MEMORANDUM
PRIVILEGED AND CONFIDENTIAL — ATTORNEY WORK PRODUCT This memorandum is protected by the attorney-client privilege and the work-product doctrine. It is prepared in anticipation of litigation and for the purpose of providing legal advice. Do not forward or disclose without the express authorization of the Responsible Partner.
From: Claire Dempsey, Working Associate, Capital Markets, Calderwood & Harkness LLP
Reviewed/Approved by: Jennifer Kwon, Responsible Partner, Capital Markets, Calderwood & Harkness LLP
To: Engagement Team — Dunmore Energy Holdings Ltd. Notes Offering (Matter No. 1016-00003)
Date: April 24, 2025
Re: ESG and Climate Risk Factor Drafting Commentary — Offering Memorandum for $850,000,000 9.375% Senior Secured Notes due 2032 of Dunmore Energy Holdings Ltd. and Dunmore upstream Finance Corp.
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I. Purpose and Scope
This memorandum provides internal Calderwood & Harkness LLP ("C&H") commentary and analysis in connection with the drafting of ESG- and climate-related risk factors for inclusion in the Preliminary Offering Memorandum (targeted distribution date: April 28, 2025) and the Final Offering Memorandum (targeted delivery date: May 14, 2025) for the Rule 144A / Regulation S offering (the "Offering") of $850,000,000 aggregate principal amount of 9.375% Senior Secured Notes due 2032 (the "Notes"). The Issuers of the Notes are Dunmore Energy Holdings Ltd., a Cayman Islands exempted company ("Dunmore" or the "Company"), and Dunmore upstream Finance Corp., a Delaware corporation (the "Co-Issuer" and, together with Dunmore, the "Issuers").
The Initial Purchasers for the Offering are Ridgeline Capital Markets LLC, acting as Lead Left Bookrunner; Clarion Securities Inc., acting as Joint Bookrunner; and Pinnacle Partners LLC, acting as Co-Manager (collectively, the "Initial Purchasers"). Counsel to the Initial Purchasers is Whitfield Baxter & Cohn LLP ("WBC"), with Harrison Cates serving as lead partner on the engagement and Priya Naveen serving as the primary working associate.
The purpose of this memorandum is to provide the engagement team with a comprehensive framework for the drafting of ESG and climate risk factors for the Offering Memorandum ("OM"). Specifically, this memorandum addresses the following topics:
(a) identification of material ESG and climate risk categories requiring disclosure in the OM, based on the Company's business profile, asset composition, geographic footprint, and emissions data;
(b) analysis of materiality thresholds applicable to each identified risk category, applying settled securities law standards;
(c) analysis of forward-looking statement safe-harbor protections, including the availability (or likely unavailability) of the statutory safe harbor under the Private Securities Litigation Reform Act of 1995 ("PSLRA") and the applicability of the common-law "bespeaks caution" doctrine;
(d) a survey of the applicable regulatory landscape for ESG and climate disclosure across the multiple jurisdictions in which Dunmore operates, including the United States, Nigeria, Senegal, the United Kingdom, and the European Union;
(e) drafting recommendations for each proposed ESG and climate risk factor, including specific language considerations, cautionary statement guidance, and practical drafting notes; and
(f) coordination protocols with respect to ESG data provided by Barrisford Advisory Group LLC ("Barrisford"), with Nathan Reyes Linley CPAs LLP serving as lead consultant on the engagement, as well as coordination with other external advisors.
This memorandum should be read in conjunction with the following companion documents, each of which has been or is being prepared by the C&H engagement team in connection with this matter:
• ESG Disclosure Framework Memorandum (prepared by Claire Dempsey; under review by Jennifer Kwon)
• OM Supplement — Risk Factors: ESG and Climate (draft risk factor language, to be finalized upon completion of this memorandum)
• Greenwashing Liability Analysis (prepared by Claire Dempsey and Eric Johannsen)
• Net-Zero Commitment Disclosure Review (prepared by Claire Dempsey)
• ESG Data Verification Checklist (coordinated with Nathan Reyes Linley CPAs LLP, Barrisford Advisory Group LLC)
• OM Backup Memorandum (maintained by the C&H engagement team to document factual bases for all OM disclosures)
The analysis set forth herein reflects the current state of applicable law and regulation as of the date of this memorandum. Given the rapidly evolving nature of ESG disclosure requirements and enforcement priorities, the engagement team should remain alert to any developments that may occur between the date hereof and the closing of the Offering on May 15, 2025.
II. Background — Dunmore's ESG Profile
II.A. Business Overview Relevant to ESG Disclosure
An understanding of Dunmore's business profile, asset composition, and geographic footprint is essential to the identification and analysis of material ESG and climate risks requiring disclosure. The following overview summarizes the aspects of Dunmore's business that are most directly relevant to the ESG risk factor drafting exercise.
Dunmore is an upstream and midstream oil and gas company with operations across West Africa and the Gulf of Mexico, supplemented by a nascent renewable energy portfolio. The Company's operations span multiple jurisdictions and regulatory environments, each with distinct ESG-related disclosure and compliance considerations. The diversity and geographic distribution of Dunmore's asset base give rise to a complex ESG risk profile that must be addressed with specificity in the OM.
Key Operating Assets. Dunmore's principal assets include:
• Nigeria (Niger Delta): OML 47 and OML 63, located in the Niger Delta region of Nigeria. These are the Company's flagship producing assets and constitute the largest concentration of proved reserves and production. Operations in the Niger Delta carry significant ESG-related risks, including community relations challenges, environmental sensitivity, security concerns, and exposure to a complex and evolving regulatory environment.
• Senegal (Offshore): The Cayar Offshore Block, operated under a production-sharing contract ("PSC") with the Republic of Senegal. The Cayar Offshore Block is currently in the development phase, and a significant portion of the net proceeds of the Offering ($250 million) is earmarked for Cayar Offshore Phase II development capital expenditures. The deployment of a substantial portion of offering proceeds into new hydrocarbon development is a fact that directly interfaces with climate-transition risk disclosure and the Company's net-zero commitment narrative.
