1. Belize Natural Energy
Economic and Business Perspectives
June 28, 2006

2. Four Key Points
 Spanish Lookout field is relatively small (a “Drop
in the Bucket”)
 Potential exists to find more oil, but the high risk
dollars are needed
 We are depending on borrowing, from the bank
and shareholders, BZD$ 100 million to explore and
find more oil
 Changing the tax scares the money away
 Honoring the original deal will encourage the
discovery of more oil for everyone

3. FYI FACTS
 Current production of 2,800 Bbl/Day
 Current reserves of 10 million Bbls
 Significant new Belize employer:
 145 Belizean employees
 400+ Belizean support jobs in other companies

4. FYI FACTS
 BNE has invested BZD$ 40 million over the past
three years
 BNE Personnel, over the past 20 years, BZD$ 74
million invested
 We are spending BZD$ 6 million per month
 BNE is spending more money than we are
making (no cash profits realized to date)
 We have just drilled two dry holes for a total cost
to date of BZD$ 3.6 million
 Mike Usher #6
 Roaring Creek #2

5. FYI FACTS
 Now to get further oil out of the ground we need
to borrow BZD$ 100 million
 Standard Bank (BZD$ 60 million)
 Investors (BZD$ 40 million)
 Standard Bank is sending three of their people
on the 10th
of July to reassess the risk
 Proposed tax changes are scaring the money
away

6. FYI FACTS
 If we increase the taxes, we may not get the loan
or investor money
 Certainly it will keep the oil at best at a trickle to
what it could have been
 We cannot explore further if we cannot raise the
capital needed
 Critical that the goal posts not be moved
 It is the equivalent of killing the goose that lays
the golden eggs

7. Assumptions
 The following economics are for the oil industry in Belize as a whole, not
just BNE
 Economics completed on a per barrel basis
 One barrel equals 42 gallons
 Oil Price – 12-month average of $60/bbl (past five years price: $35/bbl)
 Quality Differential (crude is new and has sulfur, which lessens the value)
 Transportation Cost – Trucking of $3/bbl and Barge Costs of $7/bbl (e.g.
Barge Rental plus Cargo charges costs approximately $588,000 per month)
 Overhead and Operating Cost – ($5/bbl) Production Costs for the wells and
Office General And Administrative Expenses; this is a conservative estimate
 Development Capital - $4/bbl spent on the remaining development wells to
be drilled in Spanish Lookout (conservative assumption)
 Exploration Cost - $10/bbl is a low and conservative estimate
 To date in Belize, $250,000,000 USD have been spent searching for oil
and only 10,000,000 barrels have been found, implying an exploration
cost of $25/barrel

8. Assumptions
 Royalty is calculated as ((Income After Transport) X 8.5% (7.5% GOB
Royalty + 1.0% Environmental Royalty)
 For 25% Tax Case: $46 (Income after Transport) X 8.5% = $3.91
 Working Interest of 10% is calculated as: (Net Profit – Royalties +
Exploration Cost the GOB will not pay for, we add this back into the GOB
share) X 10%
 Under the working interest, the GOB only pays for successful
exploration. As a rule of thumb, country-wide, only 20% of the dollars
spent on exploration will result in successful wells, which means the
government will only allow us to expense 20% of the exploration cost
before their share is calculated, so we’ll add back in 80% of the
exploration cost
 For 25% Tax Case: ($27 (Net profit after exploration costs) – 3.91
(Royalty) + (10 X 80% = 8) (Exploration cost on unsuccessful wells added
back in to GOB share) X 10% = 3.11

9. Assumptions
 Production Sharing is calculated as (Net Profit – Royalty – Working Interest
+ Exploration Cost the GOB will not pay for) X 1.5%
 Under Production Sharing, the GOB only pays for exploration on the
current license block, which industry wide will account for only 30% of
exploration dollars spent
 This is because oil companies will participate in drilling on other
license blocks as much as possible, a common industry practice (joint
ventures)
 For 25% Tax Case: ($27 - 3.91 (Royalty) – 3.11 (Working Interest) + ($10
X 70% = $7) (off-block exploration cost added back in to GOB share) X
1.5% = $0.40

10. Assumptions
 Income Tax of 25% is calculated as (Net Profit – Royalty – Working Interest
– Production Sharing + Exploration Cost the GOB will not pay for) X 25%
 Under Income Tax, the GOB only pays for exploration that produces oil
revenues. Ventures which do not meet with success do not get to charge
to the GOB any of their exploration expenses. Since this is an industry-
wide analysis, we should assume that half of the exploration conducted
cannot charge their exploration costs to the GOB
 For 25% Tax Case: ($27 – 3.91 (Royalty) – 3.11 (Working Interest) – 0.40
(Production Sharing) + ($10 X 50% = 5) (Unexpensable exploration cost))
X 25% = $6.14

11. Assumptions
 The following economics were
computed based on industry-wide
figures for the entire Belizean oil
industry, not just BNE
 This is because the income tax law
will apply to all oil companies in
Belize, not just BNE

12. GOB Share – 25% Tax
$ USD/Bbl
Oil Price (NYMEX) 60.00$ 12-month avg.
Less: Quality Differential (4.00)
Less: Transportation Cost (10.00) Trucking and barge.
Income after Transport 46.00
Less: Overhead and Operating (5.00) Production and Office.
Operating Margin (Income) 41.00
Less: Development Capital (4.00) Development Wells.
Less: Exploration Cost (10.00) Likely to be Higher.
Net Profit (per bbl) 27.00$
$USD/Bbl % Net Profit
Royalties (8.5%) - Gross Interest 3.91$ 14%
(net of transport and quality differential)
Working Interest (10%) 3.11 12%
(GOB pays successful exploration only - 20% of exploration)
Production Sharing Interest (1.5%) 0.40 1%
(GOB pays exploration on current block only - 30% of expl. cost)
Income Tax (25%) 6.14 23%
(GOB pays revenue producing exploration only - 50% of expl. cost)
Total Government Cash Inflows 13.57$ 50%

