1016-00003 · Client 1016 · Tax

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CALDERWOOD & HARKNESS LLP 425 Lexington Avenue New York, NY 10017

MEMORANDUM

PRIVILEGED AND CONFIDENTIAL ATTORNEY-CLIENT PRIVILEGED ATTORNEY WORK PRODUCT

This memorandum is protected by the attorney-client privilege and constitutes attorney work product. It has been prepared solely for the use of the addressees identified herein. It is not to be disclosed to, or relied upon by, any third party without the prior written consent of Calderwood & Harkness LLP.

Matter No.: 1016-00003 Date: May 14, 2025

TO: Dunmore Energy Holdings Ltd.

Attention: Deepa Rajaram, Chief Financial Officer

Alistair Forde, General Counsel

FROM: Leonard Cross, Specialist Partner, Tax — Calderwood & Harkness LLP

RE: U.S. Federal Income Tax Analysis — $850,000,000 Aggregate Principal Amount of 9.375% Senior Secured Notes due 2032

COPIES: Jennifer Kwon (Responsible Partner, Capital Markets, C&H) Theodore Langston (Billing Partner, Capital Markets, C&H) Eric Johannsen (Lead Associate, Capital Markets, C&H)

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I. Executive Summary

The purpose of this memorandum is to analyze the U.S. federal income tax consequences of the proposed issuance by Dunmore Energy Holdings Ltd. ("DEH"), a Cayman Islands exempted company, and Dunmore upstream Finance Corp. ("DUFC"), a Delaware corporation, as co-issuers (collectively, the "Issuers"), of $850,000,000 aggregate principal amount of 9.375% Senior Secured Notes due May 1, 2032 (the "Notes"). The Notes are being offered pursuant to Rule 144A under the Securities Act of 1933, as amended (the "Securities Act"), to qualified institutional buyers ("QIBs") and pursuant to Regulation S under the Securities Act to persons that are not U.S. persons (as defined in Regulation S). The Notes will not be registered under the Securities Act.

We have been asked to analyze the U.S. federal income tax treatment of the Notes as it relates to the Issuers and the holders thereof. Set forth below is a summary of our principal conclusions, each of which is discussed in greater detail in the body of this memorandum.

Debt Characterization. Based on the factors described in Section III below, we conclude that the Notes should be treated as debt instruments for U.S. federal income tax purposes. The co-issuance structure involving DUFC as a Delaware corporation and DEH as a Cayman Islands exempted company is a standard market structure for offshore holding company high-yield offerings and does not alter the debt characterization of the Notes.

Original Issue discount. The Notes are being issued at a price of 98.50% of their stated principal amount, yielding gross proceeds of $837,250,000. The resulting original issue discount ("OID") is $12,750,000, representing 1.50% of the $850,000,000 stated principal amount. We have undertaken a detailed analysis of the de minimis threshold under Section 1273(a)(3) of the Internal Revenue Code of 1986, as amended (the "Code" or "IRC"), and conclude that the OID of $12,750,000 is not de minimis. Specifically, because the period from the settlement date (May 15, 2025) to the maturity date (May 1, 2032) encompasses only six complete years, the de minimis threshold equals exactly $12,750,000, and because the statute requires OID to be "less than" the de minimis amount for it to be disregarded, OID that is equal to the threshold amount is not de minimis. Accordingly, all holders will be required to accrue OID into income over the life of the Notes using the constant yield method prescribed by Section 1272 of the Code, regardless of their regular method of accounting for tax purposes.

Withholding Tax and Portfolio Interest Exemption. Payments of interest (including OID) on the Notes to Non-U.S. Holders (as defined herein) should be exempt from U.S. federal withholding tax under the portfolio interest exemption provided by Sections 871(h) and 881(c) of the Code, subject to the satisfaction of applicable certification requirements (including the provision of a valid IRS Form W-8BEN or W-8BEN-E) and the absence of certain disqualifying relationships between the holder and the Issuers (e.g., "10-percent shareholder" status or "controlled foreign corporation" status). The co-issuance structure involving DUFC, a domestic corporation, introduces a source-of-income issue that must be carefully disclosed in the Offering Memorandum; however, to the extent payments are treated as U.S.-source by virtue of DUFC's status as a domestic co-issuer, the portfolio interest exemption should be available to qualifying Non-U.S. Holders.

FATCA. The Notes are subject to the requirements of Sections 1471 through 1474 of the Code (commonly referred to as the Foreign Account Tax Compliance Act, or "FATCA"). Interest payments treated as U.S.-source may constitute "withholdable payments" subject to 30% FATCA withholding if made to holders that are foreign financial institutions or non-financial foreign entities that fail to comply with applicable FATCA requirements. DEH should qualify as an "active NFFE" (non-financial foreign entity) for FATCA purposes. Importantly, the Indenture specifically excludes FATCA withholding from the Issuers' obligation to pay Additional Amounts under the tax gross-up covenant.

IRS Form W-8 Requirements. Holders of the Notes will be required to provide the applicable IRS Form W-8 (or Form W-9, in the case of U.S. Holders) to the Paying Agent, Beacon Fiduciary Services LLC, in order to claim exemption from withholding and to comply with information reporting requirements. Forms must be provided prior to the receipt of the first interest payment and must be renewed periodically.

This memorandum addresses only U.S. federal income tax consequences. State, local, and non-U.S. tax consequences (including, without limitation, the tax consequences under the laws of the Cayman Islands, Nigeria, Senegal, and England and Wales) are beyond the scope of this analysis. The Cayman Islands tax-exempt status of DEH is addressed in a separate Cayman Tax Status Certificate and Memorandum prepared with the assistance of local Cayman counsel. This memorandum is not intended as tax advice to holders of the Notes. The Offering Memorandum will contain a summary tax discussion based on this analysis, together with a recommendation that holders consult their own tax advisors regarding the particular tax consequences to them of an investment in the Notes, including the applicability and effect of U.S. federal, state, local, and non-U.S. tax laws.

II. Transaction Overview and Relevant Terms

A. The Notes — Key Economic Terms

The following summary of the material terms of the Notes is based on our review of the draft Indenture (dated May 8, 2025), the draft Offering Memorandum (dated May 10, 2025), the term sheet circulated by the Initial Purchasers (dated May 7, 2025), and related transaction documents.

Issuers. The Notes will be issued jointly by (i) Dunmore Energy Holdings Ltd. ("DEH"), a Cayman Islands exempted company with limited liability registered with the Cayman Islands Registry of Companies under registration number MC-384726, and (ii) Dunmore upstream Finance Corp. ("DUFC"), a Delaware corporation with Employer Identification Number 93-4728106. DUFC is a wholly-owned subsidiary of DEH formed for the sole purpose of serving as a co-issuer of the Notes and has no independent operations, employees, or material assets. Both Issuers are jointly and severally liable for all obligations under the Notes.

Aggregate Principal Amount. $850,000,000.

Issue Price. 98.50% of par, resulting in gross proceeds to the Issuers of $837,250,000.

Coupon Rate. 9.375% per annum, payable semi-annually in arrears in cash.

Semi-Annual Interest Payment. Each semi-annual interest payment will equal $39,843,750, calculated as follows: $850,000,000 × 9.375% ÷ 2 = $39,843,750. The first interest payment, payable on November 1, 2025, will represent interest accrued from the settlement date (May 15, 2025) through October 31, 2025, and will be computed on the basis of a 360-day year consisting of twelve 30-day months.

Interest Payment Dates. May 1 and November 1 of each year, commencing November 1, 2025.

Settlement Date. May 15, 2025 (T+1 after pricing on May 12, 2025, with the intervening days accounting for standard settlement processing). The first interest period runs from the settlement date (May 15, 2025) to November 1, 2025.

Maturity Date. May 1, 2032.

Minimum Denomination. $2,000 minimum principal amount; integral multiples of $1,000 in excess thereof.

CUSIP Numbers. Rule 144A Notes: 265387 AA 5; Regulation S Notes: C2085R AA 2.

ISIN Numbers. Rule 144A Notes: US265387AA51; Regulation S Notes: USC2085RAA24.

Credit Ratings. Lodestar Ratings International — preliminary B2, Stable Outlook; Veridian Credit Assessments Inc. — preliminary B+, Stable Outlook.

B. Optional Redemption and Other Features Relevant to Tax Analysis

The Notes contain several optional redemption features and other provisions that are relevant to the U.S. federal income tax analysis.

Make-Whole Redemption. Prior to May 1, 2028, the Issuers may redeem the Notes, in whole or in part, at a redemption price equal to the greater of (i) 100% of the principal amount of the Notes being redeemed and (ii) a "make-whole" price calculated as the sum of the present values of the remaining scheduled payments of principal and interest (exclusive of interest accrued to the date of redemption), discounted to the redemption date on a semi-annual basis at a rate equal to the applicable Treasury Rate plus 50 basis points, plus, in each case, accrued and unpaid interest to the redemption date.

Optional Redemption Schedule. On or after May 1, 2028, the Issuers may redeem the Notes, in whole or in part, at the following redemption prices (expressed as percentages of the principal amount of the Notes being redeemed), plus accrued and unpaid interest thereon to the applicable redemption date:

Equity Clawback. At any time prior to May 1, 2028, the Issuers may redeem up to 40% of the original aggregate principal amount of the Notes at a redemption price of 109.375% of the principal amount, plus accrued and unpaid interest, with the net cash proceeds of one or more equity offerings, provided that at least 60% of the original aggregate principal amount of the Notes remains outstanding immediately after such redemption.

Change of Control Put. Upon the occurrence of a change of control (as defined in the Indenture), each holder will have the right to require the Issuers to purchase all or a portion of such holder's Notes at a purchase price equal to 101% of the principal amount thereof, plus accrued and unpaid interest to the date of purchase.

Tax Gross-Up / Additional Amounts. The Indenture contains provisions obligating the Issuers and each Guarantor to pay additional amounts to holders (subject to specified exceptions) if any deduction or withholding for or on account of any taxes is required by law with respect to payments on the Notes. These provisions are discussed in greater detail in Section X of this memorandum.

Tax Redemption. In the event that, as a result of a change in applicable law (or a change in the official interpretation or application thereof), the Issuers become obligated to pay Additional Amounts with respect to payments on the Notes, the Issuers may, upon not less than 10 nor more than 60 days' prior notice, redeem the Notes in whole (but not in part) at a redemption price equal to 100% of the principal amount thereof, plus accrued and unpaid interest to the redemption date.

C. Guarantors and Collateral

The Notes will be guaranteed on a senior secured basis by the following subsidiaries of DEH (collectively, the "Guarantors"):

1. Dunmore Nigeria E&P Ltd. — a Nigerian limited liability company

2. Dunmore Senegal S.A. — a Senegalese société anonyme

3. Dunmore Trading Ltd. — a company incorporated in England and Wales

4. Dunmore Gulf Operations LLC — a Delaware limited liability company

5. Dunmore Renewables LLC — a Delaware limited liability company

6. Dunmore Midstream Holdings Inc. — a Delaware corporation

The Notes will be secured by first-priority liens on the following collateral: (i) the equity interests in each Guarantor and in certain other subsidiaries of DEH, (ii) substantially all tangible and intangible assets of the Issuers and Guarantors (including equipment, intellectual property, and real property interests), (iii) intercompany receivables, (iv) material hydrocarbon offtake contracts, and (v) insurance proceeds and proceeds of the foregoing. The collateral is subject to an intercreditor arrangement with Velthorn National Bank, N.A., as agent for the lenders under an existing asset-based revolving credit facility (the "ABL Facility"). Under the Intercreditor Agreement, the ABL Agent has priority with respect to certain categories of collateral designated as "ABL Priority Collateral" (principally accounts receivable, inventory, and deposit accounts), while the Trustee (on behalf of the holders of the Notes) has priority with respect to all other collateral designated as "Notes Priority Collateral."

For purposes of this memorandum, the guarantee and collateral structure generally should not alter the basic U.S. federal income tax characterization of the Notes as debt instruments. The guarantees represent credit support for the Issuers' obligations and do not transform the Notes into equity or give rise to a different tax characterization. However, if a Guarantor is called upon to make a payment under its guarantee, the source of income and withholding tax consequences of that payment must be analyzed with reference to the jurisdiction of the paying Guarantor, as discussed in Section XI below.

D. Use of Proceeds

The Issuers intend to use the gross proceeds from the offering as follows:

The use of proceeds does not have a direct bearing on the U.S. federal income tax analysis of the Notes, except to the extent that the partial refinancing of the existing 7.50% Senior Unsecured Notes due 2028 may implicate separate tax considerations for the Issuers with respect to the cancellation and reissuance of indebtedness. Those considerations are beyond the scope of this memorandum.

