WorleyParsons Commodity pain continues

Transcription

1 AUSTRALIA WOR AU Price (at 06:59, 22 Jan 2016 GMT) Neutral A$3.60 Valuation - Sum of Parts A$ month target A$ month TSR % Volatility Index High GICS sector Energy Market cap A$m day avg turnover A$m 7.0 Number shares on issue m Investment fundamentals Year end 30 Jun 2015A 2016E 2017E 2018E Revenue m 8, , , ,856.0 EBIT m Reported profit m Adjusted profit m Gross cashflow m CFPS CFPS growth % PGCFPS x PGCFPS rel x EPS adj EPS adj growth % PER adj x PER rel x Total DPS Total div yield % Franking % ROA % ROE % EV/EBITDA x Net debt/equity % P/BV x WOR AU vs ASX 100, & rec history Note: Recommendation timeline - if not a continuous line, then there was no Macquarie coverage at the time or there was an embargo period. Source: FactSet, Macquarie Research, January 2016 (all figures in AUD unless noted) 22 January 2016 Macquarie Securities (Australia) Limited Commodity pain continues Event Review of fundamentals. Impact Further declines in oil and commodity prices means there is no let-up in the tough operating environment and WOR s earnings downgrade cycle is likely to continue with both revenue and margins under pressure. The stock price has moved down partly in anticipation of this but also reflecting balance sheet concerns. Net debt to EBITDA increased from 0.9x to 2.0x in FY15 and was impacted by adverse FX movements, earnings weakness including some one-off items (onerous lease charges). We note that WOR has an FX mismatch whereby the majority of WOR s debt is in US$ whilst only 20% of earnings are in US$. This is again likely to be a negative factor in 1H16 given further A$ weakness. We forecast 2.5x net debt to EBITDA in 1H16 (based on WOR s definition). 1H16 comps challenging as effects of oil decline were only for 3-4 mths in 2H15. We f cast 38% decline in 1H16 earnings, including previously disclosed $25m restructuring charge. Earnings are 2H-biased, reflecting seasonality re N America (39% of revenue). Our 1H:2H NPAT split is 41:59. Oil & gas capex budgets available to date point to a 15% average decline in spending from the majors in CY16. This continues to be a directional indicator for WOR s revenues, albeit part of the spending decline reflects a wind-down in major projects, which has already impacted WOR in prior years as well as WOR having 15% opex exposure (still impacted but more resilient). We run a scenario analysis to stress-test balance sheet. WOR has ample liquidity ($847m in available facilities and $382m cash in FY15) and book gearing at 28% is within 25-35% target range. However, the key metric in focus is net debt to EBITDA. We have sensitised net debt to EBITDA gearing to various revenue and margin scenarios in FY17. Covenants for industry peers such as AmecFW are at 3.25x net debt to EBITDA, which we think is reasonable guide for WOR. For this level to be breached, this would require BOTH a 20% revenue fall and an 90bp decline in EBIT margins in FY17 (off an already depressed base). We factor in a 5% decline in a group revenue (-10% for Hydrocarbons in constant currency) and 30bp margins decline in FY17. We expect WOR to more aggressively target its cost and overhead base in order to mitigate the impact of very challenging conditions. Earnings and target price revision FY16, 17 and 18 eps estimates reduced by 5%, 23% and 26% respectively. Price catalyst 12-month price target: A$4.75 based on a Sum of Parts methodology. Catalyst: 24 Feb 1H16 result Action and recommendation Neutral with a reduced $4.75 TP ($7.00 prior). Cons. earnings are yet to fully reflect the impact of further oil and commodity declines. Balance sheet concerns are also likely to persist with 1H16 debt and gearing levels likely to be elevated. Whilst an equity raise is not part of our base case, there is sufficient uncertainty to keep us on the sidelines despite extent of share price fall. Please refer to page 10 for important disclosures and analyst certification, or on our website

