- Sage of Omaha takes advantage of recent weakness in oil stocks
- Stake in Fortune 500 company worth more than $9 billion
- Industry under attack from President Biden and recession worries
Warren Buffett has ramped up his oil industry exposure after buying another huge slug of shares in Houston-based Occidental Petroleum (OXY:NYSE).
The Sage of Omaha’s Berkshire Hathaway (BRKb:NYSE) confirmed in stock market filings that it has bought 794,389 shares of Occidental worth $44 million to take Berkshire’s stake in the oil company to 16.4%.
The conglomerate now owns over 153 million shares after it also bought 9.6 million Occidental shares last week in a deal worth roughly $500 million.
Berkshire is also believed to own options to acquire another 83.9 million Occidental shares that, if exercised, would see the stake increase to over 25%.
US OIL UNDER ATTACK
Occidental shares have doubled this year as oil prices went through the roof on supply fears following Russia’s invasion of Ukraine. The spot price for West Texas Intermediate has rallied more than 60% in 2022.
But US oil stocks came under pressure in June after the industry drew public criticism from President Biden for banking enormous profits while consumers struggle to make ends meet as the cost of living crisis intensifies.
Biden said at a labour union event this month that Exxon Mobil (XOM:NYSE) ‘made more money than God this year’ and sent a letter to seven oil and gas companies calling on them to increase production to help ease the burden on consumers.
BUYBACKS AND SOARING SHARE PRICES
Biden, who campaigned on a promise to reduce dependence on fossil fuels which contribute carbon emissions linked to climate change, is leaning on the industry to curb inflation.
Oil and gas companies are reaping higher profits than they have in decades and have been returning much of that windfall to shareholders in the form of share buybacks and soaring share prices.
Occidental shares, which started 2022 at $28.99, hit $70.86 at the end of May, but the stock has fallen sharply since, closing overnight at $58.90. The sell-off has clearly made the stock attractive to Buffett and Berkshire.
