John Goik John Glankler Christian 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 Sector Global Industry Classification Standard (GICS) SectorIndustry GroupIndustrySub-Industry 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: Top 5 Market 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 +DRILLINGSERVICESEXPLOR.INTEGR.R & MSTORAGE

Oil Supply

Oil Inventory

Oil Demand

Global Oil Demand

Future Projections  Oil Prices Drop-off relative to past few years Going to Hold Steady/Possibly Increase Projections are cautiously optimistic  Oil Futures

Analysts Projections  Most analysts are skeptical about the near term Global demand slashed by as much as 2.8% in 2009 Earnings for 2009 are expected to be poor  But virtually all agree on long term growth in prices Most predict an oil rebound late this year/early next year, projections as high as $85/barrel next year Oil 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 5 Sales 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) % Southwestern Energy Co. (SWN) % Murphy Oil Corporation (MUR) % EOG Resources, Inc. (EOG) % CONSOL Energy Inc. (CNX) 65.24%

Energy Sector: Top 5 Operating 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 % Change of Current Valuation From 15 Year Median

Industry Valuations – Trailing P/E % Change of Current Valuation From 15 Year Median

Industry Valuations – Forward P/E % Change of Current Valuation From 15 Year Median

Industry Valuations – P/S % Change of Current Valuation From 15 Year Median

Industry Valuations – P/CF % Change of Current Valuation From 15 Year Median

Industry Valuations – P/B % Change of Current Valuation From 15 Year Median

Industry Valuations – P/EBITDA % Change of Current Valuation From 15 Year Median

Agenda S&P 500 Energy Sector Business & Economic Analysis Financial Analysis / Valuation Recommendation

S&P 500 vs. SIM: Sector Weight Energy sector currently underweight by 137 basis points

Recommendation Increase weight of Energy sector by 137 basis points to 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 overweight Oil & Gas Drilling Integrated Oil & Gas Industry to underweight Oil & Gas Storage & Transportation Refining & Manufacturing

Energy Sector What Questions Do You Have?