Warren Buffett’s Berkshire Hathaway piled another $122 million into Occidental Petroleum.
The investor’s company now holds a 19.4% stake, up from 3% at the start of March.
Berkshire also holds stock warrants it can exercise to raise its stake to 26%.
The billionaire investor’s conglomerate scooped up 1.9 million shares, paying around $57.70 a pop, a SEC filing revealed this week. Berkshire now owns nearly 182 million shares of the oil-and-gas explorer and producer — a holding worth $10.9 billion based on Occidental’s closing price of $60.05 on Monday.
Buffett’s company initially built a 3% stake in Occidental during the first two months of this year. It has spent about $9.5 billion to increase the position by six-fold since then, mostly in the first half of March and during the past month. Berkshire is now close to owning 20% of the business, which would allow it to include a proportional share of Occidental’s profits in its reported earnings.
Berkshire already uses the “equity method” to account for its stakes of over 20% in Kraft Heinz, Pilot, Berkadia, and other companies.
Along with its common shares of Occidental, Berkshire owns $10 billion worth of preferred shares, which yield $800 million of dividends yearly. It also holds stock warrants granting it the right to buy a further 83.9 million common shares for $5 billion. Buffett secured the preferred stock and warrants in exchange for providing $10 billion of financing for Occidental’s takeover of Anadarko Petroleum in 2019.
Occidental shares are trading slightly above the warrants’ exercise price of $59.62, meaning Berkshire could exercise its warrants and sell the resulting shares for a small profit. It could also keep those shares, boosting its stake to around 26% — a major step towards buying the entire company.
Energy stocks have surged this year on the back of Russia’s invasion of Ukraine, which has disrupted global energy supplies and pushed up fuel prices. Occidental shares have soared 93% this year, lifting the fossil-fuel specialist’s market capitalization to about $56 billion. Chevron stock, which Berkshire bought aggressively in the first quarter, has gained 17% this year.
Berkshire backed up the truck after Occidental CEO Vicki Hollub outlined her vision for the company on a February earnings call. She vowed to optimize its operations, pay off debt, raise dividends, restart stock buybacks, and maximize long-term cash flows.
Buffett, who turns 92 next month, trumpeted Hollub’s approach during Berkshire’s annual shareholders’ meeting in April. He also noted that Berkshire was able to build a large stake in Occidental within weeks because a huge number of people were treating the stock market like a casino, and trading some of America’s biggest companies like poker chips.
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