Could Warren Buffett really buy Occidental Petroleum?

Seeking Alpha2022-08-21

Friday's news that Warren Buffett's Berkshire Hathaway (NYSE:BRK.A) (NYSE:BRK.B) won approval from U.S. regulators to buy as much as 50% of Occidental Petroleum (NYSE:OXY) has sparked speculation that Buffettmight eventually acquire the whole company.

"No question Buffett goes to 50% from here," said Bill Smead of Smead Capital Management and a shareholder in both Occidental (OXY) and Berkshire (BRK.A) (BRK.B), adding that the moves are looking more and more like 2009-10 when Buffett amassed a significant stake in Burlington Northern Santa Fe railroad before buying the entire company.

"It is likely that Buffett will buy the whole thing eventually," University of Maryland finance professor David Kass told CNBC. "The 50% limit may have been set to receive FERC approval for a non-controlling stake."

Occidental's (OXY) deep spending cuts, aggressive debt repayment and cash generating capabilities - $4.2B in free cash flow in Q2 - have made the company an attractive target for Buffett, Truist Securities' Neal Dingmann said, adding the stock is "a great sort of hedge against a lot of his other businesses to own such a high free-cash-flowing business."

Occidental (OXY) would work better as a subsidiary of Berkshire (BRK.A) (BRK.B) than a stock holding "given the volatility that exists in the energy/commodity markets," according to Morningstar's Greggory Warren, adding "this could end up evolving into a slow-motion takeover where Berkshire buys up to the stakes that FERC allows it to acquire until it can acquire OXY whole."

Occidental (OXY) is the best performer in the S&P 500 this year, up 146% YTD compared with the index's 11% decline, and it topped Friday's S&P leaderboard with a 9.8% gain.

Buffett has made no secret of his admiration of Occidental (OXY) CEO Vicki Hollub, saying the company "looked like a good place to put Berkshire's money" during Berkshire's (BRK.A) (BRK.B) annual shareholder meeting in April.

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Comments

  • newbe1001
    2022-08-22
    newbe1001
    Ok
  • andrew123
    2022-08-22
    andrew123
    Like 
  • WJ77
    2022-08-22
    WJ77
    👍
  • PearlynCSY
    2022-08-22
    PearlynCSY
    Warren Buffett gets permission to buy up to half of Occidental Petroleum, boosting the shares. Warren Buffett’s Berkshire Hathaway on Friday received regulatory approval to purchase up to 50% of oil giant Occidental Petroleum.Shares of Occidental jumped 10% on the news to close at $71.29 apiece, pushing their 2022 gains to more than 145%.On July 11, Berkshire filed an application with the Federal Energy Regulatory Commission to buy more of the oil company’s common stock in secondary market transactions. The conglomerate argued that a maximum 50% stake wouldn’t hurt competition or diminish regulatory authority.Carlos Clay, acting director of division of electric power regulation, granted the permission Friday, saying authorization was “consistent with the public interest.”David Kass, a fina
  • Alex1709
    2022-08-22
    Alex1709
    Yes
  • Goupppppppp
    2022-08-22
    Goupppppppp
    Will it up today?
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