front end of the corporate curve (PDVSA rsquo14) in the belly we like PDVSA rsquo17 (old) VENZ rsquo24 VENZ rsquo25 and in the long end we like PDVSA rsquo27 and VENZ rsquo38

Kristina Obrtacova KristinaObrtacovamorganstanleycom

+44 207 677 7597

Robert Tancsa Regis Chatelliermorganstanleycom

+44 207 677 6982

Paolo Batori CFA

PaoloBatorimorganstanleycom

+44 207 677 7971

Exhibit 1

Higher Average Oil Price Provides Limited Medium-Term Relief

External DebtExports ()

278316

379

457

549

302

370

472

599

752

0

100

200

300

400

500

600

700

800

2012 2013 2014 2015 2016

Trade Balance Model

Current Account Model

Source Morgan Stanley Research estimates

Exhibit 2

Oil Price Sensitivity

Trade Balance Model Current Account ModelOil Price DebtGDP DebtExports DebtGDP DebtExports($bbl) 2013 2015 2013 2015 2013 2015 2013 2015

150 340 296 170 156 417 471 209 248 130 406 424 229 251 486 603 273 357 120 441 490 265 310 521 672 314 425 110 477 558 308 380 558 743 361 506 100 513 629 360 465 596 815 418 603 90 551 701 423 568 634 890 488 721 50 713 1010 929 1392 802 1210 1045 1668



2

March 13 2012 EM Credit Strategy Update Venezuela and PdVSA Tilting the RiskReward

Executive Summary

Higher oil prices maintain the status quo Despite an average Venezuelan crude oil basket price of US$105bbl over the past 12 months (versus an average of US$75bbl for the 12 months prior) the health of the Venezuelan external accounts remains virtually unchanged We remain concerned as to the rising debt stock the increase in non-cash-generating oil exports and the resultant impact on the external balances

Our debt-sustainability analysis highlights the need for meaningful reforms As shown in Exhibit 1 (on page 1) under our current account model we estimate 2012E external debtexports of 302 compared to our earlier estimate of 312 (see Venezuela and PdVSA Fuller Pockets More Holes April 25 2011) While the higher oil price provides some near-term relief the effect of a rising debt stock and increasing non-cash oil exports pushes the minimum oil price required to effect a long-term improvement in Venezuelarsquos debt path higher and higher Our primary concern with this scenario is that high oil prices are not sustainable due to global demand destruction and following a sharp fall in oil prices (and therefore exports) external debtexports would rise (see Exhibit 3)

Exhibit 3



150 340 296 170 156 417 471 209 248 130 406 424 229 251 486 603 273 357 120 441 490 265 310 521 672 314 425 110 477 558 308 380 558 743 361 506 100 513 629 360 465 596 815 418 603 90 551 701 423 568 634 890 488 721 50 713 1010 929 1392 802 1210 1045 1668


Meanwhile flexibility at the debt vehicle of choice PdVSA is decreasing The national oil company continues to be squeezed Cash generation is impeded by an increasing volume of non-cash exports On the cash outflow side there is limited scope to reduce social and other cash contributions to government initiatives particularly in an election year while underinvestment and mounting pressure to monetise the reserve base limit the scope for cutting capex The net result is an increase in leverage which on an adjusted basis is heading towards an unsustainable level in our view

Litigation risk remains although we are a little more sanguine We maintain our view that the litigations brought by the US oil majors represent a key risk to VenezuelaPdVSA

We see a lower probability that firstly the full amount of US$27 billion will be awarded and secondly that VenezuelaPdVSA will be required to settle the cases with cash in full More likely we expect that a combination of cash debt forgiveness asset swap and PIK (current or future production) under the scenarios we highlighted in our April 25 2011 publication is the more likely outcome

Idiosyncrasies to move into focus President Chavezrsquos health together with the probability of change in the political landscape will move into focus ahead of the October 7 elections As anticipated investors have partially priced out political risk premium in the past months We estimate that the premium is 260bp

Gauging the market reaction to the change We view the change in political landscape as potentially having the most significant impact on credit spreads in the near term Below we provide a decision roadmap for three of many possible outcomes

1 Status quo ndash Chavez secures another term on October 7 We expect the credit to continue to perform in line with current dynamics (oil price trajectory general risk appetite attractive carry) and Venezuela continues on the debt path highlighted above We maintain our long position based on attractive carry with marginal potential spread compression

2 Opposition leader Henrique Capriles Radonski claims office on October 7 We expect market reaction to be positive in the near term buoyed by optimism and expectation for change We recommend investors initially maintain long positions in the near term on this momentum trade However we would look to reduce risk on early signs of potential disappointment in the pace and quality of reforms implemented by the new government

3 Imposition of a caretakerinterim government We would view the rising uncertainty as a strong signal to move underweight on all Venezuela risk




Investment Opportunities ndash Recent Performance Has Tilted the RiskReward

Venezuela is one of our largest overweight positions (see EM Credit Portfolio February 29 2012) We have long recommended a tactical long position in the credit (see Venezuela Dollar Crunch and Debt Sustainability January 18 2011) and despite the recent outperformance we still see some attractive investment opportunities

Venezuela and PdVSA bonds have been among the best-performing credits so far in 2012 outperforming the index by more than 15 The outperformance has been the combination of risk appetite against the backdrop of surging oil prices In addition as we have previously highlighted idiosyncrasies of the credit particularly in relation to a potential change in the political landscape have supported the outperformance

Exhibit 4

Outperformance Relative to EM

Venezuela 5Y CDS - CDX EM 5Y (bp)

400

500

600

700

800

900

1000

31-Aug-11 30-Sep-11 31-Oct-11 30-Nov-11 31-Dec-11 31-Jan-12 29-Feb-12

Source Bloomberg Morgan Stanley Research

Nevertheless the riskreward has deterioratedhellip We maintain our view that a near-term credit event is unlikely however our debt-sustainability analysis indicates the debt dynamics in the medium term remain challenging Strong oil prices and pre-election spending should keep the economy buoyant through 2012 In addition Venezuela has a manageable near-term debt-servicing schedule through to 2012 and 2013 and limited debt repayments in 2014

We argue that the risks are reflected in the current level of spreads however significant upside from current spreads is not as compelling as previously (see Exhibit 4) The high carry continues to be the main incentive for the inclusionoverweight position of Venezuelan risk in EM portfolios

hellipeven more so for PdVSA As the following sections highlight in greater detail PdVSA continues to serve as a vehicle to supply hard currency to the Venezuelan economy and accumulating debt remains a key concern for the national oil company despite elevated oil prices At the same time given the spread compression of late relative to the sovereign we see less scope for this trend to continue More broadly we prefer gaining exposure to Venezuela by owning the government bonds although we are more selective in different parts of the bond curves

Riskreward across the curves where to be positioned The different parts of the bond curves offer different incentives and have their own distinct risks beyond the Venezuelan credit risk in our view We see value in the front end of the corporate curve (PDVSA rsquo14) in the belly we like PDVSA rsquo17 (old) VENZ rsquo24 VENZ rsquo25 and in the long end we like PDVSA rsquo27 and VENZ rsquo38

Short-dated PDVSA rsquo14 offers attractive pick-up over the sovereign The front end of the curves has been offering a strong pull-to-par and has also benefited the most from the spread tightening as the curve has bull-steepened However the short-dated bonds trade at close to or above par making this strategy less attractive going forward Given that PDVSA rsquo14s still have a price well below par we see them as the best implementation for a front-end trade Everything else equal current market prices offer an annual pull-to-par of close to 43 cents However we remain mindful of the risk that the front end may come under pressure in a scenario of risk-aversion or a pullback in oil prices Moreover local law PdVSA bonds may suffer disproportionately under such circumstances

The belly of both curves offers the best valuations on a spread basis ndash we like PDVSA rsquo17 (old) VENZ rsquo24 and VENZ rsquo25 This premium is however justified in our view as this part of the curve carries the largest supply risk Both our external debt-sustainability model and PdVSA oil price sensitivity model point to sizeable expected issuance in 2012 Even if the new issuance comes as a private placement with the central bank technicals can be unfavourable as the new bonds gradually find their way to the secondary market via SITME (see Exhibit 5) Besides this the recent bond issues carry a large coupon and have a price around par while we prefer bonds with lower cash price

3



Exhibit 5

SITME Traded Volumes Dominated by New Issues

Bond volume (USD mm)

Issue dateTotal

(since June-11) of total


(MTD)

Ven 22 16-Aug-10 584 79 47Ven 26 17-Oct-11 452 61 209Ven 31 26-Jul-11 1626 221 75PDVSA 17N 25-Oct-10 334 45 50PDVSA 21 11-Nov-11 646 88 444PDVSA 22 10-Feb-11 833 113 00Other 3 00 174Total 7358 1000 1000 Source BCV Bloomberg Morgan Stanley Research

Lower dollar long end for a more defensive strategy Owning the long end is likely the most conservative strategy in Venezuela in our view These bonds still trade at a depressed cash price and offer carry however they are less attractive on an absolute spread basis and from the view of a potential spread compression In a bullish scenario they are likely to underperform short-dated bonds as the curve bull-steepens while it is likely to be more defensive when the credit sells off

Overlaying the above considerations with our Bond Rich amp Cheap and Par Bond Equivalent Spread models we find PDVSA rsquo14s as the most attractive in the front end PDVSA rsquo17 (old) VENZ rsquo24 and VENZ rsquo25 in the belly and PDVSArsquo27 and VENZ rsquo38 in the long end (see Exhibit 6 and Exhibit 7)

