ENERGY SECTOR
Analysts:
Brandon Harlow
Taylor Horton
Yanbing Ji
Agenda
• Overview
• ConocoPhillips
• National Oilwell Varco
• Chevron Corp
• Tesoro
• Recommendation
Energy Sector Weights
S&P 500 SECTOR WEIGHTS
Utilities Cash
Telecommunic
3%
0%
ation Services Materials
2%
3%
Information
Technology
21%
Consumer
Discretionary
13%
Consumer Staples
9%
Energy
7%
Industrials
10%
Financials
17%
Healthcare
15%
Energy Sector Weights
SIM PORTFOLIO SECTOR
WEIGHTS
Utilities Cash
Telecomm
2%
3%
unication
Materials
Services
3%
2%
Information
Technology
21%
Industrials
10%
Consumer
Discretionar
y
13%
Consumer
Staples
10% Energy
7%
Healthcare
13%
Financ
ials
16%
SIM Energy Sector:
0.12% Underweight
Current SIM Holdings
• CVX
• COP
3.31%
3.67%
Average Cost: $88.48
Average Cost: $76.25
Current Price: $90.47
Current Price: $53.60
1-Year Oil Prices
Oil Prices
• Oversupply
• US produces more oil than any other country
• May soon export (passed in House 12/03/15)
• Iran oil sanctions potentially lifted as part of nuclear deal
• OPEC members overproducing to squeeze Russia and US
• Chinese Economic Growth Slowing
• Decreased demand
• Second largest consumer and largest importer
• Strong US Dollar
• Global oil trade denominated in dollar
• Strong dollar makes oil more expensive for importer
ConocoPhillips Business
Overview
Recommendation:
Sell
ConocoPhillips
Current Price: $53.60
Target Price: $39.16
Market Cap.: $70.11 BN
Dividend Yield: 5.55%
Shares Outstanding: 1.25BN
52 Week Range: $41.10-$74.68
Beta= 0.74
Trailing P/E= N/A
Forward P/E= 60.48
Price/Book= 1.39
Price/Sales= 1.94
EV/EBITDA= 10.21
EV/Sales= 2.64
• Formed in 2002: Conoco Inc. merged with Phillips
Petroleum ($15.12B)
• Headquartered in Houston, Texas
• Operations: Upstream (Exploration & Production)
• Largest independent pure-play oil & gas exploration
& production company
• In 2011ConocoPhillips separated upstream and
downstream operations into two separate entities.
(Phillips66)
1-Year COP vs S&P 500
Market Share & Growth Drivers
Oil & Natural Gas Exploration & Production Industry:
• $4 Trillion Market
• ConocoPhillips commands 4.26% market share by sales
Growth Opportunities:
• BRIC nations: emerging economies of
Brazil, Russia, India, and China (GDP drives
demand)
• Technological Advancements
• Increase in Oil & Gas Prices
Risks:
• Decrease and volatility of Oil and Gas prices
• Global political unrest
• Increasing Interest Rates
• Increase in U.S. Dollar Strength (foreign
exchange exposure)
ConocoPhillips Financial Analysis
S&P 500
High
Low
Median
Current
Energy Sector
High
Low
Median
Current
ConocoPhillips
High
Low
Median
Current
P/E
P/B
EV/Sales
P/E
P/B
EV/Sales
P/E
P/B
EV/Sales
24.00
2.90
1.86
19.17
3.09
1.60
15.15
