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Initiating Coverage on
Greenfields Petroleum
Corporation
RESEARCH ANALYST:
Stephane G. Foucaud, P.Eng.
+44-207-448-0213 • sgfoucaud@firstenergy.com
TSX.V Listed: GNF.S
Price: C$9.00
Opinion: TOP PICK
12 Month Target Price: C$15.00
04 January, 2011
London Office: +44-207-448-0200
REGULATORY DISCLOSURES - PAGE 19
www.firstenergy.com
Greenfields Petroleum Corporation - GNF.S
04 January, 2011
Table of Contents
Highlights
Highlights...........................................................................2
Investment Summary .......................................................3
The Only Azeri Pure Play Listed in London or
Toronto .........................................................................4
Proved Plus Probable Reserves of 26.6 mmboe and
Potential Additional Upside of 57.6 mmboe of
Recoverable Resources in Two Mature Fields .......5
12 Month Newsflow Catalysts: Visibility on
Exploration Potential and Reserves Booking ..........7
Valuation: 120% Potential Upside in 12 Months,
Trading Significantly Below Core NAV ..................8
We are initiating coverage on Greenfields Petroleum
Corporation (GNF.S CN), a C$130 mm market cap
company listed on the TSX-V, with a Top Pick recommendation and a target price of C$15.00 per share.
Greenfields offers a unique investment vehicle to play
Azerbaijan, the most attractive address among the
Caspian States. Azerbaijan holds numerous giant fields
and provides the only gateway from the Caspian to the
West, independent from Russia.
Appendix
Detailed Asset Description ............................................12
Financials ..........................................................................14
Fiscal Terms .....................................................................14
Assumption and Valuation Methodology...................15
Country Review: Azerbaijan .........................................15
Shareholding and Corporate Structure........................15
Management ....................................................................16
Corporate Development Timeline ................................17
The Company holds a 26.6% WI in two giant fields
being developed in the shallow waters of the Caspian
Sea, with 26.6 mmboe of Proved plus Probable working interest (WI) reserves, based on a very conservative
recovery factor. Near-term potential upside include
(1) tripling booked reserves by increasing recovery
factor and (2) farming down the Bahar 2 exploration
block. The share currently trades well below core NAV
(C$11.38 per share based on booked reserves) and our
12 month unrisked NAV stands at C$19.70 per share,
119% above the current share price.
*Front cover photo credit: Greenfields Petroleum Corporation
For Regulatory Disclosures, Please Go to Our Website:
http://firstenergy.com/research/regulatory.php or fax us at (403) 262-0666
Our policy on the dissemination of research can be found at http://firstenergy.com/research/regulatory.php
Sources for tabular data and charts are FirstEnergy Capital Corp. and Company Reports unless otherwise noted.
This report has not been approved by FirstEnergy Capital LLP for the purposes of section 21 of the Financial Services and Markets Act
2000 as it is being distributed only to persons who are investment professionals within the meaning of article 19 of the Financial Services
and Markets Act 2000 (Financial Promotion) Order 2005 and is not intended to, and should not be relied upon, by any other person.
Authorised and regulated by the Financial Services Authority
3
Investment Summary
exploration block and intends to farm-down its interests
in the exploratory opportunity in 2011e or 2012e. Given
the prospectivity of this track being located between two
giant gas fields (5.3 tcf and 25 tcf), the upside prospectivity could potentially be very large.
We are initiating coverage on Greenfields Petroleum
Corporation (GNF.S CN) with a Top Pick recommendation and a target price of C$15.00 per share, broadly
in line with our risked NAV.
A unique investment vehicle to play Azerbaijan, the
most attractive address among the Caspian States
– Azerbaijan holds numerous giant fields, including
the famous multi-billion barrel oil field, ACG, and the
giant Shah Deniz gas fields operated by BP and named
the “Deal of the Century”. Numerous Super Majors
and Majors have holdings in the Country. Azerbaijan
has proven to offer the most stable fiscal environment
in the region for foreign oil and gas companies. Importantly, with the start up of CPC and the SPC pipelines
just a few years ago, Azerbaijan is the only gateway
from the Caspian to the West that is independent from
Russia.
Low technical risk – the base case is about developing
26.6 mmboe of Proved plus Probable reserves (WI) in
two mature fields – After payout, Greenfields holds a
26.6% WI in the mature Gum Deniz light oil field and
the Bahar gas field, in the shallow waters of the Caspian Sea and adjacent to ACG and Shah Deniz. Greenfield’s two fields have estimated WI Proved plus Probable reserves of 11.6 mmbbl oil and condensate and
90.6 bcf of natural gas. Note that 75% of the Proved
plus Probable reserves are actually in the proven category! The Company currently produces 1,740 boe/d
(September 2010), with production expected to increase
to 6,410 boe/d by 2013e.
16.00
14.00
Risked Upside
Core NAV
12.00
10.00
8.00
6.00
4.00
2 00
2.00
Risked NAV
Recovery factor increased to
15% for Bahar
Bahar 2 Exploration Area
Total Core NAV
Recovery factor increased to
15% for Gum Deniz and Behar
Source: FirstEnergy Capital, Company Reports
G&A
Net Cash
0.00
Gum Deniz and Bahar
Visibility on the large Bahar 2
exploration block in 2011 – Greenfields has a 3D seismic program
currently underway in the Bahar 2
Attractive economics – Offtake contracts are already in
place, with gas production sold to Socar, the national oil
company, at a fixed price of US$3.96/mcf at the wellhead. The oil is priced at the wellhead at only a US$6.00/
bbl discount to Brent. We estimate average operating
netbacks at US$20.60/boe in 2011e and US$25.50/boe in
2012e, with a typical Azeri attractive PSC. Development
cost for Greenfields’ share of the field is only estimated
at US$6.60/boe Proven plus Probable reserves. We forecast cash flow recycle ratio of 6.5x by 2014.
Waterfall Contribution to Core and Risked NAV by Asset
Share Price Contribution (C$/Share)
Potentially tripling Proven plus
Probable Reserves by end 2011
– The Proved plus Probable (WI)
reserves have been calculated on
conservative recovery factors,
including 11.2% for oil and 63.8%
for natural gas. Applying a more
realistic recovery factor of 15% for
oil and 75% for natural gas could
potentially yield an additional 57.6
mmboe of recoverable resources, net
to Greenfields.
Reasonable cost and funding already in place – We
estimate the entire capital expenditure programme to
develop the Company’s 26.6 mmboe of Proved plus
Probable reserves at US$175 mm. More importantly, the
initial production increases are associated with workovers, rather than drilling new wells, which materially
de-risks the growth profile. Additionally, the offshore
facilities are interconnected with a causeway, implying the cost structure remains very close to onshore
development. We estimate that the Company held US$
46 mm in cash at December 2010e and should not need
additional funds to develop its Proved plus Probable
reserves. Future free cash flow could potentially allow
for the development of the projected 57.6 mmboe of WI
resources currently not found in the Phase-1 development programme.
4
FirstFocus • Greenfields Petroleum Corporation - GNF.S • 04 January, 2011
Even more attractive valuation –
Selected Oil and Gas Pipeline Infrastructure in the Former Soviet Union
Greenfields shares trade at a 30%
Arctic Ocean
discount to core NAV (15% discount rate, after-tax) of C$11.38
Arctic Ocean
per share. Our risked NAV
(15% discount rate, after-tax) of
C$14.70 per share, which includes
the possibility (risked at 40%) of
a recovery factor of 15% on oil
and 75% on gas, is 63% above the
current share price. Our unrisked
NAV stands at C$19.70 per share.
R u s s i a
If we assumed that the recovery
factor reached 20% in the oil field,
our risked NAV estimate (15%
discount rate, after-tax), could
Japan
Kazakhstan
potentially be C$16.90 per share.
Mongolia
Our risked NAV does not factor
Iraq
in any value associated with the
possible farm-down of the Bahar
Iran
China
2 exploration block in 2011e or
Source: EIA, FirstEnergy Capital Corp.
the deeper exploration potential
Infrastructure Largely
Independent from Russia
found under both the Gum Deniz
and Bahar fields. We estimate
Azerbaijan is the oldest oil producing region in the world
Greenfields shares trades at a low 3.5x and 1.2x 2012e
and remains very prospective for oil and gas with super
and 2013e DACFM multiples. With an EV/2P multigiant fields, including ACG (the deal of the century) and
