Energy Sector
Stock Presentation
Gengyuan Cao
Chun-Ning Chen
Troy Evans
Holly Fisher
Agenda
¡  Overview
¡  Chevron
¡  ConocoPhillips
¡  National Oilwell Varco Inc.
¡  ExxonMobil
¡  Recommendation
Sector Weight
S&P 500 vs. SIM
Sector Weight in S&P 500 SIM Weight S&P 500 TELECOM SERV IDX Consumer DiscreIonary S&P 500 UTILITIES INDEX S&P 500 MATERIALS INDEX 2% 3% 3% 20% 10% 10% 15% 13% 9% 23% S&P 500 CONS STAPLES IDX S&P 500 INDUSTRIALS IDX Energy 3% 3% 0% 0% S&P 500 ENERGY INDEX 8% 16% Consumer Staples 1% Financials 10% 8% 8% 16% 19% Health Care Industrials S&P 500 CONS DISCRET IDX InformaIon Technology S&P 500 HEALTH CARE IDX Materials S&P 500 FINANCIALS INDEX TelecommunicaIon Services S&P 500 INFO TECH INDEX UIliIes Sector Performance
vs. S&P 500
Crude Oil Price
-Brent
Crude Oil Price
-WTI
Energy Stocks in SIM
Weights
¡  CVX 3.54%
¡  COP 2.47%
¡  NOV 1.24%
¡  XOM 0%
Chevron
Business Overview
Market Data
Ticker
CVX
Market Cap
198.7B
# of Shares
1.89B
Beta
1.11
Dividend Yield 4.08%
52 Week
Range
98.88-135.10
P/E (ttm)
10.70
ROE
12.60%
ROA
4.74%
D/E
0.15
¡  An integrated oil and gas
company headquartered in San
Ramon, California
¡  Third largest energy company in
the world
¡  Active in more than 180
countries
¡  Business divisions: Upstream
and Downstream
CVX vs. SPX
(1 year)
CVX
EPS compared to oil prices
Historical data shows a high correlation of .92 between
Chevron’s EPS and crude oil prices
CVX
Drivers | Risks
Drivers
Risks
¡  LNG projects starting
production in 2015-16
¡  Price risk
¡  Strong dividend history
¡  Deepwater projects in Gulf
of Mexico
¡  Increasing in refining helps
offset low oil prices
¡  Continued Spending on
exploration
¡  Environmental risks
¡  Natural disasters and
extreme weather conditions
¡  Geopolitical risks
¡  Climate policy changes
CVX
Financial Analysis
Chevron Corp., Net Profit Margin
Dec 31, 2014
Selected Financial Data (USD $ in millions)
Net income attributable to Chevron Corporation
Sales and other operating revenues
Ratio
Net profit margin
Benchmarks
Net Profit Margin, Competitors
BP PLC
ConocoPhillips
Exxon Mobil Corp.
Royal Dutch Shell PLC
Net Profit Margin, Sector
Integrated Oil & Gas
Net Profit Margin, Industry
Oil & Gas
Source: Based on data from Chevron Corp. Annual Reports
Dec 31, 2013
Dec 31, 2012
Dec 31, 2011
Dec 31, 2010
19,241
200,494
21,423
220,156
26,179
230,590
26,895
244,371
19,024
198,198
9.60%
9.73%
11.35%
11.01%
9.60%
1.07%
13.08%
8.25%
3.53%
6.19%
16.83%
7.74%
3.63%
3.08%
14.54%
9.90%
5.69%
6.84%
5.08%
8.79%
6.58%
-1.25%
6.00%
8.23%
5.47%
5.44%
6.75%
7.43%
7.60%
5.43%
5.14%
6.93%
7.37%
7.54%
5.60%
CVX
Valuation Analysis
Target price is $114.82.
Sum of Parts Analysis
CVX
Segments
Petroleum -upstream
Competitors P/S ratios
Sales per segment P/S Ratio XOM
69,825
Petroleum -Downstream
177,846
Total
247,671
Date of price
4/1/2015
Current Stock Price
$104.79
Number of diluted shares
Target Price
% return to target
Target
P/S
Segment 1,883
$114.82
9.57%
DVN
0.9
BP
1.44
SU
0.34
IMO
RDS.A
COP
Multiple Value
0.995 69,476
1.3
1.2
1.03
PBR
0.4
0.3
1.4
Total Market Cap
0.825 146,723
216,199
CVX
Valuation Analysis
Target price is $108.27.
