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In something of a reversal in trends, Occidental Petroleum has started buying back preferred stock it transferred to Warren Buffett’s Berkshire Hathaway in exchange for its financial backing for the Anadarko takeover.
The news comes just as Buffett said earlier this week he was not seeking to take control of the oil and gas major.
“We don’t know where the price of oil will be, but we like Occidental’s position in the Permian,” Buffett told Berkshire Hathaway’s shareholders at last weekend’s annual meeting.
“There’s speculation about us buying control, we’re not going to buy control,” Buffett added. “We wouldn’t know what to do with it.”
Berkshire Hathaway provided Occidental with $10 billion for its proposed takeover of Anadarko three years ago and became the owner of preferred stock of equal value. The stock carries an 8% dividend.
Oxy bought Anadarko for $55 billion in 2019, making it one of the biggest M&A deals in energy over the past few years. In that, it outbid Chevron, which had earlier announced a bid for the energy company.
Bloomberg reports that Occidental has started buying back the preferred stock under “mandatory redemption notifications”, issued for $474 million worth of stock at a price of 110% its liquidation value.
Currently, Berkshire Hathaway has a stake of 24% in Occidental. A series of stock purchases over the past year prompted speculation that the investment firm was building to a takeover, which Buffett did not comment on until this year’s general meeting.
In March alone, Buffett’s investment vehicle spent some $1 billion in Oxy stock purchases, per Reuters calculations.
Following his statements about Oxy, the oil and gas company’s stock declined substantially. Yet the buyback of part of the preferred stock package would reduce its dividend expenses, Bloomberg noted in a report on the news.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.