2016-05-31_Offshore Beta Trade Laggards Hold Greatest Upside in Recovery - D. Gacicia

Offshore ‘Beta’ Trade: Laggards Hold
Greatest Upside in Recovery
Darren Gacicia
Managing Director
Senior Oilfield Services Analyst
KLR Group, LLC
713-352-0887
dfg@klrgroup.com
For definitions and the distribution of analyst ratings, and other disclosures, please refer to pages 72 - 73 of this report

Set Up for Improving Fundamentals Align Offshore Stocks as the “Beta” Trade Within Oilfield Services
Offshore Drillers & Equipment Stocks Highest “Beta” in Recovery. Fueled by prospects of a later cycle recovery and high leverage (Net Debt/EV), the offshore driller stocks represent the highest “beta” to a
recovery in the oil services group. With better credit profiles, the offshore equipment group runs a close second in the “beta” rankings. In our view, a traditional lagged recovery of offshore activity leave shares
with offshore exposure more leveraged to the level/trajectory of oil prices. Since we see tighter commodity markets ahead, we believe portfolios should have offshore exposure to capture “beta” as sentiment
turns positive. Likewise, we are wary of the long onshore/short offshore trade, which is dangerous as the bearish paradigm for the group shifts. With an inflection in energy sector prospects and shift in
risk/reward, we suspect offshore companies with higher leverage and fundamentals most challenged by the downturn may outperform. Multiple expansion, driven in part by a de-risking and re-rating of high
leverage ratio stocks and better prospect for earnings recoveries (pgs. 11-13), may move offshore shares higher without an increase in near term earnings. We are not calling for a dramatic near term recovery in
offshore rig or equipment demand in 2016 or 2017, but we see an increasing chance that improving fundamentals may surprise our conservative estimates.
Upgrade ATW & DO to Buy. We are upgrading ATW to Buy from Accumulate. Following ATW’s agreement to eliminate covenants on its revolver until July 2018, we see potential for these shares to de-risk and
re-rate higher. We are willing to move further out on the risk frontier with ATW, as covenant issues move to the sidelines. We are raising our price target to $16, as a function of a lower WACC (160 bps reduction)
and a marginal improvement in our long term rig utilization estimates. We are also upgrading DO to Buy from Accumulate. Given that we have retired numerous older rigs from the DO fleet, we are raising our
longer term utilization assumptions (~91%) from more punitive levels. As a result, our price target increases to $33.
Estimate Changes & Price Target Increases. We are lowering our estimates for the offshore drillers as we cut near term dayrate assumptions closer to more recent fixture levels (pg. 22-23). Our normalized
dayrate assumptions remain unchanged and tied to an assumption that rigs will work at dayrates that return on par with a 10% cost of capital. We sense that dayrates sit near trough levels, but should begin to
recover more meaningfully in 2018 as rig attrition meets demand recovery. As we reviewed our offshore driller models and updated estimates, we are raising price targets for ATW, DO, ESV and adjusting our
price target for PACD to reflect the reverse share split (pg. 3).
Rig Attrition, Cold Stacking, & Modest Demand Recovery Suggest More Bullish 2018 Offshore Driller Economics. We forecast that a demand recovery by 2018, met with floater and jackup cold stacking and
retirements (pg. 46-59) should bring utilization of the marketed floater and jackup fleets above 85% (pgs 27, 41). Tighter offshore drilling markets should drive pricing power for offshore drillers in 2018. In our
view, rig attrition should continue with rising oil prices, as offshore drillers may choose to retire assets versus commit capital to older assets for maintenance and surveys (pg. 54-55). Our estimates suggest ~70
floaters retire/stack in 2016-2017 and ~115 jackups retire/stack between 2016-2018. Given risk to floater and jackup newbuilds from speculative builders and unproven shipyards, our fleet tally assumes only
75% of floaters and jackups will be delivered on schedule. We have updated our floater and jackup demand forecasts. Our field-by-field development demand analysis for floaters continues to see flattish demand
through 2020, but we see a steady uptick in exploration and appraisal activity from extremely low current levels (pg. 31). After development demand delays during the downturn, we see potential for demand to
pull forward and probabilities for project approvals (FID) to rise in our model if commodity markets strengthen (pg. 32-33). A vast majority of near term development work remains tied to existing and FID
approved projects, rather than new project starts (pgs. 36-38). Industry commentary around project redesign and standardization, lower break even costs, and potential for incremental development work for
project with existing infrastructure may prove catalysts to pull forecasted demand forward. Reduced rig supply, a positive bias toward incremental development demand, and the need for exploration for reserve
replacement may all suggest a better risk/reward for the group than currently discounted in a rising commodity price environment. We continue to prefer offshore driller exposure in RIG, NE, and ESV.
Subsea Equipment Demand Stable, Higher 2017 Tree Orders Should Improve Optics. The subsea equipment and offshore infrastructure portion of our coverage maintains a fairly constructive set up under our
offshore forecast. Again, we see potential for low expectations to become more optimistic with a recovery in commodity prices and a reversal of revision momentum to pull project times forward versus push
them later. Our subsea tree/equipment forecast maintains a stable delivery profile that is congruent with a flat development drilling demand outlook (pg. 31). Subsea tree orders remain low in 2016 (135, pg. 65),
but move higher in 2017 to support future field developments in our forecast. Akin to floater development demand, our probability-weighted estimates remain largely tied to existing and approved projects,
where near term forecasted deliveries in 2016 and 2017 have largely been ordered (pgs. 63). Our data shows a trend of costs per tree coming down, which supports the view that breakeven project costs are
falling (pg. 62). As deepwater expands as part of the demand mix (pg. 66), development cost reductions may play a key role to pull forward demand that has slipped into later years and accelerate field
developments with existing infrastructure. Non-probability weighted demand suggests potential for significant upside for new tree orders and deliveries in the event that our adjusted numbers prove
conservative. We like exposure to NOV, FTI, and OIS for offshore exposure, with a bias to get more constructive on OII and DRQ.
May 31, 2016 2

Coverage Breakdown, Preference Ranking, & Price Target Changes
Sources: KLR Group, LLC Forecasts; Factset
Company Ticker Rating
B/S & Covenant
Risk
Market Cap.
(MM)
Last
Close
Price
Current
Price
Target
Previous
Price
Target Upside North America International Business Mix
National Oilwell Varco NOV Buy No $ 12,300 $ 32.62 $ 52.00 $ 52.00 59% Mixed Mixed Rig Equipment, Diversified Equipment, Diversified Servies, Oilfield Consumables
Nabors Industries NBR Buy No $ 2,557 $ 9.07 $ 14.00 $ 14.00 54% Mixed Mixed Land Contract Driller
Superior Energy SPN Buy No $ 2,644 $ 17.46 $ 28.00 $ 28.00 60% Majority Minority Diversified Services
Forum Energy FET Buy No $ 1,564 $ 17.15 $ 22.00 $ 22.00 28% Majority Minority Diversified Equipment
Halliburton HAL Buy No $ 36,588 $ 42.58 $ 52.00 $ 52.00 22% Majority Minority Diversified Services & Equipment
Oil States OIS Buy No $ 1,691 $ 32.92 $ 45.00 $ 45.00 37% Mixed Mixed Offshore & Onshore Services & Equipment
Core Labs CLB Buy No $ 5,364 $122.25 $ 166.00 $ 166.00 36% Mixed Mixed Reservoir Analysis, Oilfield Consumables
Transocean RIG Buy Yes $ 3,597 $ 9.85 $ 19.00 $ 19.00 93% Mixed Mixed Offshore Driller
Frank's International FI Buy No $ 2,474 $ 15.92 $ 22.00 $ 22.00 38% Mixed Mixed Offshore Services & Equipment
Schlumberger SLB Buy No $ 107,361 $ 77.17 $ 106.00 $ 106.00 37% Minority Majority Diversified Services & Equipment, Subsea Equipment (CAM)
Ensco ESV Buy No $ 2,932 $ 9.73 $ 23.00 $ 22.00 136% Mixed Mixed Offshore Driller
Noble Corp. NE Buy No $ 2,058 $ 8.46 $ 20.00 $ 20.00 136% Mixed Mixed Offshore Driller
Patterson-UTI PTEN Buy No $ 2,741 $ 18.60 $ 27.00 $ 27.00 45% Majority -- Land Contract Driller
FMC Technologies FTI Buy No $ 6,112 $ 27.00 $ 43.00 $ 43.00 59% Mixed Mixed Offshore & Onshore Equipment
Rowan Companies RDC Buy No $ 2,118 $ 16.88 $ 25.00 $ 25.00 48% Mixed Mixed Offshore Driller
Helmerich & Payne HP Buy No $ 6,546 $ 60.59 $ 83.00 $ 83.00 37% Majority Minority Land Contract Driller
Atwood Oceanics ATW Buy Yes $ 684 $ 10.56 $ 16.00 $ 12.75 52% Mixed Mixed Offshore Driller
Diamond Offshore DO Buy No $ 3,446 $ 25.12 $ 33.00 $ 28.00 31% Mixed Mixed Offshore Driller
Flotek Industries FTK Buy No $ 634 $ 11.77 $ 15.00 $ 15.00 27% Majority Minority Oilfield Consumables
Newpark Resources NR Buy Yes $ 381 $ 4.53 $ 7.00 $ 7.00 55% Mixed Mixed Offshore & Onshore Services & Equipment
Weatherford WFT Accumulate Yes $ 4,980 $ 5.56 $ 7.25 $ 7.25 30% Mixed Mixed Diversified Services & Equipment
Dril-Quip DRQ Accumulate No $ 2,334 $ 61.49 $ 70.00 $ 70.00 14% Mixed Mixed Subsea Equipment, Rig Equipment
Oceaneering Intl OII Accumulate No $ 3,286 $ 33.51 $ 40.00 $ 40.00 19% Mixed Mixed Offshore Services & Equipment
US Silica SLCA Hold No $ 1,841 $ 28.99 $ 26.00 $ 26.00 (10%) Majority -- North American Proppant
Carbo Ceramics CRR Hold Yes $ 286 $ 12.20 $ 12.75 $ 12.75 5% Majority -- North American Proppant
Fairmount Santrol FMSA Hold Yes $ 867 $ 5.37 $ 3.90 $ 3.90 (27%) Majority -- North American Proppant
Seadrill SDRL Reduce Yes $ 1,639 $ 3.27 $ 3.00 $ 3.25 (8%) Mixed Mixed Offshore Driller
C&J Energy Services CJES Hold Yes $ 60 $ 0.50 $ 0.50 $ 0.50 0% Majority -- Pressure Pumping, Oilfield Services
Pacific Drilling PACD Hold Yes $ 86 $ 4.07 $ 8.65 $ 10.10 113% Mixed Mixed Offshore Driller
TopTierMiddleTierBottomTier
May 31, 2016 3

Offshore Stocks May Find a Base & Reverse Some Relative Outperformance
(68%)
121%
(100%)
(75%)
(50%)
(25%)
-
25%
50%
75%
100%
125%
150%
175%
200%
225%
250%
275%
300%
325%
350%
375%
400%
425%
Jan-06
Jul-06
Jan-07
Jul-07
Jan-08
Jul-08
Jan-09
Jul-09
Jan-10
Jul-10
Jan-11
Jul-11
Jan-12
Jul-12
Jan-13
Jul-13
Jan-14
Jul-14
Jan-15
Jul-15
Jan-16
IndexedSharePerformance(%)
Offshore Drillers Offshore Equipment/Services
(67%)
(50%)
(80%)
(70%)
(60%)
(50%)
(40%)
(30%)
(20%)
(10%)
-
10%
20%
30%
40%
50%
60%
Jan-14
Mar-14
May-14
Jul-14
Sep-14
Nov-14
Jan-15
Mar-15
May-15
Jul-15
Sep-15
Nov-15
Jan-16
Mar-16
May-16
IndexedSharePerformance(%)
Offshore Onshore
Note: Offshore index includes FI, OIS, FTI, OII, DRQ, SDRL, RIG, ESV, DO, NE, RDC, ATW, and PACD equally
weighted performance from 1/1/14 to 5/27/16. Onshore index includes SLCA, CRR, HP, NBR, and PTEN equally
weighted performance from 1/1/14 to 5/27/16
Source: Factset
Note: Offshore Drillers index includes RIG, ESV, DO, NE, RDC, and ATW equally weighted performance from
1/1/06 to 12/12/15. Offshore Equipment/Services index includes OIS, FTI, OII, and DRQ equally weighted
performance from 1/1/06 to 12/12/15
May 31, 2016 4

Coverage Universe Risk/Reward Map
Source: Factset; KLR Group, LLC Forecasts
Buy
Accumulate
Hold
Reduce
Note: PACD falls outside the parameters of the graph
ACCUMULATE
BUY
SLB
HAL

