Warren Buffett's Berkshire Hathaway has significantly increased its stake in Occidental Petroleum, purchasing shares for nine consecutive trading sessions. This move has pushed the conglomerate's holding in the Houston-based oil and gas producer to nearly 29%, according to recent regulatory filings.
Berkshire Hathaway acquired an additional 7.3 million shares of Occidental from June 5 to June 17, with purchase prices hovering around $60 per share. This brings Berkshire's total holding to over 255 million shares, representing a 28.8% stake in the company. Occidental is now Berkshire's sixth-largest stock holding, making the conglomerate the oil company's largest institutional investor by a considerable margin.
In addition to the common shares, Berkshire Hathaway owns $10 billion of Occidental preferred stock and has warrants to purchase another 83.9 million common shares at a price of $59.62 each. These warrants were part of a 2019 deal that helped finance Occidental's acquisition of Anadarko Petroleum. With Occidental's stock closing at $60.2 on June 17, Buffett's warrants are now "in the money." A full redemption of the preferred equity could potentially lift Berkshire's ownership of Occidental above 40%.
Despite the substantial investment, Buffett has made it clear that he does not intend to take full control of Occidental. This clarification comes after Berkshire received regulatory approval to purchase up to a 50% stake, fueling speculation about a possible takeover. However, Buffett has reassured stakeholders that a complete acquisition is not on the agenda.
Buffett's initial interest in Occidental was sparked after he read a transcript of the company's earnings conference call. "I read every word, and said this is exactly what I would be doing," Buffett told CNBC, praising Occidental CEO Vicki Hollub for her management of the company.
Occidental pays a 1.5% dividend yield and, while the stock is flat for the year, it dipped 5% in 2023. Buffett capitalized on market volatility in early 2022 to acquire 14% of the energy firm, worth over $7 billion, in just two weeks. Reflecting on this, he noted, "You couldn't do that with Berkshire. ... Overwhelmingly, large companies in America, they became poker chips."
The latest purchases underscore Buffett's continued confidence in the energy sector and Occidental in particular. This strategic increase in holdings comes amidst Occidental's ongoing efforts to reduce its significant debt, which stood at $18.5 billion at the end of 2023. Part of this strategy includes the potential sale of its assets in the Permian Basin's Barilla Draw region, which could fetch more than $1 billion.
In addition, Occidental has been exploring the sale of WES, a pipeline operator focused on natural gas in the U.S., which could be valued at over $20 billion, including debt. This divestment aligns with Occidental's broader strategy to streamline operations and strengthen its financial position.
