Warren Buffett bought up more Occidental Petroleum (OXY) shares after his Berkshire Hathaway (BRKB) won regulatory approval to buy up to 50%. OXY stock rose slightly late Friday.
X
Berkshire Hathaway now owns 26.8% of Occidental Petroleum, according to a regulatory filing Friday night. That came exactly one month after Warren Buffett’s firm disclosed its OXY stock stake had reached 20.2%. Crossing the 20% ownership level means Berkshire Hathaway can record Occidental earnings on its books.
The Federal Energy Regulatory Commission has given Berkshire Hathaway permission to buy up to 50% of Occidental Petroleum. That’s according to an order made public on Aug. 19. Berkshire made the request on July 11.
There is speculation that Berkshire could choose to buy all of Occidental, though The Wall Street Journal, citing sources, reported last month that Warren Buffett was unlikely to do so.
Join IBD experts as they analyze actionable stocks in the stock market rally on IBD Live
OXY Stock Rises On Buffett Buys
OXY stock rose 1.6% in late trading Friday. For the week, Occidental Petroleum stock fell 4.6% to 65.61, though it did find support at its 50-day moving average.
OXY stock broke out of a cup-with-handle base powerfully on Aug. 19 on the news that Buffett had approval to buy 50% of the company. Shares ran up to a record 77.13 on Aug. 29, but have now round-tripped all of that gain from the 66.26 buy point.
Occidental stock had held up better than many oil producers during the summer, thanks to Warren Buffett steadily adding shares. But OXY stock has come under pressure with crude oil prices retreating significantly.
Meanwhile, BRKB stock rose 2.9% to 285.77 last week. That followed three weekly declines, starting a big reversal from the 200-day moving average.
Please follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.
YOU MIGHT ALSO LIKE:
Market Rally Even Stronger Than It Looks; Five Stocks In Buy Areas
These Are Warren Buffett’s Top Stocks Now
Warren Buffett Stocks: MSFT, GOOGL Among 24 Names On This Screen
Why This IBD Tool Simplifies The Search For Top Stocks
Elon Musk Comes Up With Another Reason To Terminate $44 Billion Twitter Deal
Gas prices continue to rise as inflation surges in the U.S. FOX Business’ Madison Alworth with more.
The price of a gallon of gasoline continues to move lower after hitting a high two weeks ago.
GET FOX BUSINESS ON THE GO BY CLICKING HERE
The average price for a gallon in the U.S. slipped on Sunday to $4.192, according to the latest numbers from AAA. The price on Saturday was $4.220.
That’s a decline of 14 cents since hitting a high of $4.33 on March 11.
Drivers were paying $2.87 a gallon on average a year ago at this time.
This past week, President Biden announced plans for the release of more oil reserves.
BIDEN ADMINISTRATION TO RELEASE 1M BARRELS OF OIL DAILY FROM US RESERVES
Biden announced a release of 1 million barrels per day of crude oil for six months. At 180 million barrels it is the largest release ever from the U.S. Strategic Petroleum Reserve.
The price of crude oil dropped below $100 a barrel on Friday for the first time since Feb. 28 following the announcement.
CLICK HERE TO READ MORE ON FOX BUSINESS
Both Brent and U.S. crude benchmarks reported a losing week, settling down around 13% in their biggest weekly fall in two years.
Carl Icahn speaking at Delivering Alpha in New York on Sept. 13, 2016.
David A. Grogan | CNBC
Icahn, critical of Occidental’s outbidding of Chevron in a May 2019 deal to buy Anadarko Petroleum with $10 billion of financing from Warren Buffett, had been campaigning for the ouster of CEO Vicki Hollub for almost a year when Occidental’s shares plunged in March 2020 — allowing Icahn to boost his stake to 10% from 2.5%, according to the Journal.
Now, Occidental’s shares are surging, more than quintupling in value since they sank below $10 per share in 2020, largely thanks to the recent rise in oil prices. Its shares closed Friday at $56.15 apiece; that’s just below where they were before the Anadarko deal was finalized, according to the Journal.
Recently, Icahn has been cutting his position in Occidental and he sold the rest of it in recent days, according to a letter Icahn sent to Occidental’s board on Sunday. Icahn’s two representatives on the Occidental board will also resign, the letter noted, as required by a settlement agreement he had reached with the company two years ago this month.
The Journal, citing sources “familiar with the matter,” reports that Icahn has realized a profit of some $1 billion on the Occidental investment. Buffett, meanwhile, has been buying Occidental recently. As of Friday, Buffett’s Berkshire Hathaway reported owning roughly $5 billion worth of Occidental stock.
