Should Occidental Petroleum Be Renamed Occidental Hathaway? Warren Buffett Gets Approval To Purchase Half The Company's Stock

Zinger Key Points
  • The Federal Energy Regulatory Commission (FERC) granted approval for the purchase on Friday.
  • Buffett originally made a $10-billion investment in Occidental in 2019.

Warren Buffett and his $657.6-billion holding company Berkshire Hathaway (NYSE: BRK-A) (NYSE: BRK-B) owned zero shares of Occidental Petroleum Corporation OXY as recently as December 2021.

Just seven short months later, in July, Berkshire — which is the parent company of MidAmerican Energy Services — reportedly owned a 19.4% stake in Occidental. In the same month, according to Energy Choice Matters, Buffett's holding company was seeking approval to purchase up to 50% of Occidential’s common stock.

What Happened: The Federal Energy Regulatory Commission granted approval for the purchase on Friday, sending shares of the oil company over 9% higher during Friday’s intraday session.

Buffett originally made a $10-billion investment in Occidental in 2019 to aid with the company's acquisition of Anadarko Petroleum.
Read more: These 3 Dividend Yielding Stocks Are Warren Buffett's Top-Owned Positions In Berkshire

When the billionaire made the initial investment, he said it was “a bet on the fact that the Permian Basin is what it is cracked up to be.” After acquiring Anadarko, Occidental now owns 1.6 million acres in the U.S. Permian Basin.

An 8% annual dividend-paying preferred stock with warrants to purchase about 84 million shares at $59.624 per share was given to Berkshire along with 100,000 shares for the initial $10-billion investment.

Why It Matters: Buffett is known to like quality companies with meticulous management and strong balance sheets — speaking about Occidental CEO Vicki Hollub to CNBC in March, Buffett said she is “running the company the right way.”

Regardless of how effective the energy company is, commodity prices will determine whether the venture is a success or a failure.

Berkshire increased its holdings in Chevron Corporation CVX in the third and fourth quarters of 2021. With this, an investor can assume that Buffett has grown more optimistic about the long-term price of oil. At the end of 2021, Chevron ranked ninth among Berkshire's publicly traded holdings, with a market value of about $4.5 billion.
OXY Price Action: Shares of Occidental Petroleum were up 9.34% at $70.96 Friday afternoon, according to data from Benzinga Pro

Photo: Courtesy of Fortune Live Media on Flickr

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