2 Analysis Fig 1 Both revenue and margins under pressure; margin weakness has hurt the most in recent years 12.0 $ bn 12.0% % 8.0% % % 2.0% A 2006A 2007A 2008A 2009A 2010A 2011A 2012A 2013A 2014A 2015E 2016E 2017E Revenue ($bn) Revenue constant currency $bn EBIT margin 0.0% Fig 2 WOR s Hydrocarbons revenue vs oil & gas capex (IOCs) US$bn A$m 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 CY2008a CY2009a CY2010a CY2011a CY2012a CY2013a CY2014a CY2015e CY2016e Oil & gas capex (majors) WOR Hydrocarbons revenue WOR Hydrocarbons revenue constant currency 0 It can be seen from the above chart that WOR s hydrocarbons revenues have historically been highly correlated to oil & gas capex. In the last 2 years the relationship has lessened slightly, due to WOR s reduced involvement in major projects. Total capex budgets in 2015 for a basket of large IOCs (Shell, Conoco, Chevron, BP, Suncor, Exxon) are down 18% on pcp. Part of this decline reflects completion of major projects which was already occurring prior to recent oil price reduction. We forecast a 9% reduction in WOR s CY15 hydrocarbons revenue (constant currency) which is less than system (-18%). Oil & gas capex budgets available to date point to a 15% average decline in spending from the majors in CY16 and we forecast a -10% decline in WOR s constant currency revenues in CY16 with WOR s low major project and 20-25% brownfield exposures both moderating factors. We note that WOR s FY15 group aggregated revenue was only down 2% in A$ terms with WOR benefiting from weaker A$. We forecast -6% and -5% reduction in A$ aggregated revenue in FY16 and FY17 respectively. 22 January

3 Fig 3 WOR EBIT margins vs peers 10% 9% 8% 7% 6% 5% 4% 3% 2% 1% 0% Worley ($A) AMEC Wood Group Fluor Jacobs Engineering KBR WOR s margins have substantially underperformed global peers in recent years. Part of this reflects some own-goals re issues in Cord and Infrastructure business and also restructuring costs taken above the line. Sector margins remain under pressure as customers seek cost out and price concessions and competitive behaviour intensifies given a lack of new work. Fig 4 WOR NTM EPS vs oil prices Aug Feb Aug Feb Aug-15 Brent NTM EPS The above chart highlights the correlation between the oil price and WOR s earnings. Since Oct- 14, the oil price has fallen by 70% and consensus NTM earnings have declined by 43%. The share price continues to correlate extremely closely with the oil price. 22 January

4 EBIT margin EBIT margin Macquarie Wealth Management Fig 5 WOR ND:EBITDA x FY10a FY11a FY12a FY13a FY14a FY15a FY16f FY17f FY15 saw an appreciable lift in gearing as measured in net debt to EBITDA terms. Statutory is net debt to EBITDA is1.8x (FY15) although this is 2.0x based on WOR s definition which includes market to market of cross currency swaps (as per FY15 results presentation). In 1H16, we estimate A$975m of net debt, up from $854m in June, mainly due to FX impact of lower A$ on WOR s US$ debt. We forecast 2.4x net debt to EBITDA in both FY16 and 17. In terms of interest cover (EBIT:Net interest expense), we forecast 4.6x and 4.2x in FY16 and 17 respectively vs 6.4x reported in FY15. WOR has ample liquidity ($847m in available facilities and $382m cash in FY15) and book gearing (net debt to debt plus equity) at 28% is within 25-35% target range. We estimate gearing is 43% if include $670m of operating lease commitments (WOR has reduced the latter by $129m in last 12 months). As per FY15 results presentation, WOR has an average debt maturity of 3.5x with WOR s debt in the form of USPP, bilateral and syndicated debt. Fig 6 Running gearing sensitivities across various revenue, margin scenarios FY17e EBIT FY17 revenue y-y ch 0% -5% -10% -15% -20% 4.50% % % % % % Net debt to EBITDA (x) FY17 revenue y-y ch 0% -5% -10% -15% -20% 4.50% % % % % % We have run a scenario analysis to stress-test the balance sheet. The key metric in focus is net debt to EBITDA. We have sensitised net debt to EBITDA gearing to various revenue and margin scenarios in FY17. Covenants for industry peers such as AmecFW are at 3.25x net debt to EBITDA, which we think is a reasonable proxy for WOR (WOR has not disclosed its actual covenant level). For this level to be breached, this would require BOTH a 20% revenue fall in and a 90bp decline in EBIT margins in FY17. This in turn would require EBITDA of A$295m vs $466m in FY15 and compared to our $405m and $368m in FY16e and FY17e. In FY17e, we factor in a 5% decline in group revenue (-10% for Hydrocarbons in constant currency) and 30bp margin decline. This is off an already depressed FY16 base. 22 January

