- Warren Buffett's Berkshire Hathaway invested nearly $600 million in Occidental Petroleum last week.
- Buffett's company now holds a 17.4% stake worth almost $10 billion as of Friday's close.
- Berkshire also owns 83.9 million Occidental stock warrants and $10 billion of preferred shares.
Warren Buffett's Berkshire Hathaway poured another $582 million into Occidental Petroleum last week, boosting the value of its stake in the energy company to nearly $10 billion.
The famed investor's conglomerate scooped up nearly 9.9 million shares, paying just under $59 a share on average, a SEC filing revealed on Friday. It now owns 163 million shares, representing a 17.4% stake in the oil-and-gas explorer and producer.
Berkshire plowed around $7 billion into Occidental between February 28 and March 16, and it has invested another $1.6 billion or so over the past two months. The initial purchases contributed to Buffett's company spending a net $41 billion on equities in the first quarter — one of the most active buying periods in its history.
On top of its common shares, Berkshire owns 100,000 preferred shares of Occidental, worth $10 billion, and stock warrants allowing it to buy another 83.9 million common shares at a fixed cost of $5 billion. It received those in exchange for providing $10 billion of financing for Occidental's merger with Anadarko Petroleum in 2019.
Occidental stock closed at $60.44 on Friday, a premium to the warrants' exercise price of $59.62. If Berkshire were to exercise all of its warrants, and then sell the resulting shares at the current market price, it would net a roughly $70 million profit.
Berkshire might also choose to retain the resulting shares, lifting its stake to over 24%, if its goal is to acquire Occidental in whole. An analyst at Truist Securities recently suggested Buffett might try to buy the energy group once it repays some debt and bolsters its credit profile.
Several oil-and-gas companies have benefited from Russia's ongoing invasion of Ukraine, which has disrupted global energy supplies and pushed prices higher. Occidental's stock price more than doubled in the first five months of this year, but it has slumped by 13% since then, likely explaining why Berkshire has resumed buying in recent weeks.
Buffett warmed to Occidental this year after CEO Vicki Hollub pledged in February to improve the company's operations, reduce debt, hike dividends, relaunch stock buybacks, and generate large, sustainable free cash flows over the long term.
"What Vicki Hollub was saying made nothing but sense," Buffett proclaimed during Berkshire's annual shareholders' meeting in April. "I decided that it was a good place to put Berkshire's money," he added, referring to Occidental.
Buffett also highlighted the frantic trading of Occidental shares in the spring, which enabled Berkshire to amass a 14% stake in just over two weeks. He accused investors of treating the stock market like a casino, and some of America's largest companies like poker chips.
"The whole country in March of this year was sitting around trading Occidental in some crazy way," Buffett said. "It defies anything that Charlie and I have seen, and we've seen a lot," he added, referring to his business partner and Berkshire's vice-chairman, Charlie Munger.