Darren Gacicia 203.276.5664 ______________

1

Halliburton (HAL)

North American Risks Build - Downgrading HAL to Hold

Downgrading HAL to Hold & lowering price target to $52 from $60. We are lowering our rating and price target for HAL, as risk to consensus 2012 North America/pressure pumping estimates and headline risk from a Foreign Corrupt Practices Act (FCPA) investigation create an overhang in HAL shares, which will lead it to underperform peer oil services stocks. Although HAL will participate in OSX rallies, HAL needs negative revisions to bring down North American expectations and shift investor focus to its upside from international and offshore operations, before HAL shares can outperform.

Risk to estimates remains to the downside. Our 2012 estimate of $3.71, down further from our revision to $3.94 from $5.00 earlier in October, remains well below consensus of $4.07. Our original negative revision factored the coming balance of supply/demand in the pressure pumping market, set to erode the ~20% pricing power achieved between 2009 and 2011. Our incremental negative revision reflects both margin compression from higher costs that HAL may not pass through in the short term and faster than expected degradation of the North American pressure pumping business. Our 2012 estimate assumes support for North American margins from a recovery of activity in the Gulf of Mexico, but we can see downside risks to our estimates if pressure pumping margins decline more quickly than expected, lower North American rig counts put pressure on volumes, or Gulf of Mexico activity provides less of a buffer. In a punitive North American scenario, we see downside risk to our 2012 estimate to ~$3.00. Further potential for negative revisions exists if startup costs for the 30+ new projects in international markets drag on margins.

Different from 2008, but pressure pumping cycle looks the same. Although we

concede that the upward shift in the horsepower demand curve from the rise of unconventional oil and natural gas plays does make this cycle different from the last, we see the arrival of many traditional signs that frothy pressure pumping economics are set to decline. Most notably, we highlight the wave of new horsepower construction, reports of flattening pricing in 3Q11 (SLB), reports of oversupplied regional markets (HAL), admissions that small, private operators may slow spending amid economic uncertainty (HAL), pressure pumping IPO pipeline suggesting downside from low barriers to entry (C&J), industry players selling out (CPX, RES), investors selling stakes (DLJ/BAS).Although supported by utilization-centric contracts with large, stable operators and greater leverage to oil, we cannot see HAL’s pressure pumping business escaping an impending downturn. Please see our report, North American Risks Lead Our Forecasts Lower (10/9/11) for details on our negative supply/demand outlook for pressure pumping and risks to North American estimates.

Report of potential FCPA investigation for Angola activity adds an overhang. Details remain limited, but Friday’s reports of an investigation into FCPA violations in Angola will put an overhang on HAL shares. Given BHI’s previous and WFT’s current negative experience with FCPA investigations, the announcement will lead investors to discount the risk of fines or potential for a regulatory monitor for HAL’s activity.

Read through to BHI, NBR, & PTEN. Weaker North American pressure pumping

also poses a risk to estimates for BHI, NBR, and PTEN. That said, we remain positive on BHI and NBR, given leverage to improving international fundaments for both and upside to a visible ramp in offshore activity for BHI.

October 24, 2011

Darren Gacicia +1-203-276-5664 dg@verticalresearchpartners.com

Darren Gacicia 203.276.5664 ______________

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Valuation Summary

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

Company Ticker Rating PriceTarget

Price

Shares Out

(MM)Mkt Cap

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

Diversified Oilfield SerivicesSchlumberger SLB Buy 67 110 1,349 90,920 96,595 2.85 3.65 5.30 23.6X 18.4X 12.7X 13.0X 9.5X 7.1X 3% 6% 2%Halliburton HAL Buy 34 52 920 30,826 33,062 2.08 3.38 3.71 16.1X 9.9X 9.0X 7.9X 5.3X 4.6X 5% 7% 5%Baker Hughes BHI Buy 54 95 436 23,768 26,747 2.28 4.33 5.42 23.9X 12.6X 10.0X 10.2X 5.8X 4.7X 9% 11% 7%Weatherford WFT Buy 15 27 749 11,252 18,661 0.49 0.82 1.40 30.6X 18.4X 10.7X 9.2X 7.3X 5.6X 36% 39% 40%

