2011-10-10_vertical drilling weekly - d. gacicia

Darren Gacicia 203.276.5664 ______________

1

Vertical Drilling Weekly

North American Risks Lead Our Forecasts Lower Ratings unchanged, lowering our estimates and price targets. We are

lowering our estimates and price targets across oil service shares to reflect heightened risk to upstream activity from North American operators due to moderating commodity prices, decelerating upstream cash flows, and tighter capital markets. Although negative estimate revisions may lead volatility to persist in oil services shares, we see lowered expectations largely discounted into shares that have fallen 30-50% since July. Given that current valuations screen attractively against reduced earnings estimates, lower growth, and higher risk adjusted forecasts and price targets, we anticipate oil services shares will trade higher into the end of the year. We continue to like SLB and BHI in large caps, DRQ and NBR in small/mid. caps, and RIG, SDRL, and DO among offshore drillers.

North American activity at risk from tougher conditions. Our estimate

revisions largely reflect risks to North American activity from smaller operators in the face of lower cash flows from weakening commodity prices, funding gaps for their spending plans, and reduced access to capital from risk-averse capital markets. To reflect these risks, we are lowering our 2012 North American rig count forecast. (pgs. 3 & 12)

Pressure pumping sees biggest risk from slower growth. With pressure

pumping capacity growing from 10m HP in 1Q11 to over 17m HP by the end of 2012 according to our bottoms up analysis, we see the market reaching a balance in mid-2012 under our reduced rig count forecast. As supply balances demand, we anticipate the market will maintain its service intensity, but yield its pricing gains garnered since 2009, leading estimates lower.

Conclusion of 2011 North American budget campaigns may prove a negative catalyst. We see a rally in oversold oil services shares into the end of the year, as the impetus to spend the remainder of 2011 budgets may support 4Q11 North American activity and ease concerns of fearful investors. If WTI prices continue to hover just above project breakeven levels in the $70-$80 range, European credit concerns continue to tighten capital markets, and funding gaps persist, 2012 budgets may arrive with more cautious spending targets. If so, a deceleration of upstream activity and rig counts may arrive in 1Q12, creating a negative catalyst for oil service shares.

International activity outlook more stable. Aside from the UK, where a crop

of E&P companies need financing to develop prospects in the North Sea, we see less risk to international upstream activity from funding gaps and financing needs in tighter capital markets. Cash flow support from higher Brent prices and prospect of spending from larger, better capitalized independent oil companies, national oil companies, and OPEC members looking to maintain spare capacity suggest a positive trajectory for upstream spending. Meanwhile, strong tendering for offshore rigs in international basins continues to provide comfort for our positive international outlook.

October 10, 2011

Table of Contents Overview 1 Feature: Reflecting Risk in Estimates 2 Coverage Synopsis 8 Global Rig Count 9 Charting Global Rig Count 10 Global Rig Count & Oil Production 11 Global Rig Count Forecast 12 Global Jackup Market 13 Jackup Dayrate Analysis &Forecast 14 Global Deepwater Markets 15 Global Midwater Market 16 Cum. Rig Demand by Classification 17 Incremental Tendering & Demand 18 Floater Dayrate Analysis & Forecast 19 Jackup Fleet Expansion 20 Floater Fleet Expansion 21 Offshore Driller Valuation Methodology 22 Dividend Yield-Based Valuations 23 North American Natural Gas 24 Global Oil Markets 25 Key Oil Market Metrics 26 Global Oil Demand & Economics 27 Oil in Transit 28 US Oil Demand & Oil Stocks 29 Global Oil Stocks and Refining Margins 30 Earnings Summary 31 Valuation Summary 32 Valuation Summary – Price Targets 33 Tracking Oil Service Sector Options 34 A View From Debt Markets 35 Estimate Revisions 36 Trading Analysis 37 Sector Performance Summary 38 Estimate Revisions 31 Price Target Revisions 7

Darren Gacicia +1-203-276-5664 [email protected]

mailto:[email protected]

Darren Gacicia 203.276.5664 ______________

2

Key Upstream Spending Drivers: Cash Flow, CAPEX, & Funding Status

Higher Commodity Price Drive Cash Flows

Source: Factset, Vertical Research Partners Cash Flow & CAPEX Well Correlated

Source: Factset, Vertical Research Partners Upstream Spending May Fall to Narrow Funding Gaps

Source: Factset, Vertical Research Partners Note: Charts on page 2 & 3 include data from the following set of companies: APA, APC, BEXP, CHK, COG, COP, CLR, CVX, CXO, DNR, DVN, ECA, EOG, HES, HK, MRO, MUR, NBL, NFX, NXY, OXY, PXD, QEP, RDSA, RRC, STO, SU, SWN, TOT, UPL, WLL, XEC, XOM, EQT, FST, STR. KWK, SD, SM, TLM, WMB

Upstream Cash Flow Leveraged to Oil

Source: Factset, Vertical Research Partners

Unconventional plays drive paradigm shift, as oil drove cash flows & investment. Exploration success within politically stable US and Canada, in combination with high production rates and rising oil prices, translated into positive economics for unconventional plays. North American E&Ps shifted their focus toward unconventional plays, new companies emerged on the back of advantageous acreage holdings, and the Majors shifted attention toward booking domestic reserves. International companies & NOCs entered the North American market to fund joint ventures as means of participating in potential upside and gaining expertise they may export to international opportunities. As cash flows rose with oil prices and capital flooded into the sector, a number of smaller operators found funding to pursue new project to de-risk assets. Given access to capital markets and/or JV partners for funding to develop reserves, as well as prospects to sell to larger competitors, exploration from smaller players supported North American rig count growth. Cash flow & capital market constraints overhang the market’s current operating model. As WTI oil prices hover near project “break even” levels and European debt issues likely tighten credit markets, we see risk to the market relationships that drove recent upstream activity in North America. As illustrated above, companies with leverage to oil production are better able to internally fund their upstream CAPEX programs. As oil prices moderate, cash flows should become more constrained, likely curtailing upstream spending (CAPEX), correlated with cash flow. Similar to 2008/2009, widening funding gaps for the industry, without support from capital markets and industry funding sources, will drive CAPEX back to levels that funded by internal cash flows. Again, if present activity follows the script from 2008/2009, the impetus to spend through 2011 budgets may mask this change in tide during 4Q11, but poses a risk to a correction in activity as the market crossed over to the 2012 budgeting year.

R² = 0.81

0102030405060708090

100110120130140150160

0 100 200 300 400 500 600 700 800 900 1000

WTI

($/b

bl)

CFO (Indexed)

R² = 0.78

0

200

400

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1200

1400

0 200 400 600 800 1000

CFO

(Ind

exed

)

CAPEX (Indexed)

020406080100120140160180200220240260

0%

20%

40%

60%

80%

100%

120%

140%

160%

180%

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1Q06

2Q06

3Q06

4Q06

1Q07

2Q07

3Q07

4Q07

1Q08

2Q08

3Q08

4Q08

1Q09

2Q09

3Q09

4Q09

1Q10

2Q10

3Q10

4Q10

1Q11

2Q11

CAE

PX (I

ndex

ed)

Fund

ing

Stat

us (C

FO /

CAP

EX)

Funding Status CAPEX

2008/2009 fall in oil prices has a negative impact on Upstream fund and CAPEX

0%

50%

100%

150%

200%

250%

300%

0% 20% 40% 60% 80% 100%

CFO

/CAP

EX

% Oil Production

Darren Gacicia 203.276.5664 ______________

3

De-Risking North American Rig Count Growth

Tight Credit Markets Dangerous of US Rig Count

Source: Bloomberg, Baker Hughes, Vertical Research Partners

Small Cap. Names Host Bigger Funding Gaps


Leverage &Funding Gaps Pose Risk


Land Rig Breakdown – Leverage to Small Private Cos.

Source: Land Rig Newsletter, Vertical Research Partners

Funding gaps & smaller operators present a risk. Small private companies pose a risk to North American activity if financing becomes more difficult. Funding gaps for smaller public E&P’s likely reflect similar capital needs for smaller private operators. Given that these private operators comprise 36% of the US rig fleet, we see a significant risk from tighter capital markets in the wake of European debt issues. If the Majors and NOC’s decelerate their JV activity and acquisitions amid internal capital budgeting debates, we see a risk to activity from smaller players with limited financing options or the incentive from an end market to sell de-risked reserves, which they are not capitalized to develop.

Flattening North American Rig Count Estimates. To incorporate potential headwinds we are cutting our previous estimate for 18% US rig count growth for 2012 to 9%. Our forecast assumes operators continue to drill to maintain leases and replace reserves, but assumes that growth from well-funded operators is offset by a slowdown in activity from smaller players. Since commodity prices and capital markets have not deteriorated to the same degree as 2008/2009, we do not see a need to be more punitive, but acknowledge the potential downside risk if the economic outlook worsens.

North American Rig Count Revisions

Source: Baker Hughes, Vertical Research Partners

600

800

1,000

1,200

1,400

1,600

1,800

2,000

2,200

-

50

100

150

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250

300

350

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450

Jan-

08M

ar-0

8M

ay-0

8Ju

l-08

Sep-

08N

ov-0

8Ja

n-09

Mar

-09

May

-09

Jul-0

9Se

p-09

Nov

-09

Jan-

10M

ar-1

0M

ay-1

0Ju

l-10

Sep-

10N

ov-1

0Ja

n-11

Mar

-11

May

-11

Jul-1

1Se

p-11

US

Land

RIg

Cou

nt

3Mo.

Inte

r-ba

nk le

ndin

g Sp

read

s vs

. R

isk

Free

(bps

)

3Mo. Euribor / 3Mo. German Bund Spread

0%

50%

100%

150%

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300%

- 20,000 40,000 60,000 80,000 100,000

CFO

/CAP

EX

Mkt. Cap. ($mm)

0%

50%

100%

150%

200%

250%

300%

0% 10% 20% 30% 40% 50%

CFO

/CAP

EX

% Debt to EV

~17% of companies carryhigher leverage and funding

Large Cap32%

Majors11%

Super Indep.8%

Sm./Mid. Caps.12%

Utilities1%

Private Companies

36%

2007 2008 2009 2010 2011E 2012E 2013E 1Q11 2Q11 3Q11E 4Q11E 1Q12E 2Q12E 3Q12E 4Q12EGas Rigs 1,466 1,491 802 942 893 911 931 900 880 894 899 904 909 914 919

Previous 889 903 957 890 895 900 906 911 Oil Rigs 297 379 276 585 969 1,117 1,331 808 938 1,043 1,088 1,098 1,108 1,118 1,143

Previous 976 1,290 1,458 1,128 1,193 1,258 1,322 1,387 Misc. 5 12 21 11 8 11 12 9 8 7 8 9 10 11 12

United States 1,768 1,882 1,100 1,539 1,871 2,039 2,274 1,716 1,826 1,944 1,995 2,011 2,027 2,043 2,074 Previous 1,875 2,206 2,430 2,028 2,099 2,170 2,242 2,313

Canada 343 382 221 349 428 438 458 587 182 441 504 597 192 451 514 Previous 433 458 467 504 616 211 471 534

North America 2,110 2,263 1,321 1,888 2,299 2,477 2,733 2,303 2,008 2,385 2,499 2,608 2,219 2,494 2,588 Previous 2,308 2,664 2,898 2,532 2,585 2,638 2,690 2,743

Years Quarters

Darren Gacicia 203.276.5664 ______________

4

Negative Implications for North American Pressure Pumping Pressure Pumping Linked to Horizontal Rig Count

Source: Baker Hughes, Vertical Research Partners Pressure Pumping Revenue/Rig

Source: Spears, Company Filings & Presentations, Vertical Research Partners Supply Demand Balance Approaching

Source: Company Filings & Presentations, Vertical Research Partners

Shift to Horizontal Rig Count Maturing

Source: Baker Hughes, Vertical Research Partners Pressure pumping earnings see risk of slower rig count growth. Growth in unconventional plays, horizontal drilling, and the pressure pumping market progressed in concert over the last few years. In our view, shift in the demand curve for pressure pumping horsepower is close to maturity, with the horizontal rig count accounting for 60% of the US land rig count and growth in service intensity per well digested. As the upward shift in pressure pumping horsepower demand absorbed the spare capacity, a resultant shortage of equipment led to pricing power, economic rents, and immense horsepower construction program. We see net capacity in the market doubling between 4Q10 and 4Q12 by our estimation. Given lower barriers to entry and the emergence of new pressure pumping IPO’s like C&J and others in the pipeline, our estimates of capacity additions have a greater upside than downside risk. From our conversations with oil services companies, at the beginning of 2011, North American demand for pressure pumping horsepower was around 12m horsepower and the supply of horsepower was closer to 10m horsepower. Our analysis of horsepower supply suggests the market had 10mm horsepower in 1Q11. The estimate of 12m horsepower of demand equates to a little over 7,000 horsepower per US rig in 1Q11. Based on announced building programs and assumption that all operators will look to maintain market share, the market will reach over 17m of horsepower supplied by the end of 2012. If horsepower demand per rig grows modestly through 2012, the supply of horsepower per rig will reach equilibrium in the middle of 2012, if the US rig count growth slows in line with our forecast. As supply outstrips demand into the second half of the year, we forecast competition from incoming pressure pumping capacity will erode pricing power gained since 2009.

-

200

400

600

800

1,000

1,200

$-

$5,000

$10,000

$15,000

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$30,000

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$40,000

$45,000

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Rig

Cou

nt

Pres

sure

Pum

ping

Mar

ket (

$mm

)

Total Pressure Pumping Market US Horizontal Rig Count

$7 $7 $7 $8 $8 $8

$9 $11

$11 $13

$15 $17

$22

$- $1 $2 $3 $4 $5 $6 $7 $8 $9

$10 $11 $12 $13 $14 $15 $16 $17 $18 $19 $20 $21 $22 $23

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Rev

enue

per

irg

($00

0)

Pressure Pumping Rev. / US Rig

4,000

4,500

5,000

5,500

6,000

6,500

7,000

7,500

8,000

8,500

9,000

3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12

Hor

sepo

wer

per

rig

Pressure Pumping HP / US Rig Estimated HP Demand / US Rig

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

Jan-93

Jan-94

Jan-95

Jan-96

Jan-97

Jan-98

Jan-99

Jan-00

Jan-01

Jan-02

Jan-03

Jan-04

Jan-05

Jan-06

Jan-07

Jan-08

Jan-09

Jan-10

Jan-11

Shar

e of

US

Land

RIg

Cou

nt

Horizontal Directional Vertical

Darren Gacicia 203.276.5664 ______________

5

De-risking estimates for North American Pressure Pumping Mkt. Share

Source: Spears, Vertical Research Partners Oil Services North American Exposure

Source: Spears, Company Data, Vertical Research Partners US Land vs. International Rig Counts


Lowering our estimates for North America. The collapse of oil service shares due to fear of European debt issues make a bearish call on pressure pumping less heroic, but it allows us to calibrate our estimates and view. From conversations with industry players, we surmise 20% of the increase in pressure pumping revenue between 2009 and 2011 has come from pricing power. In our view, the market will surrender pricing premiums if supply balances demand. We see little support for pricing in long term contracts, which may support utilization for the larger players in the space, but are not structured around fixed pricing. Since we believe that North American rig count growth will accelerate once near term macroeconomic and capital market issues pass, we are not making the assumption that a an oversupply of horsepower yields a crash in North American pressure pumping or North American geographic margins. That said, we are tempering our margin expectations across 2012 to remove recent pricing gains. We see the impetus to spend the remainder of 2011 budgets as supportive of activity through the end of the year, but a deceleration of activity with the arrival of 2012 budgets. Following the lull, we see a recovery of the North American rig count into 2013, under the assumption that current economic and capital market headwinds fade. Please find the details of these assumption changes to our earnings estimates across our coverage on the next page. International outlook remains largely unchanged awaiting further data points. During the 2008/2009 downturn international rig counts fell by 13%, versus ~50% in North America. The magnitude of the negative impact from Europe remains unknown, but the shock to financial markets and degree of the slowdown does not appear as profound as 2008/2009. Capital markets have tightened, but we see this as a bigger problem for smaller, higher risk North American E&P companies than larger international IOCs and NOCs. The exception to the rule may be the emerging class of E&P companies with operations in the UK North Sea and other emerging global basins. That said, cash flow from Brent prices above $100/bbl, the impetus for OPEC to expand spare capacity to maintain order in the oil market, the awaking of upstream spending from NOCs, and strong international offshore rig tendering activity as supportive of the positive trajectory of international activity in our forecast.

