No. of Recommendations: 7
I think the insight Pabrai brings is not so much the certitude of getting oil in the Permian, but rather the degree of confidence one can have, as a minority investor, that management will juice earnings by NOT investing in discovery, but just exploit existing resources in a run-off mode, even if that run-off is over many decades. This is Munger's dream for Exxon, this non-investment orientation, and it may be something that Buffett knows that OXY and CVX's are buying into. Taking a controlling stake would be the way to cement this orientation in, and paying a premium on half the outstanding OXY shares may be a worthwhile investment to get that certainty.
And in the meantime, having 2 horses in this race may provide the advantage of improving Berkshire's negotiating strength with OXY: stick to the program of sending all profits back to the shareholders, or I might go with the other horse that is running better that way.
Since I have never believed that Buffett would want to own 100% of OXY (too much political attention / exposure - much the same as a DaVita), I have been trying to discern just why he is hoovering it up and owning so much of a company he now cannot sell without cratering it.
Taken together with Pabrai's comments, I think the bolded part in your post above gets me to an answer. I'd rephrase it this way: 'stick to the program of I will back a sale to Chevron' (or Exxon, or perhaps some up and comer). We know how far Hollub went to get Anadarko (keep scale or otherwise Oxy was next). She wants to keep her job and, if she sticks to the program, it is a win for her, shareholders and Buffett.
