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Berkshire Hathaway
purchased nearly eight million shares of
Occidental Petroleum
in recent days, bringing its stake to 208 million shares, or 23% of the big energy company, according to a regulatory filing late Wednesday.
Berkshire Hathaway (Ticker BRK.A, BRK.A) bought the shares from Monday through Wednesday at prices ranging from $56 to $61 a share. Occidental Petroleum (OXY) stock fell 5.6% Wednesday to $56.80 because of a drop of more than $3 a barrel in oil prices to under $68 a barrel as measured by West Texas Intermediate. Shares were up 1.1% to $57.40 in premarket trading Thursday.
Berkshire now holds a stake in Occidental worth nearly $12 billion after buying about $475 million in recent days.
Berkshire had bought about six million shares of Occidental stock earlier in March. As a holder of more than 10% of the energy company, Berkshire must disclose purchases within two business days.
Berkshire CEO Warren Buffett has resumed purchases of Occidental stock this month given the fall in crude prices that have dropped Occidental shares under $60. The latest buys should fuel speculation about how large an Occidental stake will be purchased by Berkshire and whether Buffett has designs on the whole company. Barron’s estimates that Berkshire has paid an average price in the low $50s for the Occidental stake.
It likely would cost Berkshire more than $50 billion to buy the rest of Occidental assuming a price of about $75 a share. Roth MKM analyst Leo Mariani doesn’t expect that to happen. “We rate Occidental Petroleum (OXY) Neutral due to its more levered balance sheet, the potential peak of chemicals earnings in 2022, its lower long-term production growth rate vs. peers and we don’t think Buffett buys the entire company,” he writes.
Buffett likes energy companies. Berkshire also owns around $27 billion in Chevron stock (ticker: CVX).
In addition to the Occidental equity holding, Berkshire owns nearly 84 million warrants to buy Occidental stock that can be exercised at just under $60 a share and $10 billion of Occidental preferred stock paying an 8% dividend rate.
Write to Andrew Bary at andrew.bary@barrons.com
Read the full article here