HAL28%

SLB21%BHI

16%

Frac Tech5%

TCW4%

WFT4%

CFW3%

NBR3%

Cudd3%

PTEN2%

Others (10+ companies)

11%

100%

90%

70%

58% 55%50%

44%

30%

0%

20%

40%

60%

80%

100%

PTEN KEG NBR HAL CAM BHI WFT SLB

% R

even

ue fr

om N

orth

Am

eric

a

800

850

900

950

1000

1050

1100

1150

1200

1250

1300

800900

1,0001,1001,2001,3001,4001,5001,6001,7001,8001,9002,0002,100

Jan-

08Fe

b-08

Mar

-08

Apr

-08

May

-08

Jun-

08Ju

l-08

Aug

-08

Sep-

08O

ct-0

8N

ov-0

8D

ec-0

8Ja

n-09

Feb-

09M

ar-0

9A

pr-0

9M

ay-0

9Ju

n-09

Jul-0

9A

ug-0

9Se

p-09

Oct

-09

Nov

-09

Dec

-09

Jan-

10Fe

b-10

Mar

-10

Apr

-10

May

-10

Jun-

10Ju

l-10

Aug

-10

Sep-

10O

ct-1

0N

ov-1

0D

ec-1

0Ja

n-11

Feb-

11M

ar-1

1A

pr-1

1M

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1Ju

n-11

Jul-1

1A

ug-1

1Se

p-11

Inte

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iona

l Rig

Cou

nt

US

Rig

Cou

nt

US Total International Rig Count

Darren Gacicia 203.276.5664 ______________

6

Earnings Revisions Summary

Company Category 2008 2009 2010 2011 2012 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 2011 2012Schlumberger EPS 4.46 2.74 2.85 3.75 5.42 0.71 0.87 1.02 1.16 1.25 1.27 1.40 1.51 -1% 2%

Previous EPS 3.80 6.54 1.02 1.21 1.41 1.50 1.75 1.91 Consensus EPS 3.80 5.34 1.03 1.21 1.19 1.28 1.42 1.57

Consensus EPS-High 4.05 5.90 1.12 1.37 1.29 1.37 1.54 1.77 Consensus EPS-Low 3.68 3.85 0.98 1.12 1.10 1.21 1.32 1.42

Halliburton EPS 2.90 1.34 2.08 3.42 3.94 0.65 0.81 0.94 1.02 1.06 0.93 0.98 0.97 2% -12%Previous EPS 3.47 5.00 0.65 0.81 0.95 1.05 1.18 1.11 1.31 1.41

Consensus EPS 3.36 4.45 0.91 1.03 1.05 1.10 1.17 1.23 Consensus EPS-High 3.50 5.40 0.96 1.12 1.19 1.28 1.41 1.51 Consensus EPS-Low 2.97 3.30 0.63 0.91 0.97 0.96 0.92 1.00

Baker Hughes EPS 5.36 1.91 2.28 4.33 5.42 0.87 0.93 1.19 1.33 1.39 1.28 1.37 1.39 -1% -7%Previous EPS 4.38 6.65 0.87 0.93 1.21 1.37 1.53 1.40 1.78 1.94


Weatherford EPS 2.00 0.36 0.49 0.82 1.40 0.10 0.17 0.25 0.29 0.33 0.31 0.37 0.40 -7% -13%Previous EPS 0.88 2.10 0.10 0.17 0.26 0.36 0.44 0.47 0.57 0.62


Key Energy Services EPS 1.29 (0.46) (0.17) 1.00 1.67 0.09 0.23 0.30 0.38 0.40 0.42 0.42 0.43 2% -5%Previous EPS 1.00 1.83 0.09 0.23 0.30 0.38 0.40 0.44 0.48 0.51


National Oilwell Varco EPS 5.13 3.94 4.08 4.48 5.26 1.00 1.14 1.16 1.19 1.24 1.30 1.34 1.38 -1% -8%Previous EPS 4.50 5.76 1.00 1.14 1.17 1.20 1.28 1.38 1.51 1.59


Cameron International EPS 2.64 2.35 2.41 2.66 3.79 0.49 0.66 0.71 0.80 0.90 0.93 0.96 1.00 -1% 1%Previous EPS 2.66 3.91 0.49 0.66 0.71 0.80 0.90 0.95 1.00 1.06


FMC Technologies EPS 2.94 2.93 3.06 1.70 2.37 0.32 0.39 0.48 0.52 0.55 0.58 0.61 0.63 -1% 4%Consensus EPS 1.71 2.28 0.46 0.54 0.52 0.56 0.59 0.63


Dril-Quip EPS 2.62 2.75 2.80 2.32 3.90 0.54 0.55 0.58 0.65 0.74 0.90 1.06 1.19 0% 13%Consensus EPS 2.33 3.45 0.58 0.65 0.74 0.82 0.88 0.95


Transocean EPS 14.40 11.44 6.08 3.24 7.00 0.48 0.65 0.81 1.29 1.39 1.69 1.95 1.97 -4% 20%Consensus EPS 3.36 5.84 0.80 1.33 1.30 1.53 1.52 1.48


Seadrill EPS 1.05 2.60 2.64 2.63 3.24 0.72 0.41 0.70 0.76 0.73 0.86 0.84 0.81 -8% 2%Previous EPS 2.63 3.36 0.70 0.76 0.85 0.86 0.84 0.81


Noble EPS 5.69 6.44 3.09 1.68 4.52 0.16 0.17 0.53 0.82 1.02 1.03 1.18 1.29 0% 15%Previous EPS 1.68 4.52 0.59 0.76 1.03 1.03 1.17 1.29


Diamond Offshore EPS 9.96 9.82 6.69 6.29 6.05 1.80 1.92 1.39 1.19 1.09 1.60 1.58 1.78 2% 21%Consensus EPS 6.18 4.99 1.47 1.09 1.15 1.26 1.23 1.29


Ensco EPS 8.21 5.50 3.80 3.04 5.75 0.46 0.72 0.85 1.17 1.34 1.58 1.67 1.79 -13% -2%Consensus EPS 3.49 5.86 0.87 1.32 1.34 1.42 1.46 1.62


Rowan EPS 4.06 2.98 2.61 1.80 4.37 0.24 0.38 0.43 0.76 0.92 0.98 1.23 1.24 6% 15%Consensus EPS 1.69 3.79 0.40 0.69 0.87 0.91 0.94 0.95


Atwood Oceanics EPS 3.25 3.77 4.04 4.02 4.35 1.08 1.15 0.98 0.97 1.02 1.16 1.21 1.48 0% 5%Previous EPS 4.02 4.44 1.08 1.15 0.98 0.97 1.02 1.16 1.29 1.57


Hercules Offshore EPS 1.07 (0.68) (0.54) (0.51) (0.15) (0.12) (0.10) (0.11) (0.17) (0.08) (0.03) (0.02) (0.01) na naConsensus EPS (0.56) (0.42) (0.14) (0.19) (0.14) (0.09) (0.09) (0.08)

Consensus EPS-High (0.38) 0.20 (0.06) (0.07) - 0.05 0.07 0.08 Consensus EPS-Low (0.67) (0.74) (0.20) (0.25) (0.24) (0.17) (0.19) (0.19)

Nabors Industries EPS 3.12 1.32 1.18 1.54 2.63 0.29 0.23 0.40 0.61 0.67 0.65 0.66 0.65 5% 8%Previous EPS 1.55 3.00 0.29 0.23 0.41 0.62 0.70 0.73 0.77 0.80


Patterson-UTI Energy EPS 2.35 (0.19) 0.69 2.28 2.66 0.46 0.52 0.59 0.71 0.77 0.72 0.63 0.54 -2% -14%Previous EPS 2.28 3.15 0.46 0.52 0.59 0.71 0.76 0.78 0.80 0.81


VRP EPS vs Consensus

Darren Gacicia 203.276.5664 ______________

7

Discounting lower growth and more risk in price targets Revised Price Valuation Ranges and Price Targets

Source: Vertical Research Partners

Change in Price Targets

Source: Bloomberg, Vertical Research Partners Relative share performance since 7/22/11

Source: Bloomberg, Vertical Research Partners

Lowering Price Targets for Oil Services Shares. In conjunction with lowering earnings estimates, we imply lower growth in our earnings multiple valuation framework. At the same time, we are transitioning the betas incorporated in our valuation analysis from the five year implied beta to the two year implied beta. The original impetus to use a longer horizon on our beta calculation looked to smooth out some of above average volatility in recent years and reduce the larger differences in implied risk between companies. Given the risk of near term earnings volatility due to economic issues overhanging the sector, we opted to migrate to a two year beta, which better reflects near term uncertainty, potential further downside risks to earnings estimates depending on macroeconomic outcomes, and the probability of greater volatility across oil service shares. As a result, discount rates used in calculating our target multiples have increased, our valuation multiples have come down, and our prices targets are lower. Our new valuation ranges and price targets are illustrated on this page and the methodology is further outlined on pg. 33. We remain bullish on international levered names at current share levels, but anticipate further volatility as unpredictable political and economic forces unfold. We continue to favor companies with leverage to international and offshore activity, with less exposure to funding issues with smaller operators, and better supported by higher Brent prices, positive indications from offshore tendering activity, and demand on OPEC spare capacity. Within this framework, SLB (Buy, PT$110) and BHI (Buy, PT$95) remain our top large cap. picks. DRQ (Buy, PT$90) and NBR (Buy, PT$29) remain our top small.mid cap. picks. We continue to favor RIG (Buy, PT$98), SDRL (Buy, PT$49), and DO (Buy, PT$100) among offshore drillers. North American levered shares should remain volatile. Given the greater exposure to North America, KEG, NBR, PTEN, and HAL experienced the biggest drop in share price since the end of July. We anticipate that these shares will remain volatile, especially those with pressure pumping exposure. Although we are lowering our North America estimates, especially as it related to pressure pumping, current depressed levels in these shares leave us looking for value rather than contemplating downgrades. In the event of progress on the European debt and macro front, we anticipate that these North American names will lead a resultant rally in the sector. Therefore, we see attractive trades brewing for HAL and NBR as the “macro fear” trade abates.

$29 $27

$95

$60

$110

$16

$28

$90

$60 $65

$80

$13 $13

$49

$33

$63

$10 $17

$54

$40 $45

$59

$-

$20

$40

$60

$80

$100

$120

$140

NBR WFT BHI HAL SLB KEG PTEN DRQ FTI CAM NOV

Implied P/E Valuation Range Price Target Current Px

Current Price

Return to Price

Target

Current Price

Targets

Previous Price

TargetsNBR 14$ 113% 29$ 37$ WFT 13$ 104% 27$ 32$ BHI 50$ 90% 95$ 125$ HAL 34$ 77% 60$ 90$ SLB 63$ 73% 110$ 150$ DRQ 55$ 64% 90$ 95$ PTEN 17$ 63% 28$ 37$ KEG 10$ 60% 16$ 22$ FTI 41$ 47% 60$ 65$ CAM 46$ 41% 65$ 71$ NOV 60$ 34% 80$ 90$

-12%-13%

-19%-20%

-21%-22%-23%

-26%-27%

-28%-28%

-32%-33%

-37%-41%

-42%-49%

-51%-51%

-60% -50% -40% -30% -20% -10% 0%FMC Technologies

Cameron InternationalSeadrillRowan

Diamond OffshoreNoble

ENSCODril-Quip

Atwood OceanicsTransocean

National Oilwell VarcoSchlumberger

WeatherfordBaker Hughes

HalliburtonHercules Offshore

Patterson-UTI EnergyNabors Industries

Key Energy Services

Darren Gacicia 203.276.5664 ______________

8

Coverage Synopsis

Note Shaded depicts Top Picks

Target Exp.Mkt. Cap. P/E P/E

Company Ticker Rating Price Price Return ($Bn) 2011 2012 2011 2012 Key ThemesBaker Hughes BHI Buy $49 $95 93% $21.5 11.4X 9.1X -1% -7% A laggard during the last cycle, BHI has polished its operating structure. We forecast a reversion to

peer growth and margins, especially in international markets. Near term headwinds from North America and pressure pumping exposure should be largely discounted into shares at these levels.

Schlumberger SLB Buy $63 $110 76% $84.5 16.7X 11.6X -1% 2% Leverage to international, offshore and NOC spending. A technology leader, whose higher value-added services should drive margins, will benefit from an expansion in exploration activity. SLB carries the least exposure to the North American market amongst diversifies oil service companies.Meanwhile, SLB's superior international footprint provides investors excellent leverage to ramp in international activity that will follow as the commodity market tiightens and internation upstream investments accelerates to keep pace with oil and natural gas demand.

Weatherford WFT Buy $13 $27 106% $9.8 16.1X 9.3X -7% -13% As a victim of operating leverage in the downturn leverage during the last downturn, WFT has felt the brunt of the latest dowturn in the market. These same forces will benefit WFT as international upstream spending activity emerges, especially from NOCs, who tend to spend at a lag to other players in the market.

FMC Technologies FTI Buy $40 $60 50% $9.6 23.6X 16.9X -1% 4% Favorable leverage to the offshore market with its subsea business and pressure pumping expansion through its flowline business, with a discounted earnings multiple offers an attractive entry point. We favor FTI's improving fundamentals, grwoth trajectory, and potential earnings visibility.

Cameron International CAM Buy $45 $65 43% $11.1 17.1X 12.0X -1% 1% Investors underestimate the company's leverage to the surface and subsea production equipment and international markets. Given the stock dramatically lagged its peers and screens well on valuation, we see a favorable risk reward amidst low expectations.

Halliburton HAL Buy $33 $60 80% $30.6 9.7X 8.5X 2% -12% Leverage to surging North American and pressure pumping economics may continue to weigh on shares. Given aggressive international growth and margin targets, we see upside once investor's attention turns to international and offshore opportunities.

National Oilwell Varco NOV Hold $59 $80 36% $24.9 13.1X 11.2X -1% -8% As the largest rig equipment provider, NOV rallied strongly with a renewal of land and offshore rig constructions. We forecast strong orders for rig and other oil services equipment, but believe that the shares may reflect those expectations as well. We are biased toward upside in our forecast, but await a better entry point. That said, with a resumption of the rally in oil services shares a trade into the $80's remains a reasonable expectation.

Dril-Quip DRQ Buy $54 $90 65% $2.2 23.5X 13.9X 0% 13% Strong exposure to offshore spending cycle, spare production capacity to capture rising order volumes, trading at a discount to recent market volatility and investor questions about the future of management, after the recent unfortunate passing of two founders. We believe that low expectations for DRQ will turn with the ramping in global offshore activity, especially in the Gulf of Mexico and Brazil. Given visibility for earnings growth and depressed valuation, we are buyers of DRQ shares.

Nabors Industries NBR Buy $13 $29 116% $3.9 8.7X 5.1X 5% 8% Missed earnings expectations and attention to upstream investments will yield attention to stronger international operations, US land drilling, and recovery of smaller business in the portfolio. Screening well on valuation and a laggard of the recent rally in oil services stocks, we like the risk/reward in NBR shares.

Patterson-UTI Energy PTEN Hold $17 $28 65% $2.6 7.4X 6.4X -2% -14% Strong leverage to the North American land drilling and pressure pumping market may contineu to overhang the shares. PTEN must continue to reinvest in new land rigs backed with contracts and maintain utilization for lower-spec. legacy rigs for positive share momentum to return.

Key Energy Services KEG Hold $10 $16 64% $1.5 9.7X 5.8X 2% -5% Well servicing, coiled tubing, and fluids management look set to drive positive economics from the rise of unconventional plays is North American and International markets. As estimates capture the positive outlook and risks are emerging for North American growth and increased equipment supply, we have become more guarded in our optimism.

Target Exp.Mkt. Cap. P/NAV P/NAV

Company Ticker Rating Price Price Return ($Bn) 2011 2012 2011 2012 Key ThemeTransocean RIG Buy $46 $98 111% $14.9 62% 59% -4% 20% Rig availability across deepwater floaters, midwater floaters, and jackups leaves room to capture

upside above our estimates. Ultimately, we see upside from the transition to a fuller payout model, which should re-rate shares on a yield basis from a discount to NAV to a premium to NAV.

Seadrill SDRL Buy $29 $49 69% $13.6 161% 150% -8% 2% Contract rollover and uncontracted deepwater newbuilds should benefit this shrewd and aggressive contractor. Rising cash flows should drive higher distributions, which should press the shares price higher relative to its yield-based valuation.

Diamond Offshore DO Buy $56 $100 79% $7.8 59% 58% 2% 21% Deepwater and midwater floater availability will allow DO to capture rising dayrates. In combination with cash flows from newbuilds, rising dividend distributions over the course of the cycle, may rerate the shares from a P/NAV discount to a premium on a yield basis. Current fleet age and quality questions will fade as rising demand with the upstream cycle brings rigs back to work.

Hercules Offshore HERO Buy $3 $10 261% $0.4 62% 55% -9% -65% Shares reflect poor sentiment for commodity jackups and few prospects for the shallow water Gulf of Mexico (GoM). A return of permitting and moderate recovery in shallow water jackup demand, given limited jackup supply in the GoM, will help utilization, dayrates, commodity rig values, and HERO shares.

Rowan RDC Buy $31 $52 68% $4.0 63% 57% 6% 15% We like RDC shares at a discount to NAV, with the prospects of open premium jackup capacity in a tightening high-spec. jackup market, and non-core business divestitures freed to reinvest into an expansion into the deepwater rig market.

Atwood Oceanics ATW Hold $36 $52 46% $2.3 78% 70% 0% 5% Solid operator, with an impetus to maintain leverage to the business through fleet expansion, and upside from rising rig values, but seeking a better entry point.

Noble NE Hold $30 $47 59% $7.5 83% 78% 0% 15% Good exposure to the contract drilling business and leverage to growth through an extensive newbuild program, which appears to have corrected recent issues with rigs under construction, but trading at NAV leaving less upside relative to other offshore drillers.

ENSCO ESV Hold $41 $63 53% $9.5 #REF! #REF! -13% -2% Quality jackup fleet will capture the rising tide in rates and the potential to unlock value in PDE assets through future contracting paint a positive picture that largely captured at the current P/NAV. A potential upside catalyst may come with the expansion of their dividend payout strategy.

Offs

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trac

t Dril

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. Cap

. Oil

Serv

, & E

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VRP EPS vs. Consensus

VRP EPS vs. Consensus

Larg

e C

ap. O

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rvic

es &

Equ

ipm

ent

Darren Gacicia 203.276.5664 ______________

9

Global Rig Counts

International Oil/Gas Breakdown Source: Baker Hughes

Oil Gas M/M MixSep-11 Aug-11 M/M Y/Y YTD % Peak Sep-11 Aug-11 M/M Y/Y YTD % Peak Oil Gas Oil Gas

Europe 63 67 -6.0% 5.0% -8.7% 83% 39 43 -9.3% 62.5% 62.5% 91% (4) (4) 62% 38%Middle East 221 209 5.7% 16.3% 21.4% 100% 71 78 -9.0% -17.4% -16.5% 76% 12 (7) 76% 24%Africa 63 60 5.0% -16.0% 0.0% 84% 11 10 10.0% 22.2% -15.4% 55% 3 1 85% 15%Latin America 376 384 -2.1% 19.0% 14.3% 96% 49 53 -7.5% -18.3% -2.0% 56% (8) (4) 88% 12%Asia/Pacific 182 183 -0.5% -12.9% -12.9% 86% 55 53 3.8% -1.8% 1.9% 79% (1) 2 77% 23%World, ex North America 905 903 0.2% 6.5% 6.2% 99% 225 237 -5.1% -4.3% -0.4% 90% 2 (12) 80.1% 19.9%

Total Oil & Gas 1,130 1,140 -0.9% 4.1% 4.8%Misc 78 84 Total World Rig Count, ex NA, CIS 1,208 1,224 -1.3% 4.1% 4.0% 98.1%

International Land/Offshore Breakdown Source: Baker Hughes

Land Offshore M/M MixSep-11 Aug-11 M/M Y/Y YTD % Peak Sep-11 Aug-11 M/M Y/Y YTD % Peak Land OS Land OS

Europe 74 74 0.0% 60.9% 32.1% 100% 46 54 -15% -4% -6% 65% - (8) 62% 38%Middle East 255 250 2.0% 5.8% 8.1% 99% 37 37 0% 6% 19% 86% 5 - 87% 13%Africa 52 48 8.3% -11.9% -1.9% 79% 26 27 -4% -10% 0% 90% 4 (1) 67% 33%Latin America 341 345 -1.2% 11.8% 8.9% 97% 91 96 -5% 20% 26% 95% (4) (5) 79% 21%Asia/Pacific 148 148 0.0% -2.6% -5.7% 93% 104 104 0% -19% -17% 79% - - 59% 41%World, ex North America 870 865 0.6% 8.3% 6.7% 99% 338 359 -5.8% -5.3% -2.6% 92% 5 (14) 72.0% 28.0%

