PRIVILEGED AND CONFIDENTIAL ATTORNEY-CLIENT PRIVILEGE / ATTORNEY WORK PRODUCT
DUE DILIGENCE MEMORANDUM — LITIGATION
CALDERWOOD & HARKNESS LLP 425 Lexington Avenue New York, NY 10017
Matter No.: 1016-00003
Date: April 28, 2025
TO: Jennifer Kwon, Responsible Partner; Theodore Langston, Billing Partner
FROM: Eric Johannsen, Lead Associate; Claire Dempsey, Working Associate
RE: Dunmore Energy Holdings Ltd. — $850,000,000 9.375% Senior Secured Notes due 2032 — Litigation Due Diligence Summary and OM Disclosure Assessment
This memorandum is a privileged and confidential attorney-client communication and attorney work product prepared by Calderwood & Harkness LLP in connection with the offering described herein. This memorandum is intended solely for the use of the addressees and should not be disclosed to any third party without the prior written consent of Calderwood & Harkness LLP.
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I. EXECUTIVE SUMMARY
This memorandum summarizes the results of the litigation due diligence conducted by Calderwood & Harkness LLP in connection with the proposed offering of $850,000,000 aggregate principal amount of 9.375% Senior Secured Notes due 2032 (the "Notes") by Dunmore Energy Holdings Ltd., a Cayman Islands exempted company ("DEH" or the "Company"), and Dunmore upstream Finance Corp., a Delaware corporation ("DUFC" and, together with DEH, the "Issuers," and together with the Guarantors defined below, "Dunmore"). The Notes are to be offered and sold pursuant to Rule 144A under the Securities Act of 1933, as amended (the "Securities Act"), and Regulation S under the Securities Act.
The purpose of this memorandum is to provide the engagement team with a comprehensive assessment of all pending and threatened litigation, arbitration, regulatory proceedings, and governmental investigations against Dunmore and each of its subsidiaries, and to evaluate whether any such matters require individual or aggregate disclosure in the Offering Memorandum (the "OM") being prepared in connection with the offering. This memorandum also assesses the adequacy of existing insurance coverage to address identified litigation exposures and identifies open items requiring follow-up before the Final OM date (currently scheduled for May 14, 2025) and the expected closing date (May 15, 2025).
Scope of Review. Our review encompasses all pending and threatened litigation, arbitration, regulatory proceedings, and governmental investigations against the Issuers and each of the six subsidiaries that will serve as guarantors of the Notes (collectively, the "Guarantors"):
(i) Dunmore Nigeria E&P Ltd. (Nigeria);
(ii) Dunmore Gulf Operations LLC (Delaware);
(iii) Dunmore Renewables LLC (Delaware);
(iv) Dunmore Senegal S.A. (Senegal);
(v) Dunmore Midstream Holdings Inc. (Delaware); and
(vi) Dunmore Trading Ltd. (England and Wales).
Sources Reviewed. In conducting this review, we have examined management representations and questionnaire responses from Alistair Forde, General Counsel of DEH; conducted litigation docket searches in all relevant jurisdictions; reviewed applicable regulatory filings and enforcement records; and reviewed correspondence and memoranda from local counsel engaged in the relevant foreign jurisdictions, including Abayomi Chambers (Lagos, Nigeria), Theron Moss & Associates SARL (Dakar, Senegal), and Cresswell & Greaves LLP (London, England). We have also reviewed the Bureau of Ocean Energy Management ("BOEM") and Bureau of Safety and Environmental Enforcement ("BSEE") enforcement database records applicable to Dunmore Gulf Operations LLC's operations in the Gulf of Mexico ("GoM"), including the Green Canyon and Garden Banks lease areas.
Overall Conclusion. Based on our review, no single pending or threatened matter, individually or in the aggregate, is expected to have a material adverse effect on the consolidated financial condition, results of operations, or cash flows of Dunmore. However, certain matters warrant individual disclosure in the Offering Memorandum, as described in Section VII of this memorandum. In particular, the ongoing dispute with the Nigerian National Petroleum Company ("NNPC") regarding back-in rights in OML 63 represents the largest identified potential exposure and, while still at the pre-litigation stage, warrants disclosure given its proximity to the materiality threshold and its significance to the Nigerian asset base.
Reference Financial Data. For purposes of the materiality assessments contained in this memorandum, we have referenced Dunmore's consolidated financial statements for the fiscal year ended December 31, 2024, as audited by Alverton & Co. LLP (engagement partner Graham Stillwell), which reflect the following key financial metrics:
II. METHODOLOGY
A. Document and Information Sources
The litigation due diligence review was conducted based on the following document and information sources:
Management Materials. We prepared and delivered a Master Due Diligence Request List to Dunmore, which included a comprehensive category devoted to litigation, proceedings, claims, and investigations. In response, management provided access to relevant files, correspondence, and internal assessments. A detailed management litigation questionnaire was completed by Alistair Forde, General Counsel of DEH, and returned to us on April 10, 2025. In addition, we received officer's certificates from authorized officers of each Guarantor subsidiary, in each case certifying as to all pending and threatened legal proceedings, arbitrations, regulatory actions, and governmental investigations involving such subsidiary as of the date of the certificate.
Litigation Docket and Public Filing Searches. We conducted litigation docket searches in the following jurisdictions, covering all filings naming any Dunmore entity as a party or potential party:
• United States federal courts (via PACER), with particular focus on the Southern District of Texas and the District of Delaware;
• Texas state courts (via the Texas Office of Court Administration electronic filing system), with particular focus on Harris County, Reeves County, and Midland County;
• Delaware Court of Chancery;
• The High Court of Justice of England and Wales (via the Courts and Tribunals Service online records);
• The Federal High Court of Nigeria (via coordination with Abayomi Chambers);
• Senegalese courts of competent jurisdiction (via coordination with Theron Moss & Associates SARL); and
• The London Court of International Arbitration ("LCIA") (to the extent publicly available information was accessible, supplemented by information provided by Cresswell & Greaves LLP).
