The Federal Energy Regulatory Commission (Federal Energy Regulatory Commission) said on Friday August 19th that it had authorized Berkshire Hathaway, owned by Buffett, to buy up to 50 per cent of shares in western oil companies.

Western oil companies rose more than 10% at one point on the news, closing up 9.88% at $71.29 on Friday. Since the beginning of the year, western oil has risen 129% with the rise of the crude oil market and the blessing of Buffett.

On July 11, Berkshire sought authorization from the Federal Energy Regulatory Commission to own up to 50% of Western Oil, saying it would not hurt competition, undermine the authority of regulators, or cause consumers to pay more.

In an order released on Friday, the Federal Energy Regulatory Commission called the authorization "in the public interest" and subject to various conditions.

Wall Street News mentioned earlier that Buffett has been on a buying spree of Western oil recently, highlighting Buffett's bet on the energy sector and his view that energy prices will remain high for some time.

Earlier this month, Berkshire revealed that it had bought another 6.68 million common shares in the western oil company, giving it a stake of more than 20 per cent in the energy company. Between Aug. 4 and Aug. 8, the company bought nearly 6.7 million shares in Western Oil companies for about $391 million.

The deal gave Berkshire a total of 188.4 million shares in western oil companies, accounting for 20.2% of the total outstanding shares of western oil, worth $11.3 billion.

In fact, according to accounting standards, once investors own at least 20% of the company's common stock, the company's earnings should have a corresponding share of their own performance-that is, according to analysts' expectations, Western Oil's earnings may reach $10.7 billion this year, so if Berkshire ends up owning 20% of Western Oil. Then Berkshire's reported profit this year may increase by about $2 billion.

The acquisition of the whole company "close at hand"

Cole Smead, president of Smead Capital Management and shareholder of Berkshire, believes that:

He (Buffett) may continue to buy, as long as he can buy it for $70 or less. If you own 30% or 40% of the stock and want to buy it out at $95 or $100, you save a lot of money, and the stock trades like a casino. The market is giving him all the stocks he wants.

David Kass, a professor of finance at the University of Maryland, agrees that acquisitions are likely on the road ahead.

I think Buffett will probably end up buying the whole company. The 50 per cent limit may be to get FERC's approval for non-controlling shares, which he clearly plans to buy. So far, his highest purchase price is $60.37 per share.

In addition, some industry insiders speculate that Berkshire and western oil companies have been communicating about potential moves to increase their stake to 50%.

Bill Stone, chief information officer of The Glenview Trust and shareholder of Berkshire, said:

He has always said that he only makes friendly deals, so he may have agreed on this limit with the board of directors of Western oil companies.

In early August, Buffett's Berkshire Hathaway reported revenue of $76.18 billion in the second quarter of this year, up 10.2% from $69.114 billion in the same period last year. It is worth noting that Berkshire Hathaway posted a net loss of $43.755 billion attributable to shareholders in the second quarter, compared with a net profit of $28.094 billion in the same period last year. The biggest drag was that its portfolio lost $53 billion in the market slump.

Western Oil, an energy stock, is of considerable value to Buffett in his portfolio. In August, Western Oil reported second-quarter results, with quarterly net profit of $3.755 billion, a year-on-year jump of 36 times and 16% higher than analysts had expected. At the end of the second quarter, cash flow from Western oil operations reached a quarterly high of $5.329 billion.

As Buffett said of the chief executive of Western oil companies at his annual meeting in April, "I decided to put Berkshire's money in a good place," and he did.