ple of US$3.78/boe, Greenfields is the cheapest stock
Shah Deniz, which is considered to be one of the world’s
in our FSU universe.
largest natural gas discoveries in the last 20 years. ACG
is estimated to contain 5.4 billion barrel recoverable
oil resources, while Shah Deniz’s commercial reserves
are over 25 tcf. The Country’s oil production has more
then quadrupled in the last 10 years and is currently in
excess of approximately 1.0 mmbbl/d. Proved reserves
With a C$130 mm market cap and US$46 mm cash,
in Azerbaijan are estimated at 7 bnbbl of oil and 30 tcf of
Greenfields Energy is a unique value proposition,
natural gas.
given that the Company’s shares are the only vehicle
listed in London or Toronto offering a 100% expoThe Country did not have access to Western technology
sure to Azerbaijan, the most attractive address in the
during Soviet domination. This implies that numerous
Caspian.
mature fields experienced very low recovery factors that
could be enhanced by modern technology.
U.S.
Oil Production, 2003
Producing region
Prospective region
Region or Basin
Oil pipeline
West Siberia
Norwegian
Gas pipeline
Volga-Urals
Precaspian
Proposed/planned gas pipeline
South Caspian
Sea
International Energy Agency (IEA).
c
BP.
North Caucasus
Far East
Norway
North European
Gas Pipeline
Azerbaijan onshore
East Siberia
Sweden
Denmark
Germany
Yamal-Europe
Baltic
Gdansk Butinge
Cz.
Rep.
Poland
Slov.
Russia
Baltic
Sea
RIGA Est.
Hung.
Brody
Pechora
Ukhta
Belarus
Yaroslavl’
MOSCOW
25.9
25.1
15.7
Volga-Urals
South Caspian
East Siberia
Timan-Pechora
8.8 North
3.6
Far East
Azerbaijan onshore
1.9Ocean
0.4
Sea
Barents Sea
Total World
East
Siberia
Novyy
Urengoy
c
Okha
Occupied by the
Soviet Union in 1945,
administered by Russia,
claimed by Japan.
Surgut
Sakhalin
Soyuz
South
VolgaUrals
Turgay
Tomsk
Tuapse
Samsun
Omsk
South Caucasus
(under construction)
Sup’sa
Erzurum
Baku-Tbilisi-Ceyhan
(under construction)
Armenia
YEREVAN
Kazakhstan-China
Middle
Caspian Aqtau
Amur
Tayshet
Lake
Baikal
Astrakhan’ Atyrau
TBILISI
Skovorodino
Kovykta
Precaspian
North
Caucasus
Georgia
Turkey
Komsomol’sk
LenaTunguska
Samara
Volgograd
Novorossiysk
Blue Stream
(Far East)
Tynda
Caspian Pipeline
Black
Sea
Consortium
Project
ASTANA
Irkutsk
Pavlodar
Daqing
Vladivostok
Nakhodka
Aral
Sea
Caspian
Sea
Azerbaijan
Sea of
Japan
Kazakhstan-China
(under construction)
Syria
BAKU
North
Korea
Central Asia–Center
South
Caspian
Lake
Balkhash
Uzbekistan
PYONGYANG
Druzhba
Turkmenistan
ASHGABAT
BEIJING
TASHKENT
Central
Asia
Kuwait
744.5
2,618.5
West
Siberia
Odesa
Black
Sea
—
of
Okhotsk
Total Region
Usinsk
Pechora
Brotherhood
Ukraine
573.1
90.0
Central Asia
Precaspian
Yamal-Europe
Northern Lights
Southern
Druzhba
KIEV
Moldova
CHISINAU
West Siberia
Timan-
Baltic Pipeline
System
MINSK
Transgas
Romania
Indiga
Varandey
Vyborg
Primorsk
St. Petersburg
Lat.
Lith.
79,110
a
Billion Cubic Meters
Region or Basin
—
10,107
b
Bering Sea
Gas Production, 2003
65
32
32
—
Laptev
Sea
Total Region
Total World
Ventspils TALLINN
VILNIUS
Yamal II
Kara Sea
Barents
Sea
Finland
161
72
Baltic
Barents Sea
Murmansk
Murmansk
Pipelines
Rostock
East
Siberian
Sea
261
209
South Turgay
Central Asia
North Sea
Northern
Druzhba
679
454
373
Timan-Pechora
Middle Caspian
b
Neth.
5,882
1,887
Proposed/planned oil pipeline
United
a
Sources: Wood Mackenzie.
Kingdom
a
Thousand Barrels/Day
DUSHANBE
Afghanistan
SEOUL
South
Korea
BISHKEK
Kyrgyzstan
Tajikistan
0
800 Kilometers
0
800 Miles
Boundary representation is
not necessarily authoritative.
The Only Azeri Pure Play Listed in
London or Toronto
A Unique Address in the Caspian
With attractive PSC terms that have not changed
since the fall of the Soviet Union, Azerbaijan fiscal
terms appear very stable. With the recent start-up of
the BP operated BTC and SCP pipelines, the Country
offers the only access, independent from Russia, to
the Caspian Sea oil and gas from the West (through
Georgia, Armenia and Turkey). Politically, Azerbaijan
has been aligned to the West and many Super Majors and Majors are operating in the Country (Total,
Statoil, BP, etc.).
Business Model
Greenfields plans to rehabilitate and develop two giant
offshore mature fields. While technically offshore, the
fields are connected to land by a network of roads. The
initial re-development plan is based on well optimization, reactivation, and recompletion.
Why Are There No Other Listed E&Ps in Azerbaijan?
Some oil and gas junior companies have operations in
5
Azerbaijan with various levels of success since the
late 1990s. We attribute this to the lack of export
infrastructure, low gas prices at the time, and the
preference of Azerbaijan for giant projects with Super
Majors. Relationships with local partners also appeared to have been an issue in the past. With the
start of the BTC oil pipeline in 2006 and the SCP gas
pipeline in 2007 providing direct access to the West
(independent from Russia), the higher gas prices
agreement with Turkey and Russia, and ACG (a flagship multi-billion barrels project operated by BP) now
at plateau production, we believe the landscape is
now much more favourable for E&Ps.
There is no bidding round is Azerbaijan. Licences
are only awarded under bilateral agreements. The
process on awarding a license is governed under the
country’s hydrocarbon law. All potential awards
must be first approved by SOCAR and then approved
by the President of Azerbaijan. The agreement containing the terms and conditions associated to the
potential licence award has then to be reviewed and
approved by the parliament. Upon the parliament
approving the license it becomes adjudicated into law
of Azerbaijan.
Frontera Resources (FRR LN) acquired a 30% WI
in the Kusangi-Garabaghli field in 1998; this is an
onshore rehabilitation field that had 4,200 bbl/d of
production at the time. Partners included Socar and
Delta Hess. Facing environmental issues and unable
to export production, Frontera defaulted on a debt
provided by the EBRD and handed over the field to
its creditor. The asset was sold to CNPC in 2002 for
US$52 mm.
Ramco Energy was more successful, being involved
early in the giant Guneshli field. Hess acquired
Ramco’s 2.08% interest in the field for US$150 mm in
2000. Ramco did not manage to enhance production
at the Muradkhanli onshore oil field and dropped the
licence in the early 2000s.
Before being taken over by
Vitol in 2009, Arawak Energy
had held 14.97 mmboe of
Proved plus Probable reserves
in the southwest Gobustan
fields, onshore Azerbaijan.
Proved Plus Probable Reserves of
26.6 mmboe and Potential Additional Upside of 57.6 mmboe of Recoverable Resources in Two Mature
Fields
Bahar Energy
Greenfields Petroleum holds a 33.3% interest in Bahar
Energy, the operator of the Bahar Exploration, Rehabilitation, Development and Production Sharing Agreement
(EDRPSA). RAFI and Baghlan also hold 33.3% each of
Bahar Energy. RAFI Oil FZE (RAFI) is a company incorporated in the Jebel Ali Free Zone, Dubai, UAE. Baghlan
Group FZCO (Baglan) is a privately held company incorporated in the Jebel Ali Free Zone, Dubai, UAE.
Bahar Energy has negotiated a 80% WI in the EDRPSA,
with SOCAR holding the balance (carried interests until
payout).
The ERDPSA
The ERDPSA covers an area of approximately 76,500
gross acres and is divided into a Rehabilitation Area
and an Exploration Area. The ERDPSA contains the
Bahar Gas Field and Gum Deniz Oil Field located in the
shallow waters of the Caspian Sea, directly offshore of
Azerbaijan.
Rehabilitation Area
The Rehabilitation Area includes the shallow water
offshore Bahar gas field and Gum Deniz oil field. Production from the Rehabilitation Area, as of 29 September,
2010, was 2,065 bbl/d and 18.93 mmcf/d or 5,220 boe/d
(1,740 boe/d net to Greenfields). The development and
production period in the Rehabilitation Area has a term
of 25 years, which may be extended by mutual agreement for an additional five years.
Peak Production (boe/d)
September 2010 estimated gross production mix (boe/d)
Gross production target 2014 (boe/d)
Number of producing wells
Number of wells plugged and abandonned or shut-in
Wells to be recompleted in phase 1
Wells candidates for optimization programme in phase 1
Planned number of side tracks (phase 1)
Planned number of new platforms (phase 1)
Planned number of new wells (phase 1)
Source: FirstEnergy Capital, Company Reports
Gum Deniz
46400
1945
12500
36
424
25
24
4
3
36
Bahar
98500
3275
21167
14
189
53
16
6
Total
144900
5220
33667
50
613
78
40
10
3
36
FirstFocus • Greenfields Petroleum Corporation - GNF.S • 04 January, 2011
WI Production and Capex Profile – Phase I Development
9,000.00
40
Greenfields WI Production (boe/d)
8,000.00
Greenfields WI Capex (US$mm)
35
7,000.00
30
6,000.00
25
5,000.00
20
4,000.00
15
Capex - US$m
mm
The facilities include 54 offshore platforms, multiple
pipelines and 16.8 kilometres of causeways, with well
pads from an offshore island into the shallow waters of
the Caspian Sea. Five pipelines transport gas and liquids
from the offshore into surface facilities located directly
