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Energy Sector Stock Analysis and Recommendations - Summer Quarter 2007

This presentation provides a detailed analysis of the energy sector's stock performance and investment recommendations for the Summer Quarter of 2007. It highlights the ongoing underweight position compared to the S&P 500 and anticipates a decline in long-term returns due to falling oil prices and greater availability of alternative energy sources. Key recommendations include selling all holdings in Schlumberger, Ltd., buying BP ADS, and maintaining positions in Exxon (XOM) and Peabody (BTU). The report emphasizes that Schlumberger is overvalued while BP presents an undervalued opportunity.

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Energy Sector Stock Analysis and Recommendations - Summer Quarter 2007

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

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

  3. CRUDE OIL PRICES

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

  5. Schlumberger, Ltd.

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

  7. DCF Valuation

  8. SLB Absolute Valuations

  9. SLB Absolute Valuations

  10. SLB Multiple Valuations Avg $61.31 Market Price 87.74

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

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

  13. BP DCF

  14. BP – Absolute Valuations

  15. BP – Absolute Valuations

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

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

  18. ANY QUESTIONS????

  19. SLB DCF

  20. BP DCF

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