CLB
FI
NR
OIS
FTK

NOVFTI

FET

RIG
DO
RDC
ATW

SPN

WFT

OII
DRQ

SLCA
CRR

SDRL

HOLD
REDUCE
(25%)
(20%)
(15%)
(10%)
(5%)
-
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
55%
60%
65%
70%
75%
80%
85%
90%
95%
100%
3%
4%
5%
6%
7%
8%
9%
10%
11%
12%
13%
14%
15%
16%
17%
18%
19%
20%
21%
22%
23%
24%
25%
26%
27%
Upside(%)
WACC (%)
May 31, 2016 5

Industry & Company Comparable Valuation Analysis
Source: Factset, KLR Group, LLC Estimates; Company Filings/Disclosures
Note: Currency in ($ US), unlessotherwise indicated
Company Ticker
5/29/16
Price Rating
KLR
Target Upside WACC
Mkt Cap
(MM)
EV
(MM)
2015 2016 2017 2015 2016 2017 2015 2016 2017 2015 2016 2017 2015 2016 2017
Diversified Oilfield Services
Schlumberger SLB $77.17 B $106.00 37% 9% $107,361 $121,241 $3.37 $1.37 $3.22 22.9X 56.3X 24.0X 12.3X 17.4X 11.5X 1.9X 3.1X 2.0X 5% 7% 7%
Halliburton HAL $42.58 B $52.00 22% 9% $36,588 $37,829 $1.56 ($0.07) $1.33 27.3X -- 32.0X 9.1X 16.5X 9.7X 3.7X 5.6X 3.3X 14% 21% 24%
Weatherford WFT $5.56 A $7.25 30% 16% $4,980 $11,527 ($0.33) ($0.89) ($0.08) -- -- -- 8.8X 26.7X 8.4X 5.7X 16.4X 4.7X 61% 53% 52%
25.1X 56.3X 28.0X 10.1X 20.2X 9.9X 3.8X 8.4X 3.4X 26% 27% 27%
Mid/Small Cap Oilfield Services
Core Laboratories CLB $122.25 B $166.00 36% 3% $5,364 $5,683 $3.17 $1.65 $2.66 38.6X 74.1X 46.0X 26.3X 45.6X 31.4X 2.0X 2.9X 2.0X 7% 6% 6%
Franks International FI $15.92 B $22.00 38% 9% $2,474 $2,852 $0.62 $0.04 $0.41 25.7X -- 38.8X 9.0X 23.1X 12.7X 0.0X 0.0X 0.0X (21%) (20%) (15%)
Superior Energy Services SPN $17.46 B $28.00 60% 15% $2,644 $3,697 ($1.29) ($2.01) ($0.61) -- -- -- 8.8X 21.9X 7.6X 3.9X 9.6X 3.3X 29% 29% 28%
Oil States International OIS $32.92 B $45.00 37% 11% $1,691 $1,654 $0.84 ($1.05) ($0.20) 39.2X -- -- 8.5X 43.1X 16.7X 0.7X 2.5X 2.7X 6% 3% 14%
Flotek Industries FTK $11.77 B $15.00 27% 15% $634 $648 ($0.02) ($0.23) $0.81 -- -- 14.5X 53.0X -- 7.7X 4.1X (17.1X) 1.0X 7% 11% 12%
Newpark Resources NR $4.53 B $7.00 55% 18% $381 $498 ($0.19) ($0.45) $0.15 -- -- 30.2X 16.1X -- 8.0X 5.8X -- 2.7X 14% 1% 4%
C&J Services CJES $0.50 H $0.50 -- 37% $60 $1,255 ($1.85) ($2.46) ($0.50) -- -- -- 25.9X -- 5.4X 23.9X -- 5.5X 90% 99% 93%
34.5X 74.1X 32.4X 21.1X 33.4X 12.8X 5.8X (0.4X) 2.5X 19% 18% 20%
Proppant
US Silica SLCA $28.99 H $26.00 (10%) 13% $1,841 $1,406 $0.08 ($0.68) $0.36 -- -- 80.5X 15.0X -- 13.4X 5.2X -- 4.7X 14% 5% 10%
Carbo Ceramics CRR $12.20 H $12.75 5% 19% $286 $297 ($1.89) ($3.30) ($1.95) -- -- -- -- -- -- (10.3X) (1.1X) (5.8X) 3% 3% 18%
Fairmount FMSA $5.37 H $3.90 (27%) 21% $867 $1,691 $0.06 ($0.30) $0.09 89.5X -- 59.7X 13.3X 30.7X 10.0X 9.7X 22.1X 7.2X 63% 64% 67%
89.5X -- 70.1X 14.1X 30.7X 11.7X 1.6X 10.5X 2.0X 27% 24% 32%
Oilfield Equipment & Manufacturers
National Oilwell Varco NOV $32.62 B $52.00 59% 11% $12,300 $13,016 $2.79 ($0.82) $0.34 11.7X -- 95.9X 5.5X 43.8X 12.7X 1.7X 11.3X 3.3X 14% 6% 7%
FMC Technologies FTI $27.00 B $43.00 59% 10% $6,112 $7,180 $2.23 $1.08 $1.43 12.1X 25.0X 18.9X 6.9X 10.6X 9.6X 1.1X 1.8X 1.7X 3% (4%) (9%)
Oceaneering OII $33.51 A $40.00 19% 11% $3,286 $3,851 $2.86 $0.90 $1.10 11.7X 37.2X 30.5X 5.7X 9.8X 9.0X 1.2X 2.1X 1.9X 11% 6% 7%
Dril-Quip DRQ $61.49 A $70.00 14% 10% $2,334 $1,900 $4.87 $2.58 $2.00 12.6X 23.8X 30.7X 7.0X 11.9X 14.8X -- -- -- (20%) (33%) (35%)
Forum Energy FET $17.15 B $22.00 28% 13% $1,564 $1,768 $0.42 ($0.89) ($0.26) 40.8X -- -- 12.1X -- 33.0X 2.7X -- 7.4X 16% 10% 11%
17.8X 28.7X 44.0X 7.4X 19.0X 15.8X 1.3X 3.8X 2.8X 5% (3%) (4%)
Offshore Contract Drillers
Transocean RIG $9.85 B $19.00 93% 17% $3,597 $9,385 $3.86 $0.10 ($0.28) 2.6X 99.8X -- 3.0X 6.9X 8.1X 2.7X 5.5X 6.0X 66% 63% 62%
Diamond Offshore DO $25.12 B $33.00 31% 12% $3,446 $5,098 $3.09 $1.76 $0.51 8.1X 14.3X 49.4X 4.8X 6.4X 7.9X 2.1X 2.8X 3.4X 42% 39% 32%
Noble NE $8.46 B $20.00 136% 15% $2,058 $6,654 $2.62 $0.07 ($0.53) 3.2X -- -- 4.0X 7.1X 8.8X 2.7X 4.4X 5.5X 60% 55% 55%
ENSCO ESV $9.73 B $23.00 136% 15% $2,932 $7,263 $4.56 $1.77 $1.08 2.1X 5.5X 9.0X 3.6X 5.4X 6.6X 2.9X 3.9X 4.8X 63% 66% 62%
Rowan RDC $16.88 B $25.00 48% 13% $2,118 $4,269 $3.53 $1.79 ($0.43) 4.8X 9.4X -- 4.1X 5.4X 8.4X 2.6X 3.4X 5.2X 52% 37% 31%
Seadrill SDRL $3.27 R $3.00 (8%) 26% $1,639 $10,476 $2.00 $0.49 ($0.15) 1.6X 6.6X -- 4.5X 6.3X 9.5X 4.7X 6.0X 9.3X 92% 81% 91%
Atwood Oceanics ATW $10.56 B $16.00 52% 23% $684 $1,826 $7.74 $4.19 $0.08 1.4X 2.5X -- 2.3X 3.3X 6.9X 2.2X 2.6X 5.5X 86% 60% 54%
Pacific Drilling PACD $4.07 H $8.65 113% 50% $86 $2,730 $0.82 ($1.58) ($9.42) 4.9X -- -- 4.6X 7.4X 17.9X 4.7X 8.1X 19.0X 101% 93% 82%
3.6X 23.0X 29.2X 3.9X 6.0X 9.3X 3.1X 4.6X 7.3X 70% 62% 59%
Onshore Drilling
Helmerich & Payne HP $60.59 B $83.00 37% 10% $6,546 $6,246 $2.99 ($1.18) ($0.65) 20.3X -- -- 5.7X 15.9X 13.6X 0.5X 1.4X 1.2X (3%) (6%) (5%)
Patterson-UTI Energy PTEN $18.60 B $27.00 45% 12% $2,741 $3,254 ($0.74) ($2.37) ($1.24) -- -- -- 5.7X 16.7X 7.7X 1.5X 4.3X 2.0X 23% 18% 10%
Nabors Industries NBR $9.07 B $14.00 54% 15% $2,557 $5,833 ($0.22) ($1.53) ($0.33) -- -- -- 5.1X 11.6X 8.0X 3.2X 7.1X 4.9X 58% 55% 54%
20.3X -- -- 5.5X 14.7X 9.8X 1.7X 4.3X 2.7X 26% 22% 20%
KLR EPS P/E EV/EBITDA Total Debt/EBITDA Net Debt/EV
May 31, 2016 6

KLR EPS Estimates vs. Consensus (continued)
Source: Factset, Company Filings; KLR Group, LLC Forecasts
Company Category 2013 2014 2015E 2016E 2017E 1Q15 2Q15 3Q15 4Q15E 1Q16E 2Q16E 3Q16E 4Q16E 1Q17E 2Q17E 3Q17E 4Q17E
Offshore Contract Drillers
Seadrill EPS $3.03 $2.69 $2.00 $0.49 ($0.15) $0.48 $0.77 $0.21 $0.54 $0.26 $0.13 $0.06 $0.04 ($0.04) ($0.06) ($0.05) ($0.00)
Prior EPS $3.03 $2.69 $2.00 $1.03 $0.56 $0.48 $0.77 $0.21 $0.54 $0.35 $0.28 $0.21 $0.19 $0.10 $0.10 $0.13 $0.23
Consensus EPS $1.29 $0.20 $0.38 $0.36 $0.27 $0.23 $0.13 $0.07 $0.03 $0.01
Consensus EPS-High $2.00 $0.78 $0.50 $0.49 $0.38 $0.41 $0.25 $0.14 $0.13 $0.23
Consensus EPS-Low $0.41 ($1.14) $0.28 $0.19 ($0.02) ($0.07) $0.06 $0.00 ($0.12) ($0.16)
Transocean EPS $3.73 $5.03 $3.86 $0.10 ($0.28) $1.10 $1.12 $0.85 $0.78 $0.36 ($0.04) ($0.13) ($0.09) ($0.07) ($0.06) ($0.11) ($0.05)
Prior EPS $3.73 $5.03 $3.86 $0.14 ($0.40) $1.10 $1.12 $0.85 $0.78 $0.36 ($0.03) ($0.11) ($0.09) ($0.08) ($0.07) ($0.15) ($0.11)
Consensus EPS $0.32 ($0.63) $0.02 ($0.00) ($0.03) ($0.05) ($0.05) ($0.23) ($0.26)
Consensus EPS-High $2.84 $1.82 $0.69 $0.76 $0.63 $0.42 $0.44 $0.48 $0.48
Consensus EPS-Low ($0.52) ($1.71) ($0.31) ($0.31) ($0.35) ($0.23) ($0.26) ($0.63) ($0.59)
ENSCO EPS $6.16 $6.21 $4.56 $1.77 $1.08 $1.38 $1.16 $1.09 $0.92 $0.75 $0.46 $0.29 $0.34 $0.26 $0.27 $0.27 $0.28
Prior EPS $6.16 $6.21 $4.56 $1.88 $1.61 $1.38 $1.16 $1.09 $0.92 $0.75 $0.47 $0.33 $0.40 $0.33 $0.37 $0.43 $0.48
Consensus EPS $1.93 $0.80 $0.56 $0.38 $0.31 $0.28 $0.24 $0.20 $0.10
Consensus EPS-Low $1.25 ($0.15) $0.43 $0.25 $0.19 $0.06 ($0.05) ($0.07) ($0.09)
Diamond Offshore EPS $4.77 $3.17 $3.09 $1.76 $0.51 $0.49 $0.66 $1.05 $0.88 $0.64 $0.42 $0.38 $0.33 $0.21 $0.16 $0.11 $0.03
Prior EPS $4.77 $3.17 $3.09 $1.82 $0.23 $0.49 $0.66 $1.05 $0.88 $0.64 $0.42 $0.41 $0.36 $0.12 $0.08 $0.04 ($0.02)
Consensus EPS $1.17 $0.88 $0.19 $0.20 $0.31 $0.34 $0.24 $0.22 $0.04
Consensus EPS-Low $0.15 ($0.08) ($0.07) ($0.10) $0.00 $0.10 $0.01 ($0.05) ($0.25)
Noble EPS $2.92 $3.04 $2.62 $0.07 ($0.53) $0.72 $0.66 $0.72 $0.52 $0.31 $0.03 ($0.13) ($0.13) ($0.13) ($0.27) ($0.18) $0.05
Prior EPS $2.92 $3.04 $2.62 $0.11 ($0.17) $0.72 $0.66 $0.72 $0.52 $0.31 $0.05 ($0.12) ($0.13) ($0.12) ($0.20) ($0.11) $0.25
Consensus EPS $0.71 ($0.42) $0.18 $0.09 $0.07 $0.06 ($0.07) ($0.17) ($0.24)
Rowan EPS $1.96 $2.11 $3.53 $1.79 ($0.43) $0.99 $0.70 $0.89 $0.95 $0.99 $0.47 $0.12 $0.21 $0.15 ($0.12) ($0.11) ($0.36)
Prior EPS $1.96 $2.11 $3.53 $2.52 $0.74 $0.99 $0.70 $0.89 $0.95 $0.99 $0.61 $0.41 $0.51 $0.43 $0.22 $0.14 ($0.05)
Consensus EPS $2.69 $0.40 $0.73 $0.50 $0.59 $0.49 $0.19 ($0.04) ($0.25)
Consensus EPS-Low $1.66 ($0.90) $0.50 $0.23 $0.28 $0.15 ($0.07) ($0.45) ($0.75)
Atwood Oceanics EPS $5.32 $4.89 $7.74 $4.19 $0.08 $1.71 $1.97 $1.73 $2.32 $1.32 $1.76 $0.57 $0.53 $0.25 ($0.19) ($0.04) $0.06
Prior EPS $5.32 $4.89 $7.74 $4.24 ($0.53) $1.71 $1.97 $1.73 $2.32 $1.32 $1.76 $0.61 $0.54 $0.05 ($0.31) ($0.18) ($0.09)
Consensus EPS $4.55 ($0.50) $0.88 $0.73 $0.06 ($0.17) ($0.10) ($0.27)
Consensus EPS-High $5.66 $1.15 $1.37 $1.07 $0.56 $0.38 $0.33 $0.17
Consensus EPS-Low $3.19 ($2.08) $0.61 $0.29 ($0.18) ($0.80) ($0.44) ($0.78)
Pacific Drilling EPS $0.42 $0.86 $0.82 ($1.58) ($9.42) $0.24 $0.22 $0.19 $0.16 ($0.01) ($1.00) ($1.56) ($2.47) ($2.21) ($2.49) ($2.51) ($2.21)
Prior EPS $0.42 $0.86 $0.82 ($0.50) ($0.71) $0.24 $0.22 $0.19 $0.16 ($0.01) ($0.10) ($0.14) ($0.25) ($0.18) ($0.19) ($0.18) ($0.15)
Consensus EPS ($0.51) ($1.49) ($0.10) ($0.13) ($0.23) ($0.28) ($0.35) ($0.38) ($0.38)
Consensus EPS-High ($0.23) ($0.88) ($0.02) ($0.06) ($0.08) ($0.25) ($0.27) ($0.26) ($0.21)
May 31, 2016 7

