(RoyalPatriot.com )- Warren Buffett’s Berkshire Hathaway has acquired additional shares of oil company Occidental Petroleum. The new acquisitions have lifted Berkshire’s stake in the firm to 22.2%. Berkshire has the regulatory clearance to purchase up to half of the oil company’s outstanding shares.
Oil prices are the key driver driving Berkshire’s bet on Occidental Petroleum and rival oil company Chevron. Although crude oil prices have calmed down in recent months — coinciding with Berkshire’s purchasing hiatus — they look primed to rocket back up this summer.
Berkshire Hathaway has bought another 5.8 million shares of Occidental Petroleum for $355 million. Berkshire controls almost 200 million shares. The value is $12 billion. Berkshire’s seventh-largest position is at just under 4%.
The International Energy Agency (IEA) anticipates oil consumption to climb by 2 million barrels per day (BPD) this year to a record 101.9 million BPD. The IEA predicts a demand revival in China as a significant driver. Also, when international travel returns to pre-pandemic levels, demand for jet fuel is expected to increase.
Berkshire began purchasing shares roughly a year ago. The corporation suspended acquisitions approximately five months ago, but Berkshire is again in a purchasing mood.
The company’s ability to generate free cash flow would improve if oil prices rose again. It might result in a larger dividend payout for shareholders. Occidental has increased its dividend by 38% and begun a $3 billion stock buyback program.
As a result of these increasing cash flows, Occidental Petroleum is in an excellent position to begin redeeming Berkshire’s preferred stock investment in the firm.
Berkshire’s interests in Occidental Petroleum and Chevron are very sensitive to oil prices in the foreseeable future. Long-term drivers for both firms seem promising. They are quickly becoming industry leaders in carbon capture and sequestration (CCS).
According to Occidental Petroleum, CCS has the potential to grow into a $3 trillion to $5 trillion industry worldwide. This means that the corporation has the potential to generate as much revenue from decarbonization services as it does from oil and gas production.
Occidental is constructing the first direct air capture (DAC) projects to remove carbon dioxide from the air and store it underground. It’s crucial for demonstrating the technology’s marketability.