ratings distribution summary - poslovni dnevnik · repsol-ypf syme, alastair repyf rep sm buy buy...

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Coverage cluster initiation

Ratings distribution summary

New rating system segments stocks into coverage clusters Coverage clusters consist of stocks covered by a single analyst or two or more analysts sharing a common industry, sector, region, or other classification. Investment ratings assigned to the stocks in the cluster reflect the analyst’s assessment of each stock’s absolute total return potential and its relative attractiveness to the other stocks in that cluster.

Expected total return by rating & dispersion guidelines Buy stocks are expected to have a total return of at least 10% and are the most attractive stocks in the coverage cluster. Neutral stocks are expected to remain flat or increase in value and are less attractive than Buy rated stocks. Underperform stocks are the least attractive stocks in a coverage cluster. Dispersion guidelines that limit the number of the stocks in each investment rating category are essential to the new rating system; Buy-rated stocks may not exceed 70%, Neutral-rated may not exceed 30%, and Underperforms must be at least 20%. See the fundamental equity opinion key in the disclosures at the end of this report for additional details.

Industry Overview

Equity | EMEA | Oil & Gas 01 June 2008

Mark Iannotti >> +44 20 7996 2665 Research Analyst MLPF&S (UK) [email protected] Alastair Syme >> +44 20 7995 2865 Research Analyst MLPF&S (UK) [email protected] Hootan Yazhari, CFA >> +44 20 7996 3250 Research Analyst MLPF&S (UK) [email protected] Andrew Knott >> +44 20 7996 2119 Research Analyst MLPF&S (UK) [email protected] Alejandro Demichelis >> +44 20 7996 1568 Research Analyst MLPF&S (UK) [email protected] Alina Chapovskaya >> +44 20 7995 4706 Research Analyst MLPF&S (UK) [email protected] James Schofield >> +44 20 7996 4690 Research Analyst MLPF&S (UK) [email protected] James Talbot +44 20 7996 1876 Specialist Sales MLPF&S (UK) [email protected]

Coverage c lus ter in i t ia t ion 01 June 2008

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EMEA Oil & Gas Coverage Cluster Detail

Company name Analyst ML

ticker BBG

symbol Old

rating New

rating Investment

opinion Currency Price* Price

objective Buy Afren Knott, Andrew AFRNF AFR LN Buy Buy C-1-9 GBP 171 221 AMEC plc Demichelis, Alejandro AMCBF AMEC LN Buy Buy B-1-7 GBP 834.5 980 BG Iannotti, Mark BRGXF BG/ LN Buy Buy A-1-7 GBP 1,266 1,600 BG Iannotti, Mark BRGYY BRGYY US Buy Buy A-1-7 USD 126 158.8 Bourbon Demichelis, Alejandro BOUBF GBB FP Buy Buy B-1-7 EUR 44.33 58 BowLeven Knott, Andrew BWLVF BLVN LN Buy Buy C-1-9 GBP 386 480 Cairn Energy Knott, Andrew CRNCF CNE LN Buy Buy B-1-9 GBP 3,366 4,170 Dana Petroleum Knott, Andrew DNPXF DNX LN Buy Buy B-1-9 GBP 1,830 2,325 Eni Syme, Alastair EIPAF ENI IM Buy Buy A-1-7 EUR 26.18 29 Eni Syme, Alastair E E US Buy Buy A-1-7 USD 81.59 90.56 Galp Energia Syme, Alastair GLPEF GALP PL Buy Buy C-1-7 EUR 16.21 20 Gazprom Yazhari, Hootan RGZPF GAZP RU Buy Buy C-1-7 USD 15.23 18.75 Gazprom-Spon ADR Regs Yazhari, Hootan OGZPY OGZD LI Buy Buy C-1-7 USD 6.04 7.5 KazMunaiGas E&P-GDR Chapovskaya, Alina XZKEF KMG LI Buy Buy C-1-7 USD 32.45 38 Lukoil Yazhari, Hootan LUKOF LKOH RU Buy Buy C-1-7 USD 112 135 Lukoil Yazhari, Hootan LUKOY LUKOY US Buy Buy C-1-7 USD 112 135 Lundin Petroleum AB Knott, Andrew LNDNF LUPE SS Buy Buy C-1-9 SEK 92.75 104 Motor Oil (Hellas) SA Schofield, James MOHCF MOH GA Buy Buy B-1-7 EUR 15.6 20.5 Oilexco Inc Knott, Andrew XOLEF OIL LN Buy Buy C-1-9 GBP 800 1,200 Oilexco Inc Knott, Andrew OILXF OIL CN Buy Buy C-1-9 USD 15.71 23.76 OMV Syme, Alastair OMVJF OMV AV Buy Buy B-1-7 EUR 52.92 64 OMV Syme, Alastair OMVKY OMVKY US Buy Buy B-1-7 USD 81.9 100 Petroleum Geo-Services ASA Demichelis, Alejandro PGEJF PGS NO Buy Buy C-1-8 NOK 150.25 180 Petroleum Geo-Services ASA-ADR Demichelis, Alejandro PGSVY PGSVY US Buy Buy C-1-8 USD 29.65 35.7 Premier Oil plc Knott, Andrew PMOIF PMO LN Buy Buy B-1-9 GBP 1,721 2,050 Premier Oil plc Knott, Andrew PMOIY PMOIY US Buy Buy B-1-9 USD 34.5 40.6 Regal Petroleum Knott, Andrew RGPMF RPT LN Buy Buy C-1-9 GBP 288 390 Repsol-YPF Syme, Alastair REPYF REP SM Buy Buy A-1-7 EUR 26.6 32 Repsol-YPF Syme, Alastair REP REP US Buy Buy A-1-7 USD 41.44 50.0 Royal Dutch Shell PLC Iannotti, Mark RYDBF RDSB LN Buy Buy A-1-7 GBP 2,105 2,450 Royal Dutch Shell PLC Iannotti, Mark RDSB RDS/B US Buy Buy A-1-7 USD 83.73 96.3 Royal Dutch Shell PLC Shs A Iannotti, Mark RYDAF RDSA LN Buy Buy A-1-7 GBP 2,150 2,450 Royal Dutch Shell PLC Shs A Iannotti, Mark RDSA RDS/A US Buy Buy A-1-7 USD 85.49 97.45 Saipem Demichelis, Alejandro SAPMF SPM IM Buy Buy A-1-7 EUR 29.5 35 Salamander Energy PLC Knott, Andrew SALDF SMDR LN Buy Buy B-1-9 GBP 340.25 400 Saras SPA Schofield, James SAAFF SRS IM Buy Buy B-1-7 EUR 3.96 4.75 Schoeller Bleckmann Oilfield Equipment Demichelis, Alejandro SBOEF SBO AV Buy Buy C-1-7 EUR 67.28 80 Subsea 7 Inc Demichelis, Alejandro SBEAF SUB NO Buy Buy C-1-9 NOK 146 170 Tatneft Chapovskaya, Alina AOTTF TATN RU Buy Buy C-1-7 USD 8 8.75 Tatneft-GDR Chapovskaya, Alina XFTFF ATAD LI Buy Buy C-1-7 RUB 158.25 175 Tecnicas Reunidas SA Demichelis, Alejandro TNISF TRE SM Buy Buy C-1-7 EUR 53.75 60 Tullow Oil Knott, Andrew TUWLF TLW LN Buy Buy B-1-7 GBP 890 1,100 Wellstream Holdings plc Demichelis, Alejandro WELLF WSM LN Buy Buy C-1-9 GBP 1,363 1,600 Neutral Aker Solutions Demichelis, Alejandro AKKVF AKSO NO Neutral Neutral C-2-7 NOK 144 145 ERG SpA Schofield, James ERGZF ERG IM Neutral Neutral B-2-7 EUR 14.7 15 Expro International PLC Demichelis, Alejandro EXPRF EXR LN Neutral Neutral B-2-9 GBP 1,616 1,600 Gazprom Neft Yazhari, Hootan XGSOF SIBN RU Neutral Neutral C-2-8 USD 7.65 7.4 Gazprom Neft Yazhari, Hootan GZPFY GZPFY US Neutral Neutral C-2-8 USD 37.3 37.0 John Wood Group PLC Demichelis, Alejandro WDGJF WG/ LN Neutral Neutral B-2-7 GBP 446 500 Neste Oil Schofield, James NTOIF NES1V FH Neutral Neutral B-2-7 EUR 21.41 21 Novatek Chapovskaya, Alina NVFIF NVTK RU Neutral Neutral C-2-7 USD 8.75 9.45 Novatek GDR Chapovskaya, Alina XAOOF NVTK LI Neutral Neutral C-2-7 USD 94 101.5 Polski Koncern Nafto-GDR Yazhari, Hootan PSKZF POKD LI Neutral Neutral B-2-7 USD 40 44 Polski Koncern Naftowy S.A. Yazhari, Hootan PSKOF PKN PW Neutral Neutral B-2-7 PLN 40 44 Rosneft Yazhari, Hootan XRNOF ROSN RU Neutral Neutral C-2-7 USD 12.2 12.5 Rosneft-GDR Yazhari, Hootan OJSCF ROSN LI Neutral Neutral C-2-7 USD 12.15 12.5 SBM Offshore Demichelis, Alejandro SBFFF SBMO NA Neutral Neutral B-2-7 EUR 25.5 26 SeaDrill Ltd Demichelis, Alejandro SDRLF SDRL NO Neutral Neutral C-2-9 NOK 166.9 165 Soco Intl Knott, Andrew SOCLF SIA LN Neutral Neutral C-2-9 GBP 1,920 2,440


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EMEA Oil & Gas Coverage Cluster Detail

Company name Analyst ML

ticker BBG

symbol Old

rating New

rating Investment

opinion Currency Price* Price

objective StatoilHydro Syme, Alastair SLDKF STL NO Neutral Neutral B-2-8 NOK 198 200 StatoilHydro Syme, Alastair STO STO US Neutral Neutral B-2-8 USD 39.15 39.5 Surgutneftegas Chapovskaya, Alina SGTZF SNGS RU Neutral Neutral C-2-7 USD 1.23 1.29 Surgutneftegas Chapovskaya, Alina SGTZY SGTZY US Neutral Neutral C-2-7 USD 12.01 12.6 Surgutneftegas - ADR Pref Chapovskaya, Alina SGTPY SGTPY US Neutral Neutral C-2-7 RUB 5.95 6.24 Surgutneftegas Pref Chapovskaya, Alina XSRGF SNGSP RU Neutral Neutral C-2-7 RUB 0.6 0.63 Technip Demichelis, Alejandro TNHPF TEC FP Neutral Neutral B-2-7 EUR 60.27 62 Technip S.A. Demichelis, Alejandro TKPPY TKPPY US Neutral Neutral B-2-7 EUR 93.95 96.9 Vallourec Demichelis, Alejandro VLOUF VK FP Neutral Neutral B-2-7 EUR 199.14 195 Underperform Acergy SA Demichelis, Alejandro ACGYF ACY NO Neutral Underperform B-3-7 NOK 132.5 130 Acergy SA Demichelis, Alejandro ACGY ACGY US Neutral Underperform B-3-7 USD 25.93 25.8 BP plc Iannotti, Mark BPAQF BP/ LN Neutral Underperform A-3-7 GBP 608 630 BP plc Iannotti, Mark BP BP US Neutral Underperform A-3-7 USD 72.51 75.4 CGG-Veritas Demichelis, Alejandro CGPVF GA FP Neutral Underperform B-3-9 EUR 172.77 160 CGG-Veritas-ADR Demichelis, Alejandro CGV CGV US Neutral Underperform B-3-9 USD 53.78 50.02 Cia Espanola de Petroleos SA Schofield, James CEPPF CEP SM Sell Underperform A-3-7 EUR 70.2 50 Gas Plus Knott, Andrew XAGSF GSP IM Neutral Underperform C-3-9 EUR 7.2 7.1 Hellenic Petroleum SA Schofield, James HLCPF ELPE GA Sell Underperform B-3-7 EUR 10.44 8.25 Industrija nafte Yazhari, Hootan XIGDF INARA CZ Neutral Underperform C-3-7 HRK 2550.66 2,400 Industrija nafte-G Yazhari, Hootan XIAIF HINA LI Neutral Underperform C-3-7 USD 550.5 517.5 Magyar Olaj-es Gazipari Rt. (GDR.) Yazhari, Hootan MGYOY MOLD LI Neutral Underperform B-3-7 USD 76 71.4 Magyar Olaj-es Gazipari Rt. (Ord.) Yazhari, Hootan MMGYF MOL HB Neutral Underperform B-3-7 HUF 23,310 22,000 Oil Refineries Limited Yazhari, Hootan XORFF ORL IT Neutral Underperform C-3-8 ILS 3.0 2.9 Petrofac Ltd Demichelis, Alejandro POFCF PFC LN Neutral Underperform C-3-7 GBP 625.5 660 Petroplus Holdings AG Schofield, James PEPFF PPHN VX Neutral Underperform C-3-7 CHF 64.1 63 TGS-NOPEC Geophysical Co ASA Demichelis, Alejandro TGSNF TGS NO Neutral Underperform C-3-9 NOK 81 75 Total Syme, Alastair TTFNF FP FP Neutral Underperform A-3-7 EUR 56 57 Total Syme, Alastair TOT TOT US Neutral Underperform A-3-7 USD 87.26 89.1 Venture Production Knott, Andrew VTPRF VPC LN Sell Underperform B-3-7 GBP 875.5 700 ROC Oil Knott, Andrew XLOOF ROC LN Buy B-1-9 AUD 114.5 182 Source: Merrill Lynch Global Research *As of 30-May-2008


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Investment thesis Acergy SA Acergy is a leading player within the fast growing SURF and IMR markets and installation of trunklines. Whilst the medium term outlook for SURF remains solid given the limited vessel supply and strong demand for offshore development, we see a more gradual margin development on Acergy, whose margin expansion may be affected by (1) stubborn execution issues in Brazil, (2) a larger proportion of lower margin, shallow-water work and (3) slower order in-take in coming quarters.

