Difficult problems require unconventional solutions
When wokeism is killed by companies that actually make money
Unless you were living under a rock the last few months, you will have noticed that Warren Buffet, the oracle of Omaha, had acquired more than 20% of Occidental stock. Today, he was given approval by FERC to increase his ownership to 50%, if he wishes, and the stock rallied 10% on the news, bringing it back to $70 a share.
I have long been a fan of Oxy, Vicki, their strategy and the Anadarko transaction, being one of the few to support it from day 1. And, while I fully acknowledge that price covers all manners of sin, the deal was announced when oil was $73 and Chevron validated that the asset had “at least” $65/share of value. Oxy paid up by 15%, circumvented a shareholder bet by going to Buffet and began to aggressively delever. COVID made things look horrible, and now, the consequences of COVID make things look incredible but it would be hard looking at things today to say Vicki wasn’t vindicated.
When I ask “What is Warren thinking…?” I look back at this post from May of 2021, and I think it truly foreshadowed Buffet’s logic: if you have a cash machine with a carbon and chemical business and can remove it from ESG board pressure circa Exxon via privatization, there are a lot of wins for Berkshire Hathaway.
Warren isn’t the only one who is slowly, but consistently, pushing back and ignoring the ESG/ fossil fuels suck narrative and buying “unwoke”companies. Jamie Dimon of JP Morgan said this this week, as reported by Yahoo!:
"Why can't we get it through our thick skulls, that if you want to solve climate [change], it is not against climate [change] for America to boost more oil and gas?" he continued, according to Yahoo.
JPMorgan Chase was ranked as the world's top "fossil fuel financier" in a report published by environmental groups last year, who said the bank contributed a total of $317 billion to the industry between 2016 and 2020.
Slowly, but surely the top money makers on the planet are acknowledging what we have known all along. The world, and it’s economy, doesn’t work without oil and gas. Which brings me to the title of the note today “Difficult problems need unconventional solutions”. In January of 2021 I wrote that the only way for industry to “win” was to shrug.
It’s time for the industry to stop fighting the narrative. It’s time to stop doing and growing and being. We need a pause. A strike. A shrug. A moment where we stop fighting. Production will fall, and prices will rise. A lot.
And when gasoline is $4.50/gallon, home heating is 75% more, airline tickets double, Amazon Prime charges a fuel surcharge... when we import 10 mmbo per day, when wind and solar companies bring fans and panels to Aspen in the middle of the night, and when people realize that their Tesla is fueled by 35% natural gas and 30% coal, only then will people know where their energy comes from.
It’s been an unconventional path and unfortunately, Europe will experience the brunt of their energy policy decisions this winter, but I believe at long last, the world will be able to have a balanced conversation and start considering that adaptation to any climate change rather than futile and $4-$9 trillion a year, mitigation is far preferable. All forms of energy are good, but anything other than fossil fuels are thermodynamically inferior.
I’ll close with a wonderful story that I think nicely exemplifies what we are seeing today from those not buying into the woke agenda. It comes from Ben’s golf coach who I’ve been fortunate to spend a lot of time with the last few weeks (For those keeping track, Ben has 1 win, 3 2nds and a 6th so far in 6 starts in High School and is currently ranked the number 15 player in the state for high school. It’s a long way from 104-105-97 as a freshman in tryouts.) In the US Amateur a number of years ago, a match was scheduled between the fastest player at the tournament and the slowest. The fast player was annoyed and knew that the slow play would throw him off his game, so he devised an unconventional strategy. On the first hole, he took 2 minutes to hit each one of his shots. He was so slow in fact the other player actually asked him about it. At the end of the hole, a USGA rules official came up to the group and said “Guys, you are on the clock for slow play…” The fast player looked at the slow player and said “I know I can play fast, can you?” He won the match by a lot. And sometimes … one needs to use their opponents weapon, like privatizing a money making company, to earn the win. Exxon should take a lesson from Warren and Vicki.
IMO…Best post ever DRW.
I was a fan too from Day 1. I wrote my first Seeking Alpha article on the merger back in 2019-"Playing The Long Game In The Permian, May 2019. It's nice to see Vicki get credit for a gutsy, strategic move. Now we have to admit, it almost wrecked the company. If two things don't happen- 1. They reschedule $5 bn of debt in 2020, and 2. the oil price rally that enabled them to start making posistive cash flow, we are probably not celebrating anything. Luck and timing have always played a role in this business. I have some thoughts about why Buffett is doing this now and will have an article out soon. Cheers