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					ab                                                                                                       Global Equity Research

                                                                                                          Americas
 UBS Investment Research
                                                                                                          Oil Drilling, Equipment & Services
 US Oil Service & Drilling
                                                                                                          Sector Comment



 Angie's Oil Service and Drilling Weekly
                                                                                                                                          26 April 2010
     SLB, HAL and WFT reported 1Q-10 results ahead of our expectations
                                                                                                                           www.ubs.com/investmentresearch
 SLB management’s optimism (echoed by HAL and WFT) regarding international
 markets potentially improving at a greater than expected pace was particularly
 encouraging. International margins were seen to have troughed this quarter, a
 quarter earlier than expected. North American performance was strong across the                                                           Angie Sedita
 board with higher activity levels and some pricing improvements driving average                                                                    Analyst
 incremental margins of 45%. However, going forward management commentary                                                            angie.sedita@ubs.com
                                                                                                                                            1-212-713 3587
 on North America matched our cautious stance for 2H-10 given uncertainty in
 natural gas fundamentals. See page 11 for 1Q-10 earnings comparision.                                                                    Sasha Sanwal
                                                                                                                                         Associate Analyst
     Diamond Offshore and ENSCO – strong 1Q-10 results                                                                             sasha.sanwal@ubs.com
 Strong earnings for both companies were generally overshadowed by changes to                                                            +1-212-713 4907
 dividends. Diamond lowered its combined quarterly dividend by $0.50 to $1.50                                                              Alston Mason
 (7% yield) reflecting the decrease in midwater rates and a desire to retain cash for                                                      Associate Analyst
 potential rig acquisitions. Management indicated the revised dividend can be                                                       alston.mason@ubs.com
 maintained “at least through 2010”. ENSCO increased its quarterly dividend from                                                           +1-212-713 8696
 $0.025 to $0.35 (3% yield). The new dividend will still allow flexibility for new
 investments and further share repurchases ($560m remaining authorization).

    Gas rig count down 17 (first decline since late Dec-09), oil up 8 rigs
 The Baker Hughes US land rig count decreased by six rigs to 1,415. The oil rig
 count was up eight to 514, while the gas rig count was down by 17 to 956 (first
 decline since late Dec-09).


                             Ticker   Price     Rating
                                                              Target
                                                              Price
                                                                           P/E
                                                                       2010E   2011E
                                                                                          EV/EBITDA
                                                                                         2010E   2011E
                                                                                                          Table of Contents
                                      4/23/10

 OIL SERVICES                                                                                             Oil Service and Drilling News ......3
 Baker Hughes                BHI       $54.18       Neutral      $50    26.1x   18.8x      9.0x    7.3x
 Halliburton                 HAL       $47.31         Buy         42    25.0x   16.8x     10.2x    7.8x
                                                                                                          Contract Awards and Other
 Schlumberger                SLB       $72.68         Buy         87    24.7x   18.8x     12.4x   10.3x   Market Updates .............................9
 Smith International         SII       $49.15       Neutral       44    44.8x   25.4x     11.2x    8.3x
 Weatherford International   WFT       $17.73         Buy         23    37.3x   17.7x     10.3x    8.0x
 AVERAGE                                                                31.6x   19.5x     10.6x    8.3x
                                                                                                          Full Company Notes ...................10
 OFFSHORE DRILLERS                                                                                        Noteworthy Data Points .............46
 Diamond Offshore            DO        $85.60         Buy       $105    10.4x    9.8x      6.0x    5.7x
 ENSCO International         ESV       $51.95       Neutral       46    13.6x   11.3x      7.4x    6.3x   Offshore Rigs Update .................47
 Noble Corporation           NE        $43.63       Neutral       44     8.1x    8.8x      5.4x    5.7x
 Pride International         PDE       $33.40         Buy         38    22.6x   11.2x     13.1x    7.4x
 Rowan Companies             RDC       $32.50       Neutral       29    14.3x   22.0x      6.7x    8.1x
                                                                                                          Land Rigs Update .......................50
 Seahawk Drilling            HAWK      $19.53       Neutral       22      n/a     n/a       n/a    8.2x
 Transocean                  RIG       $89.89         Buy        108    10.2x    8.3x      7.2x    6.1x   Diversified Oil Service Metrics ..53
 AVERAGE                                                                13.2x   11.9x      7.6x    6.8x

 LAND DRILLERS                                                                                            Technical and Other Indicators .55
 Helmerich & Payne           HP        $43.21       Neutral      $42    18.3x   14.5x      6.9x    6.3x
 Nabors Industries           NBR       $22.61       Neutral       22    22.5x   14.5x      6.9x    5.9x
 Patterson-UTI Energy        PTEN      $15.64       Neutral       15      n/a   35.0x      6.7x    5.3x
 AVERAGE                                                                20.4x   21.3x      6.8x    5.8x
 Source: Factset and UBS estimates




 This report has been prepared by UBS Securities LLC
 ANALYST CERTIFICATION AND REQUIRED DISCLOSURES BEGIN ON PAGE 61.
 UBS does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may
 have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making
 their investment decision.
US Oil Service & Drilling 26 April 2010



    Transocean’s semi Deepwater Horizon (5th gen, 8,000 ft) sunk this past
    Thursday in the GOM after an explosion and ensuing fire engulfed the rig.
    The rig is insured for its “economic value”, which we believe would be about
    $500-$550mil. The deductible is nominal at $1.5 million or less. The
    company does have environmental and claims insurance covering any
    personal injury issues, etc. We are not sure the scale of the environmental
    insurance coverage, which could become an important issue as the well still
    appears to be flowing hydrocarbons. Transocean does not have business
    interruption insurance and the earnings impact of lost revenues is 3%-4% per
    year.

    Nabors reported clean Q1-10 EPS of $0.21 (UBS $0.22 est. / cons. $0.21).
    Results from the US Lower 48 were strong, however the International
    segment was below expectations and management lowered FY10 operating
    income guidance for the segment to $300-$310 mil (15% reduction). We
    maintain our cautious outlook on natural gas for 2H-10.

    Noble reported clean EPS of $1.43 (UBS $1.32 est. / cons. $1.33). Contract
    drilling expenses drove much of the beat (6% below our estimates) as
    management held back spending due to the “challenging market”. Jackup
    markets appear to firming with dayrates and utilization holding current levels.
    Management sounded a confident tone on the outlook in Mexico despite new
    age restrictions, citing NE’s strong performance record and cost differentials.

    Market commentary – The OSX was up 7.8% vs the S&P500 up 2.1%. The                                  Weakest performer DO (down 2%),
    weakest performer was Diamond Offshore (down 2%), while the strongest                               strongest NBR (up 16%)
    was Nabors (up 16%).

Chart 1: Weekly Price Performance: Oil Services & Drillers

                           Oil Services Composite                                              Offshore and Land Drillers Composite

                                   TDW, 5%                                           DO, -2%
                                                                                                        RIG, 3%
                                    CA M , 6%
                                                                                                           PDE, 5%
                                    FTI, 6%                                                                     RDC, 7%
                                           WFT, 7%                                                                NE, 8%
                                                 NOV, 9%                                                          P TEN, 8%
                                                       SLB , 10%                                                   HP , 9%
                                                                                                                      HA WK, 10%
                                                       HA L, 1 0%                                                      ESV, 10%
                                                              1
                                                        SII, 1 %                                                                 1
                                                                                                                          HERO, 1 %
                                                                 B JS, 12%                                                            NB R, 16%
                                                                         B HI, 14%
                                                                                     -5%         0%       5%       10%        15%          20%
           0%                 5%                     10%                   15%




Source: FactSet




                                                                                                                                                  UBS 2
US Oil Service & Drilling 26 April 2010


Oil Service and Drilling News
Schlumberger Ltd: International
optimism drives stock higher
Published April 26, 2010

    Q1-10 in line and confirmation of current 2010 consensus estimates
SLB reported a clean Q1-10 EPS of $0.62 vs our $0.62 and consensus of $0.61.
Revenues were 3.2% below our forecast, with NAM 5.4% above our estimate
and Europe/CIS/Africa 9.6% below. Total costs were 3.4% below our estimate
leading to better margins in NAM (8% vs our 4% forecast) as well as in Latin
America and Middle East. Additionally, SLB confirmed current 2010 consensus
estimates.

    International growth more encouraging, also margins bottomed
SLB’s clear optimism regarding the international markets improving, potentially
at a greater than expected pace was particularly encouraging. Additionally, with
deepwater rig deliveries on time and the bulk of the rigs entering in 2010-11
should provide an additional boost. Both factors likely led to the 17% increase in
2010 capex. Finally, international margins surprised bottoming in Q1, versus
late-Q2.

    North America strong in Q2, but “uncertain” beyond
SLB indicated “uncertainty” beyond the Q2 given the “less clear” picture for
natural gas. We would expect another strong quarter in Q2, but remain
concerned about the remainder of the year and believe a best case would be
trending flat.

  Reiterate Buy, SLB trading at discount to historical premium of 20%-
25%
SLB became our “Key Call” last week. We choose the company given its
dominant international exposure and its market leading oil service franchise.
Additionally, its 5% premium to the group is well below historical levels and we
believe a re-expansion to 15%-20% is fair. Also we were encouraged SLB
repurchased the max shares under SEC regulations. PT $87, based on 22x ’11E
P/E.

See full note on page 10



Halliburton: NAM to flatten in 2H,
however Int’l stronger
Published April 19, 2010

    Solid quarter driven by North America, as expected… but Int’l weak
HAL reported operating Q1-10 EPS of $0.28 vs our estimate and consensus of
$0.25. North American revenues and margins were well above our estimates
(adding $0.07) with op income more than doubling from Q4-09. However,


                                                                                     UBS 3
US Oil Service & Drilling 26 April 2010


Middle East/Asia revenues and margins missed forecasts ($0.04 drag) as did
Europe/CIS/Africa. Results exclude $0.05 impact from Venezuelan devaluation.

   NAM gas rig count weaker in 2H-10, partially offset by oil rig count
gains
The company is cautious on activity in North America for the 2H-10. We
believe the industry could see a 200-250 gas rig count decline, which could be
partially offset by 100-150 increase in the oil rigs. Under this scenario we
anticipate margins to flatten in Q3 and Q4, with potential risk to the downside.
However, Q2-10 margins should increase further on a full quarter of pricing
impact.

    International outlook: management has “increased confidence” in 2H-10
International activity looks to be stronger than originally expected in the 2H-10
and the company sites “tangible signs” of increasing activity and has even
pushed forward some 2011 int’l capex spending into 2010. Activity gains are
expected to be evenly spread evenly throughout the regions.

   Maintain Buy; HAL well positioned and stock trading at discount to
peers
We continue our BUY rating on HAL despite short-term concerns for NAM. We
believe the company’s traction internationally should gain momentum later this
year. However, there is potential for modest downside earnings risk if the rig
count declines greater than expectations. Our $42 PT is based on an ‘11E P/E of
20x.

See full note on page 17



Weatherford International: Weathered
Q1-10 better than expected
Published April 21, 2010

    Q1-10 adjusted EPS of $0.08 vs our $0.07 estimate
WFT reported a clean Q1-10 EPS of $0.08 vs. our estimate and consensus of
$0.07. This reflects the adjustment for a write-off at the Boret subsidiary and a
fair value adjustment to the put option issued with the TNK-BP acquisition. Q1
was driven by better than expected NAM, but weaker LatAm &
Europe/WAfrica/Asia.

    Management guides Q2-10 to $0.06, however not a surprise
We believe the stock traded up today as the guidance, while lower, was still
better than expectations. In our view, lowering estimates to a baseline will help
re-build investor confidence. We have cut our estimates for 2010 and 2011
assuming a slow ramp from Q1-10 levels, with prospects for upside as the
international markets gain traction and margins begin to re-expand.

    International markets to drive growth, no secular growth seen in NAM
Growth will be driven by Algeria, Libya, Middle East, Russia, Iraq, China and
Australia as well as some parts of Latin America. We believe it should be both a


                                                                                    UBS 4
US Oil Service & Drilling 26 April 2010


revenue and a margin recovery story, given substantial margin pressure as of
late. Guidance for NAM is flat for the 2H-10 and for 2011, with which we
would agree.

    Maintain Buy rating
We maintain our Buy rating reflecting WFT’s compelling international
prospects and above-average growth rates at the top/bottom line. We would
expect WFT to see sequential earnings and operational improvement as we
progress through 2010. However, we have set our estimates at the bottom end of
the consensus range. Our $23 PT is based on a 23x ‘11E P/E multiple.

See full note on page 22



Nabors Industries: International guided
lower, US flat in 2H
Published April 21, 2010

    Q1-10 clean EPS of $0.21 vs. our $0.22 estimate and consensus of $0.21
Results exclude charges of $0.06 per share related to items including a
devaluation of the Venezuelan Bolivar, a carrying value adjustment to a holding
in a Chinese rig manufacturer, and a book loss on debt repurchases. A spike in
the effective tax rate (20% vs. FY 2010 guidance of 12%) cost $0.01 for the
quarter.

    US Lower 48 strong in Q1, but risks late 2010 and into 2011
Operating income in the Lower 48 Land segment was 35% higher than our
forecasts, driven by a higher rig count and a lower decline in average rig
margins. Nabors indicated that if natural gas prices remain at $4.00/mcf “it’s
going to be bad” as the $6-$7.00 hedges roll off for the E&P companies later
this year. However, gains in oil shale drilling should partially offset the gas
decline. We believe the company can hold on to pricing given the tight rig
market, but that there is a real possibility of a net decline in the overall rig count.

    International disappoints in Q1-10 and full year guided down
International results were much weaker than expectations due to project delays
and execution deferrals (Mexico, Saudi Arabia, and Algeria). As a result of the
delays in Q1-10 and expectations of minimal margin expansion through the
remainder of the year, the company has lowered FY10 operating income
guidance for the segment to $300-$310 mil (down $50 - $60 mil from previous
guidance).

    Valuation: Neutral rating, risk to gas prices and rig count in 2H-10
Our $22 price target for Nabors is based on a 5.8x 2010E EV/EBITDA multiple
vs. the group average of 5.6x. We maintain our Neutral rating on the company.

See full note on page 28




                                                                                          UBS 5
US Oil Service & Drilling 26 April 2010


Diamond Offshore: Dividend cut; kept “at
least through 2010”
Published April 22, 2010

    Q1-10 clean EPS of $2.09 vs. our $1.88 estimate and consensus of $1.94
Diamond reported clean EPS of $2.09 vs. our $1.88 estimate and consensus of
$1.94. The beat was driven by high specification floaters, with revenues 4%
above our forecasts and expenses 22% below. Higher taxes had a $0.06 negative
impact.

    Dividend cut expected, but not this early
Diamond lowered their quarterly dividend by $0.50 to $1.50 ($0.125 regular
dividend plus $1.375 special dividend), which equates to an annualized dividend
yield of 7%. The cut reflects "current and anticipated industry" conditions
(including a decline in dayrates from peak levels) and a desire to retain cash for
potential rig acquisitions and other corporate purposes. Management indicated
that the revised dividend can be maintained “at least through 2010”.

    Midwater markets remain soft; international jackup market active
We believe the mid-water markets remain uneven with some demand, but still a
difficult market. The company believes it can keep its lower specification rigs
which are up for contract midyear under contract; however rates could be a bit
soft during the hurricane season in the Gulf of Mexico. For the international
jackups, the market has been much more active across “all regions”.

    Valuation: Cutting price target from $110 to $105
We believe there will be some modest multiple contraction following the
dividend cut; additionally we are cutting estimates reflecting our concerns in the
mid-water markets. Our $105 price target for Diamond is based on a 7.4x 2010E
EV/EBITDA multiple.

See full note on page 33



Noble Corp: Strong quarter on lower
costs
Published April 22, 2010

    Clean EPS of $1.43 vs. our $1.32 estimate and consensus of $1.33
Noble reported clean EPS of $1.43 vs. our $1.32 estimate and consensus of
$1.33. Contract drilling expenses drove much of the beat (6% below our
estimates) as management held back some planned spending due to the
“challenging market”.

    NE confident most of 10 PEMEX jackups will stay in Mexico
Management sounded a confident tone on the outlook in Mexico despite new
age restrictions, citing NE’s strong performance record and cost differentials.
Noble has ten jackups in Mexico up for renewal this year (none would satisfy
the age requirement). Three of the five jackup opportunities in the most recent
PEMEX tender specifically require rigs to be built after 2000. Noble believes its


                                                                                     UBS 6
US Oil Service & Drilling 26 April 2010


strong track record in the region may result in PEMEX ultimately keeping all of
the rigs.

    Deepwater and jackup markets a bit mixed, but utilization steady
In the jackup markets the company sees rates as holding steady with utilization
flat. Although, there has seen a drop in the low end of the dayrate range as
companies seek term. We could see further softness in rates for jackups at the
margin as new rigs are delivered later this year. Additionally, deepwater
dayrates may not have found a floor, per Noble. However, we believe long-term
the market will firm. We believe 2010 is a mixed year, but 2011 and even more
so 2012 should be stronger.

    Valuation: Maintain Neutral rating, new jackup capacity still an issue
Our $44 price target for Noble is based on a 5.5x 2010E EV/EBITDA multiple.
We believe the strong management team, the expanding deepwater exposure,
and impressive cost controls continue to keep Noble a step ahead.

See full note on page 37



ENSCO PLC: Increasing dividend, 2010
outlook intact
Published April 26, 2010

    1Q-10 clean EPS of $1.11 vs our $1.01 estimate
ENSCO reported clean EPS of $1.11 vs. our estimate and consensus of $1.01.
The beat was largely driven by higher than forecasted deepwater and jackup
utilization as revenues were 7% above our estimate. Operating costs were $185
mil, 6% above our estimate. Lower taxes helped by $0.01.

    Significantly increasing quarterly dividend
ENSCO also announced a regular quarterly cash dividend of $0.35 (3% dividend
yield), up significantly from the current quarterly dividend of $0.025.
Management believes that the new dividend is sustainable while allowing
flexibility for new investments and additional share repurchases ($560m
remaining authorization).

    Deepwater market in transition year, jackup steady
ENSCO continues to market its three uncontracted 6th gen newbuild semis
being delivered through 2012 (one in 2H 2011 and two in 2012), as well as the
ENSCO 7500 (5th gen – 8,000 ft) which rolls-off contract in Sep-10. While 2010
appears to be a transition year for the deepwater market, contracting activity is
expected to increase as we enter 2011. ENSCO indicated that there is a good
level of demand in the global jackup markets and that jackup utilization should
remain flat in 2010.

    Maintain Neutral
We believe ENSCO’s growing deepwater exposure offers attractive growth.
However, given our concerns surrounding significant new jackup supply still



                                                                                    UBS 7
US Oil Service & Drilling 26 April 2010


entering the market in late 2010 we maintain our Neutral rating. Our $46 PT is
based on a 6.5x 2010E EV/EBITDA multiple.

See full note on page 41



Transocean’s Deepwater Horizon sinks
after explosion
Transocean’s semi Deepwater Horizon (5th gen, 8,000 ft) sunk this past
Thursday in the GOM after an explosion and ensuing fire engulfed the rig. It is
believed that efforts to shut off the well have been unsuccessful and that about
1,000 barrels per day continue to leak into the Gulf of Mexico. ROVs are on
location to pump fluid to close the BOP rams and seal off the leak (expected to
take 24 to 36 hours). The Transocean semi Development Driller III (contracted
to BP at a dayrate of $403k through Nov-16) and the drillship Discoverer
Enterprise (contracted to BP at a dayrate of $523k through Mar-11) are being
mobilized to the area in case a relief well is necessary. The company does have
environmental and claims insurance. We are not sure the scale of the
environmental insurance coverage, which could become an important issue.

The rig is insured for its “economic value”, which we believe would be about
$500-$550mil. The deductible is nominal at $1.5 million or less. To build a
similar rig today would be $600-$625mil. The company does not have business
interruption insurance, thus the lost revenues would not be reimbursed. The rig
was a 5th generation semisubmersible built in 2001 and capable of drilling in
8,000 feet of water. Transocean does not have another rig that could fill the
contract slot. The earnings impact of lost revenues is 3%-4% per year.

ONGC awards contracts in mid $60k’s
ONGC has awarded LOIs for its seven jackup tender. The contract awards are
for three year terms at a dayrate in the mid $60k’s. The low bid was set by the
ENSCO 51 and ENSCO 57 which were recently purchased by Jagson, a local
Indian company. Other rigs awarded contracts include three Transocean jackups
(J.T. Angel, Ron Tappmeyer and Trident XII) and two Noble jackups (Noble
Charlie Yester and Noble Kenneth Delaney).

ENSCO sells the ENSCO 57 for $47 mil
ENSCO has sold the ENSCO 57 (300 ft – IC) to Jagson for $47 mil. This is the
third jackup that ENSCO has sold this year and is part of an ongoing effort by
the company to upgrade its jackup fleet. Earlier this year ENSCO sold the
ENSCO 50 and ENSCO 51 (both 300 ft IC) for a combined $95 mil. All of these
jackups were older, lower specification rigs. The ENSCO 57 had a net book
value of $30 mil as of March 31, 2010.




                                                                                   UBS 8
US Oil Service & Drilling 26 April 2010


Contract Awards and Other
Market Updates
Rowan Companies: One year contract in North
Sea at a dayrate of low $160k’s
    The Rowan Gorilla V (400 ft – IC, North Sea) was awarded an incremental
    one year contract with Total at a dayrate in the low $160k’s. The contract
    will begin in May-10 after the rig completes its current contract with Total at
    a dayrate in the low $150k’s.

    The conventional jackup Rowan-Louisiana (350 ft – IS, GOM) was awarded
    a contract with Helix at a dayrate in the mid $50k’s through Jun-10. The rig
    will then commence its previously announced six month contract with
    McMoRan, also at a dayrate in the mid $50k’s.

Seahawk Drilling: Active rig’s keeping steady
work
Several of Seahawk’s jackups received short term contract awards and all of the
eight active rigs are now contracted into June, with some booked through
August.

    The Seahawk 2500 (250 ft – MS, GOM) was awarded a 30 day contract with
    ADTI/Contango at a dayrate of $33k and a 70 day contract with Arena
    Offshore at a dayrate of $35k. The rig was previously idle.

    The Seahawk 2001 (200 ft – MC, GOM) was awarded a 60 day contract with
    Castex at a dayrate of $34k. The rig is currently working for Energy XXI at a
    dayrate of $35k.

    The Seahawk 2004 (200 ft – MC, GOM) received a 45 day Letter of
    Agreement with Brandon Oil & Gas at a dayrate of $36k. The rig is currently
    working for Arena Offshore at a dayrate of $34k.

    The Seahawk 2007 (200 ft – MC, GOM) was awarded a 35 day contract with
    Breton at a dayrate of $35k, unchanged from the rig’s current dayrate.

    The Seahawk 3000 (300 ft – MC, GOM) was damaged and will require
    shipyard repair through Jul-10. The rig’s contract with Hilcorp for 100 days
    at a dayrate of $41k was transferred to the Seahawk 2601.




                                                                                      UBS 9
US Oil Service & Drilling 26 April 2010


Full Company Notes
Schlumberger Ltd: International
optimism drives stock higher
Published April 26, 2010

    Q1-10 in line and confirmation of current 2010 consensus estimates
SLB reported a clean Q1-10 EPS of $0.62 vs our $0.62 and consensus of $0.61.
Revenues were 3.2% below our forecast, with NAM 5.4% above our estimate
and Europe/CIS/Africa 9.6% below. Total costs were 3.4% below our estimate
leading to better margins in NAM (8% vs our 4% forecast) as well as in Latin
America and Middle East. Additionally, SLB confirmed current 2010 consensus
estimates.

    International growth more encouraging, also margins bottomed
SLB’s clear optimism regarding the international markets improving, potentially
at a greater than expected pace was particularly encouraging. Additionally, with
deepwater rig deliveries on time and the bulk of the rigs entering in 2010-11
should provide an additional boost. Both factors likely led to the 17% increase in
2010 capex. Finally, international margins surprised bottoming in Q1, versus
late-Q2.

    North America strong in Q2, but “uncertain” beyond
SLB indicated “uncertainty” beyond the Q2 given the “less clear” picture for
natural gas. We would expect another strong quarter in Q2, but remain
concerned about the remainder of the year and believe a best case would be
trending flat.

  Reiterate Buy, SLB trading at discount to historical premium of 20%-
25%
SLB became our “Key Call” last week. We choose the company given its
dominant international exposure and its market leading oil service franchise.
Additionally, its 5% premium to the group is well below historical levels and we
believe a re-expansion to 15%-20% is fair. Also we were encouraged SLB
repurchased the max shares under SEC regulations. PT $87, based on 22x ’11E
P/E.

Company Analysis and Our View:
Our View: We reiterate our Buy rating on Schlumberger given the company’s
leading international franchise, coupled with its dominate market share in key
high-growth, high-technology product lines. The company’s clear optimism
regarding the international markets improving, potentially at a greater than
expected pace, was particularly encouraging. The unfolding market potential led
the company to increase capex by 17% driven by spending for 2010; a sizable
increase. Given SLB has more international exposure (87% of 2011E operating
income) than any of its peer group (~60% average), SLB is the best positioned
for an international recovery. Additionally, the company has a leading
deepwater market share and with deepwater rig deliveries running on time, it is
an additional boost to volumetric growth for oilfield product sales. International
margins also surprised bottoming in Q1, versus the prior end of Q2 expectation.


                                                                                     UBS 10
US Oil Service & Drilling 26 April 2010


However, we are currently forecasting the ramp of international margins to be a
measured versus the dramatic recovery in past cycles. North America, as
expected, remains a question mark given the concerns surrounding natural gas
prices, new gas production, and the rig count. Additionally, the company
aggressively repurchased stock over the quarter; we believe the company will
use its sizable cash position to buy stock to offset the SII deal (see below).
Overall, we are positive about the tone of the conference call and encouraged by
company commentary.
Chart 2: First quarter review, so far
            Revenue Growth by Region (Q4-09 to Q1-10)
                                        SLB        WFT           HAL    AVERAGE
            North America                18.3%      20.9%         18.7%     19.3%
            Latin America                 -6.4%    -30.8%         -8.2%    -15.1%
            Europe, CIS, Africa           -8.9%     -4.9%         -7.7%     -7.2%
            Middle East, Asia              0.6%     -4.8%        -10.2%     -4.8%
            Total International           -5.3%    -14.3%         -8.6%     -9.4%
            Total                         -1.4%     -3.6%          2.0%     -1.0%

            Operating Margins (Q1-10)
                                            SLB       WFT        HAL    AVERAGE
            North America                     8.0%     12.6%      13.5%    11.4%
            Latin America                    17.5%      7.3%       9.3%    11.4%
            Europe, CIS, Africa              18.1%      6.8%      14.1%    13.0%
            Middle East, Asia                31.0%     14.7%      15.9%    20.5%
            Total International              22.2%     10.0%      13.5%    15.2%
            Total                            19.0%      6.9%      13.5%    13.1%

            Margin Change (Q4-09 to Q1-10)
                                         SLB          WFT        HAL     AVERAGE
            North America                594 bps      696 bps    632 bps    641 bps
            Latin America                174 bps      -71 bps   -240 bps    -46 bps
            Europe, CIS, Africa         -353 bps     -215 bps   -302 bps   -290 bps
            Middle East, Asia           -136 bps       75 bps   -649 bps   -237 bps
            Total International         -120 bps      -33 bps   -399 bps   -184 bps
            Total                        -46 bps      207 bps      2 bps     54 bps

Source: Company reports and UBS estimates


    International margins have bottomed in Q1, and will “resume a positive
    trend”

International margins are seen as bottoming in Q1, providing a positive surprise
from original expectations of late-Q2. We expect margin expansion
internationally to be more gradual than in past cycles, given a less dramatic
recovery. We are expecting a measured recovery this cycle. However,
management indicated that they did expect international margins to return to
peak levels, although it was unclear as to the timing. We are currently not
estimating a return to peak margins in 2011-2014. The company cited “volume
and mix” to drive increasing margins over increased pricing in 2010. Mix will
specifically be driven by the rapidly growing deepwater fleet as new rigs are
delivered. In our view, pricing gains will likely not be until late-2011 once
oilfield service capacity tightens.

It is worth noting, in the last cycle operating international margins expanded by
an average of 100 bps every quarter from peak to trough (peak at 30% in Q2-07
and trough at 18.3% in Q3-04). We are currently modelling a more gradual
margin expansion internationally, with margins rising from today’s 22% to
about 25.5% by the end of 2011 (an increase of 40 bps per quarter).

    Tangible evidence operators contemplating International activity levels
    that are "higher than originally planned"



                                                                                      UBS 11
US Oil Service & Drilling 26 April 2010


Schlumberger cited “tangible evidence” that operators are considering higher
levels of activity internationally than originally planned given higher oil prices.
In particular, the company is seeing signs of a marked improvement in some
offshore markets including the UK sector of the North Sea, Latin America and
West Africa as well as on land in Russia. Schlumberger expects much of the
increased activity to occur late 2010 and 2011. As such, the company has
increased its Oilfield Services capex guidance by $400 million to $2.8 bil (17%
increase prior guidance of $2.4 bil), in-effect pulling forward capex originally
planned for 2011 to 2010. The majority of the increase in capex will be targeted
towards Drilling and Measurements and high-end Wireline technologies. We
would note this capex has not been specifically slotted for any one region. We
would assume deepwater and international will receive the bulk of the capex,
however it is fungible and could be redirected to the US if needed.

Key regional highlights:

    —   Iraq: SLB awarded first contract. BP recently awarded three IPM
        contracts (integrated project management) valued at approximately $500
        mil ($10 mil per well) to drill 49 wells in Rumaila to Schlumberger,
        Weatherford and China’s Daqing Oil Field Co. Schlumberger was
        awarded contracts for 21 wells in partnership with the state-run Iraqi
        Drilling Co. (SLB will subcontract drilling to IDC). Looking forward,
        several additional awards are expected out of the region later this year
        given the pressure on the major oils to ramp production (tenders by
        Exxon, Eni and Shell are all believed to be closed to contract awards). We
        believe Schlumberger is well positioned to win a good share of these
        contracts. The company is in the process of completing construction on a
        new operating base in Southern Iraq, which will initially house 300
        people (expected to double to 600 people by early 2011). We would
        expect that start up and mobilization costs will likely result in low or even
        break-even margins in the initial quarters of the ramp-up. However, it is
        certainly worth noting that SLB perceives the bidding so far in the region
        as “rational”.

    —   North Sea picking-up. The company is seeing clear signs of higher
        activity in the North Sea in terms of increased drilling (particularly in the
        UK sector of the North Sea). This quarter revenue in the North Sea was
        negatively impacted by a combination of lower drilling activity that
        impacted SLB’s drilling & measurement business and delays in project
        start-ups that affected testing services and stimulation activities.

    —   Russia: SLB expects pickup in Western Siberian activity.
        Schlumberger expects higher activity levels to be driven by an increase in
        drilling in Western Siberia as Russian companies seek to maintain and
        increase oil production levels. Western Siberian margins are generally
        lower than those in Eastern Siberia, given less complex wells; however
        SLB expects the “sheer volume” of work to compensate. Additionally,
        good activity growth is expected in Sakhalin, which tends to be a very
        high margin region. However, activity growth will still be seen in Eastern
        Siberia driven by new greenfield drilling. We believe the Russian market
        could become sizable long-term and expect strong growth next year.


                                                                                        UBS 12
US Oil Service & Drilling 26 April 2010


    —   Mexico: Chicontepec unlikely to return to prior drilling levels
        anytime soon. Management believe it could be a “quite a long time” or at
        “least a couple of years” before PEMEX is in a position to judge if
        potential production in Chicontepec justifies prior drilling levels. We are
        not anticipating oilfield revenues to return to prior levels in the coming
        years in Mexico. Schlumberger has already pulled equipment from the
        region and we would expect no further margin pressure. In fact margins
        should recover modestly from these levels.

