Warren Buffett explains why he is making an effort in the energy industry
Warren Buffett (L), Managing Director of Berkshire Hathaway, and Vice President Charlie Munger attending the Annual General Meeting of Omaha in Nebraska on May 3, 2019.
Johannes Eisele | AFP | Getty Images
Warren Buffett has shown a greater interest in the oil industry with Berkshire Hathaway's last $ 10 billion investment to repay Occidental Petroleum's bid for Anadarko Petroleum, and he said it is a game on the Permian Basin.
Buffett told CNBC's Becky Quick in an interview before the start of the Berkshires 201[ads1]9 annual meeting at the CHI Health Center in Omaha, Nebraska.
"I think the Permian Basin is four million barrels a day. It's amazing." "Remember that it was the last major discovery in the United States 40 years ago or more … The United States produces 12 million barrels and four million" is from Perm, he added.
This week, Occidental revealed that Berkshire is committed to investing $ 10 billion in the company to fund the proposed acquisition of Anadarko. Berkshire would make the investment by purchasing 100,000 preferred stock shares, which pay an annual dividend of 8%.
Supported by Berkshire, Occidental's bid contributed to a previous bid by Chevron. But "Oracle of Omaha" does not consider it a hostile deal because Anadarko wants to sell its properties.
"I think it's not a hostile agreement that Anadarko had talked to Occidental about selling their properties … It's different to Coca-Cola or something like that. You buy physical assets … Anadarko wanted to sell "It wasn't like a private company that was sold or a controlled company," Buffett said.
When asked why he didn't buy Anadarko, Buffett said he wasn't an expert in the oil industry. [19659002] "Charlie is quite impressed with the Permian Basin. He knows more about oil than I do, which is not very much praised, but we both follow it, "said Buffett, referring to Berkshire's vice president Charlie Munger.
The Permian Basin, which is 250 miles wide and 300 miles Long, stretching from New Mexico to Texas and having more than 20 of the 100 oil fields in the country, according to Chevron.
"You can destroy oil fields very easily. There was a lot that was done in the early days, so you can take a big field, and by foolish production techniques you can dramatically reduce the recovery, "Buffett said.
