Presentation Transcript

1. Oil and Gas Equipment & Services Industry Analysis Chris Jennis Jeff Ritter Andrew Swint Drew Williams
2. Agenda Industry Overview Industry Growth Drivers EATO and EPM Valuation Model Recommendation
3. Industry Overview Assist oil and gas extractors with operations. Manufacture, repair and maintain the equipment used in oil extraction and transport. 2013 Industry Statistics Revenue: $114.3 billion Profit: $14.5 billion
4. Market Share
5. SWOT Analysis
6. SWOT Analysis
7. Key Industry Drivers Spending by oil and gas extraction companies 1. Oil & Gas Prices and Demand 2. Oil Rig Counts 3. Government Regulation Support: Public statements by management: Earnings call and 10-K “Mid to high single digit customer spending growth”
8. Volatile Oil and Gas demand Energy Consumption
9. Volatile
10. Rig and Well Counts “Despite the decreased rig count in the United States as compared to 2012, drilling efficiencies and the trend toward multi-well pads are driving a more robust well count. Additionally, operators have been, in some cases, increasing the numbers of hydraulic fracturing stages on horizontal wells.” -Halliburton 10-K
11. Statements by Company Management “Activity levels within our business segments are significantly impacted by spending on upstream exploration, development, and production programs by our customers. Also impacting our activity is the status of the global economy, which impacts oil and natural gas consumption. Our financial performance is significantly affected by oil and natural gas prices and worldwide rig activity. Additionally, due to improved drilling and completion efficiencies as more of our customers move to multi-well pad drilling, our financial performance is impacted by well count in the North America market.” – Halliburton 10-K “Based on customer surveys and some discussions with customers, we see total customer drilling and completion spending increasing by the mid to upper single-digit percentages”-Halliburton Q4 2013 Earnings Call Click audio Icon to listen to clip of actual Earnings Call
12. Industry Sales Growth Historical Growth for theIndustry Rig and Well Count Ex: New construction Oil and Natural Gas Price & Supply/Demand Factors Historical growth has been volatile, but growth relates closely to rig and well count. Oil prices and demand continue to increase Total rig count declined dropping 10% from 2012 to 2013. Analysts expect it to begin to increase with the price of oil. 7% Continuing 3 % Annualized average each year for the next five years
13. Growth in Eastern Hemisphere 2013 I was going to fight the witch, but her ability to turn people into cats gave me pause.
14. Valuation Models Discounted Cash Flows Residual Enterprise Income Abnormal Enterprise Income Growth
15. Valuation Models Discounted Cash Flows Residual Enterprise Income Abnormal Enterprise Income Growth
16. Valuation Models
17. Recommendations Current Share Price 4/23/14 Calculated Equity Value Per Share Hold $68.33 $70.04 Hold $62.81 $61.98 $103.4 Hold $102.2 Hold $26.61 $27.98 Confidence High Expanded Financial Statements Reformulated Expanded F/S Off balance sheet Items Full information forecasting Adjustments for mid-year/ val date
18. Questions?