LNG

Chevron Corp., the US major oil and gas company with LNG operations in Australia and Africa, has received a vote of confidence from US investor Warren Buffett whose Berkshire Hathaway has taken its stake to almost 7 percent.

Buffett’s Berkshire Hathaway has increased its stake in San Ramon, California-based Chevron by over 15.84 million shares.

This transaction has brought Berkshire Hathaway's total share count in Chevron to 126.09M shares, representing about 5.96 percent of Buffett’s investment portfolio and 6.81 percent of Chevron's outstanding shares.

Lower price

According to Berkshire Hathaway data, the Chevron shares were acquired at an average price of $149.16 each and were valued at $18.80 billion.

Buffett is a celebrity figure among America’s small retail investors and is known to his fans as “The Oracle of Omaha”.

Buffett’s other main energy investment is in Houston, Texas-based Occidental Petroleum which forms 4.19 percent of the Berkshire Hathaway portfolio. The Buffett firm also has a huge 50 percent represented by shares in Apple Inc.

Chevron’s shares have recently risen to $154.63 per share, backed by positive earnings and the company’s acquisition agreement signed in October 2023 with US oil and gas company Hess Corp.

The value of the Buffett stake has already risen and at current prices on February 19, 2024, is now worth just short of $20Bln at $19.49Bln.

Chevron recently reported annual net profits of $21.41Bln, down from $35.60Bln in the previous year, though apart from 2022 the Chevron performance was the strongest since 2013.

LNG projects advance

Chevron listed among its highlights as achieving first natural gas production from the Gorgon Stage 2 development in Western Australia where its operates both the Gorgon LNG and Wheatstone LNG export plants.

Chevron also reached a final investment decision with partners to construct a third gathering pipeline that is expected to increase natural gas production capacity at the Leviathan gas field and a future LNG hub in the East Mediterranean offshore Israel.

The company additionally expanded the Bayou Bend carbon-capture and sequestration project on the US Gulf Coast through an acquisition of nearly 100,000 acres.

However, Chevron assets in the Permian Basin in Texas and New Mexico also helped to underpin the earnings.

Chevron posted an increase in its Permian production by 10 percent in 2023 with US quarterly output coming to 1.16 million barrels per day compared with 895,000 barrels per day, helped by the 2023 acquisition of US independent oil and gas company PDC Energy.

Chevron is also paying $53Bln for New York-based Hess, giving it access to major oil discoveries in the South American nation of Guyana as well as more US shale assets in the Bakken Shale Basin of North Dakota.

The Berkshire Hathaway Energy group of US investor Warren Buffett has acquired the 50 percent of the Cove Point LNG plant in Maryland it didn’t already own for $3.3 billion from US utility Dominion Energy.

Dominion had a 50 percent non-controlling limited partner interest in Cove Point LNG and this is now owned by Berkshire Hathaway Energy, which already operates the facility.

Berkshire Hathaway Energy confirmed the acquisition for $3.3Bln and said it would now own a 75 percent limited partnership stake in Cove Point LNG LP.

It added that a subsidiary of Brookfield Infrastructure Partners, the Canadian equity fund, owns the remaining 25 percent limited partnership interest in the Cove Point business.

Berkshire Hathaway Energy holds the Cove Point stake in the BHE Gas Transmission and Storage (BHE GT&S) unit, an interstate natural gas transmission and storage company headquartered in Richmond, Virginia and with operations in 10 states.

Dominion valuation

Dominion said its own total transaction value was in fact $3.5Bln inclusive of transaction proceeds of $3.3Bln and expected proceeds from the termination of related interest rate derivatives of $200 million.

“Since 2002, Cove Point has been an excellent service provider to its international and domestic customers - linking global gas supplies with American customers, and American gas supplies with customers around the world,” said Robert M. Blue, Dominion President and Chief Executive.

“However, this investment is non-core to Dominion Energy as we focus on our state-regulated utility operations,” CEO Blue added.

“The sale demonstrates our commitment to the company's credit profile and represents an attractive exit from what has been an excellent investment for our shareholders,” Blue stated.

Cove Point produces around 5.2 million tonnes per annum from a single Train and has tolling agreements with Gas Authority of India and Sumitomo Corp. and Tokyo Gas of Japan.

Earlier deal

Buffett's company agreed to acquire its initial Cove Point stake in July 2020. That deal between Dominion and Berkshire Hathaway was valued at $9.7Bln and included gas transmission and gas storage assets as well as the Cove Point stake. It also gave the Buffett company operatorship of the LNG export plant.

Buffett's company said at the time it was acquiring the Cove Point plant as it was one of only a limited number of such LNG export facilities in the US.

