Warren Buffett Makes Massive $153.3 Million Investment in Occidental Petroleum – Find Out Why!

Warren Buffett, the legendary investor and billionaire, made a significant move in the energy sector last week by purchasing almost 2.57 million common stocks from Occidental Petroleum Corp. The total investment amounted to approximately $153.3 million, further solidifying Berkshire Hathaway Inc’s position in the United States energy company.

This purchase, made in three tranches, increased Berkshire’s common shares in Occidental to nearly 250.6 million, representing a stake of almost 28.3 percent based on Occidental’s latest declared shares outstanding. The average price per share for the new acquisition was around $59.8, with Occidental’s stock price remaining above $59 throughout the week.

In addition to the common stocks, Berkshire also holds nearly 85,000 preferred shares in Occidental, making it the sole holder of preferred shares in the company. Occidental recently declared a regular quarterly dividend of $0.22 per share and reported cash dividends of $332 million in the first quarter of 2024, including payments for preferred shares.

Berkshire’s initial investment in Occidental dates back to 2019 when it provided $10 billion for preferred shares and common share warrants to support Occidental’s acquisition of Anadarko Petroleum Corp. The conglomerate began acquiring Occidental common shares in 2022.

Last year, Occidental exercised its option to repurchase Berkshire’s preferred stake under the 2019 deal. As of March 31, 2024, Berkshire’s investment in Occidental preferred stock had an aggregate liquidation value of approximately $8.5 billion.

Occidental also has the option to repurchase $1.2 billion worth of common shares remaining under a buyback program authorized in 2023. Despite reporting a net income of $718 million for the first quarter of 2024, down from the previous year due to weaker oil prices and lower petroleum volumes, Occidental exceeded earnings per share estimates.

The company’s first-quarter earnings were boosted by a special net gain of $114 million from litigation settlements. Occidental maintained production levels of 1.2 million barrels of oil equivalent per day in the first quarter, despite challenges such as an extended third-party outage in the eastern Gulf of Mexico.

As of the end of March, Occidental had $8.3 billion in current assets, including $1.3 billion in cash and cash equivalents, and $8.8 billion in current liabilities. The company reported $720 million in quarterly free cash flow before working capital adjustments.

Warren Buffett’s continued investment in Occidental Petroleum Corp showcases his confidence in the company’s long-term prospects and the energy sector as a whole. The strategic move aligns with Berkshire Hathaway’s investment philosophy of acquiring quality assets at attractive prices for sustainable growth and value creation.