Afren Our view on the stock is: (1) that management is well positioned to deliver a suite of further materially accretive asset deals in Nigeria (in partnership with indigenous companies) and elsewhere in Africa (in partnership with NOCs), (2) management is likely to make further significant progress over the next 12 months vis-à-vis the acquisition, and monetisation, of stranded Nigerian gas assets, and (3) over the medium term, high impact exploration activity

Aker Solutions Aker Solutions (ex Aker Kvaerner) is a leading player on deepwater/harsh environment services. We expect solid EPS growth until '10 driven by the Subsea/Prods and Technology segments. Aker has underperformed recently due to a change in management, and market speculation around execution difficulties in several projects. However, we firmly believe these concerns are overdone and see a potential re-rating as the market re-focuses on Aker's operational strengths and compelling valuation.

AMEC Amec's transformation from a diverse business support operator into a focused oil services player offers significant upside potential. We believe that the market is still failing to fully value: (1) Amec's compelling growth opportunities in oil sands and in the broader oil services market, (2) further margin expansion potential on the back of growing operational efficiencies and process standardisation (Operational Excellence programme), and (3) low execution risk model (cost-plus projects).

BG Group BG has the best near term earnings growth outlook in the sector, based on our forecasts. Furthermore, longer-term the company offers an excellent investment opportunity among the integrated oils driven by best in class E&P volume growth, a leading position in global LNG and a material position in a potentially vast new play in Brazil. We would also not rule out BG as a potential takeout candidate given the Group's strong competitive position in some of the industry's hottest spots.

Bourbon Bourbon's dramatic transformation from a diverse conglomerate into a leading offshore supply vessel (PSV) operator offers significant upside potential to investors. Our investment themes centre around our belief that the market is failing to fully value (1) its modern fleet with long-term contracts, (2) its ability to enter the profitable deepwater inspection, maintenance & repair (IMR) market, and (3) the earnings upside potential offered by the booming dry bulk shipping segment.


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BowLeven Our investment view on BowLeven centres around: (1) BowLeven as an under-valued resource play, with our base case SoP (on a potential transaction value basis) significantly lower than the current share price, and (2) the highly attractive risk/reward profile associated with the company's high impact 2008/9 Cameroonian exploration and appraisal campaign (although while the key IF well, due to be drilled in April/May 2008, may be 'low risk' it is clearly not 'no risk').

BP plc With the shares trading at a premium rating and with very high market expectations for a sharp rebound in earnings we think the shares are discounting perfect execution in 2008. Our experience tells us that such execution is unlikely and that there is still some unappreciated risk associated with the BP recovery story, particularly with respect to performance refining and marketing. Recent negative headlines in Russia also add some degree of near term event risk.

Cairn Energy Our investment view on Cairn centres around: (1) the strong potential for further material reserve and resource upgrades associated with the company's flagship Rajasthan assets (specifically Managala STOIIP/EOR), (2) the company's best-in-sector oil price leverage, (3) an expected un-winding of the Rajasthan time value of money discount as we approach 2H09 first oil, (4) the potential value un-lock and Cairn India M&A signal associated with a 2H08 Capricorn spin-off.

CEPSA CEPSA's low complexity assets and high cost base asset base makes the company highly susceptible to increasingly poor fuel oil cracks and a high crude environment. We believe the business will continue to underperform in 2008 and beyond, whilst CEPSA continues to trade at a completely unjustified valuation premium to the sector.

CGG-Veritas We expect CGG-Veritas - the world's largest listed seismic player - to sustain earnings growth over the next 2 to 3 years helped by the strength of the offshore seismic market. However, we see better opportunities elsewhere as we believe that the weaker USD will affect the company's margins more than peers. In particular, we believe that the impact will be felt in its Sercel (equipment) division which has a Euro-based cost structure but mainly sells in USD.

Dana Our investment view on Dana centres around the company's: (1) relatively undemanding valuation versus peers, (2) strong oil and UK gas price leverage, and (3) front-end loaded 2009 c10+ well exploration and appraisal campaign, with the attractive risk/reward profile associated with the potentially high impact Rinnes (UK) and WEB (Egypt) wells particularly attractive in our view.

Eni We view Eni as a relative-value opportunity within the large-cap Integrated Oils, trading at a considerable discount on both cash multiples and dividend yield. That discount is striking in that there is comparatively little to differentiate across the group on growth, margins and profitability. Eni's one area of comparative weakness, around E&P resources and reserves, looks to have been well-addressed by a series of bolt-on acquisitions that leave the business with good medium-term visibility.


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ERG SpA ERG demonstrated operational underperformance in each quarter during 2007, and we see ongoing risk of disappointment in 2008 from ERG's high cost base. In particular, ERG is highly exposed to energy costs and particularly high crude prices, which given our positive estimates for crude, we see as a significant weakness. We also note significant bottlenecks in the wind turbine industry, the focus of ERG's investment program over the coming years.

Expro Expro is the top 2 player in the global well flow management tools sector. Its technological pre-eminence positions the company well to benefit from the oil industry's move to more sophisticated deepwater projects, underpinning strong EPS growth through 2010. We believe that the AX-S (rigless intervention) project could prove transformational for Expro. In addition, we see Expro as an M&A candidate as its unmatched product portfolio could attract both financial and industry buyers.

Galp Energia GALP's core business in Portuguese downstream oil and wholesale gas offers considerable growth, but it is the company's minority interests in deepwater Brazilian exploration that drive the potential upside in the shares. A back-to-back drilling programme in the Santos Basin sees a constant stream of news flow, with the opportunity of further discoveries to build on the company's existing world-class assets Tupi and Jupiter.

Gas Plus Our investment case on Gas Plus is predicated on: (1) the company's in-line valuation (both on a multiple and NAV basis), (2) a view the company's base utility-type business is well understood by the market, and (3) and the lack of near-term significant exploration/appraisal events.

Gazprom Gazprom is very well positioned within the Russian oil & gas sector. Our investment thesis is based on: (1) highly attractive valuation relative to peers, (2) unique gas industry position underpinned by unrivalled resource base and resource access (3) sustainable & highly visible margin growth coming from domestic re-pricing and surging European prices (32% EPS CAGR) and (4) compelling growth opportunities beyond 2011.

Gazprom Neft G-Neft benefits from (1) its strategically advantaged status as Gazprom's "oil arm", making it a likely beneficiary of further consolidation in the Russian oil industry, (2) A deep resource base and (3) attractive valuation. Nonetheless, it has limited free float (4pct) and significant capex risks (as the company undergoes a transformational investment programme) . Gazprom could decide to increase liquidity.

Hellenic Petro Hellenic's low complexity assets and high cost base makes the company highly susceptible to increasingly poor hydroskimming/topping refining margins. The delay to 2011 of the critical EUR1.1 billion Elefsina upgrade is disappointing, given it is the only foreseeable catalyst of significance. We believe the business and shares will underperform unless alternative catalysts are announced. In 2008, we believe Hellenic will have the most disadvantaged macro exposure of


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any European Refiner.

INA INA's sector leading growth rate and formidable opportunity set make for an attractive equity story. But with the shares trading in line with our DCF valuation and a significant premium to sector peers, we believe the potential upside is now fully discounted in the shares. We also harbour concerns over INA's US dollar 3bn capex programme (delays and cost over runs) its exposure to domestic price caps on natural gas and oil products which limit its exposure to the strong Macro back drop.

KazMunaiGas-GDR Kazmunaigas is one of our favoured picks in the FSU oil universe. Our investment thesis is based on co-investing with the government, preferential status of onshore consolidator of the Kazakh oil reserves with the pre-emption rights on the oil and gas assets granted by the government, high leverage to the crude oil prices and attractive valuation.

Lukoil Lukoil is well placed amongst the Russian oil companies given strong earnings momentum underpinned by (1) a healthy pipeline of attractive growth projects in both E&P and R&M (2) its sector leading leverage to Russian refining and (3) potential upstream tax breaks from 2009. The shares trade at a deep discount to the Russian/CIS and European oil majors on 2009E EV/DACF.

Lundin Petroleum Our investment outlook is centred around our view of the attractive risk/reward profile associated with the company's potentially transformational 2008 exploration and appraisal campaign. Specifically, we would highlight the wells on the company's Sudanese, Russian and Norwegian (Luno) assets as particularly attractive

MOL MOL benefits from a sector leading refining base and has strong leverage to key themes in European oil downstream (diesel in particular).Nonetheless we note that (1),The shares trade at a slight premium to EEMEA refiners on 2009EV/DACF, (2) a lacklustre growth profile which enhances acquisition risks and (3) recent management decisions have demonstrated they are not necessarily acting in shareholders best interests, in our view.

Motor Oil-Hellas Motor Oil is a quality refiner with an advantaged asset base and a defensive refining margin given its inland premium. We regard Motor Oil's CDU expansion project (2010 completion) as highly attractive. The resultant diesel increase/fuel oil decrease position it well to benefit from our core secular refining themes. However, a lack of near term catalysts, and consistently high valuation offer less upside than other names in the sector currently.

Neste Oil We regard Neste as a high quality European Refiner, with an advantaged asset base and good exposure to our core secular themes. However, we see risks to 2008 earnings (largely on optimistic assumptions regarding the diesel line) and ongoing operational issues with the diesel line. Further, we believe the market is currently ascribing negligible value to the Biodiesel business, and overcapacity


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issues will continue to impact Shipping.

Novatek Novatek offers the most compelling production growth story in Russian oil and gas space highly levered to the domestic gas pricing liberalisation, however we see several risk factors to the share price: challenging relative valuation, the potential upside reflected in the price exposes the stock to increased risk for de-rating, and the issues of taxation and supply competition might negatively affect the earnings growth.

Oilexco Our view on Oilexco centres around: (1) the company's sector leading production growth (c22.5kb/d in 1Q08 to 45kb/d by March 2009), (2) high impact exploration and appraisal activity (with an average of at least one well result every 6/7 weeks for next two years), (3) a view that consensus commentators' estimates of the size of Oilexco's flagship Huntington asset are too low, (4) the company's high degree of oil price leverage, and (5) M&A.

OMV OMV offers potential as one of the fastest growing companies in the European integrated oil arena, a view that does not look priced-in to current market expectations. Growth is across two parts of the business: (1) Petrom (Romania), where we believe that new investment in the mature E&P segment will start to bear fruit in terms of volumes and costs, and (2) the ex-Petrom E&P business where there is a strong portfolio of new developments.

ORL ORL is currently executing an aggressive 5 year, US Dollar 1.1bn investment programme that will see it upgrading the Haifa refinery, improving the operational performance of the site and potentially expanding its petrochemicals operations internationally (China). These initiatives underpin 8pct EPS CAGR and a healthy dividend payout. Nonetheless we are prevented from taking a more constructive view given ORL's rich valuation, country specific risks and project execution/cost over run risks.

Petrofac Ltd Petrofac boasts strong positions in the M. East onshore oil and gas engineering & construction market and in facilities management services. The stock has performed strongly recently due to (1) its superior project execution, (2) steady development of its oil & gas production portfolio, and (3) new contract awards. However, we believe that the stock is fairly valued as prospects for further earnings upgrades – a driver of the stock - may be diminishing as E&C margins approach their peak.

Petroleum Geo PGS investment themes revolve around: (1) a geared play on the strong seismic market and (2) an attempt to close the gap with market leaders through M&A and R&D investment. Given the continuing strong seismic fundamentals and PGS adding new technologies, we believe there is a more level playing field between the top 3 players (CGG, Western Geco and PGS). With one of the most efficient fleets in the industry, we see potential for PGS to gain market share and capture premium rates medium term.


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Petroplus Petroplus is the most levered European Refiner to seasonal strength in refining margins. Key drivers include strong earnings momentum as key Coryton refinery returns to full capacity, integration of French refineries, continuing low cost, high return investment projects, potential to grow earnings through further accretive acquisitions and a long-term backdrop of the only credible M&A candidate in the sector.

PKN Orlen Whilst PKN's shares screen well on most of our growth and valuation metrics, we nonetheless harbour a number of near term concerns which ultimately justify this discount. More specifically (1) uncertainties regarding corporate governance, continued pressure from high oil prices (PKN's refineries consume more than 10percent of what they process), earnings risks presented by the Mazeikiu refinery and on going maintenance could weigh negatively.

Premier Oil Our investment view primarily centres around our view of the relatively attractive risk/reward profile associated with the company's much-anticipated 2008 high impact Vientamese exploration and appraisal campaign.

RD Shell Shs A We are positive on the shares relative to the other European Majors. Investment themes include: 1) favourable earnings leverage (European gas/low exposure to PSCs), 2) a high exposure relative to industry peers to Asian growth markets, 3) a deep portfolio of long-term upstream opportunities that underpins an improvement in reserve life ratios, 4) a leading global LNG franchise, 5) an undemanding valuation, 6) a supportive dividend yield.

Regal Petroleum We see Regal as combining: (1) a high quality appraisal and development asset, (2) a highly credible management team, and (3) an exceptionally attractive absolute and relative valuation.

