Warren Buffett’s Investment in Occidental Petroleum Takes a Hit
Warren Buffett, one of the most renowned investors of our time, has seen one of his big stock bets turn sour as Occidental Petroleum shares have plummeted 29% since mid-April. This decline has had a significant impact on Buffett’s stake in the company, which is estimated to be worth around $13 billion.
The drop in Occidental Petroleum shares is closely tied to a 23% decline in crude oil prices since mid-April. The oil industry has been under pressure due to concerns about demand, particularly with a cooling US economy, and excess supply resulting from record production by US oil firms.
Buffett’s Berkshire Hathaway conglomerate has been steadily amassing a stake in Occidental Petroleum since early 2022, with Buffett making significant purchases of millions of shares around the $60 level. However, the recent decline in Occidental’s stock price has put Buffett’s investment at risk.
According to estimates, Berkshire Hathaway paid an average price of $51.22 for its stake in Occidental Petroleum, which is slightly above the current market price. Additionally, Buffett holds warrants to purchase an additional 83.5 million shares of Occidental Petroleum at a strike price of $59.62, nearly 20% above the current price.
Despite the recent dip in Occidental Petroleum shares, it remains uncertain whether Buffett will take advantage of the opportunity to buy more shares. Chris Bloomstran, a fund manager and longtime investor in Berkshire Hathaway, believes that Buffett may consider purchasing additional shares but is unlikely to take over the company.
Bloomstran also noted that Buffett may be looking for Occidental Petroleum to initiate a stock buyback program, but the company’s CEO, Vicki Hollub, has stated that they will not do so until a significant portion of their debt is paid down. Hollub mentioned on the company’s latest earnings call that they aim to reduce their debt to $15 billion by the end of 2026 or early 2027 before considering a stock buyback.
Overall, Warren Buffett’s investment in Occidental Petroleum faces challenges as the company’s stock continues to decline. While Buffett may have the financial resources to acquire more shares, the future of his investment remains uncertain in light of the current market conditions.
