Buffett/Berkshire - general news

[gfp]

21 minutes ago, xo 1 said:

Interesting thesis.  To put your explanation in my words, Chevron was a liquid option that turned out to be a modest money market (better than costless!) but that hasn't proven to be a windfall, and WEB is ready to unwind (potentially to shift to Oxy, although with some of the preferreds being called, total exposure in oil is currently being lightened)? 

 

Well the preferred shares in OXY isn't really offering "oil exposure" except in a bankruptcy.  If Buffett sells more CVX than he buys in OXY common he will be lightening his exposure to oil.  CVX is very large and liquid.  The price of oil was already lower in Q1 and CVX had a few moments of price strength early in the quarter.  We'll probably be able to tell when and at what price he sold CVX shares at once the NAIC filings are released for Q1.

[Spekulatius]

Oil / energy has been a trade for Buffett. Why should this one be any different, especially when energy prices are weak while the equities remained quite strong? I think he is in Oxy for good, but his CVX stake easily becomes a source of funds especially when risk free short term paper yields more than CVX's dividend.

Also looking at it another way, CVX trades at ~10.5x earnings, which isn't cheap historically speaking.

Edited May 9, 2023 by Spekulatius

[gfp]

On 5/6/2023 at 5:44 PM, gfp said:

I was also surprised how ruthless Buffett was on "Wheels Up," basically implying that people that gave them money for their jet cards ($1 Billion) would basically lose out (unsecured creditors in line at BK)...  He doesn't want to cause bank runs by naming any firm specifically but went straight for the jugular on Wheels Up.  I don't know anything about them but it sounded like a SPAC deal from context.

 

Well that didn't take long...  Founder and CEO steps down as bankruptcy looms

https://www.cnbc.com/2023/05/09/wheels-up-founder-abruptly-steps-down-as-losses-mount-bankruptcy-looms.html

[Xerxes]

2 hours ago, xo 1 said:

Interesting thesis.  To put your explanation in my words, Chevron was a liquid option that turned out to be a modest money market (better than costless!) but that hasn't proven to be a windfall, and WEB is ready to unwind (potentially to shift to Oxy, although with some of the preferreds being called, total exposure in oil is currently being lightened)? 

I would also highlight that the question at the AGM was about the Permian basin and Berkshire holdings in Occidental and Chevron (both), while Buffett’ response was about only Occidental and Vickie H. 
 

Buffett didn’t talk about neither about Chevron nor Michael Wirth (it’s CEO) neither in the AGM nor in Tokyo. 

@gfp

 

Yes, Occidental is not illiquid (Buffett himself indicated in the 2022 AGM, how easily he was buying the shares because of the very high turnover) but could you imagine him to plow +$20 billion additional into Occidental in that very short period of time as war broke out. No matter how liquid Occidental was, it would not be able to absorb that much of inflows. 

 

Chevron was the “shock absorber”. A temporary and a variable plug 

 

CVX was the short term trade to OXY’s long term 

 

 

 

Edited May 9, 2023 by Xerxes

[cubsfan]

47 minutes ago, Spekulatius said:

Oil / energy has been a trade for Buffett. Why should this one be any different, especially when energy prices are weak while the equities remained quite strong? I think he is in Oxy for good, but his CVX stake easily becomes a source of funds especially when risk free short term paper yields more than CVX's dividend.

Also looking at it another way, CVX trades at ~10.5x earnings, which isn't cheap historically speaking.

 

Seems right on. He and Munger know OXY inside out if you listen to their comments. Right in Charlie's backyard - and he's followed oil for years. Maybe you heard the comment Warren made about Munger family still getting royalties from one of his oil partnership unit purchases - still paying 70K per year for something he spent a tiny fraction on.

[longlake95]

1 minute ago, cubsfan said:

 

Seems right on. He and Munger know OXY inside out if you listen to their comments. Right in Charlie's backyard - and he's followed oil for years. Maybe you heard the comment Warren made about Munger family still getting royalties from one of his oil partnership unit purchases - still paying 70K per year for something he spent a tiny fraction on.

 

That royalty that Charlie receives, cost him $1000 back in the day.

