DRAFT — FOR DISCUSSION PURPOSES ONLY PRIVILEGED AND CONFIDENTIAL
CALDERWOOD & HARKNESS LLP 425 Lexington Avenue New York, NY 10017
Matter No. 1016-00003
April 26, 2025
Re: Dunmore Energy Holdings Ltd. / Dunmore upstream Finance Corp. — $850,000,000 9.375% Senior Secured Notes due 2032 — Draft Risk Factor Disclosure: Sanctions, OFAC, and Anti-Corruption
Prepared by: Claire Dempsey, Working Associate; Eric Johannsen, Lead Associate
Reviewed by: Jennifer Kwon, Responsible Partner, Capital Markets
Purpose: This memorandum contains draft risk-factor language for inclusion in the "Risk Factors" section of the Preliminary Offering Memorandum (dated April 28, 2025) and the Final Offering Memorandum (dated May 14, 2025) for the Rule 144A / Regulation S offering of the Notes. These risk factors address sanctions, OFAC, export controls, and anti-corruption risks arising from the Issuers' and Guarantors' operations and counterparty relationships in Nigeria, Senegal, and other jurisdictions. The language below is intended to supplement, and be read together with, the risk factors set forth in the main body of the Offering Memorandum.
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I. Introductory Note and Drafting Context
The risk factors set forth in Section II of this memorandum are presented as standalone draft text intended to be inserted into the Preliminary Offering Memorandum and Final Offering Memorandum under the heading "Risk Factors — Risks Related to Sanctions, Export Controls, and Anti-Corruption." These risk factors are supplemental to, and should be read together with, the other risk factors included in the main body of the Offering Memorandum, including but not limited to risks related to the Issuers' business and operations, risks related to the Notes and the Guarantees, risks related to the Collateral, and risks related to the jurisdictions in which the Company operates.
This draft has been prepared in coordination with Sandoval Compliance Solutions LLC ("Sandoval"), led by Rosa Medina, Lead Consultant, which completed a comprehensive sanctions screening of all Dunmore group entities, officers, directors, material counterparties, joint venture partners, and beneficial owners on April 25, 2025. The Sandoval screening was conducted against the following sanctions lists and databases:
(a) the OFAC Specially Designated Nationals and blocked Persons List (the "SDN List");
(b) the OFAC Sectoral Sanctions Identifications List (the "SSI List");
(c) the European Union Consolidated Sanctions List, as maintained by the European Commission;
(d) the United Kingdom Office of Financial Sanctions Implementation Consolidated List (the "OFSI Consolidated List"); and
(e) supplemental databases and screening tools as described in the Sandoval Screening Results Summary (dated April 25, 2025).
The screening conducted by Sandoval returned no matches across any of the foregoing lists and databases as of the screening date. The results of the Sandoval screening are documented in the Sanctions Screening Results Summary and the Counterparty and JV Partner Sanctions Checklist, each of which has been provided separately to this working group.
This draft has also been prepared with direct input from the OFAC and Sanctions Compliance Memorandum (the "Sanctions Compliance Memo") prepared separately by Calderwood & Harkness LLP, which provides a detailed legal analysis of the applicable sanctions, export control, and anti-corruption legal frameworks as they relate to the Issuers' and Guarantors' operations and the proposed offering. The Sanctions Compliance Memo should be consulted for the underlying legal analysis supporting the risk-factor disclosures contained herein.
In addition, the language in this memorandum should be read in conjunction with the following transaction documents and workstream materials:
• The Side Letter — Sanctions Representations supplementing the Purchase Agreement dated as of May 14, 2025 (the "Purchase Agreement") among Dunmore Energy Holdings Ltd., Dunmore upstream Finance Corp. (collectively, the "Issuers"), the Guarantors named therein, and the Initial Purchasers (Ridgeline Capital Markets LLC, Clarion Securities Inc., and Pinnacle Partners LLC). The Side Letter contains additional representations and warranties by the Issuers and Guarantors regarding sanctions compliance, which are more detailed than the corresponding representations in the Purchase Agreement itself.
• The OFAC Covenant and Representation Drafting Memorandum (internal C&H memorandum prepared by Eric Johannsen, Lead Associate), which addresses the drafting and negotiation of the OFAC-related covenants, representations, and warranties to be included in the Indenture dated as of May 15, 2025, among the Issuers, the Guarantors, and Northgate Trust Company, N.A. (as Trustee and Collateral Agent). The defined terms used in the risk factors below should be cross-checked against the defined terms used in the Indenture to ensure consistency of scope and coverage.
It is expected that this draft will undergo further revision following review by Jennifer Kwon (Responsible Partner, Calderwood & Harkness LLP), Alistair Forde (General Counsel, Dunmore Energy Holdings Ltd.), Harrison Cates (Lead Partner, Whitfield Baxter & Cohn LLP, counsel to the Initial Purchasers), and Rosa Medina (Sandoval Compliance Solutions LLC). The target for finalization of this language is prior to the distribution of the Preliminary Offering Memorandum on April 28, 2025, with such further revisions as may be required reflected in the Final Offering Memorandum.
II. Draft Risk Factor Text
The following text is intended for insertion into the Offering Memorandum under the heading "Risk Factors — Risks Related to Sanctions, Export Controls, and Anti-Corruption." All defined terms used herein, unless otherwise defined, shall have the meanings set forth in the Offering Memorandum.
Risk Factors — Risks Related to Sanctions, Export Controls, and Anti-Corruption
Risk Factor 1: Our operations in Nigeria and Senegal expose us to risks relating to economic sanctions laws and regulations, including those administered by OFAC, the European Union, and the United Kingdom.
Dunmore Energy Holdings Ltd. (the "Company"), a Cayman Islands exempted company, and its subsidiaries conduct upstream and midstream oil and gas operations in Nigeria and Senegal, and these operations expose us to significant and complex risks relating to economic sanctions laws and regulations in multiple jurisdictions.