RIG
DO
NE
ESV
RDC
SDRL
ATW
PACD
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
15% 20% 25% 30% 35% 40% 45% 50%
NetDebt/EV
Net Debt / Capital
Looking For Exposure in Mid Tier of Financial Leverage Within Offshore Driller Group
Source: Factset, Company Filings; KLR Group, LLC Forecasts
May 31, 2016 8

Mid-Cycle Valuations Track Average Returns on Assets in a Cyclical Business & Variable Returns
Source: KLR Group, LLC Forecasts; Factset
Return on Assets 10 Year Range vs. KLR “Normal Year” Forecasts
23.2%
16.6%
12.4% 11.6% 11.6% 11.6% 11.2% 10.6% 10.2% 10.1% 9.8% 9.8% 9.3% 8.8% 8.7% 8.6%
7.5% 7.1%
6.1% 5.7% 5.0% 4.6% 4.3% 4.0% 3.9% 3.7% 3.3% 3.1%
1.3%
-30%
-20%
-10%
0%
10%
20%
30%
40%
CLB
FI
DO
ATW
CRR
DRQ
SLB
FMSA
ESV
HAL
NE
OII
PTEN
HP
FTI
CJES
OIS
NOV
RDC
SLCA
FET
SPN
RIG
NBR
SDRL
FTK
WFT
NR
PACD
ROA(%)
10yr Range KLR "Normal Period" Returns
May 31, 2016 9

Potential Upside from De-Risking & Re-Rating
May 31, 2016 10

$37
$82
$57
$119
$52
$25
$193
$97
$57
$44
$31
$34
$50
$22
$32
$11
$75
$24
$33
$48
$16
$14
$32
$41
$41
$56
$29
$100
$14
$-
$10
$20
$30
$40
$50
$60
$70
$80
$90
$100
$110
$120
$130
$140
$150
$160
$170
$180
$190
$200
$210
SLCA
DRQ
HAL
SLB
OII
FI
CLB
HP
OIS
DO
FET
PTEN
FTI
FTK
RDC
FMSA
NOV
NBR
CRR
SPN
WFT
NR
NE
ESV
RIG
ATW
SDRL
PACD
CJES
Target Unrisked
Offshore Drillers Have Largest Relative Upside Profile Versus De-risked Valuations
Source: Factset
28%
33%
34%
54%
55%
57%
58%
60%
73%
75%
81%
83%
85%
87%
90%
105%
130%
165%
170%
175%
179%
204%
278%
316%
316%
430%
772%
2357%
2700%
0% 500% 1000% 1500% 2000% 2500% 3000%
SLCA
DRQ
HAL
SLB
OII
FI
CLB
HP
OIS
DO
FET
PTEN
FTI
FTK
RDC
FMSA
NOV
NBR
CRR
SPN
WFT
NR
NE
ESV
RIG
ATW
SDRL
PACD
CJES
Upside to Unrisked Target
May 31, 2016 11

Current Price Targets Versus De-risked Valuations
Source: Factset
$37
$82
$57
$119
$52
$25
$193
$97
$57
$44
$31
$34
$50
$22
$32
$11
$75
$24
$33
$48
$16
$14
$32
$41
$41
$56
$29
$100
$14
$26
$70
$52
$106
$40
$22
$166
$83
$45
$33
$22
$27
$43
$15
$25
$4
$52
$14
$13
$28
$7
$7
$20
$23
$19
$16
$3
$9
$1
$-
$10
$20
$30
$40
$50
$60
$70
$80
$90
$100
$110
$120
$130
$140
$150
$160
$170
$180
$190
$200
$210
SLCA
DRQ
HAL
SLB
OII
FI
CLB
HP
OIS
DO
FET
PTEN
FTI
FTK
RDC
FMSA
NOV
NBR
CRR
SPN
WFT
NR
NE
ESV
RIG
ATW
SDRL
PACD
CJES
TargetPrices
Target Unrisked Current Target
May 31, 2016 12

De-Risked: Coverage Risk-Reward Map
Source: Factset
HAL
SLB FI
OISDO
FET FTI FTKRDC

NOV

SPN
NR
NE
ESV RIG
ATW
DRQ
OII

WFT

SLCA

FMSA

CRR

25%
50%
75%
100%
125%
150%
175%
200%
225%
250%
275%
300%
325%
350%
375%
400%
425%
450%
7.5% 8.0% 8.5% 9.0% 9.5% 10.0% 10.5% 11.0% 11.5% 12.0% 12.5%
Upside(%)
WACC (%)
May 31, 2016 13

Tighter Energy High Yield Spreads May Signal A Positive For High Leverage Offshore Drillers
Source: Factset
50
55
60
65
70
75
80
85
90
95
Mar-15
Apr-15
May-15
Jun-15
Jul-15
Aug-15
Sep-15
Oct-15
Nov-15
Dec-15
Jan-16
Feb-16
Mar-16
Bank of America/Merrill Lynch US High Yield Energy Index
May 31, 2016 14

Significant Offshore Driller Short Positions May Create “Short Squeeze” Rallies
Source: Factset
12.112.1
11.311.0
9.8
9.1
8.5
6.7
6.3
5.8
5.3
4.9 4.7 4.6 4.6
4.2 4.2 3.9
3.5 3.4
3.2
2.6
2.3 2.2 2.1 2.0
1.3 1.1 0.9
0
2
4
6
8
10
12
14
0%
5%
10%
15%
20%
25%
30%
35%
40%
FMSA
FTK
HP
CRR
CLB
FI
FET
DRQ
NOV
DO
OII
SLCA
RDC
ATW
RIG
PTEN
CJES
NR
SDRL
NE
OIS
FTI
SPN
WFT
HAL
SLB
ESV
NBR
PACD
DaysCoverage(3MonthAvg.DailyTradingVol.)
ShortInterest%ofSharesOutstanding
Short Interest Days Coverage
May 31, 2016 15

Commodity & Macro Drivers
May 31, 2016 16

KLR Oil & Natural Gas Price Forecast Imbedded in Our Forecast
Sources: Bloomberg; KLR Group, LLC Forecasts
2014 2015 1Q16 2Q16 3Q16 4Q16 2016 2017 2018 2019 2020
KLR Group $99.55A $53.71A $35.40A $41.50 $46.50 $51.50 $43.73 $68.25 $85.00 $85.00 $85.00
Futures Market $46.74 $50.59 $51.46 $46.05 $52.83 $54.56 $56.50 $58.40
Consensus Forecast $41.00 $44.50 $48.50 $42.34 $55.00 $62.00 $65.00 $67.50
2014 2015 1Q16 2Q16 3Q16 4Q16 2016 2017 2018 2019 2020
KLR Group $93.00A $48.86A $33.73A $40.00 $45.00 $50.00 $42.18 $66.25 $82.00 $82.00 $82.00
Futures Market $45.67 $50.19 $51.13 $45.18 $51.68 $52.46 $53.61 $54.91
1
Based on daily average price
2014 2015 1Q16 2Q16 3Q16 4Q16 2016 2017 2018 2019 2020
KLR Group $4.41A $2.67A $2.09A $2.00 $2.35 $2.75 $2.30 $3.70 $4.00 $4.00 $4.00
Futures Market $1.94 $2.23 $2.67 $2.23 $2.98 $3.01 $3.02 $3.09
2
Based on monthly last day settlement price
NYMEX WTI Crude Oil ($/Bbl)1
Brent Crude Oil ($/Bbl)1
NYMEX Natural Gas ($/Mmbtu)
2
May 31, 2016 17

Mkt Share Quest Leaves OPEC Spare Capacity Low, Potentially Headed Lower as Iran Ramps
Source: IEA
Non-OPEC Supply Revisions Boost Call Spare Capacity: Bullish
$15
$35
$55
$75
$95
$115
$135
1%
2%
3%
4%
5%
6%
7%
8%
9%
10%
11%
Jan-01
Jan-02
Jan-03
Jan-04
Jan-05
Jan-06
Jan-07
Jan-08
Jan-09
Jan-10
Jan-11
Jan-12
Jan-13
Jan-14
Jan-15
Jan-16
BrentCrudeOilPrice($/bbl)
OPECSpareCapacity%ofGlobalSupply
OPEC Spare Capacity Brent Crude Price
May 31, 2016 18

$30
$50
$70
$90
$110
$130
$150
48
49
50
51
52
53
54
55
56
57
58
Jul-08
Oct-08
Jan-09
Apr-09
Jul-09
Oct-09
Jan-10
Apr-10
Jul-10
Oct-10
Jan-11
Apr-11
Jul-11
Oct-11
Jan-12
Apr-12
Jul-12
Oct-12
Jan-13
Apr-13
Jul-13
Oct-13
Jan-14
Apr-14
Jul-14
Oct-14
Jan-15
Apr-15
Jul-15
Oct-15
Jan-16
Apr-16
ActualBrentCrudeOilPrice($/bbl)
AnnualNon-OPECSupplyForecast(mmb/d)
Vintage of Forecast
2009 IEA Supply 2010 IEA Supply 2011 IEA Supply 2012 IEA Supply 2013 IEA Supply
2014 IEA Supply 2015 IEA Supply 2016 IEA Supply Brent Crude
Negative IEA Non-OPEC Supply Revision Suggest Markets Move Toward Balance
Source: IEA
Negative Non-OPEC Supply Revisions: Bullish for Oil
Note: We maintain an
extensive catalogue of the
IEA’s monthly changes to its
supply and demand
forecasts. Annual estimates
are typically initiated the
summer before the year
tracked and end the summer
after the tracking year has
ended.
Recent history sees negative
revisions for non-OPEC oil supply as
a leading indicator of oil price
recovery.
Note: Indonesia rejoined OPEC, so it has been stripped from historical data for comparability
May 31, 2016 19