    —   West Africa: continued traction. In Angola, Schlumberger was awarded
        a series of 5-6 year contracts for wireline logging, tubing, conveyed
        perforating, well testing, artificial lift, well completions, coiled-tubing
        services and well stimulation. Although many of these contracts were
        renewals, we believe Schlumberger did pick up incremental work as well.
        We believe these awards were highlighted as there have been questions as
        to the company losing market share, which SLB fully believes they have
        not.

    SLB’s leading market share in deepwater a plus as new rigs delivered

With a leading market share in the deepwater, Schlumberger is very well
positioned to benefit from the expected increase in deepwater rigs. The company
generates 30-40% of revenues from offshore and we believe most of that from
the deepwater. With new deepwater rigs coming on time, the associated oil
service activity levels have shown a greater than expected ramp. The market is
delivering 24 rigs in 2010, 24 in 2011, and 10 in 2012 and beyond. This high
margin business will be a substantial driver of revenues and operating income.

    North American seen as strong in Q2, but “uncertain” beyond

The company expects the strong performance to continue in Q2-10 with US
activity levels expected to remain steady driven by drilling required to maintain
leases as well as continued interest in oil plays. However management indicated
“uncertainty” beyond Q2 given the “less clear picture” for natural gas in the
back half of the year. We believe that holding leases in 2010 could help carry
the rig count for part of the year. However, as hedges at $6-$7/mcf begin to roll
off late-2010 we believe natural gas drilling has to slow given uneconomic
returns, leases or not. Additionally, SLB is taking significant steps in US land to
address its business and to become more capacity efficient. North America is the
only region Schlumberger has lower margins (8% in Q1) than its peer group
(12%-13%) and we do not believe that is satisfactory to the company, nor should
it be. We believe 2010 and 2011 should see a meaningful catch-up in margins as
the company begins to address and execute its restructuring.

    CEO Andrew Gould transitioning role

Schlumberger has historically had a strict retirement age of 65, which gives
CEO Andrew Gould about a year and half in his current position. Andrew has
been transitioning his current role to Paal Kibsgaard (age 42), Schlumberger’s
current COO. Paal has already assumed the responsibility for the day-to-day
operations of the company while Andrew will focus on the integration of Smith
International and Geoservices. Paal has worked for Schlumberger since 1997
and prior to his current role served as President of the reservoir characterization

                                                                                      UBS 13
US Oil Service & Drilling 26 April 2010


product group responsible for the management of the WesternGeco, Wireline,
Drilling & Measurements and Testing Services product lines. We have heard
good things regarding Paal and his ability, although clearly he has some
substantial shoes to fill.

    Company aggressively repurchases shares in quarter to max limit, and
    more to come

During the quarter, Schlumberger restarted their buyback program and
repurchased $337m in stock or 5.3 mil shares (average price of $63.72). Notably,
the company repurchased the maximum number of shares allowed under the
SEC’s Safe Harbour provision (restriction due to pending Smith International
deal). The company is continuing its repurchase program this quarter under the
provisions of the Safe Harbour but will enter a black-out period for the time
between the mailing of the merger proxy to Smith shareholders and the vote on
the transaction. Following the shareholder vote the company will be free to buy
without limits and we expect the company will be fairly aggressive in the market.
The current cash position sits at $4.2 billion.

    Revenue visibility for Western Geco improves but new capacity will
    limit pricing

Significant capacity is still entering the market in marine seismic. Consequently,
while utilization and revenues will be up, pricing will remain under pressure
during the year. We expect a sharp ramp in revenues during the year, but
margins to be under pressure. The second quarter will likely be lower than Q1 as
vessels are repositioned. Additionally, the strength typically seen in Q3 will be
muted due to difficult pricing. The company will deliver four new vessels in
2010, with one already delivered, another in Q2 and two more late summer.
Activity is improving, but pricing is not. We do not believe pricing can even
begin to improve until well into 2011.

    Appears acquisition spree over, but company has been busy in Q1

Management commented that they have “severely restrained” the acquisition
pipeline following the Smith International and Geoservices transactions. Hence,
M&A activity for now will likely be restricted to small tuck-in acquisitions
designed to acquire specific technologies or product capabilities.

    —   Geoservices: Schlumberger acquired Geoservices for $1.07 bil (including
        about $130 mil in net debt) from the private-equity firm Astorg Partners
        and other minority stakeholders (transaction closed on April 23rd 2010).
        Geoservices specializes in mud-logging (# 1 player with an estimated
        33% market share followed by Weatherford, Halliburton and Baker
        Hughes with 12-15% market shares) and well intervention or “slickline”
        (#2 position behind Schlumberger). Geoservices employs about 5,000
        people worldwide and generated about $490 mil in revenues in 2009 with
        most of its revenues coming from the Eastern Hemisphere. Schlumberger
        expects that the combination of its real-time downhole formation
        sampling with Geoservices drilling mud analysis capability will help
        customers better identify and react to drilling hazards. The company can
        also package its LWD services with Geoservices’ mud logging services to
        better understand rock lithology and fluid content. We note that

                                                                                     UBS 14
US Oil Service & Drilling 26 April 2010


        Schlumberger already had a preferred supplier relationship in place with
        Geoservices, so we expect a relatively smooth integration process. The
        transaction is expected to be roughly neutral to 2010 EPS but accretive to
        2011 (we expect accretion of $0.03-$0.05 EPS).

    —   Smith International: All stock transaction initially valued at $12.4 bil
        announced on February 18th (0.6966 share exchange ratio or 12%
        dilution). The deal is expected to close in 2H-10. We have applied a
        number of different scenarios to the SLB/SII deal to provide a range of
        potential outcomes. At the high end the transaction could be accretive by
        6% to 8% to 2012, while in the base case the deal would have no affect
        on our 2012 EPS estimates. For 2011 we believe it will be dilutive by 1%
        to 2%. We believe management’s initial guidance of cost synergies of
        $160 mil / $320 mil in 2010/2011 is conservative and based only on
        corporate structure costs. We would expect the synergies to grow on both
        the cost and revenue side. (See our note titled SLB + SII… Accretion
        Potential for 2010 published on 24th February 2010 for more details.)

    Estimates – We are marginally increasing our 2010 EPS estimate to $2.90
    from $2.86 to reflect a more positive outlook on 2H-10 international revenue
    growth and a trough in international margins in 1Q-10. Our 2011 estimates
    are unchanged.

    First Quarter Recap

This quarter international margins fell by 120 bps to 22.2% from 23.4% in Q4-
09. Much of the margin pressure was due to inclement weather in the
Europe/CIS/Africa region (particularly Russia), where margins declined by 350
bps sequentially to 18.1% from 21.6% in Q4-09. Margins in Europe/CIS/Africa
are expected to return to the low-20s “fairly quickly” (we conservatively assume
19.5% margins in 2Q-10 and 20.5% margins in 3Q-10). Latin American margins
increased by 174 bps to 17.5% in Q1-10 from 15.8% in Q4-09. Much of the
margin improvement in Latin America was driven by a lower cost structure in
Mexico and we expect margins to remain roughly flattish through the year
(unlike some of its competitors, SLB has quickly moved to align its Mexican
cost base with falling activity). Margins in Middle East/Asia were down 140 bps
sequentially, primarily due to less favourable revenue mix, but were essentially
in-line with our expectations.




                                                                                     UBS 15
US Oil Service & Drilling 26 April 2010


Table 1: 1Q-10 Summary ($m)
                                                      2010         2010       Actual vs Estimate       EPS Impact      2009       Current Qtr vs Prior Qtr      2009       Current Qtr vs Prior Yr
                                                      1QA          1QE         $             %         Act. Vs Est     4QA           $               %          1QA           $              %
Revenues by Region
   North America                                       $1,033        $980         53.1          5.4%         $0.00       $873          159.9           18.3%    $1,191         (158.2)       -13.3%
   Latin America                                        1,057       1,097        (40.1)        -3.7%        ($0.00)     1,129          (72.5)          -6.4%     1,029           27.5          2.7%
   Europe, CIS, Africa                                  1,626       1,799       (173.2)        -9.6%        ($0.02)     1,784         (158.3)          -8.9%     1,803         (177.1)        -9.8%
   Middle East, Asia                                    1,322       1,387        (65.0)        -4.7%        ($0.01)     1,314            8.3            0.6%     1,375          (52.9)        -3.8%
   Eliminations and Other                                  60          50          9.7         19.4%                       70           (9.8)         -14.1%        41           18.8         46.0%
      Total Oilfield Services Revenue                   5,097       5,313       (215.5)        -4.1%                    5,170          (72.4)          -1.4%     5,439         (341.9)        -6.3%
   Marine Revenues (incl. land and data processing)       316         301         14.8          4.9%                      307            8.7            2.8%       455         (139.1)       -30.6%
   Multiclient Revenue                                    156         145         10.8          7.4%                      242          (86.0)         -35.5%        96           60.0         62.5%
       Western GECO Revenue                               472         446         25.6          5.7%         $0.00        549          (77.3)         -14.1%       551          (79.1)       -14.4%
  Other Revenue                                            28          25          2.8         11.0%                       25            2.8           11.0%        10           18.5        190.7%
Total Revenues                                         $5,598      $5,785       (187.0)        -3.2%        ($0.04)    $5,744         (146.9)          -2.6%    $6,000         (402.5)        -6.7%

Operating Cost
   North America                                          950         941          9.6          1.0%                      855           95.2           11.1%     1,028          (78.0)         -7.6%
   Latin America                                          871         927        (55.4)        -6.0%                      951          (79.4)          -8.4%       826           45.0           5.4%
   Europe, CIS, Africa                                  1,332       1,439       (107.4)        -7.5%                    1,398          (66.7)          -4.8%     1,335           (3.5)         -0.3%
   Middle East, Asia                                      912         964        (52.3)        -5.4%                      888           23.6            2.7%       920           (7.7)         -0.8%
       Total Oilfield Services Operating Costs          4,129       4,316       (187.0)        -4.3%                    4,163          (34.7)          -0.8%     4,184          (55.0)         -1.3%
 Western GECO Operating Income                            405         373         31.6          8.5%                      435          (30.0)          -6.9%       497          (91.8)        -18.5%
Total Operating Costs                                  $4,643      $4,804       (161.0)        -3.4%                   $5,744       (1,101.2)         -19.2%    $6,000       (1,356.8)        -22.6%

Operating Income
    North America                                          83          39         43.5        111.0%         $0.03         18           64.7         359.4%        163          (80.2)        -49.2%
    Latin America                                         185         170         15.3          9.0%         $0.01        178            6.9           3.9%        203          (17.5)         -8.6%
    Europe, CIS, Africa                                   294         360        (65.8)       -18.3%        ($0.02)       386          (91.6)        -23.8%        468         (173.6)        -37.1%
    Middle East, Asia                                     410         423        (12.7)        -3.0%         $0.00        426          (15.3)         -3.6%        456          (45.2)         -9.9%
    Eliminations and Other                                 (4)          5         (8.7)      -174.0%        ($0.01)        (1)          (2.4)        184.6%        (33)          29.6         -88.9%
       Total Oilfield Services Operating Income           969         997        (28.4)        -2.9%                    1,006          (37.7)         -3.7%      1,256         (286.9)        -22.9%
 Western GECO Operating Income                             67          73         (6.0)        -8.2%        ($0.01)       115          (47.3)        -41.3%         55           12.7          23.3%
 Eliminations                                             (82)        (90)         8.4         -9.3%         $0.01        (90)           8.4          -9.3%        (91)           9.2         -10.1%
Total Operating Income                                   $954        $980        (26.0)        -2.7%         $0.02     $1,031          (76.6)         -7.4%     $1,219         (265.0)        -21.7%

Interest Income                                            13          11          2.6         24.9%         $0.00         11            2.1           18.8%        14           (0.9)         -6.3%
Interest Expense                                          (44)        (47)         3.0         -6.4%         $0.00        (47)           3.0           -6.4%       (41)          (2.8)          6.8%
Pretax Income                                             923         944        (20.4)        -2.2%                      995          (71.5)          -7.2%     1,192         (268.7)        -22.5%
Taxes                                                    (174)       (188)        13.8         -7.4%         $0.01       (175)           0.7           -0.4%      (252)          78.0         -30.9%
  Tax Rate                                              18.9%       19.9%                                               17.6%                                    21.1%
Minority Interest                                           (2)         (3)        0.6        -24.0%         $0.00          (3)          0.6          -24.0%         (2)           --           0.0%
Net Income                                               $747        $753         (5.9)        -0.8%                     $818          (70.2)          -8.6%      $938         (190.7)        -20.3%

Earnings Per Share - Basic                              $0.63       $0.63        (0.00)        -0.3%                    $0.68          (0.06)          -8.3%     $0.78          (0.16)        -20.3%
Earnings Per Share - Diluted                            $0.62       $0.62        (0.00)        -0.3%                    $0.67          (0.06)          -8.4%     $0.78          (0.16)        -20.7%

Shares Outstanding - Basic                             1,195.0     1,201.4        (6.4)        -0.5%                   1,199.0           (4.0)         -0.3%    1,195.8          (0.8)         -0.1%
Shares Outstanding - Diluted                           1,215.0     1,220.4        (5.4)        -0.4%         $0.00     1,218.0           (3.0)         -0.2%    1,209.8           5.2           0.4%

EBITDA                                                $1,558.3    $1,584.3       (26.0)        -1.6%                  $1,658.7        (100.4)          -6.1%   $1,828.5        (270.3)        -14.8%
 D&A                                                     -604.0      -604.0         --          0.0%                     -627.8         23.8           -3.8%      -609.2          5.3          -0.9%
Cash Flow                                               1351.4      1357.3        (5.9)        -0.4%                    1445.4         (94.0)          -6.5%     1547.4        (196.0)        -12.7%
Cash Flow Per Share                                      $1.11       $1.11         0.0          0.0%                     $1.19          (0.1)          -6.3%      $1.28          (0.2)        -13.0%

MARGINS

Operating Margins by Region
   North America                                         8.0%        4.0%             -      401 bps                     2.1%                -       594 bps     13.7%               -      -567 bps
   Latin America                                        17.5%       15.5%             -      204 bps                    15.8%                -       174 bps     19.7%               -      -217 bps
   Europe, CIS, Africa                                  18.1%       20.0%             -     -192 bps                    21.6%                -      -353 bps     25.9%               -      -785 bps
   Middle East, Asia                                    31.0%       30.5%             -       54 bps                    32.4%                -      -136 bps     33.1%               -      -209 bps
      Oilfield Services Operating Margins               19.0%       18.8%             -       24 bps                    19.5%                -       -46 bps     23.1%               -      -408 bps
   Western GECO Operating Margins                       14.3%       16.4%             -     -216 bps                    20.9%                -      -660 bps      9.9%               -       435 bps
 Other Operating Margins                                                              -        0 bps                                         -         0 bps                         -         0 bps
Total Operating Margins                                 17.0%       16.9%             -       10 bps                    17.9%                -       -90 bps     20.3%               -      -327 bps

REGIONAL BREAKDOWN

Revenue breakdown by region
 North America                                          18.8%       17.2%             -      159 bps                    15.5%                -       329 bps     20.0%               -      -127 bps
 Latin America                                          19.2%       19.2%             -       -3 bps                    20.0%                -       -81 bps     17.3%               -       188 bps
 Europe, CIS, Africa                                    29.5%       31.5%             -     -200 bps                    31.6%                -      -207 bps     30.3%               -       -80 bps
 Middle East, Asia                                      24.0%       24.3%             -      -30 bps                    23.3%                -        74 bps     23.1%               -        88 bps
 WesternGeco                                             8.6%        7.8%             -       75 bps                     9.7%                -      -116 bps      9.3%               -       -70 bps

Op Inc breakdown by region
 North America                                           8.0%        3.7%             -      428 bps                     1.6%                -       635 bps     12.1%               -      -417 bps
 Latin America                                          17.8%       16.0%             -      187 bps                    15.9%                -       193 bps     15.1%               -       273 bps
 Europe, CIS, Africa                                    28.3%       33.8%             -     -550 bps                    34.4%                -      -608 bps     34.8%               -      -653 bps
 Middle East, Asia                                      39.5%       39.7%             -      -24 bps                    37.9%                -       154 bps     33.9%               -       556 bps
 WesternGeco                                             6.5%        6.9%             -      -41 bps                    10.2%                -      -374 bps      4.1%               -       241 bps


Source: Company reports and UBS estimates




                                                                                                                                                                                            UBS 16
US Oil Service & Drilling 26 April 2010




Halliburton: NAM to flatten in 2H,
however Int’l stronger
Published April 19, 2010

    Solid quarter driven by North America, as expected… but Int’l weak
HAL reported operating Q1-10 EPS of $0.28 vs our estimate and consensus of
$0.25. North American revenues and margins were well above our estimates
(adding $0.07) with op income more than doubling from Q4-09. However,
Middle East/Asia revenues and margins missed forecasts ($0.04 drag) as did
Europe/CIS/Africa. Results exclude $0.05 impact from Venezuelan devaluation.

   NAM gas rig count weaker in 2H-10, partially offset by oil rig count
gains
The company is cautious on activity in North America for the 2H-10. We
believe the industry could see a 200-250 gas rig count decline, which could be
partially offset by 100-150 increase in the oil rigs. Under this scenario we
anticipate margins to flatten in Q3 and Q4, with potential risk to the downside.
However, Q2-10 margins should increase further on a full quarter of pricing
impact.

    International outlook: management has “increased confidence” in 2H-10
International activity looks to be stronger than originally expected in the 2H-10
and the company sites “tangible signs” of increasing activity and has even
pushed forward some 2011 int’l capex spending into 2010. Activity gains are
expected to be evenly spread evenly throughout the regions.

   Maintain Buy; HAL well positioned and stock trading at discount to
peers
We continue our BUY rating on HAL despite short-term concerns for NAM. We
believe the company’s traction internationally should gain momentum later this
year. However, there is potential for modest downside earnings risk if the rig
count declines greater than expectations. Our $42 PT is based on an ‘11E P/E of
20x.

Company Analysis and Our View:
OUR VIEW: We continue our BUY rating on Halliburton and our biggest
take-away from the conference call was the clear increase in confidence for
improving international activity (revenues and margins) for the second half
of the year. The company pointed to “tangible signs” of an improvement
with several recent new contract awards. Our concerns remain on the
North American market over the near-term. We believe that potential
increases in the oil rig count (estimated 100-150 rigs), will not completely
offset likely declines in the gas count (estimated 200-250 rigs). As a whole
we believe that horizontal gas shales are less oil service intensive than oil
shales. Additionally, we believe it is modestly less intensive (as a whole) for
pressure pumping on a horsepower basis. Consequently, there is potential
for some “modest” earnings risk in the 2H-10 for HAL and the sector in
general, but it is still too early to tell by what degree. Regardless, despite the


                                                                                     UBS 17
US Oil Service & Drilling 26 April 2010


potential for short-term softness for HAL and the sector, we believe that the
company’s 5% discount in valuation to its peers based on 2010 P/E, as well
as the company’s international traction positions the company well for the
long-term. We are adjusting our 2010 and 2011 estimates to reflect a more
positive stance on the international businesses, partially offset by lower
revenue and margin assumptions in North America late this year and early
2011. We are modestly increasing our 2010 estimate driven by the upside
surprise in Q1 and a higher Q2 estimate, but lower expectations in 2H-10.
Our 2010 EPS estimate rises to $1.40 from $1.33 while our 2011 estimates
are unchanged.

    North American Op. Income doubles in Q1-10 from Q4-09 on activity
    and pricing

Increased activity and pricing improvements in North America drove most of
the 1Q-10 EPS beat. North American margins came in at an impressive 13.5%
vs our 7.7% estimate and were up 580 bps from 7.2% in 4Q-09. Revenues were
up 19% with operating income increasing 120% over Q4-09 levels. Activity
gains were driven by the 21% rise in the US land rig count during the quarter
and higher levels of service intensity associated with unconventional resource
plays. Importantly, higher activity levels have helped increase industry
absorption of excess service capacity, providing an opening for pricing
improvements. As expected, product lines associated with well construction
activities have benefited the most from recent pricing improvements. For
instance, utilization rates for stimulation services approached levels last seen
during the last peak in 2008 (some crews in the Haynesville and Bakken Shales
are in a 24-hour operations mode). We believe price gains in pressure pumping
has been at 5%-30%, with more modest price increases in directional, tools,
LWD/MWD and drill bits. However, pricing has also improved at the margin for
products such as wireline where activity levels have generally been slower to
recover. We would anticipate another round of price increases in Q2-10.

    North America in Q2-10… Recent price increases to drive quarter and
    margins

Management highlighted that many of the price improvements in North America
only occurred late in the first quarter (as late as March in some cases). As a
result, the full impact of pricing improvements on margin expansion will
primarily be felt in the second quarter. Management guidance for the 2Q-10
projects a modest improvement in margin, even if activity holds at current levels.
We are currently modeling a 100 bps sequential improvement in Q2-10 margins
in North America to 14.5% followed by flattish margins trends for 2H-10 given
our concerns about natural gas.

    North America in Second Half… Mgmt believes rig count “range
    bound”

Management maintained a cautious outlook on natural gas and expects the US
land rig count to remain range-bound in the second half. We believe the natural
gas rig count could decline by 200-250 rigs, while the oil rig count could gain
100-150 rigs, thus implying a net 100-150 rig count decline. We believe that the
company’s context of “range bound” would include a 100-150 rig count decline.


                                                                                     UBS 18
US Oil Service & Drilling 26 April 2010


Given that on average gas shale plays are more oil service intensive than oil
shales this would imply potential pressure on margins and revenues later this
year. We believe it is too early to tell, but something to watch as the year
unfolds.

However, a slowdown in drilling activity in North America would be a positive
for new capacity additions as rational players would slow pressure pumping
capacity additions (estimated 6-9 month lead time for incremental capacity to
come on-line).

    International disappoints in Q1-2010

Seasonally the first quarter tends to be soft for the international markets,
however additionally weather played a roll. Unusually cold weather in Russia
and flooding in China, Indonesia and Australia affected activity further. Project
delays also partially contributed to the lower than expected earnings. In
particular, Middle East/Asia revenues were 11% below our estimates and
margins were well below our forecasts at 15.9% vs our 21% estimate and 4Q-09
margins of 22.4%. Latin American margins came in at 9.3% vs our 10.9%
estimate (down 240 bps from 11.7% in Q4-09). Europe/CIS/Africa margins
were 14.1% vs our 15.9% estimate (down 300 bps from 17.2% in Q4-09). We
expect the second quarter to be a bit better with seasonal improvements and less
weather related issues.

    International markets showing “tangible signs” of recovery for 2H-10;
    2010 capex guidance increased to $2 bil from $1.7-$1.8 bil driven by
    international

Management commentary indicated a clear increase in confidence for improving
international activity (revenues and margins) for the second half of the year. Of
note, Eastern Hemisphere margins appear to have troughed in 1Q-10 and should
see a “steady resurgence” in international activity in 2H-10. The company
pointed to “tangible signs” with several new contract awards and an increase in
tendering activity. Halliburton plans to accelerate some of the capital deliveries
slated for 2011 into 2010 given the increased visibility into international projects
(also partially driven by the more service-intensive nature of the work in North
America). The 2010 capex guidance was increased to $2bn, up 11%-18% from
the prior range of $1.7-$1.8 bil. Furthermore, several large scale oil projects are
just starting to ramp-up, adding to revenue visibility.

A few of the regional highlights include:

    —   West Africa: Halliburton continues to gain traction in the region with
        two notable contract wins. The company was recently awarded $1.3 bil (6
        year term – about $220m per year) offshore multi-product award offshore
        Angola for cementing, production enhancement, completion tools,
        wireline and perforating services. Halliburton was also awarded a
        contract from an IOC for completion services. Given Halliburton’s
        strength in deepwater, particularly completions, we expect this region to
        be a strong one as we progress through the year.

    —   North Sea: Drilling activity in the UK North Sea has dropped to its
        lowest level in over five years (although the Norwegian region remains a


                                                                                       UBS 19
US Oil Service & Drilling 26 April 2010


        bright spot). Additionally, Q1 tends to be the seasonal low. Activity
        levels are expected to start picking up, largely due to the continued
        recovery in capital markets helping ease financing constraints on
        development programs for the E&P companies. The second quarter
        should be meaningfully stronger.

    —   Iraq holds substantial promise in our view, several awards expected
        later this year. Awards are expected out of the region later this year
        given the pressure on the major oils to ramp production (tenders by
        Exxon, Eni and Shell are all believed to be closed to contract awards).
        Halliburton has already begun to mobilize equipment into the region, but
        both more equipment and more people will be needed. The company will
        spend $100 mil in Iraq in 2010. Of note, the company believes that
        margins will be break-even to start. However, even with as few as five
        rigs in the region, attractive margins can be realized over time. We expect
        Iraq to become a significant market in the coming years and could
        amount to $5 to $10 billion over the next two years, and as much as $20
        billion over the next five to seven years, in our view. BP recently awarded
        three IPM contracts (integrated project management) valued at
        approximately $500 mil ($10 mil per well) to drill 49 wells in Rumaila to
        Schlumberger, Weatherford and China’s Daqing Oil Field Co. We would
        expect Halliburton to be a participant for additional awards.

    —   Mexico outlook unclear, equipment under-utilized pressuring
        margins. As expected activity continues to be slow in Mexico with
        continued deterioration. Currently, PEMEX has five “labs” or
        laboratories with the oil service companies in which the service providers,
        including HAL, use any and all technologies to determine the best
        approach for developing Chicontepec. We believe two companies may
        prove front runners in success. HAL may ultimately grow impatient with
        the pace and “scope” of activity in the region and begin mobilizing
        equipment elsewhere. In the meanwhile margins will remain under
        pressure in Mexico.

    —   Algeria: Due to ongoing governance issues related to the government and
        Sonatrach (the national oil company) both existing and new projects are
        essentially on hold. Similar to the current situation in Mexico, Halliburton
        is maintaining its cost structure in the country but remains fully
        committed to the Algerian market. Algeria is a fairly important market for
        Halliburton and we expect good long term growth from the country.
        However, until new appointees are made in Sonatrach, business will
        essentially be on hold.




                                                                                       UBS 20
US Oil Service & Drilling 26 April 2010


Table 2: 1Q-10 Summary
                                                   2010      2010      Act vs. UBS est         EPS Impact      2010      Curr Qtr vs Pr Qtr       2009      Curr Qtr vs Pr Yr
                                                   1QA       1QE        $          %           Act. Vs Est     4QA         $           %          1QA        $           %
     Completion and Production Revenues:
        North America                              $1,125     $962      $163            17%                     $916       $209           23%     $1,071       $54             5%
        Latin America                                 202       211       (9)           -4%                       205        (3)          -1%        232       (30)          -13%
        Europe, CIS, Africa                           385       402      (17)           -4%                       423       (38)          -9%        426       (41)          -10%
        Middle East, Asia                             252       279      (27)          -10%                       274       (22)          -8%        299       (47)          -16%
        Total                                      $1,964    $1,854     $110             6%                    $1,818      $146            8%     $2,028      ($64)           -3%
     Drilling and Evaluation Revenues:
           North America                             $579     $561        $18            3%                      $519        $60           12%     $612       ($33)           -5%
           Latin America                              293       351       (58)         -16%                       334        (41)         -12%       324       (31)          -10%
           Europe, CIS, Africa                        535       563       (28)          -5%                       574        (39)          -7%       542        (7)           -1%
           Middle East, Asia                          390       441       (51)         -12%                       441        (51)         -12%       401       (11)           -3%
           Total                                   $1,797    $1,915     ($118)          -6%                    $1,868       ($71)          -4%    $1,879      ($82)           -4%
     Total Revenues by Region
          North America                            $1,704    $1,522     $182            12%           $0.01    $1,435      $269            19%    $1,683       $21             1%
          Latin America                               495       562      (67)          -12%          ($0.01)      539       (44)           -8%       556       (61)          -11%
          Europe, CIS, Africa                         920       964      (44)           -5%          ($0.01)      997       (77)           -8%       968       (48)           -5%
          Middle East, Asia                           642       720      (78)          -11%          ($0.01)      715       (73)          -10%       700       (58)           -8%
     Total Revenues                                $3,761    $3,769      ($8)            0%          ($0.01)   $3,686       $75             2%    $3,907     ($146)           -4%

     Completion and Production Operating Income:
        North America                               $137       $53       $84          159%                       $45         $92         204%      $173       ($36)          -21%
        Latin America                                 29        23         6           27%                        23           6          26%        55        (26)          -47%
        Europe, CIS, Africa                           39        57       (18)         -31%                        62         (23)        -37%        79        (40)          -51%
        Middle East, Asia                             33        38        (5)         -14%                        43         (10)        -23%        68        (35)          -51%
        Total                                       $238      $171       $67           39%                      $173         $65          38%      $375      ($137)          -36%
     Drilling and Evaluation Operating Income:
           North America                             $93       $64        $29           44%                      $58         $35           60%      $71        $22            31%
           Latin America                              17        39        (22)         -56%                       40         (23)         -58%       55        (38)          -69%
           Europe, CIS, Africa                        91        97         (6)          -6%                      109         (18)         -17%       93         (2)           -2%
           Middle East, Asia                          69       113        (44)         -39%                      117         (48)         -41%       97        (28)          -28%
           Total                                    $270      $313       ($43)         -14%                     $324        ($54)         -17%     $316       ($46)          -14%
     Total Operating Income by Region
          North America                             $230      $117      $113            96%           $0.06     $103       $127          123%      $244       ($14)           -6%
          Latin America                               46        61       (15)          -25%          ($0.01)      63        (17)         -27%       110        (64)          -58%
          Europe, CIS, Africa                        130       153       (23)          -15%          ($0.01)     171        (41)         -24%       172        (42)          -24%
          Middle East, Asia                          102       152       (50)          -33%          ($0.03)     160        (58)         -36%       164        (62)          -38%
          Total Regional Operating Income            508       484        24             5%                      497         11            2%       690       (182)          -26%
          Corporate, Eliminations & Other            (59)      (52)       (7)           13%          ($0.01)     (54)        (5)           9%       (46)       (13)           28%
     Total Operating Income                         $449      $432       $17             4%           $0.01     $443         $6            1%      $644      ($195)          -30%
          Interest Expense                           ($79)     ($82)       $3           -4%           $0.00      ($82)        $3           -4%      ($53)     ($26)          49%
          Interest Income                               3         6        (3)         -53%          ($0.00)        4         (1)         -25%         2         1           50%
     Net Interest Expense                            ($76)     ($76)      ($0)           0%                      ($78)        $2           -3%      ($51)     ($25)          49%
          Other Income                                 (9)       (4)       (5)        125%           ($0.00)       (4)        (5)        125%         (5)        (4)         80%
     Total Non-operating Items                        ($9)      ($4)      ($5)        125%                        ($4)       ($5)        125%        ($5)       ($4)         80%
     Taxes                                          ($111)    ($121)     $10            -9%          $0.02      ($103)       ($8)          8%      ($187)      $76          -41%
         Tax rate %                                 30.5%     34.5%             -   -401 bps                    28.5%           -      196 bps     31.9%             -   -138 bps
     Minority Interest                                ($1)      ($1)       $0            0%          $0.00        ($1)        $0            0%       ($2)       $1           -50%
     Net Income                                     $252      $230       $22           10%                      $257         ($5)          -2%     $399      ($147)          -37%
     Earnings Per Share
     - Basic                                        $0.28     $0.25     $0.02          10%                      $0.28     ($0.01)          -2%     $0.44     ($0.17)         -37%
     - Diluted                                      $0.28     $0.25     $0.02          10%           $0.01      $0.28     ($0.01)          -2%     $0.44     ($0.17)         -37%
     Shares Outstanding
     - Basic                                        904.8     904.8        0.0         0.0%                     903.0         1.8         0.2%     897.0        7.8          0.9%
     - Diluted                                      907.8     907.8        0.0         0.0%          $0.00      906.0         1.8         0.2%     899.0        8.8          1.0%
     EBITDA                                          $691     $674       $17             3%                      $677        $14            2%      $866      ($175)         -20%
     Cash Flow                                        494       472        22            5%                       491          3            1%       621       (127)         -20%
     CFPS                                           $0.54     $0.52     $0.02            5%                     $0.54      $0.00            0%     $0.69     ($0.15)         -21%


     MARGINS

     Total Operating Margins                        13.5%     12.8%             -        67                     13.5%              -         2     17.7%             -   (415) bps
     Total EBITDA Margins                           18.4%     17.9%             -        50                     18.4%              -         1     22.2%             -   (380) bps
     Operating Margins by Region
         North America                              13.5%      7.7%             -       579                      7.2%              -    632 bps    14.5%             - -100 bps
         Latin America                               9.3%     10.9%             -   -163 bps                    11.7%              -   -240 bps    19.8%             - -1049 bps
         Europe, CIS, Africa                        14.1%     15.9%             -   -178 bps                    17.2%              -   -302 bps    17.8%             - -364 bps
         Middle East, Asia                          15.9%     21.0%             -   -516 bps                    22.4%              -   -649 bps    23.4%             - -754 bps
     Margins by Segment
         Completion and Production revenues         12.1%      9.2%             -    291 bps                     9.5%           -       260 bps    18.5%             -   -635 bps
         Drilling and Evaluation revenues           15.0%     16.4%             -   -133 bps                    17.3%           -      -232 bps    16.8%             -   -177 bps

     REGIONAL BREAKDOWN

     Revenue breakdown by Region
          North America                            45.3%     40.4%              -    492 bps                   38.9%               -    638 bps   43.1%              -    223 bps
          Latin America                            13.2%     14.9%              -   -175 bps                   14.6%               -   -146 bps   14.2%              -   -107 bps
          Europe / Africa / CIS                    24.5%     25.6%              -   -113 bps                   27.0%               -   -259 bps   24.8%              -    -31 bps
          Middle East / Asia                       17.1%     19.1%              -   -205 bps                   19.4%               -   -233 bps   17.9%              -    -85 bps
     Op Inc breakdown by Region
          North America                            45.3%     24.3%              - 2102 bps                     20.7%               - 2455 bps     35.4%              -    991 bps
          Latin America                             9.1%     12.7%              - -363 bps                     12.7%               - -362 bps     15.9%              -   -689 bps
          Europe / Africa / CIS                    25.6%     31.7%              - -612 bps                     34.4%               - -882 bps     24.9%              -     66 bps
          Middle East / Asia                       20.1%     31.3%              - -1126 bps                    32.2%               - -1211 bps    23.8%              -   -369 bps


Source: Company reports and UBS estimates




                                                                                                                                                                                UBS 21
US Oil Service & Drilling 26 April 2010


Weatherford International: Weathered
Q1-10 better than expected
Published April 21, 2010

    Q1-10 adjusted EPS of $0.08 vs our $0.07 estimate
WFT reported a clean Q1-10 EPS of $0.08 vs. our estimate and consensus of
$0.07. This reflects the adjustment for a write-off at the Boret subsidiary and a
fair value adjustment to the put option issued with the TNK-BP acquisition. Q1
was driven by better than expected NAM, but weaker LatAm &
Europe/WAfrica/Asia.