Regulatory Enforcement Records. We reviewed the following regulatory enforcement databases and records:
• BOEM and BSEE enforcement records, including Incidents of Noncompliance ("INCs"), civil penalty actions, and any orders or notices applicable to Dunmore Gulf Operations LLC's Green Canyon and Garden Banks lease operations;
• Nigerian Department of Petroleum Resources ("DPR") enforcement records relating to OML 47 and OML 63, as provided by Abayomi Chambers; and
• Texas Commission on Environmental Quality ("TCEQ") enforcement records applicable to Dunmore Midstream Holdings Inc.
Local Counsel Coordination. Our review was coordinated with the following local counsel, who provided jurisdiction-specific assessments and factual summaries:
• Abayomi Chambers (Chidinma Okafor, Partner), 14 Broad Street, Victoria Island, Lagos, Nigeria — retained for Nigerian matters, including the OML 47 community compensation proceedings, the FIRS tax assessment dispute, and the NNPC back-in rights dispute;
• Theron Moss & Associates SARL (Moustapha Sy, Managing Partner), Rue Moussé Diop 22, Plateau, Dakar, Senegal — retained for Senegalese matters, including the subcontractor payment dispute relating to the Cayar Offshore Block; and
• Cresswell & Greaves LLP (Fiona Halsted, Partner), 10 Fenchurch Avenue, London EC3M 5BN — retained for English law matters, including the LCIA offtake contract arbitration involving Dunmore Trading Ltd.
B. Materiality Threshold
For purposes of this memorandum, we have applied both quantitative and qualitative materiality criteria in assessing whether individual or aggregate litigation matters warrant disclosure in the Offering Memorandum.
Quantitative Threshold. We have identified matters with potential exposure exceeding $25 million, or approximately 3% of Dunmore's FY 2024 EBITDA ($816,000,000 × 3% ≈ $24,500,000), as presumptively material for individual disclosure purposes. Matters with exposure below this threshold have been assessed on a qualitative basis and in the context of aggregate exposure.
Qualitative Considerations. In addition to the quantitative threshold, we have considered the following qualitative factors in determining whether individual matters warrant disclosure:
(i) whether the matter involves a risk to the regulatory status or operating licenses of material assets, including OML 47, OML 63, the Cayar Offshore Block, and the GoM lease areas, the loss or impairment of which could materially affect the Company's ability to generate revenue and service the Notes;
(ii) whether the matter involves allegations relating to sanctions compliance, anti-corruption laws (including the U.S. Foreign Corrupt Practices Act ("FCPA") and the UK Bribery Act 2010), or anti-money laundering regulations, which could carry significant reputational and regulatory consequences;
(iii) whether the matter could trigger an Event of Default under the Indenture governing the Notes or a cross-default under Dunmore's existing ABL Revolver (the $750,000,000 revolving credit facility with Velthorn National Bank, N.A. as administrative agent, of which approximately $470,000,000 is currently drawn); and
(iv) the reputational impact of the matter on the Company's ability to conduct operations and maintain relationships with host governments, communities, regulators, and counterparties.
C. Limitations and Assumptions
This memorandum is subject to the following limitations and assumptions:
Reliance on Management Representations. We have relied upon the accuracy and completeness of the management representations, questionnaire responses, officer's certificates, and other information provided to us by Dunmore. We have not conducted an independent investigation of the underlying facts of any pending or threatened matter, and we have not retained independent investigators, forensic accountants, or technical experts. To the extent that management representations are inaccurate or incomplete, our conclusions may require revision.
Foreign Jurisdiction Matters. Matters pending or threatened in Nigeria, Senegal, and England and Wales have been reviewed with the assistance of local counsel in each jurisdiction. Our assessments of the legal merits and potential exposure of such matters are based in significant part on the analysis provided by local counsel, and we defer to local counsel's expertise on questions of local procedural and substantive law.
Privileged Materials. In the course of our review, we were provided access to certain privileged litigation assessments prepared by Dunmore's internal counsel and external litigation counsel. While we have considered these assessments in forming our views, we have not reproduced the substance of such privileged communications in this memorandum in order to preserve applicable privileges. Any references to litigation risk assessments in this memorandum reflect our own independent analysis, informed by but not constituting a reproduction of privileged materials.
III. SUMMARY OF PENDING LITIGATION
Set forth below is a summary of all pending litigation, arbitration, and regulatory proceedings identified through our due diligence review, organized by entity. We have identified a total of ten matters, of which four are recommended for individual disclosure in the Offering Memorandum.
A. Dunmore Nigeria E&P Ltd. — Nigerian Matters
1. Community Compensation Proceedings — OML 47 (Niger Delta). Forum: Federal High Court, Lagos Division
Parties: Ogbara Community Development Association and 47 individual plaintiffs v. Dunmore Nigeria E&P Ltd.
Case Number: FHC/L/CS/1847/2022
Nature of Claims: The plaintiffs, comprising the Ogbara Community Development Association (an unincorporated community organization representing residents of several communities in the vicinity of OML 47 in Rivers State, Niger Delta region) and 47 named individual plaintiffs, have brought claims alleging environmental contamination, loss of fishing livelihood, destruction of farmland, and inadequate compensation arising from Dunmore Nigeria E&P Ltd.'s pipeline operations in the OML 47 license area. The plaintiffs allege that pipeline leaks and gas flaring associated with Dunmore's operations have caused soil and water contamination affecting the communities' traditional fishing grounds and agricultural land. The claims are brought under Nigerian common law principles of negligence and nuisance, as well as under the provisions of the Nigerian Oil Pipelines Act (Cap. O7, Laws of the Federation of Nigeria, 2004) and the Environmental Impact Assessment Act (Cap. E12, Laws of the Federation of Nigeria, 2004).
Amount Claimed: The plaintiffs seek damages in the aggregate amount of approximately ₦8.5 billion (approximately $10.2 million at current exchange rates), comprising compensatory damages for alleged environmental harm, loss of income, and costs of remediation, together with an award of general damages.
