Buffett Is Sitting on Occidental Warrants That Could Give Him a 23.6% Stake

(Bloomberg) — Warren Buffett’s Occidental Petroleum Corp. warrants are looking increasingly attractive as the share price climbs.

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As part of Berkshire Hathaway Inc.’s $10 billion investment in the oil company in 2019, Buffett has the option to acquire 83.86 million shares at $59.62 each, a level that the stock has closed above the past two days. Exercising those warrants could give Berkshire a nearly 23.6% stake in the oil company, in addition to its preferred stock. Buffett’s firm is already Occidental’s biggest shareholder.

“He does have a very good track record of lending out money in times of duress for the recipient, for the borrower, and procuring these warrants,” said Darren Pollock, whose Cheviot Value Management LLC oversees investments including Berkshire shares. “Over time when those businesses do well, he does have this added kicker of so many additional warrants that are worth so much over time.”

Buffett declined to comment when asked if Berkshire would exercise the warrants.

Occidental stock climbed 4.7% to $62.45 at 9:50 a.m. in New York. The company is hosting an analyst day Wednesday to discuss its low-carbon strategy.

Occidental is the top performer in the S&P 500 Index this year, gaining nearly 106% at the close of trading on March 22. Rising oil prices helped the Houston-based company pay down debt more rapidly than expected, raise its dividend and restart a share-buyback program. Sanctions against Russia for its invasion of Ukraine also boosted investor appetite for U.S. shale-focused oil stocks.

The revival brought an end to a tough three years for the company, which saddled itself with debt in the 2019 purchase of rival Anadarko Petroleum Corp. for $37 billion, just months before Covid-19 caused oil prices to collapse.

Berkshire’s preferred-stock bet on Occidental provided part of the funding for the Anadarko deal. Buffett has also been plowing money into Occidental in recent weeks, accumulating a stake that now ranks among Berkshire’s top 10 common-stock holdings.

(Updates with shares in the 5th paragraph)