$30
$50
$70
$90
$110
$130
$150
83
84
85
86
87
88
89
90
91
92
93
94
95
96
Jul-08
Oct-08
Jan-09
Apr-09
Jul-09
Oct-09
Jan-10
Apr-10
Jul-10
Oct-10
Jan-11
Apr-11
Jul-11
Oct-11
Jan-12
Apr-12
Jul-12
Oct-12
Jan-13
Apr-13
Jul-13
Oct-13
Jan-14
Apr-14
Jul-14
Oct-14
Jan-15
Apr-15
Jul-15
Oct-15
Jan-16
Apr-16
ActualBrentCrudeOilPrice($/bbl)
GlobalDemandForecast(mmb/d)
Vintage of Forecast
2009 IEA Demand 2010 IEA Demand 2011 IEA Demand 2012 IEA Demand 2013 IEA Demand
2014 IEA Demand 2015 IEA Demand 2016 IEA Demand Brent Crude
IEA Global Demand Forecast Stable, But Economic Growth Concerns May Leave Negative Bias
Source: IEA
Negative Global Demand Revisions : Bearish for Oil
May 31, 2016 20

Offshore Driller Dayrates & Fleet Breakdowns
May 31, 2016 21

Dayrate Forecast: Floater Dayrate Recover With Demand in 2018
Normalized dayrates assumed
for 10% capital returns
Transitional to
normalized dayrates
Recovery begins as rig attrition and
demand improvement balance the market
Dayrates continue to search for a bottom,
forcing lower quality rigs out of the market
Source: KLR Group, LLC Forecast
Floaters ($kpd) 2Q16E 3Q16E 4Q16E 1Q17E 2Q17E 3Q17E 4Q17E 1Q18E 2Q18E 3Q18E 4Q18E 1Q19E 2Q19E 3Q19E 4Q19E 1Q20E 2Q20E 3Q20E 4Q20E
6G HDHE 240 235 230 240 275 300 325 375 425 475 525 525 525 530 530 530 530 530 530
Previous Forecast 310 305 300 310 345 380 415 450 485 520 555 550 545 540 535 530 530 530 530
6G High 225 220 215 225 260 285 310 360 410 460 510 510 510 515 515 515 515 515 515
6G Low 220 215 210 220 255 290 325 360 395 430 465 470 475 485 490 495 495 495 495
5G HDHE 190 190 185 190 220 240 260 300 340 380 420 410 400 385 375 365 365 365 365
5G High 180 175 170 180 210 230 250 290 330 370 410 390 375 360 345 330 330 330 330
5G Low 175 170 170 175 205 230 260 290 315 345 370 350 330 310 285 265 265 265 265
4G HDHE 155 150 115 120 140 150 165 190 215 240 265 250 235 220 210 195 195 195 195
4G High 145 140 110 115 130 145 155 180 205 230 255 240 230 215 205 190 190 190 190
4G Low 140 140 105 110 130 145 165 180 200 215 235 220 205 190 180 165 165 165 165
3G HDHE 125 120 105 110 125 135 145 170 190 215 235 220 205 190 175 160 160 160 160
3G High 115 115 95 100 115 130 140 160 185 205 230 215 200 180 165 150 150 150 150
3G Low 115 110 95 100 115 130 145 160 180 195 210 195 180 165 150 135 135 135 135
May 31, 2016 22

Fragmented market, numbers of newbuilds from higher risk sponsors,
and the need for far large rig attrition/stacking, we see a sloppier jackup
downturn
Dayrate Forecast: Jackup Downturn Prolonged Until 2018
Normalized dayrates
assumed for 10% capital
returns
Transition to
normalized dayrates
Meaningful recovery in dayrates
does not arrive until 2018
Source: KLR Group, LLC Forecast
Jackups ($kpd) 2Q16E 3Q16E 4Q16E 1Q17E 2Q17E 3Q17E 4Q17E 1Q18E 2Q18E 3Q18E 4Q18E 1Q19E 2Q19E 3Q19E 4Q19E 1Q20E 2Q20E 3Q20E 4Q20E
HDHE JU 100 100 100 100 100 110 120 135 150 165 180 180 180 180 180 180 180 180 180
Prem JU 75 75 75 75 75 85 95 110 125 140 155 155 160 160 165 165 165 165 165
High End JU 60 60 60 65 70 75 80 85 90 95 100 105 115 120 130 135 135 135 135
Standard JU 55 55 55 60 65 70 75 80 85 90 95 90 90 85 85 80 80 80 80
Sub-Standard JU 45 45 45 50 55 60 65 65 65 65 65 65 65 60 60 60 60 60 60
Commodity JU 40 40 40 45 50 55 60 60 60 60 60 60 55 55 50 50 50 50 50
Legacy 35 35 35 40 45 50 55 55 55 55 55 55 50 50 45 45 45 45 45
May 31, 2016 23

Company Value Composition – Older Assets Drive Little Value in Our Models
Source: Factset; Company Filings/Disclosures KLR Group, LLC Forecast
2015 Gross Fleet Value Breakdown ($ million) 2015 Gross Fleet Value Breakdown (%)
Ticker Jackups 2G Semis 3G Semis 4G Semis 5G Semis 6G Semis Other Total
ATW $629 - - $13 - $3,132 - $3,775
DO $172 $27 $124 $422 $418 $4,459 - $5,623
ESV $3,241 - $28 - $1,692 $4,160 - $9,121
NE $1,919 - - $131 $330 $5,682 - $8,062
PACD - - - - - $2,570 - $2,570
RDC $2,584 - - - - $2,420 - $5,004
RIG $2,058 - $68 $418 $2,263 $11,361 - $16,166
SDRL $3,978 - - $23 $543 $12,803 - $17,347
TOTAL $14,583 $27 $219 $1,006 $5,245 $46,587 - $67,667
Ticker Jackups 2G Semis 3G Semis 4G Semis 5G Semis 6G Semis Other Total
ATW 17% - - 0% - 83% - 100%
DO 3% 0% 2% 8% 7% 79% - 100%
ESV 36% - 0% - 19% 46% - 100%
NE 24% - - 2% 4% 70% - 100%
PACD - - - - - 100% - 100%
RDC 52% - - - - 48% - 100%
RIG 13% - 0% 3% 14% 70% - 100%
SDRL 23% - - 0% 3% 74% - 100%
TOTAL 22% 0% 0% 1% 8% 69% - 100%
May 31, 2016 24

0%
18%
0%
11%
22%
27%
34%
0%
30%
2%
27%
33%
46%
65%
20%
55%
55%
58%
60%
63%
88%
0% 20% 40% 60% 80% 100%
DO
ESV
ATW
RIG
SDRL
RDC
NE
2016E 2017E 2018E
29%
14%
27%
36%
17%
25%
16%
2%
38%
19%
29%
45%
46%
49%
46%
63%
49%
52%
53%
58%
61%
75%
89%
100%
0% 20% 40% 60% 80% 100%
RIG
PACD
NE
DO
ESV
SDRL
ATW
RDC
2016E 2017E 2018E
Contract Coverage: Less Important Amid Contract Cancellations, Historically a Sign of Earnings Stability
Floater Contract Coverage Jackup Contract Coverage
May 31, 2016 25

Offshore Floater Market
May 31, 2016 26

197 200
212
226
241
258
282
296
312
281
241 240 251
264
271
167 173
181
191
199
211
244
258 262
225
181
188
213
224 230
85%
86% 86% 85%
83% 82%
86% 87%
84%
80%
64%
78%
89% 89%
87%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
-
50
100
150
200
250
300
350
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E
Utilization
NumberofRigs
Market Supply, EOP Contracted / Demand Implied Utilization
Floater Market Balances: Rig Attrition, Cold Stacking, Shallow Demand Tightens Markets
We forecast floater demand to
fall ~20% 2016/2015, without
recovery to 2015 levels until
2019.
We see more material pricing
power emerge as the
utilization of marketed supply
crosses into the 80%+ range.
In our view, operators will
need to offer higher dayrates
and term contracts for
offshore drillers to re-staff
and deploy capital to ready
cold stacked/non marketed
rigs.
Source: IHS Petrodata; Company Disclosuers; KLR Group, LLC Forecast
May 31, 2016 27

Floater Fleet Snapshot: 54 Rigs Uncontracted, Cold Stacked, and Not Marketed May Not Re-Enter Market
Sources: KLR Group, LLC Forecast;
Company Filings/Disclosures; IHS
Petrodata
OPERATOR CONTRACTED FLEET NOT CONTRACTED FLEET NEWBUILDS
Drilling
Enroute
Standby
MovingToLocation
WOW
Yard
Hotstacked
Warmstacked
Other
TOTALCONTRACTED
TOTALUTILIZATION
MARKETEDUTILIZATION
Hotstacked
Warmstacked
Enroute
Standby
MovingToLocation
WOW
Yard
Acceptancetesting
Outofservice
Coldstacked
Other
TOTALNOTCONTRACTED
Marketed-NC
NotMarketed-NC
Contracted
NotContracted
TOTALNEWBUILDS
Onorder
TOTALRIGS
Transocean 20 - 3 - - 1 - 3 - 27 53% 79% - 5 2 - - - - - - 17 - 24 7 17 3 2 5 - 56
Diamond Offshore 9 1 1 - - 1 - - - 12 50% 92% - 1 - - - - - - - 11 - 12 1 11 1 - 1 - 25
Ensco 10 - 1 - - - - - - 11 58% 73% - 4 - - - - - - - 4 - 8 4 4 - 1 1 - 20
Seadrill 16 - 1 - - - 1 1 - 19 83% 95% - - - - 1 - - - - 3 - 4 1 3 - 5 5 2 28
Noble 7 - - - - - - - - 7 44% 58% - 2 1 - 2 - - - - 4 - 9 5 4 - - - - 16
Ocean Rig 6 - - - - 1 - - - 7 64% 64% - 2 2 - - - - - - - - 4 4 - - 3 3 2 14
Saipem 4 - - - - - - 1 - 5 71% 71% - 2 - - - - - - - - - 2 2 - - - - - 7
Maersk Drilling 5 - 1 - - - - - - 6 75% 75% - 2 - - - - - - - - - 2 2 - - - - - 8
Atwood 4 - - - - - - - - 4 80% 80% - 1 - - - - - - - - - 1 1 - - 2 2 - 7
Stena 4 - 2 - - - - - - 6 86% 86% - 1 - - - - - - - - - 1 1 - - 1 1 - 8
Odfjell Drilling 4 - - - - 1 - - - 5 71% 83% - - - - - - - - - 2 - 2 1 1 - - - - 7
Pacific Drilling 3 - 1 - - - - - - 4 57% 57% 1 2 - - - - - - - - - 3 3 - - - - - 7
Schahin - - 1 - - - - - - 1 25% 25% 3 - - - - - - - - - - 3 3 - - - - - 4
Paragon Offshore - - 1 - - - - - - 1 17% 33% 1 1 - - - - 1 - - 2 - 5 2 3 - - - - 6
North Atlantic Drilling 2 - - - - - - - - 2 50% 100% - - - - - - - - - 2 - 2 - 2 - 1 1 - 5
Songa Offshore 5 1 - - - - - - - 6 86% 86% - 1 - - - - - - - - - 1 1 - - - - - 7
Vantage Drilling 1 - - - - - - - - 1 33% 33% - 2 - - - - - - - - - 2 2 - - 2 2 - 5
Awilco Drilling - - 1 - - - - - - 1 50% 50% - 1 - - - - - - - - - 1 1 - - - - - 2
Rowan 2 - 2 - - - - - - 4 100% 100% - - - - - - - - - - - - - - - - - - 4
Frigstad Offshore - - - - - - - - - - 0% 0% - 1 - - - - - - - - - 1 1 - - 2 2 - 3
Songa Opus Offshore Drilling - - 1 - - - - - - 1 50% 50% - 1 - - - - - - - - - 1 1 - - - - - 2
Aban Offshore 1 - - - - - - - - 1 100% 100% - - - - - - - - - - - - - - - - - - 1
Essar Oilfields Services - - - - - - - 1 - 1 100% 100% - - - - - - - - - - - - - - - - - - 1
Other 10 - - - - - - - - 10 42% 56% 1 6 - 1 - - - - - 6 - 14 8 6 - 8 8 2 32
TOTAL COMPETITIVE 113 2 16 - - 4 1 6 - 142 58% 74% 6 35 5 1 3 - 1 - - 51 - 102 51 51 4 27 31 6 275
SPECULATORS/SHIPYARDS
CIMC Raffles Offshore - - - - - - - - - - -- -- - - - - - - - - - - - - - - - 2 2 2 2
Keppel FELS - - - - - - - - - - -- -- - - - - - - - - - - - - - - - 1 1 - 1
PBR / BRAZIL
Odebrecht 4 - 2 - - - - - - 6 86% 86% - 1 - - - - - - - - - 1 1 - - - - 3 7
QGOG Constellation 6 - 2 - - - 1 - - 9 100% 100% - - - - - - - - - - - - - - - - - - 9
Petrobras 1 - 1 - - - - - - 2 50% 50% - 2 - - - - - - - - - 2 2 - 28 - 28 2 32
Odfjell Galvao - - - - - - - - - - -- -- - - - - - - - - - - - - - - - - - 1 -
Etesco 1 - 1 - - - - - - 2 100% 100% - - - - - - - - - - - - - - - - - - 2
Etesco / OAS - - - - - - - - - - -- -- - - - - - - - - - - - - - - - - - 3 -
NOC's
COSL 4 - - 1 - - - - 1 6 55% 55% 2 2 - - - - 1 - - - - 5 5 - - 1 1 - 12
Petroserv 3 - - - - - - - - 3 75% 75% 1 - - - - - - - - - - 1 1 - - - - - 4
IPC 3 - - - - - - - - 3 100% 100% - - - - - - - - - - - - - - - - - - 3
Caspian Drilling 1 - - - - 1 - - - 2 100% 100% - - - - - - - - - - - - - - - 1 1 - 3
Gazflot - - 2 - - - - - - 2 100% 100% - - - - - - - - - - - - - - - - - - 2
ONGC 1 - - - - 1 - - - 2 100% 100% - - - - - - - - - - - - - - - - - - 2
KNOC - - - - - - - 1 - 1 100% 100% - - - - - - - - - - - - - - - 1 1 - 2
PetroSaudi - - 1 - - - - - - 1 100% 100% - - - - - - - - - - - - - - - - - - 1
SOCAR - - - - - - - - - - 0% -- - - - - - - - - 2 1 - 3 - 3 - - - - 3
North Sea Rigs - - - - - - - - - - -- -- - - - - - - - - - - - - - - - 3 3 - 3
Arktikmor - - - - - - - - - - 0% 0% - 1 - - - - - - - - - 1 1 - - - - - 1
TOTAL OTHER 24 - 9 1 - 2 1 1 1 39 75% 80% 3 6 - - - - 1 - 2 1 - 13 10 3 28 9 37 11 89
TOTAL FLEET 137 2 25 1 - 6 2 7 1 181 61% 75% 9 41 5 1 3 - 2 - 2 52 - 115 61 54 32 36 68 17 364
NOC/NOCSponsored/SpeculatorsCompetitiveOffshoreDrillers
May 31, 2016 28