Repsol-YPF We view Repsol-YPF as a corporate restructuring story with three elements: (1) improved financial and valuation transparency of YPF subsidiary that will unlock trapped value and refocus remaining business around core competitive strengths, (2) a strong potential pricing theme in YPF that will lead to a higher valuation for this part of the business, and (3) an unappreciated medium-term niche growth story in Repsol, a business that is currently valued at a considerable discount to sector peers.

ROC Oil In our opinion, Roc Oil is well positioned to grow its future production through a mix of exploration appraisal and development drilling success. we view Roc as a compelling investment proposition driven by its exploration program in Angola. In our view, at current prices investors are getting free exposure to Roc's potential high impact exploration program. Supporting our base valuation is production from five assets contributing over 10,000bopd net, driving healthy free cash flow.

Rosneft Whilst Rosneft has an attractive long term growth profile & privileged access to resource, we believe the shares face a number of shorter term operational and


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financial risks which prevent us from taking a more constructive view. We highlight: (1) Project execution and cost over run risks (2) management changes and (3) share over hang risks. With the shares trading on a premium sector rating we believe they are already discounting perfect execution.

Royal Dtch Shell We are positive on the shares relative to the other European Majors. Investment themes include: 1) favourable earnings leverage (European gas/low exposure to PSCs), 2) a high exposure relative to industry peers to Asian growth markets, 3) a deep portfolio of long-term upstream opportunities that underpins an improvement in reserve life ratios, 4) a leading global LNG franchise, 5) an undemanding valuation, 6) a supportive dividend yield.

Saipem In our view, Saipem continues to be a key holding in the European oil services space given its global footprint and unique execution track record. Based on its record backlog, we forecast solid EPS growth through to 2010 mainly driven by (1) a robust performance in the Offshore Construction division and (2) the expansion of the construction and drilling fleets. We also believe that its high local content position places Saipem well in the 'hot' areas of the industry: M.East, Caspian, Africa.

Salamander Our investment view centres around: (1) the company's relatively undemanding valuation, (2) the relatively attractive risk/reward program offered by the company's multi-well 2008/9 exploration and appraisal program, (3) a view management are well-positioned to deliver further value South East Asian asset deals, and (4) a view of the strong potential for further reserve upgrades associated with the recently acquired GFI assets.

Saras SPA Saras is well positioned to exploit our core theme of secular diesel strength, and a preference for upgrading capacity. We expect diesel to outperform gasoline in the long-term and Saras' earnings are 5.9x more levered to diesel than gasoline, the highest relative leverage amongst peers. Saras has the 2nd highest diesel yield in the sector. Saras' defensive characteristics position it well for less certain times in global refining, whilst maintaining upside and enabling potential acquisitions.

SBM Offshore SBM - the world's largest provider of FPSOs – appears fairly valued to us. Whilst demand for FPSOs appears strong beyond the end of the decade - SBM is well positioned to secure 2-3 new large FPSO contracts medium term, we see growing competition capping the company's ability to continue pushing prices up. In addition, we see growing margin pressures in the Turnkey division due to (1) a larger reliance on sub-contractors than peers and (2) a limited ability to pass through cost increases.

SBO Whilst boasting a dominant position in the non magnetic directional drilling components niche, Schoeller-Bleckmann's growth story appears to offer limited upside potential. This is mainly due to looming earnings pressures near term (eg, higher energy costs and weaker USD) and limited ability to increase output prices. In addition, as management seeks to inject further growth into the company by entering new markets/regions, we also see increased M&A risk in


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the medium term.

SeaDrill Seadrill - the largest offshore driller in Europe - is set to record strong earnings growth over the next 2-3 years on the back of an ambitious newbuild programme. Although the fleet expansion provides SDRL with unique exposure to the tight deepwater drilling market (and rising dayrates), we remain cautious on the execution risks that the newbuild programme presents.

Soco Intl Our current investment stance is predicated on our view that, at current share price levels, the risk profile associated with the company's potentially transformational TGD and E South E&A wells are appropriately priced in. We would look to review this stance either on a significant pull-back in the shares or following the results of these wells.

StatoilHydro Despite offering the best large-cap leverage to rising oil prices and a decent valuation discount, our reluctance to take a more aggressive stance on StatoilHydro centres around reserves and resource. End 2007 SEC reserve life of 9.3 years is 25 percent lower than end-2001 levels and is now the lowest of the European peer group, an issue for what is predominantly an upstream company. That question-mark over medium-term portfolio visibility warrants a significant discount, in our view.

Subsea 7 Inc Our positive view on Subsea 7 centres around: (1) a geared play on the strong SURF market and (2) attempts to re-scale the business using new investment to broaden its product offering into a stubbornly tight SURF market. Consequently, we see scope for Sub7 to gain market share in W.Africa and win larger projects than traditionally focused on. This should drive solid EPS growth through the end of the decade, making Sub7 one of the fastest growing companies in the Euro Oil Services.

Surgutneftegas We view Surgutneftegas as being more of a "trading" stock, often driven by takeover speculation. Potentially there are several catalysts to the stock: Kirishi refinery upgrade, production from Talakan field with access to the East Siberian Pipeline, dividend hike. However, in our view operational risks and poor corporate governance undermine the potential upside. We expect the stock to remain volatile and perhaps at some point the company to indeed be taken over by another company.

SURGUTNEFTEG-PFD We view Surgutneftegas as being more of a "trading" stock, often driven by takeover speculation. Potentially there are several catalysts to the stock: Kirishi refinery upgrade, production from Talakan field with access to the East Siberian Pipeline, dividend hike. However, in our view operational risks and poor corporate governance undermine the potential upside. We expect the stock to remain volatile and perhaps at some point the company to indeed be taken over by another company.

Tatneft Our investment view is based on potential upside from bitumen project and the


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greenfield refinery as main catalysts and attractive relative valuation. Tatneft's deep reserve base with the largest reserve life of 32 years among our oils universe and stable operations well position the company among other oil producers, which are facing declining production from mature regions and necessity to enter new regions with limited infrastructure and high capex requirements

Technip Technip remains a strong player in the subsea construction sectors however the company is hindered by its onshore segment which has been plagued by cost overruns and delays primarily relating to LNG projects in Qatar. Whilst operational performance in Onshore is likely to improve gradually, we continue to see margins well below the peer group. This could offset the positive impact of supportive contract wins near-term and a strong position in the tight subsea installation/flexibles market.

Tecnicas Reunida Tecnicas is a leading onshore EPC contractor specialising in downstream oil & gas projects in the Middle East. We believe Tecnicas' growth story offers further upside to investors based on (1) a strong outlook for the downstream market, (2) the ability to continue growing its order book helped by expanding engineering capabilities, and (3) the potential to continue improving margins on the back of solid project execution.

TGS-NOPEC TGS is a niche player focused on the seismic multi-client market in the GoM. Recent large discoveries in region have opened up a new geological play and spurred strong demand for seismic data. TGS should benefit from the tight supply/demand balance that the sector is experiencing and looks well positioned to continue posting solid margins. TGS's steep discount to peers is unwarranted in our view, particularly as the company generates substantially higher EBIT margins than other seismic players.

Total Total, in principle, offers a superior operational and financial performance to large-cap Integrated peers. However, targets to monetise and grow remain a key challenge in an industry in the grips of hyper-inflation and supply chain pressures. Indeed, Total is not immune to the pressures on growth, cost inflation and earnings being felt across the industry, and we would contend that the scale of the differentiation is perhaps more modest than implied by the current premium sector rating.

Tullow Oil Our view on Tullow centres around: (1) the attractive risk/reward profile associated with the company's 08/9 Ugandan/Ghanian exploration and appraisal campaigns, and (2) that the market is overly focusing on these assets at the expense of the company's other key medium term exploration assets (i.e. India, Trinidad and Tobago, Cote D'Ivoire, Guyanne, Madagascar, Tanzania) which we see as having the potential to generate a new Uganda/Ghana size hub for the company.

Tupras The opinion and estimates are under review.


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Vallourec We believe that the recent improvement in: (1) pricing dynamics which should offset cost pressures, and (2) in activity levels in North America should allow Vallourec offset the impact of rising raw materials costs (energy, iron ore) and the weaker US$. This should offer strong earnings momentum in the near term. We also believe that the company's new Brazilian seamless tubes plant to be built by late 2010 - which we value at more than EUR20/sh - is failing to be fully valued by the market.

Venture Production Our view on Venture centres around: (1) the stock's fundamental overvaluation versus peers, (2) consensus multi-year earnings and NAV cuts have not been fully reflected in performance, (3) consensus continues to under-appreciate asset risk, (4) the company's lack of meaningful near-term exploration newsflow, (5) challenging UKNS asset market conditions, and (6) management's poor long-term track record of value creation (ex-macro environment).

Wellstream Wellstream is a leading supplier of deepwater flexible pipes with a focus on Brazil – a market that we believe will remain tight beyond 2010. The company's investment case centres around (1) a geared play on the strength of the flexibles market, particularly in Brazil, (2) potential economies of scale on the back of recent capacity expansions, and (3) the growth and earnings upside potential that the company's product/regional broadening offers.

Wood Group We see Wood Group - a leading player in the engineering of deepwater facilities and pipelines - continue posting healthy earnings growth in the medium term driven by its Engineering and Gas Turbine segments. However, given Wood's valuation premium to peers, we believe that there are more attractive risk/reward opportunities in the sector. Price objective basis & risk Acergy SA (ACGYF / ACGY) Our NOK130 price objective on Acergy is based around three relative valuation metrics: Economic returns: EV/Invested Capital of 1.6x versus CROCE/WACC of 2.1x: sector average 1.7x and 2.5x, respectively: PEG ratio: 2.9x, the highest in the European oil services sector which averages 1.1x: FCF Yield/EPS Growth: 2009E FCF Yield of 5.7% versus 2007-10E EPS growth of 42%: sector average of 3.4% and 19.5%, respectively. Acergy trades on a P/E of 15.9x in 2009E – a 6% premium to the European oil services sector. On relative metrics we see value around NOK130/US$25.9 share/ADR. Specifically, at that price Acergy would trade inline with the sector trend on a basis of economic returns (CROCE/WACC) versus EV/invested capital. Risk to our price objective Industry activity levels: Our forecasts are based around an expectation that commodity prices (oil) will continue to support an improving level of activity for oilfield services from the oil companies. Project execution risk: Many of Acergy’s contract awards are secured on an EPC basis in which the contractor takes on full project execution on a turnkey basis. As a result, significant cost overruns and/or project delays could have a negative impact on earnings. Currency: For all purposes Acergy is a US$ company – the majority of the revenues and majority of costs are in US$. The biggest single impact of currency is the translation impact on the Oslo-listed (NOK-quoted) share.


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Afren (AFRNF) Our 221p/sh Afren Price Objective is set at a c70% premium to NAV of 130p/sh. We continue to set our European E&P Price Objectives around NAV as we believe: (1) this is the only valuation framework which accurately captures the underlying cashflow and earnings generating ability of the company’s asset bases over time: and (2) that, as such, the company’s should trade at a premium or discount to this metric depending upon such factors as management quality/delivery track record, the strength of the macro environment, near/medium-term newsflow potential, prevailing levels of M&A activity in the sector, the likelihood of management delivering value accretive asset deals which this framework specifically precludes, and political risk issues. The premium to NAV in our Afren Price Objective reflects our high degree of confidence that company’s management team will deliver a series of materially value accretive West African (particularly Nigerian) asset deals and new licence awards over the coming 12 months and the significant premium to which spot oil prices are trading versus the ML long-term assumption of US$70/bl real. Risks to the attainment of our Price Objective are Brent oil price, currency (particularly US$:GBP), political/fiscal risk, an unexpected lull in forward deal activity, unexpected reservoir issues, unexpected development kit procurement-induced timing delays and a period of sustained exploration/appraisal disappointment.

Aker Solutions (AKKVF) We base our NOK145/share price objective for Aker Solutions around three relative valuation metrics: Economic returns: EV/Invested Capital of 2.2x vs CROCE/WACC of 2.9x: sector average 1.9x and 2.5x, respectively: PEG ratio: 0.9x, c.15% discount to the sector average of 1.05x: FCF Yield/EPS growth: 2009E FCF yield of 7% versus 2007-10E EPS growth of 17%: sector average of 3% and 20%, respectively. Specifically at NOK145/share, Aker would trade in line with the peer group on a yield/growth basis and at a 10% discount to the group in terms of the valuation of growth (PEG ratio), which we think fairly reflects Aker's lower margins than peers. Risks: Industry activity levels: Our forecasts are based around an expectation that commodity prices (oil) will continue to support an improving level of activity for oilfield services from the oil companies. That said, there is currently a wide gap between the industry’s cash generation (USD55-95/bbl oil) and investment basis (USD40/bbl) – it would take a dramatic fall in oil prices, in our view, to see industry spending patterns change significantly. Project execution risk: The majority of Aker’s contract awards are secured on an EPC basis whereby the contractor takes on full project execution on a turnkey basis. As a result, significant cost overruns and/or project delays could have a negative impact on earnings.

