> Warren Buffett Blog: Warren Buffett Places One Heck of Bet on Energy

Thursday, December 12, 2013

Warren Buffett Places One Heck of Bet on Energy

Warren Buffett made big headlines in the energy space when Berkshire Hathaway publicly disclosed that it had accumulated a $3.4 billion position in ExxonMobil . This alone is a pretty significant bet on the future of oil and gas. When you look at some of Buffett's other energy holdings, though, it points to a very specific investment strategy: Canadian oil sands. Let's take a look at Buffett's energy holdings and what makes all of them work.

Cornering the market
In the Berkshire Hathaway holdings, there are three exploration and production companies: ExxonMobil, ConocoPhillips , and Suncor . The most obvious oil sands play among these three companies is Suncor, which is the largest oil sands producer and derives more than 66% of its 560,000 barrels per day of production from bitumen and upgraded oil sands. While Exxon and Conoco have extensive oil and gas operations across the globe, both are making large bets on Canadian oil sands as well.

 ConocoPhillips, through multiple joint ventures, produced 107,000 barrels per day of bitumen from the Athabasca oil sands region. The company plans to expand that capacity to 314,000 barrels per day by 2017, which would represent about 15% of its total production target of 2 million barrels per day.

Between its ownership stake in the Syncrude project and its 70% stake in Imperial Oil , Exxon has more than 4 billion barrels of proven oil reserves in Canadian oil sands. This represents 37% of the company's total oil reserves on the books. Current production is slightly more than 200,000 barrels per day, but total production should ramp up to around half a million barrels per day as the Kearl oil sands facility reaches full production in 2020.