Berkshire Hathaway reveals $5 billion stake in oil giant Occidental Petroleum

Daniel Zuchnik | WireImage | Getty Images

In its annual letter to shareholders published less than a week ago, Warren Buffett filed a complaint he might “find little that excites us” in the stock markets.

However a new SEC filing Friday night revealed that someone at Berkshire Hathaway, Buffett himself or his portfolio managers, is very excited about Occidental Petroleum.

As of Friday, Berkshire owns 91.2 million common shares of the oil giant. They are worth $5.1 billion at the close of $56.15 tonight. The stock has gained 18% today and 45% this week.

It rose sharply with the price of oil, which soared to around $115 a barrel following the Russian invasion of Ukraine.

And as Occidental rallied, Berkshire bought.

More than 61 million shares currently in his portfolio were purchased on Wednesday, Thursday and today, at prices ranging from $47.07 to $56.45.

The remaining 29 million shares were purchased this year by Tuesday. (Berkshire reported holding no OXY shares as of December 31 in its last deposit 13F.)

Berkshire did not respond Friday night to CNBC’s request for comment.

We don’t know exactly when he bought, or what Berkshire paid for those 29 million shares, because he hadn’t yet reached the 10% ownership level which requires new purchases to be disclosed within a day of their execution.

Berkshire owns only about 9% of Occidental’s common stock. But he also has warrants to buy an additional 83.9 million shares at $59.62.

Even if the warrants were unexercised, for purposes of the SEC filing trigger, they must be counted, which technically brings Berkshire’s stake to over 17%.

Berkshire received those warrants as part of a deal that included what was, in effect, a $10 billion loan in 2019 to Occidental to help it. buy Anadarko for $38 billion.

The loan, in the form of a preferred stock purchase by Berkshire, requires Occidental to pay a dividend of 8% per year. This equates to $200 million per quarter.

At the time, Buffett told CNBC it was a bet that oil prices would rise in the long term.

Berkshire bought a relatively small stake of just under 19 million shares in the second half of 2019. It was valued at around $780 million at the end of that year.

In the shorter term, Buffett’s bet on oil prices didn’t fare too well when they crashed in early 2020 due to the onset of the COVID-19 pandemic.

To save money, Occidental made its first- and second-quarter loan payments to Berkshire in stock form. (He resumed cash payments after that.)

Berkshire received 17.3 million shares for the first trimester and 11.6 million shares for the second trimester.

But his 13F filings don’t list any OXY stock. as of June 30 and September 30 in 2020, indicating that amid the carnage in the oil market, he sold both the 19 million shares he bought and the nearly 29 million shares he received as a dividend payment.

Now, with oil prices high again, it’s back in Berkshire’s portfolio in a big way.

(Get a roundup of Warren Buffett and Berkshire Hathaway-related news and features delivered straight to your inbox each week. Sign up for the Warren Buffett Watch newsletter.)

Comments are closed.