PESA Membership Luncheon

James K. WicklundManaging Director, Energy Research

DISCLOSURE APPENDIX CONTAINS ANALYST CERTIFICATIONS AND THE STATUS OF NON US ANALYSTS. FOR OTHER IMPORTANT DISCLOSURES, visit www.credit-suisse.com/researchdisclosures or call +1 (877) 291-2683 US Disclosure: Credit Suisse 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.

November 2013

Outlook for the Oilfield Services Sector

First, the industry has changed, more dramatically than you think

Dominance of Offshore and Unconventionalshave reduced the volatility and increased the capital required

Strategic drivers of the industry have changed from revenue growth and Ebitda to Return on Capital and Capital Allocation

Compensation has shifted to better accomplish the shift in strategic drivers

2

Deepwater

Increased access – 12,000 feet & Tertiary capability, new hydrocarbon systems

$30 billion in NEW deepwater rigs on order

OFS contracts bid on razor thin margins with technology upsell & long duration

Expanding outside of the Golden Triangle

$1.2 million daily spread costs only going higher

Reality – IOC cash flow growth cannot support all new and existing rig activity

3

Unconventionals

High capex requirements are not just an issue for E&P companies but OFS as well

Cost of capital and capital charge throughout the system have got to take prominence

Long-term “stationary” operations is not what the industry has been conditioned to operate

Value delivery has got to change. Dayrates for more efficient rigs and stage-count for fracking

Industrial America is poaching, paying up for the privilege, stepping into our shoes

4

Let’s Review the PastData Indexed to 2005

6

Market Capitalization Since 2005

Source – Bloomberg – SLB, HAL, BHI, NOV, CAM, FTI, DRC, DRQ, OII, OIS, SPN

7

Capital Expenditures Since 2005

0

100

200

300

400

500

600

700

2005 2006 2007 2008 2009 2010 2011 2012

Large Cap Manufact Specialty

8

EV/Ebitda Valuation Since 2005

‐

20

40

60

80

100

120

2005

2006

2007

2008

2009

2010

2011

2012

OFS Land Offs

h

or e

Source – Bloomberg – SLB, HAL, BHI, NOV, PTEN, HP, NBR, RIG, ESV, NE, RDC

9

Large Cap OFS Metrics Since 2005

‐

50

100

150

200

250

300

350

400

450

2005

2006

2007

2008

2009

2010

2011

2012

Market Cap

CapEx

CFPS

EV/Ebitda

Source – Bloomberg – SLB, HAL, BHI, NOV,

10

Manufacturing Co. Metrics Since 2005

‐

100

200

300

400

500

600

2005

2006

2007

2008

2009

2010

2011

2012

Market Cap

CapEx

CFPS

EV/Ebitda

Source – Bloomberg – CAM, FTI, DRC, NOV

11

Specialty Co. Metrics Since 2005

‐

100

200

300

400

500

600

700

800

2005

2006

2007

2008

2009

2010

2011

2012

Market Cap

CapEx

CFPS

EV/Ebitda

Source – Bloomberg – SLB, HAL, BHI, NOV, PTEN, HP, NBR, RIG, ESV, NE, RDC

Shale RevolutionShape of Things to Come

Shale HighlightsIndustry and macro themes

US I: production momentum: technology is stretching the growth profile in N America Down-spacing & stacked pay zones

US II: it’s about liquids as our cost curve suggests persistent low US gas prices Even the Permian is 50% gas

US III: Shale led multi sector capex cycle: as P Petro-chem, GTL and LNG build out – Chemical Renaissance

US IV: BUT…risk of cost escalations (remember Australia?) Labor pressure already appearing in ‘hotspot’ areas – even as over-capacity reigns

Global shale: 1 step forward, 1 step back… China slowly out of the blocks, mixed signals in

Argentina, Saudi, Australia

Global shale: Capital build-out all over again• International is “woefully under-capitalized for

the coming shale boom”

13

Global Shale Regions – Prevalent But Untested

Source: EIA

Global Shale Regions

14

3.7bcfd by 2020 in Transport 20 BCFD of Incremental US Gas Demand Growth

Rising US Gas Demand Longer Term

0

50

100

150

200

250

2012 2013 2014 2015 2016 2017 2018 2019 2020NGV LNG Power Sector

Supply growth potential @ $5 (2011 real)

