ENERGY SECTOR
Agenda
Sector Outlook
Recommendation
Positions
Opportunities
Valuations
Sector Weightings

Third Largest Sector by weighting
S&P 500 vs. Energy Sector
Energy vs S&P 500
r=0.72
700
1,800
1,600
600
1,400
500
1,200
400
1,000
300
800
600
200
400
100
200
0
0
SPENS
S&P500 Price Index
Crude Oil Price
Performance dependent upon Crude Oil
Prices
WTI Crude vs Energy
r = .93
700
160
600
140
500
120
100
Energy

400
80
300
60
200
100
0
40
20
0
Energy
Crude Oil Price:
WTI
Recommendation Today



Hold on Sector as a whole at - 11.13%
Crude prices near 52 week highs
Hitting Resistance
BUY
SELL
Stock
Amount
Upside
Stock
Amount
Upside
CVX
60 bp
21.5%
MUR
185 bp
7.1%
NBR
180 bp
40.0%
RIG
244 bp
2.0%
SLB
180 bp
23%
Oil Integrated

Undervalued
Relative to S&P
Relative to SP500 High
Low
Oil Integrated
1.00
0.90
Median Current S&P
0.80
0.70
1.10
1.20
1.40
0.80
0.90
0.51
0.46
0.70
0.50
0.60
0.70
0.73
1.00
0.70
0.70
0.73
0.73
0.70
0.70
0.70
1.00
1.00
1.00
1.00
1.00
0.60
Ratio
P/Trailing E
P/Forward E
P/B
P/S
P/CF
0.50
0.40
0.30
0.20
0.10
-
Median
Current
S&P
Low
Chevron
Strong Global Presence majority of sales on Brent Price
 Performance dependent on
production and oil price
 Recent acquisition of Atlas
Energy provides Chevron with
great exposure to Marcellus
Shale in the U.S.
 Strong record of returning cash
to shareholders and
implementing share buybacks
current yield 2.96%

Chevron Overview



Leader in value creation from exploration activities
Lowest cost in resource additions from exploration
($0.48 / BOE) 10 year average – 41% lower than
peer average
47% success rate from exploration activities
Brent Crude Oil Correlation
$140.0
Brent vs CVX
r = .93
$120.0
$100.0
$80.0
$60.0
$40.0
$20.0
$0.0
Brent
Crude
CVX
DCF
Discounted Cash Flow Analysis
Chevron Corp (CVX)
Analyst: Chris DiYanni
Date: 3/2/2012
Terminal Discount Rate =
Terminal FCF Growth =
Year
2011E
Revenue
253,706
% Grow th
261,447
3.1%
Operating Income
47,634
Operating Margin
18.8%
Interest and Other
-
Interest % of Sales
0.00%
Taxes
20,626
Tax Rate
43.0%
Net Income
26,895
% Grow th
45,339
17.3%
51
0.02%
19,021
42.0%
26,155
-2.8%
Add Depreciation/Amort
12,911
% of Sales
Plus/(minus) Changes WC
% of Sales
20,048
42.0%
27,574
5.4%
13,515
17.0%
28
0.01%
20,253
42.0%
27,969
1.4%
15,610
6.0%
49,641
16.5%
30
0.01%
20,837
42.0%
28,774
2.9%
15,043
312,888
4.0%
50,062
16.0%
31
0.01%
21,013
42.0%
29,018
0.8%
15,644
331,661
6.0%
53,066
16.0%
33
0.01%
22,274
42.0%
30,759
6.0%
16,583
348,244
5.0%
55,719
16.0%
35
0.01%
23,387
42.0%
32,297
5.0%
15,671
2019E
360,433
3.5%
57,669
16.0%
36
0.01%
24,206
42.0%
33,427
3.5%
14,417
2020E
373,048
3.5%
59,688
16.0%
37
0.01%
25,053
42.0%
34,597
3.5%
16,787
2021E
384,239
3.0%
61,478
16.0%
38
0.01%
25,805
42.0%
35,635
3.0%
13,833
5.0%
4.5%
4.0%
4.5%
3.6%
(94)
(704)
(667)
(568)
(602)
(626)
(663)
(696)
(721)
(746)
(768)
102,472
158,098
260,571
4.84%
8.2
9.7
3.6
4.3
2,001
$
$
26
0.01%
48,250
300,854
2018E
5.0%
-0.3%
32,700
12.5%
8,437
-20.5%
Shares Outstanding
17.7%
5.0%
2017E
5.0%
10,612
Current P/E
Projected P/E
Current EV/EBITDA
Projected EV/EBITDA
47,761
283,824
2016E
5.5%
% Grow th
NPV of Cash Flows
NPV of terminal value
Projected Equity Value
Free Cash Flow Yield
3.4%
2015E
5.0%
11.5%
Free Cash Flow
270,309
2014E
6.0%
29,100
Capex % of sales
15,687
2013E
5.1%
0.0%
Subtract Cap Ex
Current Price
Implied equity value/share
Upside/(Downside) to DCF
2012E
11.0%
3.0%
109.62
130.22
18.8%
-0.2%
29,734
11.0%
10,689
26.7%
39%
61%
100%
-0.2%
29,802
10.5%
13,210
23.6%
-0.2%
30,085
10.0%
13,130
-0.6%
-0.2%
22,215
7.1%
21,821
66.2%
-0.2%
23,216
7.0%
23,462
7.5%
-0.2%
24,377
7.0%
22,894
-2.4%
-0.2%
25,230
7.0%
21,893
-4.4%
-0.2%
26,113
7.0%
24,525
12.0%
Terminal Value
Free Cash Yield
8.4
10.0
3.5
4.2
8.0
9.4
3.5
4.2
-0.2%
13,833
3.6%
34,867
42.2%
448,908
7.77%
Terminal P/E
12.6
Terminal EV/EBITDA
5.9
Recommendation: BUY





