John Goik John Glankler Christian Töpfner von Schütz

Agenda

• • • •

S&P 500 Energy Sector

Business & Economic Analysis Financial Analysis / Valuation Recommendation

S&P 500: # of Companies in Sectors

100 20 0 80 60 40

81 80 75 58 53 41 40 35 28 9

S&P 500 Energy Sector

Global Industry Classification Standard (GICS)

Sector Industry Group Industry Sub-Industry Oil & Gas Drilling (4) Energy Equipment & Services (12) Oil & Gas Equipment & Services (8) Integrated Oil & Gas (7) Energy (40) Energy (40) Oil, Gas & Consumable Fuels (28) Oil & Gas Exploration & Production (12) Oil & Gas Refining & Marketing (3) Oil & Gas Storage & Transportation (3) Coal & Consumable Fuels (3)

S&P 500 Energy Sector % of S&P 500 Integrated Oil & Gas (7) Oil & Gas Exploration & Production (12) Oil & Gas Equipment & Services (8) Oil & Gas Storage & Transportation (3) Oil & Gas Drilling (4) Coal & Consumable Fuels (3) Oil & Gas Refining & Marketing (3) 7.61% 1.99% 1.61% 0.32% 0.22% 0.20% 0.17% 12.12%

S&P 500: QTD Sector Performance 5,70% 6,00% 5,00% 4,00% 3,00% 2,00% 1,00% 0,00% -1,00% -2,00% -3,00% -4,00% 4,07% 3,41% 2,73% 1,86% 1,64% 0,43% 0,33% 0,19% -3,34%

S&P 500: YTD Sector Performance 40,00% 30,00% 31,15% 20,00% 10,00% 0,00% -10,00% 16,11% 10,45% 0,49% -0,53% -2,92% -3,20% -3,89% -5,96% -9,85%

Energy Sector: Historical Performance

Energy Sector: Historical Performance

Energy Sector: Top 5 Market Cap Exxon Mobil Corp. (XOM) Chevron Corp. (CVX) Schlumberger Limited (SLB) ConocoPhillips (COP) Occidental Petroleum Corporation (OXY)

$ 334,357,700,000 $ 130,544,200,000 $ 67,010,740,000 $ 62,788,270,000 $ 54,916,530,000

YTD Performance FMC Technologies, Inc. (FTI) Pioneer Natural Resources Co. (PXD) Diamond Offshore Drilling Inc. (DO) Massey Energy Co. (MEE) Peabody Energy Corp. (BTU)

64.88% 58.83% 52.38% 51.92% 45.78%

Agenda

• • • • S&P 500 Energy Sector

Business & Economic Analysis

Financial Analysis / Valuation Recommendation

Oil Price - Outlook



Short Term:

      High Inventories Four month rally in prices stalled in early July Demand down by 3.2 mb/d 2Q 2009 Demand down by 2.2 mb/d 3Q 2009 Demand expected to rise again by 1.4 mb/d 1Q 2010 to 85.9 mb/d Oil price expected to be $55 on average in 3Q 2009 (Morgan Stanley) 

Long Term:

    Structural capacity issues Production capacity likely to decline (weak price environment) Utilization at 100% by 2013 Demand limited by flat supply capacity

Correlation Between Crude & Stock Prices per Industry 100 80 60 40 20 0 180 160 140 120 CRUDE COAL + DRILLING SERVICES EXPLOR.

INTEGR.

R & M STORAGE

COAL + DRILLING SERVICES EXPLOR. INTEGR.

R & M STORAGE 0.650897 0.846183 0.368496 0.90326 0.6885324 0.525075166 -0.46567

Oil Supply

Oil Inventory

Oil Demand

Global Oil Demand

Future Projections

 Oil Prices  Drop-off relative to past few years  Going to Hold Steady/Possibly Increase  Projections are cautiously optimistic  Oil Futures

Crude Oil Futures

75 70 65 60 95 90 85 80

Analysts Projections

 Most analysts are skeptical about the near term  Global demand slashed by as much as 2.8% in 2009  Earnings for 2009 are expected to be poor  But virtually all agree on long term growth in prices  Most predict an oil rebound late this year/early next year, projections as high as $85/barrel next year  Oil stocks themselves tend to lead the way out of a recession

