Energy Company
Presentation
Dan Geisler
Olga Boder(Firdman)
Fall 2009
Agenda
•
•
•
•
Recommendation
Recap of Sector Presentation
Business analysis
Financial analysis &Valuation
–
–
–
–
RIG
NOV
COP
BP
• Revisit Recommendation
Recommendation
• Hold the overall % for the sector.
• Hold Transocean Ltd.
• Reduce the % of BP plc. – ADR and
ConocoPhillips Co.
• Diversify our energy sector by purchasing a stock
with an exposure to other industries inside the
energy sector.
• Purchase National Oilwell Varco (NOV).
SIM and S&P 500
Sector
S&P 500 Weight
Energy
SIM Weight
12.35%
+/-
12.80%
0.45%
SIM Companies and Industries
Weight
4.62%
3.43%
4.75%
Security
Ticker
Industry
BP plc. - ADR
BP
Major Integrated Oil & Gas
ConocoPhillips Co.
COP
Major Integrated Oil & Gas
Transocean Ltd.
RIG
Oil & Gas Drilling & Exploration
Crude Oil Price: West Texas Intermediate
COP
BP
RIG
NOV
$160
Energy Sector
700
650
$140
600
$120
550
$100
500
$80
450
400
$60
350
$40
300
$20
$0
9/30/2004
250
9/30/2005
9/30/2006
9/30/2007
9/30/2008
200
9/30/2009
Oil Price Forecast
Futures Chain (Source: Finance.yahoo.com, 11/20/2009; Current Price: $76.99)
$100
$95
$90
$85
$80
$75
10/30/2009
10/30/2010
10/30/2011
10/29/2012
10/30/2013
10/30/2014
10/30/2015
10/29/2016
10/30/2017
Industry/Sector Valuations
Energy Absolute
P/Trailing E
P/Forward E
P/B
P/S
P/CF
High
14.9
16.2
3.8
1.4
9.4
Low
6.1
7.8
1.4
0.5
4.1
Median
11.7
11.5
3.0
1.1
7.3
Current
12.1
15.4
2.1
1.0
5.4
Energy Relative to
S&P 500
High
Low
Median
Current
P/Trailing E
P/Forward E
P/B
P/S
P/CF
0.88
1.20
1.40
1.00
0.90
0.53
0.57
0.80
0.60
0.50
0.70
0.74
1.10
0.80
0.70
0.68
0.91
1.00
0.9
0.50
Overvalued by >20%
Inline within 20%
Undervalued by >20%
Overvalued by >10%
Inline within 10%
Undervalued by >10%
Industry/Sector Valuations
Oil Drilling Relative to
S&P 500
High
Low
Median
Current
P/Trailing E
P/Forward E
P/B
P/S
P/CF
3.70
2.00
1.70
4.30
1.80
0.28
0.28
0.50
1.40
0.40
0.98
0.68
1.00
2.90
1.00
0.41
0.79
0.80
1.80
0.50
Oil Integrated
Relative to S&P 500
High
Low
Median
Current
P/Trailing E
P/Forward E
P/B
P/S
P/CF
0.79
1.20
1.40
0.80
0.80
0.51
0.46
0.90
0.50
0.50
0.61
0.68
1.00
0.60
0.60
0.64
0.78
1.00
0.80
0.50
Oil Exploration
Relative to S&P 500
High
Low
Median
Current
P/Trailing E
P/Forward E
P/B
P/S
P/CF
1.10
1.90
1.30
3.50
0.80
0.55
0.51
0.70
1.50
0.40
0.70
0.73
0.80
2.20
0.60
1.00
1.20
0.80
2.50
0.50
Overvalued by >10%
Inline within 10%
Undervalued by >10%
Overvalued by >10%
Inline within 10%
Undervalued by >10%
Overvalued by >10%
Inline within 10%
Undervalued by >10%
