Energy
Thursday, December 14th, 2023 3:02 pm EDT
Key Points
- Berkshire’s Significant Investment: Berkshire Hathaway, led by Warren Buffett, has acquired over 10 million shares of Occidental Petroleum worth $588 million. This investment demonstrates Berkshire’s confidence in Occidental and its strategic moves, particularly the pending acquisition of CrownRock.
- Increased Stake in Occidental: Following the recent share purchases, Berkshire now holds a 27% stake in Occidental, valued at $13.6 billion based on the closing stock price of $57.22 as of Wednesday. Occidental’s market capitalization is currently at $50.2 billion. The shares were acquired through multiple transactions on Monday, Tuesday, and Wednesday, as disclosed in a filing with the Securities and Exchange Commission. Additionally, Berkshire holds warrants to purchase an additional 83.8 million shares at a specified price.
- Confidence in CrownRock Acquisition: Berkshire’s decision to increase its stake in Occidental is seen as a signal of confidence in Occidental’s pending acquisition of CrownRock. Despite Occidental taking on additional debt, Berkshire’s move suggests Buffett’s positive outlook on the deal. Occidental plans to acquire CrownRock, a privately held oil producer in the Permian Basin, for $12 billion. The financing for the transaction includes $9.1 billion in debt and $1.7 billion in common stock, with the deal expected to close in the first quarter of 2024. Occidental aims to manage its debt, even with the CrownRock acquisition, by divesting domestic assets that are not considered core to its overall portfolio.
Berkshire Hathaway, led by Warren Buffett, has demonstrated confidence in Occidental Petroleum’s future prospects by acquiring over 10 million shares of the company this week, amounting to a total investment of $588 million. This move brings Berkshire’s ownership stake in Occidental to 27%, valued at $13.6 billion based on the stock’s closing price of $57.22 as of Wednesday. The current market capitalization of Occidental stands at $50.2 billion.
The shares were acquired through multiple transactions on Monday, Tuesday, and Wednesday, as disclosed in a filing with the Securities and Exchange Commission. Additionally, Berkshire holds warrants that allow it to purchase an additional 83.8 million shares at a price of $56.62 each, with a total value of $4.7 billion.
This strategic investment by Berkshire is particularly noteworthy as Occidental Petroleum recently announced its plans to acquire CrownRock, a privately held oil producer located in the Permian Basin, for $12 billion. Occidental intends to finance the acquisition through a combination of $9.1 billion in debt and $1.7 billion in common stock. The deal is expected to be finalized in the first quarter of 2024.
Berkshire’s decision to increase its stake in Occidental amid the pending acquisition of CrownRock is interpreted as a vote of confidence in the deal, despite the additional debt burden that Occidental is taking on. The company is still managing obligations from its previous major acquisition of Anadarko Petroleum in 2019.
Occidental Petroleum, originally associated with legendary oilman Armand Hammer, now represents Berkshire’s sixth-largest equity holding. However, Buffett has clarified that he has no intention of taking full control of the energy company.
Buffett had previously disclosed that he began purchasing Occidental Petroleum stock after thoroughly reviewing the company’s annual report and gaining confidence in its growth potential and leadership. While Berkshire was not involved in financing the CrownRock deal, Occidental CEO Vicki Hollub mentioned that discussions took place with Buffett regarding how the acquisition aligns with the company’s corporate strategy.
Hollub further emphasized Occidental’s commitment to reducing debt below $15 billion, even with the CrownRock acquisition. This reduction is planned through divestment of domestic assets that are not considered core to the company’s overall portfolio. Despite these strategic moves, Occidental’s stock has experienced a 9% decline this year.
For the full original article on CNBC, please click here: https://www.cnbc.com/2023/12/14/buffetts-berkshire-buys-more-occidental-in-endorsement-of-permian-basin-related-purchase.html