Total Land 870 865 0.6% 8.3% 6.7% 99%Total Offshore 338 359 -5.8% -5.3% -2.6% 92%Total World Rig Count, ex NA, CIS 1,208 1,224 -1.3% 4.1% 4.0% 98.1%

North America Rig Summary Source: Baker Hughes

Latest Share W/W M/M Y/Y YTD W/W M/M Y/Y YTD % Peak % Trough Week Month Year Yr. End Peak TroughLand 1,961 98% 17 54 327 305 1% 3% 20% 18% 100% 320% 1,944 1,907 1,634 1,656 1,961 613 Inland 17 1% 2 (2) - 3 13% -11% 0% 21% 55% 425% 15 19 17 14 31 4 Offshore 33 2% 2 3 13 9 6% 10% 65% 38% 18% 110% 31 30 20 24 181 30

US Total 2,011 21 55 340 317 1% 3% 20% 19% 93% 311% 1,990 1,956 1,671 1,694 2,173 647C. Oil 356 68% 5 - 118 238 1% 0% 50% 202% 78% 2373% 351 356 238 118 454 15 C. Gas 166 32% 7 7 1 38 4% 4% 1% 30% 28% 426% 159 159 165 128 596 39 C. Misc. - 0% - - - - 0% - - - - 4 -

Canada 522 12 7 119 276 2% 1% 30% 112% 50% 967% 510 515 403 246 1,054 54 NA Total 2,533 33 62 459 593 1% 3% 22% 31% 78% 361% 2,500 2,471 2,074 1,940 3,227 701

GOM 33 3 3 13 9 10% 10% 65% 38% 19% 114% 30 30 20 24 176 29

US Oil 1,070 53% 10 13 380 305 1% 1% 55% 40% 100% 930% 1,060 1,057 690 765 1,071 115 US Gas 935 46% 12 43 (36) 16 1% 5% -4% 2% 58% 158% 923 892 971 919 1,606 591 Misc. 6 0% (1) (1) (4) (4) -14% -14% -40% -40% 9% 7 7 10 10 64 -

US Dir. 246 12% 8 11 33 34 3% 5% 15% 16% 59% 154% 238 235 213 212 416 160 US Hor. 1,148 57% 13 14 219 201 1% 1% 24% 21% 100% 2208% 1,135 1,134 929 947 1,148 52 US Vert. 617 31% - 30 88 82 0% 5% 17% 15% 58% 186% 617 587 529 535 1,064 331

Change in Rigs % Change in Rigs Historical Rig Count

Darren Gacicia 203.276.5664 ______________

10

Charting Global Rig Counts International Land & Offshore Rig Counts


Global Land Rig Count, ex CIS


Rig Count Growth YTD


International Oil & Gas Rigs


Global Offshore Rig Count, ex CIS


Rig Count Growth Y/Y


0

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Jan-82Jan-83Jan-84Jan-85Jan-86Jan-87Jan-88Jan-89Jan-90Jan-91Jan-92Jan-93Jan-94Jan-95Jan-96Jan-97Jan-98Jan-99Jan-00Jan-01Jan-02Jan-03Jan-04Jan-05Jan-06Jan-07Jan-08Jan-09Jan-10Jan-11

Offs

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Rig

Cou

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Rig

Cou

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International Land International Offshore

Europe3% Middle East

9%Africa

2%

Latin America12%

Asia Pacific5%

North America

69%

18.7%

14.3%12.2%

9.4%

-1.3%

-10.6%

-15.0%

-10.0%

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US Total Europe Latin America Middle East Africa Asia Pacific

80

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Jan-11

Gas

Rig

s

Oil

Rig

s

Oil Rigs Gas Rigs

Europe13%

Middle East11%

Africa8%

Latin America27%

Asia Pacific31%

North America

10%

27.7%

20.3%

13.4%

5.8%

-10.3% -11.4%-15.0%

-10.0%

-5.0%

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Europe US Total Latin America Middle East Asia Pacific Africa

Darren Gacicia 203.276.5664 ______________

11

Global Rig Count & Global Oil Production

Source: Baker Hughes, IEA

2011 Rig Forecast/IEA Prod. Est.

Latest

2012 Rig Forecast/ IEA Prod. Est.R² = 0.82

600

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70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92

Rig

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Oil Production (mbd)

Darren Gacicia 203.276.5664 ______________

12

Global Rig Count Forecast

International Drilling Intensity Increasing


Tracking Our 2011 Rig Count Forecast


2007 2008 2009 2010 2011E 2012E 2013E 1Q11 2Q11 3Q11E 4Q11E 1Q12E 2Q12E 3Q12E 4Q12E

Gas Rigs 1,466 1,491 802 942 893 911 931 900 880 894 899 904 909 914 919 %Y/Y 6.8% 1.7% -46.2% 17.4% -5.2% 2.0% 2.2% 2.0% -8.1% -8.5% -5.6% 0.4% 3.2% 2.2% 2.2%

Oil Rigs 297 379 276 585 969 1,117 1,331 808 938 1,043 1,088 1,098 1,108 1,118 1,143 %Y/Y 8.7% 27.5% -27.2% 112.2% 65.6% 15.2% 19.1% 79.5% 74.9% 65.5% 50.1% 35.9% 18.2% 7.2% 5.1%

United States 1,768 1,882 1,100 1,539 1,871 2,039 2,274 1,716 1,826 1,944 1,995 2,011 2,027 2,043 2,074 %Y/Y 7.2% 6.4% -41.5% 39.9% 21.5% 9.0% 11.5% 27.6% 21.3% 20.2% 18.2% 17.2% 11.0% 5.1% 4.0%

Canada 343 382 221 349 428 438 458 587 182 441 504 597 192 451 514 %Y/Y -27.3% 11.4% -42.0% 57.7% 22.8% 2.3% 4.6% 25.2% 11.6% 22.4% 24.7% 1.7% 5.5% 2.3% 2.0%

North America 2,110 2,263 1,321 1,888 2,299 2,477 2,733 2,303 2,008 2,385 2,499 2,608 2,219 2,494 2,588 %Y/Y -0.5% 7.2% -41.6% 42.9% 21.8% 7.8% 10.3% 27.0% 20.4% 20.6% 19.5% 13.2% 10.5% 4.6% 3.6%

EuropeTotal 78 98 84 94 120 140 160 118 112 123 128 133 138 143 148

%Y/Y 0.5% 26.0% -14.9% 12.4% 27.8% 16.9% 14.3% 34.2% 16.3% 33.8% 27.7% 12.7% 23.3% 16.3% 15.7%Middle East

Total 265 280 252 265 291 334 374 283 291 289 302 315 328 341 354 %Y/Y 11.6% 5.4% -9.9% 5.1% 9.9% 14.8% 11.8% 9.0% 13.8% 5.6% 11.6% 11.2% 12.6% 18.0% 17.2%

AfricaTotal 66 65 62 83 76 86 103 82 76 71 75 79 83 88 93

%Y/Y 14.0% -2.1% -5.3% 34.8% -8.3% 13.3% 20.0% 2.1% -10.6% -15.1% -9.2% -2.9% 10.1% 23.8% 23.9%Latin America

Total 355 384 356 383 427 462 492 410 417 437 444 451 458 465 472 %Y/Y 9.7% 8.2% -7.2% 7.6% 11.4% 8.1% 6.6% 8.3% 8.4% 13.4% 15.3% 10.0% 9.9% 6.4% 6.3%

Asia PacificTotal 241 252 243 269 258 278 313 273 251 249 257 265 273 281 290

%Y/Y 5.4% 4.7% -3.4% 10.7% -4.3% 7.7% 12.7% 6.4% -6.0% -9.7% -7.2% -2.9% 8.9% 12.8% 12.8%International Total, ex CIS

Total 1,005 1,079 997 1,094 1,172 1,300 1,442 1,166 1,146 1,169 1,206 1,243 1,280 1,318 1,357 %Y/Y 8.6% 7.3% -7.6% 9.8% 7.1% 10.9% 11.0% 9.7% 5.4% 5.3% 8.1% 6.6% 11.7% 12.7% 12.5%

World Total, ex. CISLand Total 2,759 2,984 2,000 2,646 3,131 3,382 3,705 3,139 2,825 3,212 3,349 3,480 3,114 3,410 3,524

%Y/Y 2.5% 8.1% -33.0% 32.3% 18.3% 8.0% 9.6% 23.7% 17.2% 16.4% 16.4% 10.9% 10.3% 6.2% 5.2%O/S Total 357 358 318 337 340 395 469 330 330 343 357 371 385 403 422

%Y/Y 0.4% 0.5% -11.3% 5.9% 0.9% 16.3% 18.8% -2.6% -4.9% 4.0% 7.7% 12.5% 16.8% 17.5% 18.2%Total 3,116 3,342 2,318 2,982 3,471 3,777 4,175 3,469 3,154 3,554 3,705 3,851 3,499 3,812 3,945

2.3% 7.3% -30.6% 28.7% 16.4% 8.8% 10.5% 20.6% 14.4% 15.1% 15.5% 11.0% 10.9% 7.3% 6.5%

QuartersYears

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Jan-05A

pr-05Jul-05O

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Rig

s / I

ncr.

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1

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(6)

(50) - 50 100 150

US Oil Rigs

Canada

US Gas Rigs

Latin America

Africa

Middle East

Europe

Asia Pacific

Current Number of Rigs Above/(Below) Our Forecast

Darren Gacicia 203.276.5664 ______________

Vertical Research Partners

13

Global Jackup Market Jackup Market Overview

Source: ODS Petrodata, Vertical Research Partners

Jackup Market Breakdown (Includes Only Active Rigs)


Standard & Premium Jackup Rig Count & Utilization


Jackups TotalContracted Supply Util. (%) Low High 2011 2012 2013 2014 2011 2012 2013 2014 2011 2012 2013 2014

Australia/New Zealand 1 1 100% $0 $0 - 1 - - 3 16 2 1 1 3 1 1 Baltic 1 1 100% $0 $0 - - - - - - - - - - - - Central America 4 5 80% $130 $135 1 2 - 1 - 3 2 - - 1 1 - Canada - - $0 $0 - - - - - - - - - 5 1 - Caspian 3 6 50% $187 $187 - 2 2 - 1 6 6 1 1 2 13 1 Far East 31 34 91% $70 $70 7 16 6 3 3 - - - 1 - - - Indian Ocean 31 34 91% $43 $162 5 7 8 4 17 11 5 1 19 6 7 1 Meditteranean/Black Sea 15 21 71% $65 $138 3 9 3 - 3 5 3 1 2 3 1 1 Mexico 30 31 97% $22 $127 5 9 3 3 8 4 - - 22 14 - - Middle East 100 119 84% $48 $275 9 31 19 31 9 33 3 - 16 52 4 - North Sea/NW Europe 39 42 93% $70 $135 4 21 5 2 3 24 12 9 1 19 17 24 Russian Arctic - 1 0% $0 $0 - 2 - - South America 10 12 83% $115 $135 - 3 1 - - 4 - - - 2 - - Southeast Asia 51 64 80% $73 $165 9 29 26 11 14 45 10 2 5 37 5 1 US Alaska 1 1 100% $0 $0 - - 1 - - 1 1 - - 1 1 - US Gulf of Mexico 38 78 49% $36 $180 16 17 1 1 13 5 - - 3 1 - - West Africa 23 34 68% $70 $134 8 9 2 2 5 18 6 - 3 23 15 - Total World 378 484 78% 67 156 77 58 79 175 50 15 74 171 66 29

Rig Yr. Demand Indic.Dayrates ($kpd) Rollovers/Newbuild Arrivals Rig Demand Indications

Gulf of Mexico Commodity Jackups Middle East Jackup Market North Sea Jackup MarketJU Workover 1 6 17% JU <250-IC 20 25 80% JU Harsh High Spec 19 21 90%JU <200-MC 2 7 29% JU <250-MS 0 1 0% JU Harsh Standard 19 20 95%JU <250-IC 1 1 100% JU 250-IS 1 1 100% 38 41 93%JU <250-IS 0 1 0% JU 250-IC 26 30 87% Far East Jackup MarketJU <250-MS 0 1 0% JU 300-IC 29 36 81% JU <250-IC 15 15 100%JU 200-MC 8 19 42% JU 301-360-IC 10 12 83% JU <250-IS 5 5 100%JU 250-IS 0 1 0% JU 361-400-IC 13 13 100% JU 300-IS 0 1 0%JU 250-MC 3 4 75% JU >400-IC 1 1 100% JU 250-IC 2 2 100%JU 250-IC 4 4 100% 100 119 84% JU 300-IC 3 5 60%JU 250-MS 3 13 23% Indian Ocean Jackup Market JU 301-360-IC 3 3 100%JU 300-IS 0 1 0% JU <250-IC 1 1 100% JU 361-400-IC 3 3 100%JU >300-IS 1 3 33% JU 250-IS 1 1 100% 31 34 91%JU 300-MC 1 1 100% JU 250-MS 3 3 100% Other Jackup Markets

24 62 39% JU 300-IS 1 1 100% Commodity Jackups 13 21 62%Gulf of Mexico Standard / High Spec.Jackups JU 250-IC 1 2 50% JU 250-IC 7 9 78%JU 300-IC 4 6 67% JU 300-IC 17 19 89% JU 300-IC 11 20 55%JU 301-360-IC 7 7 100% JU 301-360-IC 6 6 100% JU 301-360-IC 17 21 81%JU 361-400-IC 3 3 100% JU 361-400-IC 1 1 100% JU 361-400-IC 9 9 100%JU >400-IC 1 3 33% 31 34 91% 57 80 93%

15 19 79% Southeast Asia Jackup MarketMexican Jackup Market JU <200-MC 1 1 100%JU 200-MC 1 2 50% JU <250-IC 0 2 0%JU 250-IC 8 8 100% JU >300-IS 1 1 100%JU 300-IC 12 12 100% JU 300-IC 17 26 65%JU 301-360-IC 1 1 100% JU 301-360-IC 7 7 100%JU 361-400-IC 7 7 100% JU 361-400-IC 24 26 92%JU >400-IC 1 1 100% 50 63 79%

25 27 93%

0%10%20%30%40%50%60%70%80%90%100%

120

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Jan-01M

ay-01Sep-01Jan-02M

ay-02Sep-02Jan-03M

ay-03Sep-03Jan-04M

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ay-05Sep-05Jan-06M

ay-06Sep-06Jan-07M

ay-07Sep-07Jan-08M

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Darren Gacicia 203.276.5664 ______________


14

Jackup Dayrate Analysis & Forecast

Gulf of Mexico Jackup Dayrate History


North Sea Jackup Dayrate History


International Jackup Dayrate History


Middle East Jackup Dayrate History


Jackup Dayrate Forecast


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Day

rate

($/d

ay)

North Sea - Harsh High Spec. Jackup North Sea - Harsh Standard Jackup

-

50,000

100,000

150,000

200,000

250,000

Jan-

00Ju

n-00

Nov

-00

Apr

-01

Sep-

01Fe

b-02

Jul-0

2D

ec-0

2M

ay-0

3O

ct-0

3M

ar-0

4A

ug-0

4Ja

n-05

Jun-

05N

ov-0

5A

pr-0

6Se

p-06

Feb-

07Ju

l-07

Dec

-07

May

-08

Oct

-08

Mar

-09

Aug

-09

Jan-

10Ju

n-10

Nov

-10

Apr

-11

Day

rate

($/d

ay)

Southeast Asia >300 IC Southeast Asia 300 IC West Africa 300 ICWest Africa 250 IC Indian Ocean 300 IC

-

50,000

100,000

150,000

200,000

250,000

Jan-

00Ju

n-00

Nov

-00

Apr

-01

Sep-

01Fe

b-02

Jul-0

2D

ec-0

2M

ay-0

3O

ct-0

3M

ar-0

4A

ug-0

4Ja

n-05

Jun-

05N

ov-0

5A

pr-0

6Se

p-06

Feb-

07Ju

l-07

Dec

-07

May

-08

Oct

-08

Mar

-09

Aug

-09

Jan-

10Ju

n-10

Nov

-10

Apr

-11

Day

rate

($/d

ay)

Middle East 300 IC Middle East 250 IC

1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12<200 55 62 62 63 51 39 35 29 28 32 32 33 36 36 37 38 39 40 41 42

200 MS 59 66 78 78 65 45 32 29 32 34 33 33 35 36 37 38 39 40 45 50 200 MC 59 66 78 78 65 45 32 29 32 34 33 33 35 36 39 42 45 48 53 58 250 MS 57 65 72 74 71 70 70 30 32 33 32 32 33 34 37 40 43 46 51 56 250 MC 61 67 83 91 92 46 42 34 38 41 40 40 43 43 46 49 52 55 60 65

250 IC 112 125 127 129 118 91 85 64 63 66 69 69 68 65 68 71 74 77 77 77 300 IC 155 153 151 155 139 110 101 91 85 76 78 75 78 80 82 87 97 107 117 127 350 IC 173 163 172 182 166 133 110 99 105 104 108 115 104 103 113 123 133 143 143 143 400 IC 170 167 166 181 161 154 128 101 98 105 104 124 109 108 118 128 138 148 148 148 450 IC 170 167 166 181 161 154 128 101 98 105 104 124 109 108 118 128 138 148 148 148

Darren Gacicia 203.276.5664 ______________


15

Global Deepwater Markets Supply/Demand Dynamics in the Ultra-Deepwater Market


Supply/Demand Dynamics in the Deepwater Market


Ultra Deep & Deepwater Floater Rig Count & Utilization


Ultra Deepwater TotalContracted Supply Util. (%) Low High 2011 2012 2013 2014 2011 2012 2013 2014 2011 2012 2013 2014

Australia/New Zealand 1 1 100% $460 $460 - 1 - - - - 1 - - - 1 - Baltic - - $0 $0 - - - - - - - - - - - - Central America - - $0 $0 - - - - - - - - - - - - Canada 1 1 100% $560 $560 - - - - - - - - - - - - Caspian - - $0 $0 - - - - - - - - - - - - Far East 2 2 100% $531 $531 1 4 21 8 1 - - - 3 - - - Indian Ocean 6 6 100% $490 $586 - 1 2 2 - 6 2 1 - 4 1 1 Meditteranean/Black Sea 2 2 100% $285 $703 - 1 - - - 1 2 - - 1 1 - Mexico 3 3 100% $465 $520 - - - - - - - - - - - - Middle East 1 1 100% $0 $0 - - - - - - - - - - - - North Sea/NW Europe - - $0 $0 - - 1 2 - 3 1 - - 1 1 - Russian Arctic - - $0 $0 - - 1 1 South America 27 27 100% $220 $600 - 2 3 3 - - 1 1 - - 1 1 Southeast Asia 7 7 100% $424 $558 1 6 1 2 - 1 2 1 - 1 2 1 US Alaska - - $0 $0 - - - - - 1 - - - 1 - - US Gulf of Mexico 19 19 100% $295 $659 - 3 5 6 4 - - - 1 - - - West Africa 16 16 100% $360 $665 1 3 4 5 - 8 4 - - 8 1 - Total World 85 85 100% 3 21 37 28 5 20 13 3 4 16 9 4

Demand IndicationsDayrates ($kpd) Rollovers/Newbuild Arrivals Rig Yr. Demand Indic.

