EFTA01461569.pdf

For non advisory clients only In a "sector rotating" market in favour of value large cap names , Oil could be a relative bet to take, as the sector is: 1) not expensive in terms of valuations 2) favoured by the upper trending of WTI and Brent prices 3) impacted by better capital discipline (capex) expectations Lucas Herrmann, DB research on ROE trend is starting to be more optimistic as well: "Central to the deterioration in return on capital at the integrated oils has been the balance sheet build of non-productive capital. At the super-majors alone. the addition over a decade of c.$250bn of work in progress and exploration assets has proven a material drag on sector profitability clipping an estimated 3-4% from reported RoCE. Yet, with 2013 registering the first decline in non-productive capital for a decade are there now signs that yet another source of returns drag across the oil sector may be at a tipping point? We think so with our analysis suggesting scope for a 10% uplift to reported returns over the next five years". Interestingly, today also the Lex Column in "Oil Change, please" is mentioning the need to improve capital returns to fill the valuation gap (ENI the company mentioned in the article, also for the new management) Short term it could make sense to play the momentum via relative spread and with outperformance calls SXEP vs cyclical sector like chemical SX4P WTI: • Last Price 10444 T HO Co 04/16/14 104.82 ...Averse* 96.15 I Low on 04/17/13 85.34 SMUG (50) on flog* 100.67 1,! : M SNAVG (100) on Close 98.07 • SHAM (200) on Close 97.55 at r ti.K1 COMB Ccendty 07/26/13 Open 93.94 it nigh 96.20 Low 9.568 Close 90 14 9 Open Interest 0.14314 • L• WAS (15) 0.27314 Ni 7M 0.143M U. Sri 0 Nay Jun Jul Aug Set) Oct Nov Dec Jan Feb Mar 414 2013 2014 SXEP vs SX4P (Chemicals) CONFIDENTIAL — PURSUANT TO FED. R. CRIM. P. 6(e) DB-SDNY-0 123699 CONFIDENTIAL SDNY_GM_00269883 EFTA01461569