Exhibit 6

Bond Rich amp Cheap Model

28

31 S

27

26

24

Old 18

13

22 S

19

2334

38

2520N 18

1614P 37

P 27

P 21P 17 S

P 17P 15

P 14

3Y

2Y

5Y 7Y10Y

P 22

400bp

500bp

600bp

700bp

800bp

900bp

1000bp

1100bp

00 20 40 60 80 100 120

Mod Duration

Z-sp

read

Cheap+ Cheap-

Rich+ Rich-

Legend

Source Morgan Stanley Research

Exhibit 7

Par Bond Equivalent Spread Scenarios

25 30 35 40 45 50Ven 13 687 685 683 680 677 673Ven 14 778 778 777 777 776 775Ven 16 799 804 810 817 826 838

Ven 18N 963 974 987 1003 1023 1049Ven 19 869 879 891 906 924 948Ven 20 884 905 931 964 1009 1073Ven 22 939 934 928 922 914 904Ven 23 937 948 962 978 1000 1027Ven 24 935 951 972 998 1032 1079Ven 25 915 934 959 991 1033 1093Ven 26 962 962 962 961 960 959Ven 27 760 768 777 789 803 822Ven 28 830 843 858 878 904 937Ven 31 865 864 863 862 861 860Ven 34 823 837 853 874 900 934Ven 38 776 811 857 921 1011 1147

PDVSA 13 753 753 753 753 752 752PDVSA 13N 753 753 753 753 752 752PDVSA 14 978 985 994 1004 1017 1033PDVSA 15 1073 1085 1101 1120 1144 1175PDVSA 16 1050 1066 1087 1112 1144 1187PDVSA 17 1063 1081 1104 1132 1168 1217

PDVSA 17N 1061 1068 1075 1085 1096 1110PDVSA 21 1010 1023 1037 1056 1079 1110PDVSA 22 1019 1016 1013 1010 1006 1001PDVSA 27 809 857 924 1024 1186 1495PDVSA 37 775 837 927 1066 1303 1767

Par Bond Equivalent Spread

Recovery Rate Assumption


4



Updating Our Debt-Sustainability Analysis

We revisit our analysis on the Venezuelan total external debt trajectory using both the trade balance and current account models We make the following adjustments from our earlier analysis published in Venezuela and PdVSA Fuller Pockets More Holes April 25 2011

Oil prices are higher The Venezuelan oil price basket currently trades at a ~3 premium to the average of the main benchmarksrsquo spot prices (Brent WTI) In our previous publication we assumed that the Venezuelan oil basket traded at roughly a 12 discount to the WTI spot price We have noticed over the past 12 months that there has been a change in the dynamics with the Venezuelan basket trading flat to an average of the benchmarks (ie Brent WTI) Therefore in this publication we use the average of the benchmarksrsquo forward prices for 2013-16 in our debt-sustainability analysis For 2012 we take the average Venezuelan basket price YTD of US$110bbl Worth adding in looking at the forward curve the average of the benchmark spot prices of US$113bbl currently is only US$5bbl higher than the average spot one year ago but the degree of backwardation is much higher (see Exhibit 8)

Exhibit 8

Oil Future Pricing in Higher Degree of Backwardation

90

95

100

105

110

115

1 M

nth

3 M

nth

6 M

nth

9 M

nth

12 M

nth

15 M

nth

18 M

nth

21 M

nth

24 M

nth

27 M

nth

30 M

nth

33 M

nth

36 M

nth

39 M

nth

42 M

nth

45 M

nth

48 M

nth

51 M

nth

54 M

nth

57 M

nth

60 M

nth

March12

March11


However the impact of higher oil prices is offset by a decreasing level of USD cash-generating exports We adjust official export volumes by the level of shipments made under the PetroCaribe alliance and exports to China under the bilateral loan agreement We keep overall production unchanged and slightly increase domestic consumption (+4) Despite a 6 increase in the oil price assumption for 2012

over 2011 and a small change to overall export volumes (-2) export revenues fall by almost 8 reflecting the upward adjustment to non-cash-generating exports due to the servicing of Chinese loans via payments in kind

We expect the macro backdrop to remain relatively buoyant in 2012 ahead of elections in October According to the IMF real GDP growth will fall to more moderate levels in 2013 onwards following the removal of pre-election government spending (see Exhibit 9) Higher oil prices should maintain current import levels which are not expected to change following elections

Exhibit 9

Venezuela Debt Sustainability Input Assumptions

2012 2013 2014 2015 2016Real GDP Growth ( yoy) 36 21 20 20 18GDP Deflator ( yoy) 199 218 216 208 206Nominal GDP (local fx) 1641052 2034336 2514286 3088891 3779464Nominal GDP ($mm) 309893 315073 320503 325936 331537

Exchange Rate (lc$) 53 65 78 95 114Oil price ($bbl) 10982 10800 10198 9700 9300

Exports ($mm) - unadjusted 81250 79336 77619 75564 73860Exports ($mm) - adjusted 43020 42306 39948 37997 36430Imports ($mm) 45702 45788 44684 44773 44967Services Balance ($mm) -11224 -12088 -12953 -13817 -14682Income Balance ($mm) -7917 -8342 -13788 -17602 -22231Current Transfers ($mm) -588 -641 -694 -747 -800

Trade Balance - unadjusted ($mm) 35548 33548 32935 30791 28893Trade Balance - adjusted ($mm) -2682 -3481 -4736 -6775 -8536Trade Balance (unadjusted)GDP 115 106 103 94 87Trade Balance (adjusted)GDP -09 -11 -15 -21 -26

CA - unadjusted ($mm) 15819 12477 5500 -1375 -8819CA - adjusted ($mm) -22411 -24553 -32171 -38941 -46248CA (unadjusted)GDP 51 40 17 -04 -27CA (adjusted)GDP -72 -78 -100 -119 -139 Source IMF forecasts Bloomberg Morgan Stanley Research

The debt path remains challenging As shown in Exhibit 10 external debtGDP under both models shows a steady increase At the trade balance level after adjusting export revenues and lower GDP growth Venezuelarsquos external debtGDP continues its upward trajectory

Moreover the current account model shows more meaningful deterioration A continued reliance on external services together with increasing debt-servicing costs pushes the external debtGDP ratio under the current account model on a steeper path As we highlighted in Venezuela Dollar Crunch and Debt Sustainability January 18 2011 we assume that both the trade balance deficit and any external debt-servicing requirements will be met with new external debt

5



Exhibit 10

External DebtGDP Path Remains Concerning

External DebtGDP ()

440481

536

602

680

478

563

667

789

931

0

10

20

30

40

50

60

70

80

90

100

2012 2013 2014 2015 2016

Trade Balance Model



Further risk to the external debtGDP emerges in the scenario of FX devaluation This would reduce GDP in USD terms with the stock of debt remaining unchanged While there would likely be an improvement in the current account balance (lower imports) the impact of capital flight would have a much bigger negative impact on the current account

Certainly a sustained increase in the oil price would put the debt trajectory on a more sustainable path However rising debt stock and an increase in non-cash-generating oil exports mean the minimum oil price required to effect an improvement in Venezuelarsquos debt path continues to creep higher In Exhibit 11 we hold the oil price constant at US$110bbl and compare the level of USD cash-generating exports we used in our model in our previous publication of 70 to our current estimate of 62 Under the trade balance model we find that debtGDP increases to 48 in 2013 compared to 43 once the level of cash-generating exports falls from 70 to 62 If we use the current account model and reduce the level of cash-generating exports to 62 debtGDP increases by a similar magnitude to 56 from 51 for 2013

Exhibit 11

Sensitivity to the Level of Cash Generating Exports

Cash Trade Balance Model Current Account Modelgenerating DebtGDP DebtExports DebtGDP DebtExportsexports 2013 2015 2013 2015 2013 2015 2013 2015

62 477 558 308 380 558 743 361 506 70 425 462 249 284 506 643 296 458


High sensitivity to oil prices In Exhibit 12 we show the sensitivity of the economy to oil prices To illustrate we use an extreme oil price level of US$150bbl keeping all else unchanged We see debtGDP falling to 34 in 2013 under the trade balance model For the current account model debtGDP at an oil price of US$150bbl is 42 However as we highlighted previously such a sustained high level of oil prices is unlikely as this would lead to a negative impact on

global growth (through a rising oil burden) In turn a possible global slowdown and negative impact on oil demand would be unfavourable for exports the overall external balances and eventually GDP The same table below shows how Venezuelan debt metrics could deteriorate sharply in a scenario of weaker oil prices

Exhibit 12



150 340 296 170 156 417 471 209 248 130 406 424 229 251 486 603 273 357 120 441 490 265 310 521 672 314 425 110 477 558 308 380 558 743 361 506 100 513 629 360 465 596 815 418 603 90 551 701 423 568 634 890 488 721 50 713 1010 929 1392 802 1210 1045 1668


The increase in external debtexports warrants further caution Under the trade balance model Venezuelarsquos external debtexport could reach 549 by 2016 A steeper trajectory is evidenced under the current account model as external debtexport could reach 752 (see Exhibit 13) The economyrsquos reliance on external debt (stock) means that in the scenario of a sharp fall on oil prices (flow) the external debtexport balloons

Exhibit 13

External DebtExports Is Leveraged to Oil Prices


278316

379

457

549

302

370

472

599

752

0

100

200

300

400

500

600

700

800

2012 2013 2014 2015 2016

Trade Balance Model



Structural shortfalls offset the impact of higher oil prices on the external balance Structural shortfalls both existing and emerging prevail In the case of the existing shortfalls a reliance on external debt and a currency peg in tandem with high inflation are not sustainable in our view Moreover the emergence of falling USD cash-generating exports is of increasing concern The unwinding of existing shortfalls while negative in the near term has the potential to put the economy on a more sustainable path eventually reducing the emerging trend of increasing non-cash oil exports

