1. Zach Rochon Logan Cotter Adam Claugus Joseph Hsieh May 5 th, 2009

2. 1) Size and Composition 2) Economic Analysis 3) Business Analysis 4) Valuation Analysis 5) Financial Analysis 6) Recommendation

4.  Coal and Consumer Fuels  Oil and Gas ◦ Drilling ◦ Equipment and Services ◦ Exploration and Production ◦ Integrated ◦ Refining/Marketing ◦ Storage

7. 1. Size A.Adjusted market cap of $1,006,613 million B.Composes 12.51% of the S&P500 C.SIM currently underweights by 120 basis points 2. Largest Companies 1.Exxon Mobile($332.30B), PetroChina($180.73B), Royal Dutch Shell($149.17B), BHP Billiton ($141.55B), BP ($139.57B), Chevron($131.86B) 3. Performance 1.YTD: (2.25%) 2.QTD: 11.18%

8. 2) Economic Analysis

10. EUR/USD Energy (Sp-10) prices

12. 3) Business Analysis

13.  The Life Cycle  The Business Cycle

16.  Near-term future of energy markets is tied to the economy’s uncertainty.  Restoring credit flow is key to stabilizing demand.  Capital intensive nature of energy projects makes access to financing critical.

17.  Energy is at the center of a political debate ◦ Waxman-Markey Bill ◦ Cap-and-trade of greenhouse gases ◦ Carbon pricing ◦ Clean Energy and Energy Efficiency ◦ Back by Obama with majority support in the House, Senate is the only hurdle

19. EPS YOY

32.  Increase 120 basis points to par with S&P500 at 12.51% ◦ The sector is currently undervalued with strong growth potential within our one year horizon  Energy’s performance against the S&P500 ◦ QTD:11.18% vs. 6.48% ◦ YTD: (2.25%) vs. (2.49%)  We expect this trend to continue and improve long-term

33.  Biggest positives ◦ Short-Term: OPEC cutting production ◦ Long-term: U.S. economic recover  Biggest risks ◦ Appreciation of USD/Euro ◦ Uncertainty in global economy ◦ Political risk

34.  Overweight ◦ Drilling & Services  Underweight ◦ Exploration and Production  Individual stock recommendation ◦ Transocean (RIG)