2015: Should Buffett leave energy investing to Greg Abel?

GREGG WARREN: When we look back at some of your bigger stock purchases during the past decade, two names actually stand out: ConocoPhillips and ExxonMobil.

In the first instance, you bought shares near the height of the spike in oil prices in 2008, later acknowledging that this was a mistake given how dramatically oil prices fell during the crisis.

While you’ve been able to swap some of those holdings, post a spinoff of Phillips 66 into operating assets, most of what you sold the last six years, by our estimates, has been at a loss.

Given that experience, it surprised some of us to see you take a meaningful position in ExxonMobil during the summer of 2013.

While it looks like you were able to eliminate that stake at cost as oil prices fell last year, these types of investments, which can be negatively impacted by the volatility in oil prices, don’t really seem to fit well with the other types of investments in your stock portfolio, many of which are built on strong franchises with unique competitive advantages.

With that in mind, and given the track record that Greg Abel and his team at Berkshire Hathaway Energy have had acquiring and investing in energy assets, does it make more sense to leave future energy-related investments in their hands?

WARREN BUFFETT: Well, there’s nothing we like better than to back up Greg in buying utility properties.

And — but they — we call it energy, but it’s not oil and gas in Berkshire Hathaway Energy, and they’re really in a dramatically different business than ConocoPhillips or ExxonMobil.

But we are looking, constantly, for opportunities for Berkshire Hathaway Energy to spend big money, and it will.

Berkshire Hathaway Energy, we paid $35.05 per share in 1999 to buy the stock.

I was at $35, and I don’t change my prices and Berkshire — the company was then called MidAmerican — they hired some investment bankers to come out from New York, and investment bankers spent a week here doing nothing.

But they felt — before they went home, they said, you know, “You’ve got to give us something because we’re going to send a big bill.” And I said, “Well, in that case, we’ll pay $35.05 and you can say you got the last nickel out of me.” (Laughter)

So my ambition ever since has been to have Berkshire Hathaway Energy earn $35.05 per share. It’s never paid a dividend.

It will probably earn about $30 a share this year, which is a great tribute to Greg and his management. But we will get the 35 or better because he will make some good deals.

It’s not at all analogous to the ConocoPhillips or ExxonMobil investments. As it turned out, we wrote ConocoPhillips down because we were required by the auditors to do it.

We actually, by the time we got all through, we made some money in it, and we made a little money in ExxonMobil, too.

But we will not be buying, very often, oil and gas stocks, but we will — we probably haven’t bought the last one.

In the end, we look at the cash, we look at available opportunities, both in investments and businesses, and we make decisions, occasionally, on buying something and sometimes we change our mind.

And that will continue that way. It’s been going on that way for a lot of years.

And we have not distinguished ourselves, at all, in the oil and gas field, although we’ve made a little money, and we passed up one or two where we could have made a lot of money.

Charlie?

CHARLIE MUNGER: Yeah. And with interest rates being so low and the dividend on ExxonMobil being the size it was, it was not a bad cash substitute, if you think only in those terms.

WARREN BUFFETT: Yeah. It worked out OK. There were other things we could have done a lot better, but that’s always been true and will continue to be true.