Buffett's Berkshire Hathaway is looking to buy up to 50% of Occidental

(Bloomberg) — Berkshire Hathaway Inc . of Warren Buffett won approval from U.S. regulators to buy up to 50 percent of Occidental Petroleum Corp. after spending months acquiring its shares. Occidental’s shares jumped on news of the clearance.

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Berkshire filed an application with the Federal Energy Regulatory Commission for approval on July 11, according to a filing released Friday. “It is concluded that the proposed transaction is in the public interest and is permitted” subject to conditions, Carlos D. Clay, the commission’s acting director for the Western Division of Electric Power Regulation, said in the filing.

Representatives for Occidental and Berkshire did not immediately respond to requests for comment.

Berkshire has spent this year snapping up shares of Occidental, digging even deeper into a bet on the Houston-based oil company that first began playing out years ago. Earlier this month, Berkshire reported a stake in Occidental that exceeded a key level that could lead to new quarterly disclosures and a boost to the company’s earnings. The Omaha, Nebraska-based conglomerate said in an Aug. 8 filing that it holds 188 million shares of Occidental common stock, just over 20% of its 931 million shares outstanding.

“There’s no doubt that Buffett is going 50 percent from here,” said Bill Smead, who manages $4.8 billion at Smead Capital Management Inc. and is a top 20 shareholder in Occidental. “It’s looking more and more like the Burlington deal where he ended up buying the entire shooting game.”

In 2019, Buffett helped Occidental CEO Vicki Holub’s pursuit of Anadarko Petroleum Corp., agreeing to invest $10 billion in Occidental at the time, a deal that included both preferred stock and warrants. This year, Buffett praised Hollub’s leadership, a sign that the billionaire investor was all in on Occidental. That sparked speculation that Berkshire, with more than $105 billion in cash at the end of June, might try to buy more shares.

On March 7, CNBC’s Becky Quick said on “Squawk Box” that Buffett told her that Berkshire started buying on February 28 “and we bought everything we could.” Buffett decided to start buying after reading a transcript of Occidental’s Feb. 25 conference call with analysts.

“I read every word and said that’s exactly what I’m going to do,” Buffett told Quick. “She runs the company the right way.”

Occidental has been the best-performing stock in the S&P 500 this year by some margin, rising more than 140% compared with the index’s 11% decline, led by Buffett’s steady buying and high oil prices. The company’s shares were up 9.2 percent at 2:50 p.m. in New York, after rising as much as 12 percent earlier.

Hollub has made aggressive moves to boost shareholder returns this year by managing capital-intensive production growth in favor of dividends and share buybacks for investors. It also eliminated much of the $30 billion in debt the company took on when it bought Anadarko in 2019.

Occidental received an additional boost this month with the passage of the Inflation Reduction Act, which increased tax credits for carbon dioxide capture, a technology in which the company is a leading player. Holab welcomed the bill as “very positive”.

Occidental’s plans to make capturing carbon from the air a key part of achieving its ambition to be net zero by mid-century are among the most aggressive of any major U.S. oil company.

(Updates with background starting in the fourth paragraph.)

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