Berkshire Hathaway has purchased nearly 30 million shares of Occidental Petroleum since the end of 2021, adding to an existing large holding of 83.9 million warrants in the big energy company.
In a filing late Friday, Berkshire (ticker BRK/A, BRK/B) said it holds a total of 113.7 million shares of Occidental (OXY), including both the stock and warrants. The combined holding represents 11.2% of Occidental's outstanding shares but that overstates Berkshire's investment since the warrant exercise price is out of the money, or above the current stock price.
Occidental stock has surged lately, outpacing a strong energy group. The shares gained 17.6% Friday to $56.15 and have nearly doubled so far in 2022.
Berkshire got the warrants as an equity "kicker" when it invested $10 billion in Occidental preferred stock paying a lush 8% dividend yield in April 2019 when Occidental was raising money to fund its $50 billion-plus offer for Anadarko Petroleum and win a bidding war against the larger Chevron (CVX).
Those warrants have eight years until maturity and have an exercise price of $59.62. The warrants are close to being in the money now after being way out of the money in 2020 when Occidental's stock plunged below $10. Warrants are long-term call options that give the holder the right to purchase a stock at a fixed price for a set period of time. Berkshire's warrants aren't publicly traded but could be worth $15 each or more if they were.
Berkshire's Occidental stock purchases have come since the start of this year and could be a factor in the stock's gain so far in 2022.
The new equity stake of 29.8 million shares, now valued at $1.7 billion, could have been initiated by CEO Warren Buffett who oversees Berkshire's $350 billion equity portfolio, or one of his two investment lieutenants, Todd Combs and Ted Weschler, who run about 10% of the portfolio.