global oil & gas daily

www.morganmarkets.com

Europe Equity Research17 October 2011

Global Oil & Gas DailyKMI acquired EP; BP-APC $4bn settlement; AMEC contract; TOTAL Q3 11 indicators and more...

Integrated Oils, Exploration & Production, Oil Services & Equipment

Fred Lucas AC

(44-20) 7155 6131

[email protected]

J.P. Morgan Securities Ltd.

Andrew Dobbing

(44-20) 7155 6134

[email protected]


Joseph Allman, CFA

(1-212) 622-4864

[email protected]

J.P. Morgan Securities LLC

J. David Anderson, PE, CFA

(1-212) 622-6684

[email protected]


Katherine Lucas Minyard, CFA

(1-212) 622-6402

[email protected]


Brynjar Eirik Bustnes, CFA

(852) 2800-8578

[email protected]

J.P. Morgan Securities (Asia Pacific) Limited

Nadia Kazakova, CFA

(44-20) 7325-6373

[email protected]


Benjamin Wilson

(61-2) 9220-1384

[email protected]

J.P. Morgan Securities Australia Limited

Caio M Carvalhal

(55 11) 3048-3946

[email protected]

Banco J.P. Morgan S.A.

For Specialist Sales advice, please contact

Hamish W Clegg

(44-20) 7325-0878

[email protected]

See page 27 for analyst certification and important disclosures, including non-US analyst disclosures.J.P. Morgan does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision.

In the News Today

Oil rose to 3 week high on G-20 discussions and increase in US retail sales

Kinder Morgan bought El Paso for $21 bn in cash and stock

BP announced $4bn settlement with APC of deepwater horizon accident claims

RIL armed with $12.6bn cash as valuations drop

AMEC awarded design engineering contract worth £150mn

TGS started a third multi client 3D survey in Barents Sea

Total released Q3 11 main indicators, European Refining fell to $13.4

J.P. Morgan Global Energy Research

El Paso Corp.: Acquisition Price Just Above Our NAV; Likely No Other Bidders - ALERT

Master Limited Partnerships: Initiating Coverage on Energy Infrastructure MLPs: Growing Yields Based on Stable Cash Flows

Oil & Gas Exploration and Production: Weekly Comp Tables

El Paso Corp.: Model Update for Latest Financial and Operations Data

Integrated Oils and Major Producers: Valuation Update, Price Performance, and Industry Data

Oil Services & Equipment Digest: Key Indicators Shaky at the Dawn of 3Q11 Earnings

Reliance Industries Ltd: 2QFY12 - In-line print; and a glimmer at the end of the E&P tunnel

MIE Holdings Corporation: Positive takeaways from Kazakhstan field trip - ALERT

South African Oil & Gas Weekly: What Price Tuscaloosa? Chemicals Weaken, Management Pay, Iran

Table 1: Global oil & gas: Macro data points and indices

c.o.b. WTI OSX XLE SXEP S&P500

14-Oct-11 86.80 218.44 66.60 310.34 1224.5813-Oct-11 84.23 209.18 64.04 303.00 1203.66% Change 3.1% 4.4% 4.0% 2.4% 1.7%

Source: Bloomberg

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Fred Lucas(44-20) 7155 [email protected]

In the News Today

Oil rose to 3 week high on G-20 discussions and increase in US retail sales

Oil rose to 3 week high as the Group 20 started discussions in Paris on a solution to debt crisis and increase in US retail sales. WTI crude increased 2.57 to close at $86.80/bbl. Brent crude increased $3.57/bbl to close at $114.68/bbl. Source: Bloomberg

Kinder Morgan bought El Paso for $21 bn in cash and stock

Kinder Morgan agreed to buy El Paso Corp. for $21.1bn, biggest energy industry’s transaction in a year. The acquisition would create the largest natural gas pipeline network in US. The cash and stock offer is valued at $26.87 per El Paso share which is 37% premium to the Oct. 14 closing price. Source: Bloomberg

BP announced $4bn settlement with APC of deepwater horizon accident claims

BP announced that it has reached agreement with Anadarko to settle all claims related to deepwater horizon accident. Under the agreement, Anadarko will pay $4bn to BP. Anadarko will also transfer its 25% interest in MC252 lease to BP. Source: BP newsletter

RIL armed with $12.6bn cash as valuations drop

RIL is poised to use its cash for overseas acquisitions to take advantage of cheapest valuations of oil and gas companies in 3 years as profit growth slows. Reliance has a strong balance sheet and sustained base to pursue growth opportunities, Chairman Ambani said. Source: Bloomberg

AMEC awarded design engineering contract worth £150mn

AMEC announced that it has been awarded a contract worth £150mn by BP and its partners, Shell, ConocoPhillips and Chevron, to deliver the engineering and project management services for the main platform for Clair Ridge, west of Shetland.Source: Bloomberg

TGS started a third multi client 3D survey in Barents Sea

TGS has started a 3D multi client survey for 1500 km2 area between Finnmark and Nordkapp Basin in the Barents Sea. Source: Bloomberg

Total released Q3 11 main indicators, European Refining fell to $13.4

Total released Q311 main indicators and said European refining margins dropped to $13.4/ton in 3Q from $16.4 a year earlier. Source: Bloomberg

Figure 1: Front Month Brent Crude Prices

US $/bbl

Source: Bloomberg

Figure 2: Henry Hub spot prices

US$/mcf

Source: Bloomberg

98

104

110

116

122

128

16-Sep 23-Sep 30-Sep 07-Oct 14-Oct

3.3

3.5

3.7

3.9

4.1

16-Sep 23-Sep 30-Sep 07-Oct 14-Oct

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Latest Global Energy Research

The following extracts are from recently published research. Please see the relevant research report and important disclosures, including a discussion of valuation and risks, for any security recommended herein before forming any investment opinion whatsoever. J.P. Morgan research is available at http://www.morganmarkets.com, or you can contact the analyst named below.

El Paso Corp.: Acquisition Price Just Above Our NAV; Likely No Other Bidders - ALERT

Analyst: Joseph Allman, CFA(1-212) 622-4864, [email protected] report can be accessed by clicking here., or at www.morganmarkets.com

EP agreed to be acquired by KMI for $26.87/share, a 37% premium to Friday’s closing price. KMI is offering $14.65/share cash, 0.4187 KMI stock (worth $11.26 per EP share), and 0.640 KMI warrants (worth $0.96 per EP share). The expected closing date is 2Q12.

$26.87/share price just above our current NAV. The acquisition price is close to our fully loaded NAV of $25.73 (using long-term prices of $6.00/Mcf for Henry Hub gas and $90/Bbl for WTI oil). It is 14% above our $23.47/share NAV which we calculate using NYMEX prices (we used long-term prices of $4.96/Mcf gas and $87.69 oil).

KMI intends to sell El Paso’s E&P assets; we value these at $10 Bn. EP had intended to spin-off its E&P assets by YE11. KMI now intends to sell the assets. Using NYMEX futures prices, we value the E&P assets on a pre-tax, pre-G&A basis at close to $10 Bn. We think that value would likely be the best that KMI could fetch, especially given current market conditions. Using $6/$90 for long-term Henry Hub/WTI, we value the assets at $12.5 Bn, but we think only a dramatic improvement in the market would allow KMI to receive a price close to that value.

No other bidders likely. El Paso agreed that it would not solicit other offers and that it would pay a $650 MM termination fee to KMI “under certain circumstances”. Given these conditions and given the offer price relative to our NAV calculations, we think it is unlikely that another company would make a competing offer for EP.

Great year for El Paso. At Friday’s close, the stock was up 42% YTD, one of the best performers in our coverage universe, due mainly to its restructuring plans. For comparison, the median E&P company that we follow is down around 18% YTD. If the stock trades close to the transaction price, as we expect it will, the stock would be up 90% or more YTD.

No real implications for E&Ps. Because of the unique nature of this transaction (between two diversified energy/pipeline companies with MLP limited partner and GP ownership), the implications for the E&P group are limited.

North America Equity Research

http://www.morganmarkets.com/

https://mm.jpmorgan.com/PubServlet?action=open&doc=GPS-697127-0.pdf

mailto:[email protected]

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Master Limited Partnerships: Initiating Coverage on Energy Infrastructure MLPs: Growing Yields Based on Stable Cash Flows

Analyst: Jeremy Tonet(1-212) 622-4915, [email protected] report can be accessed by clicking here., or at www.morganmarkets.com

We are initiating coverage on 12 energy infrastructure Master Limited Partnerships (MLPs) with a positive sector view. These midstream MLPs connect the oil and gas produced by upstream companies to the downstream end consumers. We view energy infrastructure MLPs as a play on longer term energy demand, not commodity prices. We believe secular trends that are behind upstream development in new basins will necessitate an extensive infrastructure build-out, and in turn, will drive attractive expansion opportunities for the MLP space. We see the most upside potential with OW-rated Enterprise Product Partners (EPD), El Paso Pipeline Partners (EPB), and Buckeye Pipeline Partners (BPL).

Shifting supply sources driving demand for new energy infrastructure. We believe that the secular trend towards oil, liquids-rich, and natgas production is driving strong demand for incremental midstream capacity, especially in the Eagle Ford, Bakken, and Marcellus. Factoring in this shift in product focus as well as supply sources, growing demand from natgas fired power generation and evolving interregional dynamics, the Interstate Natural Gas Association of America anticipates $130bn of infrastructure spending between 2011 and 2020. In comparison to the $210bn market cap of the AMZ (the Alerian MLP Index), we believe this level of spending will drive significant growth in the midstream space.

Midstream MLPs own vital energy infrastructure that possesses limited commodity price exposure and produces stable cash flows. Midstream players provide the link between energy production and end markets. Through employing a ‘toll-taker’ business model, energy infrastructure MLPs generally do not take title to commodities and typically generate stable, predominantly fee-based cash flows.

EPD, EPB and BPL top the OW list. We view EPD as best positioned to capitalize on the infrastructure build-out. Enterprise’s enviable position in emerging plays, combined with a dominant NGL position, is driving more than $6bn in new expansion opportunities. With material drop-down potential, we believe EPB has significant visibility towards incremental growth and peer-leading revenue stability. Finally, we believe the market is not giving Buckeye credit for having acquired its GP and transforming the business to capitalize on shifting product flow.

Oil & Gas Exploration and Production: Weekly Comp Tables








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Stocks up 4.9% over the past week. Our E&P coverage universe was up 4.9% over the past week versus the EPX, which rose 4.2%, and the S&P, which increased 3.3%. Spot gas rose 1.4% to $3.54/Mcf, and spot oil rose 2.0% to $84.23/Bbl. The JPM E&P group is down 18.6% YTD.

E&Ps are trading at 63%/92% of JPM/NYMEX NAV. Using the J.P. Morgan equity research price deck (long-term $6.00/Mcf gas and $90.00/Bbl oil), the group is trading at 63% of NAV. Since 2006, the E&Ps have tended to trade within the range of 70% to 90% of NAV. The stocks are trading at 92% of NAV using NYMEX prices (long-term prices of $4.96/Mcf gas and $87.69/Bbl oil). In 2008, 2009, and 2010, the group traded at an average of 52%, 89% and 96% of NYMEX NAV, respectively.

E&Ps are trading at 5.7x/4.3x 2011E/2012E EBITDA. Assuming the J.P. Morgan price deck, the group is trading at 5.7x 2011E EBITDA and 4.3x 2012E EBITDA. The median E&P stock is trading at $2.31/Mcfe on an EV/proved Mcfe basis.

NAVs imply $4.75/Mcf and $85.23/Bbl. Based on our NAV calculations for the group, the E&P stocks are discounting a flat Henry Hub gas price/WTI oil price of $4.75/$85.23. Our DCF NAV company models allow us to calculate the flat commodity price deck that matches the current stock prices to the companies' NAVs.

El Paso Corp.: Model Update for Latest Financial and Operations Data


We updated our model for the latest financial and operations data.

Raising price target. We updated our model for 2Q11 10-Q data, marked-to-market 2H11 commodity prices and the latest financial and operations data. Based on our updated NAV, we are raising our December 2012 PT to $29.50 from the previous $27.00.

Integrated Oils and Major Producers: Valuation Update, Price Performance, and Industry Data

Analyst: Katherine Lucas Minyard, CFA(1-212) 622-6402, [email protected] report can be accessed by clicking here., or at www.morganmarkets.com

Stocks strengthen over last week, though still offer over 40% average potential upside. The group slightly outperformed the SPX (+3%) and WTI (+2%) this past week, with an average gain of 4%. Nonetheless, the group is off ~3% in the last month (S&P +3%) and 20% over the last three months (S&P -9%), underperforming the broader market. On average, our coverage group is offering ~41% potential upside to our YE2012 price targets. On our estimates, the shares are reflecting long-term oil price expectations of ~$79/bbl, on average, ranging from ~$67/bbl to $90/bbl.