Supply growth potential @ $4.50 (2011 real)

Source: Industry Data and Credit Suisse Estimates

0%

5%

10%

15%

20%

25%

30%

35%

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Passenger Cars

Light Trucks

Buses + Step vans (Class5-7)Heavy Trucks (Class 5-7,ex refuse)Refuse Trucks

Large Trucks (Class 8)

Other heavy trucks (RV,Off Road etc)Locomotives

Eventually North American natural gas demand will increase

US & Canadian LNG & build-out of capacity for the Chemical Renaissance

US Oil Production – 11MBD in View?

Source: Credit Suisse Estimates, HPDI

Onshore US Production Still Rising Steadily

2,400

2,900

3,400

3,900

4,400

4,900

5,400

5,100

5,600

6,100

6,600

7,100

7,600Ja

n- 10

Apr-1

0

Jul-1

0

Oct-1

0

Jan- 11

Apr-1

1

Jul-1

1

Oct-1

1

Jan- 12

Apr-1

2

Jul-1

2

Oct-1

2

Jan- 13

Apr-1

3

KBDKB

D

Domestic Monthly Crude Production [LHS] Domestic Monthly Crude Production (ex PADD V & Offshore GoM) [RHS]

16

US Shale Oil Sweet Spots Breakeven at $70 WTI or lower WTI Oil Breakeven Price at 15% IRR ($ per Bbl)

$34.

99 $

48.6

6

$52.

00

$52.

13

$52.

32

$53.

42

$57.

47

$60.

44

$61.

89

$62.

26

$64.

15

$65.

33

$66.

89

$71.

26

$73.

93

$78.

68

$79.

07

$80.

17

$85.

64

$20

$30

$40

$50

$60

$70

$80

$90

$100

$110

Source: Credit Suisse Estimates17

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Impact & Evolution of The Shale Revolution II

Total drilling & completions spend is closely correlated to total footage drilled.

Fewer rigs can drill more complex wells with longer laterals.

The Permian continues the transition to horizontal drilling and has seen the largest increase

of wells drilled per rig.

$20

$40

$60

$80

$100

$120

$140

$160

$180

$200

100

200

300

400

500

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013E

2014E

2015E

2016E

2017E

2018E

2019E

Total U.S. Footage Drilled (mm feet) Drilling & Completion Spending  ($, Bn) 0

2

4

6

8

10

12

14

Q1 ‐ 2012 Q2 ‐ 2012 Q3 ‐ 2012 Q4 ‐ 2012 Q1 ‐ 2013 Q2 ‐ 2013

Permian Eagle Ford Williston Marcellus

Barnett DJ‐Niobrara Mississippian Haynesville

Footage Drilled and Drilling & Completions Spend Wells Drilled Per Rig in Top US Basins

19

Projected E&P Capex

E&P capex is expected to be strong—good for OFS. But production growth will outpace capex spending meaning OFS fails to capture the full value of its services.

Gas (mmcfd) Oil (mbbld) Capex ($mm)Company 2013 2014 2015 2013 2014 2015 2013 2014 2015

Large Cap E&P UniverseAPA 2,144 1,989 2,090 347 355 384 $10,851 $10,600 $10,600APC 2,625 2,405 2,376 256 310 332 $7,466 $8,000 $8,000CHK 2,955 2,818 2,976 106 119 131 $7,197 $6,900 $6,900DNR 25 42 41 67 71 77 $1,046 $1,100 $1,200DVN 2,393 2,258 2,297 169 194 216 $6,969 $7,000 $7,200EOG 1,349 1,284 1,248 218 270 313 $7,158 $7,600 $8,000NBL 889 1,021 1,184 103 123 131 $3,729 $4,800 $4,800SWN 1,783 2,029 2,196 0 0 0 $2,276 $2,200 $2,200CXO 209 236 260 58 68 80 $1,802 $1,900 $2,100PXD 391 446 515 77 91 105 $2,957 $3,200 $3,200SD 288 307 328 45 46 48 $1,429 $1,500 $1,600

