Buffett’s Berkshire buys more Occidental in endorsement of Permian Basin-related purchase

Environment

The Occidental Petroleum Headquarters is seen on December 11, 2023 in The Woodlands, Texas.
Brandon Bell | Getty Images News | Getty Images

Berkshire Hathaway has purchased more than 10 million shares of Occidental Petroleum this week worth $588 million, signaling confidence in the oil producer’s pending acquisition of CrownRock.

Warren Buffett’s Berkshire now owns a 27% stake in Occidental worth $13.6 billion as of Wednesday’s stock closing price of $57.22. Occidental’s current market capitalization stands at $50.2 billion.

Berkshire bought the shares in multiple transactions on Monday, Tuesday and Wednesday, according to a filing with the Securities and Exchange Commission. Berkshire also has warrants to purchase another 83.8 million shares at price of $56.62 apiece for a total value of $4.7 billion.

Occidental on Monday agreed to purchase CrownRock, a privately held oil producer in the Permian Basin, for $12 billion. Occidental will issue $9.1 billion in debt and $1.7 billion in common stock to finance the transaction. The deal is expected to close in the first quarter of 2024.

Berkshire’s share purchases this week are a signal that Buffett has confidence in the deal despite Occidental taking on more debt. The oil producer is still working down obligations from its latest major acquisition, Anadarko Petroleum, in 2019.

Occidental, once known for being founded by legendary oilman Armand Hammer, is now Berkshire’s sixth-biggest equity holding. Buffett has ruled out the possibility of taking full control of the energy company.

The legendary investor previously revealed that he started buying the stock after reading through Occidental’s annual report and gaining confidence in the company’s growth and its leadership.

Occidental CEO Vicki Hollub told CNBC on Monday that Berkshire was not involved in financing the CrownRock deal, though Occidental did discuss with Buffett how the deal fits into its corporates strategy.

Hollub said Occidental is planning to slash its debt below $15 billion even with the acquisition of CrownRock. The company plans to do this by divesting domestic assets that are not core to the company’s portfolio, she said.

Occidental’s stock is down about 9% this year.

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