Quarterly Global Oil Market Imbalance

Transcription

1 Quarterly Global Oil Market Imbalance 2.5 (Mmbpd) Approximate 0.4 Mmbpd oversupply equals practical market balance Market modestly undersupplied 2H/ 16 Market Imbalance Global Oil 0.0 (0.5) (1.0) 1Q/ 14 2Q/ 14 3Q/ 14 4Q/ 14 1Q/ 15 2Q/ 15 3Q/ 15 4Q/ 15 1Q/ 16 2Q/ 16 3Q/ 16 4Q/ 16 1Q/ 17 2Q/ 17 3Q/ 17 4Q/ 17 Source: IEA, KLR Group 1

2 Non-OECD Preponderance of Oil Demand Growth 4.0 th '15-'19 (Mmbpd d) Cumulatuve Oil Demand Growt (0.5) (1.0) OECD Pacific FSU OECD Europe Non-OECD Europe North America Latin America Africa Middle East Asia (1.5) Source: IEA, KLR Group 2

3 Global Breakeven Cost of Supply ~$80 NYMEX (excluding OPEC Gulf States) $120 $110 l Supply ($/ Bbl) (1) Break keven NYMEX Cost of Oi $100 $90 $80 $70 $60 $50 $40 $30 $20 U.S. Oil Sands Latin America Global Deepwater North Sea FSU OPEC Gulf States OPEC non- Gulf States China Asia (non- China) Production-Weighted Breakeven Price (excluding OPEC Gulf States) (1) Cost of supply assuming 0% unlevered return. 3

4 OPEC Supply Growth Approximates NAM ( 15E- 19E) 4 '15-'19 (Mmbpd d) 3 2 il Supply Growth 1 Cumulative Oi 0 (1) OECD Europe Asia Africa Non-OPEC Mideast FSU OECD Pacific Latin America Biofuels OPEC NGLs North America OPEC Crude (2) Source: IEA, KLR Group 4

5 U.S. Oil Plays Need $90+ NYMEX $150 $140 rice ($/ Bbl) Requ uired NYMEX oil p $130 $120 $110 $100 $90 $80 $70 $60 $50 Eagle Ford Permian Bakken Niobrara SCOOP Mississippian 0% Unleveraged Return (Breakeven) 10%Unleveraged Return Source: Company reports, KLR Group estimates. 5

6 U.S. Liquids Supply Erodes (2H/15-4Q/16) U.S. Liquids Sup pply (Mmbpd) Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jul-17 Jan-18 Jul-18 Jan-19 Jul-19 Other Alaska GOM NGLs Permian Williston Eagle Ford Top-Down Forecast Source: HPDI, EIA, KLR Group 6

7 Capital Intensity Stabilized Last Two Years 60% 50% ~50% Capital Intensity (% Change Per Annum) 40% 30% 20% 10% ~10% ~35% ~25% ~15% ~20% ~20% 0% ~0% ~2% ~0% -10% (~10%) (~15%) -20% '99-'04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15E Source: Company reports, KLR Group 7

8 Light/Heavy Blending Displacing Imported Medium MMA Impor rts (Mmbpd) Jan 2011 Jul 2011 Jan 2012 Jul 2012 Jan 2013 Jul 2013 Jan 2014 Jul 2014 Jan 2015 Heavy Crude (API 25⁰ or less) Medium Crude (API 25⁰-35⁰) Light Crude (API 35⁰ or more) Source: EIA, KLR Group 8

9 Cushing, OK WTI Daily-Spot Price FOB (1995-Present) Dollars per barrel

10 Oil Services, Equipment & Drilling Mayer Brown s 10 th Annual Global Energy Conference May 13 th, 2015 James C. West james.west@evercoreisi.com