In Nigeria, our operations are conducted through Dunmore Nigeria E&P Ltd. ("Dunmore Nigeria"), which serves as operator of Oil Mining Lease 47 ("OML 47") and Oil Mining Lease 63 ("OML 63"), both located in the Niger Delta region. OML 47 contains estimated proved reserves of approximately 142.6 million barrels of oil equivalent ("MMboe") with a PV-10 value of approximately $2,840 million, and OML 63 contains estimated proved reserves of approximately 87.3 MMboe with a PV-10 value of approximately $1,620 million. In Senegal, our operations are conducted through Dunmore Senegal S.A. ("Dunmore Senegal"), which serves as operator of the Cayar Offshore Block under a production sharing contract. The Cayar Offshore contains estimated proved reserves of approximately 64.1 MMboe with a PV-10 value of approximately $1,190 million. Collectively, these three assets represent approximately $5,650 million of our total PV-10 of approximately $6,700 million, or approximately 84% of our total PV-10 as of the date of this Offering Memorandum.
The United States maintains comprehensive economic sanctions programs administered by the Office of Foreign Assets Control ("OFAC") of the U.S. Department of the Treasury under authority derived from, among other statutes, the International Emergency Economic Powers Act of 1977, as amended ("IEEPA"), the Trading with the Enemy Act, and various Executive Orders. These programs prohibit or restrict transactions involving certain countries, territories, entities, and individuals, including persons listed on OFAC's Specially Designated Nationals and blocked Persons List (the "SDN List") and the Sectoral Sanctions Identifications List (the "SSI List"). The European Union maintains its own sanctions programs under its Common Foreign and Security Policy, as implemented through regulations adopted by the Council of the European Union and applicable in all EU member states. The United Kingdom administers financial sanctions through the Office of Financial Sanctions Implementation ("OFSI") of HM Treasury, which maintains the OFSI Consolidated List of persons and entities subject to UK financial sanctions.
While neither Nigeria nor Senegal is currently subject to comprehensive U.S., EU, or UK sanctions programs, both countries are located in the West African region, where sanctions designations have been applied to specific individuals and entities. The sanctions landscape in West Africa is evolving and subject to change, and there can be no assurance that Nigeria, Senegal, or specific entities or persons operating in those jurisdictions will not become subject to expanded sanctions designations or programs in the future. The political and security environments in West Africa, including in the Sahel region, have been subject to instability, and developments in neighboring countries have in recent years prompted new or expanded sanctions designations by OFAC, the EU, and the UK.
The operations of Dunmore Nigeria under OML 47 and OML 63 are conducted under arrangements that include back-in rights held by the Nigerian National Petroleum Company ("NNPC"), a state-owned entity. The interaction with NNPC and other Nigerian state-owned enterprises in connection with the operatorship of OML 47 and OML 63 requires ongoing OFAC and sanctions diligence, as any future designation of NNPC or any of its subsidiaries, affiliates, officers, or directors could materially affect our ability to continue operating these leases. Similarly, the operations of Dunmore Senegal under the production sharing contract for the Cayar Offshore Block involve contractual and regulatory relationships with the Senegalese Ministère de l'Énergie and other governmental counterparties, the designation of any of which could adversely affect our Senegalese operations.
In addition to our governmental counterparties, our joint venture partners, offtake counterparties, suppliers, subcontractors, drilling contractors, equipment lessors, oilfield service providers, logistics companies, and other third parties with whom our subsidiaries transact may themselves become subject to sanctions designations. We engage with a broad network of local and international counterparties in connection with our Nigerian and Senegalese operations, and we cannot control or predict whether any of these counterparties, or their respective officers, directors, or beneficial owners, will become subject to sanctions in the future.
If any counterparty, joint venture partner, officer, director, or beneficial owner of an entity with which we do business is or becomes a Specially Designated National or is otherwise designated under OFAC, EU, or UK sanctions programs, we could be required to cease transacting with such person, which could disrupt our operations, result in the loss of revenue, necessitate the termination or restructuring of contractual relationships, and require costly alternatives to maintain production and export activities. In certain circumstances, we may be required to block or freeze assets or property interests of sanctioned persons, and we could face significant uncertainty regarding our ongoing contractual obligations and rights.
Violations of OFAC sanctions regulations, even those that are inadvertent or unintentional, can result in significant civil and criminal penalties. Civil penalties under OFAC's enforcement framework may be imposed in amounts up to the greater of $250,000 per violation or twice the value of the underlying transaction. Criminal penalties under IEEPA may include fines of up to $1,000,000 per violation and imprisonment of up to 20 years per violation. In addition, OFAC has broad discretion to impose remedial measures, including the requirement to adopt or enhance compliance programs, and OFAC enforcement actions can result in significant reputational harm. Violations of EU sanctions can result in criminal prosecution and substantial fines in the relevant member state, and violations of UK financial sanctions under the Sanctions and Anti-Money Laundering Act 2018 can result in criminal penalties including imprisonment for up to seven years and unlimited fines, as well as civil monetary penalties imposed by OFSI.
The proceeds of the Notes may not be used, and the Indenture governing the Notes contains covenants and representations prohibiting the use of the proceeds of the Notes, directly or indirectly, in any manner that would result in a violation of applicable sanctions laws, including regulations administered by OFAC, EU sanctions regulations, and UK sanctions legislation. Any use of proceeds in violation of these covenants could constitute an event of default under the Indenture and could expose the Company to the penalties and remedies described above.
We face the additional risk that our operations, assets, or listings could become subject to future sectoral or comprehensive sanctions targeting West African jurisdictions. If comprehensive sanctions were to be imposed on Nigeria or Senegal, or if sectoral sanctions targeting the oil and gas industry in either jurisdiction were to be adopted, the impact on our business could be severe, as the assets subject to such sanctions would represent approximately 84% of our total PV-10 value. In such a scenario, our ability to produce, transport, and sell hydrocarbons from the affected jurisdiction could be materially impaired or prohibited entirely, and the value of our proved reserves and the collateral securing the Notes could be substantially diminished.
