Investing in energy has been tricky of late. Almost all aspects of the energy patch have traded handily lower. One group that has held up in the panic has been the refining and marketing portion of the energy sector. After all, lower oil prices often help them with their margins. It was just in recent weeks that we discussed why Warren Buffett had been exiting his big oil bets. Before thinking that Buffett and his team have become schizophrenic on their views on oil and gas here, there is more to this story than just a short-term bet on oil.

Now it turns out that the “confidential information” that was withheld in the latest Berkshire Hathaway Inc. (NYSE: BRK-A) full holdings was that Buffett had really become much more selective. He and his managers decided to take on a very large stake in shares of Phillips 66 (NYSE: PSX) worth roughly $4.5 billion.

24/7 Wall St. would point out that this likely means something you may have already guessed — there is going to be more oil than there is going to be demand, likely for an extended period. Still, moving that oil and refining it, as well as marketing it, may remain very profitable. Buffett also owns this stake at roughly 11 or 12 times expected normalized earnings.

What was so interesting about the latest full Buffett holdings was that it showed that Phillips 66 as a position was eliminated entirely, but that was not the case as it was in the “confidential information.” We noted just two weeks ago that this drop of Phillips 66 looked very surprising at the time. After all, the Phillips 66 stake had been listed as 7.499 million shares in March, and it had been 6.567 million shares at the end of 2014. Another issue is that this stake fluctuated in the past and had at one point been above 27 million shares.

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The new position was after a gain of 3.17 million shares, up to a new total of 57.975 million in indirect shares in Phillips 66. We noted in our view on the full holdings two weeks ago:

Another issue which was seen in this 13F filing was that the public equities value of the portfolio was $107.18 billion, while the last earnings report showed a value of $110.776 billion. The 13F filing showed that “confidential information has been omitted from the public Form 13F report and filed separately with the U.S. Securities and Exchange Commission,” which means that what you see here may be different in reality.

Now we know where the discrepancy was. Still, does this mean something to the oil and gas sector as a whole?
Some investors are going to think that this Buffett increase means that refineries are cheap. In his defense, Mr. Buffett and his portfolio managers can easily point out that valuations are low in this group — and we cannot ignore that refining has held up better than exploration and drilling.

There is still an obvious standout issue here. That is that Buffett obviously wants to have big exposure to the energy sector, but he and his team just may not be all that certain on how to position themselves through time on what portion to own. The Phillips 66 stake originally dated back to the ConocoPhillips (NYSE: COP) days.

Buffett has previously gone big into, and shortly back out of, Exxon Mobil Corp. (NYSE: XOM). Berkshire Hathaway owned 40 million shares or so, worth $3.5 billion, and then rapidly bailed out — long before the 2015 sell-off in Exxon and Big Oil went from small losses to major pain.

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Suncor Energy Inc. (NYSE: SU) has been the one oil bet that has remained static for Buffett and his portfolio managers. Suncor’s weight inside Berkshire Hathaway was the same stake at 22.35 million shares at the end of June. The Suncor stake also had increased in late 2014 and it had grown each quarter from the 13 million shares in March of 2014. Suncor is one of the biggest players in Canada’s oil sands, and the interest here dates back to when Buffett and Bill Gates were both interested in the Canadian oil sands during the last energy boom.

Our original view was that if Buffett had really dumped the Phillips 66 stake, then chances were high you would not see it again. What appears to have happened is that he wanted to boost his stake and managed to keep it out of the public eye while it was taking place.

What matters here is that Berkshire Hathaway is now more than a 10% stakeholder in Phillips 66. That means that the company will have certain regulatory guidelines when it comes to buying or selling more shares.

Shares of Phillips 66 were up almost 3% at $79.50 in late-morning trading on Monday. The company has a consensus price target of almost $93.50 and a 52-week range of $57.33 to $87.98.

Again, it is obvious that Buffett and his team want exposure to energy. They already have a lot tied to transporting oil via rail, or did when it was flowing heavily from the Bakken. Is it possible that Buffett has realized owning energy throughout all stages of the business and commodities cycle is just hard to do — even for the Oracle of Omaha?

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