11 2015 E&P Spending Decline Global E&P capital expenditures set to decline by ~25% from 2014 International down 15 20% North America down 35 40% Steeper spending decline than during downturn Cash flow the key determinant to 2015 capex Historical and 2015E Spending North America E&P Spending ( E, $B) $900 $800 $700 $600 $500 $400 $300 $200 $100 Rest of the World Canada United States EVR ISI Estimate $225 $200 $175 $150 $125 $100 $75 $50 $ % 5 $ Source: EVR ISI Research $0 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14E '15E Source: EVR ISI Research

12 Global Liquids Cost Curve Higher incentives needed to sustain drilling and exploration NAM Shale average breakeven of $62/bbl Source: Rystad Energy, EVR ISI Research 6

13 2015 U.S. Oil Production Set to Decline U.S. oil production growth set to slow from pace of recent years 2015 output to rise by 8% or ~0.7 mmbpd to 9.3 below last week s 9.4 Slower than 2014 growth rateof 14% or 1.1mmbpd Slower than 2013 growth rate of 20% or 1.2 mmbpd 4Q15 production to roughly match 4Q14 production or be lower U.S. Crude Oil Production, E (mmbpd) U.S. Crude Oil Y/Y Production Growth (mmbpd) Jan 14 Jul 14 Jan 15 Jul 15 Jan 16 Jul 16 Jan U.S. Crude Oil Production Expected Production Source: EIA, EVR ISI Research E Source: EIA, EVR ISI Research 6

14 Canadian Oil Sands Projects Postponed 19 projects have been postponed Output growth of 1.2 mmbpd delayed Canadian ad a drilling gactivityty plummeting pu Canadian Rig Count 6 Name Developer Capacity (bbl/d) Pierre River Shell 200,000 Grand Rapids Cenovus 180, Narrows Lake Cenovus 130,000 MacKay River 2/3 Brion Energy 115,000 Joslyn North Total 100,000 Telephone Lake Cenovus 90,000 Black Rod Black Pearl 80, Foster Creek G Cenovus / Conoco 45,000 Christina Lake H Cenovus / Conoco 45,000 Kirby North CNR 40,000 Corner Statoil 40,000 Taiga Osum Oil Sands 35,000 Sunrise 2B Husky / BP 30,000 Great Divide/Algar Connacher 26,000 MacKay River 2/3 Suncor 20,000 Lindbergh 2 Penn Growth 18,000 Orion Osum Oil Sands 10,000 STP McKay Southern Pacific 10,000 Black Gold 1 KNOC (Harvest Energy) 10,000 Source: Platts, EVR ISI Research Range Source: Baker Hughes, EVR ISI Research NAM Drilling Activity, February 2015 Source: Baker Hughes, EIA, OPEC Secretariat, EVR ISI Research

15 Oil Market Bottoming Historically Major oil price declines historically unfold over 10 months, with peak to trough declines of 60% The bottoming typically phase unfolds over 2 months Prices tend to recover 100% of their losses over 6 months 12

16 1Q Results Ugly But Costs Well Managed The speed and severity of the downturn have been greater than anticipated Pricing is a knife fight, with concessions around 20% thus far NAM levered land names suffering highdecrementals Tone of management teams has shifted considerably over 1Q Companies who adhered to initial guidance have disappointed FX headwinds add fuel to the fire Fastest Rig Count Decline in the Past 20 Years U.S. Land Rig Count (LTM) 0% 10% 20% 30% 2014 Cycle 2008 Cycle 2001 Cycle 1997 Cycle 2,000 1,800 1,600 1,400 40% 1,200 50% 1,000 60% % Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14 Jan-15 Feb-15 Mar-15 Source: Baker Hughes, EVR ISI Research Source: Baker Hughes, EVR ISI Research 10