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Crude prices recover as WTI squeezes out a 2% gain to $84.23/bbl while Brent sees a 6% increase to $112.16/bbl. WTI crude oil prices dropped 7% in the last month, hovering around ~$85/bbl, while Brent gained 1%, to just over $112/bbl, accentuating the continued widening of the Brent-WTI discount, which recently peaked on 10/13 at $27.9/bbl vs. its 3Q11 average of ~$23/bbl. At the outset of 4Q11, WTI has averaged nearly $82/bbl and Brent has averaged $106/bbl vs. 3Q11 averages of ~$90/bbl and ~$113/bbl, respectively. On the refining side, we note Gulf Coast and Mid-Con WTIbased benchmark margins remain strong, averaging ~$32/bbl and ~$35/bbl in 4Q11, respectively vs. YTD averages of ~$24/bbl and ~$28/bbl, respectively. These contrast sharply with Brent-based East-Coast margins of ~$8/bbl QTD and ~$7/bbl YTD.

Oil price strength seen into 2013, largely on supply constraints. Last week, J.P. Morgan commodities research analyst Lawrence Eagles unveiled a 2013 oil price outlook in the October Oil Market Monthly, forecasting $121/bbl Brent and $114/bbl WTI, implying increases of 5% and 17% over the prior year, respectively. Despite recognition that front-month prices could fall to the $50-70/bbl range in the event of a global recession, a bigger-picture view suggests that the investment required to offset mature field declines limits non-OPEC supply growth to below demand growth for the next two years. We believe the outlook for tight supplies and stronger prices supports the case for sector investment, especially in higher-beta stocks and on pullbacks in front-month prices, as higher long-term oil prices should drive stronger cash flows and support the economics of and ability to fund a broader slate of developments.

Technical analysis suggests integrated oils modestly more constructive than other energy sectors, though overall energy may still lag. Our US Equity Technical Strategist, David Cohen, recently reviewed energy indices in Wednesday's Sector Review. Overall, the XOI looks modestly more constructive than the EPX and the OSX, while energy overall remains relatively less constructive than other sectors in the market. In our view, this would align with the sentiment we have heard from investors over the last several weeksnamely, that investors are looking to put capital back to work in the sector, but are treading lightly, preferring less-risky names with solid underlying fundamentals, attractive valuations, and strong cash flow generation, while still capturing organic growth potential. We see OW-rated OXY, HES, NXY, and TLM as particularly well-positioned to meet these criteria among our coverage.

Oil Services & Equipment Digest: Key Indicators Shaky at the Dawn of 3Q11 Earnings

Analyst: J. David Anderson, CFA(1-212) 622-6684, [email protected] report can be accessed by clicking here., or at www.morganmarkets.com

With Halliburton kicking off 3Q11 earnings season this morning, we keep our Digest concise, focusing on some of the key technical indicators and recent trends that are behind the oilfield service stocks. Overall, not a particularly rosy outlook by the






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numbers: the group is more volatile than the market, estimates are coming down, short interest is up, while fund flows are down.

Oil services strong correlation to S&P 500 with high beta. Oilfield services exhibited a strong 0.87 correlation and a high 1.4 beta relative to the S&P 500 during 3Q, but surprisingly, the correlation and volatility to oil futures was more muted. Large cap services remained the most volatile subsector and is most correlated to the broader market.

US energy sector fund flows turn negative for 1st time in 11 quarters.Fund flows for US equities were negative in 3Q11, with the US energy sector mutual funds ending their streak of 10 consecutive quarters of net positive inflows. A total of $71mm in assets flowed out of US energy mutual funds in 3Q, but net flows are up $999mm year to date. Energy sector funds currently account for about 10% of all assets placed in sector-specific funds.

Liquidity has improved, particularly for large cap services. Trading volumes are up about 40% yr-yr for oilfield services, with liquidity improving the most for the large cap services. Volumes are up yr-yr for all the names in our coverage universe with the exceptions of DO, FTI, and CAM.

Short interest increased for cap equipment and offshore drillers. Short interest for capital equipment and offshore drillers edged higher over the last month, with days to cover for DRQ, FTI, and DO climbing to 7.0, 5.5, and 5.1, respectively, but declined for large cap services.

Consensus EPS revised downward for offshore drillers. In the last couple of weeks, consensus EPS estimates for offshore drillers moved lower, led by NE’s 3Q and ‘12 EPS estimates declining 9% and 5%, respectively, while earnings for large cap services and capital equipment remained largely unchanged.

Oil service stocks outperformed the S&P by about 480bp: leader CPX (+53%), laggard NE (+6%). The BHI US land rig count increased by 10 units to 1,971 and has increased for eight out of the last 10 weeks, while Smith STAT's US land rig count decreased by 3 to 1,587.

Notable stories from last week:

HAL can’t pursue fraud claim against BP, but BP contractors could face fines. A New Orleans judge ordered that HAL, as a result of its own undue delay, missed a May 20, 2011, deadline to amend its claims against BP and thus can’t claim that BP hid critical info regarding the Macondo well—info that HAL says it first learned of in July 2011 during a deposition of a BP scientist. The Interior Department's Bureau of Safety and Environmental Enforcement (BSEE) issued its first citations against HAL and RIG related to the Deepwater Horizon incident, citing non-compliance for info requests and failure to operate in a safe and workmanlike manner. While a resulting max fine would be relatively de minimis ($35k/day*87 spill days = $3mm), it raises concerns regarding contractors’ incident indemnification and could weaken HAL’s and RIG’s legal standing vs. BP and other spill victims.

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CPX agreed to be acquired by Superior Well Services (SPN).Transaction of $7 cash and 0.945 SPN stock per CPX share, which represented ~$33 per share, or a 61% premium, based on closing prices prior to the announcement, but below the recent $41.70 high established on July 25. The deal valued the stock at 8.0x consensus 2012 EPS, a 22% discount to the multiple at recent peak and 11% discount to the current large cap average multiple. The deal, which includes a $70mm break-up fee and requires anti-trust and majority shareholder approval, is expected to close by year-end. CPX lowered its 3Q11 EBITDA to $155-160mm, which it attributed to “one-time in nature” issues. Due to J.P. Morgan's involvement, we have suspended our rating and price target for CPX. Our prior rating and price target should no longer be relied upon.

IEA lowers global oil demand by 50 KBbl/d for 2011, 210 KBbl/d for 2012. Based on global GDP growth assumptions of 3.8% in 2011 and 3.9% in 2012 with significant downside risk, global demand growth is now only +1.0 MmBbl/d and +1.3 MmBbl/d. Lower global demand is driven by lower non-OECD demand that is largely offset by lower non-OPEC supply, which has fallen as a result of various operational and weather issues over the past year. For example, J. P. Morgan analysts see Russian crude production growth slowing to below 1% in 4Q from 1.4% YTD as Russian integrateds preserve cash ahead of higher taxes starting January 2012. J. P. Morgan oil strategist Lawrence Eagles see incremental supply from Iraq and Libya as essential to meeting global demand over the next couple of years. Report of a temporary loss of 700 KBbl/d from South Rumaila could more than offset recent gains in Libya, highlighting the fragility of production from the region and lending support to oil prices last week. Libya’s oil minister believes production is currently at 400 KBbl/d and could reach 1 MmBbl/d within a year, still well below the prewar level of 1.8 MmBbl/d.

Iraq’s fourth licensing round delayed. The auction was originally scheduled for the end of January but has now been delayed until March 2012, reportedly to give companies more time to study the contract terms post the holiday season. Iraq is offering 12 new blocks (7 gas and 5 oil) estimated to contain 29 Tcf of gas and 10 BbBbl of oil to 46 qualified companies that have until November 11 to submit their feedback on the exploration model contracts. Interested companies will pay a participation fee by February 3.

Rowan newbuild EXL IV contracted to Apache. The rig will start a short 70-day contract for Apache’s Main Pass 296 block in the US Gulf of Mexico in November, about a month earlier than we had previously modeled. The mid $80kpd dayrate is lower that we had forecast, but similar to the low $80kpd rate initially received by the EXL III to work for McMoRan also on a short-term contract in the Gulf. The EXL III is now working on a 1-yr contract for McMoRan in the low $140kpd rate through May 2012.

China target 6.5Bcm of shale gas by 2015, 80Bcm by 2020. Details weren’t disclosed, but 80Bcm is equivalent to 85% of the country's total gas output in 2010. Although no commercial shale gas is currently produced in China, PetroChina plans to pump 1.5Bcm by 2015.

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Meanwhile, the Chinese government continues to negotiate with Russia over a potential trade deal that could include 68Bcm of gas imports in a 30-year deal. Russia exports 155Bcm of gas to Europe annually at prices indexed to oil prices, but with shale gas exploration starting in Poland is looking to diversify its customer base. The Russian government expects to have an agreement outlining the roadmap for a 2015 start within the next two weeks.

Petrobras delays FLNG, start GOM FPSO, collects from AKSO’s delays. Proposals for a $3bn FLNG vessel were submitted by Saipem, Technip and SBM Offshore, but Petrobras will use a new pipeline to transport gas from deepwater fields in the interim. The new pipeline is expected to come online before the end of 2014. Meanwhile, Petrobras has resumed operations in the Cascade-Chinook area of the Gulf of Mexico following the US government’s deepwater drilling moratorium. The first development in the Gulf to utilize a FPSO, the platform is in place and expected to start gathering from 2 existing wells in December while the company starts drilling a third well. Petrobras is poised to collect $70-87mm from Aker Solutions for delivery delays of its subsea production system.

Reliance Industries Ltd: 2QFY12 - In-line print; and a glimmer at the end of the E&P tunnel

Analyst: Pradeep Mirchandani, CFA(91-22) 6639 3041, [email protected] report can be accessed by clicking here., or at www.morganmarkets.com

RIL 2QFY12 earnings of Rs57bn (+16% y/y) were in line with our and consensus expectations. Lower-than-expected refining margins was offset by robust petchem earnings, but more importantly management commentary on ramping up of D6 block production was positive, though no firm timelines for ramp-up were specified

Glimmer at the end of the E&P tunnel? RIL management provided positive commentary on D6 block E&P ramp-up, stating D1-D3 shortfall could be made up through satellite fields and R-series fields’ production. Key challenge was on regulatory approvals, with tie-up of these fields to existing infrastructure technically feasible in 2 years after approvals.

2QFY12 – Petchem provides cushion: Petchem EBIT of Rs24.2bn was ahead-of-expectations on the back of a rebound in domestic demand in 2Q that management attributed to re-stocking to normalized inventory levels by downstream players and steady end-use demand. Polyester chain margins were robust with tight PX and MEG markets in 2Q. RIL expects polyester chain margins to sustain at higher levels with strong PX spreads and ability of polyester to pass through higher intermediate costs due to continuing differential vis-à-vis cotton.

Refining was a tad disappointing: Refining margins of US$10.1/bbl was below our expectation of US$10.5/bbl. Management attributed lower delta v/s Singapore benchmark to 1) tighter light-heavy differentials, 2) correction in gasoil crack, 3) higher LNG fuel costs and 4) weaker LPG

Asia Pacific Equity Research



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margins. While RIL expects refining margin environment to be strong as they expect low delivery on expected cap adds and continued demand from EM; we are cutting our complex GRM expectations on poor outlook for Light-Heavy crude differentials as Libya ramps-up crude production faster than earlier expected.

Retain OW, Sep-12 PT of Rs1140: We roll-over our PT basis to Sep-12 and incorporate conservative GRM, gas ramp-up assumptions. Key risk: prolonged economic downturn, further regulatory delays

MIE Holdings Corporation: Positive takeaways from Kazakhstan field trip - ALERT

Analyst: Brynjar Eirik Bustnes(852) 2800-8578, [email protected] report can be accessed by clicking here., or at www.morganmarkets.com

We spent the previous week travelling through Kazakhstan on a field visit to Emir Oil to gain first hand experience of what MIE has just bought. In a nutshell, the assets are there (!), operating (producing) and ready to receive fresh working capital and capital spending required to restart the development plan which was halted due to previous owner BMB Munai’s difficult financial position. MIE has outperformed Hang Seng small cap index by 47% since its Dec 2010 listing but we believe there is still substantial value to be generated from Emir Oil with MIE as new owner.

Seeing is believing: Our visit to the various fields and bases of Emir Oil made obvious the reason for lack of production growth and decline under BMB Munai. Lack of cash at BMB led to a neglect of the assets and a difficult relationship with the suppliers as they were not getting paid. We also note the presence of fields “nextdoor” to Emir’s assets - Jupiter Energy's (Australia listed) Block 31 has shown good test results on two exploration wells (third one soon), while MMG (50:50 CNPC: KazMunaiGas JV) has 3 fields (Alatobe, Accop and North Asar) next to Emir's acreage also under exploration and development.

