Global Energy Strategy
March 31, 2015
First Quarter 2015 – Performance Update
Top 10 Portfolio Holdings*
The Global Energy Strategy rose 0.41% (gross) and 0.19% (net) during the
quarter, outperforming MSCI’s All Country World Energy (ACWE) which dropped
3.32%. Since Inception, June of 2009, the Global Energy Strategy has
outperformed and returned an annualized 9.39% (gross) and 8.48% (net)
compared to the benchmark 4.09% return of the ACWE benchmark for the
period ending March 31, 2015.
CastleArk Global Energy Performance*
Cheniere Energy Inc.
4.8%
Exxon Mobil Corp.
4.8%
Chevron Corp.
4.8%
Valero Energy Corp.
4.7%
Concho Resources Inc.
4.2%
China Petroleum & Chemical ADR
3.9%
Halliburton Co
3.9%
Baker Hughes
3.6%
Total SA-Spon ADR
3.3%
Williams Cos Inc.
9.39%
10%
5.12%
0.41% 0.19%
4.25%
8.48%
4.09%
Portfolio Characteristics*
1.22%
0.30%
0%
CastleArk
Global
Energy
-0.55%
-2.52%
-3.32%
3.3%
41.0%
Percentage of Total Assets
Number of Companies
-10%
-14.58%
-15.30%
-17.07%
-20%
1Q2015
1 Year
CastleArk (Gross)
3 Year
Annualized
CastleArk (Net)
5 Year
Annualized
Annualized
Since Inception*
MSCI ACWE Index
MSCI
All Country
World
Energy
100
1,205
Forward P/E
23.4x
19.5x
Historical EPS Growth
25.5%
21.6%
Expected Growth
24.2%
17.5%
Return on Equity
13.1%
15.8%
Debt/Capital
26.5%
27.6%
Weight by Market Cap
$2.3B
$2.1B
Median Market Cap
$1.7B
$0.8B
*Data Corresponds to CastleArk Global Energy Composite.
Past performance is no guarantee of future results.
*Inception 06/30/2009
Global Energy Team
First Quarter 2015 – Portfolio Review
Jerry Castellini
Tim Clark
Global macro concerns settled in this winter quarter. North of the 38th parallel,
positions hardened as geopolitical events ramped in the Ukraine and as a new
Greek government came to power in Europe. South of the 38th, ISIS, Syria,
Libya and Yemen all competed for daily headlines. Developed equity markets
barely registered a positive return after the 2014’s performance. Emerging
Markets initially looked relatively more positive, posting a 5+% in local
currencies. US$ adjusted however, the capital flight to safety of the US
currency crushed those returns to just over a .5%.
The opening themes of 2015 were two-fold: the economic transition to a lower
oil price; and the market’s assessment of duration in this commodity price
cycle. Saudi Arabia is trying to convince the world they are serious about
market share. The market now has to decide whether the Saudis have enough
reserves and spare capacity to meet the global demands of a 30% price cut,
plus cover supply declines of 4 million bbls/day. Regardless of those
dynamics, one thing has been made clear for now - North America has
become the new, global swing producer.
Troy Logan CFA
Joe Hagan, CPA CFA
Chris Noll
Contact
CastleArk Management, LLC
1 North Wacker Drive, Suite 3950
Chicago, IL 60606
Phone: 312.456.9682
For inquiries: [email protected]
Page 1
Global Energy Strategy
March 31, 2015
First Quarter 2015 - Portfolio Review (continued)
Concerns of slowing growth prospects worldwide drove the US$ and US$
weighted assets higher. Continued difficulties in Europe, over capacity in China,
recessions in Japan and Russia, investors appeared impressed with the ability
of the U.S. economy to stay ahead of weaker trends in many other Global
markets.
The Global Energy portfolio got back on track halfway through the quarter with
strong returns driven primarily by holdings in the upstream, natural gas
processing and the oilfield service spaces. The under performance was driven
almost exclusively by lack of exposure in the large, integrated space.
