Warren Buffett’s Berkshire boosts Occidental stake as it pushes to buy half of the company

The conglomerate won regulatory approval in August to raise its holdings to as much as 50% after spending months snapping up the oil company's shares

Warren Buffett's strategy has some investors expecting him to eventually absorb Occidental and turn it into a 'cash machine' that feeds his other investments. AP
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Warren Buffett’s Berkshire Hathaway boosted its stake in Occidental Petroleum to 26.8 per cent after receiving the go-ahead last month from US regulators to buy as much as half of the oil company.

The new level of ownership, reported late on Friday in a federal filing, is up from 20.2 per cent as of August 8, according to data compiled by Bloomberg.

Berkshire won approval from US regulators in August to buy as much as 50 per cent of Occidental after spending months snapping up its shares, sending the Houston-based oil company's stock to its biggest gain in five months.

The Federal Energy Regulatory Commission (FERC) said at the time that Berkshire’s proposed stock purchases were “consistent with the public interest”.

Berkshire applied for the authorisation on July 11, the FERC said. The company has spent this year wagering more on Occidental after first making a bet on the company three years ago.

In early August, Berkshire reported that it held 188 million shares of Occidental’s common stock, a little more than 20 per cent of its 931 million shares outstanding.

“No question Buffett goes to 50 per cent from here,” Bill Smead, who manages $4.8 billion at Smead Capital Management, is a top 20 shareholder in Occidental and also owns Berkshire stock, said at the time.

“This is looking more and more like the Burlington transaction where he ended up buying the whole shooting match.”

Mr Buffett's strategy into Occidental has some investors expecting the billionaire to eventually absorb the oil producer and turn it into a “cash machine” that feeds his other investments.

Berkshire has been snapping up Occidental shares since 2019, when it bought around $10 billion in preferred stock to help the company finance a deal for a rival. That investment came with warrants for 83.9 million shares.

Mr Buffett, who told shareholders earlier this year that cash is similar to oxygen, is probably attracted by estimates showing Occidental's cash-flow potential has soared, analysts said.

He added 4.3 million shares this week, bringing Berkshire's direct holdings to 179.4 million. Occidental's shares have more than doubled this year.

Updated: September 10, 2022, 6:26 AM