Buffett’s Berkshire Hathaway wins approval to buy half of Occidental

Berkshire Hathaway won the approval of a US energy regulator on Friday to buy up to 50 per cent in Occidental Petroleum, which would allow Warren Buffett’s company to vastly increase its stake in one of the US oil industry’s most storied producers.

The Federal Energy Regulatory Commission said Berkshire’s proposal to increase its stake in the $60bn oil company, filed last month, was “consistent with the public interest”. Last month Berkshire requested “authorisation to acquire up to 50 per cent” of Occidental, Ferc said.

The regulator weighed in on the application because of its potential effects on Midwestern electricity markets. Occidental’s shares jumped 9.6 per cent to $71 after the Ferc filing.

Buffett’s support was instrumental in Occidental’s $55bn takeover of Anadarko Petroleum in 2019. Occidental chief executive Vicki Hollub flew to Berkshire’s headquarters in Omaha to secure a $10bn financing package to close the deal. Berkshire agreed to invest the $10bn in preferred shares and was given a warrant to buy up to 80mn shares of common stock.

But the transaction closed just months before the coronavirus pandemic hit oil prices, heaping pressure on Occidental after it had taken on so much debt to finance the Anadarko deal.

This year Berkshire has spent billions of dollars to purchase shares of Occidental in the open market. Its position in the company recently eclipsed 20 per cent, prompting speculation Berkshire could outright buy the business.

Berkshire has moved more aggressively this year to step up investments as its cash pile has swelled, buying up stakes in energy groups such as Occidental and Chevron. Its bets on energy have stood out, with a stake in Chevron that ranked among its largest at the end of the second quarter, worth about $24bn.

Neither Berkshire nor Occidental immediately responded to requests for comment.

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

Occidental has also sought to reposition itself as one of the sector’s leaders on climate, setting a target for net zero emissions by 2050, including from the products it sells, installing renewable energy facilities in Texas, and proposing to scale up carbon capture technology.

Its net zero strategy would also leave it in a “tax advantaged” position because of tax credits available for carbon capture techniques in the new Inflation Reduction Act passed by Congress, said Paul Sankey, an oil analyst at Sankey Research.