Introduction and Background
On June 27, 2016, the Government of the Cooperative Republic of Guyana (GoG) entered into the
Petroleum Agreement with Esso Exploration and Production Guyana Limited (EEPGL), CNOOC
Nexen Petroleum Guyana Limited, and Hess Guyana Exploration Limited for the purposes of
petroleum operations and producing oil and gas in the offshore waters of Guyana. Esso, CNOOC,
and Hess are all referred to as the Contractor, with EEPGL acting as the “operator” of Stabroek
Block Petroleum Operations and performing the Cost Recovery accounting. Martindale
Consultants, Inc. was engaged by VHE Consulting to perform a Cost Recovery audit on behalf of
the GoG, in accordance with the Petroleum Agreement, which includes both cost and revenue
components. This portion of the report discusses oil and gas produced from the Destiny Liza wells
and associated Cost Oil, Cost Gas, Profit Oil and Profit Gas, and the average fair market price
determined according to the Petroleum Agreement.

The Destiny Liza 1P3 and Destiny Liza 2P4 wells were drilled by Stena and Noble and began
producing oil and gas on December 19, 2019, to the Destiny Liza FPSO (Floating Production
Storage and Offloading) vessel. In December 2020, a total of 14 wells were producing, with six
wells producing oil and gas, two were gas injection wells, and six were water injection wells. From
December 2019 through December 2020, a total of 27,625,084 barrels of oil and 30,735,345 Mcf
of natural gas had been produced. Produced oil is stored on the Destiny Liza FPSO and offloaded
for sales. During this period, all gas produced was either used for fuel, flared, or injected back into
the formation for future oil recovery purposes. No gas was sold; as such, there was no Cost Gas
or Profit Gas.

Article 11 of the Petroleum Agreement discusses Cost Recovery and how Cost Oil, Cost Gas,
Profit Oil, and Profit Gas are determined. Article 13 provides the governing provisions for the
average fair market price to value the Cost Oil and Cost Gas (if applicable). Ernst & Young (EY)
as an independent international accounting firm, determines the average fair market price and
provides the determinations on monthly statements to EEPGL and the GoG.

EEPGL provided the monthly statements it submits to the GoG as support for production and Cost
Oil/Profit Oil allocations. The GoG provided EY’s monthly pricing documentation. Using this
information, we reviewed all months from December 2019 through December 2020…