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ENERGY SECTOR STOCK PRESENTATION

ENERGY SECTOR STOCK PRESENTATION. Janelle R. Courtright John C. Williams Summer Quarter, 2007. SECTOR RECOMMENDATION. Continue to underweight to S&P 500 Recommend to keep holdings at 270 basis points below S&P Look to underweight in the next 6 months

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ENERGY SECTOR STOCK PRESENTATION

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  1. ENERGY SECTOR STOCK PRESENTATION Janelle R. Courtright John C. Williams Summer Quarter, 2007

  2. SECTOR RECOMMENDATION • Continue to underweight to S&P 500 • Recommend to keep holdings at 270 basis points below S&P • Look to underweight in the next 6 months • Short-term returns to outperform S&P 500 • Long-term returns will under perform • Drop in oil prices, cheaper alternatives becoming more available

  3. CRUDE OIL PRICES

  4. Recommendation • Sell all of Schlumberger, Ltd. • 308 basis points • Buy 308 basis points of BP ADS • Hold Exxon (XOM) and Peabody (BTU) • Remain at 270 basis points below S&P 500

  5. Schlumberger, Ltd.

  6. SLB Profile • World’s leading oilfield services provider • Been in business since 1926 • Mature company • Cyclical company • Main driver: OIL PRICES

  7. DCF Valuation

  8. SLB Absolute Valuations

  9. SLB Absolute Valuations

  10. SLB Multiple Valuations Avg $61.31 Market Price 87.74

  11. SLB OVERVALUED • DCF Value is lower than market price • Target price is below current market price • Market Price of stock is too expensive based on valuations • Cyclical stock will fluctuate with the price of oil • Recommend: Sell

  12. BP Profile • Top 5 Energy Company • Mature company • Investing in and applying new, rapidly evolving technologies from new sources of energy that are low carbon and renewable • During 2006 renewable energy portfolio maintained a profit • Main driver: OIL PRICES

  13. BP DCF

  14. BP – Absolute Valuations

  15. BP – Absolute Valuations

  16. BP UNDERVALUED • DCF Value is higher than market price • Absolute valuation shows value in stock • Company investing in future beyond petroleum • Recommend: Buy

  17. Recommendation • Sell all of Schlumberger, Ltd. • 308 basis points • Buy 308 basis points of BP ADS • Hold Exxon (XOM) and Peabody (BTU) • Remain at 270 basis points below S&P 500

  18. ANY QUESTIONS????

  19. SLB DCF

  20. BP DCF

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