[cubsfan]

^^^ There ya' go. I think the point is, Charlie has studied the decline in different oil fields, drilling technology, etc - has plenty of engineering friends and oil contacts. He knows a lot more than people think. Then Warren differs to Charlie on oil - probably tells you a lot. Charlie loves OXY plenty.

[AlwaysDay1]

Do any of the wildcatters on the board know if perhaps it is because Chevron leases more of its Permian land while Oxy owns more of its Permian land and therefore has redevelopment opportunities? And did anyone catch the comment Buffett made on Chevron's advantage from ownership TPLT's minerals? 

[Stuart D]

 

 

53 minutes ago, AlwaysDay1 said:

Do any of the wildcatters on the board know if perhaps it is because Chevron leases more of its Permian land while Oxy owns more of its Permian land and therefore has redevelopment opportunities? And did anyone catch the comment Buffett made on Chevron's advantage from ownership TPLT's minerals? 

 

Yeah, the land angle could make sense. He did keep talking about oxy’s ‘position’ in the Permian.

 

He’s probably also selling CVX to buy some sweet PBR - lol jokes.

[Charlie]

The transcript of the Berkshire annual meeting is available at the Warren Buffett archive site at

https://buffett.cnbc.com/video/2023/05/08/morning-session---2023-meeting.html

https://buffett.cnbc.com/video/2023/05/08/afternoon-session---2023-meeting.html

 

Cheers!

 

 

[xo 1]

16 hours ago, cubsfan said:

^^^ There ya' go. I think the point is, Charlie has studied the decline in different oil fields, drilling technology, etc - has plenty of engineering friends and oil contacts. He knows a lot more than people think. Then Warren differs to Charlie on oil - probably tells you a lot. Charlie loves OXY plenty.

Right.  I don't have the source to hand, but I recall Charlie discussing how good a business big oil would be if the big oil companies would just stop with the money-destroying exploration.  I have in mind that is the appeal of OXY: CEO Holub just turns on the cash spigot.  (I haven't reconciled the Permian Basin play with that view though, as even the discussion at the annual meeting made it sound as if shale is an always-explore venture, as contrasted with Charlie's 50-year-plus monthly royalty check.)

[Spooky]

31 minutes ago, xo 1 said:

Right.  I don't have the source to hand, but I recall Charlie discussing how good a business big oil would be if the big oil companies would just stop with the money-destroying exploration.  I have in mind that is the appeal of OXY: CEO Holub just turns on the cash spigot.  (I haven't reconciled the Permian Basin play with that view though, as even the discussion at the annual meeting made it sound as if shale is an always-explore venture, as contrasted with Charlie's 50-year-plus monthly royalty check.)

 

Charlie keeps mentioning he would prefer if American oil companies stopped pumping oil entirely since hydrocarbons have other important uses and there is a limited supply. He mentioned this again at the AGM. I can't help but feel like this is part of the thesis that people are overlooking since it appears that there is still significant oil reserves under the Permian that are currently not easily accessible with current drilling technologies.

 

[cubsfan]

^^^ Well , you hit the nail on the head. This is a long duration asset for him.

[NnnnotSoSmart]

59 minutes ago, Spooky said:

 

Charlie keeps mentioning he would prefer if American oil companies stopped pumping oil entirely since hydrocarbons have other important uses and there is a limited supply. He mentioned this again at the AGM. I can't help but feel like this is part of the thesis that people are overlooking since it appears that there is still significant oil reserves under the Permian that are currently not easily accessible with current drilling technologies.

 

Yes..OXY and Chevron have rights to large portions of this "technically recoverable" oil and gas.  

 

U.S. Geological Survey assessed undiscovered, technically recoverable continuous mean resources:

 

Permian (Delaware and Midland Basins): 70.5 Billion barrels of oil and 300 Trillion cubic feet of gas.