Chevron (CVX)
Analyst: Troy Evans
2/10/2015
Terminal Discount Rate =
Terminal FCF Grow th =
Year
2015E
Revenue
154,168
% Grow th
17.9%
Operating Income
13,104
Operating Margin
8.5%
Taxes
4,849
Tax Rate
37.0%
Net Income
8,256
% Grow th
3,120
% of Sales
2.0%
Plus/(minus) Changes WC
633
% of Sales
0.4%
Subtract Cap Ex
3,004
Capex % of sales
1.9%
Free Cash Flow
9,005
% Grow th
11.8%
7,899
37.0%
13,450
3,634
2.0%
3,571
2.0%
3,634
2.0%
17,021
89.0%
NPV of Cash Flow s
NPV of terminal value
Projected Equity Value
Free Cash Flow Yield
119,104
86,384
205,488
4.30%
Current P/E
Projected P/E
Current EV/EBITDA
Projected EV/EBITDA
25.4
24.9
13.8
13.6
Shares Outstanding
Debt
Cash
Cash/share
21,349
62.9%
Add Depreciation/Amort
Current Price
Implied equity value/share
Upside/(Dow nside) to DCF
2016E
181,692
1,898.0
$
$
110.38
108.27
-1.9%
27,818
12,785
6.74
2017E
213,671
17.6%
29,551
13.8%
10,934
37.0%
18,617
38.4%
4,273
2.0%
4,352
2.0%
4,273
2.0%
22,969
34.9%
58%
42%
100%
2018E
220,615
3.3%
30,445
13.8%
11,265
37.0%
19,180
3.0%
4,412
2.0%
0
0.0%
4,412
2.0%
19,180
-16.5%
2019E
227,785
3.3%
31,434
13.8%
11,631
37.0%
19,804
3.3%
4,556
2.0%
0
0.0%
4,556
2.0%
19,804
3.3%
11.15%
2.0%
2020E
232,341
2.0%
32,063
13.8%
11,863
37.0%
20,200
2.0%
4,647
2.0%
0
0.0%
4,647
2.0%
20,200
2.0%
2021E
236,988
2.0%
32,704
13.8%
12,101
37.0%
20,604
2.0%
4,740
2.0%
0
0.0%
4,740
2.0%
20,604
2.0%
2022E
241,728
2.0%
33,358
13.8%
12,343
37.0%
21,016
2.0%
4,835
2.0%
0
0.0%
4,835
2.0%
21,016
2.0%
2023E
246,562
2.0%
34,026
13.8%
12,589
37.0%
21,436
2.0%
4,931
2.0%
0
0.0%
4,931
2.0%
21,436
2.0%
2024E
251,494
2.0%
34,706
13.8%
12,841
37.0%
21,865
2.0%
5,030
2.0%
0
0.0%
5,030
2.0%
21,865
2.0%
Terminal Value
Free Cash Yield
15.6
15.3
9.0
8.8
11.3
11.0
6.6
6.5
2025E
256,523
2.0%
35,400
13.8%
13,098
37.0%
22,302
2.0%
5,130
2.0%
0
0.0%
5,130
2.0%
22,302
2.0%
248,614
8.97%
Terminal P/E
11.1
Terminal EV/EBITDA
6.5
CVX
Target Price
Price Target
Sum of Parts
DCF
Price
114.82
108.27
Weight
25%
75%
Final Target Price
109.91
Current Price
(4/15/2015)
110.38
Upside/Downside
Potential
-0.43%
Recommendation: HOLD
ConocoPhillips
Business Overview
Market Data
Ticker
COP
Market Cap
85044.7M
# of Shares
1.23B
Beta
1.24
Dividend Yield 4.2%
52 Week
Range
60.57-87.09
P/E (ttm)
13.1
Forward P/E
25.36
ROE
43.5%
ROA
9.90%
D/E
0.167
¡  Headquartered in Houston,
Texas
¡  world’s largest independent
exploration and production (E&P)
company, based on proved
reserves and production of
liquids and natural gas.
¡  Business divisions: pure player
in oil and gas exploration and
production
COP vs. SPX
(1 year)
COP
Drivers | Risks
Drivers
Risks
¡  Market Factor
¡  Volatile crude oil price
¡  Exchange Rate
¡  Instability of Politics
¡  Interest Rate
¡  World Economy
COP
Financial Analysis
COP
Financial Analysis
COP
Financial Analysis
COP
Valuation Analysis
COP
Valuation Analysis
Target price is $67.65.
