PetroChina

PetroChina Company Limited is the listed arm of state-owned China National Petroleum Corporation (CNPC) and represents one of Buffett's most successful foreign stock investments.

Origin of Relationship

In 2003, Berkshire Hathaway invested $488 million to acquire a 1.3% stake in the company. Buffett discovered the opportunity entirely by reading the company's annual report, estimating its intrinsic value at $100 billion while it traded at a $37 billion market cap.

Major Milestones

• 2003: Initial investment of $488 million.
• 2004: [Valuation Defense] -> During the 2004 Meeting, Buffett defended the investment as "ridiculously cheap" compared to Western peers like ExxonMobil.
• 2004: [Dividend Payout] -> He highlighted the company's commitment to a 45% payout ratio.
• 2007: [Darfur Controversy] -> At the 2007 Meeting, Berkshire faced pressure to divest due to PetroChina's parent (CNPC) having operations in Sudan. Buffett refused, distinguishing between the subsidiary and state-controlled parent.
• 2007: [The Exit] -> Sold the entire stake for $4 billion in the second half of 2007 purely on valuation (~$275B market cap).

Strategic Importance

PetroChina is a landmark case study in three dimensions:

1. Investment Logic: Applying Circle of Competence to simple, commodity-based businesses.
2. Global Scaling: Proving value principles are borderless.
3. Ethical Boundaries: Demonstrating Buffett's refusal to engage in symbolic divestment if the business itself is unit-economically sound and legally distinct from a parent's political actions.

Primary Source Fidelity

"We are not in the business of telling the Chinese government how to run their country." — 2007 Meeting "We sold our holdings for $4 billion... we paid the IRS tax of $1.2 billion on our PetroChina gain. This sum paid all costs of the U.S. government... for about four hours." — 2007 Letter

🔗 Connections

• Related Entities: Warren Buffett, Charlie Munger
• Related Concepts: Circle of Competence, Intrinsic Value, Corporate Governance
• Key Sources: 2003 Letter, 2004 Meeting, 2007 Letter, 2007 Meeting