2.04
2.24
11.90
1.50
0.77
6.19
1.50
0.60
10.77
1.45
1.68
16.50
2.30
1.37
12.85
1.80
1.00
12.96
1.75
1.96
16.92
2.50
1.70
16.37
1.50
1.20
N/A
1.54
2.64
ConocoPhillips Valuation Analysis
ConocoPhillips
Occidental Petroleum
Group
BG Group
CNOOC
Hess Corp
Marathon Oil Corp
Exxon Mobil
BP
Chevron
P/S
1.94
1.90
3.30
1.40
2.10
0.40
1.34
0.45
1.30
P/B
1.75
1.60
1.80
0.80
0.80
2.40
2.07
1.07
1.15
P/E
N/A
N/A
N/A
7.90
N/A
8.9
17.85
N/A
20.41
Abs. Valuation
P/E
P/B
P/S
P/EBITDA
Average
Target
Target
Current Multiple /Current
12.96
1.54
1.89
7.09
63.79
1.65
1.50
6.20
4.92
1.07
0.79
0.87
Upside/Downside
Exp EPS
0.27
-
Target
Price
$17.22
$59.09
$36.68
$44.02
$39.25
-29.61%
ConocoPhillips Valuation Analysis
Terminal Discount Rate =
Terminal FCF Growth =
Year
Revenue
% Grow th
Operating Income
Operating Margin
Interest and Other
Interest % of Sales
2015E
2016E
2017E
2018E
2019E
10.25%
4.25%
2020E
2021E
2022E
2023E
2024E
33,331
42,737
43,260
49,316
53,262
56,457
59,280
61,948
64,581
67,325
7,433
7,129
5,581
6,044
6,527
6,919
7,265
7,592
7,914
8,251
-40.0%
22.3%
(333)
-1.0%
28.2%
16.7%
(427)
-1.0%
1.2%
12.9%
(433)
-1.0%
14.0%
12.3%
(493)
-1.0%
8.0%
12.3%
(533)
-1.0%
6.0%
12.3%
(565)
-1.0%
5.0%
12.3%
(593)
-1.0%
4.5%
12.3%
(619)
-1.0%
4.3%
12.3%
(646)
-1.0%
4.3%
12.3%
(673)
-1.0%
Taxes
2,769
2,613
2,008
2,165
2,338
2,478
2,602
2,719
2,835
2,955
Net Income
4,331
4,088
3,140
3,386
3,657
3,876
4,070
4,253
4,434
4,622
Add Depreciation/Amort
3,333
2,564
2,596
2,959
3,196
3,387
2,964
3,097
3,229
3,366
Tax Rate
% Grow th
% of Sales
Plus/(minus) Changes WC
% of Sales
39.0%
10.0%
(320)
-1.0%
39.0%
-5.6%
6.0%
(411)
-1.0%
39.0%
-23.2%
6.0%
(416)
-1.0%
39.0%
7.8%
6.0%
(474)
-1.0%
39.0%
8.0%
6.0%
(512)
-1.0%
39.0%
6.0%
6.0%
(543)
-1.0%
39.0%
5.0%
5.0%
(570)
-1.0%
39.0%
4.5%
5.0%
(596)
-1.0%
39.0%
4.3%
5.0%
(621)
-1.0%
39.0%
4.3%
5.0%
(647)
-1.0%
Subtract Cap Ex
1,333
1,709
1,730
1,973
2,130
2,258
2,964
3,097
3,229
3,366
Free Cash Flow
6,010
4,532
3,590
3,898
4,210
4,462
3,500
3,657
3,813
3,975
22,756
26,030
48,785
8.65%
47%
53%
100%
Terminal Value
69,065
Capex % of sales
% Grow th
NPV of Cash Flows
NPV of terminal value
Projected Equity Value
Free Cash Flow Yield
Current P/E
Projected P/E
Current EV/EBITDA
Projected EV/EBITDA
Shares Outstanding
Current Price
Implied equity value/share
Upside/(Downside) to DCF
4.0%
16.0
11.3
8.1
6.2
4.0%
-24.6%
17.0
11.9
9.0
6.9
4.0%
-20.8%
4.0%
8.6%
4.0%
8.0%
4.0%
6.0%
5.0%
-21.6%
5.0%
4.5%
5.0%
4.3%
Free Cash Yield
22.1
15.5
10.7
8.1
5.0%
4.3%
5.76%
Terminal P/E
14.9
Terminal EV/EBITDA
7.5
1,246
$ 55.76
$ 39.16
-29.8%
39.16
Valuation Sensitivity
Recommendation
DO NOT BUY
National Oilwell Varco
Date: 12/5/2015
Current Price
$36.69
Target Price:
$38.24