Current Position 3.90%
Increase position by 70 basis points
Current Price 109.61
Target Price $130.00
21.5% upside potential (incl. dividend)
Sensitivity Analysis
260,571
Long
2.0%
Term
2.5%
Growth
3.0%
Rate
3.5%
4.0%
Present Value Factor @
10.5%
11.0%
257,720
240,170
268,918
249,770
281,609
260,571
296,113
272,812
312,848
286,801
10.0%
277,594
290,754
305,793
323,147
343,393
Current Price
Implied equity value/share
Upside/(Downside) to DCF
$
$
11.5%
224,570
232,856
242,118
252,537
264,346
12.0%
210,624
217,820
225,815
234,751
244,804
109.62
130.22
18.8%
Implied Equity Value/Share Range
Upside/(Downside) to DCF
Low
$ 116.37
6.2%
-
High
$ 147.98
35.0%
ConocoPhillips
Portfolio
Overlook
COP
Upside/Downside
Current Return
Projected Return
Total Return
Div/Yield
Common
Stocks
5000
Current
Target
Price
Price Unit Cost
$77.27 $88.16 $63.76
14.09%
$67,550
$54,429
$121,979
3.42%
Market Value
COP
341,050.00
Portfolio
11,305,374.80
%
3.02%
Basis Points
(BPS)
302
Crude Oil Correlation
Oil Price
140
120
Brent Crude Oil Spot Price vs. COP
r=.86
COP
100
90
80
100
80
70
60
Brent Crude
Oil Spot Price
50
60
40
40
30
20
20
0
10
0
COP
Discounted Cash Flow
DCF returns with target price at $100.66