6


7


In the end the willingness to pay remains Venezuela and PdVSA have no material external debt repayments in 2012 and the principal amount in 2013 of US$22 billion looks manageable to us (see Exhibit 14) Elevated oil prices should prevent further deterioration in the external balance position Therefore we reiterate our view that tactical long positions remain attractive albeit with a close eye on the risks It is also worth highlighting that credit spreads have narrowed considerably since the beginning of 2011 therefore riskreward seems somewhat less compelling to us

Exhibit 14

Venezuela and PdVSA Global Bond Debt Servicing

45

7496 96

84 91

56 69 7657 46 43 47

315

0

5

10

15

20

25

30

35

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025+

US$bn

Venezuela Principal PDVSA Principal Venezuela Interest PDVSA Interest Source Bloomberg Morgan Stanley Research Debt servicing is for global bonds only



Estimating the Political Risk Premium

The political premium moves into focus ahead of the Venezuelan presidential elections called for October 7 2012

In assessing the outcome of the political landscape in an election year we set the framework around three possible scenarios a) status quo b) opposition victory and c) the imposition of a caretaker government (there is widespread speculation about President Chavezrsquos health following a cancer diagnosis although an official spokesperson suggests he is sufficiently recuperated to continue his political career)

Scenario 1 Chavez secures another term and status quo is maintained In this scenario the near-term debt sustainability looks manageable although deteriorating as we highlighted in the previous section We would expect Venezuelan credit to perform in line with the broader market sentiment for risky EM assets In the case of elevated oil prices we would expect outperformance as we have seen so far in 2012

Scenario 2 Henrique Capriles Radonski claims office The most recent polls taken before the opposition primary on February 12 suggest that Chavez maintains a clear majority despite health concerns However there is increasing uncertainty as to the incumbent presidentrsquos ability to successfully campaign We think that in the scenario of an opposition victory credit spreads will react positively Further we believe that the market would be buoyed by optimism and expectation for change and would give the new president some time to implement reforms In this scenario we would recommend investors maintain long positions and ride the momentum trade However material spread compression caused by either expectation of or effective change in leadership would make us become much more cautious as we see considerable risks that Mr Capriles may find it difficult to transition towards a more market-friendly policy in the near term

Scenario 3 Imposition of a caretaker government before elections This scenario requires the establishment of a caretaker government that lasts until the elections should President Chavezrsquos health deteriorate In the event where the caretaker government remains in power for longer there is a risk that the democratic process could be compromised and we would view this as negative for the Venezuelan credit In this scenario the level of uncertainty in Venezuela could markedly increase as international political institutions may assume a hostile stance We would recommend an underweight position in all Venezuelan risk if this scenario were to materialise

Whatrsquos Priced in by the Market

We introduced the concept of our Macro Scoring Indicator (MSI) in June last year (see Sovereign Credit Sensitivity to Macro Fundamentals June 6 2011) At the time our purpose was to gauge the strength of macro fundamentals for each EM country and predict spread levels based on the MSI In that respect the model has proven to be very efficient on average the MSI explains 77 of sovereign spread distributions1

Our purpose is now to use the MSI to gauge indirectly how much is priced in by the market in terms of political risk and more specifically for the Venezuela 5-year CDS contract

Exhibit 15

Estimating the Political Risk Using the MSI Model 5y CDS vs Macro Scoring Indicator

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16

Rus

Arg

Bra

Bul

Chile

China Col

Cro

Czh

Egy

Hun

IndoIsr

Kaz

Kor

Lith

MalMexPerPhi

Pol

Qat

Rom

Soaf

ThaiTurk

Ukr

VEN

Aus

Ger

Uk

Sw d

Jap

0

100

200

300

400

500

600

700

800

900

Macro Scoring Indicator

5-ye

ar C

DS

(b

p)

Political Risk 260bp


Despite using only macroeconomic variables independent from political factors the MSI still explains a very large part of spread distributions Consequently we can reasonably consider that most of the distribution which is not explained by macroeconomic factors is due to political factors2 As we correct for the imperfections of the model and determine a range band which is statistically explained by the MSI (95 of the errors) we can isolate the political risk component from the macro fundamentals (see methodology overleaf)

Using this methodology we estimate that the market is implicitly pricing 260bp of political risk for Venezuela

1Four-year average of Rsup2 coefficients using a simple exponential regression which plots 5y

CDS contracts versus the MSI 2Liquidity can explain part of the errors of the model but this consideration does not really

apply in the case of Venezuela as the 5y Venezuela CDS contract is very liquid by EM

standards

8



Methodology

The exponential regression line between CDS and MSI can be considered as the fair value level in view of the macroeconomic fundamentals prevailing in each country (see Exhibit 15) Based on the model the countries trading above the regression line are lsquocheaprsquo in view of their macro fundamentals and lsquorichrsquo if they trade below that line

We acknowledge however that the model is imperfect by nature so part of the errors can be attributed to other macroeconomic factors which are not included in our model3 as well as the imperfection of the scoring system we use to determine the MSI We therefore calculate a range band corresponding to the margin of error within which the CDS levels are indeed explained by the model ndash note in that respect that the band widens as the credit quality decreases as the distribution of the errors is not linear

Within this band or error where 95 of the distribution is explained by the model CDS spreads are efficiently explained by the model ie by macroeconomic factors alone For CDS contracts trading beyond this band the level of spread may reflect substantial political risks as perceived by the market

As we do this exercise for Venezuela we determine that the market is implicitly pricing 260bp of extra political risk for this country (ie beyond the lsquonormalrsquo political risk that is typically associated to countries with similar level of MSI)

3We only include nine macro variables into the MSI GDP growth GDP per capita inflation

fiscal balanceGDP government debtGDP external debtGDP current accountGDP FX

reservesGDP as well as the quality of the banking sector (see Pricing Contingent Liabilities

October 5 2011)

9



PdVSA ndash Rising Oil Prices Falling Cash Flowhellipthe Paradox Continues

The national oil company (NOC) remains one of two sources of hard currency supply to the Venezuelan economy As we highlighted in our early publication Venezuela and PdVSA Fuller Pockets More Holes April 25 2011 PdVSArsquos export revenues are supplemented by external debt issuance in bringing USD into the economy

Generally the structural weaknesses we highlighted in our April 25 2011 publication for PdVSA remain ndash falling production and lack of investments limiting the upside from rising oil prices an increasing level of non-cash oil exports challenges in monetising the extensive reserve base and a rising debt burden We expect that internally generated cash flow will predominantly continue to be diverted towards social and other government spending initiatives particularly in an election year

Updating our oil price sensitivity model We make the following adjustments to our cash flow model from our April 25 2011 publication See Exhibit 16 for key changes

Oil price We use a base case oil price equivalent to the average YTD of the Venezuelan basket of US$110bbl This is slightly above our base case oil price last year of US$105bbl

Production consumption and exports Total oil production remains unchanged at 25 mmbpd however we increase domestic consumption slightly (+4) The most significant adjustment relates to the level of non-cash exports which we increase by 50 following the increase in shipments to China

Social contributions We keep the level unchanged at US$15 billion based on the assumption that there is limited flexibility to decrease the contributions particularly in an election year and against the backdrop of elevated oil prices

Capital expenditure We increase capex from US$12 billion to US$15 billion based on recent announcements by PdVSA President Rafael Ramirez According to Ramirez the company invested US$151 billion in 2011 and we expect the company to endeavour to spend the same amount in 2012

Exhibit 16

PdVSA Cash Flow Model Key Changes

(653)(1154)(3000)(803)(102)(21899) 287 (27324)

FCF 2011EChange in oil

price

Change indomestic

consumption

Change innon cashexports

Change incapex

Increasefundingcosts Other FCF 2012E


Rising oil prices weakening cash flow Despite sustained elevated oil prices under our oil sensitivity model PdVSArsquos cash flow continues to be negative (see Exhibit 19) The most significant impact is the increasing level of non-cash exports According to IHS (Global Insight Report August 25 2011) Venezuela is expected to ship 407 mbpd to China under the bilateral loan agreements This follows media and analyst reports that the total loans outstanding to China now exceed US$36 billion

Calls on cash to remain high As mentioned above we do not see it as viable for PdVSA to reduce the two largest calls on its cash flow ndash capital expenditure and social payments ndash in an attempt to relieve the negative FCF The latter is inflexible especially in an election year The former is most likely to have been running below the minimum maintenance level for some period Further we expect the company to be under mounting pressure (both strategically and operationally) to increase production and to utilise internal cash flow where possible to boost production In fact Ramirez has stated that PdVSA will increase oil production by a further 558 mbpd by the end of 2012 If executed this would take the official production levels to 35 mmbpd As such we see limited flexibility in the ability for PdVSA to cut capex

PdVSA remains the debt vehicle of choice but flexibility is decreasing The company recently reported that total debt at the end of 2011 reached US$35 billion This represents an increase of US$10 billion during the year Based on our model we estimate PdVSA to have a negative FCF of US$27 billion in 2012 which we have historically assumed will be predominantly debt-funded

