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Warren Buffett Sells Stake In Oil Giant Occidental Petroleum

Warren Buffett’s Berkshire Hathaway has sold its common stock interest in Occidental Petroleum, according to a regulatory filing cited by Bloomberg.

Berkshire Hathaway had bought $10 billion in Oxy shares to help fund the company’s acquisition of Anadarko, which in hindsight, turned into one of the most ill-timed acquisitions in the history of oil. The acquisition cost Oxy some $55 billion and was aimed at expanding its presence in the U.S. shale patch.

In addition to the investment that helped fund the deal, Buffett’s investment vehicle also accumulated more interest in the oil company as Oxy paid its latest quarterly dividend in shares because it lacked the cash.

The exit could add to already significant pressure on Occidental, which has been desperately trying to turn things around as it became the worst-performing oil company on the S&P 500 Energy Index, shedding 64 percent since the start of the year. The news about Buffett’s offloading of his stake in the company will hardly serve to push the stock higher.

Occidental reported a net loss of $8.4 billion for the second quarter of the year, booking impairment charges on its oil and gas assets because of the slump in oil prices. These came in at $6.6 billion. Of this, $5.2 billion in impairments was booked on continuing operations.

Oxy has a debt load of some $40 billion, most of which it took on last year when it bought sector player Anadarko just months before oil prices tanked. About $11 billion of this debt matures by 2022, and the company is actively seeking ways to conserve and generate cash. Part of its efforts in this direction had it agree to sell its African operations to France’s Total for $8.8 billion, but the supermajor only bought Oxy’s assets in Mozambique and South Africa. According to Total, an understanding between Occidental and the Algerian authorities prevented the company from selling that business, on which the Ghana asset sale was contingent.

By Charles Kennedy for Oilprice.com

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  • Andrew Doolittle on August 18 2020 said:
    buffet selling was hardly bearish news for the US Airline Industry.

    There is in fact much to be bullish about for large cap energy at the moment given how the junk bond market seems to have stabilized for the moment plus the "paycheck protection plan" has helped keep an employee base solvent in a time of an odd financial collapse but one that indeed has hit the Global Oil Industry with particular ferocity.

    US domestic producers and indeed refiners as well look very well placed and indeed even the likes of $oxy so yet another rather confusing move from Berkshire.

    For an example of where new demand might be coming from one need only look at SpaceX which just launched its 99th Falcon 9 Rocket today including for this particular Rocket its 6th successful landing. Talk about swallowing swimming pools of fuel per second! Great news for the refining business and making kerosene anyways.

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