17 Rig Count Forecast U.S. Land Rig Count to bottom at ~800 rigs during 2Q15 Vertical rigs have fallen the hardest, down 66% from peak to trough, to 121 Directional rigs down 56% peak to trough, to 91 Horizontal rigs down 48% peak to trough, to 720 Oil rigs down 55% to 703; gas rigs down 37% to 225 2,000 U.S. Land Rig Count Forecast 2,000 U.S. Rig Count by Type 1,800 1,600 1,500 1,400 1,200 1,000 1, E E E 1Q1 2Q1 3Q1 4Q1 1Q1 2Q1 3Q1 4Q1 1Q1 2Q1 3Q1 4Q1 1Q1 2Q1 3Q1 4Q1 1Q1 2Q15 3Q15 4Q15 Source: Baker Hughes, EVR ISI Research 0 Jan 10 Jan 11 Jan 12 Jan 13 Jan 14 Jan 15 Horizontal Directional Vertical Source: Baker Hughes, EVR ISI Research 12

18 ANALYST CERTIFICATION The analysts, James West, Samantha Hoh, Cameron Schnier and Alex Nuta, primarily responsible for the preparation of this research report attest to the following: (1) that the views and opinions rendered in this research report reflect his or her personal views about the subject companies or issuers; and (2) that no part of the research analyst s compensation was, is, or will be directly related to the specific recommendations or views in this research report. DISCLOSURES This report is approved and/or distributed by International Strategy & Investment Group LLC ( ISI Group LLC ), a U.S. licensed broker dealer regulated by the Financial Industry Regulatory Authority ( FINRA ) and by International Strategy & Investment Group (UK) Limited ( ISI UK ), which is authorised and regulated in the United Kingdom by the Financial Conduct Authority. ISI Group and ISI UK are subsidiaries of Evercore Partners Inc. and collectively operate under the global marketing brand name Evercore ISI ( Evercore ISI ). The trademarks, logos and service marks shown on this report are registered trademarks of Evercore Partners Inc. The analysts and associates responsible for preparing this report receive compensation based on various factors, including the firm s total revenues, a portion of which is generated by affiliated investmentbanking transactions. Evercore ISIpublishes and disseminates research through Evercore ISI, and seeks toupdateitsresearch asappropriate, butvarious regulations may prevent this from happening in certain instances. Aside from certain industry reports published on a periodic basis, the large majority of reports are published at irregular intervals as appropriate in the analyst s judgment. Evercore ISI generally prohibits analysts, associates and members of their households from maintaining a financial interest in the securities of any company in the analyst s area of coverage. Any exception to this policy requires specific approval by Evercore ISI Compliance. Such ownership is subject to compliance with applicable regulations and disclosure. Evercore ISI also prohibits analysts, associates and members of their households from serving as an officer, director, advisory board member or employee of any company that the analyst covers. This report may include a Tactical lcall, which hdescribes a near term event or catalyst taffecting the subject company or the market overall and which his expected dto have a short term t price impact on the equity shares of the subject company. This Tactical Call is separate from the analyst s long term recommendation (Buy, Hold or Sell) that reflects a stock s forward 12 month expected return), is not a formal rating and may differ from the target prices and recommendations reflected in the analyst s long term view. Applicable current disclosures regarding the subject companies covered in this report are available at the offices of Evercore ISI, and can be obtained by writing to ISI Group LLC, Attn. Compliance, 666 Fifth Avenue, 11th Floor, New York, NY Evercore ISI and / or its affiliates, and / or their directors, officers, members and employees, may have, or have had, interests or qualified holdings on issuers mentioned in this report. Evercore ISI and / or its affiliates may have, or have had, business relationships with the companies mentioned in this report.. Additional information on securities or financial instruments mentioned in this report is available upon request. Ratings Definitions Current Ratings Definition 21