AMEC (AMCBF) We base our 980p price objective on Amec around 3 relative valuation metrics: - Economic returns: EV/Invested Capital of 1.5x versus CROCE/WACC of 2.1x: sector average 1.8x and 2.5x, respectively - PEG ratio: 0.6x vs sector of 1.1x and UK peers (WG, PFC) on 0.8x - FCF Yield/EPS growth: 08E FCF yield of 3% vs 08-10E EPS growth of 31%: sector average of 3.3% and 19%, respectively Specifically, at that price Amec would trade in-line with UK peers (WG, PFC) on both the basis of economic returns and the valuation of growth (PEG ratio). Risks: Industry activity levels: Our forecasts are based around an expectation that commodity prices (oil) will continue to support an improving level of activity for oilfield services. That said, there is currently a wide gap between the industry’s cash generation (US$65-120/bbl oil) and investment basis (US$40-50/bbl) – it would take a dramatic fall in oil prices, in our view, to see industry spending


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patterns change significantly. Project execution risk: Amec’s contract awards are partly secured on an EPC basis in which the contractor takes on full project execution. Thus, significant cost overruns/project delays could impact earnings. Currency risk: Amec’s revenues are largely in US$ (or US$-linked) while a part of its costs is £-denominated. Thus, a significant depreciation in the US$ could dampen Amec’s margins. Acquisition risk: Amec has stated its aim to consolidate the E&C sector, resulting in some (small) acquisition risk, in our view.

BG Group (BRGXF / BRGYY) Our price objective of 1,600/share equates to a 2008 prospective PE multiple of 17.5x, some 90% higher than the sector average. Our PO reflects a view that BG's management has the opportunity set to continue to create shareholder value (particularly upstream/LNG) and deliver underlying earnings growth c. 2x the sector average over a multi year period. In addition, we see M&A potential as providing price suport. Risks to our objective are Brazilian exploration disappointment, adverse currency moves and increased government intervention and regulation in Kazakhstan.

Bourbon (BOUBF) Bourbon trades on 10.1x ‘09E P/E, a c32% discount to the sector average. Given its strong growth prospects, we believe that valuation of growth (PEG ratio) is a key metric to value Bourbon. At our PO of EUR58/share Bourbon would trade in line with the European oil service sector on the basis of valuation of growth. Our valuation screens are based on three relative metrics: economic returns, PEG ratios and FCF yield/EPS growth. Currently Bourbon trades on: Economic returns: EV/Invested Capital of 1.1x vs CROCE/WACC of 1.7x: sector average 2.0x and 2.8x, respectively: PEG ratio: 0.6x, a c.40% discount to the sector average of 1.1x: FCF Yield/EPS Growth: 2008E FCF Yield of -11.8% versus 2007-10E EPS growth of 17%: sector average of 2.4% and 20%, respectively. Risks Activity levels: Our forecasts are based on an expectation that high oil prices will continue to support a high activity level for oilfield services. That said, in our view a dramatic fall in oil prices to below USD40/bbl would lead to a significant drop in industry spending. Project execution/unanticipated downtime risk: Bourbon typically takes on full project execution risk on its contracts. As a result, significant cost overruns and/or unanticipated downtime preventing vessels from working negatively impact earnings. Currency risk: The majority of Bourbon’s cost base is EUR denominated whilst the vast majority of revenues are USD denominated. Thus, a weakening USD could materially affect earnings.

BowLeven (BWLVF) Our 480p/sh BowLeven Price Objective is set at a c31% premium to our 368p/sh NAV. Key assumptions in the construction of our NAV are long-term: (1) oil price of US$75/bl: and (2) US$:GBP of 2.00. We continue to set our European E&P Price Objectives around NAV as we believe: (1) this is the only valuation framework which accurately captures the underlying cashflow and earnings generating ability of the company’s underlying asset bases over time: and (2) that, as such, the company’s should trade at a premium or discount to this metric depending upon such factors as management quality/delivery track record, the strength of the macro environment, near/medium-term newsflow potential, prevailing levels of M&A activity in the sector, the likelihood of management delivering value accretive asset deals which this framework specifically precludes, and political risk issues. The premium to NAV in our BowLeven Price Objective reflects our belief that company’s management team will deliver a series of value accretive asset deals/new license awards over the coming 12 months and the


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significant premium to which spot oil prices are trading versus the ML long-term assumption of US$70/bl real. Risks to the attainment of our Price Objective are Brent oil price, currency (particularly US$:GBP), political/fiscal risk, unexpected reservoir issues, unexpected development kit procurement-induced timing delays and a period of sustained exploration/appraisal disappointment.

BP plc (BPAQF / BP) We set a price objective of 630p/share. At our target price the shares would trade on 10.3x 2009E P/E in line with the sector average multiple which we view as appropriate given BP's medium term growth, profitability and dividend distribution potential relative to industry peers. Risks (upward and downward) to our PO are sharp moves in oil and gas prices and the USD. Negative risks are unanticipated government intervention and regulation, project execution risk and the general risk of increased taxes and tariffs.

Cairn Energy (CRNCF) Our 4170p/sh Cairn Energy Price Objective is set at a c20% premium to our 3475p/sh NAV. Key assumptions in the construction of our NAV are: (1) long-term oil price of US$70/bl: (2) first MBA oil in 2009: (3) no MBA cess tax is paid: and (4) Cairn receives an average 8% discount to Brent for its Rajasthan crude. We set our European E&P Price Objectives around NAV as we believe: (1) this is the only valuation framework which accurately captures the underlying cashflow and earnings generating ability of the company’s underlying asset bases over time: and (2) that, as such, the company’s should trade at a premium or discount to this metric depending upon such factors as management quality/delivery track record, the strength of the macro environment, near/medium-term newsflow potential, prevailing levels of M&A activity in the sector, the likelihood of management delivering value accretive asset deals which this framework specifically precludes: and political risk issues. The premium to NAV in our Cairn Energy Price Objective reflects the significant premium to which spot oil prices are trading versus the ML long-term assumption of US$70/bl real. Risks are Brent oil price, currency (particularly US$:GBP), political/fiscal risk (particularly around the Rajasthan midstream agreement), unexpected reservoir issues, unexpected development kit procurement-induced timing delays and a period of sustained exploration/appraisal disappointment.

CEPSA (CEPPF) Our price objective of EUR50.00/share values Cepsa on a multiple of 12.5x 2008E EV/DACF, a 60% premium to the European Refiners average of c.7.5x. Whilst, we believe that this multiple is appropriate, given that it is still well below Cepsa's historic premium, we note Cepsa's high cost base and disadvantaged asset base. Risks to our price objective are (1) refining margins surpising on the upside, (2) reduced cost inflation, (3) advantageous changes in refining, power or environmental regulation, (5) material exploration discoveries. The share price could decline in excess of our PO if refining margins worsen or operating costs rise on an ongoing basis.

CGG-Veritas (CGPVF / CGV) Our EUR160/share price objective for CGG-Veritas is based on three relative valuation metrics: Economic returns: EV/invested capital of 0.7x versus CROCE/WACC of 2.0x, compared with a sector average of 1.7x and 2.5x, respectively PEG ratio: 0.5x, vs sector average of 1.1x FCF yield/EPS growth: 2009E FCF yield of 10.7% versus 2007-10E EPS growth of 16%, with a sector average of 3.4% and 19.5% respectively. Our base-case estimates put CGG on a


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P/E of 12.3x 2009E – a c.18% discount to the European oil services sector. On relative metrics, we see value up to EUR160 a share. At that price, CGG would trade in line with the sector on valuation of growth (PEG ratio) and economic returns. Risks to our price objective Industry activity levels: Our forecasts are based on an expectation that commodity prices (oil) will continue to support an improving level of activity for oilfield services from the oil companies. That said, there is currently a wide gap between the industry’s cash generation (USD55-65/bbl oil) and investment basis (USD40/bbl) – it would take a dramatic fall in oil prices, in our view, to see industry spending patterns changing significantly. Project execution/unanticipated downtime risk: Seismic companies typically take on full project execution risk on their contracts. As a result, significant cost overruns and/or project delays can have a negative impact on earnings.

Dana (DNPXF) Our 2325p/sh Dana Price Objective is set at a 20% premium to our 1935p/sh. NAV. Key assumptions in the construction of our NAV are long-term: (1) oil price of US$70/bl: (2) UK gas price of 45p/therm: and (3) US$:GBP of 2.00. We continue to set our European E&P Price Objectives around NAV as we believe: (1) this is the only valuation framework which accurately captures the underlying cashflow and earnings generating ability of the company’s underlying asset bases over time: and (2) that, as such, the company’s should trade at a premium or discount to this metric depending upon such factors as management quality/delivery track record, the strength of the macro environment, near/medium-term newsflow potential, prevailing levels of M&A activity in the sector, the likelihood of management delivering value accretive asset deals which this framework specifically precludes, and political risk issues. The premium to NAV in our Dana Price Objective reflects the likelihood of management delivering further value accretive deals. Risks to the attainment of our Price Objective are Brent oil price, currency (Particularly US$:GBP), political/fiscal risk, unexpected reservoir issues, unexpected development kit procurement-induced timing delays and a period of sustained exploration/appraisal disappointment.

Eni (EIPAF / E) Our price objective of EUR 29/share for Eni is based on a multiple of 6.5x 2009e EV/DACF, a 5% premium to the current large-cap European integrated oil peer group average, and a level that we believe is consistent with Eni's strong growth opportunity and superior dividend distribution relative to peers. Risks to our price objective are a significant decline in the price of oil or a contraction in downstream margins, currency (US$-translation impact) and government regulatory or fiscal intervention.

ERG SpA (ERGZF) Our price objective of EUR15.00/share values ERG on a multiple of c.8.5x 2008E EV/DACF, inline with the pan European Refiners average. We believe that in the context of ongoing asset sale speculation and significant recent operational performance a slight premium could be appropriate. Risks to our price objective are (1) refining margins: ERG is one of the most leveraged European Refiners to refining margins, (2) further cost escalation – given lower operational efficiency than peers, (3) changes in refining, power or environmental regulation, (4) ongoing permitting delays and cost overruns in its core investment in Wind Power, and (5) unplanned outages and/or project delays, particularly given earnings from its key Coastal Refining business are concentrated from the Priolo supersite.


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Expro (EXPRF) Our 1,600p price objective on EXR is based on the high probability (+80%) of the company being taken over - due to the uniqueness of its product portfolio and global presence - and assumes a take out multiple of 12x EV/EBITDA (average multiple of comparable deals). Risks: Higher bid not materialising: Following Candover’s offer of 1,435p for EXR, Halliburton confirmed it has been in discussions with management, which could lead to a higher counter offer. There is a risk that a higher bid may not materialise. In such a case we see the downside limited to the original offer. Industry activity levels: Our forecasts are based around an expectation that commodity prices (oil) will continue to support an improving level of activity for oilfield services from the oil companies. That said, there is currently a wide gap between the industry’s cash generation (US$65-100/bbl oil) and investment basis (US$40-50/bbl) – it would take a dramatic fall in oil prices, in our view, to see industry spending patterns change significantly. Project execution risk: Some of EXR’s contract awards – eg, Production Solutions segment - are secured on a turnkey basis under which the contractor takes on full project execution on a lump sum basis. Thus, cost overruns and/or project delays could have a negative impact on earnings. Currency: EXR’s cost base is largely GBP-denominated. However, its revenue is mainly US$ linked. As a result a weakening US$ could impact EXR’s earnings.

Galp Energia (GLPEF) Our price objective of EUR 20/share based on our sum-of-parts, incorporating the Refining & Marketing business at 8x EV/DACF, Gas & Power at 9x EV/DACF and the Exploration & Production business at an average of US$5.6/boe. Note that in the E&P segment we include an assessment of the risked potential of the ongoing exploration programme in Brazil. The premium we have built into the price objective reflects the reality that the Risks are oil prices and refining margins, Portuguese electricity and natural gas prices and changes to Government regulation and fiscal terms.

Gas Plus (XAGSF) Our EUR 7.1/sh Gas Plus Price Objective is set at around 30% discount to our EUR 10.1/sh NAV. The key assumptions in the construction of our NAV is our real long-term oil price forecast of US$70/bl. We continue to set our European E&P Price Objectives around NAV as we believe: (1) this is the only valuation framework which accurately captures the underlying cashflow and earnings generating ability of the companies’ underlying asset bases over time: and (2) that, as such, the shares should trade at a premium or discount to this metric depending upon such factors as management quality/delivery track record, the strength of the macro environment, near/medium-term newsflow potential, prevailing levels of M&A activity in the sector, the likelihood of management delivering value accretive asset deals which this framework specifically precludes: and political risk issues. The discount to NAV in our Gas Plus Oil Price Objective reflects poor liquidity and low free float. Risks to the attainment of our Price Objective are Brent oil price, UK gas price, currency, unexpected reservoir issues, exploration and appraisal risk: and cost inflation.

Gazprom (RGZPF / OGZPY) Our price objective of USD18.75/share is based on target P/E multiple of 11x 2008E Earnings, in line with its historical average forward earnings multiple and its international peers. The risks to our price objective are oil prices, failure to contain costs, lower domestic gas price increases, adverse tax changes, value destruction from diversification in to non-core businesses and failure to execute


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huge investment projects on-time and within budget. Gazprom's increased size has raised expectations for corporate disclosure, which the company may not be able to match.

Gazprom Neft (XGSOF / GZPFY) Our price objective of US$ 7.4/share for Gazprom neft is based on a multiple of 6.8x 2009e EV/DACF, in line with the Russian peer group average. Whilst Gazprom Neft has significant longer term growth potential and preferential access to resource (on account of being Gazprom's oil arm), we believe the company will need to increase capex significantly to achieve longer term targets. Furthermore, the company's existing production base faces significant near term decline given the maturity of its underlying asset base. Risks to our price objective are a significant decline in the price of oil or a contraction in downstream margins, currency (US$-translation impact), being forced to acquire Gazprom's oil assets at an unfavourable price and government regulatory or fiscal intervention.

