Oxy Pref

[ValueMaven]

Buffett's equity position is 2x larger in CVX vs. OXY.  That is the real story imho 

[Paarslaars]

CVX is 5x the size of OXY, so his ownership in CVX is lower... it would be difficult to obtain an equal equity size in OXY without substantially pushing the price up. And up until recently, he was not even allowed to do this.

[Spekulatius]

On 8/29/2022 at 3:37 AM, Paarslaars said:

CVX is 5x the size of OXY, so his ownership in CVX is lower... it would be difficult to obtain an equal equity size in OXY without substantially pushing the price up. And up until recently, he was not even allowed to do this.

Buffett is already pushing up the price of OXY shares as is. If not for Buffet, Oxy shares would be much lower, Imo.

 

I actually think that he wants 20% of Oxy, so he can show the proportional income from his Oxy stake on Berkshires income statement. He has used the concept of look through earnings quite a bit before.

Edited August 30, 2022 by Spekulatius

[Xerxes]

The Economist on Occidental. 
Blomstran also alluded to the potential carbon capture business with OXY

 

 

[james22]

OXY below $60, should we assume BRK is buying again?

[gfp]

5 minutes ago, james22 said:

OXY below $60, should we assume BRK is buying again?

 

We should find out Tuesday night if they started buying again on Friday.  I wouldn't assume they are equally as eager but it wouldn't surprise me either.

[yesman182]

Looks like he is still popping the OXY 

 

https://www.sec.gov/Archives/edgar/data/797468/000089924322032210/xslF345X03/doc4.xml

[james22]

Disappointingly little. 

[james22]

Warren Buffett’s Berkshire Hathaway added to its already large Occidental Petroleum stake over the past trading sessions, a regulatory filing revealed Tuesday evening.

 

The Omaha-based conglomerate bought nearly 5.8 million shares of the oil company in a few separate trades on Friday, Monday and Tuesday, paying prices in the range from $59.8 to $61.9, the filing showed.

 

The latest purchase, totaling more than $350 million, marked the first time the “Oracle of Omaha” hiked his bet since September.

 

https://www.cnbc.com/2023/03/07/warren-buffetts-berkshire-hathaway-buys-more-occidental-petroleum-shares.html

 

More interestingly:

 

On Monday, Occidental CEO Vicki Hollub said in an interview with CNBC’s Brian Sullivan that she met with the 92-year-old investor “just a few days ago.” Hollub said they talked about the oil and gas industry and the technology involved in it.

[MCR]

WSJ - "U.S. Shale Boom Shows Signs of Peaking as Big Oil Wells Disappear"

 

https://www.wsj.com/articles/u-s-shale-boom-shows-signs-of-peaking-as-big-oil-wells-disappear-2adef03f?st=pl2jiawq15rqbpt&reflink=desktopwebshare_permalink

 

Obvious question is how to think about those Oxy and Chevron investments. Anyone got a bead on this? Energy outside of my circle of competence...

[wescobrk]

Did Buffett ever sell some shares of oxy, i can’t recall.

I didn’t buy oxy as I was guilty of only doing what Buffett does if I bought the warrants I’d be up over 10x. Seems so obvious in hindsight when oil went negative, I had concerns about servicing the debt but this was a no brainer to put a small amount of one’s net worth in.

I wonder if Buffett regrets buying this so late as he did. At least he got the warrants in 2019.

[gfp]

21 minutes ago, wescobrk said:

Did Buffett ever sell some shares of oxy, i can’t recall.

I didn’t buy oxy as I was guilty of only doing what Buffett does if I bought the warrants I’d be up over 10x. Seems so obvious in hindsight when oil went negative, I had concerns about servicing the debt but this was a no brainer to put a small amount of one’s net worth in.

I wonder if Buffett regrets buying this so late as he did. At least he got the warrants in 2019.

