A steady drop in oil prices this year has negatively impacted one of Warren Buffett’s significant stock investments. Shares of Occidental Petroleum have plummeted 29% since mid-April and are down 15% overall in 2024, trading just above $50 as of Thursday morning.
This decline in Occidental’s stock mirrors a 23% drop in crude oil prices since mid-April. Oil has been under pressure due to lower demand linked to a slowing U.S. economy and increased supply resulting from record production by American oil companies.
The sharp fall in Occidental Petroleum shares is a setback for Warren Buffett’s Berkshire Hathaway, which has steadily increased its stake in the oil producer since early 2022. Buffett began buying Occidental shares aggressively in June, acquiring millions of shares around the $60 mark. Currently, Berkshire owns a 29% stake in Occidental, valued at approximately $13 billion.
Previously, the $55-$60 range acted as a price floor for Occidental shares since Buffett’s buying spree began in 2022. For the first time in over two years, that support level has been broken. According to HedgeFollower, a hedge fund tracking website, Berkshire Hathaway paid an average price of $51.22 for its stake, just about 1% above Occidental’s current price. It’s worth noting that only Berkshire Hathaway knows the exact average price it paid for its investment.
Another indicator that Buffett’s bet on Occidental is faltering comes from the warrants Berkshire owns to buy additional shares. Chris Bloomstran, fund manager of Semper Augustus and a long-time investor in Berkshire Hathaway, told Business Insider that Buffett holds warrants to purchase 83.5 million more shares at a strike price of $59.62—nearly 20% higher than Occidental’s current price.
As to whether Buffett will capitalize on the recent dip and buy more shares, Bloomstran believes it’s possible but unlikely that Buffett will seek full control of the company. “I wouldn’t rule out a purchase of additional shares,” Bloomstran said, noting that Berkshire has plenty of available capital following its recent sales of Apple and Bank of America stock.
However, Bloomstran emphasized that Buffett has no intention of acquiring the entire company. “Warren has said he won’t buy the whole company, and I don’t think he’ll change his mind on that,” he added.
Buffett is likely hoping for Occidental to initiate a stock buyback program, according to Bloomstran. However, Occidental’s CEO, Vicki Hollub, stated that the company won’t begin buybacks until a significant portion of its outstanding debt is paid off.
On a recent earnings call, Hollub indicated that Occidental plans to reduce its debt to $15 billion before starting a buyback, a goal that could be achievable by late 2026 or early 2027.