Sandoval Compliance Solutions LLC completed a screening of all Dunmore group entities, officers, directors, material counterparties, and joint venture partners against the OFAC SDN List, SSI List, EU Consolidated Sanctions List, and UK OFSI Consolidated List on April 25, 2025, with no matches identified. However, there can be no assurance that future screening will yield the same results or that sanctions designations will not be made with respect to any of our counterparties, joint venture partners, officers, directors, or beneficial owners after the date of this Offering Memorandum. Sanctions designations can be made without advance notice and can take effect immediately upon publication by the relevant governmental authority.
Risk Factor 2: Changes in, or the expansion of, sanctions programs applicable to the regions in which we operate could materially adversely affect our business, financial condition, and results of operations.
Sanctions regimes administered by OFAC, the European Union, and the United Kingdom are dynamic and subject to frequent modification, expansion, and reinterpretation, often without advance notice to affected parties. OFAC, the EU, and the UK regularly update and expand their sanctions lists, add new sanctions programs, modify the scope of existing programs, and issue new guidance and interpretive determinations. Any such changes could have a material adverse effect on our business, financial condition, and results of operations if they affect the jurisdictions in which we operate, the counterparties with whom we transact, or the commodities in which we deal.
In recent years, the U.S. government has significantly expanded the use of secondary sanctions, which can apply to non-U.S. persons (including the Company, a Cayman Islands exempted company) that engage in certain transactions with sanctioned persons or countries, even where such transactions have no direct connection to the United States. The scope of secondary sanctions authority has been broadened under various Executive Orders, and the enforcement of secondary sanctions has become increasingly aggressive. As a non-U.S. entity with significant U.S. touchpoints — including a Delaware-incorporated co-issuer (Dunmore upstream Finance Corp.), U.S.-organized Guarantor subsidiaries (Dunmore Gulf Operations LLC, Dunmore Renewables LLC, and Dunmore Midstream Holdings Inc.), a Houston, Texas principal executive office (2900 Post Oak Boulevard, Suite 3100), and the offering of the Notes to U.S. investors under Rule 144A — the Company is subject to both primary and secondary U.S. sanctions risk.
An expansion of sanctions against individuals or entities in the Nigerian oil and gas sector could materially affect our ability to operate OML 47 and OML 63 in the Niger Delta. Such expansion could take the form of the designation of individual Nigerian government officials, officers or directors of NNPC or its subsidiaries, Nigerian business persons with interests in the oil and gas sector, or entities involved in the upstream or midstream supply chain. Similarly, the expansion of sanctions applicable to the Senegalese energy sector could affect our ability to operate the Cayar Offshore Block, including through the designation of Senegalese government officials, counterparties to our production sharing contract, or entities involved in the offshore exploration and production supply chain.
Any future sanctions designation of a governmental counterparty — including any Nigerian or Senegalese state entity with which our subsidiaries have contractual or regulatory relationships — could compel the cessation or fundamental restructuring of our operations in the affected jurisdiction. Given the centrality of state-owned entities to the regulatory and contractual framework governing upstream oil and gas operations in both Nigeria and Senegal, the designation of such entities would likely have severe and potentially irreversible effects on our ability to continue operating in the affected jurisdiction.
Our midstream operations, conducted through Dunmore Midstream Holdings Inc., and our trading activities, conducted through Dunmore Trading Ltd. (an England & Wales company), involve cross-border commodity flows, including the purchase, transportation, storage, and sale of crude oil and refined petroleum products across multiple jurisdictions. These activities may be affected by trade sanctions, export controls, maritime sanctions (including vessel designations), port restrictions, insurance sanctions, and other restrictive measures that could impair our ability to transport, sell, or deliver hydrocarbons to our customers. The imposition of sanctions on shipping companies, insurance providers, port facilities, or commodity traders with whom we do business could disrupt our supply chain and reduce our revenues.
The Company's nascent renewable energy portfolio, conducted through Dunmore Renewables LLC, consists of a 220 megawatt solar portfolio under development in West Texas. While these operations are not currently subject to heightened sanctions risk, supply-chain sanctions affecting solar panel components, inverters, or other critical equipment — including sanctions targeting certain manufacturers or countries of origin — could impact development costs, delay project timelines, and reduce the expected returns from our renewable energy investments. Geopolitical developments affecting the global solar supply chain could materially increase the cost of our renewable energy development activities.
Compliance with evolving sanctions regimes requires the dedication of significant ongoing financial, personnel, and technological resources. The Indenture governing the Notes and the related transaction documents contemplate quarterly post-closing sanctions screening obligations, which will require the Company to engage Sandoval Compliance Solutions LLC or another qualified screening provider to conduct periodic screening of all group entities, officers, directors, material counterparties, and joint venture partners against applicable sanctions lists. These ongoing compliance obligations will impose recurring costs on the Company and will require the allocation of management attention and legal resources. There can be no assurance that the Company's compliance efforts will be sufficient to identify and address all sanctions risks on a timely basis, particularly given the volume and frequency of changes to applicable sanctions lists and programs.
Risk Factor 3: We may be unable to ensure that our subsidiaries, joint venture partners, counterparties, agents, and other third parties comply with applicable sanctions laws.
The Company operates through multiple subsidiaries across diverse jurisdictions, including the Cayman Islands, the State of Delaware, Nigeria, Senegal, and England & Wales, and employs approximately 3,400 individuals worldwide. Our organizational structure is complex, and our operations involve relationships with a wide range of third parties, including joint venture partners, offtake counterparties, suppliers, subcontractors, drilling contractors, oilfield service providers, logistics companies, community intermediaries, customs brokers, local agents, and governmental authorities. Despite our efforts to implement and maintain robust compliance policies and procedures, we cannot guarantee that all of our employees, agents, joint venture partners, counterparties, and other third parties will comply with applicable sanctions laws at all times.