Industry/Sector Valuations
Oil Equipment
Relative to S&P 500
High
Low
Median
Current
P/Trailing E
P/Forward E
P/B
P/S
P/CF
1.90
1.70
2.80
2.80
1.60
0.58
0.61
1.00
1.20
0.70
1.30
1.20
2.00
1.80
1.30
0.77
1.40
1.30
1.60
0.80
Oil Refining Relative
to S&P 500
High
Low
Median
Current
P/Trailing E
P/Forward E
P/B
P/S
P/CF
1.00
3.90
1.30
0.50
0.70
0.23
0.39
0.30
0.10
0.20
0.50
0.55
0.80
0.20
0.50
0.31
3.90
0.30
0.10
0.30
Coal Relative to S&P
500
High
Low
Median
Current
P/Trailing E
P/Forward E
P/B
P/S
P/CF
23.30
2.10
1.90
4.00
2.10
0.55
0.39
0.70
0.90
0.50
1.40
0.95
1.10
1.30
0.70
0.74
1.20
1.90
1.40
0.80
Overvalued by >10%
Inline within 10%
Undervalued by >10%
Overvalued by >10%
Inline within 10%
Undervalued by >10%
Overvalued by >10%
Inline within 10%
Undervalued by >10%
Transocean Ltd. (RIG)
• Oil & Gas Drilling & Exploration Industry (correlation: 0.91)
• Provides contract drilling services for offshore oil drilling
• Their competitive advantage and source of high margin profits
is due to a specialization in harsh environment and deepwater
drilling
• Deepwater Millennium has set four world water-depth
records in the U.S. Gulf of Mexico, including the most recent
record at 8,960 feet of water
• Has well depth record of over 40,000 feet (7.5 miles)
Transocean (RIG) Key Facts/Figures
•
•
•
•
•
•
•
2008 Total revenue: $12,764m
2008 Net income: $4,202m (33.2%)
9 month profit margin: 27.8%
Current stock price (11/20/09): $83.80
Current market cap (11/20/09): $26.91b
Correlation to crude oil: 0.92
Headquartered: Vernier, Switzerland
Transocean (RIG) Valuation Ratios
RIG Absolute
P/Trailing E
P/Forward E
P/B
P/S
P/CF
High
Low
Median
Current
160.8
41.9
4.7
9.4
33.8
3.4
3.1
0.9
1.3
2.8
23.9
11.9
2.8
6.8
18.4
6.6
8.4
1.4
2.2
5.1
Target
Multiple
Target E, S, B,
etc/Share
10.3
2.1
4.2
9.0
10.0
59.9
36.6
16.4
Simple Average
Target Price
$
$
$
$
$
103.25
125.70
153.92
147.88
132.69
Overvalued by >20%
Inline within 20%
Undervalued by >20%
Transocean Ltd. (RIG)
Analyst: Dan Geisler
11/20/2009
Year
Revenue
Terminal Discount Rate =
Terminal FCF Growth =
2009E
11,764
% Grow th
EBT
EBT Margin
Interest
Interest % of Sales
Taxes
Tax Rate
Net Income
% of Sales
12,235
4.0%
3,973
33.8%
4,282
35.0%
2011E
12,846
5.0%
4,753
37.0%
37.0%
5.0%
5,729
36.0%
16,709
17,545
5.0%
5,848
5.0%
5,965
35.0%
34.0%
18,422
5.0%
6,079
33.0%
19,343
5.0%
6,190
32.0%
-
-
-
-
-
-
-
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
755
963
19.0%
22.5%
3,218
3,319
3.1%
1,412
1,468
1,188
25.0%
3,565
7.4%
1,542
-0.2%
(3,800)
