Martina GutikColleen Hurley

Ben JekeliBen Smalley

RecommendationWe recommend:

Selling 368 basis points or 100% of TransoceanBuying 418 basis points of Chevron Corp. (CVX)Holding our position in Noble Corp.Holding our position in National Oilwell

AgendaSector Presentation Recap

Transocean Analysis

Chevron Analysis

Recommendation Summary

% SIM Over/Under S&P 500 As of 4/30/10

Voted to increase weight by 50 bp

Current StocksStock Weight Price Target

PriceUpside

BTU 0% $37.29 $43 15.3%

NOV 3.30% $39.16 $45 10.6%

NE 2.78% $31.04 $37 19%

RIG 3.68% $55.38 $64 15.6%

Transocean (RIG) OverviewSector: EnergyIndustry: Oil and Gas DrillingPrice: $55.38Target: $64.00Upside: 15.6%SELL 368 basis points

RIG – Business OverviewWorld’s largest offshore drilling contractor

Owns and operates 139 rigs (including 45 high-specification floaters)

Industry leader in deepwater and harsh environment drilling

RIG - Rig Locations

NotableFar East : 25 unitsU.K. North Sea : 16 unitsMiddle East : 16 unitsU.S. Gulf of Mexico : 15 units

RIG - Initial UpsideRecovering economies

increase in oil demand, priceObama proposed increased offshore drilling

Low utilizationIndustry leader

Oil PricesCurrent oil price : $70 / barrelEuropean economyContango

Has been narrowingProjection : $78 / barrelFriday, oil dropped as much as 4.75% to $66

Slower demand this yearIEA cut projected demand by 220,000 barrels / day

(5/12/2010)

Oil Prices (2001 – Present)

RIG Stock Price (2001 – Present)

Transocean - Regression

Price of Oil and RIG Stock Line Fit Plot

0.0

20.0

40.0

60.0

80.0

100.0

120.0

140.0

160.0

180.0

0.0 20.0 40.0 60.0 80.0 100.0 120.0 140.0 160.0

Price of Oil ($)

RIG

Sto

ck P

rice

($)

RIG Stock Price

Predicted RIG Stock Price

SUMMARY OUTPUT

Regression StatisticsMultiple R 0.920519R Square 0.847355Adjusted R Square 0.846083Standard Error 13.39675Observations 122

RIG - Deepwater HorizonOn April 20th, the Deepwater Horizon (owned and

operated by Transocean) exploded.Lapses in safety caused blast

Investigators told hydraulic leak found in BOPDead battery in control podMemo from Transocean, citing 260 failure modes in

blowout preventerSignificantly slower/delayed operations

PoliticsMinerals Management Service

Financial Impact10-Q : “We expect to incur significant legal fees and

costs”.LitigationEnvironmental damage and personal injuriesClass action lawsuit – violation of federal securities laws

Contract backlog : $590 M declineLoss of revenues amount to 3-4% decline in earnings

RIG - Revenues

Operating Revenues (in $ millions) 2009 2008 2007U.S. $2,239 $2,578 $1,259U.K. 1563 2012 848India 1084 890 761Other countries 6670 7194 3509Total $11,556 $12,674 $6,377

Years ended December 31

RIG – Revenue and EPSRevenue

2010 : 10852 M (-6%)2011 : 11705 M (8%)2012 : 11667 M (0%)

EPS 2010 : 8.87 (-22%)2011 : 10.23 (15%)2012 : 10.25 (0%)

RIG - Valuation

Absolute

High Low Median Current Target Multiple Target E, S, B /share Target Price

Forward P/E 88.0 3.1 21.8 6.1 7 8.87 62.09

P/S 14.3 .3 3.3 1.6 2 33.81 67.61

P/B 4.7 0.6 1.6 0.8 1 69.22 69.22

P/CF 49.3 2.8 11.2 3.7 4 14.97 59.88

P/EBITDA 56.3 1.8 10.6 3.0 3.5 18.46 64.61

Average Target 64.68

Current Price 55.38 Upside 16.8%

Transocean - DCFTransocean (RIG)

Current Price (Input below) 55.38$

Analyst: Ben Jekeli Terminal Discount Rate = 17.0% 170 Implied equity value/share 63.04$

4/14/2010 Terminal FCF Growth = 3.0% 30 Upside/(Downside) to DCF 13.8%

(In $ millions)Year 2010E 2011E 2012E 2013E 2014E 2015E 2016E 2017E 2018E 2019E 2020E

Revenue 10,763 11,656 11,667 12,017 12,377 12,749 13,131 13,525 13,931 14,349 14,779 % Grow th 8.3% 0.1% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0%

Operating Income 3,875 4,371 4,433 4,446 4,580 4,717 4,858 5,004 5,154 5,309 5,468 Operating Margin 36.0% 37.5% 38.0% 37.0% 37.0% 37.0% 37.0% 37.0% 37.0% 37.0% 37.0%

