Occidental Petroleum
Company Overview
Occidental Petroleum is a major American oil and gas producer with approximately 3.9 billion barrels of oil equivalent proved reserves, concentrated primarily in the Permian Basin of Texas and New Mexico, which is among the world's lowest-cost producing regions. Berkshire Hathaway became Occidental's largest shareholder through an aggressive buying campaign initiated in 2022, accumulating over 25% of the company.
Investment Story
2019: Preferred stock in the Anadarko deal. Occidental acquired rival Anadarko Petroleum in 2019 for $38 billion — a large, debt-funded acquisition that required equity capital. Berkshire provided $10 billion in preferred stock paying an 8% annual dividend plus warrants to buy 83.9 million Occidental common shares at $62.50 each. This was a strategic financing similar to the 2008 Goldman Sachs and GE deals.
2022: Extraordinary common stock accumulation. Beginning in February 2022, Berkshire began purchasing Occidental common stock in the open market at a pace that raised eyebrows on Wall Street. By August 2022, Berkshire had accumulated over 188 million shares (over 20% of the company) at prices ranging from the low-$40s to over $60. The purchases continued through 2023, with Berkshire eventually receiving regulatory approval to own up to 50% of Occidental.
The investment thesis. Buffett pointed to several factors: CEO Vicki Hollub's disciplined capital allocation (prioritizing debt reduction and shareholder returns over volume growth), Occidental's low-cost Permian Basin assets that remain profitable even at low oil prices, and the company's pioneering Direct Air Capture carbon capture technology. He described Hollub as among the best CEOs in the energy industry.
Current position. By 2023, Berkshire's Occidental stake (common plus preferred) was worth approximately $20+ billion — one of Berkshire's largest investments. The annual preferred dividend alone generates $800 million per year for Berkshire regardless of oil price movements.
Buffett's Own Words
Diversified Retailing Company, Inc., through subsidiaries, operates a chain of popular-priced women's apparel stores and also conducts a reinsurance business. In the opinion of your manage- ment, its most important asset is 16% of the stock of Blue Chip Stamps. Blue Chip Stamps Our holdings of stock in Blue Chip Stamps at year-end amounted to approximately 19% of that company's outstanding shares. Since year-end, we have increase
Diversified Retailing Company, Inc., though subsidiaries, operates a chain of popular-priced women’s apparel stores and also conducts a reinsurance business. In the opinion of management, its most important asset is 16% of the stock of Blue Chip Stamps. Blue Chip Stamps Our holdings of stock in Blue Chip Stamps at year-end amounted to approximately 19% of that company’s outstanding shares. Since year-end, we have increased our holdings
Book value’s virtue as a score-keeping measure is that it is easy to calculate and doesn’t involve the subjective (but important) judgments employed in calculation of intrinsic business value. It is important to understand, however, that the two terms - book value and intrinsic business value - have very different meanings. Book value is an accounting concept, recording the accumulated financial input from both contributed capital an
Our proxy material for the annual meeting will allow you to cast an advisory vote expressing 2022/4/7 14:43 Chairman's Letter - 1984 annual meeting will allow you to cast an advisory vote expressing your views about this program - whether you think we should continue it and, if so, at what per-share level. (You may be interested to learn that we were unable to find a precedent for an advisory vote in which management seeks the opinions of shareholders about owner-related corporate policies. Managers who put thei
That is, our business value has moderately exceeded our book value, with the ratio between the two remaining fairly steady. The good news is that in 1986 our percentage gain in business value probably exceeded the book value gain. I say "probably" because business value is a soft number: in our own case, two equally well-informed observers might make judgments more than 10% apart. A large measure of our improvement in business value relative to book value reflects the outstanding pe
Investment Lessons
Management quality in capital-intensive industries matters more than industry conditions. Two oil companies with identical Permian Basin assets can produce dramatically different shareholder returns depending on whether management prioritizes production growth (at marginal returns) or shareholder returns (dividends, buybacks, debt reduction). Hollub's Occidental explicitly chose the latter — spending virtually all free cash flow on shareholder returns rather than empire-building — which is precisely the capital allocation discipline Buffett values.
Energy security creates long-term demand visibility. Buffett's large Chevron and Occidental positions reflect a specific view: oil will remain important to the global economy for decades, the energy transition will be slower and more capital-intensive than market consensus assumed in 2021-22, and disciplined producers with low-cost assets will generate excellent returns for an extended period. This is a view about energy economics, not a macro oil price prediction.
Strategic preferred stock financing is a repeatable competitive advantage. The 2019 Anadarko financing — $10 billion in preferred at 8% plus valuable warrants — echoes the 2008 Goldman Sachs and GE deals. Berkshire's ability to deploy $10 billion immediately, without conditions, at a moment of strategic urgency for the counterparty enables negotiating terms unavailable to institutional investors who cannot write checks at that speed and scale.