Based on the two big oil buys, it's easy to think that Bershire Hathaway made a big bet on the energy sector last quarter -- but that ignores the huge sale of ConocoPhillips ( COP) shares, which flushed more than $519 million worth of the Houston-based E&P from Berkshire's portfolio. The trade nearly halved Buffett's stake in ConocoPhillips, almost offsetting the Exxon and Suncor trades entirely.
There's a big difference between ConocoPhillips and the energy stocks that Berkshire actually bought: COP spun off its downstream operations into Phillips 66 ( PSX) in May 2012. The result is one of the biggest pure-play oil and gas producers with 8.6 billion barrels of proven reserves. But the fact of the matter is that a lack of refineries and gas stations actually makes COP more attractive, not less. Without the paper thin margins those businesses provide, ConocoPhillips converted twice as many sales dollars into profit as Exxon did last quarter.Around half of ConocoPhillips' reserves come from natural gas. That's an attractive mix, especially given how the firm's supermajor peers have been falling all over themselves to boost exposure to nat gas by acquiring big producers in recent years. With oil prices holding onto the high end of their historic range, nat gas prices are starting to see some buoyancy as consumers substitute one fuel for the other. With Buffett selling COP right now, I'd be buying.