Hellenic Petro (HLCPF) Our price objective of EUR8.25/share values Hellenic on a multiple of 8.2x 2008E EV/DACF, a modest c.5% discount to the European Refiners average. Historically, Hellenic has traded at a significant premium to the sector, but we believe this premium is unjustified given Hellenic’s low complexity asset base which results in the most disadvantaged exposure to our core themes (strength in diesel and crude, risks to gasoline, and continued weakness for fuel oil). Due to the delayed completion of Hellenic’s Elefsina refinery, which we believe could be completed in 2012, this disadvantaged exposure is locked in over the forecast period. Risks to our price objective are (1) refining margins – particularly if the fuel oil crack improves from record lows: and (2) risk of takeover speculation – as with other European refiners, takeover speculation could emerge, however the large government stake makes any such speculation less credible in our view. The share price could decline in excess of our PO if fuel oil cracks worsen further: operating costs rise on an ongoing basis: or a further delay/cost overrun to the Elefsina upgrade is announced.

INA (XIGDF / XIAIF) Our HRK2,400/share price objective is based on absolute valuation metrics. In particular, we have conducted a sum-of-the-parts and DCF analysis, both of which support our fair value of HRK2,400, with our SoP and DCF analysis suggesting an equity value of HRK2,426/share and HRK2,370/share respectively. Risks to our price objective are (1) significant movements in refining margins, petrochemical margins, oil prices and the HRK/US$ exchange rate, all of which have become increasingly volatile, (2) Political intervention by the government (INAs majority shareholder) in pursuit of its social agenda. This could include the introduction of price caps on fuels as well as continuing to burden INA with the responsibility of importing expensive natural gas from Russia to sell at lower regulated prices in the domestic market, (3) limited share free float and (4) cost over runs and delays on INAs 5 year US$3.1bn capex programme.

KazMunaiGas-GDR (XZKEF) Our $38/GDR price target is based on target 2009E earnings multiple of 8.2x not including the expected contribution from further value accretive M&A (PetroKazakhstan, KazakhoilAktobe and Kazturkmunai). At $38/GDR, KMG E&P would trade at a modest 4% discount to our current 2P NAV ($39/GDR using $75/bbl Brent long-term and 10% discount rate). This compares favourably to an average premium for the European E&Ps of c.40%. We think the company’s


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rating will continue to improve as market confidence in KMG E&P grows, with further evidence of value-accretion through M&A emerges and the potential of the exploration portfolio is better understood. The risks to our investment case and price objective are the relationship with the government and the national oil company, KMG E&P’s parent. This risk can manifest itself in additional domestic supply obligations, higher taxes and related party transactions, including asset deals, at unfavourable prices. KMG E&P earnings and cash flow are also more oil price sensitive than most of the oil peers.

Lukoil (LUKOF / LUKOY) Our 12-month price objective of US$135/share is based on a target EV/DACF multiple (2007E and 2008E), benchmarking Lukoil against its European and US oil peers, but adjusting the multiple for Lukoils higher volume growth, deep reserves base, and sector leading refining portfolio but also for a higher cost of capital (WACC 9.5% vs 7.5% for the international majors). At our price objective of US$135/share, Lukoil would trade on 2009E EV/DACF of 7.5x a 5-10% discount to our target multiple for Russian/CIS peers. The risks to our price objective are (1) Operational issues, mainly failure to meet production targets but also opex and capex control. (2) Government Lukoil has a good relationship with the Russian government but its main competitors are Rosneft and Gazprom, both government controlled entities, changes to fiscal terms are always a risk, particularly for Lukoil which benefits significantly from the current fiscal favouritism of the downstream in Russia. (3) Emerging markets Lukoil is one of the most liquid stocks in emerging markets. Any significant change in investor appetite for emerging market risk will likely impact Lukoil. (4) Commodity prices Lukoils earnings are to a large degree dictated by international oil prices, international and domestic refining margins and domestic gas prices over which it has little control or influence.

Lundin Petroleum (LNDNF) Our 104SEK/sh Lundin Price Objective is set at a c35% premium to our 77SEK/sh Net Asset Value (NAV). We continue to set our European E&P Price Objectives around NAV as we believe: (1) this is the only valuation framework which accurately captures the underlying cashflow and earnings generating ability of the company’s underlying asset bases over time: and (2) that, as such, the company’s should trade at a premium or discount to this metric depending upon such factors as management quality/delivery track record, the strength of the macro environment, near/medium-term newsflow potential, prevailing levels of M&A activity in the sector, the likelihood of management delivering value accretive asset deals which this framework specifically precludes, and political risk issues. The premium to NAV in our Lundin Price Objective reflects the significant premium to which spot oil prices are trading versus the ML long-term assumption of US$70/bl real. Risks to the attainment of our Price Objective are Brent oil price, currency (particularly US$:GBP), political/fiscal risk (particularly in Russia and Sudan), unexpected reservoir issues, unexpected development kit procurement-induced timing delays and a period of sustained exploration/appraisal disappointment.

MOL (MMGYF / MGYOY) Our price objective of HUF22,000/share for MOL is based on a multiple of 10x 2009e P/Ein line with the Emerging EMEA refiners. Whilst we believe a premium


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could be justified on the back of its highly complex refining asset base and strong cash flow generation, this is fully offset by (1) Management’s commitment to defending against potential acquisitions, thereby marginalising shareholder interests, (2) The high energy usage and losses at its refineries (presenting significant earnings risk in a high oil price environment), (3) MOL’s disproportionate dependence on Russian crude as a feed stock for its refineries and (4) a lack of significant organic growth opportunities, ultimately presenting acquisition risks Upside risks to our price objective are (1) significant upward movements in refining margins, petrochemical margins, oil prices and the HUF/US$ exchange rate, all of which have become increasingly volatile, (2) Significant exploration success in Hungarian tight gas and (3) favourable changes to the domestic regulatory regime

Motor Oil-Hellas (MOHCF) Our price objective of EUR20.50/share values Motor Oil on a multiple of c.15x 2008E P/E, a slight premium to the European Refiners average of c.14x. We believe that this premium is justified given Motor Oils advantaged asset base with leading exposure to our core refining themes (strength in diesel and crude, risks to gasoline, and continued weakness for fuel oil), earnings quality, sector leading 2008-10 growth and the highest dividend yield in the sector. Risks to our price objective are (1) refining margins (2) acquisition risks Motor Oil could potentially seek Retail acquisitions in the region (3) credit risk, given its high levels of gearing relative to the sector (4) changes in refining or environmental regulation, and (5) unplanned outages and/or project delays, particularly given its single asset refining exposure.

Neste Oil (NTOIF) Our price objective of EUR22.25/share values Neste on a multiple of c.14x 2008E P/E, inline with the European Refiners average. We believe that this level is appropriate given Neste's high gasoline risk, lesser earnings quality over recent quarters and recent low profitability in its Shipping and Specialty Products, despite its high complexity asset base, and exposure to our core theme of strength in diesel. Risks to our price objective are (1) refining margins, (2) project completion – the high complexity diesel line has had ongoing issues and the planned upgrading project at Naantali would be exposed to project risk, (3) continued underperformance by the specialty products and shipping businesses, (4) changes in refining or environmental regulation, and (5) unplanned outages, particularly given earnings concentration from the Porvoo refinery asset.

Novatek (NVFIF / XAOOF) Our $9.45/share ($94.5/GDR) price target is based on a 2010 target multiple of 15x forecast earnings, implying a premium relative to its peers to reflect Novatek's superior volume and earnings growth. Our price target is also underpinned by a DCF valuation of c. $10/share (WACC 10%, nominal terminal growth of 4%) however this DCF is heavily back-loaded and is therefore not the main basis of our price objective. The risks to our price objective are (1) failure to grow production at to 45bcm of gas and 4.6mn tons of liquids by 2010 as targeted by the company, (2) the domestic gas margin expanding less or at a slower pace than we expect, (3) higher than we expect gas Mineral Extraction Tax and (4) Novatek's relationship with Gazprom deteriorating. Novatek's substantial margin expansion is based on our expectations for higher natural gas prices in the domestic market. The risk is that the government fails to implement such price increases or that any increase in price is eroded through higher taxation or transportation cost. Another risk is in the gas sales volumes which might be


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suppressed by limited access to the distribution network, increased competition in the domestic market from other gas producers or limited demand growth for gas.

Oilexco (XOLEF / OILXF) Our 1200p/sh Price Objective is set at a c20% premium to our 982p/sh NAV. The key assumptions behind this valuation are discount rate (8%), long-term oil price assumption (US$70/bl real) and long-term US$:GBP rate (at 2.00). The premium reflects management's proven ability to deliver value accretive asset deals/new license awards. We set our Price Objective around NAV as we believe: (1) this is the only valuation framework which accurately captures the underlying cashflow and earnings generating ability of the company’s underlying asset bases over time: and (2) the company’s should trade at a premium or discount to this metric depending upon management quality/delivery track record, the strength of the macro environment, near/medium-term newsflow potential, prevailing levels of M&A activity in the sector, the likelihood of management delivering value accretive asset deals which this framework specifically precludes, and political risk issues. The premium to NAV reflects our high degree of confidence that company’s management team will deliver a series of value accretive asset deals and new license awards over the coming 12 months and the significant premium to which spot oil prices are trading versus the ML long-term assumption of US$70/bl real. Risks are Brent oil price, currency (particularly US$:GBP), UK political/fiscal risk, unexpected reservoir issues, unexpected procurement-induced timing delays and a period of sustained exploration/appraisal/dealflow disappointment.

OMV (OMVJF / OMVKY) Our price objective of EUR 64/share is based on a multiple of 7.3x 2009e EV/DACF, a ca. 10% premium to the average sector target multiple, a valuation that we believe is well supported OMV's superior earnings growth outlook. Risks to our price objective are a significant decline in the price of oil or a contraction in downstream margins, currency (particularly depreciation of the US$ or Romanian Lei) and finally government regulatory or fiscal intervention (particularly in Romania).

ORL (XORFF) Our price objective of ILS2.9/share for ORL is based on a multiple of 8.8x 2009e P/E, a 5-10% premium to the Emerging EMEA refiners. This premium rating is justified, in our view, by ORL's healthy growth outlook, a top quartile dividend yield and the Haifa refinery's coastal location (allowing effective margin optimisation). Upside risks to our price objective are (1) significant positive movements in refining margins, petrochemical margins, oil prices and the ILS/US$ exchange rate, all of which have become increasingly volatile, (2) Completion of attractive acquisitions as ORL seeks to execute an international inorganic growth programme, (3) Favourable changes to the domestic regulatory regime and a significant fall in political risks

Petrofac Ltd (POFCF) Our 660p price objective for Petrofac is based around three relative metrics: Economic returns: EV/Invested Capital of 2.6x versus CROCE/WACC of 3.6x: sector average 1.7x and 2.5x, respectively: PEG ratio: 0.7x verses the sector average of 1.1x, broadly in-line with the E&C sector average: FCF Yield/EPS Growth: 2008E FCF Yield of 4.9% versus 2007-10E EPS growth of 13%: sector average of 3.4% and 19%, respectively. At our price objective of 660p/share Petrofac would trade at a c20% premium to sector peers based on valuation of


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growth. In our view, this would fairly reflect the company’s compelling growth opportunities in the Middle East. Risks to our Price Objective Industry activity levels: Our forecasts are based around an expectation that commodity prices (oil) will continue to support an improving level of activity for oilfield services from the oil companies. That said, there is currently a wide gap between the industry’s cash generation (USD55-115/bbl oil) and investment basis (USD40/bbl) – it would take a dramatic fall in oil prices, in our view, to see industry spending patterns change significantly. Project execution risk: The majority of Petrofac’s large contract awards are secured on an EPC basis in which the contractor takes on full project execution on a turnkey basis. As a result, significant cost overruns and/or project delays could have a negative impact on earnings.

Petroleum Geo (PGEJF / PGSVY) We base our NOK180/sh on three relative valuation metrics: Economic returns: EV/invested capital of 1.5x versus CROCE/WACC of 3.7x, compared with a sector average of 1.8x and 2.7x, respectively: PEG ratio: 0.4x, vs sector average of 0.7x: FCF yield/EPS growth: 2008E FCF yield of 6.7% versus 2007-10E EPS growth of 21%, with a sector average of 2.9% and 18%, respectively PGS trades on a ‘09E P/E of 11.9x – a c.13% discount to its closest peer CGG-Veritas and generating economic returns that look mis-priced versus sector peers. On relative metrics, we see value up to NOK180 which we derive from applying sector average growth valuation multiples (PEG ratio). Risks: Activity levels: Our forecasts are based on an expectation that high oil prices will continue to support a high activity level for oilfield services. That said, in our view a dramatic fall in oil prices to below USD40/bbl would lead to a significant drop in industry spending. Project execution/unanticipated downtime risk: Seismic companies typically take on full project execution risk on their contracts. As a result, significant cost overruns and/or project delays can have a negative impact on earnings. Newbuild delay risk: PGS is under taking a significant development of the fleet, with eight vessels currently under construction. As a result, significant cost overruns and/or delays in the construction of the new vessels can have a negative impact on our earnings estimates.

Petroplus (PEPFF) Our price objective of CHF63/share values Petroplus on a multiple of 6.5x EV/DACF in 2008E, at roughly a 20% discount to the European Refiners average. We believe the lower relative complexity of its refineries (and thus disadvantaged exposure to macro trends and greater volatility in earnings) coupled with lack of clarity around its growth strategy justify such a discount. Risks to our price objective are: (1) refining margins - we estimate each US$0.50/bbl move in realised margins affects Petroplus's 2008E EPS by c.17%, (2) acquisition/financing risks – Petroplus's strategy is highly reliant on buying additional refineries through accretive acquisitions, (3) changes in refining or environmental regulation, and (4) unplanned outages and/or project delays.