Status: The case was filed in 2022. Following initial procedural motions, discovery is ongoing. The court has ordered exchange of witness statements, and expert reports on environmental impact are expected to be filed in the second half of 2025. No trial date has been scheduled. Dunmore Nigeria E&P Ltd. has filed a motion to dismiss certain of the plaintiffs' claims on grounds that the individual plaintiffs lack standing to bring claims that are properly brought, if at all, by the Ogbara Community Development Association, and that certain claims are barred by the applicable statute of limitations. The motion to dismiss remains pending.
Dunmore's Position: Dunmore Nigeria E&P Ltd. denies liability in its entirety. The company asserts that it has at all times complied with the requirements of the Nigerian Oil Pipelines Act and the Environmental Impact Assessment Act, including the obligations relating to environmental monitoring, community engagement, and compensation. Dunmore further asserts that any environmental impact from its operations has been within permitted levels and that remediation activities have been conducted in accordance with applicable standards.
Local Counsel Assessment: Abayomi Chambers (Chidinma Okafor) has assessed this matter as presenting moderate risk. Ms. Okafor notes that community compensation claims in the Niger Delta are common in the Nigerian oil and gas sector and that such claims historically settle for amounts significantly below the figures initially claimed by plaintiffs. Based on her experience with similar proceedings and the specific facts of this case, Ms. Okafor estimates the probable exposure in the range of $2 million to $4 million, assuming the matter proceeds to a negotiated resolution or a court-ordered settlement conference.
OM Disclosure Recommendation: We recommend disclosing this matter as a pending proceeding in the litigation section of the Offering Memorandum. The disclosure should include a brief factual description of the claims, the amount sought, the current procedural status, and management's assessment that the ultimate resolution of this matter is not expected to have a material adverse effect on Dunmore's consolidated financial condition or results of operations.
2. Tax Assessment Dispute — Federal Inland Revenue Service (FIRS). Forum: Tax Appeal Tribunal, Lagos Zone
Parties: Federal Inland Revenue Service v. Dunmore Nigeria E&P Ltd.
Case Number: TAT/LZ/PPT/009/2024
Nature of Claims: The Federal Inland Revenue Service ("FIRS") has issued an additional assessment for petroleum profits tax for fiscal years 2021 and 2022 against Dunmore Nigeria E&P Ltd. The FIRS asserts that Dunmore Nigeria underpaid its petroleum profits tax obligations during the relevant periods due to alleged errors in the computation of allowable deductions, including capital allowances and pre-production expenditures, and the treatment of certain intercompany transactions relating to the allocation of costs between OML 47 and OML 63. The FIRS assessment totals approximately ₦4.2 billion (approximately $5.0 million at current exchange rates), inclusive of additional taxes, penalties for alleged underpayment, and accrued interest.
Status: Dunmore Nigeria E&P Ltd. filed its appeal with the Tax Appeal Tribunal, Lagos Zone, in January 2024. Preliminary hearings have been conducted. The substantive hearing is scheduled for the third quarter of 2025. Dunmore has engaged independent Nigerian tax advisors to support its position before the Tribunal.
Dunmore's Position: Dunmore Nigeria E&P Ltd. disputes the FIRS assessment in its entirety and asserts full compliance with the Petroleum Profits Tax Act (Cap. P13, Laws of the Federation of Nigeria, 2004), including the provisions governing allowable deductions and the treatment of intercompany transactions. Dunmore's independent tax advisors have prepared a detailed technical analysis supporting Dunmore's filing positions for the relevant fiscal years.
Local Counsel Assessment: Abayomi Chambers (Chidinma Okafor) has assessed this matter as presenting low-to-moderate risk. Ms. Okafor notes that the FIRS assessment appears to be potentially excessive in several respects, particularly with regard to the penalty and interest components. However, she acknowledges some exposure relating to the treatment of timing differences in capital allowance computations, which could result in an adjustment in favor of the FIRS on a portion of the assessed amount.
Financial Reserves: Management has established a reserve of approximately $2.1 million against this matter, reflecting its best estimate of the probable outcome based on the advice of its tax advisors and legal counsel.
OM Disclosure Recommendation: We recommend disclosing this matter in the tax-related litigation section of the Offering Memorandum. The disclosure should note the nature and amount of the FIRS assessment, the current procedural status, Dunmore's position, and the fact that management has reserved approximately $2.1 million against this matter.
3. NNPC Back-In Rights Dispute — OML 63. Forum: No formal proceedings have been filed. The dispute is currently at the negotiation and pre-litigation stage.
Nature of Dispute: Dunmore Nigeria E&P Ltd. and the Nigerian National Petroleum Company ("NNPC") are engaged in a dispute regarding the calculation and timing of NNPC's exercise of its back-in right in OML 63. Under the terms of the OML 63 production sharing contract ("PSC") and the applicable provisions of the Petroleum Act, NNPC has the right to acquire a carried interest in OML 63 upon certain development milestones. The dispute centers on the specific terms upon which NNPC may exercise this back-in right, including the valuation methodology for the carried interest, the allocation of past costs, and the effective date of NNPC's participation. NNPC asserts that it is entitled to a carried interest on terms that differ materially from Dunmore's interpretation of the OML 63 license and the related PSC.
Potential Exposure: If NNPC's interpretation were to prevail on all disputed points, Dunmore's estimated exposure is in the range of $15 million to $30 million, reflecting the difference in the economic terms of NNPC's participation under the two competing interpretations. This estimate accounts for the impact on Dunmore's share of future production and cost recovery from OML 63.
Status: Ongoing commercial negotiations between Dunmore and NNPC are being conducted with the assistance of Abayomi Chambers (Chidinma Okafor). As of the date of this memorandum, no formal arbitration notice has been received by Dunmore, and neither party has initiated formal dispute resolution proceedings under the OML 63 PSC. However, the PSC contains an arbitration clause providing for resolution of disputes by arbitration under the rules of the International Chamber of Commerce ("ICC"), with the seat of arbitration in London.
Local Counsel Assessment: Abayomi Chambers (Chidinma Okafor) has assessed this matter as presenting moderate risk. Ms. Okafor believes that resolution through commercial negotiation remains the most likely outcome, but acknowledges that the outcome of any negotiation or arbitration is uncertain, particularly given the significant economic stakes and the complexity of the contractual and regulatory framework applicable to OML 63.