Acquisition can add 30-40% to 1Q11 reported production by 1-2Q12E: Work-over at the neglected wells is the quickest way to add production, with each well possibly adding between 0.2-0.5kbopd. Moreover, MIE is currently working on a budget for next year outlining the program for the next 1-2 years. For reference, MIE’s current production is 10kbopd in China and 2.5kbopd in Kazakh. Emir Oil currently has three rigs available, adding another one early next year, potentially adding 10 wells a year.

Production updates to provide re-rating triggers: We believe MIE's production updates would help increasing investors’ comfort to this high growth name. For a company expected to effectively double production over the next 3 years and generating around 25-30% ROE, we deem MIE’s current valuation at 4x 2012E EPS, EV of US$14/BOE proven and US$5/BOE proved+probable reserves, as too low.

5 years investment break-even: On current production, MIE generates around US$30-35mn/year net cash from Emir Oil, which would take it 5 years to recover acquisition cost. In our base case, we estimate US$240mn




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capex over 2011-2015 period, which would help Emir ramp up production from current 2.5kbopd to 10.3 by 2015. On our oil price assumptions of US$95/90/85/85 /bbl for 2012/13/14/15, we estimate MIE would cover its acquisition cost+capex by early 2015, with US$70-80mn/year subsequent net cash generation potential (this is what generates positive NPV).

Recent Kazakhstan developments: Aside we also note Kazakh government’s recent positive inclination around solving Karachaganak’s (2010: 360kbopd production and 5bn BOE ultimate recoverable reserves) tax dispute and ownership structure with BG, Eni, Chevron and Lukoil. We take this development as a constructive signal from the govt to collaborate with foreign oil companies.

South African Oil & Gas Weekly: What Price Tuscaloosa? Chemicals Weaken, Management Pay, Iran

Analyst: Alex Comer(44-20) 7325-1964, [email protected] report can be accessed by clicking here., or at www.morganmarkets.com

Performance: Sasol's share price performed strongly, gaining 5% over the week to R346. Brent futures also rose, 4% to USD 109/bbl. Naphtha was almost unchanged at USD 833/ton. In the USA, gas prices traded at USD 3.48/MMBTU (-0.19). Ethane was lower at US cents 80/gallon (-12). The rand strengthened 3c against the dollar to R7.94/USD while the 10 year generic SA bond yield remained flat at 8.2%

Chemical Demand Slowing: Polyolefin demand in Europe and the USA continues to be described as "soft". Recent monetary tightening actions of the Chinese government have included the requirement for importers to deposit significantly more cash when opening letters of credit and this has damped buying activity. Polyolefin prices remain largely unchanged in Europe and USA with margins over monomer remaining at or close to bottom of the cycle conditions. EU crackers are running at 75% and US at ~ 83% although outages of ~ 10% are continuing to support higher effective rates in the US.

Sasol 20F: Sasol released its 20F document last week. We picked up the following key points:

Staff Costs: Sasol’s average wage growth in 2011 was 1.9% for workers (excellent even allowing for rand strength), while benefits for key employees were up between 20-40% for key employees. Management’s compensation continues to significantly outstrip employees – this is fine as long as the group wage bill can be kept under control and trade union relations are not inflamed. It should be remembered management stock options are on top of this. Moreover, whilst bonus targets are nominally based on earnings growth at CPI +7% the oil price continues to be the key determining factor – the Arab spring was hardly a management controlled event. Moreover, the peer group oil companies used to set management bonuses; Exxon, BP, Chevron, Shell, Total are not necessarily the ones we would use.

South Africa Equity Research



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Strong Performance from O&S Driven by Europe: Sales were up 34% (R 4.3bn) which we think fed through to profits and we suspect was due to high surfactant prices. We think these will weaken significantly in coming months as palm kernel oil prices weaken. The O&S division contributed 14% of FY11 profits.

Solvents and Polymers: Both these divisions saw big hikes in sales to South Asia (China) as expected

Review of Iran: Sasol seem to be having reservations about Arya and Iran, we note the following statement in the 20F: “We have initiated a review of our activities in and with Iran”. Concerns expressed by management over the potential repercussions of doing business in Iran on Sasol's relationship with the United States continues to fuel industry speculation of a pull out. Sasol currently ring fences all cash flows from Arya and they are not used for dividend payments. We note that 20% of Arya is owned by the Iranian army pension fund. This week's news of the alleged Iranian plot against the Saudi US ambassador arguably further ratcheted up the risks. Ayra contributed ~ R2/share to earnings in 2011FY and hence on Sasol’s long-term PE of 10x contributes ~ R20/ share to value. Sasol has ~ USD 800m invested in Iran.

Canadian Oil and Gas Reserves: Increased disclosure on oil and gas reserves and significant information on Canada is presented from page 126-136. Sasol reported that it has 29 productive wells (14.5net) in operation, while 10 new wells are being drilled with ten drilling teams active. Sales prices achieved in Canada were R 23.9/BTU with costs of R 7.9/ BTU, pretty good numbers in our view. By comparison, in Mozambique Sasol achieved selling prices of R 11.9/ BTU with costs of R 2.3/BTU (Note selling prices to Sasol gas which then sells on to Synfuels and the domestic gas market in SA so not the end selling price which is much higher).

Synthetic oil reserves were up to 729mn bbls > 16.5 years vs 638 in 2010 (but really if you work out the coal reserves, it's much longer than this and reflects the estimated life of Synfuels plant).

Canada and US GTL feasibility studies are expected to be completed in CY 2012.

Natref Upgrade: Sasol provided an estimate cost of R5bn that will be required to upgrade the Natref refinery to ensure compliance with the new fuel regulations due to be implemented by 2014.

Gillard’s Plan for Carbon Tax Wins Approval: Australia’s lower house this week passed Prime Minister Julia Gillard’s carbon tax plan. It will now progress to a vote in the upper-house Senate next month. The proposed carbon tax will be charged at AUD 23/ton of carbon emissions and will be implemented in July 2012. We think South Africa will follow suit with a carbon tax announced in the Feb budget.

Inadequate Competition in the Piped-Gas Industry: The National Energy Regulator of South Africa (NERSA) this week released a discussion document titled ‘Determination of the inadequate competition in the piped-gas industry as contemplated in chapters 2 and 3 of the Competition Act'. This document attempts to prove that the piped-gas

13



industry is effectively dominated by a single player (Sasol), who is able to control both pricing and supply. Market value pricing methodology is currently in place for natural gas in South Africa. This system of pricing will be in place until March 2014, when the Special Regulatory Dispensation Period which has been agreed between The Minister of Minerals and Energy, The Minister of Trade and Industry and Sasol Limited will expire. The agreement contained a number of anti-competitive clauses, which NERSA believe has led to unacceptably high natural gas pricing. We continue to find this a very interesting situation and note Sasol’s re-negotiation of its major gas contracts (e.g. AMSA) in preparation for NERSA’s reassessment of the market in 2014. We believe if NERSA doesn’t provide Sasol with an acceptable return it will simply opt to take more gas in house and use it for electricity generation.

14



Global Oil Services & Equipment

Significant contract news – last 2 weeks

OFS Company

ClientProject Name

or RegionProject Description

Dateannounced

Value(m)

Seadrill Tullow Oil1 yr contract

for deepwater

Hamilton, Bermuda- Tullow Oil Ghana Ltd., a subsidiary of Tullow Oil plc has awarded Seadrill a one-year contract for operations offshore Ghana with the

newbuild ultra-deepwater semi-submersible rig West Leo. The potential contract revenue for the one-year period is US$204 million which includes US$18 million in mobilization revenue. In addition, the rig can earn a daily

performance bonus of up to 10 percent.

7-Oct-11 204

Seadrill Not disclosed

5 yr contract for North America

operations

Hamilton, Bermuda - Seadrill has entered into a Memorandum of Understanding with a major oil company for a five-year contract for operations

in North America with the ultra-deepwater semi-submersible rig West Capricorn. The potential contract value for the firm five-year period is US$919

million, which includes a US$30 million mobilization fee.

7-Oct-11 $919

AMEC GDF Suez FEED contract

London, United Kingdom – AMEC, the international engineering and project management company, has been awarded a Front End Engineering Design

(FEED) contract for GDF SUEZ E&P UK Ltd’s Cygnus gas field development, one of the most significant undeveloped gas fields in the North Sea.

3-Oct-11 $85

Saipem GazpromSubsea

development

In Russia, Saipem has been awarded a contract for the subsea development of Kirinskoye Gas Condensate Field with Mezhregiontruboprovostroy (MRTS) for Gazprom Dobycha Shelf, as part of the Sakhalin 3 project development.

The field lies in a water depth of up to 85 metres in the sea of Okhotsk, approximately 28 kilometres off the east coast of Sakhalin Island, in the

Russian Far East, and is the first subsea development of this type in Russia.

30-Sep-11 $669

TGS BoEM Seismic project

ASKER, NORWAY - TGS announces receipt of a seismic permit from the Bureau of Ocean Energy Management, Regulations and Enforcement

(BOEMRE) to acquire 3D Wide Azimuth (WAZ) data in the Gulf of Mexico. This project is expected to be part of the 2012 investment plan.

30-Sep-11

Technip PDVSA

Procurement, installation and

operation support

Technip was awarded a major procurement, installation and operation support contract by Petroleos de Venezuela S.A. (PDVSA) covering subsea, onshore and offshore facilities, for an accelerated production system on the Mariscal

Sucre Dragon development, offshore Venezuela.

28-Sep-11

Subsea 7 Not disclosed EPIC contract

Luxembourg –Subsea 7 S.A. (Oslo Børs: SUBC) announced today the award of a contract valued at approximately $465 million for the engineering,

procurement, construction and installation of sealines for a major shallow water development offshore West Africa.

28-Sep-11

SaipemCanadian Natural

ResourcesE&C onshore

contracts

San Donato Milanese (Milan)– Saipem has been awarded new onshore contracts worth approximately $650 million in Canada and Nigeria. In Canada,

Saipem has been awarded a new EPC Lump Sum contract by Canadian Natural Resources Ltd. The project consists of the EPC of a Secondary

Upgrader with a production capacity of 42,599 BPSD (barrels per stream day) of Hydrotreated Gas Oil, as part of the Horizon Oil Sands Project -

Hydrotreater Phase 2 - in Alberta, in the Athabasca region, Canada.

21-Sep-11 $650

Source: Company press releases. N/D = not disclosed

Forthcoming EventsMonday Tuesday Wednesday Thursday Friday17-Oct 18-Oct 19-Oct 20-Oct 21-Oct

HAL: Q3 results DOE Inventory Data Baker Hughes Rig Count

Monday Tuesday Wednesday Thursday Friday24-Oct 25-Oct 26-Oct 27-Oct 28-Oct

FMC: Q3 results DOE Inventory Data COP: Q3 results Baker Hughes Rig Count

BG: Q3 results SPM: Q3 results RDS: Q3 results CVX: Q3 results

BP: Q3 results STL F&R: Q3 results ENI: Q3 results GALP: Q3 results

TEC FP: Q3 results XOM: Q3 results

Total: Q3 results

Monday Tuesday Wednesday Thursday Friday31-Oct 01-Nov 02-Nov 03-Nov 04-Nov

DOE Inventory Data Baker Hughes Rig Count

Source: Company calendars, Bloomberg;* denotes subject to change

15



Refining marker marginsFigure 3: US West Coast ($/bbl) Figure 4: US Mid West ($/bbl)

Figure 5: US Gulf Coast ($/bbl) Figure 6: NW Europe ($/bbl)

Figure 7: Mediterranean ($/bbl) Figure 8: Singapore ($/bbl)

Source for all charts: Bloomberg

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

98 99 00 01 02 03 04 05 06 07 08 09 10 11E 12E 13E 14E 15E

1998 8.81999 10.42000 14.52001 14.8

2002 9.02003 12.22004 18.72005 21.22006 23.42007 24.02008 16.42009 13.42010 13.1

13.5 year average$15.4/bbl

2011E 13.4 2012E 12.82013E 12.12014E 11.52015E 10.9

0.0

5.0

10.0

15.0

20.0

25.0

98 99 00 01 02 03 04 05 06 07 08 09 10 11E 12E 13E 14E 15E


1998 3.81999 3.42000 6.22001 8.22002 5.02003 6.42004 7.82005 11.62006 12.22007 14.72008 8.52009 6.02010 6.0