Capex % of sales
-32.3%
Free Cash Flow
918
% Grow th
Debt
Cash
Cash/share
5,608
15,914
2019E
-
-0.7%
Current Price
Implied equity value/share
Upside/(Downside) to DCF
38.0%
6.0%
2018E
0.0%
(80)
Shares Outstanding
5,433
15,156
2017E
-
(31)
Current P/E
Projected P/E
Current EV/EBITDA
Projected EV/EBITDA
39.0%
6.0%
2016E
0.0%
(88)
NPV of Cash Flows
NPV of terminal value
Projected Equity Value
Free Cash Flow Yield
5,261
14,298
2015E
-
12.0%
Capital Expenditures
5.0%
2014E
0.0%
12.0%
% of Sales
13,489
2013E
-
12.0%
Plus/(minus) Changes WC
2012E
0.0%
% Grow th
Add Depreciation/Amort
2010E
12.0%
5.0%
9.3
13.1
7.4
9.7
321.0
$ 93.20
$ 131.32
40.9%
10,890
1,081
3.37
25.0%
3,945
10.7%
1,619
1,358
25.0%
4,075
3.3%
1,716
1,402
25.0%
4,206
3.2%
1,819
1,432
25.0%
4,297
2.2%
1,910
1,462
1,491
25.0%
4,386
25.0%
4,474
2.1%
2,005
2.0%
2,105
1,520
25.0%
4,559
1.9%
2,211
1,547
25.0%
4,642
1.8%
2,321
12.0%
12.0%
12.0%
12.0%
12.0%
12.0%
12.0%
12.0%
115
146
155
135
142
149
157
164
-0.6%
0.9%
1.0%
1.0%
0.9%
0.9%
0.9%
0.9%
0.9%
(2,692)
(2,055)
(1,888)
(1,716)
(1,819)
(1,910)
(2,005)
(2,105)
(2,211)
(2,321)
-22.0%
-16.0%
-14.0%
-12.0%
-12.0%
-12.0%
-12.0%
-12.0%
-12.0%
-12.0%
2,126
3,131
3,561
3,929
4,051
4,161
4,244
4,325
4,403
4,478
131.7%
20,528
21,627
42,155
3.07%
1,315
47.3%
49%
51%
100%
13.8%
10.3%
3.1%
2.7%
2.0%
1.9%
1.8%
Terminal Value
Free Cash Yield
9.0
12.7
6.9
9.0
8.4
11.8
6.3
8.3
1.7%
67,169
6.67%
Terminal P/E
14.5
Terminal EV/EBITDA
9.0
National Oilwell Varco (NOV)
• Oil & Gas Equipment & Services Industry (correlation: 0.91)
• Design, construct, manufacture, and sell systems,
components, and products used in oil and gas drilling and
production
• Business segments: Rig Technology, Petroleum Services &
Supplies, and Distribution Services
National Oilwell Varco (NOV)
Key Facts/Figures
•
•
•
•
•
•
•
2008 Total revenue: $13,431m
2008 Net income: $1,952m (14.5%)
9 month profit margin: 11.3%
Current stock price (11/20/09): $42.79
Current market cap (11/20/09): $17.9b
Correlation to crude oil: 0.94
Headquartered: Houston, Texas
National Oilwell Varco (NOV)
Valuation Ratios
NOV Absolute
P/Trailing E
P/Forward E
P/B
P/S
P/CF
High
Low
Median
Current
42.10
26.90
4.40
3.10
40.50
5.10
5.10
0.80
0.80
3.90
21.00
15.20
2.70
1.90
18.50
8.20
11.50
1.30
1.80
6.70
Target
Multiple
Target E, S, B,
etc/Share
13.50
2.00
1.90
10.00
3.48
32.92
30.63
6.39
Simple Average
Target
Price
$
$
$
$
$
46.98
65.83
58.19
63.87
58.72
Overvalued by >20%
Inline within 20%
Undervalued by >20%
National Oilwell Varco (NOV)
Analyst: Dan Geisler