OFAC and Sanctions Screening: Given that NNPC is a Nigerian state-owned enterprise, we coordinated with the sanctions and anti-corruption workstream to confirm that appropriate screening had been completed. Sandoval Compliance Solutions LLC completed its OFAC and sanctions screening of NNPC and relevant associated persons on April 25, 2025, with no adverse findings.
OM Disclosure Recommendation: We recommend disclosing this matter as a threatened or potential proceeding in the Offering Memorandum, notwithstanding the fact that no formal proceedings have been commenced. The potential exposure range of $15 million to $30 million approaches and, at the high end, exceeds the materiality threshold established for this review. Moreover, OML 63 is a significant asset in Dunmore's portfolio, with proved reserves of 87.3 MMboe and a PV-10 value of $1,620,000,000 as estimated by Duval Howard & Partners in its independent reserve report. The disclosure should include a description of the nature of the dispute, the range of potential exposure, and the current status of negotiations. The disclosure should also note that no formal proceedings have been commenced and that management continues to pursue a negotiated resolution.
B. Dunmore Gulf Operations LLC — U.S. Matters (Gulf of Mexico)
4. Personal Injury Claim — Green Canyon Platform. Forum: United States District Court, Southern District of Texas, Houston Division
Parties: James Kowalski (individual contractor) v. Dunmore Gulf Operations LLC, et al.
Case Number: 4:23-cv-04218
Nature of Claims: James Kowalski, an individual who was employed as a contract worker by a third-party service provider aboard Dunmore Gulf Operations LLC's production platform on Green Canyon Block 248, filed a personal injury claim arising from a platform accident that occurred on September 14, 2023. The plaintiff alleges that he sustained serious injuries, including a fractured femur and soft tissue injuries, when a piece of equipment malfunctioned during routine maintenance operations on the platform. The claims are brought under the Jones Act (46 U.S.C. § 30104) and general maritime law principles, including the doctrine of unseaworthiness and the general maritime negligence standard.
Amount Claimed: The plaintiff seeks compensatory damages in the amount of $6.5 million (including past and future medical expenses, lost wages, loss of earning capacity, and pain and suffering) and punitive damages in the amount of $2.0 million, for a total claimed amount of $8.5 million.
Status: discovery has concluded. Both parties have filed cross-motions for summary judgment, which are currently pending before the court. The trial date is set for September 2025. Dunmore Gulf Operations LLC has designated expert witnesses on the issues of causation, the adequacy of its safety protocols, and the plaintiff's alleged contributory negligence.
Dunmore's Position: Dunmore Gulf Operations LLC denies negligence and asserts that the plaintiff's injuries were caused in whole or in part by the plaintiff's own contributory negligence and assumption of risk. Dunmore further asserts that the equipment malfunction was attributable to a defect in equipment manufactured and maintained by a third-party vendor, and that Dunmore followed all applicable BSEE safety regulations and its own internal safety procedures.
Insurance Coverage: Dunmore Gulf Operations LLC maintains general liability and umbrella insurance coverage with Thornfield Insurance Group plc, providing coverage of up to $50 million per occurrence. The carrier has acknowledged coverage for this claim, and defense costs are being funded under the policy. Any adverse judgment or settlement is expected to be covered in full or substantially in full under the existing insurance program.
Assessment: This matter presents low risk to Dunmore net of insurance. Even assuming a plaintiff's verdict at or near the full claimed amount, the estimated net exposure to Dunmore after insurance recoveries is below $1 million (reflecting applicable deductibles and retention amounts).
OM Disclosure Recommendation: This matter is not individually material. We recommend including it in a general description of routine operational litigation in which Dunmore and its subsidiaries are involved in the ordinary course of business.
5. BSEE Civil Penalty — Garden Banks Lease. Forum: Administrative proceeding before the Bureau of Safety and Environmental Enforcement ("BSEE")
Nature of Proceeding: In 2024, BSEE issued three Incidents of Noncompliance ("INCs") to Dunmore Gulf Operations LLC relating to safety equipment testing requirements at the company's production facility on Garden Banks Block 387. The INCs alleged that Dunmore failed to conduct certain required periodic safety valve tests within the timeframes specified by BSEE regulations (30 C.F.R. Part 250). Following the issuance of the INCs, BSEE issued a proposed civil penalty in the amount of $412,000.
Status: Dunmore Gulf Operations LLC has filed an administrative response contesting two of the three INCs on the grounds that the tests at issue were conducted within the applicable timeframe but that the documentation was not contemporaneously updated in the company's electronic compliance system. Dunmore has accepted the third INC and the associated penalty component (approximately $82,000). Resolution of the contested INCs is expected in 2025.
Assessment: This matter is immaterial in amount. There is no associated license risk, and the INCs do not implicate the integrity of the Garden Banks Block 387 facility or Dunmore's ability to continue operations on the lease. This is a routine operational matter.
OM Disclosure Recommendation: This matter is not individually material. If appropriate, it may be referenced in a general discussion of regulatory compliance in the GoM operations section of the OM.
C. Dunmore Renewables LLC — U.S. Matters (West Texas Solar)
6. Landowner Lease Dispute — West Texas. Forum: 143rd District Court, Reeves County, Texas
Parties: Henderson Ranch Properties LLC v. Dunmore Renewables LLC
Cause Number: 25-03-17829-CV
Nature of Claims: Henderson Ranch Properties LLC, a Texas limited liability company and the fee owner of approximately 640 acres of land in Reeves County, Texas, has brought claims against Dunmore Renewables LLC alleging breach of a surface use agreement entered into in connection with the development of a portion of Dunmore's 220 MW solar portfolio site in West Texas. The plaintiff alleges that Dunmore Renewables exceeded the scope of the permitted surface use under the lease, including by constructing access roads and equipment staging areas outside of the designated lease premises, and by failing to restore certain areas to their original condition following the completion of construction activities. The plaintiff seeks compensatory damages in the amount of $3.2 million, as well as injunctive relief requiring Dunmore Renewables to cease the alleged unauthorized surface use and to restore the affected areas.
