Warren Buffett's Berkshire Hathaway has bet $47B on oil sector

Warren Buffett’s Omaha-based Berkshire Hathaway has bought up more than $11 billion worth of Occidental Petroleum stock this year, giving the company control of more than 20% of the oil producer.

Occidental’s stock rose more than 3.5% on Tuesday to $62.18 after Buffett revealed his latest purchases of nearly 6.7 million Occidental shares worth more than $400 million.

Wall Street follows Buffett’s actions closely, including his investments in Occidental Petroleum. Its shares have more than doubled in price this year.

Berkshire has repeatedly acquired shares of the Houston driller whenever the stock falls below $60 in recent months. Buffett also dropped more than $20 billion on Chevron stock in the first quarter of this year and took advantage of the surge in oil prices after Russia invaded Ukraine. Berkshire’s Chevron stake is worth more than $24 billion.

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That means Buffett’s conglomerate holds nearly $47 billion in oil sector investments because Berkshire holds another $10 billion worth of preferred Occidental shares that it picked up in 2019 when it helped finance Occidental’s purchase of Anadarko.

And Buffett may not be done. Berkshire owns warrants to buy another 83.9 million Occidental shares at $59.62 apiece. Edward Jones analyst Jim Shanahan estimates that Berkshire’s oil sector holdings are worth $46.6 billion today, even without the value of those warrants.

Because Berkshire now owns 20.2% of Occidental’s stock, it will be allowed to record a proportional share of the oil producer’s earnings on its earnings reports. That could provide a roughly $2 billion a year boost to Berkshire’s bottom line.

Buffett aggressively invested in stocks this year when the market was weighed down by soaring inflation and rising interest rates. Berkshire spent more than $51 billion on stocks in the first quarter, but the pace of its investments slowed considerably in the second quarter, when it was a net buyer of only $3.8 billion in stocks with much of that going into Occidental. Berkshire will detail all its second-quarter stock purchases later this month.

Most of Berkshire’s businesses have performed well this year, but the company reported a $44 billion quarterly loss over the weekend on a sharp drop in the paper value of its stock portfolio.

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