Buffett made a move, and $3.3 billion increased the energy concept again! Why he likes energy assets this much?
On Monday, July 10, Eastern Time, according to Reuters, Buffett’s $Berkshire Hathaway(BRK.A)$ Energy Company (BHE GT&S) announced that it had signed an agreement to purchase 50% of limited partnership shares of the Cove Point liquefied natural gas and liquefied petroleum gas business held by Dominion Energy .
According to regulatory filings, Total transaction value of $3.5 billion, including transaction price ($3.3 billion) and expected proceeds from termination of related interest rate derivatives (approximately $200 million), approximately 50% non-controlling interest held by Dominion Energy 2025 projected EBITDA 10.8 times of US$325 million.
Transactions will be in the form of cash and cash realized from the liquidation of certain investments. Upon completion of the transaction, Berkshire Hathaway Energy will own a 75% limited partnership stake in Cove Point LNG, while the remaining 25% remains held by Toronto-based Brookfield Infrastructure Partners.
It is reported that BHE GT&S, LLC is currently the general partner and operator of Cove Point's natural gas pipeline and LNG terminal in Lusby, Maryland.
According to public information, Berkshire Hathaway has owned 92% of BHE GT&S since 2000.
Source from www.wvnews.com
Why does Buffett like energy assets so much?
Buffet‘s $Berkshire Hathaway(BRK.B)$ $Berkshire Hathaway(BRK.A)$ has been keeping add oil assets for like $Occidental(OXY)$ ，which is the top 6
of all holdings. The holdings show a 23.9% up till now.
Perhaps it is because of the company’s good cash flow.
As per Motley Fool report, Berkshire Hathaway's investment portfolio is packed with profitable, time-tested, dividend-paying stocks. In 2023 alone, Buffett and his team should oversee the collection of around $6 billion in dividend income. But almost half of the total dividend income --- about $2.75 billion -- comes from just three stocks: $Apple(AAPL)$ , $Occidental(OXY)$ , $Bank of America(BAC)$
As per the report, $Occidental(OXY)$ shares have given $961.37 million in annual dividend income to Berkshire including preferred stock dividends.
$Occidental(OXY)$ first caught Buffet's attention in mid-2019, however, the investor exited the energy stock by the end of Q1 of 2020. Nevertheless, Buffet once again took a liking for Occidental in early 2022, around the time when Russia invaded Ukraine and crude oil prices were soaring.
Overall, Buffet owns 25.57% of the outstanding $Occidental(OXY)$ Petroleum stock.
Data from Tiger Trade, as of 13 July
TAlso, $Berkshire Hathaway(BRK.B)$ holds around $10 billion worth of $Occidental(OXY)$ preferred stock that is carrying a dividend of 8% along with another $5 billion of $Occidental(OXY)$ shares warrants. Buffet's company picked up $Occidental(OXY)$ 's preferred stock and obtained warrants back in 2019 -- which financed Occidental's purchase of Anadarko Petroleum Corp.
According to Nasdaq, $Occidental(OXY)$ 's dividend yield is around 1.23% with a P/E ratio of 6.71x. The annual dividend is around $0.72 per share.
Billionaire Warren Buffett is a name that needs no introduction. The 92-year-old philanthropist is called the 'Oracle of Omaha' by the world, a title he earned from profiting massive fortunes through his business and investment success.
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