Category: Occidental

(BRK.A), (BRK.B)

The Federal Energy Regulatory Commission (FERC) has greenlit Berkshire Hathaway’s expansion of its stake in Occidental Petroleum, deeming it “consistent with the public interest.” This move permits Berkshire to boost its ownership in the energy giant up to fifty percent.

Warren Buffett, the driving force behind Berkshire Hathaway’s major investment decisions, has articulated the company’s positive stance on Occidental Petroleum. At the 2023 Berkshire Hathaway Annual Meeting, Buffett expressed favor towards Occidental’s position in the Permian Basin, highlighting its strategic significance. However, he emphasized that Berkshire has no intentions of acquiring a controlling interest in the company. Buffett reiterated confidence in Occidental’s existing management, asserting, “we wouldn’t know what to do with it.”

In addition to its ongoing open market purchases, Berkshire Hathaway holds warrants enabling it to acquire 80 million Occidental shares at an exercise price of $62.50 per share. These warrants were obtained in 2019 when Berkshire provided $10 billion, facilitating Occidental’s successful bid of $38 billion to acquire Anadarko Petroleum, outbidding industry heavyweight Chevron.

Berkshire Hathaway’s increasing stake in Occidental Petroleum underscores its continued confidence in the energy sector and strategic investments aligned with its long-term vision.

© 2024 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell a stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

(BRK.A), (BRK.B)

Energy producer Occidental, in which Berkshire Hathaway holds a significant 25.78% stake, has recently announced a substantial 22.2% increase in its quarterly dividend. The move reflects Occidental’s commitment to enhancing shareholder value and aligns with the company’s strategic focus on delivering strong returns to investors.

Starting with the February 2024 declaration, Occidental will raise its quarterly common stock dividend per share by $0.04, reaching a new figure of $0.22.

As of October 26, Berkshire Hathaway owned an impressive 228,051,027 shares in the energy giant. Consequently, the dividend increase will result in an additional $9.1 million payout to Berkshire Hathaway in the upcoming quarter.

The dividend increase comes as Occidental on Monday announced it entered into a purchase agreement to acquire Midland-based oil and gas producer CrownRock L.P., a joint venture of CrownQuest Operating LLC and Lime Rock Partners, for cash and stock in a transaction valued at approximately $12.0 billion, including the assumption of CrownRock’s debt.

According to Occidental, the debt-funded acquisition is expected to deliver increased free cash flow on a diluted share basis, including $1 billion in the first year based on $70 per barrel WTI. The purchase of CrownRock L.P. will add to Occidental’s premier Permian portfolio with the addition of approximately 170 thousand barrels of oil equivalent per day (Mboed) of high-margin, lower-decline unconventional production in 2024, as well as approximately 1,700 undeveloped locations.

© 2023 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell a stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

(BRK.A), (BRK.B), (OXY)

Just days after Occidental Petroleum subsidiary 1PointFive was awarded a portion of a $1.2 billion grant from the Biden administration for its commercial-scale direct air capture facilities in Texas, the Berkshire Hathaway-backed company has announced that the wholly owned subsidiary has entered into a definitive purchase agreement to acquire all the outstanding equity of Carbon Engineering Ltd.

The acquisition is for total cash consideration of approximately $1.1 billion, to be made in three approximately equivalent annual payments, with the first at closing.

This transaction is expected to close before the end of 2023, subject to Canadian court reviews, Canadian and U.S. regulatory approvals and other customary closing conditions.

Occidental has been working with Carbon Engineering on direct air capture (DAC) deployment since 2019. Acquiring Carbon Engineering aligns with Occidental’s integrated net-zero strategy and provides Occidental, through its 1PointFive subsidiary, the opportunity to rapidly advance DAC technology breakthroughs and accelerate deployment of DAC as a large-scale, cost effective, global carbon removal solution. Carbon Engineering’s DAC-based climate solutions utilize standardized processes and proven industrial equipment.

“We expect the acquisition of Carbon Engineering to deliver our shareholders value through an improved drive for technology innovation and accelerated DAC cost reductions. The technology partnership also adds new revenue streams in the form of technology licensing and royalties. Importantly, the acquisition enables Occidental to catalyze broader development partnerships for DAC deployment in the most capital efficient and valuable way,” said Occidental President and CEO Vicki Hollub.

“We look forward to continuing our collaboration with the Carbon Engineering team, which has been a leader in pioneering and advancing DAC technology,” Hollub said. “Together, Occidental and Carbon Engineering can accelerate plans to globally deploy DAC technology at a climate-relevant scale and make DAC the preferred solution for businesses seeking to remove their hard-to-abate emissions.”

Upon closing, Carbon Engineering would become a wholly owned subsidiary of Oxy Low Carbon Ventures. Carbon Engineering’s personnel will continue to drive ongoing DAC technology development efforts and work closely with the Occidental and 1PointFive teams to bring DAC solutions to market. Carbon Engineering’s research and development activities and Innovation Center will remain in Squamish, British Columbia.

“We have always believed that global partnerships and cross-industry collaboration would be required to deploy DAC infrastructure at the scale required to make a climate-relevant impact. Carbon Engineering and Occidental have been working increasingly close together for the past five years to address the CO2 problem, making Occidental a trusted and committed partner for this next chapter in Carbon Engineering’s journey,” said Carbon Engineering CEO Daniel Friedmann. “At the core of this deeper relationship is the commitment to invest in the development of our technology here in Canada, and the global reach to accelerate implementation of DAC-based climate solutions in the U.S. and around the world.”

1PointFive is building Stratos, the world’s largest DAC plant, which is expected to be commercially operational in mid-2025, in Ector County, Texas. Occidental and Carbon Engineering are also adapting Stratos’ front-end engineering and design study for a DAC plant to be built at King Ranch in Kleberg County, which is part of the South Texas DAC Hub that was selected to receive a grant from the U.S. Department of Energy’s Office of Clean Energy Demonstrations.

© 2023 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway and Occidental, and this article is not a recommendation on whether to buy or sell a stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.