Other Inc. (Expense), net (387.47) (419.61) (420.00) (601) (619) (637) (657) (676) (697) (717) (739) Interest % of Sales -3.6% -3.6% -3.6% -5.0% -5.0% -5.0% -5.0% -5.0% -5.0% -5.0% -5.0%

Taxes 697 790 803 1,009 1,040 1,071 1,103 1,136 1,170 1,205 1,241 Tax Rate 20.0% 20.0% 20.0% 20.0% 20.0% 20.0% 20.0% 20.0% 20.0% 20.0% 20.0%

Net Income 2,790 3,161 3,211 4,038 4,159 4,284 4,412 4,544 4,681 4,821 4,966 % Grow th 13.3% 1.6% 25.8% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0%

Add Depreciation/Amort 1,399 1,399 1,458 1,502 1,547 1,594 1,641 1,691 1,741 1,794 1,847 % of Sales 13.0% 12.0% 12.5% 12.5% 12.5% 12.5% 12.5% 12.5% 12.5% 12.5% 12.5%

Plus/(minus) Changes WC 206 (116) (1) (36) (37) (38) (39) (41) (42) (43) (44) % of Sales 1.9% -1.0% 0.0% -0.3% -0.3% -0.3% -0.3% -0.3% -0.3% -0.3% -0.3%

Subtract Cap Ex 2,583 2,797 2,800 2,884 2,971 3,060 3,020 2,705 2,368 2,081 1,847 Capex % of sales 24.0% 24.0% 24.0% 24.0% 24.0% 24.0% 23.0% 20.0% 17.0% 14.5% 12.5%

Free Cash Flow 1,812 1,646 1,868 2,620 2,698 2,779 2,994 3,489 4,012 4,491 4,921 % Grow th -9.1% 13.4% 40.3% 3.0% 3.0% 7.7% 16.6% 15.0% 11.9% 9.6%

Transocean - SummarySell all of Transocean (368 basis points)Loss of upside

Volatility in economic recovery Oil prices

European debt crisis Strong dollar

Aftermath of Deepwater Horizon incident

Chevron Corp. OverviewSector: Energy

Industry: Oil and Gas Integrated

Price: $72.57

Target: $97

Upside: 33%

Dividend Yield: 3.90%

BUY 418 basis points

Chevron Corp.Founded in 1879 based in San Ramon, CAAmong largest U.S. integrated oil companies

Exxon and ConocoPhillips

Owns or has stake in 9,600 gas stations in the U.S. under Chevron and Texaco

Owns or has stakes in 12,400 outside the U.S.

Advantages of CVX11th largest company in S&P 500 by market capitalization

Moves fairly inline with index

3.9% dividend yield

Increased dividend payout 22 consecutive years

Geographically diversified:

Worldwide with key operations in Kazakhstan, Thailand, Indonesia, Saudi Arabia, Brazil, Venezuela, Africa, United Kingdom, and California

Advantages cont.Diversified Business:

Exploration and production of natural gas and crude oil

Seven refineries in Singapore, Thailand, South Korea, and Richmond and El Segundo, CA manufacture products for countries in the Pacific Basin. Pascagoula, MI and Pembroke, Wales, United Kingdom, supply countries primarily in the Atlantic basin.

Transportation and Storage via oil tankers and pipelines

Other areas of business: Trading, mining, and chemicals

Risks to CVXDecrease in Oil Prices

Stock price is highly correlated with oil prices r =.89 Profit margins are already low Crack Spread – Currently $11.39 (1 month) typically ≈$20

Currency Risk The strengthening of U.S. dollar Repatriated profits are going to decrease Oil is more expensive, demand falls

Government regulations Restrictions on offshore drilling

Economic Recovery EU concerns and the possible double dip recession

Stock Performance vs. S&P 5002-year

Stock Performance vs. S&P 5005-year

Revenue

Absolute

High Low Median Current Target Multiple Target E, S, B /share Target Price

Forward P/E 30.5 5.6 14.4 8.3 11 8.72 95.92

P/S 1.3 0.4 0.9 0.8 0.9 106.86 96.17

P/B 4.6 1.4 2.5 1.6 2 48.03 96.06

P/CF 11.6 3.8 7.2 6.1 7.2 12.60 90.71

P/EBITDA 8.42 2.37 5.06 4.44 5.06 17.31 87.58

Average Target 93.29

Current Price 72.57 Upside 28.6%

Relative to Industry

Hgih Low Median Current

Forward P/E 1.6 0.59 0.9 0.82

P/S 1.1 0.8 1 1

P/B 1.3 0.8 0.9 0.9

P/CF 1.3 0.5 1 0.8

P/EBITDA 1.81 0.71 0.87 0.84

Recommendation SummaryNo action on NOV and NE

SELL 368 basis points of Transocean

Expected losses impacting offshore drilling

BUY 418 basis points of Chevron Corp.

Diversified business

Questions?