    Management guides Q2-10 to $0.06, however not a surprise
We believe the stock traded up today as the guidance, while lower, was still
better than expectations. In our view, lowering estimates to a baseline will help
re-build investor confidence. We have cut our estimates for 2010 and 2011
assuming a slow ramp from Q1-10 levels, with prospects for upside as the
international markets gain traction and margins begin to re-expand.

    International markets to drive growth, no secular growth seen in NAM
Growth will be driven by Algeria, Libya, Middle East, Russia, Iraq, China and
Australia as well as some parts of Latin America. We believe it should be both a
revenue and a margin recovery story, given substantial margin pressure as of
late. Guidance for NAM is flat for the 2H-10 and for 2011, with which we
would agree.

    Maintain Buy rating
We maintain our Buy rating reflecting WFT’s compelling international
prospects and above-average growth rates at the top/bottom line. We would
expect WFT to see sequential earnings and operational improvement as we
progress through 2010. However, we have set our estimates at the bottom end of
the consensus range. Our $23 PT is based on a 23x ‘11E P/E multiple.

Company Analysis and Our View:
Our View:

Given expectations for a particularly sloppy Q1 quarter, the company did
better than expected at $0.06 ($0.08 clean). We believe the whisper was
$0.05. Additionally, WFT guided to a flat Q2-10 at $0.06, however our
expectations (and most investors) were for a decline. Moving to more
realistic estimates serves the company to work higher from a lower base.

We believe that Weatherford’s strengths lie in its international expansion,
recent awards, and vision to be in the right places (Russia, Middle East,
Algeria, Iraq, etc). The next step is delivering the earnings/margins and we
have assumed the company makes a slow progression over the course of the
year. Margins were crushed in Q4-09 and will take time to return, but we
believe they should. However, we are not assuming margins return to peak
levels in the international markets any time soon. Additionally, we believe
North America never fully recovers to prior peak levels. Importantly, by
Q4-10 the Eastern Hemisphere is expected to equate to 50% of revenues for


                                                                                    UBS 22
US Oil Service & Drilling 26 April 2010


WFT. We believe the other outstanding issue for WFT is the FCPA. In our
view, we would expect a resolution some time this year and potentially over
the next 3-5 months. Additionally, our belief is that the amount will not be
as high as rumoured by some, but it will not be negligible either. We have
reduced our 2010 estimate to $0.47 from $0.65 reflecting lower margin and
revenue assumptions for North America, as well as Latin America.
Additionally, we have lowered our 2011 to $1.00 from $1.32 assuming a
conservative ramp in international margins and moderate growth. Given
WFT’s solid positioning internationally and above-average growth rates at
the top/bottom line we continue our Buy Rating.

    North America margin expansion drives Q1 results

North American results were the highlight of the quarter with operating income
up 170% sequentially from Q4-09 and 26% above our estimate. Revenues were
essentially in-line with our estimates with sequential improvements across
“almost all product lines”. Operating margins drove the outperformance coming
in at 12.6% vs 7.7% in Q4-09 and our estimate of 10%. Margin expansion was
driven by higher volumes and operating efficiency gains from prior cost-cutting
and fixed cost absorption, which resulted in incremental margins of 46%.
Importantly, there was no material change in pricing in 1Q-10. Going forward,
pricing is expected to be “constructive”. However, we would not expect pricing
to rise materially for Weatherford although we do see the potential for higher
pricing at the margin for product lines such as directional drilling.

    WFT guides to lower earnings from North America in Q2; expect flat
    US volume growth in Q2 and 2H-10

Weatherford has guided to a $40 mil sequential decline in revenues and a $0.05
decline in North American EPS contribution in Q2-10. This is largely driven by
the seasonal decline in Canada, partially offset by margin improvement and
modest growth in the US. The second quarter is always the weakest in Canada
due to the “spring-breakup” (or thaw). Weatherford has one of the highest
exposures among the diversified oil service providers to Canada (we estimate
about 6% of total revenues). However, longer-term trends in Canada remain
favorable due to Weatherford’s focus in Canada on heavy oil with both volumes
and pricing expected to modestly strengthen into 2010/2011. For the US,
activity levels are expected to “flatten out” from Q2 going into 2H-10 and early
2011. Management maintained a cautious outlook on natural gas, matching our
own view. We believe the natural gas rig count could decline by 200-250 rigs,
while the oil rig count could gain 100-150 rigs, thus implying a net 100-150 rig
count decline. Given that on average gas shale plays are more oil service
intensive than oil shales this could imply potential pressure on margins and
revenues later this year.

    Eastern Hemisphere, management still expecting 30% revenue growth
    in 2010

Results for the Eastern Hemisphere were largely in-line with our expectations,
although on a sequential basis earnings were impacted by inclement weather
(unusually cold weather in Russia/China and flooding in Australia). The
company is maintaining their prior guidance of 30% revenue growth in 2010.


                                                                                   UBS 23
US Oil Service & Drilling 26 April 2010


However, the growth is weighted towards 2H-10 when several larger projects
are expected to start-up. On a run rate basis, we expect that Eastern Hemisphere
revenues will be over 50% of total revenues by 4Q-10, up from 40% in 2008.
Regions that have been weak in 1Q-10 due to weather and political issues such
as Russia, Libya and Algeria are expected to show the strongest growth.
However, Weatherford also expects growth from regions such as Oman, China,
Australia and Iraq.

Key Eastern Hemisphere regional highlights:

    —   Algeria: five strings restarted work this weekend. Some of the
        politically induced contract delays appear to have been resolved and
        Weatherford is in the process of restarting five strings in the country. Due
        to ongoing governance issues related to the government and Sonatrach
        (the national oil company) both existing and new projects were
        previously on hold. The company has been maintaining its cost structure
        in the country and resuming activity should drive strong incremental
        margins. Algeria has traditionally been an important market for
        Weatherford and we expect solid long term growth from the country.

    —   Iraq on track for nine strings by Q2-10. Weatherford is on track to
        have nine strings operating in Iraq by the end of Q2. BP recently awarded
        three IPM contracts (integrated project management) valued at
        approximately $500 mil ($10 mil per well) to drill 49 wells in Rumaila to
        Schlumberger, Weatherford and China’s Daqing Oil Field Co.
        Weatherford was awarded seven of the 49 wells awarded. Looking
        forward, several additional awards are expected out of the region later
        this year given the pressure on the major oils to ramp production (tenders
        by Exxon, Eni and Shell are all believed to be closed to contract awards).
        Weatherford is well positioned to win a good share of these contracts
        having been among the first to establish a local presence and move rigs
        and other infrastructure to Iraq. We expect Iraq to become a significant
        market in the coming years and could amount to $5 to $10 billion over
        the next two years, and as much as $20 billion over the next five to seven
        years, in our view. However, we would expect that start up and
        mobilization costs will likely result in low or even break-even margins in
        the initial quarters of the ramp-up until each company establishes
        sufficient scale.

    —   Russia: TNK-BP business should see slow-ramp. Weatherford’s
        acquisition of TNK-BP’s oilfield services business has been relatively
        slow to ramp, given a slower than expected pace of a recovery in Russia.
        However, revenue growth should improve in 2011. We believe
        Weatherford has yet to achieve significant gains from pass-through
        revenues at the rig level, but the company is gaining traction with new
        customers such as Rosneft.

    Latin America lower in 2010 (as expected), Mexico still unclear, Brazil
    improving

We believe the magnitude of the growth in the region will be partially
determined by Mexico and the evolution of contracts and activity in the region.


                                                                                       UBS 24
US Oil Service & Drilling 26 April 2010


Currently, Brazil, Columbia, Ecuador, Argentina and Peru are experiencing
activity gains. New contracts in Brazil and to a lesser extent Colombia are
expected to drive much of the regional growth in FY10 and FY11. However,
Mexico will still remain the largest market for Weatherford in the region.
Weatherford has guided to a 5-10% decline in revenues in 2010 but a sequential
margin recovery ($0.01 increase in Latin American EPS contribution in Q2-10).
We are assuming flattish margins in the region for the year until we have better
clarity on Mexico.

Key Latin American regional highlights:

    —   Brazil: increasing activity. We believe the company is gaining
        increasing traction in Brazil, with new contract awards of about $1.2 bil
        in the last three months. The company is running a growing riser
        maintenance program in the region, tubular running, and managed
        pressure drilling. WFT’s presence in Brazil could grow solidly in coming
        quarters.

    —   Mexico: ATG 1 & 2 not to be renewed, ATG 4 continues. The ATG 1
        & 2 contracts in Chicontepec will roll-off in May and will not be renewed.
        As such Weatherford’s activity in Chicontepec will now focus on the
        ATG 4 contract (higher margin contract). However, of the 30 rigs that
        were operating under the ATG 1 & 2 contracts, 15 are owned by
        Weatherford. Weatherford’s active rig count in the region will fall to
        about 17 rigs from a peak of 50 rigs. We expect the company will look to
        mobilize these rigs to other regions. However, the efficiency with which
        this is accomplished will be a deciding factor on how margins filter out in
        the back of 2010 (Weatherford expect to give further clarification in Q2-
        10). In terms of new awards, PEMEX has five “labs” or laboratories with
        the oil service companies in which the service providers are using any
        and all technologies to determine the best approach for developing
        different fields within Chicontepec. PEMEX is also reportedly
        considering offering incentive contracts to E&P operators
        (October/November time-frame), but based on our current understanding,
        we do not expect these awards to be a key source of incremental revenues.

    —   Venezuela expected to remain weak. The outlook for the Venezuelan
        market remains weak. The 1Q-10 revenues from the country were
        negatively impacted by lower activity levels as well as a translation effect
        due to the devaluation of the Bolivar. Given the likelihood of further
        devaluations, Weatherford appears reluctant to make further capital
        commitments in the country.

    Still guiding for positive free cash flow in 2010 and $1.1 bil in CAPEX

Weatherford maintained prior guidance of achieving positive free cash flow in
2010 (excluding one time capital outlays for acquisitions or potential legal
settlements). Capex guidance remained unchanged at $1.1 bil. Free cash flow for
the quarter came in at $165m. At the request of some investors, the company
will now include both a balance sheet and summary of changes in net debt with
their quarterly earnings release. Working capital was a $190 mil drag on free



                                                                                       UBS 25
US Oil Service & Drilling 26 April 2010


cash flow in Q1 but we expect this to reverse through the remainder of the year.
Cash payments on interest and taxes exceeded book expense by about $150 mil.

    1Q-10 recap: Q1-10 – Modestly better than expected

WFT reported a clean Q1-10 EPS of $0.06 vs. our estimate and consensus of
$0.07. However, operational Q1-10 EPS was $0.08 when adjusting for a write-
off at the Boret subsidiary (Russian manufacturer of electric submersible pumps
or ESPs) and a fair value adjustment to the put option issued with the TNK-BP
acquisition.

    —   North America operating income 26% above our estimate. Revenues
        were essentially in-line with our estimates with sequential improvements
        across “almost all product lines”. However, operating margins were
        12.6% vs our 10% estimate driven by higher volume and operating
        efficiency gains (46% incremental margins). This is up meaningfully
        from the 5.7% margins in Q4-09.

    —   Latin America disappoints, however E. Hemisphere essentially in-
        line. Latin American revenues were 29% below our estimates driven by a
        decrease in project based work in Mexico and lower activity levels in
        Venezuela (LatAm margins were 7.3% vs our 8% estimate). Revenues in
        the Europe/W. Africa/FSU were 1% below our estimate (impacted by
        inclement weather) and operating margins were ~10.5% (adjusting for
        Boret write-off and TNK put) vs our 10% estimate. Revenues in the
        Middle East/N. Africa/Asia region were 5% below our estimates with
        operating margins at 14.7% vs our 14% estimate.




                                                                                   UBS 26
US Oil Service & Drilling 26 April 2010




Table 2: 1Q-10 Summary
                                          2009       2009       Act vs UBS est        EPS Impact      2009       Curr Qtr vs Pr Qtr      2009       Curr Qtr vs Pr Yr
                                          1QA        1QE         $         %          Act. Vs Est     4QA          $           %         1QA          $          %

Revenue by Region
   North America                             $891      $891         ($0)         0%         ($0.00)     $736        $154          21%      $837         $53          6%
   Latin America                              428       601        (173)       -29%         ($0.02)      618         (190)       -31%       468         (40)        -9%
   Europe/West Africa/FSU                     455       461          (7)        -1%         ($0.00)      478          (24)        -5%       369          86         23%
   Middle East/North Africa/Asia              565       596         (31)        -5%         ($0.00)      593          (28)        -5%       582         (17)        -3%
   International                            1,448     1,659       (211)       -13%                     1,690        (242)       -14%      1,419          29          2%
Total Revenues                              $2,338    $2,549     ($211)         -8%         ($0.02)    $2,426        ($88)        -4%     $2,256        $82          4%

Expenses
   North America                             $778      $802       ($24)        -3%                      $695         $83          12%      $714         $64          9%
   Latin America                              397       553       (156)       -28%           $0.00       569        (172)        -30%       376          21          6%
   Europe/West Africa/FSU                     424       415          9          2%           $0.00       436         (12)         -3%       294         130         44%
   Middle East/North Africa/Asia              482       512        (30)        -6%           $0.00       511         (29)         -6%       448          34          8%
   Research and Development                    49        50         (1)        -2%          ($0.00)       50          (1)         -3%        49          (0)         0%
   Corporate Charges                           47        44          3          7%                        49          (2)         -4%        40           8         19%
Total Expenses                              $2,177    $2,377     ($199)        -8%          ($0.00)    $2,309      ($132)         -6%     $1,921       $257         13%

Operating Income
   North America                            $112        $89        $23         26%           $0.03       $42         $71        170%       $123         ($11)       -9%
   Latin America                               31         48       (17)       -35%          ($0.00)        49        (18)       -37%          92         (61)      -66%
   Europe/West Africa/FSU                      31         46       (15)       -33%          ($0.02)        43        (12)       -28%          75         (44)      -59%
   Middle East/North Africa/Asia               83         83        (1)        -1%           $0.00         82          0          0%        134          (51)      -38%
   Research and Development                   (49)       (50)        1         -2%           $0.00        (50)         1         -3%         (49)          0         0%
   Corporate Charges                          (47)       (44)       (3)         7%          ($0.00)       (49)         2         -4%         (40)         (8)       19%
Total Operating Income                       $161       $173      ($12)        -7%           $0.01       $117        $44         38%        $336       ($175)      -52%

Other                                          (9)      (10)         1                      $0.00         (9)         (0)         0%        (14)           4       -32%
Pretax Income                                 $56       $71       ($15)       -21%                       $16         $41        260%       $231        ($175)      -76%

Taxes                                         (11)       (13)         2       -15%          ($0.00)         3        (14)       -503%       (36)          25       -70%
   Tax Rate                                 19.3%      18.0%                                           -17.2%                             15.5%
Minority Interest                              (4)        (3)       (1)        22%          ($0.00)        (3)        (1)        28%         (9)           5       -54%
Net Income                                    $41        $55      ($14)       -25%                        $15        $26        172%       $186        ($145)      -78%

Earnings Per Share
- Basic                                     $0.06      $0.07     ($0.02)      -25%                      $0.02      $0.04        172%      $0.27       ($0.21)      -79%
- Diluted                                   $0.06      $0.07     ($0.02)      -25%          ($0.02)     $0.02      $0.04        172%      $0.27       ($0.21)      -79%

Shares Outstanding
- Basic                                     737.9      737.8          0          0%                     737.1          1           0%     698.3           40         6%
- Diluted                                   737.9      738.5         (1)         0%         $0.00       737.1          1           0%     702.6           35         5%

EBITDA                                       $410       $430       ($20)       -5%                       $370        $40          11%      $537        ($127)      -24%
   North America                             193         174         19        11%                        125         68          54%       198           (5)       -3%
   Latin America                               74         91        (18)      -20%                         92        (18)        -20%       123          (49)      -40%
   Europe/West Africa/FSU                      80         97        (18)      -18%                         93        (13)        -14%       110          (30)      -27%
   Middle East/North Africa/Asia              155        157         (2)       -1%                        155         (0)          0%       192          (37)      -19%
   Research and Development EBITDA            (47)       (48)         1        -3%                        (48)         2          -3%       (47)           0        -1%
   Corporate EBITDA                           (44)       (42)        (3)        6%                        (47)         2          -5%       (38)          (6)       17%
Cash Flow                                    $291       $313       ($22)       -7%                       $269        $22           8%      $388         ($97)      -25%
CFPS                                        $0.39      $0.42     ($0.03)       -7%                      $0.36      $0.03           8%     $0.55       ($0.16)      -29%

Depreciation and Amortization
   North America                             $81        $85         ($4)       -5%                       $84         ($3)        -4%       $75           $6          7%
   Latin America                              42         43          (1)       -2%                        43          (0)        -1%        30           12         40%
   Europe/West Africa/FSU                     49         51          (2)       -4%                        50          (1)        -3%        35           14         41%
   Middle East/North Africa/Asia              72         74          (2)       -2%                        73          (0)        -1%        58           15         25%
   Research and Development D&A                2          2           0        10%                         2           0         12%         2            0         15%
   Corporate D&A                               3          2           1        24%                         2           1         27%         2            1         73%
Total Depreciation & Amortization:           $249       $258        ($8)       -3%                       $254        ($4)        -2%       $201         $48         24%

Margins

Operating Margins by Region
   North America                            12.6%      10.0%           -    261 bps                      5.7%            -    696 bps     14.7%             - -208 bps
   Latin America                             7.3%       8.0%           -    -74 bps                      8.0%            -    -71 bps     19.7%             - -1,244 bps
   Europe/West Africa/FSU                    6.8%      10.0%           -   -324 bps                      8.9%            -   -215 bps     20.3%             - -1,356 bps
   Middle East/North Africa/Asia            14.7%      14.0%           -     65 bps                     13.9%            -     75 bps     23.0%             - -838 bps
Total Operating Margins                      6.9%       6.8%           -     11 bps                      4.8%            -    207 bps     14.9%             - -799 bps

EBITDA Margins by Region
   North America                            21.7%      19.5%           -    214 bps                     17.0%            -    466 bps     23.7%             - -199 bps
   Latin America                            17.2%      15.2%           -    197 bps                     14.9%            -    230 bps     26.2%             - -902 bps
   Europe/West Africa/FSU                   17.5%      21.1%           -   -356 bps                     19.4%            -   -192 bps     29.7%             - -1,220 bps
   Middle East/North Africa/Asia            27.4%      26.4%           -    106 bps                     26.2%            -    129 bps     32.9%             - -548 bps
Total EBITDA Margins:                       17.5%      16.9%           -     67 bps                     15.3%            -    228 bps     23.8%             - -625 bps

Revenue breakdown by region
   North America                             38%        35%            -    314 bps                      30%             -     773 bps      37%             -     97 bps
   Latin America                             18%        24%            -   -527 bps                      25%             -    -718 bps      21%             -   -244 bps
   Europe / West Africa / FSU                19%        18%            -    134 bps                      20%             -     -27 bps      16%             -    310 bps
   Middle East / North Africa / Asia         24%        23%            -     79 bps                      24%             -     -29 bps      26%             -   -163 bps
     International                           62%        65%           -    -314 bps                      70%            -    -773 bps       63%            -     -97 bps

Op Inc breakdown by region
   North America                             44%        33%           - 1,032 bps                        19%             - 2,444 bps        29%             - 1,472 bps
   Latin America                             12%        18%            - -593 bps                        23%             - -1,072 bps       22%             - -964 bps
   Europe / West Africa / FSU                12%        17%            - -534 bps                        20%             -   -777 bps       18%             - -571 bps
   Middle East / North Africa / Asia         32%        31%            -   95 bps                        38%             -   -596 bps       32%             -    63 bps
     International                           56%        67%           -                                  81%            - -2,444 bps        71%            -

Source: Company reports and UBS estimates




                                                                                                                                                                 UBS 27
US Oil Service & Drilling 26 April 2010




Nabors Industries: International guided
lower, US flat in 2H
Published April 21, 2010

    Q1-10 clean EPS of $0.21 vs. our $0.22 estimate and consensus of $0.21
Results exclude charges of $0.06 per share related to items including a
devaluation of the Venezuelan Bolivar, a carrying value adjustment to a holding
in a Chinese rig manufacturer, and a book loss on debt repurchases. A spike in
the effective tax rate (20% vs. FY 2010 guidance of 12%) cost $0.01 for the
quarter.

    US Lower 48 strong in Q1, but risks late 2010 and into 2011
Operating income in the Lower 48 Land segment was 35% higher than our
forecasts, driven by a higher rig count and a lower decline in average rig
margins. Nabors indicated that if natural gas prices remain at $4.00/mcf “it’s
going to be bad” as the $6-$7.00 hedges roll off for the E&P companies later
this year. However, gains in oil shale drilling should partially offset the gas
decline. We believe the company can hold on to pricing given the tight rig
market, but that there is a real possibility of a net decline in the overall rig count.

    International disappoints in Q1-10 and full year guided down
International results were much weaker than expectations due to project delays
and execution deferrals (Mexico, Saudi Arabia, and Algeria). As a result of the
delays in Q1-10 and expectations of minimal margin expansion through the
remainder of the year, the company has lowered FY10 operating income
guidance for the segment to $300-$310 mil (down $50 - $60 mil from previous
guidance).

    Valuation: Neutral rating, risk to gas prices and rig count in 2H-10
Our $22 price target for Nabors is based on a 5.8x 2010E EV/EBITDA multiple
vs. the group average of 5.6x. We maintain our Neutral rating on the company.



Our View

As a whole, earnings were largely in-line with our estimates driven by
activity gains and higher pricing in US land drilling operations, although
International earnings came in well below our expectations. Dayrates are
continuing to modestly increase across all rig classes (about $300
improvement in pricing this quarter), although we believe gains in pricing
will flatten as we progress through the year. We maintain our cautious
outlook on natural gas for 2H-10 and expect some softening in the rig count
later this year. Partially offsetting the declines in the gas market, Nabors
will benefit from increased oil drilling (about 1/3 of Nabors’ rigs are
working in oil or liquid-gas regions). If the rig count declines only by a
modest degree, we believe Nabors should be able to hold on to
pricing/margins seen in Q1-Q2. We assume flat pricing in the back of the
year, but a moderate decline in its rig count. International results were


                                                                                          UBS 28
US Oil Service & Drilling 26 April 2010


disappointing, but we believe this quarter will represent the trough for the
segment. Management sounded an optimistic note and expects earnings to
ramp throughout the year and into 2011 driven by increasing activity levels
from countries such as Algeria, Colombia, Saudi Arabia and Iraq. We
continue our Neutral rating on the stock given risks to the downside for
both gas prices and the rig count. Additionally the duration of softness
remains unclear. The company commented that if gas stays at $4.00/mcf it
would not be a good thing, we agree and we do not see gas going higher
near-term. We think investors should seek lower entry points before buying
the stock.

    International results below expectations due to delays in several regions

Results for the International segment in Q1-10 were much weaker than
management expected due to project delays and execution deferrals in several
regions including Mexico, Saudi Arabia, and Algeria. In Mexico PEMEX has
encountered funding constraints delaying the restarting of rig programs and in
Saudi Arabia Nabors’ rig count has declined nine rigs to 24 over the course of
the last 18 months. Part of the decrease in Saudi Arabia is a result of a
realignment in drilling towards more gas activity in the country, and Nabors’ rig
count in the region should rebound once six rigs currently preparing for gas
drilling in the region go back to work (three were previously located in Saudi
Arabia and three were mobilized in). The move towards increased gas drilling in
Saudi Arabia could benefit Nabors (company holds a 37% share of the gas
drilling market in Saudi Arabia vs. a 25% share in the overall market), however
it has become evident that the overall decrease in the Saudi Arabian rig count
from peak levels in years past is permanent. In Algeria, due to ongoing issues
related to Sonatrach (the national oil company) projects were essentially on hold.
However, the situation appears to be improving and Nabors commented that all
but two of their 11 rigs in the country have now returned to work.

    Lowering 2010 International estimates due to delays and weaker
    margins

As a result of the delays in Q1-10 and expectations of little margin expansion
through the remainder of the year, we are lowering our 2010 International
operating income estimate to $291 mil slightly below management’s revised
guidance of $300 to $310 mil (down $50 - $60 mil from previous guidance).
However, operating income is now expected to be lower than in 2009 ($365 mil).
Activity is expected to increase modestly from Q1-10 through the remainder of
2010, however margins will be roughly flat as international bidding remains
fierce. Nabors expects about 18 to 20 rigs to commence operations in the next
18 months in regions including Mexico, Saudi Arabia, Algeria, Iraq, Kuwait,
and North Africa. In 2011, management expects activity to show stronger gains,
while margins could begin to show some modest improvement. Notably
management believes that 2011 could be its best ever year in Mexico, however
we note that there is still uncertainty regarding PEMEX’s drilling plans and
competition remains tough. The international markets have often disappointed,
however they have grown and now account for 44% of op income.

    162 rigs working in the Lower 48 today up from 147 rigs in Feb-10, but
    risk for a rig count decrease in 2H 2010

                                                                                     UBS 29
US Oil Service & Drilling 26 April 2010


Nabors’ US land working rig count currently stands at 162 rigs (excludes11 rigs
that are on standby), which is up 10% from Feb-10 (147 working rigs and 13
rigs on standby). Average rig count for Q1-10 was 159, up 14% sequentially
from 139 rigs in Q4-09. Results in the Lower 48 drilling segment should
“flatten” through the remainder of the year per management; however we
believe there could be a modest decline given our belief that the gas rig count
could decrease by 200-250 rigs, partially offset by a 100-150 increase in the oil
rig count. Reconfirming this belief was comments from management that they
are seeing activity transition away from the traditional gas shales towards liquids
rich plays (i.e. Bakken Shale and Permian Basin). Nabors currently has about
33% of its operating rigs in oil or liquids rich gas directed markets. The
company commented that if gas stays at $4.00/mcf it not be a good thing, we
agree and we do not see gas going higher soon.

    Pricing for high spec rigs improving, however no price increases for
    lower spec rigs

Pricing per day increased more than $300 in Q1-10, leading to a decline in
average margins of only $720 per rig day vs. management’s estimate of $1.2k.
Nabors had several rigs roll-off long-term contracts in Q1, almost all of which
were recontracted at rates above recent comparable renewals. Notably, many of
the PACE rigs are being recontracted at rates higher than their previous rates
and operators are becoming more inclined to discuss term contracts.
Management indicated that the majority of the company’s term contracts at
recent peak rates have rolled off and that future margins should be more
reflective of spot market pricing. We believe that the market for high
specification rigs will remain tight, however pricing will likely flatten later this
year assuming some market softness. Of note, indicating the bifurcated market
only limited price increases have occurred for lower specification rigs.

    Update on E&P portfolio: Expect to exit Colombian investments soon,
    potential for IPO of NFR Energy by 2H-11

Management continues to believe that much of the value in their E&P business
is being underappreciated by the markets. Given they are not the company’s
core business lines; this is not a surprise in our view. While Nabors did not set
out a specific time-table, they continue to plan to monetize some of the assets.
Nabors will likely seek to first exit from its Colombian investment by year end
(total NBR capital contributions of around $160 mil vs. internal NBR valuation
estimates of $450 mil fair value per management). Furthermore, the company is
in early discussions (targeted completion by 2H-2011) for an equity offering for
as much as $2 bil at its NFR Energy joint-venture with First Reserve (valuation
likely requires $6+ natural gas per NBRs ). NFR Energy is Nabors’ largest E&P
investment and internal NBR estimates value the company’s stake at over $1 bil.
Around 75-80% of the joint ventures reserves are in shale plays (1 Tcf of P1
reserves and 1 Tcf of P2 reserves).

    Well Servicing should improve in second half of 2010

Operating trends for the Well Servicing segment are improving and Nabors has
now completed management changes in the segment. Operating income was up
almost 350% sequentially when adjusting for favorable adjustments in Q4-09


                                                                                       UBS 30
US Oil Service & Drilling 26 April 2010


from workers compensation and other items. Rig hours in this unit have steadily
improved since the beginning of the fourth quarter and were up 11% q-o-q. The
company expects rig hours to continue to increase in 2010 (rig hours for March-
2010 were 27% higher than October-2009), potentially allowing for price
increases in 2H-10. Growth at the segment is expected to be driven by higher oil
prices (70% of well service revenues are oil related) and increased activity levels.
The segment is also making a push to expand into the Bakken Shale. Nabors
noted improved revenue visibility as customer respond to favorable oil prices.
We expect results in the segment to continue to improve, with the second half of
2010 and 2011 showing marked improvement. The company’s premium
Millennium rigs are the only AC rigs in the market and are under-utilized given
a still soft market.

    Expect to see newbuild build contracts for “fit for purpose rigs”

Management expects competition for newbuild rigs to increase, particularly as
declines in construction costs will help meet return targets at lower contracted
dayrates. We expect that Nabors and H&P, as well as others, will add new “fit
for purpose rigs” for unconventional drilling. So far construction has only been
at the margin, but it will be something to watch for 2010-11. We believe that
Nabors currently has about six newbuilds remaining. Last quarter, the company
received four incremental five-year contract awards from a “key customer” for
newbuild rigs to be deployed in the Bakken Shale at “good” rates.