Status: The complaint was filed on March 17, 2025. Dunmore Renewables LLC's answer is due on May 12, 2025. This is an early-stage proceeding, and no discovery has been conducted.
Dunmore's Position: Dunmore Renewables LLC believes that the surface use agreement is clear and enforceable and that its activities have been conducted within the scope of the permitted surface use. Dunmore Renewables intends to vigorously defend this action and does not believe that the claims have merit. There is no threat to the continued operations of the solar facility.
Assessment: This matter presents low risk. The amount claimed is not individually material, and Dunmore Renewables' preliminary assessment of the contractual provisions supports its position. Even if the plaintiff were to prevail on certain claims, the damages are unlikely to approach the materiality threshold.
OM Disclosure Recommendation: This matter is not individually material. We recommend noting it in the general litigation disclosure section of the Offering Memorandum.
D. Dunmore Senegal S.A. — Senegalese Matters
7. Subcontractor Payment Dispute — Cayar Offshore Block. Forum: Tribunal Régional Hors Classe de Dakar (Dakar Regional Court)
Parties: Compagnie Africaine de Services Maritimes SARL v. Dunmore Senegal S.A.
Case Number: TRD/COM/2024/1478
Nature of Claims: Compagnie Africaine de Services Maritimes SARL ("CASM"), a Senegalese limited liability company that provided marine logistics and seismic survey support services to Dunmore Senegal S.A. during Phase I of the seismic survey work program at the Cayar Offshore Block, has filed a claim seeking payment of allegedly unpaid invoices. CASM asserts that Dunmore Senegal owes approximately CFA 1.8 billion (approximately $2.9 million at current exchange rates) for services rendered under the subcontract agreement between the parties.
Status: The claim was filed in October 2024. An initial hearing was held in December 2024, at which the court ordered the parties to engage in mediation before further proceedings. The mediation process is ongoing.
Dunmore's Position: Dunmore Senegal S.A. acknowledges that a portion of the claimed amount (approximately CFA 1.2 billion, or approximately $1.9 million) is properly due and payable for services rendered within the scope of the subcontract. However, Dunmore disputes approximately CFA 600 million (approximately $1.0 million) of the claimed amount, asserting that this portion relates to out-of-scope work that was performed by CASM without prior written authorization as required under the terms of the subcontract agreement.
Local Counsel Assessment: Theron Moss & Associates SARL (Moustapha Sy) has assessed this matter as presenting low risk. Mr. Sy expects that the matter will settle through the court-ordered mediation process for an amount in the range of approximately $1.5 million to $2.0 million, reflecting a partial compromise on the disputed out-of-scope charges.
OM Disclosure Recommendation: This matter is not individually material. We recommend noting it in the general litigation disclosure section of the Offering Memorandum.
E. Dunmore Trading Ltd. — English Matters
8. Offtake Contract Dispute — LCIA Arbitration. Forum: London Court of International Arbitration ("LCIA")
Parties: Dunmore Trading Ltd. v. Grandview Commodities Trading AG; counterclaim by Grandview Commodities Trading AG v. Dunmore Trading Ltd.
LCIA Reference Number: 25-0287
Nature of Claims: This dispute arises under a crude oil offtake agreement between Dunmore Trading Ltd. and Grandview Commodities Trading AG ("Grandview"), a Swiss commodity trading firm. Dunmore Trading initiated the arbitration by filing a request for arbitration in November 2024, seeking declaratory relief regarding the proper interpretation of the quality specification provisions of the offtake agreement and the allocation of responsibility for demurrage charges incurred in connection with several shipments of crude oil from the Cayar Offshore Block and Nigerian production. Grandview filed a counterclaim in January 2025, asserting claims for approximately $7.4 million in alleged quality adjustment shortfalls (reflecting alleged discrepancies between the contractual quality specifications and the actual quality of delivered crude) and demurrage charges incurred as a result of alleged delays in loading operations.
Status: The arbitral tribunal was constituted in February 2025, comprising three arbitrators. Procedural Order No. 1 was issued in March 2025, establishing the procedural timetable. The substantive hearing is currently scheduled for the fourth quarter of 2025.
Dunmore's Position: Dunmore Trading asserts that the quality of all crude oil delivered under the offtake agreement conformed to the contractual specifications and that any demurrage charges were caused by Grandview's failure to timely present compliant vessel nominations. Dunmore's affirmative claims for declaratory relief are intended to establish the correct interpretation of the quality specification and demurrage provisions to govern future performance under the agreement.
Local Counsel Assessment: Cresswell & Greaves LLP (Fiona Halsted) has assessed this matter as presenting moderate risk with respect to the counterclaim. Ms. Halsted estimates the net exposure to Dunmore Trading, after taking into account the value of Dunmore's affirmative claims as an offset against the counterclaim, at approximately $2 million to $4 million. Ms. Halsted notes that the quality specification provisions of the offtake agreement contain certain ambiguities that could be construed in Grandview's favor on a portion of the counterclaim.
OM Disclosure Recommendation: We recommend disclosing this matter in the Offering Memorandum given that Dunmore Trading Ltd. is a Guarantor of the Notes. The disclosure should include a brief description of the nature of the arbitration, the amount of the counterclaim, and management's assessment that the resolution of this matter is not expected to have a material adverse effect on Dunmore's consolidated financial condition or results of operations.
F. Dunmore Midstream Holdings Inc. — U.S. Matters
9. Environmental Notice of Violation — Pipeline Spill. Forum: Texas Commission on Environmental Quality ("TCEQ")
Nature of Proceeding: In January 2025, the TCEQ issued a Notice of Violation ("NOV") to Dunmore Midstream Holdings Inc. in connection with a minor crude oil release of approximately 12 barrels from a gathering pipeline operated by Dunmore Midstream in Midland County, Texas. The release was detected by Dunmore Midstream's automated leak detection system on January 8, 2025, and was promptly reported to the TCEQ and the National Response Center in accordance with applicable regulations. Dunmore Midstream immediately initiated containment and remediation activities, which were completed in February 2025.