13. GOB Share – 40% Tax
$ USD/Bbl
Oil Price (NYMEX) 60.00$ 12-month avg.
Less: Quality Differential (4.00)
Less: Transportation Cost (10.00) Trucking and barge.
Income after Transport 46.00
Less: Overhead and Operating (5.00) Production and Office.
Operating Margin (Income) 41.00
Less: Development Capital (4.00) Development Wells.
Less: Exploration Cost (10.00) Likely to be Higher.
Net Profit (per bbl) 27.00$
$USD/Bbl % Net Profit
Royalties (8.5%) - Gross Interest 3.91$ 14%
(net of transport and quality differential)
Working Interest (10%) 3.11 12%
(GOB pays successful exploration only - 20% of exploration)
Production Sharing Interest (1.5%) 0.40 1%
(GOB pays exploration on current block only - 30% of expl. cost)
Income Tax (40%) 9.83 36%
(GOB pays revenue producing exploration only - 50% of expl. cost)
Total Government Cash Inflows 17.25$ 64%

14. Exploration Costs
Higher Exploration Costs, more money spent on
exploration in Belize, means a higher share for
the Government of Belize.
The next few slides illustrate this conclusion.

15. GOB Share - $10 Expl.
$ USD/Bbl
Oil Price (NYMEX) 60.00$ 12-month avg.
Less: Quality Differential (4.00)
Less: Transportation Cost (10.00) Trucking and barge.
Income after Transport 46.00
Less: Overhead and Operating (5.00) Production and Office.
Operating Margin (Income) 41.00
Less: Development Capital (4.00) Development Wells.
Less: Exploration Cost (10.00) Likely to be Higher.
Net Profit (per bbl) 27.00$
$USD/Bbl % Net Profit
Royalties (8.5%) - Gross Interest 3.91$ 14%
(net of transport and quality differential)
Working Interest (10%) 3.11 12%
(GOB pays successful exploration only - 20% of exploration)
Production Sharing Interest (1.5%) 0.40 1%
(GOB pays exploration on current block only - 30% of expl. cost)
Income Tax (25%) 6.14 23%
(GOB pays revenue producing exploration only - 50% of expl. cost)
Total Government Cash Inflows 13.57$ 50%

16. GOB Share - $12 Expl.
$ USD/Bbl
Oil Price (NYMEX) 60.00$ 12-month avg.
Less: Quality Differential (4.00)
Less: Transportation Cost (10.00) Trucking and barge.
Income after Transport 46.00
Less: Overhead and Operating (5.00) Production and Office.
Operating Margin (Income) 41.00
Less: Development Capital (4.00) Development Wells.
Less: Exploration Cost (12.00) Likely to be Higher.
Net Profit (per bbl) 25.00$
$USD/Bbl % Net Profit
Royalties (8.5%) - Gross Interest 3.91$ 16%
(net of transport and quality differential)
Working Interest (10%) 3.07 12%
(GOB pays successful exploration only - 20% of exploration)
Production Sharing Interest (1.5%) 0.40 2%
(GOB pays exploration on current block only - 30% of expl. cost)
Income Tax (25%) 5.91 24%
(GOB pays revenue producing exploration only - 50% of expl. cost)
Total Government Cash Inflows 13.28$ 53%

17. GOB Share - $15 Expl.
$ USD/Bbl
Oil Price (NYMEX) 60.00$ 12-month avg.
Less: Quality Differential (4.00)
Less: Transportation Cost (10.00) Trucking and barge.
Income after Transport 46.00
Less: Overhead and Operating (5.00) Production and Office.
Operating Margin (Income) 41.00
Less: Development Capital (4.00) Development Wells.
Less: Exploration Cost (15.00) Likely to be Higher.
Net Profit (per bbl) 22.00$
$USD/Bbl % Net Profit
Royalties (8.5%) - Gross Interest 3.91$ 18%
(net of transport and quality differential)
Working Interest (10%) 3.01 14%
(GOB pays successful exploration only - 20% of exploration)
Production Sharing Interest (1.5%) 0.38 2%
(GOB pays exploration on current block only - 30% of expl. cost)
Income Tax (25%) 5.55 25%
(GOB pays revenue producing exploration only - 50% of expl. cost)
Total Government Cash Inflows 12.85$ 58%

18. Future
 At 25% income tax and $10 in exploratory
spending, the GOB receives half of net profits (a
50/50 deal)
 The more dollars spent in exploration means a
higher share for the GOB
 To ensure we receive the bank loan and investor
capital, we must keep the income tax rate at an
economically manageable 25%
 This is critical to keeping the fledgling oil
industry alive in Belize

19. Four Key Points
 Spanish Lookout field is relatively small (a “Drop
in the Bucket”)
 Potential exists to find more oil, but the high risk
dollars are needed
 We are depending on borrowing, from the bank
and shareholders, $100 BZ million to explore and
find more oil
 Changing the deal scares the money away
 Honoring the original deal will encourage the
discovery of more oil for everyone

20. Belize Natural Energy
THANK YOU
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presentation.