Warren Buffett, the CEO of Berkshire, has been slowly building up his holdings of Occidental shares this year.
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According to a document that was submitted late Monday night, Berkshire Hathaway now controls slightly more than 20 percent of Occidental Petroleum as a result of almost $400 million in new purchases of the energy business in recent days.
Berkshire Hathaway (ticker: BRK/A, BRK/B) should be able to include a proportionate amount of the earnings of Occidental Petroleum (OXY) in its financial results, which will lift annual earnings by approximately $2 billion off of a current base of more than $30 billion. Berkshire Hathaway currently holds a stake of 20.2 percent in Occidental Petroleum.
This is in contrast to Berkshire’s existing accounting practise, in which it simply factors in Occidental’s dividends when calculating its profitability. The dividend treatment is applicable to stakes that are less than 20 percent.
Berkshire CEO Warren Buffett has been steadily accumulating Occidental stock this year, and the company now holds 188.4 million shares in the domestically focused oil and gas producer, Occidental, whose earnings have surged this year with rising oil and gas prices. Berkshire CEO Charlie Munger has also been steadily accumulating Occidental stock.
According to a report made with the SEC on Form 4, Berkshire purchased around 6.7 million shares from Thursday through Monday. When Berkshire modifies its position in Occidental, it is required to file a report within two business days since it holds a 10% stake in the company.
The fresh Occidental products cost Berkshire anywhere between $57 and $60 per unit, including tax. This year, Buffett has rarely spent more than $60 for a share of Occidental, and he took advantage of the selloff in energy equities this week to purchase additional shares.
On Monday, Occidental’s share price increased by 1.8 percent, reaching $60.04, while Berkshire’s Class A stock remained relatively unchanged at $439,167.
There is ongoing speculation that Berkshire may ultimately attempt to buy the remaining 80 percent of Occidental, which would cost $60 billion at a price of $80 per share. This figure is based on the fact that the price of Occidental shares is currently at $80. The exercise price of Berkshire’s warrants to buy 83.9 million shares of Occidental’s common stock is $59.62 per share, and the company already owns $10 billion worth of Occidental’s 8% preferred stock.
On Monday morning, Berkshire did not immediately respond to a request for comment regarding the buyout talk.
Buffett admires Occidental’s Chief Executive Officer Vicki Hollub and is partial to businesses with a focus on the United States. Occidental is one of the most important oil and gas producers in the United States.
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