1. Finance & Investment Club Industrials Sector Fall 2012 Senior Analyst: Jake Siegel Junior Analysts: Payal Patel Vincent Liao, Valentina Delgado, Robert Maghielse, Soosok Kim, Shane Byrnes, Tinna Zhang, Daniel Krieger, Ruby Lin, James Yu Oil and Gas Pipeline Construction

2. 2 Industry Definition – Oil and Gas Pipeline Construction  Firms in this industry derive the majority of their revenue from the design, engineering and construction of pipelines used in the procurement, production and transfer of oil and other natural gases. These products primarily service a wide range of various U.S government agencies in addition to both domestic and international private clients who are in the business of the production, procurement and transfer of oil. Fluor Corporation (NYSE: FLR) Jacobs Engineering Group, Inc. (NYSE: JEC) Quanta Services, Inc. NYSE: PWR KBR, Inc. (NYSE: KBR) McDermott International (NYSE: MDR) MasTec, Inc. (NYSE: MTZ) WillBros Group, Inc. (NYSE: WG)

3. 3 Industry Breakdown and Summary Industrial Goods $ 48387B Heavy Construction 970B (2.01 %) Oil & Natural Gas Pipeline Construction 27B (0.057%) Industry Breakdown By Market Cap ($BLN)Sub-Sector Breakdown by 2011 Revenue ($M)

4. 4 Revenue Generation and Industry Model Design Pipeline System Raw Materials (Iron Ore) Build Pipeline System Bid For Contract

5. 5 Revenue Generation By Operating Segments Collection 58% Construction Services 60% Engineering Services 30% Operations and Maintenance 10% Provide traditional field construction services to private and public sector clients Employ engineering, architectural and design related disciplines necessary to build transportation system Repair and replacement of pumps, piping, heat exchangers, and other equipment Private and Government Clients

6. 6 Presentation Overview Oil and Natural Gas Pipeline Construction Demand in Aerospace Increased electronic demand and usage in China Key Industry Drivers/Trends Oil and Natural Gas Pipeline Construction Industry Rating: POSITIVE Growing Crude Oil Outputs Decreasing Iron Ore Prices Increasing Demand from U.S. Government

7. 7 Trends Growing Crude Oil Outputs Decreasing Iron Ore Prices Increasing Demand from U.S Government

8. 8 Trend I: Revenue Expectations from Growing Crude Oil Outputs 21% Decrease in May 2008 20% Decrease from May 2008-May 2009 7% Increase in Jan. 2012 Projected 7% Increase in Jan. 2013 Revenue that is Attributable to Crude Oil Outputs A relationship exists between total revenue of the Oil & NG Pipeline Construction Industry and Global Crude Oil Output There is an apparent one year lag between increases in Crude Oil Output and increases to industry revenue

9. 9 Trends Growing Crude Oil Outputs Decreasing Iron Ore Prices Increasing Demand from U.S. Government

10. 10 Trend II: Cost Benefits of Decreasing Iron Ore Prices 3.5% Decrease in March 2012 Iron Ore represents 50-70% of industry COGS We expect Iron Ore prices to drop even further in the next year which will continue to provide the industry with this cost advantage Current Iron Ore stockpiles at Chinese ports are at a record high 97.43M metric tons India has instituted a 2-year ban on distribution of 120M metric ton supply of iron ore

11. 11 Trends Growing Crude Oil Outputs Decreasing Iron Ore Prices Increasing Demand from U.S. Government

12. 12 Trend III: Increasing Demand from U.S. Government Projected.75% Increase to Industry Revenue 2009 and 2010 PHMSA regulations mandated pipeline maintenance and repair throughout the U.S. Contracts with PHMSA effective in 2013 and 2014 will grow revenue by a projected $250m.65% Increase to Industry Revenue

13. 13 Risks The industry is subject to risk associated with commodity price volatility With iron ore accounting for between 50-70% of COGS, hikes in the price of iron ore can force constituent firms to incur more costs and a shrink to margins. Global crude oil output sets the level of demand for industry services If crude oil output experiences a large falloff, industry revenues may start to decrease as pipeline transportation capacity demand will fall. Operations include construction and maintenance site that are inherently dangerous workplaces Failure to maintain safe work sites can expose companies to significant financial loses and potential civil and criminal liability. Firms in this industry run the risk of entering into bidding wars Firms in the industry enter silent bids for news contracts and run the risk of pricing themselves too low in order to acquire the most business

14. 14 Key Financials Company Market Cap. 5-Year Revenue Growth (%)LTM ROI or ROE LTM EBITDA Growth(%) EV/EBITDAP/E Fluor8.410.6817.2360.555.3215.30 Jacobs5.25.1510.776.676.9714.07 Quanta5.716.763.939.589.1819.59 KBR4.11.0120.253.115.4820.43 McDerm ott 2.4-3.528.93-20.434.9214.54 MasTec1.7426.1914.484.937.7821.46 Willbros0.24624.35-7.061.3225.0012.03 High8.426.1920.2560.552521.46 Low0.246-3.52-7.06-20.434.9212.03 Median4.110.6810.774.936.9715.3 Mean3.9711.529.799.399.2416.77

15. 15 Presentation Overview Demand in Aerospace Increased electronic demand and usage in China Key Industry Drivers/Trends Oil and Natural Gas Pipeline Construction Industry Rating: POSITIVE Projected 7% increase to revenue due to growing crude oil output Projected 3.5% decrease to COGS/Sales due to decreasing iron ore prices Projected.75% increase to revenue in both 2013 and 2014 due to Pipeline and Hazardous Materials Safety Administration regulations

16. 16 Thank You & Slide Matrix Industry Definition Industry Breakdown and Summary Revenue Generation Model I Revenue Generation Model II Presentation Overview Revenue Expectations from Crude Oil Outputs Decreasing Iron Ore Prices PHMSA Regulation Risks Key Financials Conclusion Thank You For Your Time We Welcome Any Questions You May Have Thank You For Your Time We Welcome Any Questions You May Have