E. Ownership Structure

DEH is majority-owned by Harborview Capital Partners Fund VI, L.P. ("Harborview Fund VI"), which holds approximately 62.4% of the equity interests in DEH. Management and directors collectively hold approximately 18.3% of the equity interests. Co-investors include Solstice Infrastructure Fund LP, which holds approximately 11.1%, and Alderman Family Office LLC, which holds approximately 8.2%.

The ownership structure is relevant to the U.S. federal income tax analysis in several respects. First, certain holders of the Notes who are affiliated with the equity investors may be "related parties" for purposes of the portfolio interest exemption analysis. Under Section 871(h)(3) of the Code, a Non-U.S. Holder that is a "10-percent shareholder" of the issuer (generally, a person who owns, directly, indirectly, or constructively, 10% or more of the total combined voting power of all classes of stock entitled to vote of the issuer) does not qualify for the portfolio interest exemption. If any affiliate of Harborview Fund VI, Solstice, or Alderman were to acquire Notes, the constructive ownership rules under Section 318 of the Code (as modified by Section 871(h)(3)(C)) could cause that holder to be treated as a 10-percent shareholder of DEH (or DUFC), thereby disqualifying the holder from claiming the portfolio interest exemption. As a practical matter, the equity investors are not expected to be noteholders, but the Offering Memorandum should contain appropriate risk-factor language addressing this possibility.

Second, the controlled foreign corporation ("CFC") rules under Sections 951 through 965 of the Code are potentially relevant to the extent that DEH or any Guarantor is a CFC with respect to a U.S. Holder that is also a noteholder. This is discussed further in Section III.B below.

III. Classification of the Notes as Debt for U.S. Federal Income Tax Purposes

A. Debt vs. Equity Analysis

The characterization of the Notes as debt or equity for U.S. federal income tax purposes is a threshold question that affects virtually every aspect of the tax analysis. If the Notes were treated as equity, the consequences would be materially adverse: payments of "interest" would be recharacterized as dividends (which are not deductible by the Issuers), the portfolio interest exemption would not be available, and the OID rules would not apply. We conclude, for the reasons set forth below, that the Notes should be classified as debt instruments for U.S. federal income tax purposes.

The Code does not provide a comprehensive definition of "debt" for federal income tax purposes. The determination of whether an instrument constitutes debt or equity is a factual inquiry that depends on the economic substance of the arrangement. The United States Supreme Court, in Helvering v. Richmond, Fredericksburg & Potomac Railroad Co., 292 U.S. 33 (1934), and subsequent cases, established that the critical distinction between debt and equity is whether there exists a genuine debtor-creditor relationship. The Tax Court and the Courts of Appeals have developed a multi-factor test for distinguishing debt from equity. Although the relative weight given to each factor varies among the circuits, the factors most commonly considered include:

(a) the presence or absence of a fixed maturity date;

(b) the presence or absence of an unconditional obligation to pay a sum certain;

(d) the source of payments (whether derived from earnings or available regardless of earnings);

(e) the debt-to-equity ratio of the issuer;

(f) whether the instruments are subordinated to or on parity with general creditors;

(g) whether the instruments carry voting or management rights;

(h) the presence or absence of conversion features;

(i) the identity of interest between creditors and shareholders;

(j) whether the instruments are labeled as debt or equity;

(k) the intent of the parties; and

(l) whether independent creditors would have extended credit on similar terms.

Applying these factors to the Notes, we find that all relevant factors strongly support debt characterization:

Fixed maturity date. The Notes have a fixed maturity date of May 1, 2032. The existence of a definite maturity date at which the principal amount becomes due and payable is a hallmark of debt. There is no provision for indefinite extension of the maturity date, and the Notes do not contain any feature that would permit the Issuers to defer principal repayment beyond maturity.

Unconditional obligation to pay a sum certain. The Issuers are unconditionally obligated to pay the full principal amount of $850,000,000 at maturity, regardless of their financial performance or earnings. The obligation to pay principal is absolute and is not contingent on profits, revenues, or any other performance metric.

Fixed rate of interest. The Notes bear interest at a fixed rate of 9.375% per annum, payable semi-annually. The interest rate is not floating, participating, or contingent on earnings. The Issuers are required to pay interest on each Interest Payment Date regardless of whether they have sufficient earnings to cover the payment.

Senior secured position. The Notes are senior secured obligations of the Issuers and rank pari passu in right of payment with all existing and future senior indebtedness. They are secured by first-priority liens on substantially all assets of the Issuers and Guarantors (subject to the intercreditor arrangement with the ABL Agent). The Notes are not subordinated to any class of general creditors and, to the contrary, enjoy the protections associated with collateral security and a senior position in the capital structure.

Reasonable debt-to-equity ratio. On a pro forma basis after giving effect to the offering and the application of net proceeds, DEH and its consolidated subsidiaries will have total gross indebtedness of approximately $1,720,000,000 and total equity (as reported on the audited consolidated financial statements for the fiscal year ended December 31, 2024) of approximately $816,000,000, resulting in a pro forma gross leverage ratio of approximately 2.11x. Pro forma net leverage (after deducting unrestricted cash of approximately $185,000,000) is approximately 1.88x. These leverage ratios are within the range typically observed for high-yield energy sector issuers and do not suggest excessive leverage that might call into question the bona fides of the debtor-creditor relationship.

Creditor rights, not equity participation rights. Holders of the Notes possess the rights of creditors, including the right to receive scheduled payments of interest and principal, the right to accelerate the Notes upon an event of default, and the right to enforce the security interest in the collateral. Holders do not possess any voting rights with respect to the management or affairs of the Issuers (other than limited consent rights under the Indenture), do not participate in the profits or losses of the Issuers, and do not have any residual interest in the Issuers' assets upon liquidation beyond the repayment of the Notes in full.

No conversion features. The Notes do not contain any provision for conversion into, or exchange for, equity securities of the Issuers or any other person. The absence of conversion features further supports the treatment of the Notes as debt.

Independent credit ratings. The Notes have been assigned preliminary credit ratings by two nationally recognized rating agencies — Lodestar Ratings International (preliminary B2, Stable Outlook) and Veridian Credit Assessments Inc. (preliminary B+, Stable Outlook). The willingness of independent rating agencies to assign credit ratings to the Notes is consistent with the treatment of the Notes as debt instruments.

Conclusion. Based on the foregoing analysis, we conclude that the Notes should be classified as debt instruments for U.S. federal income tax purposes. We note that DUFC was formed solely as a co-issuer and is a wholly-owned subsidiary of DEH. The co-issuance structure is a standard and well-established market convention for offshore holding company high-yield offerings, employed to facilitate compliance with U.S. securities law requirements and to provide a domestic co-obligor on the Notes. The inclusion of DUFC as a co-issuer does not alter the analysis of whether the Notes constitute debt or equity; the substance of the arrangement remains a borrowing by the DEH group evidenced by fixed-income instruments with all of the traditional hallmarks of indebtedness.

B. Issuer Characterization — DEH as a Foreign Corporation

DEH is a Cayman Islands exempted company with limited liability. For U.S. federal income tax purposes, DEH is treated as a foreign corporation because it is organized under the laws of a jurisdiction outside the United States. Under Section 7701(a)(4) of the Code, a "domestic" corporation is one that is created or organized in the United States or under the law of the United States or of any State. A "foreign" corporation is one that is not domestic. Because DEH is organized under the laws of the Cayman Islands, it is a foreign corporation for U.S. federal income tax purposes.

DEH is not expected to be treated as a "controlled foreign corporation" ("CFC") within the meaning of Section 957(a) of the Code with respect to any particular U.S. shareholder that is also a noteholder. Under Section 957(a), a CFC is a foreign corporation of which more than 50% of the total combined voting power or total value of stock is owned, directly, indirectly, or constructively, by "United States shareholders" (i.e., U.S. persons who each own, directly, indirectly, or constructively, 10% or more of the total combined voting power of all classes of stock entitled to vote). Harborview Fund VI (62.4% equity), Solstice Infrastructure Fund LP (11.1%), and Alderman Family Office LLC (8.2%) are equity holders, not noteholders. Although one or more of these equity holders may be U.S. persons and may be "United States shareholders" of DEH for CFC purposes, the CFC status of DEH is relevant primarily to the equity investors and does not, in itself, affect the tax treatment of the Notes in the hands of unrelated noteholders. However, if an affiliate of a United States shareholder of DEH were to acquire Notes, the portfolio interest exemption could be unavailable to that holder, as discussed in Section VI.B below.

DUFC is a Delaware corporation and is therefore a domestic corporation for U.S. federal income tax purposes. DUFC has no independent operations and was formed solely to serve as a co-issuer of the Notes. Payments on the Notes are expected to be sourced economically from DEH through its operating subsidiaries, with DUFC serving primarily as a pass-through vehicle. Notwithstanding DUFC's lack of independent operations, its status as a domestic corporation has implications for the source of income characterization of interest payments on the Notes, as discussed in Section VI.E below.

IV. Original Issue discount ("OID") Analysis

A. Determination of OID

The determination of whether the Notes have been issued with OID, and if so, the amount and treatment of that OID, is governed by Sections 1271 through 1275 of the Code and the Treasury Regulations promulgated thereunder.

Under Section 1273(a)(1) of the Code, OID is the excess of a debt instrument's "stated redemption price at maturity" over its "issue price." The "stated redemption price at maturity" is defined under Section 1273(a)(2) as the sum of all payments provided by the debt instrument other than payments of "qualified stated interest." The "issue price" of a publicly offered debt instrument (i.e., one that is issued for money in an offering to the public) is the initial offering price to the public at which price a substantial amount of the debt instruments was sold. For purposes of this analysis, the Notes are treated as publicly offered because they are offered to qualified institutional buyers and non-U.S. persons in a widely marketed offering.

Stated Redemption Price at Maturity. The stated redemption price at maturity of the Notes is $850,000,000, representing the aggregate principal amount payable at maturity. All interest payments on the Notes constitute "qualified stated interest" ("QSI") within the meaning of Treasury Regulation Section 1.1273-1(c) because the 9.375% coupon is payable unconditionally at fixed intervals of one year or less (semi-annually) at a single fixed rate that is in effect during the entire term of the debt instrument. Because all interest constitutes QSI, the stated redemption price at maturity is simply the principal amount of $850,000,000, with no interest amounts included.

Issue Price. The issue price of the Notes is $837,250,000, which is 98.50% of the stated principal amount of $850,000,000. This is the price at which a substantial amount of the Notes was sold to the public in the initial offering.

Qualified Stated Interest. As noted above, the semi-annual interest payments of $39,843,750 per period (calculated as $850,000,000 × 9.375% ÷ 2) constitute QSI under Treasury Regulation Section 1.1273-1(c). To qualify as QSI, interest must be unconditionally payable in cash or property (other than debt instruments of the issuer) at least annually at a single fixed rate. The 9.375% per annum coupon satisfies each of these requirements: it is payable in cash semi-annually, unconditionally, and at a single fixed rate that does not change over the term of the Notes.

OID Amount. Based on the foregoing, the OID on the Notes is calculated as follows:

Stated redemption price at maturity: $850,000,000

Less: Issue price: ($837,250,000)

OID: $12,750,000

Expressed as a percentage of the stated principal amount, the OID is 1.50%.

B. De Minimis OID Test

Under Section 1273(a)(3) of the Code, OID is treated as zero — that is, it is disregarded for purposes of the OID inclusion rules — if it is "less than" one-quarter of one percent (0.25%) of the stated redemption price at maturity multiplied by the number of "complete years to maturity" from the issue date. This is commonly referred to as the "de minimis" OID rule. OID that falls below the de minimis threshold is treated as zero, and holders are not required to accrue OID into income under the constant yield method; instead, any gain attributable to de minimis OID is generally recognized as capital gain upon sale, retirement, or other disposition of the instrument.

The application of the de minimis test to the Notes requires careful determination of the "number of complete years to maturity" from the issue date. This is a critical calculation because, as demonstrated below, the result determines whether the OID on the Notes must be accrued.

Settlement Date and Maturity Date. The Notes will settle on May 15, 2025. The stated maturity date is May 1, 2032. For purposes of the de minimis test, the issue date is the settlement date — May 15, 2025.