19 22 Evercore ISI s recommendations are based on a stock s total forecasted return over the next 12 months. Total forecasted return is equal to the expected percentage price return plus gross dividend yield. We divide our stocks under coverage into three ratings categories, with the following return guidelines: Buy the total forecasted return is expected to be greater than 10% Hold the total forecasted return is expected to be greater than or equal to 0% and less than or equal to 10% Sell the total forecasted return is expected to be less than 0% Suspended thecompany rating, targetprice and earningsestimateshave estimates been temporarily suspended. Historical Ratings Definitions Prior to October 10, 2014, ISI Group LLC and ISI UK utilized the following different ratings system, which was based on a 12 month risk adjusted total return: Strong Buy Return > 20% Buy Return 10% to 20% Neutral Return 0% to 10% Cautious Return 10% to 0% Sell Return < 10% For disclosure purposes, ISI Group LLC and ISI UK ratings were viewed as follows: Strong Buy and Buy equate to Buy, Neutral equates to Hold, and Cautious and Sell equate to Sell. On October 31, 2014, Evercore Partners Inc. acquired ISI Group LLC and ISI UK and transferred its research business to ISI Group LLC (the Evercore Acquisition ). Prior to October , certain research reports were separately produced by Evercore ISI s affiliate, Evercore Group L.L.C. ( Evercore Group ). Until October 10, 2014, Evercore Group s recommendations were based on a stock s expected total return relative to the analyst s coverage universe over the following 12 months. Stocks under coverage were divided into three categories: Overweight the stock is expected to outperform the average total return of the analyst s coverage universe over the next 12 months. Equal Weight the stock is expected to perform in line with the average total return of the analyst s coverage universe over the next 12 months. Underweight the stock is expected to underperform the average total return of the analyst s coverage universe over the next 12 months. Suspended the company rating, target price and earnings estimates have been temporarily suspended. For disclosure purposes, Evercore Group s prior Overweight, Equal Weight and Underweight ratings were viewed as Buy, Hold and Sell, respectively. Evercore ISI ratings distribution (as of 04/15/2015) As a result of the Evercore Acquisition, ISI Group and ISI UK became affiliated with businesses that provide investment banking services. The ratings distribution chart below reflects information relating to investment banking services that were provided by an investment banking entity that may or may not have been affiliated with Evercore ISI at the time the rating was made. Coverage Universe Investment Banking Services / Past 12 Months Ratings Count Pct. Rating Count Pct. Buy % Buy 38 13% Hold % Hold 11 4% Sell 32 5% Sell 1 3% Suspended 3 1% Suspended 1 33%

20 General Disclosures This report is provided for informational purposes only. It is not to be construed as an offer to buy or sell or a solicitation of an offer to buy or sell any financial instruments or to participate in any particular trading strategy in any jurisdiction. The information and opinions in this report were prepared by registered employees of Evercore ISI. The information herein is believed by Evercore ISI to be reliable and has been obtained from public sources believed to be reliable, but Evercore ISI makes no representation as to the accuracy or completeness of such information. Opinions, estimates and projections in this report constitute the current judgment of the author as of the date of this report. They do not necessarily reflect the opinions of Evercore and are subject to change without notice. In addition, opinions, estimates and projections in this report may differ from or be contrary to those expressed by other business areas or groups of Evercore and its affiliates. Evercore ISI has no obligation i to update, modify or amend thisreport or to otherwise notify a reader thereof fin the event that any matter stated herein, or any opinion, projection, forecast or estimate set forth herein, changes or subsequently becomes inaccurate. Facts and views in Evercore ISI research reports and notes have not been reviewed by, and may not reflect information known to, professionals in other Evercore affiliates or business areas, including investment banking personnel. Evercore ISI does not provide individually tailored investment advice in research reports. This report has been prepared without regard to the particular investments and circumstances of the recipient. The financial instruments discussed in this report may not suitable for all investors and investors must make their own investment decisions using their own independent advisors as they believe necessary and based upon their specific financial situations and investment objectives. Securities and other financial instruments discussed in this report, or recommended or offered by Evercore ISI, are not insured by the Federal Deposit Insurance Corporation and are not deposits of or other obligations of any insured depository institution. If a financial instrument is denominated in a currency other than an investor s currency, a change in exchange rates may adversely affect the price or value of, or the income derived from the financial instrument, and such investor effectively assumes such currency risk. In addition, income from an investment may fluctuate and the price or value of financial instruments described in this report, either directly or indirectly, may rise or fall. Estimates of future performance are based on assumptions that may not be realized. Furthermore, past performance is not necessarily indicative of future performance. Evercore ISI salespeople, traders and other professionals may provide oral or written market commentary or trading strategies to our clients that reflect opinions that are contrary to the opinions expressed in this research. Our asset management affiliates and investing businesses may make investment decisions that are inconsistent with the recommendations or views expressed in this research. Electronic research is simultaneously available to all clients. This report is provided to Evercore ISI clients and may not be redistributed, retransmitted or disclosed, in whole or in part, or in any form or manner, without the express written consent of Evercore ISI. Receipt and review of this research report constitutes your agreement not to redistribute, retransmit, or disclose to others the contents, opinions, conclusion or information contained in this report (including any investment recommendations, estimates or target prices) without first obtaining express permission from Evercore ISI. Thisreport isnot intended for distribution to, or use by any person or entityin in any jurisdiction or country where such distribution or use would be contrary tolocal law or regulation. For investors in the UK: In making this report available, Evercore makes no recommendation to buy, sell or otherwise deal in any securities or investments whatsoever and you should neither rely or act upon, directly or indirectly, any of the information contained in this report in respect of any such investment activity. This report is being directed at or distributed to, (a) persons who fall within the definition of Investment Professionals (set out in Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the Order )); (b) persons falling within the definition of high net worth companies, unincorporated associations, etc. (set out in Article 49(2) of the Order); (c) other persons to whom it may otherwise lawfully be communicated (all such persons together being referred to as relevant persons ). This report must not be acted on or relied on by persons who are not relevant persons. 23