Conoco Philips (COP)
Analyst: Duruo Li
Growth Rate
Date: 01/18/2012
Terminal FCF Growth
Year
7.46%
2.00%
Discount Rate
11.00%
Tax Rate
Base NWC Rate
42.19%
6.20%
2010
2011
2012E
2013E
2014E
2015E
2016E
2017E
2018E
2019E
2020E
In Million $
198,655 251,226 220,854 237,336 252,496 265,912 277,183 285,953 293,464
Revenue
Free Cash Flow
947
4,969
14,088
11,517
11,969
12,763
13,472
14,075
14,537
299,596
14,222
305,534
13,869
NPV of Cash Flows
78,282
59%
Terminal Value 157,186
NPV of terminal value
55,358
41%
Free Cash Yield
Projected Equity Value
133,641
100%
Terminal P/E
11.1
Terminal EV/EBITDA
3.8
Free Cash Flow Yield
4.84%
Current P/E
8.6
Projected P/E
Current EV/EBITDA
3.0
Projected EV/EBITDA
Shares Outstanding
In Million
1,328
Current Price
$77.27
Implied equity value/share
$100.65
Upside/(Downside) to DCF
30.3%
9.3
8.8
12.2
11.5
3.3
3.1
4.0
4.1
8.82%
Sensitivity Analysis
Sensitivity Analysis
Implied equity value/share
Growth Rate
$100.65
Discount Rate
6.00%
6.50%
7.00%
7.50%
8.00%
8.50%
9.00%
10.00%
12.00%
15.00%
8.0%
$140.78 $143.36
$145.99
$148.67
$151.40
$154.19
$157.04
$162.90
$175.32
$195.80
9.0%
$121.69 $123.78
$125.92
$128.10
$130.32
$132.59
$134.89
$139.65
$149.72
$166.31
10.0%
$107.39 $109.13
$110.90
$112.71
$114.55
$116.43
$118.35
$122.29
$130.63
$144.37
11.0%
$96.27
$97.74
$99.24
$100.77
$102.32
$103.91
$105.53
$108.85
$115.88
$127.44
12.0%
$87.39
$88.65
$89.93
$91.23
$92.57
$93.92
$95.30
$98.15
$104.15
$114.01
13.0%
14.0%
$80.12
$74.06
$81.21
$75.01
$82.32
$75.98
$83.45
$76.97
$84.60
$77.97
$85.77
$79.00
$86.97
$80.04
$89.42
$82.18
$94.61
$86.70
$103.12
$94.11
Sensitivity Analysis
Implied equity value/share
Terminal FCF Growth Rate
Growth Rate
$100.65
6.00%
6.50%
7.00%
7.50%
8.00%
8.50%
9.00%
10.00%
12.00%
15.00%
-2.0%
$83.36
$84.48
$85.62
$86.78
$87.96
$89.17
$90.40
$92.92
$98.25
$106.97
-1.0%
$85.78
$86.96
$88.17
$89.40
$90.66
$91.93
$93.23
$95.91
$101.55
$110.81
0.0%
$88.64
$89.90
$91.19
$92.50
$93.84
$95.20
$96.59
$99.44
$105.46
$115.35
1.0%
$92.08
$93.43
$94.81
$96.22
$97.66
$99.12
$100.61
$103.67
$110.15
$120.79
2.0%
$96.27
$97.74
$99.24
$100.77
$102.32
$103.91
$105.53
$108.85
$115.88
$127.44
$101.52 $103.13
$108.27 $110.06
$104.78
$111.89
$106.45
$113.76
$108.16
$115.66
$109.90
$117.60
$111.67
$119.58
$115.32
$123.64
$123.05
$132.26
$135.76
