OCTG

Joseph D. [email protected](713) 435-5385

Sales: 1-800-666-9174Trading: 1-800-333-2005

Industry Note

Energy Infrastructure: OCTG Snapshot

Here is our periodic quick review of pertinent OCTG data (aggregation of COSestimates, PipeLogix, and BHI US rig count) including: net domestic shipment totals,imports, inventory on the ground, and spot pricing trends. The data reflect the mostrecent PipeLogix update through March for shipments, through April for pricing, andthrough 5/21 for BHI rig count.

Recent Trend Summary & Our Take

• Shipments: Total domestic shipments were up 26% to 152,079 tons in March vs120,758 tons in February (down 15% from the peak of 179,229 tons in June '08).Import volumes trended up 61% to 145,667 tons in March vs 90,289 tons in February(down 75% from the peak of 571,376 in November '08). Total March shipments(domestic plus imports) were up 41% to 297,746 tons vs 211,047 tons in February(down 59% from the peak of 724,305 tons in November '08).

• Inventories: Monthly industry inventory levels declined for the 12th consecutivemonth by 5,001 tons in March vs 80,597 tons in February. Inventory on the ground[(COS estimated industry inventory level) / (existing BHI rig count x estimatedmonthly OCTG usage per rig)] stands at 6.7 months at the end of March vs 7.0months at the end of February.

• Pricing: Average ERW spot prices trended up 2.3% to $1,541/ton in April vs$1,506/ton in March. Average seamless spot prices trended up 2.3% to $1,860/ton inApril vs $1,819/ton in March. Total average OCTG spot prices (blended ERW andseamless) trended up 2.3% to $1,700/ton in April vs $1,662/ton in March (down 47%from peak of $3,220/ton in September '08).

• Our take: Monthly inventory change on the cusp of turning back into a build trend vsdeclines for the prior 12 months is the biggest takeaway. This inventory shift wasalready apparent in OIS's OCTG inventory out of 1Q with a seq build of 17% to$311MM marking a turn in the long unwinding of the past year. Net import levelsremain well below peak but along w/ domestic shipments are also on the risecommensurate w/ the rig count build. With current US count having averaged 1,479 inApril and May to date at 1,505, as well as assuming domestic shipments and importlevels holding flat from March's levels, we'd estimate current May inventory on theground stabilizing ~6 months and likely beginning a slow build pending a continuationof further domestic shipment acceleration.

May 24, 2010

Energy - Infrastructure

CAPITAL ONE SOUTHCOAST, INC - 909 POYDRAS STREET - SUITE 1000 - NEW ORLEANS, LA 70112

Please see important disclosures and analyst certification on pages 3 - 5 of this report.

OCTG Shipments, Pricing and Inventory Trends

175,630

191,753

163,402

234,503

179,229

264,743

176,793

318,205

170,380

324,591

125,644

477,910

165,703

527,678

152,929

571,376

147,975

472,270

105,477

519,315

67,230

278,708

44,179

259,049

46,731

117,473

17,429

150,208

31,135

38,710

50,025

40,430

57,822

18,342

60,556

32,802

72,276

42,710

81,564

46,433

106,207

57,932

106,236

121,663

120,758

90,289

152,079

145,667

-

100,000

200,000

300,000

400,000

500,000

600,000

700,000

800,000

Apr May Jun Jul Aug Sep Oct Nov Dec Jan

2009

Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan-10 Feb Mar

OCTG Shipments (Tons)

Net Domestic Shipments Net Imports

OCTG Inventory Trend

73,44290,121 95,126

183,551

290,454

316,483

245,803

287,560

54,256 54,954

(43,503)

(126,474)(117,822)

(91,847)(80,597)

(5,001)

(60,492)

(131,593)(144,856)

(118,970) (112,779)

(47,103)

9,5545,089

14.7

13.6

12.3

10.4

9.5

8.6

7.06.7

7.8

11.4

15.0

13.9

12.8

10.6

8.8

7.0

5.9

5.1

4.3

4.03.93.83.73.7

(200,000)

(100,000)

