Warren Buffett, the billionaire investor and CEO of Berkshire Hathaway, has announced that the company will not be making an offer to acquire Occidental Petroleum Corp, despite holding a 23.6% stake in the oil company. Speaking at Berkshire's annual shareholder meeting, Buffett confirmed that he is happy with Occidental's management and does not plan to pursue a takeover. Speculation had been rife that Berkshire might look to acquire Occidental as a way of diversifying its energy portfolio, which already includes several utilities, electricity distributors, and renewable power projects.
Berkshire started acquiring shares in Occidental in February 2022, around the time of Russia's invasion of Ukraine. Buffett has had a close relationship with Occidental CEO Vicki Hollub, and praised her management style at the shareholder meeting. Hollub has been focusing on reducing debt and returning money to shareholders since the company's acquisition of Anadarko Petroleum in 2019.
Occidental and Chevron Corp, another large holding of Berkshire, both have significant interests in the Permian Basin, an area in Texas and New Mexico that accounts for a significant amount of US crude production. As of March, Berkshire owned $21.6 billion of Chevron stock, though it appears to have sold around $6 billion in the first quarter.
Until recently, Berkshire also held $10 billion of Occidental preferred stock with an 8% dividend, which helped to fund the Anadarko purchase, plus warrants to buy another $5 billion of common shares at $59.62 each. On Saturday, Berkshire announced that Occidental had redeemed around $474 million of the preferred stock at a premium, reducing dividend payouts.
Last August, Berkshire won US Federal Energy Regulatory Commission permission to buy up to 50% of Occidental's common stock. However, it needed the authorization because it would have exceeded the Federal Energy Regulatory Commission's 25% ownership limit had it exercised the warrants. Buffett has long been on the lookout for another large acquisition for Berkshire, which owns dozens of businesses including Geico car insurance and the BNSF railroad. Berkshire had a 22.6% stake in BNSF before paying $26.5 billion for the remainder in 2010.
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