The implementation of sanctions compliance policies and procedures, including the comprehensive screening program conducted by Sandoval Compliance Solutions LLC, is designed to identify and mitigate sanctions risks across our operations. However, the effectiveness of any compliance program is inherently limited by factors including the volume and complexity of our transactions, the number and diversity of our counterparties, the pace of changes to applicable sanctions lists, and the degree to which our compliance policies are understood and followed by all relevant personnel and third parties. In particular, the geographic remoteness of certain of our Nigerian operations in the Niger Delta and the complexity of the counterparty ecosystem in the Senegalese offshore sector present challenges to the consistent implementation of sanctions compliance procedures.
The operations of Dunmore Nigeria E&P Ltd. in the Niger Delta involve engagement with numerous local subcontractors, community stakeholders, and government officials. Many of these relationships are longstanding and involve parties whose ownership structures, beneficial ownership, and affiliations may not be fully transparent or readily ascertainable. The operations of Dunmore Senegal S.A. in the Cayar Offshore Block involve similar counterparty complexity, including relationships with local service providers, governmental authorities, and community groups. In each case, the risk of inadvertent interaction with a sanctioned person — or with a person who becomes sanctioned after the establishment of the business relationship — is heightened by the nature and geographic location of our operations.
Dunmore Trading Ltd., our England & Wales offtake and trading arm, engages in commodity trading that may involve counterparties in multiple jurisdictions around the world. Commodity trading by its nature involves a complex web of intermediaries, including traders, brokers, shipping companies, insurance providers, banks, and port operators, each of which may have its own counterparty relationships and exposure to sanctioned persons or jurisdictions. The risk of inadvertent interaction with sanctioned persons is elevated in international commodity trading, and we cannot guarantee that all counterparties in our trading chain will comply with applicable sanctions laws at all times.
The Company's majority equity owner, Harborview Capital Partners Fund VI, L.P. (holding approximately 62.4% of the equity of the Company), and the Company's co-investors, Solstice Infrastructure Fund LP (holding approximately 11.1% of the equity) and Alderman Family Office LLC (holding approximately 8.2% of the equity), have each provided representations and warranties regarding their own sanctions compliance in connection with their respective investment in the Company. However, the Company does not control the activities of its equity holders in all respects, and there can be no assurance that the equity holders, their respective affiliates, or their respective portfolio companies will not engage in activities or transactions that could give rise to sanctions concerns or that could be attributed to the Company.
Any violation of applicable sanctions laws by a subsidiary, joint venture partner, counterparty, agent, or other third party acting on our behalf or in connection with our operations could be attributed to the Company under applicable legal theories, including agency, conspiracy, aiding and abetting, or causing a violation. Such violations could result in the imposition of civil and criminal penalties on the Company, significant reputational harm, loss of investor and counterparty confidence, and regulatory scrutiny. A sanctions violation could also constitute a breach of representations, warranties, or covenants under the Indenture governing the Notes, which could result in an event of default and the acceleration of the Notes in an aggregate principal amount of $850,000,000. In addition, a sanctions-related event of default under the Indenture could trigger cross-default provisions under the Company's $750 million ABL revolving credit facility with Velthorn National Bank, N.A. (of which approximately $470 million is currently drawn), compounding the financial impact on the Company and potentially threatening our ability to continue operations.
Risk Factor 4: We are subject to export control laws and regulations that could restrict our ability to export technology, data, and equipment.
Our operations in Nigeria and Senegal involve the use, transfer, and deployment of technology, technical data, software, and equipment that may be subject to U.S. export control laws and regulations, including the Export Administration Regulations ("EAR") administered by the Bureau of Industry and Security ("BIS") of the U.S. Department of Commerce. The EAR impose licensing requirements and restrictions on the export, reexport, and transfer (in-country) of certain items, including dual-use goods, software, and technology, based on factors including the item's classification, the end-use, the end-user, and the country of destination. In addition, our operations may be subject to comparable export control regimes administered by EU member states and the United Kingdom, including the EU Dual-Use Regulation (Regulation (EU) 2021/821) and the UK Export Control Act 2002 and related secondary legislation.
The transfer of certain oilfield technologies, seismic data processing software, directional drilling equipment, subsea production systems, and other specialized equipment and technology from the United States or other jurisdictions to Nigeria and Senegal may require the prior issuance of export licenses by BIS or other competent export control authorities, or may be subject to end-use or end-user restrictions. In certain cases, deemed export rules may apply to the transfer of controlled technology or source code to foreign nationals within the United States or to foreign nationals employed by our subsidiaries abroad. Compliance with these requirements can be time-consuming and burdensome, and there can be no assurance that required licenses will be granted or that existing license exceptions or exemptions will continue to be available.
Violations of export control laws can result in severe civil and criminal penalties, including significant fines, denial of export privileges, and debarment from U.S. government contracting. BIS has authority to impose civil penalties of up to $300,000 per violation or twice the value of the underlying transaction, and criminal penalties may include fines of up to $1,000,000 and imprisonment of up to 20 years per violation. The denial of export privileges could materially impair our ability to source technology and equipment from the United States for our Nigerian and Senegalese operations.
Changes in export control policies, classifications, or country-specific restrictions, particularly with respect to West African nations, could impair our ability to deploy technology critical to our exploration, development, and production activities. The U.S. government periodically reviews and revises its export control policies, and changes in the geopolitical environment in West Africa could prompt the imposition of new or expanded export control restrictions applicable to our operations. Any such changes could delay or prevent the transfer of essential technology and equipment, increase our operating costs, and adversely affect our production capabilities and competitive position.
Risk Factor 5: Our operations in Nigeria and Senegal subject us to the U.S. Foreign Corrupt Practices Act, the UK Bribery Act 2010, and other anti-corruption laws, and any violation of these laws could have a material adverse effect on our business and financial condition.
