We're in the midst of a quiet revolution in North America. New technologies like hydraulic fracturing and horizontal drilling have unlocked vast quantities of hydrocarbons in massive oil finds like the North Dakota Bakken, the Texas Eagle Ford, and the Alberta oil sands. And according to some analysts, the continent could become energy self-sufficient by 2020.
It's no surprise that an opportunity this big has attracted the attention of legendary investor Warren Buffett. Over the past few years, Berkshire Hathaway Inc. (NYSE:BRK.B) has been accumulating positions in some of the country's top energy names. Here's what the Oracle of Omaha is buying in the oil patch.
Servicing your portfolio Legendary investor Peter Lynch once said, "During the Gold Rush most would-be miners lost money. But people who sold them picks, shovels, tents, and blue jeans made a nice profit." The same principle applies in investing. While some riverboat wildcatters will strike it rich, a far more reliable strategy is to invest in the companies that provide the products and services that keep the oil fields humming.
National-Oilwell Varco, Inc. (NYSE:NOV) is one such example. The company provides a broad array of products and services for the oil patch. And because of its dominating market share, the company has one of the widest moats in the business.
The company is well positioned to profit in a big way as customers are both increasing the number of new drilling rigs and updating their aging offshore platforms. Best of all, National is poised to profit without the dry holes and volatile commodity prices that accompany an investment in your typical exploration company.
Bigger is better As the largest independent oil and gas company, ConocoPhillips (NYSE:COP) is a solid energy choice for any investor. The company is projected to grow production at a 3% to 5% annual clip over the next five years. That might not sound fast, but relative to big oil rivals like Exxon Mobil Corporation (NYSE:XOM) and Chevron Corporation (NYSE:CVX), it's lightspeed.
Even after investing billions of dollars to fund this expansion, ConocoPhillips still has plenty of funds left over to reward shareholders. The stock currently yields 3.9%. Not to mention that management has also repurchased 25% of the company's outstanding shares over the past five years.
Pumping profits into your portfolio Phillips 66 (NYSE:PSX) is a new refining company that was spun off of ConocoPhillips a few years ago. While Conoco kept all of the lucrative upstream assets, that doesn't mean Phillips 66 was left emptyhanded. The new company maintained control of a collection of valuable pipelines, chemical businesses, and refineries. Phillips 66 has a refining capacity of 2.2 million bpd and affiliation with over 7,100 branded retail outlets.