Year
Revenue
% G rowth
2015E
48,101
2016E
2017E
2018E
51,540 51,442 58,129
7.2%
-­‐0.2%
13.0%
2019E
2020E
2021E
2022E
2023E
2024E
2025E
##### 69,058 73,201 76,861 80,704 83,933 87,290
10.0%
8.0%
6.0%
5.0%
5.0%
4.0%
4.0%
Income from continuing operations before income taxes
Margin of Total Revenue
10,779 13,189 13,082 6,976 7,673 8,287 8,784 9,223 9,685 10,072 10,475
22.4%
25.6%
25.4%
12.0%
12.0%
12.0%
12.0%
12.0%
12.0%
12.0%
12.0%
Income from discontinued operations* (after tax)
% of Sales
1,056 1,079 1,088 1,229 1,352 1,461 1,548 1,626 1,707 1,775 1,846
2.2%
2.1%
2.1%
2.1%
2.1%
2.1%
2.1%
2.1%
2.1%
2.1%
2.1%
Provision for income taxes
Tax Rate
4,023 5,350 5,727 2,829 3,112 3,361 3,562 3,740 3,927 4,084 4,248
37.3%
40.6%
43.8%
40.6%
40.6%
40.6%
40.6%
40.6%
40.6%
40.6%
40.6%
Net income
7,813
Less: net income attributable to noncontrolling interests (62) (67) (70)
Net Income Attributable to ConocoPhillips % G rowth
7,751
Add Depreciation/Amort
% of Sales
Plus/(minus) Changes W C
% of Sales
Subtract Cap Ex
Capex % of sales
Free Cash Flow
% G rowth
8,919
8,443
5,376
5,914
6,387
6,770
7,109
7,464
7,763
8,073
(68)
(68)
(68)
(68)
(68)
(68)
(68) (68)
8,852 8,373 5,308 5,846 6,319 6,702 7,041 7,396 7,695 8,005
14.2%
-­‐5.4%
-­‐36.6%
10.1%
8.1%
6.1%
5.1%
5.0%
4.0%
4.0%
6,407
13.3%
(359)
-­‐0.7%
11,500
23.9%
6,236
12.1%
(1,281)
-­‐2.5%
12,000
23.3%
5,762
11.2%
(33)
-­‐0.1%
12,295
23.9%
6,511
11.2%
0
0.0%
6,917
11.9%
7,162
11.2%
0
0.0%
7,609
11.9%
7,734
11.2%
0
0.0%
8,218
11.9%
8,199
11.2%
0
0.0%
8,711
11.9%
8,608
11.2%
0
0.0%
9,147
11.9%
9,039
11.2%
0
0.0%
9,604
11.9%
9,400
11.2%
0
0.0%
9,988
11.9%
9,776
11.2%
0
0.0%
9,776
11.9%
2,298
1,807
-­‐21.4%
1,807
0.0%
4,901
171.3%
5,398
10.1%
5,835
8.1%
6,190
6.1%
6,503
5.1%
6,831
5.1%
7,107
4.0%
8,006
12.6%
NPV of Cash Flows
NPV of terminal value
Projected Equity Value
Free Cash Flow Yield
30,247
53,499
83,746
2.84%
Current P/E
Projected P/E
Current EV
Projected EV
10.4
10.8
98,455.1
101,249.1
Shares Outstanding
1,238.0
Current Price
Implied e quity value/share
Upside/(Downside) to DCF ¥ 65.39
¥ 67.65
3.5%
36%
64%
100%
Terminal Value 138,763
Free Cash Yield
9.1
9.5
98,455.1
101,249.1
9.7
10.0
98,455.1
101,249.1
5.77%
Terminal P/E 17.3
Terminal EV 156,266.2
COP
Sensitivity Analysis
Sensitivity Analysis
¥ 67.65
8%
9%
Terminal Discount 10.0%
Rate 11%
12%
2%
78.14
65.58
56.22
48.99
43.26
Terminal FCF Growth
3%
4.0%
5%
88.93 105.10 132.06
72.67 82.59
97.48
61.12 67.65
76.79
52.51 57.02
63.04
45.85 49.09
53.25
6%
185.97
122.29
90.50
71.46
58.80
COP
Target Price
Price Target
Relative Valuation
DGM
DCF
Price
75.15-108.18
31.78
67.65
Weight
20%
30%
50%
Final Target Price
66.87
Current Price
(4/16/2015)
69.01
Downside
Potential
-3.1%
Recommendation: HOLD
National Oilwell Varco
Business Overview
Market Data
Ticker
NOV
Market Cap
21.6B
# of Shares
409.94M
Beta
1.37
Dividend Yield 3.50%
52 Week
Range
46.08-86.55
P/E (ttm)
9.34
ROE
11.39%
ROA
6.80%
¡  Headquartered in Houston,
Texas
¡  Business divisions: rig systems,
rig aftermarket, wellbore
technologies, and completion
and production solutions
NOV vs. SPX
(1 year)
NOV vs. SPX
Correlation
Correlation: 0.314
NOV
Drivers | Risks
Drivers
Risks
¡  Demand for oil and gas
drilling
¡  Volatile crude oil price
¡  Price of crude oil and
natural gas
¡  Capital spending by drilling
contractors
¡  Inventory levels of oil and
natural gas ¡  Regulatory and political risks
NOV
Valuation Analysis
Target price is $24.30.