Total Return:
4.5%
Ticker
NOV
Market Cap
12.59B
Dividend Yield:
1.84
Shares Outstanding:
0.38B
Beta:
1.72
52-Week Price Range:
$35.54--$74.65
Trailing P/E
Forward P/E
P/Book
P/Sales
9.81
22.62
0.82
0.90
National Oilwell Varco (NYSE: NOV)
• A multinational provider of equipment, production operations, oilfield
services and supply chain integration services to the upstream oil and gas
industry
• Two main predecessors, founded in 1862 and 1893 respectively
• Operations: Manufacture, Upstream & Downstream
• Headquartered in Houston, TX
• Operates in 880 locations in 67 countries across six continents
• Four segments:
Figure 2 Business Segments Revenue
1-Year NOV vs S&P 500
Growth Drivers
Strengths
Weakness
 Large scope of operations
• U.S. available fleet has declined dramatically, from
•
the international market revenue represents
75% of its total revenue
 Sustained Environment Development
• Expected recovery of Oil and Gas Industry
3243 unit in 2014 to 2371 unit in 2015
• Expected low rig system utilization in next two
years & continued replacement of an aging
offshore rig fleet
• Increase in U.S. Dollar Strength
• Potential weak recovery of energy sector
NOV Financial Analysis
NOV Valuation Analysis
Terminal Discount Rate
Terminal FCF Growth Rate
2015/12/5
(000s)
Year
Revenue
2015E
% Growth
17,363.24
9.75%
4.00%
2016E
2017E
2018E
2019E
2020E
2021E
2022E
2023E
2024E
2025E
15,420.85
13,636.99
16,364.39
17,182.61
18,041.74
18,943.83
19,891.02
20,885.57
21,929.85
23,026.35
-11.19%
-11.57%
20.00%
5.00%
5.00%
5.00%
5.00%
5.00%
5.00%
5.00%
Opeating Income
Operating Margin
1,870.02
10.77%
2,467.34
16.00%
1,431.88
10.50%
1,472.80
9.00%
1,546.44
9.00%
1,623.76
9.00%
1,704.94
9.00%
1,790.19
9.00%
1,879.70
9.00%
1,973.69
9.00%
2,072.37
9.00%
Interest Income
Interest % of sales
13.89
0.08%
9.25
0.06%
8.18
0.06%
8.19
0.06%
8.19
0.06%
8.20
0.06%
8.20
0.06%
8.21
0.06%
8.21
0.06%
8.22
0.06%
8.22
0.06%
(577.68)
30.00%
(617.14)
30.00%
(465.57)
30.00%
439.38
30.00%
461.47
30.00%
484.67
30.00%
509.02
30.00%
534.60
30.00%
561.45
30.00%
589.64
30.00%
619.24
30.00%
1,440.00
6.83%
1,086.32
-24.56%
1,025.23
-5.62%
1,076.77
5.03%
1,130.89
5.03%
1,187.72
5.03%
1,247.39
5.02%
1,310.04
5.02%
1,375.83
5.02%
1,444.90
5.02%
671.96
3.87%
(896.00)
-5.16%
(560.83)
-3.23%
563.03
555.15
3.60%
212.00
1.37%
(513.51)
-3.33%
1,693.64
200.81%
463.66
3.40%
1,287.00
9.44%
(422.75)
-3.10%
2,414.23
42.55%
654.58
4.00%
(490.93)
-3.00%
(409.11)
-2.50%
779.76
-67.70%
687.30
4.00%
(515.48)
-3.00%
(429.57)
-2.50%
819.03
5.04%
721.67
4.00%
(541.25)
-3.00%
(451.04)
-2.50%
860.27
5.03%
757.75
4.00%
(568.31)
-3.00%
(473.60)
-2.50%
903.56
5.03%
795.64
4.00%
(596.73)
-3.00%
(497.28)
-2.50%
949.02
5.03%
835.42
4.00%
(626.57)