First Quarter 2015
Best and Worst Contributors*
Best:
Return
Contribution
1.
Diamondback Energy
23.1%
0.69%
2.
US Silica Holdings
31.9%
0.60%
3.
Valero Energy
25.5%
0.54%
4.
Halliburton Co.
11.9%
0.48%
5.
Cheniere Energy
9.9%
0.45%
6.
Williams Cos Inc.
13.8%
0.44%
7.
Pioneer Natural Resources
5.9%
0.44%
8.
Baker Hughes Inc.
9.8%
0.22%
9.
Dow Chemical Co.
6.2%
0.21%
3.9%
0.14%
*Argentina, Brazil, Chile, China, India, Israel, S. Korea, Malaysia, Mexico, New Zealand, Russia, S. Africa, Singapore, Taiwan & Turkey
Market and Portfolio Outlook
The global economic drag on the US economy has taken its toll this quarter.
Foreign earnings fell off almost 19% on an annualized quarter by quarter basis,
and look soft for this quarter. Meanwhile, the US$ has only continued to
appreciate against every other trading partner. The positives and likely drivers of
the US economic engine will continue to be prices of retail and commercial
energy products. Consumer spending is as strong as it has been for the past 10
years.
Global energy valuations did begin to stabilize during the first quarter, as
investors assessed both the lower demand implications of cheaper energy
prices, and future supply implications of a 50% fall in the commodity price from
the Saudi actions.
We are evaluating positions that will likely materialize as the market rotates from
bearish to bullish. We are confident that the crude oil price correction has
already begun, and we will likely see the same retracement as we have seen in
the last three major oil price declines. We are beginning to see the broader
investor base again reward growth over value. We have seen early signs as
stocks have shaken off some temporary commodity price downturns intra
quarter, as well as witnessing more generalist investors show interest in the
sector.
10. Encana Corp.
Contribution
Worst:
Return
1.
Chevron Corp.
-35.8%
-0.48%
2.
Oil Search Ltd.
-36.8%
-0.34%
3.
Whiting Petroleum Corp.
-17.5%
-0.33%
4.
ConocoPhillips
-19.2%
-0.24%
5.
Enbridge, Inc.
-11.1%
-0.21%
6.
Western Refining, Inc.
-39.2%
-0.21%
7.
China Oilfield Services Ltd.
-26.7%
-0.19%
8.
Royal Dutch Shell PLC
-18.7%
-0.19%
9.
Marathon Petroleum Corp.
-17.9%
-0.16%
-17.4%
-0.15%
10. Total SA ADR
*A complete list of each security’s contribution to performance and
description of the calculation methodology is available upon request.
CastleArk Global Energy Strategy
As noted in the last quarterly letter, we continue to see the current supplydemand imbalance in the energy markets slowly reverse themselves. Higher
priced sources of new barrels are being squeezed out as lower capex budgets
for upstream companies around the globe get finalized. Offshore, Harsh
Environment, Wildcat exploration and Oil sands outlays have been the first to
go. Next up will be the large number of marginal, unconventional resource
projects that will not work at anything below $80/barrel.
Contact
CastleArk Management, LLC
1 North Wacker Drive, Suite 3950
Chicago, IL 60606
Phone: 312.456.9682
For inquiries: [email protected]
As the market continues to transition this spring, we are putting more confidence
back into the growth-positioned energy companies. The Strategy is focused on
over-weights in high quality upstream companies; oilfield services and
downstream projects. We are also getting more underweight in the larger
integrated companies, pure international exploration companies and base
market risk.
Page 2
Global Energy Strategy
December 31, 2014
Disclosure
Past Performance is no guarantee of future results. Performance for the CastleArk Global Energy Composite includes institutional separately-managed accounts only and does
not include individual accounts we manage, nor accounts we managed in a third party sponsored “wrap fee” program.
Other information. This report contains information from market index providers or from other third parties. We believe this information is accurate, but we cannot guarantee it.