• United States (Gulf of Mexico): Deepwater leases in the Green Canyon and Garden Banks areas of the Gulf of Mexico. These assets are located within the Gulf of Mexico hurricane corridor and are subject to physical climate risks, including hurricane-related production disruptions, storm surge damage, and associated insurance cost considerations.
• United States (West Texas): A 220 MW solar portfolio operated through Dunmore Renewables LLC, a wholly owned subsidiary. While this portfolio represents the Company's entry into the renewable energy sector and may provide a partial offset to its hydrocarbon-focused business profile, the scale of the renewable portfolio relative to the total asset base is modest and should not be over-emphasized as a mitigant to climate-transition risk.
Financial Summary. For the fiscal year ended December 31, 2024, Dunmore reported revenue of approximately $2.14 billion and EBITDA of approximately $816 million. The Company employs approximately 3,400 people worldwide across its operating jurisdictions. These financial metrics underscore the material scale of Dunmore's hydrocarbon operations and the significance of ESG-related risks to the Company's business, financial condition, and results of operations.
Ownership Structure. Dunmore is majority-owned by Harborview Capital Partners Fund VI, L.P. ("Harborview"), which holds approximately 62.4% of the Company's equity. Management holds approximately 18.3% of equity. Co-investors include Solstice Infrastructure Fund LP (approximately 11.1%) and Alderman Family Office LLC (approximately 8.2%). The private equity ownership structure is relevant to the ESG risk factor analysis insofar as it influences governance considerations, capital allocation decisions, and the degree to which the Company's ESG strategy reflects the priorities of its financial sponsors.
Board and Governance. The Board Chair is Lady Constance Harrowby, who serves as an independent director and brings significant experience from her prior service as UK Energy Minister. Lady Harrowby's background is relevant to the Company's ESG governance credibility narrative, as her policy and government experience lends weight to Dunmore's public commitment to responsible energy transition. However, it also creates disclosure sensitivity: any disconnect between the governance narrative and the Company's actual capital allocation decisions (including the Cayar Phase II investment) could be a focal point for investor scrutiny.
II.B. ESG Data Inputs from Barrisford Advisory Group LLC
The ESG data underlying the risk factor analysis in this memorandum has been provided by Barrisford Advisory Group LLC, the Company's ESG consultant, with Nathan Reyes Linley CPAs LLP serving as the lead consultant on the engagement. The key data points are as follows:
• Scope 1 GHG Emissions (FY 2024): 1.42 million metric tons of carbon dioxide equivalent (CO₂e). Scope 1 emissions encompass direct emissions from owned or controlled sources, including combustion of fuels in Dunmore's operations, process emissions, and fugitive emissions (including methane).
• Scope 2 GHG Emissions (FY 2024): 0.18 million metric tons CO₂e. Scope 2 emissions represent indirect emissions from the generation of purchased electricity, steam, heating, and cooling consumed by the Company.
• Total Scope 1 + Scope 2 GHG Emissions (FY 2024): 1.60 million metric tons CO₂e.
• Methane Flaring Intensity: 3.8 m³/boe (cubic meters per barrel of oil equivalent), compared to an industry average of 5.1 m³/boe as reported by Barrisford. While Dunmore's flaring intensity is below the reported industry average, this data point requires careful contextual treatment in the risk factors to avoid creating an impression that the Company's methane emissions profile is without risk or not subject to regulatory tightening.
• Community Development Spend in Nigeria (FY 2024): $14.2 million. This figure represents direct community development expenditures in connection with OML 47 and OML 63 operations and is a relevant data point for the Nigerian community relations risk factor.
• Net-Zero Commitment: Dunmore has publicly announced a commitment to achieve net-zero greenhouse gas emissions by 2050. The details, credibility, and disclosure implications of this commitment are analyzed in the companion Net-Zero Commitment Disclosure Review memorandum.
It is important to note that all ESG data provided by Barrisford is subject to verification pursuant to the ESG Data Verification Checklist, which is being coordinated between Claire Dempsey and Nathan Reyes Linley CPAs LLP. As discussed in Section VII.A below, Claire Dempsey has submitted ESG data clarification requests to Nathan Reyes Linley CPAs LLP regarding the methodology underlying the Scope 1 emissions calculation, the basis for the methane flaring intensity figure, and a breakdown of the community development spend. Pending responses to these clarification requests, the data points cited in this memorandum should be treated as preliminary and subject to confirmation. All ESG data points cited in the risk factors of the OM must ultimately be traced to Barrisford source documents and documented in the OM Backup Memorandum.
II.C. Reserves and Asset Exposure
The reserves data underlying the risk factor analysis has been provided by the Company's independent reserves engineers, Duval Howard & Partners, under the supervision of Dr. Evelyn Marchetti. The following summary reflects total proved reserves and PV-10 valuations as of December 31, 2024:
Several observations are critical for the ESG risk factor analysis:
First, the Nigerian assets (OML 47 and OML 63) represent the largest concentration of proved reserves, accounting for approximately 66% of total proved reserves and approximately 66.6% of total PV-10 value ($4.46 billion of $6.70 billion). This concentration is relevant to both climate-transition risk (long reserve lives in a hydrocarbon-intensive jurisdiction), physical climate risk (Niger Delta flooding and coastal erosion), and social/community relations risk (Niger Delta operational challenges).
Second, the Cayar Offshore Block represents approximately 18.5% of total proved reserves and $1.19 billion in PV-10 value. The allocation of $250 million from the net proceeds of the Offering to fund Cayar Offshore Phase II development capital expenditures means that the Offering itself is directly funding new hydrocarbon asset development. This fact must be clearly acknowledged in the climate-transition risk factor, as it creates a tension with the Company's net-zero by 2050 commitment that investors will expect to see addressed.
Third, the GoM assets (Green Canyon and Garden Banks), while the smallest component of the reserves portfolio at 51.8 MMboe and $1.05 billion PV-10, are located in areas with significant physical climate risk exposure, particularly hurricane and storm surge risk.
