Warren Buffett's Berkshire Hathaway is going heavy on oil and gas exploration and production company Occidental Petroleum (NYSE: OXY), having bought 7.26 million shares of the company at prices hovering around $60 since June 5, according to the Omaha-based company's latest Form 4 filings with the US Securities and Exchange Commission.
Buffett now holds 255.28 million company stocks worth $15.28 billion, making Occidental Petroleum the six-largest stock holding in his over $300 billion portfolio with a 4.62% exposure.
Berkshire Hathaway also has warrants to purchase another 83.9 million common shares for $59.62 apiece, worth $5 billion, and owns 84,897 shares of preferred stock. The Omaha-based fund secured the warrants as part of a 2019 deal that assisted Occidental Petroleum's acquisition of Anadarko Petroleum.
While Buffett isn't looking for a controlling stake in the oil company, speculations of a takeover loom after Berkshire Hathaway was granted the regulatory nod to buy up to 50% stake in Occidental. Berkshire now holds almost a 29% stake in the oil company.
Buffett had previously said he began purchasing Occidental after reading the company's earnings conference call transcript. "I read every word and said this is exactly what I would be doing," Buffett told CNBC, adding that Occidental Petroleum CEO Vicki Hollub is "running the company the right way."
Buffett added in his 2023 shareholder letter: "No one knows what oil prices will do over the next month, year, or decade. But Vicki does know how to separate oil from rock, and that's an uncommon talent, valuable to her shareholders and to her country."
The oil company's stock has remained muted this year, dipping about 5% in 2023. Buffett had mentioned he capitalised on market volatility in early 2022 to buy a 14% stake in Occidental in just two weeks.
"I find it just incredible. You couldn't do that with Berkshire. Overwhelmingly, large companies in America, they became poker chips," Buffett said in 2022. "Imagine trying to [buy] 14% of the farms in this country; 14% of the apartment houses; 14% of the auto dealerships, or just anything, when already 40% were locked up some other place."
Although Occidental Petroleum makes most of its revenue from fossil fuel-related projects, its grand plans to transition to clean energy projects caught Buffett's eye. Occidental has invested heavily in new-age lower-carbon energy technologies through its Oxy Low Carbon Ventures subsidiary.
Seeing the path Occidental has embarked on, Berkshire Hathaway has partnered with the energy firm to commercialise lithium, which is vital for manufacturing electric vehicle batteries.
Occidental Petroleum has a subsidiary called TerraLithium that patented Direct Lithium Extraction technologies. In a new joint venture with BHE Renewables, the renewable energy arm of Berkshire Hathaway Energy, Occidental will deploy TerraLithium's DLE tech to extract and produce lithium from geothermal brine.
In its Q1 earnings report, Occidental posted a quarter-over-quarter decline in oil and gas pre-tax income to $1.2 billion from $1.6 billion. The company attributed the drop to lower crude oil prices and domestic crude oil volumes.
The average global production of 1,172 thousand barrels of oil equivalent per day for Q1 was near the "midpoint of guidance while overcoming the extended third-party outage in the eastern Gulf of Mexico," the earnings report stated.
Occidental Petroleum announced net income attributable to common stockholders for Q1 of $718 million, or $0.75 per diluted share. The stock closed at $61.26 on June 18.
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