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James Burgess

James Burgess

James Burgess studied Business Management at the University of Nottingham. He has worked in property development, chartered surveying, marketing, law, and accounts. He has also…

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Buffett Doubles Down On Oil Holdings, Scoops Up Kinder Morgan

American billionaire Warren Buffett, through his Nebraska-based company Berkshire Hathaway Inc. (NYSE: BRK-A), has acquired a $400 million stake in struggling pipeline company, Kinder Morgan (NYSE: KMI).

According to a Berkshire Hathaway US Securities and Exchange Commission filing, the 26.53 million shares of Kinder Morgan are valued at $395.8 million.

The purchase adds to Buffett’s oil interests, which includes a recently purchased 14.3 percent stake in oil refiner Phillips 66 at a time when other oil and gas investors are looking for the exit. True to Buffett’s form, the Kinder Morgan purchase came shortly after its stock price fell 53 percent in the fourth quarter and 63 percent in the last 12 months, closing the year at $14.92 per share.

Related: OPEC Ups Pressure On Iraq, Iran To Freeze Production

The fall in stock price prompted Kinder Morgan to cut its dividend in December 2015, but recently issued a positive press release announcing that it had closed on a $1 billion three-year term loan and $1 billion expansion of unsecured revolving credit facility, and expressed confidence in its own financial outlook in spite of low oil prices.

“Combined with continued high-grading of our backlog of growth projects, this insulates us well in the face of sustained unfavorable financial markets. In light of robust, positive projected free cash flow in 2016, the company’s financial outlook remains exceptionally strong,” Kinder Morgan said in the January press release.

Related: Oil Production Rumor Mill Continues To Turn As Iran Hints At Freeze

With many investors looking to Buffett as a trading superhero, shares of Kinder Morgan rose 8 percent in premarket trading on Wednesday.

“We are pleased that others see the value in the company that we see,” said Kinder Morgan spokeswoman Melissa Ruiz.

Houston-based Kinder Morgan is the largest energy infrastructure company in North American with a market cap of $38 billion. It holds stake in or operates roughly 84,000 miles of pipeline and 165 terminals.

By James Burgess of Oilprice.com

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