Fourth, the total PV-10 of $6.7 billion is based on commodity price assumptions as of December 31, 2024, and any material decline in long-term commodity price assumptions — whether driven by the energy transition, regulatory changes, or market dynamics — could result in significant impairment of these reserve values. This sensitivity should be identified in the climate-transition risk factor.
III. Applicable Legal and Regulatory Framework
III.A. Securities Act Anti-Fraud Standards
The Notes are being offered and sold in reliance on the exemptions from registration provided by Rule 144A under the Securities Act of 1933, as amended (the "Securities Act"), and Regulation S under the Securities Act. Although the Offering is exempt from the registration requirements of Section 5 of the Securities Act, the OM is nevertheless subject to the anti-fraud provisions of the federal securities laws. In particular, Section 10(b) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and Rule 10b-5 thereunder, prohibit the making of any untrue statement of a material fact or the omission to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading, in connection with the purchase or sale of any security. These provisions apply with full force to Rule 144A and Regulation S offerings.
The practical significance of the anti-fraud framework for the ESG risk factor drafting exercise is considerable. C&H is expected to deliver a 10b-5 Disclosure Letter (providing negative assurance) to the Initial Purchasers on the closing date of the Offering (May 15, 2025). The 10b-5 Disclosure Letter will cover the Final OM in its entirety, including the ESG and climate risk factors. Accordingly, each statement of fact and each characterization of risk in the ESG risk factors must be accurate, complete, and not misleading. Omissions of material information are as actionable as affirmative misstatements, and the presentation of favorable ESG data without adequate disclosure of countervailing risks may constitute the type of "half-truth" that courts have recognized as actionable under Rule 10b-5.
It is also important to note that Harrison Cates of WBC has informally signaled to Jennifer Kwon that the Initial Purchasers are placing heightened focus on the ESG and climate risk factor language in this Offering. This is consistent with the broader market trend in which initial purchasers of high-yield energy offerings are seeking more detailed and conservative ESG risk disclosures, reflecting increased investor attention to these issues and the growing body of enforcement actions and private litigation targeting ESG-related disclosure deficiencies. We should anticipate that WBC will subject our ESG risk factor drafts to careful scrutiny and that the Initial Purchasers may request more expansive or more conservative language in certain areas, particularly with respect to the net-zero commitment and greenwashing risk.
III.B. SEC Enforcement Trends — ESG and Climate Disclosure
The SEC's approach to ESG and climate disclosure has evolved significantly in recent years, and the engagement team should be aware of several key developments that inform the risk factor drafting exercise.
SEC Enforcement Actions. The SEC has brought a number of enforcement actions in recent years targeting companies that made materially misleading ESG-related statements in their public disclosures, including in offering documents. These actions have focused on a range of ESG-related claims, including overstatements of environmental compliance, misleading descriptions of ESG investment criteria, and failures to disclose material ESG-related risks. While the majority of these actions have involved SEC-reporting companies, the anti-fraud principles applied are equally applicable to offerings conducted under Rule 144A and Regulation S. The SEC has made clear that ESG disclosures, whether voluntary or required, must be accurate and not misleading.
SEC Staff Guidance. SEC Staff guidance has emphasized that issuers should ensure that ESG disclosures are consistent with their actual business practices and not selectively presented to create a misleadingly favorable impression. The Staff has specifically cautioned against "greenwashing" — that is, the practice of making ESG-related claims that are exaggerated, unsubstantiated, or inconsistent with an issuer's actual environmental or social impact. Importantly, the Staff has noted that even voluntary ESG disclosures in offering documents can create anti-fraud liability if they are materially misleading. The Greenwashing Liability Analysis memorandum prepared by Claire Dempsey and Eric Johannsen provides a detailed analysis of the greenwashing liability framework and its application to Dunmore's specific disclosures.
SEC Climate Disclosure Rule. In March 2024, the SEC adopted final rules requiring registrants to disclose certain climate-related information in their registration statements and annual reports ("Climate Disclosure Rule"). The Climate Disclosure Rule is the subject of ongoing judicial review and has been partially stayed. As a threshold matter, the Climate Disclosure Rule does not directly apply to the OM for this Offering, because Dunmore is not an SEC-reporting company and the Notes are being offered under Rule 144A and Regulation S, exempt from SEC registration. However, the Climate Disclosure Rule is relevant for two reasons: (1) it establishes a regulatory benchmark that reflects the SEC's view of the materiality of climate-related information to investors, thereby setting market expectations for the quality and specificity of climate-related disclosures in all offering documents, including private placement OMs; and (2) to the extent Dunmore or its affiliates become SEC-reporting companies in the future (e.g., through a registered exchange offer or a future public offering), the Climate Disclosure Rule may apply directly. The ESG risk factors in the OM should be drafted to a standard that is consistent with, and anticipates, the disclosure expectations reflected in the Climate Disclosure Rule.
III.C. Private Securities Litigation Reform Act (PSLRA) Safe Harbor
The PSLRA, enacted in 1995, provides a statutory safe harbor for forward-looking statements under Section 27A of the Securities Act and Section 21E of the Exchange Act. Under the statutory safe harbor, a forward-looking statement is not actionable in a private securities fraud action if it is identified as a forward-looking statement and is accompanied by meaningful cautionary statements identifying important factors that could cause actual results to differ materially from those in the forward-looking statement, or if the plaintiff fails to prove that the statement was made with actual knowledge that it was false or misleading.
A critical question for this Offering is whether the PSLRA statutory safe harbor is available for Dunmore's ESG-related forward-looking statements in the OM. The PSLRA safe harbor contains several exclusions, including an exclusion for statements made in connection with an "initial public offering." The statute does not clearly define whether a Rule 144A/Regulation S offering by a non-reporting issuer constitutes an "initial public offering" for purposes of this exclusion. Case law and commentary on this question are limited and somewhat mixed. However, the weight of authority and the more conservative analytical approach suggest that the statutory safe harbor may not be available for this Offering, for the following reasons:
(i) Dunmore is not currently an SEC-reporting company and has not previously issued securities registered under the Securities Act or the Exchange Act. The Offering of the Notes represents Dunmore's first significant offering to institutional investors in the U.S. capital markets, which has characteristics of an "initial" offering even though it is being conducted under Rule 144A and Regulation S rather than through a registered public offering.
