Mr. Crane: Orleans started its Energy Opportunities strategy back in October of 2000, and we did that in conjunction with a research and subadvisory agreement with Simmons & Company International, headquartered in Houston, Texas. Originally, Orleans acted as the investment advisor and Simmons served as a subadvisor. Recently we've changed, and created a new company called Energy Opportunities Capital Management, which is co-owned 50% by Simmons and 50% by Orleans, to serve as the investment adviser to take the Energy Opportunities strategy forward. One of the reasons for that evolution was that it enabled us to have Scott Gill, who was Co-Head of Research at Simmons, move over to Energy Opportunities to serve as a co-portfolio manager on the strategy. I think that's important to what we're doing and it has really improved our capabilities.
TWST: How your strategy has been impacted by the events of this past year?
Mr. Crane: Well, during the first half of 2008, we were pleased with the
strategy's performance, enjoying the effects of oil approaching 150 a barrel in
the summer of 2008. On the other side of that year, in the second half,
obviously we were negatively impacted as oil prices fell dramatically. But I
think more importantly, what we saw was a great deal of forced liquidations and
selling, in energy names in particular, that were divorced from the industry's
long-term fundamentals.
Obviously we've adjusted some things in the portfolio, last year and going
forward this year, but our view is that the long-term trend with respect to
energy supply and demand, which is the primary tenet of our strategy, remains
intact. So far this year, we've already seen oil prices almost double from their
earlier lows, reflecting investor sentiment that we may be on the verge of an
economic recovery that will drive energy demand, or at least put an end to any
further erosion in demand. But more importantly, there are continued concerns on
the supply side, which are now becoming exacerbated as a result of lower capital
spending toward that supply effort.
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