After a five month hiatus, Warren Buffett spent $354.5 million over the past week to bring Berkshire's ownership interest in Occidental Petroleum to 22.2%.
After reading this WSJ article today about the Permean basin, I'm curious about what WEB sees as the long term prospects for Oxy (and Chevron for that matter)?
It is maybe worth pointing out that, if the warrants are exercised, Berkshire would then own 200.153 million shares plus the $5b worth of shares purchased at $59.62, meaning 50000/59.62= 83.864 million more, out of 900.072m (current shares) + 83.864m (issued to Berkshire), i.e. 983.936m shares after issuing the new shares to satisfy the warrants, and that would be 284.017m shares, i.e. 284.017/983.936 = 28.9% of Occidental's shares.
It makes a lot of sense for Buffett to buy as much as possible on the open market before making an offer since he can avoid a control premium on whatever Berkshire owns at the time he makes the offer. OXY isn’t trading up as much as I thought it would today. Will be interesting to see how this eventually plays out.
yes, as a berkshire shareholder i’d rather see lots more shares bought at $60, not $80 with control premium. As far as I know, there’s no law that says what % you can buy on the open market when you want to eventually buy the whole thing. I could be wrong, but it seems to be more a matter of convention (and perhaps avoiding lawsuits?) than something codified in law. Why for instance not have bought more BNSF beyond 22.6% before offering a 31.5% premium for the rest?
As you say, it will be interesting to see, and i’ve taken a small stake to make it even more so.
After reading this WSJ article today about the Permean basin, I'm curious about what WEB sees as the long term prospects for Oxy (and Chevron for that matter)?
https://www.wsj.com/articles/u-s-shale-boom-shows-signs-of-peaking-as-big-oil-wells-disappear-2adef03f?st=1cp6as5p2wqcuyp&reflink=desktopwebshare_permalink
Higher oil prices? With at least the current spread on refining and chemicals?
Thanks for the detailed update! We a happy to see BRK's continued conviction in oil.
Thanks for that.
It is maybe worth pointing out that, if the warrants are exercised, Berkshire would then own 200.153 million shares plus the $5b worth of shares purchased at $59.62, meaning 50000/59.62= 83.864 million more, out of 900.072m (current shares) + 83.864m (issued to Berkshire), i.e. 983.936m shares after issuing the new shares to satisfy the warrants, and that would be 284.017m shares, i.e. 284.017/983.936 = 28.9% of Occidental's shares.
In addition, last summer (when it had just over 20% of Occidental's shares), Berkshire obtained FERC permission to increase its stake as high as 50%: https://www.reuters.com/markets/us/us-regulator-says-berkshire-hathaway-can-buy-up-50-occidental-stock-2022-08-19/#:~:text=Occidental's%20share%20price%20soared%209.9,consistent%20with%20the%20public%20interest.%22. As far as I am aware, Berkshire has not entered into any agreement with Occidental to refrain from buying shares, although convention would have it that Berkshire would make an offer to take Occidental private before acquiring a controlling stake. Interestingly, Berkshire purchased BNSF after it had acquired a 22.6% stake, very close to Berkshire's current stake in Occidental, and much smaller, if one considers the warrants...
It makes a lot of sense for Buffett to buy as much as possible on the open market before making an offer since he can avoid a control premium on whatever Berkshire owns at the time he makes the offer. OXY isn’t trading up as much as I thought it would today. Will be interesting to see how this eventually plays out.
yes, as a berkshire shareholder i’d rather see lots more shares bought at $60, not $80 with control premium. As far as I know, there’s no law that says what % you can buy on the open market when you want to eventually buy the whole thing. I could be wrong, but it seems to be more a matter of convention (and perhaps avoiding lawsuits?) than something codified in law. Why for instance not have bought more BNSF beyond 22.6% before offering a 31.5% premium for the rest?
As you say, it will be interesting to see, and i’ve taken a small stake to make it even more so.