-3.00%
(522.14)
-2.50%
996.76
5.03%
877.19
4.00%
(657.90)
-3.00%
(548.25)
-2.50%
1,046.88
5.03%
921.05
4.00%
(690.79)
-3.00%
(575.66)
-2.50%
1,099.51
5.03%
7,450.96
7,843.67
15,294.63
3.85%
49%
51%
100%
Taxes
Net Income
Tax Rate
%Growth
1,347.91
Add Depreciation/Amort
% of sales
Plus/(minus) changes WC
% of Sales
Subtract Cap Ex
% of Sales
Free Cash Flow
% Growth
NPV of Cash Flows
NPV of terminal value
Projected Equity Value
Free Cash Flow Yield
Current P/E
projected P/E
Current EV/EBITDA
Projected EV/EBITDA
Shares Outstanding
Current Price
Implied equity value/share
Upside/(Downside) to DCF
Debt
Cash
Cash/share
2015E
10.86
11.35
9.43
9.69
2016E
2017E
10.16
13.47
10.62
14.08
7.93
12.64
8.15
12.99
400.00
36.59 (12/5/2015)
38.24
4.50%
11,749.00
2,418.00
0.21
Terminal Value
19,886.78
Free Cash Yield
5.53%
Terminal P/E
13.76
Terminal EV/EBITDA
9.76
NOV DCF Analysis
Terminal Discount Rate:
9.75%
Terminal FCF Growth Rate: 4.00%
Current Price:
Implied Value:
Upside:
$36.39
$38.24
4.5%
Terminal Growth Rate
Sensitivity Analysis
Discount Rate
3. 00%
3. 25%
3. 50%
3. 75%
4. 00%
4. 25%
4. 50%
4. 75%
5. 00%
5. 25%
9.00%
39.19
40.10
41.10
42.20
43.41
44.74
46.22
47.87
49.73
51.84
9.25%
37.74
38.57
39.47
40.45
41.52
42.70
44.01
45.46
47.08
48.90
9.50 %
36.41
37.16
37.97
38.85
39.81
40.86
42.01
43.29
44.71
46.30
9.7 5%
35.17
35.85
36.58
37.37
38.24
39.18
40.21
41.34
42.59
43.98
10 .00%
34.02
34.64
35.30
36.02
36.79
37.64
38.56
39.57
40.68
40.03
1 0.25%
32.95
33.51
34.11
34.76
35.47
36.23
37.06
37.96
38.95
47.29
10.50%
31.94
32.46
33.01
33.60
34.24
34.93
34.67
36.48
37.37
38.34
10.75 %
31.00
31.47
31.98
32.52
33.10
33.72
34.40
35.13
35.92
36.79
11.0 0%
30.12
30.55
31.01
31.51
32.04
32.60
33.22
33.88
34.59
35.37
11 .25%
29.28
29.68
30.11
30.56
31.05
31.56
32.21
32.72
33.37
34.07
1 1.50%
28.50
28.87
29.26
29.68
30.12
30.59
31.10
31.65
32.24
32.87
Chevron Business Overview
Recommendation
HOLD
Chevron
Date: 12/04/2015
Current Price
Target Price:
Total Return (incl div):
Ticker
Market Cap
Dividend Yield:
Shares Outstanding:
52-Week Price Range:
Trailing P/E
Forward P/E
P/Book
P/Sales
$89.71
$100.86
17.06%
CVX
$168.8 Billion
4.63%
1.88 Billion
$69.58 - $114.45
19.48
22.37
1.08
1.23
• Headquartered in San Ramon, CA
• Integrated Oil and Gas
• Operations:
• Upstream (Exploration and Development)
• Downstream (Refining, Marketing, Transporting)
• International and Domestic
• Other Businesses (Environmental Protection)
• 12.87% of sector and 30.15% of industry market capitalization
1-Year CVX vs S&P 500
Growth Drivers
Growth Opportunities
• Increase in oil prices
• Large queue of projects
• Acquisitions
• Buying opportunity as smaller
competitors are squeezed by low oil
prices
• Risks