Yes, Warren sold sold OXY common he had bought and the shares they elected to pay his preferred distribution with for a couple quarters. He sold the shares at low prices but ensured he got his 8% out of the preferred. Sure he got warrants in 2019

but the strike is at last weeks prices, it didn’t lock in some low cost basis. 

[james22]

57:11 Berkshire's Oil Investments

 

 

Edited April 18, 2023 by james22

[NnnnotSoSmart]

Rough transcript of Pabrai's comment on OXY:

(57:11 min)
Question regarding Berkshire's foray into OXY

Q: (paraphrasing)"Could we get your thoughts on what you understand about Charlie Munger and Warren Bufffet's foray into Occidental? Because for the longest time they had avoided materials and very cyclical commodities. And then now they enter into Occidental and keep increasing their stakes. What do you think of that (OXY) as an investment?" 

Pabrai:" Yeah, so I think both of them have been investors in oil and gas for a very long time. Munger made an investment into what eventually became one of his biggest mistakes, because he didn't buy enough, Belridge Oil in 1977. So, you know that's like 46 years back. Charlie will tell me things. You know I have a good friendship with Charlie. I usually see him four or five times a year for dinner and I used to play a lot of bridge with him. You know some times I'd be at his place and he'd tell me...and you know he's living in you know Hancock Park in L.A...he's says that "you know we are sitting on top of an oil field." Then he'd explained to me that whole area actually was an oil field. But because so many humans moved in and the real estate prices became more expensive, it became more attractive to build homes and sell the real estate that way, than it did to drill for oil. L.A. basically developed without extracting the oil so to speak. So it still sits there. 

One time I was talking to him and he (Charlie) mentioned that he would like to have an investment in Exxon and be able to get a commitment from the management that they would do no more Capex, and they would simply run all the fields with the cashflow going to shareholders. And he had calculated it would be a tremendous investment. And of course oil companies don't think that way. But OXY thinks that way. So, I think the OXY investment...if you study Occidental what you'll find is they really don't have exploration going on. 

So, if we look at the whole fracking business, you know the Permian Basin and all of that, basically when you drill a well you've got a 90% plus shot of what's going to come out. The probabilities (of success) are really high. And it's not like what used to be conventional oil and gas. So here you've got very definitive metrics going on. And so OXY basically has no...almost no...speculative drilling going on. And so, in effect, it looks like a CD. They're clipping the coupons. What OXY is doing is they've got a huge gusher of cashflows coming out. And that huge gusher of cashflows is only going into buybacks and dividends. So it's all being pumped out to shareholders. And he loves that.

And then they've made an investment in Chevron. I think the reason they made the investment in Chevron is also because Chevron also has a very large position in the Permian Basin. And if OXY had been large enough he wouldn't have gone to Chevron. Just like bought all the U.S. airlines. You know a while back he bought all...because he couldn't make one bet because the size of the capital is so large.....So, I think the Chevron bet is heavily a bet based on this non-exploration risk (high probability of success). You know the oil business lately, and of course UT Austin knows this really well, with the $8 billion every year that's coming into the UT endowment, bigger than Harvard's.......

So the bet with Chevron and OXY is a coupon clipping bet. And so I think Buffett looked at what U.S. Treasuries were paying him and he doesn't want downside.  So he looked at OXY as U.S. treasuries on steroids. And I think that's why he went with that bet."  

(OXY question starts at 57:11 min)

[cubsfan]

1 hour ago, NnnnotSoSmart said:

Rough transcript of Pabrai's comment on OXY:

(57:11 min)
Question regarding Berkshire's foray into OXY

Q: (paraphrasing)"Could we get your thoughts on what you understand about Charlie Munger and Warren Bufffet's foray into Occidental? Because for the longest time they had avoided materials and very cyclical commodities. And then now they enter into Occidental and keep increasing their stakes. What do you think of that (OXY) as an investment?" 