onshore from the project fields. The main fluid and gas
handling facilities, including oil and gas storage, separation, compression, and metering stations are all onshore.
Produ
uction - boe/d
6
3,000.00
2,000.00
Many of the producing and planned well re-entries
have wellheads and platforms that have been severely
1,000.00
neglected over the last 15 to 20 years and require main0.00
2010
2011
2012
2013
2014
2015
2016
tenance, cleanup and repair. Much of this infrastructure
has not seen maintenance or repair expenditures since
investment capital was diverted to Western Siberia
before the collapse of the Soviet Union. Currently, there  We estimate the development cost of the development of 26.6 mmboe (Greenfields WI) to stand at
are 50 producing wells, including 36 wells in the Gum
US$175 mm, implying a very low US$6.60/boe
Deniz field that produce oil with associated gas and 14
Proven plus Probable reserves development cost. We
wells that are located in the Bahar gas field and produce
also forecast 6.5x recycle ratio by 2014.
gas with condensate. In addition, another 159 wells
have been shut-in and 454 wells have been plugged and
abandoned.
Very large Potential Upward Revision Across Assets
55% and 9.6% of initial hydrocarbon in place have been
recovered to date at Bahar and Gum Deniz. The current
Development Plan
26.6 mmboe Proved plus Probable reserves assumes a
The Company plans to increase existing gross produc11.2% recovery factor for oil and a 63.8% recovery for gas
tion to 18 mboe/d (66% gas) in 36 months (Phase 1)
associated with Phase-1 development. Proven reserves
and 14,500 bbl/d oil and 115 mcf/d gas by 2014e, and
are estimated at 20.4 mmboe. Increasing the overall redevelop previously discovered Proved undeveloped
reserves in the fields by implementing modern produc- covery factor to 15% for oil and 75% for gas would imply
an additional 57.6 mmboe WI recoverable resources to
tion techniques, including:
Greenfields. Assuming a 20% recovery factor for oil and
 Repair and upgrading of platforms and facilities;
75% recovery factor for gas would add another 36.0 mm Introduction of high rate gas compression;
boe of recoverable reserves to Greenfields.
 Installation of down-hole electric submersible
pumps;
Greenfiels Portfolio of Assets
 Utilization of modern compleUnrisked P50
Risked
tion techniques not associated
Reserves and Resources (mmboe)
2P
Conting. Resources mmbbl GCoS
Res.
with Soviet style oil and gas field
Core Azerbaijan
Gum Deniz
11.60
100.0% 11.60
operations;
Bahar
15.00
100.0% 15.00
 Completion of previously unExploration Upside
Azerbaijan
perforated pay-zones in existing
Bahar 2 Exploration Area
0.00
0.0%
0.00
wellbores;
Recovery factor increased to 15% for Gum Deniz and Behar
19.30
40.0%
7.72
 Sidetrack of existing wellbores
Recovery factor increased to 15% for Bahar
38.26
40.0%
15.30
26.60
0.00
57.56
49.62
and the drilling new development Total
3.78
2.03
wells, using modern seismic data. EV/2P or P50 (US$/boe)
10
5
0
Source: FirstEnergy Capital, Company Reports
Source: FirstEnergy Capital, Company Reports
MMBoe
Gum Deniz
Bahar
Total
Total - GNF.S WI
Gross
Resources
Initially In
Place
Gross
Cumlative
Production
2163
1458
3621
956
Source: FirstEnergy Capital, Company Reports
207
801
1008
266
Current
Current
Booked GNF Booked GNF
WI 2P
WI 1P
Reserves
Reserve
20.4
101
26.6
GNF WI Remaining
Recoverable resources - 15%
Oil Recovery factor and 75%
Gas Recovery Factor
116
199
315
84.2
Remaining
Upside to 2P
Recoverable
Upside to 2P
Case (GNF Resources (GNF WI) - Case (GNF
WI)
20% Recovery Factor
WI)
57.6
226
234
459
121.2
94.6
7
Bahar PSA
Source: Greenfields Petroleum
the Contractor Parties. In the event of a commercial
discovery in the Exploration Area, the development
and production period for the Exploration Area will
have a term of 25 years. Historically, there have been
eight wells drilled in this area, with one well reaching
an objective depth indicating potential hydrocarbons
from electric logs. The Exploration Area may be relinquished if non-commercial quantities of hydrocarbons
are not discovered.
Gum Deniz Oil Field
and Bahar Gas Field
Source: Greenfields Petroleum
The preceding tables present an estimated resources
potential associated with a 15% recovery on oil and a
75% recovery factor on gas effectively achieved.
Offtake Agreement
Bahar Energy is selling its production to SOCAR.
Greenfields anticipates oil realized prices to stand at
approximately US$6.00/bbl discount to the Brent oil
price. A gas contract is also in place, providing a minimum gas price of US$140/mcm or $3.96/mcf.
Exploration Upside
The Exploration Area does not currently contain any
commercial oil or gas fields. The exploration period in
the Exploration Area has an initial term of three years,
which can be extended for one year at the request of
12 Month Newsflow Catalysts:
Visibility on Exploration Potential
and Reserves Booking
Over the next 12 months, the Company will benefit
from a combination of production growth, aggressive
additional reserve bookings, and visibility on the exploration potential:
Implied value of exploration block: A 108 km2 3D
seismic programme due in 2011e (US$3.2 mm) may
also flesh-out prospective resources associated with the
exploration area, Bahar 2. The exploration block lies on
the same structural trend between two producing giant
Greenfields Energy
1
3
5
4
2
Q4 2010
1
2
3
4
5
Q1 2011
Q2 2011
Q3 2011
Q4 2011
IPO
Seismic start at Bahar 2 exploration
Bahar 2 exploration farm-out
Phase II development sanctioned and reserve booking (part of 63.6 mmboe additional WI resources)
Production reaches 2,800 boe/d
Source: FirstEnergy Capital Corp. & Company Reports
8
FirstFocus • Greenfields Petroleum Corporation - GNF.S • 04 January, 2011
Greenfields Energy Valuation Table
Unrisked
(US$MM)
Asset Valuation
Net Cash
G&A
29
-32
EMV
(US$MM)
29
-32
CAD/Share
% Total
1.80
-1.98
12.2%
-13.5%
Azerbaijan
Gum Deniz and Bahar
187
187
11.56
78.6%
Total Core NAV
184
184
11.38
77.4%
0.00
57.91
76.52
134
0.00
23.16
30.61
54
0.00
1.43
1.89
3.33
0.0%
9.7%
12.9%
22.6%
318
238
14.71
19.70
100.0%
Risked Exploration
Bahar 2 Exploration Area
Recovery factor increased to 15% for Gum Deniz and
Recovery factor increased to 75% for Bahar
Total Risked Exploration
Total NAV
Unrisked NAV
P/Core NAV
P/NAV
P/Unrisked NAV
79.1%
61.2%
45.7%
Source: FirstEnergy Capital, Company Reports
Share Price Contribution (C$/Share)
Waterfall Contribution to Core and Risked NAV by Asset
16.00
14.00
Risked Upside
Core NAV
12.00
10.00
8.00
6.00
4.00
2 00
2.00
Risked NAV
Recovery factor increased to
15% for Bahar
Recovery factor increased to
15% for Gum Deniz and Behar
Bahar 2 Exploration Area
Total Core NAV
G&A
Net Cash
Gum Deniz and Bahar
0.00
Valuation: 120% Potential
Upside in 12 Months, Trading
Significantly Below Core NAV
With the current share price of C$9.00 well below
our C$11.38 per share core NAV (15% discount
rate, after-tax), based upon a DCF 15% on future
production of 26.6 mmboe of Proved plus Probable reserves, we believe valuation is particularly
compelling. Our unrisked value for the shares
stands at C$19.70 per share, which assumes
the booking of an additional 57.6 mmboe of WI
Proved plus Probable reserves associated with a
recovery factor of only 15% for the oil field and
75% for the gas field (compared to 11.2% in the
oil field and 63.3% in the gas field in the current
2P reserve case). If we assumed that the recovery
factor reached 20% in the oil field, our risked
NAV estimate (15% discount rate, after-tax),
could potentially be C$16.90 per share. Our unrisked NAV does not factor in any value associated with the possible farm-down of the Bahar 2
exploration block in 2011e or the deeper exploration potential found under both the Gum Deniz
and Bahar fields.
Cheap on Reserves Multiples
Greenfields shares trades at US$3.78/boe on
Proved plus Probable reserves. The Company is
gas fields including Shah Deniz (5.5 tcf and 25 tcf for
currently trading below equivalent multiples for Dragon
Shah Deniz). Management has indicated that Greenfields Oil and Zhaikmunai, reflecting the maturity of both
would consider farming down its interest in the asset,
companies. Assuming a recovery factor of 15% for oil
in order to minimize its financial risk exposure; a farmand 75% for gas, would suggest that Greenfields shares
down would imply a valuation for the asset.
would trade at only US$1.19/boe.
Source: FirstEnergy Capital, Company Reports
Reserves Multiples (US$/Bbl)
EV/2P (US$/Bbl)
Reserves booking: The Company is expecting to submit
5.85
the phase II development plan for its assets, which would Dragon Oil
Zhaikmunai
4.56
potentially allow for the continued development of apGreenfields (12.35% Recovery factor)
3.78
proximately 214 mmboe (57.6 mmboe on a WI basis), as
Greenfields (15% Recovery factor)
1.19
well as additional reserve bookings at year-end 2011e.
Source: FirstEnergy Capital, Company Reports