Oil spills
• Oil prices remain low (upstream
earnings highly correlated with oil)
• Cut in capital expenditures
•
CVX Multiples
CVX
P/E
P/B
P/S
P/EBITDA
High
18.73
2.55
1.68
8.14
Low
5.34
0.97
0.54
2.88
Median
9.74
1.58
0.83
4.78
Current
18.73
1.16
1.34
8.14
Relative to S&P 500
P/E
P/B
P/S
P/EBITDA
High
77.98%
88.85%
89.84%
78.19%
Low
44.65%
65.54%
69.23%
65.45%
Median
58.67%
69.30%
61.94%
66.20%
Current
99.95%
42.49%
72.43%
78.19%
Relative to Sector
P/E
P/B
P/S
P/EBITDA
High
97.70%
82.52%
107.01%
78.04%
Low
86.13%
66.90%
85.71%
65.45%
Median
75.80%
83.60%
82.18%
66.48%
Current
102.86%
73.42%
100.75%
79.88%
Chevron DCF
(millions)
Year
Revenue
Growth Rate
2.0%
2.5%
3.0%
3.5%
4.0%
10.0%
107.08
111.44
116.41
122.15
128.85
Sensitivity Analysis
Discount Rate
10.5%
11.0%
93.30
99.77
103.46
96.44
107.64
99.98
112.41
104.00
117.92
108.58
2018E
2019E
2020E
2021E
2022E
2023E
2024E
2025E
218,503
229,428
238,605
248,150
255,594
263,262
271,160
11,115
13,518
24,222
31,215
32,775
34,414
35,791
37,222
38,339
39,489
40,674
80.00
80.00
80.00
106.59
106.03
107.15
116.48
119.15
122.29
126.96
130.23
Taxes
4,446
5,407
9,689
12,486
13,110
13,766
14,316
14,889
15,336
15,796
16,270
Net Income
6,589
8,031
14,453
18,622
19,559
20,541
21,358
22,214
22,881
23,567
24,274
17,885
19,047
20,285
24,660
26,220
27,876
29,348
30,895
32,205
33,566
34,980
(1,020)
(1,071)
(1,114)
(1,158)
(1,193)
(1,229)
(1,266)
Tax Rate
% Grow th
Add Depreciation/Amort
% of Sales
Plus/(minus) Changes WC
% of Sales
8.2%
0.1%
40.0%
13.3%
1,745
1.3%
9.8%
9.1%
0.1%
40.0%
21.9%
12.9%
(246)
-0.2%
33.8%
12.2%
0.0%
40.0%
80.0%
10.2%
(925)
-0.5%
5.0%
15.0%
0.1%
40.0%
28.8%
11.9%
(971)
-0.5%
5.0%
15.0%
0.0%
40.0%
5.0%
12.0%
-0.5%
5.0%
15.0%
0.0%
40.0%
5.0%
12.2%
-0.5%
4.0%
15.0%
0.0%
40.0%
4.0%
12.3%
-0.5%
4.0%
15.0%
0.0%
40.0%
4.0%
12.5%
-0.5%
3.0%
15.0%
0.0%
40.0%
3.0%
12.6%
-0.5%
3.0%
15.0%
0.0%
40.0%
3.0%
12.8%
-0.5%
3.0%
15.0%
0.0%
40.0%
3.0%
12.9%
-0.5%
Subtract Cap Ex
21,584
22,226
27,746
28,822
29,935
31,088
31,973
32,880
33,483
34,092
34,980
Free Cash Flow
4,635
4,606
6,067
13,489
14,825
16,258
17,619
19,071
20,410
21,811
23,008
Terminal Value
296,231
Capex % of sales
12.0%
82.35
84.69
87.28
90.19
93.45
2017E
208,098
Interest % of Sales
11.5%
87.52
90.23
93.25
96.65
100.50
2016E
3.0%
198,189
Interest Income (Expense)
$89.71
$99.98
11.45%
2015E
11.0%
148,176
Operating Margin
Discount Rate:
11%
Long-term Growth: 3%
Terminal FCF Growth =
134,898
% Grow th
Operating Income
Current Price:
Implied Value:
Upside:
Terminal Discount Rate =
12/4/2015
% Grow th
NPV of Cash Flows
NPV of terminal value
Projected Equity Value
Free Cash Flow Yield
Current P/E
Projected P/E
Current EV/EBITDA
Projected EV/EBITDA
Shares Outstanding