Number of Complete Years. The period from May 15, 2025 to May 1, 2032 is 6 years, 11 months, and 16 days. A "complete year" is a full 12-month period. The number of complete years contained within this period is six — the six complete years running from May 15, 2025 to May 15, 2031. The remaining period from May 15, 2031 to May 1, 2032 is less than a full year (approximately 11 months and 16 days) and therefore does not constitute a seventh complete year.

We note that there is a question as to whether the analysis should employ "complete years to maturity" measured from the issue date to the maturity date, or whether rounding should be applied. The statute refers to "the number of complete years to maturity from the date of original issue." Treasury Regulation Section 1.1273-1(d)(1)(i) provides that the de minimis amount is "0.0025 multiplied by the product of the stated redemption price at maturity and the number of complete years to maturity from the issue date." The term "complete years" is not defined to include partial years. Accordingly, the period from May 15, 2025 to May 1, 2032 encompasses six complete years.

An alternative calculation using seven complete years could be posited on the theory that, measured from May 2025 to May 2032, there are nominally seven calendar years. However, this approach conflates "calendar years" with "complete years from the issue date" as used in the statute. The issue date is not May 1, 2025 but May 15, 2025, and the period from May 15, 2025 to May 1, 2032 does not contain seven complete 12-month periods. We therefore employ six complete years in our calculation.

De Minimis Threshold Calculation.

De minimis threshold = 0.25% × $850,000,000 × 6 = $12,750,000

Comparison of OID to De Minimis Threshold. The OID on the Notes is $12,750,000. The de minimis threshold is also $12,750,000. These amounts are exactly equal.

Statutory Interpretation — "Less Than." Section 1273(a)(3) of the Code provides that "if the [OID] is less than [the de minimis amount], then [the stated redemption price at maturity] shall be treated as equal to the issue price." (Emphasis added.) The statute uses the phrase "less than" — not "less than or equal to" or "not greater than." Accordingly, for OID to be disregarded, it must be strictly less than the de minimis threshold. Where OID equals the de minimis threshold exactly, the statutory condition is not satisfied, and the OID is not treated as zero.

This interpretation is consistent with the plain language of the statute, the legislative history of Section 1273, and the approach taken by the IRS and commentators. See, e.g., Treasury Regulation Section 1.1273-1(d)(1); Boris I. Bittker & Lawrence Lokken, Federal Taxation of Income, Estates and Gifts, ¶ 56.2.3.

Conclusion. The OID of $12,750,000 on the Notes is not de minimis. Because the OID is not "less than" the de minimis threshold of $12,750,000 (but rather equals it exactly), the OID must be included in income by holders over the life of the Notes on an accrual basis under the constant yield method prescribed by Section 1272 of the Code, regardless of the holder's regular method of accounting.

We note that if the issue price had been even marginally higher — for example, 98.503% of par rather than 98.500% — the resulting OID of $12,724,500 would have been below the de minimis threshold and would have been disregarded. We draw this to the attention of the Issuers and the Capital Markets team in the event there is an opportunity to adjust the issue price prior to settlement; however, we understand that the issue price of 98.50% has been set by the book-running managers and is not subject to further adjustment.

C. OID Accrual — Constant Yield Method

Under Section 1272 of the Code, a U.S. Holder of the Notes (and, to the extent applicable, a Non-U.S. Holder) must include OID in gross income over the term of the Notes using the "constant yield method." The constant yield method requires the holder to include OID in income on a daily basis over the life of the instrument, with the result that the holder's taxable income from the Notes in any given accrual period may exceed the cash interest received during that period.

Under the constant yield method, the OID includible in income for each accrual period is determined as follows:

(a) Compute the "adjusted issue price" of the Note at the beginning of the accrual period. For the first accrual period, the adjusted issue price equals the issue price of the Note ($837,250,000 in the aggregate, or $985.00 per $1,000 principal amount). For each subsequent accrual period, the adjusted issue price equals the adjusted issue price at the beginning of the preceding accrual period, plus the amount of OID allocable to the preceding accrual period.

(b) Multiply the adjusted issue price at the beginning of the accrual period by the yield to maturity of the Note. The yield to maturity is the discount rate that, when used to compute the present value of all payments remaining to be made under the Note (including both QSI and principal), produces an amount equal to the issue price.

(d) The remainder is the OID includible in income for the accrual period.

Because the yield to maturity of the Notes (computed on the basis of an issue price of 98.50% of par and a 9.375% coupon payable semi-annually over a term from May 15, 2025 to May 1, 2032) exceeds the coupon rate, the OID inclusion for each accrual period will cause the holder to recognize more income than the cash interest received in that period. This "phantom income" effect is most pronounced in the early accrual periods and diminishes as the adjusted issue price accretes toward par over the term of the Notes. By the maturity date, the adjusted issue price will equal the stated principal amount, and the full $12,750,000 of OID will have been included in the holder's income.

A holder's adjusted tax basis in the Notes increases by the amount of OID included in income. Accordingly, a holder who acquires a Note at the issue price of $985.00 per $1,000 principal amount and holds it to maturity will have an adjusted tax basis of $1,000.00 per $1,000 principal amount at maturity (assuming no intervening sales, exchanges, or other adjustments), and will not recognize any gain or loss upon retirement.

An illustrative OID accrual schedule showing the period-by-period OID accrual, adjusted issue price, and total income is set forth in Appendix A to this memorandum.

D. Market discount — Not Applicable at Issuance

The market discount rules set forth in Sections 1276 through 1278 of the Code apply to debt instruments acquired at a price below the instrument's "revised issue price" (generally, the issue price plus previously accrued OID). These rules are not relevant to the Notes at the time of initial issuance because all initial purchasers will acquire the Notes at the issue price (or at a price that does not reflect a market discount below the issue price).

However, if a holder acquires Notes in the secondary market at a price below the adjusted issue price at the time of acquisition, market discount may arise. Under the market discount rules, any gain recognized on the disposition of a market discount obligation is treated as ordinary income to the extent of the accrued market discount. We recommend that the Offering Memorandum contain appropriate disclosure regarding the application of the market discount rules to secondary market purchasers.

E. Tax Treatment of Redemption Premium

The Notes may be redeemed by the Issuers at various times and at various prices, as described in Section II.B above. The tax treatment of any premium paid upon redemption depends on the characterization of the premium and the holder's adjusted tax basis at the time of redemption.

Optional Redemption at a Fixed Premium. If the Issuers exercise their optional redemption right at prices above par (e.g., 104.688% during the period from May 1, 2028 to April 30, 2029), any amount received by the holder in excess of the holder's adjusted tax basis in the redeemed Note generally will be treated as capital gain. The adjusted tax basis will include the holder's initial purchase price plus any OID previously included in income, so the gain will typically be less than the stated premium over par.

Under Treasury Regulation Section 1.1272-1(c)(5), a redemption premium is generally not taken into account in computing OID unless, based on all the facts and circumstances as of the issue date, the likelihood that the issuer will exercise the call option is more likely than not. At the time of issuance, there is no basis to conclude that the Issuers' exercise of the optional redemption right is more likely than not. Accordingly, the potential redemption premiums should not be included in the stated redemption price at maturity for purposes of computing OID.

Make-Whole Premium. The tax treatment of a make-whole premium paid upon early redemption prior to May 1, 2028 is uncertain. The IRS has not issued definitive guidance on the characterization of make-whole premiums. There are at least three possible characterizations: (i) the make-whole premium may be treated as additional interest (ordinary income to the holder); (ii) the make-whole premium may be treated as an amount received in exchange for the Note (giving rise to capital gain to the extent the total amount received exceeds the holder's adjusted tax basis); or (iii) the make-whole premium may be treated as a payment in consideration for the holder's relinquishment of its option to hold the Note to maturity (also potentially capital gain). We are not aware of any published authority that definitively resolves this issue. We recommend that the Offering Memorandum disclose the uncertainty in the tax treatment of make-whole premiums and advise holders to consult their own tax advisors.

Equity Clawback. The premium of 109.375% paid upon an equity clawback redemption should be treated in the same manner as the optional redemption premium described above. Any amount received in excess of the holder's adjusted tax basis should be treated as capital gain. Because an equity clawback is a partial redemption (up to 40% of the original aggregate principal amount), only the redeemed Notes are affected; the remaining Notes continue to accrue OID on the same schedule.

Change of Control Put. If a holder exercises the change of control put right, the holder will receive 101% of the principal amount of its Notes plus accrued and unpaid interest. Any gain (i.e., the excess of the amount received over the holder's adjusted tax basis, excluding accrued QSI) should be treated as capital gain. If the holder's adjusted tax basis (including accrued OID) exceeds 101% of par at the time of the put, the holder will recognize a capital loss.

V. U.S. Holders — Tax Consequences

A. Definition of "U.S. Holder"

For purposes of this memorandum, a "U.S. Holder" is a beneficial owner of a Note that is, for U.S. federal income tax purposes:

(i) a citizen or individual resident of the United States;

(ii) a corporation (or other entity taxable as a corporation for U.S. federal income tax purposes) created or organized in or under the laws of the United States, any state thereof, or the District of Columbia;

(iii) an estate, the income of which is subject to U.S. federal income tax regardless of its source; or

(iv) a trust if (a) a court within the United States is able to exercise primary supervision over the administration of the trust and one or more United States persons have the authority to control all substantial decisions of the trust, or (b) the trust has made a valid election under applicable Treasury Regulations to be treated as a United States person.

If a partnership (or any entity or arrangement treated as a partnership for U.S. federal income tax purposes) holds Notes, the tax treatment of a partner in the partnership will generally depend upon the status of the partner and the activities of the partnership. Partners in a partnership holding Notes should consult their own tax advisors regarding the U.S. federal income tax consequences of an investment in the Notes.

B. Interest Income (Qualified Stated Interest)

A U.S. Holder of a Note will be required to include in gross income, as ordinary interest income, the semi-annual interest payments on the Notes ($39,843,750 per semi-annual period in the aggregate, or $46.875 per $1,000 principal amount per semi-annual period) in accordance with the U.S. Holder's regular method of accounting for U.S. federal income tax purposes. Cash-method U.S. Holders will include interest income upon receipt; accrual-method U.S. Holders will include interest income as it accrues over the relevant interest period.

Source of Interest Income. The source of interest income for U.S. foreign tax credit purposes is determined under Section 861(a)(1) of the Code. Under the general rule, interest income from a foreign corporation is foreign-source income. Because DEH is a Cayman Islands exempted company and therefore a foreign corporation, interest paid by DEH on the Notes should be treated as foreign-source income for U.S. foreign tax credit purposes. However, the co-issuance structure presents a nuance: DUFC is a domestic corporation, and interest paid by a domestic corporation is U.S.-source under Section 861(a)(1). Because both Issuers are jointly and severally liable for payments on the Notes, and the economic source of interest payments is expected to be DEH (through its operating subsidiaries), the sourcing analysis is not entirely straightforward. If the IRS were to treat a portion of the interest as paid by DUFC, that portion could be characterized as U.S.-source income. We recommend that the Offering Memorandum note the potential for U.S.-source treatment of interest payments and advise U.S. Holders to consult their own tax advisors regarding the availability and limitations of the foreign tax credit.

C. OID Inclusion

As analyzed in Section IV above, the Notes have been issued with OID of $12,750,000 that is not de minimis. Accordingly, each U.S. Holder will be required to include a ratable portion of the OID in gross income over the life of the Notes on a constant yield basis, regardless of the U.S. Holder's regular method of accounting for tax purposes. The OID inclusion rules of Section 1272 of the Code apply to all U.S. Holders, including cash-method taxpayers.

As discussed in Section IV.C, the constant yield method requires the U.S. Holder to include OID in income on a daily basis, with the result that the U.S. Holder's taxable income from the Notes in any given accrual period will exceed the cash interest received during that period. This "phantom income" effect — the recognition of income in excess of cash received — is inherent in the OID accrual rules and must be clearly disclosed in the Offering Memorandum. The total amount of OID that will be accrued over the life of the Notes is $12,750,000 in the aggregate, or $15.00 per $1,000 principal amount.

A U.S. Holder's adjusted tax basis in a Note will increase by the amount of OID included in income. Conversely, if the U.S. Holder receives a payment of principal (e.g., upon partial redemption or at maturity), the adjusted tax basis will be reduced by the amount of principal received.

D. Sale, Exchange, Retirement, or Other Taxable Disposition

Upon the sale, exchange, retirement at maturity, redemption, or other taxable disposition of a Note, a U.S. Holder generally will recognize gain or loss equal to the difference between (i) the amount realized on the disposition (other than amounts attributable to accrued but unpaid QSI, which will be treated as ordinary interest income) and (ii) the U.S. Holder's adjusted tax basis in the Note.