5 We expect WOR to more aggressively target its cost and overhead base in response to very challenging conditions (we note that WOR has 148 offices in 46 countries). This should provide at least partial mitigation to buffer underlying margin pressure in an increasingly competitive market. Fig 7 WOR at a significant discount to peers (PE) 60% 40% Currentlya 44% discount 20% 0% -20% -40% -60% Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 WOR is trading at a significant discount to global peers, which reflects earnings and more latterly balance sheet concerns. WOR s share price is lagging peers on a 12-month view, which reflects extent of consensus earnings downgrades. WOR has also lagged peers on a 3-month view. We note that WOR has less diversity than Fluor, Jacobs, KBR and Amec and is more exposed to oil & gas / resources. Further downward revisions to our oil price forecasts but some light on horizon later this year We recently revised our house oil price forecasts: No Pain, No Gain. Our US-based oil analyst, Vikas Dwivedi, believes that through 1H16, the market will continue to remain over-supplied with abnormally high inventory levels. This has driven a $13 reduction in our 2016 Brent price forecast (to $45). However, we believe that a contraction in supply growth (supply growth rates achieved in 2015 are not achievable, in our view) coupled with our belief that reasonably healthy demand growth will continue, indicates a return to seasonally normal S/D balances by 3Q16 (despite new Iranian supply). Due to the storage overhang and in spite of S/D balances normalizing, we expect 2017 Brent prices to average $61, down from our previous target of $67. We forecast a $68 average price in January

6 Fig 8 Divisional snapshot further margin contraction expected in FY16 and FY17 Divisional table (A$) 1H14a 2H14a FY14a 1H15a 2H15a FY15a FY16e FY17e Aggregated revenue Hydrocarbons 2, , , , , , , ,768.8 % ch -1% -2% -1% -1% 0% -1% -5% -6% Minerals, Metals, Chemicals , % ch -2% -6% -4% -22% -8% -15% -5% -4% Infrastructure and Environment % ch -10% -19% -15% -4% 20% 7% -11% -2% Total aggregated revenue 3, , , , , , , ,457.0 % ch -2% -5% -3% -5% 1% -2% -6% -5% EBIT Hydrocarbons % ch -14% 6% -3% 19% -25% -7% -12% -10% Minerals, Metals, Chemicals % ch -10% -20% -15% -49% -68% -58% -44% -5% Infrastructure % ch -41% -31% -37% -100% 17% -56% 9% -22% Other % ch 0% -3% -1% -15% -7% -11% -6% -5% Amortisation Total EBIT % ch -29% 0% -14% 1% -36% -21% -19% -13% Margins Hydrocarbons 7.6% 11.4% 9.5% 9.2% 8.6% 8.9% 8.2% 7.9% Minerals, Metals, Chemicals 9.8% 9.9% 9.8% 6.3% 3.4% 4.9% 2.9% 2.8% Infrastructure 4.9% 3.3% 4.1% 0.0% 3.2% 1.7% 2.1% 1.7% Other -2.6% -2.3% -2.4% -2.3% -2.1% -2.2% -2.2% -2.2% Total margin 4.7% 7.7% 6.1% 5.0% 4.8% 4.9% 4.2% 3.9% As a re-cap from FY15 result, Hydrocarbons FY15 EBITA of $475m was below our $487m forecast and down on last year's $627m. 1H margins of 8.9% vs our 9.3% and vs pcp of 9.6%. Aggregated revenue down 1%. In FY16, we forecast a 5% decline in Hydrocarbons revenue and a 70bp decline in margins. This incorporates $25m of further restructuring costs in 1H16 (as previously disclosed) as well as underlying margin pressure given very competitive market conditions. We note there was $49m of restructuring and onerous lease costs taken in Q415; however restructuring costs are likely to be ongoing given deteriorating end market conditions. Minerals & Metals EBITA of $44m was below our $55m and pcp of $131m. Margins 4.9% down on pcp of 10.1%. 2H represented a big drop-off, reflecting tough sector backdrop and completion of Fairview chemicals project. We assume 2H15 run-rate flows into FY16. Infrastructure EBITA of $17m well above estimate of $0.5m. A nice recovery from a poor 1H after WOR right-sized the cost base. At its end of October AGM, WOR provided generally negative commentary re FY16 outlook. Most recent fall in oil price has caused Hydrocarbons customers to remain cautious re near-term investment plans. We expect conditions in the Minerals and Metals sector to remain depressed. Uncertain market conditions for our customers expected for at least the remainder of FY16." WOR continues to right-size its cost base and is taking a further $20-30m in redundancy and related costs in 1H16 with offsetting benefits to flow in 2H16. We understand this is broadly spread across the business. This compares to -$45m of pre-tax redundancy / onerous lease costs taken above the line in FY15. Staff numbers 30,500 as at end of September vs 31,400 disclosed at end of July. 22 January