10



However given the higher level of debt compared to last year we no longer see PdVSA being able to meet this FCF shortfall wholly with external debt issuance for two reasons First we think there would be limited investor appetite for this volume of PdVSA debt in the markets Second given the increasing debt levels US$27 billion in additional external debt would increase total leverage (on an adjusted basis) to a concerning high level of 54 times Meanwhile the current debt amortisation in 2012 is manageable in our view and is predominately local currency-denominated which we expect to be rolled over with the next external debt repayment for PdVSA being the 2013 Eurobonds (see Exhibit 17)

Exhibit 17

PdVSA Debt Maturity Is Manageable in 2012

0

2000

4000

6000

8000

10000

12000

2012 2013 2014 2015 2016 2017 2018-2024 2025+

PdVSA HoldCo Total CITGO debt Total Other Subsidiary Debt

Source PdVSA Morgan Stanley Research

Leveraging suppliers Given the significant cash shortfall and the limited financing flexibility we expect PdVSA to continue to squeeze suppliers in order to manage internal cash flow According to a Reuters report from March 2 2012 PdVSA accumulated a further US$9 billion in debt to suppliers in the first half of 2011 on top of the outstanding US$11 billion reported at the end of 2010 We make an adjustment to the total funding requirements for 2012 of US$10 billion to account for this additional source of funding

Therefore we expect a US$15-20 billion increase in debt in 2012 although we do not see the full amount raised in the public debt markets For example PdVSA plans to receive a US$2 billion loan from Chevron which will be used to raise production at the joint venture field Petroboscan In addition to squeezing working capital we expect PdVSA to leverage its international partners in Orinoco and other fields to finance its production goals Therefore if we take US$17 billion as the midpoint for our estimated increase in debt in 2012 total leverage would reach a high level of 45 times (see Exhibit 19)

Exhibit 18

PdVSA Estimated Funding Needs 2012E

US$mEstimated Funding Needs Potential SourcesFCF shortfall 27324 CITGO Dividends - External Debt Amortisation - Asset disposals - Sub-total 27324 FONDEN transfers -

Suppliers 10000

Less Debt Raised YTD - Debt Issuance 17324

Total Funding Required 27324 Total Sources 27324

PdVSA Total Debt EstimatesTotal Debt 31 December 2011 34892 Est Issuance FY2012 17324 Amortisation - Total Debt 2012E 52216

Source PdVSA Morgan Stanley Research estimates

Other sources of funding PdVSA has recently announced plans to reduce the level of USD-denominated debt as it seeks to potentially list shares in its JVs in Orinoco on the Hong Kong stock exchange The first indication of this is PdVSA agreeing to sell 10 of its stake in the Petropriar JV (70 held by PdVSA 30 by Chevron) to Chinarsquos CITIC Group Current valuations have not been disclosed

PdVSArsquos share of JVs in Orinoco ranges from 60-100 IHS notes that according to Venezuelan Law of Hydrocarbons PdVSA is required to have at least 501 control of the shares and operations of the JVs Therefore technically the NOC has capacity to reduce its holdings in all of its JVs to raise funds

Nevertheless we expect the upward debt trajectory to continue While PdVSA seeking equity financing is clearly a step in the right direction we treat this news flow with some caution We do not see the sale of part of its stake in the Orinoco JVs as a quick fix and continue to expect external debt to remain PdVSA and Venezuelarsquos key source of financing in the near term Elevated oil prices will be supportive in PdVSA attracting funding in the near term in our view However the current situation whereby PdVSA remains the key funding vehicle for the economy at the expense of balance sheet flexibility remains a key concern regarding the outlook for the credit

11



Exhibit 19

PdVSA Oil Price Sensitivity

Oil Price VNZ Basket (US$bbl) 50 60 70 80 90 100 110 120 130

Production (mbpd) 2500 2500 2500 2500 2500 2500 2500 2500 2500

Revenue 21538 25458 29378 33299 37219 41139 45059 48979 52899

Adjusted EBITDA (479) 1514 3507 5500 7493 9486 11478 13471 15464

Capex (15000) (15000) (15000) (15000) (15000) (15000) (15000) (15000) (15000)

OCF (15479) (13486) (11493) (9500) (7507) (5514) (3522) (1529) 464

Social costs (15000) (15000) (15000) (15000) (15000) (15000) (15000) (15000) (15000)

FCF (37635) (35917) (34198) (32479) (30761) (29042) (27324) (25605) (23887)

Estimated Total Debt 62527 60809 59090 57371 55653 53934 52216 50497 48779

Est Net Issuance to year-end 27635 25917 24198 22479 20761 19042 17324 15605 13887

Adj EBITDA Margin -2 6 12 17 20 23 25 28 29

Adj EBITDACash Interest -01x 04x 10x 15x 21x 26x 31x 37x 42x

OCFRevenue -72 -53 -39 -29 -20 -13 -8 -3 1

Total DebtAdj EBITDA nm 402x 169x 104x 74x 57x 45x 37x 32x


An Update on the Key Risk Litigations

In our April 25 2011 publication we highlighted key near-terms risk and factors to monitor The main risks outside the operational and funding concerns of PdVSA are the outstanding litigations brought against Venezuela by two of its former partners in the Orinoco belt projects Recall that the two significant cases are

ExxonMobil (XOM) ndash claim of US$7bn (reduced from the original claim of US$12bn) for compensation XOM filed the dispute in two separate courts ndash the International Chamber of Commerce (ICC) and International Centre for Settlement of Investment Disputes (ICSID)

ConocoPhiliips (COP) ndash filed its only arbitration claim before the ICSID The size of the original claim was US$30bn however has been reduced to US$20bn

See our earlier publication for background on the litigations

ExxonMobil ICC arbitration decision sets a favourable tone In late December 2011 the International Chamber of Commerce awarded XOM US$9076m for compensation for nationalised assets in Venezuela The company was seeking US$7bn PdVSA will be required to pay US$255m in cash after offsetting XOMrsquos debts to PdVSA of US$191m a counterclaim by PdVSA of US$160m and the netting off of US$300m of PdVSArsquos assets that were frozen by XOM through the international courts The lower-than-expected

settlement amount overall and actual cash payment were viewed favourably by the market

However we remain cautious The litigation in the ICSID is regarded as a much larger claim as XOM is seeking compensation for breach of the bilateral investment treaty XOM is claiming the same amount US$7bn having reduced the claim for the original amount of US$12bn The read-through to the ICSID case from the ICC is not clear to us given firstly the different respondents (Venezuela versus PdVSA) and secondly the broader scope of the litigation under the ICSID

Meanwhile the ConocoPhillips (COP) case is likely to remain in play for some time As it stands COP is awaiting a decision by the ICSID on certain legal and factual issues lodged in early December 2011 Therefore we expect any decision regarding the COP case is still some time away

Exiting the ICSID treaty should have little impact In January 2012 President Chavez indicated that he would ignore any ruling by the ICSID Moreover Venezuela has commenced proceedings to pull out of the ICSID although this is unlikely to affect any liabilities already in litigation Therefore the XOM and COP cases will remain valid in the ICSID

12



Read-through from Cemex decision in the ICSID In December 2011 Cemex reached a settlement with the Venezuelan government for a total of US$754m The settlement related to the nationalisation of 46 million tonnes of capacity in 2008 with the case brought before the ICSID initially for US$13bn The settlement payment was a combination of cash of US$240m bonds of US$360m issued by PdVSA and cancellation of US$154m debt owed by Cemex (see Cemex - Quick Comment Payment from Venezuela is Signed Covenant Risk Diminished December 2 2011) According to our Cemex equity analyst the payment amount was in line with valuations for other cement transactions Our simple read-through is that first the amount awarded is roughly half of the claim amount and second it appears the ICSID takes into consideration market value when determining the award amount These two factors may help in determining the payouts to the US oil majors

Caution still warranted We maintain our view that the litigations brought by the US oil majors represent a key risk to VenezuelaPdVSA However we are a little more sanguine than last year following the ICC decision and ICSID decision on Cemex We see a lower probability that firstly the full amount of US$27bn will be awarded and secondly that VenezuelaPdVSA will be required to settle the cases fully with cash More likely we expect that a combination of cash debt forgiveness asset swap and PIK (current or future production) under the scenarios we highlighted in our April 25 2011 publication is the more likely outcome

13



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14



Disclosure Section Morgan Stanley amp Co International plc authorized and regulated by Financial Services Authority disseminates in the UK research that it has prepared and approves solely for the purposes of section 21 of the Financial Services and Markets Act 2000 research which has been prepared by any of its affiliates As used in this disclosure section Morgan Stanley includes RMB Morgan Stanley (Proprietary) Limited Morgan Stanley amp Co International plc and its affiliates For important disclosures stock price charts and equity rating histories regarding companies that are the subject of this report please see the Morgan Stanley Research Disclosure Website at wwwmorganstanleycomresearchdisclosures or contact your investment representative or Morgan Stanley Research at 1585 Broadway (Attention Research Management) New York NY 10036 USA For valuation methodology and risks associated with any price targets referenced in this research report please email morganstanleyresearchmorganstanleycom with a request for valuation methodology and risks on a particular stock or contact your investment representative or Morgan Stanley Research at 1585 Broadway (Attention Research Management) New York NY 10036 USA

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Important US Regulatory Disclosures on Subject Companies Within the last 12 months Morgan Stanley has received compensation for products and services other than investment banking services from Bolivarian Republic Of Venezuela Petroleos De Venezuela SA Within the last 12 months Morgan Stanley has either provided or is providing non-investment banking securities-related services to andor in the past has entered into an agreement to provide services or has a client relationship with the following company Bolivarian Republic Of Venezuela Petroleos De Venezuela SA The equity research analysts or strategists principally responsible for the preparation of Morgan Stanley Research have received compensation based upon various factors including quality of research investor client feedback stock picking competitive factors firm revenues and overall investment banking revenues Morgan Stanley and its affiliates do business that relates to companiesinstruments covered in Morgan Stanley Research including market making providing liquidity and specialized trading risk arbitrage and other proprietary trading fund management commercial banking extension of credit investment services and investment banking Morgan Stanley sells to and buys from customers the securitiesinstruments of companies covered in Morgan Stanley Research on a principal basis Morgan Stanley may have a position in the debt of the Company or instruments discussed in this report Certain disclosures listed above are also for compliance with applicable regulations in non-US jurisdictions