23.6X 14.8X 10.6X 10.1X 7.0X 5.5X 13% 16% 14%Mid/Small Cap Oilfield SericesCore Laboratories CLB NR 98 -- 47 4,586 4,612 3.04 3.73 4.69 32.4X 26.4X 21.0X 18.4X 16.3X 13.6X na na naRPC RES NR 18 -- 148 2,619 2,731 0.97 2.15 2.59 18.2X 8.2X 6.8X 7.5X 3.9X 3.2X 5% 5% -2%Trican Well Service TCW NR C$17 -- 147 C$2543 2,566 C$1.08 C$2.04 C$2.36 16.0X 8.5X 7.4X 7.7X 4.4X 3.7X 0% 4% 4%Carbo Ceramics CRR NR 115 -- 23 2,673 2,626 3.30 5.55 7.33 35.0X 20.8X 15.7X 18.2X 11.4X 8.8X na -3% -9%Complete Production Services CPX NR 31 -- 79 2,460 2,984 1.13 2.82 4.06 27.5X 11.0X 7.6X 7.8X 4.9X 3.7X 18% 17% 15%Key Energy Services KEG Hold 11 16 151 1,651 2,057 (0.17) 1.00 1.67 na 10.9X 6.6X 14.4X 12.2X 10.0X 18% 18% 10%Superior Energy Services SPN NR 26 -- 80 2,105 2,921 1.55 2.09 3.07 17.0X 12.6X 8.6X 6.5X 5.0X 3.9X na na naCalfrac Well Services CFW NR C$29 -- 44 C$1265 1,501 C$1.45 C$3.75 C$4.36 19.9X 7.7X 6.6X 7.8X 4.1X 3.3X 15% 22% 17%Tetra Technologies TTI NR 9 -- 77 695 934 0.54 0.68 0.87 16.5X 13.3X 10.4X 3.9X 4.9X 4.8X na 10% 4%Basic Energy Services BAS NR 17 -- 42 709 1,159 (1.21) 1.96 2.71 na 8.5X 6.2X 10.6X 3.4X 2.8X 35% 48% 42%Newpark Resources NR NR 8 -- 91 754 846 0.42 0.72 0.87 19.6X 11.5X 9.5X 9.1X 5.7X 4.7X na na na

22.5X 12.7X 9.7X 10.2X 6.9X 5.7X 15% 18% 15%Oilfield Equipment & ManufacturersAker Solutions AKSO NR 60kr -- 274 16,522kr 21,737kr 6.39kr 4.83kr 6.82kr 9.4X 12.5X 8.8X 5.5X 6.9X 5.8X 28% 11% 8%National Oilwell Varco NOV Hold 66 80 424 27,844 24,491 4.08 4.48 5.26 16.1X 14.7X 12.5X 8.2X 7.2X 6.1X -10% -14% -23%Tenaris TS NR 29 -- 590 17,378 17,750 1.83 2.24 2.85 16.1X 13.1X 10.3X 8.6X 7.3X 5.9X -2% -4% -4%Vallourec VK NR 44€ -- 119 5,293€ 5,941€ 3.76€ 3.36€ 4.11€ 11.8X 13.2X 10.8X 6.4X 6.4X 5.6X 5% 14% 16%Cameron International CAM Buy 50 65 245 12,192 11,827 2.41 2.66 3.79 20.6X 18.7X 13.1X 11.1X 10.6X 7.8X -5% -3% -9%FMC Technologies FTI Buy 44 60 240 10,599 11,131 3.06 1.70 2.37 14.4X 25.9X 18.6X 16.0X 15.3X 11.5X 3% 5% 2%Oceaneering OII NR 42 -- 109 4,605 4,360 1.82 2.00 2.50 23.3X 21.2X 17.0X 9.6X 9.3X 7.7X -5% -4% -8%Dresser-Rand DRC NR 50 -- 80 4,009 3,958 1.86 1.98 3.25 27.0X 25.3X 15.5X 12.4X 10.7X 7.3X 0% 17% 12%Gardner Denver GDI Buy 73 105 52 3,820 3,963 3.38 4.30 6.00 21.6X 17.0X 12.2X 12.5X 8.3X 7.5X 3% -14% -26%Oil States International OIS NR 66 -- 51 3,369 4,186 3.26 5.57 6.81 20.1X 11.8X 9.6X 11.0X 6.3X 5.1X 1% 25% 26%Dril-Quip DRQ Buy 64 90 40 2,554 2,283 2.80 2.32 3.90 22.8X 27.5X 16.3X 13.1X 15.1X 9.5X -11% -12% -13%Lufkin Industries LUFK NR 52 -- 30 1,594 1,506 1.49 2.37 4.24 35.1X 22.1X 12.3X 16.4X 10.8X 5.8X na na naRobbins & Myers RBN NR 41 -- 46 1,883 1,668 0.93 2.39 3.02 44.1X 17.2X 13.7X 25.3X 8.7X 6.9X na -14% -24%Rotork ROR NR 16£ -- 87 1,384£ 1,286£ 0.80£ 0.95£ 1.04£ 19.9X 16.7X 15.4X 12.5X 10.7X 9.8X -7% -8% -12%Exterran Holdings EXH NR 9 -- 64 574 2,619 (0.96) (1.66) (0.83) na na na 5.8X 7.0X 5.8X 76% 74% 73%Schoeller-Bleckmann Oilfield SBO NR 59€ -- 16 948€ 997€ 1.85€ 3.14€ 3.55€ 32.1X 18.9X 16.7X 11.8X 8.4X 7.7X 6% 6% 4%