$146.45
-20.00% -10.00%
0.00%
2.00%
4.00%
6.00%
7.50%
9.00%
10.00%
15.00%
3.0%
4.0%
Sensitivity Analysis on Extreme Scenarios
Implied equity value/share
Growth Rate
$100.65
Terminal FCF Growth Rate
Lose Money Zone
Estimate Zone
-2.0%
$47.04
$56.78
$71.42
$75.10
$79.08
$83.36
$86.78
$90.40
$92.92
$106.97
-1.0%
$47.52
$57.73
$73.16
$77.05
$81.25
$85.78
$89.40
$93.23
$95.91
$110.81
0.0%
$48.10
$58.86
$75.22
$79.35
$83.82
$88.64
$92.50
$96.59
$99.44
$115.35
1.0%
$48.78
$60.21
$77.69
$82.11
$86.90
$92.08
$96.22
$100.61
$103.67
$120.79
2.0%
$49.62
$61.86
$80.70
$85.49
$90.67
$96.27
$100.77
$105.53
$108.85
$127.44
3.0%
4.0%
$50.67
$52.02
$63.93
$66.58
$84.47
$89.32
$89.71
$95.13
$95.38
$101.44
$101.52
$108.27
$106.45
$113.76
$111.67
$119.58
$115.32
$123.64
$135.76
$146.45
Multiples and Sum of Parts
Company Name Ticker
Current
Price
P/E Multiple P/B Multiple P/S Multiple P/CF Multiple
Conocophillips
COP
77.27
8.78
1.4
0.40
5.2
Exxon Mobil
Chevron
BP
Royal Dutch/Shell
Total S A
Average
Targe Price
XOM
CVX
BP
RDSA
TOT
87.14
109.61
47.84
73.79
56.49
10.30
8.20
6.40
12.40
8.10
9.08
79.73
32.27
57.69
34.17
46.12
33.23
40.70
56.98
96.82
121.79
119.60
245.97
94.15
135.67
54.27
11.78
19.93
11.39
13.18
11.77
13.61
70.76
Sum of Parts Analysis
ConocoPhillps (COP)
Segments
Upstream Oil Drilling
Down Stream Gas Refining
TOTAL
Sales per P/S
Competitors P/S ratios
Target P/S Target multiple x
Segment Ratio
VQ SD MWE NBR MRO SUN HES VLO Multiple
Sales/Segment
58182
2 2.5 2.8
1
2.075
120727.65
186502
0.7 0.1 0.6 0.1
0.375
69938.25
244684
0.4
Target Market Cap
190665.9
Date of price
Current Stock Price
3/1/2012
77.27
# of diluted shares
Target Price
% return to target
1,328
$143.60
86%
Weighted Average Price
COP
Weight
Target Price
P/E
$79.73
7.50%
$88.16
Current Price
Upside
$77.27
14.09%
Multiples
P/B
P/S
$56.98
$54.27
10.00%
10.00%
P/CF
$70.76
10.00%
DCF
$100.65
60.00%
Sum of
Parts
$143.36
2.50%
Recommendation: HOLD
DCF
Multiple
Sum of Part
Low
High
$89.93
$114.55
$54.27
$143.36
$79.73
$143.36
DCF
Multiple
Sum of Part
Price $50
60
70
Portfolio
Overlook
COP
Upside/Downside
Current Return
Projected Return
Total Return
Div/Yield
80
90
Common
Stocks
5000
100
110
120
130
Current
Target
Price
Price Unit Cost
$77.27
$88.16
$63.76
14.09%
$67,550
$54,429
$121,979
3.42%
140
150
Murphy Overview