Converting these resources into reserves could potentialEV/DACF multiples for the shares stand at 3.5x and
ly add C$5.00 per share to our risked NAV estimate.
1.2x for 2012e and 2013e, respectively.
Progressive production growth: We expect Greenfields
to reach 2,800 boe/d by the end of 2011e and 5,100 boe/d Sensitivity to Brent Price
by the end of 2012e. Phase 2 developValue Sensitivity to Variations in Discounted Oil Price
ment is not included in this forecast. We
Brent Post 2010 (US$/Bbl)
$60.00 $70.00 $80.00 $100.00 $120.00 FCC
are anticipating further visibility on the
WACC -10%
5.5
9.3
11.1
14.4
18.8
18.3
6.2
7.9
9.3
11.9
15.0
14.7
potential production forecast uplift in the WACC-15%
WACC -20%
3.5
6.8
8.0
10.1
12.5
12.2
second part of 2011.
Source: FirstEnergy Capital
9
Year end Dec 31,
Production
Oil & Liquids
Gas
Total
Production per Share
Production per D.A. Share
Cash flow
CFPS
2010e
Bbl/d
Mmcf/d
Boe/d
Boe/Share (000's)
%
Boe/Share (000's)
%
109
0.9
265
11.2
15.9
2011e
2012e
2013e
663
9.0
2,164
50.9
355.6%
66.5
317.0%
1,402
16.3
4,113
95.7
88.1%
110.5
66.1%
2,399
24.1
6,409
148.9
55.6%
196.3
77.7%
US$MM
Basic
Diluted
Basic
Diluted
-1.3
-$0.13
-$0.15
-65.0
-58.8
10.5
$0.71
$0.68
12.4
13.0
33.5
$2.25
$2.13
3.8
4.1
68.7
$4.62
$4.37
1.9
2.0
US$Mm
Basic
Diluted
Basic
Diluted
-2.7
-$0.28
-$0.31
-31.2
-28.2
-0.4
-$0.03
-$0.02
-336.4
-351.4
15.5
$1.04
$0.99
8.3
8.8
42.3
$2.85
$2.69
3.0
3.2
Capital Data
Capex
Capex vs. Cash Flow
Exit Net Debt
Entry Debt/CF
Market Cap.
US$MM
%
US$MM
Years
US$MM
7.2
-558.2%
(44.9)
N/A
145
27.3
260.4%
(25.1)
N/A
145
38.3
114.4%
(17.3)
N/A
145
35.0
0.5
(48.0)
N/A
145
Share Data
Basic shares
Options
Warrants
Convertible debentures
Diluted shares
Fully diluted shares
Mm
Mm
Mm
Mm
Mm
Mm
14.9
1.2
0.5
0.0
16.6
16.6
14.9
0.8
0.5
0.0
15.6
16.6
14.9
0.8
0.5
0.0
15.7
16.6
14.9
0.8
0.5
0.0
15.7
16.6
P/CF
Earnings
EPS
P/E
Year end Dec 31,
2010e
2011e
2012e
2013e
Share Price Y/E
Net Asset Value
Risked NAV
Price / NAV
CAD/Share
CAD/Share
CAD/Share
x
$9.00
$11.38
$14.71
0.8
$9.00
$11.38
$14.71
0.8
$9.00
$11.38
$14.71
0.8
$9.00
$11.38
$14.71
0.8
Valuation Data
DACFM
Target DACFM
x
x
-77.8
-152.8
9.7
17.7
3.54
6.24
1.26
2.57
EV/BOED
Target EV/BOED
US$/Boed
$/Boed
379,017
744,501
55,601
93,700
31,149
50,776
15,194
27,490
EBITDA
EV/EBITDA
US$Mm
x
-3.4
-29.4
8.5
14.1
30.50
4.20
65.70
1.48
Cash Flow Netback
US$/Boed
-$13.35
$13.27
22.30
29.35
Pricing
Brent
Oil
Gas
Exchange Rate
$US
$US wellhd
$US wellhd
US$ / CAD $
81.67
79.00
N/A
0.97
86.78
81.83
N/A
0.97
96.01
90.03
N/A
0.96
112.01
106.03
N/A
0.95
Note: Financial information reported in US$, with the exception of stock price, target price and NAV.
Source: FirstEnergy Capital Corp. and Company Reports
10
FirstFocus • Greenfields Petroleum Corporation - GNF.S • 04 January, 2011
THIS PAGE INTENTIONALLY LEFT BLANK.
11
Appendix
12
FirstFocus • Greenfields Petroleum Corporation - GNF.S • 04 January, 2011
Detailed Asset Description
Gum Deniz
The Gum Deniz oil field was discovered in the early
1950s, and was previously known by the names Pescheny-More and Pescheny Island field. The field started producing in 1955 and has produced approximately
207 mmbbl and 581 bcf of natural gas, implying 9.6%
recovery factor to date. Due to the slow style of Soviet
Era development, the maximum daily oil production
of 46,400 bbl/d was not achieved until 10 years later in
1962. The Gum Deniz oil field is located just offshore
of the Apsheron Peninsula, located 15 kilometres from
downtown Baku, Azerbaijan. The field expands from
a sand island 2.8 kilometres offshore and progresses
outward into the Caspian Sea through 16.8 kilometres of
causeways. It is located in shallow water (less than 10
metres).
The productive 5,200 feet stratigraphic interval found
in the Gum Deniz oil field includes several productive
formations. In total, 12 separate vertical pays zones
have been found across the field. In several blocks, all
seven zones have been found productive. On average,
three to four pay zones are found trapped in each of the
productive fault blocks located inside the Gum Deniz
oil field.
The Gum Deniz oil field was initially drilled and
developed from an island and from a causeway built
from the shore to what was believed to be the location of the field. Approximately 484 wells have been
drilled in the field. The Gum Deniz oil field is located
along the Fatmai-Gum anticline trend up-dip from the
Bahar gas field. The faulted anticline is broken into 16
fault blocks, 11 of which have established commercial
production.
The oil accumulations in the Gum Deniz oil field contain oil gravity ranging from 20º to 44º. Overall crude
gravity is found to be approximately 36º. The reservoir
rocks (sandstone and siltstones) are of good quality.
Average porosity ranges from 10% to 22% and permeability ranges from 10 to 1,200 md. Most producing
zones display permeabilities in the 100 to 230 md range.
Based on 15% recovery factor, 116 mmbbl remains to
be potentially recovered at Gum Deniz. Bahar Energy’s
near-term activity plan is broken into four phases of
specific work. Due to the number of available wellbores,
no new well drilling is planned until Phase 1D. The
main objectives are as follows for the near-term program:
 A well optimization program to increase daily production during the first six months.
 A recompletion and sidetrack program to increase
daily production and to add proved producing
reserves.
 Install three new platforms and drill 36 new development wells to develop reservoirs found in fault
blocks that could not be accessed from the causeway
development program.
 To increase daily gross production to approximately
12,500 bbl/d (3,300 bbl/d on a WI basis) or approximately 30% of the level previously established in the
field.
In Phase 1A, an aggregate of 24 well optimization upgrades are planned on active producing wells, and will
focus on replacing failed tubing and place downhole
electric submersible pumps on selected wells. The Phase
1 program is expected to result in an increase in daily
production.
Phase 1B includes recompletion activities in zones of
wells that have not previously been perforated and produced. An aggregate of 25 recompletions are planned in
Phase 1B.
Phase 1C includes sidetracking approximately four existing wellbores to access zones that have yet to be perforated and produced. These wells are deeper than the
existing wellbore depths. In addition, Bahar Energy plans
to construct and install five new offshore platforms.
Phase 1D includes drilling up to 36 new development
wells in the field. The Company will utilize new directional drilling technology to access parts of the field that
could not previously be reached from the Soviet causeway systems. On the southeastern portion of the Field,
it is anticipated that one of the platforms will be used
to expand the Field area that is currently only partially
developed.
The cost of a new horizontal well is estimated at US$4.5
mm with a typical depth of 3,500m.
Bahar
The Bahar structure in the Bahar gas field was discovered between 1955 and 1957. Initial production of the
Bahar gas field began in September 1969, with cumulative production reaching 4.28 tcf of gas and 84 mmbbl of
condensate, implying 55% recovery factor to date. Due
to the slow Soviet era style of development, the maxi-
13
Gum Deniz Field Development Plan
depth of 20 metres. In total, 203 wells have been drilled,
while only 13 wells are currently producing natural gas.
In addition, condensate is being produced and placed
into one of the 12 inch lines for delivery to the shorebased facilities.
Field development has established production over a
stratigrahic interval of more than 1,615 metres. Found
inside the 1,675 metre interval are 12 separate pay zones
with individual pay sands ranging in thickness up to 115
metres. Total net sand pay in an average well can exceed
over 300 metres.
The Bahar structure was initially defined by more than
120 exploratory and development wells. The structure is
divided into three sections by faults.
Gas accumulations contain a significant amount of condensate, which increases in richness with depth. Reservoir rocks (sandstone and siltstones) are of good quality.
Average porosity ranges from 14% to 22% and average
permeability ranges from 12 to 166 md. Water saturation
in the pay intervals ranges from 8% to 56%.
Based on a 75% recovery factor, 1.07 tcf and 23 mmbbl
remain to be recovered at the Bahar gas field. Bahar
Energy’s activity plan for the Bahar gas field is divided
into three phases. Due to the large number of available
wellbores, no new wells are planned to be drilled in the
first three phases. Rather repairs, recompletions, and the
sidetrack of existing wells will increase the production
and develop additional reserves. Due to the number of
the existing facilities, only upgrades to such facilities are
planned to increase production and reserves. The princiSource: Greenfields Petroleum
pal objectives are as follows for the near-term program:

