Buffett’s Berkshire Hathaway gets approval to buy half of Occidental Oil

Berkshire Hathaway on Friday won approval from U.S. energy regulators to buy up to 50 percent of Occidental Petroleum Corp, which would give Warren Buffett’s company a big boost to one of the U.S. oil industry’s best-known producers shares.

The Federal Energy Regulatory Commission said Berkshire’s proposal to increase its stake in the $60 billion oil company last month was “in the public interest.” Last month, Berkshire Hathaway requested “authorization to acquire up to 50 percent of Occidental,” Ferc said.

Regulators weighed the application due to its potential impact on the Midwest electricity market. Occidental’s share price is Ferc filing.

Buffett’s backing played a major role in Occidental’s $55 billion acquisition of Anadarko Petroleum in 2019. Occidental CEO Vicki Hollub flew to Berkshire’s headquarters in Omaha to secure a $10 billion financing package to close the deal. Berkshire agreed to invest $10 billion in preferred stock and receive warrants to buy up to 80 million shares of common stock.

But the deal closed months before the coronavirus pandemic hit oil prices, putting pressure on Occidental as it took on so much debt to fund the Anadarko deal.

This year, Berkshire Hathaway spent billions of dollars buying shares in Occidental on the open market. Its position in the company recently surpassed 20%, prompting speculation that Berkshire may acquire the company outright.

Berkshire Hathaway has stepped up its investments more aggressively this year as its cash hoard swells, buying stakes in energy groups such as Occidental Petroleum and Chevron. Its bets on energy stood out, with Chevron’s stake becoming one of its largest at the end of the second quarter, worth about $24 billion.

Neither Berkshire nor Occidental immediately responded to requests for comment.

While the 2020 oil crisis hit Occidental hard, forcing it to cut its dividend and rein in its drilling program, the company has been one of the stars of the recovery as months of capital discipline and higher oil prices have repaired a debt-laden balance sheet.

Occidental is also trying to reposition itself as one of the industry’s climate leaders, setting a goal of achieving net-zero emissions by 2050, including the products it sells, installing renewable energy facilities in Texas, and proposing Expand carbon capture technologies.

Its net-zero strategy will also put it in a “tax advantage” because of the tax credits available for carbon capture technology in the new Reducing Inflation Act passed by Congress, said Paul Sankey, an oil analyst at Sankey Research.

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