Warren Buffet, often called The Oracle of Omaha, significantly boosted his investment in the oil sector recently. He purchased millions more shares in a major oil company, Occidental Petroleum, acquiring an additional 10.5 million shares for $590 million.
This move, recorded on December 11 and 12, was confirmed by the Securities and Exchange Commission (SEC) filings.
Buffett Expands Stake: Buys Millions More in Major Oil Firm Post-CrownRock Deal
Buffett's Berkshire Hathaway bought millions more shares to expand its ownership in a major oil firm to 27%. Occidental Petroleum made this significant investment after buying CrownRock for $12 billion.
Buffett admires Occidental CEO Vicki Hollub, according to University of Maryland finance professor David Kass. Hollub wants to increase profits, reduce debt, buy back shares, and pay dividends.
The May Occidental annual meeting saw Buffett laud Hollub as an "extraordinary manager" for her leadership.
Kass said that Buffett's latest investment supports Occidental's CrownRock takeover. He added that Occidental's oil is primarily produced in the US, reducing global political concerns.
Kass believes Buffett's purchase of more Occidental shares shows his faith in the company's management and the economy. Buffett, a long-term investor in Occidental and Chevron, may expect oil prices to climb to their 40-year average of $80.
On Monday, Occidental Petroleum revealed its plan to purchase CrownRock, a company drilling for shale, for $12 billion. This acquisition positions Occidental as the second biggest oil producer in the Permian basin of Texas. The deal follows ExxonMobil's rise to the top in the region in October after it acquired Pioneer Resources for $60 billion.
CrownRock, based in Midland and a partnership between CrownQuest Operating LLC and Lime Rock Partners, was bought using a combination of cash and shares. Occidental plans to fund the deal with about $9 billion in new debt and issuing shares worth $1.7 billion.
Additionally, Occidental will assume CrownRock's existing debt of $1.2 billion. The company expects an immediate cash flow boost of around $1 billion from this deal. Furthermore, Occidental has committed to cutting its debt by $4.5 billion within the following year.
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Buffett Advise: America's 'Incredible' Economic Era Nearing End
Buffett, known for his savvy investing, recently shared his concerns about the future of the U.S. economy.
At his company's annual meeting, Berkshire Hathaway, he said the impressive growth the U.S. economy has seen might be slowing down. According to a report by Max Reyes and Bloomberg in Fortune, Buffett expects most of his company's businesses to earn less this year than last year.
This cautious outlook is a shift for Buffett, who usually has a positive view of the U.S. economy. The change in his attitude comes from a mix of ongoing high inflation, increasing interest rates, and troubles in the banking sector.
His longtime partner, Charlie Munger, who recently passed away, had also grown more cautious. Munger advised that people should prepare for lower profits in the future.
Although they expressed concerns, neither Buffett nor the late Munger recommended utterly pulling out of the market. Instead, they offered some strategies for investors to adapt to the changing economic environment.
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