Berkshire Hathaway (BRK.B) has taken a $5 billion U.S. position in energy giant Occidental Petroleum (OXY).
Berkshire Hathaway, the holding company of legendary investor Warren Buffett, now owns 91.2 million common shares of Occidental Petroleum, worth $5.1 billion U.S. based on the stock’s closing price last Friday (March 4) of $56.15 U.S.
Occidental Petroleum’s stock has gained 45% over the past week as global prices for crude oil spike higher. And as Occidental’s stock was rallying, Berkshire was buying.
Berkshire Hathaway now owns around 9% of Occidental’s common shares. But it also has warrants to buy another 83.9 million shares at $59.62 U.S.
Berkshire Hathaway received those warrants as part of a deal that included what was, in effect, a $10 billion U.S. loan in 2019 to Occidental to help it buy Anadarko for $38 billion U.S.
The loan, in the form of Berkshire’s purchase of preferred stock, requires Occidental to pay a dividend of 8% a year. That works out to $200 million each quarter.
Berkshire bought a relatively small stake of just under 19 million shares in the second half of 2019. It was valued at around $780 million U.S. as of the end of that year.
To conserve cash, Occidental Petroleum made its first and second quarter loan payments to Berkshire Hathaway in the form of stock. Berkshire received 17.3 million shares for the first quarter and 11.6 million shares for the second quarter.
But its 13F filings didn’t list any Occidental stock at all as of June 30 and September 30 in 2020, indicating that amid the oil market carnage at that time, Berkshires had sold both the 19 million shares it bought and the almost 29 million shares that it received as dividend payments.
But now, with oil prices strong again, OXY stock is back in Berkshire’s portfolio.