RT’s Boom Bust investigates what brought Warren Buffett to pick sides in a bidding battle to takeover Anadarko Petroleum, which holds an impressive portfolio of 250,000 acres in a prized shale asset, the Permian Basin.
Competition for dominance in the Permian, amounting to around one third of total US oil production, started between oil giant Chevron and a company one quarter its size, Occidental Petroleum, after the latter topped the giant’s bid to buy Anadarko Petroleum. While Anadarko has to choose between the two bidders, Warren Buffett’s Berkshire Hathaway decided to get involved as it committed to invest $10 billion to help Occidental win the fight.
Speaking to Boom Bust, RT America producer Sayeh Tavangar explained the reasons for the billionaire’s interest in the deal, which is “no longer Occidental versus Chevron,” but more like Chevron against Warren Buffet.
“Berkshire Hathaway owns Northern Natural Gas and that’s the nation’s largest interstate natural gas pipeline system. By buying into a possible combined Occidental and Anadarko, Berkshire is making a big bet on US shale since both companies have holdings in the Permian,” the journalist said.
She noted that the move is similar to the profitable transactions that Buffet’s firm did with Goldman Sachs and GE during 2008 financial crisis, but it’s a rare thing for the investor to participate in a bidding war.
Berkshire has relatively limited investment in oil and gas stocks, while “the preferred stock will bring 800 million of tax advantage dividends” to the company annually.
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