    Strong financial position - repurchased $110 mil of convertible debt

During the quarter Nabors repurchased another $110 mil of its convertible debt.
The company now has $1.6 bil of convertible debt remaining (due May 2011)
having repurchased about $1.4 bil over the last 15 months. With $1.1 bil in cash
and marketable securities at year end and plans to implement a $500 mil
revolving credit facility within the next few quarters, the company should have
sufficient liquidity to retire the remaining convertible debt while maintaining dry
powder for acquisitions and growth capex. If required, Nabors could also access
the debt markets at relatively attractive rates. We estimate that after retiring the
remaining convertible debt, Nabors’ debt to capital ratio will be reduced to the
high 20% range from about 42% today.

    2010/2011 estimates essentially unchanged

We are marginally lowering our 2010/2011 estimates to reflect lower
expectations for international earnings, partially offset by the improvement in
US land operations in 1Q-10 and the modestly better US land well servicing
business. Our 2010/2011 estimates decline to $1.00/$1.56 from $1.04/$1.67.




                                                                                       UBS 31
US Oil Service & Drilling 26 April 2010


Table 2: 1Q-10 Summary
                                           2010        2010        Act vs UBS est        EPS Impact      2009      Curr Qtr vs Pr Qtr     2009      Curr Qtr vs Pr Yr
                                           1QA         1QE          $         %          Act. Vs Est     4QA         $          %         1QA         $          %
Operating Revenues:
Contract drilling
  U.S. lower 48 land drilling1             $271.5      $256.8         14.7        5.4%         $0.01     $230.8       40.7       17.6%     $389.9    (118.4)    (30.4%)
  U.S. land well-servicing                   98.0       $89.2          8.8        8.9%         $0.00       88.3        9.6       10.9%      134.4     (36.4)    (27.1%)
  U.S. offshore                              38.2       $30.4          7.8       20.3%         $0.01       29.3        8.9       30.6%       60.4     (22.2)    (36.7%)
  Alaska                                     49.8       $50.2         (0.4)     (0.9%)        ($0.00)      43.2        6.6       15.2%       62.8     (13.0)    (20.7%)
  Canada                                    115.6       $98.1         17.5       15.1%         $0.01       81.2       34.4       42.3%      112.1       3.4        3.0%
  International                             245.3      $292.8        (47.4)    (19.3%)        ($0.04)     287.2      (41.9)    (14.6%)      342.7     (97.3)    (28.4%)
Subtotal contract drilling                  818.4       817.6          0.8        0.1%                    760.0       58.4        7.7%    1,102.2    (283.8)    (25.7%)

  Other Operating Segments                  $95.5       $96.2         (0.7)     (0.7%)                    $96.1       (0.6)      (0.6%)    156.9      (61.4)    (39.1%)
  Oil and gas                                17.3         9.7          7.6      44.0%                       9.0        8.3       92.8%      15.0
  Elimination of inter-segment transact     (25.5)      (25.7)         0.2        0.6%                    (24.0)      (1.5)      (6.1%)    (65.5)      40.0       61.0%
Total Revenue                              $905.7      $897.8          7.9        0.9%                   $841.1       64.6         7.7% $1,208.6     (302.9)    (25.1%)

Operating Costs:
Contract drilling
  U.S. lower 48 land drilling              $211.2      $217.4         (6.2)     (2.9%)                   $181.8       29.4       16.2%    $260.6      (49.4)    (19.0%)
  U.S. land well-servicing                   90.8        80.4         10.4       11.5%                     79.6       11.2       14.1%     120.7      (29.9)    (24.8%)
  U.S. offshore                              30.8        22.3          8.5       27.5%                     22.1        8.7       39.2%      43.5      (12.7)    (29.2%)
  Alaska                                     35.8        36.9         (1.1)     (3.0%)                     28.8        7.0       24.4%      42.0       (6.1)    (14.6%)
  Canada                                    101.0        83.9         17.1       16.9%                     80.6       20.4       25.4%      99.0        2.0        2.0%
  International                             191.8       216.9        (25.2)    (13.1%)                    212.8      (21.0)      (9.9%)    239.7      (47.9)    (20.0%)
Subtotal contract drilling                  661.4       657.9          3.5        0.5%                    605.7       55.7         9.2%    805.5     (144.0)    (17.9%)

  Other Operating Segments                  $88.3       $90.7         (2.4)     (2.7%)                    $90.2        (1.9)     (2.1%)    137.8      (49.5)    (35.9%)
  Oil and gas                                18.1        16.8          1.3        7.0%                     16.7                             11.3
  Elimination of inter-segment transact      (0.5)       (4.9)         4.4     804.5%                      (4.6)       4.1       88.2%     (20.1)      19.5       97.3%
Total Operating Costs                      $767.3      $760.5          6.8        0.9%                   $708.1       59.2        8.4%    $934.5     (167.3)    (17.9%)

Operating Income
Contract drilling
  U.S. lower 48 land drilling                $60.3      $39.4         20.9       34.7%         $0.05      $49.0       11.3        23.1%   $129.2      (69.0)    (53.4%)
  U.S. land well-servicing                     7.2        8.8         (1.7)    (23.1%)        ($0.01)       8.8       (1.6)     (18.0%)     13.7       (6.5)    (47.4%)
  U.S. offshore                                7.4        8.1         (0.7)     (9.7%)        ($0.01)       7.1        0.3         3.6%     16.8       (9.5)    (56.2%)
  Alaska                                      14.0       13.3          0.7        4.7%         $0.00       14.4       (0.4)      (3.1%)     20.8       (6.9)    (33.0%)
  Canada                                      14.6       14.2          0.4        2.5%        ($0.01)       0.6       13.9     2204.6%      13.2        1.4       10.6%
  International                               53.6       75.9        (22.3)    (41.6%)        ($0.04)      74.4      (20.8)     (28.0%)    103.0      (49.4)    (48.0%)
Subtotal contract drilling                   156.9      159.7         (2.7)     (1.7%)                    154.3        2.6         1.7%    296.7     (139.8)    (47.1%)

  Other Operating Segments                   $7.2        $5.5          1.7       23.5%                     $5.9        1.3       22.7%     $19.1      (11.9)    (62.3%)
  Oil and gas                                (0.7)       (7.1)         6.4     874.6%                      (7.8)                             3.7
  Elimination of inter-segment transact     (25.0)      (20.7)        (4.2)    (16.9%)                    (19.4)       (5.5)   (28.4%)     (45.4)      20.4       45.0%
Total Operating Income                     $138.5      $137.3          1.1        0.8%                   $133.0         5.5       4.1%    $274.1     (135.6)    (49.5%)

Total DD&A                                 $179.0      $172.2          6.8           .        ($0.02)    $171.4        7.7        4.5%     161.9       17.1       10.6%
Operating Income                           $138.5      $137.3          1.1       0.8%                    $133.0        5.5        4.1%    $274.1     (135.6)    (49.5%)

Interest expense                            $66.7       $65.2          1.6        2.4%        ($0.00)     $65.2        1.6       2.4%      $67.1       (0.3)     (0.5%)
Investment income                            (2.4)        0.0         (2.4)   (100.0%)        ($0.01)       0.2       (2.5) (1472.1%)        9.1      (11.5)   (125.8%)
Other income (expense), net                  (2.2)        0.0         (2.2)   (100.0%)        ($0.01)     (12.2)      10.0      81.9%       17.3      (19.5)   (112.8%)
Pretax Income                               $67.1       $72.2         (5.0)     (7.5%)                    $55.8       11.4      20.4%     $233.4     (166.3)    (71.2%)

Income taxes                                 $5.9        $8.7         (2.7)    (45.7%)        $0.01        $4.2        1.7       40.7%     $49.0      (43.1)    (87.9%)
Extraordinary item / other*                   0.0         0.0                                            (112.0)                             0.0
Net Income                                  $61.2       $63.5         (2.3)     (3.8%)                    $51.6        9.6       18.7%    $184.4     (123.2)    (66.8%)


Operating Earnings Per Share
 Basic                                      $0.21       $0.22         (0.0)     (3.9%)                    $0.18        0.0       18.4%     $0.65       (0.4)    (67.0%)
 Diluted                                    $0.21       $0.22        (0.01)     (5.9%)                    $0.18       0.03       15.9%     $0.65      (0.44)    (67.7%)

EBITDA                                      317.5       309.6          7.9        2.6%                    304.3       13.2        4.3%     436.0     (118.5)    (27.2%)
Cash Flow                                   240.2       235.7          4.5        1.9%                    222.9       17.3        7.8%     346.3     (106.1)    (30.6%)
Diluted Cash Flow Per Share                 $0.83       $0.83        (0.00)     (0.5%)                    $0.79       0.04        5.2%     $1.22      (0.40)    (32.5%)

Shares Outstanding
 Basic                                      284.7       283.9          0.8       0.3%                     283.9        0.8        0.3%     283.1        1.6       0.6%
 Diluted                                    290.7       283.9          6.9       2.4%                     283.9        6.9        2.4%     283.1        7.6       2.7%
*Net income excludes one-time and extraordinary items
1
 Allocates depreciation expense to operating segments based on each segments % contribution to total revenue

Source: Company reports and UBS estimates




                                                                                                                                                                 UBS 32
US Oil Service & Drilling 26 April 2010




Diamond Offshore: Dividend cut; kept “at
least through 2010”
Published April 22, 2010

    Q1-10 clean EPS of $2.09 vs. our $1.88 estimate and consensus of $1.94
Diamond reported clean EPS of $2.09 vs. our $1.88 estimate and consensus of
$1.94. The beat was driven by high specification floaters, with revenues 4%
above our forecasts and expenses 22% below. Higher taxes had a $0.06 negative
impact.

    Dividend cut expected, but not this early
Diamond lowered their quarterly dividend by $0.50 to $1.50 ($0.125 regular
dividend plus $1.375 special dividend), which equates to an annualized dividend
yield of 7%. The cut reflects "current and anticipated industry" conditions
(including a decline in dayrates from peak levels) and a desire to retain cash for
potential rig acquisitions and other corporate purposes. Management indicated
that the revised dividend can be maintained “at least through 2010”.

    Midwater markets remain soft; international jackup market active
We believe the mid-water markets remain uneven with some demand, but still a
difficult market. The company believes it can keep its lower specification rigs
which are up for contract midyear under contract; however rates could be a bit
soft during the hurricane season in the Gulf of Mexico. For the international
jackups, the market has been much more active across “all regions”.

    Valuation: Cutting price target from $110 to $105
We believe there will be some modest multiple contraction following the
dividend cut; additionally we are cutting estimates reflecting our concerns in the
mid-water markets. Our $105 price target for Diamond is based on a 7.4x 2010E
EV/EBITDA multiple.

    Lowering quarterly special dividend by $0.50 to $1.50 (7% yield),
    dividend safe for 2010

Diamond lowered its quarterly dividend by $0.50 to $1.50 ($0.125 regular
dividend plus $1.375 special dividend), which equates to an annualized dividend
yield of 7%. The cut reflects "current and anticipated industry" conditions
(including a decline in dayrates from peak levels) and a desire to retain cash for
potential rig acquisitions and other corporate purposes. We do not believe it is
surprising that Diamond reduced the dividend, however the timing did come as a
surprise (we had assumed a cut in 2011 was more likely). Management indicated
that the revised $1.50 dividend can be maintained “at least through 2010”. Given
our belief that midwater dayrates could fall further, we would expect that
eventually the dividend will have to be reviewed again.

    Midwater semis up for renewal in GOM should keep working, but at
    possible discount due to hurricane season

The Ocean Voyager (2nd gen - 3,200 ft, GOM) and the Ocean New Era (2nd gen
- 1,500 ft, Mexico) are both expected to continue working when their contracts
roll-off in July 2010, however dayrates could come at a discount to current rates

                                                                                     UBS 33
US Oil Service & Drilling 26 April 2010


due to the hurricane season. Both rigs are currently near spot market pricing, the
Ocean Voyager is working for Walter Oil & Gas in the low $200k’s and the
Ocean New Era is working for PEMEX in the low $180k’s. It is uncertain if
PEMEX will renew the Ocean New Era’s contract, however management
indicated that there is a shortage of midwater rigs in the GOM and indicated the
semi was being bid in the region.

    Seeing activity in international jackup market in all regions

Diamond indicated that international jackup demand is improving across all
regions, but that excess supply continues to pressure dayrates. This commentary
is consistent with our view that international jackup utilization (currently 81%)
and dayrates will remain roughly flat into 2011 as the industry absorbs newbuild
supply. We estimate about 40 jackups remain to be delivered through 2012
(excluding five jackups heading to non-competitive markets and 15 jackups
which we believe will have construction cancelled). Of these 40 rigs, 24 are
scheduled to be delivered in 2010, followed by another 11 rigs in 2011.

    Possible opportunities to move one jackup to Mexico

In Mexico, PEMEX has issued three formal drilling tenders for contracts
offshore Mexico. In aggregate, the tenders will include five jackups (one 250 ft
IC, three 300 ft ICs, and one 350 ft IC). It is believed that three of the tenders
are for rigs ten years of age or less. Diamond’s jackup the Ocean Scepter (350 ft
– IC) meets this age requirement and could be available for work beginning in
August 2010. Depending on the final number and provisions of the tenders,
Diamond could look to bid additional jackups for work in Mexico, however we
note that competition for those awards should be fierce. PEMEX currently has
16 jackups under contracts expiring in 2010, 11 of which require new contracts
to continue working past 2010 (five can be extended into 2011).

    No additional color on Petrobras tender, participation under current
    terms unlikely, in our view

There was no additional color regarding Petrobras’ tender for 28 ultra-deepwater
newbuild floaters for operations offshore Brazil. The offshore drilling
contractors continue to find the logistics and economics associated with the
tender challenging, and we do not believe they will bid under the current terms.
The cost to build a deepwater rig in Brazil would be significantly higher than
elsewhere and thus a dayrate which would make the newbuild economics work
would be far higher than what Petrobras is willing to pay.

The tender includes three separate sections. The first calls for seven drillships,
all to be constructed by one individual winning bidder. The second section
requires two more units, which can be either drillships, semi-submersibles or
monocolumn rigs. The initial plan is for the first nine units to be owned and
operated by Petrobras, although there may be the potential for these rigs to be
sold at some point in the future. The third part of the tender has been issued to
drilling contractors and calls for the provision of up to 19 more ultra-deepwater
floaters. Notably, all 28 rigs must be built in Brazil, which presents logistical
concerns given the lack of current shipyard infrastructure in the country. The
closing date for contract proposals has been delayed until May 2010.


                                                                                     UBS 34
US Oil Service & Drilling 26 April 2010


    Limited opportunities for new rig purchases in deepwater and shallow

There do not appear to be any rig acquisitions which management has identified.
We believe the company is most interested in ultra-deep/deepwater
opportunities, however there do not appear to be any rigs available in the near
term. As a review, Diamond purchased two newbuild 6th gen semis out of
bankruptcy proceedings in 2009 (PetroRig I - now Ocean Courage and PetroRig
II - now Ocean Valor) for $510 mil and $540 mil respectively (includes
incremental investment of $50 mil in each). We believe the company would also
consider jackups acquisitions, although these opportunities would be based
strictly on return valuation rather than strategic focus. The current price for
higher specification jackups remains high and the bid/ask spread wide, thus
making returns less attractive. Using cash to upgrade older conventionally
moored floaters could also be an option, although we believe rates in the
deepwater/midwater markets need to firm before these upgrades would make
economic sense. Management indicated that upgrading moored floaters could
cost a couple hundred million dollars per rig, which would be less attractive than
buying a newbuild in the $500 mil range (if opportunities existed).

    Cost guidance for FY 2010 reaffirmed at $1.5 bil & capex increased by
    $70 mil

Management reaffirmed 2010 cost guidance of $1.5 bil (ex. reimbursable
expenses) despite Q1-10 costs of $305 mil, below guidance of $335 - $350 mil.
The lower than expected costs in Q1-10 were a result of timing differences for
shipyard projects and rigs mobilizing to location, and will be incurred through
the balance of the year. Operating costs (ex. reimbursable expenses) are
expected to total $365 - $385 mil in Q2-10. Diamond also increased 2010 capex
guidance to $510 mil, up $70 mil for modifications needed on the Ocean Valor,
the Ocean Baroness and the Ocean Clipper, each of which were recently
awarded long term contracts with Petrobras in Brazil.

    Tax rate could increase to the 28%-30% range from 24%-27%

Diamond indicated that the full year effective tax rate could increase to the 28%-
30% range, from the previous 2010 guidance of 24%-27% if a tax law
concerning foreign earnings is not extended by Congress. The company had
previously believed the tax provision would have been extended at this point.
The extension, if passed, would be retroactive back to January 1st bringing
Diamond’s tax rate back to the 26%-28% range. The additional increase in tax is
due to a geographical shift in revenue mix.

    Lowering earnings estimates for 2010 and 2011

We are lowering our 2010 EPS estimate by 6% to $8.24 from $8.74 and our
2011 estimate by 6% to $8.77 from $9.29. These revisions reflect our
expectations for continued softness in the midwater market and an increase in
the assumed tax rate from 25% in 2010 and 24% in 2011 to 28% in both years.




                                                                                     UBS 35
US Oil Service & Drilling 26 April 2010


Figure 1: 1Q-10 Summary
                                     2010          2010      Act vs UBS est     EPS Impact     2009      Curr Qtr vs Pr Qtr     2009      Curr Qtr vs Pr Yr
                                     1QA           1QE        $         %       Act. Vs Est    4QA         $          %         1QA         $          %
Revenues
 High Specification Floaters         $383.8        $368.1     15.7       4.3%          $0.05   $380.8        3.0        0.8%    $312.1      71.7      23.0%
 Intermediate Semisubmersibles        380.7         374.4      6.3       1.7%          $0.02    394.7      (14.0)      -3.5%     417.0     (36.3)     -8.7%
 Jackups                               79.9          83.5     (3.6)     -4.3%         -$0.01     96.7      (16.7)     -17.3%     126.6     (46.6)    -36.8%
 Rev. Related to Reimbursable Ex.      15.2          22.7     (7.5)    -32.9%                    18.7       (3.4)     -18.3%      30.0     (14.8)    -49.2%
Total Revenues                       $859.7        $848.7     11.0       1.3%                  $890.8      (31.1)      -3.5%    $885.7     (26.0)     -2.9%
Expenses
 High Specification Floaters         $109.2        $139.1    (29.9)    -21.5%                  $111.3       (2.2)      -2.0%     $93.6      15.5      16.6%
 Intermediate Semisubmersibles        138.6         136.8      1.8       1.3%                   152.1      (13.5)      -8.9%     130.7       7.9       6.0%
 Jackups                               52.5          61.4     (8.8)    -14.4%                    48.2        4.3        8.9%      68.9     (16.4)    -23.8%
 Other                                  4.8           5.4     (0.6)    -10.6%                     5.4       (0.6)     -10.6%       4.5       0.4       8.0%
 Reimbursable Ex.                      14.7          21.6     (6.9)    -31.9%                    18.1       (3.4)     -18.7%      29.7     (15.0)    -50.5%
Total Expenses                       $319.8        $364.3    (44.4)    -12.2%                  $335.1      (15.3)      -4.6%    $327.5      (7.6)     -2.3%
Gross Income
 High Specification Floaters         $274.6        $229.0     45.6      19.9%          $0.18   $269.5        5.2        1.9%    $218.5      56.1      25.7%
 Intermediate Semisubmersibles        242.1         237.5      4.6       1.9%          $0.00    242.6       (0.5)      -0.2%     286.3     (44.2)    -15.4%
 Jackups                               27.4          22.2      5.2      23.7%          $0.03     48.4      (21.0)     -43.4%      57.7     (30.2)    -52.4%
 Other                                 (4.8)         (5.4)     0.6     -10.6%                    (5.4)       0.6      -10.6%      (4.5)     (0.4)      8.0%
 Reimbursable                           0.5           1.1     (0.6)    -52.6%                     0.6                   0.0%       0.3       0.2      81.1%
Total Gross Income                   $539.8        $484.4     55.4      11.4%                  $555.7      (15.8)      -2.8%    $558.3     (18.4)     -3.3%
 Depreciation & Amortization           97.4          95.5      1.9       2.0%                    89.5        7.9        8.9%      85.1      12.3      14.5%
 General & Administrative              16.7          15.8      0.9       5.4%                    14.8        1.9       12.5%      16.3       0.3       2.1%
Total Operating Income               $425.8        $373.1     52.7      14.1%                  $451.4      (25.6)      -5.7%    $456.9     (31.1)     -6.8%
Other Income (Expense)
 Interest Expense                          22.3      22.0       0.3      1.5%                    23.2       (0.9)      -3.7%       1.1      21.2 1898.3%
 Interest Income                            1.3       0.9       0.4     49.0%                     0.9        0.4       50.5%       0.6       0.7  122.6%
 Other Income                               0.4       2.5      (2.1)   -85.0%                    (7.9)       8.3     -104.7%      (3.1)      3.4 -112.2%
Total Other Income (Expense)              (20.7)    (18.6)     (2.0)    10.9%                   (30.2)       9.6      -31.6%      (3.6)    (17.1) 474.2%
Pretax Income                        $405.1        $354.5     50.6     14.3%                    421.2      (16.1)      -3.8%    $453.3     (48.2)    -10.6%
 Income Taxes                         114.8          92.2     22.6     24.6%          -$0.06    143.4      (28.6)     -20.0%     104.8      10.0       9.6%
 Gain on Sale of Assets*                0.0           0.0      0.0                                7.5       (7.5)                  0.1      (0.1)
Net Income                           $290.3        $262.3     28.0     10.7%                   $277.7       12.6       4.5%     $348.5     (58.2)    -16.7%

Earnings per Share
 Basic                                $2.09         $1.89     0.20     10.7%                    $2.00       0.09       4.5%      $2.51     (0.42)    -16.7%
 Diluted                              $2.09         $1.88     0.20     10.7%           $0.20    $2.00       0.09       4.5%      $2.51     (0.42)    -16.7%
EBITDA                                523.2         468.6     54.6     11.6%                    540.9      (17.7)      -3.3%     541.9     (18.7)     -3.5%
Cash Flow                             387.7         357.8     29.9      8.4%                    367.2       20.5        5.6%     433.6     (45.9)    -10.6%
Diluted Cash Flow Per Share           $2.79         $2.57      0.2      8.4%                    $2.64        0.1        5.6%     $3.12      (0.3)    -10.6%
Avg. Shares Outstanding
 Basic                                139.0         139.1      (0.1)     0.0%                   139.0        0.0       0.0%      139.0       0.0       0.0%
 Diluted                              139.1         139.2      (0.1)    -0.1%                   139.1       (0.0)      0.0%      139.1       0.1       0.0%
MARGINS:
                                     2010          2009      Act vs UBS est                    2009      Curr Qtr vs Pr Qtr     2009      Curr Qtr vs Pr Yr
                                     1QA           4QA        $         %                      4QA         $          %         1QA         $          %
Gross Segment Margins:
 High Specification Floaters          71.6%         62.2%       9.3     15.0%                   70.8%        0.8         1.1%    70.0%        1.6       2.2%
 Intermediate Semisubmersibles        63.6%         63.5%       0.1      0.2%                   61.5%        2.1         3.5%    68.7%       (5.1)    (7.4%)
 Jackups                              34.3%         26.5%       7.8     29.2%                   50.1%      (15.8)     (31.6%)    45.6%      (11.3)   (24.7%)
 Integrated Services                       -             -                                           -                                -
 Other
Total Gross Margin                    62.8%       57.1%         5.7     10.0%                   62.4%         0.4       0.7%     63.0%       (0.2)     -0.4%
EBITDA Margin                         60.9%       55.2%         5.6     10.2%                   60.7%         0.1       0.2%     61.2%       (0.3)     -0.5%
Operating Margin                      49.5%       44.0%         5.6     12.6%                   50.7%        (1.1)     -2.3%     51.6%       (2.1)     -4.0%
Pretax Margin                         47.1%       41.8%         5.4     12.8%                   47.3%        (0.2)     -0.3%     51.2%       (4.1)     -7.9%
Net Margin                            33.8%       30.9%         2.9      9.3%                   31.2%         2.6       8.3%     39.3%       (5.6)    -14.2%
Tax rate                              28.3%       26.0%         2.3      9.0%                   34.1%        (5.7)    -16.8%     23.1%        5.2      22.6%
*Net income excludes extraordinary and one-time charges

Source: Company reports and UBS estimates




                                                                                                                                                      UBS 36
US Oil Service & Drilling 26 April 2010


Noble Corp: Strong quarter on lower
costs
Published April 22, 2010

    Clean EPS of $1.43 vs. our $1.32 estimate and consensus of $1.33
Noble reported clean EPS of $1.43 vs. our $1.32 estimate and consensus of
$1.33. Contract drilling expenses drove much of the beat (6% below our
estimates) as management held back some planned spending due to the
“challenging market”.

    NE confident most of 10 PEMEX jackups will stay in Mexico
Management sounded a confident tone on the outlook in Mexico despite new
age restrictions, citing NE’s strong performance record and cost differentials.
Noble has ten jackups in Mexico up for renewal this year (none would satisfy
the age requirement). Three of the five jackup opportunities in the most recent
PEMEX tender specifically require rigs to be built after 2000. Noble believes its
strong track record in the region may result in PEMEX ultimately keeping all of
the rigs.

    Deepwater and jackup markets a bit mixed, but utilization steady
In the jackup markets the company sees rates as holding steady with utilization
flat. Although, there has seen a drop in the low end of the dayrate range as
companies seek term. We could see further softness in rates for jackups at the
margin as new rigs are delivered later this year. Additionally, deepwater
dayrates may not have found a floor, per Noble. However, we believe long-term
the market will firm. We believe 2010 is a mixed year, but 2011 and even more
so 2012 should be stronger.

    Valuation: Maintain Neutral rating, new jackup capacity still an issue
Our $44 price target for Noble is based on a 5.5x 2010E EV/EBITDA multiple.
We believe the strong management team, the expanding deepwater exposure,
and impressive cost controls continue to keep Noble a step ahead.

Company Analysis and Our View:
We believe Noble had a strong quarter and did well to manage their costs to
match the current “challenging” market conditions. The company has
made the right strategic decisions with its deepwater expansion program as
well as minimizing its exposure to the U.S. Gulf of Mexico jackup market.
The company’s newbuild program is on track. The newbuild semi Noble
Danny Adkins is expected to commence operations in the US Gulf of Mexico
within the next 3-4 weeks (start was delayed due to equipment issues) and
construction on the newbuild Globetrotter class drillship is ahead of
schedule. We believe that the ultra-deepwater market will remain generally
strong long-term, however pressure will continue on the mid-water and
deepwater fleet as new rigs are delivered. We are seeing a modest increase
in the pace of jackup activity with rates and utilization expected to stay flat.
However, given the overhang from new construction, we could see further
softness in jackup rates at the margin. Noble’s expanding deepwater
presence is a clear benefit. Additionally, the company has the cash and the
balance sheet strength to take advantage of opportunities to buy or build


                                                                                    UBS 37
US Oil Service & Drilling 26 April 2010


additional deepwater assets. We are raising our 2010 estimates to $5.40
from $5.13 to reflect the lower FY10 cost guidance.

    Mexico - Noble remains confident that most of their 10 jackups up for
    renewal in FY10 will remain in region despite new age restrictions

Management sounded a confident tone on the outlook in Mexico despite new
age restrictions in PEMEX’s most recent tender that require rigs to be built after
2000 (10 year age limit). PEMEX recently issued three drilling tenders for five
jackups (one 250 ft IC, three 300 ft ICs, and one 350 ft IC). At least three of the
five jackup opportunities in the tender specifically include this requirement
(none of Noble’s jackups would currently satisfy this requirement). Although
the reasoning for this restriction is still unclear, PEMEX appears to be targeting
both operational and supply efficiencies by sourcing newer rigs. Noble believes
that their strong operational performance in Mexico (99% up-time) and expected
cost-differentials relative to higher-specification newer jackups will work to
their advantage. However, the company did disclose that they are bidding
several jackups currently operating in Mexico into international opportunities
(West Africa etc). Additionally, six of Noble’s ten rolling off contracts with
PEMEX in 2010 are working on contract extensions. Notably, three of the
jackups operating on extensions have already received their maximum
extensions. However, Noble expects that these rigs will still be able to work
through the year as PEMEX has been given the flexibility to use “direct
assignments” to fill gaps in drilling requirements.

    Ultra-deepwater could see some softness near-term

Noble seemed confident in the strength of the deepwater market despite the
pending supply of newbuild floaters. Currently, leading edge ultra-deepwater
rates appear to be in the low to mid $400k’s range. Although rates have been
fairly range-bound for some time, management commented that ultra-deepwater
rates may still not be at a floor. In particular, drilling contractors appear willing
to accept lower rates for longer term. However, longer term ultra-deepwater
fundamentals remain intact as demand should continue to grow. Additionally,
management reiterated their view that current commodity prices support a
healthy inventory of drilling projects and that contract announcements will only
increase in the coming months.

    Midwater market likely to remain under pressure

Noble indicated that leading edge dayrates for its EVA design rigs in the Gulf of
Mexico is currently in the $300k range vs a current average contracted dayrate
of $415k. The EVA-4000 design entails a conversion from a three-column
submersible to a semisubmersible and the rigs are considered equivalent to third
or fourth generation units. Of Noble’s four EVA design rigs in the Gulf of
Mexico, one is scheduled to roll-off contract in Jul-10 while another three will
roll-off contract in 1H-11. Notably, the semi Paul Romano (6000 ft. - 4th gen,
GOM) rolls off its contract with Marathon in Jul-10 and is currently at a $375k
dayrate. We would expect that this rate will roll to the $300k range.

    Jackup market seeing modest increase in activity; expect flattish
    utilization for the remainder of the year


                                                                                        UBS 38
US Oil Service & Drilling 26 April 2010


Noble indicated that the North Sea, West Africa and Southeast Asia jackup
markets are seeing a modest increase in the pace of tendering and bidding
activity. However, rates still appear soft at the bottom end of the range. This
quarter, seven jackups in Mexico, three in West Africa and four in the North Sea
repriced at dayrates that were an average of 19% lower. Noble believes that they
will be able to maintain utilization at current levels in the 80% range. Some
continue to see downside to rates given the overhang of incremental supply. We
estimate about 40 jackups remain to be delivered through 2012 (excluding five
jackups heading to non-competitive markets and 15 jackups which we believe
will have construction cancelled). Of these 40 rigs, 24 are scheduled to be
delivered in 2010, followed by another 11 rigs in 2011.

    Lowering FY10 cost guidance to $1.05-$1.15 bil from $1.1-$1.3 bil

Noble continues to defer or cancel optional projects across its fleet in an effort to
reduce costs in the current “challenging” environment. In particular, the
company lowered spending on major repair and maintenance items. However,
Noble was careful to emphasize that cost reduction efforts will not be made at
the expense of operational performance. Contract drilling costs for 1Q-10 came
in at $254 mil vs our estimate of $271mil and guidance of $285m-$295m. The
company also lowered FY10 cost guidance to $1.05-$1.15 bil from prior
guidance of $1.1-$1.3 bil. Besides the lower drilling costs in 1Q-10, the change
in guidance is driven by a delay in the commencements of newbuilds, lower cost
inflation and revised currency exchange rate expectations.

    Newbuild program on track

NE confirmed that it remains on track to deliver its remaining newbuilds on
schedule. Noble expects FY10 capex to be around just under US$1 bil, in-line
with prior guidance. During March, the newbuild Noble Dave Beard (6th gen
semi – 10,000 ft, Brazil) commenced a five-year term contract in Brazil with
Petrobras at a $220k dayrate. The Noble Danny Adkins (6th gen semi – 12,000 ft,
GOM) is undergoing commissioning in the Gulf of Mexico (early April planned
start slightly delayed due to equipment issues). The company expects the rig to
commence operations within 3-4 weeks (four year contract with Shell at a
dayrate of $450k).

    —   The Noble Jim Day (6th gen semi – 12,000 ft, GOM) will mobilize to the
        US Gulf of Mexico in the end of May (mobilization delay caused by
        heavy lift company). Noble expects a smoother commissioning process
        for the rig having recently gone through the process for its sister ship, the
        Noble Danny Adkins.

