energy and infrastructure: what a difference five years makes. greg dean, cfa analyst &...
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ENERGY AND INFRASTRUCTURE:WHAT A DIFFERENCE FIVE YEARS MAKES.
Greg Dean, CFAAnalyst & Portfolio Manager
SO MUCH FOR PEAK OIL …
U.S. Crude Oil Production
0
2,000
4,000
6,000
8,000
10,000
12,000
1920
1924
1928
1932
1936
1940
1944
1948
1952
1956
1960
1964
1969
1973
1977
1981
1985
1989
1993
1997
2001
2005
2009
thou
sand
bar
rels
per
day
Total U.S. North Dakota Texas
+80% since 2008
Source: Tudor Pickering
SLOWLY REDUCING OUR RELIANCE ON THE MIDDLE EAST
U.S. Crude Oil Imports
0
2,000
4,000
6,000
8,000
10,000
12,000
Jan-20
Oct-24
Jul-2
9
Apr-34
Jan-39
Oct-43
Jul-4
8
Apr-53
Jan-58
Oct-62
Jul-6
7
Apr-72
Jan-77
Oct-81
Jul-8
6
Apr-91
Jan-96
Oct-00
Jul-0
5
Apr-10
thou
sand
bar
rels
per
day
Crude oil imports peaked
in June 2005 (-35% since!)
Source: Tudor Pickering
U.S. IS THE GLOBAL LEADER IN OIL SUPPLY GROWTH
• Grew 40% more than Saudi Arabia in 2012
• Canada + U.S. = 1 million barrels / day of oil growth in 2013 + 2014 respectively
• Essentially illegal to export crude oil from the U.S.
… so now what?
North Dakota Oil Production (MB/d)
0
200
400
600
800
1000
1200
2009 2010 2011 2012 2013e 2014e
EIA, Peters & Co.
Texas Oil Production (MB/d)
-
1,000
2,000
3,000
4,000
2009 2010 2011 2012 2013e 2014eEIA, Peters & Co.
Source: EIA, Peters & Co.
IMPORTS OF LIGHT CRUDE WILL SOON BE ELIMINATED
U.S. Imports of Light Oil (API gravity > 35)
0
500
1,000
1,500
2,000
2,500
3,000
3,500
Jan-
00Oct-
00
Jul-0
1Apr
-02
Jan-
03Oct-
03
Jul-0
4Apr
-05
Jan-
06Oct-
06
Jul-0
7Apr
-08
Jan-
09Oct-
09
Jul-1
0Apr
-11
Jan-
12Oct-
12
thou
sand
bar
rels
per
day
3 years ago we were importing >
2mm bbl/d
Now < 700k bbl/d
At this pace we could be net exporters by February!
Source: Tudor Pickering
IF WE CAN’T EXPORT, WHERE WILL IT GO?
WE NO LONGER HAVE ESTABLISHED ROUTES TO MARKET
Examples:
- Crude-by-rail (east/west coasts and Gulf of Mexico)
- Reversing/building pipelines (Seaway, Energy East, others)
- Manitoba project (OmniTRAX)
WHAT ABOUT DEMAND FOR OIL?
Not growing as fast as supply (~1%/year or 900k bbl/d):
• China not growing as fast as many expected (+4%/ 360k bbl/d) • Cars are 30% more fuel efficient today
Source: IEA
Two main reasons:
SO WHY HAS THE PRICE OF OIL BEEN SO STRONG?
1. Seasonally strong demand of crude by refiners
2. Higher than normal outages for maintenance
Source: Kessler Energy
SO HOW DO WE MAKE $$ IN ENERGY?
By remaining disciplined and flexible …– Energy infrastructure companies
– Select exploration and production companies (price x volume)
– Refiners
RAGING RIVER EXPLORATION – CASE STUDY
Was spun out of Wildstream Exploration in late 2011 / early 2012
- Management/board own ~14% of the company
- 100% focused on light oil in the Viking (Saskatchewan)
- Clean balance sheet (debt to cashflow < 1x)
- We are up > 100% in 18 months
June 2012 - Producing ~1,700
barrels / day
June 2013 - Producing ~4,400
barrels / day
Source: Bloomberg
YOU CAN PROFIT IN THIS MARKET
If you have conviction in what you own We talk to management often Site tours and conferences
If you have flexibility Never get married to a thesis or position Open mandates - no sector restrictions
By protecting capital Proper diversification No ‘filler’ positions – we hold cash
GROWING THE TEAM
CAMBRIDGE BLOG
Have you seen our blog?
Visit and sign up for our frequently updated blog at:
http://blogs.ci.com/cambridge
"Our job is to find a few intelligent things to do, not to keep up with every damn thing in the world." - Charlie Munger
DOWNSIDE PROTECTION IS THE FOCUS
Source: RBC DexiaAs of August 31, 2013
*December 31, 2007†February 15, 2011
**Cambridge Global Asset Management took over management of Cambridge American Equity Corporate Class in June 2011, inception date of fund is February 24, 2000**
Year-to-date 1 year 2012 3 year 5 yearSince
inceptionCambridge Canadian Asset Allocation
Corporate Class 11.7% 14.3% 3.5% 9.8% 4.4% 4.5%*
Cambridge Canadian Equity Corporate Class 17.1% 25.5% 16.7% 16.1% 6.3% 6.6%*
Cambridge Global EquityCorporate Class 19.8% 26.0% 15.1% 12.4% 4.0% 4.9%*
Cambridge Canadian Growth A 25.0% 41.5% 40.5% n/a n/a 27.0%†
Cambridge American Equity
Corporate Class** 25.1% 28.1% 8.2% 13.5% 3.4% -4.2%**
CAMBRIDGE IS NOT BENCHMARK FOCUSED
Cambridge Pure Canadian Top holdings August 31, 2013
Shoppers Drug Mart 6.2%
Sylogist 5.8%
Alimentation Couche-Tard 5.1%
Kelt Exploration 4.8%
CGI Group 4.4%
George Weston 4.4%
Tourmaline Oil 4.3%
Intact Financial 4.1%
TransForce Inc. 3.5%
Artek Exploration 3.2%
Total 45.8%
Cambridge Canadian Equity Top holdings
as at August 31, 2013
Intact Financial 5.8%
Alimentation Couche-Tard 5.4%
Shoppers Drug Mart 5.4%
CGI Group 5.0%
George Weston 4.7%
Tourmaline Oil 4.6%
Brookfield Infrastructure Partners 3.8%
Loblaw 3.7%
Brookfield Asset Management 3.0%
Keyera 2.9%
Total 44.3%
Source: CI Investments
Thank You
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