22.6X 19.4X 13.1X 11.2X 9.2X 6.9X 16% 25% 23%Offshore Contract DrillersTransocean RIG Buy 54 98 320 17,407 28,162 6.08 3.26 5.75 9.0X 16.7X 9.5X 6.4X 8.1X 6.3X 31% 38% 36%Seadrill SDRL Buy 33 49 469 15,570 24,604 2.64 2.63 3.24 12.6X 12.6X 10.2X 11.8X 10.2X 9.0X 33% 35% 36%Noble NE Hold 35 47 252 8,771 13,240 3.09 1.57 4.50 11.2X 22.2X 7.7X 9.0X 10.9X 6.2X 22% 33% 32%Diamond Offshore DO Buy 63 100 139 8,734 9,011 6.69 6.72 5.94 9.4X 9.3X 10.6X 5.1X 5.4X 5.7X 5% 3% -3%ENSCO ESV Hold 48 63 230 11,165 15,671 3.80 2.76 5.75 12.7X 17.6X 8.4X 18.5X 12.3X 5.8X -8% 29% 24%Rowan RDC Buy 34 52 127 4,292 4,293 2.61 1.80 4.38 12.9X 18.7X 7.7X 6.9X 9.7X 5.2X 15% 0% -8%Atwood Oceanics ATW Hold 41 52 65 2,686 4,624 4.04 4.02 4.63 10.2X 10.3X 8.9X 13.2X 12.7X 10.5X 35% 42% 44%Hercules Offshore HERO Buy 4 8 138 496 1,199 (0.54) (0.51) (0.15) na na na 7.1X 7.7X 5.1X 59% 59% 55%Vantage VTG NR 1 -- 291 378 1,369 (0.07) (0.19) (0.01) na na na 15.8X 7.5X 6.0X 73% 76% 74%

11.1X 15.3X 9.0X 10.4X 9.4X 6.7X 34% 35% 43%Land Contract DrilersNabors Industries NBR Buy 15 29 287 4,376 9,285 1.18 1.54 2.63 12.9X 9.9X 5.8X 6.4X 4.8X 3.3X 45% 52% 60%Patterson-UTI Energy PTEN Hold 19 28 156 2,984 3,471 0.69 2.11 2.31 27.9X 9.1X 8.3X 6.8X 3.7X 3.4X 11% 14% 14%Helmerich & Payne HP NR 48 -- 107 5,147 5,443 2.49 3.92 4.70 19.3X 12.3X 10.2X 7.9X 5.4X 4.5X 6% 1% 2%Unit UNT NR 46 -- 48 2,206 2,367 3.04 4.01 4.72 15.1X 11.4X 9.7X 5.5X 4.0X 3.5X na na na