    —   Construction on the newbuild Globetrotter class drillship (10000 ft – DP)
        is slightly ahead of schedule. The drillship is currently scheduled for a
        Q4-11 delivery date and remains uncontracted. However, management
        has reported strong interest in the rig and remains confident it will secure
        a contract prior to delivery.

    Uncertainty remains about Petrobras tender; expect incremental
    demand from Petrobras due to potential delays




                                                                                        UBS 39
US Oil Service & Drilling 26 April 2010


Uncertainty remains about Petrobras’ tender for 28 ultra-deepwater newbuild
floaters for operations offshore Brazil (bids are expected to be processed in
May). In particular, we believe the requirement for construction to take place in
Brazil (higher costs and limited shipyard infrastructure) raises the risk profile
above manageable levels for drilling contractors at dayrates that would be
acceptable to Petrobras. Noble management believe that even once construction
starts, it would take at least 5-6 years before the first rig is delivered. Hence, it is
likely that Petrobras will have to contract existing capacity to satisfy their
interim drilling demands, a clear positive for the contract drilling industry. As a
reference, Petrobras has tendered for 28 ultra-deepwater newbuild floaters for
operations offshore Brazil, all of which must be built in Brazil, with up to 19
rigs to be built by drilling contractors and 9 rigs to be owned by Petrobras.

    Returning cash to shareholders through planned dividend and shares
    repurchases

During the quarter, Noble’s Board of Directors announced an increase in the
regular quarterly dividend per share to $0.12 from $0.04. The Board also
approved a one time special dividend of $0.52 per share. Shareholders will vote
to approve the proposal at an annual general meeting on April 30th (required
under Swiss law). On a combined basis the dividend translates to $1.00 per
share or an annualized yield of 2.3% yield. For tax purposes the company is
treating the dividend as a return of capital through a reduction of the par value of
the company's shares. Noble also repurchased about 2.1 mil shares during the
quarter at an average cost per share of $42.21 or a total of $89 mil. At the end of
Q1-10, Noble had approximately 10.8 mil shares (about 4% of outstanding
shares) remaining under its existing repurchase authorization.




                                                                                           UBS 40
US Oil Service & Drilling 26 April 2010


Table 3: 1Q-10 Summary
                                          2010     2010     Act vs UBS est       EPS Impact     2009     Curr Qtr vs Pr Qtr     2009      Curr Qtr vs Pr Yr
                                          1QA      1QE      $           %        Act. Vs Est    4QA       $            %        1QA        $            %
Revenues
Contract Drilling                         $808.6   $809.2    ($0.6)     (0.1%)        ($0.00)   $894.2    ($85.5)      (9.6%)   $872.4     ($63.8)      (7.3%)
Labor Contracts                              7.8      9.5     (1.7)    (17.9%)        ($0.00)      8.5      (0.7)      (8.2%)      6.9        0.8       11.9%
Engineering and Consulting                   0.2      0.3                                          0.3                             0.1
Reimbursables                               24.2     23.0      1.2        5.4%         $0.00      37.2     (13.0)     (34.9%)     16.7        7.6       45.3%
Total Revenue                             $840.9   $841.9    ($1.1)     (0.1%)        ($0.00)   $940.1    ($99.3)     (10.6%)   $896.2     ($55.3)      (6.2%)

Expenses
Contract Drilling                          254.4    271.0    (16.5)     (6.1%)                   264.0       (9.6)     (3.6%)    240.9       13.6        5.6%
Labor Contracts                              5.9      7.2                                          4.9                             4.4
Engineering and Consulting                   0.0      0.0                                          0.0                             0.0
Reimbursables                               19.7     20.0                                         33.0                            14.1
Total Expenses                            $280.1   $298.2   ($18.1)     (6.1%)                  $301.9    ($21.8)      (7.2%)   $259.3     $20.7         8.0%

Gross Income
Contract Drilling                          554.2    538.3     16.0        3.0%        $0.05      630.2     (76.0)     (12.1%)    631.5      (77.3)     (12.2%)
Labor Contracts                              1.9      2.3     (0.4)    (17.5%)        $0.00        3.5      (1.7)     (46.9%)      2.6       (0.7)     (26.8%)
Engineering and Consulting                   0.2      0.3                                          0.3                             0.1
Reimbursables                                4.5      3.0     1.5       49.7%         $0.00        4.3       0.2         4.9%      2.6        1.9        73.0%
Total Gross Income                        $560.8   $543.8   $17.0        3.1%         $0.06     $638.2    ($77.4)     (12.1%)   $636.8     ($76.0)     (11.9%)

Operating Income
Depreciation & Amortization                115.9    116.0     (0.1)     (0.1%)        $0.00      112.7       3.2         2.8%     93.0       22.9       24.6%
Selling, General, & Administrative          22.0     22.0     (0.0)     (0.1%)        $0.00       19.4       2.6        13.5%     17.7        4.3       24.0%
Minority Interest                            0.0      0.0                                          0.0                             0.0
Other                                        0.0      0.0                                          0.2                             0.0
Total Operating Income                    $423.0   $405.8   $17.1        4.2%                   $506.4    ($83.5)     (16.5%)   $526.1    ($103.2)     (19.6%)

Interest Expense                             0.5      0.4      0.0       9.7%         ($0.00)      0.4       0.0         9.7%      0.5       (0.1)     (10.7%)
Interest Income                              3.6      1.8      1.8      96.2%          $0.01       1.8       1.8        96.2%      1.1        2.6      238.2%
Other Net, Income (Expense)                  0.0      0.0                                          0.0                             0.0
Pretax Income                             $426.1   $407.2   $18.9        4.6%                   $507.8    ($81.7)     (16.1%)   $514.7     ($88.5)     (17.2%)

Income Taxes                                55.4     63.1     (7.7)    (12.2%)        $0.04       67.9     (12.5)     (18.4%)    104.7      (49.3)     (47.1%)
Earnings Allocated to Unvested Shares        3.5      4.6     (1.2)    (24.9%)        $0.00        4.6                             0.0
Extraordinary Items*                         0.0      0.0                                          0.0                           (12.0)
Net Income                                $367.3   $339.5   $27.8        8.2%                   $435.3    ($68.0)     (15.6%)   $409.9     ($42.7)     (10.4%)

Operating Earnings per Share
 Basic                                     $1.44    $1.32    0.11        8.7%                    $1.70     (0.26)     (15.2%)    $1.58      (0.14)      (9.0%)
 Diluted                                   $1.43    $1.32   $0.11        8.7%         $0.11      $1.69    ($0.26)     (15.2%)    $1.58     ($0.14)      (9.2%)

EBITDA                                     538.8    521.8    17.0        3.3%                    619.1     (80.3)     (13.0%)    619.1      (80.3)     (13.0%)
Cash Flow                                  483.1    455.5    27.6        6.1%                    548.0     (64.8)     (11.8%)    502.9      (19.8)      (3.9%)
Diluted Cash Flow Per Share                $1.89    $1.77   $0.12        6.5%                    $2.13    ($0.24)     (11.4%)    $1.94     ($0.05)      (2.6%)
Avg. Shares Outstanding
 Basic                                     255.1    256.3     (1.1)     (0.4%)                   256.5       (1.4)     (0.5%)    259.3       (4.1)      (1.6%)
 Diluted                                   256.2    257.3     (1.1)     (0.4%)        $0.01      257.6       (1.4)     (0.5%)    259.8       (3.6)      (1.4%)
Segment Gross Margin
Contract Drilling                          68.5%    66.5%      2.0       3.0%                    70.5%      (1.9)      (2.8%)    72.4%       (3.9)      (5.3%)
Labor Contracts                            24.1%    24.0%      0.1       0.6%                    41.7%     (17.6)     (42.1%)    36.9%      (12.8)     (34.6%)
Engineering and Consulting                100.0%   100.0%                                       100.0%                          100.0%
Reimbursables                              18.5%    13.0%      5.5      42.1%                    11.5%       7.0        61.2%    15.6%        3.0       19.1%

Gross Margin                               66.7%    64.6%      2.1        3.3%                   67.9%       (1.2)     (1.8%)    71.1%       (4.4)      (6.2%)
EBITDA Margin                              64.1%    62.0%      2.1        3.4%                   65.9%       (1.8)     (2.7%)    69.1%       (5.0)      (7.2%)
Operating Margin                           50.3%    48.2%      2.1        4.4%                   53.9%       (3.6)     (6.6%)    58.7%       (8.4)     (14.3%)
Pretax Margin                              50.7%    48.4%      2.3        4.8%                   54.0%       (3.3)     (6.2%)    57.4%       (6.8)     (11.8%)
Net Margin                                 43.7%    40.3%      3.4        8.3%                   46.3%       (2.6)     (5.7%)    45.7%       (2.1)      (4.5%)
Tax rate                                   13.0%    15.5%     (2.5)    (16.1%)                   13.4%       (0.4)     (2.8%)    20.3%       (7.3)     (36.1%)


Source: Company documents and UBS estimates




ENSCO PLC: Increasing dividend, 2010
outlook intact
Published April 26, 2010

    1Q-10 clean EPS of $1.11 vs our $1.01 estimate
ENSCO reported clean EPS of $1.11 vs. our estimate and consensus of $1.01.
The beat was largely driven by higher than forecasted deepwater and jackup
utilization as revenues were 7% above our estimate. Operating costs were $185
mil, 6% above our estimate. Lower taxes helped by $0.01.

    Significantly increasing quarterly dividend


                                                                                                                                                       UBS 41
US Oil Service & Drilling 26 April 2010


ENSCO also announced a regular quarterly cash dividend of $0.35 (3% dividend
yield), up significantly from the current quarterly dividend of $0.025.
Management believes that the new dividend is sustainable while allowing
flexibility for new investments and additional share repurchases ($560m
remaining authorization).

    Deepwater market in transition year, jackup steady
ENSCO continues to market its three uncontracted 6th gen newbuild semis
being delivered through 2012 (one in 2H 2011 and two in 2012), as well as the
ENSCO 7500 (5th gen – 8,000 ft) which rolls-off contract in Sep-10. While 2010
appears to be a transition year for the deepwater market, contracting activity is
expected to increase as we enter 2011. ENSCO indicated that there is a good
level of demand in the global jackup markets and that jackup utilization should
remain flat in 2010.

    Maintain Neutral
We believe ENSCO’s growing deepwater exposure offers attractive growth.
However, given our concerns surrounding significant new jackup supply still
entering the market in late 2010 we maintain our Neutral rating. Our $46 PT is
based on a 6.5x 2010E EV/EBITDA multiple.

    Quarterly dividend of $0.35 (3% dividend yield), up significantly

ENSCO announced a regular quarterly cash dividend of $0.35 (3% dividend
yield), up significantly from the current quarterly dividend of $0.025. With total
contract backlog at $2.8 bil and an existing cash balance of $1.2 bil (compared
to remaining newbuild capital commitments of $1 bil) management believes that
the new dividend is sustainable while allowing flexibility for new investments
and additional share repurchases ($560m remaining authorization). It is our
understanding that ENSCO had been soliciting feedback from major
shareholders about a potential dividend increase for the last few months and we
believe that investors will view the additional yield positively.

    Deepwater contracting activity quiet as 2010 represents transition year

ENSCO continues to market its three uncontracted 6th gen newbuild semis being
delivered through 2012 (one in 2H 2011 and two in 2012), as well as the
ENSCO 7500 (5th gen – 8,000 ft, Australia) which rolls-off contract in Sep-10.
The company noted that contracting activity for the deepwater market has been
quiet in 2010 as a result of the disruption to capex programs that occurred in
2008 and 2009 with the drop in commodity prices. We agree with the
company’s belief that demand for deepwater rigs should continue to firm and
believe that contractors should increasingly look to fill drilling needs as we enter
2011. Management identified West Africa, Brazil, Australia, and the GOM as
areas with upcoming deepwater opportunities in the short to medium term.

    Jackup utilization expected to remain flattish in the mid-70% range for
    FY10

ENSCO indicated that they are continuing to see a good level of demand for
global jackups. However, the high-paced tendering activity seen at the end of
last year has partially subsided (especially in regions such as Southeast Asia).
Specific countries that have seen increased jackup demand include Saudi Arabia

                                                                                       UBS 42
US Oil Service & Drilling 26 April 2010


(recently issued tenders for two gas jackups with another tender for up to five
jackups expected soon) and Indonesia. Utilization for the company’s jackup
fleet improved again this quarter and now stands at 76% (up from 73% in Q4-
09). The company expects FY10 utilization to remain flattish in the mid-70%
range (lower in 2Q/3Q and then higher in 4Q). ENSCO has clearly articulated a
strategy of keeping rigs working whenever possible, including as
accommodation units and at lower dayrates. In this regard, ENSCO’s low cost
structure provides the company with flexibility in competitive tenders.

    Average jackup dayrates to decline further in Q2; dayrates for premium
    jackups in Gulf of Mexico increasing

Average dayrates for jackups were down 13% sequentially in Q1-10, but
management noted that dayrates for premium jackups appear to be stabilizing
and increasing slightly in some markets. ENSCO expects average jackup
dayrates to continue to decline in Q2. However, the rate of decline in average
dayrate will lessen as many of the company’s longer-term contracts previously
signed at higher dayrates have now rolled over. Interestingly, the company is
starting to see increasing dayrates and longer term contracts for premium
jackups in the U.S. Gulf of Mexico, where utilization for premium jackups is
about 90%. The company sees at least four of its six active rigs in the GOM
continue working through the hurricane season. While overall global jackup
demand is firming, ENSCO noted that bidding competition in the Middle East,
India, and South East Asia remains fierce. Additionally, demand in the North
Sea’s standard jackup market remains fragile due to weak gas prices. We see
further softness in rates for jackups at the margin as new rigs are delivered later
this year. We estimate about 40 jackups remain to be delivered through 2012
(excluding five jackups heading to non-competitive markets and 15 jackups
which we believe will have construction cancelled). Of these 40 rigs, 24 are
scheduled to be delivered in 2010, followed by another 11 rigs in 2011.

    Expect company to high grade jackup fleet at the margin

ENSCO has recently sold three older 300 ft IC jackups for combined proceeds
of $142 mil or approximately $47 mil per rig. The company is interested in
adding newer high specification jackups to its fleet by purchasing rigs in the
market (opposed to a construction program). The timing for rig acquisitions is
unknown, largely due to the gap in the bid/ask spread for newbuild jackups.
Prices for newbuild jackups have remained high as owners who built rigs at the
peak of the market hold out hope of recouping returns. We believe ENSCO will
exercise discipline while evaluating potential acquisitions.

    Newbuild program on track, ENSCO 8502 expected to commence
    operations August 2010

ENSCO’s newbuild program remains on track and the ENSCO 8502 is expected
to commence operations with Nexen in the GOM in August 2010, a bit earlier
than expected following fire damage which delayed the rig earlier this year. The
ENSCO 8503 also remains on schedule for a Q4-10 delivery date.

    Relocation to the U.K. complete; FY10 tax rate of 16-17% vs 19% in
    FY09


                                                                                      UBS 43
US Oil Service & Drilling 26 April 2010


ENSCO’s redomestication to the U.K. has now been completed. Senior
executives have relocated to London and the company is on schedule with their
planned operational restructuring to maximize the benefits of the move. Over the
past year the U.K. has instituted more progressive tax policies and ENSCO
expects to achieve similar benefits as its peers who have relocated to
Switzerland (U.K. regulations around dividends are also more permissive than
Switzerland). The company currently expects a 2010 effective tax-rate of 16%-
17% (reflecting a mid-year completion for the transition) vs the 2009 tax-rate of
19%. In 2011, the company’s effective tax rate could potentially be below 15%.
Notably, we also believe that some aspects of the tax restructuring will also
serve to offer the company more attractive potential M&A opportunities.

    Full year revenue and cost guidance unchanged

ENSCO’s 2010 full year outlook is essentially unchanged from guidance at Q4-
09. Deepwater revenues are expected to be slightly above the prior estimate of
$525 mil due to the ENSCO 8502 commencing operations earlier than expected.
Management’s internal estimate for jackup revenue is largely unchanged as the
lost revenue associated with the sale of the ENSCO 50, 51, and 57 should be
offset by improvements in the GOM and the Asia-Pacific region. Total contract
drilling expense is also essentially unchanged from prior guidance.

    Q1-10 Recap

ENSCO reported clean EPS of $1.11 vs. our estimate and consensus of $1.01.
Total revenue and operating income were 6.5% and 8.8% above our estimates,
respectively. The beat was largely driven by higher than forecasted revenues for
jackups (6% higher) and deepwater (9% higher). Gross margins of 58.9% were
in-line with our estimate of 58.8%. Lower taxes helped by $0.01.

    Earnings outlook

Our new FY 2010 estimate is $3.80, roughly unchanged from our previous
$3.83 estimate. We are lowering our 2011 estimate to $4.57 from $4.71 (3%
decrease) due to lower dayrate assumptions for some of ENSCO’s lower
specification jackups.




                                                                                    UBS 44
US Oil Service & Drilling 26 April 2010


Figure 2: 1Q-10 Summary

                                       2010         2010        Act vs UBS est       EPS Impact    2009       Curr Qtr vs Pr Qtr     2009       Curr Qtr vs Pr Yr
                                       1QA          1QE          $          %        Act. Vs Est   4QA          $            %       1QA         $            %
Revenues
Contract Drilling
Total Jackups                              319.0     302.3       $16.7       5.5%                   375.7       ($56.7)     -15.1%     514.1     ($195.1)    -37.9%
Deepwater                                  130.4     119.8        10.6       8.8%                   123.9          6.5        5.2%       0.0       130.4
Total Revenues                            $449.4    $422.1        27.3       6.5%        $0.07     $499.6        (50.2)    (10.0%)    $514.1       (64.7)    (12.6%)

Contract Drilling
Total Jackups                              139.9     136.1         3.8       2.8%                   155.8        (15.9)    (10.2%)     168.4       (28.5)    (16.9%)
Deepwater                                   45.0      37.8         7.2      19.0%                    44.9          0.1        0.2%       4.8        40.2     837.5%
Total Expenses                            $184.9    $173.9        11.0       6.3%                  $200.7        (15.8)     (7.9%)    $173.2        11.7        6.8%

Gross Income
Contract Drilling
Total Jackups                              179.1     166.3        12.8       7.7%                   219.9        (40.8)    (18.6%)     345.7      (166.6)  (48.2%)
Deepwater                                   85.4      82.0         3.4       4.1%                    79.0          6.4        8.1%      (4.8)       90.2 (1879.2%)
Total Gross Income                        $264.5    $248.3        16.2       6.5%                  $298.9        (34.4)    (11.5%)    $340.9       (76.4)  (22.4%)

Depreciation & Amortization                 53.9      56.1        (2.2)     (3.9%)                   56.1         (2.2)     (3.9%)      48.0         5.9       12.3%
General & Administrative                    20.6      17.6         3.0      17.0%                    14.4          6.2       43.1%      12.0         8.6       71.7%
Operating Income                          $190.0    $174.6        15.4        8.8%       $0.02     $228.4        (38.4)    (16.8%)    $280.9       (90.9)    (32.4%)

Interest Expense                             0.0       0.0         0.0                                0.0          0.0                   0.0         0.0
Interest Income                              0.0       0.0         0.0                                0.0          0.0    #DIV/0!        0.7        (0.7)   (100.0%)
Other Income                                 3.1       0.5         2.6     520.0%                     2.6          0.5                  (5.0)        8.1      162.0%
Pretax Income                             $193.1    $175.1        18.0      10.3%                  $231.0        (37.9)    (16.4%)    $276.6       (83.5)    (30.2%)

Income Taxes                                33.2      31.5          1.7      5.4%        $0.01       46.2        (13.0)    (28.1%)      54.5       (21.3)    (39.1%)
Minority Interest                            0.0       0.0          0.0        NA                     1.5         (1.5)   (100.0%)       0.0         0.0          NA
Other                                       (1.8)      0.0         (1.8)       NA                     0.0         (1.8)         NA      (1.4)       (0.4)    (28.6%)
Gain on asset sale*                          0.0       0.0          0.0        NA                     0.0          0.0          NA       0.0         0.0          NA
Unusual items*                               0.0       0.0          0.0        NA                     0.0          0.0          NA       0.0         0.0          NA
Adj for non-vesting restr. stock            (2.4)     (1.9)                                          (1.9)        (0.5)    (26.3%)      (2.7)        0.3       11.1%
Net Income                                $157.5    $141.7        15.8      11.2%                  $181.4        (23.9)    (13.2%)    $219.4       (61.9)    (28.2%)

Operating Earnings per Share
 Basic                                     $1.12        $1.01    $0.11      11.1%                   $1.29       ($0.17)    (13.2%)     $1.56      ($0.44)    (28.1%)
 Diluted                                   $1.12        $1.01    $0.11      11.0%        $0.11      $1.29       ($0.17)    (13.2%)     $1.56      ($0.44)    (28.1%)

EBITDA                                     243.9        230.7     13.2       5.7%                   284.5        (40.6)    (14.3%)     328.9       (85.0)    (25.8%)
Cash Flow                                  211.4        197.8     13.6       6.9%                   237.5        (26.1)    (11.0%)     266.0       (54.6)    (20.5%)
Diluted Cash Flow Per Share                $1.50        $1.41      0.1       6.7%                   $1.69       ($0.19)    (11.1%)     $1.90      ($0.40)    (20.9%)

Avg. Shares Outstanding
 Basic                                     140.7        140.6      0.1       0.1%                   140.7          0.0       0.0%      140.1         0.6       0.4%
 Diluted                                   140.8        140.6      0.2       0.2%                   140.7          0.1       0.1%      140.1         0.7       0.5%

*Net income excludes one-time and extraordinary items

ESV Quarterly Income Statement Comparison
MARGINS:
                                  2010              2009      Act vs UBS est                       2009      Curr Qtr vs Pr Qtr      2009      Curr Qtr vs Pr Yr
                                   1QA              4QA    Inc. (dec.)    %                        4QA     Inc. (dec.)      %        1QA     Inc. (dec.)     %
Total Contract Drilling              58.9%           58.8%         0.0     0.1%                      68.9%       (10.0)   (14.5%)      60.7%        (0.0)    (0.0%)

Gross Margin                               58.9%        58.8%       0.0       0.1%                  68.9%        (10.0)    (14.5%)     60.7%        (1.8)     (3.0%)
EBITDA Margin                              54.3%        54.6%      (0.4)    (0.7%)                  66.5%        (12.3)    (18.4%)     58.5%        (4.3)     (7.3%)
Operating Margin                           42.3%        41.4%       0.9       2.2%                  57.4%        (15.1)    (26.4%)     45.5%        (3.2)     (7.1%)
Pretax Margin                              43.0%        41.5%       1.5       3.6%                  57.3%        (14.3)    (25.0%)     44.0%        (1.0)     (2.2%)
Net Margin                                 35.0%        33.6%       1.5       4.4%                  44.0%         (9.0)    (20.4%)     32.7%         2.3        7.0%
Tax rate                                   17.2%        18.0%      (0.8)    (4.5%)                  23.2%         (6.0)    (25.9%)     25.5%        (8.3)    (32.6%)

Source: Company reports and UBS estimates




                                                                                                                                                             UBS 45
US Oil Service & Drilling 26 April 2010


Noteworthy Data Points
    The table below shows utilization in various regions for the week ended
    April 23rd. Semi utilization in West Africa increased 8.5% to 89.5% as the
    total fleet decreased by two. The semi fleet in Asia/Australia increased by
    three rigs and the number of contracted semis increased by one, lowering
    utilization 4.5% to 78.8%. Semi utilization in the GOM decreased 3.7% to
    96.3% as one semi rolled-off contract.

Table 4: Worldwide Offshore Rig Utilization (historical data given in Chart 4 - Chart 9)
                                           Asia/Australia                                         W. Africa                                    Gulf of Mexico                        Europe/M editerranean                                          World Total
                                     SS             DS              JU              SS               DS                JU             SS             DS               JU           SS             DS            JU                 SS             DS            JU              All

Total contracted                     26              7               71             17               10                21             26              9               42           40             1              52                172            50            352             598
change from prior w eek               1              0               0               0                0                0              -1              0               0             0             0              0                  0              0             4               4

Total fleet                          33              8               83             19               10                30             27              9               80           43             1              60                191            51            459             758
change from prior w eek               3              0               -2             -2                0                0               0              0               0             0             0              0                  1              0             0               1

Utilization                       78.8%            87.5%          85.5%         89.5%             100.0%         70.0%               96.3%        100.0%             52.5%      93.0%         100.0%           86.7%           90.1%             98.0%        76.7%            78.9%
change from prior w eek           -4.5%            0.0%            2.0%          8.5%              0.0%           0.0%               -3.7%         0.0%               0.0%       0.0%          0.0%             0.0%           -0.5%             0.0%          0.9%            0.4%


Key: SS: Semi-submersible, DS: Drillship, JU: Jackup
Source: ODS-Petrodata and UBS estimates
Table 5: Noteworthy New Offshore Rig Contracts
Date                                                                                                                                                                                                                                   Our                                       Positive/
Announced    Rig Name (rig specification)                                            Operator                               Location              Customer                           New Rate                  Old Rate            Forecast                     Duration         Negative

15-Apr-10    ENSCO 88 (jackup, 250 ft - IC)                      ENSCO                   Qatar           Ras Gas                                                                          $65k                          $85k              $65k              20 months                    neg
             Awarded 20 month contract extension with Ras Gas. Dayrate decreases to mid $60k's from mid $80k's.
14-Apr-10    PetroProd JU Tbn1 (jackup, 492 ft - IC)             Seadrill                North Sea       Statoil                       $343k                NA                                                                               NA                     5 years           neutral
             High spec / harsh environment newbuild awarded a $343k dayrate to work offshore Norway. Rig was recently acquired from Jurong shipyard by Seadrill.

08-Apr-10    GSF Arctic I (3rd gen semi, 3400 ft)                                    Transocean                             Brazil                Starfish                               $250k                     $291k                 $250k                 7 months               neutral
             Seven month award to work offshore Brazil at a dayrate of $250k, down from the current rate of $295k.

06-Apr-10    West Venture (5th gen semi, 5906 ft)                                    Seadrill                               North Sea             Statoil                                $390k                     $267k                     NA                     5 years              pos
             Five year contract award with Statoil at a $390k dayrate, up from the current $267k dayrate which was awarded in Feb-2009.

17-Mar-10    J.W. McLean (2nd gen semi, 1250 ft)                                     Transocean                             North Sea             Marathon                               $260k                           NA              $225k                6 months                neutral
             Six month award from Marathon at a dayrate of $260k. Rig is currently working for ADTI under managed contract.

02-Mar-10    Ocean Valor (6th gen semi, 10000 ft)                                    Diamond Offshore                       Brazil                Petrobras                              $450k                           NA              $475k                      3 years           neutral
             Newbuild awarded a 3 year contract with Petrobras at a dayrate of $450k ($350k prior to bankruptcy), with option to convert to 5 years within first year at a slightly lower dayrate.

17-Feb-10    GSF Constellation I (jackup, 400 ft - IC)                               Transocean                             Gabon                 Total                                  $100k                     $110k                  $90k              18 months                 neutral
             High spec jackup awarded dayrate of $100k to work offshore Gabon, down from the current dayrate of $110k with BP offshore Trinidad.

17-Feb-10    Rowan California (jackup, 300 ft - IC)                                  Rowan                                  Qatar                 Wintershall                             $75k                           NA                  NA              10 months                   pos
             LOI for a two well program at a dayrate of $70k. Rig was previously idle and we had forecasted it to remain idle through 2010.

17-Feb-10    Rowan EXL 1 (jackup, 350 ft - IC)                                       Rowan                                  US GOM                McMoRan                                $163k                           NA               $95k               10 months                   pos
             Letter Agreement for one well program (estimated to run Aug-10 to Jun-11) with a right to substitute newbuild EXL #2 starting in Sep-10.

12-Feb-10    West Gemini (DP, 10000 ft)                                              Seadrill                               Angola                Total                                  $445k                           NA                  NA                     2 years              neg
             Two year contract (+1 year option) for newbuild drillship with undisclosed operator. Dayrate believed to be around $445k excluding mobilization ($470k including mobilization).
Key Tenders to Watch:

 (1) Mexico remains a region of uncertainty, however PEMEX has released three formal drilling tenders for contracts offshore Mexico. In aggregate, the tenders will include five jackups (one
 250 ft IC, three 300 ft ICs, and one 350 ft IC). PEMEX currently has 16 jackups under contracts expiring in 2010, 11 of which require new contracts to continue working past 2010 (five can be
 extended into 2011).

 (2) Petrobras has tendered for the provision of as many as 28 ultra-deepwater newbuild floaters for operations offshore Brazil, all of which must be built in Brazil. The tender includes three
 separate sections. The first calls for seven drillships, all to be constructed by one individual winning bidder. The second section requires two more units, which can be either drillships, semi-
 submersibles or monocolumn rigs. The initial plan is for the first nine units to be owned and operated by Petrobras, although there may be the potential for these rigs to be sold at some point in
 the future. The third part of the tender has been issued to drilling contractors and calls for the provision of up to 19 more ultra-deepwater floaters. The closing date for contract proposals has
 been delayed until May 2010.