The Company and its subsidiaries are subject to the U.S. Foreign Corrupt Practices Act of 1977, as amended (the "FCPA"), which prohibits the payment, offer, or promise of anything of value, directly or through intermediaries, to any foreign government official, political party, party official, or candidate for political office for the purpose of influencing any act or decision of such person in their official capacity, inducing such person to act or refrain from acting in violation of their lawful duties, securing any improper advantage, or obtaining or retaining business. The FCPA also requires issuers and their consolidated subsidiaries to maintain books and records that accurately and fairly reflect the transactions and dispositions of assets of the issuer, and to devise and maintain a system of internal accounting controls sufficient to provide reasonable assurances regarding the authorization, recording, and accountability of transactions.
The FCPA applies to the Company because: (i) Dunmore upstream Finance Corp., the co-issuer of the Notes, is organized as a corporation under the laws of the State of Delaware; (ii) several of the Guarantor subsidiaries, including Dunmore Gulf Operations LLC, Dunmore Renewables LLC, and Dunmore Midstream Holdings Inc., are organized under the laws of the United States; (iii) the Company's principal executive offices include a Houston, Texas office located at 2900 Post Oak Boulevard, Suite 3100, Houston, Texas 77056, from which the Company and certain of its subsidiaries direct and manage operations; and (iv) the Notes are being offered and sold to qualified institutional buyers in the United States in reliance on Rule 144A under the Securities Act of 1933, as amended (the "Securities Act"). These U.S. touchpoints establish a sufficient nexus for the FCPA's jurisdictional provisions, and both the anti-bribery and books-and-records provisions of the FCPA apply to the Company and its consolidated subsidiaries.
Dunmore Trading Ltd., our England & Wales-organized offtake and trading subsidiary, is also subject to the UK Bribery Act 2010 (the "UKBA"), which has broad extraterritorial application and prohibits bribery in both the public and private sectors. The UKBA creates four categories of offenses: (i) offering, promising, or giving a bribe to another person; (ii) requesting, agreeing to receive, or accepting a bribe; (iii) bribing a foreign public official; and (iv) a corporate offense of failure to prevent bribery by persons associated with the organization. The corporate offense of failure to prevent bribery imposes strict liability on commercial organizations, and the only statutory defense is that the organization had "adequate procedures" in place to prevent bribery. The UKBA applies to Dunmore Trading Ltd. as a body corporate incorporated in England & Wales, and may also apply to other Dunmore entities that carry on business, or part of a business, in the United Kingdom. The penalties for violations of the UKBA include unlimited fines and, for individuals, imprisonment of up to ten years.
Our operations in Nigeria — a country that has historically been ranked as a high-risk jurisdiction for corruption by Transparency International and other governance and risk assessment organizations — involve regular and extensive interaction with Nigerian government agencies, including the Department of Petroleum Resources (now reorganized as the Nigerian upstream Petroleum Regulatory Commission ("NUPRC") under the Petroleum Industry Act 2021) and the Nigerian National Petroleum Company ("NNPC"), which holds back-in rights in OML 47 and OML 63. The regulatory framework governing upstream oil and gas operations in Nigeria requires frequent engagement with government officials in connection with permitting, regulatory approvals, tax and royalty administration, environmental compliance, community engagement, and other operational matters, each of which presents potential FCPA and UKBA risk.
Our operations in Senegal similarly involve interaction with the Ministère de l'Énergie and other government bodies in connection with the administration of the production sharing contract for the Cayar Offshore Block, including matters relating to exploration and development approvals, environmental permits, fiscal terms, and government participation interests. While Senegal has generally been regarded as a relatively well-governed jurisdiction within the West African region, the risks of corruption remain present in connection with government interactions in the energy sector.
Community development expenditures in Nigeria totaled approximately $14.2 million in the fiscal year ended December 31, 2024. These expenditures include payments and in-kind contributions to community stakeholders in the Niger Delta region in connection with our social license to operate, including contributions to community infrastructure projects, educational programs, healthcare initiatives, and employment and training programs. While these expenditures are an important component of our operating strategy and social responsibility commitments, they involve payments and transfers of value to community leaders, local government officials, and other intermediaries that, if not properly documented, controlled, and monitored, could give rise to FCPA or UKBA concerns. The Company has implemented internal controls and approval procedures for community development expenditures, but the high volume and decentralized nature of some of these payments create inherent compliance challenges.
Any investigation, enforcement action, or voluntary disclosure relating to potential anti-corruption violations could have severe consequences for the Company, including: significant fines and penalties (the U.S. Department of Justice and the U.S. Securities and Exchange Commission have in recent years imposed FCPA penalties exceeding $1 billion in certain high-profile enforcement actions involving energy and extractive industry companies); disgorgement of profits obtained through or in connection with the alleged corrupt conduct; appointment of an independent compliance monitor at the Company's expense; debarment from government contracts; and substantial reputational damage that could impair the Company's relationships with investors, lenders, joint venture partners, counterparties, and governmental authorities.
Criminal and civil enforcement of the FCPA by the U.S. Department of Justice (the "DOJ") and the U.S. Securities and Exchange Commission (the "SEC"), and of the UKBA by the UK Serious Fraud Office (the "SFO"), has intensified in recent years, with particular focus on the energy, extractive, and natural resources industries. Multi-jurisdictional cooperation among enforcement authorities has also increased, with U.S., UK, and local authorities frequently coordinating investigations and sharing information. A finding of violations in one jurisdiction could prompt parallel investigations and enforcement actions in other jurisdictions, multiplying the Company's exposure to penalties, legal costs, and operational disruption.
Anti-corruption compliance in our operations is further complicated by the involvement of joint venture partners, local agents, customs brokers, freight forwarders, community intermediaries, and other third parties over whom the Company exercises limited direct control. While the Company requires its joint venture partners, agents, and significant counterparties to agree to anti-corruption compliance provisions in their contracts with the Company, and while the Company conducts risk-based due diligence on such parties, there can be no assurance that these measures will be sufficient to prevent violations by third parties.