7 Fig 9 WOR trading at a valuation discount to peers across all measures PER Adjusted EV/EBITDA Adj EV/EBIT Adj EPS growth ROE Net Debt to EBITDA FCF yield Div yield YE FY15e FY16e FY15e FY16e FY15e FY16e FY15e FY16e FY15e FY15e FY16e FY15 FY16 FY15 FY16 Worley Parsons Jun % -25% 9% % 19% 16% 12% Fluor Dec % -11% 18% % 6% 1% 1% John Wood Group Dec % -22% 12% % 9% 4% 4% Amec Dec % -20% 14% % 13% 12% 12% KBR Dec na na 20% % 19% 1% 1% SNC-Lavalin Group Dec 18.5 na 9.1 na 11.5 na 31% na 125% Jacobs Engineering Dec % -11% 7% % 4% 0% 0% Chicago Bridge & Iron Co Dec % -211% -19% % 16% 1% 1% Technip Dec % 12% 13% % 9% 5% 6% McDermott International Dec na % 230% na Global peer average (ex MDR, KBR, SNC) % -44% 8% WOR prem/(disc) -54% -48% -26% -26% -34% -20% Source: Company data, data based on Macquarie forecasts except SNC, McDermott, which are sourced from Factset. January In the above table we have adjusted global peer group multiples to a June Y/E to enable like-forlike comparisons with WOR. WOR s closest peers are Jacobs Engineering, Wood Group and Amec, as these are service/consulting companies similar to WOR as well as having a comparable risk profile. WOR has less US exposure than the likes of Fluor and Jacobs. WOR has traded at an average forward PE of 17.6x since listing in 2003 compared to an average forward PE for its peers of 14.7x. This represents a 20% premium. We note that WOR as well as its peers traded at forward PE s of around 25-30x during reflecting the last share market and oil price peak. This also coincided with very strong backlog growth for the sector. Regression analysis by our US E&C team has shown a clear link between PE multiples and backlog growth. WOR is now at a 47% discount to its global peers on a FY16E PER basis. WOR is trading at a discount to its closest peers Amec, Jacobs and Wood Group. WOR is also trading below its global peers on an EV/EBITDA and EV/EBIT basis. It s worth noting that WOR has a higher level of debt than its peers which is one the key areas of concern at present. Fig 10 FY17e sum-of-parts valuation Valuation FY17e EBITA Multiple- Low Multiple - High Value - Low Value - High Hydrocarbons Minerals, Metals, Chemicals Infrastructure and Environment Other (Unallocated) Total Less Net Debt (FY16e average) Value Diluted Shares on Issue Value per share $4.76 $5.86 Average of SoP $5.31 Source: Macquarie Research, Jan 2016 In our sum of parts, we have ascribed x EBITA for WOR's Hydrocarbons division. For WOR's MMC and E&I divisions, we have applied 7-8x EBITA. We note that Fluor is trading on FY16 EV/EBIT of 6.6x (Fluor has one of the largest global E&C businesses in Resources sector). This results in a $ /sh valuation range. Our $4.75 TP represents the low end of our FY17 sum of parts valuation ($7.00 prior). 22 January

8 Interim results 1H15(a) 2H15(a) 1H16(e) 2H16(e) Profit & Loss 2014A 2015A 2016E 2017E Revenue Revenue $m % -4% % ch 29% -9% -6% -5% EBITDA $m EBITDA $m Depreciation $m Depreciation $m Amortisation of goodwill $m Amortisation of intangibles $m EBIT $m EBIT $m Net Interest expense $m Net interest expense $m Pre-Tax Profit $m Pre-Tax Profit $m Tax Expense $m Tax Expense $m Net Profit $m Net Profit $m Outside equity interests $m Outside equity interests $m Net Abn/Extra $m Net Abnormals/Extra. $m Reported Earnings $m Reported Earnings $m Adjusted Earnings $m Adjusted Earnings $m Gross Cashflow $m Gross Cashflow $m EPS (Adj/dil) c EPS (adj/diluted) c EPS growth % EPS growth % -17.5% -22.3% -24.0% -15.9% CFPS c PE (adj) x CFPS Growth % CFPS c EBITDA/Sales % CFPS Growth % EBIT/Sales % PGCFPS x Earnings Split % DPS c Revenue Growth % Yield % EBIT Growth % Franking % Profit and Loss ratios 2014A 2015A 2016E 2017E Cashflow Analysis 2014A 2015A 2016E 2017E Revenue Growth % EBIT Growth % Pre-tax Profit $m EBITDA/Sales % Depreciation & Amortisation $m EBIT/Sales % Tax Paid $m Effective tax rate % Gross cashflow $m Payout ratio % Changes in working capital $m EV/EBIT x Other $m EV/EBITDA x Operating Cashflow $m EV/Sales x Acquisitions $m Capex - Plant & Equip. $m Balance sheet ratios Asset Sales $m ROE % Other $m ROA % Investing cashflow $m ROFE % Dividend (ordinary) $m Net Debt $m Equity raised $m Net Debt/Equity % Net change in borrowings $m Interest Cover x Financing cashflow $m Price/NTA x NTA per share $ Net Change in cash/debt $m EFPOWA m Historical performance 2011A 2012A 2013A 2014A Balance Sheet 2014A 2015A 2016E 2017E Cash $m