Continental Resources, Inc. (CLR), Oneok Partners LP (OKS): Buffett Is Crude Oil’s Conductor of Choice

Because of this advantage, rail has the potential to stick around and be more than a short-term solution. It’s already starting to affect pipeline projects; as late last year Oneok Partners LP (NYSE:OKS) announced that it was not moving forward with its proposed Bakken Crude Express pipeline project after the company couldn’t secure the necessary long-term commitments. It could also mean that some of the proposed projects from the chart above might not need to be built. With ample rail capacity, producers might elect to keep riding the rails.

The big winner here? Warren Buffett’s BNSF which is a subsidiary of Berkshire Hathaway Inc. (NYSE:BRK.A). The company is transporting about a third of the Bakken’s oil production. That led the railroad company to experience a 60% jump in crude and petroleum product shipments in the first half of 2012. Overall, the company’s CEO said it likely moved 350 million barrels of crude in 2012. With its major presence in the play, Buffett’s railroad is strategically positioned to benefit from this trend.

Another big winner when it comes to crude oil by rail is Plains All American Pipeline, L.P. (NYSE:PAA). Late last year the company spent $500 million to acquire five terminals to complement its existing facilities. Overall the company is expected to have 250,000 barrels per day of loading capacity with another 335,000 barrels per day of unloading capacity. Because of the limited pipeline connectivity to the east and west coasts, Plains All American Pipeline, L.P. (NYSE:PAA) has the facilities to enable the delivery of cheaper Bakken crude to coastal refineries.

The key takeaway here is this — rails could be part of the permanent solution to move oil from production basins to market centers. As we’ve seen with the Keystone XL debate, its tough to get a major pipeline built in this country, making it less likely that we’ll see a major east or west coast pipeline built. That means more oil is likely to keep flowing through the rails, with Warren Buffett being its conductor of choice.

The article Warren Buffett Is Crude Oil’s Conductor of Choice originally appeared on Fool.com is written by Matt DiLallo .

Motley Fool contributor Matt DiLallo owns shares of Phillips 66 and has the following options: Long Jan 2014 $70 Calls on Berkshire Hathaway and Short Jun 2013 $92.5 Calls on Berkshire Hathaway. The Motley Fool recommends Berkshire Hathaway and ONEOK Partners, L.P. The Motley Fool owns shares of Berkshire Hathaway.

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