Buffett and Cramer Agree on Conoco

It appears that we now have two of the country's best-known investment professionals at least in general agreement on a member of Big Oil.

You probably recall that about a year ago at this time, Warren Buffett was buying ConocoPhillips (NYSE: COP  ) hand over fist with Berkshire Hathaway (NYSE: BRK-A  ) (NYSE: BRK-B  ) becoming the Houston-based company's largest shareholder.

Since that time, Buffett and his team have been shedding Conoco shares to harvest tax losses, and he calls buying the company when he did a “major mistake.” On Wednesday, CNBC personality Jim Cramer called Conoco "the worst of the integrateds." So it appears that Buffett and Cramer have achieved something of a meeting of the minds.

If there were any doubts about Conoco, they were done away with Wednesday, when the company told us about its latest quarterly results. Whereas BP (NYSE: BP  ) had announced a 53% decline in its income the day before, ConocoPhillips' slide was 76%.

Clearly, the company has had to deal with the roller-coaster ride of pricing that crude and natural gas have presented during the past 18 months -- along with myriad other challenges. As a result, its upstream side earned $725 million in the quarter, compared to $4 billion in the same quarter a year ago. But giving credit where it's due, with new production coming on in Russia, Canada, Norway, China, Vietnam, and the U.K., daily output was nearly 7% higher in the quarter than a year ago.

On the downstream (refining and marketing) side, Conoco recorded a loss of $52 million, versus income of $664 million a year ago. The difference was largely the result of skimpy refining margins, an international plant utilization that averaged 72%, down from last year's 88%, and a $72 million non-cash impairment charge in the quarter.

So that's two down, with ExxonMobil (NYSE: XOM  ) up next and then Chevron (NYSE: CVX  ) and France's Total (NYSE: TOT  ) on Friday. All will surely be affected by the maladies that hit BP and Conoco. And with crude and natural gas prices seemingly trading in a range for a while, if you're of a mind to tie into any of the majors, be sure you have a lengthy investment time horizon.  

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Fool contributor David Lee Smith can't claim a share in any of the companies mentioned above. He does welcome your questions or comments. The Fool has a disclosure policy.


Read/Post Comments (4) | Recommend This Article (13)

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  • Report this Comment On July 31, 2009, at 2:45 PM, plange01 wrote:

    cramer is not exactly a investment professional! more like a small time crook and snake oil salesman who has the motley fool fooled!!

  • Report this Comment On July 31, 2009, at 3:23 PM, FastSpringCEO wrote:

    You seem to be missing the point. Buffett is selling for tax purposes to offset gains. The mistake he's referring to is the timing of his purchase which does not say anything about his current feeling on its price. As you know, he tends not to comment on his current feeling on an existing holding particularly if he thinks negative. Among other issues with that, it would drive his own holdings down. For all we know, he loves COP at current prices, but needs to use something to get some tax losses to use.

  • Report this Comment On July 31, 2009, at 4:48 PM, twiceshy1960 wrote:

    I early on stupidly followed some of Cramers calls. That was a major mistake as almost everything he said to buy sank. It wasn't that long ago he was pushing Conoco. Cramer, go away you loudmouth con man.

  • Report this Comment On August 01, 2009, at 3:44 PM, kayakmastr wrote:

    Isn't any company with a major play in refining losing right now? So exactly why should we bail out of COP? One issue is that the cost of heavy and light crude no longer is much different, but I expect the refiners will figure out a way to improve margins anyway.

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