-

100,000

200,000

300,000

400,000


2009


To

ns

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

Mo

nth

s

Inventory Change Inventory on the Ground

OCTG Inventory vs US Rig Count

1,8291,863

1,9021,932

1,9872,014

1,9761,935

1,782

1,553

1,320

1,105

995

918 895931

9801,009

1,044

1,107

1,172

1,350

1,419

1,267

14.7

13.6

12.3

11.4

10.4

9.5

8.6

7.06.7

7.8

15.0

13.9

12.8

10.6

8.8

7.0

5.9

5.1

4.34.03.93.83.73.7

500

700

900

1,100

1,300

1,500

1,700

1,900

2,100


2009


Rig

Co

un

t

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

Mo

nth

s

BHI Rig Count Inventory on the Ground

1,889

2,193

2,472

2,654

2,885

3,0243,096

3,221

3,106

3,333

3,049

3,291

2,855

3,120

2,637

2,901

2,375

2,639

2,222

2,485

2,019

2,374

1,789

2,101

1,665

1,959

1,601

1,918

1,521

1,842

1,477

1,818

1,425

1,783

1,382

1,768

1,371

1,746

1,392

1,739

1,437

1,758

1,463

1,787

1,506

1,819

1,541

1,860

0

500

1,000

1,500

2,000

2,500

3,000

3,500

May Ju

n Jul

Aug Sep Oct

Nov

Dec

Jan-

09 Feb Mar Apr

May Ju

n Jul

Aug Sep Oct

Nov

Dec Ja

n

Feb

Mar Apr

OCTG Spot Price Trend ($/ton)

ERW Seamless


Energy - Infrastructure May 24, 2010

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Disclosures:

Target Price Justifications and Company-Specific Risks:BHIOur target price is based on a 10.4x EV/EBITDA target multiple on our EBITDA estimate for the four quarters ending 2Q11. Risks that may impedeachievement of our price target include: incremental capacity entering the market and the cyclical nature of the oilfield services sector.

OISOur target price is based on a 6.5x target multiple on our forward four quarter EBITDA estimate, a 14.0x P/E multiple based on our forward four quarter EPSestimate, and a five-year DCF forecast. Risks that could impede achievement of our target price include macro economic and commodity price fluctuations,offshore project delays, and volatility in onshore drilling and completion activity.

Other Disclosures:CONA, a bank affiliate of Capital One Southcoast, has received compensation for products or sevices other than investment banking services from OilStates International, Inc. in the past 12 months.

Investors should assume that Capital One Southcoast, Inc, is seeking or will seek investment banking or other business from companies rated in this report.

The research analyst principally responsible for preparation of this research report has received compensation that is based upon (among other factors)Capital One Southcoast, Inc's, investment banking revenues.

According to Reg AC, I/we, as (a) research analyst(s) of Capital One Southcoast, Inc,, certify that the research opinion(s) expressed in this researchcomment/report accurately reflect(s) my/our personal view(s) and that no specific payment was received for this particular research product

Investment Ratings: At the close of business on December 19, 2007, Capital One Southcoast, Inc, changed its investment ratings to STRONG BUY, ADD,NEUTRAL, and REDUCE from BUY, HOLD, and SELL. These ratings represent a time frame of twelve months.

Strong Buy, representing stocks deemed to have the potential to achieve a minimum 15% upside to the current price in the next twelve months, with moretimely price appreciation due to catalysts and/or compelling valuation.

Add, representing stocks deemed to have the potential to achieve a minimum 15% upside to the current price in the next twelve months or stocks deemed tohave more moderate potential with a low risk level.

Neutral, representing stocks that are deemed to have a greater amount of risk, less timely price appreciation potential, and/or near-term adverse macroconditions that could keep them from reaching full valuation.

Reduce, representing stocks deemed to have the potential for a negative return.

Distribution of Ratings/IB Services

Capital One Southcoast, Inc

IB Serv./Past 12 Mos.