Analyst: Holly Fisher
3/7/2015
Terminal Discount Rate =
Terminal FCF Growth =
Year
2015E
Revenue
20,154
% Grow th
2016E
19,146
-5.0%
Operating Income
2,620
Operating Margin
13.0%
Interest
Interest % of Sales
Taxes
Tax Rate
Net Income
Plus/(minus) Changes WC
% of Sales
-5.0%
2,183
12.0%
17,279
-5.0%
2,074
12.0%
2019E
16,674
-3.5%
2,001
12.0%
2020E
16,091
-3.5%
1,931
12.0%
2021E
16,252
1.0%
1,788
11.0%
2022E
16,414
1.0%
1,806
11.0%
2023E
16,743
2.0%
1,842
11.0%
2024E
17,245
3.0%
1,897
11.0%
2025E
17,848
3.5%
1,963
11.0%
12
12
12
12
11
11
11
11
11
12
12
0.1%
0.1%
0.1%
0.1%
0.1%
0.1%
0.1%
0.1%
0.1%
0.1%
790
693
659
626
604
583
540
545
556
573
593
30.0%
30.0%
30.0%
30.0%
30.0%
30.0%
30.0%
30.0%
30.0%
30.0%
30.0%
1,843
% of Sales
12.0%
18,189
2018E
0.1%
% Grow th
Add Depreciation/Amort
2,298
2017E
12.0%
3.5%
1,617
1,537
1,460
1,409
1,359
1,259
1,272
1,297
1,336
1,383
-12.2%
-5.0%
-5.0%
-3.5%
-3.5%
-7.4%
1.0%
2.0%
3.0%
3.5%
645
613
582
518
500
483
488
492
502
517
535
3.2%
3.0%
3.0%
3.0%
3.0%
3.0%
3.0%
3.0%
3.0%
3.0%
3.0%
57
(428)
(500)
(346)
(333)
(322)
(325)
(328)
(335)
(345)
(357)
0.3%
-2.2%
-2.7%
-2.0%
-2.0%
-2.0%
-2.0%
-2.0%
-2.0%
-2.0%
-2.0%
Subtract Cap Ex
(584)
(555)
(527)
(501)
(484)
(467)
(471)
(476)
(486)
(500)
(518)
Capex % of sales
-2.9%
-2.9%
-2.9%
-2.9%
-2.9%
-2.9%
-2.9%
-2.9%
-2.9%
-2.9%
-2.9%
Free Cash Flow
1,845.84
% Grow th
-32.5%
Shares Outstanding
Current Price
Implied equity value/share
Upside/(Downside) to DCF
1,246.11
419.0
$
$
52.70
24.30
-53.9%
1,091.09
-12.4%
1,131.39
3.7%
1,091.79
-3.5%
1,053.58
-3.5%
950.36
-9.8%
959.86
1.0%
979.06
2.0%
1,008.43
3.0%
1,043.72
3.5%
NOV
Sensitivity Analysis
NOV
Target Price
Price Target
Relative Valuation
DCF
Price
26.71
24.30
Weight
30%
70%
Final Target Price
25.02
Current Price
(4/2/2015)
52.70
Upside/Downside
Potential
-51%
Recommendation: SELL
NOV
Peer Comparison
Ticker P/E TTM P/S TTM P/B P/CF TTM EV/ EBITDA TTM Average 15.86 1.12 1.97 9.07 7.56 Natl Oilwell Varco 9.56 1.00 1.14 7.72 5.24 Schlumberger 21.03 2.2 2.8 10.96 10.25 Halliburton 17.56 1.07 2.16 7.27 7.36 Cameron Intl 11.11 .8 1.84 8.15 7.53 Weatherford Intl 10.94 .57 1.08 4.71 5.58 Baker Hughes 24.6 1.04 1.37 8.21 7.42 FMC Technologies 13.39 1.14 3.37 9.99 7.74 XOM vs. SPX
(1 year)
XOM
Target Price
Price Target
Relative Valuation
DCF
Price
75.5
86.52
Weight
30%
70%
Final Target Price
83.21
Current Price
(4/2/2015)
84.46
Upside/Downside
Potential
-1.5%
Recommendation: HOLD
Final Recommendation
Company
Price
Target
Current
Weight
Change
Recommended
Upside/
Downside
Potential
CVX
109.91
354 bps
HOLD
354 bps
-0.43%
COP
66.87
247 bps
HOLD
247 bps
-3.1%
NOV
25.02
124 bps
SELL
124 bps
0 bps
-51%
XOM
83.21
0 bps
HOLD
0 bps
-1.5%
Weight
Thank you for your attention!
Q&A