Icahn of late has been focused on smaller utility company Southwest Gas, according to the Journal. Last week, the energy firm announced plans to separate a subsidiary Icahn had called for it to sell.
For more details, read the complete Wall Street Journal report here.
In his annual letter to shareholders released less than one week ago, Warren Buffett complained he could “find little that excites us” in the equity markets.
However a new SEC filing from Friday night revealed that someone at Berkshire Hathaway, either Buffett himself or his portfolio managers, is very excited about Occidental Petroleum.
As of Friday, Berkshire owns 91.2 million common shares of the oil giant. They’re worth $5.1 billion at tonight’s close of $56.15. The stock gained 18% today and 45% this week.
It’s been moving sharply higher along with the price of oil, which has soared to around $115 barrel in the wake of the Russian invasion of Ukraine.
And as Occidental was rallying, Berkshire was buying.
More than 61 million of the shares now in its portfolio were purchased on Wednesday, Thursday, and today, at prices ranging from $47.07 to $56.45.
The other 29 million shares were purchased this year on or before Tuesday. (Berkshire reported holding no OXY shares as of December 31 in its latest 13F filing.)
Berkshire did not respond Friday night to CNBC’s request for comment.
We don’t know exactly when it bought, or what Berkshire paid for those 29 million shares, because it had not yet hit the 10% ownership level that requires new purchases be disclosed within day after they are made.
Berkshire only owns around 9% of Occidental’s common shares. But it also has warrants to buy another 83.9 million shares at $59.62.
Even though the warrants have not been exercised, for the purposes of the SEC filing trigger they have to be counted, technically putting Berkshire’s stake at more than 17%.
Berkshire received those warrants as part of a deal that included what was, in effect, a $10 billion loan in 2019 to Occidental to help it buy Anadarko for $38 billion.
The loan, in the form of Berkshire’s purchase of preferred stock, requires Occidental to pay a dividend of 8% a year. That works out to $200 million each quarter.
At the time, Buffett told CNBC it was a bet that oil prices would rise over the long term.
Berkshire bought a relatively small stake of just under 19 million shares in the second half of 2019. It was valued at around $780 million as of the end of that year.
In the shorter term, Buffett bet on oil prices wasn’t doing very well when they collapsed in early 2020 due to the onset of the COVID-19 pandemic.
To conserve cash, Occidental made its first and second quarter loan payments to Berkshire in the form of stock. (It resumed cash payments after that.)
Berkshire received 17.3 million shares for the first quarter and 11.6 million shares for the second quarter.
But its 13F filings didn’t list any OXY stock at all as of June 30 and September 30 in 2020, indicating that amid the oil market carnage it had sold both the 19 million shares it bought and the almost 29 million shares that it received as dividend payments.
Now, with oil prices strong again, it’s back in Berkshire’s portfolio in a big way.
(Get a summary of news and features related to Warren Buffett and Berkshire Hathaway delivered straight to your email inbox every week. Sign up for the Warren Buffett Watch newsletter.)
ArcBest: “I like trucking. I like ArcBest, but you know what, we did that really good compare last night of Union Pacific versus CSX, and Union Pacific’s intermodal business is really good. I’d rather go with diversification.”
Roblox: “We’re getting young people in. Now here’s the problem with Roblox: It’s good for you … not good for a lot of others. That’s because ever since the Fed changed its tune back in November, the market is too angry to like these long-term [growth stocks], but it’s OK for you. You’ve got your whole life ahead of you. You should be a buyer of Roblox because it’s a great company.”
Ulta Beauty: “I think Ulta is shooting the lights out. I think Dave Kimbell is doing a fantastic job. I think Ulta is one of the retailers that I want to own down in steps — $315, then maybe $300 pick some up. They’re really doing well.”
Jazz Pharmaceuticals: “I liked Jazz at one time, but Jazz is … a very inexpensive company. I have to reopen why it’s so inexpensive because holy cow, something is not right there, so let me come back.”
Callon Petroleum: “No, you haven’t made anything yet. Callon is real. I think you’ve got more room, more room on the upside. You stay long that.”
Zynga: “That one is over. I mean, Take-Two [Interactive] is buying it. There’s consolidation going on in this industry. It’s incredible. And by the way, last night on the Microsoft call, you could see why they’re buying Activision Blizzard. It’s going to make so much sense. Buy Microsoft.”
The New York Times Company: “I happen to like that CEO [Meredith Kopit Levien]. She’s sensational. I wish she talked to me. As much as I like the Athletic, she overpaid. … The New York Times is a great company, but they paid a little too much for that and that has really hurt the valuation. I am sorry because I think it’s a fantastic product, both of them.”