Regional View of Floater Fleet – Lower Spec. Assets Show Lower Utilization
Sources: KLR Group, LLC Forecast; Company Filings/Disclosures; IHS Petrodata
6G 5G 4G 3G 2G Total
C NC Util. C NC Util. C NC Util. C NC Util. C NC Util. C NC Util. Total
US GOM 34 10 77% 2 1 67% - 1 -- - - -- - 5 -- 36 17 68% 53
S America 30 2 94% 2 2 50% 1 - 100% 3 2 60% 5 2 71% 41 8 84% 49
NW Europe 11 5 69% 3 2 60% 6 - 100% 9 8 53% 4 5 44% 33 20 62% 53
W Africa 21 9 70% - 6 -- - - -- - 1 -- - 2 -- 21 18 54% 39
SE Asia 3 3 50% 1 4 20% - 4 -- 1 3 25% 4 2 67% 9 16 36% 25
Far East 3 3 50% 1 - 100% 1 - 100% 4 2 67% 1 1 50% 10 6 63% 16
Med/Black Sea 3 3 50% 1 1 50% - - -- 1 2 33% - 4 -- 5 10 33% 15
Aus/NZ 1 - 100% 1 - 100% 1 - 100% - - -- 2 1 67% 5 1 83% 6
C America 1 5 17% - 8 -- - - -- 1 - 100% 1 - 100% 3 13 19% 16
Indian Ocean 1 - 100% - - -- 1 - 100% 3 - 100% 1 - 100% 6 - 100% 6
Caspian 1 - 100% 1 - 100% 1 - 100% 1 3 25% - - -- 4 3 57% 7
Mexico 4 - 100% - - -- - - -- - - -- - - -- 4 - 100% 4
Canada East 3 - 100% - - -- - - -- 1 - 100% - - -- 4 - 100% 4
Middle East - - -- - - -- - - -- - 1 -- - 2 -- - 3 -- 3
US Pacific - - -- - - -- - - -- - - -- - - -- - - -- -
US Alaska - - -- - - -- - - -- - - -- - - -- - - -- -
Russian Arctic - - -- - - -- - - -- - - -- - - -- - - -- -
Canada Other - - -- - - -- - - -- - - -- - - -- - - -- -
Baltic - - -- - - -- - - -- - - -- - - -- - - -- -
116 40 74% 12 24 33% 11 5 69% 24 22 52% 18 24 43% 181 115 61% 296
May 31, 2016 29

Floaters Marketed & Cold Stacked
6G, 147,
61%
5G, 19, 8%
4G, 14, 6%
3G, 32,
13%
2G, 29,
12% 6G, 10, 19%
5G, 17, 33%
4G, 2, 4%
3G, 11, 21%
2G, 12, 23%
Floaters Marketed by Generation Floaters Cold Stacked by Generation
Sources: KLR Group, LLC Forecast; Company Filings/Disclosures; IHS Petrodata, Industry Data
May 31, 2016 30

69
80 82
107
113114
122
137
122
117
90
58
79
102
121
132
50
60
70
80
90
100
110
120
130
140
150
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016E
2017E
2018E
2019E
2020E
58
73 69
74
78
83
87
106
136
145
135
123
112
121
115111
50
60
70
80
90
100
110
120
130
140
150
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016E
2017E
2018E
2019E
2020E
Recovery of Exploration Demand For Floaters Key to Recovery & Reserve Replacement
Floater Development Demand Forecast Floater Exploration Demand Forecast
We do not see North American
unconventional production stopping the
trend of offshore field development. A
move up the learning curve and cost
efficiencies may continue to yield
economic offshore projects.
Exploration may take a break, as capital may focus on efforts
to create cash flow from development work.
Source: IHS Petrodata, Company Filings/Disclosures; KLR Group, LLC Forecast Source: IHS Petrodata, Company Filings/Disclosures; KLR Group, LLC Forecast
May 31, 2016 31

165
189
225
256
274
306
240
184
158
140
181
188
213
224
230
244
210
171
151
138
100
150
200
250
300
350
2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
TOTAL RAW FLOATER DEMAND TOTAL FLOATER DEMAND (KLR Forecast)
KLR Forecast Narrows Project Opportunity Set by Probability Weighted Analysis
Consultant data may look very bullish
when un-refined. Understanding which
projects have reached FID, have
equipment ordered, or may be lower
probability potential projects provides
a better calibration of demand.
We see a larger opportunity set as
potential upside to our forecast. In our
view, current iterations of raw data
consultants also look far more
conservative over the last 12 months.
Source: Inflied, KLR Group, LLC Forecast
May 31, 2016 32

Pro-Cyclical - Raw Demand Forecasts Push Development Drilling Out, But Recovery May Pull Activity Forward
-
20
40
60
80
100
120
140
160
180
200
2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
RawFloaterDemand
Raw Development Demand - I Year Ago Raw Development Demand - Current
Demand is pushed to the right
during the downturn.
May pull forward in estimates as
oil prices recover. Every ~2.5 rig
years of demand that pulls
forward translates into ~1% of
higher utilization, post a wave of
rig retirements.
May 31, 2016 33

Floater Demand Forecast Methodology
•Raw Project Well Count DataAggregate
•Determine Project Status
•Apply Historical/Projected Probability WeightsProbability Weight
•Sort by Project Start Date
•Sort by RegionDistribute
•Apply Historical/Projected Well to Rig RatiosConvert Wells to Rig Demand
•Consolidate Analysis
Floater Development Rig
Demand
•Less Visibility
•Understand Current Contracting
•Apply Historical Cyclical Relationships
Exploration Rig Demand
•Add Exploration & Development DemandTOTAL FLOATER DEMAND
May 31, 2016 34

Categories 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
Ordered 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%
Field in Production - Not Ordered 0% 80% 90% 100% 100% 100% 100% 100% 100% 100% 100%
Field Development in Progress - Not Ordered 0% 80% 90% 100% 100% 100% 100% 100% 100% 100% 100%
Firm Plan (FID) Early Stage Development - Not Ordered 0% 70% 75% 85% 90% 90% 90% 90% 90% 90% 90%
Probable 0% 0% 10% 50% 65% 65% 65% 65% 65% 65% 65%
Possible 0% 0% 15% 40% 45% 45% 45% 45% 45% 45% 45%
Carried Inventory 0% 50% 50% 60% 60% 65% 65% 65% 65% 65% 65%
Floating Rig & Subsea Equipment Model: Probability Weighting Methodology
Category Definitions:
• Field in Production : Field is on-stream producing oil, gas or condensate.
• Field Development in Progress: Platform or subsea completions are being constructed and pipelines laid.
• Firm Plan (FID) Early Stage Development: Development plan (PDO) submitted to relevant authority.
• Probable : Development planning stage at company level.
• Possible : Very early stage of field evaluation.
Probability Weights by Categories
Reached FID, so are approved
projects, but delays remain
variable
We assumed delayed or not
executed projects remain in the
inventory of future projects, as
we probability weight demand,
we assume a percentage of the
“carried inventory” is completed
in the following year. Carried
demand does not have a
meaningful impact on demand
until 2018.
Further out in the forecast,
where less FID projects are
known, we assume a greater
number of potential projects
reach FID and move
forward. Our forecast,
follows historical trends in
the data.
May 31, 2016 35

Percentage of Equipment Ordered Support Near Term Forecast, Illustrates Risk to Back End Forecast
Further out in the forecast,
where less FID projects are
known, we assume a greater
number of potential projects
reach FID and move forward.
Source: Infield, KLR Group, LLC Forecast
335
270
183
105
41 9 1 0 - -
93%
74%
44%
26%
10%
2% 0% 0% 0% 0% 0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
-
50
100
150
200
250
300
350
400
450
500
2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
Total Development Wells (KLR Forecast) Total Development Wells Equipment Ordered
% KLR Forecast - Equipment Ordered
May 31, 2016 36

A Vast Majority of Our Near Term Forecast Hinges on Sanctioned (FID) Projects
344 358 357 340
234
164
140 119 134
82
43
100% 99% 98%
82%
58%
41%
32%
37%
75%
83%
93%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
-
50
100
150
200
250
300
350
400
450
500
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
FID Non-FID % FID
May 31, 2016 37

Most of Our Forecast Demand Generates from Fields Already Under Development & Production
344 356
325
296
170
91
51 28 18 8 3
100% 99%
89%
71%
42%
23%
12%
9% 10% 8% 6%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
-
50
100
150
200
250
300
350
400
450
500
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
Producing/Under Development Not Under Development % Producing/Under Development
May 31, 2016 38

Floater Demand Mix is Gravitating Toward Deeper Waters
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
Shallow Water Midwater Deepwater Ultra-Deepwater
May 31, 2016 39

Offshore Jackup Market
May 31, 2016 40

382
398
417
396
409 416
431
470
496 487
457 459 467
479
493
232
347
368
325 317 327
356
401
418
378
318
341
392
416
431
61%
87% 88%
82%
77% 78%
83%
85% 84%
78%
70%
74%
84% 87% 87%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
-
100
200
300
400
500
600
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E
Utilization
NumberofRigs Market Supply, EOP Contracted / Demand Implied Utilization
Jackup Market Needs Attrition & Cold Stacking (~140 Jackups), Fragmented, It May be Sloppy
We forecast jackup activity to
decline ~16% in 2016. Without
the same granularity of data, we
assume the jackup market tracks
broader market trends. In our
view, lower average project
break-even levels and heavier
weighting of development work
may make the downturn less
severe for jackups.
We forecast the market tightens
into 2018, but it requires an exit
of ~140 rigs from the marketed
supply to make room for
newbuild arrivals from 2016
forward. The amount of attrition
needed to balance the market
may decline if rigs under
construction are not delivered.
May 31, 2016 41