Source: ODS-Petrodata and UBS estimates
Chart 3: Total US Lang Rig Count
   US Land Rig Count
                                                                  1,893 1,922 1,882
    2,000                                 1,810 1,841                                              1,851
                        1,744 1,771
              1,718                                                                                           1,705
    1,800
    1,600                                                                                                                   1,478
                                                                                                                                                                                                                                                                               1,355
    1,400                                                                                                                            1,258                                                                                                                           1,292
                                                                                                                                                                                                                                                           1,197
                                                                                                                                                                                                                                                 1,119
    1,200                                                                                                                                       1,054                                                                               1,058
                                                                                                                                                                                           1,000
                                                                                                                                                            941                    941 970
    1,000                                                                                                                                                              858 842 886
      800
      600
                                                                                         Oct-08



                                                                                                              Dec-08




                                                                                                                                                                                                                          Oct-09



                                                                                                                                                                                                                                                  Dec-09
               Mar-08

                        Apr-08



                                          Jun-08

                                                         Jul-08

                                                                  Aug-08

                                                                           Sep-08




                                                                                                                            Jan-09

                                                                                                                                      Feb-09

                                                                                                                                                 Mar-09

                                                                                                                                                            Apr-09



                                                                                                                                                                                Jun-09

                                                                                                                                                                                         Jul-09

                                                                                                                                                                                                      Aug-09

                                                                                                                                                                                                               Sep-09




                                                                                                                                                                                                                                                           Jan-10

                                                                                                                                                                                                                                                                      Feb-10

                                                                                                                                                                                                                                                                                Mar-10
                                 May-08




                                                                                                    Nov-08




                                                                                                                                                                       May-09




                                                                                                                                                                                                                                        Nov-09




Source: Baker Hughes and UBS estimates



                                                                                                                                                                                                                                                                      UBS 46
US Oil Service & Drilling 26 April 2010


Offshore Rigs Update
Offshore Utilization – by region & rig type (see Table 4
for most recent datapoints)
Below are the recent trends in offshore rig utilization for select regions and rig
types. This data is released weekly. We have tracked over ten years of data for
almost every region and every rig type. Additionally, we track dayrates on a
current and historical basis.
Chart 4: Worldwide Fleet Utilization – currently 78.9%                                                                     Chart 5: Worldwide Jackup Utilization - currently 76.7%

  94.0%
                                                                        26-Jan-07, 92.4%                                       95.0%                                                               16-Jun-06, 93.4%

                                                                                                  22-Aug-08, 90.4%                                                                                                            8-Aug- 08, 92.7%
                                                                                                                                                       13- Dec- 02, 88.9%
                                                                                                                               90.0%
  89.0%
                                                                                                                               85.0%
                                                                4- Nov- 05, 87.6%
  84.0%
                                                                                                                               80.0%
  79.0%
                                                                                                                               75.0%
                        21-Feb-03, 79.1%                                                                                                                                                                        21-Aug- 09, 71.5%
                                                                                        21- Aug- 09, 74.9%
  74.0%                                                                                                                        70.0%
          Jan-02

                        Jan-03

                                       Jan-04

                                                     Jan-05

                                                                   Jan-06

                                                                              Jan-07

                                                                                         Jan-08

                                                                                                      Jan-09

                                                                                                                 Jan-10




                                                                                                                                       Jan-02

                                                                                                                                                    Jan-03

                                                                                                                                                                  Jan-04

                                                                                                                                                                               Jan-05

                                                                                                                                                                                         Jan-06

                                                                                                                                                                                                    Jan-07

                                                                                                                                                                                                                 Jan-08

                                                                                                                                                                                                                            Jan-09

                                                                                                                                                                                                                                      Jan-10
Source: ODS-Petrodata and UBS estimates                                                                                    Source: ODS-Petrodata and UBS estimates


Chart 6: Worldwide Semi Utilization - currently 90.1%                                                                      Chart 7: US Gulf of Mexico Semi Utilization - currently 96.3%

    100.0%                                                                                                                                                                        23- Sep-05, 96.9%                         31- Dec-09, 100.0%
                                                               23- Feb- 07, 96.4%                    24- Oct - 08, 96.5%
                                                                                                                               100.0%
     95.0%                                                                                                                      90.0%
     90.0%                                                                                                                      80.0%             18- Jan- 02, 81.6%
                                                                                                                                                                                                                           2- May-08, 83.9%
     85.0%                                                                                        11- Sep- 09, 87.4%            70.0%
     80.0%                                                                                                                      60.0%
     75.0%                                                                                                                      50.0%
                                                                                                                                                    19- Apr - 02, 48.7%
                                                   13-Feb-04, 71.7%
     70.0%                                                                                                                      40.0%
               Jan-02

                            Jan-03

                                          Jan-04

                                                      Jan-05

                                                                    Jan-06

                                                                              Jan-07

                                                                                        Jan-08

                                                                                                    Jan-09

                                                                                                               Jan-10




                                                                                                                                         Jan-02

                                                                                                                                                      Jan-03

                                                                                                                                                                   Jan-04

                                                                                                                                                                                Jan-05

                                                                                                                                                                                          Jan-06

                                                                                                                                                                                                     Jan-07

                                                                                                                                                                                                                  Jan-08

                                                                                                                                                                                                                             Jan-09

                                                                                                                                                                                                                                      Jan-10
Source: ODS-Petrodata and UBS estimates                                                                                    Source: ODS-Petrodata and UBS estimates


Chart 8: US Gulf of Mexico Jackup Utilization - currently 52.5%                                                            Chart 9: West Africa Jackup Utilization - currently 70.0%

    90.0%                                                     18-Mar- 05, 83.2%                                                                              29- Nov- 02, 100.0%
                                                                                                                               100.0%
    80.0%                                                                                            1- Aug-08, 81.3%
                                                                                                                                90.0%
    70.0%
                                                                                                                                80.0%                                                                  29-Aug-08, 88.9%
    60.0%                            21- Feb- 03, 61.8%
                                                                                                                                70.0%
    50.0%                                                              12- Oct - 07, 57.8%
                                                                                                                                60.0%                                       16- Jan- 04, 62.5%
    40.0%                                                                                                                                                                                                     26- Jun- 09, 53.8%
                                                                                                                                50.0%
    30.0%
                                                                                       18-Sep-09, 25.4%                         40.0%
    20.0%
                                                                                                                                         Jan-02

                                                                                                                                                      Jan-03

                                                                                                                                                                   Jan-04

                                                                                                                                                                                Jan-05

                                                                                                                                                                                          Jan-06

                                                                                                                                                                                                     Jan-07

                                                                                                                                                                                                                  Jan-08

                                                                                                                                                                                                                             Jan-09

                                                                                                                                                                                                                                      Jan-10
            Jan-02

                          Jan-03

                                        Jan-04

                                                     Jan-05

                                                                   Jan-06

                                                                              Jan-07

                                                                                        Jan-08

                                                                                                    Jan-09

                                                                                                               Jan-10




Source: ODS-Petrodata and UBS estimates                                                                                    Source: ODS-Petrodata and UBS estimates




                                                                                                                                                                                                                                          UBS 47
US Oil Service & Drilling 26 April 2010


Offshore Rigs under Construction
We track the number of rigs around the world which are under construction, for
both the jackup and the deepwater markets. Below is a full list of the rigs, rig
type, shipyard, estimated costs and availability. In particular, we note the
number of jackups being built without contracts (on speculation) is high at over
80%. However, for the deepwater market most of the rigs under construction
already have contracts. We update this table periodically as relevant news
emerges.

Table 6: Deepwater Newbuild Construction
Semi-submersibles
                                                                                                                              Contracted
 Delivery                                                                                                   Estimated Cost    Future Day      Available /
 Date        Rig Owner           Rig Name               Water Depth      Shipyard                                ($mil)      Rate ($'000s)    Contracted Comments
 Apr-10      Seadrill            West Orion                10000'        Jurong Shipyard Pte Ltd                  $675           $550                     Next to S America for Petrobras for 6 years in 07/2010.
 May-10      Queiroz Galvao      Lone Star                  7874'        Gulf Piping Company                      $480           $346                     Commissioning. Next to S America for Petrobras for 5 years + 5 years options in 08/2010.
 May-10      Noble               Noble Jim Day             12000'        Jurong Shipyard Pte Ltd                  $550           $515                     Next to US GOM for Marathon for 2 years in 05/2010.
 Jun-10      Odfjell Drilling    Deepsea Stavanger         10000'        Daewoo                                   $674                         Available
 Jul-10      COSL                COSLPioneer                1640'        Yantai Raffles                           $415                         Available
 Aug-10      IPC                 La Muralla III            10000'        Daewoo                                   $633           $520                     Next to Mexico for PEMEX for 1,825 days in 10/2010.
 Aug-10      Maersk Drilling     Maersk Semi Tbn3          10000'        Keppel FELS                                                           Available
 Aug-10      Odebrecht           Norbe VI                   7874'        Gulf Piping Company                    $550                                      Next to S America for Petrobras for 7 years + 7 years options in 11/2010.
 Aug-10      Saipem              Scarabeo 8                 9843'        Fincantieri                            $615                                      Next to Eni for 5 years + 4 x 6 month options in 08/2010.
 Sep-10      Schahin             Pantanal                   7875'        Yantai Raffles                         $500             $265                     Next to S America for Petrobras for 7 years + options in 12/2010.
 Nov-10      COSL                COSLInnovator              1640'        Yantai Raffles                         $460             $335                     Next to NW Europe for Statoil for 8 years + options in 07/2011.
 Nov-10      Ensco               ENSCO 8503                 8500'        Keppel FELS                            $427             $525                     Next to US GOM for Cobalt for 2 years + options in 12/2010.
 Nov-10      Saipem              Scarabeo 9                10000'        Yantai Raffles                         $742                                      Next to C America for Repsol YPF for 3 years in 12/2010.
 Dec-10      Schahin             Amazonia                   7875'        Yantai Raffles                         $500             $365                     Next to S America for Petrobras for 5 years + 5 years options in 03/2011.
 Dec-10      Delba               Delba III                  7874'        Gulf Piping Company                    $611             $318                     Next to S America for Petrobras for 7 years in 04/2011.
 Dec-10      Vantage Drilling    SeaDragon I               10000'        Jurong Shipyard Pte Ltd                                 $503                     Next to Mexico for PEMEX for 5 years in 03/2011.
 Jan-11      Atwood              Atwood Osprey              6000'        Jurong Shipyard Pte Ltd                $625             $470                     Next to Aus/NZ for Chevron for 3 years + 3 years option in 01/2011.
 Apr-11      Larsen Oil & Gas    Larsen Rig I               7500'        Jurong Shipyard Pte Ltd                $640                           Available
 Jun-11      Vantage Drilling    SeaDragon II              10000'        Jurong Shipyard Pte Ltd                $510                           Available
 Jul-11      Queiroz Galvao      Alpha Star                 9000'        Keppel FELS                            $385                                      Next to S America for Petrobras for 6 years + 6 year option in 01/2012.
 Sep-11      Ensco               ENSCO 8504                 8500'        Keppel FELS                            $515                           Available
 Sep-11      IPC                 La Muralla IV             10000'        Daewoo                                 $709                           Available
 Dec-11      Seadrill            West Capricorn            10000'        Jurong Shipyard Pte Ltd                $771                           Available
 Dec-11      Island Offshore     Island Innovator           2300'        COSCO Zhoushan                         $560                           Available
 Jan-12      COSL                COSLPromoter               1640'        Yantai Raffles                         $460             $335                     Next to NW Europe for Statoil for 8 years + options in 07/2012.
 Jan-12      Ensco               ENSCO 8505                 8500'        Keppel FELS                            $537                           Available
 May-12      Delba               Delba V                    8000'                                                                $382                     Construction probable. Next to S America for Petrobras for 6 years + 6 year option in 07/2012.
 May-12      Delba               Delba VI                   8000'                                                                $382                     Construction probable. Next to S America for Petrobras for 6 years + 6 year option in 07/2012.
 Jun-12      Atwood              Atwood Semi Tbn2          10000'        Jurong Shipyard Pte Ltd                $750                           Available
 Jul-12      Ensco               ENSCO 8506                 8500'        Keppel FELS                            $560                           Available
 Dec-12      Petroserv           Petroserv Semi Tbn1       10000'        Daewoo                                 $526                           Available
 Construction Canceled or Questionable
 NA          Delba               Delba IV                     7874'      COSCO Dalian                                            $318                       Order on standby. Next to S America for Petrobras for 7 years in 07/2013.
 NA          Sevan Drilling      Sevan ONGC                  10000'      COSCO Nantong                                           $525                       Capex suspended and construction questionable.
 NA          Sevan Drilling      Sevan Brasil                 7874'      COSCO Nantong                                           $406                       Capex suspended and construction questionable.

Drillships
                                                                                                                               Contracted
 Delivery                                                                                                   Estimated Cost     Future Day      Available /
 Date        Rig Owner                Rig Name             Water Depth    Shipyard                               ($mil)       Rate ($'000s)    Contracted Comments
 Apr-10      Saipem                   Saipem 12000            12000'      Samsung Heavy Industries                $660            $420                     Next to W Africa for Total for 5 years + 2 x 1 year options in 05/2010.
 Jul-10      Seadrill                 West Gemini             10000'      Samsung Heavy Industries                $716            $445                     Next to W Africa for Total for 2 years + 1 year option in 08/2010.
 Aug-10      Frontier Drilling        Bully I                 12000'      Shanghai Shipyard & Chengxi Shi         $610                                     Next to US GOM for Shell for 5 years + 4 x 1 year options in 10/2010.
 Aug-10      Pride                    Deep Ocean Clarion      10000'      Samsung Heavy Industries                $715            $539                     Next to US GOM for BP for 5 years in 01/2011.
 Sep-10      Transocean               Deepwater Champion      10000'      Hyundai Heavy Industries                $796            $640                     Next to Med/Black Sea for ExxonMobil for 5 years in 11/2010.
 Sep-10      Pacific Drilling ServicesPacific Bora            10000'      Samsung Heavy Industries                $632                          Available
 Oct-10      Transocean               Discoverer India        10000'      Daewoo                                  $785            $537                     Next to Indian Ocean for Reliance for 5 years (may be extended to 7 or 10 years) in 12/2010.
 Nov-10      Vantage Drilling         Platinum Explorer       10000'      Daewoo                                  $761            $585                     Next to Indian Ocean for ONGC for 5 years in 12/2010.
 Dec-10      Frontier Drilling        Bully II                12000'      Shanghai Shipyard & Chengxi Shi         $632                                     Yard Tba. Next to US GOM for Shell for 5 years in 03/2011.
 Dec-10      Ocean Rig                Ocean Rig Corcovado     10000'      Samsung Heavy Industries                $748                          Available
 Jan-11      Pride                    Deep Ocean Mendocino    10000'      Samsung Heavy Industries                $725            $410                     Next to Petrobras for 5 or 7 years in 06/2011.
 Mar-11      Odebrecht                Norbe VIII              10000'      Daewoo                                  $690                                     Next to S America for Petrobras for 10 years in 06/2011.
 Mar-11      Ocean Rig                Ocean Rig Poseidon      10000'      Samsung Heavy Industries                $748                          Available
 Mar-11      Pacific Drilling ServicesPacific Scirocco        10000'      Samsung Heavy Industries                $632                          Available
 May-11      Odebrecht                Norbe IX                10000'      Daewoo                                  $690                                     Next to S America for Petrobras for 10 years in 08/2011.
 May-11      Odfjell Drilling         Deepsea Metro I         10000'      Hyundai Heavy Industries                $668                          Available
 May-11      Pacific Drilling ServicesPacific Mistral         10000'      Samsung Heavy Industries                $650                          Available
 May-11      Schahin                  Schahin Drsh Tbn1       10000'      Samsung Heavy Industries                $682                                     Next to S America for Petrobras for 10 years in 09/2011.
 Jul-11      Vantage Drilling         DragonQuest             12000'      Daewoo                                  $782            $490                     Next to US GOM for Petrobras for 8 years in 09/2011.
 Jul-11      Noble                    Noble Globetrotter      10000'      STX Heavy Industries                    $585                          Available
 Jul-11      Ocean Rig                Ocean Rig Olympic       10000'      Samsung Heavy Industries                $790                          Available
 Jul-11      Pacific Drilling ServicesPacific Santa Ana       10000'      Samsung Heavy Industries                $650                          Available
 Sep-11      Ocean Rig                Ocean Rig Mykonos       10000'      Samsung Heavy Industries                $792                          Available
 Oct-11      Schahin                  Schahin Drsh Tbn2       10000'      Samsung Heavy Industries                $709                                     Next to S America for Petrobras for 10 years in 01/2012.
 Nov-11      Odfjell Drilling         Deepsea Metro II        10000'      Hyundai Heavy Industries                $668                          Available
 Dec-11      Petroserv                Petroserv Drsh Tbn1     10000'      Daewoo                                  $755                                     Next to S America for Petrobras for 10 years in 01/2012.
 Dec-11      Stena                    Stena DrillMAX ICE       7500'      Samsung Heavy Industries              $1,150                          Available
 Dec-11      Pride                    Deep Ocean Molokai      10000'      Samsung Heavy Industries                $750                          Available
 Jan-12      Etesco                   ET-VIII                 10000'      Samsung Heavy Industries                $820                                     Next to S America for Petrobras for 10 years + 10-year option in 04/2012.
 Jan-12      Odebrecht                Norbe X                 10000'      Daewoo                                  $579                          Available
 Mar-12      Odebrecht                Norbe XI                10000'      Daewoo                                  $579                          Available
 Jul-13      Vantage Drilling         Cobalt Explorer         12000'      Daewoo                                  $672                          Available Owner has negotiated deferral of construction of this rig for a year, delaying delivery until 2013.
 Construction Canceled or Questionable
 NA          Delba                    Delba VII               10000'      Samsung Heavy Industries               $700                                        Construction status questionable. Next to S America for Petrobras for 10 years in 06/2012.
 NA          Delba                    Delba VIII              10000'      Samsung Heavy Industries               $740                                        Construction status questionable. Next to S America for Petrobras for 10 years in 08/2012.


                                                         2010 Total Floater Deliveries: 26    Uncontracted 2010                                          5
                                                         2011 Total Floater Deliveries: 26    Uncontracted 2011                                         17
                                                         2012+ Total Floater Deliveries: 11 Uncontracted 2012+                                           7
                                                         Total Floaters Under Construction: 63   Uncontracted:                                          29




Source: ODS-Petrodata and UBS estimates




                                                                                                                                                                                                                                                     UBS 48
US Oil Service & Drilling 26 April 2010




Table 7: Jackup Newbuild Construction
Delivery                                                                                                        Estimated     Contracted Future Day   Available /
Date       Rig Owner                  Rig Name                 Water Depth   Shipyard                           Cost ($mil)       Rate ($'000s)       Contracted Comments
Mar-10     Great Offshore             Great Offshore JU V351        350'     Bharati Shipyard                     $165                                 Available
Apr-10     UMW Standard Drilling      Naga-3                        350'     Drydocks World – Graha               $154                                 Available Cost increased by $5m to secure accelerated delivery 4 months earlier than originally scheduled.
Apr-10     Scorpion Offshore          Offshore Mischief             350'     Lamprell                             $201                $120
Apr-10     Rowan                      Rowan EXL 1                   350'     Keppel AmFELS                        $175                 $75                         Next to McMoRan for 1 well in 05/2010.
Jun-10     COSL                       COSL 921                      200'     Offshore Oil Engineering                                                  Available   Yard cost = $82.4 million.
Jun-10     Saipem                     Standard JU Tbn4              350'     Drydocks World – Graha                $154                                Available   Cost increased $5m to secure delivery 6 months earlier than originally scheduled.
Jul-10     COSL                       COSL 922                      200'     Offshore Oil Engineering                                                  Available
Jul-10     Seadrill                   West Callisto                 400'     Keppel FELS                           $213               $96                          Next to Premier for 8 wells + 5 x 1 well options in 07/2010; Delivered Cost is Yard Price.
Jul-10     Egyptian Drilling          Setty                         375'     PPL Shipyard Pte Ltd                  $220                                Available
Jul-10     Seadrill                   West Leda                     375'     PPL Shipyard Pte Ltd                  $219                                Available   24/7/09: launched
Aug-10     COSL                       COSL 923                      200'     Offshore Oil Engineering                                                  Available
Sep-10     COSL                       COSL 924                      200'     Offshore Oil Engineering                                                  Available
Sep-10     Rowan                      Rowan EXL 2                   350'     Keppel AmFELS                         $175                                Available
Sep-10     Skeie Technology/NorsupplySKDP 1                         400'     Keppel FELS                           $506                                Available   Keel laid: 25 Nov 2008; Yard price USD371m..
Sep-10     MENAdrill                  MENAdrill JU Tbn1             300'     Maritime Industrial Services          $182                                Available
Sep-10     Vietsovpetro               Tam Dao 02                    375'     PPL Shipyard Pte Ltd                  $226                                            Sold rig to Vietsovpetro. Next to Vietsovpetro for Owner operated in 09/2010.
Oct-10     EGAS                       El Qaher I                    375'     PPL Shipyard Pte Ltd                  $213                                Available
Oct-10     Seadrill                   West Juno                     400'     Keppel FELS                           $216                                Available   Seadrill has an option not to take delivery of this unit
Oct-10     Yantai Raffles             Yantai Raffles JU Tbn1        300'     Yantai Raffles                                                            Available
Oct-10     SinoTharwa Drilling        Bahari-1                      400'     Dalian Shipbuilding Industry Co.      $250                                Available
Dec-10     Swift Drilling             Swift 10                      147'     Drydocks World - Nanindah                                $124                         Next to NW Europe for Shell for 5 years in 12/2010.
Dec-10     MENAdrill                  MENAdrill JU Tbn2             300'     Maritime Industrial Services          $182                                Available
Dec-10     Rowan                      Rowan EXL 3                   350'     Keppel AmFELS                         $175                                Available
Dec-10     Skeie Technology/NorsupplySKDP 2                         430'     Keppel FELS                           $528                                Available   Keel laid: 18 April 2009, Yard price USD 392m.
Jan-11     EGAS                       El Qaher II                   375'     PPL Shipyard Pte Ltd                  $213                                Available
Jan-11     Shanghai Offshore Petroleu Kan Tan VI                    375'     PPL Shipyard Pte Ltd                  $229                                Available
Mar-11     Larsen Oil & Gas           PetroProd JU Tbn1             492'     Jurong Shipyard Pte Ltd               $607                                Available   Construction not halted but Shipyard has terminated contract with Petroprod for the construction.
Apr-11     Essar Oilfields Services   Essar JU Tbn1                 350'     ABG Shipyard                          $229                                Available
Apr-11     Swecomex                   Swecomex JU Tbn1              400'     Operadora Cicsa                       $195                                Available
Apr-11     Yantai Raffles             Yantai Raffles JU Tbn2        300'     Yantai Raffles                                                            Available
Jun-11     Skeie Technology/NorsupplySKDP 3                         430'     Keppel FELS                           $582                                Available
Sep-11     Rowan                      Joe Douglas                   400'     LeTourneau                            $200                                Available
Oct-11     Essar Oilfields Services   Essar JU Tbn2                 350'     ABG Shipyard                          $229                                Available
Oct-11     Yantai Raffles             Yantai Raffles JU Tbn3        300'     Yantai Raffles                                                            Available
Nov-11     Momentum Engineering       Yantai Raffles JU Tbn4        300'     Yantai Raffles                                                                        Next to Caspian for Dragon Oil for 5 years + up to two years option in 11/2011.
Jan-12     Odebrecht                  P-59                          350'     Sao Roque do Paraguacu                                                                Next to Petrobras for Owner operated in 01/2012.
Mar-12     Odebrecht                  P-60                          350'     Sao Roque do Paraguacu                                                                Next to Petrobras for Owner operated in 03/2012.
Jun-12     PetroVietnam               PetroVietnam JU Tbn1          200'     PV Shipyard                           $180                                            Next to PetroVietnam for Owner operated in 06/2012.
Sep-12     Saudi Aramco               Saudi Aramco JU Tbn1          300'     Keppel FELS                                                                           Next to Middle East for Saudi Aramco for Owner operated in 09/2012.
Feb-12     Rowan                      Rowan EXL 4                   350'     Keppel AmFELS                         $175                                Available
Construction Canceled or Questionable
Oct-11     Kito Enterprises           IOEC JU Tbn1                 350'      ZPMC                                                                      Available   Constr. Questionable
Dec-11     Kito Enterprises           IOEC JU Tbn2                 350'      ZPMC                                                                      Available   Constr. Questionable
Dec-11     Kito Enterprises           IOEC JU Tbn3                 350'      ZPMC                                                                      Available   Constr. Questionable
Jan-12     Kito Enterprises           IOEC JU Tbn4                 350'      ZPMC                                                                      Available   Constr. Questionable
Feb-12     Kito Enterprises           IOEC JU Tbn5                 350'      ZPMC                                                                      Available   Constr. Questionable
Mar-12     Kito Enterprises           IOEC JU Tbn6                 350'      ZPMC                                                                      Available   Constr. Questionable
Apr-12     Kito Enterprises           IOEC JU Tbn7                 350'      ZPMC                                                                      Available   Constr. Questionable
May-12     Kito Enterprises           IOEC JU Tbn8                 350'      ZPMC                                                                      Available   Constr. Questionable
Jun-12     Kito Enterprises           IOEC JU Tbn9                 350'      ZPMC                                                                      Available   Constr. Questionable
Jul-12     Kito Enterprises           IOEC JU Tbn10                350'      ZPMC                                                                      Available   Constr. Questionable
NA         Mosvold Middle East JackupMosvold 106                   300'      Maritime Industrial Services          $184                                            Sep-09: MIS suspended work and subsequently terminated the construction.
NA         Mosvold Middle East JackupMosvold 108                   300'      Maritime Industrial Services          $184                                            Sep-09: MIS suspended work and subsequently terminated the construction.
NA         Riginvest                  Riginvest JU Tbn1            350'      Lamprell                                                                              RigIinvest paid the deposit, but as of Sep 2009, want to sell the rig. Construction has not started as of Sep-09.
NA         Thule Drilling             Thule Energy                 300'      QGM                                   $160                                            Dispute between Thule Drilling and Norsk Tillitsmann still unresolved. Rig is 45% complete.
NA         Thule Drilling             Thule Force                  300'      QGM                                   $160                                            Dispute between Thule Drilling and Norsk Tillitsmann still unresolved. Rig is 45% complete.
Rigs Destined for Non-competitive Regions
Jun-10     Gazflot                    Arkticheskaya                328'      Zvezdochka Shipyard                   $100                                            Delivery date is estimate as no firm date has been set. Destination is Russia.
Jun-10     Shengli Offshore           Shengli X                    164'      Dalian Shipbuilding Industry Co.                                                      Next to Shengli Offshore for Owner operated in 06/2010. Destination is China.
Aug-11     NIDC                       Pars JU Tbn1                 300'      Sanaye Farasahel Co (SAF)                                                             Next to Pars Oil & Gas for Owner operated in 08/2011. Destination is Iran.
Aug-11     NIDC                       Pars JU Tbn2                 300'      Sanaye Farasahel Co (SAF)                                                             Next to Pars Oil & Gas for Owner operated in 08/2011. Destination is Iran.
Sep-11     CPTDC                      CPTDC JU Tbn1                300'      CPLEC                                                                                 Rig being built for CNPC. Next to CNPC for Owner operated in 09/2011. Destination is China.


                                                                  Non-
                                         Total deliveries        Compt. Total deliveries excl. non competitive                                          Jackups Uncontracted
           2010                               26                   2                  24                                                                Uncontracted 2010: 19 rigs (83% of expected incremental supply)
           2011                               14                   3                  11                                                                Uncontracted 2011: 10 rigs (91% of expected incremental supply)
           2012                                5                   0                   5                                                                Uncontracted 2012: 1 rig (100% of expected incremental supply)
           TOTAL                              45                   5                  40
           Constr. on hold                      15                   -                          15



Source: ODS-Petrodata and UBS estimates




                                                                                                                                                                                                                                                                         UBS 49
US Oil Service & Drilling 26 April 2010


Land Rigs Update
Baker Hughes: US and International rig count
The Baker Hughes total US rig count decreased by nine rigs during the week
ended April 23, 2010 to 1,482 active rigs. The land rig count decreased by six
rigs, the inland rig count was flat and the offshore rig count decreased by three
rigs. The Baker Hughes US land rig count is at 1,415 rigs, which is up 67% (568
rigs) from the June 2009 bottom but still down 27% (520 rigs) from the peak in
September 2008. The number of rigs drilling for oil was up by eight to 514,
while the gas-drilling rig count was down by seventeen to 956. By type, there
were 232 active directional wells (flat versus last week), 753 horizontal wells
(down by one versus last week) and 497 vertical wells (down by eight compared
to last week).

Chart 10: Total US Land Rig Count

  US Land Rig Count
   1,500                                                                                                                                                                                                                                                                       1,399 1,407 1,421 1,415
                                                                                                                                                                                                          1,339 1,341                                1,362 1,376
   1,400                                                                                                                                                                                1,288 1,288 1,313
                                                                                                                                                                1,261 1,280
   1,300                                                                                                                                 1,226
                                                                                        1,146 1,131 1,139                    1,167 1,194
   1,200                                          1,089 1,089 1,108
   1,100   1,029 1,051 1,064
   1,000
     900
     800
            11/6/2009

                        11/13/2009

                                     11/20/2009

                                                  11/27/2009

                                                               12/4/2009

                                                                           12/11/2009

                                                                                        12/18/2009

                                                                                                     12/25/2009

                                                                                                                  1/1/2010

                                                                                                                             1/8/2010

                                                                                                                                        1/15/2010

                                                                                                                                                    1/22/2010

                                                                                                                                                                1/29/2010

                                                                                                                                                                             2/5/2010

                                                                                                                                                                                         2/12/2010

                                                                                                                                                                                                      2/19/2010

                                                                                                                                                                                                                  2/26/2010

                                                                                                                                                                                                                              3/5/2010

                                                                                                                                                                                                                                         3/12/2010

                                                                                                                                                                                                                                                     3/19/2010

                                                                                                                                                                                                                                                                   3/26/2010

                                                                                                                                                                                                                                                                               4/2/2010

                                                                                                                                                                                                                                                                                          4/9/2010

                                                                                                                                                                                                                                                                                                     4/16/2010

                                                                                                                                                                                                                                                                                                                  4/23/2010
Source: Baker Hughes and UBS estimates



Chart 11: US Gas Rigs – down 40% (650 rigs) from peak                                                                                                           Chart 12: Horizontal / Directional Rigs

 US Gas Rigs                                                                                                                                                                            Horiz. / Direct. Rigs                                    Horiz. / Direct. Rigs as % of Total US
 1,800                                                                                                                                                                1,200                                                                                                                                      70%
                                                                                                                                                                                                                                                                                          66%
                                                                                                                                                                      1,100                                                                                                                                      65%
 1,600
                                                                                                                                                                      1,000                                                                                                                                      60%
 1,400                                                                                                                                                                                                                                                                                                           55%
                                                                                                                                                                            900
                                                                                                                                                                                                                                                                                                                 50%
 1,200                                                                                                                                                                      800                          48%
                                                                                                                                                                                                                                                                                                                 45%
 1,000                                                                                                                                                                      700                                                                                                                                  40%
                                                                                                                                                                            600                                                                                                                                  35%
   800
                                                                                                                                                                            500                                                                                                                                  30%
   600                                                                                                                                                                        Feb-08                 Jun-08             Oct-08           Feb-09                  Jun-09            Oct-09
           Mar-08
           Apr-08
           May-08
           Jun-08
           Jul-08
           Aug-08
           Sep-08
           Oct-08
           Nov-08
           Dec-08
           Jan-09
           Feb-09
           Mar-09
           Apr-09
           May-09
           Jun-09
           Jul-09
           Aug-09
           Sep-09
           Oct-09
           Nov-09
           Dec-09
           Jan-10
           Feb-10
           Mar-10




Source: Baker Hughes and UBS estimates                                                                                                                          Source: Baker Hughes and UBS estimates




                                                                                                                                                                                                                                                                                                            UBS 50
US Oil Service & Drilling 26 April 2010


Chart 13: International Rig Count

 International Rig Count

  1,150                                                                1,108 1,096 1,096
                                         1,102 1,092
                                                             1,087                                    1,078
  1,100 1,054         1,074 1,075                                                                                                                                                                                                                1,068 1,074
                                                                                                               1,044                                                                                                                    1,047
  1,050                                                                                                                   1,020 1,012                                                                                1,025 1,024
                                                                                                                                              986 993                                            986 983
  1,000                                                                                                                                                           967 974
                                                                                                                                                                                        947
    950
    900
    850


                                                                                 Oct-08



                                                                                                      Dec-08




                                                                                                                                                                                                          Oct-09



                                                                                                                                                                                                                               Dec-09
             Mar-08

                      Apr-08



                                         Jun-08

                                                    Jul-08

                                                              Aug-08

                                                                       Sep-08




                                                                                                                Jan-09

                                                                                                                           Feb-09

                                                                                                                                     Mar-09

                                                                                                                                              Apr-09



                                                                                                                                                                  Jun-09

                                                                                                                                                                             Jul-09

                                                                                                                                                                                        Aug-09

                                                                                                                                                                                                 Sep-09




                                                                                                                                                                                                                                        Jan-10

                                                                                                                                                                                                                                                 Feb-10

                                                                                                                                                                                                                                                           Mar-10
                               May-08




                                                                                            Nov-08




                                                                                                                                                         May-09




                                                                                                                                                                                                                      Nov-09
Source: Baker Hughes and UBS estimates



Chart 14: Canadian Land Rig Count
                                                                                                                                                                                                                          2008           2009               2010
             700                                                                                                                                                                                          Jan                494            375                456
                                                                                                                                                                                                          Feb                620            412                560
             600                                                                                                                                                                                          Mar                408            196                383
                                                                                                                                                                                                          Apr                106              74
             500                                                                                                                                                                                          May                135              72
                                                                                                                                                                                                          Jun                266            124
             400                                                                                                                                                                                           Jul               412            168
                                                                                                                                                                                                          Aug                449            177
             300                                                                                                                                                                                          Sep                435            206
                                                                                                                                                                                                          Oct                446            243
             200                                                                                                                                                                                          Nov                416            277
                                                                                                                                                                                                          Dec                359            310
             100

                0
                         Jan            Feb        Mar          Apr         May            Jun          Jul              Aug        Sep        Oct             Nov         Dec
                                                                                   2008              2009        2010


Source: Baker Hughes and UBS estimates


UBS Global Rig Count Forecast
We have provided our global rig count forecasts below. For 2010, we expect the
US land rig count to average 1,360 rigs (up 31% y-o-y) with most of the
increase coming in 1H10. Our 2010 forecast also calls for an average total
international rig count of 1,057 rigs in 2010 (up 6% y-o-y).