Despite the implementation of the Company's anti-corruption compliance program — which includes written policies and procedures, training for employees and third-party agents, risk-based due diligence on counterparties, internal controls over community development expenditures, and periodic auditing — there can be no assurance that employees, agents, joint venture partners, or other third parties associated with the Company will not engage in conduct that violates the FCPA, the UKBA, or other applicable anti-corruption laws. Any such violation, or even the allegation or perception of such a violation, could have a material adverse effect on our business, financial condition, results of operations, and the value of the Notes.
Risk Factor 6: Anti-money laundering laws and regulations impose compliance obligations that may increase our operating costs, and any failure to comply could result in significant penalties.
The Company and its subsidiaries are subject to anti-money laundering ("AML") laws and regulations in multiple jurisdictions in which they operate or conduct business. These include, without limitation: the U.S. Bank Secrecy Act of 1970, as amended, and the regulations promulgated thereunder by the Financial Crimes Enforcement Network ("FinCEN"); the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (the "USA PATRIOT Act"), including enhanced due diligence requirements applicable to correspondent accounts and certain other financial transactions; the UK Proceeds of Crime Act 2002 and the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (the "UK Money Laundering Regulations"); the Nigerian Money Laundering (Prohibition) Act 2011, as amended, and the regulations promulgated by the Nigerian Financial intelligence Unit; and Senegalese AML legislation implementing directives issued by the Economic Community of West African States ("ECOWAS") and the West African Economic and Monetary Union ("UEMOA"), as supervised by the CENTIF (Cellule Nationale de Traitement des Informations Financières).
These laws and regulations impose a range of compliance obligations on the Company and its subsidiaries, including requirements relating to customer identification and verification (know-your-customer or "KYC" procedures), ongoing monitoring of business relationships and transactions, suspicious activity reporting, record-keeping, and the implementation of internal AML policies, procedures, and controls. Compliance with these requirements imposes ongoing costs on the Company, including the costs of personnel, training, technology, and external advisory services.
The commodity trading activities conducted through Dunmore Trading Ltd. may be subject to enhanced AML scrutiny given the nature of international oil trading, which has been identified by regulators and law enforcement authorities in multiple jurisdictions as presenting elevated money laundering risk. The international nature of commodity trading, the involvement of intermediaries, the use of complex payment structures, and the potential for exposure to high-risk jurisdictions all contribute to this heightened risk profile.
The Initial Purchasers — Ridgeline Capital Markets LLC, Clarion Securities Inc., and Pinnacle Partners LLC — and the Trustee, Northgate Trust Company, N.A., are each subject to their own AML obligations under applicable U.S. law and regulation, including requirements to conduct customer due diligence and to maintain AML compliance programs. These parties may impose additional AML compliance requirements on the Issuers in connection with the offering and ongoing administration of the Notes, including requests for documentation, beneficial ownership information, and certifications regarding the source and application of funds. Compliance with these requirements may impose additional administrative burdens and costs on the Company.
Failure to maintain adequate AML controls could result in regulatory enforcement actions, civil and criminal fines and penalties, and in severe cases, criminal prosecution of the Company or its officers and employees. In addition, AML compliance failures could result in significant reputational damage, loss of banking relationships, increased cost of compliance, and adverse publicity that could impair the Company's ability to conduct business and access capital markets.
Risk Factor 7: The Indenture governing the Notes contains representations, warranties, and covenants relating to sanctions and anti-corruption compliance, the breach of which could result in an event of default.
The Indenture dated as of May 15, 2025 (the "Indenture"), among Dunmore Energy Holdings Ltd. (as Issuer), Dunmore upstream Finance Corp. (as Co-Issuer), the Guarantors named therein, and Northgate Trust Company, N.A. (as Trustee and Collateral Agent), contains representations and covenants that specifically address sanctions, anti-corruption, and anti-money laundering compliance. Among other things, the Indenture contains representations by the Issuers and Guarantors that they are not, and that none of their respective officers, directors, or, to their knowledge, employees, agents, or affiliates is, a person that is currently the subject or target of sanctions administered by OFAC, the EU, or the UK. The Indenture also contains covenants prohibiting the Issuers and the Guarantors from using, and from permitting any subsidiary to use, the proceeds of the Notes, directly or indirectly, in any manner that would result in a violation of applicable sanctions laws, anti-corruption laws (including the FCPA and the UKBA), or anti-money laundering laws.
The Purchase Agreement dated as of May 14, 2025, among the Issuers, the Guarantors, and the Initial Purchasers (Ridgeline Capital Markets LLC, Clarion Securities Inc., and Pinnacle Partners LLC) contains similar representations and warranties regarding sanctions and anti-corruption compliance. These representations and warranties have been supplemented by a separate Side Letter — Sanctions Representations, which provides additional representations and warranties by the Issuers and Guarantors with respect to their sanctions compliance, including representations regarding the results of sanctions screening, the absence of prior sanctions violations, and the Company's sanctions compliance program. The Side Letter constitutes an integral part of the Purchase Agreement and should be read in conjunction with the representations and warranties contained in the Purchase Agreement.
A breach of any sanctions, anti-corruption, or anti-money laundering representation, warranty, or covenant in the Indenture could constitute an event of default under the Indenture. An event of default under the Indenture could result in the acceleration of the Notes, rendering the entire outstanding principal amount of $850,000,000, together with accrued and unpaid interest and any applicable premium, immediately due and payable. The Company's ability to satisfy its obligations under the Notes in the event of acceleration may be limited, particularly if the breach that gave rise to the event of default also disrupts the Company's operations or access to revenue.