2011E 8.52012E 8.02013E 7.62014E 7.3 2015E 6.9

0.0

5.0

10.0

15.0

20.0

25.0

30.0

98 99 00 01 02 03 04 05 06 07 08 09 10 11E 12E 13E 14E 15E

1998 5.61999 4.72000 8.92001 9.5

2002 6.02003 8.42004 13.12005 18.22006 20.12007 20.82008 17.02009 9.22010 10.2


2011E 12.62012E 12.02013E 11.42014E 10.82015E 10.3

0.0

5.0

10.0

15.0

20.0

25.0

98 99 00 01 02 03 04 05 06 07 08 09 10 11E 12E 13E 14E 15E


1998 4.21999 3.62000 7.22001 6.42002 4.32003 6.62004 11.02005 13.22006 12.12007 14.42008 17.22009 9.02010 10.4

2011E 11.92012E 11.32013E 10.7 2014E 10.22015E 9.7

0.0

5.0

10.0

15.0

20.0

98 99 00 01 02 03 04 05 06 07 08 09 10 11E 12E 13E 14E 15E


1998 3.91999 3.72000 7.82001 5.52002 3.62003 5.52004 10.42005 12.42006 11.92007 13.02008 14.32009 7.92010 8.8

2011E 9.42012E 9.02013E 8.52014E 8.12015E 7.7

0.0

5.0

10.0

15.0

20.0

25.0

30.0

98 99 00 01 02 03 04 05 06 07 08 09 10 11E 12E 13E 14E 15E


1998 3.81999 2.52000 5.72001 4.32002 3.82003 6.42004 11.72005 13.92006 14.02007 15.02008 17.02009 8.52010 10.7

2011E 15.22012E 14.42013E 13.72014E 13.02015E 12.4

16



Oil & gas pricesFigure 9: UK natural gas (pence/therm) Figure 10: Brent oil ($/bbl)

Figure 11: US natural gas ($/mmbtu) Figure 12: CFTC non commercial long/short oil positions & WTI oil price

Figure 13: CFTC net non-commercial positions & WTI oil price Figure 14: CFTC non-commercial long/short US gas positions & Henry Hub gas price


10

20

30

40

50

60

70

80

90

100

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

UK

Ga

s f

orw

ard

pri

ce

(p

/th

erm

, m

on

thly

av

era

ge

)

Actual 25.9p

Actual 41.6p

Actual 45.5p

Actual 30.0p

Actual 61.8p

Actual 31.8p

2011Curve 59.7pJPM 57.5p

Actual 41.5p



20

30

40

50

60

70

80

90

100

110

120

130

140

Jan/03 Jan/04 Jan/05 Jan/06 Jan/07 Jan/08 Jan/09 Jan/10 Jan/11 Jan/12 Jan/13B

ren

t Fo

rwa

rd O

il P

rice

($/b

bl, m

on

thly

ave

rag

e)

Source: IPE

Actual $38.0

Actual$55.3

Actual $28.5

2008Actual $98.4

2009Actual $62.7

Actual$66.1

2012Curve $106.8

JPM $95.0

2011Curve $111.5JPM $110.0

2007Actual $72.7

2010Actual $80.3

1

2013Curve $101.9

JPM $90.0

2

3

4

5

6

7

8

9

10

11

12

13

14

Jan/03 Jan/04 Jan/05 Jan/06 Jan/07 Jan/08 Jan/09 Jan/10 Jan/11 Jan/12 Jan/13

He

nry

Hu

b fo

rwa

rd g

as

pri

ce

($/m

mb

tu, m

on

th

avg

)

Source: Nymex

Actual $5.50

Actual $6.25

Actual$9.02

Actual$7.12

Actual$7.01

Actual $4.12

JPM $4.33vs

Curve $4.12

JPM $5.40vs

Curve $4.21

Actual$8.90

Actual $4.38

JPM $5.90vs

Curve $4.72

30

50

70

90

110

130

150

-280,000

-240,000

-200,000

-160,000

-120,000

-80,000

-40,000

0

40,000

80,000

120,000

160,000

200,000

240,000

280,000

320,000

360,000

400,000

05/08 11/08 05/09 11/09 05/10 11/10 05/11

Nu

mb

er o

f c

on

tra

cts

Source: CFTC, NYMEXLong commitments Short commitments WTI ($/bbl)

30

40

50

60

70

80

90

100

110

120

130

140

150

(60)

(20)

20

60

100

140

180

220

260

300

340

May '08 Sep '08 Jan '09 May '09 Sep '09 Jan '10 May '10 Sep '10 Jan '11 May '11 Sep '11

$/b

bl

millio

n b

arr

els

Net futures Net combined WTI ($/bbl, RHS)

Source: CFTC 2

4

6

8

10

12

14

-500,000

-450,000

-400,000

-350,000

-300,000

-250,000

-200,000

-150,000

-100,000

-50,000

0

50,000

100,000

150,000

200,000

250,000

05/08 11/08 05/09 11/09 05/10 11/10 05/11

Nu

mb

er o

f co

ntr

acts

Long commitments Short commitments Henry Hub ($/mmbtu, RHA)

17



Share price chartsGlobal Integrateds and E&Ps: Top 10 and bottom 10 performers

Figure 15: Integrateds– 1 Weeks Figure 16: Integrateds - 1 Month

Figure 17: E&P - 1 Week Figure 18: E&P - 1 Month


-3.6%

0.2%

1.6%

2.6%

2.9%

3.8%

4.0%

4.5%

4.8%

5.0%

7.5%

7.6%

7.8%

8.0%

8.4%

9.0%

9.4%

10.6%

11.4%

13.4%

-5% 0% 5% 10% 15%

Sinopec

Petrochina

Repsol YPF

BG

OMV

RDS A

Sasol

PTT Exploration & Prod

Surgutneftegaz

Galp

ConocoPhillips

ENI

MOL

Hess

Rosneft

Marathon Oil

Husky Energy

Occidental

Murphy

Gazprom

-10.1%

-8.5%

-7.7%

-4.9%

-4.3%

-2.7%

-1.8%

-1.2%

-0.3%

1.7%

6.5%

7.5%

8.2%

8.3%

8.8%

10.2%

13.9%

14.3%

15.3%

17.1%

-15% -10% -5% 0% 5% 10% 15% 20%

Gazprom

Rosneft

PTT Exploration & Prod

Hess

Petrobras

OMV

Sinopec

Petrochina

Marathon Oil

Murphy

Imperial Oil

ExxonMobil

RDS B

Galp

BG

Statoil

Total

Repsol YPF

MOL

ENI

-1.9%

-0.9%

-0.1%

0.0%

0.0%

0.0%

0.7%

1.2%

1.9%

2.2%

13.5%

14.0%

14.3%

15.3%

15.6%

15.8%

18.1%

20.8%

21.3%

22.0%

-5% 0% 5% 10% 15% 20% 25%

Soco International

BHP Billiton

Woodside Petroleum

Dragon Oil

ROC Oil

Australian Worlwide Exploration

Oil Search

Heritage Oil

Origin Energy

Cairn Energy

Southwestern Energy

Talisman Energy

McMoran Exploration

Plains Exploration

Quicksilver Resources

Swift Energy

Brigham Exploration

Range Resources

Penn Virginia

Denbury Resources

-17.9%

-14.4%

-13.5%

-12.3%

-10.6%

-9.5%

-7.7%

-6.5%

-6.2%

-4.5%

3.0%

3.4%

8.1%

8.6%

9.6%

10.2%

11.3%

13.8%

15.6%

16.4%

-20% -15% -10% -5% 0% 5% 10% 15% 20%

Penn Virginia

Swift Energy

Newfield Exploration

Afren

Whiting Petroleum

Talisman Energy

McMoran Exploration

Quicksilver Resources

Devon Energy

Plains Exploration

Noble Energy

Cairn Energy

Premier Oil

Woodside Petroleum

Australian Worlwide Exploration

DNO International

Origin Energy

Santos

Eastern star gas

Range Resources

18



Global Oil Services and Refiners: Top 10 and bottom 10 performers

Figure 19: Oil Services– 1 Week Figure 20: Oil Services- 1 Month

Figure 21: Refiners- 1 Week Figure 22: Refiners - 1 Month


-13.8%

3.7%

6.5%

8.1%

8.2%

8.4%

8.5%

8.9%

9.3%

9.9%

12.7%

13.0%

13.0%

13.3%

14.4%

14.5%

14.9%

15.9%

18.4%

18.5%

-20% -15% -10% -5% 0% 5% 10% 15% 20% 25%

Lamprell

Amec

Noble Corp.

John Wood Group

Aker Solutions

Technip

Transocean Inc.

Saipem

Petrofac

Vallourec

Weatherford

Hunting

Fugro

Schlumberger

CGG Veritas

Nabors

Baker Hughes

TGS

Tecnicas Reunidas

PGS

-19.4%

-15.8%

-14.6%

-14.4%

-8.9%

-8.5%

-6.1%

-4.9%

-3.5%

-3.5%

1.5%

3.7%

4.1%

5.3%

6.6%

6.7%

8.8%

9.4%

13.1%

13.9%

-25% -20% -15% -10% -5% 0% 5% 10% 15% 20%

Lamprell

Vallourec

Nabors

Transocean Inc.

Weatherford

Noble Corp.

Amec

Halliburton

Technip

Aker Solutions

Petrofac

Subsea 7

Bourbon

Tecnicas Reunidas

TGS

John Wood Group

Fugro

CGG Veritas

SBM Offshore

PGS

1.1%

2.1%

2.3%

7.0%

8.9%

10.7%

11.2%

11.3%

12.5%

18.0%

19.4%

22.4%

22.6%

25.5%

0% 5% 10% 15% 20% 25% 30%

Tupras

Motor Oil Hellas

ERG

Petroplus

Sunoco

PKN

Neste

Hellenic

Saras

Tesoro Corporation

Valero Energy

Alon

Holly Corp

Western Refining

-7.8%

-4.6%

-0.6%

0.3%

3.4%

5.7%

5.7%

7.6%

7.9%

8.0%

11.0%

12.0%

13.3%

14.1%

-10% -5% 0% 5% 10% 15% 20%

Motor Oil Hellas

Sunoco

Alon

Saras

Neste

Holly Corp

Holly Corp

Valero Energy

ERG

PKN

Hellenic

Western Refining

Tupras

Tesoro Corporation

19



Sector Performance

Figure 23: MSCI World - 1 Week Figure 24: MSCI World - 1 Month

Figure 25: MSCI Euro - 1 Week Figure 26: MSCI Euro - 1 Month


0.6%

2.0%

2.3%

2.9%

4.0%

4.5%

4.6%

5.3%

5.4%

7.1%

7.4%

0% 2% 4% 6% 8%

Utilities

Health Care

Consumer Staples

Telecom

Financials

World

Materials

Industrials

Consumer Discretionary

IT

Energy

-1.2%

2.2%

3.1%

3.3%

3.4%

3.5%

3.7%

4.0%

4.1%

4.1%

7.3%

-2% -1% 0% 1% 2% 3% 4% 5% 6% 7% 8%

Materials

Health Care

Industrials

Consumer Staples

Energy

World

Utilities

Financials


Telecom

IT

0.9%

2.2%

2.6%

2.9%

3.0%

3.9%

4.8%

5.2%

5.3%

5.5%

6.1%

0% 2% 4% 6% 8%

Health Care

Consumer Staples

Financials

Telecom

Utilities

Euro

Materials

IT

Industrials

Energy


2.3%

5.1%

5.9%

6.1%

6.3%

6.5%

7.7%

8.6%

11.0%

11.3%

12.8%

0% 5% 10% 15%

Materials


Health Care

Industrials

Consumer Staples

IT

Energy

Telecom

Financials

Euro

Utilities

20



Coverage stocks – % Upside/ (Downside) to Target PriceFigure 27: Global Integrateds

Figure 28: Global Oil Services & Equipment

Figure 29: Global E&P’s

Source for all charts: Bloomberg, JP Morgan estimates

-5%

5%

15%

25%

35%

45%

55%

65%

75%

85%

95%

105%

PT

R

RD

SA

MU

R

S-O

il

ST

L

EC

OP

ET

L

MO

L

RD

SB

RE

P

SU

XO

M

Sasol

CV

X

CV

E

TO

T

OX

Y

Sin

op

ec

MR

O

RIL

GA

ZP

BG

Galp

RO

SN

SK

EN

ER

BP

EN

I

TA

TN

HE

S

SG

GD

LU

K

PB

R

SIB

N

ES

SR

-10%

10%

30%

50%

70%

90%

HT

G

SU

BC

DO

PD

E

TG

S

DR

Q

TE

C

PF

C

RIG

SP

M

FT

I

DR

C

CA

M

ES

V

FU

R

CIU

SL

B

TR

E

NO

V

PG

S

CG

GV

AM

EC

AK

SO

BH

I

WF

T

NE

HA

L

EX

H

LA

M

-40%

-20%

0%

20%

40%

60%

80%

100%

120%

140%

160%

NV

TK

BP

T

TLW

CN

OO

C

SIA

ON

GC

WP

L

RO

C

EN

Q

CA

IR

CN

Q

PR

E

OS

H

AW

E

PT

TE

P

ST

O

CN

E

HO

IL

TLM

NX

Y

AF

R

MIE

OG

X

SQ

Z

21



Global integrateds valuations

Table 2: Summary valuation multiples

Source: Company Reports, Bloomberg, J.P. Morgan Cazenove estimates. Prices at c.o.b 14-Oct-2011