A U.S. Holder's adjusted tax basis in a Note will generally equal the price paid for the Note, increased by any OID previously included in the holder's income and decreased by any principal payments received. For a U.S. Holder who acquires a Note at the initial issue price of $985.00 per $1,000 principal amount and holds it to maturity, the adjusted tax basis at maturity will be $1,000.00 per $1,000 principal amount (after the full $15.00 per $1,000 of OID has been included in income), and no gain or loss will be recognized upon repayment of principal at maturity.

Any gain or loss recognized on the disposition of a Note will generally be capital gain or loss. If the Note has been held for more than one year as of the date of disposition, such capital gain or loss will be long-term capital gain or loss. Long-term capital gain recognized by an individual U.S. Holder is generally subject to a reduced rate of U.S. federal income tax. The deductibility of capital losses is subject to limitations.

Accrued but Unpaid QSI. Notwithstanding the foregoing, any portion of the amount realized on a disposition that is attributable to accrued but unpaid QSI is not treated as an amount received in exchange for the Note but rather as a payment of ordinary interest income. This amount must be separated from the amount realized for purposes of computing gain or loss on the disposition.

Market discount. If a U.S. Holder acquires a Note in the secondary market at a price below the adjusted issue price (i.e., the original issue price plus accrued OID to date), the holder may be treated as having acquired the Note with "market discount" within the meaning of Section 1276 of the Code. Upon the disposition of a market discount obligation, any gain recognized is treated as ordinary income to the extent of the accrued market discount. This issue is not relevant to initial purchasers but may be relevant to subsequent purchasers in the secondary market and should be disclosed in the Offering Memorandum.

E. Medicare Contribution Tax

Under Section 1411 of the Code, U.S. Holders that are individuals, estates, or trusts (other than trusts that are exempt from tax) may be subject to an additional 3.8% tax on the lesser of (i) the U.S. Holder's "net investment income" (which includes interest, OID, and gain from the disposition of the Notes) and (ii) the excess of the U.S. Holder's modified adjusted gross income over a specified threshold amount ($250,000 for married individuals filing jointly, $200,000 for single individuals, and $12,950 for certain estates and trusts). U.S. Holders that are individuals, estates, or trusts should consult their own tax advisors regarding the potential applicability of this tax to their ownership and disposition of the Notes.

VI. Non-U.S. Holders — Tax Consequences

A. Definition of "Non-U.S. Holder"

For purposes of this memorandum, a "Non-U.S. Holder" is a beneficial owner of a Note that is not a U.S. Holder (as defined in Section V.A above) and is not a partnership (or other entity or arrangement treated as a partnership) for U.S. federal income tax purposes. A Non-U.S. Holder is generally a nonresident alien individual, a foreign corporation, a foreign estate, or a foreign trust.

B. Interest Income — Portfolio Interest Exemption

General Withholding Rule. Under the general rules of Sections 871(a) and 881(a) of the Code, payments of U.S.-source interest (including OID) to a Non-U.S. Holder are subject to U.S. federal withholding tax at a rate of 30% (or, if applicable, a reduced rate under an income tax treaty between the United States and the Non-U.S. Holder's country of residence). The withholding obligation applies to the gross amount of the interest payment, without allowance for deductions or credits.

Portfolio Interest Exemption. Sections 871(h) and 881(c) of the Code provide an exemption from the 30% withholding tax for "portfolio interest" paid to Non-U.S. Holders. The portfolio interest exemption is the primary mechanism by which Non-U.S. Holders of the Notes may receive interest (including OID) free of U.S. withholding tax. Interest on the Notes should qualify for the portfolio interest exemption, provided the following requirements are satisfied:

(i) Registered Form. The Notes must be in "registered form" within the meaning of Section 163(f) of the Code and the applicable Treasury Regulations. The Notes will be issued in registered, book-entry form through the facilities of The Depository Trust Company ("DTC") and its direct and indirect participants. The Notes will at all times be maintained in registered form. This requirement is satisfied.

(ii) Certification. The Non-U.S. Holder (or a securities clearing organization, bank, or other financial institution that holds customers' securities in the ordinary course of its trade or business on behalf of the Non-U.S. Holder) must provide an appropriate IRS Form W-8 (generally, Form W-8BEN for individuals or Form W-8BEN-E for entities) to the applicable withholding agent, certifying, under penalties of perjury, that the holder is not a U.S. person. See Section VIII below for a detailed discussion of Form W-8 requirements.

(iii) 10-Percent Shareholder Exclusion. The Non-U.S. Holder must not be a "10-percent shareholder" of the issuer within the meaning of Section 871(h)(3)(B) of the Code. A "10-percent shareholder" is any person who owns, directly, indirectly, or constructively (applying the constructive ownership rules of Section 318(a) as modified by Section 871(h)(3)(C)), 10% or more of the total combined voting power of all classes of stock of the issuer entitled to vote.

This requirement merits careful analysis in the context of the DEH ownership structure. As described in Section II.E, Harborview Capital Partners Fund VI, L.P. holds approximately 62.4% of the equity of DEH, Solstice Infrastructure Fund LP holds approximately 11.1%, and Alderman Family Office LLC holds approximately 8.2%. Management and directors collectively hold approximately 18.3%. If any entity affiliated with these equity holders, or any entity that is treated as constructively owning DEH stock through these equity holders, were to acquire Notes, that entity could be treated as a "10-percent shareholder" and would not qualify for the portfolio interest exemption.

As a practical matter, these equity investors are not expected to be noteholders. The Notes are being offered to institutional investors through the Initial Purchasers, and there is no current indication that any affiliate of the equity holders intends to acquire Notes. Nevertheless, the constructive ownership rules are broad, and we recommend that the Offering Memorandum include appropriate disclosure cautioning that holders who are, directly, indirectly, or constructively, 10-percent shareholders of DEH (or DUFC) may not qualify for the portfolio interest exemption.

(iv) Controlled Foreign Corporation Exclusion. The Non-U.S. Holder must not be a controlled foreign corporation that is "related" to the issuer through stock ownership within the meaning of Section 881(c)(3)(C) of the Code. Under this provision, a CFC that receives interest from a related person (determined under Section 864(d)(4)) does not qualify for the portfolio interest exemption. This exclusion is relevant if a foreign subsidiary of DEH that is a CFC were to hold Notes, but this scenario is not expected to arise.

(v) Bank Loan Exclusion. The Non-U.S. Holder must not be a bank receiving interest on an extension of credit made pursuant to a loan agreement entered into in the ordinary course of its trade or business. Section 881(c)(3)(A) excludes from the portfolio interest exemption interest received by a bank on a loan that is described in Section 881(c)(3)(A). The Notes are not loans; they are securities. Accordingly, this exclusion should not apply to the Notes, even if a bank acquires Notes in the secondary market. However, there is some authority suggesting that the exclusion may apply if the substance of the transaction more closely resembles a loan than a security; we do not believe this concern is applicable here.

DUFC Co-Issuer Analysis. As noted above, the portfolio interest exemption is relevant only to "U.S.-source" interest. Interest paid by DEH, a Cayman Islands exempted company (i.e., a foreign corporation), is generally foreign-source income under Section 861(a)(1) of the Code and would not be subject to U.S. withholding tax regardless of the portfolio interest exemption. However, DUFC is a domestic corporation. Under Section 861(a)(1), interest paid by a domestic corporation is U.S.-source. Because both DEH and DUFC are co-issuers and are jointly and severally liable for all payments on the Notes, there is a risk that the IRS could treat some or all of the interest payments as made by (or on behalf of) DUFC, resulting in U.S.-source characterization and subjecting the interest to U.S. withholding tax absent an applicable exemption. The portfolio interest exemption should be available to qualifying Non-U.S. Holders regardless of whether the interest is characterized as U.S.-source or foreign-source, provided the requirements described above are met. Accordingly, the co-issuance structure should not create any incremental withholding tax exposure for Non-U.S. Holders who comply with the portfolio interest exemption requirements. The Offering Memorandum should clearly disclose the co-issuer structure and the potential for U.S.-source treatment.

Conclusion. Provided the requirements set forth above are satisfied, interest (including OID) on the Notes paid to Non-U.S. Holders should be exempt from U.S. federal withholding tax under the portfolio interest exemption. Non-U.S. Holders who do not qualify for the portfolio interest exemption (e.g., because they are 10-percent shareholders, CFCs related to the issuer, or banks) will be subject to 30% U.S. withholding tax (or a reduced rate under an applicable income tax treaty).

C. Gain on Disposition

A Non-U.S. Holder generally will not be subject to U.S. federal income tax on any gain recognized on the sale, exchange, retirement, or other taxable disposition of a Note unless:

(i) the gain is "effectively connected" with the conduct by the Non-U.S. Holder of a trade or business within the United States (and, if an applicable income tax treaty so provides, the gain is attributable to a permanent establishment or fixed base maintained by the Non-U.S. Holder in the United States); or

(ii) the Non-U.S. Holder is an individual who is present in the United States for 183 days or more during the taxable year of the disposition and certain other conditions are met, in which case the Non-U.S. Holder may be subject to a flat 30% U.S. federal income tax on the gain (reduced by certain U.S.-source capital losses).

A Non-U.S. Holder whose gain is effectively connected with a U.S. trade or business will be taxed on a net income basis, as discussed in Section VI.D below.

D. Effectively Connected Income

If interest (including OID) or gain on the Notes is "effectively connected" with the conduct by a Non-U.S. Holder of a trade or business within the United States, such interest or gain will be subject to U.S. federal income tax on a net basis at the graduated rates applicable to U.S. persons. In the case of a Non-U.S. Holder that is a foreign corporation, effectively connected income may also be subject to the "branch profits tax" imposed by Section 884 of the Code at a rate of 30% (or a reduced rate under an applicable income tax treaty). The branch profits tax is imposed on effectively connected earnings and profits that are deemed "repatriated" by the foreign corporation's U.S. branch.

A Non-U.S. Holder whose income from the Notes is effectively connected with a U.S. trade or business must provide a Form W-8ECI (rather than a Form W-8BEN or W-8BEN-E) to the withholding agent. Upon receipt of a valid Form W-8ECI, the withholding agent will not withhold the 30% statutory withholding tax; instead, the Non-U.S. Holder will be required to file a U.S. federal income tax return and pay tax on a net basis at graduated rates.

E. DUFC as Co-Issuer — Source of Income Considerations

The co-issuance structure involving DEH (a foreign corporation) and DUFC (a domestic corporation) creates potential source-of-income ambiguity that warrants careful analysis and disclosure.

Under Section 861(a)(1) of the Code, the following interest is treated as U.S.-source: interest paid by the United States or any agency or instrumentality thereof, interest paid by a domestic corporation, and interest paid by certain foreign corporations that derive a specified percentage of their income from the active conduct of a trade or business within the United States. Conversely, interest paid by a foreign corporation that does not derive a specified percentage of its income from U.S. sources is generally foreign-source.

DEH is a foreign corporation, and interest paid by DEH on the Notes would ordinarily be treated as foreign-source income. DUFC is a domestic corporation, and interest paid by DUFC on the Notes would be treated as U.S.-source income. The co-issuance structure creates joint and several liability, and the question arises as to which entity is the "payor" for purposes of determining the source of interest payments.

Under the Indenture, both Issuers are jointly and severally liable for all payments of principal, interest, and premium on the Notes. As a practical and economic matter, the funds used to make payments on the Notes are expected to flow from DEH's operating subsidiaries (principally the Nigerian, Senegalese, and Gulf of Mexico operations) through DEH to the Paying Agent for distribution to holders. DUFC does not have independent operations, revenues, or assets (other than its rights under the intercompany arrangements). Accordingly, the economic substance of the payment arrangement points toward DEH as the primary payor.

Notwithstanding the economic substance, the IRS could take the position that, because DUFC is a co-issuer and is jointly and severally liable, some or all of the interest payments should be treated as made by (or on behalf of) DUFC, resulting in U.S.-source characterization. There is limited authority directly addressing this issue in the context of co-issuance structures, and we are not aware of any published ruling or case that is squarely on point.