Table 8: UBS Rig Count Forecast
                                              2008           1Q09         2Q09            3Q09         4Q09               2009       1Q10E             2Q10E      3Q10E          4Q10E           2010E         2011E

US Land Rig Count                             1,812          1,270         886             940         1,073             1,042        1,295            1,405      1,395           1,315          1,352             1,345
 Y-o-Y change                                 6.9%           -25.8%      -50.7%           -50.8%       -41.3%            -42.5%        1.9%            58.5%         48.4%        22.6%          29.7%             -0.6%

US Total Rig Count                            1,877          1,327         936             973         1,108             1,086        1,340            1,454      1,438           1,363          1,399             1,396
 Y-o-Y change                                 6.2%           -25.1%      -49.8%           -50.8%       -41.6%            -42.1%        1.0%            55.4%         47.8%        23.0%          28.8%             -0.2%

Canada Total Rig Count                            380         329           91             185          278               221           469            139           233              304         286              277
 Y-o-Y change                                 10.5%          -35.3%      -46.4%           -57.2%       -32.0%            -41.9%       42.6%            52.9%         25.9%            9.2%       29.6%             -3.3%

International Total Rig Count                 1,079          1,025         982             969         1,011              997         1,063            1,085      1,111           1,143          1,101             1,179
 Y-o-Y change                                 7.3%           -2.0%        -9.4%           -11.6%       -7.3%             -7.6%         3.7%            10.5%         14.7%        13.1%          10.4%             7.1%

Note: UBS International rig count forecast excludes Russia per Baker Hughes rig count methodology.


Source: Baker Hughes and UBS estimates



                                                                                                                                                                                                                                                          UBS 51
US Oil Service & Drilling 26 April 2010


Land Rig Newsletter
The figures below show the rig count in the four major Lower-48 US shale plays.
This data is released bi-monthly and we track results to identify trends in
onshore drilling activity. The Haynesville and Marcellus Shales have exhibited
the largest percentage increases over the last twelve months and now boast the
highest and third highest rig counts respectively. For the two weeks ending April
9, 2010, the Marcellus Shale realized the largest gain in rigs (10 rigs or 13%)
and the Fayetteville realized the largest decrease in rigs (2 rigs or 5%).

Table 9: Rig Count Changes in Key Shale Plays

                                                Peak                             Trough                                    Current                                                                                   Peak - Trough                                           Peak - Current Trough - Current
                                              Oct-08                                    Jun-09                               4/9/2010                                                                                           Oct-08 - Jun-09                                    Oct-08 - Current                                           Jun-09 - Current
Barnett                                              181                                       63                                          89                Barnett                                                                            -65%                                                     -51%                                                        41%
Fayetteville                                          51                                       43                                          35                Fayetteville                                                                       -16%                                                     -31%                                                       -19%
Haynesville                                           31                                       77                                         120                Haynesville                                                                        148%                                                     287%                                                        56%
M arcellus                                            24                                       41                                          88                M arcellus                                                                          71%                                                     267%                                                       115%
Source: The Land Rig Newsletter


Table 10: Weekly Rig Count Changes in Key Shale Plays
                           11/6/2009                 11/20/2009                  12/4/2009                   12/18/2009                   12/31/2009                      1/15/2010                      1/29/2010                      2/12/2010                     2/26/2010                     3/12/2010                        3/26/2010                      4/9/2010
Barnett                           67                         68                         63                           75                           78                             73                             73                             78                            78                            82                               89                            89
Fayetteville                      38                         33                         31                           31                           30                             34                             35                             34                            37                            35                               37                            35
Haynesville                       96                        100                        101                          107                          104                            114                            106                            114                           102                           115                              112                           120
M arcellus                        71                         79                         80                           69                           65                             70                             80                             75                            74                            77                               78                            88
Source: The Land Rig Newsletter


Table 11: Monthly Rig Count Changes in Key Shale Plays
                               Apr-09                      May-09                       Jun-09                            Jul-09                   Aug-09                           Sep-09                       Oct-09                        Nov-09                       Dec-09                       Jan-10                        Feb-10                        Mar-10
Barnett                            74                          69                           66                                64                       58                               60                           62                            68                           72                           73                            78                            86
Fayetteville                       45                          44                           45                                40                       42                               35                           32                            36                           31                           35                            36                            36
Haynesville                        63                          64                           75                                76                       86                               90                           92                            98                          104                          110                           108                           114
M arcellus                         25                          28                           41                                43                       50                               56                           66                            75                           71                           75                            75                            78
Source: The Land Rig Newsletter


Chart 15: Total active rigs (excluding rigs drilling 5000 ft or less)

  Total Activ e Rigs
  1,600
                                                                                                                                                                                                                                                                                                                                                  1,278
  1,400                                                                                                                                                                                                                                                                                                                                1,228 1,245
                                                                                                                                                                                                                                                                                                                       1,189
                                                                                                                                                                                                                                                                                           1,113 1,152
  1,200                                                                                                                                                                                                                                         1,041 1,037 1,065
                                                                                                                                                                                                                   979 986
  1,000                                            873 858 864 907 914
                                       809 793 845
               717 737 753 761 785 784
    800

    600
                                                                                                                                           Sept 11 '09

                                                                                                                                                         Sept 25 '09

                                                                                                                                                                       Oct 9, '09

                                                                                                                                                                                      Oct 23, '09




                                                                                                                                                                                                                                  Dec 4, '09

                                                                                                                                                                                                                                                Dec 18, '09

                                                                                                                                                                                                                                                              Dec 30, '09
                                        June 5 '09

                                                      June 19 '09




                                                                                                             Aug 14 '09

                                                                                                                             Aug 28 '09




                                                                                                                                                                                                                                                                             Jan 15, '10

                                                                                                                                                                                                                                                                                           Jan 29, '10

                                                                                                                                                                                                                                                                                                         Feb 12, '10

                                                                                                                                                                                                                                                                                                                       Feb 26, '10

                                                                                                                                                                                                                                                                                                                                        Mar 12, '10

                                                                                                                                                                                                                                                                                                                                                      Mar 26, '10

                                                                                                                                                                                                                                                                                                                                                                     Apr 9, '10
               May 8 '09

                           May 22 '09




                                                                                 July 17 '09

                                                                                               July 31 '09




                                                                                                                                                                                                    Nov 6, '09

                                                                                                                                                                                                                  Nov 20, '09
                                                                    July 2 '09




Source: The Land Rig Newsletter




                                                                                                                                                                                                                                                                                                                                                                    UBS 52
US Oil Service & Drilling 26 April 2010


Diversified Oil Service Metrics
This section provides an in-depth analysis of regional operating trends for the
diversified service companies, including regional revenue, revenue per rig,
operating income and operating margin trends.

Table 12: Regional Revenue Trends – Diversified Oil Service
                                                             Y-o-Y revenue growth                                     3 Year CAGR       5 Year CAGR                     Revenue ($ mil)
                                   2005           2006       2007       2008     2009             2010E      2011E          ('05-'08)         ('03-'08)     2008          2009      2010E     2011E
International
      BHI                       13.6%        22.5%          20.9%      11.9%        -9.3%         2.6%       12.0%             18.3%            17.2%      $6,700       $6,080      $6,239    $6,991
      HAL                       20.3%        23.0%          25.2%      22.2%        -9.3%        10.6%       20.7%             23.5%            20.5%       9,939        9,013       9,972    12,036
      SII                       20.3%        30.4%          31.6%      20.2%       -12.0%         5.4%       18.1%             27.3%            24.2%       4,839        4,260       4,490     5,301
      SLB                       25.2%        29.2%          30.2%      22.8%        -8.4%         8.2%       17.9%             27.4%            24.9%      18,134       16,609      17,969    21,185
      WFT                       32.5%        49.0%          34.0%      32.0%        17.9%        19.8%       19.6%             38.1%            32.0%       5,140        6,061       7,264     8,691
      Average                   21.8%        28.4%          28.0%      21.6%         -6.1%        9.3%       18.0%             26.0%            23.1%     $44,752      $42,024     $45,934   $54,204

N. America
     BHI                        23.7%        29.8%           8.9%      16.3%       -30.6%        25.8%        7.5%             18.0%            18.4%      $5,163       $3,584      $4,507    $4,844
     HAL                        33.1%        34.0%          10.5%      16.9%       -32.1%        17.1%       16.7%             20.1%            22.0%       8,340        5,662       6,630     7,734
     SII                        30.9%        32.2%          10.8%      25.2%       -33.3%        30.1%       16.1%             22.4%            24.9%       5,932        3,958       5,150     5,980
     SLB                        21.0%        40.2%           1.4%      10.6%       -37.3%        27.8%       11.2%             16.3%            18.1%       5,914        3,707       4,739     5,271
     WFT                        43.6%        54.1%           7.2%      13.3%       -38.0%        58.8%        6.7%             23.2%            28.3%       4,460        2,766       4,391     4,685
     Average                    29.4%        37.0%           7.7%      16.5%       -34.0%        29.2%       12.2%             19.8%            21.8%     $29,809      $19,676     $25,417   $28,514

Latin America
      BHI                        2.5%        17.7%          20.3%      26.9%        -1.2%         1.0%       10.9%             21.6%            17.2%      $1,147       $1,133      $1,144    $1,269
      HAL                       24.2%        12.6%          18.8%      34.9%       -10.1%        12.3%       19.4%             21.7%            21.7%       2,425        2,181       2,449     2,924
      SII                        6.7%        20.2%          35.7%      33.7%            n/a         n/a         n/a            29.7%            23.4%         987          n/a         n/a       n/a
      SLB                       26.6%        16.0%          28.5%      28.4%        -0.1%         5.0%       12.5%             24.2%            24.4%       4,230        4,225       4,434     4,986
      WFT                       38.4%        67.6%          21.5%      37.1%        71.7%         8.1%        4.9%             40.8%            36.4%       1,210        2,077       2,245     2,354
      Average                   21.2%        20.1%          24.9%      31.3%         -3.8%        6.8%       12.3%             25.3%            23.8%      $9,999       $9,615     $10,273   $11,533
Europe/Africa/CIS
     BHI                        13.7%        24.1%          23.6%       9.9%       -13.5%        -0.3%       11.9%             19.0%            17.0%      $3,380       $2,925      $2,915    $3,263
     HAL                        18.2%        25.8%          29.4%      17.5%        -9.2%         9.9%       19.7%             24.1%            20.8%       4,346        3,948       4,338     5,195
     SII                        23.5%        35.1%          31.2%      22.0%           n/a          n/a         n/a            29.3%            24.6%       2,570          n/a         n/a       n/a
     SLB                        26.7%        43.0%          30.4%      24.1%       -12.6%         5.8%       17.2%             32.3%            26.9%       8,180        7,151       7,565     8,864
     WFT                        15.3%        27.3%          43.7%      29.5%         5.0%        32.8%       19.8%             33.3%            24.6%       1,539        1,616       2,147     2,571
     Average                    20.6%        33.0%          29.8%      20.1%       -21.9%         8.5%       17.3%             27.5%            23.1%     $20,015      $15,640     $16,966   $19,893

Middle East/Asia Pacific
     BHI                        19.3%        22.3%          17.4%       8.2%        -6.9%         7.8%       12.8%             15.8%            17.4%      $2,173       $2,022      $2,180    $2,459
     HAL                        20.2%        27.7%          24.0%      20.3%        -9.0%        10.4%       23.0%             24.0%            19.2%       3,168        2,884       3,185     3,917
     SII                        25.1%        28.9%          30.1%       8.5%           n/a          n/a         n/a            22.1%            23.9%       1,282          n/a         n/a       n/a
     SLB                        22.4%        22.8%          31.1%      17.3%        -8.6%        14.0%       22.9%             23.6%            22.8%       5,724        5,234       5,969     7,335
     WFT                        45.6%        56.1%          34.8%      31.1%        -1.0%        21.3%       31.1%             40.3%            36.1%       2,392        2,368       2,872     3,765
     Average                    23.8%        28.1%          27.6%      17.7%       -15.1%        13.6%       23.0%             24.4%            22.7%     $14,738      $12,509     $14,206   $17,476

Source: Company reports and UBS estimates

Table 13: Regional Revenue per Rig Trends – Diversified Oil Service (Rev/Rig in $ thousands)
                                                         Y-o-Y rev / rig growth                                    3 Year CAGR       5 Year CAGR                    Rev / rig (annualized)
                            2005          2006           2007        2008       2009          2010E       2011E          ('05-'08)         ('03-'08)       2008           2009       2010E    2011E
International
      BHI                   4.2%      10.3%           7.8%        -0.3%         1.4%          -0.1%        3.9%             5.8%              4.9%        $4,227        $4,285     $4,279    $4,446
      HAL                  10.4%      10.8%          11.5%         8.9%         1.3%           7.7%       11.9%            10.4%              7.9%         6,270         6,353      6,839     7,654
      SII                  10.4%      17.5%          17.3%         7.2%        -1.6%           2.5%        9.5%            13.9%             11.2%         3,053         3,003      3,079     3,371
      SLB                  14.9%      16.4%          16.0%         9.5%         2.3%           5.3%        9.3%            13.9%             11.9%        11,440        11,707     12,324    13,472
      WFT                  20.2%      35.5%          19.4%        17.6%        31.7%          16.6%       10.9%            23.9%             18.0%         3,243         4,272      4,982     5,527
      Average              11.7%      15.8%          14.1%         8.4%         4.9%           6.4%        9.4%            12.7%             10.2%        $5,647        $5,924     $6,301    $6,894

N. America
     BHI                    4.7%      12.8%           9.3%         8.8%        19.9%       -3.4%           1.9%            10.3%              7.6%        $2,288        $2,743     $2,648    $2,699
     HAL                   12.7%      16.5%          10.8%         9.4%        17.3%      -10.1%          10.6%            12.2%             10.9%         3,695         4,333      3,895     4,309
     SII                   10.8%      14.9%          11.2%        17.1%           n/a          n/a           n/a           14.4%             13.5%         2,628         3,029      3,026     3,332
     SLB                    2.4%      21.9%           1.7%         3.5%         8.2%       -1.8%           5.5%             8.7%              7.4%         2,620         2,836      2,784     2,937
     WFT                   22.5%      32.1%           7.6%         5.9%         7.1%       21.9%           1.2%            14.6%             16.3%         1,976         2,116      2,580     2,611
     Average                9.7%      18.9%           8.1%         8.9%        14.0%        -0.8%          6.4%            11.9%             10.7%        $2,641        $3,011     $2,987    $3,177
Latin America
      BHI                  -5.8%      14.8%           9.6%        17.3%         6.5%           0.6%        3.3%            13.9%              7.0%        $2,984        $3,179     $3,199    $3,304
      HAL                  14.2%       9.9%           8.3%        24.6%        -3.0%          11.9%       11.2%            14.0%             11.2%         6,311         6,119      6,846     7,614
      SII                  -1.9%      17.3%          23.7%        23.6%           n/a            n/a         n/a           21.5%             12.8%         2,569           n/a        n/a       n/a
      SLB                  16.4%      13.2%          17.2%        18.6%         7.7%           4.6%        4.8%            16.3%             13.6%        11,008        11,853     12,394    12,985
      WFT                  29.3%      67.1%          10.7%        26.7%        85.1%           7.7%       -2.3%            32.8%             25.6%         3,148         5,826      6,276     6,131
      Average              11.6%      17.4%          13.8%        21.3%         3.7%           6.4%        4.6%            17.5%             13.1%        $5,204        $5,395     $5,743    $6,007
Europe/Africa/CIS
     BHI                    6.2%          -8.5%       5.1%          -9.4%        2.1%         -0.1%        3.0%            -4.5%             -1.7%        $5,052        $5,159     $5,154    $5,307
     HAL                   10.5%          -7.2%      10.1%          -3.2%        7.2%         10.2%       10.2%            -0.4%              1.5%         6,495         6,963      7,671     8,450
     SII                   15.5%          -0.3%      11.6%           0.6%          n/a           n/a         n/a            3.8%              4.6%         3,840           n/a        n/a       n/a
     SLB                   18.5%           5.5%      10.9%           2.3%        3.2%          6.1%        7.8%             6.2%              6.5%        12,224        12,611     13,376    14,416
     WFT                    7.8%          -6.1%      22.2%           6.7%      23.9%          33.1%       10.2%             7.0%              4.6%         2,300         2,851      3,796     4,181
     Average               12.7%          -1.9%      10.4%          -1.0%       -7.8%          8.8%        7.9%             2.4%              3.4%        $5,982        $5,517     $5,999    $6,471

Middle East/Asia Pacific
     BHI                    7.9%      24.0%           8.1%         3.0%        -0.1%          -0.2%        5.2%            11.4%             10.3%        $4,087        $4,082     $4,076    $4,286
     HAL                    8.8%      29.4%          14.2%        14.5%        -2.3%           2.3%       14.7%            19.2%             12.0%         5,959         5,822      5,956     6,829
     SII                   13.1%      30.7%          19.8%         3.3%            n/a           n/a         n/a           17.4%             16.4%         2,412           n/a        n/a       n/a
     SLB                   10.7%      24.4%          20.7%        11.6%        -1.8%           5.6%       14.5%            18.8%             15.3%        10,766        10,567     11,163    12,787
     WFT                   31.7%      58.2%          24.2%        24.8%          6.3%         12.3%       22.2%            34.8%             27.8%         4,498         4,781      5,370     6,564
     Average               12.0%      29.8%          17.5%        12.0%         -8.9%          5.2%       14.7%            19.5%             15.3%        $5,544        $5,051     $5,313    $6,093


Source: Company reports and UBS estimates




                                                                                                                                                                                             UBS 53
US Oil Service & Drilling 26 April 2010




Table 14: Regional Operating Income Trends – Diversified Oil Service
                                            Y-o-Y operating income growth                 2 Year CAGR       2 Year CAGR                            Operating income ($ mil)
                                 2006       2007      2008      2009    2010E     2011E         ('06-'08)         ('09-'11)      2005      2006      2007      2008     2009       2010E   2011E
International
      BHI                       44.9%      23.7%      4.6%     -32.9%   -11.6%    36.2%           13.8%              9.8%         $742    $1,076   $1,331   $1,392       $934       $826    $1,125
      HAL                       21.3%      49.5%     26.8%     -17.9%    -4.2%    34.1%           37.7%             13.3%          953     1,156    1,728    2,191      1,798      1,722     2,309
      SLB                       56.5%      45.8%     17.5%     -18.7%     2.4%    26.4%           30.9%             13.7%        1,905     2,981    4,347    5,107      4,153      4,251     5,371
      WFT                          n/a     57.1%     34.6%     -20.1%     0.9%    51.1%           45.4%             23.5%          n/a       577      907    1,221        976        985     1,488
      Average                      n/a     43.6%     19.2%     -20.7%     -1.0%   32.2%           30.8%             14.4%       $3,600    $5,790   $8,313   $9,911     $7,861     $7,784   $10,294
N. America
     BHI                        60.2%       8.3%       9.4%    -74.5%    59.8%    21.9%            8.9%             39.6%         $679    $1,087   $1,178   $1,288       $329       $526      $641
     HAL                        60.3%      -4.4%       3.3%    -76.4%    32.2%    58.3%           -0.6%             44.7%        1,292     2,071    1,980    2,045        482        637     1,009
     SLB                        71.9%      -4.2%     -10.8%    -84.2%    21.0%    66.3%           -7.6%             41.8%          933     1,604    1,537    1,371        216        262       435
     WFT                           n/a     -1.7%      11.3%    -82.5%   139.7%    43.8%            4.6%             85.6%          n/a     1,028    1,011    1,125        197        473       680
     Average                       n/a     -1.5%       2.2%    -79.0%    55.0%    45.7%            0.3%             50.3%       $2,904    $5,790   $5,705   $5,829     $1,225     $1,898    $2,765
Latin America
      BHI                       13.5%      15.1%     21.9%     -33.9%   -32.5%    64.8%           18.4%              5.5%        $134       $152     $175     $213       $141        $95      $157
      HAL                       25.6%      36.9%     49.3%     -25.7%   -24.4%    49.8%           42.9%              6.4%         203        255      349      521        387        293       438
      SLB                       50.2%      52.3%     13.7%     -12.2%    -7.3%    19.6%           31.6%              5.3%         330        495      755      858        753        699       836
      WFT                          n/a     52.8%     36.4%       1.6%   -25.7%    63.2%           44.3%             10.1%         n/a        133      203      277        282        209       342
      Average                      n/a     43.1%     26.2%     -16.4%   -17.1%    36.8%           34.4%              6.5%        $667     $1,036   $1,482   $1,869     $1,563     $1,296    $1,772
Europe/Africa/CIS
     BHI                        50.3%      29.2%      7.3%     -28.9%    -8.6%    28.6%           17.7%              8.4%         $353      $531     $685     $735       $523       $478      $615
     HAL                         8.5%      67.2%     15.2%     -17.4%     3.7%    25.1%           38.8%             13.9%          410       445      744      857        708        734       919
     SLB                        83.4%      45.6%     19.4%     -24.0%    -3.9%    29.0%           31.9%             11.3%          704     1,291    1,880    2,244      1,707      1,639     2,115
     WFT                           n/a     68.3%     33.1%     -34.2%    21.4%    38.7%           49.7%             29.8%          n/a       171      288      383        252        306       424
     Average                       n/a     47.6%     17.3%     -24.4%     -1.0%   29.0%           31.6%             13.0%       $1,467    $2,437   $3,597   $4,219     $3,189     $3,157    $4,073
Middle East/Asia Pacific
     BHI                        54.0%      19.8%     -5.7%     -39.1%    -6.3%    39.7%            6.3%             14.4%         $255      $393     $470     $444       $270       $253      $353
     HAL                        34.1%      39.3%     28.0%     -13.5%    -1.1%    37.0%           33.5%             16.4%          340       456      635      813        703        695       952
     SLB                        37.3%      43.3%     17.1%     -15.6%    13.0%    26.5%           29.5%             19.6%          871     1,195    1,713    2,005      1,693      1,913     2,421
     WFT                           n/a     52.2%     34.8%     -21.2%     6.2%    53.9%           43.3%             27.8%          n/a       273      416      561        442        469       722
     Average                       n/a     39.6%     18.2%     -18.7%     7.2%    33.5%           28.4%             19.6%       $1,466    $2,317   $3,234   $3,823     $3,108     $3,331    $4,448


Source: Company reports and UBS estimates




Table 15: Regional Operating Margin Trends – Diversified Oil Service
                                                           Operating Margin                                                         Incremental Operating Margins (y-o-y)
                                         2005       2006      2007     2008        2009    2010E      2011E              2005      2006     2007     2008      2009       2010E            2011E

International
      BHI                            18.4%         21.7%      22.2%     20.8%     15.4%    13.2%        16.1%             n/a     36.7%      24.6%       8.6%         73.9%      -67.7%     39.8%
      HAL                            18.0%         17.8%      21.3%     22.0%     19.9%    17.3%        19.2%          44.5%      16.7%      35.0%      25.6%         42.4%       -7.9%     28.5%
      SLB                            21.7%         26.3%      29.4%     28.2%     25.0%    23.7%        25.4%          33.4%      42.0%      39.9%      22.6%         62.6%         7.2%    34.8%
      WFT                               n/a        19.9%      23.3%     23.8%     16.1%    13.6%        17.1%             n/a     60.4%      33.4%      25.2%        -26.6%         0.8%    35.3%
      Average                        18.0%         22.5%      25.4%     24.8%     20.8%    18.8%        21.0%          47.8%      38.8%      35.6%      22.4%         95.4%        -2.1%    33.7%

N. America
     BHI                             21.6%         26.7%      26.5%     24.9%     9.2%     11.7%        13.2%             n/a     43.7%       24.9%      15.3%       60.7%       21.3%      34.3%
     HAL                             26.8%         32.1%      27.8%     24.5%     8.5%      9.6%        13.0%          50.5%      47.5%      -13.5%       5.4%       58.4%       16.0%      33.7%
     SLB                             24.8%         30.4%      28.7%     23.2%     5.8%      5.5%         8.3%          63.4%      44.3%      -94.1%     -29.1%       52.3%        4.4%      32.6%
     WFT                                n/a        28.0%      25.7%     25.2%     7.1%     10.8%        14.5%             n/a     79.7%       -6.6%      21.9%       54.8%       16.9%      70.4%
     Average                         20.6%         29.7%      27.4%     24.4%     7.8%      9.4%        12.3%          53.4%      53.7%        -6.2%      4.1%       56.4%       14.8%      38.3%
Latin America
      BHI                            21.0%         20.3%      19.4%     18.6%     12.4%     8.3%        12.4%             n/a     16.0%      15.0%      15.7%  527.7%           -402.6%     49.6%
      HAL                            15.1%         16.8%      19.4%     21.5%     17.7%    11.9%        15.0%          17.9%      30.6%      33.1%      27.4%   54.9%            -35.2%     30.7%
      SLB                            14.9%         19.3%      22.9%     20.3%     17.8%    15.8%        16.8%          23.5%      46.7%      35.4%      11.1% 1903.6%            -26.1%     24.8%
      WFT                               n/a        18.3%      23.0%     22.9%     13.6%     9.3%        14.5%             n/a     45.4%      45.0%      22.6%    0.5%            -42.9%    121.1%
      Average                        14.4%         18.6%      21.5%     20.7%     16.3%    12.6%        15.4%          33.7%      39.6%      33.7%      18.2%      n/a            -40.6%    37.8%

Europe/Africa/CIS
     BHI                             17.6%         21.3%      22.3%     21.8%     17.9%    16.4%        18.8%             n/a     36.8%      26.4%      16.4%        46.6%      461.9%      39.3%
     HAL                             18.0%         15.6%      20.1%     19.7%     17.9%    16.9%        17.7%          58.0%       6.0%      35.6%      17.5%        37.4%         6.7%     21.5%
     SLB                             19.9%         25.5%      28.5%     27.4%     23.9%    21.7%        23.9%          34.5%      38.6%      38.3%      22.9%        52.2%      -16.2%      36.7%
     WFT                                n/a        20.6%      24.2%     24.9%     15.6%    14.3%        16.5%             n/a     96.3%      32.3%      27.2%           n/a      10.2%      27.9%
     Average                         17.3%         21.7%      24.7%     24.2%     20.4%    18.6%        20.5%          57.2%      35.1%      34.9%      21.5%        57.0%        -2.4%     31.3%
Middle East/Asia Pacific
     BHI                             18.2%         23.0%      23.4%     20.4%     13.4%    11.6%        14.4%             n/a     44.1%      26.1%      -16.2%    115.0%         -10.8%     36.0%
     HAL                             20.4%         21.5%      24.1%     25.7%     24.4%    21.8%        24.3%          52.5%      25.2%      35.1%       33.3%     38.7%          -2.6%     35.1%
     SLB                             28.7%         32.1%      35.1%     35.0%     32.3%    32.1%        33.0%          40.1%      47.0%      44.7%       34.7%     63.7%          29.9%     37.1%
     WFT                                n/a        20.2%      22.8%     23.5%     18.7%    16.3%        19.2%             n/a     56.2%      30.3%       25.5%        n/a          5.4%     28.3%
     Average                         21.1%         26.0%      28.5%     28.4%     24.8%    23.4%        25.5%          46.8%      43.7%      37.6%       27.9%     75.4%          13.1%     34.2%


Source: Company reports and UBS estimates




                                                                                                                                                                                           UBS 54
US Oil Service & Drilling 26 April 2010


Technical and Other Indicators
Weekly market commentary
Oil service shares outperformed the S&P 500 Index for the week ended 23 April,
increasing by an average of 9.1%, compared to a 2.1% increase in the S&P 500.
Contract drilling shares also outperformed the S&P 500, increasing by 7.8%.
The OSX was up 7.8% during the week.

Table 16: Oil Services & Drilling – Price Performance
                                                Current                   52 WK                                                   Performance
Company                         Ticker           Price             High           Low              1 WK               1 Mos          3 Mos         12 Mos            YTD

OIL SERVICE
Baker Hughes                      BHI              $54.18                 $55           $33        14.0%             15.0%          22.4%          61.3%            33.8%
BJ Services                      BJS                 24.32                 24            12        12.3%             13.4%          20.0%          79.5%            30.8%
Cameron International            CAM                 47.31                 47            24         5.7%             12.3%          21.1%          88.2%            13.2%
FMC Technologies                  FTI                69.80                 70            33         5.8%             12.7%          28.7%          100.7%           20.7%
Halliburton                      HAL                 34.96                 35            18        10.5%             13.8%          12.2%          76.7%            16.2%
National Oilwell Varco           NOV                 46.26                 50            28         8.9%              8.9%           8.8%          58.0%             4.9%
Schlumberger                     SLB                 72.68                 73            45        10.5%             15.3%          11.4%          55.9%            11.7%
Smith International               SII                49.15                 49            22        10.8%             15.6%          64.2%          85.6%            80.9%
Tidewater                        TDW                 51.75                 52            40         5.0%              6.6%           8.4%          19.1%             7.9%
Weatherford International        WFT                 17.73                 24            15         7.3%             12.3%          -0.8%          11.0%            -1.0%
  Average                                                                                           9.1%             12.6%          19.6%           63.6%           21.9%

OFFSHORE DRILLERS
Diamond Offshore                 DO                $85.60             $109              $71        -1.8%              0.5%           -9.3%         15.6%            -13.0%
ENSCO International              ESV                 51.95              52               28        10.1%             18.0%           26.8%         64.7%             30.1%
Hercules Offshore               HERO                  4.67               7                3        11.5%              4.0%           -2.5%         68.0%             -2.3%
Noble Corporation                 NE                 43.63              46               27         8.0%              8.1%            4.9%         56.6%              7.2%
Pride International              PDE                 33.40              35               19         4.6%             12.9%           11.0%         61.1%              4.7%
Rowan Companies                  RDC                 32.50              33               15         6.8%             20.7%          47.1%          110.6%            43.6%
Seahawk Drilling                HAWK                 19.53              36               18        10.0%              5.4%          -15.1%           n/a            -13.4%
Transocean                       RIG                 89.89              95               64         3.4%              8.7%            4.9%         37.7%              8.6%
  Average                                                                                           6.6%              9.8%            8.5%          59.2%             8.2%

LAND DRILLERS
Helmerich & Payne                 HP               $43.21                 $49           $27         8.7%             11.4%           -2.8%         35.3%             8.4%
Nabors Industries                NBR                 22.61                 27            14        15.8%             16.6%           -5.3%         46.7%             3.3%
Patterson-UTI Energy             PTEN                15.64                 19            11         8.3%             14.0%           -5.7%         15.9%             1.9%
 Average                                                                                           10.9%             14.0%           -4.6%         32.6%             4.5%

Oil Service Index                OSX              $228.22             $229            $142             7.8%           11.4%          15.8%             55.7%        17.1%
S&P 500 Index                    SPX            $1,217.28           $1,217            $835             2.1%            3.7%          11.5%             42.9%         9.2%

Source: FactSet and UBS

Chart 16: Monthly Price Performance: Oil Services & Drillers

                          Oil Services Composite                                                         Offshore and Land Drillers Composite
                                                                                              DO, 1%
                                 TDW, 7%
                                                                                                                          RIG, 9%
                                                     CA M , 12%
                                                                                                                                     P DE, 13%
                                                      FTI, 13%
                                                                                                                                                              RDC, 21%
                                                     WFT, 1 2%
                                                                                                                         NE, 8%
                                          NOV, 9%                                                                                         P TEN, 14%
                                                                 SLB , 1 5%                                                             1
                                                                                                                                  HP , 1 %
                                                           HA L, 14%                                               HA WK, 5%
                                                                  SII, 16%                                                                         ESV, 18%
                                                          B JS, 13%                                           HERO, 4%
                                                                B HI, 15%                                                                     NB R, 17%

         0%               5%              10%                15%                20%           0%              5%          10%           15%             20%         25%




Source: FactSet




                                                                                                                                                                         UBS 55
US Oil Service & Drilling 26 April 2010


Short interest monitor
Below we examine short interest for a two-week period ending 31 March 2010.
This data is released every two weeks and was last released on 12 April 2010.

    Highest short interest: Patterson-UTI with short-interest equivalent to 16%
    of available float.

    Lowest short interest: Halliburton with short-interest equivalent to 2% of
    available float.

    Largest increase in short interest: FMC Technologies with short-interest
    increasing by 23%.