Revenue $m Receivables $m EBITDA $m Inventories $m Depreciation/Amortisation $m Investments $m EBIT $m Property, plant & equipment $m Net interest expense $m Intangibles $m Pre-Tax Profit $m Other Assets $m Tax Expense $m Total Assets $m Net Profit $m Payables $m Net Abn/Extra $m Short Term Debt $m Long Term Debt $m EPS (adj/dil) c Other Liabilities $m EPS growth % Total Liabilities $m Ordinary DPS c Shareholders Funds $m EBITDA/Sales % Minority Interests $m EBIT/Sales % Total Shareholders Equity $m ROE % ROFE % Total Funds employed $m 5, , , ,861.3 EFPOWA m Divisional Information 2014A 2015A 2016E 2017E Source: Company data, Macquarie Research, Jan 2016 Aggregate revenue EBITA Oil and Gas Minerals and Metals Industrial and Infrastructure Other Total January

9 Fundamentals Macquarie Wealth Management Macquarie Quant View The quant model currently holds a reasonably negative view on. The strongest style exposure is Valuations, indicating this stock is under-priced in the market relative to its peers. The weakest style exposure is Price Momentum, indicating this stock has had weak medium to long term returns which often persist into the future. 258/560 Global rank in Energy % of BUY recommendations 17% (1/6) Number of Price Target downgrades 1 Number of Price Target upgrades 0 Attractive Quant Local market rank Global sector rank Displays where the company s ranked based on the fundamental consensus Price Target and Macquarie s Quantitative Alpha model. Two rankings: Local market (Australia & NZ) and Global sector (Energy) Macquarie Alpha Model ranking A list of comparable companies and their Macquarie Alpha model score (higher is better). Factors driving the Alpha Model For the comparable firms this chart shows the key underlying styles and their contribution to the current overall Alpha score. KBR Fluor Jacobs Engineering Group KBR Fluor Jacobs Engineering Group Wood Group 0.3 Wood Group SNC-Lavalin Group 0.2 SNC-Lavalin Group -0.7 Amec Foster Wheeler -2.5 Amec Foster Wheeler % -80% -60% -40% -20% 0% 20% 40% 60% 80% 100% Valuations Growth Profitability Earnings Momentum Price Momentum Quality Macquarie Earnings Sentiment Indicator The Macquarie Sentiment Indicator is an enhanced earnings revisions signal that favours analysts who have more timely and higher conviction revisions. Current score shown below. Drivers of Stock Return Breakdown of 1 year total return (local currency) into returns from dividends, changes in forward earnings estimates and the resulting change in earnings multiple. KBR Fluor Jacobs Engineering Group Wood Group SNC-Lavalin Group Amec Foster Wheeler KBR Fluor Jacobs Engineering Group Wood Group SNC-Lavalin Group Amec Foster Wheeler % -40% -20% 0% 20% 40% 60% Dividend Return Multiple Return Earnings Outlook 1Yr Total Return What drove this Company in the last 5 years Which factor score has had the greatest correlation with the company s returns over the last 5 years. Operating Leverage NTM Operating Margin FY0 EPS Growth 5yr Historic Net Income Margin FY0 Price to Sales NTM Price to Sales LTM Price to Sales FY1 Cash to Total Assets FY0 Negatives Positives -24% -29% -23% -23% 29% 29% 27% 36% -40% -20% 0% 20% 40% How it looks on the Alpha model A more granular view of the underlying style scores that drive the alpha (higher is better) and the percentile rank relative to the sector and market. Alpha Model Score Valuation Growth Profitability Earnings Momentum Price Momentum Quality Capital & Funding Liquidity Risk Technicals & Trading Normalized Score Percentile relative to sector(/560) Percentile relative to market(/398) Source (all charts): FactSet, Thomson Reuters, and Macquarie Research. For more details on the Macquarie Alpha model or for more customised analysis and screens, please contact the Macquarie Global Quantitative/Custom Products Group (cpg@macquarie.com) 22 January

