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Occidental Petroleum shares slip after Warren Buffett rules out takeoverfrom SNL Daily Gas Report Occidental Petroleum shares slip after Warren Buffett rules out takeover Byline: Bill Holland Shares in US oil and gas producer Occidental Petroleum Corp. dipped in moderate trading May 8 after billionaire investor Warren Buffett squashed rumors that his Berkshire Hathaway Inc. holding company would buy out the remaining 76% of the driller's common stock. Addressing shareholders at Berkshire's annual meeting May 6, the chairman, president and CEO said his company could not bring more value to the oil and gas producer by owning more shares. President and CEO Vicki Hollub is "an extraordinary manager of Occidental," Buffett said. "I know the math of it, but I wouldn't have the faintest idea what to do if I was in an oil field." "We don't know what oil prices will be, but we do very much like Occidental, the position they have," Buffett said. "That's why we financed them a few years ago, and it looked like it was a terrible mistake when the oil market just totally collapsed, and then they changed around." By market close May 8, Occidental shares had slipped to $58.96 per share from an opening price of $60.62. "While the news may take the upside scenario off the table, not many investors we have spoken to were assuming Berkshire was going to buy all of Occidental," CreditSights analyst Charles Johnston told clients May 8. But Johnston said the larger and more significant a stake that Berkshire Hathaway takes, the greater the chance of a credit rating upgrade for Occidental. Berkshire Hathaway bought $10 billion worth of Occidental preferred stock in 2019, paying an 8% premium. This enabled Occidental to close its acquisition of Anadarko Petroleum. Berkshire sold all of its Occidental common shares during the pandemic-fueled oil crisis of 2020 but jumped back into Occidental's common stock with the purchase of $7.7 billion worth of shares in the first quarter of 2022. Berkshire kept buying Occidental shares over the past year and now owns a 23.6% stake, valued at $12.85 billion, according to a March 27 SEC filing. Berkshire is the largest single owner of both Occidental and supermajor Chevron Corp., which are Berkshire's only two exploration and production holdings. While Buffett disclaimed any interest in owning Occidental outright, he did not rule out using warrants to increase the size of the stake. "We will not be making any offer for control of Occidental, but we love the shares we have," Buffett told Berkshire Hathaway's investors in Omaha. "We may or may not own more in the future, but we certainly have warrants which we got as part of the original deal on a very substantial amount of stock at around $59 a share. And that will last a long time. I'm glad we have them." Occidental is scheduled to release its first-quarter 2023 results after the market closes May 9, with a call to discuss the quarter's results May 10. For full year 2022, the company reported earnings of $9.35 per share, missing the analyst consensus estimate of $9.80 per share. |
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