Buffet bets on Seitel

Warren Buffet’s Berkshire Hathaway has made its first venture capital investment in the oil industry with the rescue of troubled seismic data broker Seitel from the throes of bankruptcy.

The Seitel plot thickens! As revealed in Oil IT Journal last month, the troubled seismic data broker was rescued from bankruptcy by a ‘white knight’ in the form of Californian private equity firm Ranch Capital.


Now it emerges that Warren Buffet’s Berkshire Hathaway investment company is behind the Ranch move, and will be financing Seitel’s reorganization. If all goes as planned, Seitel will become a wholly-owned subsidiary of Berkshire Hathaway.


The Seitel dénouement began when holders of Seitel’s ‘senior’ debt (i.e. first creditors in the pecking order in the event of the company winding-up) filed a bankruptcy petition against Seitel. But before the court acted on the petition, Ranch acquired all $255 the senior debt at an undisclosed, but likely highly discounted rate. This debt was then sold on to Berkshire – again for an undisclosed amount and the forced bankruptcy proceedings were halted.


Seitel has now filed a reorganization plan with the Delaware Bankruptcy Court for itself and some 30 of its US-based subsidiaries. The reorganization will be financed by Berkshire. Ranch CEO Larry Hershfield will be the new Seitel chairman while Larry Lenig is to continue as CEO, upon its emergence from bankruptcy.

Business as usual

Seitel has filed to dismiss the original bankruptcy petitions, the reorganization will be carried out under US Chapter 11 legislation. Seitel and its US subsidiaries will continue to operate their business as usual. Seitel’s Canadian subsidiaries are concerned by the present reorganization. Seitel currently has $26 million of cash and a further $20 million line of credit from Wells Fargo bank to see it through the restructuring process.

A sign?

It is tempting to speculate on Buffet’s motivation behind the Seitel acquisition. Is this just an opportunistic punt by the ‘most powerful businessperson in America’—according to the current edition of Fortune magazine? Buffet is a great believer in investing in fundamentals and in intrinsic value—a great sign for a troubled industry sector. Another sign maybe the 20% hike in worldwide drilling activity just reported by Baker Hughes. But our question for Buffet is—why Seitel? Why not PGS!

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