Current Price
Implied equity value/share
Upside/(Downside) to DCF
16.0%
15.0%
-0.6%
82,441
44%
186,769
100%
104,328
2.77%
14.0%
31.7%
13.9%
122.3%
13.7%
56%
9.9%
13.6%
9.7%
13.4%
8.4%
13.3%
8.2%
13.1%
7.0%
13.0%
6.9%
Free Cash Yield
12.9%
5.5%
7.77%
25.4
20.9
11.6
Terminal P/E
12.2
6.3
5.6
4.1
Terminal EV/EBITDA
4.1
28.3
7.0
23.3
6.2
12.9
4.5
1,868
$ 89.71 premarket after preannouncement
$ 99.98
11.45%
Final Value
CVX Target Price
P/E
P/B
P/S
P/EBITDA
Average Target Price:
Method
Multiples
DCF
Final Target
Per Share Value
3.53
81.29
72.22
66.27
103.48
Target Price Weight
103.48
25%
99.98
75%
100.86
Target Ratio
14.25
1.53
1.20
7.39
Target Price
50.30
124.04
86.67
489.66
Weights
40%
30%
25%
5%
Tesoro Business Overview
Recommendation
Recommendation:
BUY
BUY
Tesoro
Tesoro
Current Price: $
Date: 12/04/2015
Target Price: $
Current Price
MarketPrice:
Cap.: $
Target
Dividend
Yield:
Total
Return
(incl div):
Shares Outstanding:
Ticker
52 Week Range: $
Market Cap
Beta=
Dividend
Yield:
Trailing
P/E=
Shares Outstanding:
52-Week
Price Range:
Forward P/E=
Price/Book=
Trailing P/E
Price/Sales=
Forward P/E
EV/EBITDA=
P/Book
EV/Sales=
P/Sales
$112.37
$141.19
27.34%
TSO
$13.5 Billion
1.74%
120.4 Million
$64.16 - $119.67
8.71
12.81
2.51
.45
• Headquartered in San Antonio, Texas
• Industry: Oil and Gas Refining and Marketing
• Operations: Downstream
• Fourth largest U.S. merchant refiner
• Earnings negatively correlated with oil prices
1-Year CVX vs S&P 500
Why Tesoro?
• Thrive in low oil price environment
• Operational improvements
• Expanding TLLP (Tesoro Logistics)
• Integrating Carson refinery
• Purchased from BP for $1.18 Billion (refinery and ~ 800 gas stations)
• Also purchased $1.3 billion in crude and other inventories
• Total cost $175 million after selling pipelines and storage facilities
• Cost savings by shipping on pipeline which it can also sell to third parties
TSO Multiples
TSO
P/E
P/B
P/S
P/EBITDA
High
223.88
2.63
0.47
9.54
Low
4.60
0.71
0.10
1.61
Median
9.25
1.55
0.19
3.94
Current
8.48
2.53
0.45
3.84
Relative to S&P 500
P/E
P/B
P/S
P/EBITDA
High
9.32
0.92
0.25
0.92
Low
0.38
0.48
0.13
0.37
Median
0.56
0.68
0.14
0.55
Current
0.45
0.93
0.24
0.37
Relative to Energy
P/E
P/B
P/S
P/EBITDA
High
11.68
0.85
0.30
0.91
Low
0.74
0.49
0.16
0.37
Median
0.72
0.82
0.19
0.55
Current
0.47
1.60
0.34
0.38
TSO DCF
Terminal Discount Rate =
Terminal FCF Growth =
12/4/2015
(millions)
Year
2015E
Consensus
29,710
28,443
Revenue
% Grow th
Discount Rate:
11%
Long-term Growth: 3%
Current Price:
Implied Value:
Upside:
Operating Margin
Growth Rate
10.5%
11.0%
11.5%
126.22
119.84
3.0% 161.15
150.51
141.19
132.97
125.66
3.5% 167.92
4.0% 175.82
156.14
162.64
137.02
145.93
151.33
129.41
136.98
141.53
