Buffett Cuts Oil Investments

The energy industry learned about the gloomy side of Warren Buffett during the second quarter of 2014.

The billionaire investor, currently heading up the $200,000 per-share Berkshire Hathaway, sold off a large majority of his stake in ConocoPhillips, based out of Houston. He also sent back some of the shares of National Oilwell Varco and Phillips 66, meaning he sold them back to the market.

Why make this change? It’s possible that he did so because crude oil prices in the US have dropped to $107 per barrel in mid-June, and this past Tuesday prices have dropped below $95 a barrel. Energy stocks were once the best performers on Wall Street, and they are now part of the middle of the pack.

“The group has been weak,” said Gil Baumgarten, president of the wealth advisory firm in Houston known as Segment Asset Management. “They’re losing their momentum. That’s pretty clear to me.”

This past Tuesday, September future prices of West Texas Intermediate dropped to $94.48 a barrel. This is the lowest price point that it has seen in seven months, we learned according to Bloomberg.

The tales of jam packed United States crude oil storage tanks and higher costs of exploration have discouraged investors amidst sinking oil prices, said Baumgarten. Earlier in the month, on a day when stock prices were soaring and the Dow Jones Industrial Average closed 186 points higher, energy stocks were flat overall – a real sign that something’s slowing within the sector, he said.

According to the regulatory document filed by Berkshire Hathaway last week, the company sold off $688 million of ConocoPhillips shares, and they only retained a stake that is worth $108 million as of the previous Tuesday. This is following Buffett’s move last year where he sold off 44% of his ConocoPhillips holdings.

Buffett even sold off $279 million worth of shares of Phillips 66, but still owns two thirds of his overall holding in the refining and midstream firm based out of Houston.

Not to be outdone, Buffett even sold off $125 million worth of shares of National Oilwell Varco, the oilfield service firm based out of Houston. His overall investment in the company is now worth $610.6 million as of the previous Tuesday. His $4.1 billion stake in Exxon Mobil Corp. was not touched.

Finally, Buffett appears a lot more bullish on his $15 billion bet on renewable energy and other power related projects. In December of last year, Berkshire Hathaway made an agreement to pay $1.4 billion for one of the energy transportation units from Phillips 66.

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