Deepwater TotalContracted Supply Util. (%) Low High 2011 2012 2013 2014 2011 2012 2013 2014 2011 2012 2013 2014

Australia/New Zealand 2 2 100% $425 $470 - 1 - 2 - 3 - - - 1 - - Baltic - - $0 $0 - - - - - - - - - - - - Central America - - $0 $0 - - - - - - 1 - - - 1 - Canada 2 2 100% $335 $480 - - - - - - - - - - - - Caspian - - $0 $0 - - - - - - - - - - - - Far East - - $0 $0 - 1 - - - 1 - - - 1 - - Indian Ocean 1 1 100% $0 $0 - 2 - - - 5 - - - 1 - - Meditteranean/Black Sea 4 4 100% $505 $530 - 4 - - 1 2 5 - 1 5 2 - Mexico 1 1 100% $380 $380 - - - - - - 1 - - - 2 - Middle East - - $0 $0 - - - - - - - - - - - - North Sea/NW Europe 9 9 100% $390 $610 - - 1 1 - 2 1 - - 1 1 - Russian Arctic - - $0 $0South America 20 20 100% $245 $550 1 1 2 3 - 6 1 - - 19 1 - Southeast Asia 4 5 80% $0 $0 1 1 1 3 2 5 3 - 3 2 1 - US Alaska - - $0 $0 - - - - - - - - - - - - US Gulf of Mexico 5 5 100% $360 $580 1 1 1 1 7 5 - - 4 3 - - West Africa 8 9 89% $193 $620 1 6 2 2 5 20 8 1 3 13 10 1 Total World 56 58 97% 4 17 7 12 15 49 20 1 11 46 18 1

Dayrates ($kpd) Rollovers/Newbuild Arrivals Demand Indications Rig Yr. Demand Indic.

80%82%84%86%88%90%92%94%96%98%100%

20

40

60

80

100

120

140

160

Jan-01M

ay-01Sep-01Jan-02M

ay-02Sep-02Jan-03M

ay-03Sep-03Jan-04M

ay-04Sep-04Jan-05M

ay-05Sep-05Jan-06M

ay-06Sep-06Jan-07M

ay-07Sep-07Jan-08M

ay-08Sep-08Jan-09M

ay-09Sep-09Jan-10M

ay-10Sep-10Jan-11M

ay-11

Tota

l Util

izat

ion

(%)

Num

ber o

f Rig

s


Darren Gacicia 203.276.5664 ______________


16

Global Midwater Market

Supply/Demand Dynamics in the Midwater Market


Midwater Floater Rig Count & Utilization


Midwater TotalContracted Supply Util. (%) Low High 2011 2012 2013 2014 2011 2012 2013 2014 2011 2012 2013 201

Australia/New Zealand 6 6 100% $159 $390 2 2 1 - 3 18 4 3 1 7 2 1 Baltic - - $0 $0 - - - - - 1 - - - 1 - Central America - - $0 $0 - - - - - 5 2 - - 2 1 Canada 1 1 100% $0 $0 - - - - - - - - - 1 1 5 Caspian 4 7 57% $0 $0 1 1 - - - 1 1 - - 1 2 Far East 4 4 100% $256 $256 - 3 - 3 - 5 - - - 2 - Indian Ocean 5 5 100% $157 $260 - 2 - - 3 11 5 - 8 6 1 Meditteranean/Black Sea 3 5 60% $247 $247 - 2 1 - - 10 5 - - 8 6 Mexico - - $0 $0 - - - - - - - - - - - Middle East - - $0 $0 - - - - - 2 1 - - 1 1 North Sea/NW Europe 29 32 91% $0 $0 7 7 7 4 1 34 18 10 1 11 10 11 Russian Arctic - - $0 $0South America 31 31 100% $150 $480 1 3 8 2 3 11 1 - 2 14 1 Southeast Asia 10 21 48% $145 $305 1 5 - 1 9 26 7 - 3 10 4 US Alaska - - $0 $0 - - - - - - - - - - - US Gulf of Mexico 2 8 25% $383 $383 3 - - 1 2 1 - - 2 2 - West Africa 9 11 82% $185 $545 2 3 - - 2 35 7 - 1 13 5 Total World 104 131 79% 17 28 17 11 23 160 51 13 18 79 34 17

Rig Yr. Demand Indic.Dayrates ($kpd) Rollovers/Newbuild Arrivals Demand Indications

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

80

85

90

95

100

105

110

115

120

Jan-01M

ay-01Sep-01Jan-02M

ay-02Sep-02Jan-03M

ay-03Sep-03Jan-04M

ay-04Sep-04Jan-05M

ay-05Sep-05Jan-06M

ay-06Sep-06Jan-07M

ay-07Sep-07Jan-08M

ay-08Sep-08Jan-09M

ay-09Sep-09Jan-10M

ay-10Sep-10Jan-11M

ay-11

Tota

l Util

izat

ion

(%)

Num

ber o

f Rig

s


Darren Gacicia 203.276.5664 ______________

17

A Cumulative Look at Rig Demand by Classification

Combined Ultra-Deepwater & Deepwater Market Cumulative Supply/Demand


Ultra-Deepwater Market Cumulative Supply/Demand


Midwater Market Cumulative Supply/Demand


Deepwater Market Cumulative Supply/Demand


Standard/Premium Jackup Cumulative Supply/Demand


0

10

20

30

40

50

60

70

80

90

0

10

20

30

40

50

60

70

80

90

3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13

Cum

ulat

ive

Rig

Sup

ply

Cum

ulat

ive

Dem

and

(Rig

Yea

rs)

Tender Pre-tender Probable Possible Ultra Deepwater/Deepwater Incremental Supply

0

2

4

6

8

10

12

14

16

18

20

0

2

4

6

8

10

12

14

16

18

20

3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13

Cum

ulat

ive

Rig

Sup

ply

Cum

ulat

ive

Dem

and

(Rig

Yea

rs)

Tender Pre-tenderProbable PossibleUltra Deepwater Incremental Supply

0

10

20

30

40

50

60

70

0

10

20

30

40

50

60

70

3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13

Cum

ulat

ive

Rig

Sup

ply

Cum

ulat

ive

Dem

and

(Rig

Yea

rs)

Tender Pre-tender Probable Possible Midwater Incremental Supply

0

10

20

30

40

50

60

0

10

20

30

40

50

60

3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13

Cum

ulat

ive

Rig

Sup

ply

Cum

ulat

ive

Dem

and

(Rig

Yea

rs)

Tender Pre-tender Probable Possible Deepwater Incremental Supply

0

50

100

150

200

250

300

350

0

50

100

150

200

250

300

350

3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13

Cum

ulat

ive

Rig

Sup

ply

Cum

ulat

ive

Dem

and

(Rig

Yea

rs)

Tender Pre-tender Probable Possible Jackup Incremental Supply

Darren Gacicia 203.276.5664 ______________


18

Incremental Tendering Activity & Demand Indications

Incremental Tender Activity Since 2010

Source: ODS Petrodata, Vertical Research Partners Incremental Pre-Tender Activity Since 2010


0

5

10

15

20

25

30

1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11Jackup Midwater Deepwater Ultra Deepwater

0

5

10

15

20

25

30

1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11Jackup Midwater Deepwater Ultra Deepwater

Darren Gacicia 203.276.5664 ______________


19

Floater Dayrate Analysis & Forecast

Ultra Deepwater Dayrate History


Deepwater Dayrate History


Midwater Dayrate History


North Sea Floater Dayrate History


Floater Dayrate Forecast


-

100,000

200,000

300,000

400,000

500,000

600,000

700,000

Jan-00Jul-00Jan-01Jul-01Jan-02Jul-02Jan-03Jul-03Jan-04Jul-04Jan-05Jul-05Jan-06Jul-06Jan-07Jul-07Jan-08Jul-08Jan-09Jul-09Jan-10Jul-10Jan-11Jul-11

TAVe

rage

Day

rate

($pd

)

US GOM - Drillship >7500 US GOM - Drillship 5001-7500S America - Drillship >5000 W Africa - Drillship >5000Indian Ocean - Drillship >5000

-

100,000

200,000

300,000

400,000

500,000

600,000

700,000


Aver

age

Day

rate

($pd

)

US GOM - Semi >7500 S America - Semi >5000 US GOM - Semi 5001-7500W Africa - Semi >5000 SE Asia - Semi 5001-7500

-

100,000

200,000

300,000

400,000

500,000

600,000


Aver

age

Day

rate

($pd

)

S America - Semi 3001-5000 W Africa - Semi 3001-5000S America - Drillship 3001-5000 US GOM - Semi 3001-5000SE Asia - Semi 3001-5000

-

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

450,000

500,000


Aver

age

Day

rate

($pd

)

Norway - Semi Harsh Standard UK - Semi Harsh Standard

1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 32G 330 320 310 340 340 390 290 220 220 260 250 250 250 240 240 250 260 270 3G 350 360 380 380 390 390 370 370 370 330 330 310 300 290 300 310 320 330 4G 380 500 530 570 410 370 430 290 320 390 300 300 290 340 340 350 360 370 5G 430 470 530 510 500 430 450 410 340 350 380 380 360 340 350 360 370 380 6G 510 480 480 570 590 390 410 470 410 410 370 380 370 380 400 410 430 440

Legacy Drillship 300 330 350 350 360 360 350 350 350 320 320 310 300 290 290 290 290 290 Modern Drillship 500 530 640 630 590 520 490 490 430 420 430 430 470 450 460 470 480 490

Darren Gacicia 203.276.5664 ______________


20

Jackup Fleet Expansion Jackup Newbuild Order Book


Owner Rig Name Shipyard Country Market CategoryWater Depth Type

Order Date

Cost ($MM)

Deliv. Date

Deliv. Year Term Contract

1 Atwood Atwood Mako PPL Shipyard Singapore JU 361-400-IC 400 IC Oct-10 190$ Sep-12 20122 Atwood Atwood Manta PPL Shipyard Singapore JU 361-400-IC 400 IC Oct-10 190$ Dec-12 20123 Atwood Atwood Orca PPL Shipyard Singapore JU 361-400-IC 400 IC Jan-11 190$ Jun-13 20134 CPTDC CPTDC JU Tbn1 CPLEC China JU 300-IC 300 IC Oct-09 May-12 20125 Deepwater Drilling & Services Dynamic Vision Keppel FELS Singapore JU 301-360-IC 350 IC May-11 180$ Feb-13 2013 ONGC6 Drilling & Offshore Drilling & Offshore JU Tbn1 ABG Shipyard India JU Harsh High Spec 350 IC Nov-10 220$ Oct-13 20137 Drilling & Offshore Drilling & Offshore JU Tbn2 ABG Shipyard India JU Harsh High Spec 350 IC Nov-10 220$ Jun-14 20148 Ensco ENSCO JU Tbn1 Keppel FELS Singapore JU Harsh High Spec 400 IC Feb-11 230$ May-13 20139 Ensco ENSCO JU Tbn2 Keppel FELS Singapore JU Harsh High Spec 400 IC Feb-11 230$ Nov-13 2013

10 Ensco ENSCO JU Tbn3 Keppel FELS Singapore JU Harsh High Spec 400 IC Oct-11 260$ Aug-14 201411 Essar Oilfields Services Essar JU Tbn1 ABG Shipyard India JU 301-360-IC 350 IC Oct-08 229$ Jun-12 201212 Essar Oilfields Services Essar JU Tbn2 ABG Shipyard India JU 301-360-IC 350 IC Oct-08 229$ Jul-12 201213 Eurasia Drilling Eurasia Drilling JU Tbn1 Lamprell UAE JU 250-IC 250 IC Oct-10 210$ Apr-13 201314 Gazflot Arkticheskaya Zvezdochka Shipyard Russia JU 301-360-IC 328 IC Mar-95 100$ Nov-11 2011 Gazflot15 Great Offshore Great Offshore JU V351 Bharati Shipyard India JU 301-360-IC 350 IC Aug-06 165$ Apr-12 201216 Greatship Greatdrill Chaaya Lamprell UAE JU 301-360-IC 350 IC Feb-11 160$ Dec-12 2012 ONGC17 Gulf Drilling International GDI JU Tbn1 Keppel FELS Singapore JU 301-360-IC 350 IC May-11 197$ Aug-13 201318 Gulf Drilling International GDI JU Tbn2 Keppel FELS Singapore JU 301-360-IC 350 IC May-11 197$ Sep-14 201419 Hercules Offshore Discovery Offshore JU Tbn1 Keppel FELS Singapore JU Harsh High Spec 400 IC Jan-11 231$ Jun-13 201320 Hercules Offshore Discovery Offshore JU Tbn2 Keppel FELS Singapore JU Harsh High Spec 400 IC Jan-11 231$ Nov-13 201321 Japan Drilling Hakuryu-11 Keppel FELS Singapore JU >400-IC 425 IC Mar-11 210$ Mar-13 201322 Jasper Offshore Jasper Adventurer Keppel FELS Singapore JU 361-400-IC 400 IC Dec-10 180$ Nov-12 201223 Jasper Offshore Jasper Beacon Keppel FELS Singapore JU 361-400-IC 400 IC Apr-11 180$ May-13 201324 KS Energy KS JU Tbn1 COSCO Nantong China JU 361-400-IC 400 IC May-11 194$ Sep-13 201325 KS Energy KS JU Tbn2 COSCO Nantong China JU 361-400-IC 400 IC May-11 194$ Mar-14 201426 Maersk Drilling Maersk JU Tbn1 Keppel FELS Singapore JU Harsh High Spec 492 IC Feb-11 500$ Nov-13 2013 Operator Tba27 Maersk Drilling Maersk JU Tbn2 Keppel FELS Singapore JU Harsh High Spec 492 IC Feb-11 500$ Jul-14 201428 Maritime Industrial Services MIS JU Hull 108 Maritime Industrial Services UAE JU 300-IC 300 IC May-07 184$ Mar-12 201229 Mosvold Middle East Jackup Haffar I Maritime Industrial Services UAE JU 300-IC 300 IC May-07 184$ Oct-11 2011 PEMEX30 National Drilling Makhasib Lamprell UAE JU <250-IC 200 IC Jul-10 159$ May-12 201231 National Drilling Muhaiyimat Lamprell UAE JU <250-IC 200 IC Jul-10 159$ Sep-12 201232 Noble Noble JU Tbn1 Jurong Shipyard Pte Ltd Singapore JU Harsh High Spec 400 IC Dec-10 220$ Dec-12 201233 Noble Noble JU Tbn2 Jurong Shipyard Pte Ltd Singapore JU Harsh High Spec 400 IC Dec-10 220$ Jun-13 201334 Noble Noble JU Tbn3 Jurong Shipyard Pte Ltd Singapore JU Harsh High Spec 400 IC Mar-11 235$ Sep-13 201335 Noble Noble JU Tbn4 Jurong Shipyard Pte Ltd Singapore JU Harsh High Spec 400 IC Mar-11 235$ Feb-14 201436 Noble Noble JU Tbn5 Jurong Shipyard Pte Ltd Singapore JU Harsh High Spec 400 IC Aug-11 245$ Aug-14 201437 Noble Noble JU Tbn6 Jurong Shipyard Pte Ltd Singapore JU Harsh High Spec 400 IC Aug-11 245$ Nov-14 201438 North Atlantic Drilling West Linus Jurong Shipyard Pte Ltd Singapore JU Harsh High Spec 492 IC Mar-11 530$ Sep-13 2013 ConocoPhillips39 Operadora Cicsa Independencia 1 Operadora Cicsa Mexico JU 361-400-IC 400 IC Jul-07 195$ Sep-11 201140 Perforadora Central Papaloapan Keppel AmFELS USA JU 361-400-IC 375 IC Feb-11 195$ Jan-13 201341 Petrobras P-59 Sao Roque do Paraguacu Brazil JU 301-360-IC 350 IC Sep-08 Jan-12 2012 Petrobras42 Petrobras P-60 Sao Roque do Paraguacu Brazil JU 301-360-IC 350 IC Sep-08 May-12 2012 Petrobras43 Prospector Offshore Drilling Prospector JU Tbn1 Dalian Shipbuilding Industry Co. China JU 361-400-IC 400 IC Dec-10 206$ Nov-12 201244 Prospector Offshore Drilling Prospector JU Tbn2 Dalian Shipbuilding Industry Co. China JU 361-400-IC 400 IC Dec-10 206$ Jan-13 201345 Prospector Offshore Drilling Prospector JU Tbn3 Dalian Shipbuilding Industry Co. China JU 361-400-IC 400 IC Apr-11 220$ Aug-13 201346 Prospector Offshore Drilling Prospector JU Tbn4 Dalian Shipbuilding Industry Co. China JU 361-400-IC 400 IC Apr-11 220$ Sep-13 201347 Prospector Offshore Drilling Prospector JU Tbn5 Shanghai Waigaoqiao Shipbuildin China JU 361-400-IC 400 IC Aug-11 211$ Feb-14 201448 Prospector Offshore Drilling Prospector JU Tbn6 Shanghai Waigaoqiao Shipbuildin China JU 361-400-IC 400 IC Aug-11 211$ May-14 201449 Rowan Joe Douglas LeTourneau USA JU 361-400-IC 400 IC Mar-08 257$ Dec-11 2011 McMoRan50 Saudi Aramco Saudi Aramco JU Tbn1 Keppel FELS Singapore JU 300-IC 300 IC Jan-10 Sep-12 2012 Saudi Aramco51 Seadrill AOR1 Keppel FELS Singapore JU 361-400-IC 400 IC Dec-10 206$ Feb-13 201352 Seadrill AOR2 Keppel FELS Singapore JU 361-400-IC 400 IC Dec-10 206$ Mar-13 201353 Seadrill AOR3 Keppel FELS Singapore JU 361-400-IC 400 IC Jun-11 189$ Aug-13 201354 Seadrill West Castor Jurong Shipyard Pte Ltd Singapore JU 361-400-IC 400 IC Oct-10 200$ Dec-12 201255 Seadrill West Oberon Dalian Shipbuilding Industry Co. China JU 361-400-IC 400 IC Nov-10 190$ Mar-13 201356 Seadrill West Telesto Dalian Shipbuilding Industry Co. China JU 361-400-IC 400 IC Nov-10 190$ Dec-12 201257 Seadrill West Tucana Jurong Shipyard Pte Ltd Singapore JU 361-400-IC 400 IC Oct-10 200$ Mar-13 201358 Standard Drilling Standard JU Tbn5 Keppel FELS Singapore JU 361-400-IC 400 IC Nov-10 185$ Jul-12 201259 Standard Drilling Standard JU Tbn6 Keppel FELS Singapore JU 361-400-IC 400 IC Jan-11 184$ Feb-13 201360 Standard Drilling Standard JU Tbn7 Keppel FELS Singapore JU 361-400-IC 400 IC Jan-11 184$ Jun-13 201361 Standard Drilling Standard JU Tbn8 Keppel FELS Singapore JU 361-400-IC 400 IC May-11 196$ Jul-13 201362 Standard Drilling Standard JU Tbn9 Keppel FELS Singapore JU 361-400-IC 400 IC May-11 196$ Nov-13 201363 Standard Drilling Standard JU Tbn10 Keppel FELS Singapore JU 361-400-IC 400 IC May-11 196$ Dec-13 201364 Standard Drilling Standard JU Tbn11 Keppel FELS Singapore JU 361-400-IC 400 IC May-11 196$ May-14 201465 Transocean Transocean Honor PPL Shipyard Singapore JU 361-400-IC 400 IC Nov-09 195$ Nov-11 201166 Transocean Transocean JU Tbn2 Keppel FELS Singapore JU 301-360-IC 350 IC Feb-11 200$ Dec-12 2012 Chevron67 Transocean Transocean JU Tbn3 Keppel FELS Singapore JU 301-360-IC 350 IC Feb-11 200$ Jun-13 2013 Chevron68 Transocean Transocean JU Tbn4 Keppel FELS Singapore JU 361-400-IC 400 IC Aug-11 195$ Jul-13 2013 Chevron69 Vietsovpetro Tam Dao 03 PV Shipyard Vietnam JU 300-IC 300 IC Jan-09 180$ Mar-12 2012 Vietsovpetro70 Vietsovpetro Vietsovpetro JU Tbn3 JU 361-400-IC 400 IC 201471 Yantai Raffles Caspian Driller Yantai CIMC Raffles China JU 300-IC 300 IC Dec-09 Mar-12 2012 Dragon Oil72 Yantai Raffles Yantai Raffles JU Tbn3 Yantai CIMC Raffles China JU 300-IC 300 IC Apr-08 Oct-11 201173 ZPMC Zhenhai 1 ZPMC Nantong China JU 361-400-IC 400 IC Jun-11 Apr-13 2013