Estimated Penalty Range: The TCEQ is currently considering the imposition of an administrative penalty in connection with the NOV. Based on the TCEQ's published penalty guidelines and the facts of this incident, the estimated penalty range is $25,000 to $75,000.
Status: Dunmore Midstream submitted its remediation completion report to the TCEQ on February 28, 2025. The TCEQ has acknowledged receipt of the report and is conducting its review. A final determination regarding the penalty, if any, is expected later in 2025.
Assessment: This matter is immaterial in amount and does not present any risk to Dunmore Midstream's operating permits or ability to continue pipeline operations. This is a routine operational matter of the type common in the midstream oil and gas sector.
OM Disclosure Recommendation: This matter is not individually material. If appropriate, it may be referenced in a general discussion of environmental compliance in the OM.
G. Dunmore Energy Holdings Ltd. — Parent-Level Matters
10. Securities-Related Demand Letter — Former Employee. Forum: No formal proceedings have been filed.
Nature of Claim: In February 2025, Dunmore Energy Holdings Ltd. received a demand letter from a former employee of its Houston office. The former employee alleges wrongful termination and asserts potential whistleblower retaliation claims under Section 21F of the Securities Exchange Act of 1934 (the Dodd-Frank Wall Street Reform and Consumer Protection Act whistleblower provisions). The demand letter alleges that the former employee was terminated in retaliation for raising internal concerns regarding alleged accounting irregularities in the preparation of Dunmore's quarterly financial reports. The former employee demands compensation in the amount of $1.5 million.
Status: Alistair Forde, General Counsel of DEH, conducted an internal investigation of the allegations raised in the demand letter and concluded that the allegations are without merit. The internal investigation found that the former employee's termination was based on well-documented performance issues unrelated to any protected whistleblower activity, and that the alleged accounting irregularities identified in the demand letter did not exist. Outside employment counsel has been retained to advise on the matter. As of the date of this memorandum, no lawsuit or administrative complaint has been filed.
Assessment: This matter presents low risk based on the current factual record. The claims appear to lack a factual basis, and the internal investigation conducted by Dunmore's General Counsel did not substantiate the underlying allegations. However, we note that if the former employee were to file a complaint invoking Dodd-Frank whistleblower protections, the matter would require careful monitoring given the heightened regulatory and reputational sensitivities associated with such claims. The SEC has been active in enforcement of the anti-retaliation provisions of Dodd-Frank, and any complaint filed with the SEC could trigger additional scrutiny.
OM Disclosure Recommendation: This matter is not currently material and does not require individual disclosure at this time. However, we recommend that this matter be closely monitored in the period between the date of this memorandum and the Final OM date (May 14, 2025) and the closing date (May 15, 2025). If a formal complaint or lawsuit is filed before the Final OM date, the disclosure obligation should be reassessed in consultation with the engagement team and Initial Purchasers' counsel.
IV. THREATENED OR POTENTIAL MATTERS
In addition to the pending matters described in Section III above, we have assessed whether there are additional threatened or potential matters that warrant disclosure or monitoring.
NNPC Back-In Rights Dispute (OML 63). As discussed in Section III.A.3 above, the dispute with NNPC regarding back-in rights in OML 63 is the most significant pre-litigation matter identified in this review. Although no formal proceedings have been commenced, the dispute is active and unresolved, and the potential exposure range of $15 million to $30 million is the largest among all identified matters. This matter is discussed in detail in Section III.A.3 and is recommended for individual disclosure in the Offering Memorandum.
General Regulatory and Operational Matters. Dunmore, as an international upstream oil and gas operator with significant operations in Nigeria, Senegal, and the GoM, is subject to routine regulatory inquiries, environmental compliance reviews, community grievance processes, and government audits that are normal to the industry and typical of operators in these jurisdictions. Based on our review of management representations and local counsel reports, no such routine matters presently give rise to material threatened claims beyond those described in Section III above.
Sanctions, Anti-Corruption, and Anti-Money Laundering. We have confirmed that, as of the date of this memorandum, there are no pending or threatened government investigations relating to sanctions compliance, OFAC regulations, anti-corruption laws (including the FCPA and the UK Bribery Act 2010), or anti-money laundering regulations involving Dunmore or any of its subsidiaries. In this regard, we note that comprehensive OFAC and sanctions screening was completed by Sandoval Compliance Solutions LLC on April 25, 2025, covering all material counterparties, joint venture partners, government entities (including NNPC), and other relevant persons. The screening produced no adverse findings.
V. INSURANCE COVERAGE SUMMARY
In connection with our litigation due diligence, we have reviewed the principal insurance policies maintained by Dunmore that are relevant to the coverage of litigation exposures identified in this memorandum. Set forth below is a summary of the relevant coverage:
General Liability and Umbrella Coverage. Dunmore's general liability and umbrella insurance program, underwritten by Thornfield Insurance Group plc, provides coverage for bodily injury, property damage, and personal injury claims arising from Dunmore's operations, subject to a per-occurrence limit of $50 million and an aggregate limit of $100 million. This coverage is relevant to the personal injury claim described in Section III.B.4 (Green Canyon platform accident), as well as to potential future claims arising from operational activities. The carrier has acknowledged coverage for the Kowalski claim, and defense costs are being funded under the policy.
Directors and Officers Liability. Dunmore maintains directors and officers liability insurance with Marlowe Asset Management Specialty Underwriters Inc., with a policy limit of $25 million. This coverage may be relevant to the former employee whistleblower demand described in Section III.G.10, to the extent that a claim is filed against individual officers or directors, or to the extent that the Company seeks coverage for defense costs incurred in responding to such a claim.
Environmental Liability. Dunmore's environmental liability insurance, underwritten by Meridian Environmental Risk Insurers Ltd., provides coverage for environmental cleanup costs, third-party claims, and related liabilities arising from pollution conditions, subject to a per-occurrence limit of $30 million. This coverage is potentially relevant to the OML 47 community compensation proceedings (Section III.A.1) and the TCEQ pipeline spill NOV (Section III.F.9).
Employer's Liability and Workers' Compensation. Dunmore maintains employer's liability and workers' compensation insurance at statutory limits in the jurisdictions in which it operates, as required by applicable law.
