Warren Buffett’s Berkshire Hathaway has increased its stake in Occidental Petroleum to 28.8%, or over 255 million shares, following nine consecutive trading sessions of buying. This move may signal Buffett’s confidence in traditional energy companies diversifying their portfolios, although Occidental was not an obvious choice considering other options available to the billionaire investor. Berkshire Hathaway also owns $10 billion of Occidental’s preferred stock and has warrants to buy 83.9 million shares for $5 billion.
The relationship between Occidental and Berkshire has been growing for five years, starting when Buffett committed $10 billion to Occidental’s bid for Anadarko in 2019. Despite some tumultuous years with wild swings in Occidental’s share price, Berkshire won regulatory approval to buy up to 50% of the company in 2022, but Buffett has indicated he does not want full control. The market remains uncertain for Occidental, with global oil demand fluctuating and crude prices hovering around the mid-$80s per barrel. There is also a wave of consolidation in the U.S. energy sector, with Occidental’s planned acquisition of CrownRock moving slowly.
The International Energy Agency and OPEC offer divergent forecasts on oil demand growth for 2024, further complicating Occidental’s outlook. The company hopes to complete the CrownRock acquisition by August, and investors will be watching closely for the next earnings update on July 30. Buffett’s investment offers no guarantee of a better future for Occidental, as the market continues to be challenging for energy companies. While the stock price has seen a 7% annualized gain and a dividend yield of nearly 1.3%, it remains to be seen if Occidental can overcome these obstacles and deliver strong performance in the future.