(ii) Courts have not consistently extended the PSLRA safe harbor to Rule 144A offerings by non-reporting issuers, and there is a risk that a court would characterize this Offering as falling within the "initial public offering" exclusion.
(iii) Even if the statutory safe harbor were theoretically available, its protections are most robust in the context of SEC-reporting companies with established disclosure histories, where forward-looking statements can be evaluated against a baseline of periodic reporting. Here, Dunmore does not have an established SEC disclosure record, which limits the practical utility of the statutory safe harbor.
Recommendation. Given the uncertainty surrounding the availability of the PSLRA statutory safe harbor for this Offering, we recommend that the engagement team not rely on the statutory safe harbor as the primary protective mechanism for ESG-related forward-looking statements in the OM. Instead, the primary reliance should be on the common-law "bespeaks caution" doctrine, supplemented by robust cautionary language. The companion Net-Zero Commitment Disclosure Review memorandum provides a detailed analysis of the safe-harbor availability question as it applies specifically to the net-zero by 2050 pledge.
III.D. Bespeaks Caution Doctrine
Under the common-law "bespeaks caution" doctrine, developed through judicial precedent principally in the Second Circuit and other federal circuits, forward-looking statements that are accompanied by meaningful, specific, and substantive cautionary language may be immunized from securities fraud liability on the ground that no reasonable investor would be misled by a forward-looking statement that is accompanied by adequate warnings of the risks and uncertainties that could cause actual results to differ from those projected. The doctrine has been recognized by the Supreme Court as a complement to, and in some respects a precursor of, the PSLRA statutory safe harbor.
For the bespeaks caution doctrine to provide meaningful protection, the cautionary language must meet several requirements:
First, the cautionary language must be substantive and specific. Boilerplate disclaimers (e.g., "actual results may differ materially from those projected") are insufficient standing alone. The cautionary statements must identify the specific, material risks and uncertainties that could cause actual results to differ from the forward-looking statement.
Second, the cautionary language must be tailored to the specific forward-looking statement at issue. General risk factors that are not connected to the particular forward-looking statement will not suffice.
Third, the cautionary language must not be contradicted by the issuer's other disclosures or by information known to the issuer. If the issuer has specific knowledge that a forward-looking statement is likely inaccurate, no amount of cautionary language will provide protection.
Application to Dunmore's ESG Disclosures. Dunmore's net-zero by 2050 commitment and its climate-transition strategy disclosures in the OM are forward-looking statements that must be accompanied by specific, tailored cautionary language to invoke the protection of the bespeaks caution doctrine. The cautionary language should identify the material assumptions underlying the net-zero commitment (including assumptions about future technology development, regulatory evolution, commodity prices, and capital availability) and the specific risks and uncertainties that could prevent the Company from achieving its stated commitment. As noted, these cautionary statements must be substantive and related to the specific forward-looking statement; they cannot be generic risk disclaimers or boilerplate.
III.E. International and Multi-Jurisdictional Considerations
Dunmore's operations span multiple jurisdictions, each with its own evolving ESG-related regulatory framework. While the OM is governed primarily by U.S. securities law, the international regulatory landscape is relevant to the ESG risk factor analysis for several reasons: it informs investor expectations regarding the quality and specificity of ESG disclosures; it may impose direct compliance obligations on Dunmore's operating subsidiaries; and the OM should not contain statements that are inconsistent with disclosures the Company is required to make under these international regimes.
United Kingdom and European Union. The International Sustainability Standards Board ("ISSB") has issued IFRS S1 (General Requirements for Disclosure of Sustainability-related Financial Information) and IFRS S2 (Climate-related Disclosures), which are being adopted or endorsed in a growing number of jurisdictions. In the European Union, the Corporate Sustainability Reporting Directive ("CSRD") and the Taxonomy Regulation impose comprehensive sustainability reporting requirements on certain companies operating in the EU. In the United Kingdom, the Financial Conduct Authority ("FCA") has implemented climate-related disclosure requirements for certain listed companies and is expanding disclosure expectations across the financial sector. These frameworks are relevant to Dunmore because Dunmore Trading Ltd. is incorporated in England and Wales, and the Notes may be purchased by UK and EU institutional investors under Regulation S. While these international regimes do not directly govern the OM, they set the standard against which sophisticated European investors will evaluate Dunmore's ESG disclosures, and any inconsistency between the OM disclosures and disclosures made by Dunmore's UK subsidiary under applicable UK or EU frameworks could create disclosure risk.
Nigeria. The Nigerian regulatory environment for ESG disclosure in the oil and gas sector is relevant given that approximately 66% of Dunmore's total proved reserves are located in Nigeria. The Nigerian Securities and Exchange Commission has issued guidelines on sustainability reporting for publicly listed companies, and the Department of Petroleum Resources ("DPR") imposes environmental compliance requirements on upstream operators, including gas flaring reduction mandates and environmental impact assessment requirements. While Dunmore is not publicly listed in Nigeria, its operating subsidiaries are subject to DPR environmental regulations, and any material non-compliance could give rise to both operational and disclosure risks that should be addressed in the OM.
Senegal. The Cayar Offshore Block is operated under a PSC with the Republic of Senegal, and the Senegalese regulatory framework for environmental impact assessment and environmental disclosure applies to the development and operation of the Block. The deployment of $250 million from Offering proceeds to fund Cayar Phase II development means that the environmental regulatory framework applicable to this asset has direct relevance to the use of proceeds and the associated risk factor disclosures.
Analysis. While none of the international or multi-jurisdictional regulatory frameworks described above directly governs the content of the OM as a matter of law, they are relevant to the ESG risk factor analysis for the following reasons: (1) they inform investor expectations regarding the quality, specificity, and consistency of ESG disclosures; (2) they may create compliance obligations for Dunmore's operating subsidiaries that, if not met, could give rise to material operational and financial risks; and (3) the OM should not contain statements that are materially inconsistent with disclosures the Company is required to make, or has made, under these international regimes. The ESG risk factors should acknowledge the multi-jurisdictional nature of the regulatory landscape and the associated uncertainty and compliance cost risks.