Global Integrated Oils - Analyst Team

UK Integrateds European Integrateds US Integrateds Emerging Oils - Asia Emerging Oils - Russia Emerging Oils - LatAmFred Lucas (AC) Nitin Sharma Katherine Lucas Minyard, CFA Brynjar Eirik Bustnes Nadia Kazakova Caio Carvalhal

(44-20) 7155 6131 (44-20) 7155 6133 (1-212) 622 6402 (852) 2800 8578 (7-495) 937 7329 (55-11) 3048 [email protected] [email protected] [email protected] [email protected] [email protected] [email protected]

Emerging Oils -South Africa For specialist sales advice please contact:Alex Comer Hamish Clegg(44-20) 7325 1964 (44-20) 7325 0878

[email protected] hamish.w [email protected]

Prices as of c.o.b. 14-Oct-11

Company Reporting Trading Share Rec Shares in MV MV EV EPS DPS Post tax CFPSCurrency Currency price issue (m) ($ m) (m) (m) 10A 11E 12E 10A 11E 12E 10A 11E 12E

OECD

Exxon Mobil $ $ 78.1 UW 4,897 379,771 379,771 388,193 6.22 9.02 10.00 1.74 1.85 1.88 9.5 11.8 11.4

BP $ £ 416.4 OW 18,796 122,730 78,866 91,254 1.09 1.11 1.05 4.5 17.6 19.7 0.8 1.7 1.7

RD Shell A $ € 24.9 N 6,139 211,943 152,684 174,936 2.94 4.23 4.66 125.2 118.8 122.4 4.4 6.9 7.6

RD Shell B $ £ 2,223.0 N 6,139 218,217 140,226 160,075 2.94 4.19 3.84 106.8 105.8 111.9 4.4 6.4 6.9

BG Group £ £ 1,343.5 OW 3,384 70,750 45,464 49,930 76.8 74.7 86.0 13.66 15.03 16.52 0.3 -1.1 -0.9

Chevron $ $ 100.5 UW 2,007 201,643 201,643 197,134 9.53 13.17 14.15 2.84 3.06 3.15 16.0 18.2 15.6

Hess $ $ 57.5 OW 328 19,425 19,425 21,273 5.15 6.70 8.01 0.40 0.40 0.40 14.3 14.4 13.5

Marathon $ $ 24.6 N 712 17,504 17,504 21,908 3.65 4.31 4.38 0.99 0.80 0.60 8.0 9.9 10.4

Murphy $ $ 52.5 N 193 10,156 10,156 11,491 4.45 5.54 5.99 1.05 1.05 1.10 11.5 13.3 13.6

Occidental $ $ 85.4 OW 814 69,446 69,446 69,995 5.73 7.76 8.56 1.43 1.76 1.84 10.1 12.2 12.0

Cenovus Energy CAD CAD 35.3 N 753 26,528 25,861 29,492 1.05 1.97 2.82 1.32 2.10 2.84 3.6 4.0 4.8

Husky Energy CAD CAD 24.4 UW 853 21,689 21,143 25,125 1.32 2.63 3.06 1.20 1.20 1.20 4.1 5.0 4.8

Suncor CAD CAD 30.5 N 1,574 47,783 46,582 57,680 1.74 3.84 4.29 0.40 0.43 0.44 4.1 5.8 4.7

ENI € € 15.7 OW 3,622 75,929 56,757 82,876 1.90 2.39 2.57 1.00 1.05 1.10 4.0 5.0 5.5

Essar Energy $ £ 282.0 OW 1,303 5,718 3,674 6,202 0.19 0.31 0.59 0.00 0.00 0.00 -0.2 0.5 0.9

GALP € € 14.9 OW 829 16,536 12,360 15,200 0.37 0.46 0.75 0.20 0.20 0.20 0.9 1.2 1.4

OMV € € 24.7 N 298 9,839 7,355 12,522 3.76 4.03 4.43 1.00 1.05 1.07 9.7 9.7 10.9

Repsol YPF € € 22.2 N 1,221 36,185 27,048 38,006 1.66 1.97 2.39 1.05 1.16 1.27 5.4 5.5 5.2

Statoil Nkr Nkr 137.6 UW 3,182 75,169 438,256 507,937 13.14 17.22 17.08 6.24 6.55 6.88 25.4 31.7 31.2

TOTAL € € 37.2 N 2,217 111,679 83,480 96,511 4.64 5.56 5.43 2.28 2.44 2.56 8.4 8.8 8.7

Emerging Market

Sinopec CNY HK$ 7.2 OW 86,702 80,487 625,988 790,901 0.83 0.92 0.97 0.21 0.23 0.25 1.5 1.7 1.8

PetroChina CNY HK$ 9.3 UW 183,021 219,555 1,707,586 1,936,550 0.76 0.89 0.81 0.29 0.40 0.37 1.4 1.5 1.6

S-Oil KRW KRW 101,500 UW 113 9,697 11,427,170 12,489,859 5957 11750 11194 2500 5000 4000 2.9 5.0 8.0

SK Innovation KRW KRW 151,000 N 92 11,849 13,962,370 20,274,928 12734 22651 19120 2100 2200 2300 16.6 23.1 23.4

Gazprom Rb $ 5.2 N 22,915 120,076 120,076 148,719 1.32 1.60 1.59 0.09 0.15 0.16 1.6 1.9 2.3

Gazprom Neft $ $ 3.3 OW 4,741 15,409 15,409 21,082 0.66 1.07 0.93 0.16 0.25 0.22 1.2 1.2 1.4

Lukoil $ $ 48.5 OW 768 37,266 37,266 45,924 12.19 14.95 12.07 2.12 2.70 2.73 15.8 18.9 18.6

Rosneft $ $ 6.5 N 9,598 62,024 62,024 81,425 1.13 1.27 1.10 0.11 0.12 0.14 1.1 1.6 1.8

Surgutneftegaz Rb $ 0.7 OW 43,428 26,912 26,912 11,419 0.12 0.16 0.13 0.02 0.02 0.02 0.2 0.2 0.2

Tatneft Rb $ 4.3 N 2,326 9,645 9,645 12,566 0.66 0.97 0.92 0.18 0.29 0.28 0.8 1.0 1.3

MOL HUF HUF 17,005 N 96 7,335 1,628,010 1,632,820 5.22 14.92 14.64 0.0 706.9 684.5 19.7 30.6 29.1

Sasol* ZAR ZAR 34,499 OW 596 28,787 230,350 229,448 2657 3441 3773 1050.0 1204.2 1245.0 35.6 41.8 53.2

Ecopetrol COP COP 3,940 N 40,473 82,418 159,461,700 159,466,886 214.6 358.6 391.2 94.2 169.8 235.3 0.4 0.5 0.5

Reliance Industries** INR INR 866.9 OW 2,981 57,902 2,838,578 3,214,602 53.1 64.6 73.3 7.0 8.0 10.0 29.7 147.0 133.6

NB: The reported Market Value (MV) and Enterprise Value (EV) are in trading currencies.

NB: The reported estimates are in reporting currencies except for Gazprom, Surgutneftegaz, Tatneft, MOL and Petrobras w hich are in $.

* - Fiscal year end June, ** - Fiscal year end March.

Company SOTP Premium PER (x) EV/DACF (x) Dividend Yield (%) YE Net debt / (cash) (m) Net Debt / Equity (%)

per share (Discount) 10A 11E 12E 10A 11E 12E 10A 11E 12E 10A 11E 12E 10A 11E 12E

OECD

Exxon Mobil 90.0 (13)% 12.6 8.7 7.8 8.4 6.7 6.9 2.2 2.4 2.4 8,422 8,825 -10,135 6 5 -5

BP 813 (49)% 6.1 5.9 6.3 9.9 4.4 4.5 1.1 4.2 4.7 19,278 19,005 20,924 20 16 16

RD Shell A 31.5 (21)% 11.7 8.2 7.4 9.0 5.8 5.2 5.7 5.4 5.6 30,888 22,659 14,781 21 14 8

RD Shell B 2,694 (17)% 11.8 8.3 9.0 9.2 6.4 5.8 4.8 4.8 5.0 30,888 24,639 19,198 21 15 11

Average (25)% 10.5 7.8 7.6 9.1 5.8 5.6 3.5 4.2 4.4 17 13 7

BG Group 1,959 (31)% 17.5 18.0 15.6 54.8 -13.9 -16.1 1.0 1.1 1.2 4,466 8,059 11,165 26 42 52

Chevron 116.0 (13)% 10.5 7.6 7.1 6.1 5.4 6.3 2.8 3.0 3.1 -4,509 -8,772 -10,620 -4 -7 -7

Hess 89.0 (35)% 11.2 8.6 7.2 4.5 4.5 4.8 0.7 0.7 0.7 1,848 1,522 125 11 8 1

Marathon 32.0 (23)% 6.7 5.7 5.6 3.8 3.1 3.0 4.0 3.3 2.4 4,404 3,600 1,985 19 14 7

Murphy 51.0 3% 11.8 9.5 8.8 5.2 4.5 4.4 2.0 2.0 2.1 1,335 1,235 1,467 16 14 15

Occidental 110.0 (22)% 14.9 11.0 10.0 8.5 7.0 7.2 1.7 2.1 2.2 549 483 -1,401 2 1 -3

Cenovus Energy 41.0 (14)% 33.5 18.0 12.5 10.9 9.9 8.2 3.7 6.0 8.0 3,631 3,775 3,169 36 34 25

Husky Energy 26.0 (6)% 18.5 9.2 8.0 7.2 5.8 6.1 4.9 4.9 4.9 3,982 4,359 4,828 26 25 25

Suncor 35.0 (13)% 17.6 7.9 7.1 8.9 6.3 7.8 1.3 1.4 1.4 11,098 8,077 6,169 30 20 13

ENI 26.4 (41)% 8.3 6.6 6.1 5.7 4.6 4.1 6.4 6.7 7.0 26,119 24,228 21,777 47 39 32

Essar Energy 4.90 (42)% 23.3 14.6 7.5 -37.5 15.3 7.9 0.0 0.0 0.0 3,934 7,081 7,876 92 151 143

GALP 21.1 (29)% 40.4 32.1 19.9 20.0 15.6 13.2 1.3 1.3 1.3 2,840 3,597 3,782 105 116 107

OMV 36.7 (33)% 6.6 6.1 5.6 4.3 4.3 3.8 4.0 4.3 4.3 5,167 4,445 4,423 46 34 32

Repsol YPF 28.7 (23)% 13.3 11.3 9.3 5.8 5.6 6.0 4.7 5.2 5.7 10,958 9,894 11,367 42 36 39

Statoil 189.0 (27)% 10.5 8.0 8.1 6.3 5.0 5.1 4.5 4.8 5.0 69,681 30,626 36,725 31 12 12

TOTAL 51.4 (28)% 8.0 6.7 6.9 5.2 5.0 5.0 6.1 6.6 6.9 13,031 12,310 10,324 22 18 14

Average (23)% 16.1 11.4 9.2 7.6 5.6 4.9 3.0 3.3 3.5 33 34 31

Emerging Market

Sinopec 7.1 6.4 6.1 5.1 4.4 4.1 3.5 3.9 4.2 135,344 146,894 132,423 32 31 24

PetroChina 10.0 8.6 9.4 6.2 5.7 5.3 3.8 5.2 4.8 187,911 274,883 324,134 20 27 29

S-Oil 17.0 8.6 9.1 33.1 19.1 11.9 2.5 4.9 3.9 1,062,689 1,782,255 442,996 23 34 7

SK Innovation 11.9 6.7 7.9 11.4 8.2 8.1 1.4 1.5 1.5 6,312,558 3,668,442 1,918,263 58 24 11