    Largest decline in short interest: Noble Corp. with short-interest declining
    by 30%.



Table 17: Short interest monitor
                                                                                                                             Short
                                                                                  Short                                    Coverage:
                                                                                Interest:  % Change in Short, %   Short      Prev.
Company                               Ticker      Rating     Short-Interest   Prev. Period Short Interest Float Coverage    Period
                                                               (shares)          (shares)                        (Days)      (Days)

OIL SERVICE
Baker Hughes                               BHI    Neutral     37,231,406       34,501,531      8%       12%       6.4         5.9
Cameron International                     CAM    Not rated     3,845,200        4,777,333    -20%       2%        1.3         1.5
FMC Technologies                           FTI   Not rated     5,608,700        4,544,986     23%       5%        3.8         2.8
Halliburton                               HAL      Buy        13,680,726       14,022,228     -2%       2%        1.0         1.0
National Oilwell Varco                    NOV    Not rated     7,302,954        8,679,238    -16%       2%        1.4         1.7
Schlumberger                              SLB      Buy        48,051,597       44,277,354      9%       4%        3.8         3.1
Smith International                        SII    Neutral      7,157,014        8,497,292    -16%       3%        0.7         0.7
Tidewater                                 TDW    Not rated     6,467,578        5,659,630     14%       13%       9.9         8.5
Weatherford International                 WFT      Buy        14,452,548       14,166,722      2%       2%        0.9         0.9

OFFSHORE DRILLERS
Diamond Offshore                       DO          Buy         9,385,908       10,089,335     -7%       7%        4.8         4.7
ENSCO International                    ESV        Neutral      4,292,896        4,806,190    -11%        n/a      1.4         1.5
Hercules Offshore                     HERO       Not rated     8,832,408        7,549,560     17%       8%        3.8         3.3
Noble Corporation                      NE         Neutral      5,283,367        7,566,634    -30%       2%        1.3         1.9
Pride International                    PDE         Buy         3,669,437        3,443,090      7%       2%        1.4         1.2
Rowan Companies                        RDC        Neutral     15,384,938       13,894,412     11%       14%       4.1         3.6
Seahawk Drilling                      HAWK        Neutral       554,971          443,463     25%        5%        5.6         4.2
Transocean Inc.                        RIG         Buy         8,995,393       10,585,742    -15%       3%        1.6         1.7

LAND DRILLERS
Helmerich & Payne                      HP         Neutral      7,229,097        9,054,302    -20%       7%        2.9         3.2
Nabors Industries                     NBR         Neutral     12,442,429       11,995,066      4%       5%        1.9         1.7
Patterson-UTI Energy                  PTEN        Neutral     24,390,427       20,923,721     17%       16%       4.1         3.5

Source: FactSet and UBS




                                                                                                                               UBS 56
US Oil Service & Drilling 26 April 2010


Money flow monitor
Below we examine money flow for the week ending 23 April. Money flow is a
cumulative figure based on a trade-by-trade analysis of each stock during a
specified period. Positive changes in money flow are viewed as bullish
indicators, while negative changes in money flow are viewed as bearish
indicators. Total money flow includes both Block and Non-Block trades. Block
money flow includes only those trades greater than 10,000 or more shares.
Whenever a trade is executed, its price is compared with the price of the
previous trade. If the trade is executed at a higher price than the previous trade
(an uptick), money flow increases by the total value of shares traded. If it is
executed at a lower price (a downtick), money flow drops.

    Total money flow:
    —    Largest increase this week: Seahawk Drilling
    —    Largest decline this week: Helmerich & Payne

    Block money flow:
    —    Largest increase this week: Cameron International
    —    Largest decline this week: Helmerich & Payne

Table 18: Money flow monitor
                                                             Weekly Statistics                                     Monthly Money Flow Statistics
                                               Total Money Flow           Block Money Flow                Total Money Flow           Block Money Flow
                                             Last     Prev      %      Last      Prev      %            Last     Prev      %      Last      Prev      %
Company                             Ticker   Week    Week Change      Week      Week Change            Month    Month Change     Month     Month   Change

OIL SERVICE
Baker Hughes                          BHI       8.67    -3.5675    343%     0.33      2.4446    -86%    -25.91   25.2766  -202%       -18.62     57.4066   -132%
Cameron International                CAM       13.48    -1.3276   1115%    12.23      0.1379   8771%     18.35    5.4257   238%       10.37      8.9311      16%
FMC Technologies                      FTI       6.46    -0.9089    811%     4.15      3.4531    20%      15.34   14.0308    9%        12.10      12.9791     -7%
Halliburton                          HAL      -33.59    30.6073   -210%   -29.75    14.6517    -303%    -22.08   -10.9986 -101%        -0.28     4.4179    -106%
National Oilwell Varco               NOV       24.86    39.0795    -36%    21.94    33.6116     -35%    117.59    0.3203 36613%      114.65      24.8827    361%
Schlumberger                         SLB      -47.74   -38.0663    -25%   -79.14    -41.5321    -91%     22.47   211.4425  -89%       -14.94    151.9133   -110%
Smith International                   SII      -6.78   -22.9289     70%    -4.72    -19.2904    76%    -133.94   -88.1898  -52%      -129.98     -57.468   -126%
Tidewater                            TDW        0.23    -4.5131    105%    -0.84     -2.6772    69%      -0.81   11.9194  -107%        -3.02     7.1924    -142%
Weatherford International            WFT       -2.76     7.8771   -135%   -17.87      4.818    -471%     13.73   -24.9196  155%        -2.54     -9.3484     73%

OFFSHORE DRILLERS
Diamond Offshore                     DO        10.97 -6.857        260%     6.14     -1.7985    441%     12.11   -25.7202     147%    11.07     -18.1681    161%
ENSCO International                  ESV        5.84 6.6225        -12%     2.73      3.8968    -30%     37.06    -7.7052     581%    30.11      -4.8876    716%
Hercules Offshore                   HERO        0.38 -1.216        131%     0.56     -0.6074    192%     -1.54     9.1751    -117%    -0.31      7.7493    -104%
Noble Corporation                     NE        9.59 3.8791        147%    -1.76      2.8098   -163%      6.92   -18.8902     137%    -1.24      3.8045    -133%
Pride International                  PDE      -27.63 -10.0034     -176%   -28.71     -9.1347   -214%    -35.98    -1.9267   -1768%   -39.94      -5.2366   -663%
Rowan Companies                      RDC        0.71 -5.2672       114%     1.18     -4.9669    124%    -17.14     7.7133    -322%   -19.68      -4.3164   -356%
Seahawk Drilling                    HAWK       67.83 3.0746       2106%    61.70    -14.4755    526%    208.00   -243.937     185%   198.24     -246.573    180%
Transocean Inc.                      RIG        0.03 -0.0091       421%     0.00         0       0%      -0.44     0.8697    -151%    -0.50      0.5508    -191%

LAND DRILLERS
Helmerich & Payne                     HP       -9.50 -1.0326      -820%    -10.76    -1.6419   -555%    -21.43 14.6792      -246%     -24.74    8.8091     -381%
Nabors Industries                    NBR        3.94 2.4659        60%      -1.37     -1.682    19%      -1.07 10.3628      -110%      -8.47    19.6808    -143%
Patterson-UTI Energy                 PTEN       0.24 -16.3999     101%    -0.4707   -14.9654    97%     -13.35 21.2972      -163%    -15.4632   15.5565    -199%

Source: Bloomberg and UBS




                                                                                                                                                           UBS 57
US Oil Service & Drilling 26 April 2010


Commodity Prices
Crude oil closed at $85.12/bbl on April 23rd, down 2% for the week. Natural gas
prices closed at $4.26/Mcf, down 5.4% for the week.

Table 19: Commodity Price Forecasts
                                           Units                2008A       2009A        2010E              2011E      1Q09A      2Q09A                     3Q09A                         4Q09A                        1Q10E            2Q10E                       3Q10E          4Q10E
Crude Oil
WTI                                        US$/Bbl              $99.75 $61.96            $75.00             $80.00     $43.31     $59.69                      $68.26                      $76.14                       $75.00             $75.00                    $75.00            $75.00
Brent                                      US$/Bbl              $98.52 $62.73            $74.00             $74.00      45.77      59.81                       68.87                       75.54                        74.00              74.00                     74.00             74.00
Natural Gas
US Composite Spot                          US$/Mcf                8.36        3.76              4.70          5.40       4.27          3.49                          3.09                      4.26                       5.15                      4.15              4.40                   5.15
Nymex                                      US$/Mcf                9.05        3.99              4.85          5.50       4.91          3.51                          3.39                      4.16                       5.30                      4.25              4.50                   5.25
AECO C Spot                                C$/Mcf                 6.45        4.02              4.25          4.74       4.93          3.48                          2.96                      4.71                       4.74                      3.63              3.89                   4.68
Other
US/CAN $                                                          0.94        0.88              0.97          0.97       0.80          0.86                          0.91                      0.95                       0.80                      0.86              0.91                   0.95
Source: Bloomberg and UBS estimates



Chart 17: WTI Crude Oil – Monthly Average                                                                                Chart 18: WTI Crude Oil – Weekly

    $160                                                                                                                        $86
    $140                                                                                                                        $84
                                                                                                                                $82
    $120
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    $100                                                                                                                        $78
     $80                                                                                                                        $76
     $60                                                                                                                        $74
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     $40
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     $20                                                                                                                        $68
            Jan-07




                                  Sep-07

                                              Jan-08




                                                                   Sep-08

                                                                             Jan-09




                                                                                                   Sep-09

                                                                                                              Jan-10
                       May-07




                                                        May-08




                                                                                       May-09




                                                                                                                                      12/18/2009

                                                                                                                                                          1/1/2010

                                                                                                                                                                          1/15/2010

                                                                                                                                                                                           1/29/2010

                                                                                                                                                                                                           2/12/2010

                                                                                                                                                                                                                          2/26/2010

                                                                                                                                                                                                                                        3/12/2010

                                                                                                                                                                                                                                                       3/26/2010

                                                                                                                                                                                                                                                                      4/9/2010

                                                                                                                                                                                                                                                                                 4/23/2010
Source: Bloomberg                                                                                                        Source: Bloomberg



Chart 19: NYMEX Natural Gas – Monthly Average                                                                            Chart 20: NYMEX Natural Gas – Weekly

    $14                                                                                                                         $6.00
    $13
    $12                                                                                                                         $5.50
    $11
    $10                                                                                                                         $5.00
     $9
     $8                                                                                                                         $4.50
     $7
     $6                                                                                                                         $4.00
     $5
     $4                                                                                                                         $3.50
     $3
                                                                                                                                $3.00
          Jan-07




                                Sep-07

                                            Jan-08




                                                                  Sep-08

                                                                            Jan-09




                                                                                                  Sep-09

                                                                                                              Jan-10
                     May-07




                                                       May-08




                                                                                      May-09




                                                                                                                                             12/18/2009

                                                                                                                                                               1/1/2010

                                                                                                                                                                              1/15/2010

                                                                                                                                                                                               1/29/2010

                                                                                                                                                                                                              2/12/2010

                                                                                                                                                                                                                            2/26/2010

                                                                                                                                                                                                                                          3/12/2010

                                                                                                                                                                                                                                                        3/26/2010

                                                                                                                                                                                                                                                                      4/9/2010

                                                                                                                                                                                                                                                                                 4/23/2010




Source: Bloomberg                                                                                                        Source: Bloomberg




                                                                                                                                                                                                                                                                                     UBS 58
US Oil Service & Drilling 26 April 2010


Valuation and other metrics

Table 20: Oil Service & Drilling Coverage Universe

                                                                                52 Week Range           Market                             Target                 Price to Earnings                                Price to Cash Flow                               EV/EBITDA
                                                    Ticker        Price          High    Low              Cap               Rating         Price          2008        2009    2010E           2011E        2008         2009    2010E          2011E       2008     2009    2010E     2011E
                                                                 4/26/10                                (in mil)

OIL SERVICES
Baker Hughes                                        BHI            $54.18         $52.41 $31.93        $16,899                Neutral         $50         10.1x     28.4x          26.1x       18.8x        7.3x       12.8x        11.7x        9.5x      5.6x     10.0x      9.0x     7.3x
Cameron International1                              CAM            $47.31         46.52       24.48      11,571                      n/a      n/a         17.7x     20.5x          21.1x       16.8x       14.9x       16.5x        16.8x       13.3x     10.1x     11.8x     11.1x     9.3x
Dril-Quip Inc1                                      DRQ            $69.97         68.50       31.46       2,785                      n/a      n/a         26.7x     25.4x          24.5x       20.5x       22.4x       22.0x        24.3x       18.9x     13.3x     14.2x     14.9x    12.5x
FMC Technologies1                                   FTI            $69.80         69.26       33.45       8,506                      n/a      n/a         23.7x     24.3x          26.7x       22.4x       21.1x       20.1x        19.6x       17.5x     13.2x     15.5x     14.4x    12.6x
Halliburton                                         HAL            $34.96         34.87       18.11      31,650                  Buy           42         12.0x     26.0x          25.0x       16.8x        9.4x       15.0x        13.8x       10.4x      7.0x     11.1x     10.2x     7.8x
                                 1
National Oilwell Varco                              NOV            $46.26         50.17       28.00      19,384                      n/a      n/a          9.1x     11.9x          14.2x       13.7x        8.0x         9.5x       10.1x        9.6x      5.4x      7.2x      6.8x     6.5x
Schlumberger                                        SLB            $72.68         72.00       44.91      86,899                  Buy           87         16.2x     26.3x          24.7x       18.8x       11.5x       15.1x        14.7x       12.3x      9.4x     12.9x     12.4x    10.3x
Smith International                                 SII            $49.15         46.19       22.12      12,209               Neutral          44         13.0x     60.5x          44.8x       25.4x        9.8x       20.1x        19.4x       14.8x      7.0x     13.1x     11.2x     8.3x
Weatherford International                           WFT            $17.73         23.75       14.63     13,109                   Buy           23          8.8x     35.1x          37.3x       17.7x        5.8x       10.0x            9.5x     7.3x      7.1x     11.4x     10.3x     8.0x

AVERAGE                                                                                                                                                   15.3x     28.7x          27.2x       19.0x      12.2x        15.7x        15.5x      12.6x       8.7x     11.9x     11.1x    9.2x

HISTORICAL 10-YEAR FORWARD MULTIPLES                                                                                                                                               27.6x                                            14.7x                                     11.1x


OFFSHORE DRILLERS
Diamond Offshore                                    DO             $85.60        $108.78 $69.64        $11,901                   Buy         $105          8.7x       8.6x         10.4x        9.8x        7.2x         6.9x           7.7x     7.3x      5.6x      5.5x      6.0x     5.7x
ENSCO International                                 ESV            $51.95         51.30       28.07       7,404               Neutral          46          6.3x       9.5x         13.6x       11.3x        5.4x         7.5x           9.6x     8.1x      4.0x      5.6x      7.4x     6.3x
Noble Corporation                                   NE             $43.63         45.60       26.53      11,229               Neutral          44          7.5x       6.8x          8.1x        8.8x        6.1x         5.4x           5.9x     6.2x      5.0x      4.6x      5.4x     5.7x
Pride International                                 PDE            $33.40         34.67       18.53       5,865                  Buy           38          9.0x     15.1x          22.6x       11.2x        6.8x       10.1x        13.5x        7.8x      5.9x      9.7x     13.1x     7.4x
Rowan Companies                                     RDC            $32.50         32.03       14.75       3,700               Neutral          29          8.1x     10.9x          14.3x       22.0x        6.2x         7.2x           8.3x     9.9x      4.6x      5.9x      6.7x     8.1x
Seahawk Drilling                                    HAWK           $19.53         35.70       17.54           231             Neutral          22           n/a           n/a           n/a       n/a        n/a         8.4x            n/a     8.1x       n/a       n/a       n/a     8.2x
Transocean                                          RIG            $89.89         94.88       63.25      28,913                  Buy          108          6.2x       7.9x         10.2x        8.3x        5.4x         6.1x           6.8x     5.6x      5.5x      6.3x      7.2x     6.1x

AVERAGE                                                                                                                                                    7.6x      9.8x          13.2x       11.9x        6.2x         7.4x           8.6x     7.6x      5.1x      6.3x      7.6x    6.8x

HISTORICAL 10-YEAR FORWARD MULTIPLES                                                                                                                                                      -                                         12.5x                                     12.3x


LAND DRILLERS
                             2
Helmerich & Payne                                   HP             $43.21         $49.13 $26.64          $4,580               Neutral         $42          9.3x     17.1x          18.3x       14.5x        6.5x         9.0x           8.9x     7.8x      5.1x      6.9x      6.9x     6.3x
Nabors Industries                                   NBR            $22.61         27.05       13.75       6,436               Neutral          22          7.4x     16.9x          22.5x       14.5x        4.7x         6.1x           6.4x     5.4x      5.6x      6.9x      6.9x     5.9x
Patterson-UTI Energy                                PTEN           $15.64         18.67       11.38       2,402               Neutral          15          6.6x           n/a           n/a    35.0x        3.9x         9.4x           7.1x     5.9x      2.8x      9.8x      6.7x     5.3x

AVERAGE                                                                                                                                                    7.8x     17.0x          20.4x       21.3x        5.0x         8.2x           7.5x     6.4x      4.5x      7.9x      6.8x    5.8x
HISTORICAL 10-YEAR FORWARD MULTIPLES                                                                                                                                                      -                                         11.2x                                      9.7x

SP500                                                SPX           1217.28        1213.9 835.45                                                           18.6x     19.7x          15.5x       13.3x
OSX                                                  OSX            228.22        221.56 142.45
1
    Estimates for companies not covered by UBS are based on I/B/E/S consensus
2
    Estimates based on calendar year

Source: FactSet and UBS estimates


Table 21: UBS estimates and other metrics
                                                                                                                                                                                               Calendar Year
                                                        Debt/        Net Debt/       Market              Y-O-Y Earnings Growth                       Earnings Per Share                             Cash Flow Per Share                                     EBITDA
                                                       Capital        Capital         Cap             08-09E     09-10E    10-11E             2008       2009    2010E          2011E           2008     2009    2010E          2011E            2008     2009    2010E       2011E

                                                                                     (in mil)
OIL SERVICES
Baker Hughes                                bhi           20%            2%           $16,899         -64%           9%         39%          $5.36      $1.90     $2.07         $2.89          $7.42     $4.23      $4.65       $5.70          $3,079   $1,705    $1,897     $2,354
Cameron International1                      cam           24%           -12%           11,571         -14%          -3%         26%           2.68       2.31      2.24          2.82           3.17      2.87       2.82        3.56           1,089     930       993       1,184
Dril-Quip Inc 1                             DRQ           0%            -28%              2,785        5%            4%         20%           2.62       2.75      2.86          3.42           3.13      3.18       2.87        3.70            193      181       173        206
FMC Technologies 1                          fti           28%           -3%               8,506        -2%          -9%         19%           2.94       2.87      2.61          3.11           3.31      3.48       3.56        4.00            640      545       589        670
Halliburton                                 hal           34%           10%            31,650         -54%           4%         49%           2.92       1.34      1.40          2.08           3.72      2.34       2.53        3.36           4,707    2,978     3,212      4,247
                             1
National Oilwell Varco                      nov           6%            -12%           19,384         -24%          -16%         3%           5.10       3.89      3.26          3.37           5.80      4.87       4.60        4.83           3,285    2,459     2,609      2,703
Schlumberger                                slb           22%            4%            86,899         -38%           7%         31%           4.48       2.77      2.95          3.86           6.33      4.81       4.95        5.91           9,342    6,784     7,085      8,544
Smith International                         sii           29%           16%            12,209         -78%          35%         76%           3.77       0.81      1.10          1.93           5.04      2.44       2.54        3.32           1,925    1,024     1,199      1,614
Weatherford International                   wft           41%           40%            13,109         -75%          -6%         111%          2.00       0.51      0.47          1.00           3.05      1.76       1.87        2.42           2,750    1,711     1,905      2,457

AVERAGE                                                   23%            2%               -           -38%           3%          42%




OFFSHORE DRILLERS
Diamond Offshore                            DO            29%           10%           $11,901          1%           -17%         6%          $9.84      $9.90     $8.24         $8.77         $11.91    $12.39     $11.16    $11.75            $2,227   $2,252    $2,084     $2,193
ENSCO International                         ESV           5%            -16%              7,404       -33%          -31%        20%           8.24       5.49      3.81          4.58           9.58      6.96       5.41        6.43           1,614    1,160      875       1,021
Noble Corporation                           NE            10%           -1%            11,229          10%          -16%         -8%          5.85       6.43      5.40          4.95           7.19      8.01       7.35        7.04           2,275    2,448     2,083      1,987
Pride International                         PDE           22%            8%               5,865       -40%          -33%        103%          3.72       2.22      1.47          2.99           4.92      3.30       2.48        4.30           1,060     645       477        851
Rowan Companies                             RDC           22%            5%               3,700       -26%          -24%        -35%          4.01       2.98      2.27          1.48           5.26      4.48       3.92        3.30            843      667       584        481
Seahawk Drilling                            HAWK          0%            -17%                  231      n/a          105%         n/a           n/a      (2.63)    (5.41)        (1.88)           na       2.34      (1.12)       2.41            255        8        (45)       18
Transocean                                  RIG           36%           33%            28,913         -21%          -23%        23%          14.42      11.42      8.79         10.83          16.58     14.77      13.29       15.95           7,164    6,216     5,499      6,480

AVERAGE                                                   18%            3%               -           -18%           -6%         18%


LAND DRILLERS
                         2
Helmerich & Payne                           HP            15%           10%            $4,580         -46%          -7%         26%          $4.65      $2.53     $2.36         $2.98          $6.62     $4.82      $4.87       $5.53           $964     $712      $706       $782
Nabors Industries                           NBR           42%           31%               6,436       -56%          -25%        55%           3.04       1.33      1.00          1.56           4.83      3.72       3.51        4.18           1,663    1,343     1,329      1,572
Patterson-UTI Energy                        PTEN          0%            -2%               2,402       -108%         -172%        n/a          2.35      (0.19)     0.14          0.45           4.06      1.66       2.19        2.63            827      239       353        447

AVERAGE                                                   19%           13%               -           -70%          -68%         41%
1
    Estimates for companies not covered by UBS are based on I/B/E/S consensus
2
    Estimates based on calendar year



Source: UBS estimates and FactSet



                                                                                                                                                                                                                                                                            UBS 59
US Oil Service & Drilling 26 April 2010




                                          UBS 60
US Oil Service & Drilling 26 April 2010




    Statement of Risk

Oilfield service and drilling stocks, are among the most volatile in the equity
market. Furthermore, industry conditions and activity levels are subject to
numerous risks, including, weather, commodity price changes, political events
in numerous countries around the world, global and regional economic
conditions, rapidly changing earnings conditions, merger and acquisition activity
by its customers (oil companies), changing technologies, and access to capital
both within the industry and for its customers. Land drilling companies are
susceptible to a number of operational and macroeconomic risks. Oil and gas
fundamentals are the primary drivers of onshore rig demand and therefore have
a strong impact on dayrates and rig utilization levels. Supply also responds to
changes in commodity prices, which may be volatile. Any increases in supply
pose an additional risk to utilization and economics. Additionally,
macroeconomic health drives demand for energy and therefore hydrocarbons. In
a pronounced weak economic environment, land drilling demand is at risk from
diminished activity.




    Analyst Certification

Each research analyst primarily responsible for the content of this research
report, in whole or in part, certifies that with respect to each security or issuer
that the analyst covered in this report: (1) all of the views expressed accurately
reflect his or her personal views about those securities or issuers; and (2) no part
of his or her compensation was, is, or will be, directly or indirectly, related to
the specific recommendations or views expressed by that research analyst in the
research report.




                                                                                       UBS 61
US Oil Service & Drilling 26 April 2010


Required Disclosures

This report has been prepared by UBS Securities LLC, an affiliate of UBS AG. UBS AG, its subsidiaries, branches and
affiliates are referred to herein as UBS.

For information on the ways in which UBS manages conflicts and maintains independence of its research product;
historical performance information; and certain additional disclosures concerning UBS research recommendations,
please visit www.ubs.com/disclosures. The figures contained in performance charts refer to the past; past performance is
not a reliable indicator of future results. Additional information will be made available upon request.

UBS Investment Research: Global Equity Rating Allocations
                                                                                                        1                                2
 UBS 12-Month Rating                      Rating Category                                     Coverage                      IB Services
 Buy                                      Buy                                                        50%                            39%
 Neutral                                  Hold/Neutral                                               40%                            33%
 Sell                                     Sell                                                       11%                            24%
                                                                                                        3                              4
 UBS Short-Term Rating                    Rating Category                                     Coverage                      IB Services
 Buy                                      Buy                                               less than 1%                            29%
 Sell                                     Sell                                              less than 1%                             0%
1:Percentage of companies under coverage globally within the 12-month rating category.
2:Percentage of companies within the 12-month rating category for which investment banking (IB) services were provided within
the past 12 months.
3:Percentage of companies under coverage globally within the Short-Term rating category.
4:Percentage of companies within the Short-Term rating category for which investment banking (IB) services were provided
within the past 12 months.

Source: UBS. Rating allocations are as of 31 March 2010.
UBS Investment Research: Global Equity Rating Definitions
 UBS 12-Month Rating                      Definition
 Buy                                      FSR is > 6% above the MRA.
 Neutral                                  FSR is between -6% and 6% of the MRA.
 Sell                                     FSR is > 6% below the MRA.
 UBS Short-Term Rating                    Definition
                                          Buy: Stock price expected to rise within three months from the time the rating was assigned
 Buy
                                          because of a specific catalyst or event.
                                          Sell: Stock price expected to fall within three months from the time the rating was assigned
 Sell
                                          because of a specific catalyst or event.




                                                                                                                                   UBS 62
US Oil Service & Drilling 26 April 2010


KEY DEFINITIONS
 Forecast Stock Return (FSR) is defined as expected percentage price appreciation plus gross dividend yield over the next 12
months.
 Market Return Assumption (MRA) is defined as the one-year local market interest rate plus 5% (a proxy for, and not a
forecast of, the equity risk premium).
 Under Review (UR) Stocks may be flagged as UR by the analyst, indicating that the stock's price target and/or rating are
subject to possible change in the near term, usually in response to an event that may affect the investment case or valuation.
 Short-Term Ratings reflect the expected near-term (up to three months) performance of the stock and do not reflect any
change in the fundamental view or investment case.
Equity Price Targets have an investment horizon of 12 months.

EXCEPTIONS AND SPECIAL CASES
UK and European Investment Fund ratings and definitions are: Buy: Positive on factors such as structure, management,
performance record, discount; Neutral: Neutral on factors such as structure, management, performance record, discount; Sell:
Negative on factors such as structure, management, performance record, discount.
Core Banding Exceptions (CBE): Exceptions to the standard +/-6% bands may be granted by the Investment Review
Committee (IRC). Factors considered by the IRC include the stock's volatility and the credit spread of the respective company's
debt. As a result, stocks deemed to be very high or low risk may be subject to higher or lower bands as they relate to the rating.
When such exceptions apply, they will be identified in the Company Disclosures table in the relevant research piece.



Research analysts contributing to this report who are employed by any non-US affiliate of UBS Securities LLC are not
registered/qualified as research analysts with the NASD and NYSE and therefore are not subject to the restrictions contained in
the NASD and NYSE rules on communications with a subject company, public appearances, and trading securities held by a
research analyst account. The name of each affiliate and analyst employed by that affiliate contributing to this report, if any,
follows.
UBS Securities LLC: Angie Sedita; Sasha Sanwal; Alston Mason.


Company Disclosures
 Company Name                                      Reuters    12-mo rating Short-term rating             Price        Price date
                      4, 5, 6b, 6c, 7, 16
 Baker Hughes Inc.                                   BHI.N         Neutral               N/A          US$54.18       23 Apr 2010
                                           16
 Diamond Offshore Drilling Inc.                      DO.N             Buy                N/A          US$85.60       23 Apr 2010
             16
 ENSCO PLC                                          ESV.N          Neutral               N/A          US$51.95       23 Apr 2010
                 4, 6a, 16
 Halliburton Co.                                    HAL.N             Buy                N/A          US$34.96       23 Apr 2010
                             16
 Helmerich & Payne Inc                               HP.N          Neutral               N/A          US$43.21       23 Apr 2010
                                   4, 5, 6a, 6b,
 Nabors Industries Limited
 6c, 7, 16                                          NBR.N           Neutral                N/A        US$22.61       23 Apr 2010
                          16
 Noble Corporation                                    NE.N          Neutral                N/A        US$43.63       23 Apr 2010
                                  16
 Patterson-UTI Energy, Inc.                        PTEN.O           Neutral                N/A        US$15.64       23 Apr 2010
                           16
 Pride International Inc.                           PDE.N             Buy                  N/A        US$33.40       23 Apr 2010
                            5, 16
 Rowan Companies Inc.                               RDC.N           Neutral                N/A        US$32.50       23 Apr 2010
                    3, 16, 18a
 Schlumberger Ltd.                                   SLB.N            Buy                  N/A        US$72.68       23 Apr 2010
                        5, 16
 Seahawk Drilling Inc.                             HAWK.O           Neutral                N/A        US$19.53       23 Apr 2010
                            2, 3, 4, 5, 6a, 16,
 Smith International Inc.
 19                                                   SII.N   Neutral (CBE)                N/A        US$49.15       23 Apr 2010
                       5, 6c, 13, 16, 18b
 Transocean Ltd.                                     RIG.N             Buy                 N/A        US$89.89       23 Apr 2010
                                4, 6a,
 Weatherford International Ltd.
 16, 22                                             WFT.N              Buy                 N/A        US$17.73       23 Apr 2010

Source: UBS. All prices as of local market close.
Ratings in this table are the most current published ratings prior to this report. They may be more recent than the stock pricing
date

2.        UBS AG, its affiliates or subsidiaries has acted as manager/co-manager in the underwriting or placement of securities of
          this company/entity or one of its affiliates within the past 12 months.




                                                                                                                             UBS 63
US Oil Service & Drilling 26 April 2010


3.      UBS Securities LLC is acting as advisor to Smith International on its announced agreement to be acquired by
        Schlumberger.
4.      Within the past 12 months, UBS AG, its affiliates or subsidiaries has received compensation for investment banking
        services from this company/entity.
5.      UBS AG, its affiliates or subsidiaries expect to receive or intend to seek compensation for investment banking services
        from this company/entity within the next three months.
6a.     This company/entity is, or within the past 12 months has been, a client of UBS Securities LLC, and investment banking
        services are being, or have been, provided.
6b.     This company/entity is, or within the past 12 months has been, a client of UBS Securities LLC, and non-investment
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6c.     This company/entity is, or within the past 12 months has been, a client of UBS Securities LLC, and non-securities
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7.      Within the past 12 months, UBS Securities LLC has received compensation for products and services other than
        investment banking services from this company/entity.
13.     UBS AG, its affiliates or subsidiaries beneficially owned 1% or more of a class of this company`s common equity
        securities as of last month`s end (or the prior month`s end if this report is dated less than 10 days after the most recent
        month`s end).
16.     UBS Securities LLC makes a market in the securities and/or ADRs of this company.
18a.    The U.S. equity strategist, a member of his team, or one of their household members has a long common stock position
        in Schlumberger.
18b.    The U.S. equity strategist, a member of his team, or one of their household members has a long common stock position
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19.     Because this company is an announced takeout candidate, UBS believes the security presents lower-than-normal risk.
        We have widened its rating band to +6%/-10% compared with +6%/-6%, respectively, under the normal rating system.
22.     UBS AG, its affiliates or subsidiaries held other significant financial interests in this company/entity as of last month`s end
        (or the prior month`s end if this report is dated less than 10 working days after the most recent month`s end).


Unless otherwise indicated, please refer to the Valuation and Risk sections within the body of this report.



For a complete set of disclosure statements associated with the companies discussed in this report, including information on
valuation and risk, please contact UBS Securities LLC, 1285 Avenue of Americas, New York, NY 10019, USA, Attention:
Publishing Administration.




                                                                                                                                 UBS 64
US Oil Service & Drilling 26 April 2010




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