Conservative Approach. We recommend a conservative approach: the Offering Memorandum should treat the interest payments as potentially U.S.-source (by virtue of DUFC's co-issuance) and rely on the portfolio interest exemption to exempt qualifying Non-U.S. Holders from U.S. withholding tax. This approach is consistent with market practice for similar offshore holding company high-yield offerings with domestic co-issuers and ensures that the disclosure adequately addre

CALDERWOOD & HARKNESS LLP 425 Lexington Avenue New York, NY 10017
MEMORANDUM
PRIVILEGED AND CONFIDENTIAL ATTORNEY-CLIENT PRIVILEGED ATTORNEY WORK PRODUCT
This memorandum is protected by the attorney-client privilege and constitutes attorney work product. It has been prepared solely for the use of the addressees identified herein. It is not to be disclosed to, or relied upon by, any third party without the prior written consent of Calderwood & Harkness LLP.
Matter No.: 1016-00003 Date: May 14, 2025
TO: Dunmore Energy Holdings Ltd.
Attention: Deepa Rajaram, Chief Financial Officer
Alistair Forde, General Counsel
FROM: Leonard Cross, Specialist Partner, Tax — Calderwood & Harkness LLP
RE: U.S. Federal Income Tax Analysis — $850,000,000 Aggregate Principal Amount of 9.375% Senior Secured Notes due 2032
COPIES: Jennifer Kwon (Responsible Partner, Capital Markets, C&H) Theodore Langston (Billing Partner, Capital Markets, C&H) Eric Johannsen (Lead Associate, Capital Markets, C&H)
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I. Executive Summary
The purpose of this memorandum is to analyze the U.S. federal income tax consequences of the proposed issuance by Dunmore Energy Holdings Ltd. ("DEH"), a Cayman Islands exempted company, and Dunmore upstream Finance Corp. ("DUFC"), a Delaware corporation, as co-issuers (collectively, the "Issuers"), of $850,000,000 aggregate principal amount of 9.375% Senior Secured Notes due May 1, 2032 (the "Notes"). The Notes are being offered pursuant to Rule 144A under the Securities Act of 1933, as amended (the "Securities Act"), to qualified institutional buyers ("QIBs") and pursuant to Regulation S under the Securities Act to persons that are not U.S. persons (as defined in Regulation S). The Notes will not be registered under the Securities Act.
We have been asked to analyze the U.S. federal income tax treatment of the Notes as it relates to the Issuers and the holders thereof. Set forth below is a summary of our principal conclusions, each of which is discussed in greater detail in the body of this memorandum.
Debt Characterization. Based on the factors described in Section III below, we conclude that the Notes should be treated as debt instruments for U.S. federal income tax purposes. The co-issuance structure involving DUFC as a Delaware corporation and DEH as a Cayman Islands exempted company is a standard market structure for offshore holding company high-yield offerings and does not alter the debt characterization of the Notes.
Original Issue discount. The Notes are being issued at a price of 98.50% of their stated principal amount, yielding gross proceeds of $837,250,000. The resulting original issue discount ("OID") is $12,750,000, representing 1.50% of the $850,000,000 stated principal amount. We have undertaken a detailed analysis of the de minimis threshold under Section 1273(a)(3) of the Internal Revenue Code of 1986, as amended (the "Code" or "IRC"), and conclude that the OID of $12,750,000 is not de minimis. Specifically, because the period from the settlement date (May 15, 2025) to the maturity date (May 1, 2032) encompasses only six complete years, the de minimis threshold equals exactly $12,750,000, and because the statute requires OID to be "less than" the de minimis amount for it to be disregarded, OID that is equal to the threshold amount is not de minimis. Accordingly, all holders will be required to accrue OID into income over the life of the Notes using the constant yield method prescribed by Section 1272 of the Code, regardless of their regular method of accounting for tax purposes.
Withholding Tax and Portfolio Interest Exemption. Payments of interest (including OID) on the Notes to Non-U.S. Holders (as defined herein) should be exempt from U.S. federal withholding tax under the portfolio interest exemption provided by Sections 871(h) and 881(c) of the Code, subject to the satisfaction of applicable certification requirements (including the provision of a valid IRS Form W-8BEN or W-8BEN-E) and the absence of certain disqualifying relationships between the holder and the Issuers (e.g., "10-percent shareholder" status or "controlled foreign corporation" status). The co-issuance structure involving DUFC, a domestic corporation, introduces a source-of-income issue that must be carefully disclosed in the Offering Memorandum; however, to the extent payments are treated as U.S.-source by virtue of DUFC's status as a domestic co-issuer, the portfolio interest exemption should be available to qualifying Non-U.S. Holders.
FATCA. The Notes are subject to the requirements of Sections 1471 through 1474 of the Code (commonly referred to as the Foreign Account Tax Compliance Act, or "FATCA"). Interest payments treated as U.S.-source may constitute "withholdable payments" subject to 30% FATCA withholding if made to holders that are foreign financial institutions or non-financial foreign entities that fail to comply with applicable FATCA requirements. DEH should qualify as an "active NFFE" (non-financial foreign entity) for FATCA purposes. Importantly, the Indenture specifically excludes FATCA withholding from the Issuers' obligation to pay Additional Amounts under the tax gross-up covenant.
IRS Form W-8 Requirements. Holders of the Notes will be required to provide the applicable IRS Form W-8 (or Form W-9, in the case of U.S. Holders) to the Paying Agent, Beacon Fiduciary Services LLC, in order to claim exemption from withholding and to comply with information reporting requirements. Forms must be provided prior to the receipt of the first interest payment and must be renewed periodically.
This memorandum addresses only U.S. federal income tax consequences. State, local, and non-U.S. tax consequences (including, without limitation, the tax consequences under the laws of the Cayman Islands, Nigeria, Senegal, and England and Wales) are beyond the scope of this analysis. The Cayman Islands tax-exempt status of DEH is addressed in a separate Cayman Tax Status Certificate and Memorandum prepared with the assistance of local Cayman counsel. This memorandum is not intended as tax advice to holders of the Notes. The Offering Memorandum will contain a summary tax discussion based on this analysis, together with a recommendation that holders consult their own tax advisors regarding the particular tax consequences to them of an investment in the Notes, including the applicability and effect of U.S. federal, state, local, and non-U.S. tax laws.
II. Transaction Overview and Relevant Terms
A. The Notes — Key Economic Terms
The following summary of the material terms of the Notes is based on our review of the draft Indenture (dated May 8, 2025), the draft Offering Memorandum (dated May 10, 2025), the term sheet circulated by the Initial Purchasers (dated May 7, 2025), and related transaction documents.
Issuers. The Notes will be issued jointly by (i) Dunmore Energy Holdings Ltd. ("DEH"), a Cayman Islands exempted company with limited liability registered with the Cayman Islands Registry of Companies under registration number MC-384726, and (ii) Dunmore upstream Finance Corp. ("DUFC"), a Delaware corporation with Employer Identification Number 93-4728106. DUFC is a wholly-owned subsidiary of DEH formed for the sole purpose of serving as a co-issuer of the Notes and has no independent operations, employees, or material assets. Both Issuers are jointly and severally liable for all obligations under the Notes.
Aggregate Principal Amount. $850,000,000.
Issue Price. 98.50% of par, resulting in gross proceeds to the Issuers of $837,250,000.
Coupon Rate. 9.375% per annum, payable semi-annually in arrears in cash.
Semi-Annual Interest Payment. Each semi-annual interest payment will equal $39,843,750, calculated as follows: $850,000,000 × 9.375% ÷ 2 = $39,843,750. The first interest payment, payable on November 1, 2025, will represent interest accrued from the settlement date (May 15, 2025) through October 31, 2025, and will be computed on the basis of a 360-day year consisting of twelve 30-day months.
Interest Payment Dates. May 1 and November 1 of each year, commencing November 1, 2025.
Settlement Date. May 15, 2025 (T+1 after pricing on May 12, 2025, with the intervening days accounting for standard settlement processing). The first interest period runs from the settlement date (May 15, 2025) to November 1, 2025.
Maturity Date. May 1, 2032.
Minimum Denomination. $2,000 minimum principal amount; integral multiples of $1,000 in excess thereof.
CUSIP Numbers. Rule 144A Notes: 265387 AA 5; Regulation S Notes: C2085R AA 2.
ISIN Numbers. Rule 144A Notes: US265387AA51; Regulation S Notes: USC2085RAA24.
Credit Ratings. Lodestar Ratings International — preliminary B2, Stable Outlook; Veridian Credit Assessments Inc. — preliminary B+, Stable Outlook.
B. Optional Redemption and Other Features Relevant to Tax Analysis
The Notes contain several optional redemption features and other provisions that are relevant to the U.S. federal income tax analysis.
Make-Whole Redemption. Prior to May 1, 2028, the Issuers may redeem the Notes, in whole or in part, at a redemption price equal to the greater of (i) 100% of the principal amount of the Notes being redeemed and (ii) a "make-whole" price calculated as the sum of the present values of the remaining scheduled payments of principal and interest (exclusive of interest accrued to the date of redemption), discounted to the redemption date on a semi-annual basis at a rate equal to the applicable Treasury Rate plus 50 basis points, plus, in each case, accrued and unpaid interest to the redemption date.
Optional Redemption Schedule. On or after May 1, 2028, the Issuers may redeem the Notes, in whole or in part, at the following redemption prices (expressed as percentages of the principal amount of the Notes being redeemed), plus accrued and unpaid interest thereon to the applicable redemption date:
Equity Clawback. At any time prior to May 1, 2028, the Issuers may redeem up to 40% of the original aggregate principal amount of the Notes at a redemption price of 109.375% of the principal amount, plus accrued and unpaid interest, with the net cash proceeds of one or more equity offerings, provided that at least 60% of the original aggregate principal amount of the Notes remains outstanding immediately after such redemption.
Change of Control Put. Upon the occurrence of a change of control (as defined in the Indenture), each holder will have the right to require the Issuers to purchase all or a portion of such holder's Notes at a purchase price equal to 101% of the principal amount thereof, plus accrued and unpaid interest to the date of purchase.
Tax Gross-Up / Additional Amounts. The Indenture contains provisions obligating the Issuers and each Guarantor to pay additional amounts to holders (subject to specified exceptions) if any deduction or withholding for or on account of any taxes is required by law with respect to payments on the Notes. These provisions are discussed in greater detail in Section X of this memorandum.
Tax Redemption. In the event that, as a result of a change in applicable law (or a change in the official interpretation or application thereof), the Issuers become obligated to pay Additional Amounts with respect to payments on the Notes, the Issuers may, upon not less than 10 nor more than 60 days' prior notice, redeem the Notes in whole (but not in part) at a redemption price equal to 100% of the principal amount thereof, plus accrued and unpaid interest to the redemption date.
C. Guarantors and Collateral
The Notes will be guaranteed on a senior secured basis by the following subsidiaries of DEH (collectively, the "Guarantors"):
1. Dunmore Nigeria E&P Ltd. — a Nigerian limited liability company
2. Dunmore Senegal S.A. — a Senegalese société anonyme
3. Dunmore Trading Ltd. — a company incorporated in England and Wales
4. Dunmore Gulf Operations LLC — a Delaware limited liability company
5. Dunmore Renewables LLC — a Delaware limited liability company
6. Dunmore Midstream Holdings Inc. — a Delaware corporation
The Notes will be secured by first-priority liens on the following collateral: (i) the equity interests in each Guarantor and in certain other subsidiaries of DEH, (ii) substantially all tangible and intangible assets of the Issuers and Guarantors (including equipment, intellectual property, and real property interests), (iii) intercompany receivables, (iv) material hydrocarbon offtake contracts, and (v) insurance proceeds and proceeds of the foregoing. The collateral is subject to an intercreditor arrangement with Velthorn National Bank, N.A., as agent for the lenders under an existing asset-based revolving credit facility (the "ABL Facility"). Under the Intercreditor Agreement, the ABL Agent has priority with respect to certain categories of collateral designated as "ABL Priority Collateral" (principally accounts receivable, inventory, and deposit accounts), while the Trustee (on behalf of the holders of the Notes) has priority with respect to all other collateral designated as "Notes Priority Collateral."
For purposes of this memorandum, the guarantee and collateral structure generally should not alter the basic U.S. federal income tax characterization of the Notes as debt instruments. The guarantees represent credit support for the Issuers' obligations and do not transform the Notes into equity or give rise to a different tax characterization. However, if a Guarantor is called upon to make a payment under its guarantee, the source of income and withholding tax consequences of that payment must be analyzed with reference to the jurisdiction of the paying Guarantor, as discussed in Section XI below.
D. Use of Proceeds
The Issuers intend to use the gross proceeds from the offering as follows:
The use of proceeds does not have a direct bearing on the U.S. federal income tax analysis of the Notes, except to the extent that the partial refinancing of the existing 7.50% Senior Unsecured Notes due 2028 may implicate separate tax considerations for the Issuers with respect to the cancellation and reissuance of indebtedness. Those considerations are beyond the scope of this memorandum.
E. Ownership Structure
DEH is majority-owned by Harborview Capital Partners Fund VI, L.P. ("Harborview Fund VI"), which holds approximately 62.4% of the equity interests in DEH. Management and directors collectively hold approximately 18.3% of the equity interests. Co-investors include Solstice Infrastructure Fund LP, which holds approximately 11.1%, and Alderman Family Office LLC, which holds approximately 8.2%.