PKN Orlen (PSKOF / PSKZF) Our price objective of PLN44/share for PKN is based on a multiple of 8x 2008e P/E, a 10-15% discount to the Emerging EMEA refiners. We believe that this discount is justified given (1) Strong governmental involvement in PKNs corporate governance, which has often caused shareholder interests to be marginalised (2)The high energy usage and losses at its refineries (presenting significant earnings risk in a high oil price environment) and (3) PKNs disproportionate dependence on Russian crudes as a feed stock for its refineries.


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Risks to our price objective are (1) significant movements in refining margins, petrochemical margins and oil prices, all of which have become increasingly volatile (2) acquisition risks PKN is seeking to develop an upstream business inorganically in the medium term (3) further capex over runs as PKN upgrades the Mazeikiu refinery (4) changes in domestic regulations, especially given the government is a key shareholder and (5) unplanned outages at its refining assets or in crude deliveries from Russia.

Premier Oil (PMOIF / PMOIY) Our 2050p/sh Premier Oil Price Objective is set at a c42% premium to our 1443p/sh NAV. Key assumptions in the construction of our NAV are long-term oil price of US$75/bl. We set our Price Objectives around NAV as we believe: (1) this is the only valuation framework which accurately captures the underlying cashflow and earnings generating ability of the company’s underlying asset bases over time: and (2) that, as such, the company’s should trade at a premium or discount to this metric depending upon such factors as management quality/delivery track record, the strength of the macro environment, near/medium-term newsflow potential, prevailing levels of M&A activity in the sector, the likelihood of management delivering value accretive asset deals which this framework specifically precludes, and political risk issues. The premium to NAV reflected in our Premier PO, reflects our confidence in management ability to compete value accretive asset deals in South East Asia and the Middle East, over the medium term. The premium to NAV in our Premier Oil Price Objective reflects the significant premium to which spot oil prices are trading versus the ML long-term assumption of US$75/bl real. Risks to the attainment of our Price Objective are Brent oil price, currency (particularly US$:GBP), political/fiscal risk, unexpected reservoir issues, unexpected development kit procurement-induced timing delays and a period of sustained exploration/appraisal disappointment.

RD Shell Shs A (RYDAF / RDSA) We have a price objective of 2,400p/share. At our price objective the shares would trade in line with key sector peers BP and Total on 2008/09E prospective P/E multiples and still be some 20% below the company's historical P/E multiple. Risks: significant economic slowdown that could negatively impact oil and gas prices and refining margins, adverse currency moves for the US dollar, risk of government intervention and regulation, project execution risk, general risk of changes in taxes and tariffs.

Regal Petroleum (RGPMF) Our 390p/sh Regal Petroleum Price Objective is set around our calculation of the company’s NAV. Key assumptions in the construction of our NAV are: (1) nominal 2011 oil price of US$75/bl: (2) convergence of Ukrainian and European gas prices by 2012: and (3) 12% Ukrainian discount rate. We continue to set our European E&P Price Objectives around NAV as we believe: (1) this is the only valuation framework which accurately captures the underlying cashflow and earnings generating ability of the companies’ underlying asset bases over time: and (2) that, as such, the shares should trade at a premium or discount to this metric depending upon such factors as management quality/delivery track record, the strength of the macro environment, near/medium-term newsflow potential, prevailing levels of M&A activity in the sector, the likelihood of management delivering value accretive asset deals which this framework specifically precludes: and political risk issues. Risks to the attainment of our Price Objective are Brent oil price, Ukrainian gas price, currency, Ukrainian political/fiscal risk, unexpected reservoir issues, financing risk, sustained appraisal disappointment: and cost


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inflation.

Repsol-YPF (REPYF / REP) Our price objective of EUR 32/share is based on three valuation components: a prospective mid-point value of YPF of US$24 billion (100% basis), of which Repsol owns 85% today, the current market value of Gas Natural, and the prospective market value attributable to the rump Repsol business, putting it on a sector average multiple of 6.5x 2009e EV/DACF. Risks to our price objective are the Argentine political and economic environment (for YPF), the oil price/refining environment and the potential share overhang of Sacyr's 20% holding.

ROC Oil (XLOOF) Our 12 month price objective for Roc Oil is $3.82ps in-line with our NPV. The valuation is a combination of DCF of production projects plus net debt, risked value for oil/gas discoveries and an EMV for the company's exploration program. Our forecasts are based on a long-term oil price of US$70/bbl and AUD/USD currency assumption of 0.72. We see further potential upside to our valuation for the following: Exploration success in Angola, Final Investment Decision of the Wei 6-12 South development, Appraisal/development drilling around Zhao Dong and Wei assets. Risks to the attainment of our Price Objective are: exploration, appraisal and development risks, oil price risk given nearly 100% of Roc's production is oil, political/fiscal risks in Angola and China.

Rosneft (XRNOF / OJSCF) Our price objective of US$ 12.5/share for Rosneft is based on a multiple of 7.4x 2009e EV/DACF, a 5-10% premium to the Russian peer group average, reflecting the company's sector leading growth rate, deep resource base and advantaged resource access. Risks to our price objective are a significant decline in the price of oil or a contraction in downstream margins, currency (US$-translation impact) and government regulatory or fiscal intervention.

Royal Dtch Shell (RYDBF / RDSB) We have a price objective of 2,450p/share. At our price objective the shares would trade in line with key sector peers BP and Total on 2008/09E prospective P/E multiples and still be some 20% below the company's historical P/E multiple. Risks significant economic slowdown that could negatively impact oil and gas prices and refining margins, adverse currency moves for the US dollar, risk of government intervention and regulation, project execution risk, general risk of changes in taxes and tariffs.

Saipem (SAPMF) We base our EUR35/share price objective on Saipem around three relative valuation metrics: Economic returns: EV/Invested Capital of 1.6x versus CROCE/WACC of 1.7x: sector average 2.2x and 2.7x, respectively: PEG ratio: 1.1x, in-line the sector average: FCF Yield/EPS Growth: 2008E FCF Yield of -6% versus 2007-10E EPS growth of 17%: sector average of 1.7% and 19%, respectively. Specifically, at EUR35/share Saipem would trade in-line with the peer group on the basis of economic returns. Risks: Business risks - Industry activity levels: Our forecasts are based around an expectation that commodity prices (oil) will continue to support an improving level of activity for oilfield services from the oil companies. That said, there is currently a wide gap between the industry’s cash generation (USD55-95/bbl oil) and investment basis (USD40/bbl) – it would take a dramatic fall in oil prices, in our view, to see industry spending patterns change significantly. Project execution risk: The


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majority of Saipem’s large contract awards are secured on an EPC basis in which the contractor takes on full project execution on a turnkey basis. As a result, significant cost overruns and/or project delays could have a negative impact on earnings. Currency: Saipem’s revenues are largely in USD (or USD-linked) while its costs are mainly Euro denominated. Therefore a significant move in the USD could impact Saipem’s margins.

Salamander (SALDF) Our 400p/sh Salamander Price Objective is set at a c10% premium to our 357p/sh NAV. We continue to set our European E&P Price Objectives around NAV as we believe: (1) this is the only valuation framework which accurately captures the underlying cashflow and earnings generating ability of the company’s asset bases over time: and (2) that, as such, the company’s should trade at a premium or discount to this metric depending upon such factors as management quality/delivery track record, the strength of the macro environment, near/medium-term newsflow potential, prevailing levels of M&A activity in the sector, the likelihood of management delivering value accretive asset deals which this framework specifically precludes, and political risk issues. The premium to NAV in our Salamander Price Objective reflects the significant premium to which spot oil prices are trading versus the ML long-term assumption of US$70/bl real. Risks to the attainment of our Price Objective are Brent oil price, currency (particularly US$:GBP), political/fiscal risk, an unexpected lull in forward deal activity, unexpected reservoir issues, unexpected development kit procurement-induced timing delays and a period of sustained exploration/appraisal disappointment.

Saras SPA (SAAFF) Our price objective of EUR4.75/share values Saras on a multiple of 8.1x 2008E EV/DACF, a modest discount to the developed European Refiners average. We believe that this level is justified given Saras's advantaged asset base (with leading exposure to our core theme of strength in diesel), as well as earnings and management quality. Further we believe that these factors justify Saras again trading at a premium to the sector. Risks to our price objective are (1) refining margins, (2) acquisition risks – Saras is seeking European refinery/retail acquisitions, (3) changes in refining, power or environmental regulation, and (4) unplanned outages and/or project delays, particularly given its single-asset refining exposure.

SBM Offshore (SBFFF) Our EUR26 price objective for SBM Offshore is based around three relative metrics: Economic returns: EV/Invested Capital of 1.3x vs CROCE/WACC of 2.0x: sector average 1.8x and 2.5x, respectively: PEG ratio: 1.5x, a c30% premium to the sector average of 1.1x: FCF Yield/EPS Growth: 09E FCF Yield of -6% vs 2007-10E EPS growth of 5%: sector average of 3.3% and 20%, respectively. Given the LT nature of the business and the growing competition in the FPSO segment, we believe that economic returns is a key metric to value SBM. At our PO SBM Offshore would trade in line with the European oil service sector on the basis of economic returns. Risks: Industry activity levels: Our forecasts are based around an expectation that commodity prices (oil) will continue to support a high level of activity for oilfield services. That said, there is currently a wide gap between the industry’s cash generation (USD65-115/bbl oil) and investment basis (USD40-50/bbl) – it would take a dramatic fall in oil prices, in our view, to see industry spending patterns change significantly. Project execution risk: Within the Turnkey segment, SBM’s contract awards are secured


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on an EPC basis - the contractor takes on full project execution. Thus, significant cost overruns and/or project delays could impact earnings. Currency: For all purposes SBM is a US$ company – revenues and costs are mainly US$-linked. The biggest impact is the translation impact on the Amsterdam-listed shares.

SBO (SBOEF) We base our EUR80 price objective on Schoeller Bleckmann around three relative valuation metrics: - Economic returns: EV/Invested Capital of 1.8x vs CROCE/WACC of 2.2x: sector average 1.9x and 2.5x, respectively: - PEG ratio: 1.2x vs sector average of 1.1x: - FCF Yield/EPS growth: ‘09E FCF yield of 3.8% vs ‘07-10E EPS growth of 13%: sector average of 3% and 20%, respectively. Specifically at this price, Schoeller Bleckmann would trade in-line with the sector on the basis of economic returns, fairly reflecting the company’s prime position in the drilling components segment, in our view. Risks: Industry activity levels: Our forecasts are based around an expectation that commodity prices (oil) will continue to support an improving level of activity for oilfield services from the oil companies. That said, there is currently a wide gap between the industry’s cash generation (USD65-115/bbl oil) and investment basis (USD40-50/bbl) – it would take a dramatic fall in oil prices, in our view, to see industry spending patterns change significantly. Currency: SBO’s cost base is largely EUR denominated whilst around two thirds of revenues are US$ denominated. Thus, a weakening US$ would materially impact SBO’s earnings.

SeaDrill (SDRLF) Our NOK165 price objective on Seadrill is based on a c20% premium to our modern-day replacement cost valuation. The premium reflects the value of the competitive advantage we ascribe to having assets in the market today (and the next couple of years), able to take advantage of significant excess economic rent over the period, versus having to wait for newbuild capacity to be built. The discounted value of those excess returns using an 8.5% WACC - represents the 20% premium.Risks Construction risk Seadrill has 10 rigs currently under construction. Due to high demand for shipyard capacity the average delay for new build drilling rigs and vessels is around 3-6 months. There is a risk that the new build drilling rigs may face longer than expected delays and therefore be unutilised. Unanticipated Downtime Drilling rigs are commonly damaged by the loss of well control. Unanticipated downtime can result in the loss of revenues while costs continue to be incurred. This could have a negative impact on earnings. Industry activity levels Our forecasts are based around an expectation that commodity prices (oil) will continue to support an improving level of activity for oilfield services from the oil companies. That said, there is currently a wide gap between the industrys cash generation (USD65/bbl oil) and investment basis (USD40/bbl) it would take a dramatic fall in oil prices, in our view, to see industry spending patterns change significantly.

Soco Intl (SOCLF) Our 2440p/sh Soco International Price Objective is set at around our NAV. Key assumptions in the construction of our NAV are: (1) real long-term oil price of US$70/bl: and (2): US$:GBP at 2.00. We see the risk associated with TGD as overly binary (versus peers) for us to have a buy recommendation. We continue to set our European E&P Price Objectives around NAV as we believe: (1) this is the only valuation framework which accurately captures the underlying cashflow and earnings generating ability of the companies’ underlying asset bases over time: and (2) that, as such, the shares should trade at a premium or discount to


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this metric depending upon such factors as management quality/delivery track record, the strength of the macro environment, near/medium-term newsflow potential, prevailing levels of M&A activity in the sector, the likelihood of management delivering value accretive asset deals which this framework specifically precludes: and political risk issues. Risks to the attainment of our Price Objective are Brent oil price, UK gas price, currency, unexpected reservoir issues, exploration and appraisal risk: and cost inflation.

StatoilHydro (SLDKF / STO) Our price objective of NOK 200/share for StatoilHydro is based on a multiple of 5.8x 2009e EV/DACF, a ca. 10% discount to the current large-cap European integrated oil peer group average, and a level that we believe is consistent with concerns over long-term portfolio renewal on a business that has seen backlog (reserve life) shrink substantially over the last few years. Risks to our price objective are a significant decline in the price of oil or a contraction in downstream margins, currency (US$-translation impact) and government regulatory or fiscal intervention.