SIM Investment 1.85%
52 week $40.41-78.16
Oil & Gas Refining &
Marketing
Explores for and produces
crude oil and natural gas
Refines and markets
petroleum products
Retail stores in Wal-Mart
parking lots
Correlation to Crude Oil
Competitors
Main Competitors vs. Murphy
30
25
20
15
10
5
0
ROE
Net
Margin
BP
ROE
Net
Margin
Exon Mobil
ROE
Net
Margin
Chevron
Source: Thomson Reuters
ROE
Net
Margin
Murphy
DCF Value
MUR
Terminal Discount Rate =
Terminal FCF Growth =
11.5%
3.0%
Thousands
Year
Revenue
2011E
28,081,340
% Grow th
2,037,200
Operating Margin
7.3%
Interest and Other
95,477
Interest % of Sales
0.3%
Taxes
776,689
Tax Rate
40.0%
Net Income
1,165,034
% Grow th
1,937,090
7.3%
90,703
0.3%
738,555
40.0%
1,107,832
-4.9%
Add Depreciation/Amort
1,123,254
% of Sales
4.0%
Plus/(minus) Changes WC
(471,738)
% of Sales
-1.7%
Subtract Cap Ex
2,737,931
Capex % of sales
Free Cash Flow
0.1%
2,400,955
2,127,299
7.2%
99,773
0.3%
811,010
40.0%
1,216,515
9.8%
1,173,800
32,279,501
10.0%
2,420,963
7.5%
129,118
0.4%
893,819
39.0%
1,398,025
14.9%
1,291,180
2015E
35,346,053
9.5%
2,650,954
7.5%
141,384
0.4%
978,732
39.0%
1,530,778
9.5%
1,413,842
2016E
38,350,468
8.5%
2,876,285
7.5%
153,402
0.4%
1,061,924
39.0%
1,660,899
8.5%
1,534,019
2017E
41,418,505
8.0%
3,106,388
7.5%
165,674
0.4%
1,146,878
39.0%
1,793,775
8.0%
1,656,740
2018E
44,524,893
7.5%
3,339,367
7.5%
178,100
0.4%
1,232,894
39.0%
1,928,313
7.5%
1,780,996
2019E
47,419,011
6.5%
3,556,426
7.5%
189,676
0.4%
1,313,032
39.0%
2,053,657
6.5%
1,896,760
2020E
50,027,057
5.5%
3,752,029
7.5%
200,108
0.4%
1,385,249
39.0%
2,166,612
5.5%
2,001,082
52,278,274
4.5%
3,920,871
7.5%
209,113
0.4%
1,447,585
39.0%
2,264,112
4.5%
2,091,131
4.0%
4.0%
4.0%
4.0%
4.0%
4.0%
4.0%
(44,018)
(64,559)
(70,692)
(76,701)
(82,837)
(89,050)
(94,838)
(100,054)
(104,557)
-0.2%
2,494,325
(148,027)
-78.0%
-27.0%
31%
69%
100%
-0.2%
2,582,360
8.0%
42,286
-128.6%
-0.2%
2,650,954
7.5%
222,974
427.3%
-0.2%
2,492,780
6.5%
625,436
180.5%
-0.2%
2,278,018
5.5%
1,089,661
74.2%
-0.2%
2,003,620
4.5%
1,616,639
48.4%
-0.2%
1,896,760
4.0%
1,958,819
21.2%
-0.2%
2,001,082
4.0%
2,066,558
5.5%
Terminal Value
Free Cash Yield
10.5
11.5
4.0
4.4
2021E
4.0%
(202,864)
60.38
65.71
8.8%
2014E
4.0%
(921,381)
193,158
$
$
23,167
10.0%
8.5%
10.0
10.9
3.8
4.1
Shares Outstanding
4.0%
29,345,001
9.0%
3,881,251
8,811,178
12,692,429
-7.90%
Current P/E
Projected P/E
Current EV/EBITDA
Projected EV/EBITDA
1,067,091
2013E
9.8%
% Grow th
Current Price
Implied equity value/share
Upside/(Downside) to DCF
26,677,273
-5.0%
Operating Income
NPV of Cash Flows
NPV of terminal value
Projected Equity Value
Free Cash Flow Yield
2012E
9.6
10.4
3.7
4.0
-0.2%
2,091,131
4.0%
2,159,556
4.5%
26,168,732
8.25%
Terminal P/E
11.6
Terminal EV/EBITDA
4.4
Recommendation: SELL

