Berkshire Hathaway exits Exxon Mobil

19 Feb 2015

Warren Buffett's Berkshire Hathaway has exited its $3.7-billion investment in Exxon Mobil amid a slump in oil prices, Bloomberg reported.

Berkshire was Exxon's sixth-largest shareholder until the end of 2014 and holding 3.7 per cent of its stock.

With US production increasing and Opec resisting output cuts, crude was down by about half since June.

The decline had severely hit profits and forced major producers and drillers to cut back on spending.

According to Fadel Gheit, an analyst for Oppenheimer in New York, Berkshire had not really been keen on energy and the energy sector obviously was now trading in completely different circumstances.

Buffett had, through acquisitions, built Berkshire into the fourth-biggest company in the world acquiring stocks like Coca-Cola and the former Washington Post, that surged in value. However, his record with energy companies had not been as stellar.

Among his biggest winner in the sector had been PetroChina, in which he booked a $3.5-billion profit after selling the investment in the oil producer for about $500 million.

This was followed by a reverse with ConocoPhillips stock before crude prices peaked in 2008, and a $2-billion bond investment in Energy Future Holdings that had to be later written down as prices of natural gas slumped.

Exxon was Buffett's eight-largest position in his portfolio.

The company's latest annual report showed that its 41.1 million shares of Exxon cost on average $90.86 apiece in 2013.

The motive for releasing such a large stake was not clear though, and Buffet might have little expectations for rising crude prices in the near term, or faith in the firm's ability to boost shareholder value at a time when crude prices were unsettled according to commentators.

Berkeshire's action follows another high-profile investor George Soros' hedge fund releasing a filing stating that the firm had cut US equity holdings and shifted to global assets.

In addition to Exxon, Soros unloaded his position in Apple Inc and Intel Corporation.

However, commentators say the Exxon stock had not performed too badly in comparison to oil prices. In the last year Exxon stock was down 6 per cent, while Brent crude prices slumped roughly 45 per cent.