Berkshire Hathaway increases stake in Occidental Petroleum to over 20%

Berkshire Hathaway increases stake in Occidental Petroleum to over 20%

Berkshire Hathaway Chairman Warren Buffett walks through the exhibit hall as shareholders gather to hear from the billionaire investor at Berkshire Hathaway Inc’s annual shareholder meeting in Omaha, Nebraska, the United States May 4, 2019. Portal/Scott Morgan

Aug 8 (Portal) – Warren Buffett’s Berkshire Hathaway Inc (BRKa.N) bought more shares in Occidental Petroleum Corp (OXY.N), beating a 20% stake in which it shared a portion of the oil company’s profits with its own could post and potentially increase billions of dollars in profits.

In a regulatory filing Monday night, Berkshire said it paid about $391 million for nearly 6.7 million shares of Occidental between Aug. 4 and Aug. 8.

The purchases gave Berkshire 188.4 million Occidental shares, or 20.2% of the reported $11.3 billion of shares outstanding.

A 20 percent stake would allow Berkshire to report its proportionate share of Houston-based Occidental’s earnings with operating results using what is known as the equity method of accounting.

Berkshire could still argue that its accounting for Occidental should remain unchanged since its holding is passive. Continue reading

According to Refinitiv I/B/E/S, analysts on average expect Occidental to post earnings of $10.5 billion this year.

Buffett’s company also owns $10 billion in Occidental preferred stock, which helped fund its 2019 purchase of Anadarko Petroleum, and has warrants to purchase an additional 83.9 million common shares for $5 billion.

Some analysts have speculated that Omaha, Nebraska-based Berkshire could eventually bid for Occidental.

Buffett’s assistant and Occidental did not immediately respond to a request for comment outside of market hours.

Berkshire generated $16.3 billion in operating income for the first half of this year.

It uses the equity method of accounting for food company Kraft Heinz Co (KHC.O), in which it holds a 26.6% stake, and truck-stop operator Pilot Travel Centers, whose 38.6% stake in expected to rise to 80% next year.

By contrast, Berkshire typically discloses its 20.2% interest in American Express Co (AXP.N), which limits its ability to exercise significant influence.

Occidental shares closed at $60.04 on Monday. The share price has more than doubled this year, benefiting from rising oil prices following the Russian invasion of Ukraine.

Berkshire owns dozens of companies including BNSF railroad, Geico auto insurance and several energy companies, as well as stocks including oil company Chevron Corp (CVX.N), where it ended June with a $23.7 billion stake.

Reporting by Jonathan Stamp in New York; Additional reporting by Sabrina Valle in Houston; Editing by Edwina Gibbs

Our standards: The Trust Principles.