Darren Gacicia 203.276.5664 ______________


21

Floater Fleet Expansion Floater Newbuild Order Book


Owner Rig Name Shipyard Country Market CategoryWater Depth Type

Order Date

Cost ($MM)

Deliv. Date

Deliv. Year

Term Contract

1 Vantage Drilling Dalian Developer COSCO Dalian China Drillship >7500 10,000 Apr-06 Dec-12 20122 Atw ood Atw ood Advantage Daew oo South Korea Drillship >7500 10,000 Jan-11 600$ Sep-13 20133 Atw ood Atw ood Condor Jurong Shipyard Pte Ltd Singapore Semi >7500 10,000 Jul-08 750$ Jun-12 20124 CNOOC Hai Yang Shi You 981 Shanghai Waigaoqiao Shipbuilding China Semi 5001-7500 7,500 Dec-06 599$ Oct-11 2011 CNOOC5 COSL COSLInnovator Yantai CIMC Raffles China Semi Harsh High Spec 1,640 Apr-06 460$ Dec-11 2011 Statoil6 COSL COSLPromoter Yantai Raff les China Semi Harsh High Spec 1,640 Jan-07 460$ Mar-12 2012 Statoil7 Diamond Offshore Ocean BlackHaw k Hyundai Heavy Industries South Korea Drillship >7500 12,000 Jan-11 590$ Jun-13 2013 Anadarko8 Diamond Offshore Ocean BlackHornet Hyundai Heavy Industries South Korea Drillship >7500 12,000 Feb-11 590$ Dec-13 2013 Anadarko9 Diamond Offshore Ocean BlackRhino Hyundai Heavy Industries South Korea Drillship >7500 12,000 May-11 610$ May-14 2014

10 Dolphin Fred Olsen Drsh Tbn1 Hyundai Heavy Industries South Korea Drillship >7500 12,000 Apr-11 615$ Sep-13 201311 Ensco ENSCO 8505 Keppel FELS Singapore Semi >7500 8,500 May-08 537$ Jan-12 201212 Ensco ENSCO 8506 Keppel FELS Singapore Semi >7500 8,500 Aug-08 560$ Jul-12 201213 Ensco ENSCO DS-6 Samsung Heavy Industries South Korea Drillship >7500 10,000 Aug-08 790$ Dec-11 201114 Ensco ENSCO DS-7 Samsung Heavy Industries South Korea Drillship >7500 10,000 Dec-10 600$ Jul-13 201315 Etesco Etesco Takatsugu J Samsung Heavy Industries South Korea Drillship >7500 10,000 Jul-08 820$ Jan-12 2012 Petrobras16 Gazflot Polyarnaya Zvezda Vyborg Shipyard Russia Semi Harsh High Spec 1,148 Nov-07 Sep-11 2011 Gazflot17 Gazflot Severnoye Siyanie Vyborg Shipyard Russia Semi Harsh High Spec 1,148 Nov-07 Sep-11 2011 Gazflot18 IPC La Muralla IV Daew oo South Korea Semi >7500 10,000 Aug-08 709$ Sep-11 201119 Island Offshore Island Innovator COSCO Nantong China Semi Harsh High Spec 2,300 Mar-07 560$ Mar-12 201220 Maersk Drilling Maersk Drsh Tbn1 Samsung Heavy Industries South Korea Drillship >7500 12,000 Apr-11 650$ Aug-13 201321 Maersk Drilling Maersk Drsh Tbn2 Samsung Heavy Industries South Korea Drillship >7500 12,000 Apr-11 650$ Nov-13 201322 Maersk Drilling Maersk Drsh Tbn3 Samsung Heavy Industries South Korea Drillship >7500 12,000 Jul-11 650$ May-14 201423 Maersk Drilling Maersk Drsh Tbn4 Samsung Heavy Industries South Korea Drillship >7500 12,000 Jul-11 650$ Aug-14 201424 Noble Noble Bully I Shanghai Shipyard China Drillship >7500 12,000 Oct-07 610$ Dec-11 2011 Shell25 Noble Noble Bully II Shanghai Shipyard China Drillship >7500 12,000 Dec-07 632$ Nov-11 2011 Shell26 Noble Noble Drsh Tbn5 Hyundai Heavy Industries South Korea Drillship >7500 10,000 Jan-11 605$ Jun-13 2013 Shell27 Noble Noble Drsh Tbn6 Hyundai Heavy Industries South Korea Drillship >7500 10,000 Jan-11 605$ Dec-13 201328 Noble Noble Drsh Tbn7 Hyundai Heavy Industries South Korea Drillship >7500 10,000 Mar-11 615$ May-14 201429 Noble Noble Drsh Tbn8 Hyundai Heavy Industries South Korea Drillship >7500 10,000 Sep-11 630$ Sep-14 201430 Noble Noble Globe Trotter STX Offshore & Shipbuilding China Drillship >7500 10,000 Sep-08 585$ Dec-11 2011 Shell31 Noble Noble Globe Trotter 2 STX Offshore & Shipbuilding China Drillship >7500 10,000 Jun-10 550$ Jun-13 2013 Shell32 Ocean Rig OCR Drillship Tbn1 Samsung Heavy Industries South Korea Drillship >7500 12,000 Apr-11 638$ Jul-13 201333 Ocean Rig OCR Drillship Tbn2 Samsung Heavy Industries South Korea Drillship >7500 12,000 Apr-11 638$ Oct-13 201334 Ocean Rig OCR Drillship Tbn3 Samsung Heavy Industries South Korea Drillship >7500 12,000 Jun-11 638$ Nov-13 201335 Odebrecht Odebrecht Drsh Tbn5 Daew oo South Korea Drillship >7500 10,000 Dec-10 May-13 201336 Odebrecht Odebrecht Semi Tbn1 Daew oo South Korea Semi Harsh Deepw ater 10,000 Dec-10 Oct-13 201337 Odebrecht ODN I Daew oo South Korea Drillship >7500 10,000 Dec-09 579$ Jan-12 2012 Petrobras38 Odebrecht ODN II Daew oo South Korea Drillship >7500 10,000 Dec-09 579$ Mar-12 2012 Petrobras39 Odfjell Drilling Deepsea Metro II Hyundai Heavy Industries South Korea Drillship >7500 10,000 Jun-08 668$ Nov-11 2011 Petrobras40 Opus Offshore Opus Drsh Tbn1 Shanghai Shipyard China Drillship <=3000 3,000 Sep-11 Mar-14 201441 Opus Offshore Opus Drsh Tbn2 Shanghai Shipyard China Drillship <=3000 3,000 Sep-11 Sep-14 201442 Pacif ic Drilling Pacif ic Khamsin Samsung Heavy Industries South Korea Drillship >7500 10,000 Mar-11 550$ Apr-13 201343 Pacif ic Drilling Pacif ic Santa Ana Samsung Heavy Industries South Korea Drillship >7500 10,000 Mar-08 650$ Dec-11 2011 Chevron44 Pacif ic Drilling Pacif ic Sharav Samsung Heavy Industries South Korea Drillship >7500 10,000 Mar-11 550$ Sep-13 201345 Petroserv SSV Catarina Daew oo South Korea Semi >7500 10,000 Dec-09 526$ Apr-12 201246 Queiroz Galvao Amaralina Star Samsung Heavy Industries South Korea Drillship >7500 10,000 Nov-10 Jul-12 2012 Petrobras47 Queiroz Galvao Laguna Star Samsung Heavy Industries South Korea Drillship >7500 10,000 Nov-10 Sep-12 2012 Petrobras48 Row an Row an Drsh Tbn1 Hyundai Heavy Industries South Korea Drillship >7500 12,000 Jun-11 740$ Sep-13 201349 Row an Row an Drsh Tbn2 Hyundai Heavy Industries South Korea Drillship >7500 12,000 Jun-11 738$ Dec-13 201350 Saipem Scarabeo 8 Fincantieri Italy Semi Harsh Deepw ater 9,843 Jun-05 615$ Dec-11 2011 Eni51 Schahin Cerrado Samsung Heavy Industries South Korea Drillship >7500 10,000 Jun-08 682$ Oct-11 2011 Petrobras52 Schahin Sertao Samsung Heavy Industries South Korea Drillship >7500 10,000 Jun-08 709$ Nov-11 2011 Petrobras53 Seadrill West Auriga Samsung Heavy Industries South Korea Drillship >7500 12,000 Nov-10 595$ Feb-13 201354 Seadrill West Capricorn Jurong Shipyard Pte Ltd Singapore Semi 5001-7500 7,500 May-08 771$ Dec-11 201155 Seadrill West Leo Jurong Shipyard Pte Ltd Singapore Semi >7500 10,000 Jun-06 510$ Dec-11 201156 Seadrill West Tellus Samsung Heavy Industries South Korea Drillship >7500 12,000 Apr-11 600$ Aug-13 201357 Seadrill West Vela Samsung Heavy Industries South Korea Drillship >7500 12,000 Nov-10 595$ May-13 201358 Sete Brasil Sete Brasil Drsh Tbn1 Estaleiro Atlantico Sul Brazil Drillship >7500 10,000 Feb-11 662$ Jan-15 2015 Petrobras59 Sete Brasil Sete Brasil Drsh Tbn2 Estaleiro Atlantico Sul Brazil Drillship >7500 10,000 Feb-11 662$ Jul-15 2015 Petrobras60 Sete Brasil Sete Brasil Drsh Tbn3 Estaleiro Atlantico Sul Brazil Drillship >7500 10,000 Feb-11 662$ Jan-16 2016 Petrobras61 Sete Brasil Sete Brasil Drsh Tbn4 Estaleiro Atlantico Sul Brazil Drillship >7500 10,000 Feb-11 662$ Jul-16 2016 Petrobras62 Sete Brasil Sete Brasil Drsh Tbn5 Estaleiro Atlantico Sul Brazil Drillship >7500 10,000 Feb-11 662$ Jan-17 2017 Petrobras63 Sete Brasil Sete Brasil Drsh Tbn6 Estaleiro Atlantico Sul Brazil Drillship >7500 10,000 Feb-11 662$ Jul-17 2017 Petrobras64 Sete Brasil Sete Brasil Drsh Tbn7 Estaleiro Atlantico Sul Brazil Drillship >7500 10,000 Feb-11 662$ Jan-18 2018 Petrobras65 Sevan Drilling Sevan Brasil COSCO Nantong China Semi >7500 10,000 Jun-08 685$ Mar-12 2012 Petrobras66 Sevan Drilling Sevan UDW3 COSCO Nantong China Semi >7500 10,000 May-11 526$ Dec-13 201367 Sevan Drilling Sevan UDW4 COSCO Nantong China Semi >7500 10,000 May-11 526$ May-14 201468 Songa Offshore Songa Semi Tbn2 Daew oo South Korea Semi Harsh High Spec 1,640 Jul-11 565$ Feb-14 2014 Statoil69 Songa Offshore Songa Semi Tbn3 Daew oo South Korea Semi Harsh High Spec 1,640 Jul-11 565$ Aug-14 2014 Statoil70 Stena Stena DrillMAX ICE Samsung Heavy Industries South Korea Drillship >7500 7,500 Apr-08 1,150$ Feb-12 201271 TMT DragonQuest Daew oo South Korea Drillship >7500 10,000 Dec-07 782$ Oct-11 2011 Petrobras72 Transocean Aker Drsh Tbn1 Daew oo South Korea Drillship >7500 12,000 Jan-11 600$ Oct-13 201373 Transocean Aker Drsh Tbn2 Daew oo South Korea Drillship >7500 12,000 Jan-11 600$ Dec-13 201374 Vantage Drilling Tungsten Explorer Daew oo South Korea Drillship >7500 12,000 May-11 590$ May-13 2013

Darren Gacicia 203.276.5664 ______________


22

Offshore Driller Valuation Methodology Offshore Contract Driller Valuation Overview


Base Rig Market Values


Historical High Spec. & Standard Jackup Values


Implied Avg. Dayrates in Rig Values Well Below 10 Year Avg. & Leading Edge Rates


Historical Floater Market Values


Price Return to TGT NAV P/NAV P/NAV Dividend DPS/ Net Debt/Rating Price Target Target '12 PE 2011 2011 2012 P/E ('12) Yield Cash EPS Gross Fleet Value

RIG US Equity Transocean Buy 46$ 98$ 111% 14.0X 75$ 62% 59% 6.6X 6.8% 45% 21.8%DO Equity Diamond Offshore Buy 56$ 100$ 79% 16.5X 94$ 59% 58% 9.2X 6.3% 33% 3.2%SDRL Equity Seadrill Buy 29$ 49$ 69% 15.1X 18$ 161% 150% 8.9X 10.4% 106% 40.4%RDC Equity Rowan Buy 31$ 52$ 68% 11.9X 49$ 63% 57% 7.1X 0.0% 0% 0.6%HERO US Equity Hercules Offshore Buy 3$ 8$ 189% na 4$ 62% 55% na 0.0% 0% 53.8%NE Equity Noble Hold 30$ 47$ 59% 10.4X 36$ 83% 78% 6.5X 1.7% 15% 23.1%ESV Equity ENSCO Hold 41$ 63$ 53% 10.9X 49$ 84% 75% 7.2X 3.4% 34% 23.8%ATW Equity Atwood Oceanics Hold 36$ 52$ 48% 12.0X 45$ 78% 70% 8.2X 0.0% 0% 7.5%

$12

$11

$17

$13

$35

$40

$50

$190

$200

$210

$170

$210

$300

$550

$600

$600

0 100 200 300 400 500 600 700

<200

200 MS

200 MC

250 MS

250 MC

250 IC

300 IC

350 IC

400 IC

450 IC

2G

3G

4G

5G

6G

Drillship

Second Hand Market Values (Adjusted from ODSPetrodata)

$-

$50

$100

$150

$200

$250Jul-01D

ec-01M

ay-02O

ct-02M

ar-03A

ug-03Jan-04Jun-04N

ov-04A

pr-05Sep-05Feb-06Jul-06D

ec-06M

ay-07O

ct-07M

ar-08A

ug-08Jan-09Jun-09N

ov-09A

pr-10Sep-10Feb-11

Rig

Mar

ket V

alue

($m

)

350 ft IC 300 feet (Harsh Env.) 300 ft IC (Standard) 250 ft IC

$31

$30

$33

$31

$42

$47

$65

$126

$128

$131

$167

$196

$226

$328

$343

$373

$40

$47

$47

$47

$52

$72

$87

$101

$105

$105

$169

$216

$261

$275

$304

$337

$36.0

$35.8

$35.8

$33.8

$43.0

$68.1

$78.9

$104.5

$110.0

$110.0

$252.7

$304.6

$292.8

$360.0

$377.5

$478.4

$- $100 $200 $300 $400 $500 $600

<200

200 MS

200 MC

250 MS

250 MC

250 IC

300 IC

350 IC

400 IC

450 IC

2G

3G

4G

5G

6G

Drillship

Leading Edge RateAverage Fixture (2000-Present)Implied Avg. Dayrate Over Asset Life ($kpd)

$(50)

$50

$150

$250

$350

$450

$550

$650

$750

Jan-06A

pr-06Jul-06O

ct-06Jan-07A

pr-07Jul-07O

ct-07Jan-08A

pr-08Jul-08O

ct-08Jan-09A

pr-09Jul-09O

ct-09Jan-10A

pr-10Jul-10O

ct-10Jan-11A

pr-11

Rig

Mar

ket V

alue

($m

)

3G 3G (Harsh Env.) 4G 5G 6G

Darren Gacicia 203.276.5664 ______________

23

Dividend Yield-Based Valuations

Dividend Yield to Payout Ratio Relationship

Source: ODS Petrodata, Bloomberg, Vertical Research Partners

Potential for Yield-Based Valuation Premiums

Source: ODS Petrodata, Bloomberg, Vertical Research Partners

DO

ATW

NE

RIG

SDRL

HERO

ESV

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%110%120%130%140%

Div

iden

d Yi

eld

(2Q

11 D

Ps A

nnua

lized

)

DPS/CEPS

DO

ATWNE

RIG

SDRL

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

0% 50% 100% 150% 200% 250%

Div

iden

d Yi

eld

(2Q

11 D

Ps A

nnua

lized

)

Price / NAV

Darren Gacicia 203.276.5664 ______________

24

North American Natural Gas US Natural Gas Storage

Source: EIA, Vertical Research Partners

Relative Storage & Gas Prices

Source: Bloomberg, EIA, Vertical Research Partners CAPEX Funded by CFO (Funding Gap/Surplus)