Rating Count Percent Count Percent

BUY [A/SB] 59 72.90 24 40.68HOLD [N] 22 27.20 4 18.18SELL [R] 0 0.00 0 0.00



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Q1 Q2 Q3 Q1 Q2 Q3 Q1 Q2 Q3 Q1 Q20

20

40

60

80

100

2008 2009 2010

07/16/07

B:$101

10/08/07

B:$108

01/30/08

B:$95

04/04/08

H:$84

05/21/08

B:$97

07/22/08

B:$102

10/03/08

B:$93

10/22/08

B:$91

11/24/08

B:$67

12/16/08

B:$56

01/28/09

B:$55

03/11/09

B:$45

08/05/09

B:$47

10/15/09

B:$58

01/26/10

B:$64

Rating and Price Target History for: Baker Hughes Incorporated (BHI) as of 05-21-2010

Created by BlueMatrix

Q1 Q2 Q3 Q1 Q2 Q3 Q1 Q2 Q3 Q1 Q20

15

30

45

60

75

2008 2009 2010

01/10/08

I:B:$46

02/21/08

B:$53

05/01/08

B:$55

05/14/08

B:$58

06/04/08

B:$65

06/26/08

B:$68

08/04/08

B:$74

09/26/08

B:$72

10/21/08

B:$41

10/31/08

B:$46

11/24/08

B:$35

01/21/09

H:$27

02/20/09

H:$24

03/31/09

H:$18

05/08/09

H:$23

05/19/09

B:$26

07/30/09

B:$28

09/23/09

H:$32

11/04/09

H:$37

01/12/10

H:$40

02/22/10

B:$46

04/16/10

B:$49

04/30/10

B:$55

Rating and Price Target History for: Oil States International, Inc. (OIS) as of 05-21-2010

Created by BlueMatrix

General Disclaimers: Our target price(s) with respect to the company(ies) covered by this report are not guarantees of future performance. They representforward-looking statements that involve risks, uncertainties, and assumptions. Our target price(s) are based on our beliefs and estimates and on informationcurrently available to us about the company, including statements by its management concerning their expectations regarding its future results. The actualfuture price of the company's stock may differ significantly from our target price(s), because many of the factors that will determine that price are beyond ourability to predict. Among those factors are future economic conditions in the country as a whole, such as interest rates, inflation, economic growth, andconsumer demand. We caution you that these and other important factors could cause the actual future price of the company's stock to be very different fromor worse than our target price(s). Accordingly, you should not place undue reliance on our target price(s), which are based only on our current expectations.We undertake no obligation to update any of them in light of new information or future events. Additional factors specific to the company that could affect thefuture price of the company's stock are identified in the "Risk Factors" section of periodic reports that are required to be filed by the company with theSecurities and Exchange Commission. You should evaluate our target price(s) in light of the risk factors, among others, identified by the company in thosereports. Prior to the close of business on July 8, 2002, Capital One Southcoast, Inc, did not provide target prices for stocks rated Hold.

The information contained herein is based on sources we consider reliable, but Capital One Southcoast, Inc, assumes no responsibility for the completenessor accuracy of such information. Neither the information nor any opinion expressed herein constitutes an offer, or an invitation to make an offer, to sell or buyany securities. Capital One Southcoast, Inc, or its individual employees and their respective affiliates may from time to time have a long or short position inthe security(ies) described above, and before or after your receipt of this report, may make or recommend purchases and/or sales for their own accounts orfor the accounts of other customers of the firm from time to time in the open market or otherwise. Opinions expressed are our present opinions only and aresubject to change without notice. Capital One Southcoast, Inc, may from time to time perform investment banking services for the company(ies) describedherein. This report has been prepared for general institutional client circulation and does not take into account the financial circumstances, investmentobjectives, or risk tolerance of any particular investor. Capital One Southcoast, Inc, recommends that investors seek individual financial advice regarding theappropriateness for their particular portfolios of the securities discussed in this report. Capital One Southcoast, Inc, is a wholly owned non-bank subsidiary of



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Capital One Financial Corporation. Investments not FDIC-insured. May lose value. No bank guarantee.

Additional information is available upon request by writing to the Equity Research Department; Capital One Southcoast, Inc; 909 Poydras Street;Suite 1000; New Orleans, LA 70112.



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OCTG

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