Increase daily production and develop additional
mum daily gas production rate of 591 mmcf/d was not
reserves from the existing active wells.
achieved until 1986; however, average production was

Increase daily production and develop additional
only 12.7 mmcf/d in June 2010. The maximum condenreserves from zones found behind pipe in existing
sate production rate of approximately 13,900 bbl/d was
wellbores.
achieved on 6 October, 1975, but was only producing

Increase daily production and develop additional
117 bbl/d in June 2010.
reserves from zones via a sidetrack program to allow
for access into zones not available in the existing
The Bahar gas field is located 21 kilometres off the coast
wellbores found inside the field.
of a Caspian Sea sand island, located 2.8 kilometres from

The programmed activity is expected to raise daily
the mainland Apsheron Peninsula. The field consists of
field production to more than 115 mmcf/d of gas
54 offshore platforms, which includes a central processand 2,000 bbl/d of condensate (Greenfields WI: 5,500
ing and metering platform for gas gathering for onward
boe/d), which will bring the field back to 25% of the
transport via five 12 inch pipelines to the shore-based
former established production levels.
gas and liquid handling facilities. Each wellhead platform has a small separate adjacent platform extension
for housing operations personnel. On average, the plat- In Phase 1A, the installation of compressors and de-bottlenecking activities are planned to improve production
forms are built on 24 to 30 pilings in an average water
14
FirstFocus • Greenfields Petroleum Corporation - GNF.S • 04 January, 2011
2010, the Company appears very well funded for its
capital programme.
Bahar Field Map
Fiscal Terms
Bahar Energy ERDPSA is a standard Azeri PSA, where
the Government take increases with the R-Factor.
Under our FirstEnergy oil price scenario, we value
Greenfields’ working interest Proven plus Probable
reserves at US$7.02/boe. This is above the equivalent
metrics for Zhaikmunai (US$5.90/boe) and Dragon Oil
(US$5.30/boe).
Source: Greenfields Petroleum
rates from the existing producing wells. In addition,
16 existing producing wells will undergo a downhole
optimization program, and selected facilities and platforms will be upgraded.
In Phase 1B, recompletion activities on approximately
53 wells are planned in zones that have not previously
been perforated and produced, as many of the wells in
the Bahar gas field have more than seven separate pay
zones, and a large number of Proved developed nonproducing (behind pipe) reserves remain unproduced
throughout the field.
Phase 1C is expected to focus on sidetracking approximately six wellbores to access deeper zones that have
yet to be perforated and produced. Sidetrack cost is
estimated at US$2.0 mm per well. Wells at Bahar can be
up to 5,000 metres deep.
With the US$41 mm placement at the time of the IPO
(including overallotment) in November and December
Closing Net Debt
Source: FirstEnergy Capital, Company Reports
"R"-factor
0.00 < R < 1.25
1.25 < R < 2.00
2.00 < R < 2.75
2.75 < R< 3.00
3.00 < R
SOCAR Share (%)
40
50
70
80
90
Contractor Parties'
Share (%)
60
50
30
20
10
Source: FirstEnergy Capital
The “R” factor for any particular quarter is calculated
based on the following formula:
R = (A(n) + B(n) + C(n))
D(n)
Financials
GNF.S Cash Flow Balance US$MM
Brent Price (US$/Bbl)
Production (Boe/d)
Opening Cash Position
Net Operating Cash Flow
Capex
Financing Cash Flow
Change in Working Capital
Closing Cash Position
The Production revenue under the ERDPSA is allocated
as follows:
 (a) The Contractor Parties recover operating costs.
 (b) The Contractor Parties recover capital costs up
to a maximum of 50% of sales revenue, after deducting operating costs. Unrecovered capital costs
are considered to be financed, and these are carried
forward and earn interest equal to LIBOR plus 4%
of the amount of any unrecovered capital costs.
 (c) The balance of sales revenue is split between
SOCAR and the Contractor Parties, based on a
series of “R” factors as follows:
2010
81.67
265
1
-2
-7
54
0
46
-47
2011
86.78
2,164
46
10
-27
0
0
29
-29
2012
96.01
4,113
29
33
-38
0
0
24
-24
Where:
 “A(n)” is the paid volume of the Contractor Parties’ cumulative (overall) capital expenses recovered up to and including the previous quarter;
2013
2014

“B(n)” is the paid volume of the
112.01
122.03
6,409
8,327
Contractor Parties’ cumulative
24
58
(overall) financing costs (credit
69
104
interest rates) recovered up to and
-35
-28
0
0
including the previous quarter;
0
0

“C(n)” is the cumulative (overall)
58
134
value of profit oil lifted by the Con-58
-134
tractor Parties up to and including
the previous quarter;
15
Bahar Energy Ltd. Economic Flow Chart
We have used a discount rate of 15%, which is in line
with other Caspian plays in our coverage universe.
Risked
Our riskd NAV is only based on the next 12 month
activities programme.
We have not ascribed any value to the Company’s
exploration blocks.
We have included in our risked NAV the possibility
of the recovery factor reaching 15% for oil and 75% for
natural gas; we have risked this outcome with at 40%.
We have valued these additional barrels at US$3.00/
bbl, which is a conservative number for the region.
 Realised oil prices: US$6/bbl discount to Brent.
 Realised gas prices: US$3.96/mcf flat.
Source: Greenfields Petroleum