21 Cushing, OK WTI Daily-Spot Price FOB (1995-Present) Dollars per barrel

22 Oil Services, Equipment & Drilling Mayer Brown s 10 th Annual Global Energy Conference May 13 th, 2015 James C. West james.west@evercoreisi.com

23 2015 E&P Spending Decline Global E&P capital expenditures set to decline by ~25% from 2014 International down 15 20% North America down 35 40% Steeper spending decline than during downturn Cash flow the key determinant to 2015 capex Historical and 2015E Spending North America E&P Spending ( E, $B) $900 $800 $700 $600 $500 $400 $300 $200 $100 Rest of the World Canada United States EVR ISI Estimate $225 $200 $175 $150 $125 $100 $75 $50 $ % 5 $ Source: EVR ISI Research $0 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14E '15E Source: EVR ISI Research

24 Global Liquids Cost Curve Higher incentives needed to sustain drilling and exploration NAM Shale average breakeven of $62/bbl Source: Rystad Energy, EVR ISI Research 6

25 2015 U.S. Oil Production Set to Decline U.S. oil production growth set to slow from pace of recent years 2015 output to rise by 8% or ~0.7 mmbpd to 9.3 below last week s 9.4 Slower than 2014 growth rateof 14% or 1.1mmbpd Slower than 2013 growth rate of 20% or 1.2 mmbpd 4Q15 production to roughly match 4Q14 production or be lower U.S. Crude Oil Production, E (mmbpd) U.S. Crude Oil Y/Y Production Growth (mmbpd) Jan 14 Jul 14 Jan 15 Jul 15 Jan 16 Jul 16 Jan U.S. Crude Oil Production Expected Production Source: EIA, EVR ISI Research E Source: EIA, EVR ISI Research 6