The ownership structure is relevant to the U.S. federal income tax analysis in several respects. First, certain holders of the Notes who are affiliated with the equity investors may be "related parties" for purposes of the portfolio interest exemption analysis. Under Section 871(h)(3) of the Code, a Non-U.S. Holder that is a "10-percent shareholder" of the issuer (generally, a person who owns, directly, indirectly, or constructively, 10% or more of the total combined voting power of all classes of stock entitled to vote of the issuer) does not qualify for the portfolio interest exemption. If any affiliate of Harborview Fund VI, Solstice, or Alderman were to acquire Notes, the constructive ownership rules under Section 318 of the Code (as modified by Section 871(h)(3)(C)) could cause that holder to be treated as a 10-percent shareholder of DEH (or DUFC), thereby disqualifying the holder from claiming the portfolio interest exemption. As a practical matter, the equity investors are not expected to be noteholders, but the Offering Memorandum should contain appropriate risk-factor language addressing this possibility.
Second, the controlled foreign corporation ("CFC") rules under Sections 951 through 965 of the Code are potentially relevant to the extent that DEH or any Guarantor is a CFC with respect to a U.S. Holder that is also a noteholder. This is discussed further in Section III.B below.
III. Classification of the Notes as Debt for U.S. Federal Income Tax Purposes
A. Debt vs. Equity Analysis
The characterization of the Notes as debt or equity for U.S. federal income tax purposes is a threshold question that affects virtually every aspect of the tax analysis. If the Notes were treated as equity, the consequences would be materially adverse: payments of "interest" would be recharacterized as dividends (which are not deductible by the Issuers), the portfolio interest exemption would not be available, and the OID rules would not apply. We conclude, for the reasons set forth below, that the Notes should be classified as debt instruments for U.S. federal income tax purposes.
The Code does not provide a comprehensive definition of "debt" for federal income tax purposes. The determination of whether an instrument constitutes debt or equity is a factual inquiry that depends on the economic substance of the arrangement. The United States Supreme Court, in Helvering v. Richmond, Fredericksburg & Potomac Railroad Co., 292 U.S. 33 (1934), and subsequent cases, established that the critical distinction between debt and equity is whether there exists a genuine debtor-creditor relationship. The Tax Court and the Courts of Appeals have developed a multi-factor test for distinguishing debt from equity. Although the relative weight given to each factor varies among the circuits, the factors most commonly considered include:
(a) the presence or absence of a fixed maturity date;
(b) the presence or absence of an unconditional obligation to pay a sum certain;
(c) the presence or absence of a fixed rate of interest;
(d) the source of payments (whether derived from earnings or available regardless of earnings);
(e) the debt-to-equity ratio of the issuer;
(f) whether the instruments are subordinated to or on parity with general creditors;
(g) whether the instruments carry voting or management rights;
(h) the presence or absence of conversion features;
(i) the identity of interest between creditors and shareholders;
(j) whether the instruments are labeled as debt or equity;
(k) the intent of the parties; and
(l) whether independent creditors would have extended credit on similar terms.
Applying these factors to the Notes, we find that all relevant factors strongly support debt characterization:
Fixed maturity date. The Notes have a fixed maturity date of May 1, 2032. The existence of a definite maturity date at which the principal amount becomes due and payable is a hallmark of debt. There is no provision for indefinite extension of the maturity date, and the Notes do not contain any feature that would permit the Issuers to defer principal repayment beyond maturity.
Unconditional obligation to pay a sum certain. The Issuers are unconditionally obligated to pay the full principal amount of $850,000,000 at maturity, regardless of their financial performance or earnings. The obligation to pay principal is absolute and is not contingent on profits, revenues, or any other performance metric.
Fixed rate of interest. The Notes bear interest at a fixed rate of 9.375% per annum, payable semi-annually. The interest rate is not floating, participating, or contingent on earnings. The Issuers are required to pay interest on each Interest Payment Date regardless of whether they have sufficient earnings to cover the payment.
Senior secured position. The Notes are senior secured obligations of the Issuers and rank pari passu in right of payment with all existing and future senior indebtedness. They are secured by first-priority liens on substantially all assets of the Issuers and Guarantors (subject to the intercreditor arrangement with the ABL Agent). The Notes are not subordinated to any class of general creditors and, to the contrary, enjoy the protections associated with collateral security and a senior position in the capital structure.
Reasonable debt-to-equity ratio. On a pro forma basis after giving effect to the offering and the application of net proceeds, DEH and its consolidated subsidiaries will have total gross indebtedness of approximately $1,720,000,000 and total equity (as reported on the audited consolidated financial statements for the fiscal year ended December 31, 2024) of approximately $816,000,000, resulting in a pro forma gross leverage ratio of approximately 2.11x. Pro forma net leverage (after deducting unrestricted cash of approximately $185,000,000) is approximately 1.88x. These leverage ratios are within the range typically observed for high-yield energy sector issuers and do not suggest excessive leverage that might call into question the bona fides of the debtor-creditor relationship.
Creditor rights, not equity participation rights. Holders of the Notes possess the rights of creditors, including the right to receive scheduled payments of interest and principal, the right to accelerate the Notes upon an event of default, and the right to enforce the security interest in the collateral. Holders do not possess any voting rights with respect to the management or affairs of the Issuers (other than limited consent rights under the Indenture), do not participate in the profits or losses of the Issuers, and do not have any residual interest in the Issuers' assets upon liquidation beyond the repayment of the Notes in full.
No conversion features. The Notes do not contain any provision for conversion into, or exchange for, equity securities of the Issuers or any other person. The absence of conversion features further supports the treatment of the Notes as debt.
Independent credit ratings. The Notes have been assigned preliminary credit ratings by two nationally recognized rating agencies — Lodestar Ratings International (preliminary B2, Stable Outlook) and Veridian Credit Assessments Inc. (preliminary B+, Stable Outlook). The willingness of independent rating agencies to assign credit ratings to the Notes is consistent with the treatment of the Notes as debt instruments.
Conclusion. Based on the foregoing analysis, we conclude that the Notes should be classified as debt instruments for U.S. federal income tax purposes. We note that DUFC was formed solely as a co-issuer and is a wholly-owned subsidiary of DEH. The co-issuance structure is a standard and well-established market convention for offshore holding company high-yield offerings, employed to facilitate compliance with U.S. securities law requirements and to provide a domestic co-obligor on the Notes. The inclusion of DUFC as a co-issuer does not alter the analysis of whether the Notes constitute debt or equity; the substance of the arrangement remains a borrowing by the DEH group evidenced by fixed-income instruments with all of the traditional hallmarks of indebtedness.
B. Issuer Characterization — DEH as a Foreign Corporation
DEH is a Cayman Islands exempted company with limited liability. For U.S. federal income tax purposes, DEH is treated as a foreign corporation because it is organized under the laws of a jurisdiction outside the United States. Under Section 7701(a)(4) of the Code, a "domestic" corporation is one that is created or organized in the United States or under the law of the United States or of any State. A "foreign" corporation is one that is not domestic. Because DEH is organized under the laws of the Cayman Islands, it is a foreign corporation for U.S. federal income tax purposes.
DEH is not expected to be treated as a "controlled foreign corporation" ("CFC") within the meaning of Section 957(a) of the Code with respect to any particular U.S. shareholder that is also a noteholder. Under Section 957(a), a CFC is a foreign corporation of which more than 50% of the total combined voting power or total value of stock is owned, directly, indirectly, or constructively, by "United States shareholders" (i.e., U.S. persons who each own, directly, indirectly, or constructively, 10% or more of the total combined voting power of all classes of stock entitled to vote). Harborview Fund VI (62.4% equity), Solstice Infrastructure Fund LP (11.1%), and Alderman Family Office LLC (8.2%) are equity holders, not noteholders. Although one or more of these equity holders may be U.S. persons and may be "United States shareholders" of DEH for CFC purposes, the CFC status of DEH is relevant primarily to the equity investors and does not, in itself, affect the tax treatment of the Notes in the hands of unrelated noteholders. However, if an affiliate of a United States shareholder of DEH were to acquire Notes, the portfolio interest exemption could be unavailable to that holder, as discussed in Section VI.B below.
DUFC is a Delaware corporation and is therefore a domestic corporation for U.S. federal income tax purposes. DUFC has no independent operations and was formed solely to serve as a co-issuer of the Notes. Payments on the Notes are expected to be sourced economically from DEH through its operating subsidiaries, with DUFC serving primarily as a pass-through vehicle. Notwithstanding DUFC's lack of independent operations, its status as a domestic corporation has implications for the source of income characterization of interest payments on the Notes, as discussed in Section VI.E below.
IV. Original Issue discount ("OID") Analysis
A. Determination of OID
The determination of whether the Notes have been issued with OID, and if so, the amount and treatment of that OID, is governed by Sections 1271 through 1275 of the Code and the Treasury Regulations promulgated thereunder.
Under Section 1273(a)(1) of the Code, OID is the excess of a debt instrument's "stated redemption price at maturity" over its "issue price." The "stated redemption price at maturity" is defined under Section 1273(a)(2) as the sum of all payments provided by the debt instrument other than payments of "qualified stated interest." The "issue price" of a publicly offered debt instrument (i.e., one that is issued for money in an offering to the public) is the initial offering price to the public at which price a substantial amount of the debt instruments was sold. For purposes of this analysis, the Notes are treated as publicly offered because they are offered to qualified institutional buyers and non-U.S. persons in a widely marketed offering.
Stated Redemption Price at Maturity. The stated redemption price at maturity of the Notes is $850,000,000, representing the aggregate principal amount payable at maturity. All interest payments on the Notes constitute "qualified stated interest" ("QSI") within the meaning of Treasury Regulation Section 1.1273-1(c) because the 9.375% coupon is payable unconditionally at fixed intervals of one year or less (semi-annually) at a single fixed rate that is in effect during the entire term of the debt instrument. Because all interest constitutes QSI, the stated redemption price at maturity is simply the principal amount of $850,000,000, with no interest amounts included.
Issue Price. The issue price of the Notes is $837,250,000, which is 98.50% of the stated principal amount of $850,000,000. This is the price at which a substantial amount of the Notes was sold to the public in the initial offering.
Qualified Stated Interest. As noted above, the semi-annual interest payments of $39,843,750 per period (calculated as $850,000,000 × 9.375% ÷ 2) constitute QSI under Treasury Regulation Section 1.1273-1(c). To qualify as QSI, interest must be unconditionally payable in cash or property (other than debt instruments of the issuer) at least annually at a single fixed rate. The 9.375% per annum coupon satisfies each of these requirements: it is payable in cash semi-annually, unconditionally, and at a single fixed rate that does not change over the term of the Notes.
OID Amount. Based on the foregoing, the OID on the Notes is calculated as follows:
Stated redemption price at maturity: $850,000,000
Less: Issue price: ($837,250,000)
OID: $12,750,000
Expressed as a percentage of the stated principal amount, the OID is 1.50%.
B. De Minimis OID Test
Under Section 1273(a)(3) of the Code, OID is treated as zero — that is, it is disregarded for purposes of the OID inclusion rules — if it is "less than" one-quarter of one percent (0.25%) of the stated redemption price at maturity multiplied by the number of "complete years to maturity" from the issue date. This is commonly referred to as the "de minimis" OID rule. OID that falls below the de minimis threshold is treated as zero, and holders are not required to accrue OID into income under the constant yield method; instead, any gain attributable to de minimis OID is generally recognized as capital gain upon sale, retirement, or other disposition of the instrument.
The application of the de minimis test to the Notes requires careful determination of the "number of complete years to maturity" from the issue date. This is a critical calculation because, as demonstrated below, the result determines whether the OID on the Notes must be accrued.
Settlement Date and Maturity Date. The Notes will settle on May 15, 2025. The stated maturity date is May 1, 2032. For purposes of the de minimis test, the issue date is the settlement date — May 15, 2025.
Number of Complete Years. The period from May 15, 2025 to May 1, 2032 is 6 years, 11 months, and 16 days. A "complete year" is a full 12-month period. The number of complete years contained within this period is six — the six complete years running from May 15, 2025 to May 15, 2031. The remaining period from May 15, 2031 to May 1, 2032 is less than a full year (approximately 11 months and 16 days) and therefore does not constitute a seventh complete year.