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

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1120 38 461 44 41OverweightBuy Equal-weightHold 1229 42 449 42 37Not-RatedHold 105 4 24 2 23UnderweightSell 464 16 124 12 27Total 2918 1058 Data include common stock and ADRs currently assigned ratings An investors decision to buy or sell a stock should depend on individual circumstances (such as the investors existing holdings) and other considerations Investment Banking Clients are companies from whom Morgan Stanley received investment banking compensation in the last 12 months

Analyst Stock Ratings Overweight (O) The stocks total return is expected to exceed the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Equal-weight (E) The stocks total return is expected to be in line with the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months

15



Not-Rated (NR) Currently the analyst does not have adequate conviction about the stocks total return relative to the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Underweight (U) The stocks total return is expected to be below the average total return of the analysts industry (or industry teams) coverage universe on a risk-adjusted basis over the next 12-18 months Unless otherwise specified the time frame for price targets included in Morgan Stanley Research is 12 to 18 months

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Other Important Disclosures Morgan Stanley amp Co International PLC and its affiliates have a significant financial interest in the debt securities of Bolivarian Republic Of Venezuela Petroleos De Venezuela SA Morgan Stanley is not acting as a municipal advisor and the opinions or views contained herein are not intended to be and do not constitute advice within the meaning of Section 975 of the Dodd-Frank Wall Street Reform and Consumer Protection Act Morgan Stanley produces an equity research product called a Tactical Idea Views contained in a Tactical Idea on a particular stock may be contrary to the recommendations or views expressed in research on the same stock This may be the result of differing time horizons methodologies market events or other factors For all research available on a particular stock please contact your sales representative or go to Client Link at wwwmorganstanleycom Morgan Stanley Research does not provide individually tailored investment advice Morgan Stanley Research has been prepared without regard to the circumstances and objectives of those who receive it 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 an investment or strategy will depend on an investors circumstances and objectives The securities instruments or strategies discussed in Morgan Stanley Research may not be suitable for all investors and certain investors may not be eligible to purchase or participate in some or all of them Morgan Stanley Research is not an offer to buy or sell any securityinstrument or to participate in any trading strategy The value of and income from your investments may vary because of changes in interest rates foreign exchange rates default rates prepayment rates securitiesinstruments prices market indexes operational or financial conditions of companies or other factors There may be time limitations on the exercise of options or other rights in securitiesinstruments transactions Past performance is not necessarily a guide to future performance Estimates of future performance are based on assumptions that may not be realized If provided and unless otherwise stated the closing price on the cover page is that of the primary exchange for the subject companys securitiesinstruments The fixed income research analysts strategists or economists principally responsible for the preparation of Morgan Stanley Research have received compensation based upon various factors including quality accuracy and value of research firm profitability or revenues (which include fixed income trading and capital markets profitability or revenues) client feedback and competitive factors Fixed Income Research analysts strategists or economists compensation is not linked to investment banking or capital markets transactions performed by Morgan Stanley or the profitability or revenues of particular trading desks Morgan 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2


Executive Summary

Higher oil prices maintain the status quo Despite an average Venezuelan crude oil basket price of US$105bbl over the past 12 months (versus an average of US$75bbl for the 12 months prior) the health of the Venezuelan external accounts remains virtually unchanged We remain concerned as to the rising debt stock the increase in non-cash-generating oil exports and the resultant impact on the external balances

Our debt-sustainability analysis highlights the need for meaningful reforms As shown in Exhibit 1 (on page 1) under our current account model we estimate 2012E external debtexports of 302 compared to our earlier estimate of 312 (see Venezuela and PdVSA Fuller Pockets More Holes April 25 2011) While the higher oil price provides some near-term relief the effect of a rising debt stock and increasing non-cash oil exports pushes the minimum oil price required to effect a long-term improvement in Venezuelarsquos debt path higher and higher Our primary concern with this scenario is that high oil prices are not sustainable due to global demand destruction and following a sharp fall in oil prices (and therefore exports) external debtexports would rise (see Exhibit 3)

Exhibit 3



150 340 296 170 156 417 471 209 248 130 406 424 229 251 486 603 273 357 120 441 490 265 310 521 672 314 425 110 477 558 308 380 558 743 361 506 100 513 629 360 465 596 815 418 603 90 551 701 423 568 634 890 488 721 50 713 1010 929 1392 802 1210 1045 1668


Meanwhile flexibility at the debt vehicle of choice PdVSA is decreasing The national oil company continues to be squeezed Cash generation is impeded by an increasing volume of non-cash exports On the cash outflow side there is limited scope to reduce social and other cash contributions to government initiatives particularly in an election year while underinvestment and mounting pressure to monetise the reserve base limit the scope for cutting capex The net result is an increase in leverage which on an adjusted basis is heading towards an unsustainable level in our view

Litigation risk remains although we are a little more sanguine We maintain our view that the litigations brought by the US oil majors represent a key risk to VenezuelaPdVSA

We see a lower probability that firstly the full amount of US$27 billion will be awarded and secondly that VenezuelaPdVSA will be required to settle the cases with cash in full More likely we expect that a combination of cash debt forgiveness asset swap and PIK (current or future production) under the scenarios we highlighted in our April 25 2011 publication is the more likely outcome

Idiosyncrasies to move into focus President Chavezrsquos health together with the probability of change in the political landscape will move into focus ahead of the October 7 elections As anticipated investors have partially priced out political risk premium in the past months We estimate that the premium is 260bp

Gauging the market reaction to the change We view the change in political landscape as potentially having the most significant impact on credit spreads in the near term Below we provide a decision roadmap for three of many possible outcomes

1 Status quo ndash Chavez secures another term on October 7 We expect the credit to continue to perform in line with current dynamics (oil price trajectory general risk appetite attractive carry) and Venezuela continues on the debt path highlighted above We maintain our long position based on attractive carry with marginal potential spread compression

2 Opposition leader Henrique Capriles Radonski claims office on October 7 We expect market reaction to be positive in the near term buoyed by optimism and expectation for change We recommend investors initially maintain long positions in the near term on this momentum trade However we would look to reduce risk on early signs of potential disappointment in the pace and quality of reforms implemented by the new government

3 Imposition of a caretakerinterim government We would view the rising uncertainty as a strong signal to move underweight on all Venezuela risk







Exhibit 4



400

500

600

700

800

900

1000









3



Exhibit 5



Issue dateTotal



(MTD)




Exhibit 6


28

31 S

27

26

24

Old 18

13

22 S

19

2334

38

2520N 18

1614P 37

P 27

P 21P 17 S

P 17P 15

P 14

3Y

2Y

5Y 7Y10Y

P 22

400bp

500bp

600bp

700bp

800bp

900bp

1000bp

1100bp

00 20 40 60 80 100 120

Mod Duration

Z-sp

read

Cheap+ Cheap-

Rich+ Rich-

Legend


Exhibit 7


25 30 35 40 45 50Ven 13 687 685 683 680 677 673Ven 14 778 778 777 777 776 775Ven 16 799 804 810 817 826 838







4






Exhibit 8


90

95

100

105

110

115

1 M

nth

3 M

nth

6 M

nth

9 M

nth

12 M

nth

15 M

nth

18 M

nth

21 M

nth

24 M

nth

27 M

nth

30 M

nth

33 M

nth

36 M

nth

39 M

nth

42 M

nth

45 M

nth

48 M

nth

51 M

nth

54 M

nth

57 M

nth

60 M

nth

March12

March11





Exhibit 9









5



Exhibit 10


External DebtGDP ()

440481

536

602

680

478

563

667

789

931

0

10

20

30

40

50

60

70

80

90

100

2012 2013 2014 2015 2016

Trade Balance Model





Exhibit 11



62 477 558 308 380 558 743 361 506 70 425 462 249 284 506 643 296 458




Exhibit 12



150 340 296 170 156 417 471 209 248 130 406 424 229 251 486 603 273 357 120 441 490 265 310 521 672 314 425 110 477 558 308 380 558 743 361 506 100 513 629 360 465 596 815 418 603 90 551 701 423 568 634 890 488 721 50 713 1010 929 1392 802 1210 1045 1668



Exhibit 13



278316

379

457

549

302

370

472

599

752

0

100

200

300

400

500

600

700

800

2012 2013 2014 2015 2016

Trade Balance Model




6


7



Exhibit 14


45

7496 96

84 91

56 69 7657 46 43 47

315

0

5

10

15

20

25

30

35

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025+

US$bn













Exhibit 15


1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16

Rus

Arg

Bra

Bul

Chile

China Col

Cro

Czh

Egy

Hun

IndoIsr

Kaz

Kor

Lith

MalMexPerPhi

Pol

Qat

Rom

Soaf

ThaiTurk

Ukr

VEN

Aus

Ger

Uk

Sw d

Jap

0

100

200

300

400

500

600

700

800

900


5-ye

ar C

DS

(b

p)








standards

8



Methodology








October 5 2011)