“D(n)” is the volume of cumulative (overall) capital expenses incurred by the Contractor Parties up
to and including the previous quarter.
Assumption and Valuation Methodology
In accordance with one of FirstEnergy’s valuation
methodologies, we have set our target price for
Greendfields’ shares in line with our estimate of the
Company’s risked NAV, based on current Proved plus
Probable reserves (core NAV) and the Company’s 12
month activity that has been appropriately risked.
Core NAV
Our core NAV is based on a DCF of the Company’s
expected production of 26.6 mmboe of Proved plus
Probable reserves. We have added the Company’s
expected net cash at the end of 2011e and deducted the
net present value of G&A, calculated as a perpetuity
based on 2011e G&A.
We have assumed US$13/boe for operating costs and
US$175 mm in capital expenditures to develop the
Company’s Proved plus Probable reserves (US$6.60/
bbl on Proved plus Probable reserves).
Country Review: Azerbaijan
Refer to our publication: “Hot Stocks of Ahead of the
Russian Winter” dated 20/10/2009.
www.firstenergy.com/research/documents/Focus-CFSU-InitiatingCoverage-2009-10.pdf
Shareholding and Corporate Structure
The management holds about 36.0% of Greenfields’
diluted shares.
Management Team
John W. Harkins
CEO
Richard E. Mac Dougal
COO
Alex T. Warmath
CTO
Mark N. Witt
A. Wayne Curzadd
Glenn F. Miller
CFO
VP and Controller
VP Operations
Board of Directors
Michael J. Hibberd
Chairman
Donald R. Ingram
Non Exec
Garry P. Michaichuk
Christopher C. Rivett-Carnac
Non Exec
Non Exec
Source: FirstEnergy Capital, Company Reports
16
FirstFocus • Greenfields Petroleum Corporation - GNF.S • 04 January, 2011
GNF.S Ownship
Shares
Options
969,667
100,000
1,511,667
100,000
1,475,667
100,000
46,694
150,000
126,750
40,000
177,000
450,000
50,000
35,000
38,077
410,000
0
0
4,840,522
65,000
65,000
65,000
65,000
0
0
1,136,000
Total Interest in GNF.S
Units
%
1,069,667
6.4%
1,611,667
9.7%
1,575,667
9.5%
196,694
1.2%
166,750
1.0%
627,000
3.8%
115,000
100,000
103,077
475,000
0
0
5,976,522
0.7%
0.6%
0.6%
2.9%
0.0%
0.0%
36.0%
Source: FirstEnergy Capital, Company Reports
Main Shareholding
Institutions
Goodman
Front Street
Lusman
Rahn & Bodmer
Ingalls & Snyder LLC
Shares and Options held by directors
2010 fully diluted shares outstanding
Ownership
1,177,000
762,500
710,000
590,000
500,000
5,976,522
16.602
% of Capital
7.1%
4.6%
4.3%
3.6%
3.0%
36.0%
Source: FirstEnergy Capital, Company Reports
Azerbaijan. Through Baghlan’s oil marketing and rail
transportation business for SOCAR, the Company has
developed strong oil marketing logistics expertise in
the region; this business generates revenues of approximately US$1.0 billion per year. In addition, Baglan
is pilot testing the remediation and reclamation of oil
from mature SOCAR refining and production sites in
Azerbaijan. The project has obvious environmental
benefits for the Country and it produces salable oil
products.
RAFI is engaged in the supply of engineering items
required for the oil & gas, petrochemical and power
industries. In addition, RAFI has expanded beyond engineering and in 2005 signed the 26th PSA agreement
for rehabilitation, development and production sharing in Azerbaijan with SOCAR. The PSA covered the
rehabilitation and development of the onshore Surakhani Field (location is 14 kilometres to the northeast
from Baku) between the Chukhuryurd and SabunchiRamani oil fields. According to the General Manager of
RAFI, Tufail Ahmad, phase one investments will total
approximately US$100 mm, and subsequently, in the
course of the PSA implementation the Company could
potentially spend up to US$400 mm. These investments will involve the restoration of infrastructure and
construction of new compressor stations. The gross
remaining resources to be extracted are expected to be
approximately 50 mmbbl. Rafi oil holds a 75% stake in
the agreement (SOCAR 25%), with a term of 25 years.
Management
John W. Harkins, President, Chief Executive Officer and Director
Source: Greenfields Petroleum
Details on Bahar Energy Shareholders
Bahar Energy is owned 33.33% by each of RAFI, Baghlan, and Greenfields Petroleum International Company
Ltd. Greenfields Petroleum International Company
Ltd. holds 166,650 shares of Bahar Energy with par
value of Arab Emirates Durham 100 each.
RAFI Oil FZE (RAFI) is a company incorporated in the
Jebel Ali Free Zone, Dubai, UAE. Baghlan Group FZCO
(Baglan) is a privately held company incorporated in
the Jebel Ali Free Zone, Dubai, UAE.
Baghlan is involved in construction, transportation
and petroleum marketing businesses predominantly in
John W. Harkins has over 30 years of diverse international energy experience in which he has managed
commercial efforts to find, capture and exploit international energy and midstream business opportunities.
Mr. Harkins acted as head of business development
in Asia for Anadarko from June 2001 to June 2008,
in which capacity he was able to expand Anadarko’s
exploration positions in Asia. Mr. Harkins’s previous
positions include senior executive for TransCanada
Pipelines Ltd., where he played a prominent role in the
establishment of some of the first private gas pipelines
and a power project in Mexico, a liquids extraction
facility in Venezuela, and major oil and gas pipelines in
Colombia. He spent 16 years with Amoco Corporation.
His international experience includes exposure to more
than 25 countries.
17
Richard E. MacDougal, Co-founder, Senior VicePresident, Chief Operating Officer and Director
Richard E. MacDougal has over 30 years of international and domestic oil and gas experience. Mr.
MacDougal was the Chief Operating Officer of GFI Oil
& Gas Corporation, a public company listed on TSX-V,
from 2005 to 2008 when the Company was sold. Mr.
MacDougal has managed international oil and gas
operations in Qatar, Oman, Brazil, Venezuela, Pakistan,
Azerbaijan, Kazakhstan, and Alaska. Previously, Mr.
MacDougal has managed operations in both major
and independent international oil and gas companies.
His previous positions include: Vice-President, International Business Development of Anadarko (2001 to
2004), President of Union Texas Petroleum Azerbaijan
Company in Baku, Azerbaijan (1995 to 1998), Senior
Vice-President and General Manager for First International Oil Company in Kazakhstan (1998 to 2000), and
Vice-President of Hurricane Hydrocarbons Ltd. (2000
to 2001), where he managed the Company’s joint ventures and acquisitions in Kazakhstan.
Alex T. Warmath, Co-founder, Senior Vice-President, Chief Technical Officer and Director
Alex T. Warmath has over 35 years of diverse international and domestic experience. Prior to co-founding
Greenfields LLC, Mr. Warmath co-founded GFI and
served as Chief Executive Officer. Mr. Warmath has
been co-founder and developer of five international
private and public oil and gas companies. Previously,
Mr. Warmath was Project G&G Manager in Indonesia
for Anadarko and was Senior Director of International
New Ventures for Enron, Global E&P. Mr. Warmath
also served as an Exploration and Development Manager for Apache. Mr Warmath experience outside of
North Amercia includes exploration and development
activities in 48 countries.
Mark N. Witt, Vice-President - Finance, Chief
Financial Officer and Treasurer
Mark N. Witt is a senior finance executive with 30
years of energy industry experience previously serving as Chief Financial Officer for four public energy
companies as well as senior management positions
with major international energy companies. Mr. Witt
served as the Chief Financial Officer for GFI, from 2005
to 2007. Previously, Mr. Witt served as Chief Financial Officer for Virginia Gas Company in 1996 and as
Chief Financial Officer for Prospect Energy Corp. from
June 2004 to November 2004. Mr. Witt has provided
financial consulting in Singapore for Rubicon Offshore
International. Mr. Witt marketed power and natural
gas derivatives for Goldman Sachs, GDF Suez and Enron Capital and Trade, and was Head of Planning and
Control for BP Exploration’s global gas business unit in
London, England.
Corporate Development Timeline

Greenfields Petroleum was founded in April 2008
by Rick MacDougal and Alex Warmath, after the
sale of their previous venture GFI Oil and Gas (for
a total of C$290.3 mm. In July 2008, the Company
completed a US$4.3 mm Phase 1 funding.

In March 2009, Greenfields signed a Heads of
Agreement with SOCAR to evaluate several opportunities in offshore Caspian Sea.

In November 2009, the president of Azerbaijan
signed a decree for SOCAR to develop an ERDPSA
with Bahar Energy (33.3% Greenfields). Greenfields will operate two producing fields containing
over 50 platforms in offshore Caspian Sea.

In December 2010, SOCAR and Bahar Energy
signed an ERDPSA agreement that contains the
Bahar gas field and Gum Deniz oil field.

In February 2010, the Company raised C$5 mm
equity priced at C$5.00 per share.

In September 2010, the Company raised C$12.83
mm equity priced at C$6.50 per share.

In October 2010, the ERDPSA became effective and
the Bahar Energy Operating Company took over
operations of the Bahar Project.

In November and December 2010, the Company
went public (IPO) and raised US$41.4 mm (including overallotment) priced at C$8.50 per share.
18
FirstFocus • Greenfields Petroleum Corporation - GNF.S • 04 January, 2011
THIS PAGE INTENTIONALLY LEFT BLANK.
19
Disclosure Requirements
X Issuer
Is this an issuer related or industry related publication?
Industry
Yes
X No
Is FirstEnergy a market maker in the issuer’s securities at the date of this report?
Yes
X No
Does FirstEnergy beneficially own more than 1% of any class of common equity of the issuer?
Yes
X No
Does FirstEnergy or the analyst have any actual material conflicts of interest with the issuer?
Explanation:
Yes
X No
Does any director, officer, employee of FirstEnergy or member of their household serve as a director or officer or advisory capacity of the issuer? (if so, list name)
Yes
X No
Did the analyst and/or associate who prepared this research report receive compensation based solely upon
investment banking revenues?
Yes
X No
Did the analyst receive any payment or reimbursement of travel expenses by the issuer?
Yes
Since July 9, 2002, has the analyst received any compensation based on a specific investment
banking transaction relative to this issuer?
Yes
X No
X No
Has any director, officer or employee who prepared this research report received any
compensation from the subject company in the past 12 months?
Yes
X No
Has FirstEnergy provided the issuer or its predecessor with non-investment banking securities-related
services in the past 12 months?
Yes
X No
Has FirstEnergy managed or co-managed an offering of securities by the issuer or its predecessor in the
past 12 months?
X Yes
No
Has FirstEnergy received compensation for investment banking and related services from the
issuer or its predecessor in the past 12 months?
X Yes
No
Does the analyst, a member of the analyst’s household, associate or employee who prepared this research
report have a financial interest in securities of the subject issuer? If yes, nature of the interest and name:
Greenfields Petroleum Corporation (TSX: GNF.S)
Ranking System
Ranking and Target Changes 2007 - 2010
FirstEnergy’s rating system reflects our outlook for expected performance of an issuer’s equity securities relative to its peer group over
the next 12 months.
£10.00
Daily Closing Price
e
Closing Price
£9.00
Ranking Change
£8.00
Target Price Change

£7.00
£6.00

£5.00
£4.00
Initiated Coverage Jan04-11 (T)
£3.00

£2.00

Sep…
RATING SYSTEM: T = Top Pick (Buy); O = Outperform (Buy); M = Market Perform (Hold); U = Underperform (Sell); SB = Speculative Buy (Buy);
R = Under Review; * = Restricted; As of April 15, 2009 X = Tender; NR = Not Rated
Source: FirstEnergy Capital Corp. & Bloomberg
Opinion: TOP PICK
12 MONTH TARGET PRICE: C$15.00
Top Picks
Outperforms
Market Performs
Underperforms
Speculative Buys
Under Review
Restricted Companies
Tenders
Not Rated
Total
Ranking
Distribution
7%
46%
26%
8%
7%
1%
4%
1%
0%
100%
% Investment
Banking Clients
4%
20%
5%
1%
4%
0%
4%
1%
0%
Nov…
Jul-10
Mar…
May…
Jan-…
Sep…
Nov…
Jul-09
Mar…
May…
Jan-…
Sep…
Nov…
Jul-08
Mar…
May…
Jan-…
Sep…
Nov…
Jul-07
Mar…
May…
£0.00
Jan-…
£1.00