10 Important disclosures: Recommendation definitions Macquarie - Australia/New Zealand Outperform return >3% in excess of benchmark return Neutral return within 3% of benchmark return Underperform return >3% below benchmark return Benchmark return is determined by long term nominal GDP growth plus 12 month forward market dividend yield Macquarie Asia/Europe Outperform expected return >+10% Neutral expected return from -10% to +10% Underperform expected return <-10% Macquarie South Africa Outperform expected return >+10% Neutral expected return from -10% to +10% Underperform expected return <-10% Macquarie - Canada Outperform return >5% in excess of benchmark return Neutral return within 5% of benchmark return Underperform return >5% below benchmark return Macquarie - USA Outperform (Buy) return >5% in excess of Russell 3000 index return Neutral (Hold) return within 5% of Russell 3000 index return Underperform (Sell) return >5% below Russell 3000 index return Volatility index definition* This is calculated from the volatility of historical price movements. Very high highest risk Stock should be expected to move up or down % in a year investors should be aware this stock is highly speculative. High stock should be expected to move up or down at least 40 60% in a year investors should be aware this stock could be speculative. Medium stock should be expected to move up or down at least 30 40% in a year. Low medium stock should be expected to move up or down at least 25 30% in a year. Low stock should be expected to move up or down at least 15 25% in a year. * Applicable to Asia/Australian/NZ/Canada stocks only Recommendations 12 months Note: Quant recommendations may differ from Fundamental Analyst recommendations Financial definitions All "Adjusted" data items have had the following adjustments made: Added back: goodwill amortisation, provision for catastrophe reserves, IFRS derivatives & hedging, IFRS impairments & IFRS interest expense Excluded: non recurring items, asset revals, property revals, appraisal value uplift, preference dividends & minority interests EPS = adjusted net profit / efpowa* ROA = adjusted ebit / average total assets ROA Banks/Insurance = adjusted net profit /average total assets ROE = adjusted net profit / average shareholders funds Gross cashflow = adjusted net profit + depreciation *equivalent fully paid ordinary weighted average number of shares All Reported numbers for Australian/NZ listed stocks are modelled under IFRS (International Financial Reporting Standards). Recommendation proportions For quarter ending 31 December 2015 AU/NZ Asia RSA USA CA EUR Outperform 50.68% 61.04% 53.16% 47.90% 65.22% 43.59% (for global coverage by Macquarie, 5.33% of stocks followed are investment banking clients) Neutral 31.51% 24.66% 34.18% 47.70% 29.71% 34.62% (for global coverage by Macquarie, 5.02% of stocks followed are investment banking clients) Underperform 17.81% 14.30% 12.66% 4.39% 5.07% 21.79% (for global coverage by Macquarie, 3.78% of stocks followed are investment banking clients) WOR AU vs ASX 100, & rec history (all figures in AUD currency unless noted) Note: Recommendation timeline if not a continuous line, then there was no Macquarie coverage at the time or there was an embargo period. Source: FactSet, Macquarie Research, January month target price methodology WOR AU: A$4.75 based on a Sum of Parts methodology Company-specific disclosures: WOR AU: Macquarie and its affiliates collectively and beneficially own or control 1% or more of any class of Worleyparsons Limited's equity securities. Important disclosure information regarding the subject companies covered in this report is available at Date Stock Code (BBG code) Recommendation Target Price 27-Oct-2015 WOR AU Neutral A$ Aug-2015 WOR AU Neutral A$ May-2015 WOR AU Neutral A$ Apr-2015 WOR AU Neutral A$ Dec-2014 WOR AU Outperform A$ Dec-2014 WOR AU Outperform A$ Oct-2014 WOR AU Outperform A$ Aug-2014 WOR AU Outperform A$ Apr-2014 WOR AU Outperform A$ Feb-2014 WOR AU Outperform A$ Nov-2013 WOR AU Outperform A$ Oct-2013 WOR AU Outperform A$ Aug-2013 WOR AU Outperform A$ Jun-2013 WOR AU Outperform A$ May-2013 WOR AU Outperform A$ Apr-2013 WOR AU Outperform A$ Feb-2013 WOR AU Outperform A$29.00 Target price risk disclosures: WOR AU: Any inability to compete successfully in their markets may harm the business. This could be a result of many factors which may include geographic mix and introduction of improved products or service offerings by competitors. The results of operations may be materially affected by global economic conditions generally, including conditions in financial markets. The company is exposed to market risks, such as changes in interest rates, foreign exchange rates and input prices. From time to time, the company will enter into transactions, including transactions in derivative instruments, to manage certain of these exposures. 22 January