Gazprom 4.0 3.3 3.3 4.1 3.4 2.8 1.7 2.8 3.0 28,643 31,382 20,941 14 13 8

Gazprom Neft 4.9 3.0 3.5 3.7 3.8 3.1 4.8 7.7 6.7 5,673 6,298 4,483 30 26 17

Lukoil 4.0 3.2 4.0 3.8 3.2 3.2 4.4 5.6 5.6 8,658 6,378 3,020 15 9 4

Rosneft 5.7 5.1 5.9 7.9 5.4 4.6 1.7 1.9 2.2 19,401 16,515 11,290 36 25 15

Surgutneftegaz 5.9 4.3 5.3 1.6 1.4 1.5 2.4 2.5 3.1 -15,493 -18,557 -21,542 -35 -37 -40

Tatneft 6.5 4.5 4.7 6.8 5.4 4.0 4.3 6.7 6.4 2,920 2,390 1,748 26 19 12

MOL 14.7 5.1 5.2 3.9 2.5 2.6 0.0 4.2 4.0 4,810 3,437 3,002 70 38 30

Sasol* 13.0 10.0 9.1 10.8 9.2 7.2 3.0 3.5 3.6 -902 -9,002 -14,550 -1 -8 -11

Ecopetrol 18.4 11.0 10.1 11.2 7.7 7.7 2.4 4.3 6.0 5,186 3,591 2,944 NM NM NM

Reliance Industries** 16.3 13.4 11.8 36.4 7.3 8.1 0.8 0.9 1.2 376,024 196,210 -148,064 37 17 -11

Average 10.0 6.7 6.8 10.4 6.2 5.3 2.6 4.0 4.0 25 17 7

22



UK & European oilfield services valuations



Pan-European Oilfield Services - Analyst Team For specialist sales advice please contact:

Andrew Dobbing (AC) James Thompson Hamish Clegg

(44-20) 7155 6134 (44-20) 7325 9460 (44-20) 7325 0878

andrew [email protected] [email protected] hamish.w [email protected]


Company Reporting Trading Price Rec MV MV EV 10 P/E (x) Cash Adjusted P/E (x) EV/EBITDA (x) EV/Sales (x) EBIT Margin (%) P/BV JPM Cazenove EPS

Currency Currency ($ mn) (mn) (mn) 10A 11E 12E 10A 11E 12E 10A 11E 12E 10A 11E 12E 10A 11E 12E 10A 11E 12E 10A 11E 12E

Amec £ £ 861.0 OW 4,604 2,910 2,206 13.8 12.3 10.8 10.7 9.5 8.4 7.8 7.2 5.8 0.7 0.7 0.6 8.4 8.5 8.8 2.26 2.05 1.85 0.63 0.70 0.80

Cape £ £ 471.6 OW 873 552 615 11.1 10.4 8.8 11.1 10.4 8.8 6.4 5.6 4.8 0.9 0.8 0.7 12.0 11.8 11.8 1.51 1.37 1.23 0.43 0.45 0.54

CGG Veritas $ € 16.1 OW 3,383 2,437 3,128 nm 118.3 11.6 nm 118.3 11.6 7.5 6.5 4.0 2.0 1.8 1.5 5.9 8.0 19.8 1.30 1.29 1.16 -0.36 0.19 1.93

Hunting £ £ 643.0 UW 1,482 937 727 25.2 21.5 16.4 19.5 16.7 12.7 10.7 12.6 8.0 1.6 2.1 1.6 10.3 9.9 12.4 1.48 1.35 1.38 0.26 0.30 0.39

Lamprell $ £ 225.0 OW 927 586 451 15.4 15.0 7.6 12.8 11.9 6.6 12.3 8.4 4.3 1.4 0.8 0.6 8.8 7.2 11.2 2.51 1.58 1.48 0.23 0.24 0.47

Petrofac $ £ 1359.0 OW 7,433 4,698 4,082 17.1 14.2 12.5 14.5 12.1 10.4 8.5 9.1 8.3 1.5 1.2 1.0 15.2 11.9 11.3 9.51 6.52 4.84 1.26 1.51 1.73

Saipem € € 29.1 OW 17,806 12,827 16,306 15.5 14.4 11.6 15.5 14.4 11.6 8.9 7.7 6.2 1.5 1.3 1.1 11.8 12.0 13.1 3.16 2.75 2.34 1.88 2.02 2.51

Subsea 7 $ Nkr 122.9 UW 3,248 18,066 18,340 20.0 17.2 13.2 20.0 17.2 13.2 7.7 6.3 5.1 1.6 1.3 1.1 14.4 14.5 15.8 2.44 2.14 1.84 110.20 128.56 167.39

Technip € € 65.0 N 10,579 7,621 6,289 17.1 15.4 13.6 16.0 14.0 12.6 8.2 7.1 5.3 1.0 0.9 0.7 10.2 10.5 10.9 2.25 2.17 1.97 3.80 4.22 4.79

Tecnicas € € 26.9 OW 2,086 1,503 994 12.4 10.4 9.4 8.9 7.4 6.8 6.1 5.2 4.5 0.4 0.3 0.3 5.6 5.7 5.7 4.40 3.73 3.21 2.18 2.60 2.87

Wood Group $ £ 582.5 N 3,404 2,152 2,184 23.2 17.0 11.8 23.5 17.2 12.0 8.3 7.6 6.7 0.7 0.6 0.5 5.7 6.2 6.7 3.47 2.67 1.89 0.40 0.54 0.78

Average 17.1 24.2 11.6 15.3 22.7 10.4 8.4 7.6 5.7 1.2 1.1 0.9 3.1 2.5 2.1

NB: The reported Market Value (MV) and Enterprise Value (EV 09) in trading currencies.

NB: The reported JPM Cazenove EPS are in reporting currencies.

Company Reporting Trading Price Rec MV MV EV 10 FCF FCF Yield (%) DPS Dividend Yield (%) Net Debt/Equity (%) ROE (%) ROCE (%)

Currency Currency ($ mn) (mn) (mn) 10A 11E 12E 10A 11E 12E 10A 11E 12E 10A 11E 12E 10A 11E 12E 10A 11E 12E 10A 11E 12E

Amec £ £ 861.0 OW 4,604 2,910 2,206 143.4 161.2 185.9 4.9 5.5 6.4 26.5 29.0 33.0 3.1 3.4 3.8 -55.4 -44.0 -50.6 17.5 15.2 16.0 43.5 35.8 42.6

Cape £ £ 471.6 OW 873 552 615 67.2 57.5 66.0 12.2 10.4 12.0 12.0 13.5 14.5 2.5 2.9 3.1 8.8 -0.9 -10.5 13.7 13.4 14.1 19.1 20.9 22.8

CGG Veritas € € 16.1 OW 3,383 2,437 3,128 81.0 194.3 338.0 2.4 5.7 10.0 0.0 0.0 0.0 0.0 0.0 0.0 36.8 33.3 22.2 -2.1 1.1 10.0 8.3 8.3 8.3

Hunting £ £ 643.0 UW 1,482 937 727 -87.2 3.0 50.2 -9.3 0.3 5.4 12.0 12.0 11.0 1.9 1.9 1.7 -36.1 30.0 24.0 5.1 5.0 6.9 12.9 6.3 9.9

Lamprell $ £ 225.0 OW 927 586 451 207.2 -179.2 96.6 22.4 -19.3 10.4 13.3 14.0 17.2 3.7 3.9 4.8 -74.9 -42.0 -45.3 16.3 10.5 19.4 nm nm nm

Petrofac $ £ 1359.0 OW 7,433 4,698 4,082 93.3 100.3 83.1 1.3 1.3 1.1 43.8 59.0 60.4 2.0 2.7 2.8 -125.6 -82.3 -55.0 55.8 45.9 38.9 nm nm nm

Saipem € € 29.1 N 17,806 12,827 16,306 -170.0 511.2 1333.6 -1.3 4.0 10.4 0.6 0.7 0.8 2.2 2.3 2.9 85.7 69.5 40.2 20.8 19.1 20.2 17.5 18.6 22.9

Subsea 7 $ Nkr 122.9 UW 3,248 18,066 18,340 69.5 221.8 271.9 2.1 6.8 8.4 0.0 0.0 0.0 0.0 0.0 0.0 3.6 -10.2 -24.1 12.0 12.3 13.8 20.6 24.5 29.4

Technip € € 65.0 N 10,579 7,621 6,289 -175.7 489.3 885.0 -2.3 6.4 11.6 1.5 1.6 1.7 2.2 2.5 2.6 -41.9 -46.3 -58.9 13.1 14.1 14.5 33.6 36.9 50.5

Tecnicas € € 26.9 OW 2,086 1,503 994 -133.0 186.2 202.2 -8.8 12.4 13.5 1.5 1.7 1.7 5.6 6.3 6.3 -149.2 -145.3 -141.6 40.2 36.1 34.3 nm nm nm

Wood Group $ £ 582.5 N 3,404 2,152 2,184 212.3 157.0 190.8 6.2 4.6 5.6 11.0 11.5 14.0 1.2 1.2 1.5 3.7 3.1 -3.8 13.8 13.7 14.6 nm nm nm

Average 2.7 3.5 8.6 2.2 2.5 2.7 18.7 16.9 18.4 22.2 21.6 26.6

23



Global E&P valuations



Global Exploration & Production - Analyst Team

Europe E&P Emerging Oils - Asia Emerging Oils - India Emerging Oils - LatAm Emerging Oils - Thailand Emerging Oils - AustraliaJessica Saadat Brynjar Bustnes Pradeep Mirchandani Caio Carvalhal Sukit Chawalitakul Ben Wilson

(44-20) 7155 6636 (852) 2800-8578 (91-22) 6157 3591 (55-11) 3048 3946 (66-2) 684-2679 (61-2) [email protected] [email protected] [email protected] [email protected] chaw [email protected] [email protected]

For specialist sales advice please contact:Hamish Clegg(44-20) 7325 0878

[email protected]


Company Analyst Reporting Trading Share Rec NOSH MV MV EV EPS DPS Post tax CFPS YE Net debt / (cash) (m) 2010 ReservesCurrency Currency price (m) ($ m) (m) (m) 10A 11E 12E 10A 11E 12E 10A 11E 12E 10A 11E 12E 2P 2P+2C JPMe

Europe

Afren Saadat $ £ 90.5 OW 965 1,359 874 956 0.05 0.46 0.72 0.0 0.0 0.0 0.22 0.89 1.00 128 -336 -879 86 113 156

Cairn Energy Saadat $ £ 298.7 OW 1,388 6,453 4,147 4,026 0.57 0.25 0.22 0.0 0.0 0.0 0.66 1.67 1.42 -187 -1,542 -3,227 254 N/A 171

EnQuest Saadat $ £ 103.5 N 799 1,287 827 801 0.06 0.08 0.13 0.0 0.0 0.0 0.33 0.78 0.43 -41 -357 -499 81 154 97

Heritage Saadat $ £ 236.2 OW 342 1,031 663 733 3.89 (0.14) (0.10) 0.0 0.0 0.0 NM NM NM -464 -339 -244 61 N/A 487

Serica Saadat $ £ 17.6 OW 177 48 31 19 (0.18) (0.02) (0.04) 0.0 0.0 0.0 -0.01 0.06 0.03 -18 -1 1 19 N/A 8

SOCO Saadat $ £ 333.8 OW 340 1,768 1,136 1,015 0.31 0.53 1.11 0.0 0.0 0.0 0.13 0.65 1.28 -189 -268 -651 143 N/A 136

Tullow Saadat $ £ 1,424.0 OW 890 19,716 12,670 14,531 0.06 0.95 0.94 9.3 9.7 9.7 0.82 1.91 1.77 1,862 1,696 1,359 300 894 973

Asia

CNOOC Bustnes CNY HKD 13.3 UW 44,669 76,228 593,207 547,953 1.20 1.62 1.43 0.4 0.7 0.6 1.77 1.96 2.10 -37,140 -42,317 -50,432 N/A N/A N/A

MIE Holdings Bustnes CNY HKD 1.9 OW 2,641 653 5,080 5,825 0.16 0.32 0.39 0.1 0.0 0.0 19.4 28.0 41.9 611 1,818 1,462 147 N/A 110

ONGC* Mirchandani INR INR 266.8 OW 8,556 46,428 2,282,177 2,175,935 22.7 26.2 28.8 8.2 9.5 10.7 44.2 48.1 48.8 -109,854 -265,847 -285,833 10,042 10,042 N/A

PTTEP Chaw alitakul THB THB 150.0 OW 3,317 16,070 497,998 516,321 12.0 15.2 20.1 5.0 6.1 8.0 22.6 23.9 29.4 18,323 63,847 20,221 1,749 2,399 2,399

Australia The 2P

AWE** Wilson AUD AUD 1.15 OW 522 597 598 462 (0.06) (0.23) 0.13 0.00 0.00 0.00 0.44 0.37 0.47 -135 -117 -88 69 126 N/A