Hit $65.60 last week
› DCF=$65.71
› Current Price = $60.99
› Upside= 7.18%
› Sell all – 185 bp
Transocean Ltd [NYSE: RIG]
100
80
60
40
20
F-12
J-12
D-11
N-11
O-11
S-11
A-11
J-11
J-11
M-11
A-11
M-11
0
Date
Company
Stock Price
52 week Low
52 week high
Sector
Industry
200
150
100
50
0
Market Cap:
Shares Outstanding:
Div Yield
Average Daily volume
Beta
Target Price
3-Mar-12
Transocean LTD
$54.19
$38.21
$85.17
Energy
Oil and gas drilling
$ 12.56B
322 M
5.9%
7.83M
1.65
$55.06
Transocean: Overview
Largest offshore driller (134 +8)
Largest jackup rig driller (59)
Largest “floating” rig driller (75)
Largest deepwater driller (43)
Largest offshore driller by equity
market capitalization
Transocean: Income Statement
Year (all values in millions)
Contract drilling revenues
2011
2010
2009
8,335
8,967
10,607
45
98
281
762
511
668
9,142
9,576
11,556
Operating and maintenance
6,956
5,119
5,140
Depreciation and amortization
1,449
1,589
1,464
288
247
209
5,229
1,012
334
(4)
(257)
9
Total Expenses
13,918
7,710
7,156
Operating Income
(4,776)
1,866
4,400
Contract drilling intangible revenues
Other revenues
Net Sales
Operating Expenses
General and administrative
Loss on impairment
Loss (Gain) on disposal of assets
Transocean: Income Statement
Year (all values in millions)
2013E
Contract drilling revenues
9626.925
9168.5
8,335
Contract drilling intangible revenues
51.975
49.5
45
Other revenues
880.11
838.2
762
10,559.0
10,056.2
9,142.0
10,909.5
10,390.0
9,060.0
Operating and maintenance
5,888.89
5,608.46
6,956.00
Depreciation and amortization
1,827.98
1,740.94
1,449.00
284.15
270.62
288.00
Loss on impairment
1,164.20
1,108.76
5,229.00
Loss (Gain) on disposal of assets
(295.65)
(281.57)
(4.00)
Total Expenses
8,869.6
8,447.2
13,918.0
Operating Income
1,689.4
1,609.0
(4,776.0)
Net Sales
Consensus
2012E
2011
Operating Expenses
General and administrative
Transocean: DCF
Discount Rate:
10%
Growth Rate used: 3%
Projected Equity Value
Free Cash Flow Yield
16,637
-30.45%
Terminal Value
22,210
Free Cash Yield
6.28%
Terminal EV/EBITDA
7.9
Terminal P/E
15.6
Current Price
$54.18
Implied equity value/share
$51.67
Upside/(Downside) to DCF
-4.6%
Transocean: Competition
NE
Market Cap
DO
NBR
RIG
Industry
10.16B
9.57B
6.20B
18.99B
247.62M
18.50%
-10.90%
31.60%
13.90%
33.10%
2.62B
3.25B
6.06B
9.14B
123.37M
41.56%
52.42%
37.69%
23.91%
55.53%
1.02B
1.65B
1.61B
1.88B
20.85M
17.93%
38.43%
11.09%
5.15%
9.97%
367.17M
962.54M
341.12M
-5.92B
N/A
EPS
1.46
6.92
0.84
-17.79
N/A
P/E
27.65
9.95
25.75
N/A
13.99
P/S
3.88
2.94
1.02
2.08
4.28
Quarterly
Rev Growth
Revenue
Gross Margin
EBITDA
Operating
Margin
Net Income
Transocean: Comparables
Relative
Multiples
S&P 500
Industry
Median
Current
Median
Current
P/Trailing E
1.3
2.5
1.2
1.9
P/Forward E
.97
1.4
1.1
1.6
P/B
.5
.4
.6
.6
P/S
2.0
1.7
1.1
1.0
P/CF
.9
1.0
.9
1.2
Transocean: Comparables
Absolute
Valuation
High
Low
Median
Current
Target
Multiple
Target
Values
Target
Price
P/Forward
E
77.0
3.1
14.4
18.1
14.4
2.26
32.54
P/S
P/B
P/EBITDA
7.0
4.1
15.25
1.3
.4
2.20
2.5
1.2
7.87
2.1
.8
7.54
2.5
1.2
7.87
31.23
44.88
8.26
78.07
53.86
65.01
P/CF
28.3
2.5
8.6
9.6
8.6
6.44
55.38
Recommendation: SELL
Analysis
Price
Weight
Value
P/Forward E
32.54
15%
4.881
P/S
78.07
15%
11.7105
P/B
53.86
10%
5.386
P/EBITDA
65.01
10%
6.501
P/CF
55.38
20%
11.076
DCF
51.67
30%
15.501
100%
$55.06
Total
Current: $54.18 Target $55.06
$1/share or <2% gain
Nabors Overview





