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- Warren Buffett is set to indirectly bet on Guyana, a tiny country undergoing a historic oil boom.
- Buffett’s Berkshire Hathaway owns about 6% of Chevron, which agreed to buy rival Hess this week.
- One of Hess’ most-valuable assets is its 30% interest in an oil reservoir off the coast of Guyana.
Warren Buffett is set to gain indirect exposure to the tiny country of Guyana, the world’s fastest-growing economy and an emerging oil superpower, thanks to Chevron‘s planned acquisition of Hess.
The oil-and-gas explorer and producer announced a deal this week to buy its smaller rival for $53 billion worth of stock. Hess’s portfolio includes a 30% stake in the Stabroek Block, an oil reservoir off the coast of Guyana where operator Exxon Mobil has discovered the equivalent of more than 11 billion barrels of oil so far.
In a press release, Chevron hailed the oilfield as an “extraordinary asset with industry leading cash margins and low carbon intensity that is expected to deliver production growth into the next decade.”
Buffett’s Berkshire Hathaway conglomerate owned 123 million Chevron shares as of June 30, giving it a 6.4% stake in the energy giant. The position is worth about $20 billion, based on Chevron’s current stock price and assuming Berkshire didn’t alter its position last quarter.
As a result, the famed investor’s company stands to gain from the Chevron-Hess merger and the profits it generates from Guyana, if they boost the value of Chevron stock or the company returns them to shareholders via dividends or buybacks.
The rush to tap Guyana’s oil reserves, and develop the South American nation into one of the world’s largest crude producers, helped fuel unmatched real GDP growth of 62% in 2022, per the International Monetary Fund.
The fledgling petrostate is set to grow another 38% this year to about $16 billion in annual GDP — roughly one-seventh of Buffett’s personal net worth of $113 billion.
Guyana — home to a mere 800,000 people — is forecasted to produce 400,000 barrels a day this year and 1.2 million by 2028, or 1.2% of the global supply, per the International Energy Agency.
If Berkshire doesn’t raise its Chevron stake, it’s set to be diluted to 5.5% as a result of the company issuing about 317 million shares to fund its agreed transaction. Hess shareholders are set to receive 1.0250 Chevron shares for each of their shares.
It’s worth emphasizing that Chevron is just one stock in Buffett’s roughly $350 billion equity portfolio, which itself accounts for just over a third of Berkshire’s $1 trillion of assets. However, Chevron was one of its five largest stock positions last quarter, and Berkshire owns a sizeable stake in the group. As a result, Buffett will likely be paying close attention to the Hess deal and the Guyana venture, given he’s poised to have a not-insignificant amount of money riding on it. (Market Insider)