Large Cap YoY -1% 5% 14% 10% 4% 2%SMID Cap E&P UniverseATHL 13 21 28 7 11 14 $360 $575 $775BCEI 24 33 38 10 16 20 $400 $500 $650CRK 159 139 132 7 11 14 $422 $450 $400CRZO 89 61 64 11 14 16 $675 $575 $575EXXI 102 104 112 30 35 40 $660 $750 $750FANG 5 12 19 6 12 19 $310 $475 $575FST 133 116 110 7 11 13 $375 $475 $475GPOR 26 146 244 8 18 26 $580 $850 $1,000KOG 23 37 43 26 41 46 $1,000 $1,000 $1,100PDCE 55 79 104 8 11 15 $443 $550 $650PVA 40 36 34 10 15 17 $490 $500 $500REXX 63 84 96 3 4 5 $265 $300 $325ROSE 117 141 161 13 17 20 $870 $1,000 $1,000RRC 730 831 1,001 10 12 15 $1,300 $1,600 $1,900SFY 91 96 99 11 12 12 $513 $500 $500WLL 73 77 82 73 84 96 $2,500 $2,500 $2,500

SMID YoY 16% 18% 35% 20% 13% 9%Total YoY 0% 6% 17% 12% 5% 3%

20

Rig Count Projection

Canada is improving as it accelerates out of a trough. In 2012, the 2nd half rig count was down 9%, a period of historical seasonal strength in Canada. Our forecast of 369 for 2013 is flat vs. 364 in 2012, but this represents a 6% improvement in 2H13 vs. 1H13.

U.S. gas drilling appears to have bottomed after being down 37% last year and an estimated 28% this year. Momentum is gradually starting to accelerate but the levels of associated gas still being produced in the country’s “oil” wells could continue to slow the eventual recovery.

U.S. oil drilling as been up 113%, 67% and 39% over the last three years ending in 2012. We are expecting only 3% growth in 2013.

Horizontal drilling has similarly had a 3-year run of growth but we are modeling down 2.5% for the year. It is in horizontal drilling/pad drilling where the greatest efficiencies are being seen so down slightly on the number would still have a very positive impact on spending.

We are estimating total footage up 2.6%, Oil wells up 3% and Natural Gas wells down almost 20% in the year over year calculations.

U.S. Projections: Rig Count, Well Count, Footage2008 2009 2010 2011 2012 2013E 2014E

Rig Count 1,877 1,085 1,539 1,875 1,919 1,791 1,795 Well Count 48,919 29,495 33,227 36,626 39,961 38,674 38,754 Footage Drilled ('000) 334,442 239,491 269,374 315,502 392,178 400,583 399,610

YoY % ChangeRig Count -42% 42% 22% 2% -7% 0%Well Count -40% 13% 10% 9% -3% 0%Footage Drilled -28% 12% 17% 24% 2.1% 0%

21

Records are Being Set

Record total revenue for Halliburton

Record revenues in Boots & Coots, cementing, completion tools, drill bits, multi-chem, and testing product lines

Record operating income in Baroid, completion tools, drill bits and testing product lines

New records Europe/Africa/CIS region

Eastern hemisphere had record revenue

22

And Others

Record revenue in the United States, the Middle East, Asia-Pacific, Africa, Russia Caspian and industrial segment for Baker Hughes

Record revenue for drilling services, completion systems, artificial lift and upstream chemicals product lines.

Record operating profit in Latin America

Record revenue and operating profit in Russia Caspian

Helmerich & Payne - Record revenues and earnings!

23

CEOs Stepping Down

Diamond Offshore

Rowan Drilling

National Oilwell Varco

Ensco

Who’s Next?

Walking Away from a Bonanza?? Not likely

24

Be Very Cautious and Focus on Returns It is a cyclical and even hyper-cyclical

industry

When it gets too good to be true, it usually is

The WORLD is now set to GRIND higher

Efficiency, effectiveness, returns will rule

Long-term tweaks replace big initiatives

Oil prices have gone up and cycles still occur

TAKE NOTHING FOR GRANTED

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