26 Canadian Oil Sands Projects Postponed 19 projects have been postponed Output growth of 1.2 mmbpd delayed Canadian ad a drilling gactivityty plummeting pu Canadian Rig Count 6 Name Developer Capacity (bbl/d) Pierre River Shell 200,000 Grand Rapids Cenovus 180, Narrows Lake Cenovus 130,000 MacKay River 2/3 Brion Energy 115,000 Joslyn North Total 100,000 Telephone Lake Cenovus 90,000 Black Rod Black Pearl 80, Foster Creek G Cenovus / Conoco 45,000 Christina Lake H Cenovus / Conoco 45,000 Kirby North CNR 40,000 Corner Statoil 40,000 Taiga Osum Oil Sands 35,000 Sunrise 2B Husky / BP 30,000 Great Divide/Algar Connacher 26,000 MacKay River 2/3 Suncor 20,000 Lindbergh 2 Penn Growth 18,000 Orion Osum Oil Sands 10,000 STP McKay Southern Pacific 10,000 Black Gold 1 KNOC (Harvest Energy) 10,000 Source: Platts, EVR ISI Research Range Source: Baker Hughes, EVR ISI Research NAM Drilling Activity, February 2015 Source: Baker Hughes, EIA, OPEC Secretariat, EVR ISI Research

27 Oil Market Bottoming Historically Major oil price declines historically unfold over 10 months, with peak to trough declines of 60% The bottoming typically phase unfolds over 2 months Prices tend to recover 100% of their losses over 6 months 12

28 1Q Results Ugly But Costs Well Managed The speed and severity of the downturn have been greater than anticipated Pricing is a knife fight, with concessions around 20% thus far NAM levered land names suffering highdecrementals Tone of management teams has shifted considerably over 1Q Companies who adhered to initial guidance have disappointed FX headwinds add fuel to the fire Fastest Rig Count Decline in the Past 20 Years U.S. Land Rig Count (LTM) 0% 10% 20% 30% 2014 Cycle 2008 Cycle 2001 Cycle 1997 Cycle 2,000 1,800 1,600 1,400 40% 1,200 50% 1,000 60% % Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14 Jan-15 Feb-15 Mar-15 Source: Baker Hughes, EVR ISI Research Source: Baker Hughes, EVR ISI Research 10

29 Rig Count Forecast U.S. Land Rig Count to bottom at ~800 rigs during 2Q15 Vertical rigs have fallen the hardest, down 66% from peak to trough, to 121 Directional rigs down 56% peak to trough, to 91 Horizontal rigs down 48% peak to trough, to 720 Oil rigs down 55% to 703; gas rigs down 37% to 225 2,000 U.S. Land Rig Count Forecast 2,000 U.S. Rig Count by Type 1,800 1,600 1,500 1,400 1,200 1,000 1, E E E 1Q1 2Q1 3Q1 4Q1 1Q1 2Q1 3Q1 4Q1 1Q1 2Q1 3Q1 4Q1 1Q1 2Q1 3Q1 4Q1 1Q1 2Q15 3Q15 4Q15 Source: Baker Hughes, EVR ISI Research 0 Jan 10 Jan 11 Jan 12 Jan 13 Jan 14 Jan 15 Horizontal Directional Vertical Source: Baker Hughes, EVR ISI Research 12