When agreeing to buy the Cove Point stake in July 2020 Buffett was also concluding his first big acquisition since 2015 and it happened to be in the natural gas and LNG business.

Buffett's BHE GT&S currently operates around 5,500 miles of transmission lines in the eastern US and 756 billion cubic feet of total natural gas storage, with 420 Bcf of working gas capacity. 

BHE GT&S also provides LNG solutions through another of its units called Pivotal LNG and other processing and storage ventures.

Warren Buffett, the Chief Executive and Chairman of Berkshire Hathaway and America’s best-known investor, said his group did not intend to acquire more shares in Occidental Petroleum nor try and take it over while it also sold billions-worth of shares in LNG operator Chevron Corp. and dumped more US bank stocks.

US investor Warren Buffett, whose Berkshire Hathaway group has a stake in the Cove Point LNG export plant in Maryland and a growing stake in US exploration and production company, Occidental Petroleum, revealed that he had stakes in Japan’s five main trading houses with their widespread energy assets and intended to buy more Japanese shares.

Warren Buffett, one of America’s most followed investors, has taken his stake in Occidental Petroleum to more than 19 percent, in a varied portfolio of energy shares and stakes acquired by the man known as the “Oracle of Omaha”.

Dominion Energy, the US utility and former operator of the Cove Point LNG export plant in Maryland, has signed a definitive agreement to sell Questar Pipelines to Southwest Gas Holdings in a transaction valued at $1.97 billion after a previous sale to Warren Buffet’s Berkshire Hathaway Energy was cancelled.

Dominion Energy, the US utility and owner of the Cove Point LNG export plant in Maryland, expects its transaction with Berkshire Hathaway Energy to close around November 1, 2020 when control of the liquefaction facility on Chesapeake Bay will pass to the company owned by billionaire investor Warren Buffett. 

“As consideration for that transaction, Dominion Energy will receive approximately $2.7 billion in cash and transfer $5.3 billion of existing Dominion Energy Gas Holdings related indebtedness to the buyer at closing,” said Dominion in a statement.

Dominion Energy expects to complete another part of the sale, involving Questar Pipelines, Berkshire Hathaway Energy upon receipt of anti-trust clearance on in early 2021. 

As consideration for that transaction, Dominion would receive around $1.3 billion in cash and transfer around $430M of existing Questar Pipelines indebtedness to Berkshire Hathaway.

Aggregate cash consideration and assumption of debt across the two anticipated closings is exactly equivalent to the original transaction terms announced on July 5, 2020.

“This mutually agreed dual-phase closing is the result of updated timing expectations for receipt of the HSR clearance from the Federal Trade Commission related exclusively to the sale of Questar Pipeline and Overthrust Pipeline (together with related entities Questar Pipelines),” explained Dominion.

“Given all closing conditions have been met with respect to non-Questar Pipelines assets included in the transaction, Dominion Energy and Berkshire Hathaway Energy have opted to move forward with an expeditious initial closing to be followed with a subsequent Questar Pipelines closing in early 2021,” it added, Richmond, Virginia-based Dominion.

As a result of the phased closing, Questar Pipelines and its associated debt will be removed from Dominion Energy Gas Holdings prior to the transfer to Berkshire. 

Dominion, whose utility business has 7 million customers in 20 US states, said it still expected to have a strong end-of-year performance with operating earnings per share, normalized for weather, to be in the top half of its $3.37 to $3.60 guidance range. 

Cove Point produces around 5.2 million tonnes per annum from a single Train and has tolling agreements with Gas Authority of India and Sumitomo Corp and Tokyo Gas of Japan.

The July 2020 deal between Dominion and Berkshire Hathaway was valued at $9.7 billion and included gas transmission and gas storage assets as well as the Cove Point stake.

The Buffett company said it was acquiring Cove Point plant as it was one of only six LNG export facilities in the US.

Business tycoon and philanthropist at the same time, Buffett was concluding his first big acquisition since 2015 and it happened to be in the natural gas and LNG business.

Buffett is considered one of the most successful global investors and has a net worth of $89Bln, making him the fourth-wealthiest person in the world.

Earlier in 2020, Buffett made a move for an LNG and pipeline natural gas project in Canada.

However, at the last minute he pulled out of the $6.7Bln LNG project deal in Quebec over concerns about infrastructure challenges.

While Berkshire Hathaway will control Cove Point LNG and be the operator, another 25 percent of the liquefaction and export plant is already owned by Brookfield Asset Management of Canada under a deal finalized in October 2019.

As part of the transaction, Berkshire Hathaway also acquires 100 percent of Dominion Energy Transmission, Carolina Gas Transmission and 50 percent of Iroquois Gas Transmission System.

After the November closing of the transaction Dominion will retain a 50 percent passive stake in Cove Point.