Assessment. Based on our review, Dunmore's existing insurance coverage is adequate to cover the aggregate estimated exposure from pending and threatened litigation matters identified in this memorandum. No uninsured material litigation risk has been identified. The most significant potential exposure — the NNPC back-in rights dispute — is a commercial/contractual dispute that is not typically covered by insurance, but even at the high end of the estimated exposure range, this matter is not expected to have a material adverse effect on Dunmore's consolidated financial condition when considered in the context of Dunmore's overall financial position.
VI. AGGREGATE EXPOSURE ASSESSMENT
The following table summarizes each matter identified in this review, together with the estimated probable exposure range, applicable insurance coverage offset, and estimated net exposure:
Aggregate Estimated Net Probable Exposure (Excluding NNPC Dispute). Excluding the NNPC back-in rights dispute, the aggregate estimated net probable exposure from all other pending and threatened matters is approximately $7 million to $18 million.
Aggregate Estimated Net Probable Exposure (Including NNPC Dispute). Including the NNPC dispute at the high end of its estimated exposure range, the aggregate estimated net probable exposure from all identified matters is approximately $22 million to $48 million.
Percentage of FY 2024 EBITDA. The aggregate estimated net probable exposure (including the NNPC dispute at the high end) represents approximately 2.7% to 5.9% of Dunmore's FY 2024 EBITDA of $816 million. Excluding the NNPC dispute, the aggregate exposure represents approximately 0.9% to 2.2% of EBITDA.
Percentage of Total Assets. The aggregate estimated net probable exposure (including the NNPC dispute at the high end) represents approximately 0.5% to 1.0% of Dunmore's total assets of $4,870 million.
Conclusion. Based on the foregoing analysis, the aggregate exposure from pending and threatened litigation is not expected to have a material adverse effect on Dunmore's consolidated financial condition, results of operations, or ability to service the $850,000,000 9.375% Senior Secured Notes due 2032. The NNPC back-in rights dispute represents the single largest source of potential exposure and warrants continued monitoring and individual disclosure in the Offering Memorandum, as discussed below.
VII. OM DISCLOSURE RECOMMENDATIONS
A. Matters Recommended for Individual Disclosure
Based on our review, we recommend that the following four matters be individually disclosed in the litigation section of the Offering Memorandum:
1. OML 47 Community Compensation Proceedings (Section III.A.1). We recommend a brief factual description of the claims, noting the forum, the amount claimed, and the current procedural status. The disclosure should include management's assessment that the ultimate resolution of this matter is not expected to have a material adverse effect on Dunmore's consolidated financial condition or results of operations. This matter is recommended for disclosure primarily because of its qualitative significance as a community and environmental claim in the Niger Delta, an area of heightened operational and reputational sensitivity for the Company.
2. FIRS Tax Assessment Dispute (Section III.A.2). We recommend a factual description of the FIRS additional assessment, noting the amount of the assessment, the basis for the dispute, the current procedural status, and the fact that management has reserved approximately $2.1 million against this matter. This matter is recommended for disclosure to provide investors with a complete picture of the Company's tax position in Nigeria.
3. NNPC Back-In Rights Dispute — OML 63 (Section III.A.3). We recommend a more detailed description of this dispute given its potential exposure range of $15 million to $30 million and the significance of OML 63 to Dunmore's asset base. OML 63 has proved reserves of 87.3 MMboe and a PV-10 value of $1,620,000,000 as estimated by Duval Howard & Partners in its independent reserve report. The disclosure should describe the nature of the dispute, the competing interpretations of the back-in right provisions, the range of potential exposure, and the fact that the matter is currently at the negotiation stage with no formal proceedings commenced. The disclosure should note that management continues to pursue a negotiated resolution and does not believe that the ultimate outcome will have a material adverse effect on Dunmore's consolidated financial condition.
4. LCIA Offtake Arbitration — Dunmore Trading Ltd. (Section III.E.8). We recommend a brief description of this arbitration, noting the nature of the claims and counterclaim, the amount of the counterclaim, and management's assessment. This matter is recommended for disclosure because Dunmore Trading Ltd. is a Guarantor of the Notes, and the existence of an active arbitration involving a Guarantor is information that investors would reasonably want to know.
B. General / Aggregate Litigation Disclosure
In addition to the individual disclosures described above, we recommend that the Offering Memorandum include a general statement substantially as follows:
Dunmore and its subsidiaries are, from time to time, involved in various legal proceedings, claims, and regulatory matters arising in the ordinary course of business, including personal injury claims, environmental compliance matters, subcontractor disputes, tax proceedings, and regulatory enforcement actions. Management believes that the resolution of such matters, individually and in the aggregate, will not have a material adverse effect on the Company's consolidated financial condition, results of operations, or cash flows.
This general disclosure should encompass the remaining matters identified in this memorandum that do not warrant individual disclosure (Matters 4, 5, 6, 7, 9, and 10), and should be cross-referenced to the risk factors section of the Offering Memorandum addressing litigation risks in oil and gas operations.
C. Risk Factor Cross-References
The litigation disclosure in the Offering Memorandum should be coordinated with and cross-referenced to the following risk factors, which should address:
(i) the risks of operating in litigious environments, including the U.S. GoM and the Niger Delta;
(ii) the risk of community opposition, environmental claims, and social license challenges in Nigeria and other West African jurisdictions;
(iii) regulatory enforcement risk in GoM operations, including the risk of BSEE civil penalties, INCs, and potential lease suspensions;
(iv) the risk of disputes and arbitration under offtake contracts and other commercial agreements with commodity trading counterparties;
(v) the risk of sanctions violations and anti-corruption enforcement actions under OFAC, FCPA, the UK Bribery Act, and other applicable regulations, particularly in connection with operations in jurisdictions with heightened corruption risk indices; and
(vi) the risk that adverse litigation outcomes or governmental investigations could trigger Events of Default under the Indenture or cross-defaults under the ABL Revolver.