Agenda

• • • • S&P 500 Energy Sector Business & Economic Analysis

Financial Analysis / Valuation

Recommendation

Energy Sector: Top 5 Sales Growth (5 year average) National Oilwell Varco, Inc. (NOV) XTO Energy Inc. (XTO) Chesapeake Energy Corporation (CHK) Diamond Offshore Drilling Inc. (DO) Southwestern Energy Co. (SWN) Net Income Growth (5 year average) Peabody Energy Corp. (BTU) Southwestern Energy Co. (SWN) Murphy Oil Corporation (MUR) EOG Resources, Inc. (EOG) CONSOL Energy Inc. (CNX)

49.32% 44.16% 38.88% 38.25% 37.62% 260.76% 156.79% 127.00% 123.59% 65.24%

Energy Sector: Top 5 Operating Margin Ensco International Inc. (ESV) Diamond Offshore Drilling Inc. (DO) Apache Corp. (APA) Denbury Resources Inc. (DNR) EOG Resources, Inc. (EOG) Operating Margin Growth (5 year average) Rowan Companies Inc. (RDC) Halliburton Company (HAL) Peabody Energy Corp. (BTU) Schlumberger Limited (SLB) Williams Companies, Inc. (WMB)

57.40% 54.74% 52.50% 51.67% 50.41% 78.46% 40.19% 33.72% 25.52% 25.46%

Energy Sector Valuations Sector Valuations vs. S&P 500 19% 14% 20% 10% 0% -10% -20% -30% -32% -40% Trailing P/E Forward P/E P/S P/B 0% -14% P/CF 0% P/EBITDA

Industry Valuations – Trailing P/E Trailing P/E vs. S&P 500 0% -10% -20% -30% -40% -50% -60% -70% -80% -56% -57% -14% -31% -60% -42% -79% OGDRL COCOF OGEQP OGEXP OGINT OGREF OGSTO

Industry Valuations – Forward P/E Industry Forward P/E vs. S&P 500 200% 159% 150% 84% 100% 50% 0% 0% -8% -50% COCOF -43% OGDRL OGEQP OGEXP 11% OGINT OGREF -19% OGSTO

Industry Valuations – P/S 20% 20% Industry P/S vs. S&P 500 16% 10% 0% -10% -20% -30% -40% -50% -45% OGDRL 0% 0% COCOF OGEQP OGEXP OGINT OGSTO 18%

Industry Valuations – P/CF Industry P/CF vs. S&P 500 0% 0% -10% -13% -14% -20% -30% -33% -40% -50% -40% -60% COCOF -55% OGDRL OGEQP OGEXP OGINT OGREF -29% OGSTO

Industry Valuations – P/B P/B vs. S&P 500 50% 50% -10% -20% -30% -40% 40% 30% 20% 10% 0% 0% -8% 0% 11% COCOF OGDRL OGEQP OGEXP OGINT -40% OGREF -30% OGSTO

Industry Valuations – P/EBITDA P/EBITDA vs. S&P 500 133% 20% 0% -20% -40% -60% -80% 140% 120% 100% 80% 60% 40% -39% -63% OGDRL -34% -9% 5% COCOF OGEQP OGEXP OGINT OGREF -36% OGSTO

Agenda

• • • • S&P 500 Energy Sector Business & Economic Analysis Financial Analysis / Valuation

Recommendation

S&P 500 vs. SIM: Sector Weight Energy sector currently underweight by 137 basis points

25,00% 20,00%

S&P 500 SIM

14,00% 12,00% 10,00% 8,00% 6,00% 4,00% 2,00% 0,00% 15,00% 10,00% 5,00% 0,00%

Energy 12,05% 10,68%

Recommendation Increase weight of Energy sector by 137 basis points to par with S&P 500 :

   Sector is undervalued and has mid to long-term growth potential Current weakness should be used to add stock in this sector Waiting until the next SIM trading window in Nov/Dec 09 could be too long since stocks will most likely move quickly on positive news   Positives:  Economic recovery (especially in China and India)  Expected rise in oil prices (mid to long-term)  Structural problems on the supply side (mid to long-term) Risks:  High inventory/low demand in short term  Overall uncertainty in oil price predictions

Recommendation

Industry to overweight

Oil & Gas Drilling Integrated Oil & Gas

Industry to underweight

Oil & Gas Storage & Transportation Refining & Manufacturing

Energy Sector

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