Source: Bloomberg, Vertical Research Partners Note: Natural Gas Levered E&P companies included in calculations: SWN, RRC, APA, DVN, APC, CHK, ECA, EOG, NBL, STR, FST

US Natural Gas Storage Injections


NYMEX 12-month Strip

Source: Vertical Research Partners Gas-Levered E&P Funding Status


0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Trill

ions

of C

ubic

Fee

t

5-Yr. Range 2009 2010 2011

80%

85%

90%

95%

100%

105%

110%

115%

120%$2.00

$3.00

$4.00

$5.00

$6.00

$7.00

$8.00

$9.00

$10.00

Jan-06A

pr-06Jun-06Sep-06D

ec-06M

ar-07Jun-07A

ug-07N

ov-07Feb-08M

ay-08Jul-08O

ct-08Jan-09A

pr-09Jun-09Sep-09D

ec-09M

ar-10M

ay-10A

ug-10N

ov-10Feb-11A

pr-11Jul-11

Stor

age

% o

f 5yr

Ave

rage

Nat

ural

Gas

Pric

e

Gas Price Storage % of 5 Year Average

0%10%20%30%40%50%60%70%80%90%

100%110%120%130%140%150%

Mar

-97

Sep-

97M

ar-9

8Se

p-98

Mar

-99

Sep-

99M

ar-0

0Se

p-00

Mar

-01

Sep-

01M

ar-0

2Se

p-02

Mar

-03

Sep-

03M

ar-0

4Se

p-04

Mar

-05

Sep-

05M

ar-0

6Se

p-06

Mar

-07

Sep-

07M

ar-0

8Se

p-08

Mar

-09

Sep-

09M

ar-1

0Se

p-10

Mar

-11

CFO

/ C

APEX

(300)

(250)

(200)

(150)

(100)

(50)

0

50

100

150


(Bcf

)

5 Year Range 2010 2009 2011

$3.40 $3.50 $3.60 $3.70 $3.80 $3.90 $4.00 $4.10 $4.20 $4.30 $4.40

1 2 3 4 5 6 7 8 9 10 11 12

Natural Gas 12-Month Strip

-

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

2,200

Mar-97

Oct-97

May-98

Dec-98

Jul-99Feb-00Sep-00A

pr-01N

ov-01Jun-02Jan-03A

ug-03M

ar-04O

ct-04M

ay-05D

ec-05Jul-06Feb-07Sep-07A

pr-08N

ov-08Jun-09Jan-10A

ug-10M

ar-11

CFO

& C

APEX

(Ind

exed

)

CFO CAPEX

Darren Gacicia 203.276.5664 ______________

25

Global Oil Markets

Oil’s Marginal Cost Curve

Source: IEA, Bloomberg

Latest

R² = 0.88

$-

$10

$20

$30

$40

$50

$60

$70

$80

$90

$100

$110

$120

$130

$140

68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93

Bre

nt, $

/bbl

Oil Supplied (mbd)

IEA '11 Demand Forecast

IEA '12 Demand Forecast

Darren Gacicia 203.276.5664 ______________

26

Key Oil Market Metrics

IEA 2010-2011 Demand Forecast

Source: IEA, Vertical Research Partners

Total OPEC vs Saudi Arabia Sustainable Production Capacity

Source: IEA, Vertical Research Partners; Note: Includes NGL production

IEA Non-OPEC Supply Forecast


IEA Implied Forecast ‘Call on OPEC’ (Forecasted World Demand Less Forecasted Non-OPEC Supply)


OPEC Spare Capacity & Brent Crude Price


85.0 85.1 85.5

85.9 86.0 86.1 86.1 86.3 86.4 86.4 86.4 86.4 86.5 86.6 86.6 86.9

87.3 87.5 87.7 87.8 87.9 87.9 87.9 88.0

88.3 88.3 87.8 87.9 87.9

88.2 88.5

88.8 89.1 89.3 89.4 89.4 89.2 89.3

89.5 89.5 89.3

91.0 91.1 90.7

84

85

86

87

88

89

90

91

92

Jul-09A

ug-09Sep-09O

ct-09N

ov-09D

ec-09Jan-10Feb-10M

ar-10A

pr-10M

ay-10Jun-10Jul-10A

ug-10Sep-10O

ct-10N

ov-10D

ec-10Jan-11Feb-11M

ar-11A

pr-11M

ay-11Jun-11Jul-11A

ug-11Sep-11

Dem

and

(mbd

)

2010 2011 2012

10.0 10.2 10.4 10.6 10.8 11.0 11.2 11.4 11.6 11.8 12.0 12.2 12.4

33.0 33.2 33.4 33.6 33.8 34.0 34.2 34.4 34.6 34.8 35.0 35.2 35.4 35.6 35.8

Jan-

07A

pr-0

7Ju

l-07

Oct

-07

Jan-

08A

pr-0

8Ju

l-08

Oct

-08

Jan-

09A

pr-0

9Ju

l-09

Oct

-09

Jan-

10A

pr-1

0Ju

l-10

Oct

-10

Jan-

11A

pr-1

1Ju

l-11 Sa

udi A

rabi

a Su

stai

nabl

e C

apac

ity (m

bd)

Tota

l OPE

C S

usta

inab

le C

aaci

ty (m

bd)

Total OPEC Sustainable Production CapacitySaudi Arabia Susutainable Production Capacity (incl. %50 Neutral Zone)

51.2 51.4 51.5

51.6

51.9

51.7 51.5

51.6 51.8

52.0 52.3 52.3 52.4

52.6 52.6

53.3

53.5

53.0 52.8

52.9 52.9 53.1

53.4 53.4 53.4 53.5 53.6 53.7 53.7

53.3 53.1 53.0

52.8

54.0 54.0 53.8

51.0

51.5

52.0

52.5

53.0

53.5

54.0

54.5

Jul-0

9A

ug-0

9Se

p-09

Oct

-09

Nov

-09

Dec

-09

Jan-

10Fe

b-10

Mar

-10

Apr

-10

May

-10

Jun-

10Ju

l-10

Aug

-10

Sep-

10O

ct-1

0N

ov-1

0D

ec-1

0Ja

n-11

Feb-

11M

ar-1

1A

pr-1

1M

ay-1

1Ju

n-11

Jul-1

1A

ug-1

1Se

p-11

2010 2011 2012

35.1 35.0 35.0

34.8

34.5

34.8

35.1 35.0 35.1

35.3 35.2 35.4 35.4 35.4 35.4

34.6 34.5

35.3

35.1 35.0 35.0

35.1 35.2

35.4

35.7 35.8 35.7 35.7 35.5

36.0

36.5 36.5 36.5

37.0 37.1

36.9

34.0

34.5

35.0

35.5

36.0

36.5

37.0

37.5

Jul-09A

ug-09Sep-09O

ct-09N

ov-09D

ec-09Jan-10Feb-10M

ar-10A

pr-10M

ay-10Jun-10Jul-10A

ug-10Sep-10O

ct-10N

ov-10D

ec-10Jan-11Feb-11M

ar-11A

pr-11M

ay-11Jun-11Jul-11A

ug-11Sep-11

mbd

2010 2011 2012

$-

$20

$40

$60

$80

$100

$120

$140

$160

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

9.0%

10.0%

Jan-01Jul-01Jan-02Jul-02Jan-03Jul-03Jan-04Jul-04Jan-05Jul-05Jan-06Jul-06Jan-07Jul-07Jan-08Jul-08Jan-09Jul-09Jan-10Jul-10Jan-11Jul-11

Oil

Px

OPE

C S

pare

Cap

acity

% S

uppl

y

OPEC Spare Capacity as % of Supply Brent Crude Px

Darren Gacicia 203.276.5664 ______________

27

Global Oil Demand & Economics

Incremental Oil Demand 2010-2011 (IEA Estimate)


WTI and Brent Oil Price Strip


Oil Demand Forecast Revision History


Consensus GDP Forecast 2011


2011/2012 IEA Demand Forecast vs. GDP/Oil Intensity

Source: Bloomberg, IMF, IEA, Vertical Research Partners

PMI History


(0.08)

(0.02)

0.11

0.07

0.17

(0.05)

0.18

0.23

(0.24)

0.53

1.10

(0.21)

0.05

0.33

0.15

0.27

0.28

0.45

0.32

0.51

1.01

3.11

(0.5) - 0.5 1.0 1.5 2.0 2.5 3.0 3.5

OECD Europe

Africa Non-OECD

India Non-OECD

OECD Asia/Pacific

Latin America Non-OECD

Other Asia Non-OECD

FSU Non-OECD

Middle East Non-OECD

OECD North America

China Non-OECD

Total World Incremental Demand

mbd2010 2011

$96.00 $97.00 $98.00 $99.00 $100.00 $101.00 $102.00 $103.00 $104.00 $105.00 $106.00 $107.00

$82

$83

$83

$84

$84

$85

1 2 3 4 5 6 7 8 9 10 11 12

Bre

nt $

/bbl

WTI

$/b

bl

WTI 12-Month Strip Brent 12-Month Strip

(0.20)

(0.10)

-

0.10

0.20

0.30

0.40

Rev

isio

ns to

201

1 Es

timat

es (m

bd)

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

18.0%

20.0%

Qatar

China

Argentina

IndonesiaC

hileTurkeyH

ong Kong

SingaporePhilippinesTaiw

anR

ussiaO

man

Saudi Arabia

South Korea

PolandM

exicoU

AE

ThailandVenezuelaSouth A

fricaB

razilG

ermany

Canada

Euro Union

Norw

ayFranceU

SAEgyptSpainU

KJapanIrelandPortugalG

reece

2011 Real GDP Growth Forecast Y/Y 2012 Real GDP Growth Y/Y

1993

1994

19951996

1997

1998

1999

20002001

2002

200320052006

2007

20082009

20042010

2012 Est.

2011 est.

-2%

-1%

0%

1%

2%

3%

4%

-1% 0% 1% 2% 3% 4% 5% 6%

Glo

bal O

il D

eman

d G

row

th

Global Real GDP Growth

30

35

40

45

50

55

60

65

Mar-05

Jul-05N

ov-05M

ar-06Jul-06N

ov-06M

ar-07Jul-07N

ov-07M

ar-08Jul-08N

ov-08M

ar-09Jul-09N

ov-09M

ar-10Jul-10N

ov-10M

ar-11Jul-11

PMI (

Rep

orte

d)

Europe PMI China Manufacturing PMI ISM US Manf'g

Darren Gacicia 203.276.5664 ______________

28

Oil in Transit

Middle East & Africa: Westbound Sailings


Middle East: Westbound Oil in Transit


West of Suez Long-Haul Arrivals


Middle East & Africa: Eastbound Sailings


Middle East: Eastbound Oil in Transit


East of Suez Long-Haul Arrivals


6.0

6.5

7.0

7.5

8.0

8.5

9.0


Mill

. bbl

s

Source: Oil Movements2007 2008 2009 2010 2011

110

120

130

140

150

160

170


Mill

. bb

ls

2007 2008 2009 2010 2011

20.0

20.5

21.0

21.5

22.0

22.5

23.0

23.5

24.0

24.5


mbd


12.5

13.0

13.5

14.0

14.5

15.0

15.5

16.0


Mill

. bbl

s


150

160

170

180

190

200

210

220

230


Mill

. bb

ls

2007 2008 2009 2010 2011

12.0

12.5

13.0

13.5

14.0

14.5


mbd


Darren Gacicia 203.276.5664 ______________

29

US Oil Demand & Oil Stocks

Crude Product Stocks, ex SPR


Gasoline Stocks


Distillate Fuel Stocks


Total Product Demand


Gasoline Demand


Distillate Demand


900

950

1,000

1,050

1,100

1,150

1,200

Jan Feb Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Mill

. bbl

.

2008 2009 2007 2010 2011

175

185

195

205

215

225

235

245


mill

. bbl

2008 2009 2007 2010 2011

100,000

110,000

120,000

130,000

140,000

150,000

160,000

170,000

180,000


mill

. bbl

2008 2009 2007 2010 2011

17

18

19

20

21

22

23


Mbd

2008 2009 2007 2010 2011

8.6 8.7 8.8 8.9 9.0 9.1 9.2 9.3 9.4 9.5 9.6 9.7 9.8 9.9


mbd

2008 2009 2007 2010 2011

3,000

3,200

3,400

3,600

3,800

4,000

4,200

4,400

4,600

4,800

5,000


mbd

2008 2009 2007 2010 2011

Darren Gacicia 203.276.5664 ______________

30

Global Oil Stocks and Refining Margins

ARA Oil Stocks


Japan Oil Stocks


Korea Oil Stocks


Singapore Oil Stocks


Global Refining Margins


500

550

600

650

700

750

800


Mill

. bbl

.

2009 2010 2011

150

160

170

180

190

200

210

220

230


Mill

. bbl

.

2007 2008 2009 2010 2011

20

30

40

50

60

70

80

90


mill

. bbl

2007 2008 2009 2010 2011

20

25

30

35

40

45

50

55


mill

. bbl

2007 2008 2009 2010 2011

$- $5

$10 $15 $20 $25 $30 $35 $40

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p-09

Oct

-09

Nov

-09

Dec

-09

Jan-

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b-10

Mar

-10

Apr

-10

May

-10

Jun-

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l-10

Aug

-10

Sep-

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USGC 3-2-1 NW Europe 3-2-1 Dubai 3-2-1 Breakeven Economics

Darren Gacicia 203.276.5664 ______________

31

Earnings Summary

Company Category 2008 2009 2010 2011 2012 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 2011 2012Schlumberger EPS 4.46 2.74 2.85 3.75 5.42 0.71 0.87 1.02 1.16 1.25 1.27 1.40 1.51 -1% 2%

Previous EPS 3.80 6.54 1.02 1.21 1.41 1.50 1.75 1.91 Consensus EPS 3.80 5.34 1.03 1.21 1.19 1.28 1.42 1.57


Halliburton EPS 2.90 1.34 2.08 3.42 3.94 0.65 0.81 0.94 1.02 1.06 0.93 0.98 0.97 2% -12%Previous EPS 3.47 5.00 0.65 0.81 0.95 1.05 1.18 1.11 1.31 1.41


Baker Hughes EPS 5.36 1.91 2.28 4.33 5.42 0.87 0.93 1.19 1.33 1.39 1.28 1.37 1.39 -1% -7%Previous EPS 4.38 6.65 0.87 0.93 1.21 1.37 1.53 1.40 1.78 1.94


Weatherford EPS 2.00 0.36 0.49 0.82 1.40 0.10 0.17 0.25 0.29 0.33 0.31 0.37 0.40 -7% -13%Previous EPS 0.88 2.10 0.10 0.17 0.26 0.36 0.44 0.47 0.57 0.62


Key Energy Services EPS 1.29 (0.46) (0.17) 1.00 1.67 0.09 0.23 0.30 0.38 0.40 0.42 0.42 0.43 2% -5%Previous EPS 1.00 1.83 0.09 0.23 0.30 0.38 0.40 0.44 0.48 0.51


National Oilwell Varco EPS 5.13 3.94 4.08 4.48 5.26 1.00 1.14 1.16 1.19 1.24 1.30 1.34 1.38 -1% -8%Previous EPS 4.50 5.76 1.00 1.14 1.17 1.20 1.28 1.38 1.51 1.59


Cameron International EPS 2.64 2.35 2.41 2.66 3.79 0.49 0.66 0.71 0.80 0.90 0.93 0.96 1.00 -1% 1%Previous EPS 2.66 3.91 0.49 0.66 0.71 0.80 0.90 0.95 1.00 1.06


FMC Technologies EPS 2.94 2.93 3.06 1.70 2.37 0.32 0.39 0.48 0.52 0.55 0.58 0.61 0.63 -1% 4%Consensus EPS 1.71 2.28 0.46 0.54 0.52 0.56 0.59 0.63


Dril-Quip EPS 2.62 2.75 2.80 2.32 3.90 0.54 0.55 0.58 0.65 0.74 0.90 1.06 1.19 0% 13%Consensus EPS 2.33 3.45 0.58 0.65 0.74 0.82 0.88 0.95


Transocean EPS 14.40 11.44 6.08 3.24 7.00 0.48 0.65 0.81 1.29 1.39 1.69 1.95 1.97 -4% 20%Consensus EPS 3.36 5.84 0.80 1.33 1.30 1.53 1.52 1.48


Seadrill EPS 1.05 2.60 2.64 2.63 3.24 0.72 0.41 0.70 0.76 0.73 0.86 0.84 0.81 -8% 2%Previous EPS 2.63 3.36 0.70 0.76 0.85 0.86 0.84 0.81


Noble EPS 5.69 6.44 3.09 1.68 4.52 0.16 0.17 0.53 0.82 1.02 1.03 1.18 1.29 0% 15%Previous EPS 1.68 4.52 0.59 0.76 1.03 1.03 1.17 1.29


Diamond Offshore EPS 9.96 9.82 6.69 6.29 6.05 1.80 1.92 1.39 1.19 1.09 1.60 1.58 1.78 2% 21%Consensus EPS 6.18 4.99 1.47 1.09 1.15 1.26 1.23 1.29


Ensco EPS 8.21 5.50 3.80 3.04 5.75 0.46 0.72 0.85 1.17 1.34 1.58 1.67 1.79 -13% -2%Consensus EPS 3.49 5.86 0.87 1.32 1.34 1.42 1.46 1.62


Rowan EPS 4.06 2.98 2.61 1.80 4.37 0.24 0.38 0.43 0.76 0.92 0.98 1.23 1.24 6% 15%Consensus EPS 1.69 3.79 0.40 0.69 0.87 0.91 0.94 0.95


Atwood Oceanics EPS 3.25 3.77 4.04 4.02 4.35 1.08 1.15 0.98 0.97 1.02 1.16 1.21 1.48 0% 5%Previous EPS 4.02 4.44 1.08 1.15 0.98 0.97 1.02 1.16 1.29 1.57


Hercules Offshore EPS 1.07 (0.68) (0.54) (0.51) (0.15) (0.12) (0.10) (0.11) (0.17) (0.08) (0.03) (0.02) (0.01) na naConsensus EPS (0.56) (0.42) (0.14) (0.19) (0.14) (0.09) (0.09) (0.08)

Consensus EPS-High (0.38) 0.20 (0.06) (0.07) - 0.05 0.07 0.08 Consensus EPS-Low (0.67) (0.74) (0.20) (0.25) (0.24) (0.17) (0.19) (0.19)

Nabors Industries EPS 3.12 1.32 1.18 1.54 2.63 0.29 0.23 0.40 0.61 0.67 0.65 0.66 0.65 5% 8%Previous EPS 1.55 3.00 0.29 0.23 0.41 0.62 0.70 0.73 0.77 0.80