46.3 billion barrels of oil and 281 trillion cubic feet of gas in the Wolfcamp shale and Bone Spring Formation of the Delaware Basin in the Permian Basin Province, southeast New Mexico and west Texas.
https://pubs.usgs.gov/fs/2018/3073/fs20183073.pdf

20 billion barrels of oil and 16 trillion cubic feet of gas in the Wolfcamp shale in the Midland Basin part of the Permian Basin Province, Texas.
https://pubs.usgs.gov/fs/2016/3092/fs20163092.pdf

4.2 billion barrels of oil and 3.1 trillion cubic feet of gas in the Spraberry Formation of the Midland Basin, Permian Basin Province, Texas.
https://pubs.usgs.gov/fs/2017/3029/fs2017173029 .pdf

 

CHARLIE MUNGER: And there’s a lot more oil down there, if anybody can figure out another magic trick. That’s all we need is another magic trick.

 

That "magic trick" could likely be enhanced oil recovery (EOR) for the shales using CO2 injection.  

[Spekulatius]

Or imagine the rest of the world is starting to drill for shale oil and gas. It's not like the US is the only country in the world with shale reservoirs. So far it has been only the US and Argentina recently but there are shale oil and gas reservoirs all over the in the world.  I would be that there are a bunch of permian quality reservoirs out there like the Beetaloo reservoir in Australia.

https://www.industry.gov.au/publications/beetaloo-strategic-basin-plan/beetaloo-strategic-basin-plan

[NnnnotSoSmart]

2 hours ago, Spekulatius said:

Or imagine the rest of the world is starting to drill for shale oil and gas. It's not like the US is the only country in the world with shale reservoirs. So far it has been only the US and Argentina recently but there are shale oil and gas reservoirs all over the in the world.  I would be that there are a bunch of permian quality reservoirs out there like the Beetaloo reservoir in Australia.

https://www.industry.gov.au/publications/beetaloo-strategic-basin-plan/beetaloo-strategic-basin-plan

No need to imagine. The ROW has been drilling for shale oil and gas around the world.  So far, no other Permian Basins have been found. But they'll keep trying.

 

Oil and gas exploration, including horizontal drilling, has been going on in the Beetaloo Basin since the 1980's.  So far, not much to show for it. A few minor puffs of gas:

https://www.hydrocarbons-technology.com/projects/beetaloo-gas-field-northern-territory-australia/

 

I see that the Australian Government has only recently approved hydraulic fracturing in the Beetaloo.  We'll see how it works out, if and when the environmentalists allow it.

https://www.theguardian.com/australia-news/2023/apr/19/beetaloo-basin-inquiry-calls-for-national-plan-to-offset-vast-emissions-expected-from-gas-projects

 

The Beetaloo Basin hydrocarbon resource is tiny compared to the Permian.  Using the same methodology posted for the Permian Basin above, the USGS estimates the Beetaloo has technically recoverable mean resources of 429 million barrels of continuous oil and 8 trillion cubic feet of continuous gas.

https://pubs.usgs.gov/fs/2019/3013/fs20193013.pdf

 

The Permian has 175 times the recoverable oil and 38 times the recoverable gas. Since the Permian basin sits under mostly fee (private) lands, the environmentalists hold little sway over oil and gas operations.

 

Operating on private land provides a "moat" to Permian operators, protecting them from irrational environmentalists and Federal bureaucrats. One of the many reasons Warren and Charlie like it so much. 

Edited May 10, 2023 by NnnnotSoSmart

[NnnnotSoSmart]

On 5/9/2023 at 1:12 PM, Spekulatius said:

Oil / energy has been a trade for Buffett. Why should this one be any different...

Cuz Charlie said recently: 

 

 "I think having a big position in the Permian Basin through those 2 companies, it’s likely to be a pretty good long-term hold."

 

https://steadycompounding.com/investing/djco23/

 

But wait...Buffett just sold some Chevron in Q1.  Well, at least Charlie and Buffett's sister kept their royalty interests for a long time.

 

Edited May 10, 2023 by NnnnotSoSmart

[John Hjorth]

Youtube [May 5 2023] : Gabelli Interview Panel Adam Mead, Chris Bloomstran & Todd Finkle about Berkshire .

 

For those who may not know, Adam is a CoBF member, username @TREVNI . Enjoy.

[Saluki]

On 5/10/2023 at 9:38 AM, Spooky said:

 

Charlie keeps mentioning he would prefer if American oil companies stopped pumping oil entirely since hydrocarbons have other important uses and there is a limited supply. He mentioned this again at the AGM. I can't help but feel like this is part of the thesis that people are overlooking since it appears that there is still significant oil reserves under the Permian that are currently not easily accessible with current drilling technologies.

