john goik john glankler christian töpfner von schütz
TRANSCRIPT
John GoikJohn GlanklerChristian Töpfner von Schütz
Agenda
• S&P 500 Energy Sector• Business & Economic Analysis• Financial Analysis / Valuation • Recommendation
S&P 500: # of Companies in Sectors
S&P 500 Energy SectorGlobal Industry Classification Standard (GICS)Sector Industry Group Industry Sub-Industry
Energy (40) Energy (40)
Energy Equipment & Services (12)
Oil & Gas Drilling (4)
Oil & Gas Equipment & Services (8)
Oil, Gas & Consumable Fuels (28)
Integrated Oil & Gas (7)
Oil & Gas Exploration & Production (12)
Oil & Gas Refining & Marketing (3)
Oil & Gas Storage & Transportation (3)
Coal & Consumable Fuels (3)
S&P 500 Energy Sector
% of S&P 500
Integrated Oil & Gas (7) 7.61%
Oil & Gas Exploration & Production (12) 1.99%Oil & Gas Equipment & Services (8) 1.61%Oil & Gas Storage & Transportation (3) 0.32%Oil & Gas Drilling (4) 0.22%Coal & Consumable Fuels (3) 0.20%Oil & Gas Refining & Marketing (3) 0.17%
12.12%
S&P 500: QTD Sector Performance
S&P 500: YTD Sector Performance
Energy Sector: Historical Performance
Energy Sector: Historical Performance
Energy Sector: Top 5Market Cap
Exxon Mobil Corp. (XOM) $ 334,357,700,000
Chevron Corp. (CVX) $ 130,544,200,000
Schlumberger Limited (SLB) $ 67,010,740,000
ConocoPhillips (COP) $ 62,788,270,000
Occidental Petroleum Corporation (OXY) $ 54,916,530,000
YTD Performance
FMC Technologies, Inc. (FTI) 64.88%
Pioneer Natural Resources Co. (PXD) 58.83%Diamond Offshore Drilling Inc. (DO) 52.38%Massey Energy Co. (MEE) 51.92%Peabody Energy Corp. (BTU) 45.78%
Agenda
• S&P 500 Energy Sector• Business & Economic Analysis• Financial Analysis / Valuation• Recommendation
Oil Price - Outlook Short Term:
High Inventories Four month rally in prices stalled in early July Demand down by 3.2 mb/d 2Q 2009 Demand down by 2.2 mb/d 3Q 2009 Demand expected to rise again by 1.4 mb/d 1Q 2010 to 85.9 mb/d Oil price expected to be $55 on average in 3Q 2009 (Morgan Stanley)
Long Term:
Structural capacity issues Production capacity likely to decline (weak price environment) Utilization at 100% by 2013 Demand limited by flat supply capacity
Correlation Between Crude & Stock Prices per Industry
COAL + DRILLING SERVICES EXPLOR. INTEGR. R & M STORAGE0.650897 0.846183 0.368496 0.90326 0.6885324 0.525075166 -0.46567
Oil Supply
Oil Inventory
Oil Demand
Global Oil Demand
Future Projections
Oil PricesDrop-off relative to past few yearsGoing to Hold Steady/Possibly IncreaseProjections are cautiously optimistic
Oil Futures
Analysts Projections
Most analysts are skeptical about the near termGlobal demand slashed by as much as 2.8% in 2009Earnings for 2009 are expected to be poor
But virtually all agree on long term growth in pricesMost predict an oil rebound late this year/early next
year, projections as high as $85/barrel next yearOil stocks themselves tend to lead the way
out of a recession
Agenda
• S&P 500 Energy Sector• Business & Economic Analysis• Financial Analysis / Valuation• Recommendation
Energy Sector: Top 5Sales Growth (5 year average)
National Oilwell Varco, Inc. (NOV) 49.32%XTO Energy Inc. (XTO) 44.16%Chesapeake Energy Corporation (CHK) 38.88%Diamond Offshore Drilling Inc. (DO) 38.25%Southwestern Energy Co. (SWN) 37.62%
Net Income Growth (5 year average)
Peabody Energy Corp. (BTU) 260.76%Southwestern Energy Co. (SWN) 156.79%Murphy Oil Corporation (MUR) 127.00%EOG Resources, Inc. (EOG) 123.59%CONSOL Energy Inc. (CNX) 65.24%
Energy Sector: Top 5Operating Margin
Ensco International Inc. (ESV) 57.40%Diamond Offshore Drilling Inc. (DO) 54.74%Apache Corp. (APA) 52.50%Denbury Resources Inc. (DNR) 51.67%EOG Resources, Inc. (EOG) 50.41%
Operating Margin Growth (5 year average)
Rowan Companies Inc. (RDC) 78.46%Halliburton Company (HAL) 40.19%Peabody Energy Corp. (BTU) 33.72%Schlumberger Limited (SLB) 25.52%Williams Companies, Inc. (WMB) 25.46%
Energy Sector Valuations%
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Industry Valuations – Trailing P/E%
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Industry Valuations – Forward P/E%
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Industry Valuations – P/S%
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Industry Valuations – P/CF%
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Industry Valuations – P/B%
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Industry Valuations – P/EBITDA%
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Agenda
• S&P 500 Energy Sector• Business & Economic Analysis• Financial Analysis / Valuation• Recommendation
S&P 500 vs. SIM: Sector WeightEnergy sector currently underweight by 137 basis points
RecommendationIncrease weight of Energy sector by 137 basis pointsto par with S&P 500 :
Sector is undervalued and has mid to long-term growth potential Current weakness should be used to add stock in this sector Waiting until the next SIM trading window in Nov/Dec 09 could be
too long since stocks will most likely move quickly on positive news
Positives: Economic recovery (especially in China and India) Expected rise in oil prices (mid to long-term) Structural problems on the supply side (mid to long-term)
Risks: High inventory/low demand in short term Overall uncertainty in oil price predictions
Recommendation
Industry to overweightOil & Gas DrillingIntegrated Oil & Gas
Industry to underweightOil & Gas Storage &
Transportation Refining & Manufacturing
Energy Sector
What Questions Do You Have?