Jackup Fleet Snapshot: 71 Rigs Uncontracted, Cold Stacked, and Not Marketed May Not Re-Enter Market
Sources: KLR Group, LLC
Forecast; Company
Filings/Disclosures; IHS
Petrodata
OPERATOR CONTRACTED FLEET NOT CONTRACTED FLEET NEWBUILDS
Drilling
Enroute
Standby
MovingToLocation
WOW
Yard
Hotstacked
Warmstacked
Other
TOTALCONTRACTED
TOTALUTILIZATION
MARKETEDUTILIZATION
Hotstacked
Warmstacked
Enroute
Standby
MovingToLocation
WOW
Yard
Acceptancetesting
Outofservice
Coldstacked
Other
TOTALNOTCONTRACTED
Marketed-NC
NotMarketed-NC
Contracted
NotContracted
TOTALNEWBUILDS
Onorder
TOTALRIGS
Ensco 23 - - - - - 1 - 1 25 81% 86% 1 3 - - - - - - - 2 - 6 4 2 - 3 3 - 34
Shelf Drilling 23 - 1 - - 2 - - - 26 76% 79% 1 5 - - - - - - - 2 - 8 7 1 2 - 2 - 36
Hercules Offshore 8 - - - - - - - - 8 30% 44% 1 9 - - - - - - - 9 - 19 10 9 1 1 2 - 29
Paragon Offshore 10 - - - - - - - - 10 32% 53% - 9 - - - - - - - 12 - 21 9 12 - - - - 31
Rowan 18 - - - - 1 - - - 19 70% 79% 1 4 - - - - - - - 3 - 8 5 3 - - - - 27
Seadrill 11 - - - - - - - - 11 69% 69% - 5 - - - - - - - - - 5 5 - - 8 8 - 24
National Drilling 15 - - - - 2 - - - 17 100% 100% - - - - - - - - - - - - - - 3 - 3 - 20
Maersk Drilling 12 - - - - - - - - 12 92% 92% - 1 - - - - - - - - - 1 1 - 1 - 1 - 14
Aban Offshore 7 - - - - - - - - 7 47% 47% 1 7 - - - - - - - - - 8 8 - - - - - 15
Noble 11 - - - - - - - 1 12 92% 92% - 1 - - - - - - - - - 1 1 - 1 - 1 - 14
Transocean 6 - - - - - - - - 6 60% 86% - 1 - - - - - - - 3 - 4 1 3 - 5 5 - 15
Atwood 3 - - - - - - - - 3 60% 60% - 2 - - - - - - - - - 2 2 - - - - - 5
Saipem 5 - - - - - - - - 5 83% 83% - - - - - - 1 - - - - 1 1 - - - - - 6
Nabors 3 - - - - - - - - 3 50% 75% 1 - - - - - - - - 2 - 3 1 2 - - - - 6
Diamond Offshore 1 - - - - - - - - 1 20% 100% - - - - - - - - - 4 - 4 - 4 - - - - 5
Vantage Drilling 2 - - - - - - - - 2 50% 50% - 2 - - - - - - - - - 2 2 - - - - - 4
North Atlantic Drilling 3 - - - - - - - - 3 100% 100% - - - - - - - - - - - - - - - - - - 3
Other 80 - 7 1 - 3 1 1 (2) 95 57% 68% 11 30 - - - - 5 - 2 25 (1) 73 45 28 2 32 34 4 202
TOTAL COMPETITIVE 241 - 8 1 - 8 2 1 - 265 61% 72% 17 79 - - - - 6 - 2 62 (1) 166 102 64 10 49 59 4 490
SPECULATORS/OTHER 8 - - - - - - - - 8 73% 89% 1 - - - - - - - - 2 - 3 1 2 2 43 45 - 56
PBR / BRAZIL
Petrobras - - - - - - - - - - 0% 0% - 2 - - - - - - - 2 - 4 2 2 - - - - 4
NOC's
COSL 24 - - - - - - 1 - 25 74% 74% 4 2 - - 1 - 1 - - - 1 9 9 - - - - - 34
Gazflot - - - - - - - 2 - 2 100% 100% - - - - - - - - - - - - - - - - - - 2
ONGC 6 - - - - - - - - 6 100% 100% - - - - - - - - - - - - - - - - - - 6
Sinopec - - - - - - - - - - -- -- - - - - - - - - - - - - - - - 1 1 - 1
SOCAR - - - - - - - - - - 0% 0% - 1 - - - - - - 1 1 - 3 1 2 - - - - 3
North Sea Rigs - - - - - - - - - - -- -- - - - - - - - - - - - - - - - - - - -
Arktikmor - - - - - - - - - - 0% 0% - 1 - - - - - - - - - 1 1 - - - - - 1
PV Drilling 2 - 1 - - - - - - 3 75% 75% - 1 - - - - - - - - - 1 1 - - - - - 4
Vietsovpetro 4 - - - - - - - - 4 100% 100% - - - - - - - - - - - - - - 1 - 1 - 5
PEMEX 2 - - - - - - - - 2 100% 100% - - - - - - - - - - - - - - - - - - 2
Arabian Drilling 5 - - - - - - - - 5 83% 83% - 1 - - - - - - - - - 1 1 - - - - - 6
Gulf Drilling International 6 - - - - - - - - 6 60% 60% 1 3 - - - - - - - - - 4 4 - - - - - 10
Teniz Burgylau - - - - - - - - - - -- -- - - - - - - - - - - - - - - 1 - 1 - 1
MEXICAN PLAYERS
Grupo R - 2 - - - - - - - 2 100% 100% - - - - - - - - - - - - - - - 4 4 - 6
Oro Negro 4 - 1 - - - - - - 5 100% 100% - - - - - - - - - - - - - - - 3 3 - 8
Perforadora Central 2 - - - - - - - - 2 33% 40% 3 - - - - - - - - 1 - 4 3 1 - 1 1 - 7
SHIPYARDS
PPL Shipyard - - - - - - - - - - -- -- - - - - - - - - - - - - - - - 4 4 - 4
CIMC Raffles Offshore - - - - - - - - - - -- -- - - - - - - - - - - - - - - - 2 2 2 2
Keppel FELS - - - - - - - - - - -- -- - - - - - - - - - - - - - - - 1 1 - 1
TOTAL OTHER 63 2 2 - - - - 3 - 70 70% 75% 9 11 - - 1 - 1 - 1 6 1 30 23 7 4 59 63 2 163
TOTAL FLEET 304 2 10 1 - 8 2 4 - 335 63% 73% 26 90 - - 1 - 7 - 3 68 - 196 125 71 14 108 122 6 653
NOC/NOCSponsored/SpeculatorsCompetitiveOffshoreDrillers
May 31, 2016 42

Regional View of Jackup Fleet
Premium High Spec. Standard HE Legacy/ (Non IC) Total
C NC Util. C NC Util. C NC Util. C NC Util. C NC Util. C NC Util. Total
US GOM 3 4 43% 1 2 33% - 15 -- - - -- 2 31 6% 6 52 10% 58
S America 2 - 100% 1 2 33% - - -- - - -- 2 4 33% 5 6 45% 11
NW Europe - - -- - - -- - 1 -- 38 12 76% 1 - 100% 39 13 75% 52
W Africa 5 3 63% 3 4 43% 2 10 17% - - -- - - -- 10 17 37% 27
SE Asia 21 16 57% 4 7 36% 7 6 54% - - -- - 5 -- 32 34 48% 66
Far East 6 3 67% 1 - 100% 5 2 71% - - -- 19 2 90% 31 7 82% 38
Med/Black Sea 5 - 100% 1 1 50% 4 1 80% - - -- 2 1 67% 12 3 80% 15
Aus/NZ 1 - 100% - - -- - - -- - - -- - - -- 1 - 100% 1
C America 1 - 100% 1 - 100% - - -- - - -- 1 2 33% 3 2 60% 5
Indian Ocean - - -- 10 - 100% 22 1 96% - - -- 3 1 75% 35 2 95% 37
Caspian - - -- 2 1 67% 3 - 100% - - -- - 4 -- 5 5 50% 10
Mexico 19 4 83% 6 2 75% 6 6 50% - - -- - 2 -- 31 14 69% 45
Canada East - - -- - - -- - - -- - - -- - - -- - - -- -
Middle East 24 5 83% 10 9 53% 60 24 71% - - -- 28 2 93% 122 40 75% 162
US Pacific - - -- - - -- - - -- - - -- - - -- - - -- -
US Alaska - - -- - - -- 1 - 100% - - -- - 1 -- 1 1 50% 2
Russian Arctic - - -- - - -- - - -- - - -- - - -- - - -- -
Canada Other - - -- - - -- - - -- - - -- - - -- - - -- -
Baltic - - -- 2 - 100% - - -- - - -- - - -- 2 - 100% 2
87 35 71% 42 28 60% 110 66 63% 38 12 76% 58 55 51% 335 196 63% 531
May 31, 2016 43

Jackups Marketed & Cold Stacked
HE, 44, 10%
Premium,
116, 25%
High Spec. ,
69, 15%
Standard,
154, 33%
Legacy/ (Non
IC), 76, 17%
HE, 6, 9%
Premium, 6,
9%
High Spec. ,
2, 3%
Standard,
21, 31%
Legacy/ (Non
IC), 32, 48%
Jackups Marketed by Class Floaters Cold Stacked by Class
May 31, 2016 44

Offshore Rig Supply & Attrition
May 31, 2016 45

Floater Supply Forecast
Jackup Supply Forecast
Forecasted Supply of Floaters & Jackups Remains Very Dependent on Attrition Via Retirement & Stacking
Our forecast calls for the bulk of
floater attrition to come at the
bottom of the market in 2016.
We assume that only 19 of the
29 Brazil-sponsored floaters
enter the market, as the rest
may be delayed or cancelled due
to the ongoing scandal.
2015 2016 2017 2018 2019 2020
Market Supply, BOP 496 487 457 459 467 479
Newbuilds 16 41 37 19 12 14
Attrition/Stacked (25) (70) (35) (10) - -
Market Supply, EOP 487 457 459 467 479 493
2015 2016 2017 2018 2019 2020
Market Supply, BOP 312 281 241 240 251 264
Newbuilds 15 15 14 12 13 7
Attrition/Stacked (46) (55) (15) - - -
Market Supply, EOP 281 241 240 251 264 271
May 31, 2016 46

Determination of the Marketed Supply of Offshore Rigs
In our view, the market balance for rigs is determined by the marketed supply of rigs that are actively available to work in relation to the
demand for rigs in a given period. By our definition the marketed supply of rigs:
Includes:
+ Contracted Rigs
+ Idle
+ Warm Stacked
+ Hot Stacked
+ In Port
+ Moving to Location
+ Acceptance Testing
+ En Route
+ Standby
+ Waiting on Weather (WOW)
+ Shipyard
Does not include:
- Under Construction
- On Order
- Cold Stacked
- Accident
- Out of Service
All of these rig are active or
bidding for work.
We do not add newbuilds
to the marketed fleet until
they are delivered.
We see low probability of
legacy cold stacked assets
returning to either the
floater or jackup fleet.
May 31, 2016 47

0 0 0
6
14 14
10
1 1
4 4
0 1
9
21 22
31
19
13
24
15 15
(4)
(2) (1) (1)
0 0 0 0
(3)
(7)
(4)
0
(1)
0
0
(2) (1) (2)
0
(15)
(30)
(15)
(40)
(30)
(20)
(10)
-
10
20
30
40
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
Rigs(Retired)/Added Newbuilds Retirements
Historical Addition/Attrition Column Chart: Floaters – Retirements Look Set to Maintain Strong Pace
May 31, 2016 48

Stacking in the Floater Market Continues to Accelerate
-
5
10
15
20
25
30
35
40
45
50
1Q06
3Q06
1Q07
3Q07
1Q08
3Q08
1Q09
3Q09
1Q10
3Q10
1Q11
3Q11
1Q12
3Q12
1Q13
3Q13
1Q14
3Q14
1Q15
3Q15
1Q16
Cold stacked Warm stacked Hot stacked
May 31, 2016 49

Historical Addition/Attrition Column Chart: Jackups – Anticipate Retirements to Accelerate
2 0 0
4 3 4
0
5 3 4 3
10
16
29
24
21
16 14
41
29
16
41
(5) (4) (2) (2) (1) (1) (1) (3) (5) (7) (7)
(2) (1)
(4)
(7)
(1)
(13) (14)
(8)
(4)
(11) (12)
(30)
(10)
10
30
50
70
90
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
Rigs(Retired)/Added
Newbuilds Retirements
May 31, 2016 50

Jackup Market Stacking Gains Pace In-Line With the Floater Market
-
10
20
30
40
50
60
70
80
90
1Q06
3Q06
1Q07
3Q07
1Q08
3Q08
1Q09
3Q09
1Q10
3Q10
1Q11
3Q11
1Q12
3Q12
1Q13
3Q13
1Q14
3Q14
1Q15
3Q15
1Q16
Cold stacked Warm stacked Hot stacked
May 31, 2016 51

-
0.10
0.20
0.30
0.40
0.50
0.60
0.70
0.80
0.90
1.00
1.10
1.20
1.30
1.40
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
RigFactorScore
Rig Delivery Year
Older Floaters Rank Poorly on Our Spec Factor Scale
Our forecast for 67 rig retirements
is drawn largely from the older
floaters amongst the 133 (34%) of
387 floaters rigs that score below
0.50 .
Factor Scores of the Floater Fleet
May 31, 2016 52

-
0.10
0.20
0.30
0.40
0.50
0.60
0.70
0.80
0.90
1.00
1.10
1.20
1.30
1.40
1.50
1.60
1960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
RigFactorScore
Rig Delivery Year
Similar to Floaters, Older Jackups Rank Poorly on Our Spec Factor Scale
Our pool of 140 rig retirement
come from the 194 (29%) of
670 jackups score below 0.50 .
Factor Scores of the Jackup Fleet
May 31, 2016 53