F5: “This is the guys who control basically the ‘red light, green light internet highway,’ but they did have a supply problem, and there’s no room for mistakes anymore in any technology company.”
Sign up now for the CNBC Investing Club to follow Jim Cramer’s every move in the market.
Disclaimer
Questions for Cramer? Call Cramer: 1-800-743-CNBC
Want to take a deep dive into Cramer’s world? Hit him up! Mad Money Twitter – Jim Cramer Twitter – Facebook – Instagram
Questions, comments, suggestions for the “Mad Money” website? madcap@cnbc.com
“I’m not anticipating that OPEC would respond, that Russia and/or Saudi Arabia would respond,” Biden told reporters at the White House. “They’re gonna pump some more oil. Whether they pump enough oil is a different thing.”
The White House has accused OPEC and its allies of putting the global economic recovery at risk by refusing to pump more oil, something that could prompt the administration to attempt to address rising prices on its own by tapping into the SPR, which can hold up to 714 million barrels of crude and is the world’s largest backup oil supply.
However, a release from the SPR, which is designed to protect the nation against a major disruption in oil supplies, would likely only provide modest, temporary relief from higher prices at the pump.
Energy Secretary Jennifer Granholm suggested last month that tapping into the SPR was under active consideration, something the department later walked back by clarifying that there was no “immediate plan” to do so. Only the US president can order crude stored in those reserves to be released.
“There are other tools in the arsenal that we have to deal” with, Biden said, adding that he is dealing with other countries. The President said “at an appropriate time,” he will discuss how to “get more energy” flowing.
Despite pleas from the White House, OPEC and its allies have so far refused to significantly increase supply after agreeing to record production cuts of nearly 10 million barrels per day. Most of those emergency cuts remain in place, giving the oil market time to heal and work off the surplus caused by the coronavirus pandemic.
Meanwhile, market forces caused US oil companies to slash production. After hitting a record of 12.9 million barrels per day in November 2019, US oil output crashed to just 10 million barrels per day in May 2020.
There’s also some skepticism about whether OPEC+ truly has the ability to sharply ramp up production after years of slower investment.
There’s a “real question mark about which countries can really add more barrels at this point,” Helima Croft, head of global commodity strategy at RBC Capital Markets, wrote to clients in a note earlier this week. Croft pointed to how OPEC+ has “underdelivered” on its planned output hikes for several months in a row.
A syringe is filled with a dose of Pfizer’s coronavirus disease (COVID-19) vaccine at a pop-up community vaccination center at the Gateway World Christian Center in Valley Stream, New York, U.S., February 23, 2021.
Brendan McDermid | Reuters
Check out the companies making headlines before the bell:
China Evergrande Group— Chinese property giant Evergrande tumbled more than 10% on Hong Kong Stock Exchange, spooking Asian markets. The company has been scrambling to pay its suppliers, and warned investors twice in as many weeks that it could default on its debts. Last week Evergrande said its property sales will likely continue to drop significantly in September after declining for months.
Pfizer — The pharmaceutical giant said Monday that trials showed its Covid vaccine was safe and effective when used in children ages 5 to 11. Pfizer and partner BioNTech said they would submit the results for approval “as soon as possible.” Shares of Pfizer were down about 1% in premarket trading.
Laredo Petroleum, Occidental Petroleum — Oil and energy stocks dipped in premarket trading on Monday. The SPDR S&P Oil & Gas Exploration ETF is down more than 3% in early trading, on pace for its 3rd straight negative session. Laredo Petroleum is down more than 8%, Callon Petroleum is down roughly 6%, and Occidental Petroleum is down nearly 5%. The losses came as crude oil fell on fears of a global economic slowdown tied to the China property market.
Colgate-Palmolive — The consumer staples stock was upgraded to buy from hold by Deutsche Bank on Sunday. The investment firm said that Colgate’s difficulties with inflation and in some international markets was already priced in to its stock.
JPMorgan, Bank of America — Bank stocks slid in unison amid a decline in bond yields on slowdown fears. Investors flocked to Treasurys for safety as the stock market is set for its biggest sell-off in months. Big bank stocks took a hit as the falling rates may crimp profits. Bank of America and JPMorgan Chase were each down more than 2% in premarket trading. Citizens Financial Group dropped 3%, while Citigroup declined 2.5%.
AstraZeneca — The United Kingdom-based pharmaceutical company announced on Monday that its breast cancer drug Enhertu showed positive results in a phase-three trial. Shares of the company were up more than 1% in premarket trading.
ARK Innovation ETF — Cathie Wood’s ARK Innovation ETF is down 2.75% in the premarket, on pace to snap a 3-day winning streak. Compugen, DraftKings, Coinbase and Square are so of the ETF’s biggest losers this morning.
