E

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LUNCHEON SPEAKER
EC A Wall Street View
Will Investors Continue to Recognize The
Industrys Fundamentals?
Wall Street Analyst
Michael S. Dudas, CFAManaging Director Jefferies
Company
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Topics We Will Discuss

• What I do for a living
• What attracts investors to EC stocks
• A look back since ECC 2007
• Financial Outlook
• Stock Performance and Valuations
• Observations

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Investor Attraction to EC Stocks

• Historical perception
• Mid-to-large cap growth
• Late cycle exposure
• Low fixed assets, high free cash flow
• Leverage to
• Energy
• Commodities
• Emerging Markets

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Question 1

• What is most important variable in determining
  future share price performance?

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Financial Outlook

• End market diversity
• Growth in
• Backlog
• Revenues
• Earnings
• Higher return to shareholders

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Market Diversity

• Jacobs 2007 Revenue By Segment (8.5 bil)

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Fluor Backlog
Note 2008 data as of June 30, 2008 Source
Company Reports, Jefferies Co. Inc. estimates
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EC Revenue Backlog
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Financial Outlook

• Direct function of client health
• More fragmented than clients
• Less capital, more people intensive
• But, perception has been

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Crude Oil Price
Source Baseline
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Question 2

• Since ECC 2007, On average how well did owner
  share prices perform?

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Owners Big Oil, Consumer/Industrial Cyclical
Source Baseline
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Owners Chemicals, Mining, Utilities
Source Baseline
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Financial Shares ETF Index
Source Baseline
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Question 3

• Since ECC 2007, On average how well did
  EC/Vendor share prices perform?

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EC Share Prices vs. SP 500
Source Baseline
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Oil Price
Source Baseline
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EC Index 2001-2008
Note Index includes CBI, FLR, JEC, MDR,
SGR Source Baseline, Jefferies Co. Inc.
estimates
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Positive Fundamental Drivers
ECC 2007
ECC 2008

• Yes, as backlogs have continued to improve
• Yes, for most
• Credit crunch
• Yes, but those prices are falling from June highs

• Expect sector to benefit during 2007-10 from
  1998-2004 underinvestment
• Expected 15-20 EPS growth
• Less directly reliant on consumer
• Commodity price inflation suggests continued
  client reinvestment

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Fundamental Concerns
ECC 2007
ECC 2008

• Client confidence could delay capital allocation
• Rising capital costs
• Execution visibility Fixed Price work at risk
• Global trade uncertainties
• Valuation nearing high end of historic levels

• Still confident, but waning?
• Yes, stunningly so
• Shift in market, but some issues linger
• Doha, Russia, Growth
• Corrected from those levels

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Valuation Summary
Source First Call Consensus Estimates, Jefferies
Co Estimates
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Observations
ECC 2007
ECC 2008

• Risk mitigation
• Technology Neutrality or ownership?
• Management challenges
• Talent attraction/retention
• Resource allocation

• Yes, as market shifts
• Debate goes on
• Focus 1 for everyone
• Appears successful, but still a concern
• Better, cash building

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Observations
ECC 2007
ECC 2008

• Question 4
• Westin bar tabs 21

• Consolidation
• Client Contractor/Vendor relationships

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Question 4

• Among EC companies, what type of consolidation
  will we witness?

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Question 5

• What worries you most about your business outlook
  during the next 12-18 months?

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Challenges Remain

• Further risk to 2008-11, sustainable prices and
  budgets
• Execution Need to prove risk mitigation a
  priority
• New business awards and backlog timing
• Can EC managements extract value from clients?
• A long way in a short period of time
• Can equities maintain (recover) valuation?
• And now.

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Question 6

• At ECC 2009, how will EC company share prices
  have performed since September 2008?

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Challenges Remain

• Further risk to 2008-11, sustainable prices and
  budgets
• Execution Need to prove risk mitigation a
  priority
• New business awards and backlog timing
• Can EC managements extract value from clients?
• A long way in a short period of time
• Can equities recover valuation?
• And now.