Floaters Surveys: Older Floaters May See Expensive Surveys As Retirement Catalyst
0
2
4
6
8
10
12
14
16
18
2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18
>25 20-25 15-20 10 -15 5-10 0-5
0
20
40
60
80
100
120
140
160
2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18
3G 4G 5G 6G
Floater Survey Due by Age Range (yrs) Cumulated Floater Survey Due by Generation
Industry commentary suggests that older floaters may require
$10 million’s to over $100 million in CAPEX to pass surveys.
Offshore Drillers are less likely to spend money on less
competitive assets. Thus, surveys may trigger retirements.
May 31, 2016 54

Jackup Survey Profile Looks Similar to Floaters, As Both Will Drive Rig Retirements
0
5
10
15
20
25
30
35
40
2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18
>25 20-25 15-20 10 -15 5-10 0-5
0
50
100
150
200
250
300
2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18
Legacy Commodity JU Sub-Standard JU Standard JU High Spec. JU Prem JU HDHE JU
Jackup Survey Due by Age Range (yrs) Cumulated Jackup Survey Due by Class
May 31, 2016 55

-
2
4
6
8
10
12
1Q16
2Q16
3Q16
4Q16
1Q17
2Q17
3Q17
4Q17
1Q18
2Q18
3Q18
4Q18
1Q19
2Q19
3Q19
4Q19
1Q20
2Q20
3Q20
Estabilished Drillers Risky Drillers Speculative/Other Shipyard Petrobras
Estabilished
Drillers, 16 , 27%
Risky Drillers, 5 ,
8%
Speculative/Other,
16 , 27%
Shipyard, 4 , 6%
Petrobras, 19 ,
32%
Floater Newbuilds: Most Risk From PBR Rigs, Established Drillers Remain Small Slice of Pie
Newbuilds by Delivery Quarter Newbuilds by Purchasing Group
With recent Seadrill (SDRL, $3.27, R, $3)
& PACD announcements, both established
and more risky offshore drillers have
begun to cancel orders.
May 31, 2016 56

Brazilian, Chinese, & Other Non Traditional (Korean) Shipyards Pose Risks to Floater Newbuilds
-
1
2
3
4
5
6
7
8
9
10
11
Daewoo
SamsungHeavyIndustries
EstaleiroAtlanticoSul
EstaleiroJurongAracruz
YantaiCIMCRaffles
BrasFELS
EstaleiroEnseadadoParaguacu
Ecovix-Engevix
HyundaiHeavyIndustries
JurongShipyardPteLtd
ShanghaiShipyard
NotKnown
BakuShipyardLLC
COSCOQidong
DalianShipbuildingIndustryCo.
Honghua
KeppelFELS
May 31, 2016 57

Jackup Newbuilds: Risks For the ~86% of Fleet Ordered by Non-Established Offshore Drillers
Newbuilds by Delivery Quarter Newbuilds by Purchasing Group
We see potential for a number of cancellations from
speculative orders and lack of interest in poorly managed
rig constructions from established offshore drillers.
Sources: KLR Group, LLC Forecast; Company Filings/Disclosures; IHS Petrodata-
5
10
15
20
25
2Q16
3Q16
4Q16
1Q17
2Q17
3Q17
4Q17
1Q18
2Q18
3Q18
4Q18
1Q19
2Q19
3Q19
4Q19
1Q20
2Q20
3Q20
4Q20
Established Drillers NOC
Chinese State Mexican Players
Offshore/OFS New Entrants Shipyard
Established
Drillers, 17 , 14%
NOC, 4 , 3%
Chinese State, 23 ,
19%
Mexican Players, 8
, 7%Offshore/OFS New
Entrants, 20 , 17%
Shipyard, 9 , 7%
Risky Drillers, 12 ,
10%
Speculative/Other,
28 , 23%
May 31, 2016 58

Jackup Newbuilds From Speculative Builders & Shipyards Likely See Late Delivery or Cancellations
-
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
KeppelFELS
ChinaMerchantsHeavyIndustry
DalianShipbuildingIndustryCo.
ShanghaiWaigaoqiaoShipbuilding
PPLShipyard
Lamprell
COSCODalian
YantaiCIMCRaffles
ABGShipyard
CPLEC
ShanghaiZhenhuaHeavyIndustries
ShanhaiguanShipbuildingIndustry…
CSSCHuangpuWenchongShipyard
DrydocksWorld
DrydocksWorld–Graha
JurongShipyardPteLtd
SamsungHeavyIndustries
TaiZhongBinHai
BharatiShipyard
COSCOQidong
Daewoo
KeppelAmFELS
KeppelKazakhstan
QingdaoWuchanHeavyIndustryCO.
YangzijiangShipbuilding
PVShipyard
May 31, 2016 59

Subsea Equipment: Potential for Upside
May 31, 2016 60

61
34
70
145
118
132
153
179
208
269
196
282
268
252
187
294
303
402
360
316
244
254
260
316
402
359
357
361
382
359
301
323
344
319
293
181
-
100
200
300
400
500
600
700
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
Subsea Tree Deliveries - Unadjusted Subsea Tree Deliveries - Probability Weighted
Forecast Subsea Tree Deliveries Sees Flattish Activity Given Project Delays
The scale of the potential tree demand list may provide room
for upward revisions to our estimates, if probabilities for more
projects improve. In our view, the possible upside may drive
multiple expansion for the subsea equipment names with a turn
in commodity markets.
Forecasted Subsea Tree Deliveries vs. Potentially Bullish Inventory of Projects
Our forecast draws from the same
data as our rig demand, which is
probability weighted as outlined
above for rig demand concerning the
same projects.
Sources: KLR Group, LLC Forecast; Company Filings/Disclosures; Infield, Industry Data
May 31, 2016 61

Cost per Tree Continues to Trend Lower – Breakeven Costs Coming Down
$5.0
$5.5
$6.0
$6.5
$7.0
$7.5
$8.0
$8.5
4Q01
3Q02
2Q03
1Q04
4Q04
3Q05
2Q06
1Q07
4Q07
3Q08
2Q09
1Q10
4Q10
3Q11
2Q12
1Q13
4Q13
3Q14
2Q15
$EPCCostPerTree($MM)
May 31, 2016 62

Our Forecast Requires New Orders to Fill the 2017/2018 Delivery Forecast for Subsea Equipment Companies
61
34
70
145
118
132
153
179
208
269
196
282
268
252
187
294
303
402
360
316
244
254
260
316
402
359
357
361
382
359
301
323
344
319
293
181
61
34
70
145
118
132
153
179
208
269
196
282
268
252
187
294
303
399
360
316
244
254
260
316
402
359
334
277
188
110
46
33
24
7
3
1
-
50
100
150
200
250
300
350
400
450
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
Subsea Tree Deliveries - Probability Weighted Subsea Tree Deliveries - Probability Weighted - Ordered
May 31, 2016 63

Our Forecast Leaves Very Low 2016 Order Expectations, Raw Order Expectation Paint More Bullish Picture
438 449
424 434
322
374
297
411
550
244
163
176
347
470
489
516
438 449
424 434
322
374
297
411
550
244
163
135
251
330 318
294
0
100
200
300
400
500
600
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Potential Orders - Raw Expected Orders - Forecast
May 31, 2016 64

438 449
424 434
322
374
297
411
550
244
163
135
251
330 318
294
438 449
424 434
322
374
297
411
550
244
163
15
0
100
200
300
400
500
600
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Expected Orders - Forecast Orders - Actual
Very Modest Tree Orders Expected in 2016, But Still off to Slow Start
KLR Subsea Tree Order Forecast vs. Actual Tree Orders
The falloff in orders in 2014
impacts the trajectories of
deliveries in 2016 and beyond,
given 2-3 year lead times on
larger projects.
May 31, 2016 65

-
50
100
150
200
250
300
350
400
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Midwater Deepwater Ultra-Deepwater
Greater Field Complexity Met with Standardization & Process Improvement To Lower Costs
According to our forecast
deepwater and ultra-deepwater
projects may continue to gain
share in the proportion of
equipment orders. Inexperience
made a smaller number of initial
projects expensive, and likely
over-engineered. We anticipate
that incremental projects may
gain efficiencies and see lower
cost gained from prior
experience and standardization
of equipment/practices.
We see the potential for a higher
content of equipment in addition to
trees to add to the dollar value of
equipment package orders. In
particular, manifolds, control
systems, boosting, separation, and
more automation may continue to
lift revenue/per tree and support
capacity utilization.
Subsea Tree/Well Demand By Water Depth
May 31, 2016 66

Subsea Equipment Manufacturing Utilization Stable, May Regain Pricing With Small Demand Upside
Subsea Tree Manufacturing Capacity & Utilization
54%
30%
58%
87%
63%
67%
69%
78%
81%
87%
61%
82%
76%
68%
49%
73%
71%
82%
72%
61%
46%
47%
48%
58%
68%
60%
59%
59%
62%
59%
49%
0%
20%
40%
60%
80%
100%
0
100
200
300
400
500
600
700
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Total Capacity Subsea Tree Deliveries - Probability Weighted Tree Capacity Utilization
May 31, 2016 67

Subsea Equipment Manufacturing Capacity Dominated by Four Largest Players
Subsea Tree Manufacturing Annual Capacity Industry Breakdown
34
34
34
65
65
65
65
68
84
90
90
90
90
90
90
101
109
109
113
113
122
122
122
126
161
161
161
161
161
161
161
22
22
26
26
41
49
67
67
68
92
105
115
115
123
123
123
125
181
181
181
181
191
191
191
201
201
201
201
201
201
201
32
32
33
47
47
47
47
47
53
63
63
66
66
66
77
86
86
93
93
93
93
93
93
93
98
98
106
110
110
110
110
25
27
27
29
29
29
36
39
39
51
51
52
61
61
61
61
80
81
86
104
104
104
104
104
104
104
104
104
104
104
104
-
-
-
1
5
9
9
9
14
14
14
20
20
29
29
29
29
29
29
29
29
29
29
31
31
31
31
37
37
37
37
0
100
200
300
400
500
600
700
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
SLB/CAM FMC GEOG Aker Solutions Dril-Quip
May 31, 2016 68

Increases Manifold Demand May Increase Capacity Utilization Above Levels Stated For Trees Only
-
10
20
30
40
50
60
70
80
90
100
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Manifold Demand May Augment Utilization
$10.0
$12.0
$14.0
$16.0
$18.0
$20.0
$22.0
$24.0
$26.0
$28.0
4Q01
4Q02
4Q03
4Q04
4Q05
4Q06
4Q07
4Q08
4Q09
4Q10
4Q11
4Q12
4Q13
4Q14
4Q15
$EPCCostPerManifold($MM)
Manifold Cost Remains Fairly Constant
May 31, 2016 69

Concentration of Deliveries/Demand with Large Customers
Subsea Tree Deliveries – Probability Weighted Subsea Tree Orders – Probability Weighted
Wells by company 2015 2016 2017 2018 2019 2020 TOTAL % Total
1 Petrobras 72 53 50 50 51 38 314 15%
2 Total 24 20 57 48 23 22 194 10%
3 Eni 7 41 39 42 20 12 161 8%
4 Shell 29 31 15 23 20 31 149 7%
5 Chevron 16 32 23 34 15 10 131 6%
6 BP 15 7 19 18 30 34 122 6%
7 ExxonMobil 30 25 4 14 22 5 100 5%
8 Statoil 26 8 10 17 16 20 97 5%
9 Woodside 3 6 7 6 21 10 53 3%
10 Tullow - 20 7 8 8 5 48 2%
11 EnQuest 13 2 13 5 7 7 47 2%
12 Premier 2 2 16 14 3 6 43 2%
13 Noble 5 7 5 9 3 9 38 2%
14 Anadarko 7 5 1 3 3 13 32 2%
15 Hess 4 1 1 7 9 6 29 1%
16 Husky 3 7 12 5 - - 27 1%
17 Apache 5 6 8 1 4 2 26 1%
18 Inpex - - 12 6 4 2 24 1%
19 CNOOC 8 1 2 1 7 5 24 1%
20 Murphy 5 3 1 5 8 1 22 1%
21 Cobalt - - - 7 9 5 20 1%
22 Freeport-McMoRan 4 8 2 4 - - 18 1%
23 ONGC 1 1 4 2 6 5 18 1%
24 KNOC 1 - 5 6 3 2 17 1%
25 LLOG 7 3 2 3 - - 15 1%
26 PEMEX - - 8 2 1 3 14 1%
27 ConocoPhillips 6 - 1 2 3 2 14 1%
28 Sinopec - - - 13 - - 13 1%
29 Maersk 5 4 1 - 2 0 12 1%
30 BG Group 6 - 1 1 4 - 12 1%
Wells by company 2015 2016 2017 2018 2019 2020 TOTAL % Total
1 BP 33 11 11 26 31 27 138 10%
2 Shell 15 15 38 17 30 18 132 9%
3 Petrobras - 1 19 20 41 40 121 8%
4 Chevron 4 8 25 20 15 31 103 7%
5 Eni 34 16 26 11 10 5 102 7%
6 Statoil 16 2 5 25 12 22 83 6%
7 Total 7 16 10 8 18 14 74 5%
8 Anadarko 3 1 2 10 22 14 52 4%
9 ExxonMobil - 3 8 22 10 6 49 3%
10 Woodside 9 2 2 20 3 12 48 3%
11 Noble 2 9 6 7 8 6 38 3%
12 Hess 1 3 15 6 2 2 29 2%
13 Tullow - 5 9 7 5 2 28 2%
14 Cobalt - - 12 8 2 4 26 2%
15 ONGC 5 1 2 8 5 4 24 2%
16 Apache 10 7 1 5 - - 23 2%
17 Eni CNPC - - 5 7 9 1 23 2%
18 Premier - - 10 9 3 - 22 2%
19 CNOOC - 2 1 7 5 4 20 1%
20 Murphy 4 2 2 6 1 3 18 1%
21 Eni EGPC - 5 2 4 3 4 16 1%
22 Reliance - - - 5 6 2 14 1%
23 Husky - 4 8 - - - 12 1%
24 BG Group - 0 1 5 - 6 12 1%
25 PEMEX - 1 2 1 2 5 12 1%
26 EnQuest - 1 1 2 3 4 12 1%
27 ConocoPhillips - - 1 4 3 2 11 1%
28 Daewoo - 2 4 1 1 2 9 1%
29 Freeport-McMoRan 9 - - - - - 9 1%
30 Petroleum Equity - 0 - 5 3 0 9 1%
May 31, 2016 70

