Investment great Warren Buffett loads up on Occidental Petroleum

Investment Great Warren Buffett continues to add Occidental Petroleum (NYSE:OXY) to his holding company Berkshire Hathaway — bringing its Occidental ownership to 15.3%.

$OXY is up 133% in 2022, and Berkshire’s move continues to drive up its price.

• Berkshire also owns 84M stock warrants, allowing them to buy more shares at a set price. If exercised, Buffett would own ~23% of the company, per Insider.
• Investors speculate on an outright Occidental acquisition by Berkshire — with Smead Capital Management placing a 25% chance on a deal (Bloomberg).

Warren Buffett needs a big deal to make a difference for Berkshire Hathaway’s massive $685B market cap, and Occidental, with a $63B market cap, could provide just that.

Recent earnings reports have shown just how profitable oil companies have become from rising oil prices.

On Sunday, Saudi Aramco reported earnings that jumped over 80% to a record high — after overtaking Apple as the world’s largest company by market cap last week.

The solution to high oil prices: For the past two years, oil producers have been reluctant to increase oil production — contributing to the oil shortage. But there are signs that’s changing.

• In April, three oil companies — Continental Resources, Hess Corp and Matador Resources — signaled plans to increase production.
• The second-largest U.S. oil giant, Chevron, plans to produce at least 15% more at the Permian Basin, the biggest U.S. oil field, and Exxon Mobil is also increasing production in the region.

Per Bloomberg, Chevron’s capital investments are 50% higher than in 2021 — but less than half of the levels from a decade ago, when oil prices were around $100 a barrel. Production is rising, but not nearly as fast as it did in previous oil boom cycles.

Not fast enough: Increasing production is a start to bringing down oil prices — but companies have warned that the supply won’t come overnight (Politico). It will be challenging to cover up lost production from Russia.