Berkshire Resumes Occidental Purchases

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%.

Warren Buffett resumed his purchases of Occidental Petroleum common stock, spending $354.5 million on March 3, 6, and 7 to acquire 5,801,791 shares at an average cost of $61.10 per share. Berkshire now owns 200,153,441 shares of Occidental which accounts for 22.2% of common stock outstanding as of January 31, 2023.¹

Berkshire’s purchases have been price sensitive and have rarely exceeded $60. After purchases in late September 2022 were revealed, Occidental shares advanced well past $60 and did not return to that level until late February 2023. Berkshire currently holds warrants to purchase 83.9 million shares of Occidental common stock at a current strike price of $59.62 per share. The warrants expire one year after the full redemption of Berkshire’s $10 billion investment in Occidental preferred stock. It is likely that Occidental will begin redeeming Berkshire’s preferred stock later this year.²

I first wrote about Berkshire’s investments in Occidental in July 2022, noting that the common stock investments might soon exceed 20% and require Berkshire to account for the holding using the equity method. I followed up with another article in August 2022 when Berkshire’s stake exceeded 20%. As disclosed in Berkshire’s 2022 annual report, the Occidental investment fell under the equity method starting in the fourth quarter. However, Occidental’s results will be incorporated into Berkshire’s financial statements with a one quarter lag.

I have been tracking all of Berkshire’s purchases of Occidental common stock as reported in Form 4 filings with the SEC. Berkshire is required to disclose all activity via Form 4 filings within two business days of a transaction. The exhibit below shows Berkshire’s purchases summarized by trading day.

Source: Form 4 Filings, Author’s Calculations

At the close of trading on March 7, 2023, Occidental shares changed hands at $60.85 valuing Berkshire’s stake at $12.2 billion. The shares are trading at around $62 shortly after the start of trading on March 8, so we will see if Mr. Buffett will further increase his bids or simply wait patiently as he has for many months.

What’s Berkshire’s end game with Occidental Petroleum?

It certainly seems likely that Mr. Buffett will continue to accumulate shares as the opportunity presents itself. The preferred stock is likely to be partially redeemed this year, depriving Berkshire of the 8% dividend but with the upside of redemption at 110% of face value.

Once the preferred stock is fully redeemed, the one year clock on the expiration of the warrants begins to tick. There is every indication that Mr. Buffett would exercise the warrants assuming they are in the money. It is certainly possible that Berkshire could acquire Occidental at some point over the next few years.

The data shown above is derived from the Form 4 filings. For readers who would like to access the source data, I have provided an Excel file below. If additional purchases are disclosed in the coming days, readers can add rows to the spreadsheet to keep an up-to-date tally of the activity.

Berkshire's History of Occidental Purchases

35.5KB ∙ XLSX file

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Spreadsheet listing all of Berkshire's purchases of Occidental Petroleum common stock from February 28, 2022 to March 7, 2023. Use of data is subject to the terms of use contained in the file. Although the author has endeavored to ensure the accuracy of this data, it is hand entered and no assurances whatsoever can be provided regarding accuracy.

Download

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1. Occidental share count as of January 31, 2023 was disclosed in its recently filed 2022 10-K.

2. The process for beginning to redeem the preferred stock is detailed in Occidental’s SEC filings and was discussed in the company’s fourth quarter 2022 earnings call. Andrew Bary recently wrote an article in Barron’s about the situation.