We note that there is a question as to whether the analysis should employ "complete years to maturity" measured from the issue date to the maturity date, or whether rounding should be applied. The statute refers to "the number of complete years to maturity from the date of original issue." Treasury Regulation Section 1.1273-1(d)(1)(i) provides that the de minimis amount is "0.0025 multiplied by the product of the stated redemption price at maturity and the number of complete years to maturity from the issue date." The term "complete years" is not defined to include partial years. Accordingly, the period from May 15, 2025 to May 1, 2032 encompasses six complete years.
An alternative calculation using seven complete years could be posited on the theory that, measured from May 2025 to May 2032, there are nominally seven calendar years. However, this approach conflates "calendar years" with "complete years from the issue date" as used in the statute. The issue date is not May 1, 2025 but May 15, 2025, and the period from May 15, 2025 to May 1, 2032 does not contain seven complete 12-month periods. We therefore employ six complete years in our calculation.
De Minimis Threshold Calculation.
De minimis threshold = 0.25% × $850,000,000 × 6 = $12,750,000
Comparison of OID to De Minimis Threshold. The OID on the Notes is $12,750,000. The de minimis threshold is also $12,750,000. These amounts are exactly equal.
Statutory Interpretation — "Less Than." Section 1273(a)(3) of the Code provides that "if the [OID] is less than [the de minimis amount], then [the stated redemption price at maturity] shall be treated as equal to the issue price." (Emphasis added.) The statute uses the phrase "less than" — not "less than or equal to" or "not greater than." Accordingly, for OID to be disregarded, it must be strictly less than the de minimis threshold. Where OID equals the de minimis threshold exactly, the statutory condition is not satisfied, and the OID is not treated as zero.
This interpretation is consistent with the plain language of the statute, the legislative history of Section 1273, and the approach taken by the IRS and commentators. See, e.g., Treasury Regulation Section 1.1273-1(d)(1); Boris I. Bittker & Lawrence Lokken, Federal Taxation of Income, Estates and Gifts, ¶ 56.2.3.
Conclusion. The OID of $12,750,000 on the Notes is not de minimis. Because the OID is not "less than" the de minimis threshold of $12,750,000 (but rather equals it exactly), the OID must be included in income by holders over the life of the Notes on an accrual basis under the constant yield method prescribed by Section 1272 of the Code, regardless of the holder's regular method of accounting.
We note that if the issue price had been even marginally higher — for example, 98.503% of par rather than 98.500% — the resulting OID of $12,724,500 would have been below the de minimis threshold and would have been disregarded. We draw this to the attention of the Issuers and the Capital Markets team in the event there is an opportunity to adjust the issue price prior to settlement; however, we understand that the issue price of 98.50% has been set by the book-running managers and is not subject to further adjustment.
C. OID Accrual — Constant Yield Method
Under Section 1272 of the Code, a U.S. Holder of the Notes (and, to the extent applicable, a Non-U.S. Holder) must include OID in gross income over the term of the Notes using the "constant yield method." The constant yield method requires the holder to include OID in income on a daily basis over the life of the instrument, with the result that the holder's taxable income from the Notes in any given accrual period may exceed the cash interest received during that period.
Under the constant yield method, the OID includible in income for each accrual period is determined as follows:
(a) Compute the "adjusted issue price" of the Note at the beginning of the accrual period. For the first accrual period, the adjusted issue price equals the issue price of the Note ($837,250,000 in the aggregate, or $985.00 per $1,000 principal amount). For each subsequent accrual period, the adjusted issue price equals the adjusted issue price at the beginning of the preceding accrual period, plus the amount of OID allocable to the preceding accrual period.
(b) Multiply the adjusted issue price at the beginning of the accrual period by the yield to maturity of the Note. The yield to maturity is the discount rate that, when used to compute the present value of all payments remaining to be made under the Note (including both QSI and principal), produces an amount equal to the issue price.
(c) Subtract from the resulting product the amount of QSI allocable to the accrual period.
(d) The remainder is the OID includible in income for the accrual period.
Because the yield to maturity of the Notes (computed on the basis of an issue price of 98.50% of par and a 9.375% coupon payable semi-annually over a term from May 15, 2025 to May 1, 2032) exceeds the coupon rate, the OID inclusion for each accrual period will cause the holder to recognize more income than the cash interest received in that period. This "phantom income" effect is most pronounced in the early accrual periods and diminishes as the adjusted issue price accretes toward par over the term of the Notes. By the maturity date, the adjusted issue price will equal the stated principal amount, and the full $12,750,000 of OID will have been included in the holder's income.
A holder's adjusted tax basis in the Notes increases by the amount of OID included in income. Accordingly, a holder who acquires a Note at the issue price of $985.00 per $1,000 principal amount and holds it to maturity will have an adjusted tax basis of $1,000.00 per $1,000 principal amount at maturity (assuming no intervening sales, exchanges, or other adjustments), and will not recognize any gain or loss upon retirement.
An illustrative OID accrual schedule showing the period-by-period OID accrual, adjusted issue price, and total income is set forth in Appendix A to this memorandum.
D. Market discount — Not Applicable at Issuance
The market discount rules set forth in Sections 1276 through 1278 of the Code apply to debt instruments acquired at a price below the instrument's "revised issue price" (generally, the issue price plus previously accrued OID). These rules are not relevant to the Notes at the time of initial issuance because all initial purchasers will acquire the Notes at the issue price (or at a price that does not reflect a market discount below the issue price).
However, if a holder acquires Notes in the secondary market at a price below the adjusted issue price at the time of acquisition, market discount may arise. Under the market discount rules, any gain recognized on the disposition of a market discount obligation is treated as ordinary income to the extent of the accrued market discount. We recommend that the Offering Memorandum contain appropriate disclosure regarding the application of the market discount rules to secondary market purchasers.
E. Tax Treatment of Redemption Premium
The Notes may be redeemed by the Issuers at various times and at various prices, as described in Section II.B above. The tax treatment of any premium paid upon redemption depends on the characterization of the premium and the holder's adjusted tax basis at the time of redemption.
Optional Redemption at a Fixed Premium. If the Issuers exercise their optional redemption right at prices above par (e.g., 104.688% during the period from May 1, 2028 to April 30, 2029), any amount received by the holder in excess of the holder's adjusted tax basis in the redeemed Note generally will be treated as capital gain. The adjusted tax basis will include the holder's initial purchase price plus any OID previously included in income, so the gain will typically be less than the stated premium over par.
Under Treasury Regulation Section 1.1272-1(c)(5), a redemption premium is generally not taken into account in computing OID unless, based on all the facts and circumstances as of the issue date, the likelihood that the issuer will exercise the call option is more likely than not. At the time of issuance, there is no basis to conclude that the Issuers' exercise of the optional redemption right is more likely than not. Accordingly, the potential redemption premiums should not be included in the stated redemption price at maturity for purposes of computing OID.
Make-Whole Premium. The tax treatment of a make-whole premium paid upon early redemption prior to May 1, 2028 is uncertain. The IRS has not issued definitive guidance on the characterization of make-whole premiums. There are at least three possible characterizations: (i) the make-whole premium may be treated as additional interest (ordinary income to the holder); (ii) the make-whole premium may be treated as an amount received in exchange for the Note (giving rise to capital gain to the extent the total amount received exceeds the holder's adjusted tax basis); or (iii) the make-whole premium may be treated as a payment in consideration for the holder's relinquishment of its option to hold the Note to maturity (also potentially capital gain). We are not aware of any published authority that definitively resolves this issue. We recommend that the Offering Memorandum disclose the uncertainty in the tax treatment of make-whole premiums and advise holders to consult their own tax advisors.
Equity Clawback. The premium of 109.375% paid upon an equity clawback redemption should be treated in the same manner as the optional redemption premium described above. Any amount received in excess of the holder's adjusted tax basis should be treated as capital gain. Because an equity clawback is a partial redemption (up to 40% of the original aggregate principal amount), only the redeemed Notes are affected; the remaining Notes continue to accrue OID on the same schedule.
Change of Control Put. If a holder exercises the change of control put right, the holder will receive 101% of the principal amount of its Notes plus accrued and unpaid interest. Any gain (i.e., the excess of the amount received over the holder's adjusted tax basis, excluding accrued QSI) should be treated as capital gain. If the holder's adjusted tax basis (including accrued OID) exceeds 101% of par at the time of the put, the holder will recognize a capital loss.
V. U.S. Holders — Tax Consequences
A. Definition of "U.S. Holder"
For purposes of this memorandum, a "U.S. Holder" is a beneficial owner of a Note that is, for U.S. federal income tax purposes:
(i) a citizen or individual resident of the United States;
(ii) a corporation (or other entity taxable as a corporation for U.S. federal income tax purposes) created or organized in or under the laws of the United States, any state thereof, or the District of Columbia;
(iii) an estate, the income of which is subject to U.S. federal income tax regardless of its source; or
(iv) a trust if (a) a court within the United States is able to exercise primary supervision over the administration of the trust and one or more United States persons have the authority to control all substantial decisions of the trust, or (b) the trust has made a valid election under applicable Treasury Regulations to be treated as a United States person.
If a partnership (or any entity or arrangement treated as a partnership for U.S. federal income tax purposes) holds Notes, the tax treatment of a partner in the partnership will generally depend upon the status of the partner and the activities of the partnership. Partners in a partnership holding Notes should consult their own tax advisors regarding the U.S. federal income tax consequences of an investment in the Notes.
B. Interest Income (Qualified Stated Interest)
A U.S. Holder of a Note will be required to include in gross income, as ordinary interest income, the semi-annual interest payments on the Notes ($39,843,750 per semi-annual period in the aggregate, or $46.875 per $1,000 principal amount per semi-annual period) in accordance with the U.S. Holder's regular method of accounting for U.S. federal income tax purposes. Cash-method U.S. Holders will include interest income upon receipt; accrual-method U.S. Holders will include interest income as it accrues over the relevant interest period.
Source of Interest Income. The source of interest income for U.S. foreign tax credit purposes is determined under Section 861(a)(1) of the Code. Under the general rule, interest income from a foreign corporation is foreign-source income. Because DEH is a Cayman Islands exempted company and therefore a foreign corporation, interest paid by DEH on the Notes should be treated as foreign-source income for U.S. foreign tax credit purposes. However, the co-issuance structure presents a nuance: DUFC is a domestic corporation, and interest paid by a domestic corporation is U.S.-source under Section 861(a)(1). Because both Issuers are jointly and severally liable for payments on the Notes, and the economic source of interest payments is expected to be DEH (through its operating subsidiaries), the sourcing analysis is not entirely straightforward. If the IRS were to treat a portion of the interest as paid by DUFC, that portion could be characterized as U.S.-source income. We recommend that the Offering Memorandum note the potential for U.S.-source treatment of interest payments and advise U.S. Holders to consult their own tax advisors regarding the availability and limitations of the foreign tax credit.
C. OID Inclusion
As analyzed in Section IV above, the Notes have been issued with OID of $12,750,000 that is not de minimis. Accordingly, each U.S. Holder will be required to include a ratable portion of the OID in gross income over the life of the Notes on a constant yield basis, regardless of the U.S. Holder's regular method of accounting for tax purposes. The OID inclusion rules of Section 1272 of the Code apply to all U.S. Holders, including cash-method taxpayers.
As discussed in Section IV.C, the constant yield method requires the U.S. Holder to include OID in income on a daily basis, with the result that the U.S. Holder's taxable income from the Notes in any given accrual period will exceed the cash interest received during that period. This "phantom income" effect — the recognition of income in excess of cash received — is inherent in the OID accrual rules and must be clearly disclosed in the Offering Memorandum. The total amount of OID that will be accrued over the life of the Notes is $12,750,000 in the aggregate, or $15.00 per $1,000 principal amount.
A U.S. Holder's adjusted tax basis in a Note will increase by the amount of OID included in income. Conversely, if the U.S. Holder receives a payment of principal (e.g., upon partial redemption or at maturity), the adjusted tax basis will be reduced by the amount of principal received.
D. Sale, Exchange, Retirement, or Other Taxable Disposition
Upon the sale, exchange, retirement at maturity, redemption, or other taxable disposition of a Note, a U.S. Holder generally will recognize gain or loss equal to the difference between (i) the amount realized on the disposition (other than amounts attributable to accrued but unpaid QSI, which will be treated as ordinary interest income) and (ii) the U.S. Holder's adjusted tax basis in the Note.