IV. Materiality Analysis
IV.A. Framework for Determining Materiality of ESG Risks
The materiality standard for securities law purposes is well established. Under TSC Industries, Inc. v. Northway, Inc., 426 U.S. 438 (1976), and Basic Inc. v. Levinson, 485 U.S. 224 (1988), information is material if there is a "substantial likelihood that a reasonable [investor] would consider it important" in making an investment decision. The standard does not require that the omitted or misstated fact would have changed the investor's decision; it requires only that there is a substantial likelihood that the information "would have been viewed by the reasonable investor as having significantly altered the 'total mix' of information made available." TSC Industries, 426 U.S. at 449.
The materiality inquiry is inherently fact-specific and context-dependent. For a high-yield oil and gas issuer with significant operations in Nigeria and Senegal, ESG and climate risks are material across multiple dimensions:
• Regulatory: Risk of new or more stringent environmental, emissions, and sustainability regulations in each operating jurisdiction, with associated compliance costs, capital expenditure requirements, and potential operational restrictions.
• Operational: Risk of operational disruptions arising from physical climate events (hurricanes, flooding, storm surges), community relations challenges (protests, vandalism, production interruptions), and environmental compliance requirements.
• Financial: Risk of asset impairment or "stranding" of hydrocarbon reserves if the energy transition causes long-term declines in commodity prices or demand; risk that carbon pricing mechanisms impose direct costs on the Company's emissions; risk that increased ESG regulatory compliance costs reduce profitability.
• Reputational: Risk that negative ESG perceptions — whether arising from actual events, disclosure failures, or accusations of greenwashing — impair the Company's ability to operate, to maintain social license in its host communities, and to access capital markets on favorable terms.
• Litigation: Risk of securities fraud litigation, shareholder or bondholder claims, and regulatory enforcement actions arising from ESG-related disclosure deficiencies or misstatements.
The following subsections apply this materiality framework to each of the ESG and climate risk categories identified in this memorandum.
IV.B. Climate-Transition Risk — Materiality Assessment
Climate-transition risk refers to the risk that regulatory changes, market shifts toward decarbonization, technological disruption, or changes in investor and consumer preferences render hydrocarbon reserves less valuable, less economic, or entirely "stranded." This risk manifests through multiple channels, including the potential for declining long-term demand for oil and gas, reduced commodity prices, the imposition of carbon pricing or emissions trading regimes, restrictions on hydrocarbon exploration and development, increased cost of capital for fossil fuel companies, and reputational consequences of association with the hydrocarbon sector.
For Dunmore specifically, the following factors support a conclusion that climate-transition risk is material:
(i) Reserve Concentration in Long-Life Hydrocarbon Assets. Approximately 66% of Dunmore's total proved reserves (229.9 MMboe) are located in Nigerian onshore and shallow-water assets (OML 47 and OML 63), which have long reserve lives extending well beyond the 2032 maturity of the Notes. These assets are productive and valuable under current commodity price assumptions, but they are exposed to transition risk over the medium to long term if decarbonization pressures reduce demand for crude oil or result in regulatory restrictions on production. The Cayar Offshore Block adds an additional 64.1 MMboe of reserves in a developing hydrocarbon asset that will require further capital investment over an extended time horizon.
(ii) Deployment of Offering Proceeds into New Hydrocarbon Development. The Offering itself is funding $250 million in new hydrocarbon development capital expenditures for Cayar Offshore Phase II. This fact means that investors are being asked to provide capital that will be deployed into hydrocarbon asset development, creating a direct nexus between the investment thesis and climate-transition risk. Investors in the Notes are not merely holding exposure to existing hydrocarbon assets; they are financing the expansion of such assets. This fact must be disclosed forthrightly.
(iii) Tension with Net-Zero Commitment. Dunmore has publicly committed to achieving net-zero greenhouse gas emissions by 2050. The simultaneous deployment of $250 million into new hydrocarbon development creates a tension with this commitment that a reasonable investor would consider significant. The risk factor must acknowledge this tension rather than obscure it.
(iv) Limited Scale of Renewable Portfolio. While Dunmore's 220 MW West Texas solar portfolio operated through Dunmore Renewables LLC represents a step toward energy diversification, it is small in scale relative to the Company's total asset base and revenue profile. The solar portfolio should not be presented in a way that would lead a reasonable investor to conclude that Dunmore has meaningfully hedged its exposure to climate-transition risk through renewable energy investments.
Conclusion: Climate-transition risk is material to Dunmore and must be disclosed as a standalone risk factor in the OM. The risk factor should address the potential for reduced demand for hydrocarbons, declining commodity prices, stranded-asset risk, and the tension between the Cayar Phase II investment and the net-zero commitment.
IV.C. Physical Climate Risk — Materiality Assessment
Physical climate risk encompasses both acute risks (discrete, event-driven impacts such as hurricanes, flooding, and storm surges) and chronic risks (longer-term, trend-driven impacts such as rising sea levels, sustained temperature extremes, and changing precipitation patterns). Both categories of physical climate risk are relevant to Dunmore given the geographic distribution of its assets.
The materiality of physical climate risk for Dunmore is supported by the following considerations:
(i) Gulf of Mexico Assets — Hurricane Exposure. Dunmore's deepwater leases in the Green Canyon and Garden Banks areas of the Gulf of Mexico are located in the Gulf of Mexico hurricane corridor. The GoM is one of the most hurricane-prone regions in the world, and deepwater oil and gas operations in the GoM have historically been subject to significant disruptions from major hurricane events, including forced evacuations of offshore platforms, production shutdowns, and physical damage to subsea infrastructure. Climate science indicates that warming ocean temperatures may increase the frequency and severity of major hurricanes in the GoM, potentially exacerbating these risks over the life of the Notes.
(ii) Niger Delta Assets — Flooding and Coastal Erosion. Dunmore's OML 47 and OML 63 operations in the Niger Delta are located in one of the world's most environmentally sensitive and climate-vulnerable regions. The Niger Delta is susceptible to flooding, coastal erosion, and sea-level rise, all of which pose risks to pipeline infrastructure, wellhead installations, flow stations, and associated facilities. Climate change is expected to exacerbate these risks over time through rising sea levels and changes in precipitation patterns.
