JANUS PREMIER GLOBAL VALUE FUND
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JANUS PREMIER GLOBAL VALUE FUND

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JANUS PREMIER GLOBAL VALUE FUND




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Presentation on theme: "JANUS PREMIER GLOBAL VALUE FUND"— Presentation transcript:

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JANUS PREMIER GLOBAL VALUE FUND

Praneeth

Raj Singh,

VidyaSri

velloo

, Bayan

Ismaeel

Slide2

Introduction

Oil & Gas Industry is NOT like other industriesSubject to Global Politics and Foreign PolicyAffects the fiscal health and budgets of many states (OPEC)Analysis of industry is not straightforward

Janus Global Premier Value Fund

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Factors to consider

Saudi Arabia’s predatory strategy Breakeven pricing for traditional drilling and frackingPossibility of change in oil price exceeding 50%Iran’s entry into global marketsDemand factors

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Saudi Arabia & OPEC

Saudi Arabia – most influential in production decisions and in affecting prices Has maintained production levels to force out shale oil producers in the US Costs of this strategy:Severely depleting Saudi’s cash reservesBudget deficit for 2015 and predicted deficit for 2016How long can they sustain this?

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Breakeven

Breakeven Analysis is not appropriate here OPEC governments reliant on oil, US government is not Costs vary based on geology, technology and volumes Producers have shelved new expansion and development projects Therefore, better to look at lifting costs to estimate minimum operational price

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Lifting Costs

Lifting costs = Productions cots Maintenance and operation of equipment required to being oil and gas to the surface Rigs can stay operational as long as price exceeds lifting costsUS Shale - $15 - $25US Combined - $14.80Saudi Arabia Traditional - $5.40

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Source: CNN Money and

Rystad

Energy

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Change in Prices for 2016

US Energy Information Administration estimates an average of $38/bbl for 2016 and $50/bbl for 2017 Goldman Sachs estimates potential low of $20/bbl for 2016 Unlikely due to strain on OPEC government budgets and tight margins on shale oil Brent futures for delivery in Dec 2016 currently priced just below $40

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Firm Analysis – Segment Revenue Mix

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Firm Analysis – Strategy Evaluation

Conoco PhillipsProsOperations around the world – helps maintain lower total average lifting costsInsulation from sudden change in policies by governmentsCut capital expenditure and operation costsStarted exporting oil from Eagle Ford shale playCut operations in Canada where lifting cost is high ($22.40/barrel)ConsPaying out dividends despite declared losses in 2015

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Firm Analysis – Strategy Evaluation

Antero ResourcesProsStrong hedging programGood midstream transportation portfolioControls other midstream services as wellConsUnfinished wells may not be useable in the futureUnable to diversify risk – both regional and from over reliance on Natural Gas revenues

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Investment Attractiveness

Antero Resources No room for growth given future price levels Stock is overvalued ($20.85 Book Value, $25 avg share price) Rapidly increasing debt the last 2-3 years Revenues may be stable, but does not mean capital growth

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Investment Attractiveness

ConocoPhillips Enjoys lower average lifting costs ($16.85/bbl before discontinuing Canada operations) Liquidated non-essential holdings and assets to improve cash position Less dependent on one resource for revenues New revenue stream added from US exports Share price at or below Book Value per share (Book Value $35.81, Share Price avg. $35)

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Recommendation

Invest in ConocoPhillips sharesCaveats:Target price: $32 - $33Stop loss price: $28 - $29Lock In Period: 5 years minimumInvest only 5% of Fund ValueMonitor long term demand trends to re-evaluate during rebalancing exercises

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Questions?

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