A U.S. Holder's adjusted tax basis in a Note will generally equal the price paid for the Note, increased by any OID previously included in the holder's income and decreased by any principal payments received. For a U.S. Holder who acquires a Note at the initial issue price of $985.00 per $1,000 principal amount and holds it to maturity, the adjusted tax basis at maturity will be $1,000.00 per $1,000 principal amount (after the full $15.00 per $1,000 of OID has been included in income), and no gain or loss will be recognized upon repayment of principal at maturity.
Any gain or loss recognized on the disposition of a Note will generally be capital gain or loss. If the Note has been held for more than one year as of the date of disposition, such capital gain or loss will be long-term capital gain or loss. Long-term capital gain recognized by an individual U.S. Holder is generally subject to a reduced rate of U.S. federal income tax. The deductibility of capital losses is subject to limitations.
Accrued but Unpaid QSI. Notwithstanding the foregoing, any portion of the amount realized on a disposition that is attributable to accrued but unpaid QSI is not treated as an amount received in exchange for the Note but rather as a payment of ordinary interest income. This amount must be separated from the amount realized for purposes of computing gain or loss on the disposition.
Market discount. If a U.S. Holder acquires a Note in the secondary market at a price below the adjusted issue price (i.e., the original issue price plus accrued OID to date), the holder may be treated as having acquired the Note with "market discount" within the meaning of Section 1276 of the Code. Upon the disposition of a market discount obligation, any gain recognized is treated as ordinary income to the extent of the accrued market discount. This issue is not relevant to initial purchasers but may be relevant to subsequent purchasers in the secondary market and should be disclosed in the Offering Memorandum.
E. Medicare Contribution Tax
Under Section 1411 of the Code, U.S. Holders that are individuals, estates, or trusts (other than trusts that are exempt from tax) may be subject to an additional 3.8% tax on the lesser of (i) the U.S. Holder's "net investment income" (which includes interest, OID, and gain from the disposition of the Notes) and (ii) the excess of the U.S. Holder's modified adjusted gross income over a specified threshold amount ($250,000 for married individuals filing jointly, $200,000 for single individuals, and $12,950 for certain estates and trusts). U.S. Holders that are individuals, estates, or trusts should consult their own tax advisors regarding the potential applicability of this tax to their ownership and disposition of the Notes.
VI. Non-U.S. Holders — Tax Consequences
A. Definition of "Non-U.S. Holder"
For purposes of this memorandum, a "Non-U.S. Holder" is a beneficial owner of a Note that is not a U.S. Holder (as defined in Section V.A above) and is not a partnership (or other entity or arrangement treated as a partnership) for U.S. federal income tax purposes. A Non-U.S. Holder is generally a nonresident alien individual, a foreign corporation, a foreign estate, or a foreign trust.
B. Interest Income — Portfolio Interest Exemption
General Withholding Rule. Under the general rules of Sections 871(a) and 881(a) of the Code, payments of U.S.-source interest (including OID) to a Non-U.S. Holder are subject to U.S. federal withholding tax at a rate of 30% (or, if applicable, a reduced rate under an income tax treaty between the United States and the Non-U.S. Holder's country of residence). The withholding obligation applies to the gross amount of the interest payment, without allowance for deductions or credits.
Portfolio Interest Exemption. Sections 871(h) and 881(c) of the Code provide an exemption from the 30% withholding tax for "portfolio interest" paid to Non-U.S. Holders. The portfolio interest exemption is the primary mechanism by which Non-U.S. Holders of the Notes may receive interest (including OID) free of U.S. withholding tax. Interest on the Notes should qualify for the portfolio interest exemption, provided the following requirements are satisfied:
(i) Registered Form. The Notes must be in "registered form" within the meaning of Section 163(f) of the Code and the applicable Treasury Regulations. The Notes will be issued in registered, book-entry form through the facilities of The Depository Trust Company ("DTC") and its direct and indirect participants. The Notes will at all times be maintained in registered form. This requirement is satisfied.
(ii) Certification. The Non-U.S. Holder (or a securities clearing organization, bank, or other financial institution that holds customers' securities in the ordinary course of its trade or business on behalf of the Non-U.S. Holder) must provide an appropriate IRS Form W-8 (generally, Form W-8BEN for individuals or Form W-8BEN-E for entities) to the applicable withholding agent, certifying, under penalties of perjury, that the holder is not a U.S. person. See Section VIII below for a detailed discussion of Form W-8 requirements.
(iii) 10-Percent Shareholder Exclusion. The Non-U.S. Holder must not be a "10-percent shareholder" of the issuer within the meaning of Section 871(h)(3)(B) of the Code. A "10-percent shareholder" is any person who owns, directly, indirectly, or constructively (applying the constructive ownership rules of Section 318(a) as modified by Section 871(h)(3)(C)), 10% or more of the total combined voting power of all classes of stock of the issuer entitled to vote.
This requirement merits careful analysis in the context of the DEH ownership structure. As described in Section II.E, Harborview Capital Partners Fund VI, L.P. holds approximately 62.4% of the equity of DEH, Solstice Infrastructure Fund LP holds approximately 11.1%, and Alderman Family Office LLC holds approximately 8.2%. Management and directors collectively hold approximately 18.3%. If any entity affiliated with these equity holders, or any entity that is treated as constructively owning DEH stock through these equity holders, were to acquire Notes, that entity could be treated as a "10-percent shareholder" and would not qualify for the portfolio interest exemption.
As a practical matter, these equity investors are not expected to be noteholders. The Notes are being offered to institutional investors through the Initial Purchasers, and there is no current indication that any affiliate of the equity holders intends to acquire Notes. Nevertheless, the constructive ownership rules are broad, and we recommend that the Offering Memorandum include appropriate disclosure cautioning that holders who are, directly, indirectly, or constructively, 10-percent shareholders of DEH (or DUFC) may not qualify for the portfolio interest exemption.
(iv) Controlled Foreign Corporation Exclusion. The Non-U.S. Holder must not be a controlled foreign corporation that is "related" to the issuer through stock ownership within the meaning of Section 881(c)(3)(C) of the Code. Under this provision, a CFC that receives interest from a related person (determined under Section 864(d)(4)) does not qualify for the portfolio interest exemption. This exclusion is relevant if a foreign subsidiary of DEH that is a CFC were to hold Notes, but this scenario is not expected to arise.
(v) Bank Loan Exclusion. The Non-U.S. Holder must not be a bank receiving interest on an extension of credit made pursuant to a loan agreement entered into in the ordinary course of its trade or business. Section 881(c)(3)(A) excludes from the portfolio interest exemption interest received by a bank on a loan that is described in Section 881(c)(3)(A). The Notes are not loans; they are securities. Accordingly, this exclusion should not apply to the Notes, even if a bank acquires Notes in the secondary market. However, there is some authority suggesting that the exclusion may apply if the substance of the transaction more closely resembles a loan than a security; we do not believe this concern is applicable here.
DUFC Co-Issuer Analysis. As noted above, the portfolio interest exemption is relevant only to "U.S.-source" interest. Interest paid by DEH, a Cayman Islands exempted company (i.e., a foreign corporation), is generally foreign-source income under Section 861(a)(1) of the Code and would not be subject to U.S. withholding tax regardless of the portfolio interest exemption. However, DUFC is a domestic corporation. Under Section 861(a)(1), interest paid by a domestic corporation is U.S.-source. Because both DEH and DUFC are co-issuers and are jointly and severally liable for all payments on the Notes, there is a risk that the IRS could treat some or all of the interest payments as made by (or on behalf of) DUFC, resulting in U.S.-source characterization and subjecting the interest to U.S. withholding tax absent an applicable exemption. The portfolio interest exemption should be available to qualifying Non-U.S. Holders regardless of whether the interest is characterized as U.S.-source or foreign-source, provided the requirements described above are met. Accordingly, the co-issuance structure should not create any incremental withholding tax exposure for Non-U.S. Holders who comply with the portfolio interest exemption requirements. The Offering Memorandum should clearly disclose the co-issuer structure and the potential for U.S.-source treatment.
Conclusion. Provided the requirements set forth above are satisfied, interest (including OID) on the Notes paid to Non-U.S. Holders should be exempt from U.S. federal withholding tax under the portfolio interest exemption. Non-U.S. Holders who do not qualify for the portfolio interest exemption (e.g., because they are 10-percent shareholders, CFCs related to the issuer, or banks) will be subject to 30% U.S. withholding tax (or a reduced rate under an applicable income tax treaty).
C. Gain on Disposition
A Non-U.S. Holder generally will not be subject to U.S. federal income tax on any gain recognized on the sale, exchange, retirement, or other taxable disposition of a Note unless:
(i) the gain is "effectively connected" with the conduct by the Non-U.S. Holder of a trade or business within the United States (and, if an applicable income tax treaty so provides, the gain is attributable to a permanent establishment or fixed base maintained by the Non-U.S. Holder in the United States); or
(ii) the Non-U.S. Holder is an individual who is present in the United States for 183 days or more during the taxable year of the disposition and certain other conditions are met, in which case the Non-U.S. Holder may be subject to a flat 30% U.S. federal income tax on the gain (reduced by certain U.S.-source capital losses).
A Non-U.S. Holder whose gain is effectively connected with a U.S. trade or business will be taxed on a net income basis, as discussed in Section VI.D below.
D. Effectively Connected Income
If interest (including OID) or gain on the Notes is "effectively connected" with the conduct by a Non-U.S. Holder of a trade or business within the United States, such interest or gain will be subject to U.S. federal income tax on a net basis at the graduated rates applicable to U.S. persons. In the case of a Non-U.S. Holder that is a foreign corporation, effectively connected income may also be subject to the "branch profits tax" imposed by Section 884 of the Code at a rate of 30% (or a reduced rate under an applicable income tax treaty). The branch profits tax is imposed on effectively connected earnings and profits that are deemed "repatriated" by the foreign corporation's U.S. branch.
A Non-U.S. Holder whose income from the Notes is effectively connected with a U.S. trade or business must provide a Form W-8ECI (rather than a Form W-8BEN or W-8BEN-E) to the withholding agent. Upon receipt of a valid Form W-8ECI, the withholding agent will not withhold the 30% statutory withholding tax; instead, the Non-U.S. Holder will be required to file a U.S. federal income tax return and pay tax on a net basis at graduated rates.
E. DUFC as Co-Issuer — Source of Income Considerations
The co-issuance structure involving DEH (a foreign corporation) and DUFC (a domestic corporation) creates potential source-of-income ambiguity that warrants careful analysis and disclosure.
Under Section 861(a)(1) of the Code, the following interest is treated as U.S.-source: interest paid by the United States or any agency or instrumentality thereof, interest paid by a domestic corporation, and interest paid by certain foreign corporations that derive a specified percentage of their income from the active conduct of a trade or business within the United States. Conversely, interest paid by a foreign corporation that does not derive a specified percentage of its income from U.S. sources is generally foreign-source.
DEH is a foreign corporation, and interest paid by DEH on the Notes would ordinarily be treated as foreign-source income. DUFC is a domestic corporation, and interest paid by DUFC on the Notes would be treated as U.S.-source income. The co-issuance structure creates joint and several liability, and the question arises as to which entity is the "payor" for purposes of determining the source of interest payments.
Under the Indenture, both Issuers are jointly and severally liable for all payments of principal, interest, and premium on the Notes. As a practical and economic matter, the funds used to make payments on the Notes are expected to flow from DEH's operating subsidiaries (principally the Nigerian, Senegalese, and Gulf of Mexico operations) through DEH to the Paying Agent for distribution to holders. DUFC does not have independent operations, revenues, or assets (other than its rights under the intercompany arrangements). Accordingly, the economic substance of the payment arrangement points toward DEH as the primary payor.
Notwithstanding the economic substance, the IRS could take the position that, because DUFC is a co-issuer and is jointly and severally liable, some or all of the interest payments should be treated as made by (or on behalf of) DUFC, resulting in U.S.-source characterization. There is limited authority directly addressing this issue in the context of co-issuance structures, and we are not aware of any published ruling or case that is squarely on point.
Conservative Approach. We recommend a conservative approach: the Offering Memorandum should treat the interest payments as potentially U.S.-source (by virtue of DUFC's co-issuance) and rely on the portfolio interest exemption to exempt qualifying Non-U.S. Holders from U.S. withholding tax. This approach is consistent with market practice for similar offshore holding company high-yield offerings with domestic co-issuers and ensures that the disclosure adequately addre

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