(iii) Senegalese Offshore Assets — Atlantic Weather Patterns. The Cayar Offshore Block in Senegal is subject to Atlantic oceanic weather patterns, including tropical storms and heavy swells that can disrupt drilling and production operations. While the risk profile for West African offshore assets is generally less severe than the GoM hurricane corridor, it is not negligible and should be disclosed.
(iv) Financial Impact Channels. Physical climate events can affect Dunmore through multiple financial channels, including property damage and asset destruction, business interruption and production downtime, increased insurance premiums and potential reductions in insurance coverage availability, acceleration of asset retirement obligations, and increased capital expenditures for facility hardening and climate adaptation measures.
(v) Insurance Considerations. The Collateral package for the Notes includes an assignment of insurance proceeds. Any material increase in insurance premiums, reduction in coverage availability, or increase in deductibles as a result of heightened physical climate risk would have direct consequences for the Company's financial condition and for the value of the Collateral securing the Notes.
Conclusion: Physical climate risk is material to Dunmore and warrants a standalone (or, at minimum, a prominent combined) risk factor in the OM. The risk factor should address both acute and chronic physical climate risks across each of the Company's operating jurisdictions, with specific reference to the GoM hurricane corridor, Niger Delta flooding and coastal erosion, and Cayar Offshore Atlantic weather exposure.
IV.D. Regulatory and Policy Risk — Materiality Assessment
The regulatory and policy risk category encompasses the risk that new or more stringent environmental, emissions, and sustainability regulations in any of Dunmore's operating jurisdictions will increase compliance costs, restrict operations, require additional capital investment, or otherwise adversely affect the Company's business, financial condition, and results of operations. This risk extends across multiple jurisdictions and regulatory domains, including GHG emissions regulation, methane and flaring regulation, environmental impact assessment requirements, carbon pricing and taxation, and ESG disclosure mandates.
The following factors support a conclusion that regulatory and policy risk related to ESG is material to Dunmore:
(i) GHG Emissions Profile. Dunmore's total Scope 1 and Scope 2 GHG emissions for FY 2024 were 1.60 million metric tons CO₂e (Scope 1: 1.42 million metric tons; Scope 2: 0.18 million metric tons). This emissions profile means that any carbon pricing mechanism — whether a carbon tax, an emissions trading system, or a regulatory cap on emissions — implemented in any of Dunmore's operating jurisdictions would have a direct and potentially material financial impact on the Company. The magnitude of the financial impact would depend on the design and pricing level of the carbon pricing mechanism, but the Company's emissions scale is sufficient to make this a material risk.
(ii) Methane and Flaring Regulation. Dunmore's methane flaring intensity of 3.8 m³/boe is below the industry average of 5.1 m³/boe reported by Barrisford, and this is a favorable data point that the Company may wish to highlight. However, regulatory trends in the United States and internationally point toward increasingly stringent methane regulation, including lower flaring limits, mandatory leak detection and repair programs, and potential bans on routine flaring. Even if Dunmore's current flaring intensity is below the current industry average, tightening regulations could require further reductions that would necessitate additional capital investment in gas capture and utilization infrastructure.
(iii) Multi-Jurisdictional Regulatory Exposure. Dunmore operates across four distinct regulatory environments (Nigeria, Senegal, the United States, and the UK/EU for its trading subsidiary), each of which has its own environmental and ESG regulatory framework and each of which is evolving independently. The cumulative compliance burden across multiple jurisdictions is itself a material risk, as regulatory changes in any single jurisdiction could require significant capital investment or operational adjustments.
(iv) ESG Disclosure Mandates. The proliferation of ESG disclosure requirements (SEC Climate Disclosure Rule, ISSB standards, EU CSRD, UK FCA rules, Nigerian SEC guidelines) creates a regulatory environment in which the Company faces increasing obligations to collect, verify, and report ESG data. The cost of compliance with these evolving requirements, and the risk of penalties for non-compliance, is a material consideration for investors.
Conclusion: Regulatory and policy risk related to ESG is material and should be addressed in a standalone risk factor.
IV.E. Reputational and Social License Risk — Materiality Assessment
Reputational risk and social license risk are particularly acute for oil and gas companies operating in the Niger Delta region of Nigeria. Dunmore's OML 47 and OML 63 operations are located in a region that has been the site of decades of tension between oil and gas operators, local communities, and the Nigerian government, arising from environmental degradation, inadequate benefit-sharing, community displacement, security challenges, and related issues.
The following factors support a conclusion that reputational and social license risk is material:
(i) Community Relations in the Niger Delta. Dunmore's $14.2 million community development spend in FY 2024 reflects the Company's ongoing engagement with host communities in the Niger Delta. However, this expenditure does not eliminate the risk of community opposition, protests, pipeline vandalism, blockades of access roads and facilities, artisanal (illegal) refining activity, and other disruptions to operations. These risks are well documented in the literature on Niger Delta oil and gas operations and are inherent in operating in the region.
(ii) Operational and Financial Impact. Community-related disruptions can result in production interruptions, damage to infrastructure, increased security costs, and, in severe cases, complete shutdowns of producing assets. Given that the Nigerian assets represent approximately 66% of Dunmore's total proved reserves, the financial impact of sustained community-related disruptions could be material.
(iii) Investor Sentiment and ESG Screening. A growing number of institutional investors apply ESG screening criteria to their investment decisions, and negative publicity or incidents related to community relations, human rights, or environmental damage in the Niger Delta could cause existing investors to divest or prospective investors to decline to purchase the Notes. This could impact secondary market liquidity and the Company's future ability to access capital markets.
(iv) Emerging Human Rights Expectations. International frameworks such as the United Nations Guiding Principles on Business and Human Rights and the OECD Guidelines for Multinational Enterprises establish expectations for human rights due diligence in the extractive industries. While these frameworks are not binding as a matter of law, they increasingly inform investor expectations, regulatory enforcement priorities, and litigation strategies. The potential for litigation or regulatory scrutiny based on alleged failures of human rights due diligence in the Niger Delta should be acknowledged.