In addition, an event of default under the Indenture could trigger cross-default provisions under the Company's $750 million ABL revolving credit facility with Velthorn National Bank, N.A. (of which approximately $470 million is currently drawn), and potentially under other debt instruments of the Company and its subsidiaries. The simultaneous acceleration of the Notes and the ABL revolving credit facility, and any other cross-defaulted indebtedness, could have a devastating effect on the Company's liquidity, financial condition, and ability to continue operations.
The preliminary credit ratings assigned to the Notes by Lodestar Ratings International (preliminary B2 with a Stable Outlook) and by Veridian Credit Assessments Inc. (preliminary B+ with a Stable Outlook) are based in part on the credit agencies' assessment of the Company's governance and compliance framework. Any sanctions or anti-corruption compliance failure, or any investigation or enforcement action relating thereto, could cause one or both rating agencies to downgrade or withdraw the ratings assigned to the Notes. A downgrade or withdrawal of ratings could adversely affect the market price and liquidity of the Notes and could increase the Company's cost of capital in future financing transactions.
The Collateral securing the Notes includes equity interests in each Guarantor subsidiary and substantially all of the tangible and intangible assets of the Issuers and Guarantors, including oil and gas properties, contract rights, equipment, inventory, accounts receivable, and intellectual property. In the event of a sanctions-related default under the Indenture, the Trustee and Collateral Agent would have the right to enforce remedies with respect to the Collateral, including by exercising rights over the equity interests and assets of the Guarantor subsidiaries. However, the enforcement of remedies with respect to Collateral located in Nigeria or Senegal may be subject to significant delays, costs, and uncertainties under the laws of those jurisdictions, including limitations on the recognition and enforcement of foreign judgments and arbitral awards, regulatory approvals required for transfers of oil and gas assets, and the practical challenges of enforcement in developing country legal systems. In addition, if the enforcement of remedies is necessitated by a sanctions violation, the relevant sanctions laws may themselves impose restrictions on the disposition or transfer of assets, further complicating the enforcement process.
Risk Factor 8: Investigations or enforcement actions by U.S., UK, EU, or local governmental authorities could disrupt our operations and divert management attention.
Governmental authorities with jurisdiction over sanctions, anti-corruption, export controls, and AML compliance have broad investigative and enforcement powers that they may exercise against the Company, its subsidiaries, officers, directors, or employees at any time. These authorities include, in the United States, OFAC, the DOJ, the SEC, and BIS; in the United Kingdom, OFSI, the SFO, and HM Revenue & Customs; in the European Union, the competent authorities of the relevant member states; and in Nigeria and Senegal, the relevant regulatory and law enforcement bodies, including the Economic and Financial Crimes Commission (Nigeria), the NUPRC, the Nigerian Financial intelligence Unit, and the Senegalese CENTIF.
Any investigation or inquiry by any of these authorities — whether or not it ultimately results in formal charges, penalties, or adverse findings — could have significant adverse consequences for the Company. Such consequences may include, but are not limited to: the requirement for significant management time and attention to be devoted to responding to the investigation, including from the Company's Chief Executive Officer, Marcus Ellingham, Chief Financial Officer, Deepa Rajaram, and General Counsel, Alistair Forde, each of whom would be expected to play a central role in any government investigation response; the incurrence of substantial legal, advisory, and forensic accounting costs; the generation of negative publicity and media attention, which could damage the Company's reputation with investors, lenders, counterparties, and governmental authorities; operational disruptions, including the potential for government-imposed restrictions on the Company's operations, asset freezes, or injunctions; the deterioration of relationships with joint venture partners, counterparties, and governmental authorities in Nigeria, Senegal, and other jurisdictions; and adverse effects on employee morale and the Company's ability to attract and retain key personnel.
The Company's Board of Directors, chaired by Lady Constance Harrowby (an independent director and former UK Energy Minister), has oversight responsibility for the Company's compliance program, including compliance with sanctions, anti-corruption, export control, and AML laws and regulations. The Board has established a Compliance Committee that receives periodic reports from management regarding compliance matters and exercises oversight over the Company's compliance policies and procedures. However, investigations and enforcement actions can arise despite the implementation of robust governance structures and compliance programs, and neither the existence of a well-functioning Board oversight mechanism nor the adoption of best-practice compliance policies can eliminate the risk of governmental investigation or enforcement.
Any material investigation or enforcement action could trigger disclosure obligations under the terms of the Indenture, including the obligation to provide notice to the Trustee and, in certain circumstances, to holders of the Notes. The disclosure of an ongoing investigation could adversely affect the market price and liquidity of the Notes and could impair the Company's ability to access the capital markets in the future, whether through additional debt offerings, equity financings, or amendments and extensions of existing credit facilities. The market perception of sanctions or anti-corruption risk associated with the Company could persist even if the investigation is ultimately resolved without adverse findings or penalties, resulting in lasting damage to the Company's reputation and market standing.
III. Cross-References and Coordination Notes
Internal C&H Notations — Not for Inclusion in the Offering Memorandum
The following cross-references and coordination notes are provided for the information of the working group and are not intended for inclusion in the Preliminary Offering Memorandum or the Final Offering Memorandum. These notes identify related workstream documents and inter-disciplinary coordination issues that should be resolved prior to finalization of the risk-factor language.
Cross-references to other OM sections:
1. "Risk Factors — Risks Related to ESG and Climate." A separate OM supplement is being prepared to address climate and environmental regulatory risks. Certain ESG and climate-related regulatory risks may overlap with sanctions and compliance considerations — for example, the potential for sanctions or trade restrictions motivated by environmental or human rights concerns, or the application of environmental sanctions to specific counterparties or jurisdictions. The ESG risk factors and the sanctions risk factors should be reviewed together to ensure consistency of disclosure and to avoid redundancy or contradiction.
2. "Environmental and Social Responsibility" section of the OM. The main body of the Offering Memorandum includes a section describing the Company's environmental and social responsibility programs, including community development expenditures in Nigeria. The disclosure of community development expenditures ($14.2 million in FY 2024) in the ESR section should be consistent with the references to community development expenditures in Risk Factor 5 above, which highlights the anti-corruption sensitivities associated with such expenditures.