VIII. INTERACTION WITH OTHER DUE DILIGENCE WORKSTREAMS
The litigation due diligence review described in this memorandum has been coordinated with several other due diligence workstreams being conducted by Calderwood & Harkness LLP and other advisors in connection with the offering. Set forth below are the principal cross-references to related workstreams:
Due Diligence Memorandum — Regulatory and Licensing. Our litigation review has identified matters that intersect with the regulatory and licensing due diligence being conducted separately. In particular, the NNPC back-in rights dispute (Section III.A.3) implicates the regulatory status of OML 63 under the Petroleum Act and the terms of the OML 63 production sharing contract. The community compensation proceedings relating to OML 47 (Section III.A.1) also bear on the regulatory and community relations environment in which Dunmore Nigeria E&P Ltd. operates. The regulatory and licensing memorandum addresses the current permit status and regulatory compliance posture for OML 47, OML 63, the Cayar Offshore Block, and the GoM leases, including permits required from the DPR/NNPC (Nigeria), the Ministère de l'Énergie (Senegal), and BOEM/BSEE (GoM).
OFAC and Sanctions Compliance Memorandum. As noted in Section III.A.3 and Section IV above, the sanctions and OFAC compliance workstream has completed its screening of NNPC and other material counterparties. The screening was conducted by Sandoval Compliance Solutions LLC and was completed on April 25, 2025, with no adverse findings. The OFAC and Sanctions Compliance Memorandum provides a detailed discussion of the screening methodology, results, and ongoing monitoring protocols.
Due Diligence Memorandum — Material Contracts. Several of the litigation matters identified in this memorandum arise under or relate to material contracts that are the subject of the material contracts due diligence review, including the OML 63 production sharing contract (NNPC back-in rights dispute), the crude oil offtake agreement with Grandview Commodities Trading AG (LCIA arbitration), and the various joint operating agreements and surface use agreements under which Dunmore and its subsidiaries operate. The material contracts memorandum provides a detailed analysis of the terms of these agreements and the contractual provisions relevant to the pending disputes.
OM Backup Memorandum. The OM backup memorandum will include a detailed factual analysis supporting each litigation disclosure statement in the Offering Memorandum, including citations to the source materials reviewed and the bases for each assertion of fact.
Coordination with Initial Purchasers' Counsel. We have coordinated our litigation due diligence with Whitfield Baxter & Cohn LLP (Harrison Cates and Priya Naveen), counsel to the Initial Purchasers, regarding the scope and adequacy of litigation disclosure in the Offering Memorandum for purposes of the Initial Purchasers' due diligence defense under Rule 10b-5 of the Securities Exchange Act of 1934. We have shared the principal findings of this memorandum with Initial Purchasers' counsel and will continue to coordinate on the drafting of the litigation disclosure language for the Final OM.
IX. OPEN ITEMS AND FOLLOW-UP
The following items remain open and require follow-up before the Final OM date (May 14, 2025) and the closing date (May 15, 2025):
1. NNPC Back-In Rights Negotiations. Obtain an updated status report from Alistair Forde, General Counsel of DEH, regarding the progress of commercial negotiations with NNPC on the OML 63 back-in rights dispute. Any material developments in the negotiations should be reflected in the Final OM disclosure. Responsible: Eric Johannsen. Target Date: May 12, 2025.
2. OML 47 Community Proceedings. Confirm with Abayomi Chambers (Chidinma Okafor) whether any new proceedings, amended pleadings, or motions have been filed in the OML 47 community compensation matter since the date of Ms. Okafor's most recent report. Responsible: Claire Dempsey. Target Date: May 10, 2025.
3. Whistleblower Demand Monitoring. Monitor whether the former employee who submitted the demand letter described in Section III.G.10 files a formal complaint or lawsuit before the closing date. If a complaint is filed invoking Dodd-Frank whistleblower protections, the OM disclosure obligation must be reassessed. Responsible: Eric Johannsen. Target Date: Ongoing through May 15, 2025.
4. Bring-Down Litigation Certificate. Request a bring-down litigation certificate from management at closing, confirming that no new material legal proceedings, arbitrations, or governmental investigations have been commenced or threatened since the date of the Preliminary OM (April 28, 2025), and that the information provided in the management litigation questionnaire remains accurate and complete in all material respects. Responsible: Claire Dempsey. Target Date: May 14, 2025.
5. LCIA Arbitration Procedural Update. Coordinate with Cresswell & Greaves LLP (Fiona Halsted) to obtain an update on the LCIA arbitration procedural calendar, including any developments relating to the exchange of written submissions, the scheduling of the substantive hearing, and any interim applications by either party. Responsible: Claire Dempsey. Target Date: May 12, 2025.
X. CONCLUSION
Based on the comprehensive review described in this memorandum, we have reached the following conclusions:
1. No Material Adverse Effect. No pending or threatened litigation matter, individually or in the aggregate, is expected to have a material adverse effect on Dunmore's consolidated financial condition, results of operations, or ability to service the $850,000,000 9.375% Senior Secured Notes due 2032. The aggregate estimated net probable exposure from all identified matters (including the NNPC dispute at the high end) represents approximately 2.7% to 5.9% of FY 2024 EBITDA and 0.5% to 1.0% of total assets.
2. Individual Disclosure Recommendations. Four matters are recommended for individual disclosure in the Offering Memorandum, as described in Section VII.A: (i) the OML 47 community compensation proceedings; (ii) the FIRS tax assessment dispute; (iii) the NNPC back-in rights dispute relating to OML 63; and (iv) the LCIA offtake arbitration involving Dunmore Trading Ltd.
3. Continued Monitoring Required. Continued monitoring of the open items identified in Section IX is required through the closing date of May 15, 2025. In particular, the NNPC back-in rights dispute and the former employee whistleblower demand should be closely tracked for any developments that could alter the disclosure analysis.
4. Coordination with Initial Purchasers' Counsel. Final litigation disclosure language in the Offering Memorandum should be coordinated with Whitfield Baxter & Cohn LLP (Harrison Cates and Priya Naveen) to ensure adequacy for Rule 10b-5 purposes.
We are available to discuss the findings and recommendations in this memorandum at your convenience.
Respectfully submitted,