Michael Korn Mario Knezevic Sashi Kommineni

Agenda Sector Overview Recap Halliburton Valero Kinder Morgan Enterprise Products Recommendation

Energy Sector Weights

Energy Sector SIM Portfolio

Halliburton – Business Overview One of the market’s top players in the Energy sector, and more specifically, the Energy Equipment and Services industry. Has a global reach and is known for being very diversified in its operations. The company has a strong foothold in its industry due to a cost- leadership strategy and continuous technological innovations

Halliburton – Business Overview Founded in 1919 Headquartered in Houston, Texas and Dubai, United Arab Emirates Operations expand across 70+ countries Roughly 50,000 employees 2 main business segments divided into 14 product service lines

5-Year HAL vs. S&P Energy Sector

HAL - Growth Drivers and Risks Technological advancements Increase in oil prices Opportunity in international economies Diversified services Risks Economic and political instability worldwide Decrease and volatility in oil prices Volume of capital spending by customers Subjection to cyber/security attacks with increasing presence of technology

HAL – Financial Analysis

HAL – Financial Analysis

HAL – Multiples Absolute Basis High Low Median Current P/E 133.7412 6.3163 23.6462 45.6487 P/B 3.0861 1.445 1.893 1.7588 P/S 1.8851 0.626 1.114 1.2932 P/EBITDA 131.9438 3.0594 12.6752 10.8244 Relative to S&P500 High Low Median Current P/E 6.5515 0.451 1.1487 2.1409 P/B 1.2992 0.5495 0.864 0.5671 P/S 1.1332 0.5517 0.759 0.6314 P/EBITDA 13.2453 0.5918 1.2724 0.9695

HAL - Valuation Terminal Discount Rate – 10.50% Terminal FCF Growth Rate – 4.00% Current Price - $44.58 Target Price - $49.33 10.65% Upside 12.27% Upside with Dividend Yield

HAL – Sensitivity Analysis

Valero – Business Overview One of the Energy sector’s majors players and a leader in the Oil & Gas Refining and Marketing industry Comprised of its refining business, ethanol division, and master limited partnership of Valero Energy Partners which handles most of its logistics network Has been one of the top-performing stocks in the energy sector, along with some of the other major oil refiners

Valero – Business Overview Recommendation: HOLD Ticker VLO Sector Energy Industry Oil & Gas Refining and Marketing Current Price (as of 11/3/2017) $80.88 Price Target $86.48 Upside 6.9%   Founded in 1980 Headquartered in San Antonio, TX Operates 15 refineries in North America and can refine up to 3.1 million barrels per day Employs around 10,000 people Was one of the largest retail operators (about 6,800 outlets) until they spun off their retail operations in 2013 Market Data Market Capitalization $36.071 billion Shares Outstanding 441.66 million 52-Week Price Range $58.47- $80.68 Beta 0.96   Financial Data (FY 2016) Revenue $75,659 Revenue Growth (YoY) -14% Operating Income $3,572 million Forward Dividend Yield: 3.60%  

1-Year VLO vs. S&P 500

VLO - Growth Drivers and Risks Benefits from VLP Rising crack spreads Increased oil demand Widening Brent-WTI spread Projects to improve refineries almost complete Risks Oil price volatility Potential for crack spreads to fall High FCFs already baked into stock price

VLO – Financial Analysis Profit Margin Operating ROA Margin ROE Margin

VLO – Financial Analysis High EPS Low for other multiples

VLO - Valuation Terminal Discount Rate – 10.75 Terminal FCF Growth Rate – 3.75 Current Price - $80.88 Target Price - $86.48 6.9 % Upside

VLO – Sensitivity Analysis

Kinder Morgan – Business Overview Founded as Kinder Morgan Energy Partners (KMP) in 1997 Created several other companies listed in the stock exchange. Kinder Morgan Management, LLC (NYSE: KMR) was formed to facilitate institutional ownership of KMP equity. Completed a $38billion acquisition of El Paso Corp and created a publicly traded entity (NYSE: EPB) to its family of companies. In 2014, all publicly held shares/units of KMP, KMR and EPB were acquired in a $76billion transaction. Kinder Morgan is now one publicly traded company with a ticker on the NYSE of KMI. Headquartered in Houston, TX one of the largest energy infrastructure companies in North America. The company specializes in owning and controlling oil and gas pipelines and terminals. Kinder Morgan owns an interest in or operates approximately 84,000 miles of pipelines and 155 terminals

5-Year KMI vs. S&P 500

KMI - Growth Drivers and Risks Asset footprint Increased oil demand Risks Oil price volatility Safety Issues Company fundamentals Picture shows asset footprint of KMI (Source: KMI Investor presentation)

KMI – Company Fundamentals KMI has built a large asset base across the energy spectrum in the U.S Achieved by aggressively purchasing third party assets of all sizes. Rising acquisition costs create need for higher energy prices to justify paying increasing valuations. KMI has a debt that is higher than its equity With energy prices still depressed, this weighs on fundamental outlook. In late 2015, management slashed the company’s dividend by roughly 75%, leaving its current yield in the 2.75% range, from as high as over 14%. So, it’s dividend yield isn’t great as well.

KMI - Valuation Terminal Discount Rate : 10% Terminal FCF Growth Rate : 4% Current Price: $17.46 Target Price: $11.27 -35.5% downside

KMI – Sensitivity Analysis

EPD – Business Overview Enterprise Products Partners L.P. is one of the largest publicly traded partnerships and a leading North American provider of midstream energy services to producers and consumers of natural gas, NGLs, crude oil, refined products and petrochemicals. Headquartered in Houston, TX. Has grown significantly since its IPO in July 1998, increasing its asset base from $715 million to $52 billion at December 31, 2016

EPD – vs S&P500 vs KMI

EPD - Valuation Terminal Discount Rate : 10% Terminal FCF Growth Rate : 4% Current Price: $26.39 Target Price: $35.61 +34.9% upside

Recommendation Current Price Target Price Potential Upside/ Downside Current Portfolio Basis Points Recommended Portfolio Basis Points Overall Recommendation Halliburton $44.58 $49.33 12.27% (with dividend) 152 bp HOLD Valero $80.88 $86.48 6.90% 302 bp 202 bp SELL Kinder Morgan $17.46 $11.27 -35.50% 207 bp 0 bp Enterprise Products Partners $26.39 $35.61 34.90% 236 bp BUY Recommendations bring our SIM portfolio weight to S&P 500 market weight