Thursday, April 05, 2007

Warren Buffett, Boone Pickens, and William Greehey walk into a bar...

How'd you like to be a fly on that wall?

I don't know if these guys have ever gotten together, I'm not even sure if they all drink (Boone Pickens and William, ahem, Greehey, I'm going to go out on a limb and suggest these guys have probably both had a drink or three before), but we can try to imagine the conversation they might have together.

Warren Buffett, CEO of Berkshire Hathaway and one of America's greatest investors (if not the greatest), would probably talk about how he likes to buy companies with compelling businesses and strong, intelligent management at undervalued prices, and with his eye firmly on the long term. He might explain how he is seeking to diversify overseas these days, particularly since he has questions about the US dollar and deficits, and though he generally avoids 'commodity' businesses, has invested in the past few years in oil companies ConocoPhillips and Chinese oil major PetroChina.

Boone Pickens, CEO of hedge fund BP Capital, and perhaps the most famous proponent of peak oil in the financial world, would probably talk of his strong belief in peak oil and that we are right now at the production peak, his high regard for natural gas and Canadian oil sands, and his large stakes in Canadian oil sands producer Suncor, refiners Tesoro and Valero, and deepwater driller Transocean.

William Greehey, former CEO of Valero and architect of it's amazing rise, might then finish up with his current view of the refinery business, which is that with everybody focused on getting the last drop of gasoline out of the barrel, the asphalt side has been neglected and is going to become quite tight in 2007.

What company might they all three agree on?

ConocoPhillips, maybe, though Boone Pickens is not a huge fan of the majors as they struggle in keeping up with the ever faster treadmill of declining reserves.

[Update - It occured to me later that maybe I ought to look at BP Capital's recent filings to see if, in fact, they owned COP, and er, sure, enough, COP is the only one of the majors they do own. Oops. So I guess Boone does like COP. The other interesting thing that stood out to me from looking at his holdings was just how much Denbury Resources (DNR) BP Capital holds. Wow, they are way overweighting that one. They have some large CO2 resources and they buy old oil fields on the cheap and CO2 flood them to recover more oil.]

My vote for a play they all might find interesting: Canadian energy company Husky Energy (HUSKF or HSE.TO).


1.) Major natural gas discovery in the South China Sea.
2.) Sizable oil sands holdings in Canada.
3.) Major refiner of asphalt in Western Canada.

(Details here.)

35% of Husky is owned by Hutchison Whampoa, a Hong Kong conglomerate/holding company. There is some speculation that a Chinese company will purchase a Canadian producer to get a significant piece of the oil sands. I have no idea if Hutchison wants to sell, but I would rather not see that happen with Husky. (Frankly, I'd rather not see it happen with any of my holdings there.) Instead, I'd just like to collect my dividends over time and let current management keep running the joint, they've been doing a rather fine job.

Note: None of the above referenced investors has, as far as I know, ever actually suggested Husky as an investment. I'm just... speculating.