Warren Buffett snaps up nearly $600 million of Occidental stock in 3 days, signaling he likes the energy group's latest deal
Warren Buffett's Berkshire Hathaway bought 10.5 million Occidental shares in three days after the oil-and-gas company agreed to acquire CrownRock.
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- Warren Buffett plowed almost $600 million into Occidental Petroleum stock in three days this week.
- The purchases suggest he approves of Occidental's CrownRock deal, and views the shares as a bargain.
- Buffett's Berkshire Hathaway now owns 26% of the energy company, a stake worth about $14 billion.
Warren Buffett's Berkshire Hathaway poured nearly $600 million into Occidental Petroleum during the first three days of this week. The stock purchases signal the famed investor approves of the energy company's pending acquisition, and suggest he sees fresh value in its shares following their recent slump.
Buffett's conglomerate snapped up about 10.5 million Occidental shares for roughly $589 million, boosting its stake to around 239 million shares or 26% of the company, a Securities and Exchange Commission filing revealed on Wednesday. The position was worth about $14 billion at the market's close, making it one of Berkshire's 10 largest holdings.
The purchases followed Occidental's announcement on Monday that it has agreed to acquire CrownRock for $12 billion including debt. The oil-and-gas explorer and producer said the deal would expand its scale in the Permian Basin, yield an extra 170,000 barrels of oil equivalent per day in 2024, and generate an estimated $1 billion in free cash flow in the first year after closing that would help to reduce its debt load.
The fact that Buffett scooped up more Occidental shares this week suggests he's a fan of the planned merger. He may haven chosen to pounce for another reason: Occidental shares have slid from a high of $67 in mid-September to around $57 today, a 15% decline.
The stock's drop has been fueled by the slump in oil prices in recent months, as investors fear slower economic growth in China and other countries will temper demand for petroleum. West Texas Intermediate, the benchmark for US crude, has tumbled by a quarter since late September, from about $94 to $70.
Buffett, a world-renowned bargain hunter who specializes in spotting undervalued stocks, likely decided that Occidental's shares were too cheap to resist. He's previously said he supports CEO Vicki Hollub's strategy, which centers on strengthening the company's operations, repaying debts, raising dividends, and generating sustainable free cash flow for the long term. "She's running the company the right way," he said in March last year.
Berkshire built its mountain of Occidental common shares from scratch starting last spring, and has secured regulatory approval to own up to 50% of the company. It also owns over $8 billion worth of preferred stock paying a 8% dividend annually, and warrants granting it the right to buy another $5 billion of common shares at a fixed price.
Buffett and his team received the preferred shares and warrants in return for helping to fund Occidental's takeover of Anadarko Petroleum in 2019. Berkshire previously owned about $10 billion of preferred shares, but Occidental has been redeeming them in recent months.