John GoikJohn GlanklerChristian Töpfner von Schütz

Agenda

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

S&P 500: # of Companies in Sectors

S&P 500 Energy SectorGlobal Industry Classification Standard (GICS)Sector Industry Group Industry Sub-Industry

Energy (40) Energy (40)

Energy Equipment & Services (12)

Oil & Gas Drilling (4)

Oil & Gas Equipment & Services (8)

Oil, Gas & Consumable Fuels (28)

Integrated Oil & Gas (7)

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) 7.61%

Oil & Gas Exploration & Production (12) 1.99%Oil & Gas Equipment & Services (8) 1.61%Oil & Gas Storage & Transportation (3) 0.32%Oil & Gas Drilling (4) 0.22%Coal & Consumable Fuels (3) 0.20%Oil & Gas Refining & Marketing (3) 0.17%

12.12%

S&P 500: QTD Sector Performance

S&P 500: YTD Sector Performance

Energy Sector: Historical Performance

Energy Sector: Historical Performance

Energy Sector: Top 5Market Cap

Exxon Mobil Corp. (XOM) $ 334,357,700,000

Chevron Corp. (CVX) $ 130,544,200,000

Schlumberger Limited (SLB) $ 67,010,740,000

ConocoPhillips (COP) $ 62,788,270,000

Occidental Petroleum Corporation (OXY) $ 54,916,530,000

YTD Performance

FMC Technologies, Inc. (FTI) 64.88%

Pioneer Natural Resources Co. (PXD) 58.83%Diamond Offshore Drilling Inc. (DO) 52.38%Massey Energy Co. (MEE) 51.92%Peabody Energy Corp. (BTU) 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

COAL + DRILLING SERVICES EXPLOR. INTEGR. R & M STORAGE0.650897 0.846183 0.368496 0.90326 0.6885324 0.525075166 -0.46567

Oil Supply

Oil Inventory

Oil Demand

Global Oil Demand

Future Projections

Oil PricesDrop-off relative to past few yearsGoing to Hold Steady/Possibly IncreaseProjections are cautiously optimistic

Oil Futures

Analysts Projections

Most analysts are skeptical about the near termGlobal demand slashed by as much as 2.8% in 2009Earnings for 2009 are expected to be poor

But virtually all agree on long term growth in pricesMost predict an oil rebound late this year/early next

year, projections as high as $85/barrel next yearOil 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 5Sales Growth (5 year average)

National Oilwell Varco, Inc. (NOV) 49.32%XTO Energy Inc. (XTO) 44.16%Chesapeake Energy Corporation (CHK) 38.88%Diamond Offshore Drilling Inc. (DO) 38.25%Southwestern Energy Co. (SWN) 37.62%

Net Income Growth (5 year average)

Peabody Energy Corp. (BTU) 260.76%Southwestern Energy Co. (SWN) 156.79%Murphy Oil Corporation (MUR) 127.00%EOG Resources, Inc. (EOG) 123.59%CONSOL Energy Inc. (CNX) 65.24%

Energy Sector: Top 5Operating Margin

Ensco International Inc. (ESV) 57.40%Diamond Offshore Drilling Inc. (DO) 54.74%Apache Corp. (APA) 52.50%Denbury Resources Inc. (DNR) 51.67%EOG Resources, Inc. (EOG) 50.41%

Operating Margin Growth (5 year average)

Rowan Companies Inc. (RDC) 78.46%Halliburton Company (HAL) 40.19%Peabody Energy Corp. (BTU) 33.72%Schlumberger Limited (SLB) 25.52%Williams Companies, Inc. (WMB) 25.46%

Energy Sector Valuations%

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Agenda

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

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

RecommendationIncrease weight of Energy sector by 137 basis pointsto 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 overweightOil & Gas DrillingIntegrated Oil & Gas

Industry to underweightOil & Gas Storage &

Transportation Refining & Manufacturing

Energy Sector

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