1. Carnegie Securities Research1 Key question is 2008 oil demand or: Will BNP – the key driver for oil demand – be affected by the credit crunch

2. Carnegie Securities Research2 1.High oil demand growth + disappointing non-OPEC production 2.Three scenarios: 1.OPEC keeps production flat = falling inventories = high oil price 2.OPEC increases production = falling spare capacity = high oil price 3.Estimates are too bullish = low OPEC prod. + flat inventories = lower oil price  2008 oil demand estimates must be cut by more than 50% for 3. to be true Tight oil markets ahead Bullish oil market outlook Oil market and oil price

3. Carnegie Securities Research3 1.Key oil price changes : a)Q4(07) to USD75 (65) b)2008e-10e to USD75 (65) c)Long-term to USD60 (50) 2.Three reasons for upgrading oil price assumption now: a)Firm optimistic view on the global economy (key driver for oil demand) b)Financial investors have already lowered their long positions c)Weaker USD is positive for the oil price (higher demand + stronger OPEC discipline) Only a global recession would bring down the oil price Increased oil price assumptions Oil market and oil price

4. Carnegie Securities Research4 Not dramatic. Future price above our estimates Increased oil price assumptions

5. Carnegie Securities Research5 Only USD67/b discounted in STL share price Increased oil price assumptions

6. Carnegie Securities Research6 Oil price assumptions What oil price is discounted? Oil market says USD75, stock market says USD67. This is close all time high difference (USD8)  Sell oil, buy oil and oil service shares!!

7. Carnegie Securities Research7 Oil market Short term oil market

8. Carnegie Securities Research8 a. Firmer optimistic view on the global economy (key driver for oil demand) Three reasons for stronger oil price The relationship GDP-oil demand is strong The world economy is expected ~ trend (3.6%) in 2008

9. Carnegie Securities Research9 Oil market forecasts 08e Y/Y change in demand (mill. b/d) IEAOPECEIAEMCAverageCarnegiemill. b/d% Demand: North America0.350.280.190.100.230.17-0.06-27% Western Europe0.250.050.060.400.190.15-0.04n.m. OECD Pacific0.19-0.040.030.300.120.11-0.02n.m. Total OECD0.790.290.280.800.540.43-0.54-100% China0.430.400.470.600.480.510.036% FSU0.080.050.130.100.090.05-0.04-44% "Other non-OECD"0.800.610.631.100.790.76-0.03-4% Total non-OECD1.311.061.231.801.351.31-0.04-3% Global demand2.101.351.512.601.891.74-0.15-8% 08e Y/Y change in production (mill. b/d) IEAOPECEIAEMCAverageCarnegiemill. b/d% Supply: North America-0.070.200.350.400.220.10-0.12-55% Western Europe-0.31-0.20-0.21-0.10-0.21-0.150.06-27% OECD Pacific0.140.16-0.020.000.070.00-0.07n.m. China0.100.01-0.020.100.05 0.0111% FSU0.470.540.410.100.380.37-0.01-3% Other non-OPEC0.720.330.510.300.460.15-0.31-67% Total non-OPEC1.051.04 0.901.010.52-0.48-48% Call on OPEC1.050.310.471.700.881.220.3438% Call on OPEC = Global demand - Total non-OPECSource: IEA, OPEC, EIA, EMC, Carnegie Research Carnegie vs. average Oil market balance – 2008 forecast

10. Carnegie Securities Research10 Non-OPEC production has disappointed lately 2007 outlook

11. Carnegie Securities Research11 Three reasons for upgrading oil price assumption b. Financial investors have already lowered their long positions Less reason to fear the financial investors.

12. Carnegie Securities Research12 Hurting the economy? c. Weaker USD is positive for the oil price (higher demand + stronger OPEC discipline) Since Oct. 2000: EURO/USD from 0.82 to 1.39 Oil price from USD30 to USD77 Linked to EUROs, the oil has only gone from USD30 to USD46

13. Carnegie Securities Research13 Hurting the economy? Hurting the economy? No! A 2008 oil price of USD75 would be only 8% up Y/Y – far less than what we have seen over the last years.