30 ANALYST CERTIFICATION The analysts, James West, Samantha Hoh, Cameron Schnier and Alex Nuta, primarily responsible for the preparation of this research report attest to the following: (1) that the views and opinions rendered in this research report reflect his or her personal views about the subject companies or issuers; and (2) that no part of the research analyst s compensation was, is, or will be directly related to the specific recommendations or views in this research report. DISCLOSURES This report is approved and/or distributed by International Strategy & Investment Group LLC ( ISI Group LLC ), a U.S. licensed broker dealer regulated by the Financial Industry Regulatory Authority ( FINRA ) and by International Strategy & Investment Group (UK) Limited ( ISI UK ), which is authorised and regulated in the United Kingdom by the Financial Conduct Authority. ISI Group and ISI UK are subsidiaries of Evercore Partners Inc. and collectively operate under the global marketing brand name Evercore ISI ( Evercore ISI ). The trademarks, logos and service marks shown on this report are registered trademarks of Evercore Partners Inc. The analysts and associates responsible for preparing this report receive compensation based on various factors, including the firm s total revenues, a portion of which is generated by affiliated investmentbanking transactions. Evercore ISIpublishes and disseminates research through Evercore ISI, and seeks toupdateitsresearch asappropriate, butvarious regulations may prevent this from happening in certain instances. Aside from certain industry reports published on a periodic basis, the large majority of reports are published at irregular intervals as appropriate in the analyst s judgment. Evercore ISI generally prohibits analysts, associates and members of their households from maintaining a financial interest in the securities of any company in the analyst s area of coverage. Any exception to this policy requires specific approval by Evercore ISI Compliance. Such ownership is subject to compliance with applicable regulations and disclosure. Evercore ISI also prohibits analysts, associates and members of their households from serving as an officer, director, advisory board member or employee of any company that the analyst covers. This report may include a Tactical lcall, which hdescribes a near term event or catalyst taffecting the subject company or the market overall and which his expected dto have a short term t price impact on the equity shares of the subject company. This Tactical Call is separate from the analyst s long term recommendation (Buy, Hold or Sell) that reflects a stock s forward 12 month expected return), is not a formal rating and may differ from the target prices and recommendations reflected in the analyst s long term view. Applicable current disclosures regarding the subject companies covered in this report are available at the offices of Evercore ISI, and can be obtained by writing to ISI Group LLC, Attn. Compliance, 666 Fifth Avenue, 11th Floor, New York, NY Evercore ISI and / or its affiliates, and / or their directors, officers, members and employees, may have, or have had, interests or qualified holdings on issuers mentioned in this report. Evercore ISI and / or its affiliates may have, or have had, business relationships with the companies mentioned in this report.. Additional information on securities or financial instruments mentioned in this report is available upon request. Ratings Definitions Current Ratings Definition 21

31 22 Evercore ISI s recommendations are based on a stock s total forecasted return over the next 12 months. Total forecasted return is equal to the expected percentage price return plus gross dividend yield. We divide our stocks under coverage into three ratings categories, with the following return guidelines: Buy the total forecasted return is expected to be greater than 10% Hold the total forecasted return is expected to be greater than or equal to 0% and less than or equal to 10% Sell the total forecasted return is expected to be less than 0% Suspended thecompany rating, targetprice and earningsestimateshave estimates been temporarily suspended. Historical Ratings Definitions Prior to October 10, 2014, ISI Group LLC and ISI UK utilized the following different ratings system, which was based on a 12 month risk adjusted total return: Strong Buy Return > 20% Buy Return 10% to 20% Neutral Return 0% to 10% Cautious Return 10% to 0% Sell Return < 10% For disclosure purposes, ISI Group LLC and ISI UK ratings were viewed as follows: Strong Buy and Buy equate to Buy, Neutral equates to Hold, and Cautious and Sell equate to Sell. On October 31, 2014, Evercore Partners Inc. acquired ISI Group LLC and ISI UK and transferred its research business to ISI Group LLC (the Evercore Acquisition ). Prior to October , certain research reports were separately produced by Evercore ISI s affiliate, Evercore Group L.L.C. ( Evercore Group ). Until October 10, 2014, Evercore Group s recommendations were based on a stock s expected total return relative to the analyst s coverage universe over the following 12 months. Stocks under coverage were divided into three categories: Overweight the stock is expected to outperform the average total return of the analyst s coverage universe over the next 12 months. Equal Weight the stock is expected to perform in line with the average total return of the analyst s coverage universe over the next 12 months. Underweight the stock is expected to underperform the average total return of the analyst s coverage universe over the next 12 months. Suspended the company rating, target price and earnings estimates have been temporarily suspended. For disclosure purposes, Evercore Group s prior Overweight, Equal Weight and Underweight ratings were viewed as Buy, Hold and Sell, respectively. Evercore ISI ratings distribution (as of 04/15/2015) As a result of the Evercore Acquisition, ISI Group and ISI UK became affiliated with businesses that provide investment banking services. The ratings distribution chart below reflects information relating to investment banking services that were provided by an investment banking entity that may or may not have been affiliated with Evercore ISI at the time the rating was made. Coverage Universe Investment Banking Services / Past 12 Months Ratings Count Pct. Rating Count Pct. Buy % Buy 38 13% Hold % Hold 11 4% Sell 32 5% Sell 1 3% Suspended 3 1% Suspended 1 33%