Beach Energy** Wilson AUD AUD 1.12 N 1,098 1,255 1,235 1,065 0.03 (0.09) 0.06 0.02 0.02 0.01 0.19 0.11 0.15 -170 -173 26 66 363 N/A

Oil Search Wilson $ AUD 5.97 N 1,307 7,875 7,884 7,550 0.14 0.15 0.14 0.04 0.04 0.04 0.33 0.36 0.38 -334 839 1,426 559 877 N/A

ROC Oil Wilson $ AUD 0.32 UW 713 228 228 197 (0.05) (0.00) 0.04 0.00 0.00 0.00 0.12 0.15 0.19 -31 -36 -3 16 N/A N/A

Santos Wilson AUD AUD 12.5 OW 843 11,082 11,096 9,934 0.59 0.84 0.61 0.37 0.30 0.30 1.15 1.85 2.53 -1,162 478 1,353 1,445 3,706 N/A

Woodside Wilson $ AUD 35.0 UW 773 28,189 28,223 32,175 2.02 2.11 2.28 1.05 1.08 1.14 3.81 4.24 5.92 3,952 5,369 4,191 1,680 3,494 N/A

Eastern Star Gas Butcher AUD AUD 0.9 0 855 872 873 841 (0.01) (0.01) (0.02) 0.0 0.0 0.0 0.00 0.00 0.00 -32 -62 -50 165 546 N/A

Latam

Gran Tierra Carvalhal $ $ 6.0 N 268 1,707 1,707 1,475 0.14 0.49 0.85 0.0 0.0 0.0 0.95 1.08 1.14 -232 -392 -640 28 187 N/A

HRT Carvalhal BRL BRL 793.9 OW 5,700 2,840 5,044 5,192 (25.36) (0.01) 0.01 0.0 0.0 0.0 NM NM NM 148 -248 -679 N/A 526 1,340

OGX Carvalhal BRL BRL 12.4 OW 0 22,484 39,930 34,825 (0.04) (0.12) 0.23 0.0 0.0 0.0 NM NM NM -5,105 -1,078 -848 N/A 2,218 8,532

Pacif ic Rubiales Carvalhal $ CAD 24.3 OW 292 7,240 7,426 7,412 0.75 2.35 3.60 0.1 0.4 0.4 2.38 4.73 5.09 -14 -53 -636 297 635 849

Russia

Novatek Kazakova Rb $ 127.3 UW 304 38,652 38,652 40,682 4.40 5.96 6.97 0.13 0.17 0.20 4.56 8.02 8.90 2,030 1,821 1,318 10,589 N/A N/A

Canada

Canadian Natural Minyard CAD CAD 32.9 N 1,088 35,070 35,975 44,949 2.36 1.94 3.73 0.30 0.35 0.36 6.38 7.75 6.96 8,974 6,902 4,079 3,557 N/A N/A

Nexen Minyard CAD CAD 17.1 OW 526 8,753 8,979 13,335 1.16 1.74 2.84 0.20 0.20 0.20 6.64 6.49 6.19 4,356 4,025 3,449 920 N/A N/A

Talisman Minyard CAD CAD 13.5 OW 1,037 13,572 13,922 16,446 0.33 1.05 1.96 0.25 0.27 0.27 3.50 4.77 4.91 2,524 2,172 924 1,201 N/A N/A

Lone Pine Resources Minyard USD USD 7.3 OW 85 617 617 906 0.45 1.14 0.00 0.00 0.00 NM NM NM 289 302 295 N/A N/A N/A

NB: The reported Market Value (MV) and Enterprise Value (EV) in trading currencies.

NB: The reported estimates are in reporting currencies except for OGX and Novatek which are in $.

NB: PTTEP reports only 1P reserves data, hence 2P and 2P+2C are necessarily JPMe.

* - Fiscal year end March, ** - Fiscal year end June.

Company Core NAV Premium RENAV Premium TNAV Premium Production (kboepd) PER (x) Dividend Yield (%) EV/DACF (x) Net Debt / Equity (%) EV per boe

per share (Discount) per share (Discount) per share (Discount) 10A 11E 12E 10A 11E 12E 10A 11E 12E 10A 11E 12E 10A 11E 12E 2P 2P+2C JPMe

Europe

Afren 152 (40)% 197 (54)% 378 (76)% 12 31 57 28.2 3.1 1.9 0.0 0.0 0.0 7.1 1.2 0.5 15 -26 -44 17.3 13.2 9.5

Cairn Energy 371 (20)% 425 (30)% 973 (69)% 17 26 32 8.2 18.6 21.6 0.0 0.0 0.0 6.9 2.1 1.6 -5 -30 -51 24.7 NM 36.5

EnQuest 102 2% 115 (10)% 127 (18)% 20 27 27 28.2 19.3 12.7 0.0 0.0 0.0 4.8 1.5 2.3 -5 -38 -47 15.5 8.1 12.8

Heritage 356 (34)% 416 (43)% 653 (64)% 1 1 2 0.9 NM NM 0.0 0.0 0.0 NM NM NM -41 -32 -23 9.4 NM 1.2

Serica 39 (55)% 46 (62)% 187 (91)% 2 2 1 NM NM NM 0.0 0.0 0.0 -18.5 4.6 9.6 -14 -1 1 1.6 NM 3.7

SOCO 350 (5)% 396 (16)% 572 (42)% 2 10 27 16.8 9.8 4.7 0.0 0.0 0.0 36.8 6.8 2.6 -19 -22 -41 11.1 NM 11.6

Tullow 714 99% 974 46% 1,725 (17)% 58 86 91 361.0 23.2 23.6 0.4 0.4 0.4 29.5 12.6 13.4 48 37 25 75.3 25.3 23.2

Average (7)% (24)% (54)% 73.9 14.8 12.9 0.1 0.1 0.1 11.1 4.8 5.0 -3 -16 -26 22.1 15.5 14.1

Asia

CNOOC - - - - - - 784 855 901 11.1 8.2 9.3 3.0 4.9 4.4 5.7 5.1 4.7 -17 -18 -19 NM NM NM

MIE Holdings - - - - - - 9 11 18 9.9 4.9 4.1 4.3 0.0 0.0 5.5 4.8 3.0 31 65 38 NM NM NM

ONGC* - - - - - - 194 213 213 11.8 10.2 9.3 3.1 3.6 4.0 4.7 3.9 3.8 -11 -23 -22 4.4 4.4 NM

PTTEP 157 5% - - - - 260 268 286 12.5 9.9 7.5 3.4 4.1 5.4 6.9 7.1 5.3 11 31 8 9.5 6.9 6.9

Average 5% - - 11.3 8.3 7.5 3.4 3.1 3.4 5.7 5.2 4.2 3 14 1 7.0 5.7 6.9

Australia

AWE** 2.5 (55)% 2.6 (56)% 3.0 (62)% 18 18 19 NM NM 9.1 0.0 0.0 0.0 2.0 2.5 2.1 -12 -12 -9 6.7 3.7 NM

Beach Energy** 0.8 35% 0.8 35% 1.0 16% 20 19 20 32.8 NM 19.0 1.6 1.6 1.1 5.0 9.0 7.6 -12 -14 2 16.4 3.0 NM

Oil Search 7.4 (19)% 7.9 (25)% 9.2 (35)% 21 18 18 42.2 39.6 41.7 0.7 0.7 0.7 17.3 18.4 18.8 -12 28 45 13.5 8.6 NM

ROC Oil 0.5 (33)% 0.5 (33)% 0.5 (33)% 8 7 5 NM NM 8.1 0.0 0.0 0.0 2.3 1.9 1.7 -22 -25 -2 12.1 NM NM

Santos 16.7 (25)% 19.9 (38)% 22.6 (45)% 138 142 160 21.0 14.8 20.3 3.0 2.4 2.4 10.3 7.4 5.8 -15 6 16 6.9 2.7 NM

Woodside 37.0 (5)% 49.2 (29)% 63.9 (45)% 198 198 254 17.3 16.6 15.4 3.0 3.1 3.3 10.9 10.2 7.1 34 40 27 19.1 9.2 NM

Eastern Star Gas N/A N/A N/A N/A N/A N/A - 0 0 -110.6 -79.9 -44.4 0.0 0.0 0.0 N/A N/A N/A -18 -24 -15 5.1 1.5 NM

Average (17)% (24)% (34)% 28.3 23.7 18.9 1.4 1.3 1.2 8.0 8.2 7.2 -7 4 13 12.5 5.4 NM

Latam

Gran Tierra - - - - 4 43% 20 20 19 43.3 12.3 7.0 0.0 0.0 0.0 4.9 3.7 2.7 -26 -36 -55 52.7 7.9 NM

HRT - - 793 - 2,250 (65)% NM NM NM 0.0 0.0 0.0 NM NM NM 6 -10 -24 NM 5.7 2.2

OGX - - 12 - 28 (56)% 0 2 13 -165.9 -57.7 30.5 0.0 0.0 0.0 NM NM 132.7 -70 -24 -38 NM 7.8 2.0

Pacif ic Rubiales - - - - 36 (33)% 72 128 145 31.4 10.1 6.6 0.4 1.6 1.6 10.4 5.2 4.4 -1 -2 -19 24.3 11.4 8.5

Average - - (15)% -30.4 -11.8 14.7 0.1 0.5 0.5 7.6 4.5 46.6 -32 -21 -38 38.5 9.6 8.5

Russia

Novatek 58.6 117% - - - - 750 796 848 29.0 21.4 18.3 1.0 1.4 1.6 29.4 16.7 15.0 42 30 17 3.8 NM NM

Average 117% 29.0 21.4 18.3 1.0 1.4 1.6 29.4 16.7 15.0 42 30 17 3.8 NM NM

Canada

Canadian Natural - - - - - - 635 637 648 13.9 17.0 8.8 0.9 1.0 1.1 6.5 5.3 5.9 43 30 15 12.3 NM NM

Nexen - - - - - - 243 252 250 14.7 9.8 6.0 0.6 0.6 0.6 3.8 3.9 4.1 50 42 32 14.1 NM NM

Talisman - - - - - - 402 465 522 40.4 12.9 6.9 0.8 0.8 0.8 4.5 3.3 3.2 24 19 7 13.3 NM NM

Lone Pine Resources - - - - - - N/A N/A N/A 16.0 6.4 0.0 0.0 0.0 NM NM NM 95 58 48 NM NM NM

Average - - - 427 451 473 23.0 13.9 7.0 0.6 0.6 0.6 4.9 4.2 4.4 53 38 26 13.3 NM NM

24



Access to Online Research and Valuation Statistics

We would like to encourage all clients to use our online facilities to access our financial valuation statistics for the energy sector, as well as the J. P. Morgan energy equity research.

For access to all J. P. Morgan’s research on energy simply click on www.morganmarkets.com


25



J.P. Morgan Global Energy Coverage

UK Integrateds

Fred Lucas

(44-20) 7155 6131

[email protected]

UK & European Oil Services & Equipment

Andrew Dobbing

(44-20) 7155 6134

[email protected]

James Thompson

(44-20) 7325 9460

[email protected]

European Integrateds

Nitin Sharma

(44-20) 7155 6133

[email protected]

UK Exploration & Production

Jessica Tadj-Saadat, CFA

(44-20) 7155 6636

[email protected]

Emerging Oils – Russia

Nadia Kazakova, CFA

(7-495) 937 7329

[email protected]

Andrey Gromadin, CFA

(7-495) 967 1037

[email protected]

Emerging Oils – Asia

Brynjar Bustnes

(852) 2800 8578

[email protected]

Sophie Tan

(852) 2800 8578

[email protected]

Australian Oils

Benjamin Wilson

(61-2) 9220 1384

[email protected]

Daniel Butcher

(61-2) 9220 1405

[email protected]

Indian Oils

Pradeep Mirchandani, CFA

(91-22) 6157 3591

[email protected]

Neil Gupte

(91-22) 6157 3592

[email protected]

For Specialist Sales advice, please contact:

Hamish Clegg

(44-20) 7325 0878

[email protected]

Americas Exploration and Production

Joseph Allman, CFA

(1-212) 622 4864

[email protected]

Ronny M Eisemann

(1-212) 622-6756

[email protected]

Xin Liu, CFA

(1-212) 622-4915

[email protected]

Jessica Lee

(1-212) 622-9812

[email protected]

Americas Oil Services & Equipment

J.David Anderson, PE, CFA

(1-212) 622-6684

[email protected]

Adam Aron

(1-212) 622-0144

[email protected]

Samantha Hoh, CFA

(1-212) 622-5248

[email protected]

Americas Integrated Oils

Katherine Lucas Minyard, CFA

(1-212) 622-6402

[email protected]

Igor Grinman

(1-212) 622-6596

[email protected]

