Link here.
Disclaimer: this is not an investment site. Do not make any investment, financial, job, career, travel, or relationship decisions based on what you read here or think you may have read here.
Re-posting from July 7, 2020.
Berkshire Hathaway Energy before the Dominion Deal:
PacifiCorp and Northern Natural Gas:
MidAmerican and NV Energy:
BHE Transmission and Kern River Transmission:
AltaLine:
Dominion natural gas pipeline and storage in these states:
For Berkshire, the deal means that Warren Buffett’s company will soon
account for 18 percent of all natural gas moved across state lines, up
from 8 percent currently. --
Source.
Previously posted:
Buffett and natural gas.
Analysis continues:
"Warren Buffett's bet is a midstream buying
signal. Berkshire Hathaway's long-awaited pandemic-era purchase in a
seemingly difficult business might seem like odd time, but there is good logic behind it -- WSJ, July 6, 2020, "Heard On The Street."
This is really pretty cool. Two items.
First: this is really, really quite interesting. Warren Buffett
has been looking for an acquisition for quite some time. What better time to
look at energy? Energy prices are incredibly low but the tea leaves
suggest this will only be temporary. If you look at the map of his
Berkshire Energy holdings, Buffett was "well-covered" in the west,
southwest, and midwest. His big gap was on the east coast.
Buffett's been following the Atlantic Coast Pipeline story for quite
some time and knows that the board rooms over at Dominion and Duke
Energy were probably well-divided on whether to continue with that
"white elephant," the Atlantic Coast Pipeline.
Aha! That's it. Maybe Dominion would like to get rid of that "white
elephant." But how to do it? Warren comes up with a solution and gives
Dominion a phone call. The rest is history. Love it.
Second: I've read any number of articles on this story since it
was announced over the weekend, writers with their analysis. Very
informative, very entertaining. But there is one word I've not yet seen
used by any writer when discussing this story.
Years ago --- LOL, years ago? -- shoot, it was decades ago, I took a
Forbes
course on investing, one of the best things I ever did, that was
probably back in 1983. One of the words I learned from the course:
moat.
In this case, "moat" means any business endeavor ...
from Investopedia:
What Is an Economic Moat?
The term economic moat, popularized by Warren Buffett, refers to a
business' ability to maintain competitive advantages over its
competitors in order to protect its long-term profits and market share
from competing firms. .July 7, 2019.
LOL. Connecting the dots. Amazing.
Warren Buffett followed his own advice several years ago when he bought
the Burlington Northern Railroad, perhaps the classic example of a
"moat."
Now, again, with a $10 billion acquisition, Warren Buffett is following
his own advice. In the current political environment, I can't think of
any sector with a bigger economic moat than the crude oil and natural
gas pipeline sector.
Absolutely brilliant. And anyone who thinks there won't be continued
growth along the Atlantic coast from North Carolina to Virginia to DC
isn't paying attention. AOC and New Yorkers may not want growth but
folks south of the Mason-Dixon Line certainly do.
Analysis continues: Berkshire Hathaway, Dominion, Duke.
Motley Fool here:
- Dominion (D) becomes a much safer retirement holding per Motley Fool;
- Dominion (and Duke) will quit dumping good money after bad money on a
proposed $8 billion natural gas pipeline; always a good thing to quit
losing money;
- Dominion's balance sheet improves;
- Dominion sees $3 billion in after-tax proceeds: will be used to re-purchase stock
- D's market cap: $63 billion
- D will reduce annual dividend to reflect new reality
- payout will improve company's payout ration from 85% to 65%, more in line with industry leaders
- dividend expected to drop from $3.76/share to $2.50 share
- 2020 operating earnings will likely fall to $3.50 vs $4.50/share
- D: drops almost 10% on news; now trading at $75
Analysis continues: "Warren Buffett's bet is a midstream buying
signal. Berkshire Hathaway's long-awaited pandemic-era purchase in a
seemingly difficult business might seem
like odd time, but there is good logic behind it --
WSJ, July 6, 2020, "Heard On The Street."
US pipelines becoming unbuildable --
Bloomberg.
To
be an energy superpower, U.S. oil and gas requires a suitably
gargantuan pipeline network that stretches for millions of miles. The
country’s ability to expand that infrastructure is being tested like
never before.
In
what’s possibly the biggest victory yet for an environmental movement
targeting the conduits carrying fossil fuels, Dominion Energy Inc. and
its partner Duke Energy Corp. said Sunday they’ll no longer pursue their
$8 billion Atlantic Coast natural gas pipeline after years of delays
and ballooning costs.
It’s the third such project this year to be sidelined or canceled
altogether amid mounting opposition to development of coal, oil and gas.
Armed with experienced lawyers and record funding, environmental groups
are finding enormous success blocking key pipeline permits in court.
The keep-it-in-the-ground movement has increasingly turned its attention
to the pipes, rather than the wells themselves, because they require
various federal and state permits, which, for the most part, can be more
easily litigated.
RBN Energy:
rulings on KXL permit cloud other oil and gas pipeline projects.
The demand destruction caused by COVID-19 hasn’t only hurt producers
and refiners; it’s also slowed the development of a number of planned
midstream projects. In fact, the only multibillion-dollar crude-related
project to reach a final investment decision (FID) during the pandemic
is TC Energy’s Keystone XL, which in late March won financial backing
from Alberta’s provincial government. But Keystone XL soon hit another
snag, this time in the form of U.S. district and appellate court rulings
that vacated the project’s Nationwide Permit 12 for construction in and
around hundreds of streams and wetlands along the U.S. portion of the
pipeline’s route in the U.S. More important, the courts also put on ice —
at least for now — the use of the general water-crossing permit for
other new oil and natural gas pipelines as well. As we discuss in
today’s blog, that could result in delays and legal challenges to dozens
of projects that midstreamers and their counterparties have been
counting on.
For midstream companies, the process of advancing a pipeline, an
export terminal, or another major project is often fraught with
challenges. For one, there’s the competition among midstreamers to line
up the long-term commitments generally needed to secure financing — a
factor that has always been a hurdle for large new midstream projects.
Then there’s the matter of locking down the various regulatory approvals
and permits that the project will need — again, always a stumbling
block that has only increased in significance over the years. Today,
environmental, landowner, and stakeholder challenges to pipeline
projects, even from the states they traverse, have become very
difficult. For example, Williams has failed to convince New York
regulators that its Constitution Pipelien project passes environmental muster. And even when midstream developers do get
the approvals and permits they need from administrative agencies,
there’s always the very real possibility that there will be court
challenges that could drag on for years.