— with reporting from CNBC’s Jesse Pound and Yun Li.
In the awful wake of an oil spill, it’s typically the smallest of organisms who do most of the cleaning up. Surprisingly, scientists know very little about the tools these tiny clean-up crews have at their disposal.
But now, thanks to a new study, researchers have uncovered a whole new cycle of natural hydrocarbon emissions and recycling facilitated by a diverse range of tiny organisms – which could help us better understand how some microbes have the power to clean up the mess an oil spill leaves in the ocean.
“Just two types of marine cyanobacteria are adding up to 500 times more hydrocarbons to the ocean per year than the sum of all other types of petroleum inputs to the ocean, including natural oil seeps, oil spills, fuel dumping and run-off from land,” said Earth scientist Connor Love from the University of California, Santa Barbara (UCSB).
But unlike more familiar human contributions of hydrocarbons into our ocean, this isn’t a one-way, local dump.
These hydrocarbons, primarily in the form of pentadecane (nC15), are spread across 40 percent of Earth’s surface, and other microbes feast on them. They’re constantly being cycled in such a way that Love and colleagues estimate only around 2 million metric tonnes are present in the water at any one time.
“Every two days you produce and consume all the pentadecane in the ocean,” Love explained.
(Luke Thompson, Chisholm Lab/Nikki Watson, MIT)
Above: A species of the globally distributed marine cyanobacteria, Prochlorococcus.
Today, humanity’s hydrocarbon footprints can be found in most aspects of our surroundings. We emit these molecules composed of only carbon and hydrogen atoms in many ways – the bulk through extraction and use of fossil fuels, but also from plastics, cooking, candles, painting, and the list goes on.
So it probably shouldn’t be a huge surprise that traces of our own emissions drowned out our ability to see the immense hydrocarbon cycle that naturally occurs in our oceans.
It took Love and colleagues some effort to clearly identify this global cycle for the first time.
Far from most human sources of hydrocarbons, in the nutrient-poor North Atlantic subtropical waters, the team had to position the ship they sampled from to face the wind, so the diesel fuel that also contains pentadecane did not contaminate the seven study sites. No one was permitted to cook, smoke or paint on deck during collections.
“I don’t know if you’ve ever been on a ship for an extended period of time, but you paint every day,” explained Earth scientist David Valentine from UCSB. “It’s like the Golden Gate Bridge: You start at one end and by the time you get to the other end it’s time to start over.”
Back on land, the researchers were able to confirm the pentadecane in their seawater samples were of biological origin, by using a gas chromatograph.
Analysing their data, they found concentrations of pentadecane increased with greater abundance of cyanobacteria cells, and the hydrocarbon’s geographic and vertical distribution were consistent with these microbe’s ecology.
Cyanobacteria Prochlorococcus and Synechococcus are responsible for around a quarter of the global ocean’s conversion of sunlight energy into organic matter (primary production) and previous laboratory cultivation revealed they produce pentadecane in the process.
Valentine explains the cyanobacteria likely use pentadecane as a stronger component for highly curved cellular membranes, like those found in chloroplasts (the organelle that photosynthesise).
The cycle of pentadecane in the ocean also follows the diel cycling of these cyanobacteria – their vertical migration in the water in response to changes of light intensity throughout a day.
Together, these findings suggest the cyanobacteria are indeed the source of the biological pentadecane, which is then consumed by other microorganisms that produce the carbon dioxide the cyanobacteria then use to continue the cycle.
Love’s team identified dozens of bacteria and surface-dwelling archaea that bloomed in response to the addition of pentadecane in their samples.
So they then tested to see if the hydrocarbon-consuming microbes could also break down petroleum. The researchers added a petroleum hydrocarbon to samples increasingly closer to areas with active oil seepage, in the Gulf of Mexico.
Unfortunately, only the sea samples from areas already exposed to non-biological hydrocarbons contained microbes that bloomed in response to consuming these molecules.
DNA tests showed genes thought to encode proteins that can degrade these hydrocarbons differed between the microbes, with a contrast evident between those that ate biological hydrocarbons and those that devoured the petroleum-sourced ones.
“We demonstrated that there is a massive and rapid hydrocarbon cycle that occurs in the ocean, and that it is distinct from the ocean’s capacity to respond to petroleum input,” said Valentine.
The researchers have begun sequencing the genomes of the microbes in their sample to further understand the ecology and physiology of the creatures involved in Earth’s natural hydrocarbon cycle.
“I think [these findings reveal] just how much we don’t know about the ecology of a lot of hydrocarbon-consuming organisms,” said Love.
This research was published in Nature Microbiology.