11/20/2009
Year
Revenue
Terminal Discount Rate =
Terminal FCF Growth =
2009E
12,771
% Grow th
EBT
EBT Margin
Interest
Interest % of Sales
Taxes
Tax Rate
Net Income
2010E
13,409
5.0%
2,171
17.0%
2,179
16.3%
2011E
14,080
5.0%
2,288
16.3%
2012E
14,784
5.0%
2,365
16.0%
2013E
15,523
5.0%
2,484
16.0%
11.0%
5.0%
2014E
16,299
5.0%
2,608
16.0%
2015E
17,114
5.0%
2,738
16.0%
2016E
17,970
2017E
18,868
5.0%
2,875
5.0%
3,019
16.0%
16.0%
2018E
19,811
5.0%
3,170
16.0%
2019E
20,802
5.0%
3,328
16.0%
-
-
-
-
-
-
-
-
-
-
-
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
733
730
766
792
832
874
917
963
33.8%
33.5%
33.5%
33.5%
33.5%
33.5%
33.5%
33.5%
1,451
% Grow th
1,462
1,536
1,573
1,652
1,734
1,821
1,011
1,912
33.5%
2,008
1,062
33.5%
2,108
1,115
33.5%
2,213
0.8%
5.0%
2.4%
5.0%
5.0%
5.0%
5.0%
5.0%
5.0%
5.0%
485
402
422
444
466
489
513
539
566
594
624
3.8%
3.0%
3.0%
3.0%
3.0%
3.0%
3.0%
3.0%
3.0%
3.0%
3.0%
(913)
(248)
(148)
(155)
(163)
(171)
(180)
(189)
(198)
(208)
13.7%
-6.8%
-1.8%
-1.0%
-1.0%
-1.0%
-1.0%
-1.0%
-1.0%
-1.0%
-1.0%
(319)
(335)
(422)
(444)
(466)
(489)
(513)
(539)
(566)
(594)
(624)
Capex % of sales
-2.5%
-2.5%
-3.0%
-3.0%
-3.0%
-3.0%
-3.0%
-3.0%
-3.0%
-3.0%
-3.0%
Free Cash Flow
(137)
Add Depreciation/Amort
% of Sales
Plus/(minus) Changes WC
% of Sales
Capital Expenditures
1,754
% 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
Debt
Cash
Cash/share
2,443
-1878.5%
12,002
14,923
26,926
-0.75%
12.6
18.6
6.0
9.3
417.0
$ 43.83
$ 64.57
47.3%
875
3,192
7.65
1,784
-27.0%
45%
55%
100%
1,721
-3.5%
1,807
5.0%
1,897
5.0%
1,992
5.0%
2,092
2,196
5.0%
5.0%
2,306
5.0%
Terminal Value
Free Cash Yield
12.5
18.4
6.2
9.5
11.9
17.5
5.9
9.1
2,421
5.0%
42,374
5.71%
Terminal P/E
19.1
Terminal EV/EBITDA
10.1
ConocoPhillips Co. (COP)
• Integrated Oil & Gas Industry
• One of the largest integrated energy company in the world
that engages in the exploration, production, refining,
processing, and marketing of petroleum and natural gas.
• Lines of Business:
• Exploration and Production
• Midstream
• Refining and Marketing
• LUKOIL Investment
• Chemicals
• Emerging Businesses
ConocoPhillips Co. (COP) Key Facts/Figures
•
•
•
•
•
•
•
2008 Total revenue: $240,842m
2008 Net income: ($16,998)m (-7.1%)
9 month profit margin: 3.4%
Current stock price (11/20/09): $52.08
Current market cap (11/20/09): $77.27b
Correlation to oil: 0.91
Headquartered: Houston , Texas
ConocoPhillips Co. (COP)
Valuation Ratios
COP Absolute
Target
Multiple
Target E, S, B,
etc/Share
0.5
0.70
91.02
$
63.70
1.6
1.3
1.60
39.98
$
63.97
