The continuous decline in international oil prices throughout the year, as well as the unfavorable multi billion dollar mergers and acquisitions in the industry, have not affected the confidence of the "stock god" Buffett in Western oil. Berkshire Hathaway continued to increase his holdings in Western Oil Company shares this week.
Buffett continues to increase positions
On Wednesday local time, according to documents submitted by Berkshire Hathaway to the Securities and Exchange Commission (SEC), the agency increased its holdings in Western Oil stocks for three consecutive days this week, spending approximately $588.7 million (approximately RMB 4.2 billion) to acquire nearly 10.5 million shares of Western Oil Company stocks. After this increase in holdings, Berkshire's holdings of Western Oil stocks increased to 238 million shares, with a shareholding ratio of over 27.13% and a total market value of approximately 13.648 billion US dollars (approximately 97.2 billion yuan).
In addition, Berkshire also holds preferred shares and warrants of Western Oil, which can acquire 83.8 million shares of Western Oil Company at a price of $47 per share. If these subscription privileges are exercised, Berkshire's stake in Western Oil will reach 33%.
The stock price trend of Western Petroleum within the year
It is worth noting that international oil prices did not perform well this year. Although there was a slight increase in the third quarter, international oil prices still showed a downward trend throughout the year. WTI crude oil and ICE crude oil have both fallen by over 10% since the beginning of the year.
NYMEX WTI crude oil price trend
The low oil prices are also reflected in the financial reports of Western oil companies. The company's quarterly revenue and net profit have significantly declined from last year's high.
Quarterly revenue performance of Western oil companies
Quarterly performance of net profit of Western oil companies
New mergers and acquisitions do not affect Buffett's confidence
Buffett's continued increase in holdings in Western Oil occurred after Western Oil announced an industry merger of $12 billion (approximately RMB 85 billion). Although the industry is not optimistic about this acquisition, Buffett still expressed his support for it with real money and silver.
On December 11th, Western Petroleum announced that it had completed an acquisition agreement to acquire US shale oil producer CrownRock for $12 billion to expand its control over the largest shale oil field in the United States. The acquisition plan is expected to be completed in the first quarter of 2024.
Screenshot of news from the official website of Western Petroleum
According to the acquisition agreement, Western Oil will acquire CrownRock in cash and stock for a transaction value of approximately $10.8 billion. In addition, the acquisition terms require Western Oil to assume the $1.2 billion debt held by CrownRock.
Public information shows that CrownRock is a large private energy producer jointly established by CrownQuest Operating LLC and Lime Rock Partners, headquartered in Midland, Texas, mainly engaged in shale oil extraction, oil sales, oilfield development and other related businesses. And Midland is located in the Permian Basin, a major energy production hub in the United States. Currently, CrownRock owns approximately 86000 acres of land in the northern Midland Basin and is one of the largest closed oil and gas producers in the region.
Due to the possibility of the acquisition expanding the company's leverage ratio, affecting shareholder dividends and share buybacks, market analysis suggests that this acquisition may not be recognized by Buffett. Previously, when Western Oil acquired Anadarko, Buffett provided funding and his subscription stake was also acquired at the time.
After the announcement of the acquisition of CrownRock, Vicki Hollub, CEO of Western Petroleum, also stated that he did not need Buffett's help to complete the acquisition.
But Berkshire's continued increase in holdings after the merger announcement means that Buffett still voted in favor of the company's prospects.
Energy giants are fighting for shale oil
Western Oil's $12 billion acquisition of CrownRock is also the third heavyweight deal in the US energy industry recently.
In October this year, American oil and gas giant ExxonMobil proposed to acquire Pioneer Natural Resources for a total price of $64.5 billion (approximately RMB 459.1 billion). This acquisition is not only the world's largest acquisition this year, but also the largest acquisition by ExxonMobil since the 21st century and the largest acquisition in the oil and gas industry in nearly 20 years. It is expected to be completed in the first half of 2024. This transaction will make ExxonMobil the largest oil producer in the Permian Basin.
Pioneer Natural Resources is the third largest shale oil producer in the Permian Basin, second only to Chevron and ConocoPhillips. Its shale oil industry is mainly concentrated in the Permian Basin in western Texas. Both CrownRock and Pioneer Natural Resources, which were acquired by Western oil, have shale oil fields located in the Permian Basin.
Previously, ExxonMobil stated that after the acquisition is completed, it will integrate the two largest oil fields in the Permian basins of Texas and New Mexico to become the largest oil producer in the basin, with a daily production of approximately 1.2 million barrels, exceeding most OPEC member countries.
Western Petroleum stated that after acquiring CrownRock, it can increase production capacity by 170000 barrels of oil equivalent per day, while also providing 1700 undeveloped locations, of which 1250 are ready for development, which could allow Western Petroleum to obtain a large potential profitable onshore oil resource during the Permian period.
In addition, in October, another oil and gas giant, Chevron, also announced that it had reached a final agreement with US oil producer Hess Corporation to acquire all issued shares of Hess for $53 billion (approximately RMB 377.2 billion).
This also means that after the major integration of the oil and gas industry in this round, giants such as ExxonMobil, Chevron, and Western Petroleum will gather in the Permian Basin to engage in a new round of competition in the shale oil field.
Western Oil's $12 billion acquisition of CrownRock is also the third heavyweight deal in the US energy industry recently.
In October this year, American oil and gas giant ExxonMobil proposed to acquire Pioneer Natural Resources for a total price of $64.5 billion (approximately RMB 459.1 billion). This acquisition is not only the world's largest acquisition this year, but also the largest acquisition by ExxonMobil since the 21st century and the largest acquisition in the oil and gas industry in nearly 20 years. It is expected to be completed in the first half of 2024. This transaction will make ExxonMobil the largest oil producer in the Permian Basin.
Pioneer Natural Resources is the third largest shale oil producer in the Permian Basin, second only to Chevron and ConocoPhillips. Its shale oil industry is mainly concentrated in the Permian Basin in western Texas. Both CrownRock and Pioneer Natural Resources, which were acquired by Western oil, have shale oil fields located in the Permian Basin.
Previously, ExxonMobil stated that after the acquisition is completed, it will integrate the two largest oil fields in the Permian basins of Texas and New Mexico to become the largest oil producer in the basin, with a daily production of approximately 1.2 million barrels, exceeding most OPEC member countries.
Western Petroleum stated that after acquiring CrownRock, it can increase production capacity by 170000 barrels of oil equivalent per day, while also providing 1700 undeveloped locations, of which 1250 are ready for development, which could allow Western Petroleum to obtain a large potential profitable onshore oil resource during the Permian period.
In addition, in October, another oil and gas giant, Chevron, also announced that it had reached a final agreement with US oil producer Hess Corporation to acquire all issued shares of Hess for $53 billion (approximately RMB 377.2 billion).
This also means that after the major integration of the oil and gas industry in this round, giants such as ExxonMobil, Chevron, and Western Petroleum will gather in the Permian Basin to engage in a new round of competition in the shale oil field.
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