Warren Buffett Bakken Shale Investment

Jeff Siegel

Written By Jeff Siegel

Posted January 7, 2013

$2.5 billion.

That’s how much Warren Buffett’s Berkshire Hathaway will pay SunPower Corporation (NASDAQ: SPWR) for two solar projects in California.

When this news hit last week, SunPower soared more than 30% — and solar stocks across the board got a nice lift.

Of course, this isn’t the first time the solar industry can thank Uncle Warren…

Back in 2011, the Oracle of Omaha ponied up another $2 billion and bought First Solar’s (NASDAQ: FSLR) 550 megawatt Topaz solar farm. That deal bolstered the struggling solar firm’s ability to plow through the battered sector with razor-thin margins. And little by little, First Solar is inching back up…

In fact, the stock has risen more than 120% over the past five months.

Now, I’m not saying you should run out and buy First Solar; I still think the solar manufacturing industry is going to struggle this year, and at least in the first half of 2013, it’s going to be touch and go with a lot of these stocks.

But we’re still gearing up to dip our toes back in the waters of the solar sector this year. And I suspect Buffett is still in the market for a few more good solar deals in 2013, too…

Bottom line: Through his MidAmerican Energy unit of Berkshire Hathaway, Buffett has been actively increasing his investments in wind and solar farms. And the company’s CFO Patrick Goodman said last year that the company favors bets on renewable energy amid high utility valuations. This is why much of its renewable energy assets are in California.

Of course, that doesn’t mean MidAmerican is going whole hog on renewable energy.

Truth is, despite more than $10 billion invested in wind and solar alone, most of MidAmerican’s energy mix continues to be dominated by coal, oil, and natural gas. The latter, by the way, is where Buffett has really staked his claim.

Buffett’s Bakken Monopoly

Although $10 billion may seem like a lot of scratch to pony up for a handful of renewable energy assets, it’s peanuts compared to the skin Buffett’s got in the oil and gas game…

It wasn’t long ago when he made a $34 billion purchase that put him in position to have a virtual monopoly in one of the hottest and fastest-growing oil fields in the world.

You see, Buffett’s $34 billion purchase essentially gave him access to the single railroad company that moves nearly every ounce of oil coming out of the Bakken: Burlington Northern Santa Fe (BNSF).

And with continued delays over the Keystone XL Pipeline, BNSF is in prime position to move all that oil for years to come.

It was an ingenious move that essentially gave Buffett the keys to a company that is now the lifeblood of America’s oil and gas boom. Brilliant!

No-Brainer Bakken Plays

Of course, BNSF isn’t the only shrewd investment guys like Buffett are making in the Bakken.

In fact, there are two other “backdoor” Bakken plays that are now riding the coattails of Buffett’s BNSF investment. And it’s no coincidence that Buffett’s got a piece of this action, too.

You see, here’s something that most folks don’t realize: Every oil and gas well that uses fracking in the United States requires between 3,000 and 10,000 tons of sand. And this isn’t just regular sand…

Frac sand is a very specific type of highly-specialized, round, durable sand. It’s actually crush-resistant.

And there are two specific companies that have access to the biggest frac sand mines in the country — and that provide the logistics to get all that sand to the nearly 13,000 new shale wells that will be drilled this year alone. That, by the way, is in addition to all the wells that are currently using these two companies to operate on a daily basis.

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