14. Carnegie Securities Research14 OPEC likely to increase production going forward Historically, OPEC has increased actual production ahead of increasing quotas!! OPEC must increase production soon 2000 2004 PS: in Dec. 2002 and Jan. 2003, OPEC production fell by about 2mb/d due to an unexpected strike in Venezuela! 2002- 03 2007

15. Carnegie Securities Research15 Further increase is likely at the 5 Dec. OPEC meeting July prod. was 26.7mb/d, 1. Nov. OPEC10 quotas = 27.2mb/d, - We assume that OPEC10 produces 27.5mb/d in Q4(07), - We assume that OPEC10 produces 28.0mb/d in Q1(08), OPEC must increase production soon

16. Carnegie Securities Research16 Estimates have been for a tighter oil market Oil market: 2007 outlook Non-OPEC estimates have been slashed. In particular in: -Western Europe - North America - Other non-OPEC (Brazil) Demand estimates flat on average

17. Carnegie Securities Research17 Estimates have been for a tighter oil market Oil market: 2007 outlook Call on OPEC up, but …

18. Carnegie Securities Research18 Estimates have been for a tighter oil market Oil market: 2007 outlook … OPEC has cut production

19. Carnegie Securities Research19 OPEC wants to avoid the 2006 situation Oil price assumptions In 2006, OPEC produced too much over the summer and the oil price fell sharply in the autumn (from USD76 in Aug. 06 to USD55 in Jan. 07). - also: mild hurricane season and mild weather! - build in inventories It seems like OPEC desperately wants to avoid the 2006 situation. Note that the June 07 production was 1.6mb/d below the June 06 production!

20. Carnegie Securities Research20 Estimates have never started this bullish! 2008 outlook

21. Carnegie Securities Research21 OECD oil inventories will drop if OPEC keeps prod. unchanged Oil market

22. Carnegie Securities Research22 Oil market Oil price moves with OPEC production (when OPEC production reflects the tightness in the market)

23. Carnegie Securities Research23 Oil market Oil price moves with OPEC production (when OPEC production reflects the tightness in the market)

24. Carnegie Securities Research24 We see higher OPEC prod. which should lead to lower spare capacity Oil market

25. Carnegie Securities Research25 Oil market Medium to long-term market

26. Carnegie Securities Research26 The big picture: oil demand continues up The oil market: medium to long-term picture

27. Carnegie Securities Research27 The big picture: oil demand will continue up Demand per capita will increase, due to … … strong non-OECD growth The oil market: medium to long-term picture

28. Carnegie Securities Research28 Underlying demand growth from non-OECD is strong! China p.t. The oil market: medium to long-term picture

29. Carnegie Securities Research29 Underlying demand growth from non-OECD is strong! The oil market: medium to long-term picture

30. Carnegie Securities Research30 Late 70s/80s: Mexico +3mb/d Early 80s: UK +2mb/d 90s: West Africa +3mb/d Late 80s/90s: Norway +3mb/d Late 80s/90s: Brazil +1mb/d 70s: China +2mb/d 2015-25s: Barents sea +2-5mb/d? The big picture: where should it all come from? Late 1990s: Caspian sea +1mb/d 2006-15s: Canadian oil sands from 1-3mb/d? The oil market: medium to long-term picture

31. Carnegie Securities Research31 Non-OPEC unable to ramp up production Non-OPEC does not manage to increase production now despite the high oil price over the recent years High oil price lead to high non- OPEC production in the 70s High oil price lead to high non- OPEC production in the late 90s The oil market: medium to long-term picture

32. Carnegie Securities Research32 Long-term: production outside of OPEC and FSU peaked in 2004 The world will get more dependent on OPEC and the FSU The oil market: medium to long-term picture

33. Carnegie Securities Research33 Several regions have seen peak production already The oil market: medium to long-term picture US peaked in 1971 UK peaked in 1999

34. Carnegie Securities Research34 Several regions have seen peak production already The oil market: medium to long-term picture Norway peaked in 2001 Has Mexico peaked?