Patterson-UTI Energy EPS 2.35 (0.19) 0.69 2.28 2.66 0.46 0.52 0.59 0.71 0.77 0.72 0.63 0.54 -2% -14%Previous EPS 2.28 3.15 0.46 0.52 0.59 0.71 0.76 0.78 0.80 0.81


VRP EPS vs Consensus

Darren Gacicia 203.276.5664 ______________

32

Valuation Summary

Note: Curreny in ($ US), unless otherwise indicated

Company Ticker Rating PriceTarget

Price

Shares Out

(MM)Mkt Cap

(MM) EV (MM)2010A 2011E 2012E 2010A 2011E 2012E 2010A 2011E 2012E 2010A 2011E 2012E

Diversified Oilfield SerivicesSchlumberger SLB Buy 63 110 1,349 84,524 89,980 2.85 3.75 5.42 22.0X 16.7X 11.6X 12.1X 8.7X 6.4X 3% 6% 3%Halliburton HAL Buy 33 60 920 30,642 32,786 2.08 3.42 3.94 16.0X 9.7X 8.5X 7.8X 5.2X 4.4X 5% 6% 4%Baker Hughes BHI Buy 49 95 436 21,513 24,492 2.28 4.33 5.42 21.6X 11.4X 9.1X 9.3X 5.4X 4.3X 10% 11% 8%Weatherford WFT Buy 13 27 749 9,814 17,223 0.49 0.82 1.40 26.7X 16.1X 9.3X 8.5X 6.8X 5.2X 39% 43% 44%

21.6X 13.5X 9.6X 9.4X 6.5X 5.1X 14% 17% 15%Mid/Small Cap Oilfield SericesCore Laboratories CLB NR 92 -- 47 4,266 4,292 3.04 3.76 4.86 30.1X 24.4X 18.8X 17.2X 14.9X 12.0X na na naRPC RES NR 17 -- 148 2,505 2,617 0.97 2.15 2.59 17.4X 7.8X 6.5X 7.2X 3.8X 3.1X 6% 5% -2%Trican Well Service TCW NR C$16 -- 147 C$2333 2,355 C$1.08 C$2.04 C$2.40 14.7X 7.8X 6.6X 7.0X 4.0X 3.2X 0% 5% 4%Carbo Ceramics CRR NR 111 -- 23 2,563 2,516 3.30 5.55 7.36 33.5X 19.9X 15.0X 17.4X 11.0X 8.4X na -3% -9%Complete Production Services CPX NR 20 -- 79 1,616 2,139 1.13 2.87 4.13 18.1X 7.1X 4.9X 5.6X 3.4X 2.6X 25% 24% 21%Key Energy Services KEG Hold 10 16 151 1,468 1,875 (0.17) 1.00 1.67 na 9.7X 5.8X 13.1X 11.2X 9.1X 20% 20% 11%Superior Energy Services SPN NR 27 -- 80 2,188 3,004 1.55 2.10 3.09 17.7X 13.1X 8.9X 6.6X 5.2X 4.0X na na naCalfrac Well Services CFW NR C$26 -- 44 C$1125 1,361 C$1.45 C$3.74 C$4.42 17.7X 6.9X 5.8X 7.0X 3.8X 3.0X 16% 24% 18%Tetra Technologies TTI NR 8 -- 77 588 828 0.54 0.58 0.78 14.0X 13.0X 9.8X 3.4X 4.2X 4.2X na 12% 5%Basic Energy Services BAS NR 15 -- 42 654 1,105 (1.21) 2.00 2.90 na 7.7X 5.3X 10.1X 3.3X 2.5X 37% 50% 44%Newpark Resources NR NR 6 -- 91 574 666 0.42 0.70 0.87 14.9X 9.0X 7.3X 7.2X 4.5X 3.7X na na na

19.8X 11.5X 8.6X 9.3X 6.3X 5.1X 17% 20% 17%Oilfield Equipment & ManufacturersAker Solutions AKSO NR 54kr -- 274 14,810kr 20,025kr 6.39kr 5.61kr 7.14kr 8.5X 9.6X 7.6X 5.0X 5.5X 5.1X 30% 11% 8%National Oilwell Varco NOV Hold 59 80 424 24,916 21,564 4.08 4.48 5.26 14.4X 13.1X 11.2X 7.3X 6.4X 5.4X -11% -16% -27%Tenaris TS NR 27 -- 590 15,925 16,298 1.83 2.17 2.77 14.7X 12.4X 9.8X 7.9X 6.6X 5.3X -2% -5% -4%Vallourec VK NR 44€ -- 119 5,241€ 5,889€ 3.76€ 3.68€ 5.16€ 11.7X 12.0X 8.5X 6.4X 6.1X 4.8X 5% 13% 11%Cameron International CAM Buy 45 65 245 11,141 10,775 2.41 2.66 3.79 18.8X 17.1X 12.0X 10.2X 9.6X 7.1X -5% -3% -10%FMC Technologies FTI Buy 40 60 240 9,636 10,168 3.06 1.70 2.37 13.1X 23.6X 16.9X 14.6X 14.0X 10.5X 3% 5% 2%Oceaneering OII NR 37 -- 109 4,061 3,816 1.82 2.00 2.51 20.5X 18.7X 14.9X 8.4X 8.1X 6.7X -5% -4% -9%Dresser-Rand DRC NR 45 -- 80 3,624 3,574 1.86 1.96 3.23 24.4X 23.2X 14.1X 11.2X 9.6X 6.6X 0% 17% 12%Gardner Denver GDI Buy 69 105 52 3,603 3,747 3.38 4.30 6.00 20.4X 16.0X 11.5X 11.8X 7.9X 7.1X 3% -15% -29%Oil States International OIS NR 54 -- 51 2,756 3,574 3.26 5.57 6.88 16.5X 9.6X 7.8X 9.4X 5.3X 4.3X 2% 29% 30%Dril-Quip DRQ Buy 54 90 40 2,180 1,909 2.80 2.32 3.90 19.4X 23.5X 13.9X 11.0X 12.7X 8.0X -13% -14% -15%Lufkin Industries LUFK NR 47 -- 30 1,437 1,348 1.49 2.46 4.44 31.7X 19.2X 10.6X 14.7X 9.0X 5.2X na na naRobbins & Myers RBN NR 39 -- 46 1,778 1,563 0.93 2.39 3.02 41.7X 16.3X 12.9X 23.7X 8.2X 6.3X na -15% -26%Rotork ROR NR 16£ -- 87 1,372£ 1,275£ 0.80£ 0.95£ 1.04£ 19.7X 16.8X 15.3X 12.4X 10.7X 9.7X -8% -9% -12%Exterran Holdings EXH NR 9 -- 64 562 2,608 (0.96) (1.66) (0.83) na na na 5.8X 7.0X 5.7X 77% 75% 74%Schoeller-Bleckmann Oilfield SBO NR 55€ -- 16 872€ 922€ 1.85€ 3.13€ 3.63€ 29.5X 17.4X 15.0X 10.9X 7.8X 7.1X 6% 6% 4%

20.5X 17.4X 11.7X 10.3X 8.3X 6.2X 16% 26% 23%Offshore Contract DrillersTransocean RIG Buy 46 98 320 14,868 25,632 6.08 3.24 7.00 7.6X 14.3X 6.6X 5.8X 7.4X 5.2X 34% 42% 39%Seadrill SDRL Buy 29 49 469 13,571 22,605 2.64 2.63 3.24 11.0X 11.0X 8.9X 10.9X 9.4X 8.3X 36% 38% 39%Noble NE Hold 30 47 252 7,461 11,836 3.09 1.68 4.52 9.6X 17.6X 6.5X 8.0X 9.2X 5.4X 25% 36% 36%Diamond Offshore DO Buy 56 100 139 7,774 8,170 6.69 6.29 6.05 8.4X 8.9X 9.2X 4.6X 5.1X 5.1X 5% 5% 0%ENSCO ESV Hold 41 63 230 9,489 13,931 3.80 3.04 5.75 10.8X 13.5X 7.2X 16.5X 10.4X 5.2X -9% 32% 27%Rowan RDC Buy 31 52 127 3,950 3,952 2.61 1.80 4.37 11.9X 17.2X 7.1X 6.4X 9.0X 4.8X 16% 0% -9%Atwood Oceanics ATW Hold 36 52 65 2,305 4,243 4.04 4.02 4.35 8.8X 8.8X 8.2X 12.1X 11.6X 10.1X 38% 46% 47%Hercules Offshore HERO Buy 3 8 138 382 1,084 (0.54) (0.51) (0.15) na na na 6.5X 7.0X 4.6X 65% 65% 62%Vantage VTG NR 1 -- 291 352 1,343 (0.07) (0.19) (0.01) na na na 15.5X 7.3X 5.9X 74% 77% 75%

9.7X 13.1X 7.7X 9.6X 8.5X 6.1X 37% 38% 47%Land Contract DrilersNabors Industries NBR Buy 13 29 287 3,858 8,767 1.18 1.54 2.63 11.4X 8.7X 5.1X 6.0X 4.6X 3.1X 48% 56% 63%Patterson-UTI Energy PTEN Hold 17 28 156 2,635 3,094 0.69 2.28 2.66 24.7X 7.4X 6.4X 6.0X 3.1X 2.7X 12% 15% 18%Helmerich & Payne HP NR 42 -- 107 4,494 4,791 2.49 3.93 4.72 16.9X 10.7X 8.9X 6.9X 4.7X 4.0X 7% 1% 2%Unit UNT NR 39 -- 48 1,882 2,043 3.04 4.02 4.83 12.8X 9.7X 8.1X 4.7X 3.5X 3.0X na na na

16.4X 9.1X 7.1X 5.9X 4.0X 3.2X 22% 24% 28%Offshore Supply ChainTidewater TDW NR 43 -- 52 2,237 2,691 4.99 2.43 2.58 8.6X 17.8X 16.7X 6.6X 9.0X 9.3X -2% 18% 26%Seacor Holdings CKH NR 84 -- 22 1,820 2,031 12.23 3.80 na 6.9X 22.1X na na na na na na naBristow Group BRS NR 42 -- 37 1,550 2,148 3.11 3.24 3.93 13.7X 13.1X 10.8X 8.1X 8.0X 8.7X 29% 28% 25%

15.2X 18.8X 17.2X 8.2X 9.7X 7.9X 23% 27% 25%Engineering & ConstructionSaipem SPM NR 27€ -- 441 11,778€ 15,158 1.80€ 2.06€ 2.42€ 14.8X 12.9X 11.0X 8.4X 7.3X 6.4X 22% 21% 17%Technip TEC NR 60€ -- 111 6,642€ 5,332€ 3.73€ 4.20€ 4.91€ 16.1X 14.3X 12.2X 6.9X 6.3X 5.3X -25% -27% -29%Mcdermott MDR NR 14 -- 235 3,274 2,780 1.28 1.17 1.49 10.9X 11.9X 9.3X 5.8X 6.1X 5.0X -26% -25% -34%Petrofac PFC NR 12£ -- 346 4,299£ 3,283£ 1.26£ 1.50£ 1.76£ 9.9X 8.3X 7.1X 5.1X 4.5X 3.8X -41% -32% -37%Amec AMEC NR 8£ -- 332 2,757£ 2,020£ 0.59£ 0.69£ 0.80£ 14.0X 12.0X 10.4X 7.5X 6.4X 5.6X -37% -33% -41%Wood Group WG/ NR 5£ -- 369 1,991£ 2,017£ 0.39£ 0.58£ 0.77£ 13.9X 9.3X 7.0X 4.9X 4.7X 4.0X 11% 1% -8%Helix Energy Solutions HLX NR 13 -- 106 1,423 2,416 0.53 1.47 1.73 25.4X 9.1X 7.8X 5.2X 4.0X 3.7X na 35% 25%Tecnicas Reunidas TRE NR 23 -- 56 1,270 739 2.41 2.58 2.76 9.4X 8.8X 8.2X 4.5X 4.4X 4.2X -99% -94% -125%Global Industries GLBL NR 8 -- 116 918 873 (0.34) (0.59) 0.17 na na 45.8X 119.2X -58.8X 7.2X -1% 15% 14%Cal Dive International DVR NR 2 -- 95 167 307 (0.11) (0.17) 0.39 na na 4.5X 4.7X 6.1X 2.2X 53% 47% 39%

15.0X 12.0X 12.7X 16.8X 6.3X 5.3X 24% 21% 20%SeismicPetroleum Geo-Services PGS NR 57kr -- 218 12,436kr 12,788kr 0.39kr 0.44kr 1.05kr 146.4X 131.0X 54.2X 28.3X 24.2X 18.3X 2% 3% 3%Cie Generale De Geophysique GA NR 14€ -- 152 2,139€ 3,346€ (0.26)€ 0.20€ 1.26€ na 70.8X 11.2X 6.4X 5.3X 4.0X 35% 33% 29%

81.8X 43.1X 15.4X 11.1X 7.6X 5.4X 24% 43% 41%TankersTeekay TK NR 21 -- 72 1,541 7,076 (1.53) (1.63) (0.12) na na na 9.8X 10.8X 9.0X 73% 75% 75%Frontline FRO NR 4 -- 78 343 3,021 1.79 (1.30) (1.09) 2.5X na na 6.0X 12.3X 11.1X 88% 87% 87%Nordic American Tanker NAT NR 13 -- 47 593 651 0.22 (0.74) (0.38) 56.1X na na 8.5X 18.5X 10.4X 6% 20% 17%Overseas Shipholding Group OSG NR 12 -- 30 377 2,089 (3.41) (5.48) (3.25) na na na 17.4X 26.1X 11.3X 82% 84% 84%Teekay Tankers TNK NR 4 -- 48 201 642 0.57 0.29 0.17 7.3X 14.4X 25.1X 9.1X 9.4X 10.1X 60% 61% 60%

22.0X 14.4X 25.1X 10.2X 15.4X 10.4X 62% 66% 65%

EPS P/E EV/EBITDA Net Debt/Cap (Mkt)

Darren Gacicia 203.276.5664 ______________

33

Valuation Summary – Price Targets

Theoretical Target to P/E Ratio to 2012 EPS


Theoretical Target to P/E Ratio to 2011 EPS


Theoretical Price Target Ranges, Price Targets, & Current Trading Levels


Relative Upside to Price Targets


BETA US 10YR ERP Cost of Year 1 Year 2 Terminal PT P/E 2012Ticker (Adj 2YR) 2.1% 5.0% Equity Growth Growth Growth Ratio EPS TargetBHI 1.37 2.1% 5.0% 8.9% 20.4% 23.2% 3.0% 21.0X 5.42$ = 114$ CAM 1.47 2.1% 5.0% 9.4% 14.5% 13.0% 3.0% 16.8X 3.79$ = 64$ DRQ 1.51 2.1% 5.0% 9.6% 51.9% 26.1% 3.0% 24.1X 3.90$ = 94$ FTI 1.32 2.1% 5.0% 8.7% 25.8% 29.4% 3.0% 24.3X 2.37$ = 58$ HAL 1.55 2.1% 5.0% 9.8% 12.4% 21.3% 3.0% 16.6X 3.94$ = 65$ KEG 1.72 2.1% 5.0% 10.7% 2.3% 1.2% 3.0% 11.0X 1.67$ = 18$ NBR 1.71 2.1% 5.0% 10.6% -4.2% 26.2% 3.0% 13.0X 2.63$ = 34$ NOV 1.52 2.1% 5.0% 9.7% 19.1% 3.5% 3.0% 15.4X 5.26$ = 81$ PTEN 1.47 2.1% 5.0% 9.4% -14.7% 19.9% 3.0% 13.3X 2.66$ = 35$ SLB 1.32 2.1% 5.0% 8.7% 28.2% 16.8% 3.0% 22.4X 5.42$ = 122$ WFT 1.59 2.1% 5.0% 10.0% 36.6% 29.3% 3.0% 20.7X 1.40$ = 29$

BETA US 10YR ERP Cost of Year 1 Year 2 Terminal PT P/E 2011Ticker (Adj 2YR) 2.1% 5.0% Equity Growth Growth Growth Ratio EPS TargetBHI 1.37 2.1% 5.0% 8.9% 25.2% 20.4% 3.0% 21.4X 4.33$ = 93$ CAM 1.47 2.1% 5.0% 9.4% 42.4% 14.5% 3.0% 21.1X 2.66$ = 56$ DRQ 1.51 2.1% 5.0% 9.6% 68.2% 51.9% 3.0% 32.2X 2.32$ = 75$ FTI 1.32 2.1% 5.0% 8.7% 39.1% 25.8% 3.0% 26.1X 1.70$ = 45$ HAL 1.55 2.1% 5.0% 9.8% 15.0% 12.4% 3.0% 15.7X 3.42$ = 54$ KEG 1.72 2.1% 5.0% 10.7% 66.3% 2.3% 3.0% 18.1X 1.00$ = 18$ NBR 1.71 2.1% 5.0% 10.6% 70.9% -4.2% 3.0% 17.6X 1.54$ = 27$ NOV 1.52 2.1% 5.0% 9.7% 17.4% 19.1% 3.0% 17.5X 4.48$ = 78$ PTEN 1.47 2.1% 5.0% 9.4% 16.7% -14.7% 3.0% 13.0X 2.28$ = 30$ SLB 1.32 2.1% 5.0% 8.7% 44.7% 28.2% 3.0% 27.8X 3.75$ = 104$ WFT 1.59 2.1% 5.0% 10.0% 72.1% 36.6% 3.0% 27.6X 0.82$ = 23$

$29 $27

$95

$60

$110

$16

$28

$90

$60 $65

$80

$13 $13

$49

$33

$63

$10 $17

$54

$40 $45

$59

$-

$20

$40

$60

$80

$100

$120

$140


Implied P/E Valuation Range Price Target Current Px

0%

20%

40%

60%

80%

100%

120%


116% 106%93%

80% 76%64% 65% 65%

50% 43% 36%

Darren Gacicia 203.276.5664 ______________

34

Oil Services Sector Options: Tracking Signs from Implied Volatility

Current Implied Volatility: Two Closest Expirations

Source: Bloomberg Vertical Research Partners

1 Mo. ∆ Current Implied Volatility: Two Closest Expirations


Historical OSX Implied Volatility (two closest contracts) vs. OSX Index Performance:


- 50 100 150S&P 500

AKSOWORCKH

SDRLPFCSBO

DOTECCLBBRSTDW

TRE SMSLBESVGDIGLFOSX

DRCTKNE

SPMFTIOII

NATRIGTS

DRQATWUNTRDCTNKBHI

CAMRBNNOVVK

GGSGIFI

TCWHALCFWPGSOISHOS

HPWFTPTEN

WGLUFK

TTISPNNBRCRRDVR

IOKEGEXHHLX

DWSNRESCPX

HERONR

MDROSGBASGOKFRO

Percent Change 1 -Year (40) (20) - 20 40GIFIGLF

IODVR

RBNS&P 500

GDISDRLSLB

AMECGA

OYOGPHIIRORTGEVTGWG/

AKSOTNK

OIIDRCPFCFTIWGNOVDO

CKHNR

SBOBRSDRQ

NEGGSRDC

WORCAMSPMBHI

TECCPXOSX

HALESVRIG

WFTKEGOIS

HPUNTTS

PGSHLX

TDWATW

TKPTEN

VKBASNBR

DWSNCLB

TTIHERO

TRE SMNATHOS

LUFKTCWRESCRREXHSPNOSGMDRGOKFROCFW

Percent Change 1-Year

050100150200250300350400

20

25

30

35

40

45

50

Oct-06

Dec-06

Feb-07

Apr-07

Jun-07

Aug-07

Oct-07

Dec-07

Feb-08

Apr-08

Jun-08

Aug-08

Oct-08

Dec-08

Feb-09

Apr-09

Jun-09

Aug-09

Oct-09

Dec-09

Feb-10

Apr-10

Jun-10

Aug-10

Oct-10

Dec-10

Feb-11

Apr-11

Jun-11

Aug-11

OSX

Inde

x

Impl

ied

Vola

tility

Darren Gacicia 203.276.5664 ______________

35

View from Debt Markets

1 Week Bid Spread ∆ to Benchmark


Oil Services & Equipment Debt Yield Map


1 Year Corporate CDS


1 Month Bid Spread ∆ to Benchmark


Offshore Contract Drillers Debt Yield Map


Average Current Yield Relative to S&P Rating


(100)

(50)

-

50

100

150

200

CFW

202

0O

ffsh.