Emerging Oils – LatAm

Caio Carvalhal

(55-11) 3048-3946

[email protected]

Felipe Dos Santos

(55-11) 4950-3796

[email protected]

South African Oils

Alex Comer

(44-20) 7325 1964

[email protected]

Head of Global Commodity Research

Colin Fenton

(1-212) 834-5648

[email protected]

Energy Strategy – Oil

Lawrence Eagles

(1-212) 834-8107

[email protected]

David G Martin

(44-20) 7777-0211

[email protected]

Energy Strategy – Gas

Scott Speaker(1-212) 834-3878

[email protected]















26



J.P. Morgan Oil & Gas Coverage Names

UK Integrateds - Fred Lucas

BG Group, BP, RD Shell A & B

UK & European Oil Services & Equipment - Andrew Dobbing, James Thompson

Aker Solutions, Amec, CGG Veritas, Fugro, Hunting, Lamprell, PGS, Petrofac, Saipem, Subsea 7, TGS Nopec, Technip, Tecnicas Reunidas, Cape plc

European Integrateds - Nitin Sharma

ENI, Essar Energy, Galp Energia, OMV, Repsol YPF, Statoil, TOTAL

UK Exploration & Production - Jessica Tadj-Saadat, CFA

Afren, Cairn Energy, Enquest, Heritage Oil, Serica Energy, Soco International, Tullow Oil, Ophir Energy

Emerging Oils – Russia - Nadia Kazakova, CFA

C.A.T Oil, Eurasia Drilling Company, Gazprom, Gazprom Neft, HMS Group, MOL, Novatek, PKN Orlen, Rosneft, Surgutneftegaz, Surgutneftegaz Prefs

Andrey Gromadin, CFA

Alliance Oil Company, Bashneft, Bashneft (pref), Integra, Lotos, Lukoil, Tatneft, Tatneft Prefs, Tupras

Emerging Oils – Asia - Brynjar Bustnes, Sophie Tan

CNOOC, China Oilfield Services Limited, Inpex Corporation, MIE Holdings, PetroChina, S-OIL Crop, SK Energy, Sinopec

Australian Oils - Benjamin Wilson, Daniel Butcher

AWE Limited, Beach Energy, Oil Search, ROC Oil, Santos, Woodside Petroleum, Eastern Star Gas

Indian Oils - Pradeep Mirchandani, CFA

BPCL, Cairn India Ltd., Essar Oil, GAIL, Gujarat Gas Gujarat State Petronet Ltd., HPCL, Indian Oil, Indrapastha Gas, Oil India Ltd., ONGC, Petronet LNG Ltd., Reliance Industries Ltd.

Americas Exploration & Production - Joseph Allman, CFA

ATP Oil & Gas, Anadarko Petroleum, Apache Corp., Approach Resources, Atlas Energy, Berry Petroleum, Brigham Exploration, Cabot Oil & Gas, Carrizo Oil & Gas, Chesapeake Energy, Cobalt International Energy, Concho Resources, Continental Resources, Delta Petroleum Corp, Denbury Resources, Devon Energy, EOG Resources, EQT Corp., EXCO Resources, El Paso Corp., Goodrich Petroleum, McMoran Exploration, Newfield Exploration, Noble Energy, PDC Energy, Penn Virginia Corp., PetroQuest Energy, Petrohawk Energy, Pioneer Natural Resources, Plains E&P, QEP Resources, Quicksilver Resources, Range Resources Corp., SM Energy, SandRidge Energy, Southwestern Energy, Swift Energy, Ultra Petroleum, Venoco Inc., Whiting Petroleum Corp., Williams Companies

Americas Oil Services & Equipment - J.David Anderson, PE, CFA

Baker Hughes, Cameron Int’l, Diamond Offshore, Dresser-Rand, Dril-Quip, Ensco, Exterran Holdings, FMC Technologies, Halliburton, National Oilwell Varco, Noble Corp., Pride International, Rowan Companies, Schlumberger, Transocean, Weatherford Inernational

Americas Integrateds - Katherine Lucas Minyard, CFA, Igor Grinman

Canadian Natural Resources, Cenovus Energy, Chevron, ConocoPhillips, Exxon Mobil, Hess, Husky Energy, Marathon Oil, Murphy Oil, Nexen, Occidental Petroleum, Suncor Energy, Talisman Energy, Lone Pine Resources

Emerging Oils – LatAm – Caio Carvalhal

Ecopetrol. Gran Tierra Energy, HRT, Lupatech, OGX, Petrobras, Pacific Rubiales, Tenaris

South African Oils - Alex Comer

Sasol

27



Companies Recommended in This Report (all prices in this report as of market close on 14 October 2011)Buckeye Partners L.P. (BPL/$65.57/Overweight), El Paso Corp. (EP/$19.59/Overweight), Enterprise Products Partners, L.P. (EPD/$43.23/Overweight), Hess (HES/$57.47/Overweight), MIE Holdings Corporation (1555.HK/HK$1.92/Overweight), Nexen (NXY.TO/C$17.08/Overweight), Occidental Petroleum (OXY/$85.42/Overweight), Reliance Industries Ltd (RELI.BO/Rs866.90/Overweight), Talisman Energy (TLM.TO/C$13.53/Overweight)

Analyst Certification: The research analyst(s) denoted by an “AC” on the cover of this report certifies (or, where multiple research analysts are primarily responsible for this report, the research analyst denoted by an “AC” on the cover or within the document individually certifies, with respect to each security or issuer that the research analyst covers in this research) that: (1) all of the views expressed in this report accurately reflect his or her personal views about any and all of the subject securities or issuers; and (2) no part of any of the research analyst's compensation was, is, or will be directly or indirectly related to the specific recommendations or views expressed by the research analyst(s) in this report.

Important Disclosures

Market Maker: JPMS makes a market in the stock of Talisman Energy.

Lead or Co-manager: J.P. Morgan acted as lead or co-manager in a public offering of equity and/or debt securities for El Paso Corp., MIE Holdings Corporation, Occidental Petroleum, Hess, Talisman Energy, Enterprise Products Partners, L.P., Buckeye Partners L.P. within the past 12 months.

Client: J.P. Morgan currently has, or had within the past 12 months, the following company(ies) as clients: El Paso Corp., MIE Holdings Corporation, Reliance Industries Ltd, Occidental Petroleum, Hess, Nexen, Talisman Energy, Enterprise Products Partners, L.P., Buckeye Partners L.P..

Client/Investment Banking: J.P. Morgan currently has, or had within the past 12 months, the following company(ies) as investment banking clients: El Paso Corp., MIE Holdings Corporation, Occidental Petroleum, Hess, Talisman Energy, Enterprise Products Partners, L.P., Buckeye Partners L.P..

Client/Non-Investment Banking, Securities-Related: J.P. Morgan currently has, or had within the past 12 months, the following company(ies) as clients, and the services provided were non-investment-banking, securities-related: El Paso Corp., Reliance Industries Ltd, Occidental Petroleum, Hess, Nexen, Talisman Energy, Enterprise Products Partners, L.P., Buckeye Partners L.P..

Client/Non-Securities-Related: J.P. Morgan currently has, or had within the past 12 months, the following company(ies) as clients, and the services provided were non-securities-related: El Paso Corp., Reliance Industries Ltd, Occidental Petroleum, Hess, Nexen, Talisman Energy, Enterprise Products Partners, L.P., Buckeye Partners L.P..

Investment Banking (past 12 months): J.P. Morgan received in the past 12 months compensation for investment banking El Paso Corp., MIE Holdings Corporation, Occidental Petroleum, Hess, Talisman Energy, Enterprise Products Partners, L.P., Buckeye Partners L.P..

Investment Banking (next 3 months): J.P. Morgan expects to receive, or intend to seek, compensation for investment banking services in the next three months from El Paso Corp., MIE Holdings Corporation, Reliance Industries Ltd, Occidental Petroleum, Hess, Talisman Energy, Enterprise Products Partners, L.P., Buckeye Partners L.P..

Non-Investment Banking Compensation: J.P. Morgan has received compensation in the past 12 months for products or services other than investment banking from El Paso Corp., Reliance Industries Ltd, Occidental Petroleum, Hess, Nexen, Talisman Energy, Enterprise Products Partners, L.P., Buckeye Partners L.P..

J.P. Morgan Securities LLC and/or its affiliates are acting as a financial advisor to Plains Exploration & Production Company(NYSE:PXP) in connection with the execution of a definitive purchase and sale agreement to sell its interests in oil and gas properties located in the Permian and Piceance Basins to Occidental Petroleum Corp (NYSE: OXY). Transaction is subject to customary closing conditions and adjustments.

Important Disclosures for Equity Research Compendium Reports: Important disclosures, including price charts for all companies under coverage for at least one year, are available through the search function on J.P. Morgan’s website https://mm.jpmorgan.com/disclosures.jsp or by calling this U.S. toll-free number (1-800-477-0406).

Explanation of Equity Research Ratings and Analyst(s) Coverage Universe: J.P. Morgan uses the following rating system: Overweight [Over the next six to twelve months, we expect this stock will outperform the average total return of the stocks in the analyst's (or the analyst's team's) coverage universe.] Neutral [Over the next six to twelve months, we expect this stock will perform in line with the average total return of the stocks in the analyst's (or the analyst's team's) coverage universe.] Underweight [Over the next six to twelve months, we expect this stock will underperform the average total return of the stocks

https://mm.jpmorgan.com/disclosures.jsp

28



in the analyst's (or the analyst's team's) coverage universe.] In our Asia (ex-Australia) and UK small- and mid-cap equity research, each stock’s expected total return is compared to the expected total return of a benchmark country market index, not to those analysts’ coverage universe. If it does not appear in the Important Disclosures section of this report, the certifying analyst’s coverage universe can be found on J.P. Morgan’s research website, www.morganmarkets.com.

Coverage Universe: Lucas, Frederick G: BG Group (BG.L), BP (BP.L), Royal Dutch Shell A (RDSa.L), Royal Dutch Shell B (RDSb.L)

J.P. Morgan Equity Research Ratings Distribution, as of September 30, 2011

Overweight(buy)

Neutral(hold)

Underweight(sell)

J.P. Morgan Global Equity Research Coverage 47% 42% 11%IB clients* 51% 44% 33%

JPMS Equity Research Coverage 45% 47% 7%IB clients* 70% 60% 52%

*Percentage of investment banking clients in each rating category.For purposes only of FINRA/NYSE ratings distribution rules, our Overweight rating falls into a buy rating category; our Neutral rating falls into a hold rating category; and our Underweight rating falls into a sell rating category.

Equity Valuation and Risks: For valuation methodology and risks associated with covered companies or price targets for covered companies, please see the most recent company-specific research report at http://www.morganmarkets.com , contact the primary analyst or your J.P. Morgan representative, or email [email protected] .

Equity Analysts' Compensation: The equity research analysts responsible for the preparation of this report receive compensation based upon various factors, including the quality and accuracy of research, client feedback, competitive factors, and overall firm revenues, which include revenues from, among other business units, Institutional Equities and Investment Banking.

Registration of non-US Analysts: Unless otherwise noted, the non-US analysts listed on the front of this report are employees of non-US affiliates of JPMS, are not registered/qualified as research analysts under NASD/NYSE rules, may not be associated persons of JPMS, and may not be subject to FINRA Rule 2711 and NYSE Rule 472 restrictions on communications with covered companies, public appearances, and trading securities held by a research analyst account.

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General: Additional information is available upon request. Information has been obtained from sources believed to be reliable but JPMorgan Chase & Co. or its affiliates and/or subsidiaries (collectively J.P. Morgan) do not warrant its completeness or accuracy except with respect to any disclosures relative to JPMS and/or its affiliates and the analyst's involvement with the issuer that is the subject of the research. All pricing is as of the close of market for thesecurities discussed, unless otherwise stated. Opinions and estimates constitute our judgment as of the date of this material and are subject to change without notice. Past performance is not indicative of future results. This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The opinions and recommendations herein do not take into account individual client circumstances, objectives, or needs and are not intended as recommendations of particular securities, financial instruments or strategies to particular clients. The recipient of this report must make its own independent decisions regarding any securities or financial instruments mentioned herein. JPMS distributes in the U.S. research published by non-U.S. affiliates and accepts responsibility for its contents. Periodic updates may be provided on companies/industries based on company specific developments or announcements, market conditions or any other publicly available information. Clients should contact analysts and execute transactions through a J.P. Morgan subsidiary or affiliate in their home jurisdiction unless governing law permits otherwise.

"Other Disclosures" last revised September 30, 2011.

Copyright 2011 JPMorgan Chase & Co. All rights reserved. This report or any portion hereof may not be reprinted, sold or redistributed without the written consent of J.P. Morgan. #$J&098$#*P

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