Occidental stock (NYSE: OXY) made a big leap on Friday, rising nearly 12.5% to $72.49. The oil and gas company announced Warren Buffett’s Berkshire Hathaway received authorization from the federal energy regulators on Friday to acquire up to 50% of Occidental Petroleum.
The Federal Energy Regulatory Commission (FERC) stated that Berkshire adding to its previous 20.2% stake in the company was “consistent with the public interest.” Berkshire requested the share purchase back in July claiming the move “would not have an adverse effect” on utility rates and would not hurt competition.
According to Cole Smead, president of Smead Capital Management which also owns Occidental and Berkshire shares, Buffett is motivated about the move as he is optimistic about the oil and gas industry and “thinks it can make him wealthy” unlike other market participants that consider it a “dead business”.
Some investors and analysts have stated that Berkshire could eventually take over Occidental in order to diversify its energy portfolio that includes several utilities, electricity distributors, and renewable power projects like wind.
Buffett’s move also comes after Senate passed Biden’s unprecedented climate bill, including an expanded tax credit for carbon capture projects that Occidental can benefit from.
Occidental is one of the major oil and gas producers with the most ambitious emissions reduction targets and large developments of carbon capture and low emissions projects. The company has said it aims to reach net-zero carbon emissions by 2050.
According to Occidental CEO Vicki Hollub, the company is focused on its carbon management business that is projected to equal its chemicals business in approximately 10 to 15 years and make around $507 million of profit a year.
Beyond 15 years, the carbon management division is projected to exceed the oil and gas operations and what they are bringing in as profits today.
The company is also looking good now after paying back some of the $38 billion debt it borrowed in 2019 to buy Anadarko Petroleum. Occidental confirmed during its May 2022 earnings call its previous plan to cut debt to $20 billion in the short-term, benefiting from the high oil and gas prices.