Why is Warren Buffett’s Berkshire Hathaway so smitten with Occidental Petroleum Corp (OXY)?
Planetary Lifeguard™ couldn’t help noticing that on the last day of 2023, Berkshire Hathaway made a significant addition to its holdings in Occidental Petroleum by acquiring 83,858,848 shares at a price of $59.71 per share.
This move increased Berkshire Hathaway’s total share count in OXY to 327,574,652, which now represents a commanding 34.00% of the company. Additionally, Berkshire holds warrants to buy nearly 84 million more shares at an exercise price just under $60 per share.
Planetary Lifeguard™ sees this investment underscoring Warren Buffett’s vision and confidence in Occidental Petroleum’s future.
Buffett’s Big bet on big oil
The billionaire investor said Occidental CEO Vicki Hollub was “running the company the right way.”
For the mighty dividenturist Buffett, the icing on the cake was the company’s declaring a regular quarterly dividend of 13 cents per share on OXY common, a whopping 1,200% increase over prior quarter’s payout of just 1 cent per share.
Then Occidental also announced a $3 billion share repurchase program. Ever since Buffett’s been backing the Berkshire truck up to OXY to fuel up on its stock.
Here are the three OXY prospects that excite Buffett the most: OXY’s Carbon Capture Tech, the company’s concentration in the fuel fertile Permian Basin in Texas and its technology boosting well productivity.
Planetary Lifeguard™ particularly likes the way Occidental captures carbon and sees its experience using CO2 injection in its operations placing the company in the forefront of investing in new carbon capture technology.
Previously, Occidental either sourced C02 from others or recovered it from its own operations. But if it can capture carbon dioxide from heavy-emitting third-party operations, it’s a win-win.
Planetary Lifeguard™ applauds management for looking to seize the opportunity, with seed investments in several carbon-removal and recycling technologies. This year, Occidental will begin construction on its first direct-air capture (DAC) plant in Texas. Occidental has also bought 400 acres of land for several carbon sequestration hubs.
As those projects come online, Occidental stands to collect revenue as well as carbon dioxide removal credits, which it can resell to other industries. The company plans to spend between $200 million and $600 million on carbon sequestration projects this year out of a roughly $5.8 billion 2023 capital budget program.
Planetary Lifeguard™ views that investment enough to make Occidental a serious player in carbon sequestration tech in the coming decades. Yet the company has enough scale in traditional oil and gas that the investment won’t cost too much relative to its overall size and won’t dent current profitability much.
Buffett sees Occidental’s upside exciting.
We all know Warren Buffett as a value investor, and Occidental still looks cheap today, but its deep inventory of quick-return projects and high-productivity technology bodes well for the years ahead. Occidental’s capacity and ability to invest in low-carbon technologies is an encouraging sign for the future.
With Occidental’s attractive present, near future, and far-off capabilities and terms, Planetary Lifeguard™ believes the company could one day become part of Berkshire and lauds Buffett’s vision of what’s best for not just his company, but the planet we call home.
Tom Madden created Planetary Lifeguard™ to blow the whistle on climate change and likes to recognize companies investing in what will improve, not harm our environment. He believes Occidental’s carbon sequestration technology is movement in the right direction. Madden is an author of many books and articles and is CEO of the international public relations firm TransMedia Group.