FACTBOX-Buffett ramps up oil bets with $4 bln Chevron stake
Feb 17 (Reuters) – Warren Buffett’s purchase of a $4.1 billion stake in Chevron Corp is the latest sign of confidence in an oil industry recovery in a year that has also seen one of America’s most influential financiers reset key investments.
U.S. oil and gas companies have become a theme for Buffett’s Berkshire Hathaway Inc at a time when the industry is suffering its biggest shakeout in decades.
BERKSHIRE OIL INVESTMENTS
– Berkshire in April last year bought Dominion Energy’s gas assets for $4 billion.
– Buffett bought $10 billion of Occidental Petroleum Corp preferred stock in 2019, helping fund the Houston-based company’s $35.7 billion acquisition of Anadarko Petroleum Corp.
– Tuesday’s filing showed Berkshire held 48 million shares in Chevron as of Dec. 31 and 13.85 million shares in Canadian oil sands operator Suncor Energy Inc.
OIL BOUNCE
Oil prices have rallied about 63% since November and are currently trading at about $64 a barrel after sinking as low as $16 last April.
Top oilfield service companies Schlumberger, Halliburton and Baker Hughes Co have all predicted a steady recovery in the oil industry this year.
“The Chevron stake suggests confidence that returns on capital for oil and gas stocks are in for a good run – and we’d agree,” Tudor Pickering Holt and Co analysts wrote in a note on Wednesday about the Berkshire stake.
CHEVRON NOT EXXON?
Berkshire’s investment in Chevron comes about six years after the fund dissolved its stake in rival oil major Exxon Mobil.
While top investment banks have increasingly turned positive on Exxon, as the company has cut costs and the sector recovers, Chevron is widely considered to have a stronger balance sheet, higher quality Permian position and consistent dividends.
Both companies reported losses in 2020, but analysts expect Chevron to be able to better leverage a recovery in the oil market thanks to its exposure to production, compared to Exxon’s heavier exposure to refining.
“The underperformance of energy stocks relative to the market last year, for example means that the energy sector is an area where there is more value and high dividend yields with now the prospect of stronger commodity prices,” said Anish Kapadia, director of energy at London-based Palissy Advisors.
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