Warren Buffett's Berkshire Hathaway bought close to $590 million worth of Occidental Petroleum stock this week after the latter announced it would acquire Permian oil driller CrownRock.
Occidental said it will buy CrownRock for cash and stock in a deal valued at around $12 billion, including debt. The target company has more than 94,000 net acres of premium stacked pay assets and supporting infrastructure that "are well positioned alongside Occidental's legacy Midland Basin business," per the buyer.
The deal will add 170,000 barrels of oil equivalent in daily output to Occidental's total.
Following the news, Berkshire Hathaway bought stock in Occidental in five tranches, Bloomberg reported today. It has cemented the investment company as Occidental's largest shareholder with a stake of 27%.
Three years ago, Berkshire Hathaway funded Oxy's takeover of Anadarko with $10 billion in the form of equity. As part of that deal, the investment firm received stock purchase warrants that allowed it to acquire 20% or more in Occidental.
Berkshire has been buying stock in Occidental for over a year with regular stock purchases. At one point these gave rise to talk that Berkshire Hathaway was preparing to take over Occidental. Buffet himself dispelled the rumors, saying "We will not be making any offer for control of Occidental, but we love the shares we have.
"We may or may not own more in the future but we certainly have warrants on what we got as part of the original deal on a very substantial amount of stock around $59 a share, and warrants last a long time, and I'm glad we have them."
According to Bloomberg, Occidental did not need financial help from Buffett's firm for the acquisition of CrownRock but the stock purchases are bound to be seen as a sign of support for the move from the company's largest shareholder.
By Charles Kennedy for Oilprice.com
Charles is a writer for Oilprice.com More