 

 

I used to own shares of a land based oil rig driller called Patterson UTI, and the former CEO/founder was a thousand years old and very sharp.  Reminded me of Munger.  He said that the problem with the oil industry (the E&P guys) is that they like to drill holes more than they like making money, and that if you give them a dollar, they will drill you a hole, you give them another dollar and they drill you another hole, and that you run out dollars before they every tell you that it's a bad idea to drill another hole. 

[John Hjorth]

3 minutes ago, Saluki said:

 

I used to own shares of a land based oil rig driller called Patterson UTI, and the former CEO/founder was a thousand years old and very sharp.  Reminded me of Munger.  He said that the problem with the oil industry (the E&P guys) is that they like to drill holes more than they like making money, and that if you give them a dollar, they will drill you a hole, you give them another dollar and they drill you another hole, and that you run out dollars before they every tell you that it's a bad idea to drill another hole. 

 

What a weird kind of libido.

[Parsad]

https://finance.yahoo.com/news/charlie-munger-pockets-70-000-185148690.html

 

Cheers!

[MMM20]

The Real Story of Buffett, Berkshire, and Tobacco https://invariant.substack.com/p/buffett-berkshire-tobacco

[rkbabang]

1 hour ago, MMM20 said:

The Real Story of Buffett, Berkshire, and Tobacco https://invariant.substack.com/p/buffett-berkshire-tobacco

I think the press is going to start trying to change the narrative on Buffett and turn him into some kind of villain because he never completely towed the ESG line and more importantly he’s rich so obviously he’s evil and did bad things. You watch, mark my words 10 years after he’s gone he will not be looked on with respect by the next generation. No industry leader will dare not do what their expected of ESG wise if even Buffett can be turned into a villain.

 

A good book on ESG that I’m currently reading is “Capitalist Punishment”. I highly recommend it.

 

Capitalist Punishment: How Wall Street Is Using Your Money to Create a Country You Didn't Vote For https://a.co/d/hgiy09W

[MMM20]

7 hours ago, rkbabang said:

I think the press is going to start trying to change the narrative on Buffett and turn him into some kind of villain because he never completely towed the ESG line and more importantly he’s rich so obviously he’s evil and did bad things. You watch, mark my words 10 years after he’s gone he will not be looked on with respect by the next generation. No industry leader will dare not do what their expected of ESG wise if even Buffett can be turned into a villain.

 

A good book on ESG that I’m currently reading is “Capitalist Punishment”. I highly recommend it.

 

Capitalist Punishment: How Wall Street Is Using Your Money to Create a Country You Didn't Vote For https://a.co/d/hgiy09W

The part I always refer back to is below. I think their sort of business ethics will prove enduring and the top down bureaucratic version en vogue these days will fade away. The sociopathic and psychopathic CEO types *should* be called out and shunned - maybe that’s the bright side of all this - but Berkshire should indeed be viewed as a national asset, and it will be by enough of us. Maybe that’s wishful thinking.

 

Buffett:

So the fact that we’ve not been significant holders of tobacco stocks has not been because they’ve been on a boycotted list with us. It just means that overall we were uncomfortable enough about their prospects over time that we did not feel like making a big commitment in them.

Charlie Munger:

Yeah. I think each company, each individual, has to draw its own ethical and moral lines, and personally, I like the messy complexity of having to do that. It makes life interesting.

Warren Buffett:

I hadn’t heard that before. (Laughing)

We’ll make him in charge of this decision.

Charlie Munger:

Yeah, no, no. But I don’t think we can justify our call, particularly. We have to draw the line somewhere between what we’re willing to do and what we’re not, and we draw it by our own lights.

Edited May 14, 2023 by MMM20

[DooDiligence]

I've seen a couple of meme's on reddit where WEB gets lumped in with the likes of musk and other odious characters. Also got into an argument a while back over the lack of philanthropy among the uber wealthy and when I linked to Buffett's history of giving I got downvoted into oblivion. A lot of people are having a hard time sifting through bullshit to see truth. This has always been a difficult task but I think it's exponentially more difficult in the era of viral hot takes and mis/disinformation.