Increase the position again, holding more than 97 billion shares! Occidental Petroleum, Buffett has bought it?

Investing must be rational, and if you can't understand it, don't do it – Warren Buffett

If we understand Buffett's investment logic, we will find that in addition to minor corrections to our positions when necessary. Under normal circumstances, Warren Buffett will not make a significant rebalancing for several years.

Since buying Apple's shares in 2016, Buffett has continued to increase his position, until Apple became Berkshire's largest holding, Buffett's position structure began to stabilize, and no longer buy and sell on a large scale.

Recently, Warren Buffett once again chose to increase his position in Occidental Petroleum, after this increase, Buffett's Berkshire Hathaway's shares in Occidental Petroleum will increase to 238 million shares, and the shareholding ratio will climb to more than 27.13%, with a total market value of about 13.648 billion US dollars, or about 97.4 billion yuan.

So, why did Warren Buffett choose to continue to support Occidental Petroleum, and will Buffett fully acquire Occidental Petroleum in the future?

In fact, Warren Buffett's preference for Western oil is already very clear.

First of all, since entering 2023, the performance of international oil prices has not been too good. Judging from the level of the whole year, international oil prices have been in a downward trend.

And Occidental Petroleum significantly underperformed the index during the year, falling 2.34% for the year. According to Occidental Petroleum's first three quarterly reports, in the first three quarters of 2023, the company achieved revenue of US$21.389 billion, a year-on-year decrease of 25.65%, and a net profit attributable to the parent company of US$744 million, a year-on-year decrease of 74.54%.

In addition, on December 11, Occidental Petroleum also announced a purchase agreement.

According to Occidental Petroleum, the company intends to buy US shale oil producer CrownRock for $12 billion to expand its control over the largest shale oil field in the United States. The acquisition is expected to close in the first quarter of 2024.

Under the terms of the agreement, Occidental Petroleum will acquire CrownRock in a cash-and-stock basis, with $10.8 billion as the target price and $1.2 billion as CrownRock's debt.

Some analysts pointed out that the acquisition may lead to the expansion of the company's debt, which will affect the company's shareholder dividends and share repurchases, which is not expected to be supported by Buffett.

But unexpectedly, Buffett increased his holdings of Occidental Petroleum for three consecutive days, spending about $588.7 million cumulatively, adding nearly 10.5 million shares of Occidental Petroleum stock. If its preferred shares and warrants of ownership in Occidental Petroleum are included, Berkshire's stake in Occidental Petroleum would be 33 percent, assuming that these subscription privileges are exercised.

Kanjian Finance believes that the current decline in international oil prices and the performance of Occidental Petroleum in the capital market will help Berkshire increase its holdings of Occidental Petroleum at a lower price. From Warren Buffett's actions, it can be inferred that Berkshire will most likely continue to bless Occidental Petroleum in the future.

Of course, if international oil prices continue to fall and Occidental Petroleum's share price continues to decline, the possibility of a full acquisition by Berkshire cannot be ruled out.

According to related news, the consolidation of the U.S. oil and gas industry is also accelerating. Back in October, ExxonMobil planned to acquire Pioneer Natural Resources for a total price of $64.5 billion, and the deal is expected to close in the first half of 2024.

It is worth noting that the deal is the world's largest M&A in 2023 and the company's largest this century, and ExxonMobil's approach has a clear effect on the industry, after the completion of the deal, ExxonMobil's oil production will reach 1.2 million barrels per day.

In addition, in October, Chevron also announced that it would collect $53 billion from U.S. oil producers to buy all of Hess's outstanding shares. It can be seen that the major mergers and acquisitions in the U.S. oil and gas industry will kick off.

Judging from the practices of the above-mentioned American oil and gas companies, we have reason to believe that Buffett will not sit idly by in the future, with the consolidation of the industry, Buffett may further expand the scale of investment, and the current Berkshire book funds have hit a new high, and there is also a need for good investment targets, from this latitude, the full acquisition of Occidental Petroleum may be the best option.