Oil’s Well That Ends Well: Warren Buffett’s Unshaken Spree in Occidental Petroleum

Berkshire Hathaway has piled more than $11 billion into the energy giant in just over 12 months.

A trifecta of bank failures last week could be stirring up panic over market implosions and financial disasters, but Warren Buffett remains unshaken and continues to shop for stocks.

Buffett, apparently unfazed by bank fiascos and looming market collapse, is still buying shares.

Buffett’s Berkshire Hathaway has been on an oil slick shopping spree, splurging about $467 million on Occidental Petroleum in just three days, according to an SEC filing. This has pumped up their stake in the oil-and-gas firm to a slick 23.1%.

Buffett’s company dished out about $467 million on Occidental this week, bumping up its stake to 23.1%.

Over the past year, Berkshire has been gushing funds into Occidental, splashing out a staggering $11.1 billion. Thanks to Buffett’s interest, the energy stock skyrocketed nearly 120% in 2022, making it the S&P 500’s top-performing star. Berkshire Hathaway has poured a whopping $11 billion into the energy behemoth in just over a year.

The nonagenarian billionaire resumed his Occidental share hunt earlier this month after a brief five-month pause. With the stock’s 26% tumble since November, it’s no surprise the deal-seeker is swooping in, as the price dipped to $57 on Wednesday. The Oracle of Omaha’s position is now valued at a cool $11.8 billion.

In the last five trading days alone, Occidental’s stock price has slipped 9%, likely due to the recent collapse of Silvergate, Silicon Valley Bank, and Signature Bank. This turmoil raises fears of a domino effect among other banks. But, as Buffett famously advises, ‘be greedy when others are fearful,’ and it seems he’s practicing what he preaches.

Buffett admires Occidental for its strong domestic presence, debt reduction, dividend payouts, and share buybacks, according to CEO Vicki Hollub. Additionally, the surge in energy prices last year, driven by the Russia-Ukraine conflict, has padded Occidental’s profits.

Buffett and his crew got the green light in August to ramp up their Occidental ownership to a whopping 50%, hinting they’re still in progress. Plus, they funneled around $20 billion into Chevron last year, bagging a $30 billion stake in the fossil fuel giant by year’s end. These moves reveal Berkshire’s bullish attitude towards the energy sector.

Besides their 23.1% stake, Berkshire also holds $10 billion in Occidental’s preferred stock, raking in a sweet $800 million annually in dividends. Furthermore, they possess warrants for acquiring about 84 million more common shares at a fixed $5 billion. Berkshire secured these financial goodies in exchange for funding Occidental’s acquisition of Anadarko Petroleum in 2019.

After surpassing 20% ownership of Occidental in August, Berkshire started counting its stake under the equity method, resulting in $258 million of the company’s after-tax earnings being reported as Berkshire’s own in 2022.

Hats off to the Wizard of Wall Street! Buffett’s move mirrors his 2008 grand slam with Goldman Sachs and General Electric, where he doubled his dough in just a year. The maestro’s master plan? Simple: pour cash into colossal, fail-proof firms, grab a board seat or advisory gig, secure preferred payouts, and make a swift exit when the market booms. Pure genius!

Excerpts from Business Insider, Victor Jung.

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