Overvalued by >20%
2.53
3.97
4.64
4.50
12.95
$
49.85
Inline within 20%
2.3
5.7
4.1
5.70
12.54
$
71.45
Undervalued by >20%
$
62.24
High
Low
Median
Current
P/Trailing E
18.8
5.3
8.9
13.6
P/Forward E
1.2
0.2
0.7
P/B
3.5
0.8
P/S
12.44
P/CF
11
Simple Average
Target Price
ConocoPhillips (COP)
Analyst: Olga Boder(Firdman)
10/12/2009
Year
2009E
Revenue
138,667
% Grow th
9,513
EBT Margin
6.9%
Interest
Interest % of Sales
Taxes
7.9%
% of Sales
15,981
7.1%
236,335
5.0%
16,307
6.9%
248,152
5.0%
17,122
6.9%
260,559
5.0%
17,197
6.6%
273,587
5.0%
17,510
6.4%
287,267
5.0%
18,385
6.4%
-
-
-
-
-
-
0.0%
0.0%
0.0%
0.0%
0.0%
5,794
40.0%
8,692
10,505
7,778
40.0%
11,667
34.2%
11,461
6,018
40.0%
9,028
-22.6%
12,045
6,302
40.0%
9,453
4.7%
12,219
6,392
40.0%
9,588
1.4%
12,830
6,523
40.0%
9,784
2.0%
13,235
6,849
40.0%
10,273
5.0%
13,897
6,879
40.0%
10,318
0.4%
14,591
7,004
40.0%
10,506
1.8%
15,321
7,354
40.0%
11,031
5.0%
16,087
7.1%
5.7%
5.9%
5.9%
5.7%
5.7%
5.6%
5.6%
5.6%
5.6%
5.6%
(7,623)
(913)
(199)
(612)
(643)
(675)
(709)
(744)
(782)
(821)
(862)
-0.5%
11,058
6.0%
7,226
-761.2%
54,024
38,530
92,554
-1.35%
14.2
16.2
5.6
6.2
1,523.4
$
$
7.4%
5.0%
0.0%
(1,093)
Shares Outstanding
15,756
225,081
-
% Grow th
Current P/E
Projected P/E
Current EV/EBITDA
Projected EV/EBITDA
7.4%
5.0%
2019E
0.0%
6.5%
NPV of Cash Flows
NPV of terminal value
Projected Equity Value
Free Cash Flow Yield
15,046
214,363
2018E
-
-5.5%
Free Cash Flow
10.0%
5.1%
2017E
0.0%
9,000
Capex % of sales
19,444
204,155
2016E
-
9,823
Subtract Cap Ex
5.4%
2015E
0.0%
52.3%
Plus/(minus) Changes WC
194,248
2013E
-
5,708
% of Sales
2014E
2012E
0.0%
% Grow th
Add Depreciation/Amort
2011E
-
40.0%
Net Income
14,486
12.0%
3.0%
0.0%
3,805
Tax Rate
Debt
Cash
Cash/share
184,300
32.9%
EBT
Current Price
Implied equity value/share
Upside/(Downside) to DCF
2010E
Terminal Discount Rate =
Terminal FCF Growth =
53.08
60.75
14.5%
28,926
888
0.58
-0.1%
10,684
5.5%
12,245
69.5%
58%
42%
100%
-0.3%
11,229
5.5%
9,232
-24.6%
-0.3%
11,790
5.5%
9,239
0.1%
-0.3%
12,379
5.5%
9,363
1.3%
-0.3%
12,998
5.5%
9,312
-0.6%
-0.3%
13,648
5.5%
9,777
5.0%
-0.3%
14,331
5.5%
9,797
0.2%
-0.3%
15,047
5.5%
9,959
1.6%
Terminal Value
Free Cash Yield
9.3
10.6
4.4
4.8
6.9
7.9
3.5
3.9
-0.3%
15,800
5.5%
10,457
5.0%
119,669
10.23%
Terminal P/E
10.3
Terminal EV/EBITDA
4.8
BP PLC(BP)
• Integrated Oil & Gas Industry
• The 3rd largest global energy company and the 5th largest
company in the world. BP supplies fuel for transportation,
energy for heat and light, retail services, and petrochemicals
products.