A Top Pick (Buy) rating represents a security expected to provide a
return materially higher than the peer group average.
An Outperform (Buy) rating represents a security expected to provide a
return greater than the peer group average.
A Market Perform (Hold) rating represents a security expected to provide a return in line with the peer group average.
An Underperform (Sell) rating represents a security expected to provide
a return less than the peer group average.
A Speculative Buy (Buy) rating represents a security where the return
potential is high, but the risk of a significant loss is material.
A Tender (X) represents a security where investors are guided to tender
to the terms of the takeover offer.
The author of this report hereby certifies that the views expressed in this report
accurately reflect his/her personal views about the subject security and issuer.
The author of this reports further certifies that no part of his/her compensation
was, is, or will be directly or indirectly related to the specific recommendations
or views contained in this research report.
FirstEnergy Capital may receive or intends to seek compensation for investment
banking services from all issuers under research coverage within the next three
months.
This report has not been approved by FirstEnergy Capital LLP for the purposes
of section 21 of the Financial Services and Markets Act 2000 as it is being distributed only to persons who are investment professionals within the meaning of
article 19 of the Financial Services and Markets Act 2000 (Financial Promotion)
Order 2005 and is not intended to, and should not be relied upon, by any other
person.
20
FirstFocus • Greenfields Petroleum Corporation - GNF.S • 04 January, 2011
Notes
21
Notes
22
FirstFocus • Greenfields Petroleum Corporation - GNF.S • 04 January, 2011
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ZĞƐĞĂƌĐŚƐƐŽĐŝĂƚĞ
ŝƌĞĐƚ
ϰϬϯͲϮϲϮͲϬϲϲϴ
ϰϬϯͲϮϲϮͲϬϲϰϯ
ϰϬϯͲϮϲϮͲϬϲϴϵ
ϰϬϯͲϮϲϮͲϬϲϰϴ
ϰϬϯͲϰϰϰͲϰϴϴϲ
ϰϬϯͲϰϰϰͲϴϮϳϯ
ϰϬϯͲϮϲϮͲϬϲϬϵ
ϰϬϯͲϮϲϮͲϬϲϮϰ
ϰϬϯͲϮϲϮͲϬϲϮϱ
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ϰϬϯͲϮϲϮͲϬϲϮϵ
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ϰϬϯͲϮϲϮͲϬϲϮϮ
ŵĂŝůΛĨŝƌƐƚĞŶĞƌŐLJ͘ĐŽŵ
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ϰϬϯͲϮϲϮͲϬϲϲϵ
ϰϬϯͲϮϲϮͲϬϲϮϬ
ϰϬϯͲϮϲϮͲϬϲϵϰ
ϰϬϯͲϮϲϮͲϬϲϳϴ
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ϰϬϯͲϮϲϮͲϬϲϬϴ
ϰϬϯͲϮϲϮͲϬϲϲϱ
ϰϬϯͲϮϲϮͲϬϲϭϴ
ϰϬϯͲϮϲϮͲϬϲϭϳ
ϰϬϯͲϰϰϰͲϴϮϲϵ
ϰϬϯͲϰϰϰͲϰϴϵϲ
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ĞďďĂŬŬĞ
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ũǁĚĂǀŝĚƐŽŶ
ĂŵĚĞŶŝŶŽ
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ƐĂŚĞůǁĞƌ
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ŬďƌŽŽŬĞƐ
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ŵŵƚƵƌŶĞƌ
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ƌĂŝŐ'͘ƵƌŶƐ
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WĞƚĞƌ͘>ƵŶĚďĞƌŐ
ZŝĐŚĂƌĚ:͘DĂƚƚŚĞǁƐ
DĂƌŬ͘WĞĂƌƐŽŶ
dŝƚůĞ
sŝĐĞWƌĞƐŝĚĞŶƚ͕ĐƋƵŝƐŝƚŝŽŶƐΘŝǀĞƐƚŝƚƵƌĞƐ