Pabrai:" Yeah, so I think both of them have been investors in oil and gas for a very long time. Munger made an investment into what eventually became one of his biggest mistakes, because he didn't buy enough, Belridge Oil in 1977. So, you know that's like 46 years back. Charlie will tell me things. You know I have a good friendship with Charlie. I usually see him four or five times a year for dinner and I used to play a lot of bridge with him. You know some times I'd be at his place and he'd tell me...and you know he's living in you know Hancock Park in L.A...he's says that "you know we are sitting on top of an oil field." Then he'd explained to me that whole area actually was an oil field. But because so many humans moved in and the real estate prices became more expensive, it became more attractive to build homes and sell the real estate that way, than it did to drill for oil. L.A. basically developed without extracting the oil so to speak. So it still sits there. 

One time I was talking to him and he (Charlie) mentioned that he would like to have an investment in Exxon and be able to get a commitment from the management that they would do no more Capex, and they would simply run all the fields with the cashflow going to shareholders. And he had calculated it would be a tremendous investment. And of course oil companies don't think that way. But OXY thinks that way. So, I think the OXY investment...if you study Occidental what you'll find is they really don't have exploration going on. 

So, if we look at the whole fracking business, you know the Permian Basin and all of that, basically when you drill a well you've got a 90% plus shot of what's going to come out. The probabilities (of success) are really high. And it's not like what used to be conventional oil and gas. So here you've got very definitive metrics going on. And so OXY basically has no...almost no...speculative drilling going on. And so, in effect, it looks like a CD. They're clipping the coupons. What OXY is doing is they've got a huge gusher of cashflows coming out. And that huge gusher of cashflows is only going into buybacks and dividends. So it's all being pumped out to shareholders. And he loves that.

And then they've made an investment in Chevron. I think the reason they made the investment in Chevron is also because Chevron also has a very large position in the Permian Basin. And if OXY had been large enough he wouldn't have gone to Chevron. Just like bought all the U.S. airlines. You know a while back he bought all...because he couldn't make one bet because the size of the capital is so large.....So, I think the Chevron bet is heavily a bet based on this non-exploration risk (high probability of success). You know the oil business lately, and of course UT Austin knows this really well, with the $8 billion every year that's coming into the UT endowment, bigger than Harvard's.......

So the bet with Chevron and OXY is a coupon clipping bet. And so I think Buffett looked at what U.S. Treasuries were paying him and he doesn't want downside.  So he looked at OXY as U.S. treasuries on steroids. And I think that's why he went with that bet."  

(OXY question starts at 57:11 min)

Thanks for the transcript on OXY thoughts by Munger. Always valuable insights by Charlie.

[NnnnotSoSmart]

Buffett keeps buying OXY:

 

https://www.sec.gov/Archives/edgar/data/1067983/000095017023030512/xslF345X03/ownership.xml

 

OXY continues to redeem the preferred.

 

Preferred share count down from 93,532 shares on May 30  to to 91,964 on June 28. 

 

https://www.sec.gov/Archives/edgar/data/1067983/000089924323014128/xslF345X03/doc4.xml

 

 

[gfp]

26 minutes ago, NnnnotSoSmart said:

 

Buffett keeps buying OXY:

 

https://www.sec.gov/Archives/edgar/data/1067983/000095017023030512/xslF345X03/ownership.xml

 

OXY continues to redeem the preferred.

 

Preferred share count down from 93,532 shares on May 30  to to 91,964 on June 28. 

 

https://www.sec.gov/Archives/edgar/data/1067983/000089924323014128/xslF345X03/doc4.xml

 

 

 

So if my napkin math checks out that is a redemption of 1,568 preferred shares during that period, at $100,000 per share face value, redeemed at a 10% premium to face (plus accrued dividends), so that sent Berkshire $172.48 million plus any accrued but unpaid dividends.  I'm sure a more enterprising person could reverse engineer the size of the Occidental share repurchase for the period that would result in that level of mandatory redemption at the 50/50 over $4 TTM deal...