18.8X 10.7X 8.5X 6.6X 4.5X 3.7X 21% 22% 25%Offshore Supply ChainTidewater TDW NR 47 -- 52 2,457 2,911 4.99 2.43 2.38 9.5X 19.5X 19.9X 7.2X 9.8X 10.0X -2% 17% 24%Seacor Holdings CKH NR 87 -- 22 1,881 2,093 12.23 3.80 na 7.1X 22.8X na na na na na na naBristow Group BRS NR 48 -- 37 1,769 2,367 3.11 3.24 3.96 15.6X 14.9X 12.2X 8.9X 8.8X 9.6X 26% 25% 23%

16.4X 19.6X 19.1X 8.6X 10.3X 8.5X 22% 25% 24%Engineering & ConstructionSaipem SPM NR 31€ -- 441 13,887€ 17,267 1.80€ 2.06€ 2.42€ 17.5X 15.3X 13.0X 9.6X 8.3X 7.3X 20% 19% 15%Technip TEC NR 68€ -- 111 7,502€ 6,192€ 3.73€ 4.21€ 4.90€ 18.2X 16.1X 13.8X 8.0X 7.3X 6.2X -22% -23% -24%Mcdermott MDR NR 14 -- 235 3,331 2,836 1.28 1.16 1.48 11.1X 12.2X 9.6X 5.9X 6.3X 5.1X -25% -25% -33%Petrofac PFC NR 14£ -- 346 4,745£ 3,730£ 1.26£ 1.50£ 1.75£ 10.9X 9.2X 7.8X 5.8X 5.2X 4.4X -36% -30% -26%Amec AMEC NR 9£ -- 332 3,020£ 2,282£ 0.59£ 0.69£ 0.80£ 15.4X 13.2X 11.4X 8.5X 7.3X 6.3X -33% -28% -35%Wood Group WG/ NR 6£ -- 369 2,163£ 2,189£ 0.39£ 0.58£ 0.77£ 15.1X 10.1X 7.6X 5.3X 5.2X 4.3X 10% 1% -7%Helix Energy Solutions HLX NR 17 -- 106 1,805 2,798 0.53 1.48 1.74 32.3X 11.5X 9.8X 6.0X 4.6X 4.3X na 29% 21%Tecnicas Reunidas TRE NR 26 -- 56 1,462 932 2.41 2.56 2.74 10.9X 10.2X 9.5X 5.6X 5.5X 5.3X -76% -72% -89%Global Industries GLBL NR 8 -- 116 918 873 (0.34) (0.59) 0.17 na na 45.8X 119.2X -58.8X 7.2X -1% 15% 14%Cal Dive International DVR NR 2 -- 95 186 326 (0.11) (0.23) 0.37 na na 5.2X 5.0X 7.2X 2.4X 50% 45% 36%

17.0X 13.3X 13.7X 17.5X 7.0X 5.8X 22% 19% 18%SeismicPetroleum Geo-Services PGS NR 68kr -- 218 14,843kr 15,194kr 0.39kr 0.40kr 1.03kr 174.7X 169.1X 66.4X 33.6X 28.7X 21.9X 2% 3% 2%Cie Generale De Geophysique GA NR 16€ -- 152 2,429€ 3,637€ (0.26)€ 0.20€ 1.21€ na 81.2X 13.3X 6.9X 5.8X 4.4X 32% 30% 26%

98.2X 52.8X 18.2X 12.6X 8.6X 6.3X 21% 40% 39%TankersTeekay TK NR 26 -- 72 1,853 7,388 (1.53) (1.65) (0.18) na na na 10.2X 11.4X 9.4X 69% 72% 72%Frontline FRO NR 5 -- 78 382 3,060 1.79 (1.40) (1.23) 2.7X na na 6.1X 12.8X 11.8X 87% 86% 86%Nordic American Tanker NAT NR 14 -- 47 679 737 0.22 (0.81) (0.53) 64.2X na na 9.6X 23.3X 13.3X 5% 18% 19%Overseas Shipholding Group OSG NR 13 -- 30 403 2,116 (3.41) (6.04) (3.90) na na na 17.6X 31.8X 12.8X 81% 83% 84%Teekay Tankers TNK NR 5 -- 48 244 686 0.57 0.28 0.15 8.9X 17.9X 33.9X 9.8X 10.1X 10.9X 56% 56% 56%