Grp

201

5W

FT 2

020

Obe

brec

ht 2

021

GLB

L 20

27St

ena

2019

RIG

201

3R

DC

201

7A

KSO

201

4R

IG 2

018

SLB

202

1R

IG 2

020

HA

L 20

19N

E 20

13B

HI 2

018

CA

M 2

018

RIG

201

3D

olph

in 2

019

WFT

201

8N

E 20

41C

AM

202

1H

AL

2021

DO

201

5W

FT 2

013

ESV

2027

SLB

201

6C

AM

201

4H

AL

2096

KEG

201

4SL

B 2

021

BH

I 201

8R

IG 2

027

Sten

a 20

16O

dfje

ll 20

11B

HI 2

013

BH

I 202

4ES

V 20

40C

AM

203

8O

cean

Rig

201

6N

BR

202

0N

E 20

40W

FT 2

037

NE

2016

ESV

2020

WFT

203

6W

FT 2

012

NE

2020

ESV

2016

WFT

201

7ES

V 20

21SL

B 2

013

NO

V 20

15M

aers

k 20

14W

FT 2

017

WFT

201

9N

BR

202

0N

OV

2012

NB

R 2

019

BA

S 20

19R

IG 2

015

WFT

201

6R

IG 2

037

1W

Bid

Spr

ead

to B

ench

mar

k (b

ps)

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

18.0%

- 2 4 6 8 10 12 14 16 18 20

Yiel

d to

Wor

st

Years to MaturityNorth American Drillers Norwegian Drillers

-

50

100

150

200

250

300

350

400

WFT CDS USD5Y

HAL CDS USD5Y

BHI CDS USD5Y

CAM CDS USD5Y

DO CDS USD5Y

NE CDS USD5Y

RIG CDS SR5Y

Bas

is P

oint

s

1Y CDS Contracts52 Wk Range Current Bid

(400)

(300)

(200)

(100)

-

100

200

300

GLB

L 20

27A

KSO

201

4St

ena

2017

Sten

a 20

19SL

B 2

013

DO

201

4N

E 20

14N

BR

201

2B

HI 2

013

HA

L 20

96C

AM

201

4N

OV

2012

CFW

202

0SL

B 2

021

HER

O 2

017

DO

201

5O

ffsh.

Grp

201

5W

FT 2

011

PDC

201

8W

FT 2

013

NB

R 2

020

CA

M 2

041

HA

L 20

21W

FT 2

013

DO

203

9N

E 20

15B

HI 2

029

WFT

201

2B

HI 2

040

NE

2021

NE

2020

HA

L 20

18ES

V 20

19H

ERO

203

8St

ena

2020

SLB

201

3SL

B 2

021

Mae

rsk

2014

BH

I 201

8N

E 20

13ES

V 20

16SL

B 2

021

HA

L 20

38W

FT 2

020

RD

C 2

019

NB

R 2

020

KEG

202

1R

IG 2

018

Offs

h. G

rp 2

015

WFT

201

7N

BR

201

9So

nga

2012

Obe

brec

ht 2

021

WFT

203

7W

FT 2

019

WG

201

2W

FT 2

036

RIG

201

5R

IG 2

018

NB

R 2

018

WFT

201

6B

AS

2016

1M

Bid

Spr

ead

to B

ench

mar

k (b

ps)

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

- 2 4 6 8 10 12 14 16 18 20

Yiel

d to

Wor

st

Years to Maturity

Internation Levered North American Levered

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

A+ A A- BBB+ BBB BBB- BB+ BB- B-

Aver

age

Cur

rent

Yie

ld

S&P Ratings

Darren Gacicia 203.276.5664 ______________

36

Estimate Revisions

Current Year Estimate Revision, Prev. 4 Wks.


Current Year Estimate Revisions, Prev. 3 Mos.


Next Year Estimate Revisions, Previous 4 Wks


-44.4%-31.4%-31.0%

-27.3%-18.8%

-17.1%-11.6%

-6.5%-5.4%-5.1%

-3.8%-3.8%-3.0%-2.7%-2.6%-2.5%-2.2%-2.0%-1.0%-0.7%-0.6%-0.6%-0.5%-0.2%-0.2%-0.1%-0.1%-0.1%

0.0%0.0%0.0%0.0%0.0%0.0%0.0%0.0%0.0%0.0%0.0%0.0%0.0%0.0%0.0%0.0%0.0%0.0%0.0%0.1%0.3%0.3%0.3%0.4%0.4%0.5%0.5%0.6%0.7%0.9%1.1%1.1%1.5%1.8%2.1%2.9%3.2%3.7%4.2%

5.8%6.1%

-50% -40% -30% -20% -10% 0% 10%PGSCKHGIFI

PTENRORUNT

TSDWSN

RESBRNC

HOSSBO

VKGE

WG/ATW

SDRLPFCPDCPKDGDISPNCFW

FTIGLBL

ESVEXHGA

GGSWFTSLBHAL

OYOGGOKSPMCAMBRS

IOHERO

KEGNOV

DOAKSOAMEC

HPNE

GLFDRCBASVTGRIG

CRRUDRLTDWTECNBRCLBTTI

PHIIWOR

BHICPX

NRRBNDVRTCWOISWG

MDR

-85.9%-70.6%

-59.1%-53.5%

-45.7%-44.1%

-37.3%-37.0%-35.6%-34.1%

-29.5%-28.6%-27.6%-26.6%-26.6%

-20.1%-19.9%-19.6%-18.7%-17.4%-14.7%-14.4%-13.9%-12.8%

-6.7%-5.5%-2.8%-2.0%-2.0%-1.8%-1.7%-1.3%

0.2%0.4%0.6%0.9%1.0%1.0%2.0%2.3%2.7%2.7%3.0%3.6%3.9%4.5%5.2%5.5%6.0%6.1%6.5%7.0%7.2%7.7%8.0%8.9%9.0%9.3%9.9%10.0%10.3%10.8%12.2%12.7%12.9%14.5%

18.7%19.9%

37.6%

-100% -50% 0% 50%PGSHLXRORNOVGIFI

PTENCKH

NRSBO

OIIGE

DWSNUNT

SDRLIO

VKAKSO

HOSDRQSLBPHIIWG/PDC

BRNCSPMHALGDIESVGOKBASPKDBHI

NBRSPN

AMECFTI

PFCDVRATWBRS

DOGGS

HEROTCWCRR

NETTI

TGERESCFWTECRIGOIS

KEGGA

CLBGLBLUDRL

RBNEXHTDWWOR

HPVTGWFTDRCMDRCPXTRE

-20%

-15%

-10%

-5%

0%

5%

10%

UN

TPG

S IO OII

TTI

PDC

DR

CW

FTG

IFI

GG

SO

ISW

G/

RIG

SPM

HO

SPK

DD

WSN

ATW VT

GG

LFC

LBG

LBL

ESV

RES

HER

OEX

HG

DI

TDW

TRE

BH

IC

KH

CPX

CFW G

ATC

W DO TS

SLB

PHII

BA

SB

RS

HA

LR

BN

NR VK TGE

NO

VK

EGPT

EN NE

WO

RD

RQ

SDR

LU

DR

LSP

NN

BR

TEC

FTI

AK

SOC

RR

WG

AM

ECSB

O HP

RO

RB

RN

CG

EG

OK

DVR PF

CM

DR

CA

M

Darren Gacicia 203.276.5664 ______________

37

Trading Analysis

Short Interest Ratio %


Insider Buy/Sell % of Position in Last 6 months


Performance Relative to Recent Peak


0.5%0.7%

1.0%1.2%1.3%1.4%1.4%1.5%1.6%1.6%1.7%1.7%1.8%1.9%2.0%2.0%2.1%2.1%2.2%2.3%2.5%2.5%2.7%2.8%2.8%3.1%3.3%3.3%3.4%3.4%

3.8%3.9%4.0%4.0%4.1%4.2%4.3%4.3%4.6%4.6%4.9%

5.2%5.3%5.4%5.6%5.6%

5.9%6.1%6.2%

6.9%7.0%7.0%7.1%7.2%7.3%

7.7%8.1%8.1%

8.9%9.5%

12.5%13.3%

0% 5% 10% 15%TCW

GLBLMDRRIG

BRNCESVNBR

GEUNTHALBHI

SDRLPTENWFT

TSGDI

CFWCAMCKHSLBRDCDVRGOKNOV

NEOISOII

VTGSPNBASATWCRRWORDRC

HPLUFKHERO

IOKEG

OYOGPDCEXHCPXHLXRESPKDRBNGLFTTI

GIFIWG

HOSGGS

DOFTI

CLBBRSDRQ

UDRLNR

TDWDWSN

-27.1%-24.7%

-23.2%-15.1%

-12.0%-6.7%

-4.2%-3.5%-3.4%-3.3%

-2.0%-1.9%-1.3%-1.3%-1.2%-1.1%-0.3%-0.2%-0.2%-0.1%-0.1%-0.1%0.0%

0.0%0.0%0.0%0.0%0.0%0.0%0.0%0.0%0.0%0.0%0.0%0.0%0.0%0.1%0.1%0.1%0.1%0.2%0.3%0.5%0.5%0.6%0.8%1.0%1.2%1.5%1.9%1.9%2.5%2.7%2.9%3.2%3.2%4.1%4.4%4.6%4.9%5.1%5.9%6.2%7.0%8.1%

10.0%14.8%

16.4%18.0%18.3%

-30% -20% -10% 0% 10% 20% 30%CLB

OYOGCPXCRRCAMGLF

HPGDI

GGSFTI

MDRSLBBHI

DWSNRDCCKHRBNUNTDRCPKDWG/TDWHOSTREPHIISBODRQ

DOUDRL

SPMTCW

SDRLCFWNBRPFC

WORKEG

LUFKGA

SPNROR

OIIDVRNOVGIFI

AKSOVK

HLXRESHALWFT

GLBLRIGEXHPGSGOKOISTECGE

ATWWG

BASIO

PTENTTI

HEROPDC

AMECNR

VTG

0%20%40%60%80%

100%

GLB

LD

OD

VRU

DR

LW

OR

EXH

FTI

BR

SW

GG

IFI

TS OII

ATW H

PH

ERO

CR

RD

RQ

GO

KR

OR

CK

HD

WSN

NB

R VK RES

CLB

SBO

WG

/H

LX GA

HO

SPD

CA

MEC

TDW

SDR

LU

NT

GE

RB

NR

IGD

RC

TEC

WFT

SPM

BA

SA

KSO VT

GPK

DLU

FK GD

IR

DC

PGS

SPN

PFC IO

KEG

PTEN ES

VG

LFTR

EN

RB

HI

OIS

CA

MTC

WN

OV

SLB

CPX

HA

LC

FW GG

SM

DR

OYO

G

Buy Hold Sell

Darren Gacicia 203.276.5664 ______________

38

Sector Performance Summary

Weekly Performance


Year to Date Performance


Performance Relative to Recent Peak


-19.0%-11.4%

-9.6%-8.4%

-5.7%-5.1%-4.9%-4.8%-4.7%

-3.2%-2.6%-2.4%

-1.3%-0.9%-0.1%

0.0%0.4%0.5%0.5%0.9%1.2%1.7%1.8%1.8%1.8%1.9%2.0%2.2%2.2%2.5%2.5%2.6%2.7%3.2%3.3%3.4%3.4%3.5%3.8%4.4%4.5%4.6%4.7%4.9%5.0%5.3%5.3%5.4%5.8%5.9%6.0%6.0%6.7%6.9%7.1%7.4%7.9%8.1%8.4%8.8%9.2%9.4%9.5%

10.5%10.6%

12.1%12.1%

13.7%14.5%14.8%

16.5%16.9%

-30% -20% -10% 0% 10% 20%GOK

LUFKEXHDVRTREGGS

AKSOHERO

PGSVTGRIG

PTENTTI

TECBRS

GLBLPHIIPKDSPMDRQ

VKWG/

AMECESVGE

CLBROR

DOWORHLXTDWKEGRDCPDCATW

HPNR

RESPFCGA

SPNCKHCFWSLB

SDRLWG

SBOOIS

UNTOII

HOSTSFTIBHI

TCWWFTCRRCPXGDI

BASHALCAMNBRGLF

DWSNDRCRBN

OYOGUDRL

NOVIO

GIFI

-78.9%-69.1%

-63.3%-55.3%

-52.3%-44.9%-44.0%-42.8%-42.5%-40.4%-38.2%-37.7%-37.1%-35.8%-35.4%-35.0%-33.1%-32.6%-31.0%-30.0%-27.8%-27.6%-27.2%-26.1%-25.1%-25.0%-25.0%-24.4%-22.9%-21.7%-21.7%-21.4%-21.0%-20.4%-19.9%-18.4%-18.2%-17.0%-16.2%-15.9%-15.9%-15.5%-15.3%-14.3%-14.2%-13.7%-13.7%-13.4%-13.2%-12.8%-12.6%-11.2%-10.5%-10.4%

-9.8%-7.7%-6.8%-6.5%-5.0%-4.9%-3.5%

0.1%0.5%1.6%2.3%2.8%

6.6%6.9%8.8%10.6%

14.3%26.4%

32.1%

-100% -50% 0% 50%GOKDVREXHWGTRE

TSVK

NBRWFTVTGGA

AKSOPGS

TTIOYOG

IORIG

MDRCPXDRQ

AMECSPMGGS

UDRLCFWSLBKEG

LUFKESVPFCSPN

PTENTCW

HEROTDWHAL

DWSNCKHOIS

UNTPDCSBO

GESDRL

GIFIBHIDOHP

TECRORNOVRDCBRSCAM

FTIPHIIRESBASATWWG/PKDGDI

WOROIINR

CLBDRCCRRRBNHLX

GLBLHOSGLF

0%10%20%30%40%50%60%70%80%90%

GO

KH

ERO

WG

DVR

EXHVTGU

DR

LR

IGTTIW

FTN

BR

GLB

LH

LXG

AIO D

WSN

AK

SOPG

SPD

CTS VK PK

DG

ETR

ED

OG

GS

MD

RB

AS

HO

SPH

IIU

NT

GIFI

PTENK

EGSPNC

PXW

OR

LUFK

BH

IESVTD

WH

PSLBA

TWH

AL

OYO

GG

LFW

G/

TCW

CR

RR

ESO

ISN

RN

OV

RD

CD

RQ

AM

ECC

FWSPMR

BN

BR

SSB

OC

KH

CA

MPFCG

DI

SDR

LTECC

LBFTID

RC

OII

RO

R

Darren Gacicia 203.276.5664 ______________

39

Analyst Certification Vertical Research Partners analyst(s) whose name(s) appears on the front page of this research report hereby certifies that the recommendations and opinions expressed in the research report accurately reflect the research analyst's personal views about any and all of the subject securities or issues discussed herein. Transacting Disclosures Vertical Research Partners is not a broker dealer, so does not trade or carry proprietary positions with firm capital in any covered or other stocks. We have fully flexible payment mechanisms available to our institutional clients, including CSA and CCAs in place with all larger broker dealers and execution-only firms in the US. Employees and partners of Vertical Research Partners LLC may from time to time, own beneficial positions in securities we publish on. Vertical Research Partners' employees and partners are prohibited from transacting in such securities within 48 hours of a change in recommendation. All employee and partner transactions in covered securities are required to be pre-approved and monitored by VRP LLC. Other Disclosures Although the information contained herein has been obtained from sources we believe to be reliable, the accuracy and completeness of such information and the opinions expressed herein cannot be guaranteed. The information and opinions contained herein are subject to change without notice, and Vertical Research Partners, LLC assumes no responsibility to update or amend any information or opinions contained herein. Copyright 2011 Vertical Research Partners, LLC. All rights reserved. All material presented in this document, unless specifically indicated otherwise, is under copyright to Vertical Research Partners, LLC. None of the material, nor its content, nor any copy of it, may be altered in any way, or transmitted to or distributed to any other party, without the prior express written permission of Vertical Research Partners, LLC. This report is limited for the sole use of clients of Vertical Research Partners, LLC. Authorized users have received an encryption decoder with regulates and monitors the access to Vertical Research Partners content. Any distribution of the content produced by Vertical Research Partners, LLC will violate the understanding of the terms of our relationship. The content of Vertical Research Partners website and reports is provided as general and impersonalized investment information and commentary does not constitute a specific recommendation or solicitation that you should purchase or sell any particular security or investment advisory services. Vertical Research Partners is not responsible for trades executed by subscribers to its content. Third-party data providers make no warranties or representations of any kind relating to the accuracy, completeness, or timeliness of the data they provide and shall not have liability for any damages of any kind relating to such data. Vertical Research Partners, LLC does not provide individually tailored investment advice. Vertical Research Partners’ research has been prepared without regard to the individual financial circumstances and objectives of persons who receive it. The securities/instruments discussed in Vertical Research Partners’ research may not be suitable for all investors. Vertical Research Partners, LLC recommends that investors independently evaluate particular investments and strategies, and encourages investors to seek the advice of a financial adviser. The appropriateness of a particular investment or strategy will depend on an investor’s individual circumstances and objectives. The securities, instruments or strategies discussed in Vertical Research Partners, LLC reports may not be suitable for all investors.

2011-10-10_vertical drilling weekly - d. gacicia

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