Subsea 7 Inc (SBEAF) We base our PO of NOK170/sh around 3 relative valuation metrics. Economic returns: EV/Invested Capital of 2.6x vs CROCE/WACC of 3.0x: sector average 2.2x and 2.7x, respectively: PEG ratio: 1.2x, vs sector average of 1.1x: FCF Yield/EPS Growth: 2008E FCF Yield of -3% vs 2007-10E EPS growth of 12%: sector average of 1.7% and 19%, respectively. At NOK170/sh Subsea 7 would trade at a 10% discount on the basis of economic returns (CROCE/WACC) vs EV/invested capital and on the valuation of growth (PEG ratio) Acergy - its nearest competitor. Risks: Activity levels: Our forecasts assume that high oil prices will continue to support a high activity level for oilfield services. That said, in our view a dramatic fall in oil prices to below USD40/bbl would lead to a significant drop in industry spending. Project execution risk: The majority of contracts are secured on an EPC basis i.e. Sub7 takes on full project execution on a turnkey basis. Thus, significant cost overruns and/or project delays could negatively impact earnings. Increasing offshore construction capacity: Sub7 and other players are commissioning additional construction vessels. Additional capacity in the market and competitors’ aggressive pricing strategies could materially impact earnings. Currency: Subsea 7’s cost base is largely denominated in GBP and NOK. However, its revenue is set to be increasingly USD linked. As a result movements in exchange rate could materially affect Subsea 7’s earnings.

Surgutneftegas (SGTZF / SGTZY) Our $1.29/share price target is based on a 2009 target multiple of 11.8x forecast earnings, to reflect growth projects coming through in 2009 - Talakanskoe field and Kirishi refinery upgrade and exposure to the tax breaks anticipated for Russian oil companies. The risks to our price objective are (1) failure to rump-up production from Talakanskoe field and significantly higher decline from the core production from West Siberia than we currently expect (2) significantly lower oil prices than our forecast (3) failure to contain costs (4) corporate governance issues and lack of disclosure concerning the number of treasury shares might potentially dilute the value of the existing outstanding shares.

SURGUTNEFTEG-PFD (XSRGF / SGTPY) Our $13.33 share price target is based on a 2009 target multiple of 12x forecast earnings, to reflect growth projects coming through in 2009 - Talakanskoe field


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and Kirishi refinery upgrade and exposure to the tax breaks anticipated for Russian oil companies. The risks to our price objective are (1) failure to rump-up production from Talakanskoe field and significantly higher decline from the core production from West Siberia than we currently expect, (2) significantly lower oil prices than our forecast, (3) failure to contain costs, (4) corporate governance issues and lack of disclosure concerning the number of treasury shares might potentially dilute the value of the existing outstanding shares.

Tatneft (AOTTF / XFTFF) Our price objective of $8.75/share ($175/GDR) is based on a target multiple of 9x 2009E earnings and a $0.5/share premium for bitumen project. Our target multiple would place Tatneft at an appropriate but modest discount to its Russian peers, given low organic growth and ongoing concerns about corporate governance but deep resource base and potential upside from bitumen project. The risks to our price objective are significantly lower oil prices than we currently forecast, failure to contain costs, loss of control of key investment projects, increase investment in non-core activities and the continuing influence of the government of Tatarstan, which may lead to decisions which are fundamentally misaligned with minority shareholders.

Technip (TNHPF / TKPPY) We base our EUR62 price objective on TEC around 3 relative valuation metrics: Economic returns: EV/Invested Capital of 0.9 vs CROCE/WACC of 1.1: sector average 1.7 and 2.5, respectively: PEG ratio: 0.8x vs sector average of 1.1x: FCF Yield/EPS growth: ‘09e FCF yield of 2.8% vs ‘07-10e EPS growth of 61%: sector average of 3.4% and 19.5%, respectively. Specifically at this price, TEC would trade in-line with the sector on the valuation of growth (PEG ratio) basis, fairly reflecting the combination of TEC’s strong growth opportunities in subsea construction and the execution risks faced in onshore E&C, in our view. Risks Industry activity levels: Our forecasts are based around an expectation that commodity prices (oil) will continue to support a high level of activity for oilfield services. Project execution risk: The majority of TEC’s contracts are secured on an EPC basis in which the contractor takes on full project execution on a turnkey basis. As a result, significant cost overruns and/or project delays could have a negative impact on earnings. Currency: TEC’s revenues are largely USD-linked but costs are mainly EUR-denominated. Thus a significant move in the US$ is likely to have an impact on earnings.

Tecnicas Reunida (TNISF) Our PO of EUR60/share is based around 3 relative valuation metrics: Economic returns: EV/invested capital of 3.5x vs CROCE/WACC of 3.6x: sector average 2.0x and 2.7x, respectively. PEG ratio: 0.6x vs sector average of 1.1x. FCF yield/EPS growth: 2008E FCF yield of 3.9% vs 2007-10E EPS growth of 26%: sector average of 2.5% and 20%, respectively. At this price, TRE would trade in line with its peers on the basis of growth adjusted multiples (PEG) and on a yield/growth basis. Risks: Activity levels: Our forecasts are based on an expectation that high oil prices will continue to support a high activity level for oilfield services. That said, in our view a dramatic fall in oil prices to below USD40/bbl would lead to a significant drop in industry spending. Project execution risk: Many of TRE’s contracts are secured on an EPC basis i.e. TRE takes on full project execution on a turnkey basis. Thus, significant cost overruns and/or project delays could negatively impact earnings. Currency: TRE’s cost base is largely EUR denominated whilst revenues are increasingly USD denominated. A weakening USD will therefore squeeze profit margins. Spanish


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taxation changes: Our forecasts assume TRE’s international activities remain exempt from corporate tax in Spain. A change in the Spanish tax system, altering this exemption could materially affect earnings.

TGS-NOPEC (TGSNF) Our NOK75 per share price objective for TGS-Nopec is based on three relative valuation metrics. Economic returns: EV/invested capital of 1.7x versus CROCE/WACC of 5.4x, compared with a sector average of 1.8x and 2.7x, respectively PEG ratio: 0.6x, c50% discount to the sector average (1.1x): FCF yield/EPS growth: 2008E FCF yield of 2.1% versus 2007-10E EPS growth of 5%, with a sector average of 2.0% and 19%, respectively. Our base-case estimates put TGS-Nopec on a 2009E P/E of 10.9x – a c.3% discount to the sector and generating economic returns that look mis-priced to sector peers. On relative metrics, we see value up to NOK75 a share. At that price TGS-Nopec would trade in line with the sector on economic returns. Risks: Industry activity levels: Our forecasts are based on an expectation that commodity prices (oil) will continue to support an improving level of activity for oilfield services from the oil companies. That said, there is currently a wide gap between the industry’s cash generation (USD55-95/bbl oil) and investment basis (USD40/bbl) – it would take a dramatic fall in oil prices, in our view, to see industry spending patterns changing significantly. Project execution/unanticipated downtime risk: Seismic companies typically take on full project execution risk on their contracts. As a result, significant cost overruns and/or project delays can have a negative impact on earnings.

Total (TTFNF / TOT) Our price objective of EUR 57/share for Total is based on a multiple of 7.2x 2009e EV/DACF, a 10% premium to the current large-cap European integrated oil peer group average, and a level that we believe is consistent with Total's strong growth and resource opportunity relative to peers. Risks to our price objective are a significant decline in the price of oil or a contraction in downstream margins, currency (US$-translation impact) and government regulatory or fiscal intervention.

Tullow Oil (TUWLF) Our 1100p/sh Tullow Price Objective is set at a c35% premium to our 818p/sh NAV. Key assumptions in the construction of our NAV are long-term: (1) oil price of US$70/bl: (2) UK gas price of 45p/therm: and (3) US$:GBP of 2.00. We set Price Objectives around NAV as we believe: (1) this is the only valuation framework which accurately captures the underlying cashflow and earnings generating ability of the company’s underlying asset bases over time: and (2) that, as such, the company’s should trade at a premium or discount to this metric depending upon such factors as management quality/delivery track record, the strength of the macro environment, near/medium-term newsflow potential, prevailing levels of M&A activity in the sector, the likelihood of management delivering value accretive asset deals which this framework specifically precludes, and political risk issues. The premium to NAV in our Tullow Price Objective reflects our high degree of confidence that company’s management team will deliver a series of value accretive asset deals and new license awards over the coming 12 months and the significant premium to which spot oil prices are trading versus the ML long-term assumption of US$70/bl real. Risks to the attainment of our Price Objective are Brent oil price, currency (particularly US$:GBP), political/fiscal, unexpected reservoir issues, unexpected development kit procurement-induced timing delays and a period of sustained


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exploration/appraisal disappointment.

Tupras (TUPRF) The opinion and estimates are under review.

Vallourec (VLOUF) At our price objective of EUR195, Vallourec would trade around our DCF value and at 11.3x our 2009 earnings estimates. This multiple would be in line with Vallourec’s historical multiple and still at a 25% discount to its European oil services peers. We believe these levels would be appropriate given the improving outlook for the tubes market and the company’s expansion plans in the Brazilian deepwater market. Risks to our price objective are: Competition: Possible increase in competition from new players in China and elsewhere. Industry activity levels: Our forecasts are based around an expectation that oil prices will continue to support an improving level of activity for oilfield services from the oil companies. That said, there is currently a wide gap between the industry’s cash generation (USD55-65/bbl oil) and investment basis (USD40/bbl) – it would take a dramatic fall in oil prices, in our view, to see industry spending patterns change significantly. Currency: Vallourec’s cost base is largely denominated in EUR. However, its revenue is mainly USD denominated. A weakening USD will therefore squeeze the company’s profit margins.

Venture Production (VTPRF) Our 700p/sh Venture Production Price Objective is set around our calculation of the company’s NAV. Key assumptions in the construction of our NAV are: (1) real long-term oil price of US$70/bl: and (2): real long-term UK gas price of 45p/therm. We continue to set our European E&P Price Objectives around NAV as we believe: (1) this is the only valuation framework which accurately captures the underlying cashflow and earnings generating ability of the companies’ underlying asset bases over time: and (2) that, as such, the shares should trade at a premium or discount to this metric depending upon such factors as management quality/delivery track record, the strength of the macro environment, near/medium-term newsflow potential, prevailing levels of M&A activity in the sector, the likelihood of management delivering value accretive asset deals which this framework specifically precludes: and political risk issues. Given management’s extremely poor historical track record of operational delivery, we set our Venture Production Price Objective at NAV, despite prevailing high macro environment. Risks to the attainment of our Price Objective are Brent oil price, UK gas price, currency, unexpected reservoir issues, exploration and appraisal risk: and cost inflation.

Wellstream (WELLF) Our valuation is based on three relative metrics: Economic returns, PEG ratio and FCF yield/EPS growth. WSM trades on: Economic returns: EV/Invested Capital of 3.5x vs CROCE/WACC of 3.6x compared with a sector average 2.0x and 2.7x, respectively: PEG ratio: 0.6x, a c.40% discount to the sector (1.1x) and at a c.30% discount to its UK peers (Wood and PFC): FCF Yield/EPS Growth: 08E FCF Yield of 5.1% vs 2007-10E EPS growth of 40% vs sector average of 2.3% and 20%, respectively. Given its strong growth prospects, we believe that the PEG ratio is a key metric to value WSM. Specifically, at our PO of 1,600p/sh, WSM would trade in line with the Euro Oil Service sector on the basis of valuation of earnings growth. Risks Activity levels: Our forecasts are based on an expectation that high oil prices will continue to support a high activity level for oilfield services. That said, in our view a dramatic fall in oil prices to below


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USD40/bbl would lead to a significant drop in industry spending. Project execution risk: WSM’s contract awards are largely secured on a fixed-price basis (ie, the contractor takes on full project execution risk). Thus, significant cost overruns/project delays could impact earnings. Currency risk: WSM’s cost base is still largely GBP denominated whilst sales are mainly in USD/Brazilian real. As a result, significant changes in the exchange rate (USD/GBP or BRL/GBP) could impact earnings.

Wood Group (WDGJF) We base our 500p/share price objective on Wood Group around 3 relative valuation metrics: Economic returns: EV/Invested Capital of 1.8x versus CROCE/WACC of 2.2x: sector average 1.7x and 2.5x, respectively: PEG ratio: 0.7x vs the sector average of 1.1x: FCF Yield/EPS growth: 2009E FCF yield of 6.9% versus 2007-10E EPS growth of 19%: sector average of 3.4% and 19%, respectively. Specifically, at that price Wood would trade at a 20% premium to the European oil services sector – reflecting Wood’s superior returns - and the valuation of growth (PEG ratio). Risks Industry activity levels: Our forecasts are based around an expectation that commodity prices (oil) will continue to support an improving level of activity for oilfield services from the oil companies. That said, there is currently a wide gap between the industry’s cash generation (USD65-115/bbl oil) and investment basis (USD40-50/bbl) – it would take a dramatic fall in oil prices, in our view, to see industry spending patterns change significantly. Project execution risk: A part of Wood Group’s contract awards are secured on an EPC basis in which the contractor takes on full project execution on a turnkey basis. As a result, significant cost overruns and/or project delays could have a negative impact on earnings. Analyst Certification We, Mark Iannotti, Alastair Syme, Hootan Yazhari, CFA, Andrew Knott, Alejandro Demichelis, Alina Chapovskaya and James Schofield, hereby certify that the views each of us has expressed in this research report accurately reflect each of our respective personal views about the subject securities and issuers. We also certify that no part of our respective compensation was, is, or will be, directly or indirectly, related to the specific recommendations or view expressed in this research report.


