In our view, long-term investment themes encompassing the level of global investment that will be necessary to keep pace with anticipated increases to global energy demand (assuming global economic growth in-line with IMF projections), as well as maintain and modernize existing facilities and infrastructure are worthy possibilities for energy portfolios.
While the macroeconomic environment continues to be characterized by significant uncertainty, the outlook for our coverage universe varies according to market segment and geographic area. Therefore, in addition to providing an overview of our coverage universe, this report is designed to provide an in-depth analysis of the capital spending prospects within each material energy subsector (and geographic region) and to determine the relative competitive positioning within each material energy subsector of all stocks we cover.
Through our analysis, we have determined that the LNG, Upstream Oil & Gas (including Canadian Oil Sands), and Midstream (storage & transmission) subsectors represent the most compelling near to intermediate-term growth prospects, while the refining, petrochemical and conventional power markets are more challenged. Accordingly, we believe Chicago Bridge & Iron (CBI), Dresser-Rand Group (DRC), and KBR Inc. (KBR) possess the best growth prospects of our E&I universe. We rate each name Overweight. We are also Overweight industry bellwether Fluor Corp (FLR). Although FLR offers market leading exposure to OECD downstream (a negative factor), the Company’s competitive positioning within the LNG and Upstream subsectors is improving considerably.
Jeff A. Dietert
713-223-7840
jdietert@simmonsco-intl.com
Guy Baber, CPA
713-546-7201
gaber@simmonsco-intl.com
The full report contains detailed information.
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Appendix D
Analyst Certification:
I, Guy Baber, hereby certify that the views expressed in this research report to the best of my knowledge, accurately reflect my personal views about the subject compan(ies) and its (their) securities; and that, I have not been, am not, and will not be receiving direct or indirect compensation in exchange for expressing the specific recommendation(s) or views in this research report.
Important Disclosures:
For detailed rating information, go to http://publicdisclosure.simmonsco-intl.com. Additional information is available upon request. Simmons & Company's ratings system categorizes individual stock performance as Underweight, Neutral or Overweight relative to the performance of the S&P 500 Index and its discrete energy sub-sector over a 12 month period. Research analysts compensation is based upon (among other things) the firm's general investment banking revenues. Simmons & Company International may seek compensation for investment banking services from The Shaw Group Inc.,Chicago Bridge & Iron,Dresser-Rand,Fluor,KBR, Inc.,The Shaw Group, Inc. and other companies for which research coverage is provided. The firm would expect to receive compensation for any such services.
Foreign Affiliate Disclosure:
This report may be made available in the United Kingdom through distribution by Simmons & Company International Capital Markets Limited, a firm authorized and regulated by the Financial Services Authority to undertake designated investment business in the United Kingdom. Simmons & Company International Capital Markets Limited's policy on managing investment research conflicts is available by request. The research report is directed only at persons who have professional experience in matters relating to investments who fall within the definition of investment professionals in Article 19(5) Financial Services and Markets Act (Financial Promotion) Order 2001 (as amended) ("FPO"); persons who fall within Article 49(2)(a) to (d) FPO (high net worth companies, unincorporated associations etc.) or persons who are otherwise market counterparties or intermediate customers in accordance with the FSA Handbook of Rules and Guidance ("relevant persons"). The research report must not be acted on or relied upon by any persons who receive it within the EEA who are not relevant persons. Simmons & Company International Capital Markets Limited is located at Sackville House, 40 Piccadilly, Mezzanine, London, United Kingdom.