Tuesday, March 10, 2009

ConocoPhillips Vs Reliance Industries

Warren Buffet has not invested in Indian stocks as far as I can remember, but he surely has a lot of investments in other stock markets all over the world. To quote Warren Buffet from Berkshire Hathway Annual Report for 2008,

“I told you in an earlier part of this report that last year I made a major mistake of commission (and maybe more; this one sticks out). Without urging from Charlie or anyone else, I bought a large amount of ConocoPhillips stock when oil and gas prices were near their peak. I in no way anticipated the dramatic fall in energy prices that occurred in the last half of the year. I still believe the odds are good that oil sells far higher in the future than the current $40-$50 price. But so far I have been dead wrong. Even if prices should rise, moreover, the terrible timing of my purchase has cost Berkshire several billion dollars.”

Berkshire owns 5.7% in ConocoPhillips and that investment is down 37% (Cost $7008 mn and Value now $4398 mn) Vs Crude Oil drop of 69% (CMP around $45 against all time high at $147). So definitely the investment has done better, even if in loss. These things actually don’t matter as we all know Warren Buffet doesn’t buy for a year or two, he buys businesses and not stocks. What is evident from the report is that he is bullish on Crude. So this article tries to compare 2 stocks related to Oil – one in which Warren Buffet has invested but we haven’t i.e. ConocoPhillips and one in which he has not invested but many of us may have i.e. Reliance Industries. The businesses aren’t strictly comparable but still worth a try –



Reliance Industries


Petroleum exploration and production, Refining, Marketing, supply and transportation, Natural Gas gathering, processing and mktg, Chemicals and Plastics production and distribution, Biofuels, Power Generation, E-GasTM Gasification Technology

Exploration and Production, Petroleum Refining and Marketing, Petrochemicals, Textiles, Retail

Financials: (in $billions)

Year ended Dec 2008

Year ended Mar 2008




Adjusted Earnings



Total Assets






Employee strength



Refining Capacity (mn bpd)



Definitely ConocoPhillips is a bigger company than Reliance Industries but as said before, strict comparison is difficult because of Diversified nature of Reliance. Currencies are different, Indian companies have to earn Rs 50 to earn a Dollar. Also we have to remember that this is a de-merged Reliance, previously it had Telecom, Power and Finance sectors also in its size before the Ambani Duo got separated, comparison became easier after the de-merger but it impacted the size adversely.

New developments:-

After RIL-RPL merger, Reliance is to become world’s largest producer of Ultra Clean Fuels from a single location. It owns 2 of the 3 largest, most complex refineries in the world and boasts of 25% of World’s most complex refining capacity. From that angle, it is better than ConocoPhillips also.

(RIL-RPL merger details here)

Natural Gas from KG-D6 field is expected to start later this month and it can add 15% to revenues of Reliance in the year starting April 1st. Initial supply is of 15 mmscmd but latter it may be ramped up to 40 mmscmd (Million Standard Cubic Meters a Day) which can boost the stock.

(Sources: Company websites, Berkshire Hathway Annual Report 2008, Reuters)

Berkshire Annual Report for 2008 – Worth a read for any investor!


ConocoPhillips Factsheet Dec 2008 http://www.4shared.com/file/92062527/56fa8096/COPFactSheet_4Q08.html

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