Oil & Gas Drilling &
Exploration
Land Drilling worldwide
contractor
Markets land well rigs
Operates 500 rigs
worldwide
52 week Range= $11.0532.47
DCF
Nabor Industries Ltd
Terminal Discount Rate =
Terminal FCF Grow th =
11.5%
3.0%
Year
2012E
2013E
2014E
2015E
2016E
2017E
Revenue
6,377
7,652
8,570
8,999
9,449
9,827
% Grow th
20.0%
Operating Income
1,077
Operating Margin
Interest and Other
Interest % of Sales
Taxes
Tax Rate
Net Income
1,330
3.0%
1,895
10,842
3.0%
1,952
11,167
3.0%
2,010
11,502
3.0%
2,070
18.0%
18.0%
18.0%
18.0%
18.0%
239
287
321
337
354
368
383
394
406
418
431
3.7%
3.7%
3.7%
3.7%
3.7%
3.7%
3.7%
3.7%
3.7%
3.7%
3.7%
168
209
234
257
269
280
291
300
309
318
328
20.0%
20.0%
20.0%
20.0%
20.0%
20.0%
20.0%
20.0%
20.0%
20.0%
20.0%
835
935
24.6%
12.0%
995
9.8%
1,077
1,120
1,165
1,200
1,236
1,273
1,312
5.0%
4.0%
4.0%
3.0%
3.0%
3.0%
3.0%
460
990
945
884
818
737
651
558
13.0%
12.0%
11.0%
10.0%
9.0%
8.0%
7.0%
6.0%
5.0%
4.0%
-74
(153)
(171)
(180)
(189)
(197)
(204)
(211)
(217)
(223)
(230)
-2.0%
-2.0%
-2.0%
-2.0%
-2.0%
-2.0%
818
737
651
558
460
8.0%
7.0%
6.0%
5.0%
4.0%
-2.0%
930
Capex % of sales
14.6%
Free Cash Flow
448
1,148
15.0%
% Grow th
1,028
1,026
12.3%
-1.2%
-2.0%
1,286
15.0%
-2.0%
1,350
-2.0%
1,323
14.0%
13.0%
529
506
486
510
531
961
990
18.0%
-4.2%
-4.0%
5.0%
4.0%
81.0%
3.0%
4,017
4,413
8,430
7.44%
48%
52%
100%
9.0
12.6
4.4
5.7
7.2
10.1
3.5
4.6
1,019
3.0%
1,050
3.0%
Terminal Value
Free Cash Yield
6.4
9.0
3.3
4.2
20.62
28.87
40.0%
Implied Equity Value/Share Range
Upside/(Dow nside) to DCF
1,277
15.0%
292
$
$
1,840
10,526
18.0%
Subtract Cap Ex
Current Price
Implied equity value/share
Upside/(Dow nside) to DCF
4.0%
18.0%
Plus/(minus) Changes WC
Shares Outstanding
1,769
10,220
2022E
18.0%
782
Current P/E
Projected P/E
Current EV/EBITDA
Projected EV/EBITDA
1,701
4.0%
2021E
17.4%
Add Depreciation/Amort
NPV of Cash Flow s
NPV of terminal value
Projected Equity Value
Free Cash Flow Yield
1,620
5.0%
2020E
17.4%
670
% of Sales
1,490
5.0%
2019E
16.9%
% Grow th
% of Sales
12.0%
2018E
$
Low
24.18
17.3%
-
High
$
36.29
76.0%
Long
Term
Growth
Rate
8,430
2.00%
2.50%
3.00%
3.50%
4.00%
10.50%
9,004
9,328
9,695
10,114
10,598
1,081
3.0%
13,105
8.25%
Terminal P/E
10.0
Terminal EV/EBITDA
6.0
Present Value Factor @
11.00%
11.50%
12.00%
8,435
7,927
7,472
8,711
8,165
7,677
9,022
8,430
7,905
9,374
8,728
8,160
9,777
9,067
8,447
12.50%
7,062
7,240
7,437
7,657
7,901
Recommendation: BUY