Conclusion: Reputational and social license risk is material, particularly with respect to Dunmore's Nigerian operations, and should be addressed in a standalone risk factor.
IV.F. ESG Forward-Looking Statement Risk — Materiality Assessment
Dunmore's publicly announced net-zero by 2050 commitment and its ESG-related disclosures in the OM create a distinct category of risk: the risk that the Company fails to achieve its stated commitments, that its ESG metrics are revised or challenged, or that the very act of making ESG-related commitments and disclosures creates litigation, regulatory, or reputational exposure.
The materiality of this risk is supported by the following considerations:
(i) Net-Zero Commitment. The net-zero by 2050 commitment is a forward-looking statement that sets a definitive target for the Company's emissions trajectory. Failure to achieve or demonstrate credible interim progress toward this target could expose Dunmore to accusations of greenwashing, regulatory scrutiny (including potential enforcement actions), investor litigation, and reputational harm. The tension between the net-zero commitment and the simultaneous investment of $250 million in new hydrocarbon development (Cayar Phase II) heightens this risk.
(ii) Data Reliability. The ESG metrics disclosed in the OM — including Scope 1 and Scope 2 emissions, flaring intensity, and community development spend — are based on methodologies and data that are evolving and may be subject to revision, restatement, or challenge. The data has been prepared by Barrisford Advisory Group LLC and has not been independently audited or assured by Alverton & Co. LLP, the Company's independent auditor. Any future revision or restatement of ESG data could undermine investor confidence and create disclosure liability.
(iii) Litigation Exposure. Securities fraud litigation targeting ESG-related disclosures has increased in frequency and significance in recent years. Investors who purchased the Notes in reliance on Dunmore's ESG disclosures could bring claims if those disclosures prove to have been materially misleading or if the Company's actual ESG performance materially diverges from its stated commitments.
Conclusion: The risk associated with ESG forward-looking statements and the net-zero commitment is material and should be disclosed as a standalone risk factor. This risk factor requires particularly careful drafting and should be reviewed by Jennifer Kwon before circulation.
V. Proposed Risk Factor Drafting — Section-by-Section Commentary
This section provides detailed drafting commentary and guidance for each of the five proposed standalone ESG and climate risk factors recommended for inclusion in the OM. The actual draft risk factor language will be set forth in the companion OM Supplement — Risk Factors: ESG and Climate; this section provides the analytical framework, content guidance, and specific drafting notes that should inform the preparation of that language.
V.A. Risk Factor 1: "Climate change, including the transition to lower-carbon energy sources, may adversely affect demand for our products, the value of our reserves, and our financial condition."
Scope of Disclosure. This risk factor should address climate-transition risk comprehensively, encompassing the potential for reduced global demand for oil and gas as a result of the shift toward renewable and lower-carbon energy sources; the potential for declining commodity prices driven by policy actions, technological disruption, and changing consumer and investor preferences; the risk that regulatory measures such as carbon pricing, emissions trading systems, and restrictions on hydrocarbon exploration and development render existing reserves less valuable or uneconomic; and the risk that Dunmore's hydrocarbon-focused business model becomes increasingly difficult to sustain in a decarbonizing global economy.
Dunmore-Specific Language. The risk factor should contain specific, company-tailored language rather than generic industry risk disclosure. Specifically, it should:
• Reference Dunmore's total proved reserves of 345.8 MMboe and total PV-10 of $6.7 billion, and note that a significant and sustained decline in long-term commodity price assumptions — whether driven by the energy transition, regulatory developments, or market forces — could trigger impairment charges against the carrying value of these assets. The risk factor should note that PV-10 valuations are based on commodity price assumptions as of December 31, 2024, and that these assumptions are inherently uncertain and subject to change.
• Disclose that $250 million of the net proceeds of the Offering is being allocated to fund Cayar Offshore Phase II development capital expenditures. This allocation of proceeds into new hydrocarbon asset development should be identified as subject to transition risk over the 2032 maturity horizon of the Notes and beyond. The risk factor should make clear that investors are providing capital that will be deployed into hydrocarbon development, which may become less economic over time as a result of the energy transition.
• Reference the 220 MW West Texas solar portfolio operated through Dunmore Renewables LLC, which may be presented as evidence of the Company's interest in energy diversification. However, the risk factor should include a clear acknowledgment that the scale of the renewable portfolio is modest relative to the total asset base and revenue profile, and that investors should not rely on the renewable portfolio as a meaningful mitigant of climate-transition risk.
• Acknowledge the tension between the Company's net-zero by 2050 commitment and its ongoing and planned investment in hydrocarbon assets.
Cautionary Language. The risk factor should include substantive cautionary language meeting the requirements of the bespeaks caution doctrine. The cautionary statements should identify specific uncertainties that could cause actual outcomes to differ from the Company's current expectations, including: the pace and trajectory of the global energy transition; the unpredictability of future commodity prices; the potential for new or more stringent carbon pricing or emissions regulations; the rate and scale of renewable energy technology development and deployment; shifts in investor and consumer preferences; the availability and cost of carbon capture and other emissions-reduction technologies; and the potential for geopolitical developments to accelerate or retard the energy transition.
Drafting Note. The risk factor should avoid language that implies Dunmore views climate-transition risk as immaterial, remote, or unlikely to affect its business during the tenor of the Notes. Given the seven-year maturity (2032) and the long reserve lives of the Nigerian assets, transition risk is a genuine and material concern over the investment horizon. The tone of the risk factor should be balanced but candid — acknowledging both the current profitability of the Company's hydrocarbon operations and the real possibility that the energy transition could materially affect the value of those operations and the reserves that support them.
V.B. Risk Factor 2: "Physical effects of climate change, including extreme weather events, may disrupt our operations and damage our assets."
Scope of Disclosure. This risk factor should address both acute and chronic physical climate risks. Acute risks include discrete, event-driven impacts such as hurricanes, tropical storms, flooding, storm surges, and extreme precipitation events. Chronic risks include longer-term, trend-driven impacts such as rising sea levels, sustained temperature extremes, changes in precipitation patterns, and coastal erosion. Both categories are relevant given the geographic distribution of Dunmore's assets.