3. Barrisford Advisory Group LLC ESG Data Package. The ESG data package prepared by Barrisford Advisory Group LLC includes detailed community spend data ($14.2 million in Nigeria for FY 2024) that forms the basis for the community development expenditure disclosures in both the ESR section and Risk Factor 5. The figures should be confirmed as consistent across all sections of the Offering Memorandum.
Cross-references to C&H workstream documents:
4. OFAC and Sanctions Compliance Memorandum (separate C&H workstream document). This memorandum provides the detailed legal analysis supporting the risk-factor disclosures contained herein. All legal conclusions reflected in the risk factors should be confirmed against the analysis in the Sanctions Compliance Memo.
5. Sanctions Screening Results Summary and Counterparty and JV Partner Sanctions Checklist. These documents, prepared by Sandoval Compliance Solutions LLC and provided to the C&H working group, contain the detailed results of the April 25, 2025 sanctions screening. The screening results should be reviewed and confirmed prior to finalization of the risk-factor language.
Coordination with local counsel:
6. Abayomi Chambers (Chidinma Okafor). Nigerian local counsel has been engaged to provide advice on the Nigerian regulatory landscape, including the status and operations of NNPC and the NUPRC, the regulatory framework governing OML 47 and OML 63, and the risk of Nigerian sanctions or regulatory actions that could affect the Company's operations. The Nigerian regulatory discussion in Risk Factors 1, 2, 3, and 5 should be reviewed by Abayomi Chambers for accuracy.
7. Theron Moss & Associates SARL (Moustapha Sy). Senegalese local counsel has been engaged to advise on the Senegalese compliance context, including the regulatory framework governing the Cayar Offshore Block production sharing contract, the role of the Ministère de l'Énergie, and applicable Senegalese AML and anti-corruption laws. The Senegalese-specific disclosures in the risk factors should be reviewed by Theron Moss & Associates for accuracy.
8. Cresswell & Greaves LLP (Fiona Halsted). UK counsel should review the UKBA-related risk-factor language in Risk Factor 5 for accuracy under English law, including the description of the UKBA offenses, the jurisdictional scope of the UKBA, and the applicability of the "adequate procedures" defense. Any comments from Cresswell & Greaves should be incorporated prior to finalization.
Internal drafting coordination:
9. Indenture OFAC Covenant Drafting. These risk factors should be reviewed in parallel with the Indenture OFAC covenant drafting (see OFAC Covenant and Representation Drafting Memorandum prepared by Eric Johannsen) to ensure consistency of defined terms and scope of representations. In particular, the defined terms "Sanctions," "Sanctioned Person," "Sanctioned Country," and "Anti-Corruption Laws" as used in the Indenture should be cross-checked against the usage of these terms in the risk factors to ensure that the scope of the risk-factor disclosure is coextensive with the scope of the Indenture covenants and representations. Any discrepancies should be flagged and resolved prior to finalization.
IV. Cautionary Language / Forward-Looking Statement Safe Harbor
The following cautionary language is intended for inclusion in the Offering Memorandum in connection with the risk factors set forth in Section II above.
Certain statements contained in these risk factors constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements are statements that are not historical facts and may be identified by the use of words such as "may," "will," "could," "would," "should," "expect," "anticipate," "believe," "estimate," "intend," "plan," "project," "predict," "potential," "continue," and similar expressions or the negative of such terms. These forward-looking statements include, but are not limited to, statements regarding: the potential impact of sanctions designations on the Company's operations, assets, and financial condition; the potential for changes in or expansion of sanctions programs applicable to the jurisdictions in which the Company operates; the Company's ability to ensure compliance by its subsidiaries, employees, agents, joint venture partners, counterparties, and other third parties; the potential consequences of investigations, enforcement actions, or violations of sanctions, anti-corruption, export control, or AML laws; and the potential impact of sanctions or compliance events on the Company's access to capital markets, credit ratings, and business relationships.
These forward-looking statements are based on the Company's current expectations, assumptions, estimates, and projections regarding future events and conditions, and are subject to significant risks, uncertainties, and contingencies, many of which are beyond the Company's control. Factors that could cause actual results to differ materially from those expressed or implied by these forward-looking statements include, but are not limited to:
• changes in sanctions designations by OFAC, the EU, the UK, or other governmental authorities, including the designation of persons or entities with which the Company or its subsidiaries have business relationships;
• the adoption of new or expanded sanctions programs applicable to Nigeria, Senegal, or other jurisdictions in which the Company operates;
• new enforcement actions, investigations, or inquiries by U.S., UK, EU, Nigerian, Senegalese, or other governmental authorities with respect to sanctions, anti-corruption, export control, or AML compliance;
• changes in government policy, regulation, or political conditions in Nigeria, Senegal, or other countries in which the Company operates;
• changes in the interpretation, application, or enforcement of existing sanctions, anti-corruption, export control, or AML laws;
• the actions or omissions of the Company's subsidiaries, employees, agents, joint venture partners, counterparties, or other third parties;
• the outcome of any future sanctions screening or compliance review; and
• other factors described in the "Risk Factors" section of this Offering Memorandum.
The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements made by or on behalf of reporting companies. However, the safe harbor provided by the Private Securities Litigation Reform Act does not apply to statements made in connection with an offering of securities exempt from registration under the Securities Act, including the Rule 144A / Regulation S offering contemplated hereby. Accordingly, the Company does not benefit from the statutory safe harbor with respect to the forward-looking statements contained in this Offering Memorandum. Notwithstanding the foregoing, the Company has included the cautionary language set forth in this section as a matter of best practice and to provide investors with a framework for evaluating the forward-looking statements contained in these risk factors.
Investors are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this Offering Memorandum. The Company undertakes no obligation to update or revise any forward-looking statement to reflect events, circu