Warren Buffett, renowned investor and CEO of Berkshire Hathaway, has exhibited a notable interest in Occidental Petroleum (NYSE: OXY), gradually accumulating a substantial 28% stake in the company over the past few years. With recent additional purchases, Occidental has emerged as one of Berkshire’s top holdings, positioned just behind fellow oil giant Chevron (NYSE: CVX).
Buffett’s latest acquisition spree includes three separate purchases of Occidental shares since December, collectively amounting to hundreds of millions of dollars. Despite Berkshire Hathaway’s existing ownership of about $8.5 billion worth of preferred shares in Occidental, yielding an 8% dividend, Buffett’s continued investment signals his confidence in the company’s potential.
One of the key factors driving Buffett’s favouritism towards Occidental is its strategic positioning in the oil and gas sector, particularly its strong presence in the Permian Basin. Unlike Chevron, which generates substantial revenue from downstream operations, Occidental’s primary focus lies in oil extraction, making its fortunes closely linked to oil prices.
Occidental’s recent acquisitions, including Anadarko and CrownRock, have further solidified its position in the Permian Basin, providing access to cost-effective oil production. While these investments have resulted in an increased debt burden, management remains committed to divesting non-core assets to alleviate financial pressure.
CEO Vicki Hollub’s bullish outlook on oil prices has also bolstered Buffett’s confidence in Occidental. Hollub’s projections anticipate a potential oil supply shortage by 2025, driven by OPEC production cuts and rising demand from China. She foresees oil prices reaching $80 per barrel by the end of the year, reinforcing Occidental’s profitability prospects.
Buffett’s admiration for Hollub’s leadership prowess was evident during Berkshire’s 2023 Shareholder meeting, where he praised her as an “extraordinary manager.” Hollub’s adept handling of Occidental during the challenging oil market conditions of 2020 underscores her capability to navigate volatile market dynamics effectively.
In summary, Warren Buffett’s continued investment in Occidental Petroleum reflects his confidence in the company’s strategic positioning, bullish market outlook, and strong leadership under CEO Vicki Hollub. As Occidental continues to pursue its growth trajectory, Buffett’s unwavering support underscores the company’s potential as a significant player in the energy sector.
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