32 General Disclosures This report is provided for informational purposes only. It is not to be construed as an offer to buy or sell or a solicitation of an offer to buy or sell any financial instruments or to participate in any particular trading strategy in any jurisdiction. The information and opinions in this report were prepared by registered employees of Evercore ISI. The information herein is believed by Evercore ISI to be reliable and has been obtained from public sources believed to be reliable, but Evercore ISI makes no representation as to the accuracy or completeness of such information. Opinions, estimates and projections in this report constitute the current judgment of the author as of the date of this report. They do not necessarily reflect the opinions of Evercore and are subject to change without notice. In addition, opinions, estimates and projections in this report may differ from or be contrary to those expressed by other business areas or groups of Evercore and its affiliates. Evercore ISI has no obligation i to update, modify or amend thisreport or to otherwise notify a reader thereof fin the event that any matter stated herein, or any opinion, projection, forecast or estimate set forth herein, changes or subsequently becomes inaccurate. Facts and views in Evercore ISI research reports and notes have not been reviewed by, and may not reflect information known to, professionals in other Evercore affiliates or business areas, including investment banking personnel. Evercore ISI does not provide individually tailored investment advice in research reports. This report has been prepared without regard to the particular investments and circumstances of the recipient. The financial instruments discussed in this report may not suitable for all investors and investors must make their own investment decisions using their own independent advisors as they believe necessary and based upon their specific financial situations and investment objectives. Securities and other financial instruments discussed in this report, or recommended or offered by Evercore ISI, are not insured by the Federal Deposit Insurance Corporation and are not deposits of or other obligations of any insured depository institution. If a financial instrument is denominated in a currency other than an investor s currency, a change in exchange rates may adversely affect the price or value of, or the income derived from the financial instrument, and such investor effectively assumes such currency risk. In addition, income from an investment may fluctuate and the price or value of financial instruments described in this report, either directly or indirectly, may rise or fall. Estimates of future performance are based on assumptions that may not be realized. Furthermore, past performance is not necessarily indicative of future performance. Evercore ISI salespeople, traders and other professionals may provide oral or written market commentary or trading strategies to our clients that reflect opinions that are contrary to the opinions expressed in this research. Our asset management affiliates and investing businesses may make investment decisions that are inconsistent with the recommendations or views expressed in this research. Electronic research is simultaneously available to all clients. This report is provided to Evercore ISI clients and may not be redistributed, retransmitted or disclosed, in whole or in part, or in any form or manner, without the express written consent of Evercore ISI. Receipt and review of this research report constitutes your agreement not to redistribute, retransmit, or disclose to others the contents, opinions, conclusion or information contained in this report (including any investment recommendations, estimates or target prices) without first obtaining express permission from Evercore ISI. Thisreport isnot intended for distribution to, or use by any person or entityin in any jurisdiction or country where such distribution or use would be contrary tolocal law or regulation. For investors in the UK: In making this report available, Evercore makes no recommendation to buy, sell or otherwise deal in any securities or investments whatsoever and you should neither rely or act upon, directly or indirectly, any of the information contained in this report in respect of any such investment activity. This report is being directed at or distributed to, (a) persons who fall within the definition of Investment Professionals (set out in Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the Order )); (b) persons falling within the definition of high net worth companies, unincorporated associations, etc. (set out in Article 49(2) of the Order); (c) other persons to whom it may otherwise lawfully be communicated (all such persons together being referred to as relevant persons ). This report must not be acted on or relied on by persons who are not relevant persons. 23