25.3X 17.9X 33.9X 10.6X 17.9X 11.6X 60% 63% 63%

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

Darren Gacicia 203.276.5664 ______________

3

Valuation Summary – Price Targets

Theoretical Target to P/E Ratio to 2012 EPS

Source: Bloomberg, Vertical Research Partners

Theoretical Target to P/E Ratio to 2011 EPS

Source: Bloomberg, Vertical Research Partners

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

Source: Bloomberg, Vertical Research Partners

Relative Upside to Price Targets

Source: Vertical Research Partners

BETA US 10YR ERP Cost of Year 1 Year 2 Terminal PT P/E 2012Ticker (Adj 2YR) 2.2% 5.0% Equity Growth Growth Growth Ratio EPS TargetBHI 1.37 2.2% 5.0% 9.1% 20.4% 23.2% 3.0% 20.5X 5.42$ = 111$ CAM 1.47 2.2% 5.0% 9.6% 14.3% 12.8% 3.0% 16.3X 3.79$ = 62$ DRQ 1.51 2.2% 5.0% 9.7% 51.9% 26.1% 3.0% 23.6X 3.90$ = 92$ FTI 1.32 2.2% 5.0% 8.8% 25.8% 29.4% 3.0% 23.7X 2.37$ = 56$ HAL 1.55 2.2% 5.0% 10.0% 12.8% 21.4% 3.0% 16.3X 3.71$ = 60$ KEG 1.72 2.2% 5.0% 10.8% 2.3% 1.2% 3.0% 10.8X 1.67$ = 18$ NBR 1.71 2.2% 5.0% 10.8% -4.2% 26.2% 3.0% 12.7X 2.63$ = 33$ NOV 1.52 2.2% 5.0% 9.8% 19.1% 3.5% 3.0% 15.0X 5.26$ = 79$ PTEN 1.47 2.2% 5.0% 9.6% -13.8% 20.1% 3.0% 13.2X 2.31$ = 30$ SLB 1.32 2.2% 5.0% 8.8% 28.7% 16.8% 3.0% 21.9X 5.30$ = 116$ WFT 1.59 2.2% 5.0% 10.2% 36.6% 29.3% 3.0% 20.3X 1.40$ = 28$

BETA US 10YR ERP Cost of Year 1 Year 2 Terminal PT P/E 2011Ticker (Adj 2YR) 2.2% 5.0% Equity Growth Growth Growth Ratio EPS TargetBHI 1.37 2.2% 5.0% 9.1% 25.2% 20.4% 3.0% 20.8X 4.33$ = 90$ CAM 1.47 2.2% 5.0% 9.6% 42.3% 14.3% 3.0% 20.6X 2.66$ = 55$ DRQ 1.51 2.2% 5.0% 9.7% 68.2% 51.9% 3.0% 31.4X 2.32$ = 73$ FTI 1.32 2.2% 5.0% 8.8% 39.1% 25.8% 3.0% 25.4X 1.70$ = 43$ HAL 1.55 2.2% 5.0% 10.0% 9.9% 12.8% 3.0% 14.7X 3.38$ = 50$ KEG 1.72 2.2% 5.0% 10.8% 66.3% 2.3% 3.0% 17.7X 1.00$ = 18$ NBR 1.71 2.2% 5.0% 10.8% 70.9% -4.2% 3.0% 17.2X 1.54$ = 27$ NOV 1.52 2.2% 5.0% 9.8% 17.4% 19.1% 3.0% 17.0X 4.48$ = 76$ PTEN 1.47 2.2% 5.0% 9.6% 9.4% -13.8% 3.0% 12.0X 2.11$ = 25$ SLB 1.32 2.2% 5.0% 8.8% 45.1% 28.7% 3.0% 27.2X 3.65$ = 99$ WFT 1.59 2.2% 5.0% 10.2% 72.1% 36.6% 3.0% 27.0X 0.82$ = 22$

$29 $27

$52

$95

$110

$16

$28

$90

$60 $65

$80

$15 $15

$34

$54

$67

$11 $19

$64

$44 $50

$66

$-

$20

$40

$60

$80

$100

$120

$140

NBR WFT HAL BHI SLB KEG PTEN DRQ FTI CAM NOV

Implied P/E Valuation Range Price Target Current Px

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

100%

NBR WFT BHI SLB HAL KEG PTEN DRQ FTI CAM NOV

91%80% 74%

63% 55%46% 46% 41% 36% 31% 22%

Darren Gacicia 203.276.5664 ______________

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