9











Exhibit 16


(653)(1154)(3000)(803)(102)(21899) 287 (27324)


price

Change indomestic

consumption


Change incapex






10




Exhibit 17


0

2000

4000

6000

8000

10000

12000

2012 2013 2014 2015 2016 2017 2018-2024 2025+





Exhibit 18



Suppliers 10000








11



Exhibit 19



Production (mbpd) 2500 2500 2500 2500 2500 2500 2500 2500 2500

Revenue 21538 25458 29378 33299 37219 41139 45059 48979 52899

Adjusted EBITDA (479) 1514 3507 5500 7493 9486 11478 13471 15464

Capex (15000) (15000) (15000) (15000) (15000) (15000) (15000) (15000) (15000)

OCF (15479) (13486) (11493) (9500) (7507) (5514) (3522) (1529) 464

Social costs (15000) (15000) (15000) (15000) (15000) (15000) (15000) (15000) (15000)

FCF (37635) (35917) (34198) (32479) (30761) (29042) (27324) (25605) (23887)





OCFRevenue -72 -53 -39 -29 -20 -13 -8 -3 1













12





13




London


New York


Hong Kong



EM Economics




14











of Total IBC




15







16


17





The Americas

1585 Broadway


United States

Tel +1 (1)212 761 4000

Europe


London E14 4AD

United Kingdom

Tel +44 (0) 20 7 425 8000

Japan


Tokyo 150-6008

Japan

Tel +81 (0)3 5424 5000

AsiaPacific

1 Austin Road West

Kowloon

Hong Kong

Tel +852 2848 5200







Exhibit 4



400

500

600

700

800

900

1000









3



Exhibit 5



Issue dateTotal



(MTD)




Exhibit 6


28

31 S

27

26

24

Old 18

13

22 S

19

2334

38

2520N 18

1614P 37

P 27

P 21P 17 S

P 17P 15

P 14

3Y

2Y

5Y 7Y10Y

P 22

400bp

500bp

600bp

700bp

800bp

900bp

1000bp

1100bp

00 20 40 60 80 100 120

Mod Duration

Z-sp

read

Cheap+ Cheap-

Rich+ Rich-

Legend


Exhibit 7


25 30 35 40 45 50Ven 13 687 685 683 680 677 673Ven 14 778 778 777 777 776 775Ven 16 799 804 810 817 826 838







4






Exhibit 8


90

95

100

105

110

115

1 M

nth

3 M

nth

6 M

nth

9 M

nth

12 M

nth

15 M

nth

18 M

nth

21 M

nth

24 M

nth

27 M

nth

30 M

nth

33 M

nth

36 M

nth

39 M

nth

42 M

nth

45 M

nth

48 M

nth

51 M

nth

54 M

nth

57 M

nth

60 M

nth

March12

March11





Exhibit 9









5



Exhibit 10


External DebtGDP ()

440481

536

602

680

478

563

667

789

931

0

10

20

30

40

50

60

70

80

90

100

2012 2013 2014 2015 2016

Trade Balance Model





Exhibit 11



62 477 558 308 380 558 743 361 506 70 425 462 249 284 506 643 296 458




Exhibit 12



150 340 296 170 156 417 471 209 248 130 406 424 229 251 486 603 273 357 120 441 490 265 310 521 672 314 425 110 477 558 308 380 558 743 361 506 100 513 629 360 465 596 815 418 603 90 551 701 423 568 634 890 488 721 50 713 1010 929 1392 802 1210 1045 1668



Exhibit 13



278316

379

457

549

302

370

472

599

752

0

100

200

300

400

500

600

700

800

2012 2013 2014 2015 2016

Trade Balance Model




6


7



Exhibit 14


45

7496 96

84 91

56 69 7657 46 43 47

315

0

5

10

15

20

25

30

35

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025+

US$bn













Exhibit 15


1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16

Rus

Arg

Bra

Bul

Chile

China Col

Cro

Czh

Egy

Hun

IndoIsr

Kaz

Kor

Lith

MalMexPerPhi

Pol

Qat

Rom

Soaf

ThaiTurk

Ukr

VEN

Aus

Ger

Uk

Sw d

Jap

0

100

200

300

400

500

600

700

800

900


5-ye

ar C

DS

(b

p)








standards

8



Methodology








October 5 2011)

9











Exhibit 16


(653)(1154)(3000)(803)(102)(21899) 287 (27324)


price

Change indomestic

consumption


Change incapex






10




Exhibit 17


0

2000

4000

6000

8000

10000

12000

2012 2013 2014 2015 2016 2017 2018-2024 2025+





Exhibit 18



Suppliers 10000








11



Exhibit 19



Production (mbpd) 2500 2500 2500 2500 2500 2500 2500 2500 2500

Revenue 21538 25458 29378 33299 37219 41139 45059 48979 52899

Adjusted EBITDA (479) 1514 3507 5500 7493 9486 11478 13471 15464

Capex (15000) (15000) (15000) (15000) (15000) (15000) (15000) (15000) (15000)

OCF (15479) (13486) (11493) (9500) (7507) (5514) (3522) (1529) 464

Social costs (15000) (15000) (15000) (15000) (15000) (15000) (15000) (15000) (15000)

FCF (37635) (35917) (34198) (32479) (30761) (29042) (27324) (25605) (23887)





OCFRevenue -72 -53 -39 -29 -20 -13 -8 -3 1













12





13




London


New York


Hong Kong



EM Economics




14











of Total IBC




15







16


17





The Americas

1585 Broadway


United States

Tel +1 (1)212 761 4000

Europe


London E14 4AD

United Kingdom

Tel +44 (0) 20 7 425 8000

Japan


Tokyo 150-6008

Japan

Tel +81 (0)3 5424 5000

AsiaPacific

1 Austin Road West

Kowloon

Hong Kong

Tel +852 2848 5200




Exhibit 5



Issue dateTotal



(MTD)




Exhibit 6


28

31 S

27

26

24

Old 18

13

22 S

19

2334

38

2520N 18

1614P 37

P 27

P 21P 17 S

P 17P 15

P 14

3Y

2Y

5Y 7Y10Y

P 22

400bp

500bp

600bp

700bp

800bp

900bp

1000bp

1100bp

00 20 40 60 80 100 120

Mod Duration

Z-sp

read

Cheap+ Cheap-

Rich+ Rich-

Legend


Exhibit 7


25 30 35 40 45 50Ven 13 687 685 683 680 677 673Ven 14 778 778 777 777 776 775Ven 16 799 804 810 817 826 838







4






Exhibit 8


90

95

100

105

110

115

1 M

nth

3 M

nth

6 M

nth

9 M

nth

12 M

nth

15 M

nth

18 M

nth

21 M

nth

24 M

nth

27 M

nth

30 M

nth

33 M

nth

36 M

nth

39 M

nth

42 M

nth

45 M

nth

48 M

nth

51 M

nth

54 M

nth

57 M

nth

60 M

nth

March12

March11





Exhibit 9









5



Exhibit 10


External DebtGDP ()

440481

536

602

680

478

563

667

789

931

0

10

20

30

40

50

60

70

80

90

100

2012 2013 2014 2015 2016

Trade Balance Model





Exhibit 11



62 477 558 308 380 558 743 361 506 70 425 462 249 284 506 643 296 458




Exhibit 12



150 340 296 170 156 417 471 209 248 130 406 424 229 251 486 603 273 357 120 441 490 265 310 521 672 314 425 110 477 558 308 380 558 743 361 506 100 513 629 360 465 596 815 418 603 90 551 701 423 568 634 890 488 721 50 713 1010 929 1392 802 1210 1045 1668



Exhibit 13



278316

379

457

549

302

370

472

599

752

0

100

200

300

400

500

600

700

800

2012 2013 2014 2015 2016

Trade Balance Model




6


7



Exhibit 14


45

7496 96

84 91

56 69 7657 46 43 47

315

0

5

10

15

20

25

30

35

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025+

US$bn













Exhibit 15


1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16

Rus

Arg

Bra

Bul

Chile

China Col

Cro

Czh

Egy

Hun

IndoIsr

Kaz

Kor

Lith

MalMexPerPhi

Pol

Qat

Rom

Soaf

ThaiTurk

Ukr

VEN

Aus

Ger

Uk

Sw d

Jap

0

100

200

300

400

500

600

700

800

900


5-ye

ar C

DS

(b

p)








standards

8



Methodology








October 5 2011)

9











Exhibit 16


(653)(1154)(3000)(803)(102)(21899) 287 (27324)


price

Change indomestic

consumption


Change incapex






10




Exhibit 17


0

2000

4000

6000

8000

10000

12000

2012 2013 2014 2015 2016 2017 2018-2024 2025+





Exhibit 18



Suppliers 10000








11



Exhibit 19



Production (mbpd) 2500 2500 2500 2500 2500 2500 2500 2500 2500

Revenue 21538 25458 29378 33299 37219 41139 45059 48979 52899

Adjusted EBITDA (479) 1514 3507 5500 7493 9486 11478 13471 15464

Capex (15000) (15000) (15000) (15000) (15000) (15000) (15000) (15000) (15000)

OCF (15479) (13486) (11493) (9500) (7507) (5514) (3522) (1529) 464

Social costs (15000) (15000) (15000) (15000) (15000) (15000) (15000) (15000) (15000)

FCF (37635) (35917) (34198) (32479) (30761) (29042) (27324) (25605) (23887)





