Berkshire Holds 16.4% of Occidental Petroleum After Recent Purchase

Text size

Berkshire Hathaway

continued to add to its stake in

Occidental Petroleum
,
buying 794,000 shares this past Thursday, lifting its stake to 16.4% of the big U.S. energy company, according to a filing late Monday.

 Berkshire Hathaway (Ticker BRK/A, BRK/B) led by CEO Warren Buffett had purchased a total of 9.5 million shares on June 17 and June 22. Berkshire’s stake in Occidental Petroleum (OXY) now totals 153.5 million shares and is worth $9 billion.

Berkshire paid $53.39 for the vast bulk of the newly purchased shares, which amounted to a small buy relative to those in recent months. Occidental Petroleum (OXY) stock has rallied in recent days along with energy prices and gained 2.4% to $58.90 on Monday.

Buffett seems to like buying Occidental stock in the 50s. Berkshire has paid an average price of about $53 a share for roughly 80% of the entire stake based on filings since March, Barron’s estimates. We also estimate the average cost for the entire holding is around $52 a share, resulting in a paper profit of about $1 billion. Berkshire first disclosed the stake in early March.

 Occidental stock hit a high of $74 in late May.

As a holder of more than 10% of Occidental, Berkshire must disclose trades in the stock within two business days via a filing with the Securities and Exchange Commission.

The fresh purchases may fuel speculation that Berkshire will add further to its stake and reach 20%, or potentially bid for the entire company. At 20%, Berkshire likely would get a different accounting treatment for Occidental that would let it reflect a proportional share of Occidental’s earnings in its own results.

Occidental said on its earnings conference call in May that it expected to begin a $3 billion share repurchase program in the current quarter. Assuming that program is executed, Berkshire’s percentage stake in the company will rise. Occidental has been focused on repaying debt associated with its purchase in 2019 of Anadarko Petroleum. Debt has steadily come down in recent quarters due to ample profits and net debt stood at $23 billion at the end of the first quarter.

It isn’t hard to see why Berkshire continues to be attracted to Occidental, which is one of the top-performing stocks this year in the S&P 500 index. Even with the run-up in the stock, Occidental trades for just five times projected 2022 earnings. Buffett like American companies, and Occidental gets the vast bulk of its energy production domestically.

Write to Andrew Bary at andrew.bary@barrons.com