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Important Disclosures Investment Rating Distribution: Energy Group (as of 01 Apr 2008) Coverage Universe Count Percent Inv. Banking Relationships* Count Percent Buy 132 54.77% Buy 38 33.04% Neutral 94 39.00% Neutral 24 31.17% Sell 15 6.22% Sell 1 7.14% Investment Rating Distribution: Global Group (as of 01 Apr 2008) Coverage Universe Count Percent Inv. Banking Relationships* Count Percent Buy 1696 46.36% Buy 420 27.80% Neutral 1600 43.74% Neutral 417 28.92% Sell 362 9.90% Sell 79 23.80% * Companies in respect of which MLPF&S or an affiliate has received compensation for investment banking services within the past 12 months. For purposes of this distribution, a stock rated Underperform is included as a Sell.

FUNDAMENTAL EQUITY OPINION KEY: Opinions include a Volatility Risk Rating, an Investment Rating and an Income Rating. VOLATILITY RISK RATINGS, indicators of potential price fluctuation, are: A - Low, B - Medium and C - High. INVESTMENT RATINGS reflect the analyst’s assessment of a stock’s: (i) absolute total return potential and (ii) attractiveness for investment relative to other stocks within its Coverage Cluster (defined below). There are three investment ratings: 1 - Buy stocks are expected to have a total return of at least 10% and are the most attractive stocks in the coverage cluster; 2 - Neutral stocks are expected to remain flat or increase in value and are less attractive than Buy rated stocks and 3 - Underperform stocks are the least attractive stocks in a coverage cluster. Analysts assign investment ratings considering, among other things, the 0-12 month total return expectation for a stock and the firm’s guidelines for ratings dispersions (shown in the table below). The current price objective for a stock should be referenced to better understand the total return expectation at any given time. The price objective reflects the analyst’s view of the potential price appreciation (depreciation). Investment rating Total return expectation (within 12-month period of date of initial rating) Ratings dispersion guidelines for coverage cluster*

Buy ≥ 10% ≤ 70% Neutral ≥ 0% ≤ 30%

Underperform N/A ≥ 20% * Ratings dispersions may vary from time to time where Merrill Lynch Research believes it better reflects the investment prospects of stocks in a Coverage Cluster.

INCOME RATINGS, indicators of potential cash dividends, are: 7 - same/higher (dividend considered to be secure), 8 - same/lower (dividend not considered to be secure) and 9 - pays no cash dividend. Coverage Cluster is comprised of stocks covered by a single analyst or two or more analysts sharing a common industry, sector, region or other classification(s). A stock’s coverage cluster is included in the most recent Merrill Lynch Comment referencing the stock.

Price charts for the securities referenced in this research report are available at http://www.ml.com/research/pricecharts.asp, or call 1-888-ML-CHART to have them mailed.

MLPF&S or one of its affiliates acts as a market maker for the securities recommended in the report: Acergy SA, BowLeven, BP plc, Dana, Eni, Expro, Oilexco, Petrofac Ltd, Premier Oil, Regal Petroleum, Repsol-YPF, ROC Oil, Salamander, Soco Intl, StatoilHydro, Total SA, Tullow Oil, Venture Production.

MLPF&S or an affiliate was a manager of a public offering of securities of this company within the last 12 months: BowLeven, Galp Energia, Gas Plus. The company is or was, within the last 12 months, an investment banking client of MLPF&S and/or one or more of its affiliates: Afren, BowLeven, BP plc, Cairn

Energy, CGG-Veritas, Eni, Gas Plus, Gazprom, OMV, Premier Oil, Repsol-YPF, Rosneft, Royal Dtch Shell, Soco Intl, StatoilHydro, Tatneft, Total SA, Tullow Oil. MLPF&S or an affiliate has received compensation from the company for non-investment banking services or products within the past 12 months: BP plc. In the US, retail sales and/or distribution of this report may be made only in states where these securities are exempt from registration or have been qualified for

sale: Acergy SA, Afren, Aker Solutions, AMEC, BG, Bourbon, BowLeven, BP plc, Cairn Energy, CEPSA, CGG-Veritas, Dana, Eni, ERG SpA, Expro, Galp Energia, Gas Plus, Gazprom, Gazpromneft, Hellenic Petro, INA, KazMunaiGas E&P, Lukoil, Lundin Petroleum, MOL, Motor Oil - Hellas, Neste Oil, Novatek Oao, Oilexco, OMV, ORL, Petrofac Ltd, Petroleum Geo-Sv, Petroplus, PKN Orlen, Premier Oil, Regal Petroleum, Repsol-YPF, ROC Oil, Rosneft, Royal Dtch Shell, Saipem, Salamander, Saras SPA, SBM Offshore, SBO, SeaDrill, Soco Intl, StatoilHydro, Subsea 7 Inc, Surgutneftegas, Tatneft, Technip SA, Tecnicas Reunida, TGS Nopec Geophy, Total SA, Tullow Oil, Vallourec, Venture Production, Wellstream, Wood Group.

MLPF&S or an affiliate has received compensation for investment banking services from this company within the past 12 months: Afren, BowLeven, BP plc, Cairn Energy, CGG-Veritas, Eni, Gas Plus, Gazprom, OMV, Premier Oil, Repsol-YPF, Rosneft, Royal Dtch Shell, Soco Intl, StatoilHydro, Tatneft, Total SA, Tullow Oil.

MLPF&S or an affiliate expects to receive or intends to seek compensation for investment banking services from this company within the next three months: Afren, AMEC, BG, BowLeven, BP plc, Cairn Energy, Dana, Eni, Expro, Galp Energia, Gazprom, Hellenic Petro, INA, KazMunaiGas E&P, Lukoil, Lundin Petroleum, MOL, Motor Oil - Hellas, Neste Oil, Novatek Oao, Oilexco, OMV, Petroleum Geo-Sv, Petroplus, Premier Oil, Regal Petroleum, Repsol-YPF, ROC Oil, Rosneft, Royal Dtch Shell, Saipem, Saras SPA, SeaDrill, Soco Intl, StatoilHydro, Subsea 7 Inc, Tatneft, Tecnicas Reunida, Total SA, Tullow Oil, Vallourec, Venture Production, Wellstream.

MLPF&S together with its affiliates beneficially owns one percent or more of the common stock of this company. If this report was issued on or after the 10th day of the month, it reflects the ownership position on the last day of the previous month. Reports issued before the 10th day of a month reflect the ownership position at the end of the second month preceding the date of the report: Acergy SA, Afren, Aker Solutions, Bourbon, BowLeven, Cairn Energy, Dana, Eni, Expro, Galp Energia, Gas Plus, MOL, Neste Oil, Novatek Oao, Oilexco, Petrofac Ltd, Petroleum Geo-Sv, PKN Orlen, Premier Oil, Repsol-YPF, Royal Dtch Shell, Salamander, Saras SPA, SBM Offshore, SeaDrill, Soco Intl, Subsea 7 Inc, Tatneft, Tecnicas Reunida, TGS Nopec Geophy, Total SA, Vallourec, Venture Production, Wellstream.

MLPF&S or one of its affiliates is willing to sell to, or buy from, clients the common equity of the company on a principal basis: Acergy SA, BowLeven, BP plc, Dana, Eni, Expro, Oilexco, Petrofac Ltd, Premier Oil, Regal Petroleum, Repsol-YPF, ROC Oil, Salamander, Soco Intl, StatoilHydro, Total SA, Tullow Oil, Venture Production.

The company is or was, within the last 12 months, a securities business client (non-investment banking) of MLPF&S and/or one or more of its affiliates: BP plc.


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The analyst(s) responsible for covering the securities in this report receive compensation based upon, among other factors, the overall profitability of Merrill Lynch, including profits derived from investment banking revenues.


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Other Important Disclosures

UK readers: MLPF&S or an affiliate is a liquidity provider for the securities discussed in this report. The company is a corporate broking client of Merrill Lynch International in the United Kingdom: BowLeven, Cairn Energy, Gazprom, Oilexco, Premier Oil, Soco

Intl, Tecnicas Reunida, Tullow Oil. MLPF&S or one of its affiliates has a significant financial interest in the fixed income instruments of the issuer. If this report was issued on or after the 10th day of

a month, it reflects a significant financial interest on the last day of the previous month. Reports issued before the 10th day of a month reflect a significant financial interest at the end of the second month preceding the date of the report: Gazprom, MOL, Total SA.

Information relating to Non-U.S. affiliates of Merrill Lynch, Pierce, Fenner & Smith Incorporated (MLPF&S): MLPF&S distributes research reports of the following non-US affiliates in the US (short name: legal name): Merrill Lynch (France): Merrill Lynch Capital Markets

(France) SAS; Merrill Lynch (Frankfurt): Merrill Lynch International Bank Ltd, Frankfurt Branch; Merrill Lynch (South Africa): Merrill Lynch South Africa (Pty) Ltd; Merrill Lynch (Milan): Merrill Lynch International Bank Limited; MLPF&S (UK): Merrill Lynch, Pierce, Fenner & Smith Limited; Merrill Lynch (Australia): Merrill Lynch Equities (Australia) Limited; Merrill Lynch (Hong Kong): Merrill Lynch (Asia Pacific) Limited; Merrill Lynch (Singapore): Merrill Lynch (Singapore) Pte Ltd; Merrill Lynch (Canada): Merrill Lynch Canada Inc; Merrill Lynch (Mexico): Merrill Lynch Mexico, SA de CV, Casa de Bolsa; Merrill Lynch (Argentina): Merrill Lynch Argentina SA; Merrill Lynch (Japan): Merrill Lynch Japan Securities Co, Ltd; Merrill Lynch (Seoul): Merrill Lynch International Incorporated (Seoul Branch); Merrill Lynch (Taiwan): Merrill Lynch Global (Taiwan) Limited; DSP Merrill Lynch (India): DSP Merrill Lynch Limited; PT Merrill Lynch (Indonesia): PT Merrill Lynch Indonesia; Merrill Lynch (KL) Sdn. Bhd.: Merrill Lynch (Malaysia); Merrill Lynch (Israel): Merrill Lynch Israel Limited; Merrill Lynch (Russia): Merrill Lynch CIS Limited, Moscow; Merrill Lynch (Turkey): Merrill Lynch Yatirim Bankasi A.S.; Merrill Lynch (Dubai): Merrill Lynch International Bank Ltd, Dubai Branch; MLPF&S (Zürich rep. office): MLPF&S Incorporated Zürich representative office.

This research report has been prepared and issued by MLPF&S and/or one or more of its non-U.S. affiliates. MLPF&S is the distributor of this research report in the U.S. and accepts full responsibility for research reports of its non-U.S. affiliates distributed in the U.S. Any U.S. person receiving this research report and wishing to effect any transaction in any security discussed in the report should do so through MLPF&S and not such foreign affiliates.

This research report has been approved for publication in the United Kingdom by Merrill Lynch, Pierce, Fenner & Smith Limited, which is authorized and regulated by the Financial Services Authority; has been considered and distributed in Japan by Merrill Lynch Japan Securities Co, Ltd, a registered securities dealer under the Securities and Exchange Law in Japan; is distributed in Hong Kong by Merrill Lynch (Asia Pacific) Limited, which is regulated by the Hong Kong SFC; is issued and distributed in Taiwan by Merrill Lynch Global (Taiwan) Ltd or Merrill Lynch, Pierce, Fenner & Smith Limited (Taiwan Branch); is issued and distributed in Malaysia by Merrill Lynch (KL) Sdn. Bhd., a licensed investment adviser regulated by the Malaysian Securities Commission; is issued and distributed in India by DSP Merrill Lynch Limited; and is issued and distributed in Singapore by Merrill Lynch International Bank Limited (Merchant Bank) and Merrill Lynch (Singapore) Pte Ltd (Company Registration No.’s F 06872E and 198602883D respectively). Merrill Lynch International Bank Limited (Merchant Bank) and Merrill Lynch (Singapore) Pte Ltd. are regulated by the Monetary Authority of Singapore. Merrill Lynch Equities (Australia) Limited, (ABN 65 006 276 795), AFS License 235132, provides this report in Australia. No approval is required for publication or distribution of this report in Brazil.

Merrill Lynch (Frankfurt) distributes this report in Germany. Merrill Lynch (Frankfurt) is regulated by BaFin. Copyright, User Agreement and other general information related to this report: Copyright 2008 Merrill Lynch, Pierce, Fenner & Smith Incorporated. All rights reserved. This research report is prepared for the use of Merrill Lynch clients and

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This research report provides general information only. Neither the information nor any opinion expressed constitutes an offer or an invitation to make an offer, to buy or sell any securities or other investment or any options, futures or derivatives related to such securities or investments. It is not intended to provide personal investment advice and it does not take into account the specific investment objectives, financial situation and the particular needs of any specific person who may receive this report. Investors should seek financial advice regarding the appropriateness of investing in any securities, other investment or investment strategies discussed or recommended in this report and should understand that statements regarding future prospects may not be realized. Investors should note that income from such securities or other investments, if any, may fluctuate and that price or value of such securities and investments may rise or fall. Accordingly, investors may receive back less than originally invested. Past performance is not necessarily a guide to future performance. Any information relating to the tax status of financial instruments discussed herein is not intended to provide tax advice or to be used by anyone to provide tax advice. Investors are urged to seek tax advice based on their particular circumstances from an independent tax professional.

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ratings distribution summary - poslovni dnevnik · repsol-ypf syme, alastair repyf rep sm buy buy...

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