OCFRevenue -72 -53 -39 -29 -20 -13 -8 -3 1













12





13




London


New York


Hong Kong



EM Economics




14











of Total IBC




15







16


17





The Americas

1585 Broadway


United States

Tel +1 (1)212 761 4000

Europe


London E14 4AD

United Kingdom

Tel +44 (0) 20 7 425 8000

Japan


Tokyo 150-6008

Japan

Tel +81 (0)3 5424 5000

AsiaPacific

1 Austin Road West

Kowloon

Hong Kong

Tel +852 2848 5200







Exhibit 8


90

95

100

105

110

115

1 M

nth

3 M

nth

6 M

nth

9 M

nth

12 M

nth

15 M

nth

18 M

nth

21 M

nth

24 M

nth

27 M

nth

30 M

nth

33 M

nth

36 M

nth

39 M

nth

42 M

nth

45 M

nth

48 M

nth

51 M

nth

54 M

nth

57 M

nth

60 M

nth

March12

March11





Exhibit 9









5



Exhibit 10


External DebtGDP ()

440481

536

602

680

478

563

667

789

931

0

10

20

30

40

50

60

70

80

90

100

2012 2013 2014 2015 2016

Trade Balance Model





Exhibit 11



62 477 558 308 380 558 743 361 506 70 425 462 249 284 506 643 296 458




Exhibit 12



150 340 296 170 156 417 471 209 248 130 406 424 229 251 486 603 273 357 120 441 490 265 310 521 672 314 425 110 477 558 308 380 558 743 361 506 100 513 629 360 465 596 815 418 603 90 551 701 423 568 634 890 488 721 50 713 1010 929 1392 802 1210 1045 1668



Exhibit 13



278316

379

457

549

302

370

472

599

752

0

100

200

300

400

500

600

700

800

2012 2013 2014 2015 2016

Trade Balance Model




6


7



Exhibit 14


45

7496 96

84 91

56 69 7657 46 43 47

315

0

5

10

15

20

25

30

35

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025+

US$bn













Exhibit 15


1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16

Rus

Arg

Bra

Bul

Chile

China Col

Cro

Czh

Egy

Hun

IndoIsr

Kaz

Kor

Lith

MalMexPerPhi

Pol

Qat

Rom

Soaf

ThaiTurk

Ukr

VEN

Aus

Ger

Uk

Sw d

Jap

0

100

200

300

400

500

600

700

800

900


5-ye

ar C

DS

(b

p)








standards

8



Methodology








October 5 2011)

9











Exhibit 16


(653)(1154)(3000)(803)(102)(21899) 287 (27324)


price

Change indomestic

consumption


Change incapex






10




Exhibit 17


0

2000

4000

6000

8000

10000

12000

2012 2013 2014 2015 2016 2017 2018-2024 2025+





Exhibit 18



Suppliers 10000








11



Exhibit 19



Production (mbpd) 2500 2500 2500 2500 2500 2500 2500 2500 2500

Revenue 21538 25458 29378 33299 37219 41139 45059 48979 52899

Adjusted EBITDA (479) 1514 3507 5500 7493 9486 11478 13471 15464

Capex (15000) (15000) (15000) (15000) (15000) (15000) (15000) (15000) (15000)

OCF (15479) (13486) (11493) (9500) (7507) (5514) (3522) (1529) 464

Social costs (15000) (15000) (15000) (15000) (15000) (15000) (15000) (15000) (15000)

FCF (37635) (35917) (34198) (32479) (30761) (29042) (27324) (25605) (23887)





OCFRevenue -72 -53 -39 -29 -20 -13 -8 -3 1













12





13




London


New York


Hong Kong



EM Economics




14











of Total IBC




15







16


17





The Americas

1585 Broadway


United States

Tel +1 (1)212 761 4000

Europe


London E14 4AD

United Kingdom

Tel +44 (0) 20 7 425 8000

Japan


Tokyo 150-6008

Japan

Tel +81 (0)3 5424 5000

AsiaPacific

1 Austin Road West

Kowloon

Hong Kong

Tel +852 2848 5200




Exhibit 10


External DebtGDP ()

440481

536

602

680

478

563

667

789

931

0

10

20

30

40

50

60

70

80

90

100

2012 2013 2014 2015 2016

Trade Balance Model





Exhibit 11



62 477 558 308 380 558 743 361 506 70 425 462 249 284 506 643 296 458




Exhibit 12



150 340 296 170 156 417 471 209 248 130 406 424 229 251 486 603 273 357 120 441 490 265 310 521 672 314 425 110 477 558 308 380 558 743 361 506 100 513 629 360 465 596 815 418 603 90 551 701 423 568 634 890 488 721 50 713 1010 929 1392 802 1210 1045 1668



Exhibit 13



278316

379

457

549

302

370

472

599

752

0

100

200

300

400

500

600

700

800

2012 2013 2014 2015 2016

Trade Balance Model




6


7



Exhibit 14


45

7496 96

84 91

56 69 7657 46 43 47

315

0

5

10

15

20

25

30

35

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025+

US$bn













Exhibit 15


1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16

Rus

Arg

Bra

Bul

Chile

China Col

Cro

Czh

Egy

Hun

IndoIsr

Kaz

Kor

Lith

MalMexPerPhi

Pol

Qat

Rom

Soaf

ThaiTurk

Ukr

VEN

Aus

Ger

Uk

Sw d

Jap

0

100

200

300

400

500

600

700

800

900


5-ye

ar C

DS

(b

p)








standards

8



Methodology








October 5 2011)

9











Exhibit 16


(653)(1154)(3000)(803)(102)(21899) 287 (27324)


price

Change indomestic

consumption


Change incapex






10




Exhibit 17


0

2000

4000

6000

8000

10000

12000

2012 2013 2014 2015 2016 2017 2018-2024 2025+





Exhibit 18



Suppliers 10000








11



Exhibit 19



Production (mbpd) 2500 2500 2500 2500 2500 2500 2500 2500 2500

Revenue 21538 25458 29378 33299 37219 41139 45059 48979 52899

Adjusted EBITDA (479) 1514 3507 5500 7493 9486 11478 13471 15464

Capex (15000) (15000) (15000) (15000) (15000) (15000) (15000) (15000) (15000)

OCF (15479) (13486) (11493) (9500) (7507) (5514) (3522) (1529) 464

Social costs (15000) (15000) (15000) (15000) (15000) (15000) (15000) (15000) (15000)

FCF (37635) (35917) (34198) (32479) (30761) (29042) (27324) (25605) (23887)





OCFRevenue -72 -53 -39 -29 -20 -13 -8 -3 1













12





13




London


New York


Hong Kong



EM Economics




14











of Total IBC




15







16


17





The Americas

1585 Broadway


United States

Tel +1 (1)212 761 4000

Europe


London E14 4AD

United Kingdom

Tel +44 (0) 20 7 425 8000

Japan


Tokyo 150-6008

Japan

Tel +81 (0)3 5424 5000

AsiaPacific

1 Austin Road West

Kowloon

Hong Kong

Tel +852 2848 5200



7



Exhibit 14


45

7496 96

84 91

56 69 7657 46 43 47

315

0

5

10

15

20

25

30

35

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025+

US$bn













Exhibit 15


1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16

Rus

Arg

Bra

Bul

Chile

China Col

Cro

Czh

Egy

Hun

IndoIsr

Kaz

Kor

Lith

MalMexPerPhi

Pol

Qat

Rom

Soaf

ThaiTurk

Ukr

VEN

Aus

Ger

Uk

Sw d

Jap

0

100

200

300

400

500

600

700

800

900


5-ye

ar C

DS

(b

p)








standards

8



Methodology








October 5 2011)

9











Exhibit 16


(653)(1154)(3000)(803)(102)(21899) 287 (27324)


price

Change indomestic

consumption


Change incapex






10




Exhibit 17


0

2000

4000

6000

8000

10000

12000

2012 2013 2014 2015 2016 2017 2018-2024 2025+





Exhibit 18



Suppliers 10000








11



Exhibit 19



Production (mbpd) 2500 2500 2500 2500 2500 2500 2500 2500 2500

Revenue 21538 25458 29378 33299 37219 41139 45059 48979 52899

Adjusted EBITDA (479) 1514 3507 5500 7493 9486 11478 13471 15464

Capex (15000) (15000) (15000) (15000) (15000) (15000) (15000) (15000) (15000)

OCF (15479) (13486) (11493) (9500) (7507) (5514) (3522) (1529) 464

Social costs (15000) (15000) (15000) (15000) (15000) (15000) (15000) (15000) (15000)

FCF (37635) (35917) (34198) (32479) (30761) (29042) (27324) (25605) (23887)





OCFRevenue -72 -53 -39 -29 -20 -13 -8 -3 1













12





13




London


New York


Hong Kong



EM Economics




14











of Total IBC




15







16


17





The Americas

1585 Broadway


United States

Tel +1 (1)212 761 4000

Europe


London E14 4AD

United Kingdom

Tel +44 (0) 20 7 425 8000

Japan


Tokyo 150-6008

Japan

Tel +81 (0)3 5424 5000

AsiaPacific

1 Austin Road West

Kowloon

Hong Kong

Tel +852 2848 5200













Exhibit 15


1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16

Rus

Arg

Bra

Bul

Chile

China Col

Cro

Czh

Egy

Hun

IndoIsr

Kaz

Kor

Lith

MalMexPerPhi

Pol

Qat

Rom

Soaf

ThaiTurk

Ukr

VEN

Aus

Ger

Uk

Sw d

Jap

0

100

200

300

400

500

600

700

800

900


5-ye

ar C

DS

(b

p)








standards

8



Methodology








October 5 2011)