Buy 180 bp
› Current Price$20.62
› Target Price $28.71
› 40% upside potential
Long
Term
Growth
Rate
8,430
2.00%
2.50%
3.00%
3.50%
4.00%
Present Value Factor @
11.00% 11.50% 12.00%
8,435
7,927
7,472
8,711
8,165
7,677
9,022
8,430
7,905
9,374
8,728
8,160
9,777
9,067
8,447
10.50%
9,004
9,328
9,695
10,114
10,598
Current Price
Implied equity value/share
Upside/(Downside) to DCF
$
$
12.50%
7,062
7,240
7,437
7,657
7,901
20.62
28.87
40.0%
Implied Equity Value/Share Range
Upside/(Downside) to DCF
Low
$ 24.18
17.3%
-
High
$ 36.29
76.0%
Schlumberger





One of the largest oil
services companies
Technological advantage
in most of its services
Industry leader in Russian Oil
services market
Strong R&D edge – 7K
people
Winning large contracts in
Gulf Coast
DCF
Company
Analyst: Chris DiYanni
Date: 1/18/2012
Terminal Discount Rate =
Terminal FCF Growth =
Year
2012E
Revenue
44,826
% Grow th
51,550
15.0%
Consensus
Operating Income
Operating Margin
Interest and Other
Interest % of Sales
Taxes
8,830
10,846
13,026
% of Sales
11.0%
18,903
99,017
10.0%
20,794
106,939
8.0%
22,457
112,286
5.0%
23,580
116,216
3.5%
24,405
21.0%
21.0%
21.0%
337
387
426
513
579
649
720
792
856
898
930
0.8%
0.8%
0.8%
0.8%
0.8%
0.8%
0.8%
0.8%
0.8%
0.8%
0.8%
2,301
22.0%
8,158
5,670
2,772
22.0%
9,828
20.5%
6,238
2,989
22.0%
10,596
7.8%
7,048
3,377
22.0%
11,973
13.0%
7,241
3,782
22.0%
13,410
12.0%
6,488
4,000
22.0%
14,183
5.8%
5,401
4,400
22.0%
15,601
10.0%
4,951
4,752
22.0%
16,849
8.0%
4,278
4,990
22.0%
17,692
5.0%
4,491
5,165
22.0%
18,311
3.5%
4,184
11.0%
11.0%
11.0%
11.0%
10.0%
8.0%
6.0%
5.0%
4.0%
4.0%
3.6%
(2,241)
(2,577)
(2,835)
(3,204)
(3,620)
(4,055)
(4,501)
(4,951)
(5,347)
(5,614)
(5,811)
-5.0%
4,900
11.0%
6,351
34.7%
57,310
68,098
125,408
4.58%
15.5
18.9
7.5
9.1
-5.0%
5,100
11.0%
8,130
28.0%
-5.0%
5,200
10.0%
9,240
13.7%
-5.0%
5,793
8.0%
9,801
6.1%
7.0%
10,166
3.7%
-5.0%
5,401
6.0%
9,682
-4.8%
-5.0%
4,951
5.0%
10,650
10.0%
-5.0%
4,278
4.0%
11,502
8.0%
-5.0%
4,491
4.0%
12,077
5.0%
Terminal Value
Free Cash Yield
12.6
15.4
6.2
7.6
10.5
12.8
5.3
6.5
75.69
92.14
21.7%
Implied Equity Value/Share Range
-5.0%
5,677
46%
54%
100%
1,361
$
$
17,841
90,016
2022E
21.0%
4,715
Shares Outstanding
12.0%
2021E
21.0%
% Grow th
Current P/E
Projected P/E
Current EV/EBITDA
Projected EV/EBITDA
15,929
81,095
2020E
22.0%
10.3%
NPV of Cash Flows
NPV of terminal value
Projected Equity Value
Free Cash Flow Yield
13.0%
2019E
22.0%
-5.0%
Free Cash Flow
14,097
72,406
2018E
22.0%
4,600
Capex % of sales
13.0%
2017E
23.0%
4,931
Subtract Cap Ex
64,076
2016E
21.0%
23.1%
Plus/(minus) Changes WC
2015E
19.7%
6,625
% of Sales
10.0%
56,112
% Grow th
Add Depreciation/Amort
56,705
51,404
22.0%
Net Income
2014E
45,637
1,869
Tax Rate
Current Price
Implied equity value/share
Upside/(Downside) to DCF
2013E
10.5%
3.5%
Low
$ 82.57
-
High
$ 104.81
Long
Term
Growth
Rate
125,408
3.00%
3.25%
3.50%
3.75%
4.00%
10.00%
129,227
132,208
135,418
138,885
142,641
-5.0%
4,184
3.6%
12,500
3.5%
184,824
6.76%
Terminal P/E
10.1
Terminal EV/EBITDA
6.5
Present Value Factor
10.25%
10.50%
124,573
120,233
127,299
122,731
130,226
125,408
133,379
128,282
136,784
131,378
@
10.75%
116,175
118,470
120,923
123,552
126,375
11.00%
112,372
114,485
116,739
119,149
121,730
Recommendation: BUY
Buy 180 bp
 Current Price - $76.09
 Target Price - $92.14
 Upside Return - ~23% (incl. div)

Long
Term
Growth
Rate
125,408
3.00%
3.25%
3.50%
3.75%
4.00%
Present Value Factor @
10.25%
10.50%
10.75%
124,573
120,233 116,175
127,299
122,731 118,470
130,226
125,408 120,923
133,379
128,282 123,552
136,784
131,378 126,375
10.00%
129,227
132,208
135,418
138,885
142,641
Current Price
Implied equity value/share
Upside/(Downside) to DCF
$
$
11.00%
112,372
114,485
116,739
119,149
121,730
75.69
92.14
21.7%
Implied Equity Value/Share Range
Upside/(Downside) to DCF
Low
$ 82.57
9.1%
-
High
$ 104.81
38.5%
Recommendation Today

Hold on Sector as a whole at - 11.13%
BUY
SELL
Stock
Amount
Upside
Stock
Amount
Upside
CVX
70 bp
21.5%
MUR
185 bp
7.1%
NBR
180 bp
40.0%
RIG
244 bp
2.0%
SLB
180 bp
23%
Questions?