Billionaire Warren Buffett's Berkshire Hathaway Inc. conglomerate continued to increase its stake in Occidental Petroleum Corp. after Buffett said last year that Berkshire had no plans to take over the oil and gas producer.
In a burst of buying at the start of February, Berkshire Hathaway added 4.3 million in common shares of Occidental, increasing its stake from 27.6% of the upstream company to 28.2%, according to a Feb. 5 filing with the US SEC.
According to the filing, Berkshire paid between $56 and $58 per share, on average, for a total in the neighborhood of $245 million for the additional shares. Occidental shares closed the market on Feb. 6 up 1% on an average volume of trades to $57.57/share.
Berkshire Hathaway did not return a call for comment.
At Berkshire Hathaway's annual meeting in May 2023, Buffett said he did not want to take over the independent oil and gas company. "There's speculation about us buying control — we're not going to buy control," Buffett, the chairman, CEO and president of Berkshire Hathaway told shareholders at the company's meeting in Omaha, Neb. "We wouldn't know what to do with it."
A solid company in an undervalued sector such as oil and gas is a textbook Buffett play, said Rob Thummel, senior portfolio manager and managing director at energy investment manager Tortoise Capital.
"Buffett is known for buying easy-to-understand companies that operate in underappreciated industries supported by strong business fundamentals," Thummel said in a Feb. 6 email. "Occidental Petroleum is a fairly straightforward business to understand. Its primary revenues are derived from the production of oil and gas. The oil and gas industry is not in favor with much of the market so the sector and Occidental trade at discounts to the S&P 500."
There also was no mystery to Buffett's interest in Occidental for Gabelli Funds analyst Simon Wong. The oil and gas industry has underinvested in new projects and stands to profit when commodity prices rise due to supply shortages, Wong said in a Feb. 6 email. Plus, Buffett likes the leadership of Occidental President and CEO Vicki Hollub.
"Since meeting him for financing for the Anadarko acquisition, Hollub laid out an operational and deleveraging plan to Buffett and followed it, which reinforced Buffett's confidence in her," Wong said.