35. Carnegie Securities Research35 They are all calling on more OPEC oil!!

36. Carnegie Securities Research E&P Spending 1.Stabile and high E&P spending growth E&P spending is expected to remain high 2.No cheap oil left Continued high oil demand (non-OECD), production challenge (non-OPEC), alternative energy no substitute on a large scale

37. Carnegie Securities Research37 Offshore increasingly important

38. Carnegie Securities Research38 E&P Spending Solid growth in E&P spending  growth in non-OECD oil demand, declining RRR’s & no surplus hardware capacity

39. Carnegie Securities Research39 E&P Spending High and stabile E&P spending, diminishing growth.

40. Carnegie Securities Research40 E&P Spending Project delays may cause E&P spending to have been revised down, the aggregate total 07- 09e is UP!

41. Carnegie Securities Research Oil service segments

42. Carnegie Securities Research42 Oil service value chain

43. Carnegie Securities Research Seismic Market

44. Carnegie Securities Research44 Surge in spending growth Seismic market Strong growth

45. Carnegie Securities Research Drilling Market

46. Carnegie Securities Research46 Market structure Drilling market

47. Carnegie Securities Research47 Strong drilling activity ahead Planned drilling activity constrained by capacity  longer cycle?

48. Carnegie Securities Research48 Floaters Drilling market Global effective utilisation of 97% in August 2007

49. Carnegie Securities Research49 Delivery time of floaters Drilling market Fleet growth of 30% over the next four years Strong order book, but…

50. Carnegie Securities Research50 Deepwater fleet Drilling market …but much is already taken

51. Carnegie Securities Research51 53% of speculative orders are contracted Drilling market

52. Carnegie Securities Research52 Deepwater demand, known projects Drilling market According to Global Santa Fe there is undersupply of 42 rig years until YE(10)

53. Carnegie Securities Research53 Deepwater dayrates have stabilised around USD500,000 Drilling market

54. Carnegie Securities Research54 Payback Drilling market Reduced payback = few new orders or higher rates?

55. Carnegie Securities Research55 Jack-up Drilling market Global effective utilisation of 94.1% in August 2007

56. Carnegie Securities Research56 Jack-up – newbuildings Drilling market Fleet growth of 20% over the next three years

57. Carnegie Securities Research57 Jack-up dayrates Drilling market

58. Carnegie Securities Research Subsea Market

59. Carnegie Securities Research59 Subsea/Construction market booming Planned activity booming in 2009

60. Carnegie Securities Research60 Subsea vessel market balance: robust outlook Subsea support vessels Outstanding subsea requirements at all-time high

61. Carnegie Securities Research61 Subsea vessel market balance: robust outlook Subsea support vessels We expect full utilisation out 2009

62. Carnegie Securities Research FPSO Market

63. Carnegie Securities Research63 FPSO market Lots of new FPSO units will arrive

64. Carnegie Securities Research64 E&P Spending Market drivers indicate strong outlook for oil services

65. Carnegie Securities Research65 Share by segment

66. Carnegie Securities Research66 Offshore support vessels

67. Carnegie Securities Research67 Market pyramid Supply vessels Increasing ordering activity in the high-end segment

68. Carnegie Securities Research68 Large PSV expected to hit the market soon Supply vessels 17 of the 80 vessels expected for delivery over the next 12 months have been delayed by a total of 29 months. 19 of 80 newbuild deliveries have already found work. This is compared with 24 of 80 in the April report

69. Carnegie Securities Research69 Large PSV expected to hit the market soon Supply vessels

70. Carnegie Securities Research70 Only 17 newbuild AHTS expected within 1 year Supply vessels 10 of the 17 vessels expected for delivery within the next 12 months have been delayed by a total of four months.

71. Carnegie Securities Research71 No wonder why ordering activity is high! Supply vessels Payback around 1-1.5 years at current rates

72. Carnegie Securities Research72 Dayrates for PSVs keep surprising Supply vessels Payback around 2 years at current rates

73. Carnegie Securities Research73 1.High oil demand growth + disappointing non-OPEC production 2.Stock market discounts 2008 oil price of USD67 (future price = USD75)  Buy oil shares + short the oil price  Buy oil service (2007-09e est. robust even if oil price falls to USD55- 60) CONCLUSION Energy & Utility sector

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