Warren Buffett, through Berkshire Hathaway’s ownership of Chevron shares, is poised to gain indirect exposure to Guyana, an emerging oil powerhouse, following Chevron’s planned acquisition of Hess.
The acquisition, valued at $53 billion in stock, includes Hess’s 30% stake in the Stabroek Block off Guyana’s coast, where Exxon Mobil has discovered an estimated 11 billion barrels of oil. This move is hailed as an enormous asset for Chevron, expected to drive production growth for years.
Buffett’s Berkshire Hathaway holds approximately 123 million Chevron shares, a 6.4% stake worth roughly $20 billion. The conglomerate stands to benefit from the Chevron-Hess merger and potential profits from Guyana, either through increased Chevron stock value or returns to shareholders.
Guyana’s rush to tap into oil reserves has driven impressive economic growth, with a staggering 62% increase in real GDP in 2022. The country, with just 800,000 inhabitants, is forecast to produce 400,000 barrels per day in 2022, rising to 1.2 million barrels by 2028, around 1.2% of global supply.
However, with Chevron set to issue approximately 317 million shares to fund the transaction, if Berkshire doesn’t increase its Chevron holding, it will face dilution to about 5.5%.
While Chevron is just one stock in Buffett’s expansive portfolio, which comprises about $350 billion in equities, it represents a significant portion of his holdings. Consequently, Buffett is expected to closely monitor the Hess acquisition and Guyana’s oil venture due to the substantial investment exposure.