DĂŶĂŐŝŶŐŝƌĞĐƚŽƌ͕ĐƋƵŝƐŝƚŝŽŶƐΘŝǀĞƐƚŝƚƵƌĞƐ
ŶĂůLJƐƚ͕ĐƋƵŝƐŝƚŝŽŶƐΘŝǀĞƐƚŝƚƵƌĞƐ
ŶĂůLJƐƚ͕ĐƋƵŝƐŝƚŝŽŶƐΘŝǀĞƐƚŝƚƵƌĞƐ
sŝĐĞWƌĞƐŝĚĞŶƚ͕ĐƋƵŝƐŝƚŝŽŶƐΘŝǀĞƐƚŝƚƵƌĞƐ
sŝĐĞWƌĞƐŝĚĞŶƚ͕ĐƋƵŝƐŝƚŝŽŶƐΘŝǀĞƐƚŝƚƵƌĞƐ
sŝĐĞWƌĞƐŝĚĞŶƚΘŝƌĞĐƚŽƌ͕ĐƋƵŝƐŝƚŝŽŶƐΘŝǀĞƐƚŝƚƵƌĞƐ
ƐƐŽĐŝĂƚĞ͕ĐƋƵŝƐŝƚŝŽŶƐΘŝǀĞƐƚŝƚƵƌĞƐ
ŝƌĞĐƚ
ϰϬϯͲϰϰϰͲϴϮϲϴ
ϰϬϯͲϮϲϮͲϬϲϬϮ
ϰϬϯͲϰϰϰͲϰϴϵϳ
ϰϬϯͲϰϰϰͲϴϮϴϱ
ϰϬϯͲϮϲϮͲϬϲϲϬ
ϰϬϯͲϰϰϰͲϰϴϵϮ
ϰϬϯͲϮϲϮͲϬϲϳϳ
ϰϬϯͲϰϰϰͲϴϮϴϰ
ŵĂŝůΛĨŝƌƐƚĞŶĞƌŐLJ͘ĐŽŵ
ĐŐďƵƌŶƐ
ďĨĚƵŶŶ
ĂĚĞƉƉ
ŬŵĐůĂƌŬ
ĚƚŬƌĞďĂ
ƉĐůƵŶĚďĞƌŐ
ƌũŵĂƚƚŚĞǁƐ
ŵĐƉĞĂƌƐŽŶ
ĚŵŝŶŝƐƚƌĂƚŝŽŶ
ŚƌŝƐƚŝŶĂ'ƌĂĐĞLJ
ŚĂŶĚƌĂ͘,ĞŶƌLJ
ƌŝĚŐĞƚ'͘DĂŚŽŶĞLJ
,ŝŶƐŽŶEŐ
DĂƌŝŶĂWŽƐƚ
ZƵďLJ&͘tĂůůŝƐ
ZŽďĞƌƚY͘tŽŽĚ
dŝƚůĞ
DĂŶĂŐĞƌ͕ŽŶĨĞƌĞŶĐĞƐΘŽŵŵƵŶŝƚLJ
ŚŝĞĨ&ŝŶĂŶĐŝĂůKĨĨŝĐĞƌ
sŝĐĞWƌĞƐŝĚĞŶƚ͕^LJŶĚŝĐĂƚŝŽŶ
sŝĐĞWƌĞƐŝĚĞŶƚ͕ŽŵƉůŝĂŶĐĞ
ŽŶƚƌŽůůĞƌ
ŚŝĞĨKƉĞƌĂƚŝŶŐKĨĨŝĐĞƌ
sŝĐĞWƌĞƐŝĚĞŶƚ͕/ŶĨŽƌŵĂƚŝŽŶdĞĐŚŶŽůŽŐLJ
ŝƌĞĐƚ
ϰϬϯͲϮϲϮͲϬϲϱϲ
ϰϬϯͲϮϲϮͲϬϲϮϯ
ϰϬϯͲϮϲϮͲϬϲϮϳ
ϰϬϯͲϮϲϮͲϬϲϱϴ
ϰϬϯͲϮϲϮͲϬϲϳϵ
ϰϬϯͲϮϲϮͲϬϲϯϭ
ϰϬϯͲϮϲϮͲϬϲϭϵ
ŵĂŝůΛĨŝƌƐƚĞŶĞƌŐLJ͘ĐŽŵ
ĐŐƌĂĐĞLJ
ĐĂŚĞŶƌLJ
ďŐŵĂŚŽŶĞLJ
ŚŶŐ
ŵƉŽƐƚ
ƌĨǁĂůůŝƐ
ƌƋǁŽŽĚ
23
&ŝƌƐƚŶĞƌŐLJĂƉŝƚĂů>>W͘ϴϱ>ŽŶĚŽŶtĂůů͕>ŽŶĚŽŶ͕hŶŝƚĞĚ<ŝŶŐĚŽŵϮDϳ
dĞů͗нϰϰ͘Ϭ͘ϮϬϳ͘ϰϰϴ͘ϬϮϬϬ&Ădž͗нϰϰ͘Ϭ͘ϮϬϳ͘ϰϰϴ͘ϬϮϰϰ
ZĞƐĞĂƌĐŚ
^ƚĞƉŚĂŶĞ'͘&ŽƵĐĂƵĚ
'ĞƌƌLJ&͘ŽŶŶĞůůLJ
<ŝŶŐƐůĞLJK͘:ŝďƵŶŽŚ
ĂǀŝĚZ͘ǀĂŶƌƉ
dŝƚůĞ
sŝĐĞWƌĞƐŝĚĞŶƚΘŝƌĞĐƚŽƌ͕/ŶƐƚŝƚƵƚŝŽŶĂůZĞƐĞĂƌĐŚ
sŝĐĞWƌĞƐŝĚĞŶƚ͕/ŶƐƚŝƚƵƚŝŽŶĂůZĞƐĞĂƌĐŚ
ƐƐŽĐŝĂƚĞ͕/ŶƐƚŝƚƵƚŝŽŶĂůZĞƐĞĂƌĐŚ
ƐƐŽĐŝĂƚĞ͕/ŶƐƚŝƚƵƚŝŽŶĂůZĞƐĞĂƌĐŚ
ŝƌĞĐƚ
нϰϰͲϬͲϮϬϳͲϰϰϴͲϬϮϭϯ
нϰϰͲϬͲϮϬϳͲϰϰϴͲϬϮϭϰ
нϰϰͲϬͲϮϬϳͲϰϰϴͲϬϮϮϳ
нϰϰͲϬͲϮϬϳͲϰϰϴͲϬϮϰϯ
ŵĂŝůΛĨŝƌƐƚĞŶĞƌŐLJ͘ĐŽŵ
ƐŐĨŽƵĐĂƵĚ
ŐĨĚŽŶŶĞůůLJ
ŬŽũŝďƵŶŽŚ
ĚƌǀĂŶĞƌƉ
^ĂůĞƐΘdƌĂĚŝŶŐ
ZŝĐŚĂƌĚŽǁŶĂƌĚ
:ŽŚŶW͘'ŝůďĞƌƚ
ZƵƉĞƌƚ,ŽůĚƐǁŽƌƚŚ,ƵŶƚ
:ĂƐŽŶ͘<ŶŽǁůĞƐ
:ŽŚŶZ͘DĂŶŝƐŽŶ
dŝƚůĞ
^ĂůĞƐdƌĂĚĞƌ͕/ŶƐƚŝƚƵƚŝŽŶĂů^ĂůĞƐΘdƌĂĚŝŶŐ
/ŶƐƚŝƚƵƚŝŽŶĂů^ĂůĞƐ
sŝĐĞWƌĞƐŝĚĞŶƚΘŝƌĞĐƚŽƌ͕/ŶƐƚŝƚƵƚŝŽŶĂů^ĂůĞƐΘdƌĂĚŝŶŐ
^ĂůĞƐdƌĂĚĞƌ͕/ŶƐƚŝƚƵƚŝŽŶĂů^ĂůĞƐΘdƌĂĚŝŶŐ
^ĞƚƚůĞŵĞŶƚƐ͕/ŶƐƚŝƚƵƚŝŽŶĂů^ĂůĞƐΘdƌĂĚŝŶŐ
ŝƌĞĐƚ
нϰϰͲϬͲϮϬϳͲϰϰϴͲϬϮϬϵ
нϰϰͲϬͲϮϬϳͲϰϰϴͲϬϮϬϲ
нϰϰͲϬͲϮϬϳͲϰϰϴͲϬϮϭϮ
нϰϰͲϬͲϮϬϳͲϰϰϴͲϬϮϬϴ
нϰϰͲϬͲϮϬϳͲϰϰϴͲϬϮϭϬ
ŵĂŝůΛĨŝƌƐƚĞŶĞƌŐLJ͘ĐŽŵ
ƌĚŽǁŶĂƌĚ
ũƉŐŝůďĞƌƚ
ƌŚŚƵŶƚ
ũĚŬŶŽǁůĞƐ
ũƌŵĂŶŝƐŽŶ
ŽƌƉŽƌĂƚĞ&ŝŶĂŶĐĞ
<ŚĂůŝĚŚŵĞĚ
^ƚĞƉŚĞŶ͘&ƌĂŶĐĂǀŝůůĂ
dƌĂǀŝƐ<͘/ŶůŽǁ
,ƵŐŚZ͘^ĂŶĚĞƌƐŽŶ
DĂũŝĚ^ŚĂĨŝƋ
ĞƌĞŬ͘^ŵŝƚŚ
dŝƚůĞ
ŶĂůLJƐƚ͕ŽƌƉŽƌĂƚĞ&ŝŶĂŶĐĞ
ŶĂůLJƐƚ͕ŽƌƉŽƌĂƚĞ&ŝŶĂŶĐĞ
ƐƐŽĐŝĂƚĞ͕ŽƌƉŽƌĂƚĞ&ŝŶĂŶĐĞ
DĂŶĂŐŝŶŐŝƌĞĐƚŽƌ͕ŽƌƉŽƌĂƚĞ&ŝŶĂŶĐĞ
DĂŶĂŐŝŶŐŝƌĞĐƚŽƌ͕ŽƌƉŽƌĂƚĞ&ŝŶĂŶĐĞ
sŝĐĞWƌĞƐŝĚĞŶƚ͕ŽƌƉŽƌĂƚĞ&ŝŶĂŶĐĞ
ŝƌĞĐƚ
нϰϰͲϬͲϮϬϳͲϰϰϴͲϬϮϮϭ
нϰϰͲϬͲϮϬϳͲϰϰϴͲϬϮϬϭ
нϰϰͲϬͲϮϬϳͲϰϰϴͲϬϮϭϱ
нϰϰͲϬͲϮϬϳͲϰϰϴͲϬϮϬϮ
нϰϰͲϬͲϮϬϳͲϰϰϴͲϬϮϮϲ
нϰϰͲϬͲϮϬϳͲϰϰϴͲϬϮϬϯ
ŵĂŝůΛĨŝƌƐƚĞŶĞƌŐLJ͘ĐŽŵ
ŬĂŚŵĞĚ
ƐĂĨƌĂŶĐĂǀŝůůĂ
ƚŬŝŶůŽǁ
ŚƌƐĂŶĚĞƌƐŽŶ
ŵƐŚĂĨŝƋ
ĚĂƐŵŝƚŚ
ĐƋƵŝƐŝƚŝŽŶƐΘŝǀĞƐƚŝƚƵƌĞƐ
ZŽůĨ͘'͘ĂŬŬĞƌ
WĂƵůW͘ĂŶŶŝƐƚĞƌ
ZŽŵĂŝŶŽŚďŽƚĞ
DĂƌŬt͘>ůĂŵĂƐ
dŝƚůĞ
ŝƌĞĐƚŽƌĂŶĚh<ŽͲ,ĞĂĚ͕ĐƋƵŝƐŝƚŝŽŶƐĂŶĚŝǀĞƐƚŝƚƵƌĞƐ
ƐƐŽĐŝĂƚĞ͕ĐƋƵŝƐŝƚŝŽŶƐĂŶĚŝǀĞƐƚŝƚƵƌĞƐ
ƐƐŽĐŝĂƚĞ͕ĐƋƵŝƐŝƚŝŽŶƐĂŶĚŝǀĞƐƚŝƚƵƌĞƐ
DĂŶĂŐŝŶŐŝƌĞĐƚŽƌ͕ĐƋƵŝƐŝƚŝŽŶƐĂŶĚŝǀĞƐƚŝƚƵƌĞƐ
ŝƌĞĐƚ
нϰϰͲϬͲϮϬϳͲϰϰϴͲϬϮϮϱ
нϰϰͲϬͲϮϬϳͲϰϰϴͲϬϮϰϭ
нϰϰͲϬͲϮϬϳͲϰϰϴͲϬϮϮϯ
нϰϰͲϬͲϮϬϳͲϰϰϴͲϮϮϮϰ
ŵĂŝůΛĨŝƌƐƚĞŶĞƌŐLJ͘ĐŽŵ
ƌĞďĂŬŬĞƌ
ƉƉďĂŶŶŝƐƚĞƌ
ƌďŽƚĞ
ŵǁůůĂŵĂƐ
ĚŵŝŶŝƐƚƌĂƚŝŽŶ
DĂƌĐŝĂ͘DĂŶĂƌŝŶ
ĚƌŝĂŶWĞŶŶLJ
DŽLJĂ͘tŽŽĚĞƌ
dŝƚůĞ
&ŝŶĂŶĐŝĂůŽŶƚƌŽůůĞƌ
ŚŝĞĨKƉĞƌĂƚŝŶŐKĨĨŝĐĞƌ;h<Ϳ
KĨĨŝĐĞDĂŶĂŐĞƌ
ŝƌĞĐƚ
нϰϰͲϬͲϮϬϳͲϰϰϴͲϬϮϮϵ
нϰϰͲϬͲϮϬϳͲϰϰϴͲϬϮϬϳ
нϰϰͲϬͲϮϬϳͲϰϰϴͲϬϮϬϰ
ŵĂŝůΛĨŝƌƐƚĞŶĞƌŐLJ͘ĐŽŵ
ŵĐŵĂŶĂƌŝŶ
ĂƉĞŶŶLJ
ŵĐǁŽŽĚĞƌ
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