11 Analyst certification: We hereby certify that all of the views expressed in this report accurately reflect our personal views about the subject company or companies and its or their securities. We also certify that no part of our compensation was, is or will be, directly or indirectly, related to the specific recommendations or views expressed in this report. The Analysts responsible for preparing this report receive compensation from Macquarie that is based upon various factors including Macquarie Group Ltd total revenues, a portion of which are generated by Macquarie Group s Investment Banking activities. General disclosure: This research has been issued by Macquarie Securities (Australia) Limited (ABN , AFSL No ) a Participant of the Australian Securities Exchange (ASX) and Chi-X Australia Pty Limited. This research is distributed in Australia by Macquarie Equities Limited (ABN , AFSL No ) ("MEL"), a Participant of the ASX, and in New Zealand by Macquarie Equities New Zealand Limited ( MENZ ) an NZX Firm. Macquarie Private Wealth s services in New Zealand are provided by MENZ. Macquarie Bank Limited (ABN , AFSL No ) ( MBL ) is a company incorporated in Australia and authorised under the Banking Act 1959 (Australia) to conduct banking business in Australia. None of MBL, MGL or MENZ is registered as a bank in New Zealand by the Reserve Bank of New Zealand under the Reserve Bank of New Zealand Act Any MGL subsidiary noted in this research, apart from MBL, is not an authorised deposit-taking institution for the purposes of the Banking Act 1959 (Australia) and that subsidiary s obligations do not represent deposits or other liabilities of MBL. MBL does not guarantee or otherwise provide assurance in respect of the obligations of that subsidiary, unless noted otherwise. This research is general advice and does not take account of your objectives, financial situation or needs. Before acting on this general advice, you should consider the appropriateness of the advice having regard to your situation. We recommend you obtain financial, legal and taxation advice before making any financial investment decision. This research has been prepared for the use of the clients of the Macquarie Group and must not be copied, either in whole or in part, or distributed to any other person. If you are not the intended recipient, you must not use or disclose this research in any way. If you received it in error, please tell us immediately by return and delete the document. We do not guarantee the integrity of any s or attached files and are not responsible for any changes made to them by any other person. Nothing in this research shall be construed as a solicitation to buy or sell any security or product, or to engage in or refrain from engaging in any transaction. This research is based on information obtained from sources believed to be reliable, but the Macquarie Group does not make any representation or warranty that it is accurate, complete or up to date. We accept no obligation to correct or update the information or opinions in it. Opinions expressed are subject to change without notice. The Macquarie Group accepts no liability whatsoever for any direct, indirect, consequential or other loss arising from any use of this research and/or further communication in relation to this research. The Macquarie Group produces a variety of research products, recommendations contained in one type of research product may differ from recommendations contained in other types of research. The Macquarie Group has established and implemented a conflicts policy at group level, which may be revised and updated from time to time, pursuant to regulatory requirements; which sets out how we must seek to identify and manage all material conflicts of interest. The Macquarie Group, its officers and employees may have conflicting roles in the financial products referred to in this research and, as such, may effect transactions which are not consistent with the recommendations (if any) in this research. The Macquarie Group may receive fees, brokerage or commissions for acting in those capacities and the reader should assume that this is the case. The Macquarie Group s employees or officers may provide oral or written opinions to its clients which are contrary to the opinions expressed in this research. Important disclosure information regarding the subject companies covered in this report is available at Macquarie Group 22 January