One of the world’s wealthiest men set to indirectly benefit from Guyana’s oil wealth

Jan 14, 2024 ExxonMobil, News, Oil & Gas

Kaieteur News – In October 2023, Chevron acquired Hess for US$53 billion, which granted the U.S. supermajor access to one of the most promising prospects in the global resources industry – Guyana’s vast offshore oil reserves.

Market Insider reported that, one of the world’s richest men, Warren Buffett is set to gain indirect exposure to Guyana, the world’s fastest-growing economy and an emerging oil superpower, thanks to Chevron’s acquisition of Hess.

Market Insider correspondent Theron Mohamed, last year reported that Hess’ portfolio includes a 30% stake in the Stabroek Block, an oil reservoir off the coast of Guyana where operator Exxon Mobil has discovered the equivalent of more than 11 billion barrels of oil so far.

In a press release, Chevron hailed the oilfield as an “extraordinary asset with industry leading cash margins and low carbon intensity that is expected to deliver production growth into the next decade.”

One of the world’s richest men, Warren Buffett (AP Images)

Buffett’s Berkshire Hathaway conglomerate owned 123 million Chevron shares as of June 30, giving it a 6.4% stake in the energy giant. The position is worth about US$20 billion, based on Chevron’s current stock price (at that time) and assuming Berkshire didn’t alter its position.

As a result, the famed investor’s company stands to gain from the Chevron-Hess merger and the profits it generates from Guyana, if they boost the value of Chevron stock or the company returns them to shareholders via dividends or buybacks.

The rush to tap into Guyana’s oil reserves, and develop the South American nation into one of the world’s largest crude producers, helped fuel unmatched real Gross Domestic Product (GDP) growth of 62% in 2022, per the International Monetary Fund (IMF).

The fledgling petro state is set to grow another 38% this year to about US$16 billion in annual GDP — roughly one-seventh of Buffett’s personal net worth of US$113 billion.

Guyana — home to a mere 800,000 people — was forecasted to produce over 400,000 barrels a day by the end of 2023 and 1.2 million by 2028, or 1.2% of the global supply, per the International Energy Agency.

If Berkshire doesn’t raise its Chevron stake, it’s set to be diluted to 5.5% as a result of the company issuing about 317 million shares to fund its agreed transaction. Hess shareholders are set to receive 1.0250 Chevron shares for each of their shares.

It’s worth emphasizing that Chevron is just one stock in Buffett’s roughly US$350 billion equity portfolio, which itself accounts for just over a third of Berkshire’s US$1 trillion of assets. However, Chevron was one of its five largest stock positions in the third quarter of last year, and Berkshire owns a sizeable stake in the group. As a result, Buffett will likely be paying close attention to the Chevron-Hess merger and the Guyana venture, given he’s poised to have a not-insignificant amount of money riding on it.