9











Exhibit 16


(653)(1154)(3000)(803)(102)(21899) 287 (27324)


price

Change indomestic

consumption


Change incapex






10




Exhibit 17


0

2000

4000

6000

8000

10000

12000

2012 2013 2014 2015 2016 2017 2018-2024 2025+





Exhibit 18



Suppliers 10000








11



Exhibit 19



Production (mbpd) 2500 2500 2500 2500 2500 2500 2500 2500 2500

Revenue 21538 25458 29378 33299 37219 41139 45059 48979 52899

Adjusted EBITDA (479) 1514 3507 5500 7493 9486 11478 13471 15464

Capex (15000) (15000) (15000) (15000) (15000) (15000) (15000) (15000) (15000)

OCF (15479) (13486) (11493) (9500) (7507) (5514) (3522) (1529) 464

Social costs (15000) (15000) (15000) (15000) (15000) (15000) (15000) (15000) (15000)

FCF (37635) (35917) (34198) (32479) (30761) (29042) (27324) (25605) (23887)





OCFRevenue -72 -53 -39 -29 -20 -13 -8 -3 1













12





13




London


New York


Hong Kong



EM Economics




14











of Total IBC




15







16


17





The Americas

1585 Broadway


United States

Tel +1 (1)212 761 4000

Europe


London E14 4AD

United Kingdom

Tel +44 (0) 20 7 425 8000

Japan


Tokyo 150-6008

Japan

Tel +81 (0)3 5424 5000

AsiaPacific

1 Austin Road West

Kowloon

Hong Kong

Tel +852 2848 5200




Methodology








October 5 2011)

9











Exhibit 16


(653)(1154)(3000)(803)(102)(21899) 287 (27324)


price

Change indomestic

consumption


Change incapex






10




Exhibit 17


0

2000

4000

6000

8000

10000

12000

2012 2013 2014 2015 2016 2017 2018-2024 2025+





Exhibit 18



Suppliers 10000








11



Exhibit 19



Production (mbpd) 2500 2500 2500 2500 2500 2500 2500 2500 2500

Revenue 21538 25458 29378 33299 37219 41139 45059 48979 52899

Adjusted EBITDA (479) 1514 3507 5500 7493 9486 11478 13471 15464

Capex (15000) (15000) (15000) (15000) (15000) (15000) (15000) (15000) (15000)

OCF (15479) (13486) (11493) (9500) (7507) (5514) (3522) (1529) 464

Social costs (15000) (15000) (15000) (15000) (15000) (15000) (15000) (15000) (15000)

FCF (37635) (35917) (34198) (32479) (30761) (29042) (27324) (25605) (23887)





OCFRevenue -72 -53 -39 -29 -20 -13 -8 -3 1













12





13




London


New York


Hong Kong



EM Economics




14











of Total IBC




15







16


17





The Americas

1585 Broadway


United States

Tel +1 (1)212 761 4000

Europe


London E14 4AD

United Kingdom

Tel +44 (0) 20 7 425 8000

Japan


Tokyo 150-6008

Japan

Tel +81 (0)3 5424 5000

AsiaPacific

1 Austin Road West

Kowloon

Hong Kong

Tel +852 2848 5200












Exhibit 16


(653)(1154)(3000)(803)(102)(21899) 287 (27324)


price

Change indomestic

consumption


Change incapex






10




Exhibit 17


0

2000

4000

6000

8000

10000

12000

2012 2013 2014 2015 2016 2017 2018-2024 2025+





Exhibit 18



Suppliers 10000








11



Exhibit 19



Production (mbpd) 2500 2500 2500 2500 2500 2500 2500 2500 2500

Revenue 21538 25458 29378 33299 37219 41139 45059 48979 52899

Adjusted EBITDA (479) 1514 3507 5500 7493 9486 11478 13471 15464

Capex (15000) (15000) (15000) (15000) (15000) (15000) (15000) (15000) (15000)

OCF (15479) (13486) (11493) (9500) (7507) (5514) (3522) (1529) 464

Social costs (15000) (15000) (15000) (15000) (15000) (15000) (15000) (15000) (15000)

FCF (37635) (35917) (34198) (32479) (30761) (29042) (27324) (25605) (23887)





OCFRevenue -72 -53 -39 -29 -20 -13 -8 -3 1













12





13




London


New York


Hong Kong



EM Economics




14











of Total IBC




15







16


17





The Americas

1585 Broadway


United States

Tel +1 (1)212 761 4000

Europe


London E14 4AD

United Kingdom

Tel +44 (0) 20 7 425 8000

Japan


Tokyo 150-6008

Japan

Tel +81 (0)3 5424 5000

AsiaPacific

1 Austin Road West

Kowloon

Hong Kong

Tel +852 2848 5200





Exhibit 17


0

2000

4000

6000

8000

10000

12000

2012 2013 2014 2015 2016 2017 2018-2024 2025+





Exhibit 18



Suppliers 10000








11



Exhibit 19



Production (mbpd) 2500 2500 2500 2500 2500 2500 2500 2500 2500

Revenue 21538 25458 29378 33299 37219 41139 45059 48979 52899

Adjusted EBITDA (479) 1514 3507 5500 7493 9486 11478 13471 15464

Capex (15000) (15000) (15000) (15000) (15000) (15000) (15000) (15000) (15000)

OCF (15479) (13486) (11493) (9500) (7507) (5514) (3522) (1529) 464

Social costs (15000) (15000) (15000) (15000) (15000) (15000) (15000) (15000) (15000)

FCF (37635) (35917) (34198) (32479) (30761) (29042) (27324) (25605) (23887)





OCFRevenue -72 -53 -39 -29 -20 -13 -8 -3 1













12





13




London


New York


Hong Kong



EM Economics




14











of Total IBC




15







16


17





The Americas

1585 Broadway


United States

Tel +1 (1)212 761 4000

Europe


London E14 4AD

United Kingdom

Tel +44 (0) 20 7 425 8000

Japan


Tokyo 150-6008

Japan

Tel +81 (0)3 5424 5000

AsiaPacific

1 Austin Road West

Kowloon

Hong Kong

Tel +852 2848 5200




Exhibit 19



Production (mbpd) 2500 2500 2500 2500 2500 2500 2500 2500 2500

Revenue 21538 25458 29378 33299 37219 41139 45059 48979 52899

Adjusted EBITDA (479) 1514 3507 5500 7493 9486 11478 13471 15464

Capex (15000) (15000) (15000) (15000) (15000) (15000) (15000) (15000) (15000)

OCF (15479) (13486) (11493) (9500) (7507) (5514) (3522) (1529) 464

Social costs (15000) (15000) (15000) (15000) (15000) (15000) (15000) (15000) (15000)

FCF (37635) (35917) (34198) (32479) (30761) (29042) (27324) (25605) (23887)





OCFRevenue -72 -53 -39 -29 -20 -13 -8 -3 1













12





13




London


New York


Hong Kong



EM Economics




14











of Total IBC




15







16


17





The Americas

1585 Broadway


United States

Tel +1 (1)212 761 4000

Europe


London E14 4AD

United Kingdom

Tel +44 (0) 20 7 425 8000

Japan


Tokyo 150-6008

Japan

Tel +81 (0)3 5424 5000

AsiaPacific

1 Austin Road West

Kowloon

Hong Kong

Tel +852 2848 5200






13




London


New York


Hong Kong



EM Economics




14











of Total IBC




15







16


17





The Americas

1585 Broadway


United States

Tel +1 (1)212 761 4000

Europe


London E14 4AD

United Kingdom

Tel +44 (0) 20 7 425 8000

Japan


Tokyo 150-6008

Japan

Tel +81 (0)3 5424 5000

AsiaPacific

1 Austin Road West

Kowloon

Hong Kong

Tel +852 2848 5200





London


New York


Hong Kong



EM Economics




14











of Total IBC




15







16


17





The Americas

1585 Broadway


United States

Tel +1 (1)212 761 4000

Europe


London E14 4AD

United Kingdom

Tel +44 (0) 20 7 425 8000

Japan


Tokyo 150-6008

Japan

Tel +81 (0)3 5424 5000

AsiaPacific

1 Austin Road West

Kowloon

Hong Kong

Tel +852 2848 5200












of Total IBC




15







16


17





The Americas

1585 Broadway


United States

Tel +1 (1)212 761 4000

Europe


London E14 4AD

United Kingdom

Tel +44 (0) 20 7 425 8000

Japan


Tokyo 150-6008

Japan

Tel +81 (0)3 5424 5000

AsiaPacific

1 Austin Road West

Kowloon

Hong Kong

Tel +852 2848 5200








16


17





The Americas

1585 Broadway


United States

Tel +1 (1)212 761 4000

Europe


London E14 4AD

United Kingdom

Tel +44 (0) 20 7 425 8000

Japan


Tokyo 150-6008

Japan

Tel +81 (0)3 5424 5000

AsiaPacific

1 Austin Road West

Kowloon

Hong Kong

Tel +852 2848 5200



17





The Americas

1585 Broadway


United States

Tel +1 (1)212 761 4000

Europe


London E14 4AD

United Kingdom

Tel +44 (0) 20 7 425 8000

Japan


Tokyo 150-6008

Japan

Tel +81 (0)3 5424 5000

AsiaPacific

1 Austin Road West

Kowloon

Hong Kong

Tel +852 2848 5200



The Americas

1585 Broadway


United States

Tel +1 (1)212 761 4000

Europe


London E14 4AD

United Kingdom

Tel +44 (0) 20 7 425 8000

Japan


Tokyo 150-6008

Japan

Tel +81 (0)3 5424 5000

AsiaPacific

1 Austin Road West

Kowloon

Hong Kong

Tel +852 2848 5200


Economy & Finance

Ms venny2012