A former U.S. special-operations soldier turned math wonk is shaking up the world of commodity trading.
Since leading a management takeover at Castleton Commodities International LLC almost three years ago, Chief Executive Officer William Reed has been on a buying spree backed by hedge funds and billionaires. Two months after acquiring Morgan Stanley’s oil business, Reed has made Castleton among the world’s biggest independent energy traders.
What distinguishes Castleton are the deep pockets of shareholders such as Paul Tudor Jones and Highbridge Capital Management founder Glenn Dubin. They gave Reed the funding he needed to make the Connecticut company global, with profits close to those of some of the biggest independent traders including Gunvor Group Ltd. and Mercuria Energy Group Ltd.
“Castleton is the new model of commodity trading,” said Craig Pirrong, a finance professor at the University of Houston. “They have the advantages of a private firm but with the ability of accessing lots of capital easily.”
Reed, 49, who started in the business as a junior trader of natural gas and electricity for Enron Corp. in the 1990s, put Castleton’s money to work buying power plants in Texas, coal terminals in Kentucky, oil storage tanks in Shanghai and natural-gas wells in Colorado. He capped off the dealmaking with Project Horizon: the codename for the acquisition of Morgan Stanley’s oil-trading business.
Stamford Base
From a nondescript seven-story building in Stamford, Connecticut -- a state rivaling New York for billion-dollar hedge funds -- Castleton’s net income more than doubled last year to $236 million from $108 million in 2013, according to a company presentation obtained by Bloomberg. That same year, Mercuria earned $273 million and Gunvor $267 million.
Mike Geller, an outside spokesman for the company, declined to comment about Castleton’s profitability.
More growth may be on the way. The oil business acquired from Morgan Stanley generated $281 million of net revenue in 2013, the New York-based bank said in an internal presentation in December, a copy of which was obtained by Bloomberg. The bank traded about 1.9 million barrels a day last year.
Global Ambitions