Dunmore-Specific Language. The risk factor should include specific references to each of the Company's operating regions and the physical climate risks to which they are exposed:
• Gulf of Mexico: Reference the Green Canyon and Garden Banks deepwater leases as located within the Gulf of Mexico hurricane corridor. Note the historical frequency and severity of hurricane-related disruptions to GoM oil and gas operations. Identify the specific risks of platform evacuations, production shutdowns, damage to subsea infrastructure, and the potential for prolonged business interruption.
• Niger Delta (Nigeria): Reference OML 47 and OML 63 as located in the Niger Delta, a low-lying coastal region that is susceptible to flooding, coastal erosion, and sea-level rise. Note the potential for damage to pipeline infrastructure, flow stations, and other surface facilities. Identify the risk that chronic climate impacts (e.g., sea-level rise, increased flooding frequency) could require accelerated asset retirement or relocation of facilities, with associated capital expenditure implications.
• Cayar Offshore (Senegal): Reference the Cayar Offshore Block as subject to Atlantic oceanic weather patterns, including tropical storms and heavy swells that can disrupt offshore drilling and production operations.
Financial Impact Language. The risk factor should identify the specific financial impact channels through which physical climate risk could affect Dunmore, including: property damage to onshore and offshore infrastructure; business interruption and production downtime; increased insurance premiums and potential reductions in insurance coverage availability; higher deductibles and self-insurance retention levels; acceleration of asset retirement obligations; and increased capital expenditures for facility hardening, climate adaptation, and disaster preparedness.
Insurance Considerations. The risk factor should note that the Collateral package for the Notes includes an assignment of insurance proceeds. Any material increase in insurance premiums, reduction in available coverage, increase in deductible levels, or exclusion of climate-related perils from insurance policies would have direct consequences for the Company's financial condition and for the value of the Collateral securing the Notes. The risk factor should note the possibility that insurance markets may reduce their appetite for climate-exposed assets, making it more difficult or expensive for the Company to obtain adequate coverage.
Cautionary Language. The cautionary language for this risk factor should identify specific uncertainties regarding the severity, frequency, geographic concentration, and timing of physical climate events; the adequacy and availability of insurance coverage; the potential for climate science to reveal risks that are not currently anticipated; and the difficulty of predicting the long-term physical impacts of climate change on the Company's specific operating locations.
V.C. Risk Factor 3: "Evolving ESG-related laws, regulations, and stakeholder expectations may increase our compliance costs, restrict our operations, and impact our access to capital."
Scope of Disclosure. This risk factor should address the rapidly evolving and increasingly complex regulatory landscape for ESG disclosure and emissions regulation across the multiple jurisdictions in which Dunmore operates. It should also address the related risk that evolving stakeholder expectations — from investors, lenders, regulators, and the public — may impose additional constraints on the Company's operations and capital access.
Specific Regulatory References. The risk factor should reference specific regulatory developments and frameworks, including:
• United States: SEC climate disclosure rules (adopted March 2024, subject to judicial review and partial stay); potential federal methane regulation, including EPA regulations on methane emissions from the oil and gas sector; state-level climate and environmental regulations that may apply to Dunmore's GoM and West Texas operations.
• Nigeria: Nigerian DPR environmental compliance requirements, including gas flaring reduction mandates, environmental impact assessment requirements, and potential future carbon pricing or emissions regulations applicable to upstream operators.
• Senegal: Senegalese environmental impact assessment requirements and environmental permitting obligations applicable to the Cayar Offshore Block, including requirements under the PSC.
• United Kingdom and European Union: UK FCA climate-related disclosure expectations applicable to UK-incorporated entities; EU CSRD and Taxonomy Regulation; ISSB standards (IFRS S1, S2) as they may be adopted or endorsed in jurisdictions relevant to Dunmore's operations or investor base.
GHG Emissions Data. The risk factor should reference the Company's Scope 1 GHG emissions (1.42 million metric tons CO₂e) and Scope 2 GHG emissions (0.18 million metric tons CO₂e) for FY 2024, and note that the introduction of carbon pricing in any operating jurisdiction could have a material financial impact on the Company, the magnitude of which would depend on the design and pricing level of the mechanism.
Methane Flaring. The risk factor should reference the Company's methane flaring intensity of 3.8 m³/boe and note that, while this figure is below the industry average of 5.1 m³/boe reported by Barrisford, regulatory trends point toward increasingly stringent methane regulation, and further reductions in allowable flaring may require additional capital expenditure for gas capture and utilization infrastructure.
Capital Access Risk. The risk factor should address the growing risk that ESG-focused investors and lenders may decline to invest in, or may divest from, high-yield oil and gas securities. This trend could impact secondary market liquidity for the Notes, increase the Company's cost of capital, and limit the Company's ability to refinance the Notes at or prior to maturity or to raise additional capital for future operations and development. The risk factor should note that ESG screening and exclusion criteria are becoming increasingly prevalent among institutional investors and that the availability of capital for fossil fuel companies may be constrained over the tenor of the Notes.
Cautionary Language. The cautionary statements for this risk factor should address the inherent unpredictability of regulatory developments across multiple jurisdictions, the difficulty of forecasting compliance costs for regulations that have not yet been finalized or enacted, the evolving and unsettled nature of ESG standard-setting (including the lack of globally harmonized ESG disclosure standards), and the potential for regulatory change to occur more quickly or more aggressively than currently anticipated.
V.D. Risk Factor 4: "Our operations in Nigeria expose us to community relations risks, including operational disruption and reputational harm."
Scope of Disclosure. This risk factor should address the social and community-relations risks specific to Dunmore's Nigerian operations, with particular focus on OML 47 and OML 63 in the Niger Delta region. The Niger Delta has a well-documented history of tensions between oil and gas operators and local communities, and the risk factor should acknowledge this context.
Dunmore-Specific Language. The risk factor should include the following company-specific disclosures:
• Reference the Company's $14.2 million in community development expenditures in Nigeria