122.59
129.08
132.93
3,784
12.7%
-
0.0%
2019E
2020E
2021E
2022E
2023E
2024E
2025E
31,359
32,926
34,573
35,956
37,394
38,890
40,056
41,258
42,496
3,973
4,116
4,235
4,315
4,113
4,278
4,406
4,538
4,675
5.0%
12.7%
-
0.0%
5.0%
12.5%
-
0.0%
5.0%
12.3%
-
0.0%
4.0%
12.0%
-
0.0%
4.0%
11.0%
-
0.0%
4.0%
11.0%
-
0.0%
3.0%
11.0%
-
0.0%
3.0%
11.0%
-
0.0%
3.0%
11.0%
-
0.0%
2,081
2,185
2,264
2,329
2,373
2,262
2,353
2,423
2,496
2,571
Net Income
1,622
1,703
1,788
1,852
1,906
1,942
1,851
1,925
1,983
2,042
2,104
600
650
691
719
748
778
(150)
(150)
(179)
(186)
700
800
748
778
55.0%
% Grow th
562
Add Depreciation/Amort
55.0%
5.0%
% of Sales
2.0%
% of Sales
-0.3%
-0.5%
2.4%
2.3%
(81)
Plus/(minus) Changes WC
685
% Grow th
133.30
5.0%
2018E
1,982
Tax Rate
Free Cash Flow
12.0%
29,865
2017E
29,370
Taxes
Capex % of sales
141.23
145.58
0.0%
Subtract Cap Ex
2.0% 150.15
2.5% 155.28
-
Interest % of Sales
Sensitivity Analysis
10.0%
12.7%
Interest Income
$112.37
$141.19
25.60%
Discount Rate
3,604
Operating Income
2016E
31,210
11.0%
3.0%
NPV of Cash Flows
NPV of terminal value
Projected Equity Value
Free Cash Flow Yield
Current P/E
Projected P/E
Current EV/EBITDA
Projected EV/EBITDA
Current Price
Implied equity value/share
Upside/(Downside) to DCF
1,418
1,453
9,851
8,617
18,468
9.65%
53%
47%
100%
9.1
11.4
4.3
5.2
Shares Outstanding
2.0%
2.5%
8.6
10.8
4.1
5.0
55.0%
5.0%
2.1%
55.0%
3.6%
659
2.0%
(158)
-0.5%
-0.5%
2.6%
2.0%
1,488
2.4%
659
1,695
13.9%
$
8.2
10.3
3.9
4.7
112.37 premarket after preannouncement
141.19
25.6%
2.9%
2.0%
(165)
55.0%
1.9%
2.0%
(172)
55.0%
-4.7%
2.0%
-0.5%
-0.5%
-0.5%
2.0%
2.0%
2.0%
691
1,740
2.7%
719
1,770
1.7%
1,672
-5.5%
55.0%
4.0%
2.0%
55.0%
3.0%
801
2.0%
(192)
55.0%
3.0%
825
2.0%
(197)
55.0%
3.0%
850
2.0%
(203)
-0.5%
-0.5%
-0.5%
-0.5%
2.0%
2.0%
2.0%
2.0%
1,739
4.0%
801
1,791
825
850
1,845
1,900
Terminal Value
24,466
3.0%
3.0%
Free Cash Yield
131
$
55.0%
3.0%
7.77%
Terminal P/E
11.6
Terminal EV/EBITDA
5.0
Energy Portfolio Mix
Optimum Energy Portfolio Mix
Weight
Expected Return
Dividend Yield
Total Return
Standard Deviation
Maximize
% of SIM Portfolio
Constraints:
CVX Max
TSO Max
Energy Mix
CVX
52.57%
12.43%
4.63%
17.06%
22.25%
TSO
47.43%
25.60%
1.74%
27.34%
31.44%
3.68%
3.32%
Correlation TSO - CVX
0.3158
1
1
1
1
Energy Portfolio
100.00%
21.94%
21.66%
1.01
0.53
0.47
1.00
<
<
=
0.71
0.71
1
Recommendation: Energy 7.00% of SIM Portfolio
Company
COP
CVX
TSO
NOV
Current
Price
$53.60
$89.71
$112.37
$36.93
Target
Price
Total
Return
Current
Weight
17.06%
3.31%
HOLD (add 37 bps)
0.00%
DO NOT BUY
$39.16
-28.94%
$141.19
27.34%
$100.86
$38.24
4.50%
3.67%
0.00%
Action
SELL 367 bps
BUY 332 bps
Suggested
Weight
0.00%
3.68%
3.32%
0.00%
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