CastleArk Management, L.L.C. - Global Energy Strategy Composite Annual Disclosure Presentation
Year End
2015*
2014
2013
2012
2011**
2010
2009***
Total
Firm
Assets
(millions)
4,256
4,434
3,876
3,060
2,825
2,901
2,429
Composite Assets
US
Dollars
(millions)
151
150
231
197
175
181
153
Number of
Accounts
Five or fewer
Five or fewer
Five or fewer
Five or fewer
Five or fewer
Five or fewer
Five or fewer
3- year Annualized
Standard Deviation
Annual Performance results
Composite
Gross
0.41%
(13.84%)
17.93%
5.13%
(1.20%)
20.50%
31.23%
Net
0.19%
(14.58%)
16.95%
4.24%
(1.97%)
19.48%
30.67%
MSCI ACWE
Index
(3.32%)
(13.41%)
13.54%
2.36%
(3.08%)
11.54%
19.72%
Composite
Dispersion
0.09
0.06
0.03
0.00
0.05
0.07
N/A
Composite
16.12
16.49
21.26
24.32
MSCI
ACWE
Index
14.91
15.56
18.78
22.33
*Results shown for the year 2015 represent partial period performance from December 31, 2014 through March 31, 2015.
**The standard deviation is not presented for 2009 through 2011 because 36 monthly returns are not available and is not required for periods prior to 2011.
*** Results shown for the year 2009 represent partial period performance from June 30, 2009 through December 31, 2009.
1. MSCI ALL COUNTRY WORLD ENERGY Index
N.A. - Information is not statistically meaningful due to an insufficient number of portfolios in the composite for the entire year.
CastleArk Global Energy Composite consists of a fully discretionary account that invests in common stocks of the global energy sector and related companies that trade on
major global stock exchanges. For comparison purposes the composite is measured against the MSCI All Country World Energy Sector Index.
The CastleArk Global Energy composite was created June 30, 2009. CastleArk Management L.L.C. claims compliance with the Global Investment Performance Standards (GIPS®)
and has prepared and presented this report in compliance with the GIPS standards. CastleArk Management, L.L.C. has been independently verified for the periods March 1, 1999
through December 31, 2011. The verification report(s) is/are available upon request. Verification assesses whether (1) the firm has complied with all the composite construction
requirements of the GIPS standards on a firm-wide basis and (2) the firm’s policies and procedures are designed to calculate and present performance in compliance with the GIPS
standards. Verification does not ensure the accuracy of any specific composite presentation.
CastleArk Management, L.L.C. is registered as an investment advisor with the Securities and Exchange Commission under the Investment Advisers Act of 1940. A list of
composite descriptions is available upon request.
Results are based on fully discretionary accounts under management, including those accounts no longer with the firm. Past performance is not indicative of future results.
The U.S. Dollar is the currency used to express performance. Returns are presented gross and net of management fees and include the reinvestment of all income. Net of fee
performance was calculated using actual management fees. The composite and benchmark returns are reported net of any foreign withholding taxes on dividends, interest and
capital gains. The annual composite dispersion is an asset-weighted standard deviation calculated for the accounts in the composite the entire year. Policies for valuing portfolios,
calculating performance, and preparing compliant presentations are available upon request.
The investment management fee schedule is as follows: 1.25% on the balance. Actual investment advisory fees incurred by clients may vary.
Use of Performance Data:
Past performance should not be construed as a guarantee of future performance. The information provided in this presentation should not be construed as a recommendation to
purchase or sell any particular security or an assurance that any particular security held in a portfolio will remain in the portfolio or that a previously held security will not be
repurchased. Securities discussed in this presentation may not represent a portfolio's entire holdings. It should not be assumed that any of the security transactions or holdings
discussed have been or will prove to be profitable or that future investment decisions will be profitable or will equal or
exceed the investment performance of the securities discussed.
Contact
CastleArk Management, LLC
1 North Wacker Drive, Suite 3950
Chicago, IL 60606
Phone: 312.456.9682
For inquiries: [email protected]
Page 3