Top 30 Subsea Tree Orders Customers: SLB/CAM & FMC Dominate Market Share
Market Share by Subsea Tree Orders Since 2005
Subsea Tree Order Market Share 2010-2015
Operators
listed in
order of
the number
of tree
orders
since 2005.
Source: Infield, Company Filings/Disclosures
SLB/CAM, 23%
FMC, 42%
GEOG, 14%
Aker Solutions,
17%
Dril-Quip, 2%
Others, 2%
SLB/CAM FMC Dril-Quip
1 Petrobras 40% 35% 1% 24% --
2 Total 20% 53% 0% 27% --
3 Shell 1% 84% 14% -- --
4 Statoil -- 58% 7% 35% --
5 BP 65% 25% 9% -- --
6 Chevron 34% 32% 34% -- --
7 Eni 17% 21% 44% 19% --
8 ExxonMobil 14% 27% 59% -- --
9 EnQuest -- 49% 10% 41% --
10 BHP Billiton 92% -- 8% -- --
11 Woodside -- 98% 2% -- --
12 Tullow -- 78% 22% -- --
13 CNOOC -- 96% 2% -- 2%
14 Murphy 100% -- -- -- --
15 Anadarko 19% 19% 51% 11% --
16 Husky 9% 21% -- 66% 4%
17 Premier -- 11% 17% -- 71%
18 Noble 91% 6% -- 3% --
19 BG Group EGPC Petronas 100% -- -- -- --
20 Maersk -- -- 100% -- --
21 LLOG -- 100% -- -- --
22 ConocoPhillips -- 97% -- -- 3%
23 Hess -- -- -- 100% --
24 Reliance 32% 68% -- -- --
25 PEMEX 50% 50% -- -- --
26 Freeport-McMoRan 30% 9% 61% -- --
27 Apache -- 56% 38% -- 6%
28 Sinopec 23% -- 77% -- --
29 Inpex -- -- 100% -- --
30 Centrica -- 20% 75% -- 5%
GEOG VetcoGray Aker Solutions
May 31, 2016 71

IMPORTANT DISCLOSURES
Rating System
KLR Group, LLC employs a five tier rating system for evaluating the potential return associated with owning common equity shares of rated firms. The expected
return of any given equity is measured on a quantitative basis in relation to our target price. Since stock prices are volatile on a daily basis KLR will utilize at
least a +/- 5% variance tolerance in determining our ratings. Descriptions of the ratings are as follows:
Buy - The common stock of the company is estimated to have over 30% upside to our target price.
Accumulate - The common stock of the company is estimated to have 10%-30% upside to our target price.
Hold - The common stock of the company is estimated to be within +/-10% of our target price.
Reduce - The common stock of the company is estimated to have 10%-30% downside to our target price.
Sell - The common stock of the company is estimated to have over 30% downside to our target price.
Risk Factors
Macro:
Sustained weakness in commodity prices. Persistent weakness in commodity prices may negatively impact oilfield service company returns. This risk is magnified
for companies with weaker balance sheets and higher near term liabilities.
Access to capital markets: The ability of many oilfield service companies to withstand the downturn hinges on their access to capital. If capital markets begin
to close off to the industry it would be difficult for many companies to maintain their existing operating plans.
Foreign exchange volatility. The sector’s international component leaves earnings exposed to foreign exchange volatility.
Climate change regulation. The increased attention on climate change and greenhouse gas (GHG) emissions could lead to new regulations aimed at limiting
future GHG emissions. If enacted these regulations could impose additional costs for both operators and service providers.
Company Centric:
Contracting risk: The new and rolling contracts across the oil services business may perpetuate lower dayrates and falling contract pricing, even if renegotiations
occur during the initial phases of a recovery.
Continued oversupply in rig market: Day rates could remain depressed if the rig market remains oversaturated resulting from fewer rig retirements than
forecasted.
Rig productivity gains: If onshore rigs continue to achieve new productivity gains, the demand for onshore rigs could continue to deteriorate, particularly in
the lower end of the onshore rig market. Greater levels of efficiency and productivity gains may
Lumpy Cash Flows: The lumpy nature of the equipment & manufacturing industry could cause a significant lag between the recovery in the oil and gas industry
and the improvement in the equipment & manufacturing industry’s cash flow position.
Cost Escalation: Fixed price long term contracts common in the oilfield equipment & manufacturing leave industry participants particularly vulnerable to cost
increases. This risk could be magnified for contracts entered into during a low price environment.
Adoption of new technologies: Many proppant providers are relying on new technologies to improve margins. However, there is a risk that the industry may
continue to prefer lower cost options. Alternatively, the industry could select a single new technology winner with the losers going the way of the Beta Max video.
Other Companies Mentioned in this Report
Atwood Oceanics, Inc.(ATW) - Rating: Accumulate; Price Target: 12.75; Price: 10.56
C&J Energy Services, Ltd.(CJES) - Rating: Hold; Price Target: 0.50; Price: 0.50
Core Laboratories N.V.(CLB) - Rating: Buy; Price Target: 166.00; Price: 122.25
CARBO Ceramics Inc.(CRR) - Rating: Hold; Price Target: 12.75; Price: 12.20
Diamond Offshore Drilling Inc(DO) - Rating: Accumulate; Price Target: 28.00; Price: 25.12
Dril-Quip, Inc.(DRQ) - Rating: Accumulate; Price Target: 70.00; Price: 61.49
ENSCO PLC(ESV) - Rating: Buy; Price Target: 22.00; Price: 9.73
Forum Energy Technologies Inc(FET) - Rating: Buy; Price Target: 22.00; Price: 17.15
Franks International NV(FI) - Rating: Buy; Price Target: 22.00; Price: 15.92
Fairmount Santrol Holdings Inc(FMSA) - Rating: Hold; Price Target: 3.90; Price: 5.37
FMC Technologies, Inc.(FTI) - Rating: Buy; Price Target: 43.00; Price: 27.00
Flotek Industries Inc(FTK) - Rating: Buy; Price Target: 15.00; Price: 11.77
Halliburton Company(HAL) - Rating: Buy; Price Target: 52.00; Price: 42.58
Helmerich & Payne, Inc.(HP) - Rating: Buy; Price Target: 83.00; Price: 60.59
Nabors Industries Ltd.(NBR) - Rating: Buy; Price Target: 14.00; Price: 9.07
Noble Corp plc(NE) - Rating: Buy; Price Target: 20.00; Price: 8.46
National-Oilwell Varco, Inc.(NOV) - Rating: Buy; Price Target: 52.00; Price: 32.62
Newpark Resources Inc(NR) - Rating: Buy; Price Target: 7.00; Price: 4.53
Oceaneering International(OII) - Rating: Accumulate; Price Target: 40.00; Price: 33.51
Oil States International, Inc.(OIS) - Rating: Buy; Price Target: 45.00; Price: 32.92
Pacific Drilling SA(PACD) - Rating: Hold; Price Target: 1.10; Price: 4.07
May 31, 2016 72

Patterson-UTI Energy, Inc.(PTEN) - Rating: Buy; Price Target: 27.00; Price: 18.60
Rowan Companies PLC(RDC) - Rating: Buy; Price Target: 25.00; Price: 16.88
Transocean LTD(RIG) - Rating: Buy; Price Target: 19.00; Price: 9.85
Seadrill Ltd(SDRL) - Rating: Reduce; Price Target: 3.25; Price: 3.27
Schlumberger Limited.(SLB) - Rating: Buy; Price Target: 106.00; Price: 77.17
U.S. Silica Holdings Inc(SLCA) - Rating: Hold; Price Target: 26.00; Price: 28.99
Superior Energy Services, Inc.(SPN) - Rating: Buy; Price Target: 28.00; Price: 17.46
Weatherford International Plc(WFT) - Rating: Accumulate; Price Target: 7.25; Price: 5.56
For ratings and price target history please visit http://www.klrgroup.com/research/disclosure/.
Distribution of Ratings
IB Serv./Past 12 Mos.
Rating Count Percent Count Percent
Buy 40 54.05 0 0
Accumulate 18 24.32 0 0
Hold 14 18.92 0 0
Reduce 1 1.35 0 0
Sell 1 1.35 0 0
Additional Disclosures
KLR Group, LLC is a member of FINRA and SIPC and a registered U.S. Broker-Dealer.
Investment Banking services include, but are not limited to, acting as a manager/co-manager in the underwriting or placement of securities, acting as financial
advisor, and/or providing corporate finance or capital markets-related services to a company or one of its affiliates or subsidiaries within the past 12 months.
Analyst Certification
I, Darren Gacicia, hereby certify that the views expressed in this research report accurately reflect my personal views about the subject company(ies) and its
(their) securities and that no part of my compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed
by me in this research report.
The Firm and/or its affiliates intend(s) to seek compensation from Atwood Oceanics, Inc., C&J Energy Services, Ltd., Core Laboratories N.V., CARBO Ceramics
Inc., Diamond Offshore Drilling Inc, Dril-Quip, Inc., ENSCO PLC, Forum Energy Technologies Inc, Franks International NV, Fairmount Santrol Holdings Inc,
FMC Technologies, Inc., Flotek Industries Inc, Halliburton Company, Helmerich & Payne, Inc., Nabors Industries Ltd., Noble Corp plc, National-Oilwell Varco,
Inc., Newpark Resources Inc, Oceaneering International, Oil States International, Inc., Pacific Drilling SA, Patterson-UTI Energy, Inc., Rowan Companies PLC,
Transocean LTD, Seadrill Ltd, Schlumberger Limited., U.S. Silica Holdings Inc, Superior Energy Services, Inc. and Weatherford International Plc for investment
banking services within three months, following publication of the research report.
Any opinions expressed herein are statements of our judgment as of the date of publication and are subject to change without notice.
Reproduction without written permission is prohibited.
The closing prices of securities mentioned in this report are as of May 30 2016. Additional information is available to clients upon written request.For complete
research report on Atwood Oceanics, Inc., C&J Energy Services, Ltd., Core Laboratories N.V., CARBO Ceramics Inc., Diamond Offshore Drilling Inc, Dril-Quip,
Inc., ENSCO PLC, Forum Energy Technologies Inc, Franks International NV, Fairmount Santrol Holdings Inc, FMC Technologies, Inc., Flotek Industries Inc,
Halliburton Company, Helmerich & Payne, Inc., Nabors Industries Ltd., Noble Corp plc, National-Oilwell Varco, Inc., Newpark Resources Inc, Oceaneering
International, Oil States International, Inc., Pacific Drilling SA, Patterson-UTI Energy, Inc., Rowan Companies PLC, Transocean LTD, Seadrill Ltd, Schlumberger
Limited., U.S. Silica Holdings Inc, Superior Energy Services, Inc. and Weatherford International Plc, please call (713) 654-8080.
Readers are advised that this report is issued solely for informational purposes and is not to be construed as an offer to sell or the solicitation of an offer to buy.
The information contained herein is based on sources which we believe to be reliable but is not guaranteed by us as being accurate and does not purport to
be a complete statement or summary of the available data. Past performance is no guarantee of future results.
May 31, 2016 73

2016-05-31_Offshore Beta Trade Laggards Hold Greatest Upside in Recovery - D. Gacicia

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