• Lines of Business:
• Exploration and Production
• Refining and Marketing
• Other Businesses and Corporate
BP PLC (BP) Key Facts/Figures
•
•
•
•
•
•
•
2008 Total revenue: $ 367,053m
2008 Net income: $ 21,157 m (5.7%)
9 month profit margin: 7.2%
Current stock price (11/20/09): $ 57.83
Current market cap (11/20/09): $180.62b
Correlation to oil: 0.67
Headquartered: London, England
BP PLC (BP) Valuation Ratios
BP Absolute
Target
Multiple
Target E, S, B,
etc/Share
10.5
10.30
5.90
$
60.77
2.6
1.8
1.80
32.13
$
57.83
Overvalued by >20%
0.3
0.8
0.8
0.80
85.70
$
68.56
Inline within 20%
3.3
7.6
7.1
7.10
8.15
$
57.83
Undervalued by >20%
$
61.25
High
Low
Median
Current
P/Trailing E
16
4.5
10.7
13.4
P/Forward E
13.8
4.7
10.3
P/B
3.3
1.4
P/S
1.1
P/CF
9.7
Simple Average
Target Price
BP plc (BP)
Analyst: Olga Boder(Firdman)
11/21/2009
Year
2009E
Revenue
385,405
% Grow th
75,291
EBT Margin
19.5%
Interest
Interest % of Sales
Taxes
21.7%
13.0%
3.0%
62,171
13.0%
492,585
3.0%
64,036
13.0%
507,363
3.0%
65,957
13.0%
522,584
3.0%
67,936
13.0%
538,261
3.0%
69,974
13.0%
-
-
-
-
-
0.0%
0.0%
0.0%
0.0%
0.0%
38,534
34,318
39.0%
53,678
11,534
28.0%
5,382
1.3%
20,098
7.1%
54,215
40.7%
129,058
67,044
196,102
21.36%
3.9
4.3
2.4
2.6
3,120.0
$
$
60,360
478,238
-
% Grow th
Shares Outstanding
13.0%
3.0%
0.0%
7.1%
Current P/E
Projected P/E
Current EV/EBITDA
Projected EV/EBITDA
58,602
464,309
-
2.4%
NPV of Cash Flows
NPV of terminal value
Projected Equity Value
Free Cash Flow Yield
13.0%
3.0%
2019E
0.0%
27,479
Free Cash Flow
56,895
450,786
2018E
-
9,101
Capex % of sales
13.0%
3.0%
2017E
0.0%
2.9%
% of Sales
55,238
437,656
2016E
-
10,985
Subtract Cap Ex
5.0%
2015E
0.0%
16.9%
Plus/(minus) Changes WC
424,909
2013E
-
45,928
% of Sales
2014E
2012E
0.0%
% Grow th
Add Depreciation/Amort
2011E
-
39.0%
Net Income
87,996
12.0%
3.0%
0.0%
29,363
Tax Rate
Debt
Cash
Cash/share
404,675
5.0%
EBT
Current Price
Implied equity value/share
Upside/(Downside) to DCF
2010E
Terminal Discount Rate =
Terminal FCF Growth =
57.83
62.85
8.7%
28,926
888
0.28
21,543
39.0%
33,695
-37.2%
12,111
28.0%
5,651
1.3%
30,296
7.1%
20,892
-61.5%
66%
34%
100%
22,189
39.0%
34,706
3.0%
12,474
22,855
39.0%
35,747
3.0%
12,849
23,540
39.0%
36,820
3.0%
13,234
24,247
39.0%
37,924
3.0%
13,631
24,974
39.0%
39,062
3.0%
14,040
25,723
39.0%
40,234
3.0%
14,461
26,495
39.0%
41,441
3.0%
14,895
42,684
3.0%
15,342
28.0%
28.0%
28.0%
28.0%
28.0%
28.0%
28.0%
(1,313)
(1,352)
(1,393)
(1,435)
(1,478)
(1,522)
(1,568)
(1,615)
-0.3%
31,074
7.1%
14,794
-29.2%
-0.3%
32,006
7.1%
15,238
3.0%
-0.3%
32,966
7.1%
15,695
3.0%
-0.3%
33,955
7.1%
16,166
3.0%
-0.3%
34,974
7.1%
16,651
3.0%
-0.3%
36,023
7.1%
17,150
3.0%
-0.3%
37,103
7.1%
17,665
3.0%
Terminal Value
5.4
5.8
3.1
3.3
39.0%
28.0%
Free Cash Yield
3.4
3.7
2.1
2.3
27,290
-0.3%
38,217
7.1%
18,195
3.0%
208,229
10.03%
Terminal P/E
6.2
Terminal EV/EBITDA
3.5
Recommendation
Mult. Weighting
40%
DCF Weighting
60%
Stock Mult. Target Price
DCF Target Price
Weighted Average Current Price Upside/(Downside) Current Holding Recommendation
RIG
$132.69
$131.32
$131.87
$83.80
57.4%
4.75%
4.75%
NOV
$56.52
$64.57
$61.35
$42.79
43.4%
0.0%
2.50%
COP
$62.24
$60.75
$61.35
$52.08
17.8%
3.43%
2.93%
BP
$61.25
$62.85
$62.21
$57.83
7.6%
4.62%
2.62%
Questions?