Warren Buffett’s $13 billion stake in Occidental Petroleum has experienced a downturn, with share prices falling 29% since mid-April. This drop mirrors a 23% decline in crude oil prices, fueled by worries regarding demand and surplus supply. According to the latest estimates, Berkshire Hathaway’s interest in Occidental Petroleum is now regarded as underwater.
The ongoing slide in oil prices throughout this year has caused this significant stock position to suffer notable losses. Year-to-date, Occidental Petroleum’s shares have decreased by 15%, currently trading slightly over the $50 mark. This steep decline represents a significant reversal for Warren Buffett, who has been acquiring millions of shares of Occidental at around the $60 mark since June 2022.
Berkshire Hathaway currently holds a 29% share in the oil enterprise. For the first time in over two years, the $55-$60 range—which had previously provided support for Occidental Petroleum’s stock since Buffett began acquiring shares—has been broken. It is estimated that Berkshire Hathaway purchased shares at an average price of $51.22, which is now nearly 1% above the stock’s current valuation.
In addition, Berkshire Hathaway possesses warrants to acquire an additional 83.5 million shares of Occidental Petroleum at a strike price of $59.62, which is approximately 20% higher than the current price.
Buffett’s Investment in Occidental Faces Challenges
Despite the recent downturn, there is a chance that Buffett might buy more shares, even though he has made it clear that he does not plan to take control of the company.
Chris Bloomstran, fund manager of Semper Augustus and a long-term investor in Berkshire Hathaway, suggested that Buffett would likely prefer to see Occidental Petroleum start a stock buyback program. However, Occidental’s CEO Vicki Hollub has noted that a buyback will not commence until the company significantly reduces its debt. Hollub has stated that the firm aims to decrease its debt to $15 billion before considering a stock repurchase, a goal that could potentially be realized by late 2026 or early 2027.
The difficulties facing Buffett come amid broader market fluctuations. Recently, Bank of America CEO Brian Moynihan remarked on Buffett’s diminished stake in the bank, indicating that Buffett has been a stabilizing influence but has divested nearly $7 billion in shares since mid-July. Despite these hurdles, Buffett’s investment skills continue to be highly esteemed.
Reflecting on previous choices, even Buffett has acknowledged errors, such as his tardy investment in Amazon.com Inc. He had the opportunity to invest in Amazon during its nascent phase and IPO in 1997 but chose not to act. Currently, Occidental Petroleum’s shares are trading at $50.99, up 0.65% on Thursday.
Nonetheless, the stock has seen a year-to-date decline of 15.09%.
